1) SYSTEM OF ACCOUNTING :
 
 i. The Company generally follows the mercantile system of accounting
 and recognizes income and expenditure on an accrual basis except those
 with significant uncertainties.
 
 ii. Financial statements are based on historical cost except in case of
 sales tax deferral detailed in Note no 11.  These costs are not
 adjusted to reflect the impact of the changing value in the purchasing
 power of money.
 
 2) FIXED ASSETS AND DEPRECIATION :
 
 i. FIXED ASSETS :
 
 Fixed Assets are carried at Cost of Acquisition (including cost of
 specific borrowings) or construction, less accumulated Depreciation
 (except freehold land) and amortization (of Cost of Acquisition).  In
 respect of Projects implemented by the Company, Fixed Assets include
 all duties, non-refundable taxes, levies and costs incurred (which are
 directly attributable) for bringing Assets into working condition for
 its intended use, including expenses during construction period.  Trial
 Run Expenditure, etc.
 
 ii. DEPRECIATION :
 
 a) LEASEHOLD LAND -
 
 Cost of leasehold land is amortized over the lease period.
 
 b) OTHER FIXED ASSETS -
 
 Depreciation on fixed assets is being provided on straight-line basis
 in the manner and at the rates specified in Schedule XIV to the
 Companies Act, 1956.
 
 Depreciation on additions on account of increase in rupee value due to
 revalorisation of foreign currency loans is being provided at
 respective rates of depreciation of related assets with retrospective
 effect from the date of addition of said asset.
 
 3) CONVERSION OF FOREIGN CURRENCIES :
 
 All foreign currency loans and balances in the form of Current Assets
 and Current Liabilities outstanding on the date of Balance Sheet are
 converted at the appropriate rates of exchange prevailing on the date
 of the Balance Sheet.  Exchange difference arising from foreign
 currency fluctuations is dealt with in the Profit and Loss Account.
 
 4) TECHNICAL KNOW-HOW :
 
 Expenditure on Technical Know-how in connection with production
 facilities is capitalised to the cost of the plant.
 
 5) INVESTMENTS :
 
 Investments are valued at cost of acquisition.
 
 6) INVENTORY VALUATION :
 
 i. FINISHED GOODS & MATERIALS IN PROCESS
 
 a) Trial Run products are stated at their cost or market/realisable
 value, which ever is lower.
 
 b) Finished goods and materials in process are stated at their cost or
 Market/realisable value, whichever is lower.
 
 c) Cost of finished goods includes all allocable overheads but excludes
 selling expenses, excise duty and interest.
 
 ii. RAW MATERIALS
 
 Raw Materials are valued at cost or market value whichever is lower.
 Cost is arrived at Weighted Average Rate.
 
 iii. STORES AND SPARES
 
 Stores and spares are generally valued at their weighted average
 prices.  However certain low value items like maintenance spares are
 valued at the latest purchase price.
 
 7) TRIAL RUN EXPENDITURE :
 
 Loss on conducting trial runs of the Plant viz. Trial Run Expenditure,
 net of realization during the said period, is transferred at the end of
 each financial year to Capital Work in Progress and thereafter
 allocated to Capital Account.
 
 8) DEBENTURE & SHARE ISSUE EXPENSES :
 
 Debenture & Share Issue Expenses (including Corporate Publicity expenses considered to be indirectly related
to the Share Issue expenses) incurred in respect of Debentures/Shares raised by the Company are written off
against the balance in the Share Premium Account in accordance with Section 78 of the Companies Act, 1956.
 
 9) DEFERRED REVENUE EXPENDITURE :
 
 Deferred Revenue Expenditure is written off over the estimated period
 of benefits or over a period of seven years in equal annual installments, whichever is less.
 
 10) EXPORT SALES :
 
 Sales for exports are accounted on the date of issue of the Mate's
 Receipt.
 
 11) RETIREMENT BENEFITS :
 
 i. Gratuity :
 
 Payment for present liability of future payment of gratuity is being
 made to approved gratuity funds which fully cover the same under Cash
 Accumulation Policy of the Life Insurance Corporation of India.
 
 ii. Superannuation :
 
 Contribution to Superannuation Fund is being made to Life Insurance
 Corporation of India as per the scheme of the Company.
 
 iii. Provident Fund :
 
 Provident Fund contributions are made to the KSTL Provident Fund in
 respect of Non Bargainable Staff and in respect of Workers (Bargainable) the same is deposited with the
Government Provident Fund Authority.
 
 iv. Employees Pension Scheme :
 
 Contribution to Employees Pension Scheme, 1995 are made to the Government Provident Fund Authority.