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Oil & Natural Gas Corpn Ltd.

BSE: 500312 Sector: Oil & Gas
NSE: ONGC ISIN Code: INE213A01029
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OPEN 133.50
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VOLUME 1498255
52-Week high 194.60
52-Week low 108.50
P/E 4.35
Mkt Cap.(Rs cr) 175,180
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 133.50
CLOSE 132.70
VOLUME 1498255
52-Week high 194.60
52-Week low 108.50
P/E 4.35
Mkt Cap.(Rs cr) 175,180
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

Report on the Audit of the Standalone Financial Statements

1. Opinion

We have audited the accompanying Standalone Financial Statements of Oiland Natural Gas Corporation Limited ("the Company") which comprise theBalance Sheet as at March 31 2021 the Statement of Profit and Loss (including OtherComprehensive Income) the Statement of Changes in Equity and the Statement of Cash Flowsfor the year then ended and notes to the Standalone Financial Statements including asummary of significant accounting policies and other explanatory information (hereinafterreferred to as "the Standalone Financial Statements").

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Financial Statements give theinformation required by the Companies Act 2013 ("the Act") in the manner sorequired and give a true and fair view in conformity with the Indian Accounting Standardsspecified under section 133 of the Act read with the Companies (Indian AccountingStandards) Rules 2015 as amended (‘Ind AS") and other accounting principlesgenerally accepted in India of the state of affairs of the Company as at March 312021and its profit (including other comprehensive income) the changes in equity and its cashflows for the year ended on that date.

2. Basis for Opinion

We conducted our audit of the Standalone Financial Statements inaccordance with the Standards on Auditing (SAs) specified under section 143(10) of theAct. Our responsibilities under those Standards are further described in theAuditor's Responsibilities for the Audit of the Standalone Financial Statementssection of our report. We are independent of the Company in accordance with the Code ofEthics issued by the Institute of Chartered Accountants of India together with the ethicalrequirements that are relevant to our audit of the Standalone Financial Statements underthe provisions of the Act and the Rules made thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the Standalone Financial Statements.

3. Emphasis of Matter

We draw attention to following Notes to the Standalone FinancialStatements:-

i. Note No. 53 which states that the Company's Board does nothave the requisite number of Independent Directors and also does not have a womanIndependent Director from September 8 2020 as required by the provisions of theSecurities Exchange Board of India (Listing Obligations and Disclosure Requirement)Regulations 2015 Department of Public Enterprises (DPE) Guidelines and the provisions ofthe Act so as to constitute proper Board of the Directors and its subcommittees whichinter alia includes the Audit Committee. As a result in the absence of valid quorum noAudit Committee meetings have been convened after September 8 2020 and in suchcircumstances as implied from the said Note the mandatory functions of the AuditCommittee such as review of quarterly results/annual financial statements approval ofrelated party transactions etc. have been directly carried out by the Board of Directorsof the company. Accordingly the enclosed Standalone Financial Statements have beendirectly approved by the Board of Directors.

ii. Note No. 48.1.1(d) wherein it is stated that DirectorateGeneral of Hydrocarbons (DGH) had raised a demand on all the JV partners under theProduction Sharing Contract with respect to Panna-Mukta and Mid and South Tapti contractareas (PMT JV) being BG Exploration and Production India Limited (BGEPIL) and RelianceIndustries Limited (RIL) (together "the Claimants") and the Company (all threetogether referred to as "Contractors") towards differential GOI share of ProfitPetroleum and Royalty alleged to be payable by contractors pursuant to Government'sinterpretation of the Final Partial Award of Arbitral Tribunal (40% share of the Companyamounting to USD 1624.05 million equivalent to Rs 119351.43 million including interestupto 30th November 2016). Subsequent to Tribunal Orders dated October 122016 DGH vide letters dated May 25 2017 June 4 2018 and January 14 2019 had askedcontractor for re-casting of accounts of the PMT JV and for remitting the respective PIshare of balance dues including interest till the date of remittance. As the Company isnot a party to the arbitration the details of the proceedings of arbitration and copy ofthe order of London High Court are not available with the Company. The Company hasresponded that the English High Court has delivered its final verdict on May 2 2018following which the Arbitral Tribunal re-considered some of its earlier findings from the2016 FPA (Revised Award); The Government of India and JV Partners have challenged parts ofthe Revised Award before the English Court. On February 12 2020 the English Court passeda verdict favouring the challenges made by BGEPIL and RIL and also remitted the matter inthe Revised Award back to Arbitral Tribunal for reconsideration. In January 2021 theTribunal issued a verdict favouring BGEPIL/RIL on the remitted matter which has beenchallenged by the GOI before the English Court. Pending finalization of the decision ofthe Arbitral Tribunal the Company has indicated in its letters to DGH that the finalrecasting of the accounts is premature and the issues raised by DGH may be kept inabeyance and therefore no provision for the same has been considered necessary and hasbeen disclosed as contingent liability.

iii. Note No. 48.1.1(b) with respect to demand orders served onvarious work centres of the company by tax authorities under Service Tax (ST) and Goods& Service Tax (GST) demanding ST and GST on Royalty in respect of Crude Oil andNatural Gas. Based on the legal opinion the Company is contesting such demands andestimated amounts worked out towards ST and GST (including interest and penalty upto March31 2021) of Rs 39604.84 million and Rs 77173.72 million respectively (Total Rs116778.56 million) which has been considered as contingent liability. As a measure ofabundant caution the Company has deposited ST and GST along with interest under protestamounting to Rs 13524.39 million and Rs 56777.04 million respectively (Total Rs70301.43 million).

iv. Note No. 30.4 which describes the managements' assessmentof the impact of COVID-19 pandemic on the basis of internal and external sources ofinformation on its business operation and other related components. As stated in the saidNote the management expects no significant impact of COVID-19 on the affairs of thecompany on a long term basis.

