3.16 Provisions, Contingent Liabilities, Contingent Assets and Commitments

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Contingent assets are disclosed in the Financial Statements by way of Notes to Accounts when an inflow of economic benefits is probable.

Contingent liabilities are possible obligations whose existence will only be confirmed by future events not wholly within the control of the Company, or present obligations where it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are disclosed on the basis of judgment of the management / independent experts in the Financial Statements by way of Notes to Accounts, unless possibility of an outflow of resources embodying economic benefit is remote. [Refer para 4.3].

Contingent assets and contingent liabilities are reviewed at each balance sheet date to reflect the current management estimate.

Capital and Other Commitments disclosed are in respect of items which in each case are above the threshold limit. [Refer para 4.3].

3.17 Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity or a contract that will or may be settled in the entity's own equity instruments and is a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity's own equity instruments.

Initial recognition and measurement

Financial Assets and Financial Liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of Financial Assets and Financial Liabilities (other than Financial Assets and Financial Liabilities at fair value through profit or loss) are added to or deducted from the fair value of the Financial Assets or Financial Liabilities, as appropriate, on initial recognition.

Transaction costs directly attributable to the acquisition of Financial Assets or Financial Liabilities at fair value through profit or loss are recognised immediately in Statement of Profit and Loss. [Refer para 4.3].

3.18. Financial Assets

Subsequent Measurement

All recognised Financial Assets are subsequently measured in their entirety at either amortised cost or fair value, based on the business model for managing the financial assets and the contractual cash flow characteristics.

(i) Financial Assets at Amortised Cost

Financial Assets are subsequently measured at amortised cost using the effective interest method if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the Financial Asset give rise on specified dates to Cash Flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

(ii) Financial Assets at Fair value through Other Comprehensive Income (FVOCI)

Financial Assets are measured at fair value through Other Comprehensive Income if these Financial Assets are held within a business whose objective is achieved by both selling Financial Assets and collecting contractual Cash Flows, the contractual terms of the Financial Asset give rise on specified dates to Cash Flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

(iii) Financial Assets at Fair value through Profit or Loss (FVTPL)

Financial Assets are measured at fair value through profit or loss unless it is measured at amortised cost or at fair value through Other Comprehensive Income.

After initial measurement, any fair value changes including any interest income, impairment loss and other net gains and losses are recognized in the Statement of Profit and Loss.

(iv) Cash and Cash Equivalents

The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be Cash Equivalents. Cash and Cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.

(v) Equity Investments:

Equity Investments (Other than Subsidiaries, Joint Ventures (JV) and Associates):

All Equity Investments in the scope of Ind AS 109 are measured at Fair value. Equity Instruments which are held for trading are classified as at FVTPL. For all other such equity investments, the Company decides to classify the same either as FVOCI or FVTPL. The Company makes such election on an instrument-byinstrument basis. The classification is made on initial recognition and is irrevocable.

Equity Investments (In subsidiaries, Joint Ventures (JV) and Associates):

Investment in Subsidiaries, Joint Ventures (JV) and Associates are accounted for at cost in Standalone Financial Statements.

(vi) Impairment of Financial Assets

The Company assesses at each Balance Sheet date whether a Financial Asset or a group of Financial Assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to 12 month expected credit losses or at an amount equal to lifetime expected losses, if the credit risk on the financial asset has increased significantly since initial recognition.

(vii) Derecognition of Financial Assets

The Company derecognises a Financial Asset when the contractual rights to the cash flows from the asset expire, or when it transfers the Financial Asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a Financial Asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in the Statement of Profit and Loss.

3.19. Financial Liabilities and Equity Instruments

3.19.1 Financial Liabilities Subsequent measurement

(i) Financial liabilities at amortised cost:

Financial Liabilities are measured at Amortised Cost at the end of subsequent accounting periods. The carrying amounts of Financial Liabilities that are subsequently measured at amortised cost are determined based on the Effective Interest method. Interest expense that is not capitalised as part of costs of an asset is included in the 'Finance Costs' line item.

(ii) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include derivatives. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss.

(iii) Embedded derivatives

Derivatives embedded in all other host contract except for an asset are separated only if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host and are measured at fair value through profit or loss. Embedded derivatives closely related to the host contracts are not separated.

Derecognition of Financial Liabilities

The Company derecognises Financial Liabilities when, and only when, the Company's obligations are discharged, cancelled or have expired. The difference between the carrying amount of the Financial Liability derecognised and the consideration paid and payable is recognised in the Statement of Profit and Loss.

3.19.2 Equity Instruments

An Equity Instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received. Incremental costs directly attributable to the issuance of new ordinary equity shares are recognized as a deduction from equity, net of tax effects.

3.20. Financial Guarantee

Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of

i. The amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and

ii. The amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of Ind AS 115.

When the Company receives Financial Guarantee from its holding company, initially it measures guarantee fees at the fair value. The Company records the difference between the fair value of Corporate Guarantee received and the consideration paid by the company as “Deemed Equity” from Holding Company with a corresponding asset recorded as prepaid guarantee charges or by debiting to statement of Profit and Loss as the case may be. Such deemed equity is presented under the head 'Other Equity' in the Balance Sheet.

Prepaid guarantee charges are recognized in the Statement of Profit and Loss over the period of Financial Guarantee received.

