Manual-formatted

c. Then process shipment for loading confirmation (O4G1) which will result in posting of two material documents i.e. for receipt against the PO details maintained in exchange assignment and issue against the delivery attached to the shipment. d. Invoice in VF01. 13.34.2 Rail movement (MOT-02): Both bulk LPG & POL can be processed on similar lines as detailed for ROAD – POL above, with suitable movement type and shipment types. 13.34.3 Coastal movement (MOT-03): The existing procedure of costal movement is modified to the extent that purchase has to be directly booked in logical coastal location of RP. Rest of the transaction of removal of product form coastal plant by RP shall remain the same. While creating STO for withdrawal from CS** plants to RP the user will have to specify whether the product being shipped has origin from Indian Oil itself or is being purchased from SAR on interstate movement basis. This will permit processing of receipt without maintaining “SHIPMENT” no. and fulfilling corresponding checks for coastal movement. No separate RLLP will be created for such cases as existing CS** costal logical plants will suffice. 13.34.4 Pipeline movement (MOT-05): The existing procedure is purchasing in logical plant attached to SAR, then transferring the product to logical pipeline plant (like 31L8 etc.) followed by withdrawal from P/L logical plant by RP. The new process shall involve purchase in RLLP instead of logical plant attached to SAR. a. GRN for purchase to be made in RLLP e.g. Movement from EOL to Ajmer BP (1374) , then GRN to be made in logical plant code of Ajmer BP (374N). b. Then quantity is required to be transferred to pipeline logical plant thru STO. ( e.g. 31L8 for JLPL from 374N)  Quantity in logical plant code of receiving location should be nullified by dispatching location, logical plant attached to SAR. Purchase of Crude Oil & Products Page 324

c. Physical plant to withdrawn quantity from pipeline and GRN to be made against STO placed on pipeline logical plant (31L8 to 1374) as per existing practice. For OMC receipt transactions being processed by RC logical plants operating through YVC402 (B2B mode) suitable changes will be incorporated shortly to permit background processing as per the interstate purchase process detailed above. Nomenclature of logical purchasing plants for actual receiving plants is as follows: The plant codes are represented as 4-character alphanumeric code where the first digit normally represents the region code of plant e.g. 1221 belongs to NR. The logical plant for this location for the purpose of interstate purchase shall be 221N where 221 represents the plant & N represents Northern region. Thus combination of logical plants shall be: • 1371-371N • 2371-371E • 3371-371W • 4371-371S The logical plants for required locations have already been created. If any requirement arises in future COIS shall be suitably advised by concerned dispatching location / state or regional finance. Authorizations for required plants / logical plants shall be provided as per requirement to dispatching & receiving plants. Incorporation of Actual Supply Plant in Outline Agreement no. for revised hydrocarbon interstate purchase process a. For newly created logical plants, pricing ( i.e. RTP_IPP Freight) should be picked from actual Supply plants as per attached mail from HO Finance. b. Actual supply plant should be mentioned in “Your Reference” filed in outline agreement header data. Purchase of Crude Oil & Products Page 325

In pricing of purchase order “Your Reference “ filed will be read from corresponding outline agreement no. to get the actual supply point and copy the pricing i.e. RTP & NRF from supply plant. c. If the outline agreements are already created by users , they can now edit the outline agreement and put the supply plant in “Your Reference” field. d. For coastal movement: In Outline agreement “ your Reference” field is to be populated with Location code from where RTP and NRF should be picked i.e. Reeving location code as per your mail. Purchase of Crude Oil & Products Page 326

CHAPTER 14 : INSURANCE OPERATIONS 14.1 GENERAL OUTLINES OF INSURANCE 14.1.1 It is necessary to ensure that timely steps are taken to insure the properties of the Corporation like plant and machinery, buildings, equipment & appliances, furniture & fixtures, inventories, platinum, palladium and other noble metals in spent catalyst against various risks in accordance with the policy decisions taken by the Management from time to time. 14.1.2 All insurance policies shall be obtained by following e-tendering process (barring small policies with premium outgo of less than Rs. 2 Lakh) with the empaneled insurance companies. The existing list* of empaneled companies is as under: - Category \"A\"- For all fire, package and other insurance policies where premium outgo is Rs. 1 Crore and above following companies are empaneled • United India Insurance Company Limited • New India Assurance Company Limited • National Insurance Company Limited • Oriental Insurance Company Limited • ICICI Lombard General Insurance Co. Ltd. • HDFC-ERGO General Insurance Co. Ltd. • IFFCO- TOKIO General Insurance Co. Ltd. • Reliance General Insurance Co. Ltd. • Bajaj Allianz General Insurance Co. Ltd • TATA - AIG General Insurance Co. Ltd • Cholamandalam MS General Insurance Co. Ltd • SBI General Insurance Co Ltd Category \"B\"- For policies where premium outgo is less than Rs. 1 Crore In addition to twelve companies of Category A, following companies are also empaneled • Royal Sundaram General Ins Co.Ltd • Future Generali Insurance Co. Ltd • Shriram General Insurance Co. Ltd • Bharti AXA General Insurance Co. Ltd • Universal Sompo *List of Empaneled Insurance Company is subject to change 14.1.3 Under package policy risk Inspection of Refineries Units / Marketing Installation / Pipeline Locations as desired by Insurance companies are carried out so that best possible risk rating, important parameters like Probable Maximum Loss (PML) and other important inputs are Insurance Operations INDEX Page 327

obtained by the Insurance companies for onward submission to re insurers. Location selected for risk inspection should maintain a data base of all the information shared with Insurance companies during such risk inspections. 14.1.4 Tendering Procedure: a. Bids (Technical/ Price) are invited from empanelled insurance company. The technically qualified bids are opened and contract is awarded to L1 bidder. There can be co-Insurers in the policy but dealing shall be with lead insurance company. Premium payments, settlement of claims, policy endorsement etc. shall be handled by lead insurance company only. b. Private sector insurance companies shall be provided the lead if they happen to be lowest bidder. Private insurance companies are equated at par with PSU insurance companies for all purposes. However, the private insurance companies are required to submit a confirmation from the competent authority to the effect that they are competent enough to handle the lead up to 100% if provided to them. 14.1.5 For policies falling under category A, it is suggested that the insurance business shall be shared amongst the bidders. Leader of the insurance programme shall be the bidder with lowest bid and with high ranking if the tender is based on Techno Commercial Rating. Sharing shall be done among the bidders only after acceptance of the terms of leader of the programme. The sharing of business shall be decided by the concerned location / division after considering proper completion amongst bidders and risk to be undertaken. Insurance policies other than project related policies, should be obtained on an annual basis. When a policy is taken during mid of a year, the policy shall be extended to coincide with renewal of other insurance policies. 14.1.6 Timely action for renewal should be taken and renewal instructions should reach the insurers at least four week before the expiry of the policy so that the cover can be granted by the insurers before the expiry of the current period. 14.1.7 According to the Insurance Amendment Act, 1968 and the rules framed there under, premium for insurance should be paid in advance. If the premium is not paid in advance, the risk is not held covered and it results in the nullification of the insurance cover. The Insurance Act, however, provides that the premium on insurance policy can be paid upto the end of succeeding month in which risk is assumed provided a Bank Guarantee in the proforma given in the Act and Rules for an amount equivalent to the amount of Insurance premium is submitted to the Insurance Company before start of the risk coverage. 14.1.8 The Act also provides that no cover can be granted for a back dated period. As such proposals for insurance/renewals should be sent to the insurers well in time. 14.1.9 General insurance contract is a contract of indemnity, the purpose of which is only to indemnify any actual loss suffered by the insured. After the insurer agrees to indemnify the Insurance Operations Page 328

actual loss suffered by the insured, the insurer becomes entitled to all the rights and privileges which the insured is enjoying against third party for indemnification of losses. Indemnification of losses cannot be claimed from the insurers as well as from the third parties. 14.1.10 Insurance is a contract of good faith. The law casts upon the insured as also the insurer the duty to disclose mutually every material fact within its knowledge. There should be no misstatement or omission of facts. In case of any subsequent material change in the circumstances, the same should be intimated to the insurer. 14.1.11 If the property insured shall, at the time when the loss is incurred, be collectively of a greater value than the sum insured thereon, the insured is considered to be his own insurer for the difference between the insured value and the actual value. In such a case the insured has to bear a rateable proportionate loss. 14.1.12 In the case of package Insurance policy the total loss limit is Rs. 13,500 Crs which is very much above the loss limit available with the Indian Insurance companies. Therefore the risk of package Insurance policy is placed to international Reinsurers. In this process a consortium of Indian Insurance company is selected through a QCBS tender, wherein the leader of the consortium manages the whole insurance program of IOCL in the international insurance market. 14.1.13 Steps to be taken when loss occurs: a. In the first hand loss is to be intimated to the division administering the insurance policy, for example in case of loss in package policy intimation is to be done to Refineries Division whereas in case of General liability policy intimation to be given to Marketing Division. Division administering various insurance policies is given in annexure-1. Respective division will study the incidence in line with the policy issued and lodge the claim to the insurance company. b. Immediate intimation of loss to be given and should be confirmed in writing clearly giving the policy particulars, the place of loss, estimated amount of loss, cause of loss, contact persons with telephone numbers etc. Follow up with insurance company should be made for appointment of surveyor. Once the surveyor is appointed communication should be made with him regarding their documentary requirement for survey. c. Insurance Surveyor should be allowed to examine & inspect the loss. In case if any immediate loss prevention measures are to be taken, the same should be properly documented and evidenced by some responsible officer/supervisor of the insured or their agents. d. All the necessary documents like repair estimates, purchase bills, reports, drawings, maps etc. related to the claim should be provided to the surveyor. e. All steps should be taken to minimize the loss and detail of expenditure incurred on minimization of loss should be maintained as the expenditure so incurred may be claimed under Add on Cover of Package Policy. Insurance Operations Page 329

f. All possible steps should be taken to protect the recovery rights of the insurers by filing FIR, Notices etc. where applicable. g. Salvage is the property of the Insurer and the same should be properly preserved by the insured. h. Final Claim Amount should be filed with insurance company after considering Loss of property, claim admissible under add on covers and Loss of profit. Difference between Final Claim submitted, and Claim approved by insurance company should be analyzed and the deductions made should be agreed by IOCL or justification for the same should be furnished to Insurance company for wrong deduction carried out by them. 14.1.14 It may be worthwhile to get a panel of two-three surveyors selected/appointed in consultation with the insurance company and in case of loss insured may directly approach any one of the appointed surveyors for survey without any loss of time. 14.2 INSURANCE COVERS Normally insurance cover shall be obtained for the following types of risks. The list is subject to such additions and alterations that may be considered necessary by the Management in individual circumstances: a. Marine, Storage cum Erection All Risk Cover for Projects (CPIM) b. Package Insurance policy, covering • All risk insurance for Assets of Refineries, Marketing, Pipeline and Business Development Locations (Including Boiler Explosion Insurance) • All risk insurance for stock • Business Interruption Cover • Add on covers c. Terrorism Insurance Policy (For Operational and Project Assets) d. Marine Cargo Insurance/Inland transit insurance • For Crude oil • Other than Crude oil e. Vehicle Insurance Policy f. Public Liability Insurance • Mandatory Policy under the Public Liability Insurance Act • Public Liability Policy: Umbrella/ Industry Policy • Public Liability Insurance: Legal and no-fault liability g. Miscellaneous Assets Insurance Policy h. Directors & Officers liability Insurance Policy i. Workmen Compensation Policy for Apprentice j. Cyber Insurance k. Other Insurance Policy • Benzene Transit Insurance INDEX • Marine Cargo Policy • Coastal Marine Cargo Policy Insurance Operations Page 330

