Manual-formatted

7.4.14 during the quarter/year except the Lube plants and the total freight booked on account of stock transfer should be considered as denominator and numerator respectively. The worked-out freight rate per KL to be used for valuation of finished lubricants /greases except lube plants. • For valuation of Closing Stock of Lubricants/greases, e all the Four elements i.e. Formulation Cost (WAR), Packing Charges, Transportation cost (Depot Surcharge) & Blending Cost are added together to arrive the total cost. This total cost is compared with NRV and lower of the total cost or NRV is taken for final Valuation. • Contaminated lubricants should be valued at Furnace Oil rate. Contaminated greases should be valued at nil rates and action initiated to obtain the approval of competent authority for absorbing the loss. Similarly, quantities of sludge should also be valued at nil rates and accounted for as a part of stock loss. In respect of other bulk off-spec. products, the valuation should be done with reference to the rate of rebranded product and necessary approval for loss on account of down gradation should be obtained. Package cost should not be considered while valuing contaminated stocks stored in barrels. Lubricants / greases in transit from other divisions/ regions: Valuation of lubes and greases in transit from other Divisions/Regions should be made for various elements of raw material cost, package cost, blending fees as considered for valuation of dispatching plant physical stock, may be adopted. 7.4.15 Lubricants & Greases in Transit - Ex-Imports: The valuation of imported lubricants and greases remaining in transit at the end of quarter/financial year should be done at import cost. Applicable exchange rates will be advised by Imports Section, Marketing HO based on the BL Date. 7.4.16 GAS a. Inventory In Hand: The Inventory lying Unsold as on Closing date in Transporter (for e.g. GAIL) and LNG Terminal Operator (for e.g. PLL) is classified under this head, the same is being authenticated by taking a Physical Stock Certificate from respective Transporter / Terminal Operator and is matched with the Balance as per Books SAP and countersigned by functional Group. b. RLNG/ LNG: Valued at Cost vs NRV whichever is lower based on FIFO. c. Cost: - Cost is as per BD Books. Cost is calculated on the basis of actual invoices raised by the supplier / transporter / terminal operator for that RLNG. d. For LNG Cost is calculated on the basis of actual invoices raised by the LNG Supplier, Custom duty on Invoice Price, Custom House Agent and Surveyor charges and any other charges incurred or to be incurred for bringing LNG to Terminal Operator. e. FIFO is considered based on actual despatched from Terminal. f. NRV: - Net Realizable Value is being calculated based on actual sales executed during 1st to 7th date of succeeding month of the Quarter. 7.5 STOCK IN PROCESS The valuation of Intermediate Stock (IS) at Refinery Division is provided below: Inventories INDEX Page 204

7.5.1 IS is valued at lower of its cost or realizable value. Intermediate stock is divided into straight run IS & specialty units IS. 7.5.1.1 Cost of IS of straight run units: for calculating the cost of Intermediate Stock, quantity of Intermediate stock shall be bifurcated between various categories of imported and indigenous crude. This is to be done on proportionate basis taking into account the crude throughput of indigenous and imported crude for the respective month. After bifurcating the Intermediate Stock quantity into various types of crude, the total cost is calculated based on the average cost of consumption of each crude during the respective month. In rare scenario, if the closing stock of IS is more than the crude throughput of the respective month, the entire cost of crude consumed during the respective month may be attributed to intermediate stock (equal to crude throughput of the respective month) and the balance quantity of IS stock may be valued on the basis of previous month’s crude consumption. (The previous month’s crude consumption is already calculated and need not be computed again.) Further, the following elements shall also be added to arrive at the total cost of Intermediate Stock- 1.Operating cost per MT at 50% of Operating cost considered for valuation of straight run finished products. 2.Natural Gas used as Fuel/MT at 50% of Cost of Natural Gas used as Fuel, for the respective month. 3.Fuel & Loss at 50% of the actual fuel & loss percentage for the respective month. 7.5.1.2 Cost of IS of specialty units: The IS of specialty unit is calculated at equivalent feed cost + 50% operating cost of the specialty unit + 50% fuel & utilities consumed in specialty unit. NRV of IS: The NRV is calculated based on the ILP of next month at NRVs provided by MKTG HO. The production of specialty products is converted in the equivalent straight run products including fuel for specialty units. NRV of ISD is Gross Realisation (without considering Natural Gas Fuel Cost) per MT of crude th’put based on ILP of Next month plus 50% Fuel & loss (excluding NG) less 50% Natural Gas as Fuel less 50% Operating cost as per BE of next year. 7.5.2 The physical inventory of all intermediate stocks is taken at the end of the financial year. SLOP oil stock should also be included in the intermediate stock. However, sludge should not be included in intermediate stock pending actual recovery of oil. 7.5.3 Stock of streams received from other units or purchased for further processing is to be treated as intermediate stock. Accordingly, this shall be valued at lower of cost or realisable value along with own intermediate stock. For this purpose, the weighted average cost of the total intermediate stock (i.e. own plus received from other units) shall be compared with realisable value. The actual cost of stream received from other units to be taken at debit note (net of Inventories Page 205

cenvat/ITC) value minus profit margin (of sending unit) plus freight from sending to receiving unit. For this purpose, the profit margin for the concerned month shall be intimated by sending unit to the receiving unit. Intermediate products transferred from one unit to another, in transit as on the date of balance sheet shall be accounted for by the receiving unit. 7.5.4 The format for working out intermediate stock valuation is given below. Intermediate Stock Valuation Qty TMT Rate Per MT Value Rs. Lakh 1. COST OF INTERMEDIATE STOCK A Landed Crude Cost as per actual (type wise i.e. HS, LS, BH etc.) B 50% of Fuel & Loss % in respective month (excl. Natural Gas) Calculation for (B) may be done as shown below a Fuel & Loss% in respective month (excl. Natural Gas) b 50% of 'Fuel & Loss% in respective month (a/2) c Quantity of closing IS (as per actuals) d Equivalent Crude throughput (c)/(1-(b)) e Fuel & Loss for IS (d) - (c) C 50% of Operating Cost Per MT in the year D 50% of Natural Gas per MT during the respective month E Cost of Closing IS (A+B+C+D) 2. REALISABLE VALUE OF INTERMEDIATE STOCK A Average Realisable value per MT of crude throughput during the next month (based on ILP of next month) B Less: 50% of Operating cost per MT of crude th'put (operating cost per MT as per BE) C Less: 50% Natural gas Cost per MT based on ILP ADD: impact of 50% of Fuel and Loss D Next month Fuel & Loss % (excl. NG) E 50% of Fuel and Loss (excl. NG) F Adjusted realisation (A)/(100-(D))*(100-(E)) G Net Realisable Value After adjusting operating Cost (E)- (B)-(C) 3. STOCK VALUATION (LOWER OF 1.E OR 2.G) 7.5.5 PNCP Intermediate Stock Valuation 7.5.5.1 Cost of Intermediate Stock Intermediate product stock of each petrochemical unit should be valued at input cost escalated for 50% process loss of respective unit + 50% utilities cost + 50% operating cost (fixed + variable). The Joint products like Ethylene, Propylene, Raw C4 Py gas and Butene-1 etc. are processed further in other petrochemical units and therefore should be considered as Intermediate stock. However, the cost of the same will be computed as joint product. 7.5.5.2 Realizable Value for Intermediate stock Inventories Page 206

Compute the realizable value based on next month’s production plan and NRV given by BD/Marketing considering 50% of loss. Deduct 50% operating cost and 50% utilities cost However, NRV for Joint products like Ethylene, Propylene, Raw C4 Py gas and Butene-1 etc. are processed further in other petrochemical units will be intimated by RHQ/BD. Intermediate stock should be valued at lower of cost or realizable value. 7.5.6 Stock in Process: The semi-finished and Stock-in-process of finished lubricants as on the quarter / year end, shall be valued with reference to the raw material cost of respective Base Oil and additives. For valuation purposes 50% of the calculated blending rate is added to the cost of Semi-finished Goods/Stock in process. Unfilled finished lubricants lying in bulk in the storage tanks of lube blending/filling plants should be valued as finished stocks. 7.5.7 Empty Barrels & Tins: The inventory of empty barrels at the end of quarter/financial year should be valued on weighted average cost as advised by Head Office. 7.5.7.1 Inventory of empty tins (small packs, 1/2 liter to 5 liters) as at the end of quarter/financial year should be valued at the Regional Weighted average cost worked out based on Opening Stock, Purchases and issues during the quarter / financial year. 7.5.7.2 In case of inter-Regional transfers, the value of barrels is transferred at actual rate. Since the valuation of closing stock of barrels is to be done on all India weighted average cost, any difference arising out of this should be debited/ credited to Consumption Account of barrels. While working out the consumption figures, it should be ensured that loss arising out of theft, etc. is not charged to Consumption Account but the value of the same should be adjusted under appropriate head of account and approval of the competent authority should be obtained. Sample Disclosure at IOCL level Inventories Page 207

Inventories Page 208

Annexure – 7.1 CLASSIFICATION AND VALUATION OF INVENTORIES UNDER DIFFERENT SCENARIOS 1. Different categories of inventories (other than stores and spares) are classified as under: • Inventory purchased for further processing is to be classified as Raw Material • Inventory purchased for resale is to be classified as Stock-in-Trade • Internally produced inventory for further processing is to be classified as Work-in- progress • Internally produced inventory for sale is to be classified as Finished Products • Any inventory earmarked for further processing or some specific use only shall be classified for that purpose. All other quantity shall be treated as for general purpose i.e. for sale Any inventory invoiced to petrochemicals or lying in petrochemicals storage location including in transit as on balance sheet date will only be considered as earmarked for that purpose. All other quantity shall be treated as for general purpose i.e. for sale 2. Item wise classification to be followed as per above categorization and classification: Sl Material Recommended Remarks No. Classification* 1 Naphtha/ Propylene /PGH/LPG/LABFS/Benzene Purchased from Outside for Raw Material internal consumption Own production identified for Work in Progress Since the stock is out of own petrochemicals plant production and is specifically identified for further processing in Petrochemical plant, it should be treated as ISD and should be valued accordingly. Own production not identified for Finished Goods petrochemicals plant 2 SKO Specifically identified for further Work in Progress Since the stock is out of own processing (in -GR) production and is used for further processing in secondary unit as well as despatches to marketing. In case, it is specifically identified for further processing in secondary units, it should be treated as ISD. Not specifically identified for Own Finished Goods use/ identified for resale 3 HSD/ Lubes identified for own Stores consumption 4 RLNG Inventories INDEX Page 209

