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« Mar 11
Notes to Accounts Year End : Mar '12
1.  The financial statements for the year ended 31st March 2011 were
 prepared as per then applicable, Schedule VI to the Companies Act,
 1956.  Consequent to the Notification of Revised Schedule VI under the
 Companies Act, 1956, the financial statements for the year ended 31st
 March 2012 are prepared as per Revised Schedule VI. Accordingly, the
 previous year figures have also been reclassified to conform to this
 years classifi cation.  The adoption of revised Schedule VI for
 previous year figures does not impact recognition and measurement
 principles followed for preparation of financial statements.
 
 2.  Amount in the financial statements are presented in Rs. crore (upto
 two decimals) except for per share data and as other-wise stated.
 Certain amounts, which do not appear due to rounding off, are
 incorporated separately.
 
 3.  a) Certain loans & advances and creditors in so far as these have
 since not been realised/discharged or adjusted are subject to confi
 rmation/ reconciliation and consequential adjustment, which in the
 opinion of the management is not material.
 
 b) In the opinion of the management, the value of assets, other than fi
 xed assets and non-current investments, on realisation in the ordinary
 course of business, will not be less than the value at which these are
 stated in the Balance Sheet.
 
 4.  The coal price Notification No 222021 /1/ 2008-CRC-UU dated
 31.12.2011 issued by Ministry of Coal (MoC) proposed migration from
 Useful Heat Value (UHV) to Gross Calorifi c Value (GCV) based pricing
 of coal, and also increased the coal prices. This was superseded by
 Notification dated 31.01.2012, partially rolling back the increase in
 coal prices. Various stakeholders including power utilities and MOP
 have expressed concern on the switchover from existing UHV to GCV based
 pricing of coal, without having put in place the prerequisite technical
 and legal framework. The issue is under deliberation at MOP and Central
 Electricity Authority with MoC for an early resolution.
 
 Pending resolution of the issues, stations are continuing to make
 payment and accounting of coal as per the pre-migrated system of UHV
 based pricing of coal and the difference between the amounts billed by
 the coal companies and the payments made/accounted for has been shown
 as contingent liability. Since fuel cost is a pass through component of
 tariff, the revision of price will not have any adverse impact on the
 profits of the Company.
 
 5.  The levy of transit fee/entry tax/VAT on supplies of fuel to some
 of the power stations has been paid under protest as the matters are
 subjudice at various courts. Probable demand for the period upto
 January 2012 has been included under contingent liabilities. In case
 the Company gets refund / demand from fuel suppliers/tax authorities on
 settlement of these cases, the same will be passed on to respective
 benefi ciaries.
 
 6.  Disclosure as per Accounting Standard - 9 on Revenue Recognition
 
 Due to uncertainty of realisation in the absence of sanction by the
 GOI, the Companys share of net annual profits of one of the stations
 taken over by the Company in June 2006 for the period 1st April 1986 to
 31st May 2006 amounting to Rs. 115.58 crore (previous year Rs. 115.58
 crore) being balance receivable in terms of the management contract
 with the GOI has not been recognised.
 
 7.  Disclosure as per Accounting Standard - 11 on Effects of Changes
 in Foreign Exchange Rates The effect of foreign exchange fl uctuation
 during the year is as under:
 
 i) The amount of exchange differences (net) debited to the statement of
 profit & loss is Rs. 19.66 crore (previous year Rs. 6.50 crore).
 
 ii) The amount of exchange differences (net) debited to the carrying
 amount of fixed assets is Rs. 1,661.21 crore (previous year Rs. 168.29
 crore).
 
 8.  Disclosure as per Accounting Standard - 12 on Accounting for
 Government Grants Revenue grants recognised during the year is Rs. 0.24
 crore (previous year Rs. 0.43 crore).
 
 9.  Disclosure as per Accounting Standard - 15 on Employee Benefits
 General description of various defi ned employee benefit schemes are
 as under:
 
 A.  Provident Fund
 
 Company pays fixed contribution to provident fund at predetermined
 rates to a separate trust, which invests the funds in permitted
 securities.  Contribution to family pension scheme is paid to the
 appropriate authorities. The contribution of Rs. 173.46 crore (previous
 year Rs. 191.19 crore) to the funds for the year is recognised as expense
 and is charged to the statement of profit and loss. The obligation of
 the Company is to make such fixed contribution and to ensure a minimum
 rate of return to the members as specifi ed by GOI. As per report of
 the actuary, overall interest earnings and cumulative surplus is more
 than the statutory interest payment requirement. Hence no further
 provision is considered necessary.
 
 B.  Gratuity & Pension
 
 The Company has a defi ned benefit gratuity plan. Every employee who
 has rendered continuous service of five years or more is entitled to
 get gratuity at 15 days salary (15/26 X last drawn basic salary plus
 dearness allowance) for each completed year of service subject to a
 maximum of Rs. 0.10 crore on superannuation, resignation, termination,
 disablement or on death.
 
 The Company has a scheme of pension at one of the stations in respect
 of employees taken over from erstwhile state government power utility.
 In respect of other employees of the Company, pension scheme is yet to
 be implemented as stated in Note 11 b) above.
 
