1.  ACCOUNTING CONVENTIONS
 
 The accounts of the Corporation are prepared under the historical cost
 convention using the accrual method of accounting.
 
 2.  FIXED ASSETS
 
 2.1 Fixed assets are stated at cost of acquisition/construction. In
 cases where final settlement of bills with contractors is pending, but
 the asset is complete and ready for use, capitalisation is done on
 estimated basis subject to necessary adjustment, including those
 arising out of settlement of arbitration/court cases, in the year(s) of
 final settlement.
 
 2.2 Fixed Assets created on land not belonging to the Corporation are
 included under fixed assets.
 
 2.3 Capital Expenditure on assets where neither the land nor the asset
 is owned by the Company is reflected as a distinct item in capital work
 in progress till the period of completion and thereafter in the fixed
 assets.
 
 2.4 Payments made provisionally towards compensation and other expenses
 relatable to land are treated as cost of land.
 
 2.5 Land taken for use from State Government (without transfer of
 title) and expenses on relief and rehabilitation as also on creation of
 alternate facilities for land evacuates or in lieu of existing
 facilities coming under submergence and where construction of such
 alternate facilities is a specific pre condition for the acquisition of
 the land for the purpose of the project, are accounted for as
 Land-unclassified/Right of use, to be amortised over a period of 30
 years from the date of commercial operation of the project.
 
 2.6 Assets procured/created in projects on grants-in-aid/agency or
 deposit basis are not included in the assets, as ownership does not
 vest with the Corporation.
 
 2.7 Construction equipments declared surplus are shown at lower of book
 value and net realisable value.
 
 3.  MACHINERY SPARES
 
 3.1 (a) Machinery spares procured along with the Plant & Machinery or
 subsequently and whose use is expected to be irregular are capitalized
 separately, if cost of such spares is known and depreciated fully over
 the residual useful life of the related plant and machinery at the
 rates of depreciation and methodology as notified by CERC for such
 Plant & Machinery. If cost of such spares is not known particularly
 when procured along with mother plant, these are capitalized &
 depreciated along with mother plant at the rates of depreciation and
 methodology as notified by CERC for such Plant & Machinery.
 
 (b) WDV of spares is charged off to Profit & Loss Account in the year
 in which such spares are replaced in place of retrieved spares,
 provided the spares so retrieved do not have any useful life. Similarly
 value of such spares, procured & replaced in place of retrieved spares,
 is charged off to Profit & Loss Account in that year itself, provided
 spares so retrieved do not have any useful life.
 
 (c) When the useful life of the related fixed asset expires and asset
 is retired from active use, such spares are valued at net book value or
 net realizable value which ever is lower. However, in case retired
 assets are not replaced, WDV of related spares less disposable value is
 written off.
 
 3.2 Other spares are treated as stores & spares forming part of the
 inventory and expensed when issued.
 
 4.  CAPITAL WORK IN PROGRESS
 
 4.1 Projects under commissioning and other capital work-in-progress are
 carried at cost. Administration & General overhead expenses
 attributable to construction of fixed assets are identified and
 allocated on systematic basis on major immovable assets other than land
 and infrastructural facilities, on commissioning of the project.
 
 4.2 Expenditure on maintenance, up gradation etc. of common public
 facilities in projects under construction is charged to `Expenditure
 During Construction (EDC)''.
 
 4.3 Expenditure in relation to Survey and Investigation of the projects
 is carried as capital work in progress. Such expenditure is either
 capitalized as cost of Project on completion of the construction of the
 project or the same is expensed in the year in which it is decided to
 abandon such project.
 
 5.  DEPRECIATION & AMORTISATION
 
 5.1 Depreciation is provided on pro rata basis in the year in which the
 asset becomes available for use.
 
 5.2.1 Depreciation on Fixed Assets of Operating Units of the company is
 charged on straight-line method following the rates and methodology as
 notified by the Central Electricity Regulatory Commission (CERC) for
 the fixation of tariff except for assets specified in 5.2.3 below , in
 respect of which depreciation is charged at the rates mentioned in that
 policy.
 
 5.2.2 Depreciation on Fixed Assets of other than Operating Units of the
 company is charged on straight-line method to extent of 90% of the cost
 of asset following the rates as notified by the Central Electricity
 Regulatory Commission (CERC) for the fixation of tariff except for
 assets specified in 5.2.3 below, in respect of which depreciation is
 charged at the rates mentioned in that policy.
 
 5.2.3 Depreciation in respect of following assets shall be charged on
 straight line method to the extent of 90% of the cost of asset
 following the rates of depreciation indicated as against each asset
 
 (i) Construction Plant & Machinery 11.25%
 
 (ii) Computer & Peripherals 30%
 
 5.2.4 Temporary erections are depreciated fully (100%) in the year of
 acquisition / capitalization by retaining Re.1/- as a WDV for control
 purpose.
 
 5.3 Assets valuing Rs. 5000/- or less but more than Rs. 750/- and such
 items (excluding immovable assets) with written down value of Rs. 5000/-
 or less at the beginning of the year are fully depreciated during the
 year with Re. 1 as a balance value.
 
 5.4 Low value items, which are in the nature of assets (excluding
 immovable assets) and valuing upto Rs. 750/- are not capitalized and
 charged off to revenue.
 
 5.5 Cost of software is recognized as `Intangible Assets'' and is
 amortized on straight line method over a period of legal right to use
 or three years, whichever is earlier. Other intangible assets are
 amortized on straight line method over the period of legal right to use
 or 35 years whichever is earlier.
 