4 Critical Accounting Judgments, Assumptions and Key Sources of Estimation Uncertainty

Inherent in the application of many of the Accounting Policies used in preparing the Financial Statements is the need for management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual outcomes could differ from the estimates and assumptions used.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.

Key source of judgments, assumptions and estimation uncertainty in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of useful lives of Property, Plant and Equipment, Employee Benefit Obligations, Provision for Income Tax and measurement of Deferred Tax Assets.

4.1 Critical judgments in applying accounting policies

The following are the critical judgements, apart from those involving estimations (Refer note 4.2 below), that the Management have made in the process of applying the Company's accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.

(a) Determination of Functional Currency

Currency of the primary economic environment in which the Company operates (“the Functional Currency”) is Indian Rupee (?) in which the company primarily generates and expends cash. Accordingly, the management has assessed its Functional Currency to be Indian Rupee (').

4.2 Assumptions and key sources of estimation uncertainty

Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.

a) Useful life of Property, Plant and Equipment and Intangible Assets

Management reviews its estimate of the useful lives of PPE and Intangible Assets at each reporting date, based on the future economic benefits expected to be consumed from the Assets.

b) Defined Benefit Obligation (DBO)

Management's estimate of the DBO is based on a number of critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the DBO amount and the annual defined benefit expenses.

c) Provision for Income Tax

Significant judgements are involved in determining the provision for Income Taxes, including amount expected to be paid/recovered for uncertain tax positions.

d) Recognition of Deferred Tax Assets

The extent to which Deferred Tax Assets can be recognized is based on an assessment of the probability of the Company's future taxable income against which the Deferred Tax Assets can be utilized. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties.

e) Leases

Identifying whether a Contract includes a Lease

The Company enters into hiring/service arrangements for various assets/services. The Company evaluates whether a contract contains a lease or not, in accordance with the principles of Ind AS 116. This requires

significant judgments including but not limited to, whether asset is implicitly identified and substantive substitution rights available with the supplier, decision making rights with respect to how the underlying asset will be used, economic substance of the arrangement, etc.

Determining Lease Term (Including Extension and Termination Options)

The Company considers the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. Assessment of extension/termination options is made on lease by lease basis, on the basis of relevant facts and circumstances. The lease term is reassessed if an option is actually exercised. In case of contracts, where the Company has the option to hire and de-hire the underlying asset on some circumstances (such as operational requirements), the lease term is considered to be initial contract period.

Identifying Lease Payments for Computation of Lease Liability

To identify fixed (including in-substance fixed) lease payments, the Company consider the non-operating day rate/standby as minimum fixed lease payments for the purpose of computation of Lease Liability and corresponding Right of Use Assets.

Low Value Leases

Ind AS 116 requires assessment of whether an underlying asset is of low value, if lessee opts for the option of not to apply the recognition and measurement requirements of Ind AS 116 to leases where the underlying asset is of low value. For the purpose of determining low value, the Company has considered nature of assets and concept of materiality as defined in Ind AS 1 and the conceptual framework of Ind AS which involve significant judgment.

Determining Discount Rate for Computation of Lease Liability

For computation of Lease Liability, Ind AS 116 requires lessee to use their incremental borrowing rate as discount rate if the rate implicit in the lease contract cannot be readily determined.

For leases denominated in Company's Functional Currency, the Company considers the incremental borrowing rate to be Corporate Bond Rates for similar rated Organizations.

4.3 The Company has adopted materiality threshold limits in the preparation and presentation of Financial Statements as given below:

5.1 Property, Plant and Equipment pledged as security [refer note 22]:

Loan from OIDB is secured by way of first ranking pari passu charge by way of hypothecation / mortgage only on Property, Plant & Equipment / projects financed out of loan proceeds of OIDB.

Working capital borrowings from consortium banks are secured by way of first ranking pari passu charge by way of hypothecation of Company's stocks of Raw Material, Finished Goods, Stock-in-Process, Stores, Spares, Components, Trade receivables, Outstanding Money Receivables, Claims, Bills, Contract, Engagements, Securities both present and future and further secured by second ranking pari passu charge over companies movable and immovable property (all Property, Plant & Equipment) both present and future.

Loan from EXIM Bank is secured by first ranking pari passu charge by way of hypothecation / mortgage on moveable fixed assets, lands and other immovable properties, both present and future.

5.2 The Company was eligible for certain economic benefits such as exemptions from entry tax, custom duty etc. on import/local purchase of capital goods in earlier years. The Company had accounted benefits received for custom duty and entry tax on purchase of Property, Plant and Equipment as Government grants. The Company had adjusted the cost of Property, Plant and Equipment as at April 1, 2017 and credited deferred Government grant amounting to ' 3,618.21 million. Similarly, during the current financial year the company has received economic benefits of ' 50.88 million included in the cost of Property, Plant and Equipment by crediting deferred Government Grant. The deferred Government grant is amortised over the remaining useful life of the Property, Plant and Equipment amounting to ' 162.60 million for the year ended March 31, 2024 (Year ended March 31, 2023'159.02 million).

5.3 Exchange Rate Fluctuation Loss / (Gain) [Net] capitalised:

Additions/(adjustments) to Plant and Equipment includes ' (0.06) million [Year ended March 31, 2023'24.36 million] in relation to exchange rate fluctuation loss / (gain) [net] capitalised as per para D13AA of Ind AS 101.