• Employee Fidelity Guarantee Insurance • Aviation Refuelling Insurance • Fidelity Insurance for Third Party 14.3 MARINE, STORAGE CUM ERECTION ALL RISK (EAR) COVER FOR PROJECTS 14.3.1 During the construction period of plan projects, it is necessary to take a Marine cum Erection all risk (including storage) Insurance policy to cover the risks of loss or damage to buildings, equipment and materials. Such policy may be obtained for major plan projects either directly by Divisional HO or by any unit in consultation with Divisional HO Finance. For other AF/ non- plan item which is not covered/declared under the package policy such coverage may be obtained by the units on case to case basis in consultation with Divisional HO. This policy is arranged in such a way that the Marine/Inland transit policies telescope into this Erection all risk policy so that at no time the property remains uncovered from the time the ownership of the equipment/material is passed on till the completion of erection and commissioning. Before taking any cover for EAR Risk, the possibility of coverage of same under Minor Works / Property under course of construction clause of Package Policy of Indian Oil should be checked as there is no premium payment for inclusion of Qualifying assets under these clauses 14.3.2 For Projects, a combination of Marine, Erection all Risk and Terrorism Policy is taken to ensure a seamless and continuous insurance cover without any break from the moment the project material/ machineries start their journey from the • Port of Shipment (in case of FOB, CFR, CIF consignments) • Supplier’s warehouse (in other cases) for transit by Rail/Road, Air or Sea/Water ways, continues when the material is stored at the project site, during its installation and finally during the integrated testing (Pre-defined Testing Period) and continues till completion of Performance Guarantee (PG) Test of Plant/ any other condition as per contract. In case the PG Test could not be achieved till the expiry of pre-defined testing period, the same, on request of Project In charge can be extended on payment of additional premium as per mutually agreed rates. Before taking Terrorism cover for EAR Policy, the possibility of coverage of same under Terrorism Policy of Indian Oil should be checked as the premium rates are comparatively lower in Terrorism Policy of Indian Oil. 14.3.3 Procedure for Obtaining Project Insurance: - a. Identifying the nature of Insurance covers to be obtained (e.g. Marine, EAR, Terrorism) b. Determining the following key elements: • Sum insured • Period of Insurance • Deductibles • Add on covers Insurance Operations INDEX Page 331

c. Deductibles for marine/ erection cover shall be selected on case-to-case assessment of risk insured. d. Depending on the sum Insured value of the Project and the risk bearing capacity of the insurers, the competent authority may decide sharing of the insurance business amongst lowest bidders, in the seriatim starting from the lowest bidder subject to other bidders in seriatim matching the L1 price. The ratio of sharing of business is finalised before issue of tender document. e. Floating the tender to the empanelled insurance companies will be as per the panel approved by corporate office. f. Pre-Bid Meeting to ensure agreement to the requirement of tender and to discuss all the issues so that deviation from standard tender condition is minimised. g. Evaluating the bids of the Insurance Companies on Techno Commercial grounds. h. For obtaining the project insurance following information is required to be submitted to the insurers. • Brief of Project • Geographical Information of Site • Plot Plan • Milestones (Physical Progress/ S Curve) • Units • List of major equipment • Period of insurance • Sum Insured – imports, indigenous and erection • Risk to be covered • Per Bottom Limit-Maximum Value of any Single Consignment • Per location limit-Maximum Value of All consignment at any one location at any one time outside the insured site. • Excess clause • Add on covers 14.3.4 Project insurance comprises of following two Insurance Cover • Marine Cargo Insurance Policy • Erection All Risk Policy 14.3.5 Marine Policy:- Marine Insurance covers risks of pilferage, physical loss, fire, burglary, theft or damage during transit of material/ equipment. Mode of dispatch shall include Rail, Road, Air, Sea transport, Ship, Boat, Barge, Parcel, Post, Courier, etc. Marine insurance also includes intermediate storage in or outside India during transit of the goods. 14.3.6 Types of Marine Insurance Cover:- • Institute Cargo Clause (A) ICC (A) • Institute Cargo Clause (B) ICC (B) • Institute Cargo Clause (C) ICC (C) Insurance Operations Page 332

14.3.7 ICC (C) covers all the following risks • Fire or Explosion • Vessel being stranded, grounded, sunk or capsized • Overturning or derailment of land conveyance • Collision or contact of vessel, craft or conveyance with any external object except water • Discharge of cargo at a port of distress • General Average Sacrifice • Jettison 14.3.8 ICC (B) will cover followings risks in addition to ICC (C) • Washing Overboard • Earthquake, Volcanic Eruption or Lightning • Entry of sea, Lake or river water into vessel, craft, hold, container or place of storage • Total loss of any package lost overboard or dropped while loading on to or unloading from vessel and craft 14.3.9 ICC (A) will cover following risks in addition to ICC (B) • Malicious Damage • Theft • Piracy • Any other risk except a few standard exclusions ICC(A) covers all the risk of loss or damage of cargo except a few standard exclusions 14.3.10 Standard Exclusions-Marine Insurance ICC (A), (B) and (C) exclude the following risks: • Wilful misconduct of the Assured • Ordinary leakage, ordinary loss in weight or volume or ordinary wear and tear • Insufficiency or unsuitability of packing or preparation of the subject matter insured • Inherent vice or nature of the subject matter insured • Delay • Insolvency • Unseaworthiness and unfitness of vessel craft conveyance, containers, etc. • War, Strikes Insurance Operations Page 333

14.3.11 Erection All Risk:- This policy would cover a period commencing from the date of arrival of major equipment and materials at the project site and during its storage, installation, erection and finally during the integrated testing (Pre-defined Testing Period) and continues till completion of PG Test of Plant/ any other condition as per contract. Basically, all risks of pilferage, physical loss or damage arising out of but not limited to the following risks shall be covered under the policy. • Location Risks: Fire, Lightening, Theft, Burglary, Pilferage, etc • Handling Risks:- Impact of falling objects, transportation, Collision, etc • Operational Risks:- Failure of safety devices, Leakage, Insulation failures, short circuits, explosion, fire, etc • Risks of Human:- Carelessness, Negligence, RSMD (Riot, Strike, Malicious Damage), SRCC (Strike, Riots, Civil Commotion). • Act of God:- Storm, Flood, Tempest, Inundation, Earthquake, etc 14.3.12 Add on Covers: EAR is an All-Risks Policy subject to the specified exclusions. The following risks can be covered in EAR by paying extra premium. These are just a tentative list of add on covers • Clearance and Removal of Debris • Escalation % (increased replacement value). • Extra Charges for expediting (Air freight etc.) • Additional Custom Duty • War and SRCC risk coverage during transit. • Waiver of Subrogation. • Third party liability - For one accident - For all accidents during project period • Surrounding Property • Intermediate storage at Fabricators Workshop. • Intermediate Storage during Transit • 72 Hours Clause • Earthquake and FSTI Cover • Loss minimization expenses. • Automatic Reinstatement of Sum Insured. • Professional Fees Clause. 14.3.13 General Exclusions- Erection All Risk Policy • War, invasion, act of foreign enemy, hostilities or war like operations- whether war be declared or not, civil war, mutiny, terrorist activity, requisition or destruction by orders of any Govt. authority or any public, municipal or local authority • Nuclear reaction, nuclear radiation, radioactive contamination • Wilful act or wilful negligence of Insured or his representatives • Cessation of work whether total or partial Insurance Operations Page 334

14.3.14 Lodging of claim:- Responsibility to lodge the claim with insurance company rests with functional department (Project/ Materials/Operation & Maintenance, as the case may be) at Project Site as per procedure laid down in Materials Management Manual. 14.3.15 In a first of its kind, an outline agreement is finalized which contains the terms and conditions including price for all category of projects across Indian Oil. For coverage of the marine cum EAR risks of the projects we can get the coverage as per the agreed terms as and when the project is initiated. Through this initiative IOCL is able to get very attractive terms including price by tapping the adequate capital available in the international market by showcasing IOCL project risk in most appropriate manner. The process has resulted in substantial reduction of premiums. Moreover this outline agreement shall also ensure complete centralization of Marine cum EAR policies at one place. The major highlights of the outline agreement are provided below: • A broad facility for IOCL projects for pre agreed period • The list of the projects is expected commence during the agreed period is shared with insurance company. However, any other projects not included in the mentioned list can also be covered under the said outline agreement with the intention to cover all projects incepting during the agreed period • Each insurance ceded into this program will run to it natural expiry. • Rate for insurance as well as extensions have been pre-agreed to ensure that tendering is not required for taking insurance of each project separately. • Pre agreed table of rates based on project type classification and sum insured classification • Major add on clauses are provided below: - Escalation of sum insured - Automatic reinstatement - In land transit to cover movement/ transit between one part of site to other part of site including movement from/ to off-site storage spanning over public road in between - Off-site storage / fabrication - Design Defect Liability (DE-3 for CAR and DE-4 for EAR) - Hydrocarbon processing endorsement - Extended Maintenance cover - Cover for temporary structure and content - Intermediate storage at fabricator’s workshop - Third Party Liability - Property belonging to or held in the care/custody control of the insured - Professional Fees - Expediting expenses - 72 hours clause - Loss minimization expenses Insurance Operations Page 335

14.4 PACKAGE INSURANCE POLICY Package insurance policy for entire Indian Oil is obtained by Ref HQ for a period of one year from the empaneled insurance companies through tendering process. Package policies are Reinsurance driven policies The scope of cover of package policy includes All Risk (AR) insurance coverage of stocks, properties, Business Interruption (BI) cover, Add on Covers-Under all risk category and BI Category. This policy also includes Machinery Breakdown (MB) as well as Machinery Breakdown Loss of Profit (MBLOP). Detail about Loss Limits , Deductibles, Declarations under the policy is given in \"Annexure -1\". 14.4.1 All Risk - Property All risks of accidental physical loss, destruction or damage to the property as described in the property schedule of package policy, directly and wholly attributed to any cause, except as hereinafter provided, occurring during the tenure of the policy, referred to herein as 'damage'.” 14.4.1.1 Excluded Property As per the terms and conditions of Package Policy destruction of or damage to any of the following is not covered under the Policy- a. Property in course of construction or erection or dismantling or undergoing testing or commissioning except those which have been specifically declared under package policy (Add on cover - Property in the course of construction- erection or Minor Works). However, this Exclusion shall not apply in respect of normal maintenance and testing. It is also understood that bringing up from shutdown shall not be construed as testing. b. Road vehicles except vehicles licensed for general road use, railway rolling stock, waterborne vessels or craft; but this exclusion shall not apply to the Insured's fire fighting vehicles within a radius of 20 kilometers of the insured premises, whilst going to or returning from a mutual aid assignment. c. Land (including topsoil, back fill, runways, canals, dams, bridges, docks, or tunnels) d. Goods or property in transit, other than; e. land transits of plant and/ or machinery for the purpose of maintenance and general running for operational use, f. property in transit as provided under the Temporary Removal Extension/Add on cover. g. Underground property other than foundations, pipelines, cabling drains, tanks, and contents thereof and related equipment. h. Offshore property other than jetty facilities declared as insured under the policy. i. Property belonging to third parties unless specifically declared as insured under add on cover for \"Customers, Suppliers and utilities extension\" in the package policy. j. Cash, bullion, coins, cheque, stamps, precious stones, jewelry, antiques, securities, obligation of any kind, books of account or other business books or records, computer records or data, manuscripts, plans, drawings, patterns or models. Insurance Operations INDEX Page 336

