Annual Report - GAIL - 2008-2009

GAIL INDIA LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members

Dear Shareholders,

The setting up of your Company in August 1984 heralded a new era of natural
gas in the country and now your Company has completed 25 years of service
to the nation. It gives me immense pleasure, to present the 25th Annual
Report of your 'Navratna' Company along with Audited Financial Statements
for the Financial Year 2008-09, on behalf of the Board of Directors of your
Company.

SERVICE THE NATION WITH GREEN FOOTPRINTS:

The natural gas infrastructure of your Company plays a significant role in
serving the nation by facilitating equitable geographical distribution of
economic benefits. It provides access to the domestic gas producers, making
gas available to the customers including those who are remotely located,
facilitating monetization and development of gas fields which are otherwise
scattered and devoid of market access. The pipeline network has created
choice for customers by providing cheaper, environment-friendly alternative
fuel and has reduced import-dependency as natural gas has substituted
liquid fuels such as Naphtha, fuel oil, etc.

Natural gas infrastructure developed by your Company over the years has
touched the life of common man in many ways, be it social, economic or
environmental aspects, The development has not only supported various
industrial segments like power and fertilizer, but also helped to further
expand and meet the demand in these sectors. It has also helped in
improving the quality of life in the alarmingly polluted cities like Delhi,
Mumbai, Agra, Firozabad, etc. In addition to the direct benefits, the
indirect benefits as a result of these infrastructural developments by your
Company, has helped in social development in the rural areas by extending
basic amenities.

Your Company has also spearheaded the spread of City Gas and Piped Gas
network in the country which has helped in bringing down pollution levels
in metros such as Delhi and Mumbai. The pipeline network of your Company
caters to the gas consumers in the states of Gujarat, Maharashtra,
Rajasthan, Madhya Pradesh, Delhi, Haryana, Uttar Pradesh, Andhra Pradesh,
Tamil Nadu, Assam and Tripura.

Your Company has interest in the business of Natural Gas, LPG, Liquid
Hydrocarbons and Petrochemicals, the latter being value-added products and
diversified into Exploration & Production and City Gas Distribution.

Your Company has made significant contributions to the nation's economy by
supplying natural gas through its pipeline network for:

* Generation of over 11,000 MW of power.

* Production of over 11.5 million tonnes per annum of Urea.

* Production of more than 1 million ton per annum of LPG in the country.

* Over 5.75 lac vehicles in the country today running on CNG supplied by
your Company and over 7 lac households on Piped Natural Gas (PNG) in the
country.

* Production of petrochemicals of around 700,000 tonnes per annum which is
used in the plastics industry.

The overall contribution to the nation has been truly remarkable. With its
robust future plans, your Company is committed to build a green future for
India.


HIGHLIGHTS:

During the year 2008-09, the important physical & financial highlights are
as under:

PHYSICAL HIGHLIGHTS:

Particulars 2008-09 2007-08

Gas Transmission (MMSCMD) 83.29 82.10

LPG Production (TMTs) 1,088 1,043

Pentane/Propane/SBP Solvents / 313 305
Naptha Production (TMTs)

Polymer Production (TMTs) 420 386

LPG Transmission (TMTs) 2,744 2,754

FINANCIAL HIGHLIGHTS: (Rs. in crores)

Particulars 2008-09 2007-08

Turnover (Net of ED) 23,776 18,008

Other Income 797 556

Cost of Sales (excluding Interest 19,722 14,058
and Depreciation and including
extraordinary items)

Gross Margin 4,851 4,506

Interest 87 80

Depreciation 560 571

Profit Before Tax 4,204 3,855

Provision for Tax 1,400 1,254

Profit after Tax 2,804 2,601

Appropriations:

Interim Dividend 507 338

Proposed Final Dividend 381 507

Corporate Dividend Tax 151 144

Transfer to Bond Redemption Reserve 32 32

Transfer to General Reserve 280 260

Balance carried forward to Balance Sheet 1,453 1,320

BONUS:

As shareholders granted approval in 24th Annual General Meeting held on 4th
September, 2008, the Authorized Share Capital of your Company increased
from Rs.1,000 crores to Rs.2,000 crores which facilitated issuance of one
fully paid-up bonus share for every two equity shares held by the
shareholders of the Company. The Company implemented the proposal of bonus
shares in the month of October, 2008. Consequently, the paid-up share
capital of the Company was increased from Rs. 845.65 crores to Rs.1268.48
crores.

DIVIDEND:

Your Company has a consistent track-record of dividend payment So far, your
Company has disbursed dividend of more than Rs 6,500 crores to the
shareholders including Government of India (Rs. 4,324 crores), which is
more than eight times the original investment of Rs. 845.65 crores by the
Government in its equity capital.

The Board of Directors of the Company had earlier approved payment of an
interim dividend @40% per equity share (Rs.4/- per equity share) amounting
to Rs. 50739 crores, this interim dividend was paid on the enhanced share
capital base of Rs.1268.48 crores and the same was paid in the month of
February, 2009.

Further, the Board has recommended payment of final dividend @ 30% per
equity share (Rs.3/- per equity share) amounting to Rs. 380.54 crores. With
this, the total dividend payment for the fiscal 2008-09 will be at 70%
(Rs.7/- per equity share) amounting to Rs. 887.93 crores.

CORPORATE STRATEGY:

Your Company has developed Strategic Plan for the period 2007-12. The goals
set by your Company includes doubling of its bottom line by the year 2011-
12. The strategy developed to realize the set goals is as under:

* Gas Sourcing & Marketing:

Tying-up with producers and suppliers for marketing and transmission of
natural gas on long term and sustainable basis. This is likely to be
realized by securing more gas from new gas finds and pursuing early
finalization of contracts with customers and suppliers.

* Gas Transmission:

Expanding of the pipeline infrastructure by expanding the capacity from
6,700 km to 12,000 km with the laying of new pipelines by 2011-12.

* City Gas:

Pursuing of City Gas distribution opportunities in the country. This
requires the introduction of Compressed Natural Gas for the automotive
sector and Piped Natural Gas for commercial and domestic use in 230 cities
and 5 corridors in a phased manner.

* Petrochemicals:

In the area of Petrochemicals business, your Company plans to examine
possible options for expansion of Petrochemical Complex at Pata and explore
green field participation in new ventures in India and abroad.

* E&P:

Your Company also plans to strengthen E&P capability and resources by
participating as a major partner/operator in domestic E&P/CBM bidding. This
would help in developing E&P as a self-sustainable business for augmenting
additional supplies of natural gas. These would include investments in both
domestic on-land and off-shore field with a balanced portfolio of
developmental and exploratory projects.

* Globalization:

On the globalization front, focus on areas having synergy with existing
businesses by entering into new and emerging gas rich countries with focus
on sourcing of gas and participation in down stream activities.

The natural gas demand in India is at an inflection point and several
forces are at work that could dramatically grow the natural gas demand. The
present sources of natural gas are projected to deplete in the coming years
and therefore, there is a need to look at new sources that are coming up,
Collectively, such a rapid rise in expected demand and re-alignment of
sources of gas supply will interact to determine the robust future gas
industry structure.

Your Company has launched project 'Next Wave' for development of long term
Strategy for the coming decade. The objective is not only to identify
growth opportunities but also to ensure preparedness for implementation.

BUSINESS SEGMENTS OF GAIL-PERFORMANCE:

Your Company has been achieving an all round 'Excellent' rating by
Government of India since MoU signing. During the year under review, the
segment wise business performance of the Company is as under:

* Natural Gas:

Your Company owns and operates a network of over 7,000 km of natural gas
high pressure trunk pipeline with a capacity to carry 148 MMSCMD of natural
gas across the country. It supplies nearly 82 million cubic metres of
natural gas per day as fuel to power plants, as feedstock for gas based
fertilizer plants and to over 500 other small, medium and large industrial
units to meet their energy and process requirements. Your Company's share
of gas transmission business is 79% and the Company holds 70% market share
in gas marketing in India.

Natural gas continues to constitute the core business of your Company.
During the year 2008-09, Gas Sales was 79 MMSCMD compared to 69 MMSCMD in
the previous financial year. The Gas Transmission during the year was 83
MMSCMD compared to 82 MMSCMD in the previous financial year.

During the year under review, your Company has transmitted a volume of 83
MMSCMD of natural gas and traded volume was around 79 MMSCMD.

* Petrochemicals:

Your Company owns and operates a gas based integrated petrochemical plant
at Pata, Uttar Pradesh with a capacity of producing 4,10,000 TPA of
Polymers i.e. HDPE and LLDPE. Your Company is in the process of installing
an additional furnace of 1,00,000 TPA capacity at Pata to further increase
polymer production capacity of the plant.

Your Company i5 currently in the process of setting up a 2,80,000 TPA Assam
Petrochemical Complex at an investment of Rs. 5,460 crores under joint
venture with NRL, OIL and Assam Government.

During 2008-09, your Company has produced 4,20,000 MT of polymer and sold
4,23,000 MT of polymer.

* LPG Transmission:

Your Company is the only Company in India which owns and operates pipelines
for LPG transmission. It has a 1,900 km LPG pipeline network, 1,300 km of
which connects the Western and Northern parts of India and 600 km of
network is in the Southern part of the country. The LPG transmission system
has a capacity to transport 3.8 MMTPA of LPG. LPG transmission throughput
was 2.7 million MT in the year 2008-09.

* Other Liquid Hydrocarbon:

Your Company has 7 LPG plants in the country. In the year 2008-09, total
Liquid Hydrocarbon production was over 1.4 million MT which mainly included
1.1 million MT of LPG, 0.15 million MT of Propane and 0.05 million MT of
Pentane.

