CONVENTION
 
 To prepare financial statements in accordance with applicable
 Accounting Standards in India. A summary of accounting policies, which
 have been applied consistently, is set out below. The financial
 statements have also been prepared in accordance with relevant
 presentational requirement of the Companies Act, 1956.
 
 BASIS OF ACCOUNTING
 
 The financial statements have been prepared under the historical cost
 convention and on accrual basis and on going concern concept.
 
 USE OF ESTIMATES
 
 The preparation 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 the reported
 amount of revenues and expenses during the reported period. Difference
 between the actual results and estimates are recognized in the period
 in which the results are known / materialized.
 
 FIXED ASSETS
 
 To state Fixed Assets at cost of acquisition inclusive of inward
 freight, duties and taxes and incidental expenses related to
 acquisition. In respect of major projects involving
 construction/fabrication, related pre-operational expenses form part of
 the value of the assets capitalized. Expenses capitalized also includes
 applicable borrowing costs. To adjust the original cost of fixed assets
 acquired through foreign currency loans at the end of each financial
 year by any change in liability arising out of expressing outstanding
 foreign loan at the rate of exchange prevailing at the date of Balance
 Sheet.
 
 To capitalize software where it is expected to provide future enduring
 economic benefits. Capitalization costs includes license fees and cost
 of implementation/system integration services. The costs are
 capitalized in the year in which the relevant software is implemented
 for use.
 
 All up-gradation/enhancements are generally charged off as revenue
 expenditure unless they bring similar significant additional benefits.
 
 No amortization is provided in the Accounts in respect of leasehold
 land in view of the long term tenure, which is akin to ownership.
 
 Depreciation on Fixed Assets is provided for on Written Down Value
 Method at the rates and in the manner specified in the Schedule XIV of
 the Companies Act, 1956.
 
 INVESTMENTS
 
 To state current investments at lower of cost and fair value, and long
 term investments are stated at cost. Where applicable, provision is
 made where there is a permanent fall in valuation of long term
 investments.
 
 CURRENT ASSETS
 
 Inventories are valued as  
 
 (a) Stores and Spares       at lower of cost or net realizable 
                             value
 
 (b) Raw Materials           at lower of cost or net realizable 
                             value
 
 (c) Work in process         at lower of cost or net realizable 
                             value
 
 (d) Finished Goods          at lower of cost or net realizable 
                             value
 
 Cost is arrived at on First in First Out basis. Cost comprises
 expenditure incurred in normal course of the business in bringing such
 inventories to its location and includes, where applicable, appropriate
 overheads based on normal level of activities. Obsolete, slow moving
 and defective inventories are identified at the time of physical
 verification of inventories and, where necessary, provision is made for
 such inventories.
 
 FOREIGN CURRENCY TRANSACTIONS
 
 (a) Transactions denominated in foreign currencies are recorded at the
 exchange rate prevailing on the date of the transaction.
 
 (b) Monetary items denominated in foreign currencies at the year end
 are restated at the year end rates. In case of items which are covered
 by forward exchange contracts, the difference between the year end rate
 and the rate on the date of the contract is recognized as exchange
 difference and the premium paid on forward contracts is recognized over
 the life of the contract.
 
 (a) Non-monetary foreign currency items are carried at cost.
 
 (b) In respect of branches, which are integral foreign operations, all
 transactions are translated at rates prevailing on the date of
 transaction or that approximates the actual rate on the date of
 transaction. Branch monetary assets and liabilities are restated at the
 year end rates.
 
 (c) Any income or expense on account of exchange difference either on
 settlement or on translation is recognized in the profit and loss
 account except in cases where they relate to acquisition of fixed
 assets, in which case they are adjusted to the carrying cost of such
 assets.
 
 INCOME
 
 Sales comprises sale of goods and services.
 
 Revenue in respect of purchase/sale of product and scrap is recognized
 at the point of receipt/despatch from/to parties at/from plant and warehouses.
 
 Interest on Fixed Deposits with banks and other miscellaneous income
 are also accounted for on the accrual basis except interest accrued on
 NSC, dividend and interest if any arising on income tax, sales tax and
 excise duty refunds.
 
 BENEFITS TO WORKMEN
 
 Liabilities in respect of retirement benefits are provided for by
 monthly payments to pension and provident funds under the Employees''
 Provident Funds (and Miscellaneous Provisions) Act, 1952 which are
 charged against revenue.
 
 Benefit in terms of workmen demand pending settlement, accumulated
 leave, medical reimbursement and leave travel concession are accounted,
 when paid and bonus to employees, is provided for on accrual basis.
 Gratuity liabilities are determined as per the actuarial valuation done
 using the projected unit credit method.  Gratuity Scheme in respect of
 the employees of the company is administered through Life Insurance
 Corporation of India (LIC). Annual contribution as determined by the
 LIC are charged to the Profit & Loss Account. The additional liability,
 if any, arising out of the difference between the actuarial valuation
 as at the Balance Sheet date and the fund balance is accrued and
 provided for at the year end.
 
 TAXES ON INCOME
 
 To provide and determine current tax as the amount of tax payable in
 respect of taxable income for the period.  To provide and recognize
 deferred tax on timing differences between taxable income and
 accounting income subject to consideration of prudence.
 
 Not to recognize deferred tax assets on unabsorbed depreciation and
 carry forward of losses unless there is virtual certainty that there
 will be sufficient future taxable income available to realize such
 assets.
 
 IMPAIRMENT OF ASSETS
 
 Impairment is ascertained at each balance sheet date in respect of
 company''s fixed assets. An impairment loss is recognized wherever the
 carrying amount of an asset exceeds its recoverable amount. The
 recoverable amount is the greater of the net selling price and value in
 use. In assessing value and use, the estimated future cash flows are
 discounted to their present value based on an appropriate discount
 factor.
 
 
 ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS
 
 Provisions are recognized in terms of Accounting Standard
 29-Provisions, Contingent Liabilities and Contingent Assets issued by
 The Institute of Chartered Accountant of India, when there is a present
 legal or statutory obligation as a result of past event where it is
 probable that there will be outflow of resources to settle the
 obligation and when a reliable estimate of the amount of the obligation
 can be made.
 
 Contingent Liabilities are recognized only when there is a possible
 obligation arising from past events due to occurrence or non occurrence
 of one or more uncertain future events not wholly within the control of
 the company or where reliable estimate of the obligation can not be
 made. Obligations are assessed on an ongoing basis and only those
 having largely probable outflow of resources are provided for.
 Contingent Assets are not recognized in the financial statements.
 
 CLAIMS
 
 To disclose claims against the company not acknowledged as debts after
 a careful evaluation of the facts and legal aspect of the matter
 involved.
 
 MISCELLANEOUS EXPENDITURE
 
 -Preliminary Expenses including issue expenses are amortized over a
 period of five years.  -Payment made to Rajasthan State Mines &
 Minerals Limited, on account of dues of Hindustan Farms & Fertilizers
 Co. Ltd., for ensuring regular supply of rock phosphate from Rajasthan
 State Mines & Minerals Limited, is treated as Deferred Revenue
 Expenditure and is amortized over a period five years.