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THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(i)1

MINISTRY OF FINANCE AND COMPANY AFFAIRS

(Department of Company Affairs)

NOTIFICATION

New Delhi, the 8th October, 2002

G.s.R686(E).— -In exercise of the powers conferred by sub-section (1) of section 642,

read with clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 (1 of

1956), the Central Government hereby makes the following rules, namely: -

1. Short Title and Commencement- (1) These rules may be called the Cost Accounting

Records (Petroleum Industry) Rules, 2002.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Application .-They shall apply to every company engaged in production, processing

and manufacturing of crude oil, gases (including Compressed Natural Gas or Liquified

Natural Gas and re-gasification thereof) or any other petroleum products :

Provided that these rules shall not apply to a company, -

(a) the aggregate value of the machinery and plant installed wherein, as on the

last date of the preceding financial year, does not exceed the limits as

specified for a small scale industrial undertakings under the provisions of

Industries (Development and Regulation) Act, 1951 (65 of 1951); and

(b) the aggregate value of the turnover made by the company from the sale or

supply of all its products during the preceding financial year does not exceed

ten crore rupees.

3. Maintenance of records .-(1) Every company to which these rules apply shall, in

respect of each of its financial year commencing on or after the 1^st day of April,

2003 keep proper books of accounts relating to the utilisation of materials, labour

and other items of cost in so far as they are applicable to any of the products or

activities referred to in rule 2. The books of account, so maintained shall contain,

inter-alia, the particulars specified in Schedule annexed to these rules and

Proformae A to I mentioned in the said schedule:

Provided that if the said company is manufacturing any other product(s)or is

engaged in other activities in addition to the products or activities referred to in rule

2, the particulars relating to utilisation of materials, labour and other items of cost in

so far as they are applicable to such other products or activities shall not be

included in the cost of the product or activities referred to in rule 2.

(2) The books of accounts referred to in sub-rule (1) shall be kept on a regular basis

in such a manner as to make it possible to calculate the cost of each product or

activity referred to in rule 2 for every financial year from the particulars entered

therein. Every such books of account and the proformae specified in the said

Schedule, shall be completed not later than ninety days from the close of the

financial year of the company to which it relates.

,J) '"he Statistical -nd o. . . . j j j . . , shall be maintained in accordance with the

provisions of the Schedule to these rules in such a manner as to enable the

company to exercise, as far as possible, control over the various operations and

costs with a view to achieve optimum economies in cost. These records shall also

provide the necessary data required by the Cost Auditor to suitably report on all the

points referred to in Cost Audit (Report) Rules, 2001 as amended from time to time.

(4) It shall be the duty of every person, referred to in sub-section (6) and (7) of

section 209 of Companies Act, 1956 (1 of 1956), to take all reasonable steps to

secure compliance by the company with the provisions of sub rules (1), (2) and (3)

of this rule in the same manner as he is liable to maintain accounts required under

sub section (1) of section 209 of the said Act.

4. Penalty - If a company contravenes the provisions of rule 3, tM rf^mpany and every

officer thereof who is in default, including the persons referred to in sub-rule (4) of

rule 3 shall, be punishable as provided under sub-section (2) of section 642 read

with sub-sections (5) and (7) of section 209 of Companies Act, 1956 (1 of 1956).

"SCHEDULE

[See rule 3]

1. MATERIALS. - (1) The proper records shall be maintained showing separately all

the receipts, issues and balances, both in quantities and values of each item of

materials, consumable stores, casings and other tubular items, chemicals, tools,

drilling bits, spares etc. required for producing, preceding or manufacturing of the

products or activities referred to in rule 2. The cost shall include all direct charges

up to supply base or refinery. The basis on which the cost of issue and consumption

has been calculated shall be indicated in cost records and followed consistently. In

the case of consumable stores and small tools the cost of which are insignificant,

the company may, if it so desires, maintain such records for the group of such-

consumable stores and tools. The cost of materials, consumable stores, casings

and other tubular items, chemicals, drilling bits, tools and spares etc. shall be

properly identified and charged to the relevant departim.it , cost centres or

activities, on equitable and reasonable basis and applied consistently

(2) Where joint products or more than one product of equal ecoron z importance

arises from a process, the cost up to the point of separation of proaucts shaifbe

apportioned to such joint products on reasonable and equitable basis and shall be

applied consistently. The basis on which such joint costs are apportioned to

different products arising from the process or processes shall be indicated in the

cost records. The basis of the apportionment of common selling and distribution

expenses to the product in the case of multiproduct unit shall be equitable and

applied consistently

(3) The proper records shall be maintained indicating the quantity as well as value

of by-products recovered in the different processes having significant value of the

cost of input of materials. In the case of certain by-products recovered, which

cannot be reused in the process and are sold or disposed of without further

processing, the realisation from such sales shall be recorded and adjusted against

the process concerned on a reasonable basis. In case further processing is

necessary to make the by-products usable or saleable, as the case may be,

adequate records of the cost involved for such further processing shall be

maintained. If such processing is done by any outside agency, proper records to

show the quantity sent for processing, quantity received back after processing and

the cost incurred thereon shall be maintained in detail. The net realisation, if any

shall be adjusted against the major process relatable to such by-product. The cost

of by-products shall be determined on equitable and reasonable basis and applied

consistently.

THE GAZbllt: OF INDIA: EXTRAORDINARY

PART II—SEC. 3(i)]

(4) The proper records shall be maintained showing the quantity and value of

wastage, spoilage, rejections and losses of materials, process materials,

consumable stores whether in transit, storage, manufacture or at any other stage.

The method followed for adjusting the above losses as well as the income derived

from the disposal of rejected and waste materials including spoilage, If any, in

determining the cost of product shall be indicated in the cost records. Any abnormal

wastage or spoilage or rejection shall be indicated distinctly and separately along

with reasons thereof.

(5) Where any credit under Central Value Added Tax (CENVAT) under the Central

Excise Act, 1944 (1 of 1944) or any other benefit such as duty drawbacks or any

other similar items of credit, received or receivables on any item of material and/br

consumables stores or spares, the cost of such material and or consumable stores

or spares should be shown after adjusting such credit or benefits.