* Sourcing of Gas:

Your Company continues to have focus on securing gas supplies from
international markets. LNG and transnational pipelines are the two
prevalent modes of cross border gas trade and your Company has been making
all efforts to bring natural gas in the country.

* Exploration and Production (E&P):

During the year 2008-09, your Company acquired one exploration block in
Cauvery Onland, CY-ONN-2005/1 as Operator in NELP-VII bidding round. Your
Company was also associated with hydrocarbon discovery in Cambay onland
block CB-ONN-2003/2.

As on 31st March, 2009, your Company had participating interest in 27 E&P
blocks and 3 CBM block of which 15 were acquired in NELP-VI bidding round
and 3 in CBM-III bidding round.

Out of these, 24 E&P blocks are in India and 3 blocks are overseas (A-1 and
A-3 blocks in Myanmar and Block 56 in Oman). One of the onland block in
Cambay basin is generating revenue and Rs. 32.72 crores has been generated
as revenue during the year 2008-09.

A Gas Sales and Purchase Agreement (GSPA) has been signed for blocks A-1
and A-3 Myanmar by the Consortium and Government of Myanmar with China
National Petroleum Corporation (CNPC) for export of gas to China in which
GAIL is participating along with OVL Presently, the Front End Engineering
Design (FEED) study is in progress for preparation of Field Development
Plan.

As on 31st March, 2009, your Company is operating two onland E&P blocks
viz. RJ-ONN-2004/1 (Rajasthan Onland) and CY-ONN-2005/1 (Cauvery Onland).

* Coal Bed Methane:

Your Company has participating interest in 3 Coal Bed methane blocks, 2 of
which are in Chattisgarh and 1 in Jharkhand. These blocks were awarded in
CBM-III bidding round to the consortium led by Arrow Energy of Australia.

INITIATIVES:

* Organizational Initiatives:

During the year under review, your Company has adopted various technology
initiatives. Your Company is an extremely IT savvy organization and
continuously adopting latest and state-of-the-art IT solutions keeping pace
with fast changing industry. These solutions are not only helping in
continuous improvement in efficiency and productivity of employees but also
ensuring 'right information to right person' by use of latest security
solutions.

In last one year, your Company has come up with a state-of-the-art 3-way
Disaster Recovery (DR) center at Jaipur to ensure resumption of business
critical systems like SAP-ERP setup, Gas Management System (GMS) etc. in
the eventuality of any disaster like fire, flood, earthquake, cyber attack
etc. in the primary data center at Noida. During the unfortunate fire
incidence at Noida during July, 2008, the entire business operation was
resumed back from the DR setup within few hours time without any impact to
the business and without any loss of data.

As part of Supplier Relationship Management (SRM) and to bring more
transparency in tendering process, E-tendering system has been rolled out
at all major locations of your Company. On the other hand, for better
customer satisfaction, your Company has started sending automated SMS
intimation to the customers on price change, dispatch status etc. besides
other CRM initiatives like online customer ledger, online feedback
monitoring etc.

To enhance the IT security, your Company has deployed latest and best of
its class Antivirus, Antispam, Content filtering solution etc. in entire
organization which protects your Company data from external and internal
threats.

To keep pace with the industry and to adopt the changed business scenario,
your Company is planning to upgrade the SAP-ERP system to the latest
version with additional facilities like reverse auctioning, e-recruitment,
Governance Risk & Compliance (GRC) etc. Also the IT operation and processes
have been streamlined & structured and the Business Information System
(BIS) wing has been certified with ISO 9001:2000.

Your Company signed a Memorandum of understanding (MOU) with Transparency
International India (Til) on 'Integrity Pact Programme' as a measure
focused at enhancing operational transparency in its contracts and
procurements process. Integrity Pact is a tool devised by Til worldwide to
fight corruption in public procurement and thus to assist in improving the
credibility of public procedures and administration. Your Company is among
the first few Indian corporates to introduce 'Integrity Pact' in
procurement and contracts.

Under Quality Management, your Company has been certified ISO: 9001-2000
which includes its sites and corporate office. Action is being taken to
modify the existing ISO system as per ISO: 9001-2008,100 Quality Circle
projects at all the sites of your Company, which has resulted an annual
saving of approximately Rs.90 lacs during the financial year 2008-09.

* Domestic Business Initiatives:

Your Company established a world class National Gas Management Centre
(NGMC) with an objective of round-the-clock marketing and control of
transmission assets of the Company from a single location. NGMC deals with
your Company's natural gas transportation and LPG transmission business
throughout India in which live data is available at a centralized location
for monitoring of pipeline and delivery condition of all major customers'
terminals.

National Gas Management Center, which is the first of its kind for the gas
business in India, encompasses management of entire gas trading of your
Company, transportation and LPG transmission business throughout India with
the availability of live data at centralized location for monitoring
pipeline parameters, delivery conditions at all major customer terminals,
gas reconciliation and accounting for entire gas business.

To ensure efficient real time management and gas nominations, delivery and
allocation with accurate gas reconciliation, a Gas Management System (GMS),
a web enabled system, is also available in NGMC, which integrates all the
shippers, suppliers, customers and transporters of gas to provide better
co-ordination and transparency in Gas Transportation business.

Your Company is in the process of acquiring 19% equity stake in ONGC Petro-
additions Limited (OPaL) along with co-promoter status. OPaL is setting up
a petrochemical complex at Dahej in Gujarat for producing 1.1 million
tonnes per annum of ethylene, which is scheduled to be commissioned by the
end of the year 2012.

Further, your Company has signed Memorandum of Understanding (MoU) with:

* IOCL for evaluating the potential of setting up of petrochemical complex
in Barauni, Bihar and

* IFFCO to evaluate the potential of setting up of gas based power plant &
other industries including chemicals, fertilizers, CNG & PNG in India.

* In its efforts to reduce Green House Gas (GHG) emissions, your Company
has signed an agreement for sale of steam through waste heat recovery at
its Vaghodia processing plant. Your Company has initiated steam conversion
project based on waste heat recovery system from gas turbines. This rare,
multi-benefit project would not only utilize Clean Development Mechanism
(CDM) for power generation, but also lead to conservation of gas as well as
increased energy efficiency.

* Global Business initiatives:

Your Company is globalizing its business activities with an objective of
exploring growth opportunities and entering new markets. Your Company is
continuously pursuing gas sector business opportunities abroad.

Your Company has been successful in Myanmar, Egypt, China and Oman in
securing participation in gas sector related projects and also has
participating interest in two offshore blocks (A-1 & A-3) in Myanmar and
one onshore block (Block 56) in Oman. Your Company has secured
participating interest in three retail gas companies in Egypt and one
retail gas company in China.

Further, your Company has a wholly owned subsidiary company namely 'GAIL
Global (Singapore) Pte Ltd.', at Singapore for pursuing overseas business
of your Company. In addition your Company has recently formed a Joint
Venture with China Gas Global Energy Holdings Limited wherein your Company
and China Gas are equal partners. In order to have long term association
with China Gas and also to expand business in the fast growing downstream
Chinese gas sector, the Joint Venture (JV) will pursue opportunities in
CNG, City Gas, Pipeline, CBM, LNG and E&P projects.

In addition, your Company has been nominated as a nodal agency from Indian
side by Government of India for pursuing Iran-Pakistan-India (IPI) natural
gas pipeline project and Turkmenistan-Afghanistan-Pakistan-India (TAPI)
natural gas pipeline project for supply of gas to India from Iran and
Turkmenistan respectively.

During the year under review, your Company signed a Memorandum of
Understanding (MoU) with Delta Compressor of Argentina for pursuing CNG
opportunities abroad and SIBUR Holding for pursuing gas processing & gas
based petrochemical opportunities in Russia.

PIPELINE PROJECTS:

During the financial year 2008-09, your Company has completed connectivity
to Pune city gas and consumers of Usar (Mumbai) region. Further, your
Company has provided connectivity to supply piped natural gas to City Gate
stations at Noida, Greater Noida, Gurgaon & Faridabad. Connectivity to East
-west pipeline has been provided at Oduru in Andhra Pradesh, Mhaskalin
Maharashtra and Ankot in Gujarat to enable flow of gas from Reliance D-6
block in K.G. Basin to consumers in various regions thereby enabling
optimum utilization of pipeline networks on national basis.

LPG Pipeline connectivity has also been provided to Essar Oil at Jamnagar
to take LPG into JLPL system. LPG pipeline connectivity have also been
given to IOCL bottling plant at Vijaipur & Gandhar and BPCL bottling plant
at Jaipur.

Your Company is executing various major pipelines extending over 2,000 km
Dahej - Vijaipur pipeline and Vijaipur - Dadri pipeline are being executed
to enhance DVPL/GREP capacity upto 80 MMSCMD. Further, Dadri - Bawana -
Nangal pipeline, Chainsa-Jhajjar-Hissar pipeline are under execution to
meet the requirement of various consumers in northern region.

The pipeline from Dadri to Bawana will supply gas to Pragati Power at
Bawana to cater power needs of NCR region during Commonwealth Games 2010.
These projects will enable your Company to maintain its domination in the
gas transmission and distribution business.

In north-east region, your Company is also operating 69 km regional
pipelines in Assam and Tripura. The pipelines existing in Assam supply gas
to LPG plant of your Company and ASEB. In Tripura, the pipelines are
connecting ONGC gas fields at Agartala dome, Rokhia and Konaban. Your
Company is also supplying natural gas to Tripura Natural Gas Company
Limited.

Your Company has proudly laid the first pipeline in the country in desert
area from Gamnewala to Ramgarh to supply gas to RSEB's power plant. 66 km
Dandewala - Gamnewala - Ramgarh pipeline has been laid which supplies gas
to RSEB.

Your Company has taken various initiatives to transparently execute the
projects without any time & cost overruns through meticulous Project
monitoring.

