A.  Basis of Accounting:
 
 (i) The financial statements have been prepared in accordance with
 relevant accounting standards under the historical cost convention,
 except as stated in note 1 B.
 
 (ii) The accounts have been prepared on accrual basis of accountancy in
 accordance with the accounting principles generally accepted in India.
 
 B.  Fixed Assets:
 
 Fixed assets are stated at cost of acquisition/construction/revalued
 amount less accumulated depreciation.
 
 C.  Depreciation:
 
 Depreciation is provided on the basis of straight-line method on all
 depreciable fi xed assets at the rates prescribed in Schedule –XIV of
 the Companies Act, 1956, on prorata basis except:
 
 a) Depreciation pertaining to assets of Research and Development Centre
 and of the Export Oriented Unit is provided on the basis of written
 down value method.
 
 b) Depreciation on plant and machinery of bio-mass energy plants is
 provided at a higher rate at 7.5% instead of the prescribed rate for
 continuous process plant considering the useful life of plant supported
 by technical evaluation and report.
 
 c) In case of revalued assets, the difference between the depreciation
 based on revalued cost and the depreciation charged on historical cost
 is recouped out of revaluation reserve.
 
 d) Depreciation on assets of overseas projects is provided at the rates
 as per the requirement of laws of respective foreign countries. Such
 rates of depreciation in each overseas project are higher than the
 depreciation rates prescribed under Schedule-XIV by the Companies Act,
 1956.
 
 e) Depreciation on all the vehicles in the Company is provided at a
 higher rate at 15% instead of the prescribed rate, considering the
 useful life of vehicles based on technical evaluation by the
 management.
 
 f) Intangible assets are amortized over a period of fi ve years on
 prorata basis.
 
 D.  Revenue Recognition:
 
 (i) Transmission & Distribution Division:
 
 Sales are recognized on delivery of materials. Sales includes excise
 duty, freight receipts and export benefi ts but excludes VAT.
 
 Erection and works contract revenue for work completed is recognized on
 percentage of completion method based on completion of physical
 proportion of the contract work. When it is probable that total
 contract cost will exceed the total contract revenue, the expected loss
 is recognized immediately.
 
 
 (ii) Infrastructure Division: Revenue is recognized by adding the
 aggregate cost and proportionate margin using the percentage completion
 method.  Percentage of completion is determined as a proportion of cost
 incurred to date to the total estimated contract cost. When it is
 probable that total contract cost will exceed the total contract
 revenue, the expected loss is recognized immediately.
 
 (iii) Bio-mass Energy Division: Revenue is recognized on supply of
 electricity generated to the customer.
 
 (iv) Real Estate Division: Revenue is recognized at the time of
 transfer of signifi cant risks and rewards of ownership to the buyer on
 executing agreement for sale. Estimated cost of completion against
 sales recognized, wherever applicable, is provided for in Profit and
 loss account. Advances received against booking of units are appearing
 as current liabilities.
 
 (v) Others Dividends are recorded when the right to receive payment is
 established. Interest income is recognized on time proportion basis.
 
 E.  Inventories:
 
 (i) Transmission & Distribution Division:
 
 Raw materials, semi-fi nished goods, fi nished goods, scraps,
 construction work-in-progress and construction and other stores-spares
 & tools are stated at lower of cost and net realizable value. The cost
 of inventories is computed on weighted average basis.
 
 (ii)   Infrastructure Division:
 
 Construction material, stores-spares & tools and construction
 work-in-progress are valued at lower of cost or net realizable value.
 The cost is computed on weighted average basis.
 
 (iii) Biomass Energy Division:
 
 Fuel and stores, spares and tools are stated at lower of cost and net
 realizable value. The cost of fuel, stores, spares and tools are
 computed on weighted average basis.
 
 (iv) Real Estate Division:
 
 Finished and semi-fi nished inventory are stated at lower of cost and
 net realizable value. Cost is computed on average cost basis which
 includes payments made against agreement to purchase land, development
 cost direct and attributable towards the specifi c real estate project
 and cost of borrowings as stated in note 1 J.
 
 F.    Investments:
 
 Long term investments are stated at cost after deducting the provision
 for diminution in value, if any, other than of a temporary nature.
 Current investments are stated at lower of cost or fair value.
 
