1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements are prepared on accrual basis of accounting
under the historical cost convention and in accordance with generally
accepted accounting principles in India and the relevant provisions of
the Companies Act, 1956 including Accounting Standards notified there
1.2 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 and assumptions and such differences are
recognized in the period in which the results are crystallized.
1.3 RESERVES ANDSURPLUS
Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed
Assets (except assets covered under mega insurance policy) as at the
end of the year by appropriating current year profit towards future
losses which may arise from un-insured risks. The same is shown as
Self insurance reserve under ''Reserves & Surplus''.
1.4.1 Grants-in-aid received from Central Government or other
authorities towards capital expenditure for projects, betterment of
transmission systems and specific depreciable assets are shown as
grants-in-aid till the utilization ofgrant.
1.4.2 On capitalization of related assets, grants received for specific
depreciable assets are treated as deferred income and recognized in the
Statement of Profit and Loss overthe useful life of related asset and
in proportion to which depreciation on these assets is provided.
1.5 FIXED ASSETS
1.5.1 Fixed assets are shown at historical cost comprising of purchase
price and any attributable cost of bringing the assets to its working
condition for its intended use.
1.5.2 In the case of commissioned assets, deposit works/cost- plus
contracts where final settlement of bills with contractors is yet to be
affected, capitalization is done on provisional basis subject to
necessary adjustments in the year offinal settlement.
1.5.3 Assets and systems common to more than one transmission system
are capitalised on the basis of technical estimates/ assessments
1.5.4 Transmission system assets are considered when they are ''Ready
for intended use'', for the purpose of capitalization, after test
charging/successful commissioning of the systems/assets and on
completion of stabilization period wherever technically required.
1.5.5 The cost of land includes provisional deposits,
payments/liabilities towards compensation, rehabilitation and other
expenses wherever possession of land is taken.
1.5.6 Expenditure on levelling, clearing and grading of land is
capitalised as part of cost of the related buildings.
1.5.7 Insurance spares, which can be used only in connection with an
item of fixed asset and whose use is expected to be at irregular
intervals are capitalized and depreciated overthe residual useful life
ofthe related plant & machinery. In case the year of purchase and
consumption is same, amount of insurance spares are charged to revenue.
1.5.8 Mandatory spares in the nature of sub-station equipments /capital
spares i.e. stand-by/service/rotational equipment and unit assemblies
either procured along with the equipments or subsequently, are
capitalized and depreciation is charged in accordance with the relevant
accounting standard. In case the year of purchase & consumption is
same, amount of mandatory spares are charged to revenue.
1.6 CAPITAL WORK - IN - PROGRESS (CWIP)
1.6.1 Cost of material consumed, erection charges thereon along with
other related expenses incurred for the projects are shown as CWIPtill
the date of capitalization.
1.6.2 Expenditure of Corporate office, Regional Offices and Projects,
attributable to construction of fixed assets are identified and
allocated on a systematic basis to the cost of the related assets.
1.6.3 Interest during construction and expenditure (net) allocated to
construction as per policy No. 1.6.2 above (allocated to the projects
on prorate basis to their capital expenditure), are apportioned to
capital work in progress (CWIP) on the closing balance of specific
asset or part of asset being capitalized. Balance, if any, left after
such capitalization is kept as a separate item under the CWIPSchedule .
1.6.4 Deposit works/cost-plus contracts are accounted for on the basis
of statement received from the contractors or technical assessment of
1.6.5 Unsettled liability for price variation/ exchange rate variation
in case of contracts are accounted for on estimated basis as per terms
1.7 INTANGIBLE ASSETS
1.7.1 The cost of software (which is not an integral part of the
related hardware) acquired for internal use and resulting in
significant future economic benefits, is recognized as an intangible
assets in the books of accounts when the same is ready for its use.
1.7.2 Afforestation charges paid for acquiring right-of-way of laying
transmission lines are accounted for as intangible assets and same are
amortized following the rates and methodology notified by Central
Electricity Regulatory Commission (CERC) Tariff Regulation.
