A) BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
 
 The financial statements have been prepared under historical cost
 convention on accrual basis and comply with notified accounting
 standards as referred to in Section 211(3C) and other relevant
 provisions of the Companies Act, 1956.
 
 B) REVENUE RECOGNITION
 
 . Sales include product subsidy and claims, if any, for reimbursement
 of cost escalation receivable from FICC/ Ministry of
 Agriculture/Ministry of Fertilisers.
 
 . Grants and subsidies from the government are recognized when there is
 reasonable assurance of the receipt thereof on the fulfilment of the
 applicable conditions.
 
 . Revenue in respect of Interest other than on deposits, Insurance
 claims, Subsidy and Reimbursement of cost escalation claimed from
 FICC/Ministry of Agriculture/Ministry of Fertilisers beyond the
 notified Retention Price and Price Concession on fertilisers, pending
 acceptance of claims by the concerned parties is recognised to the
 extent the Company is reasonably certain of their ultimate realisation.
 
 . Clean Development Mechanism (CDM) benefits known as Carbon Credit for
 wind energy units generated and N20 reduction in its Nitric Acid plant
 are recognized as revenue on the actual receipts of the applicable
 credits and estimated at prevailing realisable values.
 
 . Export benefit in the form of EPCG licence is recognized as and when
 it is received for the value of the certificate.
 
 . Rental income from realty business is recognized based on the
 contractual terms. In case of revenue sharing arrangements, the rental
 income is recognized on the basis of provisional information provided
 by the lessees where the final data is awaited on the date of revenue
 recognition.
 
 C) FIXED ASSETS
 
 . Fixed Assets (including major modifications/betterments) are recorded
 at cost of acquisition or construction (including interest/financial
 charges, project restructuring cost and other expenditure incidental
 and related to such acquisition/construction).
 
 . Intangible Assets (Goodwill, Patent, Trademark, Software Licenses
 etc.) are capitalised at cost of acquisition or development (including
 interest/financial charges and expenditure incidental and related to
 such acquisition/ development).
 
 . Exchange variation arising from repayment/restatement of the
 debts/borrowings in foreign currencies for acquisition of fixed assets
 is capitalized as per the Accounting Standard 11 as amended by the
 Notification No.  G.S.R.225 (E) dated 31.03.09.
 
 . Machinery Spares other than those required for regular maintenance
 are capitalised at cost.
 
 . Cost of fixed assets, the ownership of which does not vest with the
 Company as also expenditure on installation/ erection etc. of assets
 taken on lease is capitalised.
 
 . Relief/Incentive granted by the Government of India by way of refund
 of Customs Duty paid on NP Project imports, is treated as a special
 reserve and adjusted against depreciation, over the remaining useful
 life of Fixed Assets of NP Project.
 
 D) DEPRECIATION
 
 . Depreciation is provided by Straight Line Method, except for
 relocated DNA-III Plant which is depreciated by Written Down Value
 method.
 
 . Tangible assets, owned by the Company, are depreciated in accordance
 with the rates prescribed in Schedule XIV to the Companies Act, 1956
 except in the following cases where higher rates are applied to the
 factors of accelerated obsolescence, relocation of plant, modifications
 of existing plants etc.
 
 . Depreciation on exchange rate variance capitalised as part of the
 cost of Fixed Assets upto 31st March, 2011, has been provided
 prospectively over the residual useful life of the assets.
 
 . Machinery Spares other than those required for regular maintenance
 are capitalised as per Accounting Standard- 10 on Fixed Assets and
 depreciated over remaining useful life of the related
 machinery/equipments. Costs of such spares are charged to Profit and
 Loss Account when issued for actual use at written down value.
 
 . Cost of Fixed Assets, ownership of which does not vest with the
 Company, is amortised over a period of 60 months.
 
 . Intangible assets are amortised over a period not exceeding 60 months
 except in the case of right to use of properties which are ammortised
 over the effective useful life of such rights.
 
 . Cost of Leasehold Land is amortised over the lease period.
 
 E) IMPAIRMENT OF ASSETS
 
 The Company assesses at each Balance Sheet date whether there is any
 indication that any asset may be impaired.  If any such indication
 exists, the recoverable amount of the asset is estimated. Impairment
 loss is recognised if the carrying value exceeds the recoverable
 amount.
 
 F) INVENTORIES
 
 . Inventories of raw materials are valued at lower of moving weighted
 average cost, written down to realisable value if the costs of the
 related finished goods exceed their net realisable value.
 
 . Inventories of stores, regular spares, oil, chemicals, catalysts and
 packing material are valued at moving weighted average cost.
 
 . Inventories of finished goods including those held for captive
 consumption are valued at lower of factory cost (including depreciation
 but excluding interest) and net realisable value.
 
 . Value of Work-in-Process of all products is ignored for the purpose
 of inventory having regard to the concept of materiality and difficulty
 of quantifying such stocks with exactitude.
 
 . CENVAT is accounted as per exclusive method of accounting in terms of
 Accounting Standard (AS)-2 on Valuation of Inventories.
 
 6) INVESTMENTS
 
 Long term investments are valued at cost after appropriate adjustment,
 if necessary, for diminution in their value which are other than
 temporary in nature. Current Investments are stated at lower of cost
 and fair value.
 