SALARIES AND WAGES, -d) The Proper records shall be maintained to show the

attendance and earnings of all employees of the cost centers or departments and

the work on which they are employed. The records shall also indicate the following

separately for each cost or work centre or department in line with the accepted

Standards and Practices.

(a) piece rate wages (wherever applicable);

(b) incentive wages, either individually or collectively as production bonus or

under any other scheme based on output;

(d) earnings of casual or contractual labour;

(e) bonus or gratuity, statutory as well as other,

(f) contribution to superannuation scheme; and

(g) any other earning of the nature specified in (a) to (f) above.

(2) The records shall be maintained in such a manner as to enable the company to

furnish necessary particulars under this head in Proformae A to I of Schedule or

annexed to these rules. Where the employees work in such a manner that it is not

possible to identify them with any specific cost or work centre or department, the

labour charges shall be apportioned to the cost or work centers or departments on

equitable basis and applied consistently.

(3) Any wages and salaries allocable to capital works, such as, additions to plant

and machinery, buildings or other fixed assets of any activity etc. shall be

accounted for under the relevant heads. Similarly, payments in the nature of

deferred revenue expenditure shall be separately recorded under separate

classified headings indicating the reasons therefor. The method followed for

accounting of such payments in determining the cost of the product or activity shall

be on equitable and reasonable basis ^ d applied consistently. The said method

snail be disclosed in the cost records also.

(4) The cost of termination benefits payable to employees shall be separately

recorded under separate classified heads. The method followed for such cost in

determining the cost of the product or activities referred to in rule 2 shall be on

equitable and reasonable basis, applied consistently and disclosed separately. Only

the termination benefits say in respect of voluntary retirement scheme, which are

payable in addition to the normal retirement benefits and are likely to provide

benefits in terms of savings in cost in future shall be treated as deferred revenue

expenditure over a period not exceeding five years. These costs shall not form part

of salaries and wages and shall be shown separately. Such costs shall be excluded

from valuation of inventories since these do not result in putting the inventories to

their present location and condition.

3. SERVICE DEPARTMENT EXPENSES. -The proper records shall be maintained to

Indicate expenses incurred in respect of each service department or cost centre like

laboratory, transport, dispensary, township, fire fighting security, etc. These

expenses wherever significant and material shall be apportioned to relevant product

or activities on equitable and reasonable basis and applied consistently. Where

these services are utilised for other products or activities of the company also, the

basis of apportionment of such expenses to the products or activities referred to in

rule 2 and others shall be equitable and clearly indicated in the records and applied

consistently.

4. UTILITIES. - The Cost Statements for each utility shall be maintained separately in

Proforma 'A'. Wherever such utility is functionally independent and not forming part

of a composite unit.

(1) Water: - Proper records showing the quantity and cost of treated or cooling

water produced and consumed, if any, for production, processing and

manufacturing of the products or activities referred to in rule 2 in different cost

centres or departments shall be maintained. The cost of treated water apportioned

to the cost centres or departments concerned shall be on equitable and reasonable

basis and applied consistently.

(2) Steam: - Where steam is raised by the company, proper records showing the

quantity and cost of steam raised and consumed for the production, processing or

manufacturing of the products or activities referred to in rule 2 shall be maintained.

The cost of steam consumed by various units like the petroleum, refining etc., and

by other units of the company shall be apportioned on equitable and reasonable

basis and applied consistently. Where steam is raised and supplied by any other

unit of the company to the referred plant, the cost of steam so supplied shall be

charged to the referred Plant on equitable and reasonable basis and applied

consistently.

(3) Power: - Proper records shall be maintained for the quantity and cost of power

purchased for the production, processing or manufacturing of the products or the

activities referred to in rule 2 in different cost centres or departments. Where power

is generated by the company itself, adequate records, showing all elements of cost

shall be maintained to show the cost of power generated and consumed for the

products or activities under reference in different work centres or departments.

Records shall also Indicate installed capacity, number of units generated, losses

and consumption in each work centres or departments separately. Where power is

generated, and supplied by any other unit of the company to the plant producing,

processing or manufacturing the products or activities under reference, adequate

records shall be maintained to indicate the quantity and cost of power so supplied.

The cost of power allocated to products or activities referred to in rule 2 shall be on

equitable and reasonable basis and applied consistently. The records should state

clearly the measures taken on conservation of energy and its corresponding impact

on unit cost of production.

(4) Other Utilities: - The proper records showing quantity and cost shall be

maintained in respect of any other utilities produced or purchased or utilised or

installed by the company such as effluent treatment plant etc for producing,

processing and manufacturing the product or activities referred to in rule 2.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PAR: II—SEC. 3(iYl

5. WORKSHOP OR REPAIRS AND MAINTENANCE OR TOOL ROOMS. - (1) The

Proper records showing the expenditure incurred by the workshop or tool room

under different heads and on repairs and maintenance in the various cost centers or

departments or plant wise or oil fields wise shall be maintained. The records shall

also indicate the basis of charging the workshop or tool room or repairs and

maintenance expenses to different cost centers or departments or plant wise or oil

fields wise. Where maintenance work is done by direct workers of any production

cost centre or department the wages and salaries of such workers shall be treated

as direct expenses of the respective cost centre or department. If the services are

utilised for other products or activities also, the manner of charging a share to such

products or activities shall be on equitable and reasonable basis and applied

consistently.

(2) The records shall indicate the amount and also the proportion of closing

inventory of stores and spare parts representing items, which have not moved for

over 24 months.

(3) The expenditure on major repair works from which benefit is likely to accrue for

more than one financial year shall be deferred over the period expected to benefit

on a reasonable and equitable basis and applied consistently. Such cost shall be

shown separately and the method of accounting along with the basis of allocation of

such costs shall also be clearly indicated in cost records.

S. FIXED ASSETS AND DEPRECIATION. - (1) The proper and adequate records

shall be maintained for assets used for exploration for and production, processing

and manufacturing of the products or activities referred under rule 2 in respect of

which depreciation has to be provided for. These records shall inter alia, indicate

grouping of assets under each product or activity referred under rule 2, the cost of

each item of assets including installation charges, date of acquisition and rate of

depreciation.