Not Specifically identified for Refinery (i.e. sold/ agreement to sale upto 7th of next month) - Long term contracts of sale Stock in Trade NRV determination is to be based on respective long-term contracts of Gas sale. Any variation in valuation of this inventory in BD books is to be booked in BD books. - Other than long term contracts Stock in Trade NRV determination is to be based on of sale spot gas rates. Any variation in valuation of this inventory in BD books is to be booked in BD books. Specifically identified for Refinery Raw Material Any variation in valuation of this - whether in the books of BD/RD inventory in BD books is to be (i.e. other than above) booked in RO books. 5 Base Oil Outside purchase for lube plant Raw Material Outside purchase for resale Stock in Trade Own production identified for Work in Progress Since the stock is out of own Lube plant consumption production and is specifically identified for further processing in Lubes plant, it should be treated as ISD and should be valued accordingly. Own production not identified for Finished Goods Lube plant consumption 6 Butane /Propane Stock in trade 7 Ethanol/Bio diesels Raw Material *Note: Wherever the change in material code as per recommended classification is not feasible in SAP, the required impact is to be given thru an FI journal voucher by divisions. Inventories Page 210

Annexure – 7.2 APPLICABLE PRINCIPLES FOR CONSIDERATION OF EXPENDITURE/ INCOME FOR THE PURPOSE OF INVENTORY VALUATION S. Expenditure Applicable principles No. Head 1 Provision for With effect from 2017-18, the provision for contingencies are being Contingencies booked under the natural head and same is treated accordingly. However, written back any past provision written back during the year shall continue to be excluded e.g. not deducted from the operating cost. 2 Commodity Continued to be excluded e.g. not deducted from the operating cost Hedging except for the amount booked in natural head after implementation of Gain/Losses (Net) hedge accounting w.e.f 01.04.2018. Amount booked in natural head needs to be treated accordingly e.g. to be considered in operating cost, if applicable. 3 Provision for With effect from 2017-18, the provision for contingencies are being Probable booked under the natural head and same is treated accordingly e.g. to be Contingencies considered in operating cost, if applicable. 4. Income from To be excluded e.g. not deducted from the operating cost since there is no Finance Lease (In corresponding depreciation cost booked in accounts by IOCL case IOCL is lessor) 5. Other Non- To be excluded e.g. not deducted from the operating cost since it is a non- Operating operating income. Revenue 6. Bank Charges To be excluded e.g. not deducted from the operating cost since in the nature of finance charges. 7. Renewable To be included in operating cost (only for the REC purchased from outside) energy since it is an obligation on account of power generation from non- purchase renewable sources. However, the REC certificates purchased from other obligation units/ divisions should not be included since there is no cost involved. expenses (booked under power & fuel) 8. Amortisation of To be Included considering the corresponding increased depreciation Capital Grants expenses and the amortization is directly linked to the depreciation of the respective asset. 9. Revenue Grants Revenue grants directly related to production of goods should only be included. Inventories INDEX Page 211

S. Expenditure Applicable principles No. Head 10. Grants having Income/Amortization should be considered when condition of feature of Capital grants include/is related to the production of goods considering the as well Revenue corresponding increased depreciation & other expenses. (E.g. In case of grants (e.g. EPCG benefit, depreciation of assets should be included in cost whereas EPCG amortization of grant should not be included since the condition is related benefit) to export of goods and not connected to production of goods). 11. Canalizing Should be included while allocating the expenses of RHQ/ commission from International Trade. CPCL As per para 16 on Ind-AS 2, the storage cost is to be excluded while valuation Storage facilities in of inventories unless those costs are necessary in the production process 12. Refinery locations before a further production stage. In IOCL refineries the storage facilities (tanks) can be classified as follows: Raw material and chemical tanks: These tanks are necessary for storage of raw material and chemicals for further processing into finished products in the production process. Therefore, the cost of these tanks should be included as operating cost in inventory valuation. WIP tanks: These tanks are necessary for storage of intermediate products for further processing into finished products in the production process. Therefore, the cost of these tanks should be included as operating cost in inventory valuation. Finished product tanks: These tanks are used for storage of potential finished products. Further, the necessary quality testing of this stock is performed in these tanks only, before final clearance of the product for saIe / transfer/ despatch. In case the product stored in these tanks fails in quality testing further processing/ blending is performed in order to achieve the desired quality finished products. Therefore, the cost of these tanks should be included as operating cost in inventory valuation. 13. Dispatch facilities As per para 16 on Ind-AS 2, the selling and distribution costs are to be in Refinery excluded while valuation of inventories. The gantries and railway sidings locations facilities in refinery locations are used for both to transfer the product to marketing locations andreceive rawmateriaIs / intermediate products from other units/ outside. In case of Refineries, major use of these facilities is to transfer the product to marketing except Guwahati Refinery. Hence, while valuing the inventory lying in refineries, the cost of dispatch facilities in refinery locations should not be included in operating cost, if the facilities are used majorly for outward transfer the product. Further, keeping in view the materiality, only the costs which are direct and specific cost to the dispatch facilities e.g. Depreciation, Specific repairs and maintenance, Establishment etc. only should be excluded from operating cost of refineries. Inventories Page 212

S. Expenditure Applicable principles No. Head 14. Operating cost in The expenditure in township including associated facilities like respect of occupational health center, schools, hospitals, cubs, etc.are in the nature of Township staff welfare expenditure incurred on the employee’s respective unit (including attached marketing and pipelines locations). The cost relating to the employees of marketing and pipelines location is transferred by refinery to respective divisions and only the net cost relating to the refinery employees remains in the books of refinery division which continue to be part of operating cost for valuation of inventories. 15. Administrative The Refinery Head office (RHQ) is primarily an extension of the refinery offices including management and administration wherein the planning and monitoring of Refinery Head operations of all therefineries are carried out.Further, various functions like office and crude procurement and payment, finance etc. are centralised for all Corporate office refineries in RHQ. Thus, keeping in view the principle enumerated in Ind- expenses AS 2 for inclusion of general overheads for maintenance of factory buildings and equipment, and the cost of factory management and administrationin the cost of inventories, the cost of RHQ should be included in the cost of inventory of all refinery units on allocation basis. However, the cost of corporate office (except International Trade department) should continue to be excluded from inventory valuation at refineries since the corporate office is involved in the monitoring and management of all divisions. Inventories Page 213

CHAPTER 8 : ACCOUNTING OF EMPLOYEE BENEFITS 8.1 INTRODUCTION 8.1.1 IOCL is extending various post-employment benefits to the employees of the Company like payment of Gratuity, Provident Fund, Leave Encashment, Post-retirement medical benefits, Superannuation benefits, etc. The accounting of these employee benefits in the books of the Company is done in accordance with the provisions of Ind AS- 19 “Employee Benefits”. Further, the disclosures in respect of these benefits are also made in the financial statements of the Company in accordance with Ind AS-19 based on Actuarial Valuation. 8.1.2 For the purpose of managing the benefits being paid to the separated employees, IOC has formed various trusts. These trusts have been created with the sole purpose of providing the specified benefits to the employees. The accounts of these trusts are prepared, maintained and audited separately in accordance with the provisions laid down in the Rules framed by the Company in this behalf and as per the rules prescribed by respective statutes. 8.1.3 The creation of corpus for the purpose of payment of post-retirement benefits is also governed by the Guidelines issued by Department of Public Enterprises. As per the existing DPE guidelines effective 01.01.2017, the Corporation can make yearly contribution towards the retirement benefits (Provident Fund, SABF, Gratuity & PRMS) subject to maximum ceiling of 30% of Basic Pay + DA, which is determined as follows: %age Particulars determination Max ceiling on contribution towards retirement benefits 30% Less: Contribution to PF (fixed as per relevant law) 12% Less: Less: Max ceiling on contribution to remaining funds 18% Contribution to Gratuity based on actuarial valuation x% Contribution to PRMS based on periodic approved percentage by management (say - 4.0% last approved from 1.1.2017) 4% Contribution to SABF (remaining %age) (14-x) % An illustration on how these percentage benefits are arrived is given below: (Rs.in Cr.) Particulars Gratuity PRMS 1200 550 Liability as at the beginning of the year 1300 630 100 80 Liability as at the year end 50 50 150 130 A Incremental Liability 130 50 B Benefits paid during the year C Interest earned/ Contribution Accounting of Employee Benefits INDEX Page 184

Net Debit/Expenditure (A + B - C) 20 80 Basic Pay + DA 2000 2000 % Expenditure during the year 1.00% 4.0% % Expenditure towards SABF (18%-1.00%-4%) 13% *If the percentage of expenditure as per actuarial report comes higher than 4% (i.e. approved rate), the amount of differential contribution shall be shown as adjustable advance to PRMB Trust. 8.1.4 References to Authoritative Literature • Ind AS-19 Employee Benefits • Ind AS Compliant Schedule III to Companies Act 2013 and guidance note thereon 8.1.5 Ind AS Accounting Policy 8.1.5.1 Short Term Benefits the services Short Term Employee Benefits are accounted for in the period during which have been rendered. 8.1.5.2 Post-Employment Benefits and Other Long-Term Employee Benefits The Company’s contribution to the Provident Fund is remitted to separate trusts established for this purpose based on a fixed percentage of the eligible employee’s salary and charged to Statement of Profit and Loss/CWIP. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, is made good by the Company and charged to Statement of Profit and Loss/CWIP. The Company operates defined benefit plans for Gratuity, Post-Retirement Medical Benefits, Resettlement, Ex-gratia and AOD pension fund. The cost of providing such defined benefits is determined using the projected unit credit method of actuarial valuation made at the end of the year. Out of these plans, Gratuity, Post-Retirement Medical Benefits and AOD pension fund are administered through respective Trusts. Obligations on other long-term employee benefits viz leave encashment and Long Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year. The Company also operates a defined contribution scheme for Pension benefits for its employees and the contribution is remitted to a separate Trust. 8.1.5.3 Termination Benefits Payments made under Voluntary Retirement Scheme are charged to Statement of Profit and Loss on incurrence. 8.1.5.4 Re-measurement Accounting of Employee Benefits Page 185