Our opinion on the Standalone Financial Statements is not modified inrespect of these matters.

4. Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of these Standalone Financial Statements of thecurrent period. These matters were addressed in the context of our audit of the StandaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:

Key Audit Matter

How our audit addressed the matter

Modified Audit Procedures necessitated pursuant to outbreak of COVID-19 pandemic: Due to the restrictions imposed the audit processes were largely carried remotely by us from our respective places.
Due to continuing spread of COVID-19 pandemic and the consequential restrictions imposed by Central / various State Governments / Authorities extended from time to time during the year 2020-21 and thereafter the audit could not be carried by visiting the respective Assets/ Basins/ Plants/ Units/ Offices / other Business areas/ Corporate Office of the Company. The Company has provided / shared with us the necessary books of accounts records documents etc. through digital medium such as e-mails file sharing through Video Conferencing and remote / VPN access over secured network to SAP Web- Ice BI platform ICFR Portal shared common drives etc.
Accordingly this extraordinary situation due to Covid-19 has necessitated modification of our audit procedures so as to carry out the audit remotely through online access / receipt of digital documents. To this extent the audit processes were carried out on the basis of verification of such books of accounts records documents etc. made available to us as above which were relied upon as audit evidence for conducting the audit and reporting for the current period.
Accordingly we modified our audit procedures as follows:
a. Conducted verification of necessary books of accounts records documents etc. maintained by the respective Assets/ Basins/ Plants/ Units/ Offices / other Business areas/Corporate Office etc. of the company through digital medium and remote electronic access as mentioned above.
b. Carried out verification of scanned copies of the documents evidences deeds certificates and the related records made available to us by the company through aforesaid digital medium.
c. Making enquiries and gathering necessary audit evidence through Video Conferencing dialogues and discussions over phone calls e-mails and similar communication channels.
d. Resolution of our audit observations through electronic and other telecommunication media instead of a physical meetings and interaction with the designated officials.
e. We have also relied upon and performed our audit procedures in accordance with the Advisories and Key considerations issued by the Institute of Chartered Accountants of India on the various Accounting and Auditing aspects impacted by COVID-19.
Evaluation of adequacy of provision for impairment for tangible and intangible assets Our audit procedures included the following:
(Refer Note 47 to the Standalone Financial Statements)
Management has assessed whether any provision needs to be recognised on account of impairment of tangible and intangible assets.
The Company reviews the carrying amount of its tangible and intangible assets (Oil and Gas Assets including Capital Work-in-Progress (CWIP) & Development Wells in Progress (DWIP) Other Property Plant & Equipment (including Capital Works-in-Progress Right of Use Assets) for the "Cash Generating Unit" (CGU) determined at the end of each reporting period to assess whether there is any indication that those assets have suffered any impairment loss.
Oil and Gas price assumptions have a significant impact on CGU impairment assessments and are inherently uncertain.
Furthermore oil and gas prices are subject to increased uncertainty given regulatory guidelines including notified gas prices climate change and the global energy transition. We evaluated the appropriateness of management's identification of the CGUs and exploration and evaluation assets and tested the operating effectiveness of controls over the impairment assessment process including indicators of impairment.
The management's assumptions for prices of oil and gas in future are highly judgemental and may not be reflective of above factors leading to a risk of material misstatement. We reviewed the reasonableness of the judgments and decisions made by the management regarding assumptions (including the relevant regulatory guidelines) for Oil and Gas prices in future to identify whether there are indicators of possible management bias and accordingly relied upon the management's assumptions for Oil and Gas prices in future.
Given the long timeframes involved certain recoverable amounts of assets are sensitive to the discount rate applied. Since the determination of appropriate discount rate is judgemental there is a risk that discount rates may not reflect the return required by the market and the risks inherent in the cash flows being discounted which may lead to a material misstatement. We reviewed the appropriateness of discount rates used in the estimation.
The determination of recoverable amount being the higher of fair value less costs to sell and value- in use is based on the factors as discussed above necessitating judgement on the part of management. We relied on the technical assessment of the Management with regard to the Reserves and the Production profile of Oil and Gas as shown to us by the management.
The determination of recoverable amount being the higher of fair value less costs to sell and value- in use is based on the factors as discussed above necessitating judgement on the part of management. We performed testing of the mathematical accuracy of the cash flow models and checked the appropriateness of the related disclosures.
We evaluated management's assessment and related calculations of impairment including comparison of the recoverable amount with the carrying amounts of respective CGUs in the books of accounts. We perused the future plans related to exploration activities.
Further we have relied upon management's assessment that the Mining Lease (ML)/ Petroleum Mining Lease (PML) shall be regranted wherever expired/ is expiring in near future.
In case of exploration and evaluation assets based on management's judgement assessment for impairment is carried out when further exploration activities are not planned in near future or when sufficient data indicate that although a development is likely to proceed the carrying amount of the exploration asset is unlikely to be recovered in full from successful development or by sale. Based on the above factors we have considered the measurement of Impairment as Key Audit Matter.
Estimation of Decommissioning liability
(Refer Note 24 to the Standalone Financial Statements)
The Company has an obligation to restore and rehabilitate the Asset/fields operated upon by the Company at the end of their use. This decommissioning liability is recorded based on estimates of the costs required to fulfill this obligation. Our audit procedures included the following:
The provision is based upon current cost estimates and has been determined on a discounted basis with reference to current legal requirements and technology. Evaluated the approach adopted by the management in determining the expected costs of decommissioning.
At each reporting date the decommissioning liability is reviewed and re-measured in line with changes in observable assumptions timing and the latest estimates of the costs to be incurred at reporting date. Identified the cost assumptions used that have the most significant impact on the provisions and tested the appropriateness of these assumptions. Reviewed the appropriateness of discount and inflation rates used in the estimation.
We have considered the measurement of decommissioning costs as Key Audit Matter as it requires significant management judgment including accounting calculations and estimates that involves high estimation uncertainty. Verified the unwinding of interest as well as understanding if any restoration was undertaken during the year.
We have relied upon the technical assessment with respect to the Production Profile as estimated by the management based on which the Terminal year of the Asset /fields for decommissioning has been estimated.
We have relied upon management's assessment that the Mining Lease (ML) / Petroleum Mining Lease (PML) would be regranted till the terminal year of the field as estimated by the management. Relied on the judgments of the internal/ external experts for the purpose of technical /commercial evaluation.
Assessed the appropriateness of the disclosures made in the financial statements.
Litigations and Claims
(Refer Note 48 to the Standalone Financial Statements)
Litigation and claims are pending with multiple tax and regulatory authorities and there are claims from vendors/suppliers and employees which have not been acknowledged as debt by the company (including Joint Operations). Our audit procedures included the following: Understood Management's internal instructions process and control for determining and estimating the tax litigations other litigations and claims and its appropriate accounting and/or disclosure.
In the normal course of business financial exposures may arise from pending legal/regulatory proceedings and from above referred claims not acknowledged as debt by the company. Tested key controls surrounding such litigations.
Whether a claim needs to be recognized as liability or disclosed as a contingent liability in the Standalone Financial Statements or is considered as remote is dependent on a number of significant assumptions and judgments made by the management. Discussed pending matters with the Company's personnel with respect to status of cases of litigation and claims.
The amounts involved are potentially significant and determining the amount if any to be recognized or disclosed in the financial statements is inherently subjective. Assessed management's conclusions through understanding precedents set in similar cases including placing reliance upon the expert opinions wherever obtained by the management.
We have considered Litigations and claims as Key Audit Matter because the estimates on which these amounts are based involve a significant degree of management judgment including accounting estimates that involves high estimation uncertainty. We have assessed the adequacy and appropriateness of presentation and disclosure of the Contingent liabilities in the Standalone Financial Statements.

