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2.15 Provision and Contingencies
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be
reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
2.16 Employee benefits
a. Short-term obligations
Liabilities for wages and salaries, including other monetary and non-monetary benefits that are expected to be settled wholly within 12 months after the end of the reporting period are recognised and measured at the undiscounted amounts expected to be paid when the liabilities are settled.
b. Post-employment obligations (Defined Benefit Obligations)
The Company operates the following postemployment schemes:
• defined benefit plans - gratuity and postretirement medical benefit scheme
• defined contribution plans such as provident fund.
Defined Benefit Plans - Gratuity obligations and postretirement medical benefit obligations
The liability or asset recognised in the balance sheet in respect of gratuity is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
settled wholly within 12 months after the end of the reporting period are measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period, using the projected unit credit method. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in the statement of profit and loss.
2.17 Segment reporting
The board of directors assesses performance of the Company as Chief Operating Decision Maker.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM).
The Company has a single operating segment that is “Sale of Natural Gas”. Accordingly, the segment revenue, segment results, segment assets and segment liabilities are reflected in the financial statements as at and for the financial year ended March 31, 2024.
2.18 Earnings per share
Basic earnings per share is computed by dividing the profit after tax before other comprehensive income by the weighted average number of equity shares outstanding during the financial year. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.
2.19 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company's accounting policies, which are described in note 2, the management of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
In the following areas the management of the Company has made critical judgements and estimates
Useful lives of property, plant and equipment
The Company reviews the useful lives and carrying amount of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Provision for Capital Work in Progress
The Company has a defined policy for provision of slow and nonmoving capital work in progress (CWIP) based on the ageing of CWIP. The Company reviews the policy at regular intervals.
Estimation of defined benefit obligation
The company has defined benefit plans for its employees which are actuarially valued. Such valuation is based on many estimates and other factors, which may have a scope of causing a material adjustment to the carrying amounts of assets and liabilities.
Recognition of deferred tax assets
Deferred tax asset is recognised for all the deductible temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible temporary difference can be utilised. The management assumes that taxable profits will be available while recognising deferred tax assets.
Provision for Inventory including Capital Inventory
The Company has a defined policy for provision of slow and non-moving inventory based on the ageing of inventory. The Company reviews the policy at regular intervals.
Recognition and measurement of other provisions
The recognition and measurement of other provisions are based on the assessment of the probability of an outflow of resources and on past experience and circumstances known at the balance sheet date. The actual outflow of resources at a future date may therefore vary from the figure so provided and included as liability.
Recognition and measurement of unbilled gas sales revenue
In case of customers where meter reading dates for billing is not matching with reporting date, the gas sales between last meter reading date and reporting date has been accrued by the company based on past average sales. The actual sales revenue may vary compared to accrued unbilled revenue so included in Sale of natural gas and classified under current financial assets.
31. Disclosures under Indian Accounting Standards:
31.1 Employee Benefit Obligations
a. Short-term Employee Benefits
These benefits include wages and salaries, including other monetary and non-monetary benefits, compensated absences which are either non-accumulating or accumulated and expected to be availed within twelve months after the end of the reporting period.
b. Long-term Employee Benefits
i) Defined Contribution Plans
The Company makes Provident Fund and National Pension Scheme (NPS) contributions, which are defined contribution plans, for qualifying employees. Company has no further payment obligations once the contributions have been paid. Under the Provident Fund Schemes and NPS, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The contributions payable to these plans by the Company are in compliance with the rates specified in the rules of the schemes. The Company recognised H 7.85 crore (previous year H 6.79 crore) as an expense and included in Note 27 - Employee Benefits Expense ‘Contribution to Provident Fund and Other Fund’s in the Statement of Profit and Loss for the year ended March 31, 2024.
ii) Defined Benefit Plans
The Company offers the following defined benefit schemes to its employees:
- Gratuity (refer note 27): The Company’s gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, Employee who has completed five years of service is entitled to specific benefit, the plan is funded.
- Post-Retirement Medical Benefit Plan (PRMB) (refer note 27): The Company has provided Post-Retirement Medical Scheme. Under the scheme eligible retired employees of the company and their spouse are provided medical claims for hospitalisation through insurance policy coverage.
The following table sets out the funded/unfunded status of the defined benefit schemes and the amount recognised in the financial statements:
a. Fair Value Hierarchy of Financial Assets and Liabilities
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are (i) recognised and measured at fair value and (ii) measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, Company has classified its financial instruments into three levels prescribed under the accounting standards below:
Level 1: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company can access at the measurement date.
Level 2: Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Level 3 inputs are unobservable inputs for the asset or liability.
Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period. There is no Level 1 and Level 3 type Financial Assets or Financials Liabilities as on 31st March 2024.
