1.  BASIS OF PREPARATION
 
 The financial statements are prepared on accrual basis of accounting
 under historical cost convention in accordance with generally accepted
 accounting principles in India and the relevant provisions of the
 Companies Act, 1956 including accounting standards notified there
 under.
 
 2.  USE OF ESTIMATES
 
 The preparation of financial statements requires estimates and
 assumptions that affect the reported amount of assets, liabilities,
 revenue and expenses during the reporting period. Although such
 estimates and assumptions are made on a reasonable and prudent basis
 taking into account all available information, actual results could
 differ from these estimates & assumptions and such differences are
 recognized in the period in which the results are crystallized.
 
 3.  GRANTS-IN-AID
 
 3.1 Grants-in-aid received from the Central Government or other
 authorities towards capital expenditure as well as consumers''
 contribution to capital works are treated initially as capital reserve
 and subsequently adjusted as income in the same proportion as the
 depreciation written off on the assets acquired out of the grants.
 
 3.2 Where the ownership of the assets acquired out of the grants vests
 with the government, the grants are adjusted in the carrying cost of
 such assets.
 
 3.3 Grants from Government and other agencies towards revenue
 expenditure are recognized over the period in which the related costs
 are incurred and are deducted from the related expenses.
 
 4.  FIXED ASSETS
 
 4.1 Fixed Assets are carried at historical cost less accumulated
 depreciation/amortisation.
 
 4.2 Expenditure on renovation and modernisation of fixed assets
 resulting in increased life and/or efficiency of an existing asset is
 added to the cost of related assets.
 
 4.3 Intangible assets are stated at their cost of acquisition less
 accumulated amortisation.
 
 4.4 Capital expenditure on assets not 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.
 
 4.5 Deposits, payments/liabilities made provisionally towards
 compensation, rehabilitation and other expenses relatable to land in
 possession are treated as cost of land.
 
 4.6 In the case of assets put to use, where f ina I settlement of bi I
 Is with contractors is yet to be effected, ca pita I isation is done on
 provisional basis subject to necessary adjustment in the year of final
 settlement.
 
 4.7 Assets and systems common to more than one generating unit are
 capitalised on the basis of engineering estimates/assessments.
 
 5.  CAPITAL WORK-IN-PROGRESS
 
 5.1 In respect of supply-cum-erection contracts, the value of supplies
 received at site and accepted is treated as Capital Work-in-Progress.
 
 5.2 Administration and general overhead expenses attributable to
 construction of fixed assets incurred til I they are ready for their
 intended use are identified and allocated on a systematic basis to the
 cost of related assets.
 
 5.3 Deposit works/cost plus contracts are accounted for on the basis of
 statements of account received from the contractors.
 
 5.4 Unsettled liability for price variation/exchange rate variation in
 case of contracts are accounted for on estimated basis as per terms of
 the contracts.
 
 6.  OIL AND GAS EXPLORATION COSTS
 
 6.1 The Company follows ''Successful Efforts Method'' for accounting of
 oil & gas exploration activities.
 
 6.2 Cost of surveys and prospecting activities conducted in search of
 oil and gas are expensed off in the year in which these are incurred.
 
 6.3 Acquisition and exploration costs are initially capitalized as
 ''Exploratory Wells-in-Progress'' under Capital Work-in-Progress.
 
 7.  DEVELOPMENT OF COAL MINES
 
 Expenditure on exploration of new coal deposits is capitalized as
 ''Development of coal mines'' under Capital Work- in-Progress till the
 mines project is brought to revenue account.
 
 8.  FOREIGN CURRENCY TRANSACTIONS
 
 8.1 Foreign currency transactions are initially recorded at the rates
 of exchange ruling at the date of transaction.
 
 8.2 At the balance sheet date, foreign currency monetary items are
 reported using the closing rate. Non-monetary items denominated in
 foreign currency are reported at the exchange rate ruling at the date
 of transaction.
 
 8.3 Exchange differences (loss), arising from translation of foreign
 currency loans relating to fixed assets/capital work-in-progress to the
 extent regarded as an adjustment to interest cost are treated as
 borrowing cost.
 