1.8 CONSTRUCTION STORES
Construction stores are valued at cost.
1.9 BORROWING COST
1.9.1 All the borrowed funds (except short term funds for working
capital) are earmarked to specific projects. The borrowing costs
(including bond issue expenses, interest, discount on bonds, front end
fee, guarantee fee, management fee etc.) are allocated to the projects
in proportion to the funds so earmarked.
1.9.2 The borrowing costs so allocated are capitalised or charged to
revenue, based on whether the project is under construction or in
1.10 TRANSACTION IN FOREIGN CURRENCY
1.10.1 Transactions in foreign currencies are initially recorded at the
exchange rate prevailing on the date of transaction. Foreign currency
monetary items are translated with reference to the rates of exchange
ruling on the date of the Balance Sheet. Non-monetary items denominated
in foreign currency are reported at the exchange rate ruling on the
date of transaction.
1.10.2 Foreign Exchange Rate Variation (FERV) arising on settlement /
translation of foreign currency loans relating to fixed assets/ capital
work-in-progress are adjusted to the carrying cost of related assets.
1.10.3 FERV accounted for as per policy no 1.10.2 is
recoverable/payable from the beneficiaries on actual payment basis as
per Central Electricity Regulatory Commission (CERC) norms w.e.f. 1st
April, 2004 or Date of Commercial Operation (DOCO) which ever is later.
The above FERV to the extent recoverable or payable as per the CERC
norms is accounted for as follows:
a) FERV recoverable/payable adjusted to carrying cost of fixed assets
is accounted for as ''Deferred foreign currency fluctuation
asset/liability a/c'' with a corresponding credit/debit to ''Deferred
income/expenditure from foreign currency fluctuation a/c''.
b) ''Deferred income/expenditure from foreign currency fluctuation a/c''
is amortized in the proportion in which depreciation is charged on such
c) The amount recoverable/payable as per CERC norms on year to year
basis is adjusted to the ''Deferred foreign currency fluctuation
asset/liability a/c'' with corresponding credit/ debit to the trade
1.10.4 FERV earlier charged to Statement of Profit and Loss & included
in the capital cost for the purpose of tariff is adjusted against
''Deferred foreign currency fluctuation asset/liability a/c'' in the
i) Depreciation component of transmission charges (being 90% of such
FERV) is adjusted against Deferred foreign currency fluctuation
asset/liability a/c in the transmission charges.
ii) Balance 10% is adjusted against the transmission charges over the
tenure of respective loan.
1.10.5 FERV arising out of settlement/translation of long term monetary
items (other than foreign currency loans) relating to fixed assets/CWIP
are adjusted in the carrying cost of related assets.
1.10.6 FERV arising during the construction period from
settlement/translation of monetary items denominated in foreign
currency (other than long term) to the extent recoverable/payable to
the beneficiaries as capital cost as per CERC tariff Regulation are
accounted as ''Deferred foreign currency fluctuation asset/liability
a/c''. Transmission charges recognised on such amount is adjusted
against above account.
1.10.7 Other exchange differences are recognized as income or expenses
in the period in which they arise.
1.11.1 Current investments are valued at lower of cost and fairvalue
determined on an individual investment basis.
1.11.2 Long term investments are carried at cost. Provision is made for
diminution other than temporary, in the value of such investments.
1.12.1. Inventories are valued at lower of the cost, determined on
weighted average basis and net realizable value.
1.12.2 Steel scrap and conductor scrap are valued at estimated
realizable value or book value, whichever is less.
1.12.3 Mandatory spares of consumable nature and transmission line
items are treated as inventory after commissioning ofthe system.
1.12.4 Surplus materials as determined by the management are held for
intended use and are included in the inventory.
1.12.5 The diminution in the value of obsolete, unserviceable and
surplus stores and spares is ascertained on review and provided for.
