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Directors Reports
GAIL (India) Ltd.
 
March 2015

BOARD OF  DIRECTORS

DEAR SHAREOWNERS,

On behalf of the Board of Directors of your Company, it is my pleasure to present the 31st Annual Report of your Maharatna Company, along with Audited Financial Statements for the financial year 2014-15-

PARTNER GROWTH WITH INDIA'S NATURAL GAS LEADER

With a turnover of Rs.56,56g Crores, GAIL (India) Limited, is India's largest natural gas Company and ranked among the top gas utilities in Asia. Your Company has a presence across the entire gas value chain with activities ranging from Gas Transmission and Marketing to Processing (for fractionating LPG, Propane, 5BP Solvent and Pentane), transmission of LPG, and production and marketing of Petrochemicals like HDPE and LLDPE. Your Company has extended its presence in Power, LNG re-gasification. City Gas

Distribution and Exploration & Production through equity and joint venture participations and also diversified into solar and wind power generation.

Gas transmission is one of the core competencies of GAIL and it draws strength from aboutll.OOO km of natural gas pipeline network and 2,038 km of LPG pipeline transmission network.

With a lean workforce of 4,266 employees, your Company plays a meaningful role in social and economic development of the country and makes a substantial contribution towards its energy security.

DISINVESTMENT BY PRESIDENT OF INDIA

The Government of India (Gol) has disinvested 15,672,024 shares on 27* March, 2014 through CP5E ETF. Further, Gol has disinvested 37,819 shares on 8th April, 2015 through CP5E ETF as Bonus Units. After disinvestment, the President of India holds 711,695,832 equity shares, representing 56.11% of paid-up share capital of GAIL.

DIVIDEND

Your Company has a consistent track-record of dividend payment. So far, your Company has disbursed dividend of over Rs.l3,043 Crores to the shareholders including Rs.7,925 crores disbursed as dividend to Government of India.

The Board of Directors of your Company had earlier approved payment of an interim dividend @ 30% (Rs.3 per equity share) on equity share of Rs.l0 each amounting to Rs.380.54 Crores, which was paid in March, 2015. Further, the Board has recommended payment of final dividend @ 30% (Rs.3 per equity share) on equity share of Rs.10 each for 2014-15 amounting to f 380.54 Crores. With this, the total dividend payment for the fiscal year 2014-15 will be 60% (Rs.6 per equity share) on equity share of Rs.10 each amounting to Rs.76l.09 Crores on its paid-up equity capital of Rs.l.268.48  Crores and dividend distribution tax of Rs.l53.56 Crores. The total dividend pay-out including corporate dividend taxaccountsfor30.10%of Profit After Tax.

CONTRIBUTION TO EXCHEQUER

Your Company has contributed over Rs.5,788 Crores in 2014-15 to the exchequer through dividend, duties, taxes and others, as compared to f 6,993 Croresin2013-14.

CREDIT RATING

Your Company has been reaffirmed the highest domestic credit rating of AAA from ICRA, CARE, CRISIL and India Ratings, which carry the lowest credit risk. The international rating agency, Moody's International, Hong Kong, has also reaffirmed the corporate issuer rating of Baa2, which is one notch higher than sovereign rating. Further, Fitch Ratings has also assigned a long-term foreign currency issuer default rating of BBB- with a Stable outlook, which is equal to sovereign rating.

CORPORATE STRATEGY

In order to make a quantum leap in its growth trajectory, your Company has developed its corporate strategy for the period 2011-2020. This strategy is currently under execution and the Company is closely monitoring progress on various strategic initiatives as well as continually assessing the macro environment to evaluate its impact on GAIL's businesses. The management of your Company has been playing a crucial role to achieve the strategic objectives and to ensure that it emerges as an integrated hydrocarbon major with significant upstream, midstream and downstream interests by 2020.

In the upstream segment, your Company plans to increase LNG imports through conventional route as well as through terminal capacity booking. It also plans to acquire equity in producing assets/liquefaction facilities to source equity-linked LNG. It has made remarkable progress in sourcing LNG by finalizing several long-term deals with suppliers, like Sabine Pass Liquefaction LLC (USA), Gazprom (Russia) and WGL Midstream Inc. (USA). GAIL Global (USA) LNG LLC, a subsidiary of your Company in the United States of America (USA), has booked LNG capacity in Dominion Cove Point's LNG liquefaction terminal in the state of Maryland. In addition, your Company is pursuing LNG shipping business by charter hiring LNG ships to transport LNG from the USA to India and other global markets. Your Company has also ventured into LNG trading business through its wholly owned subsidiary, GAIL Global Singapore Pte Limited.

To facilitate increase in LNG volumes, your Company plans to set up land based LNG terminals and Floating Storage and Regasification Units (FSRUs). It is also booking additional regasification capacities in existing and new terminals being set up by other companies. Your Company has tied-up additional regasification capacities at Dahej LNG terminal with Petronet LNG Limited (PLL). Further, in-line with the LNG sourcing efforts, your Company has intensified its domestic gas market development efforts in India to attract and retain more customers.

In order to bridge the demand-supply gap of natural gas as well as to address the energy security needs of the country, your Company is aggressively pursuing the transnational Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. Bilateral GSPA with Turkmengas has already been signed to import 38 MMSCMD gas into the country through this pipeline. Further, the TAPI Pipeline Company Limited has been incorporated as a Special Purpose Vehicle in the Isle of Man by the four TAPI entities.

In the midstream segment, your Company aspires to retain its leadership position through a continuous pan-India expansion of pipeline networks in synchronization with customer readiness along the pipeline networks. Your Company now has approximately 11,000 km network of natural gas pipeline in the country To further cater to the growing demand and to increase its geographic reach, various pipeline projects are at different phases of execution which will take the network size to around 15,000 km. In the downstream segment, your Company aspires to be amongst the top petrochemical players in the country by expanding existing capacities, setting up new plants, acquiring equity stakes in upcoming projects along with product off-take rights for marketing. It has doubled existing petrochemical production capacity at Pata by commissioning the second petrochemical unit Pata. A Greenfield Petrochemical plant is also beingset up in Assam through your Company's subsidiary, Brahmaputra Cracker & Polymer Limited (BCPL). Another petrochemical plant at Dahejis being setup through a JV.ONGC Petro-additions Limited (OPaL). By 2016, your Company is expected to havel.7 MMTPA polymer volume for marketing. On the retail side, your Company is targeting additional 40-50 Geographical Areas (GAs) through its subsidiaries and JVs for city gas distribution (CGD) in the coming years. Your Company's wholly owned subsidiary, GAIL Gas Limited, is progressing on track with respect to CGD projects in the cities of Kota, Dewas, Meerut and Sonepat. Further, GAIL Gas Limited has won the authorization from Petroleum & Natural Gas Regulatory Board (PNGRB) in 4th round of CGD bidding to develop CGD network for the city of Bengaluru. Your Company aims to reduce its carbon footprint in a phased manner and contribute positively towards a low carbon economy Accordingly your Company has set targets for renewable energy projects and significant progress has been made so far. Your Company has 118 MW installed capacity of wind energy. It has also established a 5 MW solar power project. Further, your Company is a stakeholder in an SPV created under the aegis of Ministry of Petroleum & Natural Gas (MOP & NG) & Ministry of New and Renewable Energy (MNRE) for setting up of grid connected Renewable Energy Power Projects.

In order to achieve the strategic goals efficiently and in a time bound manner, a major thrust is being given to strengthen and enhance the capabilities of human resource of your Company. Accordingly, recruitment, training and development policies are being suitably aligned with strategic objectives to enable your Company to implement and achieve its strategic goals by 2020.

BUSINESS PERFORMANCE

During the year under review, the segment wise business performance of your Company is as under:

• Natural Gas Marketing

Natural gas continues to constitute your Company's core business. During 2014-15, gas sales clocked 72 MMSCMD, compared to 79 MMSCMD in the previous financial year. Major supplies of natural gas are made as fuel to power plants, as feedstock for gas-based fertilizer plants and for LPG extraction. Your Company holds around 60% market share in India.

• Transmission

Natural Gas

Your Company owns and operates a network of about 11,000 kms of high pressure trunk pipelines with a pan-India capacity to transport around 206 MMSCMD of natural gas. Average gas transmission during the year was 92 MMSCMD compared to 96 MMSCMD in the previous financial year.   