For items excluded from the package policy separate Insurance cover shall be taken, if required. Excluded Cause a. Wear and tear including gradual deterioration, rusting, corrosion, metal fatigue, oxidation, damp, wet or dry rot, changes in temperature or humidity, subsidence, heave, normal settling, shrinkage or expansion in buildings or foundations, erosion of soil, landslip, animals, vermin or insects; b. Fermentation, evaporation, loss of weight, contamination or change in quality except where such is directly caused by an Occurrence, which is not excluded or coverage is provided c. The cost of replacing, repairing or rectifying defective parts, materials, workmanship, design or defect or omission in design or specification or latent defect; d. Seepage, pollution or contamination, direct or indirect, other than as provided elsewhere e. Infidelity or dishonesty on the part of the Insured or any of his employees f. The deliberate and sustained operation of the Insured's plant, machinery, pipeline or other equipment outside of the design limitations g. The deliberate withholding from the Insured by the supply authority of supplies of water, steam, gas, electricity, fuel or refrigerant as a result of a dispute h. War, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation or nationalization; i. Loss or Damage to property by or under the order of any government or public or local authority j. Nuclear weapons material; ionizing radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste k. Loss of data, data media and records, as well as its regeneration 14.4.1.2 After construction or purchase, all items of plant and machinery shall be covered under Package Insurance Policy. Assets like office buildings, canteen buildings, firefighting buildings, Township buildings, Administrative buildings, roads, railways, sewage and water lines, office equipment like AC, refrigerator, water cooler etc. shall normally be excluded from this insurance cover, as full-fledged internal firefighting systems exist at IOCL locations but same can be included in other policy. However, in respect of office/Administrative buildings at other than locations, the same may be included in this insurance cover. Coverage for instrumentation and inspection and construction equipment may be decided on case to case basis at Divisional/Unit level. 14.4.1.3 Basis for Computation of Insurable value The computation of insurable value shall be done on reinstatement value i.e. original cost escalated to present General Price Inflation Index and without deducting depreciation. The Insurance Operations Page 337

first insurance shall be obtained on the original cost of the assets. For renewals, the original cost of plant and Machinery shall be escalated to the present-day cost on the basis of latest cost indices published by the Reserve Bank of India. While working out the insured amount for assets, expenditure like cost of foundations, plinths, ground pavements, base stones for columns, stone floors, stone staircases, boiler beds chimneys, dust chimneys etc. shall be excluded from the cost of such assets for insurance purposes. The cost of such items shall be firmed up at the time of capitalization of assets. Adjusted Gross Block = Gross Block - Civil work for foundation (Actual or as per Engineering Estimate) Reinstatement Value = Adj Gross Block x General Price Inflation index for C.Y./ General Price Inflation index of assets’ Addition year 14.4.1.4 The cost inflation index for calculation of reinstatement value shall be communicated by Refinery Head Quarters. 14.4.1.5 For the purpose of renewal every year, approximate value of the additions made shall be added to arrive at provisional insurable value. The final insurable value may be advised within the time period agreed with insurer. In case after expiry of agreed period the final value of the additions as determined after the Balance Sheet is substantially different from the amount estimated at the time of renewal, supplementary insurance will be obtained whenever necessary after making payment of premium on pro rata basis. 14.4.1.6 The payment of premium shall initially be made through Bank Guarantee which would be valid for a period upto the end of succeeding month in which risk is assumed and the final payment will be made through e-payment on finalization of Insurable values. The sum insured intimated on expiry of Bank Guarantee shall be considered as final value for the purpose of payment of Insurance premium. While giving Bank Guarantee sufficient margins should be kept so that any anticipated additions during the period of Bank Guarantee is taken care by the BG. 14.4.1.7 The package policy for the refinery plants includes Machinery Breakdown (MB) as well as Machinery Breakdown Loss of Profit (MBLOP) and the Boiler Explosion cover is also covered under Package Policy. Exclusions of Machinery Breakdown: a. Loss or damage for which a manufacturer, supplier, contractor or repairer is responsible under warranty or guarantee b. Wear and tear, rust, corrosion, erosion, cavitation etc. due to gradual deterioration c. Loss or disappearance which is discovered only during an inventory or stocktaking or which is not traceable to a specific occurrence of loss or damage Insurance Operations Page 338

d. Shrinkage, evaporation, loss of weight, consequences of exposure to light e. Loss or damage attributable to extremes or changes of temperature or humidity or to non-existing, inadequate heating, air-conditioning or cooling equipment, excessive moisture, dampness, deterioration, decay. f. Any malfunction of hardware, software or embedded chips as well as any loss, damage, destruction, distortion, erasure, corruption or alteration of electronic data g. Costs of maintenance, upgrade or improvement, normal upkeep 14.4.1.8 For claims arising due to fire etc. immediate intimation shall be sent to the insurers giving the date, time and location of the fire. If possible, the extent of damage due to fire shall be mentioned in the intimation to enable the insurers to decide regarding survey arrangements. When it is necessary to take up the repair jobs immediately with a view to normalise production, the repair jobs shall be taken up only after giving the advance intimation to the insurer. 14.4.1.9 When repair jobs are undertaken after fire, a separate account of the materials and cost of labour shall be maintained by the Maintenance Department and these details shall be furnished to Finance for filing the claim bill with the insurers. The cost of firefighting materials incurred shall be included in the claim bill, which will be given by Fire & Safety Department. While preparing any claim , expenditure incurred on account of all the Add on Covers needs to be analyzed thoroughly 14.4.1.10 In terms of the fire insurance policy when a claim for loss is settled, the original sum insured stands reduced automatically from the date of such loss by the claim amount. In such cases the original insured amount is restored by deduction of differential premium from the original claim amount. 14.4.1.11 A clause on “Inadvertent omission to insure additions” is available in the package policy as an add on cover. The same is taken to ensure coverage of those items which have been inadvertently missed out for inclusion in the policy. 14.4.1.12 Projects which have been capitalized after successful commissioning and are no more covered in Marine cover and erection all risk cover for projects, may be added under package policy on pro rata basis for the remaining period of the policy. While transition of property from Erection all risk policy to Package policy, conditions of Package Policy clause should be tested. Accordingly RHQ be informed for major project commissioning one month in advance to ensure there is smooth transition of property from EAR Policy to package policy. 14.4.1.13 Acceptance of property under Package Policy is subject to satisfactory completion of the following conditions: - a. Mechanical completion including testing, b. Testing and commissioning conforming to 100% contract design criteria relative to temperatures and pressures maintained by the entire in a stable & control manner for continuous ongoing period of minimum 72 hrs. duration as approved by the insured and Insurance Operations Page 339

an engineer firm or licenser involved in the project or as per standard practice of the contractor or this licenser. c. Official acceptance by the Insured following formal handover without reservation or waiver of guarantee conditions to the suppliers of the equipment in respect of said mechanical specifications in being understood that no equipment faults or punch list items affecting mechanical integrity of the plant are outstanding and that no temporary structures and no modifications remain as shall be notified by the insured. In the event that compliance with 2 and 3 will be deferred upon mechanical completion or testing, such alternative procedures which will be adopted prior to the attachment under the policy shall be agreed upon between the Insurers and the Insured on a case to case basis and the attachment of risk under the policy shall be subject to the approval of the Insurer. Proviso: This exclusion doesn't apply to on-going maintenance/ schedule turnaround. This exclusion also doesn't apply to revamp work subject to the maximum contract value as declared within the ‘Minor Works’ extension clause contained within the policy. The above conditions should be met so that there is no reduction in the claim amount in case of eventuality. 14.4.2 All Risk -Stocks of Crude Oil & Finished Product 14.4.2.1 Under Package policy stocks of crude oil and finished products in various tanks and pipelines shall be covered under All Risk Cover. As the stock keeps on varying from time to time, insurance shall be obtained in the form of declaration policy whereby the maximum stock for each product held at refinery tanks is declared as sum insured. 14.4.2.2 For calculating initial sum insured at the time of policy best possible estimation should be done. For same 80 % or 60% of tank fill quantity can be considered. For doing an upward or downward adjustments quarterly declarations made in previous years can be a useful indicator. Rate for arriving at the value of sum insured shall be intimated by RHQ. 14.4.2.3 The value of the Stock on the last day of each quarter shall be declared in writing by the Insured to the Insurer within thirty days thereafter, and if a declaration be not so given the Insured shall be deemed to have declared the maximum Sum insured as the value 14.4.2.4 As and when the rates of crude oil/ products are increased/ decreased, the insured value shall be properly revised (Components for Crude Rates may be further provided). For finished products, Refinery Transfer Price and applicable Excise Duty shall be considered for arriving at the value. In case of Pipeline Transfers taxes may also be included. 14.4.2.5 The insurance for filled bitumen drums, LPG cylinders, sulphur, coke etc. shall also be taken. 14.4.2.6 Insurance for oil stocks lying in the intermediate tanks can be obtained for a fixed amount wherever a declaration policy is not feasible. In such cases, the normal quantity of stock to be held in such tanks shall be ascertained in consultation with the Production Department and a fixed amount policy shall be obtained from the insurers. The risks covered for stock of oil in intermediate tanks will be the same as applicable to finished products and crude oil. Insurance Operations Page 340

14.4.2.7 Insurance for items of Stores, hazardous Chemicals, Catalysts, spent catalyst etc. shall also be obtained under the declaration policy. To avoid applicability of Average Clause, such stocks should be kept separately to the extent possible and practical. 14.4.2.8 Being a declaration-based policy, the refund/ payment of premium may be involved depending upon the amount of declarations. Thus on the expiry of the period of Insurance the actual premium shall be calculated at the appropriate rate on the average amount declared. 14.4.3 Business Interruption Cover “The insurers agrees that if property insured under Section All Risk be lost, destroyed or damaged by any of the contingencies insured there under (destruction or damage so caused being hereinafter termed \"Damage\") at any time during the period of insurance and the business carried on by the insured be in consequence thereof interrupted or interfered with, the insurer will pay to the insured the amount of actual loss sustained resulting from such interruption on interference in accordance with the provisions of this policy.” 14.4.3.1 Business Interruption (BI) cover shall essentially cover loss of Gross Profit due to (a) reduction in Turnover and (b) Increase in Cost of Working 14.4.3.2 The sum insured for Business Interruption cover shall be projected net profit plus the Standing charges. Standing charges shall include: a. Power and Fuel b. Repairs and maintenance to the extent it is Fixed-usually 50% is considered c. Establishment Cost (Excluding overtime cost) d. Administrative overheads (Excluding exchange fluctuations) e. Interest (Excluding Interest on Working capital, Entry Tax and VAT ITC) f. Depreciation including amortization 14.4.3.3 Deductible limits should be kept in the policy keeping in view its impact on the Insurance Premium and previous claim experience at the Refinery 14.4.3.4 The indemnity period shall commence from date of loss and shall include the time excess period opted. The indemnity period should be kept considering Rebuilding, Business Content & Machinery and Rebuilding of Customer Base. 14.4.3.5 Being a declaration-based policy, the refund/payment of premium may be involved depending upon the amount of declarations. At the expiry of this policy the insured shall declare the actual gross profit earned during the policy period suitably adjusted to reflect the period of indemnity. 14.4.4 Add On Covers Different types of Add on Covers are available under this policy, detail of some of the Add on Covers are as under. Detail about other add on covers are available under the policy document Insurance Operations Page 341

14.4.4.1 Add on cover: - Temporary removal Clause automatically covers items temporarily removed for cleaning, renovation, repair and other similar purposes, elsewhere on the same or to any other premises worldwide and in transit thereto and there from by road, rail or inland water way and/ or whilst temporarily stored elsewhere. Accordingly, for high value consignments sent for repair and renovation there is no need for a separate insurance coverage and the same are covered under temporary removal clause of package policy. Looking at the risk appetite of IOCL a limit of `25 lakh may be considered as a threshold limit for declaring items temporarily removed for cleaning, renovation, repair and other similar purposes from units. For Items below ` 25 Lakh, same should be covered in the open marine cover. Units from where the plant and machinery, Equipment are sent for repair have to send the information in the following format to RHQ-Finance so that information of the same is communicated to the lead insurance company: Description of Qty Value Reason for Vendor Estimated Address of item to be Insured movement Name duration for facility for insured Rs.Lakh (repairs/ repairs carrying out refurbishme repairs nt, etc.) The only condition this add on cover is that the item is temporarily removed forms a part of total sum insured under package policy. 14.4.4.2 Add on cover: -Minor Works Clause: The add on cover automatically include minor alterations and/ or construction and/ or re-construction and/ or additions and/ or maintenance and/ or testing and commissioning and/or modifications and/ or work carried out on any of the property insured under this policy, subject to the limits prescribed in Annexure - 1. Accordingly there is no need for separate insurance policy at divisional / unit level for alteration/ construction/ reconstructions/ additions/ maintenance/ testing and commissioning/ modification works. But as there is an aggregate limit for this cover hence all the divisions/refinery units have to send a monthly MIS giving details of facilities getting coverage under this add on so that the control over aggregate permissible limit is maintained. 14.4.4.3 Detail of Other Add on Covers along with applicable deductible , aggregate sum insured and specific requirement for the same is given in Annexure-1 14.4.4.4 Accounting under Package Policy a. The payment of premium shall initially be through Bank Guarantee which would be valid up to expiry of the succeeding month and the final payment will be made through e- payment on finalization of Insurable values. The sum insured intimated on expiry of Bank Guarantee shall be considered as final value for the purpose of payment of Insurance premium. Insurance Operations Page 342