1.13 REVENUE RECOGNITION
1.13.1 Transmission Income is accounted for based on tariff orders
notified by the CERC. In case of transmission projects where final
tariff orders are yet to be notified, transmission income is accounted
for as per tariff norms and other amendments notified by the CERC in
similar cases. Difference, if any, is adjusted based on issuance of
final notification of tariff orders by the CERC. Transmission Income
in respect of additional capital expenditure incurred after the date of
commercial operation is accounted based on actual expenditure incurred
on year to year basis as per tariff norms of the CERC.
1.13.2 Income from short term open access is accounted for on the basis
of regulations notified by the CERC.
1.13.3 The Transmission system Incentive / disincentive is accounted
for based on certification of availability by the respective Regional
Power Committees and in accordance with the norms notified / approved
by the CERC.
1.13.4 ADVANCE AGAINST DEPRECIATION
22.214.171.124 Advance against depreciation (AAD), forming part of tariff
pertaining upto the block period 2004-09, to facilitate repayment of
loans, is reduced from transmission income and considered as deferred
income to be included in transmission income in subsequent years.
126.96.36.199 The outstanding deferred income in respect of AAD is
recognized as transmission income, after twelve years from the end of
the financial year in which the asset was commissioned, to the extent
depreciation recovered in the tariff during the year is lower than
depreciation charged in the accounts.
1.13.5 Surcharge recoverable from trade receivables and liquidated
damages / warranty claims / interest on advances to suppliers are
recognized when no significant uncertainty as to measurability and
1.13.6 Telecom income is accounted for on the basis of terms of
agreements/ purchase orders from the customers.
1.13.7 Income from sole consultancy contracts are accounted for on
technical assessment of progress of services rendered.
1.13.8 In respect of ''Cost-plus-consultancy contracts'', involving
execution on behalf of the client, income is accounted for (wherever
initialadvancesreceived) inphasedmanneras under:
a. 10% ontheissueofNoticelnvitingTenderforexecution
b. 5% on the Award of Contracts for execution
c. Balance 85% on the basis of actual progress of work including
1.13.9 Income from Sale of Goods is recognized on the transfer of
significant risks and reward of ownership to the buyer.
1.13.10 Application Fees received on account of Long Term Open Access
(LTOA) Charges is accounted for as and when received in accordance with
1.13.11 Scrap other than steel scrap & conductor scrap are accounted
for as and when sold.
1.13.12 Dividend income is recognized when right to receive payment is
1.14 LEASED ASSETS - UNIFIED LOAD DESPATCH CENTRE (ULDC)
1.14.1 State sector unified load dispatch centre (ULDC) assets leased
to the beneficiaries are considered as Finance Lease. Net investment in
such leased assets along with accretion in subsequent years is
accounted for as Lease Receivables under long term loans & advances.
Wherever grant-in-aid is received for construction of State Sector
ULDC, lease receivable is accounted for net of such grant.
1.14.2 Finance income on leased assets are recognised based on a
pattern reflecting a constant periodic rate of return on the net
investment as per the levellised tariff notified/to be notified by the
1.14.3 FERV on foreign currency loans relating to leased assets is
adjusted to the amount of lease receivables and is amortised over the
remaining tenure of lease. FERV recovery (as per CERC norms) from the
constituents is recognised net of such amortised amount.
1.15.1 Depreciation / amortization is provided on straight line method
following the rates and methodology notified by the CERC for the
purpose of recovery of tariff except for the following assets in
respect of which depreciation / amortization is provided at the rates
a) Computers & Peripherals 30%
b) Mobile Phones 33.33%
c) Software 33.33%
1.15. 2 ULDC assets are depreciated on Straight Line Method @ 6.67%
per annum as determined by the CERC for levellized tariff.
1.15. 3 Depreciation on assets of telecom and consultancy business, is
provided for on straight line method as per rates specified in Schedule
XIV of the Companies Act, 1956.
1.15.4 Depreciation on additions to/deductions from fixed assets during
the year is charged on pro-rata basis.