 The existing schemes are funded by the Company and are managed by
 separate trusts. The liability for the same is recognised on the basis
 of actuarial valuation.
 
 C.  Post-Retirement Medical Facility (PRMF)
 
 The Company has Post-Retirement Medical Facility (PRMF), under which
 retired employee and the spouse are provided medical facilities in the
 Company hospitals/empanelled hospitals. They can also avail treatment
 as out-patient subject to a ceiling fixed by the Company. The
 liability for the same is recognised on the basis of actuarial
 valuation.
 
 D.  Terminal Benefits
 
 Terminal benefits include settlement at home town for employees &
 dependents and farewell gift to the superannuating employees. Further,
 the Company also provides for pension in respect of employees taken
 over from erstwhile State Government Power Utility at another station.
 The liability for the same is recognised on the basis of actuarial
 valuation.
 
 E.  Leave
 
 The Company provides for earned leave benefit (including compensated
 absences) and half-pay leave to the employees of the Company which
 accrue annually at 30 days and 20 days respectively. 73.33 % of the
 earned leave is en-cashable while in service, and upto a maximum of 300
 days on separation. Half-pay leave is en-cashable only on separation
 beyond the age of 50 years up to the maximum of 240 days (HPL) as per
 the rules of the Company. The liability for the same is recognised on
 the basis of actuarial valuation.
 
 The above mentioned schemes (C, D and E) are unfunded and are
 recognised on the basis of actuarial valuation.
 
 The summarised position of various defi ned benefits recognised in the
 statement of profit and loss, balance sheet are as under:
 
 G.  Actual return on plan assets Rs. 94.63 crore (previous year Rs. 83.89
 crore).
 
 H.  Other Employee Benefits
 
 Provision for long service award and family economic rehabilitation
 scheme amounting to Rs. 4.85 crore (previous year Rs. 2.76 crore) for the
 year have been made on the basis of actuarial valuation at the year end
 and debited to the statement of profit & loss.
 
 The estimates of future salary increases considered in actuarial
 valuation, take account of infl ation, seniority, promotion and other
 relevant factors, such as supply and demand in the employment market.
 Further, the expected return on plan assets is determined considering
 several applicable factors mainly the composition of plan assets held,
 assessed risk of asset management and historical returns from plan
 assets.
 
 J.  The Companys best estimate of the contribution towards
 gratuity/pension for the financial year 2012-13 is Rs. 68.59 crore.
 
 10.  Disclosure as per Accounting Standard - 16 on Borrowing Costs
 
 Borrowing costs capitalised during the year are Rs. 2,342.21 crore
 (previous year Rs. 1,743.61 crore).
 
 11.  Disclosure as per Accounting Standard - 17 on Segment Reporting
 
 Segment information:
 
 a) Business segments
 
 The Companys principal business is generation and sale of bulk power
 to State Power Utilities. Other business includes providing
 consultancy, project management and supervision, oil and gas
 exploration and coal mining.
 
 b) Segment revenue and expense
 
 Revenue directly attributable to the segments is considered as Segment
 Revenue. Expenses directly attributable to the segments and common
 expenses allocated on a reasonable basis are considered as Segment
 Expenses.
 
 c) Segment assets and liabilities
 
 Segment assets include all operating assets in respective segments
 comprising of net fixed assets and current assets, loans and advances.
 Construction work-in-progress, construction stores and advances are
 included in unallocated corporate and other assets. Segment liabilities
 include operating liabilities and provisions.
 
 12. Disclosure as per Accounting Standard - 26 on Intangible Assets
 
 Research expenditure charged to revenue during the year is Rs. 29.89
 crore (previous year Rs. 28.30 crore).
 
 b) Joint venture operations:
 
 i) The Company along-with some public sector undertakings has entered
 into Production Sharing Contracts (PSCs) with GOI for three exploration
 blocks namely KG- OSN-2009/1, KG-OSN-2009/4 and AN-DWN-2009/13 under
 VIII round of New Exploration Licensing Policy (NELP VIII) with 10%
 participating interest (PI) in each of the blocks.
 
 Based on the un-audited statement of the accounts for the above blocks
 forwarded by M/s Oil & Natural Gas Corporation Ltd., the operator, the
 Companys share in respect of assets and liabilities as at 31st March
 2012 and expenditure for the year are given below:
 
 ii) Exploration activities in the block AA-ONN-2003/2 were abandoned
 due to unforeseen geological conditions & withdrawal of the operator.
 Attempts to reconstitute the consortium to accomplish the residual
 exploratory activities did not yield result. In the meanwhile, MoP&NG
 demanded from the Company the cost of unfi nished minimum work
 programme of US$ 7.516 million. During the year, provision of Rs. 41.19
 crore along-with interest has been made. The Company has sought waiver
 of the claim citing force majeure conditions at site leading to
 discontinuation of exploratory activities.
 