Re-measurement, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in profit or loss on the earlier of: • The date of the plan amendment or curtailment, and • The date that the Company recognises related restructuring costs Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises the following changes in the net defined benefit obligation as an expense in the statement of profit and loss: 8.2 • Service costs comprising current service costs, past-service costs, gains and losses on 8.2.1 curtailments and non-routine settlements; and • Net interest expense or income RECOGNITION AND MEASUREMENT OF EMPLOYEE BENEFITS Short term employee benefits Description Benefits (other than termination benefits) expected to be settled wholly within 12 months after end of the period and includes: • wages, salaries and social security contributions; • short-term compensated absences such as paid annual leave • profit-sharing and bonuses payable within twelve months after the end of the period. • non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees. In case of short-term employee benefits: • No actuarial assumptions are required to measure the obligation. • No possibility of any actuarial gain or loss. IOCL Short term employee benefits includes: • Salary; • Wages • Bonus • Staff welfare expenses Other Short-Term Employee Benefits • Workmen Compensation: Accounting of Employee Benefits INDEX Page 186

The Company pays an equivalent amount of 100 months’ salary to the family member of the employee if employee dies while he is on duty. This scheme is not funded by the company. The liability originates out of the Workmen compensation Act and Factory Act. The amount is booked as expense on incurrence. Accounting Distinction between short-term and other long-term employee benefits is based on the expected timing of settlement rather than employee’s entitlement to benefits i.e. Even if benefit is due to be settled within 12 months from reporting date, but management expects benefit to be settled after 12 months, it should be accounted for as other long-term employee benefit. 8.2.2 Post-employment benefits 8.2.2.1 Defined Contribution Plans A. Description of Defined Contribution Plans A.1 Employees Pension Scheme (EPS-95) Erstwhile Family Pension scheme 1971 has been replaced with Employee Pension Scheme 1995 w.e.f. 16.11.95 by Govt of India. Amount of monthly contribution notified by RPFC from time to time is deducted from Company’s contribution toward Provident fund of members and paid to EPFO. At present out of the monthly Company contribution towards PF, contribution equivalent to 8.33% of PF wages or Rs.15000/-, whichever is lower, is deposited with RPFC towards EPS- 95. The contribution in respect of all the officers is deposited by divisional head quarter and in respect of non-officers contribution is deposited by the respective Unit/location. The Statutory returns and pension claims are filed accordingly. In case of Inter-divisional posting, the contributions will continue to be deposited by the Parent Divisions. Accounting of Employee Benefits Page 187

As per the notification of EPFO the scheme has been discontinued for members having salary exceeding Rs. 15000/- p.m. from 01.09.2014. Accordingly, The EPS 95 Scheme has been discontinued for employees joined after 01/09/2014, however, for existing members, the scheme shall remain continued. A.2 IOCL Superannuation Benefit Fund Scheme A contributory Superannuation Benefit Fund Scheme was introduced in the Corporation as a welfare measure for providing social security. Specified benefits under the scheme accrue to members on fulfillment of laid-down conditions, in the following events: • Retirement on attaining the age of superannuation. • Death/ permanent total disablement while in service. • Separation due to resignation on or before 31.12.2016, after rendering a prescribed minimum service of 15 years before attaining the age of superannuation. (The benefit in such a case is payable at the notional age of superannuation). • Separation due to resignation on or after 1.1.2017, the net accumulated fund shall be transferred to similar SABF fund of his new corporation (if he joins PSU/Government) otherwise, the fund will be transferred to his NPS account regulated under PFRDA.; The scheme is operated through a Trust, “Indian Oil Corporation Limited Employees Superannuation Benefit Fund”. The Trustees manage the funds and purchase annuity from the LIC/ any other IRDA approved Insurance Company to secure entitled recurring benefit to the beneficiary qualifying under the scheme. Contributions under the modified Scheme w.e.f. 01.01.2007: Monthly contributions shall be made by the employer and employee under the Scheme at prevailing rates. For this purpose, w.e.f. 01.01.2007 individual card (ledger) is maintained for all employees of IOCL thereafter in case of new employees from the date of their joining the Company. Contribution by Employer With effective from 01.01.2007, the Employer’s contribution in the SBF Scheme would come out of 30% of Basic Pay and DA actually paid after adjusting the contributions made towards Provident Fund, Gratuity Fund and Post-Retirement Medical Fund. The contribution rate to the Superannuation Benefit Fund would vary on year to year basis depending on actuarial valuation of Gratuity Fund as well as periodic contribution of Post-Retirement Medical Fund. The percentage of employer’s contribution during a financial year is provisionally decided based on past years cost keeping adjustment for contingencies, which shall be finalized at the end of the year. The difference between the two rates would be adjusted accordingly. Contributions by the employees The employees will make the direct contribution under the modified SABF Scheme @ 2% of Basic Pay and DA, irrespective of age. This rate will remain fixed unless changed by the Trustees. Uploading of SABF Contribution data to update the individual card: Accounting of Employee Benefits Page 188

Employer’s and employee’s contribution towards SABF are uploaded by CPC, PLHO, Noida on monthly basis in order to update the individual SABF card of employee. The members can view the balance in the individual card through intranet portal. Settlement of superannuation cases At the time of separation of employee, annuity is purchased from insurance companies empaneled by SABF Trust, Delhi Office on submission of duly filled SABF forms. Original SABF forms are submitted to RHQ by the HR department of concerned division. After the due verification of SABF form, case is settled by RHQ and credit note for 1/3rd Commutation, if opted for, is sent to the concerned division for onward payment to the employee. Original SABF forms are to be sent to opted insurance company as empaneled by SABF Trust for onward processing and scanned copy is kept with IOC for future reference. The following eight options are provided for pension payment to the superannuating employee: a. For lifetime of member only. b. Lifetime with a guaranteed period for 5 years c. Lifetime with a guaranteed period for 10 years. d. Lifetime with a guaranteed period for 15 years. e. Lifetime with ROC to the beneficiary on the death of the member f. Joint life i.e. member as well as his/her spouse. g. Lifetime with a guaranteed period for 20 years. h. Joint life and last survivor pension with return of capital To provide the detailed information to the ex-employees, a comprehensive letter is issued, which primarily includes the followings information: File No. Reference No allotted by IOCL to be quoted in all future communication with IOCL Annuity No Reference No allotted by Insurer to be quoted in all future communication with insurer. Commutation Amount advised towards 1/3 commutation amount, if opted for Amount commutation as “Yes”. Purchases Price/ Amount of annuity purchase with insurer for purchases of annuity. This Annuity amount amount is refundable under Option No 5 & 8 to the nominees of annuitants. Pension amount Amount payable to the annuitant/beneficiary under mode opted by annuitant. Pension due date First due date of pension. (received within the next 30 days and thereafter in the 1st week of every month) First due date of Date within which life certificate is required to be submitted in order Life Certificate to ensure regular pension. (Not earlier than 30 days) Time Interval for Frequency/ periodicity of submission of life certificate. submission of Life Certificate As per Ind AS, The Uniform Advance taken by SABF Trust from IOCL is measured at fair value by discounting at the applicable G-Sec rate (i.e. 7.85%). The interest income is accrued on quarterly Accounting of Employee Benefits Page 189

basis considered the G-sec rate. All deferred employee expenses are recognized in P&L in FY 2017-18 as the whole amount pertains to the past services of employees. The amount w.r.t uniform advance is repaid yearly on the basis of actual settled cases. Year End activities: The SABF rate of Company’s Contribution for the current year is provisional, which is finalized at the end of the year based on the Actuarial Valuation liability arrived at in respect of Gratuity and PRMS. The difference in two percentage i.e. provisional and final, is adjusted in the individual card of the employee in the following financial year and amount payable/recoverable with the Trust is shown in the Vendor code (10116582) of SABF Trust. The final rate of the current year / the rate advised by CO is to be considered as provisional rate for the next year. Balance Confirmation Certificate is given by IOCL in respect of amount payable/recoverable by SABF Trust. In respect of employees posted at CPCL, SABF contribution is directly credited to the bank account of SABF Trust and accordingly individual card is updated. B : Accounting of Defined Contribution Plans Accounting for defined contribution plans is straightforward because the reporting entity’s obligation for each period is determined by the amounts to be contributed for that period. Consequently, no actuarial assumptions are required to measure the obligation or the expense and there is no possibility of any actuarial gain or loss. Moreover, the obligations are measured on an undiscounted basis, except where they are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. (Para 50 of Ind AS 19) Recognition and measurement of Defined Contribution Plans When an employee has rendered service to an entity during a period, the entity shall recognise the contribution payable to a defined contribution plan in exchange for that service: a. as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, an entity shall recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or cash refund. b. as an expense, unless another Ind AS requires or permits the inclusion of the contribution in the cost of an asset (see, for example, Ind AS 2- Inventories and Ind AS 16- Property, plant and equipment). (Para 51 of Ind AS 19) When contributions to a defined contribution plan are not expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service, they shall be discounted using the discount rate specified in paragraph 83. (Para 52 of Ind AS 19) Accounting of Employee Benefits Page 190

8.2.2.2 Defined Benefit plans A : Description of Defined Benefit Plans A.1 Provident Fund: The Company's contribution to the Provident Fund is remitted to separate provident fund trusts established for this purpose based on a fixed percentage of the eligible employee's salary and charged to Statement of Profit and Loss. Shortfall, if any, in the fund assets, based on the Government specified minimum rate of return, will be made good by the Company. Due to this liability on the company, PF is treated as defined benefit scheme. The Company has three Provident Funds for employees of Marketing Division, Refineries Division (incl. Pipelines and R&D Centre) and Assam Oil Division maintained by respective PF Trusts in respect of which actuarial valuation is carried out for identification of any deficit as at the end of financial year. These trusts are being merged after necessary approvals. Accounting of Employee Benefits Page 191

