4th Strategy Meet27th – 29th February 2004

ATR on Decisions taken in Earlier Strategy Meets

(FINANCE)

Action Taken Report on Decisions of 1st Strategy

MeetHeld at Mussoorie 6– 8 July

2001

Decision 1.1Delegation of Powers to below Board.

ATRi. The board of Directors in its meeting on 27.07.2001approved modifications in BDP (1994) giving enhanced

powersto the:a) Committees of the Boardb) Committee of C&MD and functional Directors.c) C&MDd) Functional Directorsii. Board in its 84th Meeting on 27.11.2001 approved

enhancedpowers to below Board level w.e.f. from 01.01.2002.

Contd.

iii. Board in its 100th meeting on 13.11.2002 approved

delegation of powers to newly created positions under CRC.

iv. Further, need based modifications in BDP are pending

submission to the Sub-Committee of the Board for

consideration.

Action Taken Report on Decisions of 3rd Strategy Meet

Held at Chennai 12–14 July 2002

Gas Business – Marketing Issues

ATR on decisions arising from presentation on “Gas Business – Marketing Issues” which brought out imperatives and the issues

related to marketing of gas including constraints faced by ONGC due to non-availability of gas supply contract with GAIL.

Gas Business – Marketing IssuesDecisions – 3.6.2Debits, including interest be raised to GAIL for gas

supplies, mode of payment by GAIL, credit policy etc. be reviewed

and clearly defined . “Standard Credit Policy” be worked out

for all the product and customers.

ATRi. Instructions issued to Assets/Basins to periodically

issue interest advices to GAIL for delayed payment.ii. Mode of Payment, Credit period being discussed with

GAIL as part of GSA.iii. Standard Credit Policy of ONGC approved by Board in

its 112th Meeting held on 26.07.02. This was conveyed to all key Executives by Director (Offshore) in Nov 2003.

Gas Business – Marketing IssuesDecisions – 3.6.3Details regarding outstanding amount against GAIL

on account of MGO be worked out and debit be raised.

ATRMatter discussed with GAIL in several meetings.i. ONGC requested GAIL for providing a

certificate from GAIL starting that they passed on all MGO payments from its customers to ONGC.

ii. GAIL agreed to issue a monthly certificate in future for MGO charges received from its customers.

Gas Business – Under Recoveries

ATR on decisions arising from presentation on “Gas Business –Under Recoveries” i.e. due to not allowing fuel oil parity, Gas Pool contributions and contributions for JV differential Gas Price.

Gas Business – Under RecoveriesDecisions3.7.1 Submission to be made to the Government to review and revise the Gas Policy to correct distortion.3.7.2 Submission to be made to the Government for

equitable treatment to ONGC at par with other producers.3.7.3 Total Revenue from gas, subsidy by ONGC and under recoveries be worked out and out up to MoP&NG for information.3.7.4 Submission be made to the Government for transfer

of Gas Pool Account from GAIL to ONGC.

Contd..

Gas Business – Under Recoveries ATRi. Proposal of MoP&NG to review the gas price

applicable for natural gas produced by ONGC and OIL was

considered in the meeting of Group of Ministers held on 23.07.03. The following were decided.a. The consumer price be revised to an adhoc figure of

Rs.3200/MCM.b. A tariff committee be constituted to study the cost structure.c. The contribution to gas pool be restricted to Rs 1 billion annually. Contd…

Gas Business – Under Recoveries d. JV gas produced from P&M Tapti JV’s be sold at

market determined price.e. Gas produced from new fields be sold at a price

determined in terms of NELP contracts.

ii. ONGC has written letters to MoP&NG highlighting shortcomings of the cost plus system and has

requested Ministry to incorporate Supreme Court decision of right of ONGC to fix gas price.

Contd…

Gas Business – Under Recoveries iii. Regarding JV purchase differential, MoP&NG has conveyed following decisions:

• GAIL is allowed to market additional gas from Tapti field at market determined rates.

• The Gas of Ravva satellite field will be directly sold by GAIL at market determined price from April ’03.

Contd…

Gas Business – Under Recoveries

iv. ONGC has requested MoP&NG to reimburse the higher cost of JV gas for Ravva Satellite fields till March ’03 from Gas Pool Account on the lines of reimbursement to GAIL.

The matter was discussed with AS&FA, MoP&NG on 02.01.04 & 06.02.04 where it was agreed to examine the matter once again.