 

5. Other Matters

i. We have placed reliance on technical/ commercial evaluation bythe management in respect of categorization of wells as exploratory developmentproducing and dry well allocation of cost incurred on them production profile proved(developed and undeveloped)/ probable hydrocarbon reserves and depletion thereof on Oiland Gas Assets impairment liability for decommissioning costs liability for NELP andnominated blocks for under performance against agreed Minimum Work Programme.

ii. As mentioned in Note No. 46.1.3 the Standalone FinancialStatements include the Company's share in the total value of assets liabilitiesexpenditure and income of 167 blocks under New Exploration Licensing Policy (NELP)/Hydrocarbon Exploration and Licensing Policy (HELP) / Discovered Small Fields (DSFs)/ OpenAcreage Licensing Policy (OALPs) and Joint Operations (JO) accounts for exploration andproduction out of which:

a. 8 NELPs/ HELPs/ JOs accounts have been certified by otherChartered Accountants. In respect of these 8 NELPs/ HELPs/ JOs Standalone FinancialStatements include proportionate share in assets and liabilities as on March 31 2021amounting to Rs 86484.06 million and Rs 45497.33 million respectively and revenue andprofit including other comprehensive Income for the year ended March 312021 amounting toRs 60629.92 million and Rs 19749.54 million respectively Our opinion is based solely onthe certificate of the other Chartered Accountants.

b. 10 NELPs / HELPs/ JOs have been certified by the management inrespect of NELPs / HELPs/ JOs operated by other operators. In respect of these 10 NELPs /HELPs/ JOs Standalone Financial Statements include proportionate share in assets andliabilities as on March 31 2021 amounting to Rs 8705.76 million and Rs 8047.15 millionrespectively and revenue and profit including other comprehensive Income for the yearended March 312021 amounting to Rs 130.89 million and Rs 177.62 million respectively Ouropinion is based solely on management certified accounts.

iii. We audited the restatement/retrospective adjustments asdisclosed in Note No. 52 to the Standalone Financial Statements which have been made tothe comparative Standalone Financial Statements presented for the years prior to yearended March 31 2021 in accordance with the requirement of applicable Ind AS. In ouropinion such adjustments are appropriate and have been properly applied.

iv. The Standalone Financial Statements of the Company for the yearended March 31 2020 were audited by joint auditors of the Company five of which are thepredecessor audit firms and have expressed an unmodified opinion dated June 30 2020 onsuch standalone financial statements.