b. Premium payment is made to Insurance Company by RHQ and information for insurance expense for the Quarter is sent to Refinery Units/divisions based on their sum insured. 14.5 TERRORISM INSURANCE POLICY 14.5.1 The coverage in terrorism policy includes following: 14.5.2 • Property and Stock value • Business Interruption This Insurance policy insures property against physical loss or physical damage occurring during the period of this Policy caused by an Act of Terrorism or Sabotage. 14.5.3 For the purpose of this Insurance, an Act of Terrorism means an act or series of acts, including the use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed for political, religious or ideological purposes including the intention to influence any government and/or to put the public in fear for such purposes. For the purpose of this Insurance, an act of sabotage means a subversive act or series of such acts committed for political, religious or ideological purposes including the intention to influence any government and/ or to put the public in fear for such purposes. 14.5.4 Separate cover for Terrorism and Sabotage Risks with an given overall indemnity limit for a single event or number of events taken together, during the policy period with a provision of one free re-instatement floating on all locations is taken at Refineries Head Office for IOCL and no separate policy for the same is required at Divisional Level /Refinery unit level. 14.5.5 Detail of Other Add on Covers along with applicable deductible, aggregate sum insured and specific requirement for the same is given in Annexure-1 14.6 MARINE INSURANCE 14.6.1 For Crude oil 14.6.1.1 A marine insurance declaration policy for movement of crude oil is taken at RHQ. Marine insurance for crude covers the following: a) Import of Crude Oil b) Movement of Crude through Costal tankers in India. 14.6.1.2 Period of Insurance: Marine Insurance Policy becomes due for renewal on 1st September of every year. Period of policy is twelve months. 14.6.1.3 Coverage under Marine Insurance Policy: ICC-A and Institute Bulk Oil Clause – Difference between ICC-A and Institute Bulk Oil Clause a. ICC-A: Clause. Institute Cargo Clause A is an All Risk policy. It means that coverage of Risk is wide under ICC-A clause. Shipment involving Transshipment/ Lighterage are generally classified in ICC-A. Premium Rates for this type of clause is higher than Institute Bulk Oil Clause. Insurance Operations INDEX Page 343

b. Institute Bulk Oil Clause: Classification under this clause is done when it is not classified under ICC - A i.e. when shipment does not involve any Transshipment/ Lighter age. Coverage of this cover is specific. Following risks are covered under this clause which is as given below. • fire • explosion • sinking • stranding • jettison • General Average • earthquake • entry of sea water • washing overboard etc. • 14.6.1.4 Valuation for Insurance Premium Purposes: Valuation is done on C & F (Cost and Freight) basis. Indemnity Limit: Marine Insurance Policy is an open cover policy. There is a Limit for open cover for maximum value for Import/ Coastal movement per cargo. In other words indemnity limit is maximum value per shipment i.e. PBL (Per Bottom Limit) calculated on the basis of quantity declared by the shipping department and after taking into consideration current crude oil prices and USD-INR rates. However, the insurer shall be advised at least 5 working days in advance in case single cargo value exceeds PBL and in that case maximum value of cover can exceed the PBL. Further in case of Iranian Crude Oil Cargo advance intimation is required to be given to insurance company for necessary approval from Reinsurer. Moreover, sometimes insurance companies deny covering the Iranian cargo due to US sanctions, in such cases insurance is kept in the scope of supplier. 14.6.1.5 Deductibles in Policy: The crude oil marine policy has deductible limits of 1% Excess Clause i.e. 1% of Consignment Value. 14.6.1.6 Accounting under marine cargo policy for crude Oil: a. Payment of Marine Insurance Premium: On renewal of Marine Insurance Policy, one- month insurance premium is paid in advance to the Insurance Company in which periodical funding is made by the IOCL. Generally monthly payment is made in Cash Deposit Account. Insurance Company deducts premium from this Cash Deposit Accounts on the basis of provisional declaration of loading given by shipping department. b. The provisional declaration is given by shipping department before the start of loading month. Based on the declaration, endorsements are issued by insurance company. c. On the basis of declarations made balance in Cash Deposit account is monitored and in case there is any expected shortfall in premium the same is funded to the insurance company by finance department. Insurance Operations Page 344

d. The final declaration is generally filled by shipping department within given time and thereafter final certificates are issued. Receipt of Insurance Certificates: There are two types of certificate received from the Insurance Company. First is Provisional and second is Final Certificates. Accounting is made on the basis of available Final Certificate in quarterly closing. However, in case of yearly closing accounting for March month is done on basis of provisional certificate. 14.6.1.7 T - Code for Accounting: Accounting is done through T-Code YMIROOTH. Like other cost elements, cost is captured at the time of MIGO. While doing MIRO, actual amount of insurance premium (net of GST) is cleared through Insurance Clearing GL and credited to Insurance Vendor. Final amount of insurance premium is adjusted through Price Difference at the time of MIRO. 14.6.1.8 The advance amount paid to insurance company is debited to its Special GL. The special GL and vendor account are cleared after expiry of relevant insurance year and adjustment of refund for that particular year. 14.6.1.9 Detail of Other Add on Covers along with applicable deductible, aggregate sum insured and specific requirement for the same is given in Annexure-1 14.6.2 Other than Crude Oil for Store , Spares , Catalyst Etc.- 14.6.2.1 Marine / Transit policy is taken to cover the transit risk of all type of goods required in day to day operation such as raw material, stores and spares, capital equipment etc. This policy is taken at Refinery Head office for Refineries, Pipeline & R&D division. 14.6.2.2 This policy provides transit cover from anywhere in World to Anywhere in World for goods required in day to day operation such as raw material, stores and spares, capital equipment etc. Marine Coverage for Material Sent for Repair / Refurbishment below 25 lacs can be covered under this policy. Items above 25 lacs to be declared in package policy under temporary removal clause. 14.6.2.3 Basis of Computation of Sum Insured: Units are required to work out estimated amount of imported and indigenous material to be received for which insurance coverage is required. Estimated amount of all the refineries, pipelines & R&D is consolidated, and tender enquiry is issued for taking consolidated insurance policy. 14.6.2.4 Premium Payment: This Policy is an open cover policy. There is a Limit for open cover for maximum value for movement per cargo. Whenever the value of cargo is above a threshold, advance intimation of the same is required to be given to insurance company. Based on the overall sum insured, premium payment is made to Insurance company. Quarterly / Monthly declarations in the specified format is made to the insurance company and based on the declaration premium is amortized from the advance premium paid to the insurance Insurance Operations Page 345

company. In case there is shortfall after adjusting the premium on declarations, premium based on estimated future declarations is made to the insurance company. 14.6.2.5 Accounting of Premium Paid: Insurance expense is recognised in books based on the declaration given to the insurance company. Unutilized portion of Advance insurance premium is recognised in books as prepaid expense. 14.6.2.6 Detail of Other Add on Covers along with applicable deductible, aggregate sum insured and specific requirement for the same is given in Annexure-1 14.7 INSURANCE FOR VEHICLES 14.7.1 For vehicles, normally insurance cover shall be obtained only for the third-party risk. Under the third party risk, the insurer indemnifies the loss in the event of accident caused by or arising out of the use of vehicles covered by the insurance for all sums including payments, cost and expenses which the insured becomes liable to pay in respect of death or bodily injury to any person or damages to property other than the property belonging to the insured. 14.7.2 Wherever comprehensive insurance policies are taken the replacement value shall be adopted for insurance. As the loss claim is permissible only in case of accidents/theft etc., comprehensive cover should be taken for the vehicles depending upon the deployment and exposures to such risks. 14.7.3 While taking the insurance, details such as type of vehicles, registration number etc. and the period of coverage have to be intimated to the insurers. Care has to be taken to see that the \"no claim\" discount wherever applicable is availed of. No insurance cover is required for cycles. 14.8 PUBLIC LIABILITY INSURANCE 14.8.1 The Corporation is currently taking four policies to cover various public liabilities which arise out of the business of refining, transportation and marketing of petroleum and petroleum products. These policies are: Policy Description of Policy 1 Mandatory Policy under the Public Liability Insurance Act 1991 Insurance Operations INDEX Page 346

Policy Description of Policy 2 Comprehensive General Liability Policy: Comprehensive General Liability Policy covering Refineries/ Marketing and Pipeline and transportation 3 and Pollution seepage and contamination. Public Liability Insurance: Legal and no-fault liability in case of accident at 4. registered customer/ dealer’s premises and during transportation of LPG Cylinders Aviation Refuellers Liability Policy 14.8.2 Policy 1- Mandatory Policy under the Public Liability Insurance Act 1991 It is a mandatory for parties dealing in hazardous goods, as per the Public Liability Insurance Act, 1991.The policy is of standalone nature and cannot be combined with any other policy. Premium is payable as per the prevailing tariffs laid down under the Act. The policy covers all locations/ pipelines of IOC handling petroleum products viz. Refineries/ pipelines/ terminals/ depots/ LPG Bottling Plants/AFS etc. This policy is for the period starting from 1st April every year. Limits of Indemnity, Deductibles etc. is given in Annexure-1 . This is a mandatory policy under the Public liability Act 1991, and the same is dealt directly by Marketing Division of IOCL 14.8.3 Policy 2- Public Liability Policy: Comprehensive General Liability Policy It provides protection to the oil companies against risks for higher compensations/ damages sought by the aggrieved parties, through lawsuits. To illustrate, in case of an accident/ event, the affected person(s) has the right to initiate legal action against the oil company for providing compensation for losses/ damages, whether or not any compensation has been granted to him under the Mandatory Policy. This policy is for the period starting from 1st May every year. Limits of Indemnity, Deductibles etc. is given in Annexure-1. The other companies under this umbrella policy are BPCL, HPCL, CPCL, NRL. This policy is taken by BPCL and in IOCL it is coordinated by Marketing Division. Risk of liability claims due to bodily injury and property damage arising out of premises, operations, products, and completed operations to third parties. This policy covers all the locations & operations of IOCL and the products its deal expect LPG. Specific exclusion- product pollution workmen compensation employee liability All Business Insurance products have a combined Public and Products Liability cover. Both Public and Products Liability provide coverage for third party injury or property damage that you might cause. The difference is that Public Liability relates to injury or property damage whilst you’re on the job, and Products Liability relates to injury or damage caused by any products you distribute, supply or manufacture. 14.8.4 Policy 3-Public Liability Insurance: Legal and no-fault liability Insurance Operations Page 347

It covers legal/ no fault liability risks from accidents occurring during transportation/ storage of LPG at dealers/ customers’ premises. This policy covers exclusively marketing of LPG cylinders. The storage is limited to customers and dealers registered premises and transportation include from dealer to customer and empty cylinders back up to the plant. While policy 1 is an individual policy taken by the Corporation, Policy 2 and 3 are being taken on Industry basis. The premium of Policy 2 and 3 is shared amongst the oil companies. This policy is taken by OMC's in cyclic order and in IOCL it is coordinated by Marketing Division. 14.8.5 Policy 4 – Aviation Refuellers Liability Policy It covers legal liability for any risk of loss to Aircraft out of our Refueling Operations. The policy is taken for 1 billion dollars and is on industry basis i.e. IOC, BPC and HPC. The policy is taken by IOCL on behalf of Industry. While policy 1 is an individual policy taken by the Corporation, Policy 2,3 and 4 are being taken on Industry basis. The premium of Policy 2 and 3 is shared amongst the oil companies. This policy is taken by OMC's in cyclic order and in IOCL it is coordinated by Marketing Division. 14.9 MISCELLANEOUS ASSETS POLICY Insurance policy will be taken for computers, mobile, electronic equipment, Building (Not insured in Package Policy ) used in Administrative Offices , Refineries , Township , Guest Houses etc. based on the advice given by different department / Locations / Divisions. The insurance value for these items shall also be intimated by user department / refineries/pipelines location since these items are subject to high obsolescence. Care shall be taken to insure items of plant & machinery under fire policy in case they are not to be included under this policy. Limits of Indemnity, Deductibles etc. is given in Annexure-1 14.10 DIRECTORS & OFFICERS LIABILITY INSURANCE Directors & Officers (D&O, Executive and Management Liability) Insurance is coverage designed to address the personal liability that company directors, officers and other members of a corporate board can incur for their acts and/or decisions arising from their duties, which may or may not be indemnifiable by the corporation. Limits of Indemnity, Deductibles etc. is given in Annexure-1. Thus D&O policy is Risk Transfer Mechanism designed to protect the personal fortune of Directors & Officers of a Company against the consequences of their personal liability for financial losses arising out of corporate acts The policy wording is split into two sections: INDEX Insurance Operations Page 348

