(a) Accounting Convention
 
 These financial statements have been prepared to comply in all material
 aspects with the applicable accounting principles in India, including
 standards notified u/s 211 (3C) of the Companies Act, 1956 and the
 relevant provisions of the Companies Act, 1956 and the Regulations
 under the Electricity Act, 2003, to the extent applicable. A summary of
 important accounting policies which have been applied consistently are
 set out below. The financial statements have also been prepared in
 accordance with relevant presentational requirements of the Companies
 Act, 1956 of India.
 
 (b) Basis of Accounting
 
 The financial statements have been prepared under the historical cost
 convention, modified by revaluation of certain fixed assets as stated
 in item 2C and Note 4 below.
 
 (c) Fixed Assets
 
 Fixed Assets other than furniture and vehicles acquired upto 31 March
 2005, have been adjusted for the effect of valuation made by an
 approved external valuer at the then current replacement cost after
 necessary adjustment for depreciation. Subsequent acquisition of these
 assets, furniture and vehicles are stated at cost of acquisition
 together with any incidental expenses related to acquisition and
 appropriate borrowing costs. In case of a project, cost also includes
 pre-operative expenses and where applicable, expenses during trial run
 after netting off of revenue earned during trial run and income arising
 from temporary use of funds pending utilisation An impairment loss is
 recognized where applicable, when the carrying value of fixed assets of
 cash generating unit exceed its market value or value in use, whichever
 is higher. Capital Works in Progress include advances made in respect
 of capital expenditure. Intangible assets comprising software and
 trademarks, expected to provide future enduring economic benefits are
 stated at cost of acquisition / implementation / development less
 accumulated amortisation.
 
 (d) Depreciation
 
 In terms of applicable Regulations under the Electricity Act, 2003,
 depreciation on fixed assets other than freehold land is provided on
 straight line method on a prorata basis at the rates specified therein,
 the basis of which is considered by the West Bengal Electricity
 Regulatory Commission (Commission) in determining the tariff for the
 year of the Company. Additional charge of depreciation for the year on
 increase in value arising from revaluation is recouped from Revaluation
 Reserve. Leasehold land is amortized over the unexpired period of the
 lease.
 
 Cost of intangible assets, comprising software related expenditure, are
 amortised in three years and those relating to trademarks in twenty
 years, based on useful life assessed by an independent valuer.
 
 (e) Leasing
 
 Lease rentals in respect of assets taken under operating lease are
 charged to revenue.
 
 (f) Investments
 
 Current Investments are stated at lower of cost and fair value and Long
 Term Investments are stated at cost. Provision is made where there is a
 decline, other than temporary, in the value of long term investment.
 
 (g) Inventories
 
 Inventories of stores and spare parts and fuel are valued at lower of
 cost and net realizable value. Cost is calculated on weighted average
 basis and comprises of expenditure incurred in the normal course of
 business in bringing such inventories to their location and condition.
 Obsolete, slow moving and defective inventories are identified at the
 time of physical verification of inventories and where necessary,
 adjustment is made for such items.  (h) Foreign Currency Transactions
 
 Transactions in foreign currency are accounted for at the exchange rate
 prevailing on the date of transactions. Transactions remaining
 unsettled are translated at the exchange rate prevailing at the end of
 the financial year. Exchange gain or loss arising on settlement /
 translation is recognized in the Profit and Loss Account. The
 outstanding loans repayable in foreign currency are restated at the
 year-end exchange rate. Exchange gain or loss arising in respect of
 such restatement is accounted for as an income or expense with
 recognition of the said amount as refundable or recoverable, which will
 be taken into consideration in determining the Companys future tariff
 in respect of the amount settled. Foreign currency loans, availed of on
 a fully hedged basis in Indian Rupee and where as per the terms of the
 underlying contracts no exchange fluctuation is on the Companys
 account, are accounted for in the currencies in which such loans have
 been fully hedged.
 
 (i) Sales
 
 Earnings from sale of electricity are net of discount for prompt
 payment of bills and do not include electricity duty payable to the
 State Government. They also include, as per established practice,
 consistently followed by the Company in the past, estimated sums
 recoverable from / adjustable on consumers account, calculated on the
 basis of rates approved / specified by the appropriate authorities
 which are reflected in the subsequent bills. In terms of the applicable
 regulations and tariff determination process followed by the
 Commission, advance against depreciation forms part of tariff. Such
 advance against depreciation of a year is adjusted against earning from
 sale of electricity for inclusion of the same in subsequent years,
 based on due consideration by the authorities in the tariff
 determination process.
 
 0) Other Income
 
 Income from hire of meters is accounted for as per the approved rates.
 Income from investments and deposits etc. is accounted for on accrual
 basis inclusive of related tax deducted at source, where applicable.
 Delayed payment surcharge, as a general practice, is determined and
 recognised on receipt of overdue payment from consumers.
 
 (k) Employee Benefits
 
 Contributions to Provident Fund and contributory Pension Fund are
 accounted for on accrual basis. Provident Fund contributions are made
 to a fund administered through duly constituted approved independent
 trust. The interest rate payable to the members of the trust shall not
 be lower than the statutory rate of interest declared by the Central
 Government under the Employees Provident Funds and Miscellaneous
 Provisions Act, 1952 and deficiency, if any, is made good by the
 Company. The Company, as per its schemes, extend employee benefits
 (current and/or post retirement), which are accounted for on accrual
 basis and includes actuarial valuation as at the balance sheet date in
 respect of gratuity, leave encashment and certain medical benefits, to
 the extent applicable, made by independent actuary. Actuarial gains and
 losses, where applicable, are recognised in the Profit and Loss
 Account. Compensation in respect of voluntary retirement scheme is
 charged off to revenue.
 
 (I) Miscellaneous expenditure to the extent not written off or adjusted
 
 The erstwhile governing statute for the Company, viz., the Electricity
 (Supply) Act, 1948 (ESA), provided for amortisation of preliminary
 expenses and certain capital issue expenses over the unexpired period
 of licence. The Company, as per the consistently applied accounting
 policy continues with such amortisation of expenditure incurred upto
 the year 2004-05. Thereafter, pursuant to repeal of ESA, such
 expenditures are charged off to revenue.
 
 (m) Borrowing Costs
 
 Borrowing Costs attributable to acquisition and / or construction of
 qualifying assets are capitalized as a part of cost of such assets upto
 the date where such assets are ready for their intended use. Other
 borrowing costs are charged to revenue.
 
 (n) Taxes on Income
 
 Current tax represents the amount payable based on computation of tax
 as per prevailing taxation laws under the Income Tax Act, 1961.
 
 Provision for deferred taxation is made using liability method at the
 current rates of taxation on all timing differences to the extent it is
 probable that a liability or asset will crystallize. Deferred tax
 assets are recognized subject to the consideration of prudence and are
 periodically reviewed to reassess realization thereof. Deferred Tax
 liability or asset will give rise to actual tax payable or recoverable
 at the time of reversal thereof. Since tax on profits forms part of
 chargeable expenditure under the applicable regulations, deferred tax
 liability or asset is recoverable or payable through future tariff.
 Hence, recognition of deferred tax asset or liability is made with
 corresponding provision of liability or asset, as applicable.