LPG

Your Company has the distinction of being the only company in India, to own and operate exclusive pipelines for LPG transmission for third-party usage. It owns and operates two LPG Pipeline transmission systems with a total length of 2038 kms. Of this, 1415 km of pipeline network transports LPG from western to northern parts of India (Jamnagar- Loni LPG Pipeline) and the remaining 623 kms of pipeline network transports LPG in the country's southern part (Vizag-Secunderabad LPG Pipeline). The LPG transmission system has a capacity to transport up to 3.8 MMTPA of LPG. In2014-15, the LPG transmission throughput achieved was about 3.09 Million MT.

• Petrochemicals

During 2014-15, your Company has produced 447 Thousand MT of polymers and sold 441 Thousand MT of polymers.

• LPG and Other Liquid Hydrocarbon Production

Your Company has seven LPG plants in the country. USAR LPG Plant is in complete shutdown condition and is being kept under preservation mode. In 2014-15, the total liquid hydrocarbon production was aboutl,276 Thousand MT, which mainly comprised of 1,039 Thousand MT of LPG, 115.8lThousand MT of Propane, 22.76Thousand MT of Pentane and 98.75 Thousand MT of Naphtha.

During the year 2014-15, E&P business has generated sufficient revenue to be self-sustainable. Production of gas from its A-l & A-3 block in Myanmar has reached peak production of 14 MMSCMD. In 2014-15, revenue of approximately Rs.663.10 Crore has been generated from sale of hydrocarbon from its 4 producing blocks namely A-l & A-3, Myanmar and Cambay Onland blocks CB-ONN-2000/l (Ahmadabad) & CB-ONN-2003/2 (Ankles war) in Gujarat. The Field Development Plan (FDP) has been submitted for gas resource of 71 BCFin Tripura block.

Your Company is an Operator in three onland blocks viz. (I) RJ-ONN-2004/l in Rajasthan basin (Ganganagar) awarded during NELP-VI bidding round, ii) CY-ONN-2005/l in Cauvery basin, Tamil Nadu (Thanjavur and Thiruvarur) awarded during NELP-VII bidding round and (iii) CB-ONN-2010/ll in Cambay basin, Gujarat (Anand and Ahmadabad) awarded during NELP-IX bidding round. Your Company is non-operating partner in remaining!2 blocks.

During the year 2014-15, preparation for drilling of exploratory wells in block CY-ONN-2005/l was in progress. Actual drilling shall start after land acquisition. In block CB-ONN-2010/ll, during the year 2014-15, acquisition, processing and interpretation (API) of 131 KM2 3D Seismic Data has been completed. Drilling of exploratory wells is planned during2015-l6.

INITIATIVES FOR FUTURE GROWTH

• Global Initiatives

In November 2014, GAIL Global (USA) LNG LLC (GGULL), wholly-owned subsidiary of your Company in the US, signed a 20 year gas sourcing agreement with WGL Midstream Inc. (USA) for procuring natural gas required to feed the 2.3 MMTPA Dominion Cove Point LNG Terminal. Earlier in 2013, GGULL has signed Terminal Service Agreement (TSA) with Dominion Cove Point LNG LP for booking 2.3 MMTPA liquefaction capacity in the Cove Point LNG liquefaction project located at Lusby in the state of Maryland in the US.

Your Company is constantly pursuing a leading role in the TAPI Pipeline project to receive Natural Gas from the Galkynysh fields in Turkmenistan. The Pipeline Consortium Company TAPI Pipeline Company Limited (TPCL) was incorporated on 11th November 2014 in 'Isle of Man', a British Crown dependency located in the Irish Sea. TAPI has a mandate to build, own and operate the proposed TAPI Pipeline.

• Domestic initiatives

The domestic business initiatives of your Company were as follows:

 LNG Regasification Terminals

Your Company is planning to set up a Floating Storage & Re- gasification Unit (F5RU)/ Re-gasification terminal on the East coast of India. In this regard, discussions are on with Adani Ports and Special Economic Zone Ltd. (APSEZ) for equity participation and booking of capacity in the proposed regasification terminal at Dhamra port in Odisha.

LNG Shipping

In 2011, your Company contracted 3.5 MMTPA of LNG from Cheniere Energy, USA on FOB basis for an initial period of 20 years. Further, in 2013 your Company has also signed a Terminal Service Agreement (TSA) for booking of 2.3 MMTPA of liquefaction capacity in Dominion Cove Point terminal for 20 years. The initial supplies from both these contracts are expected to commence from December 2017. Currently, your Company is in the process of long term Charter hiring of LNG ships through international bidding route.

Natural Gas Pipeline Projects

During the year, your Company has completed 36 number of 'Last Mile Connectivities' coveringl29 km approx. of pipeline to increase the commercial utilization of various pipeline networks in 11 states-Uttar Pradesh, Uttarakhand , Punjab, Haryana, Rajasthan, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Kerala.

Non-Conventional Energy

Your Company has a total installed capacity of 118 MW of Wind Energy Generation Projects (WEG). Your Company had started with a modest capacity of 4.5 MW wind energy in the state of Gujarat in March 2010 for captive use. After the success of the first WEG project, an additional capacity of 14.7 MW of WEG was installed in January 2012 in the state of Gujarat for captive use. Your Company graduated to commercial production after commissioning98.75 MW of WEG projects in the states of Tamil Nadu and Karnataka in March 2012.

During the year, your Company also entered into generation of solar power by setting up a 5 MW Solar Power Plant in the state of Rajasthan under the Jawaharlal Nehru National Solar Mission, through bidding.

Coal Gasification

Your Company is entering into a joint venture for Coal Gasification cum Fertiliser production at Talcher, Odisha, with Rashtriya Chemicals and Fertilizers Limited (RCF), Fertilizer Corporation of India Limited (FCIL) and Coal India Limited (CIL). It is proposed to setup Coal Gasification unit based on Coal supplied from a coal block allocated for the plant.

The project envisages production of 3,850 MT urea per day. The success of this project shall pave the way forward for production of fertilizer from the abundantly available domestic coal, resulting in lesser dependency on import of fertilizers.

RELATED PARTIES-SUBSIDIARIES/ASSOCIATES/JOINT VENTURES

Your Company has formed subsidiaries and joint venture companies for CGD, petrochemicals, LNG, gas trading, power generation and shale gas. Your Company is one of the pioneers introducing city gas projects in India for natural gas supplies to households, commercial and transport sectors through its subsidiary and joint venture companies. The details of these subsidiary and joint venture companies are mentioned hereunder:

NATURAL GAS, LNG AND POWER

• GAIL Global (Singapore) Pte. Limited (wholly owned subsidiary)

GAIL Global (Singapore) Pte. Ltd. (GGSPL), primarily "\ started as an overseas investment arm of your J Company and was operational zed for LNG trading in 2012. It commenced its business operations in May  GGSPL  2012. GGSPL is now actively involved in business activities in the area of LNG Trading. Till 31st March, 2015, GGSPL has traded eight LNG cargoes out of which three have been traded during the financial year 2014-15.

GGSPL has also been mandated by your Company to market upto 3 MMTPA of its USA sourced LNG in the international market. GGSPL is already marketing such volumes in the international markets. The supplies against the said volumes are expected to start from the year 2018.

GGSPL is also targeting LNG third-party trades, ship chartering and risk management activities along with supplying LNG cargoes to GAIL

GAIL Global (USA) Inc (wholly owned subsidiary)

GAIL Global (USA) Inc. (GGUI), was incorporated as a wholly owned subsidiary of your Company to undertake investment in the Eagle Ford shale gas asset. The primary objective behind this investment was to enter into the US Shale Gas market and to GGUI bring the Shale Gas technology to India. GGUI executed a definitive agreement with M/s Carrizo Oil & Gas Inc., USA (Carrizo) on September 28, 2011, to enter into an unincorporated Joint Venture (JV) in the Eagle Ford Shale asset in Texas. GGUI acquired a 20% participating interest in this joint venture. Carrizo, with the remaining 80% participating interest, is functioning as the Operator for the JV.