1.15.5 Where the cost of depreciable asset has undergone a change due
to increase/decrease in long term monetary items on account of exchange
rate fluctuation, price adjustment, change in duties or similar
factors, the unamortized balance of such asset is depreciated
prospectively at the rates and methodology as specified by the CERC
Tariff Regulations, except for telecom assets where residual life is
determined on the basis of rates of depreciation as specified in
Schedule XIV of the Companies Act, 1956.
1.15.6 Plant and machinery, loose tools and items of scientific
appliances, included under different heads of assets, costing Rs.
5000/- or less, orwhere the written down value isRs. 5000/- or less as
at the beginning ofthe year, are charged off to revenue.
1.15.7 Other fixed assets costing upto Rs. 5000/- are fully depreciated
in the year of acquisition.
1.15.8 Leasehold Land is fully amortized over 25 years or lease period
whichever is lower in accordance with the rates and methodology
specified in the Central Electricity Regulatory Commission (Terms and
Conditions of Tariff) Regulations, 2009. Lease hold Land acquired on
perpetual lease is not amortised.
1.15.9 In the case of assets of National thermal power corporation
limited (NTPC), National hydro-electric power corporation limited
(NHPC), North-eastern electric power corporation limited (NEEPCO),
Neyveli lignite corporation limited (NLC) transferred w.e.f. April
1,1992, Jammu and Kashmir Lines w.e.f. April 1,1993, and Tehri hydro
development corporation limited (THDC) w.e.f. August 1,1993,
depreciation is charged based on gross block as indicated in
transferor''s books with necessary adjustments so that the life of the
assets as laid down in the CERC notification for tariff is maintained.
1.16.1 Pre-paid/prior-period expenses/income of items up to Rs.100000/-
are charged to natural heads of account.
1.16.2 Expenditure of research and development, other than Capital
Expenditure , are charged to revenue in the year of incurrence.
1.16.3 Capital expenditure on assets not owned by the company is
charged off to revenue as and when incurred
1.17 IMPAIRMENT OF ASSETS
Cash generating units as defined in Accounting Standard -28 on
''Impairment of Assets'' are identified at the balance sheet date with
respect to carrying amount vis-a-vis. recoverable amount thereof and
impairment loss, if any, is recognised in Statement of profit & loss.
Impairment loss, if need to be reversed subsequently, is accounted for
in the year of reversal.
1.18 EMPLOYEE BENEFITS
1.18.1 Company contribution paid/payable during the year to defined
pension contribution scheme and provident fund scheme is recognized in
the Statement of Profit and Loss. The same is paid to a fund
administered through a separate trust.
1.18.2 The liability for retirement benefits of employees in respect of
Gratuity, is ascertained annually on actuarial valuation at the year
end, is provided and funded separately.
1.18.3 The liabilities for compensated absences, leave encashment, post
retirement medical benefits, settlement allowance & farewell gift to
employees are ascertained annually on actuarial valuation at the year
end and provided for.
1.18.4 Short term employee benefit are recognized at the undiscounted
amount in the Statement of Profit and Loss in the year in which the
related services are rendered.
1.18.5 Actuarial gains/losses are recognized immediately in the
Statement of Profit & Loss.
1.19 PROVISIONS AND CONTINGENT LIABILITIES
A provision is recognized when the company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made based on technical valuation and past
experience. Provisions are not discounted to its present value and are
determined based on management estimate required to settle the
obligation at the balance sheet date. No provision is recognized for
liabilities whose future outcome cannot be ascertained with reasonable
certainties. Such contingent liabilities are not recognized but are
disclosed on the basis of judgment of the management /independent
expert. These are reviewed at each balance sheet date and adjusted to
reflect the current management estimate.
1.20 INCOME TAX
Income Tax comprises of current and deferred tax. Current income taxes
are measured at the amount expected to be paid to the income tax
authorities in accordance with Income Tax Act, 1961. Deferred tax
resulting from timing difference between accounting and taxable profit
is accounted for using the tax rates and the tax laws enacted or
substantively enacted at the balance sheet date. Deferred tax assets
are recognized only to the extent that there is reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realized.