(A) BASIS OF PREPARATION OF ACCOUNTS:
 
 The financial statements are prepared under the historical cost
 convention, (except for revalued assets which are stated at revalued
 amount) and in accordance with the generally accepted accounting
 principles in India and the provisions of the Companies Act, 1956.
 
 (B) USE OF ESTIMATES:
 
 The preparation of financial statements requires estimates and
 assumptions to be made that affect the reported amount of assets and
 liabilities on the date of the financial statements and the reported
 amount of revenues and expenses during the reporting period.
 Differences between the actual results and estimates are recognized in
 the period in which the results are known/materialized.
 
 (C) REVENUE RECOGNITION:
 
 Sales are recognized when goods are billed and are accounted net of
 trade discounts, rebates, VAT & excise duty (except where Exemption is
 availed) but includes, export incentives. Income on services rendered
 is accounted for as and when the services are rendered as per the
 terms.
 
 (D) FIXED ASSETS:
 
 Fixed Assets are stated at cost (net of availed CENVAT and Taxes),
 except revalued assets which are stated at revalued amount and include
 assets acquired from other Division of the Company less
 depreciation. The costs of fixed assets include expenses incurred during
 pre-commercial production/construction period.
 
 (E) DEPRECIATION:
 
 Depreciation on all the assets has been provided as per the rates
 prescribed in Schedule XIV of the Companies Act. 1956.
 
 Depreciation on all assets has been provided on Straight Line Method
 (S.L.M) except assets at Chattral Unit on which depreciation has been
 provided on Written down Value Method (W.D.V.).
 
 Depreciation for Power Plant at Kutch is provided at the rates
 applicable for continuous process plant.
 
 The amount of Long Term lease hold land is amortized by equal
 installments during the last fifteen years of the residual lease
 period.
 
 (F) INVESTMENTS:
 
 Long term investments including investment in subsidiary company are
 stated at cost. Diminution in value, if any, which is of a temporary
 nature, is not provided.
 
 (G) INVENTORIES:
 
 Finished goods are valued at cost or estimated net realizable value
 whichever is lower. Raw-material and stores are valued at cost.
 Work-in-progress value includes raw-material, labour and appropriate
 overheads. The Cost is worked out on weighted average basis.
 
 (H) RESEARCH AND DEVELOPMENT:
 
 Revenue expenditure on research and development is charged against the
 profit of the year in which it is incurred, except in case of new
 projects, where it is accounted for as deferred revenue expenditure and
 charged to Profit & Loss account from the commencement of the project
 in five years. Capital expenditure on research and development is shown
 as an addition to fixed assets.
 
 (I) FOREIGN EXCHANGE TRANSACTIONS:
 
 The transactions in foreign Exchange are accounted at the exchange rate
 prevailing on the date of transaction. Foreign Currency monetary assets
 and liabilities at the date of balance sheet are translated at the rate
 of exchange prevailing on that date.
 
 Gains/losses arising out of fluctuations in the exchange rates are
 recognized in Profit and Loss in the period in which they arise except
 in respect of imported Fixed Assets where exchange variance is adjusted
 in the carrying amount of respective Fixed Assets.
 
 To account for differences between the forward exchange rates and the
 exchange rates at the date of transactions, as income or expense over
 the life of the contracts, except in respect of liabilities incurred
 for acquiring imported Fixed Assets, in which case such differences are
 adjusted in the carrying amount of the respective Fixed Assets.
 
 To account for profit/loss arising on cancellation or renewal of
 forward exchange contracts as income/expense for the period, except in
 case of forward exchange contracts relating to liabilities incurred for
 acquiring imported Fixed Assets, in which case such profit/loss are
 adjusted in the carrying amount of the respective Fixed Asset.
 
 (J) TAXES ON INCOME :
 
 Current tax is determined as the amount of tax payable in respect of
 taxable income for the period and the credits computed in accordance
 with the provisions of the Income Tax Act, 1961, and based on the
 expected outcome of the assessment/appeals.
 
 MAT credit is recognized as an asset only when and to the extent there
 is convincing evidence that the company will pay normal income tax
 during the specified period.
 
