1.  System of Accounting:
 
 i. The Company follows the mercantile system of accounting and
 recognises income and expenditure on an accrual basis, except those
 with significant uncertainties.
 
 ii. Financial Statements are based on historical cost. These costs are
 not adjusted to reflect the impact of the changing value in the
 purchasing power of money.
 
 iii. The preparation of financial statements in conformity with
 generally accepted accounting principles requires management to make
 estimates and assumptions that affect the reported amounts of assets,
 liabilities, revenue and expenses and disclosure of contingent assets
 and liabilities. The estimates and assumptions used in the accompanying
 financial statements are based upon management’s evaluation of the
 relevant facts and circumstances as of the date of the financial
 statements. Actual results may differ from the estimates and
 assumptions used in preparing the accompanying financial statements.
 Any revisions to accounting estimates are recognised prospectively in
 current and future periods.
 
 2.  Fixed Assets and Depreciation:
 
 A.  Fixed Assets are stated at their original cost of acquisition
 including incidental expenses related to acquisition and installation
 of the concerned assets. The Fixed Assets manufactured by the Company
 are stated at manufacturing cost. Fixed Assets are shown net of
 accumulated depreciation (except free hold land) and amortisation. Also
 refer Para 4(i).
 
 B.  Expenditure on New Projects and Expenditure during Construction
 etc.:
 
 In case of new projects and in case of substantial modernisation or
 expansion at the existing units of the Company, expenditure incurred
 including interest on borrowings and financing costs of specific loans,
 prior to commencement of commercial production is capitalised to the
 cost of assets. Trial Run expenditure is also capitalised.
 
 C.  Depreciation and Amortisation:
 
 a) Lease hold land and Power Line:
 
 Premium on leasehold land is amortized over the period of lease and
 expenditure on power line is amortized over a period of seven years.
 
 b) Other Fixed Assets:
 
 i. Depreciation on additions to Buildings, Plant & Machinery, Railway
 Sidings, Electrical Installations and Aircrafts is being provided on
 Straight Line Method basis in accordance with the provisions of
 Section 205(2)(b) of the Companies Act, 1956 in the manner and at the
 rates specified in Schedule XIV to the said Act.
 
 ii. Depreciation in respect of other assets viz. Factory Equipments,
 Computers, Engineering Instruments, Furniture & Fittings, Office
 Equipments and Vehicles is being provided on Written Down Value basis
 in accordance with the provisions of Section 205(2)(a) of the Companies
 Act, 1956 in the manner and at the rates specified in Schedule XIV to
 the said Act.
 
 c) i.  Depreciation on additions to assets during the year is being
 provided on pro-rata basis from the date of acquisition/ installation.
 
 ii. Depreciation on assets sold, discarded or demolished during the
 year, is being provided at their respective rates on pro-rata basis
 upto the date on which such assets are sold, discarded or demolished.
 
 iii. Depreciation on additions on account of increase in Rupee value
 due to revalorisation of foreign currency loans is being provided at
 rates of depreciation over the future life of said asset.
 
 3.  Inventories:
 
 Cost of Inventories have been computed to include all cost of
 Purchases, Cost of Conversion and Other Costs incurred in bringing the
 inventories to their present location and condition:
 
 i. Raw materials and components, stores and spares are valued at cost.
 The costs are ascertained using the weighted average method, except in
 case of slow moving and obsolete material, at lower of cost or
 estimated realisable value.
 
 ii.  Work-in-Progress and finished goods are valued at the lower of
 cost or estimated realisable value.
 
 iii.  Scrap is valued at estimated realisable value.
 
 iv.  Goods in transit are stated at actual cost upto the date of
 Balance Sheet.
 
 v. Dies are amortised over their productive life. Expenditure incurred
 to repair the dies from time to time is charged to Profit and Loss
 Account.
 
 4.  Foreign Currency Conversion:
 
 i. Foreign currency exposure in respect of Long Term Foreign Currency
 Monetary items, for financing Fixed Assets, outstanding at the close of
 the financial year are revalorised at the contracted and/or appropriate
 exchange rates at the close of the year.  The gain or loss due to
 decrease/increase in Rupee liability due to fluctuation in rate of
 exchange is recognised in the Profit & Loss Account.
 
 ii. Current Assets and Other Liabilities in foreign currency and
 foreign currency exposure in respect of foreign currency loans other
 than for financing fixed assets outstanding at the close of the
 financial year are valued at the contracts and/or appropriate exchange
 rates at the close of the year. The loss or gain due to fluctuation of
 exchange rates is charged to Profit & Loss Account.
 
 iii. Though the accounting policy detailed in (i) and (ii) above has
 been consistently followed in terms with the Accounting Standard-11,
 the policy has been overridden by an amendment to the aforementioned
 accounting standard for limited period of time as stated in Note No. 21
 in Schedule K to the Financial Statements.
 
 iv.  Foreign Currency Hedging Instruments:
 
 Outstanding Contracts, entered into by the Company intended to serve as
 a hedge against Foreign Exchange Fluctuations to protect the foreign
 currency cash flows are marked to market value at the close of each
 accounting period. The valuation gains and losses in respect of such
 contracts, where they are intended to hedge future cash flows arising
 from foreign currency monetary items existing on the valuation date are
 recognised in the Profit and Loss Account and where they are intended
 to hedge future cash flows consequent to highly probable forecast
 transactions are, if effective, carried to Hedge Reserve to flow to the
 Profit and Loss Account when the transactions occur, else are
 recognised in the Profit and Loss Account.
 
