1.  We have audited the attached Balance Sheet of BEML Limited as at
 31st March 2011, the Profit and Loss Account and the Cash Flow
 Statement for the year ended on that date annexed thereto. These
 financial statements are the responsibility of the Company''s
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India.  Those standards require that we plan and
 perform the audit to obtain reasonable assurance whether the financial
 statements are prepared, in all material respects, in accordance with
 an identified financial reporting framework and are free of material
 misstatement. An audit includes examining, on a test basis, evidence
 supporting the amounts and disclosures in the financial statements. An
 audit also includes assessing the accounting principles used and
 significant estimates made by management, as well as evaluating the
 overall financial statement presentation. We believe that our audit
 provides a reasonable basis for our opinion.
 
 3.  As required by the Companies (Auditors'' Report) Order, 2003 as
 amended by Companies (Auditor''s Report) (Amendment) Order, 2004
 (together ''the Order''), issued by the Central Government of India in
 terms of subsection (4A) of Section 227 of ''The Companies Act, 1956''
 (the ''Act'') and on the basis of such checks of the books and records of
 the Company as we considered appropriate and according to the
 information and explanations given to us, we give in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order.
 
 4.  Further to our comments in the Annexure referred to in Paragraph 3
 above we report as follows:
 
 a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit.
 
 b) In our opinion proper books of accounts as required by law have been
 kept by the Company so far as it appears from our examination of these
 books and proper returns adequate for the purpose of audit have been
 received from offices not visited by us.
 
 c) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 accounts maintained by the Company.
 
 d) In our opinion, the Balance Sheet, Profit and Loss Account and the
 Cash Flow Statement comply with the Accounting Standards referred to in
 Sub-section (3C) of Section 211 of the Companies Act, 1956.
 
 e) Without qualifying our opinion reference is invited to:
 
 1. Note No. D-3(ii) Schedule 23 in respect of claim from Railway Board
 in respect of wheel sets for Rs. 1480.60 lacs. The readability of this
 claim depends on the outcome of the representation which can not be
 presently be determined.
 
 2.  Note No. D-7, Schedule 23 in respect of non confirmation of various
 nominal balances. The impact on accounts, if any, is at present not
 ascertainable.
 
 3.  Note No. D-13 Schedule 23 in respect of non provision for the
 decline, other than temporary, in the value of investments in BEML
 Midwest Limited which depends on the outcome of legal proceedings.
 
 4.  Note No. D-l(v)&(vi) Schedule 23 for the recognition of sales of
 defence products to Ministry of Defence and sale of intermediary
 products to a Defence Research Establishment due to complex nature of
 such contracts and other reasons stated therein.
 
 f) Being a government company, the provisions of Sec 274(1 )(g) of the
 Act relating to disqualification of Directors are not applicable to the
 company in terms of notification no: GSR 829(E) dated 21st October
 2003.
 
 g) In our opinion and to the best of our information and according to
 the explanations given to us the said financial statements read with
 the significant accounting policies and the notes appearing in Schedule
 23 give the information as required by the Act in the manner so
 required, and give a true and fair view in conformity with accounting
 principles generally accepted in India:
 
 (A) In the case of the Balance Sheet, the state of affairs of the
 Company as at 31st March 2011;
 
 (B) In the case of the Profit and Loss Account of the profit for the
 year ended on that date; and
 
 (C) In the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO AUDITORS'' REPORT
 
 (Referred to in Paragraph 3 of our Report of even date on the Financial
 Statements of BEML Limited for the year ended 31st March, 2011)
 
 Auditors'' Report
 
 1.  (a) The Company is maintaining proper
 
 records showing full particulars including quantitative details and
 situation of fixed assets.
 
 (b) Fixed assets have been physically verified by the management during
 the year. No material discrepancies have been noticed on such
 verification.
 
 (c) The disposals of assets during the year were not substantial so as
 to affect its going concern status of the Company.
 
 2.  (a) The Company has conducted physical verification of inventories
 (excluding non moving inventory, materials lying with third parties and
 work in progress) during the year in accordance with the program
 designed to cover all items over a phased manner. In respect of
 materials with third parties these are confirmed by them in a few cases
 (Refer Note: D 2(b) Schedule 23). In our opinion the frequency of
 verification is reasonable.
 
 (b) The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the company and the nature of its business, except in respect of non
 moving inventory, materials lying with third parties and work in
 progress.
 
 (c) The Company has maintained proper records of inventories. No
 material discrepancies were noticed on physical verification.
 
 3.  The Company has not granted or taken any secured or unsecured loans
 to or from Companies, firms or such parties covered in the register
 maintained under Section 301 of the Companies Act, 1956.  Consequently
 clauses iii(a) to iii(g) of paragraph 4(iii) of the order are not
 applicable to the Company.
 
 4.  In our opinion and according to the information and explanations
 furnished to us, there are adequate internal control procedures
 commensurate with me size of the Company and the nature of its business
 for the purchase of Inventory and Fixed Asset and sale of goods and
 services.
 
 5.  There are no contracts or arrangement by the company with any party
 referred to in Sec 301 of the Companies Act 1956, which are to be
 entered in the register required to be maintained under that section
 and hence the requirement of reporting on the reasonability of such
 transactions having regard to the prevailing market prices made in
 pursuance of such contracts does not arise.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of provisions of Sec 5 8A, 58AA of the Companies Act, 1956
 and any other relevant provisions of the Act and the rules framed
 thereunder. Therefore, the provisions of Clause 4(vi) of the Order are
 not applicable to the company.
 