• Directors and Officers: All Directors & Officers are covered wherein deductible is not applicable. • Company Reimbursement: In case Company is allowed to reimburse the loss amount to Directors & Officers, then company get reimbursement for such claims subject to deductible. Who is an Insured Person • All Directors of the Insured Organization including Non-Executive or Shadow Directors • All authorised officers of the Insured in the Organisation including Managers & Company Secretary • Past Directors & Officers including Retired Directors • New positions created after policy inception • Group Coverage holding board and all subsidiary board plus positions on external boards which are held by any Insured • Persons purely at the request of the Insured Organization in order to protect its interests (e.g. Associate & Joint venture companies). Acquisitions if any, with prior intimation to Insurer. 14.11 WORKMEN COMPENSATION POLICY Workmen Compensation Policy is taken to mitigate the risk arising out of accident / injury to apprentices working in IOCL locations. This policy is taken to pay the compensation for injury / accident as per the Employees Compensation Act, Fatal Accident Act or Compensation awarded as per court of law. Indemnity, Deductibles etc. is given in Annexure-1. 14.12 CYBER AND CRIME INSURANCE POLICY IOCL has vast network of information technology which is vulnerable to cyber threats. Some of the IT infrastructure and facilities are as under: • Data Centers at Gurgaon, Bengaluru for business application. Both ISO 27001:2013 certified • 77 various devices deployed at DC Gurgaon & Bengaluru protecting critical infrastructure • Data Centers at RHQ, MKHO, PLHO for Divisional level applications • Vast and geographically diversified IT network consisting of 6 Nos. of Gateways, Multiple websites & Mobile Apps, Two email Gateways, 600 MPLS Links and around 25000 end points IOCL has taken its first Cyber and Crime insurance policy in Jan 2019 with worldwide jurisdiction. Sum insured is Rs. 350 Crore with Deductibles of Rs.10 lakh and 8 hours for Business Interruption, Investigation Cost: NIL for investigation cost including forensic cost. 14.13 CFA FIDELITY POLICY As per CFA Policy, the stocks held with CFA’s are covered only partially by Bank Guarantee. In order to protect IOCL’s interests as the stocks are kept with outsiders and employees of Insurance Operations INDEX Page 349

CFA are carrying out the operations, CFA fidelity policy is taken for a value of maximum stocks kept at the CFA. The policy covers fidelity of the CFA and its employees. The policy is taken by Marketing Division. 14.14 EMPLOYEES FIDELITY POLICY To protect against frauds and dishonest committed by employees and consequent losses, employees fidelity policy is taken by the Marketing Division. 14.15 CHARTERER’S LIABILITY INSURANCE POLICY: Following risks are covered under charterer’s legal liability Insurance Policy: Class A – Charterer’s Liability Damage to Hull – legal liability for physical loss of or physical damage to the vessel Hire & Demurrage – legal liability for hire, demurrage or damages for loss of use (including detention) Cargo Loss or Damage P&I – Legal liabilities arising on account of and / or expenses and / or compensation for Illness, Injury and Loss of Life, Loss of or Damage to Property, Collision, Wreck Removal, Quarantine Expenses, Towage, Pollution, contribution to Salvage and / or General Average Expenses – Sue and Labour, removal and replacement of bunkers, fines, stowaways, enquiry expenses Class B – Cargo Owner’s Legal Liability All legal liabilities, costs and expenses incurred in the capacity of cargo owner including but not limited to those arising on account of heating and / or comingling and / or Ship-to-Ship Transfer of cargo Class C – Defence (FDD) Legal costs and expenses incurred in relation to the operation of the insured vessel arising from events occurring during the period of insurance Class FB – Bunker (including own bunker on-board Time Charter vessel) Losses / Liabilities pertaining to bunker, costs incurred in its removal / replacement etc 14.16 ROLE OF DIVISIONS / UNITS IN INSURANCE MANAGEMENT Assets which are required to be insured must be informed to RHQ along with supporting document such as commissioning certificate, throughput data (if any) etc. along with the copy of approval of unit finance head before commencement of insurance cover. Generally following declarations / information are required to be given by divisions/units to RHQ. Insurance Operations INDEX Page 350

• Declaration of new assets • Quarterly Stock Declaration for package policy • Quarterly Declaration of Material considered under Marine policy • Declaration of Assets under temporary removal clause • Declaration of Assets under minor works clause of package policy • Intimation of loss • Coordination for Risk Assessment carried out by Reinsurer • Co-ordination with surveyor for Loss Assessment, submission of information and resolving the query of surveyor • Preparation of Claim Information and Submission • Keep a track on the amount spent for replacement of assets in case of loss • In case need of new insurance cover is required, detailed requirement for same requires to be given 14.17 ROLE OF REFINERIES HEAD OFFICE IN INSURANCE MANAGEMENT Since the majority of insurance policy is taken by RHQ on behalf of Units and Divisions , it is the responsibility of units to give all the requisite details on timely basis to RHQ so that appropriate insurance coverage can be taken for the assets. Following are the roles of RHQ • Declaration of new assets and Premium payment to Insurance Company and resolving their query • Preparation of Quarterly Stock Declaration and filing the same with Insurer • Preparation of Quarterly Declaration of Material considered under Marine policy and filing of same with insurer • Declaration of Assets under temporary removal clause to insurer • Endeavour to cover maximum additional facilities / projects Assets under minor works clause of package policy • Coordination with insurer for expeditious settlement of claim • Assessment of New Risk and ways to mitigate the risk by taking appropriate insurance coverage • Centralized Tendering, Policy Management and Claim Monitoring 14.18 ACCOUNTING OF EXPENDITURE PENDING FINALIZATION OF INSURANCE CLAIMS The expenditure incurred on repair/ restoration jobs is to be charged to the natural head of account and the corresponding claim shall also be credited to the same head of account. Booking of losses and corresponding insurance claims Corporate Office vide mail dated 26th October’2018 have issued following guidelines in the matter of booking of losses and corresponding insurance claims: The major issues involved in this regard are as follows: • 1. Delay in giving effect in Fixed Assets Register or books of accounts; • 2. Booking of loss without write off approval as per DOA; Insurance Operations INDEX Page 351

• 3. Delay in booking of loss for want of certainty of realization and amount claimable; • 4. Deferment of claim booking till certainty of claim is established; • 5. Delay in write off of claims in cases of prolonged pendency of claims. In the above context, the following clarifications are provided for guidance to Divisions in pursuit of maintaining uniformity: a. While the loss of crude oil, petroleum products, other similar items is automatically accounted during the course of inventory valuation, the loss of other items like stores, spares, plant, equipment, should be immediately recorded by way of removal of such items from the books of accounts. However, in case of partial damage of items where the item is not to be discarded but restored, such removal may not be called for. b. Every booking of loss to books of accounts should be backed by appropriate write-off approval. The write off approval in case of abnormal losses of crude, petroleum, petrochemical products are required to be taken in line with clause no (v) of Item no. G- 20 of enclosure XIII of the DOA. The write off of losses of item of stores/equipment/plants, is required to be taken as per Clause (i) of the aforesaid item of DOA. It is clarified that the loss requiring write off will be the amount net of insurance claim. c. In certain cases, the booking of loss and/or insurance claim may not be possible immediately for want of ascertainment of amount claimable. However, as the insurance claim is required to be lodged within prescribed time schedule, the booking of loss/claim should be done forthwith upon lodging such claim and on judgement basis at any intervening balance sheet date. d. In case of any abnormal loss of crude/petroleum/petrochemical products where the insurance claim is lodged but the certainty of realization is not there because of any reasons, either write-off approval as per DOA needs to be taken stating the possibility of recovery through insurance or alternatively claim should be booked with corresponding provision for doubtful claims with due approval as per cl. no. (vi) of item no. G.20 of enclosure XIII of DOA. e. In cases of prolonged pendency of insurance claims, the aspect of certainty of realization should be examined afresh at each balance sheet date and necessary provision against the claim is required to be made with due approval as per DOA, in case there is lack of certainty. Based on above guidelines the claims under all risk policy can be categorised under the following heads: 14.18.1 Complete loss of Asset: • In case of complete loss of asset, same is required to be removed from the books. Insurance Operations Page 352

• Write off approval of WDV of the asset net of the estimated insurance claim is required to be obtained as per applicable DOA/DOP. It is clarified that loss incurred due to policy deductible is also required to be taken. • Corresponding Expenditure for reconstruction of the assets is to be capitalised. • Initial Claim amount is to be booked in Contra GLs in SAP. • Once the claim amount is reasonably certain and realisablity of the same is ensured, claim is to be recognised by crediting Insurance claim Income GL. • Claim may be considered as certain when there is positive outcome from the surveyor report/insurance co./internal judgement. • Once the claim is recorded in books, the aspect of certainty of realization should be examined afresh at each balance sheet date and necessary provision against the claim is required to be made if required. • Lack of certainty may be considered if there is subsequent development in the Insurance claim wherein surveyor/Insurance co. has given negative inputs. • Once the claim is settled, it is to be ensured the loss approval taken earlier is in line with the final settled amount. If there is any shortfall in the loss approval due to reduction in the claim amount same will required to be approved. Approving authority will be decided based on the total loss amount i.e. initial loss plus differential loss. 14.18.2 Partial loss of Asset: • No accounting entry is required to be passed for partial loss of asset. However administrative approval will required be obtained net of insurance claim as per applicable DOP/DOA. It is clarified that loss incurred due to policy deductible is also required to be taken. • Corresponding Expenditure for repairs of the assets is to be charged to R&M. • Initial Claim amount is to be booked in Contra GLs in SAP. • Once the claim amount is reasonably certain and realisablity of the same is ensured, claim is to be recognised by crediting Insurance claim Income GL. • Claim may be considered as certain when there is positive outcome from the surveyor report/insurance co./internal judgement. • Once the claim is recorded in books, the aspect of certainty of realization should be examined afresh at each balance sheet date and necessary provision against the claim is required to be made if required. • Lack of certainty may be considered if there is subsequent development in the Insurance claim wherein surveyor/Insurance co. has given negative inputs. • Once the claim is settled, it is to be ensured the loss approval taken earlier is in line with the final settled amount. If there is any shortfall in the loss approval due to reduction in the claim amount same will required to be approved. Approving authority will be decided based on the total loss amount i.e. initial loss plus differential loss. 14.18.3 Loss of Crude/Hydrocarbon products. Insurance Operations Page 353

• The loss of crude oil, petroleum products, other similar items is automatically accounted during the course of inventory valuation. In case of loss of crude oil, crude cost is required to be credited and abnormal loss will be debited. In case of loss of ISD/Finished product, Fuel & loss will be required to be credited and abnormal loss will be debited. • Administrative approval will required be obtained net of insurance claim as per applicable DOP/DOA. It is clarified that loss incurred due to policy deductible is also required to be taken. • Initial Claim amount is to be booked in Contra GLs in SAP. • Once the claim amount is reasonably certain and realisablity of the same is ensured, claim is to be recognised by crediting Insurance claim Income GL. • Claim may be considered as certain when there is positive outcome from the surveyor report/insurance co./internal judgement. • Once the claim is recorded in books, the aspect of certainty of realization should be examined afresh at each balance sheet date and necessary provision against the claim is required to be made if required. • Lack of certainty may be considered if there is subsequent development in the Insurance claim wherein surveyor/Insurance co. has given negative inputs. • Once the claim is settled, it is to be ensured the loss approval taken earlier is in line with the final settled amount. If there is any shortfall in the loss approval due to reduction in the claim amount same will required to be approved. Approving authority will be decided based on the total loss amount i.e. initial loss plus differential loss Insurance Operations Page 354

Annexure – 14.1 SUMMARISED DETAILS OF VARIOUS INSURANCE POLICIES S.No Particulars Remarks 1 PACKAGE POLICY (a) Policy Expiry Date 14th September (b) Location / Locations of Refineries, Marketing , Pipeline, Business Development Divisions Covered Division including JV company-IOLPL. Under this Policy (c) Limits of Liability INR 13,500 Crore Each and Every Loss combined for Property Damage and Business Interruption excess of Deductibles and Time Excess Period INR 2671 Crore Each and Every Loss for SBM and associated assets (d) Deductible For Refineries, Petrochemical and BD Assets - INR 7.5 Crore For GTs of MHPS at Panipat Naphtha Cracker- INR 11.25 Crs For Marketing and Pipeline Assets - INR 2.5 Crore In respect of BI – First 45 days of value of loss of the affected unit each and every loss In respect of BI for GTs of MHPS at Panipat naphtha Cracker-First 60 days of value of loss of the affected unit each and every loss Windmill & Solar Power Plant: INR 1 Crore for each & every loss. In respect of Following add on Covers deductible is 2.5 % of Claim Amount subject to INR 10 Lakh Minor Works / Property Under Course of Construction Inland Transit Temporary Removal Clause In respect of the Minor Word add-ons, however, for testing period for assets covered, the excess shall be: 5% of claim amount subject to a minimum of INR 25,00,000 Each and every loss. In respect of other add on covers deductible is 2.5% of Claim amount subject to INR 50 Lakh SBM Assets including associated stock: INR 6.5 Crs for each & every loss, however nil in case of total constructive loss. If more than one of the above deductibles applies to a single Occurrence under Property damage and/or Machinery breakdown section of this Policy at the locations affected by any one event/AOG peril, such deductibles shall be applied separately but the cumulative deductible so calculated shall not exceed the single largest deductible applicable. (e) Declarations to be Following four types of declarations are required to be given under given under this the policy policy Declaration of Final Value of Stock to Insurer within 30 days from the end of each quarter Insurance Operations INDEX Page 355