(i) Measured at Fair Value Through Profit or Loss (FVTPL)
The company has investments in debt mutual funds which are not quoted in the active market. These debt mutual funds are subsequently measured at FVTPL as per the closing NAV statement provided by the mutual fund house. The corresponding unrealized gain or loss on fair valuation is recorded in profit and loss account under other income. Accordingly, such debt mutual funds fall under fair value hierarchy level 2. The fair value of these mutual funds as at March 31, 2024 is H 968.38 crore (previous year H 717.21 crore).
(ii) Measured at Fair Value Through Other Comprehensive Income (FVOCI)
The company has investments in Compulsorily Convertible Preference Shares (CCPS) which are not quoted in the active market. These CCPS are subsequently measured at FVOCI on the basis of fair valuation on the reporting date. The corresponding unrealized gain or loss on fair valuation is recorded in OCI. The fair value of these CCPS as at March 31, 2024 is H 50.00 crore (previous year H Nil).
The fair values of all current financial assets and liabilities including trade receivables and unbilled revenue, cash and cash equivalents, bank balances, bank fixed deposits, corporate fixed deposits, security deposits, trade payables, lease liabilities, Payables for purchase of property, plant and equipment and other current financial assets and liabilities are considered to be the same as their carrying values, due to their short term nature. The fair values of all non-current financial assets and liabilities including security deposits, trade receivables and lease liabilities and other non-current financial assets and liabilities are considered to be the same as their carrying values, as the impact of fair valuation is not material.
b. Capital Management
Total equity as shown in the balance sheet includes equity share capital, general reserves and retained earnings. There are no interest bearing loans and borrowings by the Company.
The Company aims to manage its capital efficiently to safeguard its ability to continue as a going concern and to optimise returns to its shareholders.
The Company's policy is to maintain a stable and strong capital structure with a focus on total equity so as to maintain investor, creditors and market confidence and to sustain future development and growth of its business. The Company will take appropriate steps in order to maintain, or if necessary adjust, its capital structure. The management monitors the return on capital as well as the level of dividends to shareholders.
c. Financial risk management
Company’s activities expose it to credit risk, liquidity risk and market risk. This note explains the sources of risk which the company is exposed to and how the company manages the risk and its impact on the financial statements.
(i) Credit Risk
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Company. The credit risk arises from trade receivables, security deposits, cash and cash equivalents and deposits with banks and corporates.
Trade receivables
The company supplies natural gas to customers.
Concentrations of credit risk with respect to trade receivables are limited as majority credit sales are made to high credit worthy entities and balance credit sales are against securities in the form of customer security deposits, bank guarantees and letter of credit. All trade receivables are reviewed and assessed for default on regular basis. Our historical experience of collecting receivables, supported by the level of default, is that credit risk is low.
For trade receivables, except for specifically identified cases, Company follows a simplified approach where provision is made as per the ageing buckets which are designed based on historical facts and patterns.
31.4 Financial Instruments (Fair Value Measurements): (Contd..)
Other financial assets
The Company maintains exposure in security deposits, reinstatement charges receivable, cash and cash equivalents and term deposits with banks and corporates.
In case of security deposits and reinstatement charges, majority of which are given to Municipal authorities (which are government controlled entities) towards pipeline laying activity, the credit risk is low. However, historically the company has experienced a delay/ non receipt of these amounts and hence allowances have been taken into account for the expected credit losses of these security deposits and reinstatement charges.
In case of bank /corporate fixed deposits regular quotations for interest rate are invited and based on best offered rate the bank deposits are placed with banks/corporates having reasonably high net worth. Exposures of deposit placed are restricted to limits per bank/corporate as per policy and limits are actively monitored by the Company. We understand that the credit risk is very low to moderate for such deposits.
The Company’s maximum exposure to credit risk is the carrying value of each class of financial assets as disclosed in note 4,5,6,9,10,11 and 12.
(ii) Liquidity Risk
Liquidity risk is the risk that the Company will find it difficult in meeting its obligations associated with its financial liabilities on time.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying business, Company’s treasury maintains flexibility in funding by maintaining availability under cash and cash equivalents, bank fixed deposits, corporate fixed deposits and mutual funds.
Management monitors rolling forecasts of the Company’s liquidity position and cash and cash equivalents on the basis of expected cash flows.
The tables below analyses the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities.
Foreign Exchange Risk
Company is exposed to foreign exchange risk arising from direct transactions in foreign currency and also indirectly through transactions denominated in foreign currency though settled in functional currency (INR), primarily with respect to the US Dollar (USD). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the company’s functional currency (INR).
The risk is measured through a forecast of highly probable foreign currency cash flows. As per the risk management policy, the foreign currency exposure is unhedged however managed partially through natural hedge under gas sales contracts and balance through adjustment in sales prices.