 5.  Technical Know-how Fees:
 
 Expenditure on acquiring Technical Know-how is being amortized over a
 period of six years.
 
 6.  Investments:
 
 a.  Trade and Strategic Investments made by the Company are of a long
 term nature and hence, diminution in value of investments, if any, is
 generally not considered to be of permanent nature.
 
 b.  Current Investments are valued at cost of acquisition, less
 provision for diminution, as necessary, if any.
 
 7.  Revenue Recognition:
 
 a.  Sales:
 
 i.  Domestic Sales are accounted for when dispatched from the point of
 sale, consequent to property in goods being transferred.
 
 ii.  Export Sales are accounted on the basis of dates of Bill of
 Lading.
 
 b.  Export Incentives:
 
 Export Incentives are accounted for on Export of Goods if the
 entitlements can be estimated with reasonable accuracy and conditions
 precedent to claim is fulfilled.
 
 c.  Interest is accrued over the period of loan/investment.
 
 d.  Dividend is accrued in the year in which it is declared, whereby
 right to receive is established.
 
 e.  Profit/Loss on sale of investment is recognised on contract date.
 
 8.  Research & Development Expenditure:
 
 Research & Development Expenditure is charged to Revenue under the
 natural heads of account in the year in which it is incurred.  However,
 expenditure incurred at development phase, where it is reasonably
 certain that outcome of research will be commercially exploited to
 yield economic benefits to the Company, is considered as an intangible
 asset.
 
 Fixed Assets purchased for research and development are accounted for
 in the manner stated in clause 2 above.
 
 9.  Employee Benefits:
 
 i.  Benefits in the form of Provident Fund and Pension Schemes whether
 in pursuance of law or otherwise which are defined contributions, is
 accounted on accrual basis and charged to Profit & Loss Account of the
 year.
 
 ii.  Gratuity:
 
 Payment for present liability of future payment of gratuity is being
 made to approved gratuity funds, which fully cover the same under cash
 accumulation policy of the Life Insurance Corporation of India. The
 employee’s gratuity is a defined benefit funded plan. The present value
 of the obligation under such defined benefit plan is determined based
 on the actuarial valuation using the Projected Unit Credit Method as at
 the date of the Balance Sheet and the shortfall in the fair value of
 the plan Assets is recognised as an obligation.
 
 iii.  Superannuation:
 
 Defined Contributions to Life Insurance Corporation of India for
 employees covered under Superannuation scheme, are accounted at the
 rate of 15% of such employees’ Annual Salary.
 
 iv.  Privilege Leave Benefits:
 
 Privilege Leave Benefits or compensated absences are considered as long
 term unfunded benefits and is recognised on the basis of an actuarial
 valuation using the projected Unit Credit Method determined by an
 appointed Actuary.
 
 v.  Termination benefits:
 
 Termination benefits such as compensation under voluntary retirement
 scheme, are recognized as a liability in the year of termination.
 
 10.  Borrowing Costs:
 
 Interest on borrowings is recognised in the Profit and Loss Account
 except, interest incurred on borrowings, specifically raised for
 projects are capitalised to the cost of the assets until such time that
 the asset is ready to be put to use for its intended purpose, except
 where installation is extended beyond reasonable/normal time lines.
 
 11.  Taxation:
 
 Provision for Taxation is made on the basis of the Taxable Profits
 computed for the current accounting period in accordance with the
 Income Tax Act, 1961. Deferred Tax resulting from timing difference
 between Book Profits and Tax Profits is accounted for, at the
 applicable rate of Tax to the extent the timing differences are
 expected to crystallise, in case of Deferred Tax Assets and Liabilities
 with reasonable certainty and in case of Deferred Tax Assets
 represented by unabsorbed depreciation and carried forward business
 losses, with virtual certainty that there would be adequate future
 taxable income against which Deferred Tax Assets can be realised.
 
 12.  Provisions:
 
 Necessary Provisions are made for present obligations that arise out of
 past events prior to the Balance Sheet date entailing future outflow of
 economic resources. Such provisions reflect best estimates based on
 available information.
 
 13.  Impairment of Assets:
 
 The Company tests for impairments at the close of the accounting
 period, if and only if, there are indications that suggest a possible
 reduction in the recoverable value of an asset. If the recoverable
 value amount of an Asset, i.e. the net realisable value or the economic
 value in use of a cash generating unit, is lower than the carrying
 amount of the Asset, the difference is provided for as impairment.
 However, if subsequently, the position reverses and the recoverable
 amount become higher than the then carrying value, the provision to the
 extent of the then difference is reversed, but not higher than the
 amount provided for.