Our opinion on the Standalone Financial Statements is not modified inrespect of above matters.

6. Information Other than the Standalone Financial Statements andAuditor's Report Thereon

The Company's Board of Directors is responsible for thepreparation of the other information. The other information comprises the informationincluded in the Board's Report including Annexures to Board's Report ManagementDiscussion and Analysis Business Responsibility Report and Report on Corporate Governancebut does not include the Standalone Financial Statements and our auditors' reportthereon. The above-referred information is expected to be made available to us after thedate of this audit report.

Our opinion on the Standalone Financial Statements does not cover theother information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statementsour responsibility is to read the other information identified above when it becomesavailable and in doing so consider whether the other information is materiallyinconsistent with the Standalone Financial Statements or our knowledge obtained in theaudit or otherwise appears to be materially misstated. If based on the work we haveperformed we conclude that there is a material misstatement of this other information weare required to report that fact.

When we read the other information if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance and take appropriate actions necessitated by the circumstances and theapplicable laws and regulations.

7. Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements

The Company's Board of Directors is responsible for the mattersstated in section 134(5) of the Act with respect to the preparation and presentation ofthese Standalone Financial Statements that give a true and fair view of the financialposition financial performance changes in equity and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theIndian Accounting Standards (Ind AS) specified under section 133 of the Act. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Company and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring accuracy and completeness of the accounting recordsrelevant to the preparation and presentation of the Standalone Financial Statements thatgive a true and fair view and are free from material misstatement whether due to fraud orerror.

In preparing the Standalone Financial Statements the Board ofDirectors is responsible for assessing the Company's ability to continue as a goingconcern disclosing as applicable matters related to going concern and using the goingconcern basis of accounting unless management either intends to liquidate the Company orto cease operations or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing theCompany's financial reporting process.

8. Auditor's Responsibilities for the Audit of StandaloneFinancial Statements

Our objectives are to obtain reasonable assurance about whether theStandalone Financial Statements as a whole are free from material misstatement whetherdue to fraud or error and to issue an auditors' report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of theStandalone Financial Statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Company has adequate internal financial controls with reference to financialstatements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of thegoing concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Company's ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditors'report to the related disclosures in the Standalone Financial Statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors' report. However future events orconditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation structure and content of theStandalone Financial Statements including the disclosures and whether the StandaloneFinancial Statements represent the underlying transactions and events in a manner thatachieves fair presentation.

Materiality is the magnitude of misstatements in the StandaloneFinancial Statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the Standalone FinancialStatements may be influenced. We consider quantitative materiality and qualitative factorsin

(i) planning the scope of our audit work and in evaluating the resultsof our work; and

(ii) to evaluate the effect of any identified misstatements in theStandalone Financial Statements.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the StandaloneFinancial Statements of the current period and are therefore the key audit matters. Wedescribe these matters in our auditors' report unless law or regulation precludespublic disclosure about the matter or when in extremely rare circumstances we determinethat a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of suchcommunication.

9. Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016("the Order") issued by the Central Government of India in terms of sub-section(11) of section 143 of the Act we give in "Annexure-1" a statement on thematters specified in paragraphs 3 and 4 of the Order to the extent applicable.

2. Based on verification of books of accounts of the Company andaccording to information and explanations given to us we give below a report on theDirections and Sub-directions issued by the Comptroller and Auditor General of India interms of Section 143(5) of the Act:

