Mundra Port and Special Economic Zone

1.  Nature of operations
 
 Mundra Port and Special Economic Zone Limited (MPSEZL) (erstwhile
 Gujarat Adani Port Limited) is the developer and operator of the Mundra
 Port pursuant to the concession agreement with Government of Gujarat
 (GOG) and Gujarat Maritime Board for 30 years effective from February
 17, 2001, with the right and authority to develop, design, fi nance,
 construct, operate and maintain the port and related infrastructure.
 This port is a deep water direct berthing port with natural draft of 17
 mtrs.
 
 Under sub-concession agreement between Mundra International Container
 Terminal Limited (MICTL) (erstwhile Adani Container Terminal Limited)
 and MPSEZL entered into on January 7, 2003, MPSEZL has given rights to
 MICTL to handle the container cargo for a period of 28 years i.e. upto
 February 17, 2031.
 
 Consequent to the introduction of Special Economic Zone Act, 2005, the
 Company has received the approval of Government of India vide their
 letter dated April 12, 2006, as a developer of Multi Product Special
 Economic Zone at Mundra and the surrounding areas. Keeping in view the
 synergy of its Port Business and SEZ Business, Mundra Special Economic
 Zone Limited was merged with the Company w.e.f.  April 1, 2006. The
 Company has developed infrastructure for Multi Product Special Economic
 Zone in the Mundra Region along with the Port facilities.
 
 2.  Segment Information
 
 The Company is primarily engaged in the business of developing,
 operating and maintaining the Mundra Port and port based related
 infrastructure facilities including Multi Product Special Economic
 Zone. The entire business has been considered as a single segment in
 terms of Accounting Standard-17 on Segment Reporting issued by the
 Institute of Chartered Accountants of India. There being no business
 outside India, the entire business has been considered as single
 geographic segment.
 
 3.  Related Party Disclosures
 
 The Management has identifi ed the following Companies and individuals
 as related parties of the Company for the year ended March 31, 2009,
 for the purposes of reporting as per AS 18 - Related Party
 Transactions:
 
 4.  Amounts Received/Receivable under Long-term Lease/Infrastructure
 Usage Agreements
 
 The Company has entered into various long-term agreements granting
 sub-leases out of its leasehold lands and/or rights to use
 infrastructure facilities for the period of the sub-leases which are
 generally co-terminus with the period of the Concession Agreement
 between the Company, Gujarat Maritime Board and Government of Gujarat.
 The Company has received/to receive upfront amounts in consideration of
 grant of the sub-leases and rights to use its infrastructure
 facilities. Unamortized amounts received/receivable under Long-term
 Leases/Infrastructure Usage Agreements at the end of the year amounting
 to Rs. 65,184.65 lacs (Previous Year Rs. 68,109.47 lacs) have been
 disclosed on the face of the Balance Sheet (Also refer Note 2(m)
 above).
 
 5. The Government of India (GOI) has, vide its letter dated 12th
 April, 2006, granted approval to the Company’s proposal for
 development, operation and maintenance of a Multi-product Special
 Economic Zone (SEZ) at Mundra, Gujarat. Subsequently through a Notifi
 cation dated 23rd June, 2006, the Ministry of Commerce & Industry
 (Department of Commerce) has included Mundra Port and port limits in
 notifi ed Special Economic Zone.
 
 The Company is of the view, supported by an external opinion, that it
 may avail benefi t u/s 80IAB of the Income Tax Act, on the entire
 income of the Company including the Special Economic Zone Operations.
 Accordingly, the Company has decided to avail benefi ts u/s 80IAB of
 the Income Tax Act, 1961, from the accounting year 2007-08 and has not
 created provision for income tax on income attributable to SEZ
 activities (including notifi ed port area).
 
 ADANI
 
 6.  The Company has made provision of Rs. 1,380.67 lacs for current
 taxation based on its profi t excluding SEZ (including notifi ed port
 area) profi t for the year ended 31st March, 2009. The Company has
 reversed the excess tax provision of Rs. 1,457.46 lacs relating to
 previous year. Provision for dividend distribution tax has not been
 made as Company is not liable to deposit dividend distribution tax in
 terms of section 115-O (6) of the Income Tax Act, 1961.
 