Contd…

Cash Flow Projections

ATR on decisions arising from presentation

on “Cash Flow projections” outlining Cash

Flow projections during Xth plan period, funding alternatives etc.

Cash Flow Projections

Decisions – 3.15.1 & 3.15.2i. Cash Flow projections be re-worked out

factoring all the plan expenditure.ii. Investment be classified as productive

investment and investment under compulsion.

ATR

i. The cash flow projections were worked out and desired presentation on both the decisions were made in the Strategy review meet held on 26/27.07.2002 at Behror.

Cash Flow Projections

Decisions – 3.15.3A note be put up to the Govt. for revision of

section 42 of the income tax act.

ATR • Request for change in Section 42 of the

Income Tax Act has been made to Govt. from time to time and last being on 11 Nov. 2003 (for Finance Bill, 2004).

• Another request being made to MoP&NG to get it examined by the Committee constituted under Chairmanship of AS&FA, with MoF official as member.

Cash Flow Projections

Decisions – 3.15.4A Study be made on convergence of Regimes i.e.

impact on Government and ONGC.

ATR• A study on comparison of various regimes

was made. Based on the study it was decided not to pursue the matter further.

Cash Flow ProjectionsDecisions – 3.15.5Submission be made to Government/RBI to allow E&P companies for hedging crude and gas.

ATR i. On request, MoF allowed ONGC to hedge its

underlying exposure to price risk with respect to crude, gas and VAP subject to following conditions:

a. Hedging transaction should be put up to the Board along with complete explanation.

b. Specific approval from RBI for every hedging contract.

c. Purchase process for OTC contract should be fair and transparent.

ii. ONGC’s request to MoF on 02.12.03 to review condition a & b is awaiting decision.

Outstanding Dues

ATR on decisions arising from presentation

on “Outstanding dues” showing outstanding

dues from PSUs and other companies.

Outstanding Dues

Decisions – 3.16.1 (Dues from Gujarat Consumers)

i. Legal notice be sent to the Gas consumers for payment of dues in the context of Supreme court decision.

ii. A Letter from ONGC be sent to the supervisory authorities of respective companies. Further, letters be sent to the Chief Secretary, Gujarat, Secretary (Fertilizer), Secretary (Agriculture).

Contd…

Outstanding DuesATR Private Consumers:

Five consumers have paid as final settlements. One consumer has been referred to BIFR. For remaining four, application submitted before Supreme Court on 16.09.2002.

PSU Consumers:i. Matter taken up with Ministry from time to

time.ii. C&MD has also requested MoP&NG’s support

on:- Resolution of the issue in the Committee of

Secretaries.

Contd…

Outstanding Dues- Appropriate intervention with the Government

of Gujarat.- Suspension of supply against GLC allocation to

defaulting consumers.

iii. C&MD had requested C&MD, GAIL to impress upon consumers to clear long standing dues, even by resorting to disconnection of gas supply.

iv. MoP&NG agreed to take up the matter with COS in a meeting held on 02.01.04. A draft note for COS was submitted to Ministry on 28.01.04.

Contd…

Outstanding Dues

Decisions – 3.16.2 (Dues from BRPL)i. Claim for current due i.e. upto March 2002 has

been pursued with BRPL.ii. BRPL be asked to pay dues for April, May and

June 2002 on installments, if they are not in a position to pay entire dues.

ATRi. Matter was taken up rigorously and as a result

all payments were received in August and September 2002.

ii. BRPL has not yet paid interest (Rs 264 million), linking it to excess BS&W in Assam Crude.

Outstanding Duesiii. PPAC has advised in Sept. ’03 that additional

cost incurred by refineries due to high BS&W during 1998-2002 be shared equally by all refineries, ONGC/OIL and Oil Pool Account.

iv. ONGC has taken up with MoP&NG to restrict B&W to actual loss to refineries.

v. Accordingly, ONGC has again requested BRPL to release dues for outstanding interest. Reminder sent on 30.01.04.

Outstanding DuesDecisions – 3.16.3 (Dues from GAIL)i. A letter written to GAIL for claims related to

NE Power Sector Units.ATRi. GAIL released Rs 1.07 billion on account of

regular gas supply bills. With this GAIL has cleared all dues for supply of gas in Northeast till Dec. ’03, as per its accounts.

ii. All dues on account of regular gas supply bills are now being received regularly.

iii. Outstanding due on account of MGO (Rs 537 million) and interest (Rs 2,779.5 million) have till now not been liquidated. Matter being pursued.