 Deferred Tax is recognized, subject to the consideration of prudence,
 on timing differences, being the difference between taxable income and
 accounting income that originate in one year and are capable of
 reversal in one or more subsequent years.  Deferred Tax asset/liability
 is calculated on the basis of the rate of Income Tax (excluding other
 levies) applicable for the current year.
 
 Deferred tax assets are recognized and carried forward to the extent
 that there is virtual certainty that sufficient future taxable income
 will be available against which such deferred tax assets can be
 realized
 
 (K) LEASES:
 
 Lease payments for assets taken on operating lease are recognized as an
 expense in the revenue / profit and loss account over the lease term.
 
 (L) BORROWING COSTS:
 
 Borrowing costs are recognized as expenses in the period in which they
 are incurred, except to the extent where borrowing costs that are
 directly attributable to the acquisition, construction, or production
 of an asset till put for its intended use is capitalized as part of the
 cost of that asset. A qualifying asset is one that necessarily takes
 substantial period of time to get ready for intended use. All other
 borrowing cost(except as stated in note no 7) is charged to revenue.
 
 (M) IMPAIRMENT OF ASSETS:
 
 The company assesses at each balance sheet date whether there is any
 indication that an asset may be impaired. If any such indication
 exists, the company estimates the recoverable amount of the assets. If
 such recoverable amount of the assets is less than its carrying amount,
 the carrying amount is reduced to its recoverable amount. The reduction
 is treated as an impairment loss and is recognized in the profit and
 loss account. If at the balance sheet date there is an indication that
 if a previously assessed impairment loss no longer exists, the
 recoverable amount is reassessed and the asset is reflected at the
 recoverable amount subject to a maximum of depreciated historical cost.
 
 (N) DEFERRED REVENUE EXPENDITURE :
 
 Expenditure relating to Preliminary Expenses, Capital issues and
 Deferred Revenue Expenses is amortized on straight line basis over a
 period of five years.
 
 (O) RETIREMENT / POST RETIREMENT BENEFITS:
 
 Contributions to defined contribution schemes such as Employees
 Provident fund and Family pension fund are charged to the profit & loss
 account as and when incurred.
 
 The company contributes to Group Gratuity policy with SBI Life
 Insurance Company Limited and Life Insurance Company Limited, for the
 Future Gratuity payment of the employees of the Engineering and EV
 Division on actuarial valuation method, whereas in case of Steel
 Division liability is provided on the basis of actuarial valuation.
 
 Leave Encashment liability of the company is provided on the basis of
 actuarial valuation.
 
 (P) PROVISIONS AND CONTINGENT LIABILITIES:
 
 i. Provisions are recognized when the present obligation of a past
 event gives rise to a probable outflow, embodying economic benefits on
 settlement and the amount of obligation can be reliably estimated.
 
 ii.  Contingent Liabilities are disclosed after a careful evaluation of
 facts and legal aspects of the matter involved.
 
 iii. Provisions and Contingent Liabilities are reviewed at each Balance
 Sheet date and adjusted to reflect the current best estimates.
 
 (Q) SEGMENT REPORTING
 
 The accounting policies adopted for segment reporting are in line with
 the accounting policies of the company with the following additional
 policies for the segment reporting:
 
 a) Inter segment revenue have been accounted for, based on the
 transaction price agreed to, between segments which is primarily market
 led.
 
 b) Revenue and expenses have been identified to segments on the basis
 of their relationship to the operating activities of the segment.
 Revenue and expenses, which relate to the enterprise as a whole and are
 not allocable to segment on a reasonable basis, have been included
 under unallocated corporate expenses.
 
 I.  TOTAL FOREIGN EXCHANGE EARNING & OUTGO:
 
 (a) Earning in Foreign Exchange for Export of Goods & Services Rs.
 797.53 Millions (Rs. 534.53 Millions in Previous Year)
 
 (b) Expenditures in Foreign Currency for Import of Materials, Traveling
 & Others Rs. 3163.67 Millions (Rs. 3204.65 Millions in Previous Year).