 8.4 Exchange differences arising from settlement / translation of
 foreign currency loans (other than regarded as borrowing cost),
 deposits/ liabilities relating to fixed assets/capital work-in-progress
 in respect of transactions entered prior to 01.04.2004, are adjusted in
 the carrying cost of related assets. Such exchange differences arising
 from settlement / translation of long term foreign currency monetary
 items in respect of transactions entered on or after 01.04.2004 are
 adjusted in the carrying cost of related assets.
 
 8.5 Other exchange differences are recognized as income or expense in
 the period in which they arise.
 
 9.  BORROWING COSTS
 
 Borrowing costs attributable to the fixed assets during
 construction/exploration, renovation and modernisation are capitalised.
 Such borrowing costs are apportioned on the average balance of capital
 work-in-progress for the year.  Other borrowing costs are recognised as
 an expense in the period in which they are incurred.
 
 10.  INVESTMENTS
 
 10.1 Current investments are valued at lower of cost and fair value
 determined on an individual investment basis.
 
 10.2 Long term investments are carried at cost. Provision is made for
 diminution, other than temporary, in the value of such investments.
 
 10.3 Premium paid on long term investments is amortised over the period
 remaining to maturity.
 
 11.  INVENTORIES
 
 11.1 Inventories are valued at the lower of, cost determined on
 weighted average basis, and net realizable value.
 
 11.2 The diminution in the value of obsolete, unserviceable and surplus
 stores and spares is ascertained on review and provided for.
 
 12.  PROFIT AND LOSS ACCOUNT
 
 12.1 INCOME RECOGNITION
 
 12.1.1 Sale of energy is accounted for based on tariff rates approved
 by the Central Electricity Regulatory Commission (CERC) as modified by
 the orders of Appellate Tribunal for Electricity to the extent
 applicable. In case of power stations where the tariff rates are yet to
 be approved, provisional rates are adopted.
 
 12.1.2 Advance against depreciation considered as deferred revenue in
 earlier years is included in sales, to the extent depreciation
 recovered in tariff during theyear is lower than the corresponding
 depreciation charged.
 
 12.1.3 Exchange differences on account of translation of foreign
 currency borrowings recoverable from or payable to the beneficiaries in
 subsequent periods as per CERC Tariff Regulations are accounted as
 ''Deferred Foreign Currency Fluctuation Asset/Liability''. The increase
 or decrease in depreciation or interest and finance charges for the
 year due to the accounting of such exchange differences as per
 accounting policy no. 8 is adjusted in sales.
 
 12.1.4 Exchange differences arising from settlement/translation of
 monetary items denominated in foreign currency (other than long term)
 to the extent recoverable from or payable to the beneficiaries in
 subsequent periods as per CERC Tariff Regulations are accounted as
 ''Deferred Foreign Currency Fluctuation Asset/Liability'' during
 construction period and adjusted in the year in which the same becomes
 recoverable/payable.
 
 12.1.5 The surcharge on late payment/overdue sundry debtors for sale of
 energy is recognized when no significant uncertainty as to
 measurability or collectability exists.
 
 12.1.6 Interest/surcharge recoverable on advances to suppliers as well
 as warranty claims/liquidated damages wherever there is uncertainty of
 realisation/acceptance are not treated as accrued and are therefore
 accounted for on receipt/acceptance.
 
 12.1.7 Income from consultancy services is accounted for on the basis
 of actual progress/technical assessment of work executed, in line with
 the terms of respective consultancy contracts. Claims for reimbursement
 of expenditure are recognized as other income, as per the terms of
 consultancy service contracts.
 
 12.1.8 Scrap other than steel scrap is accounted for as and when sold.
 
 12.1.9 Insurance claims for loss of profit are accounted for in the
 year of acceptance. Other insurance claims are accounted for based on
 certainty of realisation.
 
 12.2 EXPENDITURE
 
 12.2.1 Depreciation on the assets of the generation of electricity
 business is charged on straight line method following the rates and
 methodology notified by the CERC Tariff Regulations, 2009.
 
 12.2.2 Depreciation on the assets of the coal mining, oil & gas
 exploration and consultancy business, is charged on straight line
 method following the rates specified in Schedule XIV of the Companies
 Act, 1956.
 
 12.2.4 Depreciation on additions to/deductions from fixed assets during
 the year is charged on pro-rata basis from/up to the month in which the
 asset is available for use/disposal.
 