During the year,12wells came online. Taking total online wellsto79 as on December 31, 2014. In addition, 16 wells were under different stages of Drilling & Completion as on that date. The gross production volume of GGUIduring2014was978.5Mboe

• GAIL Global (USA) LNG LLC (wholly owned subsidiary of GGUI)

GAIL Global (USA) LNG LLC (GGULL) was formed during March 2013 for entering into contractual agreements with Dominion Cove Point LNG, LP (DCP) for booking of LNG Tolling capacity of 2.3 MdlHwA MMTPA in its DCP LNG terminal. GGULL has signed Gas Sales & Purchase Agreement (GSPA) on November 30, 2014 with WGL Midstream, Inc. for sourcing of gas on delivered basis at the inlet of Cove Point pipeline/ terminal for a term of 20 years to produce about 2.3 MMTPA of LNG at the Cove Point Terminal. GGULL and DCP have satisfied all the Condition Precedents in the Terminal Service Agreement(TSA) making the TSA effective with effect from Decemberig,2014.

• GAIL China Gas Global Energy Holdings Limited

The joint venture company, GAIL China Gas Global Energy Holdings Limited, was formed with an objective to pursue gas sector opportunities, mainly in China. Potential gas sector projects are being identified for implementation by the company. Your Company has a 50% equity stake with China Gas Holdings Limited as an equal partner.

• Petro net LNG Limited (PLL)

PLL, which was formed for setting up of LNG import and re-gasification facilities, currently owns and operates an LNG re-gasification terminal of 10 MMTPA capacity located at Dahej, Gujarat. PLL has a long term LNG supply  petronet contract with Ras Gas, Qatar for import of 7-5 MMTPA of LNG. PLL is undertaking capacity expansion of LNG re­gasification terminal to 15 MMTPA at Dahej which is expected to be completed by end of 2016. PLL has also setup up an LNG re-gasification terminal at Kochi, Kerala with a capacity of 5 MMTPA. PLL also has a long term LNG supply contract with Exxon Mobil's Gorgon Project for supply of I.44MMTPA of LNG for its Kochi terminal.

Your Company has 12.5% equity stake with Bharat Petroleum Corporation Ltd. (BPCL), Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation Limited (I0CL) as equal partners.

• Ratnagiri Gas and Power Private Limited (RGPPL)

RGPPL was formed as a joint venture with NTPC for \ taking over and operating the erstwhile Dabhol Powerncnn Rs. C Project assets consisting of 1967.08 MW gas-based combined cycle Power Block and 5 MMTPA LNG Block. The assets were transferred to RGPPL in October 2005.

The power block has been revived and is under commercial operation since 19th May 2009. The power block was not operated due to no availability of domestic gas in 2014-15 and paucity of funds.

The gas delivery to LNGT erminal through high pressure delivery system was started in January 2013 and commissioned with effect from 22nd May 2013. Since the power generation is envisaged to entirely use available domestic gas, the integrated LNG terminal is also utilized for tolling purposes. RGPPL has already entered into a long-term framework agreement with GAIL for commercial utilization of LNG terminal and commenced tolling operations. 25 cargos have been successfully unloaded since commissioning .l0cargos were unloaded during2014-15.

RGPPL is in a difficult financial position due to non-liquidation of high receivables from its beneficiaries and non-availability of domestic gas for power generation leading to inability in meeting its debt servicing obligations for the year 2014-15-

To avoid being a Non Performing Asset, RGPPL has converted lenders' outstanding dues into equity. As a result, your Company has 25.51% equity stake in RGPPL with NTPC holding 25.51%, MSEB Holding Company Limited holdingl3.51% and Indian Financial institutions holding 35-47%.

CITY GAS DISTRIBUTION (CGD)

• GAIL Gas Limited (wholly owned subsidiary)

GAIL Gas was incorporated with the objective of focused implementation of City Gas Distribution (CGD) projects in the country. GAIL Gas has been authorized by Petroleum and Natural Gas Regulatory Board (PNGRB) for implementing City Gas Distribution Projects in Dewas, Kota, Sonipat, Meerut, Vadodara and Taj Trapezium Zone. In addition, GAIL Gas is pursuing City Gas Business in the state of Kerala, Andhra Pradesh, Karnataka, Rajasthan and West Bengal etc. through its joint ventures. It has won authorization from PNGRB in 4th round of CGD bidding to develop CGD network for the city of Bengaluru. It has signed MoU with Bharat Petroleum Corporation Limited for joint participation under 5th round of CGD bidding and have been authorized by PNGRB for the implementation of City Gas Distribution in Haridwar District (GA).

Compressed Natural Gas (CNG)

During the year, GAIL Gas augmented its CNG distribution infrastructure by enhancing the capacity of existing stations and adding new stations at Sonipat.CNGsalesincreasedto31 MMSCM in2014-15.

Piped Natural Gas (PNG)

In PNG business, GAIL Gas is supplying PNG to domestic customers progressively in its authorized cities. Presently, the company is catering to8,700households.

GAIL Gas has maintained its focus on the PNG industrial and commercial segment as one of the potential growth areas. With its concentrated efforts in the year 2014-15, the total number of commercial and industrial customers increased to 503 in 2014-15-

GAIL Gas has commissioned the steel networks in the geographical area (GA) of Sonepat, Dewas, Kota and Meerut. Further, the steel network augmentation is under progress in the Taj Trapezium Zone (TTZ). For reaching more charge areas for domestic connections, the steel grid network and MDPE pipeline network has been extended to 374.21 kms and 586.74 kms respectively in 2014-15 in the cities of Sonepat, Meerut, Dewas, Kota and Taj Trapeziumzone.

During the year, the sales volume from industrial and commercial customers grewto526 MMSCM.

• Aavantika Gas Limited (AGL)

AGL was incorporated to implement CGD Projects in  Madhya Pradesh. As on 31st March 2015, AGL operated 18 CNG stations including7 daughter stations, 8 online stations kH and3motherstations.

Further, as on 31st March 2015, AGL supplied PNG to around 2500 Domestic, 32 Commercial and 52 Industrial customers in its authorized geographical regions. AGL is also catering to the fuel requirement of around 20,000 CNG vehicles operating in the region. Your Company has a 22.5% stake with HPCL as an equal partner.

Bhagyanagar Gas Limited (BGL)

BGL was incorporated to implement CGD projects in Andhra Pradesh. As on 31st March 2015, BGL operated 32 CNG stations including 3 daughter booster stations, 8 online stations and7 mother stations

Further, as on 31st March 2015, BGL supplied PNG to over 3,100 Households, 46 Commercial & 3 Industrial customers in its authorized geographical regions. BGL is also catering to the fuel requirement of around 31,600 CNG vehicles operating in the region. Your Company has a 22.5% stake with HPCL as an equal partner.

Central U.P. Gas Limited (CUGL)

CUGL was incorporated to implement CGD projects in Uttar Pradesh. As on 31st March 2015, CUGL operated 16 CNG stations including 4 mother stations, 9 online stations and 3 daughter booster stations.

Further, as on 31st March 2015, CUGL supplied PNG to over 8300 domestic, 119 commercial & 39 Industrial customers in its authorized geographical regions. CUGL is also catering to the fuel requirement of around 46,600 CNG vehicles operating in the region. Your Company has a 25% stake with BPCL as an equal partner.

Green Gas Limited (GGL)

GGL was incorporated to implement CGD projects in Uttar Pradesh. As on 31st March 2015, GGL operated 14 CNG stations including 5 daughter stations, 5 online stations and 4 mother stations.

Further, as on 31st March 2015, GGL supplied PNG to over 7,800 Domestic, 9 Commercial &4 Industrial customers in its authorized geographical regions. GGL is also catering to the fuel requirement of around 33,400 CNG vehicles operating in the region. Your Company has a 22.5% stake with I0CL as an equal partner.

Indraprastha Gas Limited (IGL)

IGL was incorporated to implement CGD projects in Delhi's National Capital Territory (NCT) and cities in adjoining National Capital Region (NCR). As on 31st March, 2015, IGL operated326CNG stations including68 mother stations, 228 online stations and 30 daughter stations.