SUBSIDIARIES & JOINT VENTURES:

Apart from its area of direct operations, your Company has formed joint
venture companies for City Gas Distributions and Petrochemicals. For CNG,
the JVs include Joint Ventures overseas while for petrochemicals, currently
your Company has two joint ventures in the country and is scouting for one
overseas. Your Company was the first Company to introduce City Gas Projects
in India for supplies to households, commercial users and for the transport
sector by forming Joint Venture Companies.

* Subsidiaries:

* GAIL Gas Limited:

For implementation of the City Gas Distribution projects, your Company has
incorporated a wholly owned subsidiary, GAIL Gas Limited on 27th May 2008.
The setting up of the subsidiary will also help in part compliance of
requirement of unbundling of the business for your Company which may come
in future. The equity holding of GAIL in the City Gas Joint Venture
Companies is also proposed to be transferred to GAIL Gas Limited.

GAIL Gas participated in the 1st bidding round for CGD conducted by PNGRB
for 5 out of 6 cities namely Dewas, Kota, sonepat, Mathura, Meerut &
Kakinada. GAIL Gas won authorisation for 4 cities namely Dewas, Kota,
Sonepat and Meerut in the highly competitive environment.

* GAIL Global (Singapore) Pte Limited:

Your Company has a wholly owned subsidiary, namely, GAIL Global (Singapore)
Pte Ltd. to manage investments abroad. Your Company is looking for further
business opportunities through this subsidiary company.

* Brahmaputra Cracker and Polymer Limited (BCPL):

Your Company has 70% equity share in Brahmaputra Cracker and Polymer
Limited (BCPL) with Oil India Limited (OIL), Numaligarh Refinery Limited
(NRL), Govt, of Assam, each having 10% equity share. The authorized capital
of the Company is Rs. 1,200 crores. Feedstock Supply Agreements have been
signed between Brahmaputra Cracker and Polymer Limited (BCPL) and all the
three suppliers viz., Oil and Natural Gas Corporation Limited, Oil India
Limited and Numaligarh Refinery Limited. Technology license agreements have
been signed for cracker, polyethylene and polypropylene units.

* Joint Ventures:

* Aavantika Gas Limited (AGL):

AGL is a Joint Venture of your Company and Hindustan Petroleum Corporation
(HPCL) for implementation of City Gas Projects in the cities of Madhya
Pradesh. Your Company has 22.5% stake in the Company along with HPCL as
equal partner. MOPNG has authorized AGL for CGD in Indore, Gwalior& Ujjain.

In Indore, AGL is operating 4 CNG stations to serve more than 450 vehicles
whereas, in Ujjain, it is operating 1 CNG station.

Till date, AGL has invested about Rs 13.9 crores and planning to expand the
existing network to the surrounding areas as well as implement CGD network
in the new cities like Gwalior and Ujjain.

* Bhagyanagar Gas Limited (BGL):

BGL is currently operating two Auto LPG station in Hyderabad and one Auto
LPG station in Tirupathi. It is currently operating 6 CNG stations in
Vijaywada and three CNG stations in Hyderabad and one CNG station in
Rajahmundery.

Your Company has 22.5% stake in the Company along with HPCL as equal
partner. Till date, BGL has made a total investment of Rs. 23.62 crores.
BGL has received authorization from MOPNG for CGD in Hyderabad & Vijaywada.

BGL has plans to expand the existing network to the surrounding areas as
well as implement CGD network in the new cities like Rajahmundery and
Kakinada.

Accordingly, BGL has also submitted bid for the city of Kakinada in the
bidding process initiated by PNGRB.

Central U.P. Gas Limited (CUGL):

CUGL is currently operating six CNG stations in Kanpur and two CNG stations
in Bareily. Recently, CUGL commenced its domestic supply of PNG with
connections to 35 households. Your Company has 22.5% stake in the Company
along with BPCL as equal partner.

Till date, CUGL has made a total investment of Rs. 60.19 crores. in Kanpur
and Bareilly CGD projects. It has received authorization from MOPNG for CGD
in Kanpur & Bareilly.

Green Gas Limited (GGL):

MOPNG has authorized GGL for CGD in Lucknow & Agra. Till date, GGL has made
a total investment of Rs. 81.75 crores in Lucknow and Agra City Gas
Distribution projects. The Company is currently operating four CNG stations
in Lucknow and three CNG stations in Agra. GGL has tied up for commencement
of domestic supply of PNG with connections to 514 households, 30 commercial
and 1 industrial establishment. Your Company has 22.5% stake in the Company
along with IOCL as equal partner.

* Indraprastha Gas Limited (IGL):

IGL is supplying piped gas to around 1.33 lac domestic, 313 commercial, 15
small industrial consumers and CNG to over 2.50 lac vehicles through 164
CNG stations in Delhi. IGL is also operating three CNG stations in Noida,
two CNG stations in Greater Noida, two in Ghaziabad, three in Faridabad and
four CNG stations in Gurgaon.

IGL is the largest CGD entity in terms of CNG sales and vehicles in India
and is fast spreading its CGD network beyond its existing areas of
operations. IGL has received authorization from MOPNG for CGD in Delhi &
its suburbs, viz. NOIDA (Gautam Budh Nagar), Gurgaon & Faridabad.

PNGRB has authorised IGL for CGD in NCT of Delhi. Till date, IGL has made
an investment of Rs 727 crores. In view of the competing scenario, IGL has
also submitted bid for the city of Meerut and Sonepat in the bidding
process initiated by PNGRB. Your Company has 22.5% stake in the Company
along with BPCL as equal partner.

* Mahanagar Gas Limited (MGL):

MAHANAGAR GAS:

MGL is a Joint Venture of your Company and British Gas. MGL has set up 132
CNG stations catering to over 1.9 lac vehicles spread over Mumbai, Thane,
Mira-Bhayandar and Navi-Mumbai areas beside supplying PNG to over 3.8 lac
domestic customers covering 23 lac people, 1000 small industrials
commercial consumers. Till date, MGL has invested around Rs 850 crores in
the city of Mumbai. It has received authorization from MOPNG for CGD in
Mumbai, District Thane including Navi Mumbai & Mira Bhayander. PNGRB has
authorised MGL for CGD in Mumbai & Greater Mumbai.

Your Company has 49.75% stake in the Company along with British Gas as
equal partner.

* Maharashtra Natural Gas Limited (MNGL):

MNGL is a Joint Venture of your Company and Bharat Petroleum Corporation
Limited (BPCL) for implementation of City Gas Projects in Pune city. MNGL
received authorization from MOPNG for CGD in Pune including Pimpri-
Chinchwad area. It has started 7 stations supplying CNG to nearly 150
vehicles. Till date MNGL has made a total investment of Rs. 87.45 Crores.
MNGL is fast spreading its CGD network beyond its existing areas of
operations i.e. Pune to the areas of Pimpri, Chichwad,Talegaon, Hinjewadi
&Chakan. Your Company has 22.5% stake in the Company along with BPCL as
equal partner.

* Petronet LNG Limited (PLL):

PLL was formed for setting up of LNG import and regasification PLL has a
long term LNG supply contract with Ras Gas and Qatar, for import of 7.5
MMTPA of LNG. PLL Dahej terminal has been expanded to 10 MMTPA capacity.
Your Company has 12.5% equity stake in the Company along with BPCL, ONGC
and IOCL as equal partners.

* Ratnagiri Gas and Power Private Limited (RGPPL):

RGPPL is a joint venture Company between your Company, NTPC, Financial
Institutions and MSEB. Your Company has 28.33% stake in the Company along
with NTPC as equal partner. The capacity of the Ratnagiri Gas & Power
Station is 2,150 MW.

* Tripura Natural Gas Company Limited (TNGCL):

TNGCL is presently supplying gas to 7,193 domestic, 113 commercial, 28
industrial consumers and has set up one CNG station in Agartala catering to
more than 800 vehicles. TNGCL received authorization from MOPNG for CGD in
Agartala. Your Company has 29% stake in the Company. The business will be
executed through Joint Venture with Reliance Gas Corporation Limited
(RGCL).

* GAIL China Gas Global Energy Holdings Limited:

The joint venture company has been formed with an objective to pursue gas
sector opportunities, mainly in China. Your Company has 50% equity interest
in the company along with China Gas as equal partner.

HEALTH, SAFETY & ENVIRONMENT-SUSTAINABLE DEVELOPMENT:

Your Company is a responsible Corporate Citizen and Health, Safety and
Environment (HSE) excellence has been extensively promoted as a corporate
culture within the organization. The Safety & Health of employees and
external stakeholders are embedded in the core organizational values of the
Company. The HSE policy, inter-alia, aims to ensure safety of public,
employees, plant & equipment, ensure compliance with all statutory rules
and regulations, imparting training to its employees, carrying out safety
audits of its facilities and promoting eco-friendly activities.

During the year under review, major health and safety initiatives taken are
mentioned below:

* Corporate Health, Safety & Environment (HSE) Policy:

Your Company is committed to promote highest levels of Safety, Health,
Environment and Loss Control in the areas of its business of natural gas
and LPG transmission, production of LPG, petrochemicals etc., with clear
emphasis on improving the environment for sustainable development. The
safety and occupational health of its employees and external stakeholders
are of paramount importance and all these attributes are embedded within
the core organizational values of the organization. Your Company provides
appropriate levels of training to employees to ensure that they are able to
fulfill HSE responsibilities.

