1.  BASIS OF ACCOUNTING
 
 The financial statements are prepared under the historical cost
 convention in accordance with the generally accepted accounting
 principles in India. The applicable mandatory Accounting Standards
 notified under The Companies (Accounting Standard) Rules,2006 and the
 requirements of the Companies Act, 1956 of India have been followed in
 preparation of these financial statement.
 
 2.  USE OF ESTIMATES
 
 The presentation 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 reported amount
 of revenues and expenses during the reporting period. Difference
 between the actual result and estimates are recognized in the period in
 which the results are known / materialized.
 
 3.  FIXED ASSETS
 
 a.  Tangible Assets are stated at cost, less accumulated depreciation
 and impairment loss, if any. Costs include all expenses incurred to
 bring the assets to its present location and condition. The cost may
 undergo changes, where applicable, subsequent to its
 acquisition/construction on account of exchange rate variations agreed
 under Capital Contracts.
 
 b.  Intangible Assets are recognized if it is probable that the future
 economic benefits that are attributable to the assets will flow to the
 enterprise and the cost of the assets can be measured reliably. The
 intangible assets are stated at cost less accumulated amortisation and
 accumulated impairment losses, if any.
 
 c.  Mines Development Expenditure under Fixed Assets comprises of
 initial expenditure for lignite mines and expenditure for removal of
 overburden. Such expenditure is amortised over quantities of lignite
 actually extracted. Relevant stripping ratio is also considered while
 determining amortization of expenditure for removal of overburden.
 
 d.  Works under erection / installation / execution including advances
 for capital works are shown as Capital Work-in-progress.
 
 4.  DEPRECIATION
 
 a.  Depreciation on all fixed assets except computer software and
 Capital Spares is provided on straight line method at the rates
 specified under Schedule XIV of the Companies Act, 1956, such rates
 being not lower than the rates based on management''s estimate of useful
 economic life of the assets.
 
 b.  Computer software is amortized on straight-line basis over a period
 of five years.
 
 c.  Leasehold land is amortized over the period of lease on
 straight-line basis.
 
 d.  Capital Spares are depreciated over the useful life of such spares.
 
 5.  INVESTMENTS
 
 Long term Investments are shown at cost. However, when there is
 decline, other than temporary in the value of a long term investment,
 the carrying amount is reduced to recognize the decline.
 
 Current Investments are stated at lower of cost and net realizable
 value.
 
 6.  INVENTORIES
 
 Inventories are valued at lower of cost or net realizable value as
 under: Inventories Cost Formula
 
 a.  Raw Materials (other than Lignite) Weighted Average Cost
 
 b.  Lignite Absorption costing. Cost includes Extraction Cost, Mining
 overheads including amortized cost as per 3(c) above.
 
 c.  Stores and Spares Weighted Average Cost
 
 7.  FOREIGN CURRENCY TRANSACTIONS
 
 Transactions in foreign currency are accounted for at the exchange rate
 prevailing on the date of transactions.  Monetary items denominated in
 foreign currency as at the balance sheet date are converted at the
 exchange rates prevailing on that date. Exchange differences are
 recognized in the profit and loss account.
 
 8.  TAXATION
 
 a.  Provision for Current Tax is made on the basis of estimated tax
 payable for the year as per the applicable provisions of the Income Tax
 Act, 1961.
 
 b.  Deferred tax is recognized subject to consideration of prudence, on
 timing differences that originate in one period and are capable of
 reversal in one or more subsequent periods between taxable income and
 accounting income. Deferred tax assets and liabilities are measured
 using the rates and tax laws that have been enacted or substantively
 enacted by the balance sheet date.
 
 c. 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. In the year in which the Minimum
 Alternative Tax (MAT) credit becomes eligible to be recognized as an
 asset in accordance with the recommendations contained in Guidance Note
 issued by the Institute of Chartered Accountants of India, the said
 asset is created by way of a credit to the profit and loss account and
 shown as MAT credit entitlement.
 
 d. Advance taxes and provisions for current income taxes are presented
 in the balance sheet after off-setting advance tax paid and income tax
 provision and company intends to settle the asset and liability on a
 net basis.
 
 9.  EMPLOYEE BENEFITS
 
 a.  Post-employment benefits
 
 i) Defined Contribution plan :
 
 Company''s contribution paid/payable for the year to defined
 contribution retirement benefit schemes are charged to Profit and Loss
 Account.
 
 ii) Defined Benefit plan :
 
 Company''s liabilities towards defined benefit schemes are determined
 using the Projected Unit Credit Method. Actuarial valuations under the
 Projected Unit Credit Method are carried out at the balance sheet date.
 Actuarial gains and losses are recognised in the Profit and Loss
 account in the period of occurrence of such gains and losses. Past
 service cost is recognised immediately to the extent that the benefits
 are already vested and otherwise it is amortised on straight-line basis
 over the remaining average period until the benefits become vested.
 
 The retirement benefit obligation recognised in the balance sheet
 represents the present value of the defined benefit obligation.
 
 b.  Short-term employee benefits :
 
 Short-term employee benefits expected to be paid in exchange for the
 services rendered by employees are recognised undiscounted during the
 period employee renders services. These benefits include incentives.
 
 c.  Long term employee benefits :
 
 Compensated absences which are not expected to occur within twelve
 months after the end of the period in which the employee renders the
 related services are recognized as an actuarially determined liability
 at present value of the defined benefit obligation at the balance sheet
 date.
 
 10.  REVENUE RECOGNITION
 
 a.  Revenue from sale of energy is recognized when no significant
 uncertainty as to the measurability or ultimate collection exists.
 
 b.  Interest on investment is booked on a time proportion basis taking
 into account the amounts invested and the rate of interest.
 
 c.  Dividend income is recognised when the right to receive payment is
 established.
 
 d.  Claims lodged with insurance company in respect of risk insured are
 accounted on admittance basis.
 
 e.  Delayed payment charges under Power Purchase Agreements are
 recognised, on grounds of prudence, as and when recovered.
 
 f.  Other income is recognised on accrual basis except when realization
 of such income is uncertain.
 
 g.  Unscheduled Interchange (UI) charges receivable/payable is
 accounted as and when notified by State Load Dispatch Center (SLDC).
 
 11.  PROVISION, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
 
 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 recognized but are disclosed in the
 notes. Contingent assets are neither recognized nor disclosed in the
 financial statements.
 
 12.  IMPAIRMENT OF ASSETS
 
 An asset is treated as impaired when the carrying cost of asset exceeds
 its recoverable value. An impairment loss is charged to the Profit &
 Loss Account in the year in which an asset is identified as impaired.
 The impairment loss recognised in prior accounting periods is reversed
 if there has been a change in the estimate of recoverable amount in
 subsequent period.
 
 13.  BORROWING COST
 
 Borrowing cost including interest and other financial charges which are
 directly attributable to the acquisition or construction of qualifying
 assets is capitalised as part of the cost of that asset up to the
 period the project is commissioned or asset is ready for use. Other
 borrowing costs are recognised as expenses in the period in which they
 incurred.