A. General Accounts are prepared under the historical cost basis in
 accordance with Generally Accepted Accounting Principles (GAAP),
 accounting standards issued by the Institute of Chartered Accountants
 of India and the relevant provisions of the Companies Act 1956. All
 Income and expenditure having material bearing are recognized on
 accrual basis, except where otherwise stated.  
 
 B. Use of estimates 
 
 The presentation of financial statements is in conformity with
 generally accepted accounting principles and it requires management to
 make estimates and assumptions that affects the reported amounts of
 assets and liabilities, and the disclosure of contingent liabilities on
 the date of financial statements. Actual results could differ from
 those estimates. Any revision to accounting estimates is recognized
 prospectively in current and future periods.
 
 C. Fixed Assets 
 
 Fixed assets are stated at cost which is inclusive of freight, duties,
 taxes and all other incidental expenses related thereto. The
 diminution, if any, in the book value of these assets is provided for
 in the year of such determination of diminution.  
 
 D. Depreciation / Amortization 
 
 I) Depreciation / amortization on the original cost of fixed assets is
 provided as under:
 
 a) Leasehold land premium is being amortized from the commencement of
 commercial production over the remaining period of the lease.  
 
 b) In respect of other items of fixed assets, depreciation is provided
 on straight line method at the rates and in the manner as specified in
 Schedule XIV to the Companies Act, 1956.
 
 II) Depreciation / amortization on the incremental amount added to the
 cost of fixed assets on the revaluation is provided on the basis of the
 estimated useful life.  
 
 E. Valuation of Inventories 
 
 Finished goods, Stores, spares, process chemicals, packing materials
 and fuel are valued at the lower of cost and net realizable value. Cost
 is assigned on FIFO basis.  Obsolete, defective and unserviceable
 stocks are provided for.
 
 F. Borrowing Cost: 
 
 Borrowing costs attributable to acquisition and reconstruction of
 assets are capitalized as a part of the cost of such asset up to the
 date when such asset is ready for its intended use.  Other borrowing
 costs are charged to Profit and Loss Account.
 
 G. Retirement and other Benefits 
 
 Contributions to the Provident Funds are made in accordance with the
 rules of the funds.  Liability in respect of gratuity is provided for
 on the basis of valuation, as worked out at the year end by the Company
 according to provisions of the Payment of Gratuity Act, 1972.
 Liability in respect of Leave encashment is provided on the basis of
 valuation, as worked out according to company policy 
 
 H.  Foreign Currency Transactions
 
 I. Transactions in foreign currency are recorded at the rate of
 exchange prevailing at the date of transaction.
 
 II. Liabilities and assets in foreign currency outstanding as at the
 year end other than for financing fixed assets are converted at the
 rate prevailing at the year end and difference, if any, is adjusted in
 the profit and loss account.
 
 I.  Research and Development Expenses
 
 Revenue expenditure is charged to the Profit & Loss Account and Capital
 expenditure is added to the cost of fixed assets in the year in which
 it is incurred.
 
 J.  Accounting for Taxes on Income
 
 Current tax is determined as the amount of tax payable in respect of
 taxable income for the period. Deferred tax is recognized, for all
 timing differences, subject to the consideration of prudence applying
 the tax rates that have been substantively enacted by the balance sheet
 date. Deferred tax assets has been recognized on carry forward losses
 of earlier years, for which relief has been granted by BIFR order
 .However an application has been submitted
 to the CBDT for their approval.
 
 K.  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 it is probable that there will be outflow of
 resources.
 
 II.  Contingent Liabilities (excluding those, liability whereof is not
 ascertainable) are not recognized but are disclosed in the notes
 forming part of accounts.
 
 III.  Contingent Assets are neither recognized nor disclosed in the
 financial statements.