* Safety Performance:

On the road to Health, Safety & Environment (HSE) excellence, your Company
has adopted a top-down approach and has embraced the principles and codes
of best HSE practices in its HSE Management System. HSE Management System
comprises of 18 elements which includes Leadership & Commitment, Employees'
Participation, Facility Design, Construction & pre-startup safety review,
Process Safety Information, Risk Analysis and Management, Third Party
Services, Personnel Safety, Control of Defeat and Reliability of Critical
System and Devices, Work Permit System, Operation & Maintenance, Inspection
& Maintenance, Management of Change, Training, Incident Investigation and
Analysis, Occupational Health, Environment Management, Emergency Planning
and Response and Compliance Audit.

Your Company continues to demonstrate excellent safety performance. Safety
Indices across all work centers are meticulously monitored with an aim for
improvement.

* Safety Training:

Your Company continues to give utmost importance to train the employees on
HSE aspects. Apart from employees, spouses, children, contract workers,
tanker drivers, nearby villagers etc. are also imparted safety training.

* External Safety Audits (ESA):

Your Company's safety practices and systems are audited for continual
improvement by national, international agencies and inter unit safety audit
teams. During the year 2008-09, a total 12 nos. of external safety audits
were carried out. Major work centers have been certified for Integrated
Management Systems (IMS). IMS outlines the standards needed to align with
or conform to internationally accredited certifications such as ISO 9001
(quality assurance), ISO 14001 (environment) and OHSAS 18001 (health and
safety).

During the year under review, inter unit safety audits have also been
carried out for seven units of your Company.

* Occupational Health:

Your Company continued its commitment to improve the well being of its
employees. During the year 2008-09, all employees at the work centers were
medically examined. Besides, contract workers, CISF personnel, villagers
from nearby areas were also covered under the program.

CORPORATE SOCIAL RESPONSIBILITY:

Your Company has set high standards of discharging corporate social
responsibilities.The Company has earmarked 1% of profit after tax of the
previous financial year for CSR programmes. The funds are used for
economic, environmental and social upliftment of communities in and around
the work centers in the major thrust areas such as Community Development,
Infrastructure, Drinking water / Sanitation, Literacy enhancement /
Empowerment, Educational aids, Healthcare / Medical.

Your Company has set up Air Pollution Related Disease Diagnostic Centers
(APRDCs) in over 20 cities in various parts of the country at a cost of
about Rs.4crores. Under this programme, the diagnostic centers equipped
with modern diagnostic amenities related to respiratory and cardio-vascular
diseases and well trained medical personnel have been set up in partnership
with reputed Government/trust managed hospitals/Institutions to provide
diagnostic facilities and treatment to the people who are not able to
afford baseline investigations for diagnosis. APRDC also works as R&D for
development of facilities for diagnosing suspended particles, which are
known to cause acute heart diseases.

Major initiatives undertaken, during the year under review, by your Company
includes:

* Contribution to Cama and Albess Hospital, Mumbai for setting up of a
state-of-the-art Oncology unit for treatment of under privileged people of
the society exclusively women and children.

* Installation of 100 solar street lights near its petrochemical plant in
District Auraiya, Uttar Pradesh.

* Contribution to the Wild life Trust of India for operation of Mobile
Veterinary Unit Services (MVS) in Assam for rescue, rehabilitation and
release of distressed and diseased wild animals by providing them
appropriate veterinary services.

* Funding for solar heater for the Blind school at Abu Road, Rajasthan
apart from support to physically handicapped in other areas also.

* Various community development programmes such as providing of mid day
meal for children through sponsorship of food delivery vehicles in Delhi &
Gujarat, providing playground equipments for children's parks in Gujarat
and facilitating the senior and aged through provision of furniture and
fixtures in old age home in Chennai.

* Continued support to the rehabilitation of leprosy patients by enabling
purchase of raw material for power looms being run by leprosy cured
patients, reconstructive surgeries for such patients and imparting
vocational training so as to help them in achieving a degree of self
sufficiency at various locations in UP and Delhi.

* Distribution of sewing machines, tricycles and motorized vehicles at
Andhra Pradesh, Mumbai & Delhi for empowerment of physically challenged.

* Contribution for construction of Bharat Ghars, community centers, library
building and bus shelters for use by the local population in the rural
areas.

* HUMAN RESOURCE:

Humans are one of the most critical resources in the business which can be
continuously harnessed to maximise the effectiveness of the enterprise. A
number of initiatives have been taken to this end in order to upgrade the
skills and attitudes of employees at all levels while creating a congenial
and secure work environment to motivate them.

With a view to strengthen mechanisms for speedy and effective settlement of
employee grievances in the Company, an Online Grievance Redressal System
was launched.

President of India has notified presidential directives issued by MoPNG
vide its letter dated 24.04.2009 with respect to pay revision of employees
of your Company w.e.f. 01.01.2007.

* Training Initiatives:

Oil & Gas industry is rapidly transforming all along the value chain. This
evolution poses new challenges and throws up significant growth
opportunities to your Company Training and Development is a strategic focus
and essential to embark upon various growth initiatives. GAIL Training
Institute (GTI) at Noida & Jaipur have been set up as Intellectual wing to
equip human resources with necessary Knowledge, Skills and Attitude (KSA)
to retain your Company's competitiveness in the emerging marketplace. Both
these Institutes are certified for ISO 9001 Quality Management System. The
Training programs are identified by synchronizing organizational needs with
individual needs through an e-Performance Management System (e-PMS). It is
one of the important parameters of assessment of MOU performance of your
Company & track record of Excellent performance has been maintained in
FY2007-08. During the period under review, 12,710 training days were
imparted.

Your Company amended object clause of Memorandum of Association through
postal ballot process, to carry on business of training including
consultancy on commercial basis.

GTI is also pursuing opportunities to offer training programmes to Indian &
Overseas companies to convert itself into a Profit Centre. GTI is committed
to deliver its best with a team of highly skilled faculty who possesses a
blend of academic and practical experiences to achieve the stature at par
with other International Training Institutes of repute.

* Representation of Women Employees and SC/ST/OBC:

As on 31st March, 2009 there were 174 women employees (4.91%), (116
executives and 58 non-executives) in the Company.

The total manpower of the Company as on 31st March, 2009 stood at 3,544 out
of which 17.24% belong to SC, 6.88% belong to ST, 16.96% to OBC, 7.34% to
Minorities and 2.31% to physically challenged.

* Vigilance Function:

Your Company organized a 'Vendor Interaction Programme' during the
Vigilance Awareness Week to obtain feedback about vendor issues.
Suggestions given by vendors were given due consideration after
deliberations by the management. Your Company also organized a 'Customers'
Meet' at one of its Zonal Offices on the same occasion to discuss various
issues of mutual interest. By organizing such meetings with vendors &
customers, your Company has been able to improve the level of trust,
transparency and confidence building among its stakeholders.

To bring about complete transparency in contract and procurement
activities, your Company is regularly hosting tenders on its website for
wide publicity. Tenders related to Original Equipment Manufacturers and
Proprietary items are also hosted on the website. It is mandatory for the
vendors/contractors to enter into the agreement with your Company under
Integrity Pact, wherever the contract value is Rs. 1 crores and above and
all tenders above Rs. 50 lacs are taken up under e-tendering.

* Official Language:

Your Company is continuously making vigorous efforts for the propagation
and successful implementation of the Official Language Policy of the
Union. The Official Language Implementation Committees at Corporate as well
as Regional level held their quarterly meetings regularly to monitor and
review the progress made in achieving the targets fixed in the Annual
Programme.

Your Company was recognized for excellence in propagation and
implementation of the Official Language Policy of Government of India. Her
Excellency, Smt. Pratibha Devisingh Patil, Hon'ble President of India gave
away the award to CMD, GAIL in a glittering function held invlgyan Bhawan
on 14th September, 2008.

In an endeavor to remove the hesitation of employees in using Hindi for
official purposes, several Hindi workshops were organized at all the work
centers.

For the purpose of ensuring wider participation of employees innovative
efforts were made like introducing a new incentive scheme 'Rajbhasha
Catalyst'; to encourage employees to write original articles on technical
subjects in Hindi. An essay competition on the subject 'Asian Oil & Gas
Market: opportunities, prospects & energy security' was organized among
PSUs under MOPNG etc.

With a view to impart working knowledge of Hindi as well as computer
training to employees in bilingual Software, a comprehensive and time bound
programme was prepared and implemented during the year. Further, in order
to promote the use of Hindi as the official Language by more and more
employees, an Official Language Catalyst Scheme was launched.

ACCOLADES:

In connection with celebration of silver jubilee year of your Company, the
Department of Post brought out a commemorative postage stamp of your
Company, which was released by Her Excellency, Smt. Pratibha Devisingh
Patil, Hon'ble President of India, in a glittering function held in the
Rashtrapati Bhawan in the month of November, 2008.

During the year under review, continuing the past trend, your Company was
proud recipient of several awards. Some of the significant awards conferred
upon your Company are as under:

* Corporate Awards:

- Your Company has been adjudged the Oil and Gas Transportation Company for
the year 2007-08 by Petrofed.

- Your Company has won the Safety Innovation Award 2008 for excellence in
innovative safety measures for its Agartala, Vaghodia, Gandhar, Nasirabad,
Pata, Vijaipurand Hazira units. This is the highest number of units of any
company receiving this prestigious award from Institution of Engineers in a
year.

- Your Company has been ranked 2nd among gas utilities in Asia in the
Platts Global Ranking of Energy Companies.

- Your Company has been selected as the top Indian company in the Gas
Processing, Distribution and Marketing Sector for the Dun & Bradstreet
Corporate Rolta Corporate Awards 2008.

- Your Company received the Award for the Most Diversified PSU in the
country from Dalal Street Investment Journal.

- Your Company has been ranked among the Forbes 2000 companies.

- Your Company won the Amity Award for excellence in Human Resources.

