1.  GENERAL
 
 Financial statements are prepared under the historical cost convention
 and in accordance with generally accepted accounting practices.
 
 2.  FIXED ASSETS
 
 Fixed assets are stated at cost, less accumulated depreciation. Cost of
 acquisition of fi xed assets is inclusive of freight, duties, and
 taxes, incidental expenses relating thereto, interest on direct
 borrowals upto commissioning, wherever applicable, and the cost of
 installation/erection, as applicable. CENVAT availed, if any, on Fixed
 Assets, is not included in the Cost of such Fixed Assets capitalised.
 
 3.  LEASED ASSETS
 
 (A) ASSETS UNDER FINANCE LEASE:
 
 Assets acquired under fi nance lease arrangement on or after 01.04.2001
 are recognised separately among the fi xed assets, at the inception of
 the lease at lower of their fair value or the present value of minimum
 lease payments in respect thereof. Depreciation and lease charges on
 such assets are accounted for, in accordance with the Accounting
 Standard-19 – Accounting for Leases issued by The Institute of
 Chartered Accountants of India.
 
 (B) ASSETS UNDER OPERATING LEASE:
 
 Assets used by the Company as a lessee under operating lease agreement
 are not recognised in the Companys accounts. Lease payments under
 operating lease are charged to the Profit and loss account on a
 systematic basis representative of the pattern of the benefit accruing
 to the Company from the use of the asset under operating lease.
 
 4.  INVESTMENTS
 
 Investments (Long Term) are stated at cost less provision for
 diminution in value other than temporary, if any. Short term
 investments are valued at Cost or Fair value whichever is lower.
 
 5 INVENTORIES
 
 (a) Finished goods are valued at cost or market value, whichever is
 lower.
 
 (b) Stock of scrap -
 
 i. In respect of Engineering Unit, purchased scrap and internally
 generated scrap for use in production are both valued at average cost
 of purchased scrap.
 
 ii. In respect of other scrap, the stock of scrap is not valued and
 adjusted. Sales, as and when made, are adjusted.
 
 (c) Work-in-Progress, raw materials, stores, spares, material in
 transit, are valued at cost except where the net realisable value of
 the fi nished goods they are used in is less than the cost of fi nished
 goods and in such an event, if the replacement cost of such materials
 etc., is less than their book values, they are valued at replacement
 cost.
 
 6. SALES AND OTHER EARNINGS
 
 (a) Sales and service earnings are inclusive of excise duty, service
 tax, freight, insurance etc. recovered thereon.
 
 (b) Despatches from Engineering Unit are in completely knocked down
 condition and are invoiced at the appropriate technically evaluated
 values, which are matched with contracted sale prices.
 
 (c) Electricity generated by the power units of the company, sold to
 its other units is accounted at the tariff rates charged by the State
 Electricity Boards. Such earnings are adjusted to the power charges.
 
 (d) Dividend income is accounted as and when the right to receive
 arises.
 
 (e) Other income - Revenue in respect of other incomes are recognised
 when there is a reasonable certainty as to its realisation.
 
 7.  FOREIGN EXCHANGE TRANSACTIONS
 
 A) Transactions in foreign currency are initially accounted at the
 exchange rate prevailing on the date of the transaction, and adjusted
 appropriately with the difference in the rate of exchange arising on
 actual receipt/payment during the year.
 
 B) At each Balance Sheet date
 
 - foreign currency monetary items are reported using the rate of
 exchange on that date
 
 - foreign currency non-monetary items are reported using the exchange
 rate at which they were initially recognized
 
 C) In respect of forward exchange contracts in the nature of hedges
 
 - Premium or discount on the contract is amortised over the term of the
 contract,
 
 - Exchange differences on the contract are recognized as Profit or
 loss in the period in which they arise
 
 8.  ACCOUNTING FOR DERIVATIVES
 
 The company uses derivative instruments to hedge its exposure to
 movements in foreign exchange rates, interest rates and currency risks.
 The objective of these derivative instruments is only to reduce the
 risk or cost to the company and is not intended for trading or
 speculation purposes.
 
 9. EMPLOYEE BENEFITS
 
 a) 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.
 
 b) Long Term Employee benefits i.e. such benefits which do not fall
 due wholly within twelve months after the end of the period in which
 the employees render the related service, are recognized as follows
 
 - Expense is arrived at as per actuarial valuation and is recognized
 and charged to the Profit and Loss Account in the year in which
 employee has rendered services in lieu of such leave.
 
 - Liability as at the date of each Balance Sheet is arrived at and
 recognized therein as per actuarial valuation.
 
 c) Post-Employment benefits:
 
 (i) Defined Contribution plans: The
 
 companys employees are covered under superannuation schemes, state
 governed provident fund scheme, employee state insurance scheme and
 employee pension scheme, which are in the nature of Defined
 Contribution Plans. The contributions paid/ payable under the schemes
 are recognized during the period in which the employee renders the
 related service.
 