(2) Also such records as will enable to identify and/or allocate gross fixed assets,

accumulated depreciation up to the year and net fixed assets under the heads; land

and buildings, plant and machinery, furniture and fixtures etc. employed for

products or activities referred under rule 2 along with the method and rate of

depreciation shall be maintained. The basis of apportionment of common assets to

the products or activities under reference shall also be indicated. In case of

revaluation of assets, the same shall be indicated separately and shall not be

included in the cost statement. The basis of allocation of depreciation on indirect

assets to the products or activities under reference shall be on equitable and

reasonable basis and applied consistently.

(3) The basis on which depreciation is calculated and allocated or apportioned to

various cost centers or departments and absorbed on all products shall be clearly

indicated in the cost records. If depreciation charged or chargeable to the cost

centers or departments is in excess or lower than the depreciation calculated by

applying the rates of depreciation prescribed under the provisions of sub-section f )

of Section 205 of the Companies Act, 1956 (1 of 1956), such amount of excess or

lower depreciation, shall be indicated clearly in the cost records. The cost records

shall also show the effect of such excess or lower depreciation as the case may be,

on the per unit cost of each respective product or activity. The cumulative

depreciation charged in the cost records, against any individual item of asset shall

not, however, exceed the original cost of the respective asset.

(4) The cost incurred on exploration and development of new oil fields shall be

treated and amortised in accordance with the method of costing followed, namely,

"Full Cost Method" or "Successful Efforts Method" etc. The method of costing

followed shall be disclosed and followed consistently.

7. SURVEY COST. -The proper records shall be maintained showing basin wise

details of survey cost, if any, incurred by geological field parties, seismic field

parties, gravity magnetic parties, shallow drilling parties, etc. These records shall

contain details of expenses incurred such as salaries and wages, explosives and

detonators, stores and spares, repair and maintenance, contractual payment if any,

depreciation etc so as to enable the company determine the cost of survey as per

respective Proforma. The records shall also indicate the treatment of survey cost.

8. EXPLORATION AND DEVELOPMENT DRILLING COST. - (1) The Proper records

shall be maintained for the expenses incurred in exploration and development of

area covered by a petroleum exploration license or a mining lease for exploration

for or production of crude oil and natural gas. These details shall be prepared for

onshore and offshore separately. The cost incurred for acquisition of exploration

license or mining lease and acquisition of properties shall be treated as deferred

revenue expenditure and charged off on a reasonable and equitable basis.

Adequate records shall also be maintained as per respective Proforma showing

details of exploratory drilling or development expenses incurred on preparatory

cost, rig operation cost, transport, well maintenance, other services and

depreciation etc. The records shail indicate details or successful or undecided

exploratory wells carried as wells-in-progress and successful wells after commercial

production created as 'producing properties'. The producing properties shall be

depleted applying unit of production method considering the proved developed

hydrocarbon reserves or any other methods as per the accepted standards and

practices.

(2) The proper records shall be maintained showing details of expenses incurred or

provision made in respect of dismantling, abandoning and restoring of on-shore or

off shore well sites abandoned during the year and basis followed for charging the

abandonment and restoration cost to the product.

(3) The proper records shall be maintained in respect of provision made towards

impairment of the properties.

OTHER OVERHEADS. - (1) The proper records shall be maintained for the

products or activities under reference showing the various items of expenses

comprising the ether overheads. These expenses shall be analysed, classified and

grouped according to activities, namely exploration and production of crude oil and

gases, refining and transportation etc. and administration, installation and

distribution of thesp nrcriucts in line with accepted standards and practices.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PARTH—SHC,3(J)1

(2) Where the company is manufacturing products other than the products or

activities under reference, the records shall clearly indicate the basis followed for

apportionment of the common overheads including head office expenses of the

company to such products and to products or activities under reference including

capital works as applicable. Where certain expenses forming part of overhead can

be identified with a particular activity or a product, such expenses shall be

segregated and charged to the relevant activity or product in the first instance and

thereafter the residual expenses under the above categories of overheads shall be

apportioned on a reasonable and equitable basis and applied consistently. The

overheads chargeable to capital works shall be indicated separately in the cost

records. The basis of apportionment or absorption of overheads to the cost or work

centers or departments and products shall be indicated in the cost records. The

records shall be maintained in such a manner as to indicate the details of other

overheads for exploration, production, transportation, refining, administrative and

marketing and distribution etc, as applicable.

10.ROYALTY OR TECHNICAL KNOW-HOW FEE OR LEASING CHARGES - (1)

The adequate records shall be maintained showing the royalty and/or technical

know-how fee including other recurring or non-recurring payments of similar nature

if any, made for the products or activities under reference to collaborators or

technology suppliers in terms of agreements entered into with them. Such records

shall be kept separately in respect of each such collaborator or supplier. The basis

of charging such amount, including lump sum payment and its treatment shall be

indicated in the cost records.

(2) In the case of leasing arrangements, proper records shall be maintained

showing details of terms and conditions, leasing charges paid or payable as well as

received or receivable.

11. RESEARCH AND DEVELOPMENT EXPENSES. - (1) The Proper records showing

the details of expenses, if any, Incurred by the company for the research and

development work on the products or activities covered under these rules according

to the nature of development of products i.e. existing or new product or processes,

development of process of manufacture, existing and new, design and development

of new plant facilities and market research for the existing and new products etc.,

shall be maintained separately. The records shall also indicate the payments made

to outside parties for the research and development work.

(2) The method of charging these expenses to the cost of products or activities

under reference and all other products shall be indicated in the cost records.

Where the utility of such research and development work extends over more than

one financial year, such expenses shall be treated as deferred revenue expenses

and charged to the cost of production of the product or activities under reference

and all other products if any, on a reasonable basis and applied consistently in line

with the accepted standards and practices. The detailed criteria on which it is

decided to extend the utility period of these expenses to more than one financial

year shall be disclosed in the cost records. The following criteria, which are only

indicative and not exhaustive, may be adopted in such cases:

(i) the output or process is clearly defined and the costs attributable to the output

or process can be separately identified;

(ii) the technical feasibility of the output or process has been demonstrated;

(iii) the management of the enterprise has indicated its intention to produce and

market or use the output or process;

(iv) there is a reasonable indication that current and future research and

development costs to be incurred on the project together with expected

production, administrative and selling costs are likely to be more than covered

by related future revenues or benefits; and

(v) adequate resources exist or are reasonably expected to be available to

complete the project and market the output or process.