* HSE:

During the year 2008-09, your Company has been awarded 23 nos. of coveted
awards/appreciation for its excellent performance in HSE. Some of the
significant awards conferred upon your Company are as under:

- International Safety award from British Safety Council for Petrochemical
Plant at Pata, Gandhar and Rajamundary installations and Vijaipur unit.

- Golden Peacock Award for Occupational Health & Safety from Institute of
Directors to Hazira Gas Compressor Station.

- Two top awards from Oil Industry Safety Directorate for Gas Processing
Unit, vijaipur and HVJ Pipeline.

- 'Suraksha Puraskar' from National Safety Council to Gas Processing Unit,
Gandhar and HVJ Compressor Station, Vijaipur.

- 'Certificate of appreciation' from Gujarat Safety council to Gas
Processing Plant, Vaghodia, Hazira Compressor Station & Regional Pipeline
network Head Quarters, Baroda.

* Others:

- Your Company has once again received the National Award for Excellence in
Cost Management from The Institute of Cost and Works Accountants of India
(ICWAI). Your Company as a organization won the second award under the
category of Public Sector Manufacturing (Large), Pata unit won the Second
Award in public sector Manufacturing (Large) category & vljaipur LPG unit
won the Good Performance Award in public sector manufacturing (Large)
category of National Award for Excellence in Cost Management 2008.

- Indira Gandhi Rajbhasha Award by the Government of India to propagate and
implement the Official Language Policy.

RIGHT TO INFORMATION:

In order to promote transparency and accountability, an appropriate
mechanism has been set up across the Company in line with the Right to
Information Act, 2005. Your Company has nominated APIOs/PIOs/CPIO at its
units/offices across the country to provide information to citizens under
the provisions of RTI Act.

MANAGEMENT DISCUSSION AND ANALYSIS:

The detailed Management Discussion and Analysis form part of this report at
Annexure A.

CORPORATE GOVERNANCE:

Your Company believes Corporate Governance is at the root of shareholder's
value creation. Pursuant to clause 49 of the Listing Agreement with the
Stock Exchanges, a report on Corporate Governance forms part of this Report
at Annexure B.

The statutory auditors of the Company have examined and certified your
Company's compliance with respect to conditions enumerated in clause 49 of
the Listing Agreement and DPE guidelines on corporate governance. The
certificate forms part of this Report at Annexure C.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION:

Details of conservation of energy, technology absorption in accordance with
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988 are annexed at Annexure D.

PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956:

The particulars of employees u/s 217 (2A) of the Companies Act, 1956, read
with Companies [Particulars of Employees) Rules, 1975.

FIXED DEPOSITS:

Your Company has not accepted any Fixed Deposits and, as such, no amount of
principal or interest was outstanding as of the balance sheet date.

FOREIGN EXCHANGE EARNINGS AND OUTGO:

During the year under review, foreign exchange earnings were Rs 6.96
crores. Expenditure in foreign currency was Rs. 1,949.12 crores.

During the year under review, your Company has incurred expenditure of
Rs.0.42 crores on foreign tours, foreign training, seminars & conferences,
Rs.0.11 crores on entertainment and Rs. 11.89 crores on advertising &
publicity.

DIRECTORS:

Dr. U.K. Sen was appointed as non-official part-time (Independent) Director
w.e.f. 29.04.2008. Shri M.R. Hingnikar, Director (HR) ceased to be a
Director w.e.f. 27.07.2008. Prof. A.Q. Contractor was appointed as non-
official part-time [Independent) Director w.e.f. 04.08.2008. Shri D.N.
Narasimha Raju, Joint Secretary, MOPNG, Part-time Director, Government
Nominee ceased to be a Director w.e.f. 23.01.2009 and in his place Shri
Apurva Chandra, Joint Secretary, MOPNG was appointed as a Director w.e.f.
23.01.2009. Shri R.D. Goyal was appointed as Director (Projects) w.e.f.
01.07.2009.

CODE OF CONDUCT:

In line with the requirements of clause 49 of Listing Agreement, the Board
members and Senior Management Personnel, have affirmed compliance with the
Code of Conduct for the financial year ending 31st March, 2009.

DIRECTORS' RESPONSIBILITY STATEMENT PURSUANT TO SECTION 217 (2AA) OF THE
COMPANIES ACT, 1956:

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956
in relation to Directors' Responsibility Statement, it is confirmed that:

i) in the preparation of the annual accounts for the financial year ended
31st March, 2009, the applicable accounting standards have been followed
along with proper explanation relating to material departures;

ii) the Directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit of the Company
for the year under review;

iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;

iv) the Directors have prepared the annual accounts for the financial year
ended 31st March, 2009 on a going concern basis.

AUDITORS:

* Statutory Auditors:

The Statutory Auditor of the your Company is appointed by Comptroller &
Auditor General of India (CAG). M/s Mehra Goel & Co., Chartered
Accountants, New Delhi was appointed as Statutory Auditors of your Company
for the year 2008-09. M/s SCJ Associates, Chartered Accountants, Agra and
M/s Rupa Sekar & Associates, Chartered Accountants, Bhopal were appointed
as Branch Auditors for U.P. Petrochemicals Complex at Pata and LPG Plant at
Vijaipur respectively for the year 2008-09.

The review by CAG forms part of this report. Notes on accounts referred in
the Auditors' Report are self explanatory and therefore, do not call for
any further comments.

* Cost Auditors:

Pursuant to the directions of the Central Government for audit of cost
accounts, your Company has appointed M/s. R.J. Goel & Co., Delhi for
Vijaipur - LPG, M/s. Ramnath Iyer & Co., New Delhi for Pata - LPG, M/s.
K.G. Goyal & Co., Jaipur for Vaghodia - LPG, M/s Shome & Banerjee, New
Delhi for Gandhar - LPG, M/s. K. Narsimhma Murthy, Hyderabad for Usar -
LPG, M/s Bandyopadhyaya & Bhaumik & Co., Kolkata for Lakwa - LPG and M/s.
R.M. Bansal & Co., Kanpur for CNG Station, Baroda as Cost auditor for the
year ended 31st March, 2009.

ACKNOWLEDGMENT:

The Board of Directors acknowledge their gratitude for the valuable
guidance and support received from Government of India in particular the
Ministry of Petroleum and Natural Gas (MOPNG) and various State
Governments.

The Board acknowledges their deep and sincere thanks for the co-operation
and assistance received from Shareholders, Bankers, Financial Institutions,
Customers and Suppliers.

The Board would like to place on record its appreciation to the hard work,
commitment and unstinting efforts put in by your Company's employees at all
levels.

For and on behalf of the Board

Dr. U.D. Choubey
Chairman & Managing Director

Place : New Delhi
Dated : 13.07.2009

Management Discussion and Analysis:

ECONOMIC DEVELOPMENTS - MACRO:

Indian Gas Sector - An Analysis:

Owing to the climate change concerns worldwide, the emphasis on clean
energy is increasing day-by-day. Natural Gas, with its inherent environment
- friendly nature, is assuming greater significance in the energy sector.

Share of Natural Gas in India's energy basket has gradually increased to
9%. Although it is still low compared to the world average of 24%, the
steep growth in demand coupled with recent increase in supplies owing to
the large discoveries on the east coast has instilled the confidence that
the Natural Gas contribution in Indian energy sector will significantly
increase. The likely increase of share of gas in consumption pattern in
Indian context is further supported by the fact that only around 20% of
India's sedimentary basin has been explored.

Primary Energy Consumption India:

With the growth In demand from Power, Fertilizer, City Gas, etc. and
presence of multiple players and gradual developments on the regulatory
front, scenario of Indian Natural Gas sector is changing. There is an
enhanced infrastructure requirement owing to the growing gas demand which
require more supplies from indigenous as well as imported sources.

Gas Demand Outlook:

Natural Gas sector in country is progressively becoming competitive in
nature due to changes in policies relating to gas pricing, presence of
multiple players in upstream, midstream and downstream segments of the
industry and alignment of customers towards a market determined gas pricing
regime. These changes are going to significantly alter the dynamics of
hitherto controlled and regulated Natural Gas industry to a free market
scenario.

Presently, power sector consumes roughly around 46% of the total Natural
Gas sales in the country followed by fertilizer sector which consumes
around 25%.

Gas Demand Projections MMSCMD

2009-10 2011-12

Power 103 127
Fertilizer 56 76
City Gas 14 16
Industrial 17 20
Petrochemicals 29 33
Sponge Iron 7 8
Total 226 280

Source: Working group report on Petroleum & Natural gas sector for the
eleventh plan period.

Gas Supply Outlook:

The situation on the supply side is going to change because of large
discoveries of gas from New Exploration and Licensing Policy (NELP) blocks
in the East Coast. Higher re-gasification capacities of LNG terminals at
Dahej, Dabhol, Hazira and Kochi are being planned by your Company, Petronet
LNG Limited (PLL) & Hazira LNG Private Limited (HLPL) to meet the ever
increasing demand for LNG in the country. However, the contracted LNG
volume is far less compared to the capacities envisioned to be created.

Gas Supply Projections MMSCMD

Sources 2009-10 2011-12

ONGC &OIL 56 51

Pvt/JVs (as per DGH) 60 58

LNG 53 83

Additional anticipated 74 94
supply

Total 243 286

Source: Working group report on Petroleum & Natural gas sector for the
eleventh plan period.

OPPORTUNITIES, THREATS, RISKS, CONCERNS & MITIGATION:

Gas Sourcing:

As the country's leading marketer and transporter of gas, your Company has
been proactive in sourcing gas to maintain and increase its market share.
These efforts have assisted your Company in receiving the marketing rights
for about 18 MMSCMD including entire PMT gas of 17.3 MMSCMD. Further, your
Company is in process of tying up additional 5.5 MMSCMD from C Series,
Bandra formation and Vasai gas fields in western offshore region of ONGC.