Further, as on 31st March 2015, IGL supplied PNG to over 5.6 Lac Domestic, 1,560 Commercial and 717 Industrial customers in its authorized geographical region, which includes the entire public transport of the national capital and also the world's largest bus fleet on CNG. IGL is also catering to the fuel requirement of around 7.6 lac CNG vehicles in the Delhi/NCR. Your Company has a 22.5% stake with BPCL as an equal partner.

Mahanagar Gas Limited (MGL)

""v MGL was incorporated to implement CGD projects in ( Mumbai and its adjoining areas. As on 31st March 2015, MGL  / operated 180 CNG stations including 19 mother stations, d 24 daughter stations.  GAS Further, as on 31st March 2015, MGL supplied PNG to over 8 Lac Domestic, 2607 Commercial and 57 Industrial customers in its authorized geographical region. MGL is also catering to the fuel requirement of around 4.2 lac CNG vehicles operating in the region. Your Company has a 35% stake with British Gasasan equal partner.

Maharashtra Natural Gas Limited (MNGL)

MNGL was incorporated to implement CGD projects in and around Pune. As on 31st March 2015.MNGL operated 30 CNG stations including 5 mother stations, 11 online stations and 14 MNGL daughterstations.

Further, as on 31st March 2015, MNGL supplied PNG to over 16147 Domestic, 47 Commercial and 97 Industrial customers in its authorized geographical region. MNGL is also catering to the fuel requirement of around 79,400 CNG vehicles operating in the region. Your Company has a 22.5% stake with BPCL as an equal partner.

Tripura Natural Gas Company Limited (TNGCL)

TNGCL was incorporated to implement CGD projects in Agartala. As on 31st March 2015, TNGCL operated 5 CNG stations including 3 mother stations and 2 daughter stations.

Further, as on 31st March 2015, TNGCL supplied PNG to over 18000 Domestic, 294Commercialand47lndustrial customers in its authorized geographical region. TNGCL is also catering to fuel requirement of around 6986 CNG vehicles operating in the region. Your Company has 29%stakeinthejointventure.

Vadodara Gas Limited (VGL)

Shareholders approved the transfer of your Company's CNG stations and associated pipeline in Vadodara to the proposed joint venture company of GAIL Gas Limited with Vadodara Municipal Sewa Sadan in the year 2011.

Accordingly, VGL was incorporated as joint venture company (JVC) of GAIL Gas Limited and Vadodara Mahanagar  Seva Sadan (VMSS) for the supply of Compressed Natural Gas ("CNG") and Piped Natural Gas ("PNG") in the city of Vadodara. Your Company has signed the Business Transfer Agreement (BTA) with VGL and transferred its assets to VGL. VGL is operating the CGD business we.f. 1st January 2014 in Vadodara. Consequent upon transfer of assets to VGL, your Company has a 32.93% stake, GAIL Gas Ltd. holdingl7.07% stake and VMSS holding50% stake.

VGL operates nine CNG stations in Vadodara and is dispensing more than 65,000 kg/day CNG. The CNG network in the city of Vadodara includes 2 mother stations, 1 on-line station and 6 daughter booster stations as well asl3 km steel pipelines.

VGL also caters to the Piped Natural Gas (PNG) requirements of its consumers in Domestic and Commercial sectors. VGL supplies PNG to 76,000 houses and 2,800 commercial in the city through a 750 km long PE Pipeline Distribution Grid and 07 District Pressure Regulating System.

PETROCHEMICALS

Brahmaputra Cracker and Polymer Limited (BCPL) (Subsidiary)

1 BCPL is setting up a 2,80,000 TPA polymer plants in Dibrugarh, Assam. The Company is now in the final phase of project execution and has achieved an overall physical progress of 99.6% and financial progress of 96 % till the end of the financial year. The commissioning of the  project is expected in the near future.

Your Company has a 70% equity stake in Brahmaputra Cracker and Polymer Limited (BCPL).with Oil India Limited (OIL), Numaligarh Refinery Limited (NRL) and the Government of Assam having 10% equity share each.

ONGC Petro-additions Limited (OPaL)

OPaL is implementing a Greenfield petrochemical complex of 1.4 MMTPA Polymer capacity at Dahej, Gujarat. Your Company is a co-promoter of OPaL, having a  15.5% equity stake, with an investment of Rs.994.95 crore. Oil and Natural Gas Corporation Limited (ONGC) and Gujarat State Petroleum Corporation Limited (GSPC) are the other promoters of OPaL.

OTHERS

• TAPI Pipeline Company Limited

Your Company is pursuingtheTurkmenistan- Afghanistan-Pakistan-India (TAPI) Pipeline project to receive Natural Gas supply from the Galkynysh fields of Turkmenistan. The Pipeline Consortium Company (TPCL) was incorporated on 11th November 2014 in 'Isle of Man', to build, own and operate the proposed TAPI Pipeline. Presently it is formed with equal participation by the four nominated entities (GAIL, ISGS, AGE, and Turkmengaz) of India, Pakistan, Afghanistan and Turkmenistan respectively. A Consortium Leader shall be inducted in due course.

• South-East Asia Gas Pipeline Company Limited (SEAGP)

SEAGP was formed to transport natural gas from A1/A3 blocks in Myanmar to Myanmar-China border. This pipeline is currently transporting nearly 15 MMSCMD of natural gas. Your Company has a 4.17%equitystakeinSEAGP.

LOAN, INVESTMENTS AND CORPORATE GUARANTEE

A statement containing the salient feature of the financial statement of your Company's Subsidiaries, Associate Companies and Joint Ventures as per first proviso of section 129(3) of the Companies Act, 2013 is included in the consolidated financial statement. Further, details of Loans and Investments covered under the provisions of Section 186 of the Companies Act, 2013 forms part of financial statement, a separate section in the Annual Report FY 2014-15.

Your Company has given corporate guarantees to its subsidiaries only, for availing loan, as per provisions of section 186 of the Companies Act, 2013, the details of the same are as under:

• Rs.504.34 Crores given to Oil Industrial Development Board on behalf of Brahmaputra Cracker and Polymer Limited

• m8CroresgiventoOil Industrial Development Boar don behalf of GAIL Gas Limited.

• USD114.I million given to State Bank of India, New York Branch on behalf of GAIL GIobal (USA) lnc.

• USD 100 million given to Mizuho Bank Ltd. on behalf of GAIL Global (Singapore) Pte. Ltd.

IT ADVANCEMENTS

Your Company has been very IT-savvy and has always been at the forefront in leveraging various technologies for transparent, efficient and effective execution of businesses and underlying operations. With a young workforce, faster technology curve adoption is but natural to your Company. Today, your Company's transactional engagements with customers, vendors, employees, business associates and partners remain on electronic platform through various ERPmodules.

Some of the initiatives such as e-tendering, e-auction/reverse auction, e-recruitment. Bill Watch System, e-payments were adopted by your Company quite some time back thus facilitating transparent dealings with the stake­holders concerned. By adopting the latest and state-of-the-art IT solutions, yourCompanyiskeepingpacewiththefastchangingindustryenvironment.lt  strives continually for efficiency enhancement of employees and has enabled access of required information to the right person, using the latest IT security solutions.

All the three datacentres of your Company have been certified for ISO 27001:2013 for Information Security Management Framework (ISMS). This certification shall provide recognition to your Company datacentres as secured data centres in the industry. The IS027001 ISMS Frame work ensures highest security levels for information assets available in the datacentres of your Company. The implementation of ISO 27001 based ISMS framework has also helped in implementing Crisis Management Plan for countering Cyber Attacks and Cyber Terrorism.

Your Company has implemented centralized Pipeline Integrity Management System for its cross-country pipeline network to ensure continuous up dation of O&M data and elimination of aging effect on pipelines. Your Company has also implemented an automated GPS based system for monitoring of pipeline patrolling.

Your Company has implemented Biometric based Access Control system to prevent unauthorized access to plant premises and office buildings at Petrochemical and LPG Plants, Compressor Stations and Pumping Stations.

Your Company is implementing Manufacturing Integration & Intelligence to integrate plant systems with enterprise application for generating alarms and root cause analysis alongwith the latest version of Environment Health & Safety Management for monitoring various processes. Your Company is also implementing a mobility solution for its field engineers to run plant maintenance application on mobile device.