Outstanding DuesDecisions – 3.16.4 (Dues from Govt.)Request be put up to the Govt. for payment

of dues. Govt. be requested to issue PPAC Bonds.

ATR

Bonds will be issued after C&AG audit of the past

account as on 31st March 02 and Govt. approval.

Matter is being pursued with PPAC regularly.

Outstanding DuesClaims outstanding as on 05.02.04 are:1. Past cost in respect of discovered fields Rs

9.88 bln2. Royalty and Cess of other JVs, partners.

share in r/o NELP Blocks Rs 1.87 bln

3. Capital cost of Gas Compressor Rs 1.50 Cr

4. Crude Oil (1996-98) Rs 6.20 bln5. JV purchase differentials of Ravva Rs

1.27 bln

TOTAL Rs 20.82 bln

Inter Corporate Loans and AdvancesDecisions – 3.16.5i. A letter be written to the Dept. of

Disinvestment (DOD) through Administrative Ministry.

ii. A letter be written to the Chairman, Indian Airlines for M/s Vayudoot dues.

iii. To write letter to C&MD, HSL indicating that if dues are not paid business relation might be terminated.

Inter Corporate Loans and AdvancesATR

i. Letters have been written by Director (F) to MoP&NG to take up the matter with respective Administrative Ministries is being pursued regularly.

ii. None of the concerned PSU is under disinvestment.iii. Follow up letter have been written regularly to all

four PSUs namely HAL, NPCCL, CCIL and Vayudoot.

iv. All six projects executed by HSL including advance paid thereto, are under arbitration.

Action Taken Report on Decisions of Strategy Review

Meet

Held at Behror during 26-27 July 2002

Cash Flow Projections

ATR on decisions arising from presentation

on “Cash Flow Projections”.

Cash Flow Projections

Decisions – 4.1.1The following be studied and comprehensive

framework be worked out:• Resource Planning for 10th Plan.• Resource Planning for Equity Oil.• Strategic plan to utilize the resources.

ATR• The Above points have been factored into

while preparing the annual budgets.

Cash Flow Projections

Decisions – 4.1.2Investments in refurbishment/acquisition

of rigs, vessels, FPO, Seismic vessels, computation

capabilities etc., be factored in cash flow.

ATR

The requirement has been factored in annual budgets.

Cash Flow Projections

Decisions – 4.1.4A comprehensive note for concession at par with OIL

under section 42 be submitted for the consideration of the

Govt.

ATR • Presentation be made by C&MD and D (F) to

Advisor to Union Finance Minister, who desired that the matter be discussed with his OSD.

• Further deliberations held with OSD and documents desired by him have been furnished.

• Response from Government awaited.

Under Recoveries

ATR on decisions arising from presentation

on “Gas Business – Under recoveries” i.e. due

to not allowing Fuel oil parity, Gas Pool

contributions and contribution for JV differential Gas price.

Under Recoveries

Decisions – 4.2.1 & 4.2.24.2.1 ONGCs concern for under recoveries on

account of Gas pricing, Gas Pool Account, PSC differential etc. was noted and it was desired that submission be made to the Government to address the issue.

4.2.2 Year wise details regarding ONGC’s contributions to the Gas Pool Account and its under-utilization be submitted to the Secretary.

ATRAlready covered in ATR on 3rd Strategy Meet

Decisions.

Under Recoveries

Decisions – 4.2.3ONGC’s concern for imposition of additional cess

was noted and it was desired that all issues related to the

Financials be flagged to the Ministry of Finance (MoF) for

suitable corrective measures during Union Budget for the

next year.

ATRi. The matter was discussed in meetings taken by

AS&FA on 02.01.04 and 06.02.04.

Under Recoveries

ii. During the meeting, the request was made to consider for fixing Cess at ad-valorem on the lines of Royalty on oil & gas.

iii. Director (F) has again requested MoP&NG in Dec. ’03 to reduce the crude cess from present Rs 1,800 per tonne to Rs 900 for Northeast in line with concession to refineries.

iv. ONGC has submitted proposal on other financial matters for forthcoming Budget.

Under Recoveries

Decisions – 4.3.1ONGC concern for outstanding due from various

agencies was noted and the following was decided:i. Grievance related to the outstanding dues of

ONGC be submitted to the Cabinet Secretariat.ii. Issue related outstanding due (and other issues)

from Oil PSUs to be taken up during the meeting of the C&MD of the oil and gas PSUs.

ATRAlready covered in ATR on 3rd Strategy Meet

decisions.