Your Company is in talks with suppliers like HOEC (Tamil Nadu), SGL
Consortium (Rajasthan) and other new upstream players under NELP to source
additional gas.

Further, to meet the requirements of customers, your Company has soureed
around 426 MMSCMD of Spot RLNG till date in 2008-09 from sources like PLL /
HLPL to meet the additional demand.

Your Company is in the process of signing gas transportation agreement for
RIL's KG Basin gas which is being distributed in line with EGOM Directives
to designated consumers viz. fertilizers, LPG Plants, power and city gas
distribution projects and RLNG contracts of total quantity around 10.53
MMSCMD were renewed with 81 consumers during the year.

Gas Transmission:

Your Company is the market leader in the field of transmission and
distribution commanding a share of around 79% of the entire gas available
and owns and operates a network of over 7,000 km of Natural Gas high
pressure trunk pipeline.

Your Company has been authorized by MOPNG for 5 upcoming pipelines as well
for up gradation of 2 existing pipelines and is in the process of laying
the pipelines in phased manner. The total length of these pipelines along
with the 3 capacity augmentation lines will be around 6,600 km. This will
further strengthen your Company's position as a major gas transmission
Company and expand the transmission network. These pipelines will be built
by your Company on an open access and common carrier principle and are
expected to be completed in two phases in the next 3-4 years. When these
pipelines are commissioned, the capacity is expected to increase from 150
MM5CMD to around 300 MMSCMD.

The country is facing a rapid decline of domestic volumes from existing
major suppliers. Further, with the deregulation, new players may enter into
the market resulting lowering of transmission charges. Your Company sources
majority of gas from ONGC producer for which a Gas Sales Agreement has been
executed between your Company & ONGC. Your Company also sources gas from
other suppliers namely OIL, PLL, Cairn Energy, PMT etc. for which requisite
agreements are in place.

In order to further augment the existing supplies, your Company has
executed contracts with ONGC, PMT, PLL, HLPL for sourcing additional gas,
entered into a MoU with Reliance Industries Limited (RIL) and ONGC for
cooperation in the gas sector and is in discussions with ONGC for sourcing
Coal Bed Methane (CBM) gas from CBM blocks owned by ONGC in the eastern
region.

Inter-State Gas grid:

Your Company plans to complete seven new Gas pipelines spread over 6,600 km
at an estimated Capex of Rs. 28,000 crores by financial year 2011-12. This
would increase the transmission capacity to approximately 300 MMSCMD and
almost double gas pipeline networks to over 12,000 km of natural gas
pipelines.

Dadri Nangal Pipeline, augmentation of HVJ & GREP Pipeline and Chainsa-
Jhajjar-Hissar Pipeline are already under execution. The other major
pipelines planned are Jagdishpur-Haldia Pipeline, Dabhol-Bangalore Pipeline
and Kochi-Mangalore-Bangalore Pipeline. Your Company has received the
authorization from MOPNG for laying these pipelines.

Your Company is planning to lay offshore pipeline from Kochi LNG terminal
to NTPC Kayamkulam for supplying gas to NTPC power plant. Your Company is
also executing a gas pipeline from Langetala gas fields to RRUVNL Power
plant at Ramgarh in Jaisalmer district of Rajasthan.

Your Company has also applied to PNGRB for EOI of Central India pipeline
from Vijayawada (AP) to Vijaipur (MP) with approximate length of 1,050 km
and capacity of 30 MMSCMD.

E&P:

Your Company is participating in 27 E&P and 3 CBM Blocks. In 8 E&P blocks,
hydrocarbon discoveries have been made. Other blocks are in exploration
phase where seismic data acquisition, geological studies and drilling is
planned as per Annual Work Programme. Most of these services are outsourced
and currently their prices are linked with crude oil prices as well as
availability of equipments specially deep water vessels. With the launch of
New Exploration and Licensing Policy (NELP), the Company has opportunities
to acquire E&P blocks and to carry out exploration in these blocks.

As your Company is operating 2 onland blocks, its scientific capabilities
of E&P department is being enhanced by engaging experienced domain experts
as advisors, workstation for geological interpretation & modeling and field
association & trainings etc. Apart from above, your Company has recruited
experienced drilling personnel. The new exploration opportunities are also
being evaluated technically as well as commercially.

The volatility in crude oil prices could affect the revenue from E&P
blocks.

Subsidy:

As per Government of India's directives, in order to make LPG affordable to
common man, your Company is sharing the subsidy burden on account of under-
recoveries on domestic LPG, since the year 2003-04.

Your Company has borne a subsidy of Rs. 7,212 crores since FY 2003-04.
During the year under review, Company has made a provision of Rs. 1,781
crores on account of subsidy which includes Rs. 87 crores on account of
lower subsidy provided during FY 2007-08.

Gas Policy & Pricing:

Petroleum and Natural Gas Regulatory Board Act, 2006 has been enacted by
Parliament and Gas Pipeline Policy has been announced by Government of
India for business of Natural Gas transmission, refining, processing,
storage, transportation, distribution and marketing. The Regulator will
oversee and promote the development of natural gas sector and it also
envisages an arm length relationship between transmission entity and
marketing/exploration activity. The regulator has issued regulation namely
'Petroleum & Natural Gas Regulatory Board Determination of Natural Gas
Pipeline Tariff Regulation, 2008' in respect of Natural Gas Transmission
tariff which, inter-alia, includes:

* Natural Gas pipelines includes Spur Line and excludes Dedicated Pipeline
and CGD networks.

* Capacity of Natural Gas Pipeline means the sum of capacity requirements
of the entity (I/C + GSA), firmed-up contracted capacity with other
entities (GTA) and at least 33% of sum of own requirement and firmed-up
capacity.

* Tariff shall be uniform within a Zone. Each Zone shall be of 300 km each.
Each tariff zone shall have a corridor of 50 km or 10% of the length of the
pipeline, whichever is lower, on either side of the pipeline. The First
zone shall start from the point of origin of pipeline.

* Tariff shall be worked out on DCF methodology based on the balance
economic life of the pipeline.

* Economic Life of the pipeline shall be a period of 25 years beginning
from the date of commencement of physical activity for laying the pipeline.

* Tariff Review shall be done by the PNGRB after every five consecutive
years.

Government of India has prepared the gas utilization policy which governs
the priority area for gas distribution from Reliance Industries D-6 Block
in K.G. Basin. Fertilizer, Power, City Gas, etc. are major beneficiaries
under the policy.

Presently, gas is being marketed under multiple pricing mechanism, which is
being governed as per various Production Sharing Contracts (PSC) and
considering the priority areas for mass consumption.

APM gas is supplied to Power & Fertilizer sector at base price of
Rs.3,200/1,000 SCM. Price for city gas & small consumers is around
Rs.3,840/1,000

SCM, while same is supplied to non APM consumers as USS 4.75/MMBTU. Price
of gas supplied from Rawa Satellite is around USS 430/MMBTU and RLNG is
supplied at ex-terminal pooled price as declared by ePLL on monthly basis.

Government of India is a major shareholder of the Company. Major decisions
like fixation of price of Natural Gas and subsidy sharing are taken by the
Government of India. Furthermore, the petrochemical and LPG prices are
influenced by global demand supply position and vary from time to time.

Tariff Review:

Government of India notified the Petroleum and Natural Gas Regulatory Board
(PNGRB) Act, 2006 in 2006. Accordingly, PNGRB was established on October 1,
2007 and notified various regulations including Petroleum and Natural Gas
Regulatory Board (Determination of Natural Gas Pipeline Tariff)
Regulations, 2008. As per Tariff Regulation each entity engaged in Natural
Gas business has to submit to the PNGRB, the financial costs and other data
for determination of natural gas pipeline tariff. PNGRB has prescribed the
methodology for working out the transportation tariff of natural gas
pipeline, in accordance of which GAIL is in the process of finalizing the
Natural Gas Pipeline Tariffe for all its pipeline networks for onward
submission to PNGRB.

Petrochemicals:

Your Company owns and operates a gas based integrated petrochemical plant
at Pata, Uttar Pradesh with a capacity of producing 4,10,000 TPA of
Polymers i.e. HDPE and LLDPE. Your Company is in the process of installing
an additional furnace of 1,00,000 TPA capacity at Pata to further increase
polymer production capacity of the plant. Your Company is currently in the
process of setting up a 2,80,000 TPA Petrochemical Complex at Lepetkata in
district Dibrugarh, Assam at an investment of Rs. 5,460 crores under Joint
venture with OIL, NRL and Assam Government.

PHYSICAL PERFORMANCE:

2008-09 2007-08

Total Gas Throughout 83.29 82.10
(MMSCMD)

Total- Liquid 1,405 1,344
Hydrocarbon Sales (TMT)

Total Polymers Sales (TMT) 423 391

Total LPG Transported (TMT) 2,744 2,754

Crude oil Sale (MT) 13,153 2,684

FINANCIAL PERFORMANCE:

Income:

Your Company registered a turnover (net of Excise Duty) of Rs. 23,776
crores in FY 2008-09, a 32% increase, as against Net Sales of Rs. 18,008
crores in the previous year. The increase in turnover was achieved despite
subsidy provision of Rs. 1,781 crores during FY 2008-09 against Rs.1,314
crores during last year. The other income was Rs. 797 crores as against
Rs.556 crores in the last year. The total income was Rs. 24,578 crores
against Rs. 18,594 crores during last year, registering a growth of 32%.

Cost of Sales:

Cost of sales including depreciation and interest was Rs. 20,369 crores as
against Rs. 14,709 crores during the previous year showing an increase of
38%. The increase was mainly on account of increase in volume of PMT gas
purchase, increase in salary expenditure due to provision on account of
wage revision etc.