 G.  Retirement Benefits:
 
 (i) Gratuity liability is provided under a defined benefit plan, under
 Group Gratuity Cash Accumulation Scheme of the Life Insurance
 Corporation of India under an irrevocable trust. The Companys
 liability towards gratuity is determined on the basis of actuarial
 valuation done by an independent actuary.
 
 (ii) Contribution to Provident Fund, a defined contribution plan is
 charged to the Profit and Loss Account.
 
 (iii) Provision for leave encashment liability is made on actuarial
 valuation as at the Balance Sheet date.
 
 (iv) All other short-term employee benefits are recognized as an
 expense at the undiscounted amount in the profit and loss account of
 the year in which the related service is rendered.
 
 H.  Excise/Custom Duty:
 
 The liability for excise and custom duty in respect of materials lying
 in factory/bonded premises is accounted for as and when they are
 cleared / debonded.
 
 I.  Foreign Currency Transactions:
 
 Foreign currency transactions are accounted for at the exchange rate of
 the date of transaction. Foreign currency monetary assets and
 liabilities, remaining unsettled at the end of the year are translated
 at the exchange rate prevailing at the end of the year and difference
 is adjusted to respective accounts in profit & loss account. The
 exchange gain or loss between forward exchange contract rate and
 exchange rate at the date of transaction are recognized in profit and
 loss account over the life of the contract. Any profit or loss arising
 on settlement or cancellation of foreign currency forward contracts or
 options are recognized in profit & loss account for period in which
 settlement or cancellation takes place.  Translation of overseas jobs /
 projects of non-integral foreign operations: -
 
 a) Assets and liabilities at the rates prevailing at the end of the
 year.
 
 b) Income and expenses at the exchange rate of the date of transaction.
 
 c) Resulting exchange differences are accumulated in foreign currency
 translation reserve account.
 
 J.  Borrowing Costs:
 
 Borrowing costs that are directly attributable to the acquisition,
 construction or production of qualifying assets are capitalized as part
 of the cost of such assets. All other borrowing costs are recognized as
 expense in the period in which they are incurred.
 
 K.  Impairment of assets:
 
 The carrying amount of assets, is reviewed at each balance sheet date
 to determine whether there is any indication of impairment. If any such
 indication exist, the recoverable amount of the assets is estimated. An
 impairment loss is recognized whenever the carrying amount of an asset
 or its cash generating units exceeds its recoverable amount. An
 impairment loss is reversed if there has been a change in the estimates
 used to determine the recoverable amount and recognized in compliance
 with AS-28.
 
 L.  Taxes on Income:
 
 a) Tax on income for the current period is determined on the basis of
 estimated taxable income and tax credit computed in accordance with the
 provisions of the Income Tax Act, 1961.
 
 b) Deferred tax is recognized on timing difference between the
 accounting income and the estimated taxable income for the period and
 quantifi ed using the tax rates and laws enacted or substantively
 enacted as on the balance sheet date.
 
 c) Deferred tax assets which arise mainly on account of unabsorbed
 losses or unabsorbed depreciation are recognized and carried forward
 only to the extent that there is virtual certainty supported by
 convincing evidence that suffi cient future taxable income will be
 available against which such deferred tax assets can be realized.
 
 M.  Use of Estimates:
 
 The presentation of financial statements requires certain estimates
 and assumptions. These estimates and assumptions affect the reported
 amounts of assets and liabilities on the date of the financial
 statements and the reported amounts of revenues and expenses during the
 reporting period. Differences between the actual results and estimates
 are recognized in the period in which the results are known /
 materialized.
 
 N.  Preliminary Expenses:
 
 Preliminary expenses incurred are charged to revenue.
 
 O.  Provisions, Contingent Liabilities and Contingent Assets:
 
 i) Provisions involving substantial degree of estimation in measurement
 are recognized when there is a present obligation as a result of past
 events and that probability requires an outfl ow of resources.  
 
 ii) A disclosure for a contingent liability is made when there is a
 possible obligation or a present obligation that may, but probably will
 not, require an outfl ow of resources. Where there is a possible
 obligation or a present obligation in respect of which the likelihood
 of outfl ow of resources is remote, no disclosure is made.