5.4 Disclosure as per Ind AS 8 - 'Accounting Policies, Changes in Accounting Estimates and Errors' and Ind AS 1 'Presentation of Financial Statements'

During the current financial year, the Company has changed the accounting policy regarding de-recognition of Property, Plant and Equipment (PPE). Considering the impact being immaterial in applying the change in accounting policy prior to FY 2023-24, the company has considered the said changes from the beginning of the current financial year. The change in accounting policy has resulted in increase in profit before tax for FY 202324 by ' 98.55 million. [refer note 16.3]

5.5 Disclosure as per Ind AS 8 - 'Accounting Policies, Changes in Accounting Estimates and Errors' and Ind AS 1 'Presentation of Financial Statements'

During the current financial year, the Company has changed the accounting policy on Property, Plant and Equipment (PPE) relating to Capital Stores and Spares. Considering impracticability to determine the cumulative effect of applying the change in accounting policy prior to FY 2023-24, the company has considered the impact of said changes from the beginning of the current financial year. This has resulted in additional capitalization of ' 1,607.42 million during the year. The same is shown as PPE and capital stores (under Capital Work in Progress) amounting to ' 823.89 million and ' 783.53 million respectively. This has resulted in decrease in profit before tax for FY 2023-24 by ' 70.30 million.

Further, during the current financial year, based on the previous experience the Company has revised its materiality threshold limit (accounting estimate) for Capitalization of overhaul and repair expenses to give more reliable information of the financial statement. This has resulted in increase in profit before tax for FY 2023-24 by ' 2,191.93 million. Overall future impact of the said change in accounting estimate is not disclosed considering impracticability in assessing the effect of same.

5.6 Freehold land includes land measuring 2.37 acres situated in the state of Gujarat having gross carrying amount of ' 0.91 million. The said land is currently in the possession of the company, some trespassing has been observed and company is contemplating appropriate action in this regard.

6.1 Includes leasehold lands where the ownership will be transferred to the Company at the end of the lease period. These leasehold lands are not depreciated.

6.2 Right-of-Use Assets includes assets having gross carrying amount of ' 2,571.49 million (As at March 31, 2023 ' 1,869.07 million), which is in possession of the Company towards which formal lease / sale deeds are yet to be executed [refer note 48.1].

The above includes land pertaining to Refinery Land (Phase I and II) measuring to 3.47 acres, for which company has informed to Karnataka Industrial Area Development Board (KIADB) to take suitable action to surrender / de-notify same as it is under encroachment. At present the value of the said land is not ascertainable and expected amount is insignificant.

6.3 An amount of ' 2.40 million (Year ended March 31, 2023'0.71 million) towards depreciation charged to Right-of-Use Asset has been capitalized as component of cost of Capital Work-in-Progress (CWIP) [refer note

7.1 Additions to CWIP includes borrowing costs amounting to ' 12.78 million (For the year ended March 31, 2023 ' 23.38 million) and allocated / will be allocated to different class of assets. The rate used to determine the amount of borrowing costs eligible for capitalisation was 7.56 % (For the year ended March 31, 2023 was 5.22%) which is the effective interest rate on borrowings.

7.2 An amount of ' 0.03 million (Year ended March 31, 2023 ' 0.90 million) towards Finance cost on lease liability has been capitalized as a component of cost of Capital Work-in-Progress (CWIP).

7.3 An amount of ' 2.40 million (Year ended March 31, 2023'0.71 million) towards depreciation charged to Right-of-Use Asset has been capitalized as a component of cost of Capital Work-in-Progress (CWIP).

7.4 Capital Work-in-Progress (CWIP) includes interest on borrowings pertaining to Unsecured Rupee Term Loan for Capex [refer note 22.7.1] and Unsecured Foreign Currency Term Loan (FCNR) (B) for Capex [refer note 22.8].

16.1 The cost of inventories recognized as an expense includes ' Nil million (Year ended March 31, 2023 ' Nil million) in respect of write down of inventories to net realisable value. There has been no reversal of such write down in current year and previous year.

16.2 Disclosure as per Ind AS 8 - 'Accounting Policies, Changes in Accounting Estimates and Errors'

During the current financial year, the basis adopted for arriving at the estimate for the provision for Nonmoving and Slow Moving inventories has been reviewed and changed considering the latest available information relating to consumption pattern based on the experience and judgement. The impact on account of above change in estimate has decreased the provision (net), resulting increase in profit before tax by ' 104.08 million for FY 2023-24. Overall future impact of the said change in accounting estimate is not disclosed considering impracticability in assessing the effect of same.

16.3 Disclosure as per Ind AS 8 - 'Accounting Policies, Changes in Accounting Estimates and Errors' and Ind AS 1 'Presentation of Financial Statements'

During the current financial year, the Company has changed its accounting policy for de-recognition of Property, Plant and Equipment (PPE), consequent to same inventorization of Scrap material generated out of the discarded PPE has now been discontinued. Considering the impact being immaterial in applying the change in accounting policy prior to financial year 2023-24, the company has considered the said changes from the beginning of the current financial year. Consequent to this opening stock of scrap material amounting to '122.42 million has now been adjusted against the Sale of Scrap under Other Operating revenue. The above changes resulted in reduction in profit before tax for FY 2023-24 by ' 196.65 million [refer note 5.4, 28.2 and 32.2].