Declaration of Assets forming part of Sum Insured under the policy taken out for repairing / refurbishment in third party premises under Temporary Removal Clause. Under this clause declaration upto the date of expiry of policy can be given. In case period of movement / storage is beyond date of policy expiry than in such case a fresh intimation is required to be given for such cases for coverage of same under new policy. Declaration of Assets which are eligible for coverage under Minor Works require to be cover under this policy Declaration of Addition / Revision in Sum Insured Figures (f) Add on Covers Particulars Rs Crs Section 1& 2 (PD & MB) Involuntary Betterment-Limit: 200 Catalysts 300 Fire Fighting Expenses Actual Capital Addition Clause 5% Demolition of properties 25 Temporary Removal 50 Fees 10 Expenses Related to Reducing Loss 25 Expenses to Minimize an imminent Loss 25 Minor Works- Limit 400/4000 Inland Transits 50 Shut Down/ Start Up Costs 100 Premium adjustment -stock 65% Aggravation of Risk 100 Immediate Repairs 20 Inadvertent Omission 45/450 Architects, Surveyors & Consulting Engineers Fees 45 Deliberate Damage Property not on the Insured Premises 50 (Unnamed) Property not on the Insured Premises 90 (Named) Leakage and Overflowing 800 Contamination and Co-mingling of Stocks Additional Custom Duty 25 Expediting Expenses 15 50 25 Insurance Operations Page 356

Escalation Clause- 7.5% Leak Search Cost 20 Section-3 (LOP) Alternative Premises NA Departmental Clause NA Power and Utilities Extension 17% Named Direct Suppliers & Customers 10% Extension Delayed Indemnity clause NA Additional Increased Cost of Working 10%/25 Prevention of Access 30 days Interdependency clause- PNCP/PXPTA 250/500 Premium adjustment-BI 40% Section-1,2 & 3 Property Plant Testing Commissioning NA Clause T&D lines 100 Vessel Impact to Jetty and Port Blockage 150 Margin Clause 10% Average Clause 15% Section-4 (SPM) Escalation clause 7.5% Errors and Omission Clause 5% Minor works 100 Expediting expenses 20 Leak Search Cost 20 Demurrage Charges 20 2 TERRORISM POLICY (a) Policy Expiry Date 31st July (b) Location / All Locations of IOCL including three JVs (HURL, ISRPL & IOLPL) Divisions Covered Under this Policy (c) Limits of Liability INR 3000 Crores for a single event or number of events taken together, during the policy period with a provision of one free reinstatement, floating on all Locations. (d) Deductible For Refineries, Petrochemical and BD Assets - INR 5 Crore For Marketing and Pipeline Assets - INR 2.5 Crore In respect of BI - 45 days equivalent of average daily value of loss of the affected unit each and every loss (e) Declarations to be Declaration of Addition / Revision in Sum Insured Figures needs to be given under this given to insurance company policy Insurance Operations Page 357

3 MARINE INSURANCE - FOR CRUDE OIL (a) Policy Expiry Date 31st August (b) Location / IOCL Divisions Covered Under this Policy (c) Limits of Liability INR 1250 Crore for Import and INR 350 Crore for Coastal Movement of Cargo (d) Deductible 1% of Consignment Value (e) Declarations to be Provisional Declaration before lifting of Crude Oil. In case of Iranian given under this Crude Oil Lifting, advance intimation for approval from reinsurer to be policy given. Final Declaration to be given after cargo reaches its destination. 4 MARINE INSURANCE - FOR OTHER THAN CRUDE OIL (a) Policy Expiry Date 31st March (b) Location / Refineries Division, Pipeline Division and R&D Division Divisions Covered Under this Policy (c) Limits of Liability Sum Insured - INR 4000 Crore Per Sending Limit - INR 100 Crore Per Location Limit - INR 200 Crore (d) Deductible For Transit: 0.25% of the consignment value subject to minimum of INR 0.25 Lakh For Storage: 5% of the Claim value subject to minimum of INR 0.25 Lakh . (e) Declarations to be Quarterly Declaration of Transit within 30 Days from the end of each given under this quarter. policy Where Consignment Value exceeds INR 100 Crore, Advance intimation should be sent to insurance company before commencement of movement. Sufficient Time margin should be kept in hand so that tender enquiry can be issued in case insurance company refuse to give insurance cover. 5 PUBLIC LIABILITY INSURANCE (ACT POLICY) (a) Policy Expiry Date 31st March (b) Location / IOCL Divisions Covered Under this Policy Insurance Operations Page 358

(c) Limits of Liability Aggregate One Year (AOY) : INR 15 Crore Any one Accident (AOA) : INR 5 Crore (d) Deductible Nil 6 PUBLIC LIABILITY INSURANCE (UMBRELLA POLICY) (a) Policy Expiry Date 30th April (b) Location / IOCL Divisions Covered Under this Policy (c) Limits of Liability Aggregate One Year (AOY): INR 800 Crore Any one Accident (AOA): INR 800 Crore (d) Deductible 0.5% of Claim amount, Subject to Minimum of INR 3 Lakh and Maximum of INR 10 Lakh 7 MISCELLANEOUS ASSETS POLICY (a) Policy Expiry Date 30th April (b) Location / Locations of Refineries, R&D and Pipeline Divisions Covered Under this Policy (c) Deductible For All Risk and Burglary Risk 5% of Claim amount subject to INR 2,500 For Standard Fire Sum Insured up to INR 10 Crore per location- 5% of claim amount subject to a minimum of INR 10,000/- Sum Insured above INR 10 Crore and up to INR 100 Crore per location- 5% of claim amount subject to a minimum of INR 25,000/- Sum Insured above INR 100 Crore and above per location- 5% of claim amount subject to a minimum of INR 5,00,000/- (e) Declarations to be Declaration of Addition / Revision in Sum Insured Figures is required to given under this be given to Insurance company policy 8 DIRECTORS & OFFICERS LIABILITY POLICY (a) Policy Expiry Date 3rd July (b) Location / IOCL Divisions Covered Under this Policy (c) Limits of Liability INR 250 Crore (d) Deductible Deductible under Side A Coverages - Nil Deductible under Side B Coverage - For India INR 2.5 Lakh For Rest of the World INR 5 Lakh Deductible under Side C Coverages( entity securities claim) - For India INR 12.5 Lakh , For Rest of the World INR 25 Lakh (e) Coverage & Limits Retirement Cover – Discovery Period 96 months for retired directors Pollution Defence Costs (Full) Crisis Communication (sub limit of 10% of the overall liability limit) Insurance Operations Page 359

Entity Securities Claim limit (Rs. 25 Cr) Automatic Inclusion of Subsidiaries/ Joint Venture (sub limit of 10% of the Total assets of the insured) Outside Directorship Business/ Network Interruption coverage Regulatory Response Cost/ investigation cost Professional Services with carve back for Failure to Supervise Additional Limit of Non-Exec Directors Civil fines and penalties (sub limit of 10% of the overall liability limit) Occupational Health & Safety Defence Cost. Shareholders claim excluding individual shareholders holding 15% or more of the issued and outstanding voting share capital of the IOCL. Heirs , Estates and Legal Representatives Public Relationship cost (Sub Limit –Rs. 1 Crores) Insured vs Insured (Full) (Defence cost only) Side “A” before “B” before “C” 9 WORKMEN COMPENSATION POLICY FOR APPRENTICE (a) Policy Expiry Date 31st May (b) Location / Locations of Refineries , Marketing and Pipeline Divisions Covered Under this Policy (c) Limits of Liability The Workmen’s Compensation policy to pay compensation for injury either under: The Employee's Compensation Act, 1923 and subsequent amendments of the said Act prior to the date of the issue of the Policy Fatal Accidents Act, 1855 or at Common Law (No capping of limit of liability on Common Law. This is as per actual award by court ) This Policy also includes cover for Occupational Diseases Medical Expenses upto INR 50,000 Per Person Contractor / Sub Contractor Worker (d) Declarations to be Increase in the number of person covered in this policy to be informed given under this to insurance company and pro rata premium on the same is required to policy be made. 10 CYBER AND CRIME INSURANCE POLICY (a) Policy Expiry Date 14th January (b) Location / IOCL Divisions Covered Under this Policy Insurance Operations Page 360

(c) Limits of Liability INR 350 Crores (d) Deductible Deductibles of Rs.10 lakh and 8 hours for Business Interruption (e) Converge Data Liability (10% of SI) Loss of Personal & Corporate Information Outsourcing Network Security Administrative Obligations (20% of SI) Data Administrative Investigation / Fines Extended Reported Period Reputation & Response Costs Pro-active Forensic Services Repair of Company / Individual Reputation Notification & Monitoring (10% of SI) Professional Fees for credit monitoring services & costs of customer credits, in relation to notification to individuals or regulators w.r.t. Data breach, for recreation or recollection of Data Multimedia Liability Expenses of compensation and defence costs for a Media Wrongful Act Network Interruption (120 Days) Loss in respect of a Material Interruption in Insured’s Computer System Cyber / Privacy Extortion Loss that an Insured incurs solely as a result of an Extortion Threat Automatic Acquisition Clause Automatic extension of indemnify to any firm acquired or created by the Insured during the Policy Period Criminal Reward (1 Cr) Amount offered by the Insurer for information that leads to the arrest and conviction of any individual(s) committing or trying to commit any illegal act Fund Transfer Fraud (25% of SI) Financial loss resulting from the theft of the Company’s funds from a Transfer Account arising as a result of a Hacking Impersonation Fraud (25% of SI) Loss resulting directly from the Insured having Transferred money from its own accounts arising from amendment of current payments detail of a customer, supplier, or service provider 11 COMPREHENSIVE PROJECT INSURANCE MEGA POLICY (CPIM) (a) Policy Expiry Date 14th January (b) Location / All the projects of IOCL declared. Divisions Covered Under this Policy (c) Limits of Liability Full value of the sum insured (d) Deductible Marine: 0.5% of the consignment value subject to minimum of INR 1 (one) lakh Insurance Operations Page 361

Erection: 5% in case of normal period, testing period & catalyst and 10% in case of ACT of God subject to certain minimum limits in different cases. Insurance Operations Page 362

CHAPTER 15 : CRUDE OIL / PRODUCT ACCOUNTING 15A. OIL ACCOUNTING AT REFINERIES 15.1 INTRODUCTION 15.1.1 Indian Oil Corporation procures and processes both Indigenous and Imported crude oil at its refineries. The major portion of the crude oil requirement is met out of imports. Imported crude oil is mostly procured on FOB basis and transportation is arranged by IOC itself. The Indigenous crude oil purchases are based on long term contracts whereas imported crude oil procurement is based on Term/ Spot contracts. 15.1.2 Indigenous crude oil from onshore oilfields in Gujarat and Assam is supplied by ONGC, OIL 15.1.3 and other PSC operators through the ONGC/ OIL pipelines at the refinery head. Rajasthan crude is supplied by Sellers' pipelines at Viramgam and Radhanpur where it is injected into SMPL for JR and into MPPL for PR respectively. Indigenous offshore supplies from Bombay High are brought to Vadinar Port/Mundra Port/Haldia/Paradip Port and Panna Mukta are brought to Vadinar Port. Imported crude oil is brought to the four port locations namely Vadinar, Haldia, Mundra and Paradip and is transported to inland refineries through IOC’s/OIL’s Pipelines and to Guwahati Refinery through rail wagons. The scheme of crude oil movement is as follows: a. Receipts at Vadinar: Transported through Salaya Mathura Pipeline (SMPL) to Gujarat, Mathura and Panipat Refineries. b. Receipts at Mundra: Transported through Mundra Panipat Pipeline (MPPL) to Panipat refinery c. Receipts at Haldia: Either received directly at Haldia Refinery from the port or further transported through Haldia Barauni Pipeline (HBPL) to Barauni Refinery or further to Bongaigaon Refinery through OIL’s pipeline. d. Receipt at Paradip: Either Received directly at Paradip Refinery or further transported through Paradip Haldia Barauni pipeline (PHBPL) to Haldia, Barauni, to Bongaigaon Refinery through OIL’s pipeline and to Guwahati Refinery through rail wagons. Measurement of crude oil: a. The quantity of crude oil received is determined by dips of the receiving tanks. Before receipt of crude oil into the receiving tanks, dips and temperature of the crude oil in the tanks is taken jointly by the representatives of the Refinery/Pipelines and crude suppliers for indigenous crude and surveyor for imported crude. After receipt, dips and temperature are again taken after allowing for the usual settling time. b. The dip memos serve as basic documentary evidence for the crude supplies received. Dip memos contain all necessary details such as tank number, tank dip, water cut, tank temperature, density etc. c. Samples are drawn during the receipt of crude in receiving tanks either through online continuous dripping method with the help of devices like auto sampler or in batches through Top Middle & Bottom (TMB) method at frequent intervals (generally every 2 Crude Oil / Product Accounting INDEX Page 363