(iv) Interest Rate Risk:
There are no interest bearing borrowings and hence company is not exposed to interest rate risk presently. The Company’s investments in fixed deposits with banks/corporates and liquid debt mutual funds are for short durations, and therefore do not expose the Company to significant interest rates risk.
31.5 Leases - Ind AS 116:
Company as a Lessee
The company has various operating lease arrangements for hiring of vehicles, equipment, offices, stores premises and land. Operating leases relate to land with lease term of 17 to 116 years. The Company does not have an option to purchase at the end of the lease term.
The following are the practical expedients availed by the Company:
• Discount rate of 9.00% per annum has been applied to leases entered till Jun’21, thereafter discount rate of 7.55% per annum till September’22 and discount rate of 8.85% per annum from October’22 has been applied which is likely incremental rate of borrowing.
31.8 Capital and other commitments
a. Estimated amount of contracts to be executed for project execution including labour and purchase of material relating to construction of pipeline network and CNG outlets not provided for (net of advances) H 680.13 crore (previous year H 468.52 crore).
b. All term contracts for purchase of natural gas with suppliers, has contractual obligation of “take or pay” for shortfall in contracted Minimum Guaranteed Quantity (MGQ) as specified in individual contracts. Estimation of these MGQ commitments is dependent on nomination of quantity by suppliers and actual purchase by the company. As both the factors “quantity nomination by supplier” and “quantity to be purchased by the company”, are not predictable, MGQ commitment is not quantifiable.
c. The Company has issued Corporate Guarantees of H 566.00 crore (Previous year H Nil) on behalf of Unison Enviro Private Limited to the lenders for Rupee term loan and non-fund based facility. The amount of Rupee term loans outstanding as on March 31, 2024 against these Corporate Guarantee is H Nil and non-fund based facility availed is J 21.45 crore
31.9 Contingent Liabilities (to the extent not provided for)
Claims against the Company not acknowledged as debts in respect of which the Company does not expect outflow of resources
J 364.41 crore (previous year H 372.18 crore), includes:
31.9 Contingent Liabilities (to the extent not provided for) (Contd..)
iv) GAIL (India) Limited (GAIL) raised demand in April 2014 for transportation tariff with respect to ONGC’s Uran Trombay Natural Gas Pipeline (UTNGPL) pursuant to demand on them by Oil and Natural Gas Corporation Limited (ONGC), based on the Petroleum and Natural Gas Regulatory Board (PNGRB) order dated December 30, 2013, determining tariff for ONGC’s UTNGPL as a common carrier. The total demand raised by GAIL for the period from November 2008 till July 2021 was H 331.80 Crore. The Company disputed the demand with GAIL based on contractual provisions and since the transportation charges are to be paid by a third-party user for utilisation of UTNGPL to ONGC as common carrier and not for transportation of its own gas by ONGC.
The Company filed an appeal with the PNGRB in February 2015, the same was dismissed in October 2015. The Company filed a writ petition, in November 2015, with the Hon’ble High Court of Delhi. The Court advised the Company to file an appeal with Appellate Tribunal for Electricity (APTEL) being Appellate Authority of the PNGRB in November 2016. The matter was heard by APTEL and remanded back to the PNGRB on technical grounds in September 2019. PNGRB in March 2020, had passed an Order which directed the Company and GAIL to pay the disputed transportation tariff to ONGC. The Company filed an Appeal before APTEL against the PNGRB order in April 2020. The matter was heard by APTEL in October 2020. APTEL remanded back the case in July 2021 to PNGRB for proper adjudication. The matter was heard by PNGRB in April 2022 and an order was passed in September 2022 directing the Company to pay the disputed transportation tariff for the period 2014 to 2021 as per the transportation tariff fixed by PNGRB for UTNGPL. The Company had filed a writ before the Hon’ble High Court of Delhi challenging the PNGRB’s September 2022 order. The Hon’ble High Court of Delhi vide its order dated December 13, 2022 has stayed the recovery against the PNGRB order and has directed the Company to deposit a sum of H 50 Crore with GAIL by February 15, 2023, which was deposited with GAIL on February 14, 2023. The Hon’ble High Court has rescheduled the next hearing to July 22, 2024.
Based on the legal opinions obtained, the Company believes that it has a strong case and does not expect any outflow of resources. Hence, no provision has been recognised.
v) Claims from consumers are not acknowledged as debts H 0.49 crore (previous year H 0.29 crore).
vi) The revision of Trade Discount with the Oil Marketing Companies (OMCs) is pending from earlier years. In November 2021, The Ministry of Petroleum & Natural Gas (MoP&NG) issued guidelines pertaining to revised Trade Discounts. Basis the guidelines issue by MoP&NG and negotiation with OMCs, revised Trade Discounts are now agreed with OMCs with effect from 1st April 2023, however, for earlier years, the liability has been provided to the extent considered appropriate by the Company, pending final settlement.
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