Your Company is implementing Enterprise Analytics for the Top Management to provide the latest business metrics or key performance indicators accessible anytime, anywhere on any device. Your Company is also upgrading its SAP systems for mitigating any risk and maintaining readiness for innovation.

MOVING TOWARDS EXCELLENCE

Your Company as a continually improving organization, believes in raising the bars of performance levels in steps to achieve functional excellence. With this objective, your Company has taken various initiatives during2014-15.

Your Company has taken an initiative to integrate all departments and its employees with digital services with an objective to reduce paperwork. Your Company has been at the forefront of leveraging information technology for running its business process. With 2020 vision in sight, your Company needed robust processes, structure and most importantly prompt decision making to act as the key enablers and accelerators.

As part of e-enablement, your Company is planning to deploy cell phone application for its pipeline maintenance personnel, so that the information related to safety, procedures, spares etc. is readily available even when in the field. Globally, the worlds of IT and Operational Technology are converging and hence, your Company intends to improve the overall asset management and safety across the organization by leveraging these technologies and has initiated integration of IT with Plant systems, which will deliver enhanced information for better decisions, reduced costs, lower risks etc.

With the rapid urbanization throughout the country. Integrity Management of Cross Country Pipelines is not just a maintenance activity anymore and requires focus on various other elements as they have direct impact on the integrity Management and your company focus on multiple requirements of the present day Integrity Management i.e. Safety, Operations, Maintenance, Environment, Stakeholders, Technology and Education.

All the activities executed in your Company are being monitored and controlled for timely completion. Improvement Audits are being conducted by team members to identify the lapses / deviations, if any, for taking corrective actions.

Your Company views suppliers/contractors/consultants as critical partners in growth. A symbiotic relationship with these key Stakeholders not only ensures economic gains, higher quality, improved planning and timeliness of project but also ensures greater long term support and value. Your Company developed an effective Stakeholder Management Mechanism wherein regular meetings are held with key Suppliers / Contractors / Consultants to understand their issues / concerns and address them appropriately in time-bound manner. Further, your Company is currently in the process of developing a pre-dispute resolution mechanism, through which post closure legal disputes/arbitrations are targeted to be minimized to a large extent.

HEALTH, SAFETY AND ENVIRONMENT

Your Company's HSE policy is to conduct business with a robust and integrated Health, Safety and Environment (HSE) Management System focused on improving harmony with the environment through sustainable development. Safety and Health of its people is of paramount importance for your Company and these attributes are embedded in the core organizational values of your Company. Employees and Contract Workers in your Company are strongly encouraged to adopt safe working culture and behaviour to ensure effective implementation of the HSE Policy. Your Company identifies all the Health, Safety and Environment hazards, evaluates the associated risks and manages these through effective and appropriate control programs and deployment of latest technology.

Your Company primarily operates in the hydrocarbon sector which is inherently very hazardous. Your Company regularly identifies the hazards and evaluates their risk potential in various areas of its operations. While on the one hand, your Company takes adequate preventive measures to minimise risks during design, construction, operations & maintenance activities, on the other hand, your Company takes measures to mitigate the consequences in case of any undesirable incident. Your Company employs  Management System. Stringent SOPs (Standard Operating Procedures), Work Permit Systems, Process Safety Management, Safety Audits are some key elements of HSE Management System which are monitored rigorously and regularly, and reviewed at the highest level in your Company. This year, your Company reviewed SOPs of all locations and standardised the SOPs through international experts in safety and process licensors. Your Company has adopted the practice of observing l 0th of every month as Monthly Safety Day when the Officer-in-charge at all locations devote half-a-day to review safety issues. Exceptions noted are brought to the immediate notice of top management.

A massive exercise has been taken up to develop systems, procedures &S0P for each activity that is taken up on regular basis and which being vetted by internationally reputed consultants to align with global best practices. Parallelly, web/online portals have been developed for various new application for ease in data access and data archiving.

Sustainable Development (SD) Committee of Board of Directors is the apex body in your Company to review HSE performance and emergency preparedness and met 3 times during the year.

Your Company has an Emergency Response and Disaster Management Plan (ERDMP) in place for all of its installations, which has been accredited by Petroleum and Natural Gas Regulatory Board (PNGRB) approved third party accreditation agencies and submitted to PNGRB after approval from your Company's Board. Your Company has also prepared a Disaster Management Plan (DMP) as per instruction of the Ministry to deal with disasters.

Your Company has implemented a Behaviour Based Safety (BBS) Program at all locations to foster the culture of safety amongst all the stakeholders. Lead trainers have been developed and various monitoring committees have been formed at all locations to ensure that the BBS culture is nurtured on sustainable basis.

Safety audits were carried out in your Company during the year by various authorities, reputed third parties and in-house safety audit teams to evaluate implementation of safety systems. Timely compliance of recommendations of the safety audits are monitored and reviewed at various levels including by the top management of your Company.

Safety Training and unit specific training through well-structured modules is imparted to all employees in your Company at the time of induction as well as transfer to a new location as per job profile. In addition, periodic refresher training and specialised training related to specific work area are also provided.

The Safety performance in your Company is measured through "HSE Index" which is evaluated on the basis of important HSE Management System elements. To make the safety performance evaluation more objective, HSE Index system was reviewed by a senior level committee and has been made more comprehensive and stringent by including additional elements of HSE Management System in the evaluation system. The revised parameter, named the HSE Score has been implemented since September 2014.

Corporate level Occupational Health Committee in your Company met on quarterly basis during the year to monitor the implementation of occupational health and hygiene program. Occupational Health Audit of two process plants at Usar and Gandhar were carried out this year by members of the corporate occupational health committee. Occupational Health check­ups of employees and contract workers were carried out in your Company to assess the occupational health parameters and take corrective measures.

SUSTAINABILITY INITIATIVES

Your Company published its fifth Sustainability Report - 'Fostering Responsible Growth' for 2014-15 based on the Global Reporting Initiative (GRI) Guidelines. Sustainability reporting has helped us in measuring and monitoring our Company's performance and moving beyond the mandatory requirements to ingrain sustainability within the organization in letter and spirit. It has served as an important management tool helping us re-look at our Company's systems, policies and procedures.

Taking a step ahead, from measuring to taking concrete actions in the right direction is also important. Your Company has been among the very few companies to have set voluntary targets through Sustainability Aspirations 2020 and transparently disclose it in the public domain. Your Company has disclosed additional targets through the revised Sustainability Aspirations 2020 in the Sustainability Report. The targets are in the area of Specific Energy Reduction, Specific GHG Emission Reduction, Specific Fresh Water Consumption Reduction and Zero Waste Water discharge.

Since inception, your Company has been guided by the principles of accountability and transparency. In 2011, your Company formally began its sustainability journey. Your Company believed that although it was a few steps behind, taking small yet strategic steps in right direction was more important. Your Company has a Sustainable Development Committee comprising the Functional Directors as members to regularly monitor it sustainability initiatives and performance. Your Company has strengthened its data management systems to capture credible and authentic data and information from its varioussites.

For the first time, your Company has been acknowledged among CDP's India Leaders 2014 and featured in the Climate Disclosure Leadership Index (CDLI). Your Company is the only Company in Utilities category featuring in the top 22 India Leaders.

Your Company believes that it is important to collaborate with industry leaders, associations and peers to address national and global sustainability challenges and work towards a common goal. Its focus has remained on collaborating with various external stakeholders such asTERI.CII, GRI, UNGC, FICCI and CDP among others, to gain from their knowledge and experience in the area of sustainability. Your Company conducted workshops in collaboration with organizations such GRI Focal Point India and CDP during the year.

In line with the Listing Agreement requirements. Business Responsibility Report (BRR) 2014-15 is contained in a separate section in the Annual Report. Your Company was placed at 2nd position in the Environmental Social and Governance (ESG) Score of India Inc. Study (2014) based on the BRR of 2013­14 conducted by Sustainable Business Leadership Forum.

VIGILANCE

The Vigilance department of your Company is ISO-9001:2008 certified for having adopted Quality Management System in compliance with the requirements of ISO. Various e-initiatives and system improvements were implemented in your Company for effective utilization of systems, which helps in preventing corruption and ensures all round good governance. Some of these improvements are:

• Introduction of Percentage Mark-up Model for O&M, ARC and Civil contracts works tenders.