(3) The expenses incurred by the Research and Development Department for

providing technical know-how to outsiders shall be recorded separately and

excluded from the cost of products or activities under reference. The amount

recovered for providing technical know-how to outsiders shall also be indicated

separately and excluded from the income arising from the sale of output under

reference.

12. QUALITY CONTROL. - The adequate records shall be maintained to indicate the

expenses incurred in respect of quality control department or cost centre for

products or activities under reference. Where these services are also utilised for

other products of the company, the basis of apportionment to products or activities

under reference and to other products shall be equitable and clearly indicated in the

records and applied consistently.

13.TRANSPORTATION EXPENSES. - The proper records shall be maintained

showing quantity transported, distance covered and cost incurred for transporting of

crude oil and gas referred to in ruie 2 by any of the modes of transport such as

pipeline, ocean tankers and rail or road from the Central Tank Farm, Oil Collecting

Stations and oil dispatch points, Gas Collecting Stations and gas dispatch points, or

Process Platforms etc., as the case may be. The record shall also indicate the

capacity of pipeline, throughput handled, its maintenance and security personnel

cost etc. The record shall also indicate the cost of flow improver, chemicals used, if

any, to enable the company to determine cost of transportation as per respective

Proforma and quantity of additional petroleum products pumped through pipelines

to meet higher seasona! demand.

14. PACKING EXPENSES. - In case of packing of products under reference for retail

sales or retail marketing, the proper records shal! be maintained showing the

quantity and cost of various packing materials and other expenses incurred on

packing for marketing of petroleum products. Where such expenses are incurred in

common for other products also the basis of apportioning the expenses between

the relevant products shall be clearly indicated in the cost records and applied

consistently.

15. MARKETING and DISTRIBUTION EXPENSES. - The proper record shall be

maintained for the quantity handled, stock loss, if any, and expenses incurred on

marketing under various heads such as main installation, distribution and

administration etc. The cost of marketing and distribution shall be indicated in

'respective Proforma.

3139GI/2002—6

„ _ _ _ _ _ _

THE GAZETTE OF fNDIA: EXTRAORDINARY

|PAKIT1—SF.C,3(J)1

16. EXPENSES OR INCENTIVES ON EXPORTS. - The proper records showing the

expenses incurred on the export sales, if any, of the product under reference shall

be separately maintained so that the cost of export sales can be determined

correctly. Separate cost statement shall be prepared for product exported giving

details of export expenses incurred and incentive earned. In case, duty free imports

of Input materials are made, the cost statements should reflect this fact.

17. INTEREST AND OTHER BORROWING COSTS. - The proper records shall be

maintained for money borrowed for each project and/or working capital and interest

charge thereon. The amount of interest and other borrowing costs shall be allocated

or apportioned to the products or activities under reference and other products or

activities on a reasonable and equitable basis, and applied consistently. The basis

of further charging of the share of the interest and other borrowing costs to the

various types of such products shall also be reasonable and equitable and the

same shall be followed consistently. The basis of such allocation or apportionment

shall be spelt out clearly in the cost records and statements. Net interest and other

borrowing costs incurred for Project under execution shall be capitalised for the

period up to the date the project is ready to commence commercial activities.

However, capitalisation of borrowing costs should be suspended during extended

periods in which active development is interrupted.

18. WORK IN PROGRESS AND FINISHED STOCK. - The method followed for

determining the cost of work in progress and finished stock of the outputs shall be

indicated in the cost records so as to reveal the cost element that have been taken

into account in such computation. The appropriate share of conversion cost up to

the stage of completion shall be taken into account while computing the cost of

work in progress. The method adopted for determining the cost of work in progress

and finished goods shall be followed consistently.

19. COST STATEMENTS. - (1) The Cost statement showing details of exploration,

finding, production, refining and transportation etc. and all elements of cost of

current financial year and previous year shall be prepared for the process and

adopted for producing, processing and manufacturing of the products or activities

referred under rule 2 in Proformae A to I.

(2) The output emerging from a process, which forms input for a subsequent

process shall be valued at the cost of production up to the previous stage.

20. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS. - (1) The Cost

statements shall be reconciled with the financial statements for the financial year

specifically indicating the expenses or incomes not considered in the cost records

or statements so as to ensure accuracy and to adjudge the profit of the products or

activities under reference with the overall profit of the company. The variations, if

any, shall be clearly indicated and explained.

(2) A statement showing the total expenses incurred and income received by the

company under different heads of accounts and the share applicable to the other

activities or products shall be prepared and reconciled with the financial statement.

21. ADJUSTMENT OF COST VARIANCES. - Where the company maintains cost

records on any basis other than actual such as standard costing, the records shall

indicate the procedure followed by the company in working out the cost of the

activities and services under such system. The cost variances shall be shown

against the separate heads and analysed into material, labour, and overheads and

further segregated into quantity, price and efficiency variances. The method

followed for adjusting the cost variances in determining the actual cost of the

product shall be indicated clearly in the cost records. The reasons for the variances

shall be duly explained in the cost records and statements.

22.STATISTICAL RECORDS. - (1) The records regarding available rig days, operation

hours or plant hours and actual utilisation, as may be applicable shall be maintained

for products or activities under reference. Suitable records for computation of idle

time of rig, plants, American Petroleum Institute (API) gravity of crude oil, its

Sulpher contents, storage capacity at various marketing installations etc. as may be

applicable shall also be maintained and analysed.

(2) The adequate records shall be maintained to enable the company to identify the

capital employed, net fixed assets and working capital separately for different

products, activities and other products and other activities to the extent such

elements are separately identifiable. Non-identifiable items shall be allocated on a

suitable and reasonable basis to different products, activities and other products

and other activities. Fresh investments on fixed assets that have not contributed to

the production or processing of products or activities under reference during the

relevant period shall be indicated in the cost records. The records shall, in addition,

show assets added as replacement and those added for increasing existing

capacity.