Directions/ Sub-directions u/s 143(5) of the Act for year 2020-21 Directions Auditor's reply on the action taken on the directions
1) Whether the Company has system in place to process all the accounting transactions through IT system? If yes the implication of processing of accounting transaction outside IT System on the integrity of the accounts along with the financial implications if any may be stated. Yes the Company has system in place to process all the accounting transactions through IT system namely SAP Based on the audit procedures carried out and as per the information and explanations given to us no accounting transactions have been processed / carried outside the IT system. Accordingly there are no implications on the integrity of the accounts.
2) Whether there is any restructuring of an existing loan or cases of waiver/ write-off of debts/ loans/ interest etc. made by a lender to the company due to the Company's inability to repay the loan? If yes the financial impact may be stated. Whether such cases are properly accounted for? (In case lender is a Government Company then this direction is also applicable for statutory auditor of lender Company) Loan/Debt where Company is borrower:
Based on the audit procedures carried out and as per the information and explanations given to us there were no cases of restructuring or waivers / write-off of debts/ loans/ interest etc. by any lender due to the company's inability to repay the loan during the FY 2020-21.
Loan/Debt where Company is lender:.
Based on the audit procedures carried out and as per the information and explanations given to us there were no cases of restructuring or waivers / write-off of debts/ loans/ interest etc. during the FY 2020-21 with regard to amounts lent by the company to the other parties
3) Whether funds (Grant/ subsidy etc.) received/ receivable for specific schemes from Central/ State agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation. Based on the audit procedures carried out and as per the information and explanations given to us the funds (Grant/ subsidy) received/ receivable for specific schemes from Central/ State agencies were properly accounted for/ utilized as per its term and conditions.
Sub-Directions
1) With regards to production reporting by Company please ensure compliance to disclosure requirement as per para 56 of Guidance Note 1956 on accounting for Oil and Gas Producing Activities with reference to P&NG Rules 1959 for exclusion of BS&W quantity. The quantity of accumulated depletion may also be reviewed and reported suitably. The accounting of ‘Pipeline condensate' and ‘off-gas' quantity under crude production may need revision to avoid double accounting as this already forms part of natural gas production quantity measured and reported at offshore wellhead. The production reporting by the Company at Note No. 49 to the Financial Statements is excluding BS&W and in compliance with the disclosure requirement as per Para 56 of Guidance Note on accounting for Oil and Gas Producing Activities with reference to P&NG Rules 1959. Based on the audit procedure performed and as per the information and explanation given to us the production considered for reserve estimation and depletion of ONGC Offshore was reviewed and it was observed that the pipeline condensate and Gas liberated in the CSU (CSU Off Gas) have not been considered for depletion and reserve estimation. Refer Note No. 36.1 to the Financial Statements.
2) It may be ensured that impairment test of tangible and intangible assets is done on the basis realizable value rather than on notified gas prices as it was generally observed that gas prices actually received were lower than the notified gas prices. AsperrequirementofIndAS36on1mpairment of Assets' the estimates of future cash flows for measuring value in use shall be based on the cash flow projections on reasonable and supportable assumptions that represent management's best estimate of the range of economic conditions that will exist over the remaining useful life of the asset. The above methodology has also been prescribedi n the Guidance Noteon' Oiland Gas Producing Activities' (Ind AS).
On the basis of information and explanation provided to us impairment testing of tangible and intangible assets relating to gas bearing fields/ assets is carried out on the basis of the prices estimated by the management. Such prices are estimated based on the method prescribed in the New Domestic Natural Gas Pricing Guidelines 2014 issued by MoP&NG. For difficult areas prices are estimated based on the formula prescribed in the Notification dated 21.03.2016 issued by MoP&NG. We have been informed that realization in the earlier years have broadly been in line with the management's estimated price for the purposes of computing the impairment as laid down in Ind AS 36 and the same has been reviewed by us on test basis. The management has represented that the lower realization during the Financial Year 2020-21 as compared to the management estimates is mainly on account of the impact of Covid 19 apart from certain volatility in the global oil & gas market during that period.
Further the management represented to us that the gas prices considered for testing the impairment of tangible and intangible assets in accordance with Ind AS 36 are based on the most reliable information available taking a long-term view of the range of economic conditions over the remaining useful life of the asset.
The management has further represented to us that this method has been consistently followed by the Company.
Based on the above we are of the view that the Company has complied with the requirements of Ind AS 36 and the Guidance Note while making impairment assessment by taking long-term view of the range of economic conditions over the remaining useful life of the assets.

 

3. As required by Section 143(3) of the Act we report that:

a. We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

b. In our opinion proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

c. The Balance Sheet the Statement of Profit and Loss includingOther Comprehensive Income the Statement of Changes in Equity and Cash Flows dealt withby this Report are in agreement with the books of account;

d. In our opinion the aforesaid Standalone Financial Statementscomply with the Ind AS specified under Section 133 of the Act read with the Companies(Indian Accounting Standards) Rules 2015 as amended;

e. As per Notification number G.S.R. 463(E) dated 5thJune 2015 issued by Ministry of Corporate Affairs section 164(2) of the Act regardingthe disqualifications of Directors is not applicable to the Company since it is aGovernment Company;

f. With respect to the adequacy of the internal financial controlswith reference to financial statements of the Company and the operating effectiveness ofsuch controls refer to our separate report in "Annexure 2";

g. As per Notification number G.S.R. 463 (E) dated 5thJune 2015 issued by Ministry of Corporate Affairs section 197 of the Act regardingremuneration to director is not applicable to the Company since it is a GovernmentCompany; and

h. With respect to the other matters to be included in theAuditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors)Rules 2014 in our opinion and to the best of our information and according to theexplanations given to us:

i. the Company has disclosed the impact of pending litigations onits financial position in its Standalone Financial Statements - Refer Note 48.1.1 to theStandalone Financial Statements;

ii. the Company did not have any long-term contracts includingderivative contracts for which there were any material foreseeable losses- Refer Note 55to the Standalone Financial Statements;