• Monitoring timely release of retention money of contractors by implementing automatic MIS Alert to the respective OICs of all the units.

• Fraud Prevention Policy hosted on your Company's website.

• Standardization of procedure for the generation of Minimum Guaranteed Off take (MGO) invoice through SAP in GAIL Gas Ltd.

• All Vigilance and CVC Circulars uploaded on Intranet portal for awareness of employees.

The Vigilance Awareness Week-2014 was observed on the theme "Combating Corruption - Technology as an enabler "at the Corporate Office and also at all work centers of your Company from 27th October to 1st November 2014. It encompassed various activities to spread anti-corruption drive, brainstorming sessions for interweaving enabling technologies and applications for creating a transactional backbone. This is a step towards increasing transparent and efficient decision making and improving process performance.

A magazine "JAGROOK", containing CVC circulars, articles and case studies on corruption was also published. To evaluate our systems and procedures, a Customer Interactive Meet was organized. Customers were also apprised about e - initiatives taken by your Company to make the system transparent with minimum human intervention. Customers have shared their experience with your Company, put forward their feedback, suggestions and grievances. Vendor Interactive meetswere organized at your Company's petrochemical plantat Pata.

CAPABILITY BUILDING

• Human Capital

Your Company lays strong emphasis on attracting and acquiring best talent and also on efficient deployment of manpower on rightjobs as per business requirements of the Company. Value Added per Employee gives an account of efforts of your Company's emphasis to make the best and most productive use of the resources and business opportunities available. For the year under review, value added per employee wasRs.173.73 Lacs.

• Leadership Development Program

Your Company realizes that it is critical to continually strive to develop and enhance the capability and competence of its senior level executives in order to prepare them for future leadership positions. As part of the Leadership Development Program, Senior Management Development Centre (SMDC) exercise has been undertaken. SMDC has been  conducted for senior executives in Chief Manager and above grades and as of now around 670 senior executives have been covered under this exercise. During the year under review, more than 95% of the executives who got promoted to the level of Chief Manager were covered under the SMDC Exercise.

In order to fill in the developmental gaps of such executives identified through SMDC exercise, a comprehensive Individual Development Plan (IDP) has been drawn up for all the participants of SMDC exercise. The IDP consists of customized training programmes at premier business schools, e-learning courses and distribution of books.

Representation of Priority Section

Your Company has been complying with the Presidential Directives and other instructions/guidelines issued from time to time pertaining to Policies and Procedures of Government of India in regard to reservation, relaxations, concessions etc. for Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs) and Persons with Disabilities (PWDs) in direct recruitment.

During the year under review, total of 314 new employees joined your Company. The total manpower of your Company as on 31st March 2015 stood at 4266 (including CMD, Whole-time Directors and CVO) with 16.62% of Company's employees belonging to SC category, 6.70% to ST category, 19.60% to OBC (NCL) category, 8% to Minorities and 2.09% to PWDs category. Your Company's workforce comprised of 5.98% women employees as on 31st March 2015.

Capability Development

Your Company believes that its human resource is one of the most vital assets for achieving its Vision, Mission and Objectives. Therefore,

Capability Building and Talent Development of its human resources has been the key focus area for your Company.

The GAIL Training Institute (GTI) is organizing systematic and structured programs for capability building across all levels within the organization. In recognition of the initiatives taken by it, GTI has received the prestigious Golden Peacock National Training Award - 2014. GTI has maintained the track record of excellent MOU performance in all the parameters in the MoU signed with the administrative ministry.

Some of the salient achievements/initiatives for talent development are asunder:

Various certification Training Programme from NACE, ASME, OEMs and technology licensors for gaining state-of-the-art expertise for its technical human resources.

Specialized Training Programme on new business areas in line with Company's strategy 2020 such as Shale Gas, Energy Trading Hedging and Risk Management etc. were organized.

For executives of the level Chief Manager and above. Individual Development Plan(IDP) based on the SMDC exercise were executed. The IDP comprised distribution of competency based books, access to e-learning modules from Harvard Manage Mentor(HMM) and Customised Management Development Programmes through IIM Bengaluru and Kolkata.

Customised Management Development Courses from leading management institutes specifically for executives from HR discipline.

Mentorship programme established for all new joinin gexecutives.

Training mandays per employee more than 5 for the year under review.

Healing with nutrition programme organised for employees for stayingfit & reducing stress.

Awareness programs on sustainable development organised for employee satsites.

Knowledge sharing seminar for motivating employees to share best practices across all sites.

For creating knowledge based and competitive environment, in-house business quizzes and business simulations organized to keep the employees updated with latest developments in the business areas.

In its pursuit of offering training programs to external organizations and to convert itself into a revenue generating centre, GTI has successfully organized training programs for participants from several organizations like RGPPL, HPCL.BCPL, IGL, MGL, MNGL, GSPL, HMEL etc. Further, in collaboration with American Society of Mechanical Engineers (ASME), U.S.A., GTI is successfully running certificate courses in ASME B31.8 for various external organizations.

Your Company is also playing an active role in formation of hydrocarbon skill council to carry forward of skill building in hydrocarbon sector to support the National Skill Development Mission.

Official Language

Your Company is continuously endeavoring for the propagation and successful implementation of the Official Language Policy of the Union. The Official Language Implementation Committees at Corporate as well as work centre level held their quarterly meetings regularly to monitor and review the progress made in achieving the targets fixed in the Annual Programme issued by the Government of India.

Hindi Workshops/Trainings are being organized on regular basis at GTI, Jaipur and Noida as well as the other work-centres. Hindi Computer Training sessions are integral part of these programmes. During the year2014-15, a total of 65 workshops were organized where 865 employees were given training. All the computers of the Company are equipped with the Unicode Hindi fonts with transliteration key-board typing facility.

With a view to create greater awareness and consciousness among employees, hindi Fortnight was celebrated from 15-29 September, 2014 across the Company. Every Monday/first working day of the month is beingob served as Hindi Diwas across the Company.

A unique initiative has been taken to implement the special software to generate Pay Slip, CPF Card, Pension Card, Promotion Order, Transfer Order, Reliving Order etc. in bi-lingual version from SAP. Your Company is one of the few PSUs to implement this facility.

As a unique initiative, names of all employees of your Company in official e-mail IDs are being displayed in hindi also. The terminology being used across your Company has been standardized and circulated.

The bilingual website of your Company is regularly updated with latest news and press releases. Intranet of your Company is also available in bilingual format.

Your Company has published an issue of hindi magazine 'Rajbhasha Sahyog" for propagation of hindi among the employees. In order to cultivate the habit of reading in hindi, motivational and inspirational books were distributed to the employees of your Company and their family members.

During the year 2014-15, the 1st Sub-Committee of Parliament on Official Language inspected the Bengaluru and Noida offices of your Company to review the progress of Official Language. The Sub-Committee appreciated the efforts and sincerity of your Company to implement the Official Language. MoP & NG has also recognized the efforts of your Company for effective and wide implementation, and propagation of hindi among Oil PSUs and awarded your Company under Rajbhasha Shield Yojana.

• Sexual Harassment of Women at Workplace

The Company has in place a Policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All concerned persons as per the Act are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2014-15:

- No of complaints received: Nil

- No of complaints disposed off: Nil I

NNOVATION, RESEARCH AND DEVELOPMENT

Your Company is committed to address the challenges of ever changing business scenario through innovation. Your Company has made enduring efforts to encourage innovation and creativity of employees through its Suggestion Scheme. The Suggestion Scheme helps to promote organization-wide idea generation for incremental innovation. All employees of your Company are motivated to suggest improvements in their respective areas  of work. The suggestions are evaluated in a timely manner for implementation and the best suggestion is awarded with the CMD trophy.

Your Company is also the co-ordinat or for mid-stream sector of Oil & Gas industry for promoting industry-wide innovation in the sector. Innovation workshops were held as part of this initiative where the Best and innovative practices adopted by various departments are shared for due recognition and further propagation.