 (ii) Defined benefit plans:
 
 The companys liability to gratuity on retirement of its eligible
 employees is funded under a Defined benefit Plan with the Life
 Insurance Corporation of India. The present value of the obligation
 under such Defined benefit plan is determined based on actuarial
 valuation using the Projected Unit Credit Method. The incremental
 expense thereon for each year is arrived at as per actuarial valuation
 and is recognized and charged to the Profit and Loss account in the
 year in which the employee has rendered service.
 
 The fair value of the plan assets and the gross plan obligation, under
 the said plan, are recognized in each Balance Sheet on net basis.
 
 d) Actuarial Gains/losses are charged to the Profit and Loss account
 immediately in each year.
 
 10. DEPRECIATION
 
 Depreciation is provided in accordance with the rates and rules
 prescribed under Schedule XIV to the Companies Act, 1956, as follows:--
 
 i.  In respect of assets existing as on 30-6-1988, under the written
 down value method: and
 
 ii.  In respect of assets acquired on or after 1-7- 1988, under the
 straight line method.
 
 11. IMPAIRMENT OF ASSETS
 
 The carrying amount of assets are reviewed at each Balance sheet date
 to assess, if there is any indication of impairment based on
 internal/external factors. An impairment loss is recognised wherever
 that carrying amount of the assets exceeds its recoverable amounts.
 The recoverable amount is the greater of the assets net selling price
 and value in use. The impairment loss recognised in prior accounting
 period is reversed if there has been a change in the estimate of
 recoverable amount.
 
 12. WARRANTY CLAIMS
 
 Companys liability for Warranty claims and Guarantee claims are
 accounted on acrual basis as per contracts, after adjusting the claims
 no longer required.
 
 13. DIVIDENDS
 
 Provision is made in the accounts for the dividends paid / payable by
 the Company as recommended by the Board of Directors, pending approval
 of the shareholders at the Annual General Meeting.  Income Tax on
 dividend payable is provided for in the year to which such dividends
 relate.
 
 14.  BORROWING COSTS
 
 Borrowing costs that are directly attributable to the acquisition,
 construction or production of qualifying assets are capitalised as part
 of the cost of that asset. A qualifying asset is an asset that
 necessarily takes a substantial period of time to get ready for its
 intended use. All other borrowing costs are charged to revenue in the
 period in which they are incurred.
 
 15. EXPENDITURE DURING CONSTRUCTION PERIOD
 
 All identifi able revenue expenses including interest on term loans
 incurred in respect of various projects/ expansions are allocated to
 capital cost of respective assets/ capital work in progress.
 
 16. EXPENDITURE ON APPROVED RESEARCH AND DEVELOPMENT PROGRAMME
 
 In respect of approved Research and Development Programme, expenditure
 of capital nature is included in the fi xed assets and other
 expenditure is charged off to revenue in the year in which such
 expenditure is incurred.
 
 17. TAXATION
 
 Provision is made for income tax liability estimated to arise on the
 results for the year at the current rate of tax in accordance with the
 Income Tax Act, 1961.
 
 - Deferred tax resulting from timing differences between taxable and
 accounting income is
 
 accounted for using the tax rates and laws that are enacted or
 substantively enacted as on the balance sheet date.
 
 - Deferred tax assets arising on account of brought forward losses and
 unabsorbed depreciation are recognised only when there is virtual
 certainty supported by convincing evidence that such assets will be
 realised.  Deferred tax assets arising on other temporary timing
 differences are recognised only if there is a reasonable certainty of
 realisation.
 
 - MAT Credit Entitlement as per the provisions of Income Tax Act, 1961,
 is treated as an asset by credit to the Profit and loss account.
 
 18. EARNINGS PER SHARE (EPS)
 
 The earnings considered in ascertaining the companys Basic EPS is the
 attributable net Profit or loss to the equity shareholders as per
 AS-20 Earnings Per Share. The number of shares used in computing
 Basic EPS is the weighted average number of shares outstanding during
 the period. The Diluted EPS is calculated on the same basis as Basic
 EPS, after adjusting for the effects of potential dilutive equity
 shares unless the effect of the potential dilutive equity shares is
 anti-dilutive.
 
 19. PROVISIONS/ CONTINGENT LIABILITIES AND ASSETS
 
 Provisions involving substantial degree of estimation in measurement
 are recognised when there is a present obligation as a result of past
 events and it is probable that there will be an outfl ow of resources.
 Contingent liabilities are not recognised, but are disclosed in the
 notes on accounts. Contingent assets are neither recognised nor
 disclosed in the financial statements.