Provident Fund deductions shall be made as per the PF Rules. In respect of all the employees, PF deductions shall be made automatically while running the salary by CPC. At the end of month, YHR149 report is taken out from the SAP by PF section in respect of all the employees for uploading the data in PFMS where in member wise PF balances are maintained. In respect of new entrants, master is created by HR and thereafter data is uploaded by Finance department. Employees may also contribute voluntarily to VPF by applying online through ESS. Employees may modify (increase/ decrease/ start/ stop) their contribution to VPF only twice in a year (April/ October). No further modification is allowed during the year. After implementation of PFMS portal, member can view the details of contribution, interest, withdrawal etc. at any point of time. All PF related payments are released through SAP t-code YF_SALARY for preparation of voucher. Lump sum contributions to VPF are acceptable only against payment of arrears and bonus net of Tax. Interest payable to employee is available in PF card which can be viewed at any point of time as mentioned in point no. 8.6.6. Final interest is calculated after preparation of PF Balance sheet. The guidelines for accounting of Provident Fund are enclosed as Annexure – 8.1: A.2 IOCL Employees Group Gratuity Scheme Each employee rendering continuous service of 5 years or more is entitled to receive gratuity amount equal to 15/26 of the eligible salary for every completed year of service subject to maximum of INR 0.20 crore at the time of separation from the company. Further, the ceiling of gratuity in respect of executives shall increase by 25% whenever IDA rises by 50%. IOC’s Gratuity scheme is a Defined Benefit & funded scheme as per the provisions of Ind AS- 19.For administration of gratuity payments to the employees, an irrevocable trust namely 'IOCL Employees Group Gratuity trust' has been formed on 31st March 1987. Based on the actuarial valuation, initial contribution was made towards the trust, which was deposited with the LIC, New Delhi through whom the trust funds are being managed. The amount deposited by Trust shall be invested as per investment guidelines mentioned in trust deed . Out of the total amount deposited with LIC each year as contribution, certain amount shall be appropriated by LIC for insurance coverage in respect of employees dying during the service to cover up the minimum assured gratuity which is higher than the gratuity otherwise payable based on the service period of the employee. The amount of contribution to gratuity fund advised by Actuary on yearly basis is allocated amongst Units/Division on the basis of total Basic + DA for the previous year. Accounting of Employee Benefits Page 192

The amount paid by IOC each year as contribution shall be taken to the credit of general Fund of Trust as contribution received from IOC and the amount claimed by IOC each year in respect of gratuity paid/payable to employees during the year shall be debited to the general Fund of the Trust. The net surplus in the Income & Expenditure Account of the Trust is transferred to the credit of General Fund of the Trust at the end of each year. Each division would work out the amount of gratuity payable to the employee at the time of resignation/ retirement/ death/ termination and the same shall be continued to be paid by them to the concerned employee directly on the due date as per rules and regulations of the Corporation. At present, the maximum gratuity that can be paid to the separated employee/nominee cannot exceed Rs.20 lakh. This ceiling of gratuity in respect of executives shall increase by 25% whenever IDA rises by 50%. In case, for any reasons, the amount of gratuity payable to employees is withheld for some time, a liability in favour of the concerned employee should be created and the amount should be claimed from the Trust as if gratuity amount has been paid to the employee. In case, the amount of gratuity has already been adjusted against House Building Advance, the necessary adjustment entries should be passed by the concerned Finance Department on the due date and claim the amount so adjusted from Trust Funds. Details of gratuity payment made (including liability created/adjustments made as herein- above) during the month shall be extracted from SAP by RHQ who shall thereafter claim the amount from Gratuity Fund maintained with LIC/Other Insurer on behalf of the Trust on monthly basis and the same shall be reimbursed to IOC. In death cases, the debit notes regarding the accelerated gratuity amount paid to the nominee of deceased employee (i.e. minimum assured gratuity minus normal gratuity based on service period as referred to in Para above) shall be transferred to RHQ Finance who shall claim the same from LIC on a quarterly basis against the annual term insurance premium paid to LIC. The normal gratuity payable is being paid by the trust and differential of normal & accelerated gratuity in case of death is being paid by LIC. The annual term insurance premium is debited by LIC from our Gratuity Fund maintained with it on intimation by RHQ. At the end of the financial year, debit/ credit notes based on the actuarial valuation and funds available with the Gratuity Trust shall be raised by RHQ Finance to all the Divisions depending upon the Basic + DA for the whole year of the of respective divisions. Accounting Procedure is given in Annexure – 8.1. A.3 IOCL Employees Post-Retirement Medical Benefit Scheme PRMS provides medical benefit to retired employees and eligible dependent family members. IOC’s Post-Retirement Medical Benefit Scheme is again a Defined Benefit and funded scheme and accordingly the related disclosures are made in the IOC’s financial statements as per provisions of Ind AS -19. Accounting of Employee Benefits Page 193

The scheme is operated through a 'Trust'. The Trust has also been approved by Commissioner of Income Tax, Mumbai under the Income Tax Act 1961 and the Rules made there under. The Trust has been formed on 28th February 2011 with the sole purpose of providing post- retirement medical benefits to the retired employees of the Company and their eligible dependents who shall be entitled to such benefits in accordance with the 'Post-Retirement Medical Benefit Rules' Initial contribution was made by IOC towards the Trust based on approved percentage by board . Further monthly contribution to the Trust is made based on the provisional percentage of Basic Salary and DA determined by Corporate Office. The percentage shall be finalized at the end of each financial year based on the actuarial valuation in line with Ind AS-19. If Actuarial percentage is more than percentage approved by Board than the excess contribution will be shown as advance to Trust and if the Actuarial percentage is less than Board approved percentage, contribution to be made @ approved Board percentage and differential contribution may be adjusted in future. Further the retiring employees of IOC shall be required to deposit onetime contribution with the Company so as to become eligible members for receiving the benefits under the Scheme which is transferred to the Trust on quarterly basis. The funds contributed towards the Trust shall be invested by the Trust in line with the investment policy approved by the Trustees within the framework of Section 11(5) of Income Tax Act. The Claims towards the payment of medical benefits to the retired employees and their eligible dependents shall be first paid by IOC and thereafter, the Trust shall reimburse the same amount to IOC on quarterly basis. As per the revised guidelines of Department of Public Enterprises dated 24th January 2013, the funding of benefits for employees who have retired prior to 1st January, 2007 is totally different from that of employees retiring subsequent to that date. Thus, separate corpus comprising 1.5% of PBT has been created in the books of the corporation in the financial year 2012-13 for the employees retiring prior to the aforesaid date which shall not be merged with the corpus formed for the employees retiring after that date. Accounting procedures of PRMB scheme are given in Annexure – 8.1. A.4 Resettlement Allowance: Resettlement allowance is paid to employees to permanently settle down at a place other than the location of last posting at the time of retirement. IOC’s Resettlement Allowance Scheme is a Non Funded and Defined Benefit Scheme for which liability is provided in the books of the Company as required under Ind AS-19 Under this Scheme, benefits are paid to the retired employees who shift to a different place for resettlement after retirement and claim the allowance within six months from the date of retirement. As per the practice of the Company, the benefits are paid to the employees as per extant rules. Accounting of Employee Benefits Page 194

Every year, the future liability in respect of Resettlement Allowance benefits, is determined as per the actuarial valuation carried out by Independent Actuary based on the employees’ data as at the end of the year. A.5 Ex gratia: Ex-gratia is payable to those employees who have retired before 01-11-1987 and not covered under the pension scheme. Further, for employees who have retired on or after 01-11-1987 but upto 31.12.2006 and their entitlement under the pension scheme is less than applicable amount under Ex- Gratia Scheme, such employees are also eligible to the extent of shortfall or difference under Ex-gratia scheme. The scheme of ex-gratia has been restricted to cover only those eligible employees who have retired upto 31.12.06, and not thereafter. B : Accounting of Defined Benefit Plans Accounting of Employee Benefits Page 195

Impact of re-measurement in net defined benefit liability/ (asset) to be split between other comprehensive income and statement of profit and loss by actuary: • Actuarial gains or losses return on plan assets (excluding interest on net asset/liability) and any change in effect of asset ceiling is to be recognised in other comprehensive income and not reclassified to profit and loss in subsequent period. • Service cost and net interest cost (i.e. time value) on net defined benefit deficit/ (asset) to be recognised in statement of profit and loss. The Company had the option to choose disclosure of net interest on the net defined liability (asset) within operating expenses or alternatively as a component of finance cost. The company has decided to show as part of employee benefit expenses. 8.2.2.3 Other Long- Term Employee Benefits A: Description of Other Long- Term Employee Benefits A.1 Leave Encashment: Each employee is entitled to get 8 earned leaves for each completed quarter of service. Encashment of earned leaves is allowed during service leaving a minimum balance of 15 days subject to maximum accumulation up to 300 days. In addition, each employee is entitled to get 5 sick leaves at the end of every six months. The entire accumulation of sick leaves is permitted for encashment only at the time of retirement. The company has taken an insurance policy for leave encashment from LIC. LIC vide its letter dated 20 March 2018 has also confirmed the terms of the policy which confirms that the proceeds of the policy can be used only to pay or fund employee benefits under a defined benefit plan. Since the proceeds of the policy is restricted to pay or fund employee benefits under a defined benefit plan, the definition of qualifying insurance policy is getting fulfilled as per Para 8 of Ind AS 19. Thus, IOC’s Leave Encashment Scheme is a funded employee benefit Scheme. The recognition and measurement principles of the defined benefit plan shall apply to the funded leave encashment scheme and plan asset-liability and their corresponding expense- income shall be recorded on net basis. Every year, the Leave Encashment liability in respect of Earned Leave and Sick Leave is determined as per the actuarial valuation carried out by Independent Actuary based on the data regarding Salary and Leave Balance of each employee as at the end of the year. Based on the Leave Encashment Liability determined by the Actuaries, funds are invested with the insurance companies after due consideration of returns being offered by them. On the exit of an employee, the Leave Encashment amount shall be paid by the Divisions and debit notes shall be sent to RHQ Finance who shall then claim the amounts from the funds being maintained with the insurers. Further under the scheme, IOC has also taken an Insurance Cover of Rs.5000/- under One Year Renewable Group Term Assurance Plan of LIC in consideration of which an annual term insurance premium is also charged by LIC which is treated as business expenditure in the books of IOC. Accounting of Employee Benefits Page 196