 7.  Sundry Debtors outstanding for a period more than six months
 include deferred receivables (amount receivable under Lease/Long-term
 Infrastructure Usage Agreements) of Rs. 7,347.47 lacs (Previous Year
 Rs. 18,590.90 lacs).
 
 8.  Details of Employee Benefi ts - Gratuity
 
 The Company has a defi ned gratuity plan. Every employee gets a
 gratuity on departure at 15 days salary (last drawn salary) for each
 completed year of service. The scheme is fully funded with Life
 Insurance Company of India (LIC) in the form of a qualifying insurance
 policy.
 
 The following tables summarise the components of net benefi t expense
 recognised in the Profi t and Loss Account and the funded status and
 amounts recognized in the Balance Sheet for the respective plans.
 
 9.  Income from Operations includes:
 
 a.  Land Lease Income, Long-term Infrastructure Usage Income and Income
 incidental thereto of Rs.10,370.46 lacs (Previous Year Rs. 14,731.50
 lacs).
 
 b.  Construction contract revenue income of Rs. 3,696.42 lacs (Previous
 Year Rs. Nil).
 
 10.  Assets taken under Operating Leases - residential houses for staff
 accommodation are obtained under operating lease. Lease rent is payable
 as per the lease term. The lease rent term is generally for eleven
 months for residential houses and renewable by mutual agreement. There
 is no sub-lease and all the leases are cancelable in nature. There are
 no restrictions imposed by the lease arrangements.  There is no
 contingent rent in the lease agreements. There is no escalation clause
 in the lease agreements. Expenses incurred under such leases have been
 included in the Profit and Loss Account.
 
 11.  The Company had incurred a sum of Rs. 709.50 lacs in an earlier
 year on consultancy services procured for putting up a Shipyard
 Project.  This amount is being carried forward in the Balance Sheet
 under the head Capital Work-in-Progress and will be transferred to a
 Company to be incorporated or divisions of the Company for putting up
 the project as may be possible.
 
 12.  Contingent Liabilities not provided for:
 
                                                      (Rs. in lacs)
 
 Particulars                             Year ended      Year ended
                                   31st March, 2009   31st March, 2008
 
 a. Corporate Guarantee given by 
 the Company against credit facility 
 availed by a body                       6,200.00         7,500.00
 corporate
 
 b. In earlier Years, some contractors. 
 of the Company had filed civil suits 
 against                                   751.50           751.50
 the Company for recovery of damages 
 caused to its machinery in an earthquake
 Rs. 37.10 lacs (Previous Year Rs. 37.10 lacs), 
 to its cargo stores in Company’s godown
 Rs. 94.40 lacs (Previous Year Rs. 94.40 lacs) 
 and due to mishandling of wheat cargo
 by the Company Rs. 620.00 lacs (Previous Year 
 Rs. 620.00 lacs). Above civil suits are
 currently pending with various Civil Courts in 
 Gujarat. The management is reasonably
 confi dent that no liability will devolve on 
 the Company in this regard and hence no
 provision is made in the books of accounts 
 towards these suits.
 
 c. In earlier Years., the Company had received 
 show cause notices from the Custom         255.00           497.15
 Authorities for recovery of custom duty 
 and interest on the import of a tug and bunkers.
 by the Company Rs. 207.13 lacs (Previous Year 
 Rs. 449.29 lacs), import of various
 Cargoes at Port Rs. 47.86 lacs (Previous Year 
 Rs. 47.86 lacs). The Customs cases are
 currently pending with, Custom, Excise and Service 
 Tax Appellate Tribunal (Rs. 207.13
 lacs), Assistant Commissioner of Customs, 
 Mundra (Rs. 14.20 lacs), Customs, Excise
 and Service Tax Appellate Tribunal, Mumbai 
 (Rs. 26.60 lacs), Commissioner of Customs
 (Appeals), Ahmedabad (Rs. 2.62 lacs) and 
 Deputy Commissioner of Customs, Gujarat,
 (Rs. 4.44 lacs) respectively. The management 
 is reasonably confi dent that no liability
 will devolve on the Company and hence no 
 liability has been recognised in the books
 of accounts.
 