 5.6 Leasehold Land is amortized over the period of lease or 30 years
 whichever is lower.
 
 5.7 Fixed Assets created on leasehold land are depreciated to the
 extent of 90% of original cost over the balance available lease period
 of respective land or at the applicable depreciation rates &
 methodology notified by CERC regulations for such assets, whichever is
 higher.
 
 5.8 Capital Expenditure referred to in Policy 2.3 is amortized over a
 period of 5 years from the year in which the first unit of project
 concerned comes into commercial operation and thereafter from the year
 in which the relevant asset becomes available for use.
 
 5.9 Where the cost of depreciable assets has undergone a change during
 the year due to increase/decrease in long term liabilities on account
 of exchange fluctuation, price adjustment, change in duties or similar
 factors, the unamortized balance of such assets is depreciated
 prospectively over the residual life of such assets at the rate of
 depreciation and methodology notified by CERC regulations.
 
 5.10 Where the life and / or efficiency of an asset is increased due to
 renovation and modernization, the expenditure thereon along-with its
 unamortized depreciable amount is charged prospectively over the
 revised / remaining useful life determined by technical assessment.
 
 6.  INVESTMENTS
 
 Investments are intended for long term and carried at cost. Provision
 for diminution, other than temporary, in the value of such investment
 is provided.
 
 7.  INVENTORIES
 
 7.1 Stores & Spares are valued at cost, determined on weighted average
 basis or net realizable value whichever is lower.
 
 7.2 Losses towards unserviceable and obsolete stores and spares,
 identified on a systematic basis, are provided in the accounts.
 
 7.3 Loose tools issued during the year are charged to consumption
 account where cost of individual items is Rs. 5,000/- or less and in
 other cases written off in 5 yearly equated installments.
 
 7.4 Stores issued for operation and maintenance at Power Stations but
 lying unused at site at the year-end are evaluated at engineering
 estimates and taken as stores.
 
 8.  FOREIGN CURRENCY TRANSACTIONS
 
 8.1 Transactions in foreign currency are initially recorded at exchange
 rates prevailing on the date of transaction. At each Balance Sheet date
 monetary items denominated in foreign currency are translated at the
 exchange rate prevailing on the Balance Sheet date.
 
 8.2 Exchange differences are recognised as income & expenses in the
 period in which they arise in Profit & Loss Account in case of
 operational stations and to EDC in case of projects under construction.
 However, Exchange Differences in respect of liabilities relating to
 fixed assets/capital work-in-progress arising out of transaction
 entered into prior to 01/04/2004 are adjusted to the carrying cost of
 respective fixed asset/Capital Work-in-Progress.
 
 9.  EMPLOYEE BENEFITS
 
 9.1 Provision for Post employment benefit as defined in Accounting
 Standard 15 (2005) on Employee Benefits is made based on actuarial
 valuation at the year-end.
 
 9.2 Provision for Long term employee benefits is made in the books on
 the basis of actuarial valuation made at the year end.
 
 9.3 Expenses on Ex-gratia payments & Notice Pay under Voluntary
 Retirement Scheme are charged to revenue in the year of incurrence.
 
 10.  REVENUE
 
 10.1 (a) Sale of energy is accounted for as per tariff notified by
 Central Electricity Regulatory Commission. In case of Power Station
 where tariff is not notified, sales are billed on provisional rates
 worked out based on the parameters and method adopted by the
 appropriate authority. Recovery/refund towards foreign currency
 variation in respect of foreign currency loans and recovery towards
 income tax are accounted for on year to year basis.
 
 (b) Incentives/Disincentives are recognised as per tariff
 notifications. In case of Power Station where tariffs have not been
 notified, incentives are recognized provisionally on assessment of the
 likelihood of acceptance of the same.
 
 (c) Adjustments arising out of finalisation of global accounts, though
 not material, are effected in the year of respective finalisation.
 
 (d) Advance against depreciation considered as deferred income in
 earlier years is included in sales on straight line basis over the
 balance useful life after 31st March of the year closing after a period
 of 12 years from the date of commercial operation of the project,
 considering the total useful life of the project as 35 years.
 
 10.2 In respect of Project Management/Consultancy Contracts/Cost plus
 Contract, revenue is recognized based on the terms of agreement and the
 quantum of work done under the contract.
 
 10.3 Interest on investments is accounted for on accrual basis.
 
 10.4 Interest / Surcharge charged from customers are recognized as
 income on receipt or when there is reasonable certainty of collection.
 
 11.  MISCELLANEOUS
 
 11.1 Liabilities for Goods in transit/Capital works executed but not
 certified are not provided for, pending inspection and acceptance by
 the Corporation.
 
 11.2 Power supplied from Power Stations to Projects under construction
 is charged as per normal tariff.
 
 11.3 Prepaid expenses and prior period expenses/income of items of
 Rs.50,000/- and below are charged to natural heads of accounts.
 
 11.4 Insurance claims are accounted for based on certainty of
 realization.
 
 12.  BORROWING COST
 
 Borrowing costs attributable to the Fixed Assets during
 construction/renovation & modernisation are capitalised. Other
 borrowing costs are recognised as an expense in the period in which
 they are incurred.
 
 13.  TAXES ON INCOME
 
 Tax on income for the current period is determined on the basis of
 taxable income under the Income Tax Act, 1961.
 
 Deferred tax is recognized on timing differences between the accounting
 income and taxable income for the year and quantified using the tax
 rates and laws enacted or substantively enacted as on the Balance Sheet
 date. Deferred tax assets are recognized and carried forward to the
 extent there is a reasonable certainty that sufficient future taxable
 income will be available against which such deferred tax assets can be
 realized. Deferred Tax Recovery Adjustment Account is credited/debited
 to the extent tax expense is chargeable from the Beneficiaries in
 future years.