On death of an employee, in addition to his/her leave encashment benefit, his/her family shall also be entitled to the amount of insurance cover of Rs.5000/- for which debit notes shall be sent by the Divisions to RHQ Finance along with required documents so as to enable to claim the same from LIC. A.2 Long Service Award: On completion of specified period of service with the company and also at the time of retirement, employees are rewarded with amounts based on the duration of service completed. IOC also offers Long Service Awards to the employees based on the number of years the employees served the Company. Under this Scheme, the awards are distributed in the form of Gift vouchers or any other manner as approved by the management. At the end of each year, Actuarial Valuation is carried out based on the employees’ data and is provided in the books of accounts of the Company in accordance with the provisions of Ind AS- -19. IOC’s Long Service Award is a non funded Other long-term employee benefit. A.3 Felicitation Scheme Felicitation scheme for retired employees has been modified from September’ 2018 to provide cash incentive on attaining the age of 70 years and more on the occasion of Indian Oil Day i.e. 1st September. Age Amount in Rs. Officers Workmen 70 75000 50000 75 100000 75000 80 130000 100000 85 175000 125000 90 225000 150000 95 300000 200000 100 500000 300000 At the end of each year, Actuarial Valuation is carried out based on the employees’ data and is provided in the books of accounts of the Company in accordance with the provisions of Ind AS- -19. IOC’s Felicitation Scheme is a non funded Other long-term employee benefit. A4. Leave Fare Allowance (LFA) / Leave Travel Concession (LTC): LTC is allowed once in a period of two calendar years (viz. two-yearly block). An employee has, in any given block period of two years, an option of availing LTC or encashing the entitlements of LFA. In respect of LTC- a. In respect of leave travel concession cases (including LTC encashment) it is the responsibility of the Personnel Department to issue sanction orders for leave travel concession for applicable block years. The record for the concessions availed by different employees for different blocks shall be maintained by the Personnel Department. On the basis of the sanction order issued by the Personnel Department, the TA/LTC Section shall make advance payment as per LTC rule to the employees. Accounting of Employee Benefits Page 197

b. In respect of employees who avail LTC advance but do not perform the journey, the advance shall be refunded to Finance Department within one week of rejoining duty after expiry of leave period. If the employee does not avail LTC nor goes on leave, then the advance has to be deposited back within a week of taking advance. If the leave period is more than 30 days and onward journey has not commenced within 30 days of drawl of advance, full amount of advance drawn by employee shall be deposited within one week after expiry of 30 days from the date of drawl of advance even though the employee may continue to be on leave. c. LTC adjustment bill shall be submitted by the employee within 15 days of completion of return journey and unspent amount of the advance, if any, shall be deposited with Finance Department. LTC Claims shall be checked with reference to LTC rules. d. Employees are required to submit a claim form for the journey performed specifying the date of journey, place of destination, actual expenditure incurred on LTC, the mode/ class of travel, etc. e. For lump sum claim for encashment of LTC in lieu of availing LTC facility, orders regarding admissibility shall be issued by the Personnel Department. The section shall make payment on the basis of such orders for the admissible amount. The payment shall be debited to LTC encashment Account under the relevant heads. Where no journey is performed by the employee during the year or no declaration is submitted by the employee in respect of the same, then the entire amount of LTC encashment will be taxable. The quantum of exemption for LTC availed or encashed will be calculated as per income tax rule. Employees opting for Encashment of LTC amount linked to their actual Grade once in a block of 2 calendar years. Following are grade wise entitlement Category Entitled Amount as Note: Encashment of member(Rs.) respect of dependent family Officers- Gr. D & above 9702 Officers- Gr. A,B,C 5540 Non-Officers LTC in 4282 members (other than parents). In respect of LFA Facility: a. Employees who are otherwise eligible under the LTC Scheme of the Corporation would be eligible to opt for the Lump-sum LFA facility. b. The Lump-sum LFA facility would be in lieu of the LTC Scheme of the Corporation. This can be applied through ESS. c. Eligible employees who desire to avail the lump-sum LFA facility would convey their option in favour of Lump-sum LFA facility in lieu of the existing facility. There is no time frame for exercising the Option but once an employee has exercised his/her option in favour of the Lump-sum LFA facility, it shall not be open to him to revert back to LTC Scheme in future. Employees opting for Lump-sum LFA facility would be eligible to claim a lump-sum amount once in a block of 2 calendar years. Accounting of Employee Benefits Page 198

Following are the grade wise entitlement: SN Category/ Grade Lump-sum Entitlement 1 Workmen with BP less than Rs.38970* 1.00 time of monthly actual BP+DA 2 Workmen with BP of Rs.38970 or more* 1.25 times of monthly actual BP+DA 3 Officers in Gd. A0, A, B & C 1.50 times of monthly actual BP+DA 4 Officers in Gd. D, E & F 2.00 times of monthly actual BP+DA 5 Officers in Gd. G, H & I 2.50 times of monthly actual BP+DA *Guidelines awaited Accordingly, LTC shall be considered as “Other long-term employee benefits” and expense shall be recognized over the expected period of settlement. In this respect, accounting guidelines considering the pay revision are as under: Actual Liability for the LTC / LFA due for completed blocks shall be provided by divisions based on actual salary / entitlements. For New Blocks following needs to be complied: • Expenses shall be booked in the period for all the encashment made during that period pertaining to current block. In addition, the liability needs to be created for fitment @15% for all encashment. • As the LFA is credited in advance to the employee’s account and the service period completion is 2 years (i.e. 8 quarters), the balance un-encashed liability based on the current salary shall be prorated into eight quarter and liability is booked for the completed quarters including fitment @15. The old provisions recognised in the earlier quarters of the current block shall be reversed. • In other cases where additional LTC is allowed e.g. NE LTC or any other block is followed, same methodology is to be followed for liability/ expenses bookings for the quarter. The measurement of other long-term employee benefits is not usually subject to the same degree of uncertainty as the measurement of post-employment benefits. B : Accounting for other Long- Term Employee Benefits Accounting of Employee Benefits Page 199

Distinction between short-term and other long-term employee benefits is based on the expected timing of settlement rather than employee’s entitlement to benefits i.e. Even if benefit is due to be settled within 12 months from reporting date, but management expects benefit to be settled after 12 months, it should be accounted for as other long-term employee benefit. 8.2.2.4 Termination Benefits A: Description of Termination Benefits B: Accounting of Termination Benefits Recognition Accounting of Employee Benefits Page 200

An entity shall recognise a liability and expense for termination benefits at the earlier of the following dates: a. when the entity can no longer withdraw the offer of those benefits; and b. when the entity recognises costs for a restructuring that is within the scope of Ind AS 37 and involves the payment of termination benefits. (Para 165 of Ind AS 19) Measurement An entity shall measure termination benefits on initial recognition, and shall measure and recognise subsequent changes, in accordance with the nature of the employee benefit, provided that if the termination benefits are an enhancement to post-employment benefits, the entity shall apply the requirements for post-employment benefits. Otherwise: • if the termination benefits are expected to be settled wholly before twelve months after the end of the annual reporting period in which the termination benefit is recognised, the entity shall apply the requirements for short-term employee benefits. • if the termination benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period, the entity shall apply the requirements for other long-term employee benefits. (Para 169 of Ind AS 19) 8.3 DISCLOSURES 8.3.1 Short term employee benefits Although this Standard does not require specific disclosures about short-term employee benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1, Presentation of Financial Statements, requires disclosure of employee benefits expense. (Para 25 of Ind AS 19) 8.3.2 Post-Employment Benefits 8.3.2.1 Defined Contribution Plans An entity shall disclose the amount recognised as an expense for defined contribution plans (Para 53 of Ind AS 19). IOCL disclosures made in annual accounts are as under 8.3.2.2 Defined Benefit Plans The summarised position of various Defined Benefit Plans recognised in the Statement of Profit & Loss, Balance Sheet and Other Comprehensive Income is as under: Accounting of Employee Benefits INDEX Page 201

Accounting of Employee Benefits Page 202

Accounting of Employee Benefits Page 203

The estimate of future salary increases considered in actuarial valuation takes account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market. Accounting of Employee Benefits Page 204

8.3.2.3 Other Long- Term Employee Benefits Although this Standard does not require specific disclosures about other long-term employee benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1 requires disclosure of employee benefits expense. (Para 158 of Ind AS 19) 8.3.2.4 Termination Benefits Although this Standard does not require specific disclosures about termination benefits, other Ind ASs may require disclosures. For example, Ind AS 24 requires disclosures about employee benefits for key management personnel. Ind AS 1 requires disclosure of employee benefits expense. (Para 171 of Ind AS 19) 8.3.3 Extracts from Guidance note on Ind AS Compliant Schedule III Disclosure of the following is required: • Salaries and wages The aggregate amounts paid/payable by the company for payment of salaries and wages are to be disclosed here. Expenses on account of bonus, leave encashment, compensation and other similar payments also need to be disclosed here. Where a separate fund is maintained for Gratuity payouts, contribution to Gratuity fund should be disclosed under the sub-head Contribution to provident and other funds. The term employee should be deemed to include directors who are either in whole-time or part-time employment of the company. It will exclude those directors who attend only Board meetings and are not under a contract of service with the company. Those who act as consultants or advisers without involving the relationship of master and servant with the company should also be excluded. A distinction should be made between persons engaged under a contract of service and those engaged under a contract for services. Only the former is to be included in the computation. Whether part-time employees are to be included would depend on the facts and circumstances of each case - the basic criterion being whether they are employed under a contract of service or a contract for services. Accounting of Employee Benefits Page 205

• Contribution to provident and other funds The aggregate amounts paid/payable by a company on account of contributions to provident fund and other funds like Gratuity fund, Superannuation fund, etc. are to be disclosed here. Contributions for such funds for contract labour may also be separately disclosed here. However, penalties and other similar amounts paid to the statutory authorities are not strictly in the nature of ‘contribution’ and should not be disclosed here. • Staff welfare expense The total expenditure on staff welfare is to be disclosed herein. 8.4 REQUIREMENT RELATED TO DISCLOSURES TO ANNUAL ACCOUNTS IN NOTE–35 The compilation for Note-35 is as per the following format advised by CO: Amount Amount Amount Provisio Amou Net Amount S. Particulars paid by the paid by provided n Made nt tfd Amount booked in No. Division to the by Division During to included OCI Retired Division for leave the CWIP in Profit & Loss Employees to On roll encashme Year A/c * employe nt paid in es April (a)+(b)+(c )+ (d) - (e) (a) (b) (c) (d) (e) (f) (g) Leave Encashme (i) nt (ii) Gratuity Post- Retiremen t Medical (iii) Benefit* Resettlem ent Allowance (iv) s Long Service (v) Award (vi) Ex Gratia Felicitatio (vii) n Total Break up of Benefits paid under PRMS INDEX Employee Retired before 01.01.2007 (1.5% of PBT Fund Employees Retired on or after 01.01.2007( 30% Fund) Accounting of Employee Benefits Page 206