(3) In the case of new major projects for product or activity referred ;o under rule 2,

proper records shall be maintained indicating the funds raised^r~om different

sources, their utilisation, stage-wise cost incurred and progress of th project as per

the project report. Cost and time over run shall also be analysed wiin reference to

the cost of services or activity and profitability of the company.

(4) Whenever WTO provisions are attracted, proper records shall be maintained to

identify the competitiveness of the product in the domestic as well as global market.

Adequate statistical records shall also be maintained to identify the market share of

the product manufactured and the likely impact thereon on account of competitive

goods imported into the country.

23. CAPTIVE CONSUMPTION. - If the products under reference are used for captive

consumption, proper records shall be maintained showing the quantity and cost of

each item of output transferred to other department or work centers of the company

for self-consumption and sold to outside parties separately. The rates at which the

transfers are affected shall beat cost only.

24. POLLUTION CONTROL. - Expenditure incurred by the company on various

measures to protect the environment like effluent treatment, con' 'M . pollution of

air, water, etc., should be properly recorded.

25.HUMAN RESOURCES DEVELOPMENT. - Expenditure incurred by the company

on the human resources development activity shall be recorded separately.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(i)]

26. INTER COMPANY TRANSACTIONS. - (1) in respect of related party transactions

or supplies made or services rendered by a company to its holding company or

subsidiary or a company termed "related party relationship" as defined below and

vice-a-versa, records shall be maintained showing contracts entered into,

agreements or understanding reached in respect of:

(a) purchase and sale of raw materials, finished products, process

materials, chemicals and rejected goods including scraps, etc;

(b) utilisation of plant facilities and technical know-how;

(d) administrative, technical, managerial and/or any other consultancy

services;

(e) purchase and sale of capital goods including plant and machinery;

(f) any other payment related to production, processing or manufacturing

of product under reference.

These records shall also indicate the basis followed for arriving at the rates charged

or paid for such products or services so as to enable determination of the

reasonableness of such rates in so far as they are in any way related to product

under reference.

(2) The transactions by the following "related party relationships" shall be covered

under sub rule (1): -

(a)

enterprises that directly, or indirectly through one or more intermediaries,

control, or are controlled by, or are under common control with, the reporting

enterprise

(this

includes

holding companies, subsidiaries and fellow

subsidiaries);

(b)

associates and joint ventures of the reporting enterprise and the investing

party or venturer in respect of which the reporting enterprise is an associate or

a joint venture;

(c)

individuals owning, directly or indirectly, an interest in the voting power of the

reporting enterprise that gives them control or significant influence over the

enterprise, and relatives of any such individual;

(d)

key management personnel and relatives of such personnel; and

(e)

enterprises over which any person described in (c) or (d) is able to exercise

significant influence. This includes enterprises owned by directors or major

shareholders of the reporting enterprise and enterprises that have a member

of key management in common with the reporting enterprise.

However, the following shall not be deemed as "related party relationships": -

(a) Two companies simply because they have a Director in common,

notwithstanding paragraph (d) or (e) above (unless the Director is able

to affect the policies of both companies in their mutual dealings);

(b) a single customer, supplier, franchiser, distributor, or general agent with

whom an enterprise transacts a significant volume of business merely

by virtue of the resulting economic dependence; and

enterprise by virtue only of those dealings (although they may

circumscribe the freedom of action of the enterprise or participate in its

decision-making process);

i. providers of finance;

ii.trade unions;

iii public utilities;

iv Government departments and Government agencies including

Government sponsored bodies.

Explanations; - for the purpose of these rules, -

(a) "related party relationships" means parties who are considered to be related

if at any time during the reporting period one party has the ability to control the other

party or exercise significant influence over the other party in making financial and/or

operating decisions;

(b) "related party transaction" means a transfer or resources or obligations

between related parties, regardless of whether or not a price is charged;

the voting power of an enterprise; or

(ii) control of the composition of the Board of Directors in the case of a company or

of the composition of the corresponding governing body in case of any other

enterprise; or

(iii) a substantial interest in voting power and the power to direct, by statute or

agreement, the financial and/or operating policies of the enterprise;

(d) "Significant Influence" means participation in the financial and/or operating

policy decisions of an enterprise, but not control of those policies;

(e) "an Associate" means an enterprise in which an investing reporting party has

significant influence and which is neither a subsidiary nor a joint venture of that

party;

(f) "a Joint venture" means a contractual arrangement whereby two or more

parties undertake an economic activity, which is subject to joint control;

(g) "joint control" means the contractually agreed sharing of power to govern the

financial and operating poiicies of an economic activity so as to obtain benefits from

it;

(h) "key management personnel" means those persons who have the authority

and responsibility for planning, directing and controlling the activities of the reporting

enterprise;

(i) "relative" means in relation to an individual, means the spouse, son, daughter,

brother, sister, father and mother who may be connected by blood relationships;

(j) "holding company" means a company having one or more subsidiaries;

(k) "subsidiary" means a subsidiary within the meaning of Section 4 of the

•companies Act, 1956(1 of 1956);

(I) "fellow subsidiary" means a company is said to be a fellow subsidiary of

another company if both are subsidiaries of the same holding company;

0") "state-controlled enterprise" means an enterprise, which is under the control

of the Central Government or State Government.

-ft

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(i)]

PROFORMA 'A'

Name of the Company:

Statement showing the cost of Utilities like (1) Water (2) Power etc. produced

or consumed during the year/period:

Quantitative Information:

Serial

Number

Particulars

Installed capacity

Quantity produced

Capacity utilisation (%)

Quantity re-circulated

Quantity purchased, if any

Self consumption including

losses (to be specified)

Net units available

Unit

Current year

Previous year

Cost Information:

Serial

Number

A1.

10.

.11.