hours) so as to make a composite representative sample. The samples are sent to laboratory for ascertaining density and BS & W (Bottom, Sediments & Water). To arrive at the quantity of dry crude oil received, deduction is made for BS & W on the basis of laboratory test reports. d. Crude quantity received at natural temperature is converted into quantity at 150C. The volume of the crude oil received at 15°C is determined on the basis of dip measurement and temperature recorded in the dip memos using tank calibration charts and 53-A ASTM tables. The volume is converted into metric ton quantity by taking into account density at 15°C duly corrected for weight/ volume conversion factor (VCF). All this calculation is carried out in by preparing outturn in SAP for which entry of Before Receipt –Dip, Density, Temperature, Water and BS&W and After Receipt – Dip, Density, Temperature, Water and BS&W is done for each tank in SAP T-code YM71. 15.1.4 Reports and Statements a. Tank wise Out-turns are prepared for crude receipts on the basis of dip memos and the volume calculations (YM71) based on Tank Calibration Chart uploaded for respective Tank. b. Monthly crude oil reconciliation is prepared. The reconciliation shows the opening stock, the Gross crude receipts, BS&W, Net crude receipts as reported in the receipt out-turns, the crude processed as reported in the issue out-turns and closing stock and storage losses/ gains, if any. c. Crude Oil Tank operation report (Pumping report) is prepared every day for each tank based on the dips at 0700 hrs. This report gives the opening and closing dips which covers the tank operation for receipt, dewatering, or feed to unit on the basis of jointly signed dip memos. The dormant variations if any, is also available from this report. This report also gives the dips before receipt and after receipt. From this report the receipt, issue and closing stock of crude is ascertained through tank out-turns. 15.2 INTRODUCTION TO CRUDE OIL ACCOUNTING IN SAP 15.2.1 Accounting for Crude Oil in SAP was implemented from 1st May 2005. All the relevant data regarding Crude Oil transactions, including the terms and conditions of Term/ Spot contract for Crude Oil procurement, Shipping Arrangements, receipt of Crude Oil at Shore Tanks, its movement through the Pipeline(PL) system, receipt & consumption of Crude Oil at the Refineries, are recorded in SAP. 15.2.2 The Crude Oils procured and processed by IOCL are classified under following broad categories and separate material codes have been created for each of them: Indigenous Crude: • 000000000060000004 – Offshore Bombay High Crude Oil • 000000000060000030 – Onshore North Gujarat Crude Oil • 000000000060000031 – Onshore South Gujarat Crude Oil • 000000000060000033 – Onshore Assam Crude Oil Crude Oil / Product Accounting INDEX Page 364

• 000000000060000093 - Duliajan – HWC • 000000000060000094 - Digboi – HWC • 000000000060000097 - Kharsang – HWC • 000000000060000098 - Kharsang - LWC • 000000000060000154 – Onshore Mangla Crude Oil • 000000000060000152 – Offshore Panna Mukta Crude Oil Imported Crude: • 000000000060000028 – Imported High Sulphur Crude Oil (common for Basrah Lt, KEC, Arab Mix, Iran Mix etc) • 000000000060000029 – Imported Low Sulphur Crude Oil (common for Bonny Lt, Escravos, Labuan etc.) Material code for Crude starts with prefix of 10 Zero’s and then starts with 6*. All the transactions for Crude Oil are dealt with reference to these material codes. 15.2.3 Each consignment of offshore and imported Crude Oil, received in the high seas is identified by a batch which is the combination of tanker name and B/L date. The total cost for the consignment is accumulated with reference to the batch and the stock of Crude Oil is valued accordingly. The crude oil from shore thanks is pumped into the pipeline (PL) system as consignment of LS, HS, BH and Panna crude oil. Each consignment is given a pipeline batch name and entries in SAP are posted for pumping crude oil on FIFO basis (based on YVR 329) from one or more shore tanks based on actual operations. However, upon receipt in the PL system, the batches are merged into common batches (one batch for each category of Crude i.e. HS, LS, BH, PMT or Mangla) to arrive at the weighted average cost of respective category of Crude Oil. The Onshore Crude is received on a continuous basis through ONGC/OIL/Cairn’s pipelines and the receipt entries are posted in a single batch on a daily basis. 15.2.4 Various Plants have been created in the system to depict the physical movement and the position of Crude Oil from the point of loading in Tankers upto consumption at refinery. Each Plant is assigned to a company code and all the transactions with reference to the Plant are accounted for in the books of accounts of that company code to which it has been assigned. A Plant can be assigned to only one company code but one company code can have multiple Plants assigned to it. The various Plant codes and their respective company codes are as under: Plant Name Plant Code Company Code High Seas (West) 90L1 9000 High Seas (East) 90L2 9000 SMPL 9191 9000 MPCPL 9195 9060 PHBPL 9196 9000 Barauni- BGR (OIL PPL) - 9000 Gujarat Refinery 9030 9030 Mathura Refinery 9050 9050 Crude Oil / Product Accounting Page 365

Panipat Refinery 9060 9060 Barauni Refinery 9020 9020 Haldia Refinery 9040 9040 Bongaigaon Refinery 9800 9800 Digboi Refinery 9500 9500 Guwahati Refinery 9010 9010 Paradip Refinery 9070 9070 15.2.5 In line with the approved accounting policy of the Company, weighted Average Cost method is followed for valuation of Crude Oil transactions and the inventory. The valuation of Crude Oil is based on the material code, the batch and the Plant where it is lying at the said point of time. The price of any batch of Crude Oil in a plant is referred to as its MAP(Moving Average Price). Several Storage locations have been created in each Plant so as to enable the recording of stock movement in different tanks/pipelines. However, these storage locations do not have any impact on the valuation of Crude Oil as MAP is maintained at the level of the Plant. The stock in various storage locations with the same batch identity in a Plant carries the same MAP. 15.2.6 The MAP of a batch in a material code is updated after every Goods Receipt (GR) in the Plant. The GR contains the details of the material that is received, the issuing Plant, issuing batch, receiving material code, receiving Plant and receiving batch. When a GR is prepared, the same is valued based on the MAP of the issuing batch in the issuing Plant. Then this value along with the Qty is added to the inventory of receiving batch in the receiving Plant. The revised MAP of the receiving batch is computed by dividing the revised value by the revised qty. This MAP is used for all the subsequent issue transaction from this batch, until another GR is prepared. Consequently, a different MAP is maintained for each batch in each material code in different Plants at same point of time. Example given under: Opening Stock Plant: 90L1 Plant: 9191 Batch: ALBAT05017 Batch: CRUD_HS Qty: 1500MTs Qty: 1000MTs Value: Rs.300 lakh Value: Rs.220 lakh MAP: Rs.20000/MT MAP: Rs.22000/MT 750 MTs issued from ALBAT05017 batch in 90L1 to CRUD_HS batch in 9191 Closing Stock Plant: 90L1 Plant: 9191 Batch: ALBAT05017 Batch: CRUD_HS Qty: 750 MTs Qty: 1750MTs Value: Rs.150 lakh Value: Rs.370 lakh MAP: Rs.20000/MT MAP: 37000000/1750: Rs.21153/MT Crude Oil / Product Accounting Page 366

15.2.7 The cost of different grades of crude oil (like Bonny Lt, Escravos, Basrah Lt, Arab Mix, etc.) is merged based on the broad categories viz. HS and LS and a common MAP for the category is arrived at. This is done by merging the different batches after receipt in PL system. 15.2.8 The total Stock of Crude Oil is segregated and shown in the books of different locations based on the Plant codes. a. The value of Crude Oil stored in the refinery tanks is carried in the books of the respective refinery unit. b. The value of the Crude Oil in transit (both for East as well as West Coast) and the Crude Oil in the common pipeline system (SMPL & PHBPL) including line balancing tanks are shown in the books of Refineries HO. Crude Oil in the OIL India Pipeline (BR-BGR section) is accounted for in the books of Refinery HQ. c. Crude Oil in the MPPL pipeline is accounted for in the books of Panipat Refinery. 15.3 CREATION OF PURCHASE ORDER & LOADING IN HIGH SEAS (SIT) 15.3.1 Imported Crude Actions by International Trade & Shipping department a. The International Trade Department enters into Term/ Spot contracts with the various suppliers for purchase of Crude oil, based on the Production plans. After that the specific consignments are arranged with the suppliers and intimation is given to the Shipping department for nomination of the vessel, along with the detailed FOB pricing formula. b. The Chartering Cell of the Shipping Department arranges the vessel for transportation of crude oil. After nomination of vessel, the Shipping department creates a Purchase Order (PO) and incorporates the FOB (based on the formula intimated by IT), Freight, Insurance and surveyor charges as pricing conditions. In addition to the above cost elements, the Daughter Vessel (DV) Freight, Port Charges, Trans-shipment charges, Bunker Cost etc. are also included as conditions in PO. c. A loading confirmation is made with reference to the above PO at the High Seas Plant (90L1 for West Coast & 90L2 for East Coast) for the Bill of lading quantity. Inventory, in the Finance Module as well as the Material module are simultaneously updated by the quantity and the value of this High Seas Loading confirmation. The value of the crude oil consignment is arrived at based on all the cost elements mentioned in the PO conditions including FOB, Freight & Insurance, Surveyor charges, DV Freight, Port Charges Transshipment charges, etc. and is recorded with a specific reference to the batch name. In case of voyage charters, the freight cost is not booked till completion of discharge. In case of time charters the freight is recognised on the basis of cost allocated from one disport to another disport. Further, in case of last voyage performed by TC vessel, cost is recognised as and when PO is created. 15.3.2 Indigenous Offshore Crude Actions at Refinery Finance HO a. Refineries HO Finance department creates the PO with reference to contract created in SAP for each tanker. The PO conditions include FOB, Freight including Bunker charges (in case of TC vessel) & Insurance only. Crude Oil / Product Accounting INDEX Page 367

b. The loading confirmation is created by RHQ finance for offshore indigenous crude oil at the High seas Plant based on Custody transfer certificate for Bombay High crude received from Port locations. The quantity posted in case of Bombay high crude if directly loaded from offshore SBM/platform is the net shore receipt quantity escalated by the notional ocean loss of 0.998% in case of West Coast and 0.997% in case of East Coast (in line with COSA with ONGC). c. The loading confirmation is created by RHQ finance for offshore indigenous crude oil at the High seas Plant based on Bill of lading quantity for Panna Mukta crude received from Port locations. d. As in case of the imported Crude, the Inventory qty and value are updated for indigenous offshore crude in similar way. 15.3.3 Indigenous Onshore Crude Actions at Refinery Finance HO Refineries HO Finance department creates the PO with reference to contracts created in SAP based on allocated quantity of crude oil by MOP&NG, on ONGC & OIL, Cairn, and PSC Contractor for each month in Refinery HO company code, with delivery location as Guwahati, Gujarat, BGR, Digboi and Panipat Refinery unit. The rate mentioned in the PO is inclusive of transportation charges, VAT/CST etc. 15.4 PIPELINE MOVEMENT, REFINERY RECEIPT & CONSUMPTION BY THE UNIT 15.4.1 Actions by port locations at Vadinar, Mundra, Haldia and Paradip a. The Vadinar and Mundra port locations prepare Stock Transfer Orders (STO) and receive Crude Oil from the High Sea Plant (90L1) based on the actual shore receipt quantity. Similarly, in the East Coast, Crude oil is drawn from 90L2 plant by PHBPL and Paradip Refinery, based on the actual shore receipts. STOs are similar to the PO except that the same are raised on another Plant location of IOC itself instead of a vendor. Additional cost elements along-with their respective vendors are included as conditions in the STO (example Customs Duty, Port Charges, Wharfage, Tug hire, etc.). b. In the West coast, the additional cost elements (Customs Duty and Port Charges) are incurred by the port offices itself and the same are included in the respective STOs as conditions. In case of the Haldia Port - East coast, the Customs Duty on each consignment received in Daughter Vessel is intimated by Kolkata Office and the port charges as incurred by the respective locations are included in the STOs. c. The Customs Duty, Port charges, Wharfage, Tug hire, etc. are loaded on the qty received in the shore tanks, based on the conditions mentioned in the STO. The GR is prepared with reference to STO and the Crude is valued based on the MAP of the specified batch from which the Crude is drawn, plus the additional cost elements incorporated in the STO. At the time of loading these additional cost to the crude cost, a liability against each of them is created in the books where the stock is posted, as defined hereunder Plant Plant code Company code Company code name Vadinar (SMPL) 9191 9000 RHQ Mundra (MPCPL) 9195 9060 Panipat Refinery Crude Oil / Product Accounting INDEX Page 368

