(1) Accounting Convention
 
 The Financial Statements are prepared based on Historical cost
 convention of accounting and in accordance with the prevalent
 Accounting Standards and the provisions of the Companies Act, 1956 as
 amended, except to the extent disclosed in the Notes on Accounts.
 
 (2) Revenue Recognition
 
 Revenue is recognised with respect to Sales (net of discount) and Other
 Income on accrual basis with disclosed exceptions on receipt basis as
 under. :
 
 (a) Sales
 
 Sales (net of discount) include handling charges and packing charges
 but exclude excise duty and Sales Tax / Value Added Tax.
 
 (b) Other Income
 
 (i) Insurance and other claims treated as Other Income. However,
 insurance claims are adjusted towards replacement cost on selective
 basis.
 
 (ii) Dividend income.
 
 (iii) Compensation (Net) received from the Multilateral Fund towards
 the phasing out of CTC product under Montreal Protocol.  
 
 (iv) Receipt against monetisation of Certified Emission Reduction (CER)
 under Kyoto Protocol for Clean Development Mechanism.  
 
 (v) Income arising from Derivative transactions is recognised in the
 books of accounts as and when the settlements take place in accordance
 with the terms of the respective contracts over the tenor thereof. The
 open positions are marked to market on the Balance Sheet date and
 losses, if any, are provided for, while gains, if any, are not
 recognised.
 
 (3) Fixed Assets, Leased Assets, Capital Work in Progress, Expenditure
 on New Projects and Depreciation
 
 (a) Fixed Assets, Leased Assets, Capital Work in Progress and
 Expenditure on New Projects:
 
 (i) Fixed Assets are stated at cost of acquisition or construction less
 accumulated depreciation. In case of capital expenditure, such costs of
 acquisition or construction are capitalised upto the date the assets
 are put to use. Interest, commitment and other charges on borrowings,
 as also expenditure directly attributable to specific project upto its
 commissioning are accumulated as cost of relevant projects.  Further,
 in respect of grass root projects, initial and pre-operative
 expenditure incurred prior to commissioning of the projects are also
 considered as cost of relevant projects.
 
 (ii) Capital Assets under erection/installation are reflected in
 Balance Sheet as Capital Work-in-Progress.  Expenditure on New
 Projects includes advances to suppliers, contractors and others.  
 
 (iii) Cost of major civil works required as plant and machinery
 supports is considered as Plant and Machinery.  (iv) In respect of
 plant & machinery acquired on lease, lease rent payable on such assets
 prior to completion of the project is capitalised.
 
 (b) Accounting for Finance Lease :
 
 (i) The Company is capitalising the assets acquired under finance lease
 at fair value/contracted price and charging depreciation on it in
 accordance with Accounting Standard -19 Leases.
 
 (ii) The lease rents paid/payable on these assets have been bifurcated
 into interest and principal and accordingly interest has been charged
 to revenue and principal has been reduced from the liability of lessor.
 
 (iii) On completion of the finance lease, the value of the said leased
 asset is considered as an asset of the Company, at the Gross / Net
 value appearing in Balance Sheet on the date of the completion of the
 lease.
 
 (iv) The Residual value payable on the termination of finance lease is
 accounted as Revenue Expenditure.
 
 (c) Leasehold Land / Right of Use of Land.
 
 Cost of leasehold Land and right of use of land are amortised over the
 period of lease.
 
 (d) Depreciation
 
 Depreciation on fixed assets including leased assets acquired under
 finance lease is provided on Straight Line Method at the rates
 prescribed in Schedule XIV of the Companies Act, 1956, as amended.
 Depreciation on additions to Fixed Assets (except those of Rs5,000/- and
 below) is charged on prorata basis. Depreciation on assets disposed
 off/discarded during the year is charged upto the date of
 disposal/discard. Further, as regard to additions/deductions to the
 fixed assets arising from exchange variations, depreciation thereof is
 considered and covered during the period of residual life of the
 relevant assets.  
 
 (4) Investments
 
 All investments are stated at cost less permanent diminution, if any.
 
 
 (5) Foreign Exchange Transactions
 
 (i) Transactions in foreign currency are recorded at the exchange rates
 prevailing or approximately close to the exchange rate prevailing at
 the time of transaction. Any difference arising on actual payment /
 realisation is accounted under exchange variation account.  
 
 (ii) The liability in respect of the loans repayable in foreign
 currencies has been translated into rupees taking into consideration
 the exchange rates prevailing on the date of the Balance Sheet. The
 increase / decrease in the liability, if material, arising on
 realignment of foreign currencies where the loans are utilised for
 procurement of fixed assets is adjusted to the cost of such assets at
 the year end.
 
 (iii) Other current assets & liabilities at the end of the year are
 being valued at the exchange rate prevailing on the date of Balance
 Sheet and difference arising is accounted as exchange difference and
 charged/credited to profit and loss account.
 
 (6) Inventories
 
 (a) Valuation of inventories at both Baroda and Dahej plants has been
 worked out separately.
 
 (b) (i) Raw Materials, Packing Materials and Stores & Spares are valued
 at daily weighted average cost.
 
 (ii) Raw Materials of imported goods, Salt, Furnace Oil, Aluminium
 Ingots and Alumina Trihydrate Powder are valued at monthly weighted
 average cost.
 