Particulars

Materials or

Chemical (specify)

(a)

(b)

(c)

Utilities (specify)

(a)

(b)

(c)

Wages and

Salaries

Consumable Stores

and Spares

Repairs and

Maintenance

Depreciation

Other Direct

Expenses, if any

Other Overheads

TOTAL

Less: Credit, if any

Net Total

Quan-

tity

Rate per

unit

(*»•)

Amount

(Rup«M

In too)

Cost i

Current

Year

(Rupees)

>er Unit

Previous

Year

(Rupees)

Apportioned to cost

centre or activity

4.etc.

Notes:

Separate cost sheet is to be prepared for each major utility having

significant impact on cost, whenever such utility is functionally independent

and not forming part of composite unit.

If any of the utilities, which are manufactured by the company, is sold to

outside parties, proper credit should be given in the cost of production of the

respective utility.

The Proforma may be modified suitably including for method of accounting

followed e.g. successful effort method or full cost method to incorporate unit

specific features, if any, indicating reasons thereof.

Delete items not applicable.

*._

J'i*i^^irX^^fl^!l^^-I'^AQ^PlNAW

J ^P^i H—SKC:. 3(i)l

Name of the company:

Statement showing the details of Survey Cost: during the year

ending:

•

Cost Information:

Serial

Num

ber

5^—

Particulars

Materials

a) Explosives

and

Detonators

b)Others(to be specified)

Brought

Forward

(Rc^c-s In

Salaries and Wages

Contractual Services

(a) Shot Hole Drilling

(b) Other

Contractual

Payments

Other direct Expenses

(a) Data Processing cost

(b) Data Interpretation Cost

Repairs and Maintenance

Depreciation

Royalty or Technical Know-

How or Lease Rent

Administration. Overheads

Others (to be specified)

Total Survey Cost

Currant year

Amount

(Rupees in

?acs)

Total

Amount

(Rupees in

(acs)

Status

SI.NO.

Particulars

Cost of Survey transferred to Producing,

Properties.

Cost of Survey directly charged off to Cost

of production

Cost of Survey carried forward

Others (to be specified)

Total Survey Cost

Total

Notes: -

1. The Proforma may be modified suitably including for method of accounting

followed e.g. successful effort method or full cost method to incorporate unit

specific features, if any, indicating reasons thereof.

2. Delete items not applicable.

PROFORMA 'C

Name of the Company

Area under Exploration or development: Offshore or Onshore

Statement showing Cost of Exploratory drilling or Development drilling during the

year

Quantitative Information

SI.No.

Particulars

Meter drilled

Status of Wells

(a) Under Drilling

(b) Under Testing

(c)Dry

(d) Hydrocarbon Bearing

(e) Service Wells

Unit

Current

Year

Previous

Year

Cost Information

SI.No.

Particulars

Preparatory Cost

(a) Land

(b) Approach Road

(d) Others

(To

specified)

(e) Total Preparatory Cost

Drilling - cost of Rigor Drill

ship Operation

(a) Material Cost

(i) (to be specified)

(ii)

(iii) Total

(b) Salaries and Wages

(d) Repair and Maintenance

(e) Others (to be specified)

Total

Production Testing Cost

Other direct expenses

(a) Cementing

(b) Logging

Well Materials

Depreciation

(a) Rigs

(b) Casing

(d) Drill Pipes

Brought

forward

Amount (Rs

Current

Year

•)

Total

3139GI/2002—7

THE GAZh'l'I'fc: OF INDIA: EXTRAORDINARY

[PART II—SKC. 3(i)l

10.

11.

12.

(e) Well Head

(f) Others (to be specified)

Royalty or Technical know-

how

Lease rent, if any

Research and Development

Others (to be specified)

Administration Overhead

Total Cost

III

Status

SI.No.

Particulars

Cost

successful

wells

transferred to producing property-

Service

Wells

transferred to

Producing Properties.

Cost of abandoned or dry wells

charged off

Cost of wells in progress carried

forward

Others (to be specified)

Total

Exploration

Drilling

Development

Drilling

Total

Note:

(1) Separate proforma to be prepared for Exploratory Drilling and

Development Drilling.

(2) The Proforma may be modified suitably including for method of

accounting followed e.g. successful effort method or full cost method to

incorporate unit specific features, if any, indicating reasons thereof.

(3) The column for "Brought forward" under the head "Amounts (Rs)" stands

for amount charged towards wells-in-progress during the previous year.

(4) Separate details shall be maintained for the expenses incurred for

offshore and onshore activities.

(5) Delete items not applicable.

Proforma 'D'

Name of the company:

Statement showing the Cost of Finding Proved Reserves Established during

the year ending:

Quantitative Information:

serial

Number

Particulars

Number of wells for exploratory drilling

Number of wells for development drilling

Total Meterage drilled

Proved Reserves

Established/Proved in terms of Oil

equivalent

unit

Current

Year

Previous

Year

Cost Information:

Serial

Numb

Particulars

Survey Cost

(From Proforma B)

Exploration Drilling

Cost

(From Proforma C)

Development

Drilling cost

(From Proforma C)

Others (to be

specified)

Total Finding Cost

Amount

Current Yor

(RUIMM In lacs)

Previous. Y«ar

(Rup«M In taca)

Cost per

Unit

Currant Y«ar

(RUIMM)

Previous. Yiir

(RUIMM)

Notes: -

I.The Proforma may be modified suitably including for method of

accounting followed e.g. successful effort method or full cost method to

incorporate unit specific features, if any, indicating reasons thereof.

2. Delete items not applicable.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC, 3(i)l

Proforma 'E'

Name of the company:

Statement showing the Cost of intermediate-activities like Lifting, Conveying,

Treating and Transportation of Crude Oil and Natural Gas during the year

ending:

Onantifatlvp Information¹

Serial

Number

10.

11.