21.1 An amount of ' 63.76 million as at March 31, 2024 (As at March 31, 2023 ' 51.99 million) shown as deemed equity which denotes the difference between the fair value of Corporate Guarantee received from Holding Company and the consideration paid by the company.

21.2 The Company created capital redemption reserve on redemption of preference share capital during the financial years 2011-12 and 2012-13.

21.3 The Company created securities premium on issue of equity share capital and the same can be utilized as per the requirement of the Companies Act, 2013.

21.4 The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the general reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the general reserve will not be reclassified subsequently to Statement of Profit and Loss.

21.5 Other reserve represents excess consideration paid towards acquisition of non-controlling interest in erstwhile subsidiary company ONGC Mangalore Petrochemicals Limited (OMPL) from non-controlling share holders.

21.6 The amount that can be distributed by the Company as dividend to its equity shareholders is determined considering the requirements of the Companies Act, 2013 and the dividend distribution policy of the Company. Thus, the amount reported in General Reserve is not entirely distributable.

21.7 On January 22, 2024, the Company had declared an interim dividend of ' 1.00 per share (10%) which has since been paid.

In addition to above for the year ended March 31, 2024, the Board of Directors has proposed a final dividend of ' 2 per share (20%) be paid on fully paid-up equity shares. This final dividend shall be subject to approval by shareholders at the ensuing Annual General Meeting and has not been included as a liability in these financial statements. The proposed equity dividend is payable to all holders of fully paid equity shares. The total estimated equity dividend to be paid is ' 3,505.20 million.

21.8 The company has a dividend distribution policy in line with SEBI (LODR) Regulation, 2016, Department of Investment and Public Asset Management (DIPAM) guidelines, Provisions of Companies Act, 2013, Companies (Declaration & Payment of Dividend) Rules, 2014 and other guidelines to the extent applicable. As per the guidelines with respect to payment of dividend issued by DIPAM, Government of India, the company is required to pay a minimum annual dividend of 30% of PAT or 5% of the net-worth, whichever is higher subject to maximum dividend permitted under extant legal provisions. Nonetheless, CPSEs are expected to pay the maximum dividend permissible under the Act under which a CPSE has set up, unless lower dividend proposed to be paid is justified after the analysis of the aspects on case to case basis viz. net-worth of CPSE and its capacity to borrow, Long Term Borrowings, CAPEX / Business Expansion needs, Retention of profit for further leveraging in line with the CAPEX needs; and Cash and Bank balance. Though the company endeavours to declare dividend as per these guidelines, during the Financial Year, considering Company's Capital Expenditure plans and loan repayments due in FY 2024-25 and cash position of the company, the Company did not pay/declare dividends as prescribed by the DIPAM. The dividend as per DIPAM guidelines works out to ' 10,787.81 million and ' 7,915.18 million for FY 2023-24 and FY 2022-23 respectively against which ' 5,257.80 million and ' Nil million was paid / proposed to be paid respectively [Refer Note No. 21.7].

The Company has represented on June 19, 2023 to the Ministry of Petroleum and Natural Gas (MoPNG) being its Administrative Ministry, for grant of exemption from payment of dividend for FY 2022-23 as prescribed by DIPAM. The reply for same from MoPNG is awaited. In similar line, representation for grant of exemption for making lower dividend payment for FY 2023-24 will be made in due course to Ministry of Petroleum and Natural Gas (MoPNG).

22.10 Deferred Payment Liabilities - From Government of Karnataka :

22.10.1 Deferred payment liability against tax payable under Central Sales Tax (CST) represents amount payable on account of "Interest free loan" received from Government of Karnataka. This sum of the deferred CST loan against Central Sales Tax (CST) shall be repayable in five equal annual instalments without interest after the closure of deferment period.

22.10.2 The benefit of a Government loan at a below-market rate of interest is treated as a government grant (Ind AS 20). The Interest free loan is recognised and measured in accordance with Ind AS 109, Financial Instruments. The benefit of the Interest free loan is measured as the difference between the initial carrying value of the loan determined in accordance with Ind AS 109, and the proceeds received. The benefit is accounted for in accordance with this Standard.

22.11 Other Working Capital Loan :

Unsecured short term working capital loan from bank amounting to ' 19,131.33 million as at March 31, 2024 (As at March 31, 2023 ' 16,955.86 million) (Interest rate as at March 31, 2024 is in range of 7.10% to 7.50% and March 31, 2023 was in range of 6.84% to 7.15%).

22.12 The repayment schedules disclosed above are based on contractual cash outflows and hence will not reconcile to carrying amounts of such borrowings which are accounted at amortised cost.

22.13 "Regulation 50B of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations) read with Chapter XII of the NCS Master Circular on ‘Fund raising by issuance of debt securities by large corporates’ (LC Chapter), inter-alia, mandates that LCs shall raise not less than 25% of their incremental borrowings in a financial year through issuance of debt securities over a contiguous block of three years.

As per Clause 7.3 of the revised framework for fund raising issued vide SEBI circular no. SEBI/HO/DDHS/DDHS -RACPOD1/P/CIR/2023/172 dated 19.10.2023, Large Corporate (LC) shall endeavour to comply with the requirement of raising 25% of their incremental borrowings done during FY 2021-22, FY 2022-23 and FY 2023-24 respectively by way of issuance of debt securities till March 31, 2024, failing which, such LCs shall provide a one-time explanation in their Annual Report for FY 20232024.