 d.Joint Commissioner Customs, Mundra has held 
 the Company liable for short delivery         7.59            7.59
 of imported goods namely, H.M.S. through 
 Mundra Port to various customers. The
 Company has been directed to remit the 
 differential duty of Rs. 7.09 lacs and penalty
 of Rs. 0.50 lacs - under section 117 of the 
 Customs Act has been imposed. MPSEZL
 has preferred to challenge the said OrdeRs. 
 which are pending before Commissioner
 of Customs (Appeals) at Ahmedabad. The 
 management is reasonably confi dent that no
 liability will devolve on the Company and 
 hence no liability has been recognized in the
 books of accounts.
 
 e. Deputy Commissioner of Customs, Mundra has 
 held that the Company wrongly availed        26.33           26.33
 duty benefi t exemption under DFCEC Scheme 
 on import of secondhand equipment
 and demanded duty payment of Rs. 25.00 lacs. 
 The Company has filed its reply to
 the show cause notice with Deputy Commissioner 
 of Customs, Mundra and Assistant
 Commissioner of Customs, Aircargo Complex, 
 Ahmedabad and the management is of
 the view that no liability shall arise on the Company.
 
                                                         
 f.Various show cause notices received from 
 Commissioner/Additional Commissioner/     7,447.48         5,126.70
 Joint Commissioner/Deputy Commissioner of 
 Customs and Central Excise, Rajkot,
 for wrongly availing of Cenvat credit/Service 
 tax credit and Education Cess on input
 services and steel, cement and other misc. 
 fixed assets. The Excise department has
 demanded recovery of the duty along with 
 penalty and interest thereon. The Company
 has given deposit of Rs. 250 Lacs against 
 the demand. The matters. are pending before
 High Court, Gujarat and Commissioner of 
 Central Excise (Appeals), Rajkot. The Company
 has taken an external opinion in the matter 
 based on which, accordingly management
 is of the view that no liability shall arise 
 on the Company.
 
 g. Differential amount of customs duty in 
 respect of machinery imported under EPCG   1,437.50         2,603.10
 Scheme and interest thereon. Based on 
 budgeted sales plan, management is hopeful
 that it will be able to discharge the 
 obligation by executing the required volume of
 exports in the future period.
 
 h. Export duty on steel product supplied by 
 units in Domestic Tariff Area (DTA). Based    269.68            -
 on the appeal fi led, by the Company with 
 the High Court, Gujarat, the management is
 reasonably confi dent that no liability will 
 devolve on the Company and hence no liability
 has been recognized in the books of accounts.
 
 13. For the development of Special Economic Zone (SEZ) in the Mundra
 Taluka region, the Company is also acquiring land in Mundra and
 surrounding region under arrangements/agreements with private
 landowners/parties for development of contiguous SEZ area, apart from
 acquisition of land from Government of Gujarat. Till 31st March, 2009,
 the Company has paid an aggregate amount of Rs. 19,164.66 lacs to
 various private landowners/parties for acquisition of land, out of
 which Rs.7,889.78 lacs has been capitalized on allotment of a portion
 of land and the balance amount of Rs. 11,274.88 lacs is outstanding as
 advance at the year end.
 
 14.  Miscellaneous Expenditure - Share Issue Expenses:
 
 The Company has incurred expenses of Rs. 754.25 lacs (Previous Year Rs.
 5,814.62 lacs) during the year paid to, in connection with its Initial
 Public Offer (IPO). In terms of Section 78 of the Companies Act, 1956,
 the Company has adjusted the said share issue expense against the
 Securities Premium received from the said IPO.
 
 15.  Previous Year Comparatives
 
 Previous year’s figures have been regrouped where necessary to conform
 to this year’s classification.