1.  Basis of Preparation of Financial Statements
 
 The financial statements of the Company are prepared under the
 historical cost convention in accordance with the applicable accounting
 standards issued by the Institute of Chartered Accountants of India and
 on an accrual basis, except in case of Interest on Term Loans and
 Working Capital Loans due to Banks and financial institutions.
 
 2.  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. Difference
 between the actual results and estimates are recognised in the period
 in which the results are known/ materialised.
 
 3.  Fixed Assets and Depreciation
 
 a) Fixed Assets are stated at cost less accumulated depreciation.
 
 b) All costs, including financing cost till the date of commencement of
 commercial production, net charges on foreign exchange contracts and
 adjustments arising from exchange rate variations relating to
 borrowings attributable to fixed assets are capitalized.
 
 c) Fixed assets, whose actual costs cannot be accurately ascertained,
 are initially capitalized on the basis of estimated costs and final
 adjustments for costs and depreciation, if any, are made
 retrospectively on ascertainment of actual costs.
 
 d) Grants – in – aid received from Government against purchase of fixed
 assets are apportioned to the respective assets on the basis of landed
 cost.
 
 e) Machinery spares including insurance spares the use of which is
 expected to be irregular is charged off to the Profit & Loss Account as
 and when consumed.
 
 f) Depreciation is provided on straight-line method at the rates and in
 the manner prescribed in Schedule XIV of the Companies Act, 1956,
 except for vehicles for which written down value method has been
 adopted. For the purpose of determining the appropriate depreciation
 rates plant & machinery falling in the category of continuous process
 plant are identified on the basis of technical opinion obtained by the
 company.
 
 4.  Foreign Currency Transaction
 
 a) Transactions denominated in foreign currencies are normally recorded
 at the exchange rate prevailing at the time of transaction.
 
 b) All monetary items denominated in foreign currency are restated at
 the exchange rates prevailing as on the date of Balance Sheet and
 exchange differences arising thereon are adjusted to Profit & Loss
 Account, except those relating to acquisition of fixed assets – which
 are adjusted to the cost of the asset.
 
 5.  Revenue Recognition
 
 Revenue is recognized only when it can be reliably measured and it is
 reasonable to expect ultimate collection.
 
 6.  Inventories
 
 a) Raw materials, Packing materials, Stores and spare parts are valued
 at cost, generally determined on FIFO basis. Work – in – process is
 valued at cost and finished goods are valued at lower of cost and net
 realizable value.
 
 b) The closing stock of finished goods includes Excise Duty to the
 extent of sales effected in India till the date of finalization of
 accounts.
 
 7.  Deferred Revenue Expenditure
 
 a) Deferred revenue expenditure is being written off over a period of
 five years.
 
 b) Catalytic materials having longer useful life are treated as
 deferred revenue expenditure and are written off in five years from the
 date of charging.
 
 c) Advertisement expenditure incurred at the time of commencement of
 the commercial production is written off in five years.
 
 8.  Pre - Operative Expenditure
 
 Expenses in respect of formation of the Company and Public Issue
 expenses are written off in ten years from the financial year 1997- 98
 onwards.
 
 9.  Sales
 
 Gross Sales are inclusive of Excise Duty, Freight and transportation
 charges, wherever applicable.
 
 Goods sold in domestic market are treated as sales on delivery to the
 carriers. Export sales are treated as sales on endorsement of shipping
 bills by Customs Authorities.
 
 10.  Purchase
 
 Purchases of imported materials are accounted for on the basis of
 landed costs and other expenses incurred for bringing the inventories
 to their present location and condition. Purchases affected within
 India are net of Central Sales Tax since the same is recoverable.
 
 11.  Taxation
 
 a) Provision for income- tax is made on the basis of the estimated
 taxable income for the current accounting period in accordance with the
 Income Tax Act, 1961
 
 b) Deferred Tax Assets/Liabilities resulting from timing difference is
 accounted for in pursuance to the provision of the Accounting Standard
 22 (AS – 22) “Accounting for Taxes on Income” issued by The Institute
 of Chartered Accountants of India at the rates prevailing at the year
 end and to the extent the timing difference are expected to
 crystallize.
 
 12.  Retirement Benefits
 
 a) Year-end accrued liabilities on account of gratuity payable to
 employees are recognized on the basis of actuarial valuation.
 
 b) Leave encashment benefit are recognized on the basis of actuarial
 valuation.
 
 13.  Contingent Liabilities
 
 Provisions involving substantial degree of estimation in measurement
 are recognized when there is a present obligation as a result of past
 events and it is probable that there will be an outflow of resources.
 Contingent Liabilities are not recognised but are disclosed in the
 notes. Contingent Assets are neither recognized nor disclosed in the
 financial statements.