The company was identified as Large Corporate in FY 2021-22 as per said SEBI circular. During FY 202223, the company received interest free VAT loan from Government of Karnataka amounting to ' 1,121.22 million and the same has been considered under incremental borrowing. In view of Clause 7.3 of the revised framework, the company is required to mandatorily raise at least 25% of its incremental borrowing during FY 2022-23, i.e. ' 280.31 million, through issuance of debt securities till March 31, 2024, else provide a one-time explanation in the Annual Report for FY 2023-2024.

On account of sufficient profitability/internal accruals, all long term fund requirements during FY 2023-24 have been met through internal generation of funds. In the absence of any long term loan requirement in FY 2023-24, the company was unable to comply with the requirement of mandatory raising of 25% of borrowings through issuance of debt securities.”

36.5.3 In compliance with the norms of the Karnataka Electricity Regulatory Commission, Company had made provision towards purchase of Renewable Energy Certificates (REC) in order to meet compliance requirement of Renewable Purchase Obligation (RPO) and accordingly, provision for same was recognized in the books amounting to ' 1,211.70 million till March 31, 2023.

During current financial year, the REC price has reduced substantially resulting in closing provision in the books pertaining to the said purchase obligation being restated to ' 459.97 million. Further, considering the legal opinion along with other favourable judgements in similar matter, during the current Financial Year, the company has re-assessed the requirement of carrying the provision in books of accounts and concluded that the provision is no longer required to be carried in the books. Accordingly, the said provision has now been reversed.

Besides, the company being a Co-generation Captive user, is not an obligated entity for RPO. Nevertheless, it has fulfilled the RPO requirements based on power generated from own solar roof top, captive plant gas turbine using refinery fuel gas, green energy purchase from open access and Heat Recovery Steam Generators. Considering the fact that the outflow of resource for the company is also remote, no contingent liability has been disclosed.

39 Leases

39.1 Obligations under finance leases

39.1.1 The Company has adopted Ind AS 116 ‘Leases’ effective April 1, 2019. The Company has entered into lease agreements for lands which have been classified as finance leases and the same is now disclosed as Right of Use Assets (ROU). The ownership of the lands will be transferred to the Company at the end of the lease term with nominal payment of administrative charges. The lease term ranges from 5 to 44 years.

Financial lease obligation as at March 31, 2024 is immaterial (As at March 31, 2023 : immaterial).

39.2 Operating lease arrangements

39.2.1 Leasing arrangements

The Company has adopted Ind AS 116 ‘Leases’ effective April 1, 2019. The Company has entered into arrangements for buildings, right of way and lease of land which have been classified as operating leases and the same is now disclosed as Right of Use Assets (ROU). The lease period for buildings ranges from 3 years to 10 years, for right of way ranges from 11 months to 30 years and for leases of land ranges from 11 months to 99 years. For leasehold land, the Company does not have option to purchase the land at the end of the lease period. Generally, the lease arrangements for land requires Company to make upfront payments at the time of the execution of the lease arrangement with annual recurring charges with escalations in annual lease rentals.

39.2.2 Payments recognized as an expense

The Company has adopted Ind AS 116 ‘Leases’ effective April 1, 2019 and wherever the lease is short term lease, lease for low value assets or having variable lease payments are not included in lease liabilities.

40 Employee Benefits :

Pursuant to the scheme of Amalgamation ('the Scheme') approved by the Ministry of Corporate Affairs (MCA) vide its order No. 24/3/2021-CL-III dated April 14, 2022, during the previous financial year, Human Resource (HR) integration of erstwhile subsidiary company ONGC Mangalore Petrochemicals Limited (OMPL) with the company was carried out w.e.f May 1, 2022 (effective date of the scheme). Consequently, with effect from previous financial year, the Employee Benefit Expenses including Actuarial valuation is accounted in the books of accounts factoring the financial implication on integrated basis.

Present Status of Provident Fund (Trust) :

(a) Based on the request from the Board of Trustees of Provident Fund of MRPL and also by the Company, EPFO has issued the order dated December 12, 2022, stating that the exemption granted to the establishment stands surrendered w.e.f December 31, 2022 and the company has to report the compliances as un-exempted establishment with effect from January 2023. Accordingly, from January 2023 onwards, the Company has started remitting the contribution towards the Provident Fund to EPFO along with the applicable administrative charges thereon.

(b) The company has transferred all its members' balances and the corresponding investments held in Government Securities along with the other funds available with PF Trust (including funds realised from sale of investments in other securities) to EPFO. As the amount transferred to EPFO together with the face value of securities / instruments, is more than the members' balances including the accrued interest thereon as on December 31, 2022, no additional provision is warranted during the current financial year (Year ended March 31, 2023 ' Nil). The Company is awaiting for a formal notification of cancellation of exemption and also gazette notification under Para 28(5) of the Employees' Provident Funds Scheme, 1952.

40.1.2 Defined benefit plans

40.1.2.1 Brief Description: A general description of the type of Defined benefit plans are as follows:

a) Gratuity:

15 days salary for every completed year of service. Vesting period is 5 years and the payment is restricted to ' 2 million. Besides the ceiling of gratuity increase by 25% whenever IDA rises by 50%.