For arriving at the above details, the following are required:- a. Actuarial Valuation data for all active employees in prescribed format to determine the Actuarial Valuation liability at the end of the year by the independent Certified Actuary. The Actuarial Valuation data is extracted centrally by RHQ using SAP T-Code YHR143. To the above data, the details of deputation out/ on lien employees is added to arrive at the total employee list. Employees i.e. deputation-in cases, who are not covered under the Corporation's retirement benefit plans are excluded for the purpose of actuarial valuation. b. Following details are to be provided by the Divisions/ Units on the amount of benefits paid in respect of • Gratuity–amount of gratuity paid to the separated employees during the year. Employee wise details to be provided with separate indication for accelerated gratuity cases. • PRMS–Employee wise details of amount paid to separated employees. Separate booking for employees separated prior to 01.01.2007 and separated after 01.01.2007 to be provided by Divisions/Units. • Leave Encashment–amount paid towards encashment of Sick Leave and Earned Leave during the year. c. It should be ensured that the details as shown in the accounts are reconciled and matched with the information provided to RHQ i.e. the respective Trust's. d. Following details are extracted from the Fund Statement of LIC/ Other Investment at the end of the year (towards define benefit obligation – Funded i.e. for gratuity, PRMS & Staff Pension Fund at AOD):- • Actual Return on Plan Assets • Investment Pattern for the year • Investment details for the year • Fair value of Plan Assets at the end of the year e. Additional disclosures to be given in respect of define benefit obligation schemes (both funded and non-funded), at CO/RHQ level, are as under: • Reconciliation of balance of define benefit obligation • Reconciliation of balance of fair value of plan asset • Reconciliation of fair value of plan asset and define benefit obligation • Amounts recognised in CWIP/ P&L Account • Major actuarial assumptions 8.5 OTHER WELFARE SCHEMES 8.5.1 Indian Oil Employees Co-operative Society (Benevolent Fund) The Indian Oil Employees Welfare Co-operative Society has implemented the Scheme of Benevolent Fund, for the benefit of the employees of the Corporation, the membership of which is governed as per the rules of the society. these rules inter-alia provide that a member shall contribute Rs.30/- per month in order to secure a benefit of Rs.1500/- per month for 5 years paid quarterly to his family in case of his untimely death or total disability. Accounting of Employee Benefits INDEX Page 207

The scheme also provides that on retirement/resignation/termination of the member from the services of the Corporation, total amount contributed by him will be refunded without interest or at the discretion of the employee the amount can be donated to the society. The employee shall become a member of the scheme by making an initial payment of Rs.11/- (Rs.10 towards share capital and Rs.1/- towards entrance fees). The monthly subscription of Rs.30/- shall be deducted from the salary by the Payroll section on intimation by the society. The amount so deducted shall be transferred to the Society's Registered Office at Mumbai. 8.5.2 LIC's Group Savings Linked Insurance Scheme LIC have formulated a Group Savings Linked Insurance Scheme for employees of Public Sector Undertakings. The scheme has also been introduced in IOC. Under the scheme, a part of the monthly contribution payable shall be charged for risk coverage of life and the remaining amount shall be kept in a savings account earning interest at pre-determined rates compounded on yearly basis. The contribution shall be payable by the member employees through the employer by deduction from monthly salary. The scheme is intended to provide the member employees the twin benefits of an insurance cover to help the family in the event of death in service and a lump sum payment to augment their resources after attaining the age of superannuation About 1/3rd of the monthly contribution shall be appropriated towards risk cover and balance 2/3rd as per the scheme, shall be put by LIC in a savings account earning interest. The scheme was applicable in case of officers w.e.f. 20th July 1986 and in case of other non- officer employees w.e.f. 20th May. 1987. However, in case of officers, the GSLIS is discontinued w.e.f. 2008 after the introduction of Tatkal Sahatya Yojna Scheme. In case of Non-Officers, the recovery of GSLIS is remitted by the division to concerned LIC office. The monthly contributions will be deducted from the salaries of the members every month in advance. In the event of a member remaining on leave, the contribution will be, in the first instance advanced by the Corporation and the same shall be deducted from the salary/ amount subsequently payable to the employee. When an employee in lower category is promoted to higher category, the change in the amount of insurance cover and the increase in his monthly subscription, shall take effect only on the following (annual) renewal date. The scheme shall not be applicable to the deputation-in cases. HR advice every month the amount to be deposited with LIC. The Group Category Insurance covers are as under: • 1. Non-officers in Grades IV, V, VI, VII and VIII Rs.50,000/- • 2. Non-Officers in Grades I, II and III Rs.25,000/- The monthly contribution payable shall be Rs.50/- and Rs.25/- for group 1 and 2 respectively. Accounting of Employee Benefits Page 208

8.5.3 HBA Mortgage Redemption Scheme Instead of taking a separate policy from any insurance company, the scheme is managed by the Corporation itself. The recoveries made from employees are to be maintained in a separate account of i.e. \"HBA - Mortgage Redemption Scheme.\" • The claims will be settled out of this amount. • Each division will settle the claims with the approval of concerned Head of HR; • Divisions will send quarterly report to CO-HR indicating the amount of recoveries made, claims settled and the claims pending with them; • CO-HR at the end of the financial year will review the overall position to carry out suitable adjustments in the next financial year. 8.5.4 Conveyance Redemption Scheme On similar lines of HBA mortgage scheme conveyance advance redemption scheme is also in operation. 8.5.5 Education Loan Redemption Scheme On similar lines of HBA mortgage scheme education loan redemption scheme is also in operation. Accounting of Employee Benefits Page 209

Annexure – 8.1 ACCOUNTING PROCEDURES- SABF Superannuation Benefit Fund Scheme Accounting procedure Separate books of accounts are prepared for IOCL SABF Trust at the end of the financial year and are audited by independent Statutory Auditors. Following SAP Codes are used. The codes may vary depending on circulars/guidelines issued from time to time in this regard: Particulars SAP Codes Vendor Code of IOCL 10213825 Vendor Code of SABF Trust 10116582 O/L SABF Trust (for day to day transactions with IOCL) 2120700000 SABF Contribution Credit Note-PLHO 2120640000 SABF Contribution Credit Note-NRO/SRO 2120670000 Pay Roll Other Liabilities-SABF 2120380170 Sectional GL for exchanging debit/credit notes 2431300000 Contribution to SABF-Officers 5282540000 Contribution to SABF-Staff 5282550000 Staff welf-rehabilitation grant (one-time payment) 5284100020 State Bank of India 7019000112 Followings transactions are routed during the year in respect of SABF: Transactions Accounting Entry GL Code Dr/Cr Monthly SABF Contribution Company Contribution Contribution to SABF-Officers 5282540000 Dr. Contribution to SABF-Staff 5282550000 Dr. (Entry is passed by PLHO) SABF Sectional GL 2431300000 Cr. Employee ‘s A/c Dr. Employee Contribution Pay Roll Other Liabilities-SABF 2120380170 Cr. (Entry is passed by PLHO) Pay Roll Other Liabilities-SABF 2120380170 Dr. SABF Sectional GL 2431300000 Cr. Withdrawal of SABF O/L SABF Trust A/c 2120700000 Dr. Contribution Vendor Code of SABF Trust 10116582 Cr. (Entry is passed by RHQ) Vendor Code of SABF Trust 10116582 Dr. HDFC Bank 6159000162 Cr. Transfer to Credit Note of SABF SABF Sectional GL 2431300000 Dr. Contribution SABF Contribution Cr Note-PL 2120640000 Cr. Accounting of Employee Benefits Page 210

Transactions Accounting Entry GL Code Dr/Cr (Entry is passed by RHQ) SABF Contribution Cr Note- 2120670000 Cr. Refund of excess withdrawal NRO/SRO Dr. Vendor Code of IOCL 10213825 Cr. O/L SABF Trust A/c 2120700000 (Entry is passed by RHQ) State Bank of India 7019000112 Dr. Cr. Cr Note for 1/3 Commutation Vendor Code of IOCL 10213825 Dr. for superannuated cases O/L SABF Trust A/c 2120700000 (Entry is passed by RHQ) Cr. Sectional GL of Units Dr. Vendor Code of IOCL 10213825 Cr. Refund of Commutation O/L SABF Trust A/c 2120700000 Dr. 7019000112 Cr. amount to IOCL Dr. (Entry is passed by RHQ) State Bank of India Cr. Vendor Code of IOCL 10213825 Dr Cr. Credit/Debit Note for Employee’s Contribution at the time of resignation Dr. Cr. SABF Sectional GL 2431300000 Dr. For contribution up to Dec’06 Employee Cr. (Entry is passed by units) Employee Dr. Cr. Bank Dr. For contribution after Dec’06 O/L SABF Trust A/c 2120700000 Cr. (Entry is passed by RHQ) Sectional GL of Units Transfer of contribution up to O/L SABF Trust A/c 2120700000 Dec’06 SABF Sectional GL 2431300000 (Entry is passed by RHQ) Refund of employee’s Vendor Code of IOCL 10213825 contribution to IOCL for O/L SABF Trust A/c 2120700000 resigned cases State Bank of India 7019000112 (Entry is passed by RHQ) Vendor Code of IOCL 10213825 Refund of Uniform Advance to Vendor Code of IOCL 10213825 Dr. IOCL Vendor Code of SABF Trust 10116582 Cr. (Entry is passed by RHQ) State Bank of India 7019000112 Dr. Vendor Code of IOCL 10213825 Cr. Transfer of Balance of GLs to SABF Contribution Cr Note-PL 2120640000 Dr. Vendor of Trust SABF Contribution Cr Note-NRO 2120670000 Dr. (Entry is passed by RHQ) O/L SABF Trust A/c 2120700000 Cr. Accounting of Employee Benefits Page 211