 13. Disclosure as per Accounting Standard - 28 on Impairment of
 Assets
 
 As required by Accounting Standard (AS) 28 Impairment of Assets
 notified under the Companies (Accounting Standards) Rules, 2006, the
 Company has carried out the assessment of impairment of assets. Based
 on such assessment, there has been no impairment loss during the year.
 
 14.  Contingent Liabilities:
 
 a) Claims against the company not acknowledged as debts in respect of:
 
 (i) Capital Works
 
 Some of the contractors for supply and installation of equipments and
 execution of works at our projects have lodged claims on the Company
 for Rs. 4,417.04 crore (previous year Rs. 3,485.85 crore) seeking
 enhancement of the contract price, revision of work schedule with price
 escalation, compensation for the extended period of work, idle charges
 etc. These claims are being contested by the Company as being not
 admissible in terms of the provisions of the respective contracts.
 
 The Company is pursuing various options under the dispute resolution
 mechanism available in the contracts for settlement of these claims. It
 is not practicable to make a realistic estimate of the outfl ow of
 resources if any, for settlement of such claims pending resolution.
 
 (ii) Land compensation cases
 
 In respect of land acquired for the projects, the land losers have
 claimed higher compensation before various authorities/courts which are
 yet to be settled. In such cases, contingent liability of Rs. 1,173.58
 crore (previous year Rs. 1,851.08 crore) has been estimated.
 
 (iii) Fuel Suppliers
 
 Pending resolution of the issues disclosed in Note 32, payments and
 accounting of coal are being made as per the pre-migrated system of UHV
 based pricing of coal. The difference between the billing by the coal
 companies on the revised GCV based price and payment released on
 pre-revised UHV based price amounts to Rs. 399.39 crore (previous year Rs.
 Nil).
 
 Further, an amount of Rs. 399.42 crore (previous year Rs. 182.22 crore)
 towards surface transportation charges, customs duty on service margin
 on imported coal etc. has been disputed by the Company.
 
 (iv) Others
 
 In respect of claims made by various State/Central Government
 departments/Authorities towards building permission fees, penalty on
 diversion of agricultural land to non-agricultural use, nala tax, water
 royalty etc. and by others, contingent liability of Rs. 877.47 crore
 (previous year Rs. 1,064.40 crore) has been estimated.
 
 (v) Possible Reimbursement
 
 The contingent liabilities referred to in (i) above, include an amount
 of Rs. 1,769.70 crore (previous year Rs. 1,495.35 crore) relating to the
 hydro power project stated in Note 21 b) - Other current assets, for
 which Company envisages possible reimbursement from GOI in full. In
 respect of balance claims included in (i) and in respect of the claims
 mentioned at (ii) above, payments, if any, by the company on settlement
 of the claims would be eligible for inclusion in the capital cost for
 the purpose of determination of tariff as per CERC Regulations subject
 to prudence check by the CERC. In case of (iii) & (iv), the estimated
 possible reimbursement is by way of recovery through tariff as per
 Regulations, 2009 and others is Rs. 676.32 crore (previous year Rs. 146.97
 crore).
 
 b) Disputed Income Tax/Sales Tax/Excise Matters
 
 Disputed Income Tax/Sales Tax/Excise matters pending before various
 Appellate Authorities amount to Rs. 3,038.63 crore (previous year Rs.
 2,465.26 crore). Many of these matters were disposed off in favour of
 the Company but are disputed before higher authorities by the concerned
 departments. In such cases, the company estimate possible reimbursement
 of Rs. 2,111.54 crore (previous year Rs. 1,793.36 crore).
 
 c) Others
 
 Other contingent liabilities amount to Rs. 327.20 crore (previous year Rs.
 398.74 crore).
 
 Some of the benefi ciaries have filed appeals against the tariff
 orders of the CERC. The amount of contingent liability in this regard
 is not ascertainable.
 
 15.  Capital and other commitments
 
 a) Estimated amount of contracts remaining to be executed on capital
 account and not provided for as at 31st March 2012 is Rs. 29,563.89 crore
 (previous year Rs. 23,779.74 crore).
 
 b) In respect of investments of Rs. 2,895.97 crore (previous year Rs.
 2,440.72 crore) in the joint venture entities, the Company has
 restrictions for their disposal ranging from two years to twelve years
 from the date of incorporation/allottment of shares/commercial
 operation of the projects as the case may be.
 
 c) In respect of investments of Rs. 866.61 crore (previous year Rs. 731.34
 crore) in the subsidiary Companies, the Company has restrictions for
 their disposal for five years from the date of commercial operation of
 the respective project.
 
 d) As at 31st March 2012, the Company has commitments of Rs. 3,236.96
 crore (previous year Rs. 2,340.91 crore) towards further investment in
 the joint venture entities.
 
 e) As at 31st March 2012, the Company has commitments of Rs. 1,419.32
 crore (previous year Rs. 1,561.68 crore) towards further investment in
 the subsidiary companies.
 
 f) Companys comittment towards the minimum work programme in respect
 oil exploration activities of joint venture operations has been
 disclosed in Note 44 b).
 
 g) Companys commitment in respect of further commitments relating to
 lease agreements has been disclosed in Note 41.
Source : Dion Global Solutions Limited
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