The MRPL Gratuity Fund Trust was formed on April 20, 2007 and investments of the funds received from the company after actuarial valuation and the investment of the funds upto June 28, 2013 was made in the manner prescribed by Income tax Rule 67(1) of the Income Tax Rules ,1962 as amended from time to time. The Funds of MRPL Gratuity Fund Trust after June 28, 2013 are being invested in Group Gratuity Cash Accumulation Scheme (Traditional Fund) of various insurance companies.

The gratuity provision for employees of erstwhile subsidiary company OMPL was unfunded and consequent to the HR Integration with the company during the previous financial year, the same has been classified as funded in line with the policy followed by the company.

b) Post-Retirement Medical Benefits:

After retirement, on payment of one time lump sum contribution, the superannuated employee and his/her dependent spouse and dependent parents will be covered for medical benefit as per the rules of the Company.

During the previous financial year, pursuant to HR Integration, employees of erstwhile subsidiary company OMPL are being covered under Post Retirement Medical Benefit scheme of the Company.

c) Resettlement Allowance:

At the time of superannuation, employees are entitled to settle at a place of their choice and they are eligible for Settlement Allowance.

During the previous financial year, pursuant to HR Integration, employees of erstwhile subsidiary company OMPL are also being covered under the Resettlement Allowance benefits of the Company.

40.1.2.2 These plans typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

40.2 Other long term employee benefits

40.2.1 Leave encashment

A brief description on Leave encashment are as follows:

a) Earned Leave Benefit (EL) :

Accrual - 32 days per year.

Accumulation up to 300 days allowed.

EL accumulated in excess of 15 days is allowed for encashment while in service provided the EL encashed is not less than 5 days.

b) Half Pay Leave (HPL) :

Accrual - 20 days per year.

Encashment while in service is not allowed.

Encashment on retirement is permitted; restricted up to 300 days along with Earned leave.

The liability for above leaves (a & b) are recognized on the basis of actuarial valuation.

40.3 Termination Benefits :

40.3.1 Premature Retirement on Medical Grounds :

The Company has an approved scheme of Premature Retirement on Medical Grounds. Ex-gratia payment equivalent 60 days emolument for each completed year of service or the monthly emoluments at the time of retirement multiplied by the balance months of service left before normal date of retirement, whichever is less is payable apart from Superannuation Benefits.

40.3.2 Scheme for Self Insurance for providing lump-sum monetary compensation:

Under the scheme of ‘Post Retirement Benefit and Benefit on Separation’, in case of employee suffering death or permanent total disablement due to an accident arising out of and in the course of employment, a compensation equivalent to 100 months Basic Pay plus Dearness Allowance (DA) without laying down any minimum amount is payable.

40.3.3 Benefits of Separation under SABF (re-nomenclatured now as MDCPS) :

In case of death / permanent disablement of an employee while in service in the Company, the beneficiary has to exercise desired options available within 6 months from the date of death / permanent total disablement.

40.3.4 Terminal benefits are unfunded plans, and no plan assets are involved.

40.3.5 Termination Benefits are charged to Statement of Profit and Loss as and when incurred.

41 Segment Reporting

The Company has “Petroleum Products” as single reportable segment.

41.1 Information about major customers

Company’s significant revenues are derived from sales to oil marketing companies which is 62% and 57% of the Company's sales related to petroleum products for the year ending March 31, 2024 & March 31, 2023 respectively. The total sales to such companies amounted to ' 6,48,229.38 million for the year ended March

43.4 Market Risk

Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business. The major components of market risk are foreign currency exchange risk and interest rate risk.

43.5 Foreign currency risk management

The Company undertakes transactions denominated in foreign currencies, primarily for purchases of crude oil and exports sales and has borrowings denominated in foreign currency; consequently, exposures to exchange rate fluctuations arise. Significant carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:

43.5.2 Forward foreign exchange contracts

The Company books short term forward contracts upto a maximum period of 30 days to the limited extent when export receivables date and import payments date do not fall within the spot date.

43.6 Interest rate risk management

The Company has availed borrowings at fixed and floating interest rates, hence is exposed to interest rate risk. The Company has not entered into any of the interest rate swaps and hence the Company is exposed to interest rate risk.

Interest rate sensitivity analysis

The sensitivity analysis below have been determined based on the exposure to interest rates at the end of the reporting period. For floating rate borrowings, the analysis is prepared assuming the amount of the borrowings outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used for disclosing the sensitivity analysis.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company's profit for the year ended March 31, 2024 would decrease/increase by ' 260.32 million (for the year ended March 31, 2023 : decrease/increase by ' 480.79 million). This is mainly attributable to the Company's exposure to interest rates on its variable rate borrowings (considered on closing balance of borrowings as at year end).

43.7 Credit risk management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Company. Credit risk arises from cash and cash equivalents, deposits with banks as well as customers including receivables. Credit risk management considers available reasonable and supportive forward-looking information including indicators like external credit rating (as far as available), macroeconomic information (such as regulatory changes, government directives, market interest rate etc.).

Major customers comprise of public sector undertakings (Oil Marketing Companies - OMCs) having highest credit ratings and carry negligible credit risk. Concentration of credit risk to any other counter party did not exceed 10% of total monetary assets at any time during the year.

Only high rated banks are considered for placement of deposits. Bank balances are held with reputed and creditworthy banking institutions.