Transactions Accounting Entry GL Code Dr/Cr Vendor Code of SABF Trust 10116582 Dr. O/L SABF Trust A/c 2120700000 Cr. Rehabilitation Grant for R-1 Cases To raise debit note Sectional GL of Units 2120700000 Dr. (Entry is passed by RHQ) O/L SABF Trust A/c 5284100020 To book expenses Staff welf-Rehabilitation Grant Cr. (Entry is passed by Units) Sectional GL of Units 2120700000 Dr. O/L SABF Trust A/c 10116582 Cr. To withdraw the funds Vendor Code of SABF Trust Dr. (Entry is passed by RHQ) Cr. Vendor Code of SABF Trust State Bank of India 10116582 Dr. 7019000112 Cr. ACCOUNTING GUIDELINES- PROVIDENT FUND The following G/Ls are used for the purpose Final settlement (FS), Refundable Loan (RL), Permanent withdrawal (i.e. NRL), Refund of RL/NRL etc.: G/L Code Remarks 3441320550 Payment/ of returnable loan to employees 3441320551 Payment/ of NRL for purchase of house etc. to employees - 2120380500 Receipt of Lump Sum VPF via Cheque 3441310270 Payment of final part settlement of employees 2431100000 Cross Co. Code of PF 10117593 Vendor Code of PF Trust 212033000 Repayment of Refundable Loan/NRL given to employee Divisions shall continue to send the debit/ credit note for items mentioned below along with the details latest by 7th of the month as per the required format: • Lump sum VPF received via cheque • Recovery of Refundable PF loan given to employee (other than through salary) The related trusts shall consider the balance of each item as appearing in the respective GL code for monthly settlement with Trust. The following is the process flow of accounting entries:- • CPC shall send Unit/location wise summary in respect of the following: - Employee’s contribution (EC), Company contribution (CC) and Voluntary contribution (VC) through salary - Recovery of refundable loan along with interest from salary - EPS amount Accounting of Employee Benefits Page 212

• The system generated entry shall be passed by raising a consolidated credit to respective dealing trust and corresponding debit to all units/location in the respective G/L code by CPC. • Once the accounting entry has been posted by CPC, respective dealing trust are to check the total amount with the wage type report using SAP t-code YHR 149. In case of any difference, the same is to be intimated to dealing trust latest by 10th of the month. Monthly recovery with regard to Refundable loan given to employees is extracted from PFMS and updated in SAP through T-code YHCIT15 & SM 35. Accordingly, consolidated entry is sent by CPC as mentioned above. Accounting Procedure for Gratuity: Separate books of accounts are prepared for IOCL Gratuity Trust and are audited by independent statutory auditors. Following SAP Codes are used in respect of Gratuity Fund: Particulars SAP Codes Vendor Code of Gratuity Trust 10116581 Sectional GL for exchanging debit/ credit notes 2431200000 Claims recoverable from Employees Group Gratuity Trust 3441310150 Contribution to Gratuity Fund-Officers 5282510000 Contribution to Gratuity Fund-Staff 5282520000 Following transactions are routed during the year in respect of Gratuity Trust: Transactions Accounting Entry SAP Code Dr/Cr Dr. Normal Gratuity payments to the Claims recoverable from Gratuity 3441310150 Cr. separating employees by Trust Units/Divisions/Regions (separated Vendor Code (Entry is passed by PLHO/ by units in Vendor employees/nominees) certain cases) Transfer of debit notes in respect of Entry passed by division: 243120000 Dr. accelerated gratuity payment in death Gratuity Sectional GL Vendor code Cr. cases as per Rules Vendor (Nominees of deceased employees) Entry passed by RHQ: 3441310150 Dr. Claims recoverable from Gratuity 2431200000 Cr. Trust Gratuity Sectional GL Monthly transfer of Debit Note w.r.t. Gratuity Sectional GL 2431200000 Dr. Normal Gratuity Claims 3441310150 Cr. (Entry is passed by RHQ) Claims recoverable from Gratuity Trust Accounting of Employee Benefits Page 213

Refund of Gratuity Claims to IOCL Vendor Code of Trust 10116581 Dr. (Entry is passed by RHQ) Cr. Claims recoverable from Trust/ 3441310150/ Sectional GL 2431200000 (as the case may be) Bank A/c 7019000111 Dr. Vendor Code of Trust 10116581 Cr. Exchange of debit/credit notes at the Entry passed by RHQ: 2431200000 Dr/Cr. end of the year Claims recoverable from Gratuity Cr/Dr. (Entry is passed by RHQ) Trust Sectional GL of division Entry passed by divisions: Dr/Cr. Sectional GL of divisions 5282510000 Cr/Dr Contr to Gratuity Fund- Officers 5282520000 Cr/Dr. Contr to Gratuity Fund- Staff Transfer of GL balance to the Trust Vendor code of Trust 10116581 Dr/Cr. Vendor at the end of the year Claims recoverable from Gratuity 3441310150 Cr/Dr. (Entry is passed by RHQ) Trust IND AS- Contribution to Provident 5540500520 Dr/Cr. Recognition of Actuary Loss/Gain to & Other Funds OCI IND AS- Remeasurement of 5540500150 Dr/Cr. Defined Benefit Plans Accounting Procedure of PRMB: Accounting of Employee Benefits Page 214

Separate books of accounts are prepared for IOCL PRMB Trust at the end of the financial year and are audited by the Independent Statutory Auditors. The SAP Codes, as tabled below, are used in respect of PRMB Fund. The codes may vary depending on circulars/ guidelines issued from time to time in this regard: Particulars SAP Codes PRMS Vendor 11118003 Provision for PRMS 2310300000 Medical Expenses Other than Hospital (Officer) 5284070000 Medical Expenses Nominated Hospitalization (Officer) 5284070001 Medical Expenses Non-Nominated Hospitalization 5284070002 (Officer) Medical Expenses Other than Hospital (Staff) 5284080000 Medical Expenses Nominated Hospitalization (Staff) 5284080001 Medical Expenses to spouse of deceased employee 5284080002 Medical Expenses Non-Nominated Hospitalization (Staff) 5284080003 Provisional liability for PRMS 5284070004 PRMB Actuarial Valuation (Officer) 5284100000 PRMB Actuarial Valuation (Staff) 5284110000 Post-Retirement Medical Benefit Section 2432200000 Other Liability- Contribution to EPRMB 2112204400 Loans & Advances-UCG-Employees PRMBF 3441310055 Staff Welf-Med Exp Post Retr Recovered from Trust 5284081000 One-time Employee Contribution recovery 4516080130 Following transactions shall be routed during the year in respect of PRMB Fund: Transactions Accounting Entry SAP Code Dr/Cr Payment of PRMS Claims PRMS Expenditure GL codes at Dr. (Routine working) at S.No. 3 to 9 in divisions level above table (Entry is passed by) Vendor (retired employee/ Vendor Code Cr. nominated hospitals/spouse of deceased employee) Booking of provisional PRMS Expenditure 5284070004 Dr liability for PRMS Claims Liability GL Cr PRMB Section 2432200000 Dr PRMB Expenditure recovery GL 5284081000 Cr Recovery of onetime non- At the time of retirement of employees: Dr. refundable contribution Vendor (Employee) Accounting of Employee Benefits Page 215

Transactions Accounting Entry SAP Code Dr/Cr from employees on One-time employee contribution 4516080310 Cr. retirement at the division level and transfer thereof recovery to RHQ Finance (Entry is passed by) By 5th of the month subsequent to the end of quarter: One-time employee contribution 4516080310 Dr. Cr. recovery PRMB Section 2432200000 Raising debits by the RHQ PRMB Section 2432200000 Dr. Finance w.r.t. PRMB claims settled during a Staff Welf-Med Exp 5284081000 Cr. quarter Post Retr Recovered (Entry is passed by 15th of from Trust the month subsequent to the end of the Quarter) Monthly PRMBF PRMB Actuarial 5284100000 Dr. Valuation (Officer) (respective CC) Dr. contribution PRMB Actuarial Cr. Valuation (Staff) 5284110000 (Entry is passed by PL HO) PRMB Section (respective CC) 2432200000 Withdrawal of PRMBF PRMB Section 2432200000 Dr. 2112204400 Cr. company contribution as Other Liability- Contr to EPRMB 2112204400 Dr. well as onetime employee 11118003 Cr. Dr. contribution after Cr. Dr. receiving the same from Other Liability- PL HO/ (Entry is passed by Contr to EPRMB Cr. RHQ) PRMS Vendor PRMS Vendor 11118003 Bank A/c Reimbursement PRMS Loans & Advances-UCG- 3441310055 claims by Trust after 2432200000 receiving quarterly debit Employees PRMBF notes from (Entry is passed by RHQ) (From01.01.2007) PRMB Section PRMS Vendor 11118003 Dr. Accounting of Employee Benefits Page 216

Transactions Accounting Entry SAP Code Dr/Cr Loans & Adv-UCG-Employees 3441310055 Cr. PRMBF (From01.01.2007) Bank Ac/ Dr. Cr. PRMS Vendor 11118003 Dr/Cr. Recognition of Actuary IND AS- Contribution to 5540500520 Dr/Cr. Loss/Gain to OCI Provident & Other Funds IND AS- Remeasurement of 5540500150 Defined Benefit Plans Accounting Procedure- Leave Encashment: Following SAP codes are used in SAP in respect of Leave Encashment Scheme. The codes may vary depending on circulars/guidelines issued from time to time in this regard: Particulars SAP Codes Vendor Code of LIC 10116648 Provision for Leave Encashment 2310200000 Sectional GL for Leave Encashment 2431600000 Leave Encashment Funds 3447218000 Claims recoverable from insurers 3443205000 Interest income from Other Companies/Others 4518000010 Leave Encashment Expenditure (Officers) 5282660000 Leave Encashment Expenditure (Staff) 5282670000 Leave Encashment - Payment to retired employees 5282660020 Following accounting entries shall be passed during the year in respect of Group Leave Encashment Scheme: Transactions Accounting Entry SAP Code Dr/Cr Payment of leave encashment benefits at 3443205000 Dr. the units/division level Claims recoverable (respective CC) Cr. (Entry is passed by units) from Insurers Dr. Cr. Vendor (retired employee/nominee of deceased employee) Transfer the claims recoverable amount to expense GL codes at the end of the year. Payment of insurance cover of Rs.5000/- Sectional GL 2431600000 in death cases Vendor (retired (Entry is passed by units) employee/nominee of deceased employee) Recovery from LIC of the amounts paid as Claims recoverable 3443205000 Dr. (CC 9000) insurance cover in death cases from Insurers Accounting of Employee Benefits Page 217

