Growing with Green Energy ANNUAL REPORT 2 0 1 0 - 1 1 GAIL (India) Limited Asia's No. 1 Gas Utility Company Asia's No. 1 Gas Utility Company GAIL has been ranked No. 1 Gas utility company in Asia and second in Gas utility globally. GAIL has also been conferred 17th rank by PLATTS in the fastest growing Asian Companies. PLATTS has been coming out with Top-250 ranks of Global Energy Company every year. This is one of the most prestigious awards in the field of Oil and Gas in the world. PLATTS ranks the energy companies' financial performance globally, regionally and by industrial sector. Its ranking is based on four key metrics- assets worth, revenues, profits and return on invested capital. All companies in the list have more than US $2 billion assets. The fundamentals and market data comes from a database compiled and maintained by Capital IQ Compustat, a business of Standard & Poor’s, which like PLATTS, is a division of the McGraw-Hill Companies. Gail (India) Ltd # 1 Gas Utilities Company in 2010 Asia Letter from CMD 04 Highlights 06 Board of Directors 10 Directors' Report 14 Management Discussion & Analysis 27 Report on Corporate Governance 35 Five Year Profile 50 Annual Accounts 57 Auditor's Report to the Shareholders 58 Financial Statement 62 Cash Flow Statement 82 Accounting Policies 84 Balance Sheet Abstract & Company's General Business Profile 102 Schedule of Fixed Assets - Township 105 CONTENTS CONTENTS Income and Expenditure - Township etc. 106 Comments of C&AG 107 Subsidiary Companies 108 Consolidated Financial Statements 188 Annual Report 2010-2011 Statutory Auditors Registrar and Share Transfer Agent M/s Rasool Singhal & Co. Chartered Accountants, Aligarh MCS Limited F-65, Okhla Industrial Area Phase- I, New Delhi - 110020 M/s M.L. Puri Chartered Accountants, New Delhi Bankers Cost Auditors State Bank of India Corporate Accounts Group Branch M/s Rohit J Vora Cost Accountants, Vadodara Jawahar Vyapar Bhavan, 11th & 12 th Floors M/s R. Nanabhoy & Co. Cost Accountants, Mumbai Tolstoy Marg, New Delhi - 110001 M/s M Goyal & Co. Cost Accountants, Jaipur ICICI Bank Ltd. 9A, Phelps Building, M/s Chandra Wadhwa & Co. Cost Accountants, New Delhi Connaught Place New Delhi - 110001 M/s Dhanajay V. Joshi & Cost Accountants, Pune Associates HDFC Bank Ltd. 1st Floor, Kailash Building 26, Kasturba Gandhi Marg M/s DGM & Associates Cost Accountants, Guwahati New Delhi-110001 M/s Mani & Co. Cost Accountants, Kolkata 03 M/s K.L. Jaisingh & Co. Cost Accountants, Noida Registered Office Company Secretary 16, Bhikaiji Cama Place Vision Shri N.K. Nagpal R.K. Puram, New Delhi - 110066 Be the Leading Company in Natural Gas and Beyond, with Subsidiary Companies Stock Exchanges where Shares/GDRs of the Company are listed Global Focus, Committed to Customer Care, Value Creation for all Stakeholders and Environmental Responsibility. GAIL Global (Singapore) Pte Limited Bombay Stock Exchange Limited Floor 1, Phiroze Jeejeebhoy Towers, 5 Shenton Way, #23-03 UIC Building, Singapore - 068808 Dalal Street, Mumbai-400001 Brahmaputra Cracker and Polymer Limited Mission National Stock Exchange of Exchange Plaza, Hotel Brahmaputra Ashok, M.G.Road, Guwahati, Assam-781001 India Limited Plot No. C/1, G Block Bandra-Kurla Complex, To accelerate and optimise the effective and GAIL Gas Limited Bandra (East) economic use of Natural Gas and its fractions to the 16, Bhikaiji Cama Place Mumbai - 400051 benefit of national economy. R.K. Puram, New Delhi - 110066 London Stock Exchange (GDRs) 10, Paternoster Square London - EC4M 7LS(U.K.) Annual Report 2010-2011 Statutory Auditors Registrar and Share Transfer Agent M/s Rasool Singhal & Co. Chartered Accountants, Aligarh MCS Limited F-65, Okhla Industrial Area Phase- I, New Delhi - 110020 M/s M.L. Puri Chartered Accountants, New Delhi Bankers Cost Auditors State Bank of India Corporate Accounts Group Branch M/s Rohit J Vora Cost Accountants, Vadodara Jawahar Vyapar Bhavan, 11th & 12 th Floors M/s R. Nanabhoy & Co. Cost Accountants, Mumbai Tolstoy Marg, New Delhi - 110001 M/s M Goyal & Co. Cost Accountants, Jaipur ICICI Bank Ltd. 9A, Phelps Building, M/s Chandra Wadhwa & Co. Cost Accountants, New Delhi Connaught Place New Delhi - 110001 M/s Dhanajay V. Joshi & Cost Accountants, Pune Associates HDFC Bank Ltd. 1st Floor, Kailash Building 26, Kasturba Gandhi Marg M/s DGM & Associates Cost Accountants, Guwahati New Delhi-110001 M/s Mani & Co. Cost Accountants, Kolkata 03 M/s K.L. Jaisingh & Co. Cost Accountants, Noida Registered Office Company Secretary 16, Bhikaiji Cama Place Shri N.K. Nagpal R.K. Puram, New Delhi - 110066 Subsidiary Companies Stock Exchanges where Shares/GDRs of the Company are listed GAIL Global (Singapore) Pte Limited Bombay Stock Exchange Limited Floor 1, Phiroze Jeejeebhoy Towers, 5 Shenton Way, #23-03 UIC Building, Singapore - 068808 Dalal Street, Mumbai-400001 Brahmaputra Cracker and Polymer Limited National Stock Exchange of Exchange Plaza, Hotel Brahmaputra