Segment Wise Turnover (Net of ED):

(Rs. in crores)


PARTICULARS 2008-09 2007-08

1. Transmission Services:

a) Natural Gas 2,216 2,026
b) LPG Transmission 380 382
2. Gas Trading 15,435 10,332
3. Petrochemicals 2,705 2,569
4. LPG & Other Liquid Hydro Carbons 2,964 2,641
5. GAILTEL 24 28
6. Unallocated 52 30
TOTAL SALES 23,776 18,008

Profitability:

The Net Profit of the Company during the current financial year 2008-09 was
Rs. 2,804 crores against Rs. 2,601 crores during the previous year, an
increase of 8%. The increase in Net Profit was mainly due to higher
production of polymer products, higher Gas Transmission volume, better
product prices of LPG & polymer etc. LPG subsidy during the period
increased by Rs. 467 crores to Rs. 1,781 crores compared to Rs. 1,314
crores in the corresponding previous period.

Shareholders' Fund:

The reserves and surplus were at Rs. 13,501 crores at the end of the
current financial year as compared to Rs. 12,159 crores at the end of the
last financial year. As on 31st March 2009, networth of the Company stood
at Rs. 14,575 crores as compared to Rs.12,842 crores as on 31st March,
2008.

Ratio Analysis:

PAT to Networth & PAT to Net Sales for the Company during the year under
review stands at 19% & 12% respectively. Return on Capital Employed (ROCE)
is 25% for FY 2008-09. Debt Equity ratio stands at very comfortable
position of 0.08 as on 31st March, 2009. Diluted EPS has gone up to Rs. 22
during the year 2008-09 from Rs. 21 per share for the period ended on 31st
March 2008. Market capitalization as on 31st March, 2009 was Rs. 30,983
crores as against Rs. 35,928 crores as on 31st March, 2008.

Funds Flow:

The source of funds comprising equity, loan and deferred tax liability
stood at Rs.17,296 crores as compared to Rs. 15,590 crores in the previous
year, During the year under review, the paid-up capital of the Company has
increased from Rs. 845.65 crores to Rs. 1268.48 crores consequent upon
issuance of one fully paid-up bonus share for every two equity shares.
There has been an increase in reserves and surplus from Rs.12,159 crores to
Rs.13,501 crores. The capital work in progress stood at Rs.2,426 crores as
against Rs. 817 crores in the previous year.

MATERIAL DEVELOPMENT IN HR AND INDUSTRIAL RELATIONS:

Your Company believes that a continuous thrust on learning by the employees
has been its unique preposition which has always yielded results and is the
source of sustainable key competitive advantage. Towards this end, your
company has been quite proactive in the area of Human Resource Development.

The total employee strength of your company stood at 3,544 on 31st March,
2009.

Industrial relations scenario remained harmonious and cordial for most part
of the year. However, on account of pay revision issues, strike was
observed by the Officers of the Company at Industry level in January, 2009.
However, officers rendered extra work on 10th and 11th January, 2009 (2nd
Saturday and Sunday) without any additional compensation. This resulted in
a loss of 0.06% of the available man days.

Company continues to focus on employee oriented initiatives with a view to
tap potential of employees while synergising individual development and
organizational growth.

ENVIRONMENT PROTECTION AND CONSERVATION/RENEWAL ENERGY DEVELOPMENTS/FOREIGN
EXCHANGE CONSERVATION:

Your Company is committed to operational excellence a long with improvement
in environmental performance. It is highly sensitive to the changing
requirements of the environment and stake holders, which reflected in all
its activities.

Your Company being a Natural Gas Company is environment friendly, spreading
green energy by transportation of Natural Gas and LPG through pipelines,
promoting CNG as alternate fuel for transport sector, promoting PNG for
household use and developing green and healthy environment in and around
its work stations.

Few of the initiatives undertaken during the year to protect and sustain
the environment are mentioned as under:

* Environmental Performance:

Your Company's sustainability initiatives are focused on resource
conservation, and are aimed at preserving and protecting the natural
resources for future generations. Your Company continues to recognize the
importance of all the National & International regulations and ensures 100%
compliances at all times. Your Company's environmental performance is well
within the emission limits as per statutory guidelines. Your Company has
taken up various projects on renewable energy sources like wind energy for
meeting its energy needs, Flare Gas Recovery Project at Pata Petrochemical
plant, Waste Heat Recovery projects at various plants, Biogas Plant from
Kitchen Waste at Pata,Tapping Solar Energy for Solar water heating Systems
at various plants and various process engineering related energy efficiency
projects at each plant.

* Greenbelt Progress:

Your Company develops green and healthy environment in and around its
workstations. Your Company's process plant is among the Plants converted
from Barren Land into a Green Oasis. The green cover together with large
water bodies in the complex has created an ideal habitat for birds, in the
process plants. Tree planting and Horticulture related improvement
programmes are ongoing process in your Company to enhance the pollution
free environment in and around.

* Water Conservation & Rainwater Harvesting:

Your Company's water conservation efforts are directed at prevention of
water wastage. Waste of water use is eliminated at the design stage itself
for ensuring productive & efficient utilization of water in the process
plants. The comprehensive waste water management facilities comprise of oil
removal facilities, chemical treatment and Biological treatment facilities
with Extended Aeration process.

'Rainwater Harvesting' was also undertaken at most of our work centers, to
recharge the groundwater strata effectively.

* Air Monitoring:

Your Company continuously monitors ambient air quality. The pollutants are
maintained below stipulated norms, by providing adequate stack heights for
effective dispersion together with the use of clean fuel. Continuous
monitoring of ambient air quality is done by State of the Art Ambient Air
Quality Monitoring Stations at its process plants.

* Solid Waste Management:

In your process plants, the solid wastes are collected, stored and handled,
in a manner which has no detrimental effect on the ground water or other
environment.

CORPORATE SOCIAL RESPONSIBILITY:

Your Company has been emphasizing on the cause of community development and
empowerment. Your Company has adopted a policy whereby one percent of its
profits (PAT) is utilized for meeting its corporate social
responsibilities. Details of activities undertaken during the year under
review has already been covered in the Directors' Report.

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY:

Your Company has developed internal control system in its various business
processes commensurate with size and nature of business. Your Company has
an independent in-house Internal Audit Department functionally reporting to
the Audit Committee. Internal Audit Department consists of professionally
qualified executives from various disciplines who carry out audit of
financial, technical and other business activities of the Company besides
reviewing the adequacy of internal control systems, risk management process
etc. under Internal Audit Charter which contains best global practices in
the profession of Internal Auditing.

CAUTIONARY STATEMENT:

Statements in the Directors' Report and Management Discussion & Analysis,
describing the Company's Objectives, projections and estimates,
expectations, predictions etc. may be 'forward looking statements' within
the meaning of the applicable laws and regulations. Actual results,
performances or achievements may vary materially from those expressed or
implied, depending on economic conditions, Government policies and other
incidental factors.

Annexure - D:

ANNEXURE TO THE DIRECTORS' REPORT ON CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO AS PER SECTION 217 (1) (e)
OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (DISCLOSURE OF PARTICULARS
IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988:

A. CONSERVATION OF ENERGY:

(a) Energy conservation measures taken:

1) Retrofitting of RG heater with PLC based Burner Management System:
Improved burner with PLC based Burner management system has been installed
for RG heaters to replace earlier inefficient burners at Vijaipur with an
investment of around Rs. 1 crore. The new PLC based Burner management
system resulted in fuel saving of around 10,479 MMBTU of natural gas which
corresponds to saving of around Rs. 24 lacs.

2) Switching over of CCVT/TEG power to Grid Power: CCVT and TEG installed
at remote RR stations to supply electrical power are reliable but less
efficient source of power supply. CCVT/TEG has been replaced by Grid supply
at some of RR stations in HVJ, JLPL, VSPL & Vadodara resulted in saving of
around Rs. 96 lacs.

3) Modification done in lighting system: Optimization, replacement of
conventional lighting system by energy efficient lighting like T-5 tube
lights, CFL, MH lamps, Electronic chokes etc. along HVJ, JLPL etc. &
automation of lighting control system of switchgear room at Jhabua
compressor station resulted in saving of around 15 lac units which
corresponds to saving of around Rs. 7 lacs.

4) Purging of Flare Header by using inert gas: Natural gas is being saved
by purging the flare header by nitrogen in place of natural gas at GPU
Gandhar. This has resulted in saving of around 3,13,944 SCM of natural gas
which corresponds to saving of around Rs. 23 lacs.

5) Installation of Energy Efficient UPS: At GPU, Vijaipur old thyristerised
UPS is replaced with energy efficient IGBT based. UPS which has resulted in
saving of around 0.35 lac units which corresponds to saving of around
Rs.1.75 lacs.

6) Installation of Variable speed Drive: Installed variable speed drive in
one of the cooling tower fans at Gandhar to provide optimized cooling.
Total reduction in energy consumption is around 28,558 KWH which
corresponds to saving of around Rs. 1.7 lacs.

7) Stoppage of Pre Chlorination pump by system modification: At GPU
Gandhar, pre-chlorination has been stopped and chlorination is being done
through existing water flow line modification. This has resulted in energy
saving to the tune of 6,570 KWH which corresponds to saving of around
Rs.0.37 lacs.

8) Installation of VFD for DVPL gas after coolers & Lube oil cooler at
Vijaipur: To harnessing the benefit from climatic variations, Variable
Frequency Drives have been installed for gas after coolers & lube oil
cooler of DVPL compressors. The estimated energy saving is around 1.5 lacs
units which corresponds to saving of around Rs. 7.5 lacs.