Particulars

Gross Production

Crude Oil

Natural Gas

Used for Mining Operation

Crude Oil

Natural Gas

Transit Loss

Crude Oil

Natural Gas

Unavoidable loss or flaring

Bottom Sediment and Water

Net production

Crude Oil

Natural Gas

Net Production In appropriate oil

equivalent terms

Crude oil

Natural Gas

T ..al in appropriate oil equivalent terms

Transferred to Refinery or Extraction

plant

Crude Oil

Natural Gas

Sales

Crude Oil

Natural Gas

Trunk pipeline capacity for tra^^rtation to

delivery point

Quantity throughput by pipeline

Unit

Current

Year

Previous

Year

Cost Information:

A. Llftlno

Number

particulars

Salary and Wages

Power, Fuel and

Water

Stores and pp^res

or chemicals

Logistic Se^ices

or Transport

Amount

Currant YMr

JRupMs)

Prevfc

YMr

JRllIMM)

uost per

Unit

Current YMr

(RupoM)

Previous. YMr

(Rupees)

10.

11.

Allocation

Repairs and

Maintenance

Well Services

(a) Work over

(b) Water

Injection

Other Indirect Cost

including

Overhead

(a) Service

Overheads

(b)Administration

Overheads

(c)Others (to be

specified)

Depreciation

Depletion

Other costs (to be

jsgecified)

TOTAL LIFTING

COST

B. Cost of Conveying and Treating

sonai

Number

10.

11.

Particulars

Salary and Wages

Consumables

Demulsifier and

Desalter

Other Stores and

spares or chemicals

Logistic Services or

Transport Allocation

Repairs and

Maintenance

Power and Fuel

Allocation

General

Administration

Overheads

Depreciation

Others to be

specified

TOTAL COST OF

CONVEYING and

TREATING

Amount

Currant Yaar

(Rupoet)

Previous. Y»»r

(Rupwt)

Cost per

Unit

Currant Year

(Rupon)

Previous. YMT

(RupeM)

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(i)]

C. Cost of TransDortatlon of Crude Oil or Natural Gas

Serial

Num

ber

10.

11.

12.

13.

Particulars

Salary and Wages

Consumables

(a) Pour Point

Depressant (PPD) or

Flow Improver

(b) Others

Crude Oil

Conditioning Plant

(COCP) Charges

Stores and spares

or chemicals

Logistic Services or

Transport Allocation

Repairs and

Maintenance

Power and Fuel

General

Administrative

Overheads

Depreciation

Others to be

specified

TOTAL COST OF

TRANSPORTATION

Less: Amount

received separately

from customers, if

any.

Net Cost

Amount

Current Y«ar

PMVIMM. Y«ar

(RupMt)

Cost per

Unit

Current YMT

(RupaM)

Previous, Y w

(RupMt)

Notes: -

1 Separate Proforma shall be prepared separately for onshore and offshore

production.

2. The administration overheads shall be included in the cost of crude oil or gas

only to the extent they contribute in putting the goods or services produced at

the present location and condition. The balance of administrative overheads, if

any, shall be included in the cost of goods or services sold. The proforma may

be amended accordingly, if required.

3. The Proforma may be modified suitably including for method of accounting

followed e.g. successful effort method or full cost method to incorporate unit

specific features, if any, indicating reasons thereof.

4. Wherever any company is engaged in transporting of crude oil or natural gas or

other petroleum products, separate details as per C above shall be filled in

respect of such transportation activity with suitable modifications, wherever

required.

Delete items not applicable.

Proforma 'F*

Name of the company:

Name and address of the crude producing unit:

Statement showing the Cost of Production of Crude Oil and Natural Gas

during the year ending:

1. Quantitative Information:

Serial

Number

Particulars

Gross Production

Used for Mining Operation

Transit Loss

Net Production

Unit

Current

Year

Previous

Year

i. uosi inrarmauon

Serial

Number

10.

11.

12.

13.

Particulars

Finding Cost (From

Proforma D)

Lifting Cost

(From Proforma E)

Cost of Conveying and

Treatment

(From Proforma E)

Cost of Exploratory or

Development Drilling -

Charged off, if any.

Cost of transportation, if

any (from Proforma E)

Cost of Survey charged

off, if any

Provision for

Impairment

Provision for

Abandonment

Overhead:

(a) Project

(b) Regional

Royalty on production, if

any

Statutory levies on

production, if any

Other Expenses (to be

specified)

Total Cost of

Production

Amount

Currant

Y«ar{Ru|MM

In lacs

Previous

YMrJRuptn

hi toes)

cost per

Unit

Currant Yasr

(RUPMS)

cost per

Unit

Previous. Ysar

(Rupsss)

THE GAZETTE OF INDIA: EXTRAORDINARY

IPAR I II—SEC. 3(i)l

B Transferred to:

SI.

No.

Products

Transferred to:

1) Refinery or

Extraction plant:

Crude oil

Natural Gas

2).Sales:

Crude oil

Natural Gas

3).Related Party

transfer:

Crude oil

Natural Gas

Basis of

apportionment

of cost

Actual

quantity

Equivalent

quantity

Value (Rs.

in Lakhs)

Notes: -

(1) Separate cost statement shall be maintained in respect of Crude Oil and

Natural Gas.

(2) The Proforma may be modified suitably Including for method of accounting

followed e.g. successful effort method or full cost method to incorporate unit

specific features, if any, indicating reasons thereof.

(3) If separate charges are levied from customers for transporting of Crude

Oil or Natural Gas from CTF to delivery point,, only the net cost shall be

shown in point 5 above.

(4) Delete items not applicable.

_57

Proforma 'G'

Name of the company:

Name and address of the Fuel refining unit:

Statement showing the summary Cost of Refining for the year ending:

Name of the Product:

Quantitative Information:

Serial

Number

Particulars

Installed capacity

Crude or Gas refined

Capacity utilisation

Fuel and loss (quantity)

Fuel loss (%)

UNIT

IMMTPA*

MMTPA*

%AGE

Current

Year

Previous

Year

*MMTPA: - Million Metric Tone Per Annum

II Cost Information:

Serial

Number

A1.

Particulars

Material

(a) Cost of captive

crude oil or gas

power transferred,

i) (Oil field to be

specified)

ii)

i<i)

(b) Transportation

Cost, if any.

(d) Total

Crude oil or gas

Purchased

(i) Indigenous

(ii) Imported

Process material,

Consumable stores

and spares

Utilities

(a) Water

(b) Steam

(d) Others (specify)

(e) Total

Wages and Salaries

Quantity

Rate

(Rupees

per tonne)

Amount

(Rupees

in lacs)

Cost per

Unit

Current.