43.8 Liquidity risk management

The Company manages liquidity risk by maintaining sufficient cash and cash equivalents including bank deposits and availability of funding through an adequate amount of committed credit facilities to meet the obligations when due. Management monitors rolling forecasts of liquidity position and cash and cash equivalents on the basis of expected cash flows. In addition, liquidity management also involves projecting cash flows considering level of liquid assets necessary to meet obligations by matching the maturity profiles of financial assets & liabilities and monitoring balance sheet liquidity ratios. The Company manages liquidity risk by maintaining adequate cash & credit lines and continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay.

45.2 Disputed tax / Duty demands pending in appeal as at March 31, 2024

45.2.1 Income Tax: ' 243.55 million as at March 31, 2024 (As at March 31, 2023'198.62 million). Against this ' Nil million as at March 31, 2024 (As at March 31, 2023'9.00 million) is pre-deposit / paid under protest and is included under tax assets/ liability [refer note 14].

45.2.2 Excise Duty: ' 4,899.33 million as at March 31, 2024 (As at March 31, 2023'11,077.05 million). Against this ' 90.28 million as at March 31, 2024 (As at March 31, 2023'187.22 million) is pre-deposit / paid under protest and is included under other assets [refer note 15].

45.2.3 Customs Duty: ' 1,079.20 million as at March 31, 2024 (As at March 31, 2023'1,039.34 million). Against this ' 379.40 million as at March 31, 2024 (As at March 31, 2023'379.40 million) is adjusted / paid under protest and is included under other assets [It excludes the amount mentioned at 45.2.4] [refer note 15].

45.2.4 There is a claim from the Custom Department for customs duty amounting to ' 2,121.14 million as at March 31, 2024 (As at March 31, 2023 ' 2,121.14 million) along with applicable interest and penalties totally amounting to ' 6,168.37 million as at March 31, 2024 (As at March 31, 2023'6,168.37 million) in respect of classification of tariff of the reformate for the purpose of payment of import duty. An appeal has been filed before the Appellate Authority contesting the entire demand. Pending outcome of the appeal proceedings, no provision for the said demand has been made in the books [refer note 15].

45.3 Others :

As informed by a vendor company, there is a claim from the Deputy Commissioner of Commercial Tax (CT) amounting to ' 4,598.87 million as at March 31, 2024 (As at March 31, 2023'4,359.27 million) against which a writ petition has been filed by them before Hon'ble Karnataka High Court . In terms of the contract entered with the vendor company, the said liability as and when reaches finality is to be discharged by the company on back to back basis.

45.4 Contingent Asset :

An amount of ' 95.28 million as at March 31, 2024 (As at March 31, 2023'95.28 million) earmarked by MSEZL as third party share payable to the company towards pipeline-cum-road corridor usage which is not considered in the current period, as the same has not been finalized pending freezing of the project cost of pipeline corridor project.

46 Commitments

46.1 Capital Commitments:

46.1.1 The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) as at March 31, 2024'7,847.74 million (As at March 31, 2023'7,146.09 million).

46.1.2 The Company has requested KIADB for allotment of 1,050 acres of land for Phase IV expansion. The balance capital commitment against land is ' 6,399.15 million (As at March 31,2023'6,399.40 million).

46.1.3 Pursuant to Supplementary Audit conducted by Comptroller and Auditor General of India under section 143 (6) (a) of Companies Act, 2013, additional disclosure has been given as follows :

The estimated amount towards acquistion of additional land of 27 acres for development of green belt and buffer zone to meet Environmental clearance conditions for Phase III as at March 31, 2024'216.00 million (As at March 31, 2023'216.00 million).

46.2 Other Commitments

46.2.1 The Company is in possession of certain land provisionally measuring 36.69 acres ceded by HPCL for use by the Company for it's Phase III expansion and upgradation work. The consideration for such land is mutually agreed to be by way of swapping of land in possession of Company / HPCL. The final documentation in this regard is pending to be executed.

46.2.2 Letters of Credit and Bank guarantees issued by bankers towards procurement of goods and services and outstanding as at March 31, 2024'661.60 million (As at March 31, 2023'1,047.67 million).

46.2.3 The Company has entered into a long term RLNG off take agreement with M/s BPCL. This agreement has a take or pay clause and the Company is committed to purchase the said RLNG over the tenure of the agreement.

46.2.4 The Company has entered into a long term transmission of RLNG agreement with M/s GAIL. This agreement has a ship or pay clause and the Company is committed to pay the ship or pay charges over the tenure of the agreement.

46.2.5 The Company has an export obligation to the extent of ' 305.30 million as at March 31, 2024 (As at March 31, 2023 ' Nil million) on account of concessional rate of duty availed under EPCG license scheme on procurement of capital goods and the same is expected to be fulfilled by way of exports.

46.2.6 Pending commitments on account of Corporate Environment Responsibility (CER) and Enterprise Social Commitment (ESC) as at March 31, 2024'361.18 million (As at March 31, 2023'755.23 million).

47 Reconciliation of liabilities arising from financing activities.

The table below details change in the Company's liabilities arising from financing activities, including both cash and non cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Company's Statement of Cash Flows as cash flows from financing activities.