Ashok, M.G.Road, Guwahati, Assam-781001 India Limited Plot No. C/1, G Block Bandra-Kurla Complex, GAIL Gas Limited Bandra (East) 16, Bhikaiji Cama Place Mumbai - 400051 R.K. Puram, New Delhi - 110066 London Stock Exchange (GDRs) 10, Paternoster Square London - EC4M 7LS(U.K.) Annual Report 2010-2011 Letter from CMD, GAIL Dear Shareowners, increasing the demand for clean Exploration & Production efforts, make a meaningful difference in the energy sources like natural gas. In order continued expansion of pipeline lives of many people in the areas of its Our business philosophy is to grow in a Greetings! to leverage the opportunities, your networks, and increasing capacities in operations and beyond. Company is taking effective steps to petrochemicals. Besides all of this, city manner that is sustainable for the Congratulations on yet another consolidate its position in the entire gas projects will continue to remain at To conclude, your support is a great economy, the stakeholders, the successful year of growth and gas value chain. The underlying the heart of our initiatives to take clean motivator for Team GAIL and it is our achievements for your Company. The philosophy of your Company is to energy to the common man. Strategy constant endeavour to drive your community and the environment. top-line grew by a remarkable 30% grow in a manner that is sustainable 2020 also aims to tap emerging Company ahead in a faster and to reach ` 32,459 crore and the for the economy, stakeholders, potential in gas-based power, responsible manner. I am confident market capitalization crossed ` 58,000 community and environment. renewable power from wind and solar, that your Company will cross many crore by the end of the year. We are unconventional energy sources like new milestones in the years to come consistently moving forward towards The implementation of the projects Shale Gas and Coal Gasification. Thrust by leveraging its strengths and tapping greater heights. and initiatives as per the existing would also be given to seeding in on new opportunities. Your Strategic Plan, 2007-2012 is moving as investment in emerging technologies continued trust in the Company and Globally, there is an increasing thrust envisaged. With the execution of on- like Fuel cells and Hydrogen. This will our unstinting efforts to excel will on developing cleaner energy sources going cross-country gas pipeline enable your Company to play an continue to take your Company onto and clearly, the spotlight is on natural projects, your Company will augment important role in developing the share more rewarding journeys ahead. gas. In Asia itself, gas consumption in its pan-India presence with a total of cleaner energy in India’s overall China and India grew at a galloping pipeline network of about 14,500 kms. energy mix. 05 rate of 21.8% and 21.5% respectively, The doubling of capacity of gas-based in the year 2010. These two emerging Petrochemical Plant at Pata, at an At the organizational level, major energy powerhouses – China and investment of ` 8,140 crore, is also on emphasis is being given to capability India – are re-defining the Asian gas fast-track. building and continuous re-engineering (B.C. Tripathi) markets. In this scenario, it will be of work processes in order to develop Chairman and Managing Director particularly gratifying for you to know Going forward, in order to accelerate robust enterprise architecture and that your Company has been ranked your Company’s growth in the next to enhance the quality of decision as “Asia’s No. 1 Gas Utility decade, Strategy 2020 has been making with reduced cycle-times. Company”, and globally, “No. 2 Gas drawn-up by the Board. One of the key Your Company will continue to Utility Company“, in Platts Top 250 targets that your Company has set for strengthen the knowledge Energy Company rankings. It itself under this strategic plan is to management system in the underscores the rise of Asian reach a turnover of ` 1 lakh Crore organization through greater emphasis companies among global energy by 2016-17. on IT and technology. majors and the strong position of your Company in the global gas-utility The key strategic directions that have Continuing with its value of space. emerged for your Company from this ‘business-beyond-profits', your strategic plan include, strengthening Company remains committed to the India is slated to become the world’s its core business areas in natural gas vision of achieving sustainable growth rd 3 largest consumer of energy by value chain through LNG sourcing, for the nation. With increased 2025, and growing climate change securing equity gas through Mergers & allocation and well-structured CSR concerns will play a significant role in Acquisitions, an aggressive push to activities, your Company continues to Annual Report 2010-2011 increasing the demand for clean Exploration & Production efforts, make a meaningful difference in the energy sources like natural gas.