 12.2.5 Assets costing up toRs. 5000/- are fully depreciated in the year
 of acquisition.
 
 12.2.6 Cost of software recognized as intangible asset, is amortised on
 straight line method over a period of legal right to use or 3 years,
 whichever is less. Other intangible assets are amortized on straight
 line method over the period of legal right to use following the rates
 and methodology notified by CERC Tariff Regulations, 2009.
 
 12.2.7 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 unamortised balance of such asset is charged off
 prospectively at the rates and methodology notified by CERC Tariff
 Regulations, 2009/ revised useful life determined based on rates
 specified in Schedule XIV of the Companies Act, 1956.
 
 12.2.8 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 off prospectively over the
 revised useful life determined by technical assessment.
 
 12.2.9 Machinery spares which can be used only in connection with an
 item of plant and machinery and their use is expected to be irregular,
 are capitalised and fully depreciated over the residual useful life of
 the related plant and machinery at the rates and methodology notified
 by CERC Tariff Regulations, 2009 for such items of plant and machinery.
 
 12.2.10 Capital expenditure on assets not owned by the company is
 amortised over a period of 4 years from the month in which the first
 unit of project concerned comes into commercial operation and
 thereafter from the month in which the relevant asset becomes available
 for use. However, similar expenditure for community development is
 charged off to revenue.
 
 12.2.11 Leasehold land and buildings are fully amortised over 25 years
 or lease period whichever is less following the rates and methodology
 notified by CERC Tariff Regulations, 2009. Leasehold land acquired on
 perpetual lease is not amortised.
 
 12.2.12 Land acquired under Coal Bearing Areas (Acquisition &
 Development) Act, 1957 is amortised on the basis of lease period or
 balance useful life of the respective project whichever is less.
 
 12.2.13 Expenses on ex-gratia payments under voluntary retirement
 scheme, training & recruitment and research and development are charged
 to revenue in the year incurred.
 
 12.2.14 Preliminary expenses on account of new projects incurred prior
 to approval of feasibility report/ techno economic clearance are
 charged to revenue.
 
 12.2.15 Actuarial gains/losses in respect of ''Employee Benefit Plans''
 are recognised in the statement of Profit & Loss Account.
 
 12.2.16 Net pre-commissioning income/expenditure is adjusted directly
 in the cost of related assets and systems.
 
 12.2.17 Prepaid expenses and prior period expenses/income of items of
 Rs.100,000/- and below are charged to natural heads of accounts.
 
 12.2.18 Carpet coal is charged off to coal consumption. However, during
 pre-commissioning period, carpet coal is retained in inventories and
 charged off to consumption in the first yearof commercial operation.
 Transit and handling losses of coal as per norms are included in cost
 of coal.
 
 13.  LEASES
 
 13.1 FINANCE LEASE
 
 13.1.1 Assets taken on finance lease are capitalized at fair value or
 net present value of the minimum lease payments, whichever is less.
 
 13.1.2 Depreciation on the assets taken on finance lease is charged at
 the rate applicable to similar type of fixed assets as per accounting
 policy no. 12.2.1 or 12.2.2. If the leased assets are returnable to the
 lessor on the expiry of the lease period, depreciation is charged over
 its useful life or lease period, whichever is less.
 
 13.1.3 Lease payments are apportioned between the finance charges and
 outstanding liability in respect of assets taken on lease.
 
 13.2 OPERATING LEASE
 
 Assets acquired on lease where a significant portion of the risk and
 rewards of the ownership are retained by the lessor are classified as
 operating leases. Lease rentals are charged to revenue.
 
 14.  PROVISIONS AND CONTINGENT LIABILITIES
 
 A provision is recognised when the company has a present obligation as
 a result of a past event and it is probable that an outflow of
 resources will be required to settle the obligation and in respect of
 which a reliable estimate can be made. Provisions are determined based
 on management estimate required to settle the obligation at the balance
 sheet date and are not discounted to present value. Contingent
 liabilities are disclosed on the basis of judgment of the
 management/independent experts. These are reviewed at each balance
 sheet date and are adjusted to reflect the current management estimate.
 
 15.  CASH FLOW STATEMENT
 
 Cash flow statement is prepared in accordance with the indirect method
 prescribed in Accounting Standard (AS) 3 on ''Cash Flow Statements''.