A. SIGNIFICANT ACCOUNTING POLICIES
 
 1. BASIS OF PREPARATION OF financial STATEMENTS
 
 a) The financial Statements have-Been prepared under the historical
 cost convention, in accordance with the generally accepted
 accounting principles and the provisions of the Companies Act, 1956 as
 adopted consistently by the Company
 
 b) The Company generally follows mercantile system of accounting and
 recognises significant items of income and expenditure on accrual
 basis, except for income by way of interest on calls in arrears and
 expenditure by way of (a) interest on overdue bills and letters of
 credit (b) brokerage, commission, claims and incentives to dealers and
 agents which are accounted for on cash basis/settlement of accounts as
 it is not possible to ascertain with reasonable certainty the quantum
 thereof.
 
 2. FIXED ASSETS AND DEPRECIATION
 
 a) Fixed assets are stated at cost of acquisition/construction less
 accumulated depreciation. All costs including finance costs till
 commencement of commercial production and adjustments arising from
 foreign currency exchange rate variations relating to specific
 borrowings attributed to the fixed assets are capitalised. (Refer
 Note 4 (d).
 
 b) Assets purchased under Hire Purchase are capitalised alongwith the
 hire charges payable upto the date of commissioning of the commercial
 production on the plant and Machinery.
 
 c) Depreciation of fixed assets is provided on straight line method at
 the rates and in the manner prescribed in Schedule XIV of the Companies
 Act, 1956. Depreciation on incremental cost arising on account of
 transactions of foreign currency liabilities for acquisition of fixed
 assets are amortised prospective over the residual life of the assets.
 (Refer Note 4 (d) )
 
 3. FOREIGN EXCHANGE TRANSACTIONS
 
 a) Transactions denominated in foreign currency are normally recorded
 at the exchange rate prevailing at the time of the transactions.
 Exchange difference arising out of subsequent settlements are dealt in
 the Profit and Loss subsequent settlements are dealt in the Profit and
 Loss Accounts in the year of settlement. (Refer Note 4(d)
 
 b) Foreign currency transactions remaining unsettled at the end of the
 year are translated at year end rates. Gain or loss on transactions of
 long term liabilities incurred to acquire fixed assets is treated as an
 adjustment t6 the carrying cost of such fixed assets.
 
 4. FOREIGN BRANCH ACCOUNTS: Foreign branch accounts are
 incorporated in the financial statements by translation at the year end
 rates. (Refer Note 4(d))
 
 5. INVESTMENTS
 
 Long with term investments are stated at cost.
 
 6. INVENTORIES a) Raw-materials, stores, spares and others are valued
 at cost.
 
 b) Work in progress is valued at estimated cost.
 
 c) Finished goods are valued at lower of coast and net realisable
 value.
 
 7. SALES
 
 Sales are recognised inclusive of excise duty but net of returns,
 discounts, incentives, rebates and claims. Export sales are recognised
 on receipt of Bill of Lading.
 
 8. INTER BRANCH TRANSFERS
 
 Inter branch purchase and sales are squared off while consolidating the
 accounts.
 
 9. EXCISE DUTY
 
 Excise duty is accounted on the basis of payments made in respect of
 goods cleared from the factory premises. Excise duty for goods lying in
 the warehouse is neither included in the expenses nor in valuation of
 inventories of such goods. This accounting practice has not impact on
 profit/loss of the Company.
 
 10. EMPLOYEES BENEFITS
 
 Gratuity in respect of eligible employees has been provided for on the
 basis of management's estimate.
 
 11. LEASES
 
 Leases rentals are expressed with reference to lease terms and other
 consideration except for rentals pertaining to the year up to the date
 of commissioning of the assets which are capitalised.
 
 12. AMORTISATION OF EXPENSES
 
 Share issue expenses and Deferred revenue expenses (corporate
 advertising and sales promotional) are being amortised over a period of
 ten years and Market Development Expenses are being amortised over a
 period of five years.