 7.  In our opinion, the Company has an internal audit system, the scope
 and coverage of which requires to be enlarged to be commensurate with
 the size of the Company and the nature of its business.
 
 8.  The Central Government has prescribed maintenance of cost records
 under Section 209(1 )(d) of the Companies Act, 1956 in respect of
 Internal Combustion Engines and Heavy Earthmoving Equipments
 manufactured by the company. We have broadly reviewed the cost records
 maintained by the company pursuant to the rules made by the Central
 Government for the maintenance of cost records and we are of me opinion
 mat, prima facie, the prescribed records have been made and maintained.
 We are not required to and, accordingly have not made a detailed
 examination of me records.
 
 9. (a) The Company is generally regular in depositing the undisputed
 statutory dues including Sales Tax, Provident Fund, Investor Education
 and Protection Fund, Employees State Insurance, Income Tax, Wealth Tax,
 Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues
 with appropriate authorities and no undisputed amounts in respect of
 these cases were outstanding for a period of more than six months from
 the date they became payable as at the end of the year.
 
 (b) The details of disputed Income Tax/ Sales Tax/Customs Duty/Wealth
 Tax/ Service Tax/Excise Duty/Cess as at the end of the year that have
 not been deposited are detailed hereunder:
 
 S. Name of       Nature of       Amount  Period to   Forum where the 
 No the Statute   the dues      (Rs.Lacs) amount      dispute is pending
                                          relates
 
 1.               Excise duty     197.90  From         CESTAT, 
                  including               2003-04 to   Bangalore.
                  interest and            2007-08
                  penalty
 
 2.               Excise duty      56.15  From         Other Appellate
                  including               2005-06 to   authorities.
     Central      interest and            2010-11
     Excise       penalty.
 
 3.  Act 1944     Auto cess       125.22  From         Commissioner of
                                          1999-00 to   CE, Bangalore.
                                          2010-11
 
 4.               Service tax     134.68  2004-05      CESTAT
 
 5.               Service tax      80.29  2003-04to    Other Appellate
                                          2009-10      authorities
 
 6.               Customs        5269.86  2001-02      Original authority
      The         duty.                   and
      Customs                             2004-05
      Duty Act,
 
 7.   1962.       Customs          13.39  2006-07      Commissioner
                  duty.                               (Appeals)
 
 8.               Sales Tax        55.05  1998-99      Sales Tax Tribunal
      Sales Tax
 9.   Act of      Sales tax       116.99  1999-2000,   Revision &
      respective                          and from     Appellate Board.
      States                              2003-04 to
                                          2005-06
 
 10.              Sales tax       323.08  From         Other appellate
                                          1990-91 to   authorities
                                          2007-08
 
 11.  Income tax  Disallowance    219.45  2005-06      ITAT, Bangalore.
      Act, 1961   of technical
                  know-how
                  fee paid
 
 Total                           6592.06
 
 Note: A sum of Rs. 262.35 Lacs have been paid towards the above
 disputed statutory dues under protest.
 
 10.  The Company does not have accumulated losses at the end of the
 financial year and it has not incurred cash losses in the financial
 year under review and in the immediately preceding financial year.
 
 11.  Based on our audit procedures and according to the information and
 explanation given to us and in our opinion the Company has not
 defaulted in repayment of dues to banks.  There are no dues to any
 financial institution or debenture holders.
 
 12.  In our opinion and according to the explanations given to us and
 based on the information available, the Company has not granted any
 loans or advances on the basis of security by way of pledge of shares/
 debentures and other securities.
 
 13.  The Company is not a chit fund or a nidhi / mutual benefit
 company/ society. Therefore, clause 4(xiii) of the Order is not
 applicable to the Company.
 
 14.  In our opinion the Company is not dealing in shares, securities,
 debentures and other investments. Hence clause 4(xiv) of the Order is
 not applicable to the Company.
 
 15.  The Company has given guarantee to loan taken by another Company
 from banks. This includes guarantee given to BEML Midwest Limited for
 Rs. 1912.50 Lacs to a bank. The terms and conditions, prima facie, in
 our opinion, are not prejudicial to the interest of the Company. We are
 unable to comment on whether the guarantee given on behalf of BEML
 Midwest is prejudicial to the interest of the Company in view of the
 various developments as given in note No D-13 of Schedule 23.
 
 16.  The term loans availed by the Company have been applied for the
 purposes for which the loans were obtained.
 
 17.  According to the information and explanation furnished to us and
 on an overall examination of the Balance Sheet of the Company as at
 31st March 2011, no funds raised on short-term basis have been used for
 long-term purposes.
 
 18.  During the year the Company has not made any preferential
 allotment of shares.
 
 19.  The Company has not issued any debentures and hence clause 4(xix)
 of the order relating to creating of charge is not applicable.
 
 20.  The Company has raised monies through Follow on Public Offering in
 the earlier year and the status of utilization of funds is disclosed by
 the management in Note No. D-6, Schedule 23 and the same has been
 verified by us.
 
 21.  According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
 For PADMANABHAN RAMANI & RAMANUJAM
 
 Chartered Accountants 
 
 FRN: 002510S
 
 (G VIVEKANANTHAN)
 
 PARTNER
 
 Membership No.28339
 
 Place: Bangalore
 
 Date :31st May 2011