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

For G M Kapadia & Co Chartered Accountants Firm Reg. No. 104767W For R Gopal & Associates Chartered Accountants Firm Reg. No. 000846C For SARC & ASSOCIATES Chartered Accountants Firm Reg. No. 006085N
Sd/- (Rajen Ashar) Partner (M. No. 048243) UDIN: 21048243AAAADE3969 Place: Mumbai Sd/- (Sunil Kumar Agarwal) Partner (M. No. 093209) UDIN:21093209AAAAAX4657 Place: New Delhi Sd/- (Sunil Kumar Gupta) Partner (M. No. 084884) UDIN: 21084884AAAAAE1417 Place: New Delhi
For Kalani & Co. Chartered Accountants Firm Reg. No: 000722C For R.G.N. Price & Co. Chartered Accountants Firm Reg. No. 002785S For S. Bhandari & Co. Chartered Accountants Firm Reg. No.000560C
Sd/- (Vikas Gupta) Partner (M. No. 077076) UDIN: 21077076AAAAAF1316 Place: Jaipur Sd/- (Rangarajan Raghavan Iyengar) Partner (M. No. 041883) UDIN:21041883AAAAAE1463 Place: Mumbai Sd/- (Sudha Shetty) Partner (M. No. 047684) UDIN: 21047684AAAAAF5033 Place: Mumbai
June 24 2021

 

Annexure - 1 to the Independent Auditors' Report

(Referred to in paragraph 9(1) under ‘Report on Other Legal andRegulatory Requirements' section of our report of even date)

i. a. The Company has generally maintained proper records showing fullparticulars including quantitative details and situation of fixed assets (Property Plant& Equipment (PPE)).

b. As per the information and explanations given to us and on the basisof our examination of the records of the Company the fixed assets (PPE) havingsubstantial value other than those which are underground/ submerged/ under jointoperations have been physically verified by the management in a phased manner to cover allitems over a period of three years which in our opinion is reasonable having regard tothe size of Company and nature of its business. The reconciliation of physically verifiedassets with the book records is in progress. Discrepancies noticed on the physicalverification and consequential adjustments are carried out on completion ofreconciliation. According to information and explanations given by the management and inour opinion the same are not material.

c. On the basis of the information to the extent compiled by theCompany pending the reconciliation of the available records with the books of account andalso considering the voluminous nature and various locations we report that thetitle/lease deeds of immovable properties are held in the name of Company except for thefollowing where the title/lease deeds are not available with the Company:

(Rs. in million)

Nature

Number of Assets

Gross Block

Net Block

Lease hold land

13

572.54

362.69

Free hold land

11

1331.30

1331.30

Building

6

279.63

48.29

Total

30

2183.47

1742.28

 

ii. According to the information and explanations given to us theinventory (excluding inventory lying with third parties inventory under joint operationsand material in transit) has been physically verified by the management in a phased mannerat reasonable intervals to cover all items over a period of three years which in ouropinion is reasonable having regard to the size of Company and nature of its business.Such verification did not reveal any material discrepancies.

iii. The Company has not granted loans secured or unsecured to anycompanies firms limited liability partnerships or other parties covered in the registermaintained under section 189 of the Act.

iv. In our opinion and according to the information and explanationsgiven to us the Company has not advanced loans to directors / to a Company in which theDirector is interested to which provisions of section 185 of the Act apply. The provisionsof section 186 of the Act in our opinion are not applicable to the Company.

v. In our opinion and according to information and explanations givento us the Company has not accepted any deposits from the public and hence provisions ofSections 73 to 76 and other relevant provision of the Act and Companies (Acceptance ofDeposits) Rules 2014 are not applicable.

vi. We have broadly reviewed the cost records maintained by the Companypursuant to the Companies (Cost Records and Audit) Rules 2014 as amended and prescribedby the Central Government under sub section (1) of section 148 of the Act and we are ofthe opinion that prima facie the prescribed accounts and records are being made andupdated on regular basis. However we have not made a detailed examination of the costrecords with the view to determine whether they are accurate or complete.

vii. a. According to records of the Company undisputed statutorydues including Provident Fund Income Tax Sales Tax Service Tax Duty of Customs Dutyof Excise Value Added Tax Goods and Service Tax Cess and other statutory dues havegenerally been regularly deposited with the appropriate authorities. According to theinformation and explanations given to us no undisputed amounts payable in respect of theaforesaid dues were outstanding as at March 312021 for a period more than six months fromthe date of becoming payable.

b. According to the information and explanations given to us therewere no dues in respect of Income Tax Duty of Excise Duty of Customs Sales Tax ServiceTax Value Added Tax and Goods and Service Tax which have not been deposited on account ofany dispute 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

Central Excise Act 1944 Commissioner

2018-19

2.37

-

2.37

Custom Excise and Service Tax Appellate Tribunal

2005-06 2018-19

37.67

21.12

16.55

Hon. High Court

2012-13 to 2014-15

6577.04

-

6577.04

Hon. Supreme Court

2001-02 2006-07 to 2008-09

517.54

-

517.54

Total (A)

7134.62

21.12

7113.50

The Customs Act 1962 Commissioner

1987-88

331.32

-

331.32

Custom Excise and Service Tax Appellate Tribunal

2007-08 2020-21

7.00

1.00

6.00

Hon. High Court

2012-13 2015-16

64.17

-

64.17

Total (B)