Haldia 9040 9040 Haldia Refinery Paradip (PHBPL) 9196 9000 RHQ • The Crude Oil is received in the storage location created for the shore tanks in the PL Plant code and it carries the specific batch name and cost. Thereafter, in the west coast, at the time of pumping into the PL system the Crude is transferred to the Line fill storage location and from this Linefill location Crude oil is drawn by refinery. When the pumping transaction is recorded, the Crude is manually re-batched and merged with the common batches (based on the category of Crude) and then the system revises the MAP of the common batch based on the transaction value and qty. • STOs are prepared wherever the transaction involves movement of Crude Oil from one Plant to another Plant with any additional cost element added to it. In other cases, the movement of Crude Oil is posted by way of a direct transaction code with reference to the plant, material code and batch, in Material module. 15.4.2 Actions by refinery users a. The Oil Movement and Storage Section in the Refinery is responsible for handling of receipt, storage and dispatch transactions for crude oil and oil products. b. The movement of Crude Oil is posted from Linefill location in PL Plant to refinery Plant against a STO. c. Crude Oil Tank Operation Report is received from OM&S and outturns are prepared accordingly. STO is prepared through transaction code ME21N on FIFO basis for the crude available in SLOC in pipeline company code. Crude is identified on FIFO basis using transaction code YVR329. If required, outturn quantity is bifurcated batch-wise on FIFO basis. Crude is received batch-wise in tanks using transaction code VL10D. The identity of batch is maintained in Crude oil Refinery tanks. Hence at a given point of time a crude oil tank at Refinery may contain one or more than one batch for a particular type of crude oil. The issue of crude oil for processing in Refinery is done on broad classification of crude oil such as LS, HS, BH, PM, Mangla etc. PSL for Crude oil is prepared on the basis of broad classification of Crude rather than batch. d. Receipt of Crude oil is reconciled with pipeline under broad category of Crude oil mentioned above on monthly basis. Note: Relevant SAP T-code for Crude receipt & Issues ME21N 1. Creation of PO ME22N ME23N 2. Alteration of PO YVR329 VL10D 3. View of PO MIGO 4. For batching of Crude Receipts VL02N 5. Posting of Receipt VL09 YMU133 6. Posting of Issue YM101 7. Edit of delivery document created through T-code VL10D 8. Deletion of delivery document created through T-code VL10D YMB5B 9. Updation of daily tank dips YM71 10. Report regarding physical stock in the Crude Tank which also shows difference between book stock & Physical stock 11. Report regarding Crude Receipt & Issue 12. Creation of Out-turn for Crude Receipt and Issue Crude Oil / Product Accounting Page 369

13 Out Turn Summary Report YMR113 e. The GR is done based on the tank out turn at the refinery. Here again the unit specific costs are loaded on the qty received at refinery tanks and forms cost of crude oil. Based on the conditions mentioned in the STO, Liability is created in respective refinery company codes. f. The Onshore Crude Oil is received by Gujarat, Panipat, BGR, Digboi and Guwahati refinery against the PO created by refinery HO. In case of Gujarat Refinery, the qty received includes the receipts from the small Oil fields operators through ONGC’s Pipeline. g. The Goods issue, for Crude Oil issued from the refinery tanks to Processing units are posted on daily basis through MIGO. h. Daily tank dips (running dips if operation is not completed and gross dip if operation is completed) at 0700 hrs is entered by Refinery Users in SAP through T-code YMU 133. The MIGO transactions are also to be done where operation is completed. The SAP system will not allow the posting of dip if the book stock (MB5B) and Physical Stock (YM101) is not matched for the preceding 7th day. Difference of book balance and physical balance is reflected in downloaded report generated by t-code YM101. It is pertinent to mention that the differential report is not visible on SAP screen but reflected in downloaded report. 15.5 PAYMENT AND RELATED ACTIVITIES FOR IMPORTED AND INDIGENOUS CRUDE OIL 15.5.1 Actions at Shipping Department 15.5.2 a. At the time of each loading confirmation, provisional liabilities against various cost elements based on the PO conditions are created in the books of Refinery HO. b. The invoices for all the cost elements which are paid from Refinery HO (namely FOB, Freight, Insurance, etc., except for the FOB on the indigenous crude oil) are received by the Shipping Department. Then the Finance arm of the shipping department examines the same thoroughly and the same is passed over to Shipping team in the Finance Dept for effecting the payment along-with the details of any adjustments to the made in the same. The payments are based on the bill of lading quantity Actions at Refinery HO Finance Shipping a. The payments for all the elements except FOB on Indigenous Crude oil ,Panna Mukta Voyage charges and Panna Mukta Cargo Handling charges are effected by Shipping team of Refineries HO Finance, based on the documents received from Shipping department b. Invoice Verification (MIRO) in SAP is the process by which actual liability for any cost element is created in the respective vendor and the differential with respect to the provisional liability already created at the time of loading confirmation or GR, is accounted for in the cost of the crude oil. Refineries HO Finance shipping carries out the MIRO for all the elements except FOB on indigenous crude oil, Panna Mukta Voyage charges and Panna Mukta Cargo Handling charges in the SAP system on a periodic basis. Crude Oil / Product Accounting INDEX Page 370

The payments which have been effected on the due dates are squared off against the actual liability now generated by the MIRO activity. 15.5.3 Actions at Refinery Finance HO Offshore Crude payment a. At the time of each loading confirmation for indigenous offshore crude oil, provisional liabilities against various cost elements based on the PO conditions are created in the books of Refinery HO. b. The payments for FOB on indigenous offshore crude oil, freight & port charges for Bombay High crude in case the voyage is arranged by seller, voyage cost of Panna Mukta Crude oil during the monsoon season and cargo handling charges of Panna Mukta Crude is effected by Refineries HO Finance department. These payments are based on the quantities which have been loaded in the system as stock in transit. It also carries out the MIRO for these elements on a periodic basis and squares off the same against the payments effected. Since the provisional rate is inclusive of Sales Tax, MIRO is also done with the rate inclusive of sales tax. 15.5.4 Onshore Crude payment a. The payment for the onshore crude oils including for supplies from small oilfields (Production Sharing Contract oilfields) are effected regularly by Refinery HO finance based on the respective agreements. b. As the crude from small oilfields are commingled and supplied with the crude oil from ONGC, no separate PO is prepared for each of PSC crude oil. PO for crude oil from small PSC fields are prepared for major crude oil grade wise from PSC oilfields which have been commingled with it. The refinery receipts from all the small PSC fields are posted against these PO. c. The Refineries HO Finance department carries out the MIRO on a periodic basis for the onshore supplies. Since the provisional rate is inclusive of Transportation, Sales Tax etc., MIRO is also done with the rate inclusive of transportation, sales tax. d. The various payments effected for the onshore crude oil supplies are adjusted against the liability created by MIRO transactions. 15.5.5 Actions by Finance users at port offices a. Since 15-Feb-05, bonded movement of crude oil has been done away with and the stock at all locations except at the tanks in Haldia which are received directly and not through PHBPL, are duty paid. The payment for the Customs Duty is effected at the port offices in case of West coast (Vadinar & Mundra) and East Coast (Paradip) and at Kolkata in case of direct receipts at Haldia. Kolkata office intimates to HBCPL & Haldia refinery, the amount of Duty remitted with respect to each DV consignment. b. The provisional liability for Customs Duty is generated at the time of GR based on the STOs in the books of the recipient company code. As stated earlier the liability is created at the time of receipt from High seas to the shore tanks, except in case of direct receipts at Haldia shore tanks. As the shore tanks for direct receipt at Haldia are bonded, the Crude Oil / Product Accounting Page 371

15.5.6 liability is created only at the time the crude oil is pumped out into the HBCPL system and not at the time of receipts at the shore tanks from High seas. c. The users at port offices/ refineries clears the provisional liability so created by MIRO. The execution of MIRO would result in clearing the provisional liability and creation of the actual liability in the vendors’ account. Thereafter, the user adjusts payments lying in the vendors’ account against the liability generated MIRO. d. The port offices/ Haldia refinery does the payment of port charges, wharfage, etc. for disport location. The MIRO for the same is done is also done by them based on the actual payments effected against the same. Then the payments and the liabilities are squared off. Actions by refinery users a. Exchange Fluctuation: As per the accounting policy the exchange rate considered for booking of the cost in the books of accounts, is the exchange rate prevailing on the transaction date. The dollar payments for crude oil are effected based on the exchange rates at which the currency has been arranged. The difference between these two rates is accounted for as Exchange fluctuation and is accounted for separately, as an operating cost element. b. Price Difference: Many of the cost elements fed in the PO’s and STO’s are provisional. The crude oil transactions in SAP are carried out based on these values and the provisional liabilities are also created for the individual cost elements based on these values. At the time of invoice verification the provisional costs are revised and final cost is captured into the system. The difference between the provisional and the final values are accounted for in cost of the raw material and/or the same is parked in a GL code 5291500055 -“Price Difference”. The proportion in which the difference is to be accounted for in stock and in PD account is decided based on the qty of crude received with reference to the relevant batch and PO/STO and stock available at the time the entry is posted, with original batch identity in the plant where the crude oil was received. 15.6 SCHEME OF ENTRIES 15.6.1 Imported & Indigenous Offshore Crude Crude oil Financial JV entry Remarks Transaction Various cost elements are defined in the PO including FOB, Freight & Insurance, Surveyor Contract creation No Entry is passed charges, DV Freight, Port Charges Trans-shipment charges, etc. and PO creation and amendments Crude Oil / Product Accounting INDEX Page 372

Crude oil Financial JV entry Remarks Transaction Loading Dr Inventories at High Seas Plant This entry would include all the cost elements Confirmation at Cr GR/ IR clearing mentioned in the PO conditions. Inventory is High Seas Cr Freight Clearing debited and the Purchase offset account is credited with the sum total of the cost elements. Dr Purchases (FOB) The individual cost is booked in the respective Dr Purchases (Freight) purchases accounts and provisional liabilities Cr Purchase offset created in the distinct provisional liability accounts. STO for receipt at No Entry is passed Additional cost elements incurred at the port shore plant including Customs Duty, Warfage, Port Charges etc., are defined in STO. In case of Haldia, Customs Duty is not included as the tank stock is bonded GR against STO at Dr Inventories at Shore Plant Inventory at the High Seas plant is credited by the shore plant Cr Inventories at High Seas Plant MAP of the issuing batch and inventory at the Cr Customs clearing Shore plant is debited with the same plus the Cr Port charges clearing additional cost defined in STO namely Customs Dr Purchases Customs Duty, Port Charges etc. The Purchase offset Dr Purchases Port charges account is credited with the sum total of the Cr Purchase offset additional cost elements. The individual additional cost is booked in the respective purchases accounts and provisional liabilities created in the distinct provisional liability accounts. STO & Receipt at HBCPL System from Shore Tank No Entry is passed at the time of STO and entry as given above is posted with reference to HBCPL shore tanks and HBCPL system stock with the addnl cost element of Customs Duty. Movement from Cr Inventories at Plant A The Crude Oil is transferred from Plant A to Plant one plant to other Dr Inventories at Plant B B at the MAP in Plant A without any further without addnl cost addition in value STO for receipt at No Entry is passed Additional cost elements incurred at the time of Refinery from PL receipt in refinery tank are defined in STO. System GR against STO at Cr Inventories at PL System The cost elements which are incurred at the refinery Dr Inventories at Refinery refinery, if any are added to the inventories Dr Cost, if any valuation and the provisional liability is created Cr Purchase offset in the books of the refinery company code. Crude Oil / Product Accounting Page 373