Year

Previous

Year

3139GI/2002—8

THE GAZK'ITK OF INDIA: EXTRAORDINARY

[PART II—SKC. 3(iM

10.

11.

12.

13.

14.

15.

16.

Repair and

Maintenance

Depreciation

Royalty or technical

Know-how or Lease

rent

Quality Control

Research and

development

Other direct expenses

(to be specified)

Administrative

Overhead

(a)Salaries and wages

(b)Others (specify)

(c)Total (a+b)

Total (1 to 12)

Stock Adjustment

Less Credit for

wastage or by

products

(a) (Specify)

(b)

(c)

Total Cost

Cost ADDortloned to loint nroducts

Serial

Number

Products

Total cost Apportioned to:

I) Related Party Transfer

a) (to be specified)

ii) Sales

a)(to be specified)

Mi) Others

a) (to be specified)

Basis of

apportionment

of cost

Actual

quantity

Equivalent

Quantity

Value

Rs.or

Lakhs

Notes: -

(1) If a product emerging from one-process forms the raw material for

subsequent process or other products covered under rule 2, separate cost

statement of production under this proforma (suitably modified, if

necessary) shall be maintained for each process or products such as

manufacture of base oils.

(2) In case a joint product is sold without further processing, details in

regard to quantity sold, cost of sales and average sales realization etc shall

be indicated in appropriate statement. If these are further processed,

separate cost statement as per this proforma or any other form as thereof

shall be prepared.

(3) The basis on which cost is apportioned to joint products shall be

indicated in this proforma.

(4) The Proforma may be modified suitably including for method of

accounting followed e.g. successful effort method or full cost method to

incorporate unit specific features, if any, indicating reasons thereof.

(5) Delete items not applicable.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—Sue. 3ffl|

PROFORMA 'H'

Name of the company:

Name and address of Refinery or

Plant:

Statement showing the Cost of Sales of (Name of the product):

I QUANTITATIVE INFORMATION

Serial

Number

Particulars

Opening Stock

Gross Quantity

Produced

Quantity purchased

Loss

Net availability

Used for mining

operation

Captive Consumption

Quantity sold

Closing Stock

Unit

Current year

Previous year

II COST INFORMATION

Sr.

No.

Particulars

Cost of captive Production

Cost of purchases

Stock Adjustment

Add: Opening stock

Less: Closing stock

Packing cost,if any

Statutory Levies

a)Royalties on sales

b)Cess

c)Excise duty

d)Sales tax

e)Octroi

f)Port Trust charges

g)Others

Total

Other Expenses (to be

specified)^

Selling and Distribution

Expenses

(a) Salaries and wages

(b) Freight and

Transport Charges

selling agents

Unit

Qty

Rate

Total cost

(Lakhs)

Cost per unit

Currant

Ytar

JR»LJ

Previous

Year

(Rs)

10.

11.

13.

14.

15.

16.

17.

18.

19.

(d) Advertisement

expenses

(e) Others

Total

Total Cost of Sales

Borrowing charges

a) For manufacturing

activity referred to in

Rule 2

b) Others

ci Total

Total cost

Sales Realization

Less: Excise duty

Net sales Realisation

Margin

Add: Export Benefits and

incentives, if any

Total Margin (including

export benefits)

Ex-factory price (excluding

sales tax etc.)

Maximum retail price

(excluding sales tax etc.)

Maximum retail price, if

any, prescribed by the

Government or statutory

regulatory body etc.

Notes: -

1. Separate statement shall be maintained in respect of each major product.

2. Sales realization for quantity sold at price notified or fixed by Government If

any and at the price fixed by company shall be indicated separately.

3. Separate proforma shall be prepared for the quantity sold with in the

country and the quantity exported. Expenses incurred on export and the

incentive earned thereon shall be indicated in the proforma applicable for

the quantity produced and exported.

4. The Proforma may be modified suitably including for method of

accounting followed e.g. successful effort method or full cost method to

incorporate unit specific features, if any, indicating reasons thereof.

5. Delete items not applicable.

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(01

PROFORMA 'I'

Name of the company:

Statement showing the allocation or apportionment of total expenses or Income of

the company between service or activities covered under rule 2 and other activities

during the year ending

Serial

Numb

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

Particulars

Direct Material

Process materials

Utilities

(a) Power

(b) Fuel

(d) Effluent

Treatment

(e) Other (specify)

Salaries and wages

Consumable Stores

and Spares)

Repairs and

Maintenance

Depreciation or

Depletion etc.

Transportation Charges

Quality Control

Cess

Royalty or Technical

Know-how

Other Statutory Levies

Lease rent

Research and

development

Works overhead

Administrative

overhead

Other direct expenses

(to be specified)

Adjustment in

difference between

opening and closing

work in progress

Less credit for

recoveries

Total

expenses

as per

audited

financial

accounts.

Share applicable

to activities

covered under

rule2

Explora-

tion

Refining

Share

applicable

to other

activities

Basis of

alloca-

tion

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

Less self consumption,

if any,

Adjustment in

difference between

opening and closing

stock of finished goods

Total

PackingLExpenses

Borrowing charges

Selling and Distribution

expenses

Any other expenses not

included in cost

Any other income not

considered in cost

Total cost excluding

Excise duty

Total cost including

Excise duty

Total Sales realization

including Excise Duty

Add: Export Benefit, if

any

Margin (31-30)

Notes: -

1) Cost centers are illustrative only.

2) All items of income and expenditure in this Proforma shall be reconciled

with the financial accounts for the relevant period/year.

3) The Proforma may be modified suitably including for method of

accounting followed e.g. successful effort method or full cost method

to incorporate unit specific features, if any, indicating reasons thereof.

4) Delete items not applicable."

(F. No. 52/15/CAB-20O1]

RAJTVMEHRISHI, Jt. Secy,

Printed by the Managor, Govt, of India Press, Ring Road, Mayapuri, New Delhi-I10064

and Published by the Controller of Publications, Delhi-] 1005-4.