 H) FOREIGN CURRENCY TRANSACTIONS, FORWARD CONTRACTS AND DERIVATIVES
 
 . Transactions in foreign currency are recorded at the rate of exchange
 prevailing on the dates of the transactions.  Foreign currency monetary
 items are restated at the rate as of the date of Balance Sheet or, as
 the case may be, at forward contract rates.
 
 . Exchange differences either on settlement or on translation are dealt
 with in the Profit and Loss Account.  However exchange differences,
 arising either on settlement or on translation, in case of borrowings
 used for acquisition of fixed assets are capitalised.
 
 . Wherever the variable interest in respect of External Commercial
 Borrowings is swapped for fixed interest rates, the fixed interest
 expense is recognised in the accounts.
 
 . The Company uses foreign currency forward contracts to hedge its
 actual underlying exposures and not for trading or speculation purpose.
 The use of these forward contracts reduces the risk and/or cost to the
 Company.
 
 . The outstanding derivative contracts at the Balance Sheet date other
 than forward exchange contracts mentioned above are valued by marking
 them to market and losses, if any, are recognised in the Profit and
 Loss Account.  For this purpose, the net effect of all the related
 streams of cash flows are taken into consideration.
 
 I) EMPLOYEE BENEFITS
 
 . Short-term employee benefits are recognised as an expense at the
 undiscounted amount in the Profit and Loss Account of the year in which
 the related service is rendered.
 
 . The eligible employees of the Company are entitled to receive
 benefits under the Provident Fund, a defined contribution plan in which
 both the employees and the Company make monthly contributions at a
 specified percentage of the covered employees salary (currently 12% of
 employees salary). The contributions as specified under the law are
 paid to the Regional Provident Fund Commissioner and the Central
 Provident Fund under the Pension scheme. The Company recognises such
 contributions as expense of the year in which the liability is
 incurred.
 
 . The Company has an obligation towards Gratuity, a defined benefit
 retirement plan covering eligible employees.  The plan provides for a
 lump sum payment to vested employees at retirement, death while in
 employment or on termination of employment of an amount equivalent to
 15 to 30 days salary payable for each completed year of service.
 Vesting occurs upon completion of five years of service. The plan is
 managed by a trust and the fund is invested with Life Insurance
 Corporation of India under its Group Gratuity Scheme. The Company makes
 annual contributions to gratuity fund and the Company recognises the
 liability for Gratuity benefits payable in future based on an
 independent actuarial valuation.
 
 . The Company has a Superannuation Plan for its executives - a defined
 contribution plan. The Company makes annual contributions at 15% of the
 covered employees salary. The plan is managed by a trust and fund is
 invested with Life Insurance Corporation of India under its Group
 Superannuation Scheme. The contributions as specified under the trust
 deed are paid to the Life Insurance Corporation of India. The Company
 is liable for annual contributions and recognises such contributions as
 an expense of the year in which the liability is incurred.
 
 . The Company provides for the encashment of leave or leave with pay
 subject to certain rules. The employees are entitled to accumulate
 leave for availment as well as encashment subject to the rules. As per
 the regular past practice followed by the employees, it is not expected
 that the entire accumulated leave shall be encashed or availed by the
 employees during the next twelve months and accordingly the benefit is
 treated as long term defined benefit. The liability is provided for
 based on the number of days of unutilised leave at the Balance Sheet
 date on the basis of an independent actuarial valuation.
 
 . The Company has a Wealth Creation Scheme for its executives - a
 defined contribution plan. The Company makes annual contributions at 3%
 of the covered employees salary which are then invested by the Company
 in securities. Subject to Companys Policy the vested employees are
 eligible to receive accumulated balance at retirement, death while in
 employment or on termination of employment. The Company is liable for
 annual contributions and recognises such contributions as an expense of
 the year in which the liability is incurred.
 
 . The Company has a medical benefit plan according to which employees
 are entitled to be covered under mediclaim policy for the next five
 years post their superannuation. The amount being insignificant, the
 liability towards such benefit is recognised based on the actual
 premium payable.
 
 J) BORROWING COST
 
 . Borrowing cost on working capital is charged against the profit/loss
 for year in which it is incurred.
 
 . Borrowing costs that are attributable to the construction/acquisition
 of fixed assets are capitalised as a part of the cost of these
 capitalised assets till the date of completion of physical
 construction/mechanical completion of the assets.
 
 . Borrowing costs that are attributable to the development/acquisition
 of intangible asset are capitalised till the date of use.
 
 K) PRIOR PERIOD ITEMS
 
 Significant items of Income and Expenditure which relate to prior
 accounting periods, are accounted in the Profit and Loss Account under
 the head Prior Years Adjustments other than those occasioned by
 events occurring during or after the close of the year and which are
 treated as relatable to the current year.
 
 L) CONTINGENT LIABILITIES
 
 Contingent Liabilities as defined in Accounting Standard-29 are
 disclosed by way of notes to accounts. Provision is made if it becomes
 probable that an outflow of future economic benefits will be required
 for an item previously dealt with as a contingent liability.
 
 M) TAXES ON INCOME
 
 Current tax is determined as the amount of tax payable in respect of
 taxable income for the period. Deferred tax is recognised, subject to
 the consideration of prudence in respect of deferred tax assets, on
 timing differences, being the differences between taxable income and
 accounting income that originate in one period and are capable of
 reversal in one or more subsequent periods. For this purpose, deferred
 tax liabilities and assets are reckoned on net basis, after inter-se
 set-off, for each component of the timing differences.