Mahanagar Gas Ltd. - Quarterly/Annual Result Disclosures and Notes dated 30 Jun 2021

1. The above financial results are submitted by the company pursuant to Regulation 33 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015. Financial results were reviewed and recommended by the Audit Committee and approved by the Board of Directors at their meetings held on July 28, 2021.



2. Financial results have been prepared in accordance with the Indian Accounting Standards (Ind AS) prescribed under the section 133 of the Companies Act, 2013 read with rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and the Companies (Indian Accounting Standards) Rules, 2016.



3. The Company is in the business of selling and distribution of natural gas. There are no separate reportable segments, other than selling of natural gas, as per IND AS 108 - Operating Segments.



4. As per authorisation terms and conditions of the PNGRB for Raigad Geographical Area, the Company is required to meet Minimum Work Programme (MWP) targets by March 2020 (with reference to connections and pipeline inch Kilo Meters) and the Company had submitted Performance Bank Guarantee of Rs.105.20 Crore dated March 19, 2015 to the PNGRB. Show cause notice dated July 23, 2018 was given by the PNGRB for shortfall in periodic MWP, asking the Company to explain why penalty should not be levied for the interim MWP target shortfall. The Company submitted catch up plan vide letter dated August 2, 2018 for meeting MWP target by March 2020 and reiterated host of factors beyond control of the Company causing a shortfall. Further, PNGRB called a Joint Progress Review Meeting on August 27, 2019 and post review revised catch up plan was submitted to PNGRB on November 15, 2019. As of 31st March 2020, the Company has achieved cumulative number of Domestic connections as per PNGRB MWP target. Post outbreak of COVID-19 the company had requested PNGRB in April 2020 to extend the timeline for achieving the MWP of Inch-Kms by six months up to March 31, 2022. The PNGRB, sought information on COVID-19 lockdown in July 2020 from the City Gas Distribution companies and has issued public notice dated November 5, 2020, extending MWP timeline due to COVID-19 lockdown for various Geographical areas, where extension of 251 days for Raigad was granted. The company has appraised PNGRB vide letter dated February 9, 2021 with ground level challenges faced in Raigad and has requested for extension up to March 2022. The management is of the view that it will be able to achieve the inch km targets as per timelines submitted and that the penalty can be avoided. Accordingly, no provision is deemed necessary in relation to the bank guarantee issued to the PNGRB at this stage.



5. GAIL (India) Limited (GAIL) raised demand in April 2014 for additional transportation tariff pursuant to demand on them by Oil and Natural Gas Corporation Limited (ONGC), based on the Petroleum and Natural Gas Regulatory Board (PNGRB) order dated 30.12.2013, determining tariff for ONGC’s Uran Trombay pipeline (UTPL) as a common carrier. The Company disputed the demand with GAIL based on contractual provisions and since the transportation charges are to be paid by a third-party user for utilisation of UTPL to ONGC as common carrier and not for transportation of its own gas by ONGC.



Complaint was filed with the PNGRB in February 2015. It was dismissed in October 2015. The writ petition was filed in November 2015 with the High Court of Delhi. The Court advised to appeal before Appellate Tribunal for Electricity (APTEL) being Appellate Authority of the PNGRB in November 2016. The matter was heard by APTEL and remanded back to the PNGRB on technical grounds in September 2019. PNGRB on 18 March 2020 had passed an Order through which it directed MGL and GAIL to pay to ONGC. MGL filed its Appeal before APTEL on 20th April 2020 during lockdown. The matter was heard by APTEL on 9th October 2020. APTEL has recently passed judgement on 16 July 2021. The matter stands remanded back to PNGRB for proper adjudication.



Total demand from November 2008 till June 2021 is Rs.330.48 Crores (including Rs.223.32 Crores covered in the case filed with APTEL and Rs.107.16 Crores demand received subsequently). Based on the legal opinion, the Company believes that it has a strong case and does not expect any outflow of resources. Hence, no provision has been made.



6. The last settlement on trade discount with the Oil Marketing Companies (OMCs) was done in June 2018. Thereafter, there was no written response from OMCs till July 2020 in spite of follow up by the Company. OMCs vide letters dated August 27, 2020 and October 05, 2020, have communicated that trade discount revision was not undertaken by OMC pending De Novo study, which OMC had entrusted to a third party. Post completion of such study, OMCs have communicated the revised trade discount they wish to make applicable to various geographies (Metro and other class of cities) as per the recommendation of the aforesaid study, without sharing the details of the report.



Subsequently de novo study report has been shared on 24th November 2020. As per letter No. L-16019/2/2019-GP-I dated July 31, 2019 issued by Ministry of Petroleum & Natural Gas (MOPNG) addressed to OMCs and GAIL, a consultative process was to be undertaken with City Gas Distribution (CGD) companies to finalize trade discount after completing de novo study. However, no consultation was held with the Company during or after De Novo Study.



The Company had replied to OMC vide letters dated September 04, 2020 and October 26, 2020, that any unilaterally determined high trade discount is not acceptable. In January 2021, Ministry of Petroleum & Natural Gas was appraised by many CGD companies in a joint virtual meeting. On 29th June 2021, MOPNG called for virtual meeting with few CGD entities, including MGL and has sought further inputs from the CGDs. Pending consultation / negotiation, any additional liability cannot be quantified and continues to be considered as contingent liability.



7. The Company's operations were impacted due to 2nd wave of COVID 19 in April 2021, resulting in reduction of sales volumes (except for sales volumes in household gas consumption mainly used for cooking requirements) due to lockdown advised by the State and/or Central government.



With respect to take or pay contract arising out of purchase of Non-APM gas, Company has considered force majeure clause in view of COVID-19 being declared as a pandemic and thereby does not foresee any obligation arising out of such contract. Further in assessing the recoverability of carrying amounts of Company’s assets such as Investments, loans / advances, trade receivables, inventories etc., the Company has considered various internal and external information up to the date of approval of these financial statements and concluded that they are recoverable based on the cash flow projections.



8. The figures of the last quarter ended 31st March 2021 are the balancing figures between audited figures in respect of the full financial year up to 31st March 2021 and the unaudited year-to-date published figures up to 31st December 2020 being the date of the end of the third quarter of the financial year which were subjected to limited review.



9. As on June 30, 2021, position of three independent directors including women Independent Director is vacant and the Company is in the process of filling the vacant positions.