402.49

1.00

401.49

Income Tax Act 1961 Commissioner/ (Appeals) and Additional Commissioner/ ITO

2002-03 2007-08 2009-10 2012-13 to 2015-16

166790.69

162873.71

3916.98

Income Tax Appellate Tribunal

2007-08 2009-10 to 2011-12

120391.65

120391.65

-

Hon. High Court

1990-91 2000-01

420.83

411.92

8.91

Total (C)

287603.17

283677.28

3925.89

Goods and Services Tax Goods and Services Tax Appellate Tribunal

2017-18

2090.88

1868.83

222.05

Hon. High Court

2017-18 to 2020-21

77824.88

54908.21

22916.67

Total (D)

79915.76

56777.04

23138.72

Commissioner/ Joint Commissioner/ Commissioner -Appeals/ Joint Commissioner- Appeals

2000-01 2001-02 2005-06 to 2007-08 2009-10 to 2012-13 2014-15 to 2016-17

2022.10

21.25

2000.85

Central Sales Tax Act 1956 and Respective States' Sales Tax Acts Appellate Tribunal/ First Appellate Authority

1996-97 1998-99 1999-2000 2001-02 to 2006-07 2009-10 to 2015-16

15598.64

67.61

15531.03

Hon. High Court

1978-79 1992-93 to 1994-95 2006-07 2012-13

43.17

23.61

19.56

Hon. Supreme Court

2002-01 to 2008-09 2012-13 2016-17

10990.75

623.96

10366.79

Total (E)

28654.66

736.43

27918.23

Commissioner/ (Appeals) Joint Comm. Additional Comm. of Custom Excise and Service Tax Director General

2006- 07 2007- 08 2011-12 to 2016-17

13062.97

0.49

13062.48

Finance Act 1994 (Service Tax) Custom Excise and Service Tax Appellate Tribunal/ First Appellate Authority

2003-04 2005-06 to 2012-13 2014-15 to 2017-18

42165.28

13575.52

28589.76

Hon. High Court

2005-06; 2012-13 2015-16

199.96

2.56

197.40

Total (F)

55428.21

13578.57

41849.64

Grand Total (A+B+ C+D+E+F)

459138.91

354791.44

104347.47

 

viii. In our opinion and according to the information andexplanations given to us the Company has not defaulted in repayment of loans orborrowings dues to Banks and Financial Institutions or dues to Debenture (Bond) Holders.The Company has not borrowed any amount from Government.

ix. In our opinion and according to the information andexplanations given to us the term loans taken by the Company have been generally appliedfor the purpose for which they were raised. The Company has not raised any money by way ofinitial public offer or further public offer.

x. According to the information and explanations given to us nomaterial fraud on the Company by its officers or employees or by the Company has beennoticed or reported during the year.

xi. As per notification number G.S.R. 463 (E) dated 5thJune 2015 issued by Ministry of Corporate Affairs section 197 of the Act as regards themanagerial remuneration is not applicable to the Company since it is a GovernmentCompany.

xii. In our opinion the Company is not a Nidhi Company. Thereforethe provisions of clause 3(xii) of the Order are not applicable to the Company.

xiii. According to the information and explanations given by themanagement and based on our examination the transactions with the related parties are incompliance with section 188 of the Act where applicable. As stated in Note No. 53 of theStandalone Financial Statements read together with para 3(i) of our IndependentAuditors' Report as no meeting of the Audit Committee has been convened afterSeptember 8 2020 the mandatory function of review/ approval of related partytransactions as required under section 177 of the Act to be performed by the AuditCommittee has been directly carried out by the Board of Directors of the company. TheCompany has disclosed the details of the related party transactions in the Notes to theStandalone Financial Statements as required by the applicable Indian AccountingStandards.

xiv. According to the information and explanations given to us andon an overall examination of the Balance Sheet the Company has not made any preferentialallotment or private placement of shares or fully or partly convertible debentures duringthe year.

xv. According to the information and explanations given by themanagement the Company has not entered into any non-cash transactions specified undersection 192 of the Act with directors or persons connected with him.

xvi. In our opinion the Company is not required to register undersection 45-IA of the Reserve Bank of India Act 1934.

For G M Kapadia & Co Chartered Accountants Firm Reg. No. 104767W

For R Gopal & Associates Chartered Accountants Firm Reg. No. 000846C

For SARC & ASSOCIATES Chartered Accountants Firm Reg. No. 006085N

Sd/- (Rajen Ashar) Partner (M. No. 048243) UDIN: 21048243AAAADE3969 Place: Mumbai

Sd/- (Sunil Kumar Agarwal) Partner (M. No. 093209) UDIN: 21093209AAAAAX4657 Place: New Delhi

Sd/- (Sunil Kumar Gupta) Partner (M. No. 084884) UDIN: 21084884AAAAAE1417 Place: New Delhi

For Kalani & Co. Chartered Accountants Firm Reg. No: 000722C

For R.G.N. Price & Co. Chartered Accountants Firm Reg. No. 002785S

For S. Bhandari & Co. Chartered Accountants Firm Reg. No.000560C

Sd/- (Vikas Gupta) Partner (M. No. 077076) UDIN: 21077076AAAAAF1316 Place: Jaipur