Your Company has set-up a Pilot Land Fill Gas (LFG) Project at Ghazipur in Delhi to reduce the GHG emissions. A further initiative is being taken-up to utilize the low quality LFG to produce power. A 30 KW micro turbine based power plant is being installed to generate power with LFG after its partial up gradation. The successful fruition of this end eavour shall demonstrate the use of LFG as a source of renewable energy. This also demonstrates the commitment of your Company towards sustainable utilization of waste energy and reduction of its carbon footprint.

Your Company is aggressively pursuing many R&D projects in its identified thrust areas with a focus on developing high-impact innovative technologies to conduct the existing businesses in a more optimal and sustainable manner. Your Company has a judicious mix of various basic, applied and pilot projects encompassing the natural gas value chain in its R&D portfolio. In addition, few projects are also being pursued in upcoming areas like Underground Coal Gasification, Fuel Cells, Hydrogen and Gas Hydrates. These R&D projects are being pursued in association with reputed research organizations / institutes. Your Company has also implemented many developmental projects to improve efficiency of existing operations and to conserve the Environment by utilizing better technologies.

TOTAL QUALITY MANAGEMENT

Your Company continues to focus on continual and sustainable improvement in the process, system and functional areas. Customer satisfaction is the top priority of your Company and is being continuously monitored through regular interactions. Major achievements of your Company in TQM are as under:-

Customer Satisfaction Indexachievedduring2014-15 is 89.72%.

105 Nos. of quality circle projects were undertaken by your Company during FY 2014-15 at various work centres resulting in tangible benefits ofRs.278.65 lakhs in addition to the recurring intangible benefits.

Gas Processing Unit, Vaghodia of your Company has been recommended for certification of Energy Management System (EMS) ISO:50001-2011.

PROCUREMENT FROM MSEs

The Government of India has notified a Public Procurement Policy for Micro and Small Enterprises (MSEs), Order 2012. In terms of the said policy, the total eligible value of annual procurement of goods produced and services rendered by MSEs (including MSEs owned by SC/ST entrepreneurs) during the year 2014-15 is about Rs.138 crore of which the total procurement made from MSEs (including SC/ST entrepreneurs) directly or indirectly isRs.26 crore whichisapproximately!9%of Rs.138 crore.

MOU PERFORMANCE

A Memorandum of Understanding (MoU) is signed every year between your Company and its administrative ministry i.e. MoP & NG, to enhance the performance level of the Company through the targets set therein. The MoU for the year2014-15wassigned between the Chairman& Managing Director and the Secretary (P&NG), Government of India on 21st March,2014.

The thrust while fixing MoU targets was more towards improving Performance on critical aspects of the Company which include gas marketing, gas transmission, project implementation, capital expenditure, new business areas etc. Significant thrust has also been given on Corporate Social Responsibility, Research & Development Projects and Human Resource Management.

Your Company has been consistently achieving excellent MoU rating since the inception of MoU system i.e. from 1989-90 to 2013-14- In spite of the economic slowdown and relatively unfavourable business environment compared to preceding years, your Company achieved MoU composite score of1.288 for the year 2013-14 which is considered as Excellent MoU rating.

In the financial year 2014-15, there is a gap between MoU targets and actual achievement primarily due to fall in domestic gas availability, decrease in Spot/ RLNG prices, decrease in petrochemical and LHC prices and sharp decline in crude oil prices. The final evaluated MoU score and rating for FY 2014-15 is expected to be announced in December 2015.

The MoU for the year 2015-16 was signed between the Chairman & Managing Director and the Secretary (P&NG), Government of India on 31st March, 2015.

LAURELS  

Corporate

• Your Company featured amongst "India's 100 Best Companies to Work For 2014 Study" conducted by Great Place to Work Institute for the third consecutive year.

• Sustainability Report for FY 2013-14, received the coveted 'A+ Application Level' statement by international organization Global Reporting Initiative (GRI).

• Company of the Year 'in the Project Management category for its Dabhol-Bengaluru natural gas pipeline project at the Petroleum Federation of India (Petro Fed) Oil &Gas Industry Awards2013

HSE

• International Safety Award - 2014 from the British Safety Council, UK to GAIL Pata and GAIL NCR.

• International Safety Award-2015 by the British Safety Council, UK to HVJ Compressor Station, Vijaipur.

• "Suraksha Puraskar (Bronze Trophy)-2013" by the National Safety Council of India, Mumbai to LPG Recovery Plant, Vijaipur.

• "Prashansa Patra (Certificate) Safety Award-2013"by the National Safety Council of India, Mumbai to HVJ Compressor Station,  Vijaipur (M.P).

• Shreshtha Suraksha   Puraskar (Second Level-Silver trophy) for year 2014 from the National Safety Council, Mumbai to GPU,  Vijaipur.

• Suraksha Puraskar  (Third level - Bronze trophy) for year 2014 from National Safety Council .Mumbai to HVJ Compressor Station, Vijaipur.

• Golden Peacock Environment Management Award 2014 by the Institute of Directors, New Delhi to GAIL, Vijaipur.

• Golden Peacock Occupational Health & Safety Award 2014 by the Institute of Directors, New Delhi to GAIL NCR.

• Safety Innovation Award-2014 by the Institution of Engineers (India), Delhi State Centre to Maharashtra region pipeline system.

• NationalSafetyAwardfromDGFASLIforyear2012toGAILPata.

• NSC Safety Award-2013asSarvashreshta from NSC MP-Chapter to GAIL Vijaipur.

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 ACPIOs/CPIO/ Appellate Authorities 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 forms a part of this report at Annexure-A.

CORPORATE GOVERNANCE

Your Company believes that good corporate governance is critical in establishing a positive organizational culture. It is evident by responsibility, accountability, consistency, fairness and transparency towards its stakeholders. Pursuant to the revised clause 49 of the Listing Agreement with the Stock Exchanges and DPE guidelines on Corporate Governance, a report on Corporate Governance forms part of this Report at Annexure- B.

The details of the meetings of the Board, Company's policy on Directors' appointment and remuneration etc. and other matters, details of establishment of whistle blower mechanism etc. forming part of report on Corporate Governance.

There is no significant and material orders passed by the regulators or Courts or tribunals impacting the going concern status and Company's operations in future.

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

AUDITORS

• Statutory Auditors

The statutory auditor of your Company is appointed by Comptroller & Auditor General of India (CAG). M/s G.S. Mathur & Co., Chartered Accountants, New Delhi and M/s S.K. Mittal & Co., Chartered Accountants, New Delhi appointed as Joint Statutory Auditors of your Company for 2014-15.

Review and Comments of CAG on the Company's Financial Statement for the financial year ending 31st March, 2015 by CAG, if any, forms part of Financial Statement. Notes on Financial Statement referred to in the Auditors' Report are self-explanatory and, therefore, does not call for any further comment.

• Cost Auditors

Your Company has appointed M/s Rohit & Associates for Pondicherry Rajamundry & Bangalore unit(s); M/s R Nanabhoy & Co. for Hazira, Vaghodia, Vadodra, Jhabua, Khera, Vijaipur, Auraiya, Agra, Kailaras, Chiansa & Noida (NCR) unit(s); M/s M Goyal& Co. for Mumbai & Vadodra unit(s); M/s Dhananjay V. Joshi & Associates for V5PL & JLPL unit(s) and M/s DGM& Associates for Agartala &Lakwa unit(s) as cost auditors for FY2014-15.M/s Chandra Wadhwa & Co. is the lead cost auditor.

The due date for filing Cost Audit Reports for the financial year ended 31s' March, 2014 was 27th September, 2014 and the same were filed to Registrar of Companies on 26,hSeptember,2014.

• Internal Auditor

Your Company has an in-house Internal Audit Department, which is headed by Executive Director.

• Secretarial Auditor

Your Company has appointed M/s Agarwal S. & Associates as secretarial auditors for 2014-15- Secretarial Audit Report confirming compliance by Practicing Company Secretary to the applicable provisions of the Companies Act, 2013, Listing Agreement and other applicable laws, forms part of this Report at Annexure- D.