 (iii) Natural Gas is valued at fortnightly weighted average cost.  
 
 (iv) The valuation of inventories includes taxes, duties ((net of
 excise duty and Value Added Tax) / counter veiling duty to the extent
 to which CENVAT credit availed) and other direct costs attributable to
 the cost of inventory.
 
 (c) Finished Goods are valued at lower of average cost for the year or
 average sale price for the year or average sale price of last month of
 financial year.
 
 (d) Finished Goods lying with Consignment Stocklists are valued at lower
 of yearly average cost or average sale price for the year or average
 sale price of last month of financial year plus transport charges and
 excise duty paid.
 
 (e) By-products are valued at lower of average net realisable value for
 the year or average net realisable value of last month of financial
 year.
 
 (f) Sale of Finished Goods in transit is valued at actual sales invoice
 value.
 
 (g) Process stocks are valued at weighted average cost.
 
 (h) Stock of items traded is valued at lower of the landed cost or
 realisable value.
 
 (i) Consumable stores categorised separately are charged to Profit and
 Loss Account at the time of purchase.  (j) Stores and spares issued to
 consuming departments and which are in the process of utilisation and /
 or remaining with them at the year end are included in the inventory at
 the weighted average cost.
 
 (7) CENVAT and Value Added Tax Credit
 
 (i) CENVAT and VAT Credit available on the material (inputs) is
 adjusted against purchases.
 
 (ii) Cenvat Credit and VAT available on capital goods is adjusted
 against the cost of the capital assets.
 
 (iii) The CENVAT and VAT credit available on purchase of raw materials,
 other eligible inputs and capital goods is utilised against excise duty
 and VAT payable on clearance / sale of goods produced. The unutilised
 CENVAT and VAT credit is shown under the head Loans and Advances.  
 
 (iv) CENVAT and VAT benefits are accounted on accrual basis.
 
 
 (8) Taxation
 
 (i) 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, on timing differences, being the
 difference between taxable income and accounting income that originate
 in one period and is capable of reversal in one or more subsequent
 periods.
 
 (ii) Deferred tax is measured based on the tax rates and the tax laws
 enacted or substantively enacted at the balance sheet date. Deferred
 tax assets are recognised only to the extent that there is a reasonable
 certainty that sufficient future taxable income will be available
 against which such deferred tax assets can be realised.
 
 (9) Other Capital Expenditure
 
 When heavy expenditure for sustaining plant efficiency is required to
 be incurred and the benefit from this expenditure is to extend for a
 number of years, such heavy expenditure, on a selective basis, is
 treated as Other Capital Expenditure and shown in the schedule of
 Fixed Assets and carried forward for amortisation over a reasonable
 period of time, after facilities have been put to use/completion of the
 job.
 
 (10) Expenditure by way of contributions
 
 The Company''s Contribution or Expenditure incurred in securing
 requirements of Utilities and Services without acquiring ownership
 rights on the assets so created are considered as Fixed Assets and are
 written off over an appropriate period.
 
 (11) Excise Duty
 
 The excise duty in respect of closing stock of finished goods is
 included as part of the inventory cost.
 
 (12) Employee Benefits
 
 (a) Short term Employee Benefits :
 
 All employee benefits payable wholly within twelve months of rendering
 the services are classified as short term employee benefits. Benefits
 such as salaries, wages etc. and the expected cost of bonus, Ex-gratia,
 Leave Travel Allowance, Reimbursement of Medical Expenses, Personal
 Accident Policy, Deposit Linked Insurance Policy are recognised in the
 period in which the employee renders the related services.
 
 (b) Post-Employment Benefits :
 
 (i) Defined Contribution Plan : The Company''s contribution paid/
 payable during the year to Provident Fund, Superannuation Fund and
 other welfare funds are considered as defined contribution plans. The
 Contribution paid/ payable under these plans are recognised during the
 period in which the employee renders the services.  
 
 (ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is
 considered as defined benefit plan. The present value of the obligation
 is determined based on actuarial valuation using the Projected Unit
 Credit Method.
 
 Actuarial gains and losses are recognised immediately in the Profit &
 Loss Account.
 
 The fair value of the plan assets is reduced from the gross obligation
 under the defined benefit plan to recognise the obligation on net
 basis.
 
 Gains or losses on the curtailment or settlement of any defined benefit
 plan are recognised when the curtailment or settlement occurs.
 
 (c) Long term Employee Benefits :
 
 The obligation for long term employee benefits such as long term
 compensated absenses, long service award etc. is recognised in the same
 manner as in the case of defined benefit plans as mentioned in (b) (ii)
 above.
 
 (13) Research and Development
 
 The capital expenditure in respect of Research and Development
 activities is charged to Profit and Loss Account in the year in which
 it is incurred.
 
 (14) Prior Period Adjustments
 
 All identifiable items of Income and Expenditure pertaining to prior
 period are accounted through Prior Period Adjustment Account.
 
 (15) Borrowing Cost
 
 Borrowing Costs attributable to the acquisition and construction of
 assets are capitalised as part of the cost of such asset upto the date
 when such asset is ready for its intended use. Other borrowing costs
 are treated as revenue expenditure.
 
 (16) Impairment of Assets
 
 Impairment loss, if any, is provided to the extent, the carrying amount
 of assets exceeds their recoverable amount.