Sd/- (Rangarajan Raghavan Iyengar) Partner (M. No. 041883) UDIN: 21041883AAAAAE1463 Place: Mumbai

Sd/- (Sudha Shetty) Partner (M. No. 047684) UDIN: 21047684AAAAAF5033 Place: Mumbai

June 24 2021

 

Annexure - 2 to Independent Auditors' Report

(Referred to in paragraph 9 (3) (f) under ‘Report on Other Legaland Regulatory Requirements' section of our report of even date)

Report on the Internal Financial Controls with reference to StandaloneFinancial Statements under Clause (i) of Sub-section 3 of Section 143 of the Act

To the Members of Oil and Natural Gas Corporation Limited

We have audited the internal financial controls with reference toStandalone Financial Statements of Oil and Natural Gas Corporation Limited ("theCompany") as of March 312021 in conjunction with our audit of the StandaloneFinancial Statements of the Company for the year ended on that date.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing andmaintaining Internal Financial Controls based on the internal control over financialreporting criteria established by the Company considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls overFinancial Reporting issued by the Institute of Chartered Accountants of India. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial information as required under the Act.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company'sinternal financial controls with reference to Standalone Financial Statements based on ouraudit. We conducted our audit in accordance with the Guidance Note on Audit of InternalFinancial Controls over Financial Reporting (the "Guidance Note") issued by theInstitute of Chartered Accountants of India and the Standards on Auditing as specifiedunder section 143(10) of the Act to the extent applicable to an audit of InternalFinancial Controls with reference to Standalone Financial Statements. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate Internal FinancialControls with reference to Standalone Financial Statements was established and maintainedand if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls with reference to Standalone FinancialStatements and their operating effectiveness. Our audit of internal financial controlswith reference to Standalone Financial Statements included obtaining an understanding ofinternal financial controls with reference to Standalone Financial Statements assessingthe risk that a material weakness exists and testing and evaluating the design andoperating 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 Financial Statements whether due to fraud orerror.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the Company's internalfinancial controls with reference to Standalone Financial Statements.

Meaning of Internal Financial Controls with reference to StandaloneFinancial Statements

A Company's internal financial control with reference toStandalone Financial Statements is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of StandaloneFinancial Statements for external purposes in accordance with generally acceptedaccounting principles. A Company's internal financial control with reference toStandalone Financial Statements includes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of theCompany;

(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of Standalone Financial Statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of theCompany are being made only in accordance with authorizations of management and directorsof the Company; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the Company's assetsthat could have a material effect on the Standalone Financial Statements.

Inherent Limitations of Internal Financial Controls with reference tofinancial statements

Because of the inherent limitations of internal financial controls withreference to Standalone Financial Statements including the possibility of collusion orimproper management override of controls material misstatements due to error or fraudmay occur and not be detected. Also projections of any evaluation of the internalfinancial controls with reference to Standalone Financial Statements to future periods aresubject to the risk that the internal financial control with reference to StandaloneFinancial Statements may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequateInternal Financial Controls with reference to Standalone Financial Statements and suchInternal Financial Controls with reference to Standalone Financial Statements wereoperating effectively as at March 312021 based on the criteria for Internal FinancialControl over financial reporting established by the Company considering the essentialcomponents of internal control stated in the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting issued by the Institute of Chartered Accountants ofIndia.

Other Matters

As stated in Note No. 53 of the Standalone Financial Statements readtogether with para 3(i) of our Independent Auditors' Report as no meeting of theAudit Committee was held after September 8 2020 and hence the mandatory functions ofthe Audit Committee such as review/approval/ oversight/ evaluation of the company'sexternal financial reporting related party transactions Internal financial controls overfinancial reporting risk management system internal audit function whistle blower andvigil mechanism end utilisation of funds etc. have been directly carried out by theBoard of Directors of the company.

For G M Kapadia & Co Chartered Accountants Firm Reg. No. 104767W For R Gopal & Associates Chartered Accountants Firm Reg. No. 000846C For SARC & ASSOCIATES Chartered Accountants Firm Reg. No. 006085N
Sd/- (Rajen Ashar) Partner (M. No. 048243) UDIN: 21048243AAAADE3969 Place: Mumbai Sd/- (Sunil Kumar Agarwal) Partner (M. No. 093209) UDIN: 21093209AAAAAX4657 Place: New Delhi Sd/- (Sunil Kumar Gupta) Partner (M. No. 084884) UDIN: 21084884AAAAAE1417 Place: New Delhi
For Kalani & Co. Chartered Accountants Firm Reg. No: 000722C For R.G.N. Price & Co. Chartered Accountants Firm Reg. No. 002785S For S. Bhandari & Co. Chartered Accountants Firm Reg. No.000560C
Sd/- (Vikas Gupta) Partner (M. No. 077076) UDIN: 21077076AAAAAF1316 Place: Jaipur June 24 2021 Sd/- (Rangarajan Raghavan Iyengar) Partner (M. No. 041883) UDIN: 21041883AAAAAE1463 Place: Mumbai Sd/- (Sudha Shetty) Partner (M. No. 047684) UDIN: 21047684AAAAAF5033 Place: Mumbai

 

.