Transactions Accounting Entry SAP Code Dr/Cr (Entry is passed by RHQ) Sectional GL 2431600000 Cr. Vendor Code of LIC 10116648 Dr. 3443205000 Cr. Claims recoverable from Insurers Dr. Cr. Bank A/c 10116648 Vendor Code of LIC Dr. Cr. Payment of annual term insurance Ins - Others 5290200150 3447218000 Dr. premium (TIP) charged by LIC Bank A/c Cr. (Entry is passed by RHQ) Dr. Deposit of funds with the insurers Leave Encashment Funds Cr. (Entry is passed by RHQ) Bank A/c Year End Transactions Leave Encashment Funds 3447218000 4518000010 Recognition of interest income at year Interest from Other end on funds invested with insurers Companies/Others (Entry is passed by RHQ) Recognition of leave encashment To raise Debit note (Entry passed by RHQ): expense at the year-end based on increase in Leave encashment liability Sectional GL of Units Dr. over and above the Leave encashment Cr. funds Provision for Leave 2310200000 Encashment Dr. Dr. To book expense (Entry passed by units): Cr. Dr. Leave Encashment 5282660000 Cr. Expenditure (Officers) Leave Encashment 5282670000 Expenditure (Staff) Sectional GL of Units Transfer of claims recoverable to expense Leave Encashment - Payment 5282660020 codes to Retired employees (Entry to be passed by Units) 3443205000 Claims recoverable (respective CC) from Insurers Accounting of Employee Benefits Page 218

CHAPTER 9 : ACCOUNTING OF EMPLOYEE RELATED TRANSACTIONS 9A. PAYROLL 9.1 GENERAL OUTLINE FOR PAY ROLL FUNCTION 9.1.1 In a company, payroll function in finance means, keeping the records for the payment and deductions related to employees, processing of employee's claim, salaries and wages including bonus and arrear. From accounting perspective, payroll is crucial because payroll and employee related taxes are quite complex in nature and also subject to statutory laws and regulations. The primary objective of the payroll section is to ensure timely and accurate payment after withholdings & deductions, settlement of withholdings and deductions and accounting and compliances of statutory requirement. 9.1.2 In the corporation, the major part of salary functions is being executed on SAP Payroll & ESS 9.2 (Empl oyee Self Service) platform which is maintained by both HR & Finance. The major function of payroll can be grouped under following areas namely: a. Monthly Processing of Salary b. Off-cycle Payments c. Bonus Payment d. Arrear Payment e. Accounting and payment of deputation In/Out employees f. Final Settlement for separated employees g. Payment of Statutory & Other Liabilities h. Closing related activities- Quarterly & Annual i. Preparation of MIS j. Filing of Statutory Returns EMPLOYEE SELF SERVICE PORTAL (ESS PORTAL) Employee self-service (ESS) is a web-based application that allows employees to access their personal information available in corporation's records, their payroll details and allow them to submit various claims and declaration. The information and claims in ESS gets updated in SAP employee master after due approvals at competent level and claims if any will be paid off in monthly salary processing or off-cycle payments depending upon the nature of the claim. Currently ESS allows employees to apply for the following claims: • Children Education Allowance INDEX • Hostel subsidy • Conveyance maintenance • Toll Tax • Professional Membership Fees • Telephone Reimbursement Accounting of Employee Related Transactions Page 219

• Medical Reimbursement • Leave Fare Assistance (LFA) • Award to meritorious children • Conveyance maintenance • Conveyance declaration • Leave Request (Sick Leave, Earned Leave, Casual Leave & Restricted Holiday) • Furniture/ PC/ Mobile Claim • Furniture/ PC Maintenance claim • Income Tax declarations • LFA/LTC Exemption • Associate club Membership • Ticket & Travel • Bank details updation • DTH claim • Excursion /Picnic claim • LSA card acknowledgement • Spectacle Reimbursement • Business/Official expenditure • Extended hours • Loan for Children Education Support • Section 89 relief • Conveyance Advance 9.3 INFO TYPE/ WAGE TYPE/ GL CODES 9.3.1 Info type/Wage Type: In SAP Payroll package, master information of employees is being maintained in various Info Types and Wage Types. Info Types identify the broad category within which the employee master data is maintained. Wage Type on the other hand indicated the different heads within the respective Info Type Info type are characterized by the following: • Basic Personal Data: Date of birth, Address & family members & dependents etc. • Organization Related: Action, Organization Assignment, seniority Ranked List & LTC Info type etc. • Planning Data: • Time Management Data: Planned working time, Absence, Attendances & overtime etc. Accounting of Employee Related Transactions INDEX Page 220

Payroll data maintenance Responsibility: Payroll Info types are maintained by HR as well as by finance department, responsibility matrix is as follows: S.N Particulars Info- Responsibility type 1 Planned working schedule 7 HR 2 Basic Pay details like Basic Pay, DA, HRA etc. 8 HR 3 Payments & recoveries of recurring nature like 14 HR BF, HRR etc. 4 Income tax Perks like Gold coin perk, 10% of 14 Fin Furniture Cost etc. 5 Salary Advance & PF Loan 45 Fin 6 All other Loans & Advances like HBA, Vehicle 45 HR Loan etc. 7 Third party Recoveries (Society, LIC, VPF & GPF) 57 Fin 8 All other third-party recoveries like Club, Union, 57 HR Association etc. 9 Housing Status (HRA / COA / CLA) 581 HR 10 Transport Status (Conveyance Reimbursement / 583 HR Transport Subsidy) 11 Details of LTC Availed 9019 HR 12 LFA/ LTC status 9027 HR 13 One-time payments & recoveries like 15 Fin Honorarium, Elect Charges etc. 14 PAN & TAN details 185 Fin 15 Off-cycle Payments other than ESS claims, Loan 267 Fin Payments 16 Provident Fund master 587 Fin 17 Professional Tax master 588 Fin 580, 582, Income tax savings declarations 584, Fin 585, 18 586 19 All other payroll master data like Actions, Leaves Misc HR etc. 9.3.2 Payroll GL codes: Wage types are mapped with general ledger (GL) codes. One Wage type cannot be mapped with more than one GL code, however multiple wage types can be mapped with single GL code. Payment and deductions are maintained in these wage types and accordingly payment/ deductions are being made through salary or off-cycle run. Accounting entries are automatically posted through SAP depending on the mapped GL codes in the respective company codes. The list of GL codes with assigned wage types can be seen using SAP T-Code PC00_M99_DKON. Accounting of Employee Related Transactions Page 221

9.3.3 Payroll Area: It is logical object to signify the group of employees for whom payroll is run at one time. i.e payroll processing centers. There are 18 payroll area in IOCL for processing of salary/Off-cycle payment. Unit-wise payroll areas are there for Refineries Division. Marketing Division has been provided payroll areas Region-wise. One payroll area each has been assigned to other Divisions. Each employee has been assigned one payroll area under which his salary is being processed. Each company code has been assigned to one payroll area. There may be more than one company code in one payroll area. S.N Payroll Payroll Go Live Head Officer Staff Area Area (Approx) (Approx) Name Date Count (Approx) 1 D1 R&D 01.12.2011 460 430 30 2 A1 Indian Oil 01.06.2015 884 405 402 3 M1 AOD 01.08.2011 911 700 183 4 M2 01.11.2011 4944 2450 1990 5 M3 Marketing 01.01.2012 3238 1541 1389 6 M4 HO 01.08.2011 3632 1718 1464 7 M5 Northern 01.06.2011 3625 1897 1528 Region Eastern Region Western Region Southern Region 8 P1 PLHO 01.04.2011 3482 2377 884 9 R1 Ref HQ 01.10.2012 1700 1629 71 10 R2 01.06.2011 1435 648 648 11 R3 Mathura 01.09.2011 1570 549 967 12 R4 Refinery 01.09.2012 2484 1134 1131 13 R5 Haldia 01.06.2012 1352 448 784 14 R6 Refinery 01.07.2012 1046 367 558 15 R7 01.08.2012 2202 732 1406 Panipat Refinery Barauni Refinery Guwahati Refinery Gujrat Refinery 16 R8 AOD 01.04.2012 1494 317 839 17 R9 BGR 01.04.2012 1272 444 698 Accounting of Employee Related Transactions Page 222

18 RP Paradip 01.04.2015 902 512 358 Refinery 36633 18298 15330 Total 9.3.4 Payroll Period: Payroll Periods are the periods for which payroll is run. It is a combination of 9.3.5 accounting year and accounting period,e.g.2009,01(April 2009).It is managed through T code PA03-Payroll control record. When payroll is released for payroll then Master data cannot be modified. On the day of processing, master data gets locked and no entry can be made during that period. Payroll Processing Types: There are two types of payroll processing in SAP HR payroll module: a. Regular Payroll Run: Salary processing is being done in regular payroll run. Info types 0008, 0014 and 0015 etc. is being processed in regular payroll run and it is done only after the release of payroll for the month. b. Special Payroll Run (Off cycle): Special payroll run can be processed any time during a payroll period but before release the payroll for the month. Info type 0267 is processed and all ESS payments like bonus payment LFA, Leave encashment, medical payment, Loan etc. are processed in special payroll run. 9.3.6 In case of transferred employees, the payroll area and company code are changed in SAP. On transfer to the new location, joining action in SAP is carried out by HR wherein company code change takes place on the date of his joining at new place. Thereafter, transfer action is to be carried out by HR PA40whereby the recoveries of the previous location are delimited / stopped and the employee is expected to apply afresh in the new location. The payroll area is to be changed by HR on the 1st of the following month of the joining date of the employee. Payroll area is just an indicator. The salary of the transferred employees for the transition month is prepared at the old location and posted in that payroll area. The Balance Sheet items like recoveries etc. gets posted fully in the new company code whereas the P&L items is split between the previous and the new company codes, depending upon the duration. 9.4 ROLE OF HR & ADMINISTRATION DEPARTMENT 9.4.1 The matters relating to recruitments, promotions, transfers, suspensions etc., are dealt with by the HR Department. Appropriate action is initiated in SAP by HR after observing the prescribed procedure, whereby the corresponding details get updated in SAP. Parameters such as basic pay, special pay, stagnation pay, family planning incentive, HRA, eligibility for conveyance reimbursement, leave fare assistance, number of dependents, tea allowance, washing allowance, cafeteria entitlement, professional updation allowances get updated. In addition, various deductions towards Employees Provident Fund, SABF, Benevolent fund etc. are also updated. Accounting of Employee Related Transactions INDEX Page 223