9) Reduction of pressure setting of compressed air system: As per
recommendation of energy audit, pressure setting of air compressors reduced
for unloading from 8.4 to 7.4 kg/cm2 & loading from 7.7 to 6.7 kg/cm2. This
has resulted into energy saving of around @12 units per hour which
corresponds to saving of around 0.27 lacs KWH or which corresponds to
saving of around Rs. 1.35 lacs.

10) Replacement of conventional tube lights with energy efficient tube
lights is under implementation. In the first phase, 1100 Nos. of
conventional 40W tube-rods have been replaced with T5 28 W energy efficient
tube-rods in the plant. This will result into a saving of nearly 1,10,000
units of electricity/Rs. 3.68 lacs.

11) In view of energy saving measure, Electrical maintenance has replaced
5,000 incandescent lamps of 60 watts with 13 watts CFL, 1400 Nos of 40
watts tube rods with T5 - 28 watt energy efficient tube rods and 1100 Nos.
of conventional 40W tube-rods have been replaced with T5 28 W energy
efficient tube-rods in the plant resulted in monetary saving of around
Rs.205 lacs / annum.

12) The C2 Hydrogenation unit in gas cracker unit has been a source of
Ethylene loss on account of poor selectivity of the catalyst and resulting
in more Ethane recycle, due to conversion of product Ethylene into Ethane.
Catalyst replaced in all the three reactors with an investment of around
Rs. 6 crores which resulted in saving of around Rs. 7 crores per annum,
achieved in terms of energy as well as increased production of polymer.

13) In the D.M. Plant, recovery of heat from incoming steam condensate to
Thermax Condensate Polishing Unit has been done by joining the tube side
outlet of the heat exchanger to the condensate header so that the flow

through the tube side increases up to 220 m3/hr, resulting in effective
heat transfer from hot condensate to outgoing condensate to Boiler/HRSG and
decreasing the load on the cooling tower. The flow through heat exchanger
has been increased by injection of the condensate in D.M. export line. The
implementation of above modification scheme resulted in the saving of
around Rs. 61 lacs per annum.

14) In four of the cooling tower pumps (one from CT-1 and three from CT-3)
coating of polymeric material has been done in the pump casings/pump
impellers which shall result in improved performance of the pumps and
corresponds to a monetary saving of Rs.32 lacs/annum. Coating of polymeric
material on other Cooling water pumps is under progress.

15) Vapor from Propylene exchanger at GPU (08-EE-35) was taken in Knockout
drum-l of 1st stage of Propylene refrigeration Compressor. This closed the
Anti-Surge Valve from 60% open to 20% open condition. Thus load on all four
stages of C3R Compressor were balanced. This modification has resulted in a
saving of Rs. 1.54 crores per annum.

16) As a step towards protection of environment, Solarwater heaters have
been installed in public buildings/Bachelor Hostel accommodation (23 Nos)
and Guest house (18 Nos) as an alternative source of energy to conserve
fossil fuel.

(b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:

1) Installation of aerodynamic FRP fan blades in Cooling Towers: Blades of
ID fans in TR-12 at Vijaipur are being replaced with aerodynamic FRP fan
blades with an estimated investment of Rs. 3.0 lacs. Estimated energy
saving will be to the tune of 1 lac units/year which corresponds to saving
of around Rs. 5 lacs/year.

2) Replacement of conventional metallic wear rings with non-metallic wear
ring in cooling water circulation pumps at vijaipur. Non-metallic composite
wear ring will be fitted on CWC pumps C&D as per API 610 (9th edition) in
place of conventional metallic wearing ring with an estimated investment of
Rs.1.0 lac. Estimated energy saving will be around 0.76 Lac units/year
which corresponds to saving of around Rs. 3.8 lacs.

3) Installation of power controller for HVAC compressor motors: Power
controllers will be used to control the power supply for 110 KW HVAC
compressor motors with an estimated investment of Rs. 3.0 lacs. Estimated
energy saving will be around 0.56 lacs Units/year which corresponds to
saving of around Rs. 2.8 lacs.

4) Replacement of GLS lamps with CFLs Action being taken to replace
conventional incandescent lighting with CFLs in Vijaipur Township with an
estimated investment of Rs. 8.0 lacs. Estimated energy saving will be
around 2.1 lac Units/year which corresponds to saving of around Rs. 10.5
lacs.

5) Installation of solar water heater at vijaipur: A set of 4x500 LPD
capacity solar water heaters is being installated in the bachelor hostels
to replace electric geysers with an estimated investment of Rs. 4.5 lacs.
Estimated energy saving will be around 0.2 lac Units/year which corresponds
to saving of around Rs. 1 lac.

6) Flare gas recovery project: This project will recover gases going into
flare system for utilization in boilers. The project is under
implementation. With an estimated investment of around Rs. 6 crores, the
project would result into fuel savings of 1.2 MT/hr which corresponds to
saving of around Rs. 7 crores/year plus CDM benefit additionally.

7) Ethylene boil off gas diversion to HDPE units: The project comprising of
existing BOG compressor up gradation and associated pipings is under
implementation. With an estimated investment of Rs. 9.85 crores, the
project will benefit by improving energy efficiency and increasing ethylene
production by 15 MT/hr which corresponds to saving of around Rs. 10
crores/year plus CDM benefit additionally.

(c) Impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:

Energy conservation measures taken so far have resulted in an improvement
in energy efficiency as detailed at (a) and (b) above.

(d) Total energy consumption and energy consumption per unit of production:

As per Form A annexed.

B. TECHNOLOGY ABSORPTION:

(e) Efforts made in technology absorption:

As per Form B annexed.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

(f) Activities relating to exports; initiatives taken to increase exports;
development of new export markets for products and services; and export
plans:

Owing to huge domestic demand for polymers during FY 2008-09, there were no
exports during the year.

(g) Total foreign exchange used and earned:

During the year, your Company has incurred expenditure of Rs. 0.42 crores
on foreign tours, foreign training, seminars & conferences, Rs. 0.11 crores
on entertainment and Rs. 11.89 crores on advertising & publicity.

FORM - A:

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY:

A. POWER & FUEL CONSUMPTION:

2008-09 2007-08

1. ELECTRICITY:

a. Purchased Unit (KWH) 263089553 259242945

Total Amount (Rs. in lacs) 11402.00 10363.86

Rate/Unit (Rs./KWH) 4.33 4.00

b. Own Generation:

(i) Through Diesel Generator Unit (KWH) 590533 440482

Units per liter of Diesel Oil (KWH/Litres) 2.54 2.67

Cost/Unit (Rs./KWH) 14.53 13.40

(ii) Through Steam Turbine/Generator Units (KWH) 207969525 198155526

Units per ltr. of fuel oil/gas 2881.68 3013.23

Cost/Unit 3.93 3.84

2. COAL NIL NIL

Quantity (tonnes) Total cost Average rate:

3. FURNACE OIL NIL NIL

Quantity (K. ltrs.)

Total amount

Average rate

4. OTHERS/INTERNAL GENERATION:

Natural Gas Consumption (SCM/Year) 2017888 2161632

Total Amount (Rs. in lacs) 319.81 233.66

Cost of natural gas/SCM (Rs./SCM) 15.85 10.81

B. CONSUMPTION PER UNIT OF PRODUCTION:

2008-09 2007-08

ETHYLENE:

Production (MT) 431580 393389

Electricity (KWh/MT) 49.49 51.37

Furnace Oil Nil Nil

Coal Nil Nil

Others - Fuel Gas (MT/MT) 0.27 0.29

- Steam (MT/MT) 0.94 0.94

HDPE:

Production (MT) 198545 135530

Electricity (KWh/MT) 332.58 334.56

Furnace Oil Nil Nil

Coal Nil Nil

Others - Steam (MT/MT) 0.83 0.84

LLDPE:

Production (MT) 221481 250051

Electricity (KWh/MT) 248.00# 238.00

Furnace Oil Nil Nil

Coal Nil Nil

Others - Fuel Gas (MT/MT) 0.042 0.035

- Steam (MT/MT) 0.79# 058

# The specific consumptions of steam / Electricity in LLDPE plant are on
the higher side due to comparatively lower plant load in 2008-09.

FORM - B:

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION:

RESEARCH & DEVELOPMENT (R&D):

1. Specific areas in which R&D carried out by the Company:

During the year 2008-09, usage of H-CNG & Underground coal gasification
were pursued.

2. Benefits derived as a result of the above R&D:

Since the interactions with the relevant organizations were continuing, no
specific benefits could be derived during this time.

3. Future plan of action:

A new emphasis was laid by the Company with formation of a new R&D
Department, which has adopted a number of prioritized projects and the two
of which were included in the MoU of GAIL with MOPNG in 2009-10 i.e.
Hydrocarbons from waste plastics & Energy from Municipal Solid waste.

4. Expenditure on R&D:

Capital : Rs. Nil
Recurring : Rs. Nil
Total : Rs. Nil
Total R&D expenditure as a percentage of total turnover : NA

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

1. Efforts, in brief, made towards technology absorption, adaptation and
innovation Efforts were initiated for absorption of technologies in the
fields of H-CNG & Underground coal gasification etc.

2. Benefits derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution, etc.

Since the efforts were initiated, no immediate benefits could be derived.

3. In case of imported technology (imported during the last five years
reckoned from the beginning of the financial year), following information
may be furnished:

a. Technology imported : (i) HDPE technology from Mitsui Chemical
Inc, Japan from GAIL Petrochemical
complex expansion, 100 KTA capacity.

: (ii) Ethylene cracker technology, from
SWEC, USA for GAIL Petrochemical complex
expansion for addition of 100 KTA
ethylene capacity.

b. Year of import : (i) 2005

: (ii) 2005

c. Has technology been fully : (i) Yes
absorbed?
: (ii) Yes

d. If not fully absorbed,
areas where this has not taken
place, reasons therefore
and future plans of action : N.A.