The observations made by secretarial auditor in his Audit report are as under:

i. Proviso to Sectionl49(l) read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 i.e. Appointment of at least one woman Director.

ii. Section 149(4) of Companies Act, 2013, Clause 49(II)(A) of the Listing Agreement and Clause 3.1.4 of the Guidelines on Corporate Governance for Central Public Sector Enterprises i.e. Optimum Combination of Executive and non-Executive Directors.

iii. Sections 135(1), 177(2) and Section 178(1) of the Companies Act, 2013 and Rule 6 of the  Companies (Meetings of Board and its Powers) Rules,2014, regarding composition of CSR Committee, Audit Committee and Nomination and Remuneration Committee.

iv. Section 149(8) read with Schedule IV (VIII) and Section 178(2) of Companies Act, 2013, w.r.t performance evaluation of Independent Directors.

Explanation on observations made by secretarial auditor in seriatim are asunder:

a) As on 31st March, 2015, your Company's Board comprised of five whole-time Directors including CMD and one Government Nominee Director. GAIL does not have any woman Director. The term of Independent Director(s) on your Company's Board including woman Director expired on 28th February, 2015. Subsequently with the appointment of a woman Director, Smt. Anuradha Sharma Chagti as Government Nominee Director by MoPNG on the Board w.e.f. 21st May, 2015 the requirements of Sectionl49(l) has been fulfilled.

b) Your Company is a Government Company, appointment/nomination of all the Directors is being done by the President of India, through the Ministry of Petroleum & Natural Gas (MoP&NG). Your Company is continuously pursuing with MoP &NG for appointment of requisite number of Independent Directors on the Board of the Company.

c) Your Company was in compliance of composition of CSR Committee, Audit Committee and Nomination and Remuneration Committee till 28.02.2015. However, after cessation of Independent Directors w.e.f. 28.02.2015, the Company was not in compliance with the aforementioned provisions of the Companies Act, 2013, as stated at b) above.

d) Your Company is a Government Company, appointment/nomination of all the Directors is being done by the President of India, through the MoP &NG and performance evaluation of individual Directors including Independent Directors is to be done by Government of India being appointing authority

The Compliance to observations of the secretarial auditor at s. no. ii) and iii) as stated above shall be met once the requisite numbers of Independent Directors are appointed by Government of India on your Company's Board.

CORPORATE SOCIAL RESPONSIBILITY

Your Company believes that Corporate Social Responsibility (CSR) plays a major role in the development of any country. Therefore, it has made Corporate Social Responsibility (CSR) an integral part of its ethos and culture. Annual Report on CSR activities as required under Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 read with sectionl34(3) andl35(2) of the Companies Act, 2013 is placed at Annexure-E.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION

Details of conservation of energy and technology absorption in accordance with section 134(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014forms a part of this report at Annexure-F.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

As per requirement ofl34 (3) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 particulars of contracts or arrangements with related parties as referred in section 188(1) of the Companies Act, 2013 is placed at Annexure-G. Your Company has formulated the policy on dealing with Related Party Transactions and the same is hosted on your Company's website at <http://www.gailonline.com/final_site/pdf/> GAIL_Related_Party_Transaction_Policy.pdf.

PARTICULARS OF EMPLOYEES

As per provisions of section 197(12) of the  Companies Act, 2013 read with the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company is required to disclose the ratio of the remuneration of each Director to the median employee's remuneration etc. in the Directors' Report.

However, as per notification dated 5*h June, 2015 issued by the Ministry of Corporate Affairs, Government of India, Government Companies are exempted from complying with provisions of section 197 of the Companies Act, 2013. Your Company is a Government Company, therefore, such particulars have not been included as part of Directors' Report.

EXTRACT OF ANNUAL RETURN

Extract of Annual Return forms part of this Report at Annexure-H.

ISSUE OF SHARES AND FIXED DEPOSITS

Your Company has not issued equity shares with differential rights as to dividend, voting or other wise and issue of shares (including sweat equity shares) to employees of the Company under any scheme.

Your Company has not accepted any fixed deposits and, as such, no amount of principal or interest was outstand in gas of the Balance Sheet date.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, foreign exchange earnings were Rs.644-49 Crores and foreign currency outgo was Rs.8n88.49 Crores.

During the year under review, there was an outgo of Rs.2.20 Crores on foreign toursand training.

KEY MANAGERIAL PERSONNEL AND DIRECTORS

During the year, the following ceased to be Key Managerial Personnel onthe Board of your Company:

• Shri S. Venkatraman, Director (BD) w.e.f. 30th September, 2014 upon attainingthe age of superannuation.

• Shri P.K.Jain, Director (Finance) w.e.f. 30th April, 2015 upon attaining the age of superannuation.

During the year, the following ceased to be Directors on the Board of your Company:

• Shri RK. Singh, Government Nominee Director w.e.f. 26th September, 2014 upon ceasing to official of MoPNG.

• Shri Rajive Kumar, Government Nominee Directorw.e.f.15,December,2014 upon ceasing to official of MoPNG.

• Smt. Shyamala Gopinath and Dr. A.K. Khandelwal, Independent Director(s) w.e.f. 28th February, 2015 consequent upon completion of tenure for 3years.

The Board placed on record its deep appreciation for the valuable services rendered by outgoing Directors during their association with your Company.

Shri Ashutosh Jindal was appointed as Part-time Director (Government Nominee) onthe Board of your Company w.e.f. 24th February 2015. Shri Subir Purkayastha was appointed as Director (Finance) and Chief Financial Officer by the Board of your Company w.e.f. 1st May, 2015. Smt. Anuradha Sharma Chagti was appointed as Government Nominee Director by the Board of your Company w.e.f. 21st May, 2015.

The tenure of Shri Prabhat Singh as Director (Marketing) was extended for a period of beyond 24.02.2015 till 30.11.2016 i.e. the date of his superannuation, or until further orders, whichever is earlier by Government of India.

Further, Shri M. Ravindran, Director (HR) and Dr. Ashutosh Karnatak, Director (Projects) are retiring by rotation and being eligible have offered themselves for re-appointment.

None of the Director is in receipt of any commission from any subsidiary Company of your Company.

PERFORMANCE EVALUATION

As per provisions of section 134(3)(p) of the Companies Act, 2013 every listed company, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors should form part of the Directors' Report.

However, as per notification dated 5*h June, 2015 issued by the Ministry of Corporate Affairs, Government of India, Government Companies are exempted from complying with provisions of section 134(3)(p) of the Companies Act, 2013. Your Company is a Government Company and the appointment, tenure, performance evaluation etc. of Directors is done by

Government of India, therefore, such particulars have not been included as part of Directors' Report. Remuneration of CMD, Whole-time Directors and its employees is determined by Government of India. As per requirement of clause 49 of Listing Agreement, evaluation criteria for the Board is being formulated.

CODE OF CONDUCT

Pursuant to 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 ending315,March,2015.

DIRECTORS RESPONSIBILITY STATEMENT

Yours Directors confirmed that:

i) In the preparation of the  annual accounts for the financial year ending315' March, 2015, the applicable accounting standards have been followed, along with proper explanation relating to material departures;

ii) selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent 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) taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) prepared the annual accounts for the financial year ending 31st March, 2015 on a going concern basis;

v) had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively and

vi) laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

ACKNOWLEDGMENT

Your Directors express their gratitude for continuance guidance and support by the Government of India, especially the Ministry of Petroleum and Natural Gas, various state governments, and regulatory and statutory authorities.

Your Directors acknowledge the wise counsel received from Statutory Auditors, Secretarial Auditor and CAG for their consistent support and cooperation.

Your Directors also wish to thank all the shareowners, business partners and members of GAIL family for reposing their faith, trust and confidence in your Company.

On behalf of your Directors, I would like to place on record their deep sense of appreciation for the committed services by the Company's executives, staff and workers.

Your Directors and employees look forward to the future with confidence and stand committed to create a prosperous future for all stakeholders.

For and on behalf of the Board

B.C. Tripathi

Chairman & Managing Director

Place: New Delhi

Dated: 5th August, 2015

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MARWADI GROUP:SEBI REG.NO. MSFL – NSE: INB/INF/INE 230876034, BSE: INB/INF 010876036,
EXCH. MEM. CODE – NSE: 08760, BSE: 0910, NSDL: IN-DP-NSDL-98-99,
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MERCHANT BANKING: INM NCDEX: 00087, ACE: 6171, ICEX: 2012 CIN of MSFL : U65910GJ1992PLC017544,
CIN of MCBPL : U74992GJ2001PTC040221
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