50 Integration of Human Resource of erstwhile subsidiary company ONGC Mangalore Petrochemicals Limited:

Pursuant to the scheme of Amalgamation ('the Scheme') approved by the Ministry of Corporate Affairs (MCA) vide its order No. 24/3/2021-CL-III dated April 14, 2022, during the previous financial year, Human Resource (HR) integration of erstwhile subsidiary company ONGC Mangalore Petrochemicals Limited (OMPL) with the company is carried out w.e.f May 1, 2022 (effective date of the scheme).

Subsequently, during previous financial year the management grade employees of erstwhile subsidiary company OMPL represented the matter before Honourable High Court of Karnataka with regard to their salary and grade fixation and the matter is subjudice.

Furthermore, the memorandum of settlement with respect to non-management employees of erstwhile subsidiary company OMPL is under negotiation and yet to be concluded. Necessary provision on estimated basis towards the financial implication on account of the settlement has been duly considered in the books of accounts.

51 The Company also operates in special economic zone (SEZ) in Mangalore, accordingly is eligible for certain economic benefits such as exemptions from GST, custom duty, excise duty, service tax, value added tax, entry tax, etc. which are in the nature of government assistance. These benefits are subject to fulfilment of certain obligations by the Company.

52 The Company has a system of periodic physical verification of Inventory, Property, Plant and Equipment and capital stores in a phased manner to cover all items over a period. Adjustment differences, if any, is carried out on completion of reconciliation.

53 The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

54 Some balances of trade and other receivables, trade and other payables and loans are subject to confirmation/reconciliation. Adjustments, if any, will be accounted for on confirmation/reconciliation of the same, which will not have a material impact.

55 During FY 2021-22, company was awarded with 87,748 Nos of Energy Saving Certificates (EScerts) from Bureau of Energy Efficiency (BEE) as part of "Perform, Achieve and Trade" (PAT) scheme, India for achieving reduction in Specific Energy Consumption above targets set by them for the performance during FY 2018-19. Further to that, during FY 2023-24, Monitoring and Verification Audit was conducted as per the guidelines of Bureau of Energy Efficiency (BEE) by approved Empaneled Accredited Energy Auditor (EmAEA) and they have submitted the Certificate of Verification indicating an equivalent reduction of 48,269 EScerts due to non-achievement of Specific Energy Consumption against the targets set by them for the performance during FY 2022-23 which will result in net 39,479 Nos of Energy Saving Certificates

(EScerts) available with the company. These can be redeemed to meet Refinery's own shortfall (if any) or can be used as tradable certificates which can be sold through power exchanges in future periods. The final Monitoring and Verification report and related forms are submitted to State Designated Agency, which is Karnataka Renewable Energy Development Limited (KREDL). The final issuance of EScerts for PAT - VI cycle is yet to be done by Ministry of Power resulting in the current number of EScerts held by the company remaining at 87,748 Nos. and the calculated floor value of the said certificates correspond to ' 161.47 million as per formula prescribed by Hon'ble Ministry of Power for determining the floor price (As at March 31, 2023 ' 161.47 million). The Company intends to redeem the ESCerts only to meet refineries own shortfall (if any) based on Monitoring & Verification to be conducted in future and hence the same has not been carried in inventory. MRPL was not notified under Perform, Achieve and Trade (PAT) cycle during FY 2023-24.

56 The number of independent directors during previous financial years were less than the minimum number of Independent Directors required in terms of the provisions of the Listing Agreement and the Companies Act, 2013 and composition of the Board Level Committees viz., Audit Committee, Nomination & Remuneration Committee and Risk Management Committee. Consequently penalty for the said non-compliances was levied by both BSE and NSE for an amount of ' 13.03 million and ' 10.95 million respectively upto December 2023. The company being a Central Public Sector Enterprise (CPSE), the nomination of Directors on the Board of the Company is made by the Administrative Ministry of the company, i.e. Ministry of Petroleum and Natural Gas (MoPNG), Government of India (GoI). The company has been continuously following up with MoP&NG for appointment of requisite number of Independent Directors on the Board. MoP&NG has appointed 4 (Four) independent directors during 2021-22 which enabled the Company to comply with regard to only composition of above referred Committees. Further the Policy for exemption of fines, which provides for waiver/ reduction of penalty in case of inability of the Company to make any appointment on the Board due to pending approval from the Government (Ministry) / Regulator or any statutory Authority. In view of the above, the Exchanges were requested by the company to waive off the fine citing the above fact and subsequently based on the request by the company, BSE waived fines up to December, 2020 under Regulation 17(1), 18(1), 19(1) & 21(1) of SEBI (LODR), Regulations, 2015 and NSE from December 2020 to March 2022 under Regulation 18(1), 19(1) & 21(1) of SEBI (LODR), Regulations, 2015 for an amount of ' 3.29 million and ' 2.33 million, respectively. For the balance amount of ' 9.74 million and ' 8.62 million levied by BSE and NSE, waiver is expected.

57 The Company has assessed the possible effect that may result from Russia-Ukraine War, which is not significant on the carrying amounts of Property, Plant and Equipment, Inventories, Receivables and Other Current Assets. In the opinion of the management, the carrying amount of these assets will be recovered.

58 Figures in parenthesis as given in these notes to financial statements relate to previous years. Previous year figures have been regrouped wherever required.

59 Approval of financial statements

The financial statements were approved for issue by the Board of Directors on May 3, 2024.