1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements are prepared on accrual basis of accounting
under the historical cost convention, in accordance with generally
accepted accounting principles in India, the relevant provisions of the
Companies Act, 2013 (to the extent notified), the Companies Act, 1956
(to the extent applicable) including Accounting Standards notified
there under and the provisions of the Electricity Act, 2003 to the
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 AND SURPLUS
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 of grant.
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 over the 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 less accumulated
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
effected, capitalization is done on provisional basis subject to
necessary adjustments in the year of final settlement.
1.5.3 Assets and systems common to more than one transmission system
are capitalized 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 leveling, clearing and grading of land is
capitalized 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 and Mandatory spares in the nature of sub-station equipments
/ capital spares i.e. stand-by/service/rotational equipment and unit
assemblies, are capitalized and depreciated over the residual useful
life of the related plant & machinery. In case the year of purchase and
consumption is same, amount of such 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 CWIP till
the date of capitalization.
1.6.2 Cost of material for construction of Substation (including HVDC)
is being transferred to Capital Work in Progress during the progress of
1.6.3 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.
1.6.4 Interest during construction and expenditure (net) allocated to
construction as per policy No. 1.6.3 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 CWIP Schedule.
1.6.5 Deposit works/cost-plus contracts are accounted for on the basis
of statement received from the contractors or technical assessment of
1.6.6 Unsettled liability for price variation/ exchange rate variation
in case of contracts are accounted for on estimated basis as per terms
of the contracts.
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 for laying
transmission lines are accounted for as intangible assets and same are
amortized over the period of thirty five years following the rates and
methodology notified by Central Electricity Regulatory Commission
(CERC) Tariff Regulation.
1.7.3 Expenditure incurred, eligible for capitalization under the head
Intangible Assets, are carried as Intangible Assets under Development
where such assets are not yet ready for their intended use.
1.7.4 Expenditure incurred on the development of new technology is kept
under Intangible assets under development till its completion. After
satisfactory completion of development stage, the expenditure kept
under as Intangible Assets to be included in the project cost of new
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 debit / credit 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 Deferred foreign currency
fluctuation asset/liability a/c in the transmission charges over the
tenure of respective loans.
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 fair value
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 of the 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 for based on actual expenditure
incurred on year to year basis as per tariff norms of the CERC.
1.13.2 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
220.127.116.11 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.
18.104.22.168 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.
1.13.4 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
1.13.5 Income from Telecom Services are accounted for on the basis of
terms of agreements / purchase orders from the customers.
1.13.6 Income from sole consultancy contracts are accounted for on
technical assessment of progress of services rendered.
1.13.7 In respect of ''Cost-plus-consultancy contracts'', involving
execution on behalf of the client, income is accounted for (wherever
initial advances received) in phased manner as under:
a) 10% on the issue of Notice Inviting Tender for execution
b) 5% on the Award of Contracts for execution
c) Balance 85% on the basis of actual progress of work including
1.13.8 Income from Sale of Goods is recognized on the transfer of
significant risks and reward of ownership to the buyer.
1.13.9 Application Fees received on account of Long Term Open Access
(LTOA) Charges is accounted for as and when received in accordance with
1.13.10 Scrap other than steel scrap & conductor scrap are accounted
for as and when sold.
1.13.11 Dividend income is recognized when right to receive payment is
1.14 LEASED ASSETS
1.14.1 State sector unified load dispatch centre (ULDC)/ Fiber Optic
Communication Assets (FOC) 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 tariff notified/to be notified by the CERC.
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 DEPRECIATION / AMORTIZATION
1.15.1 Depreciation / amortization on the assets related to
transmission business and communication system of ULDC commissioned on
or after 1st April 2014 are provided on straight line method following
the rates and methodology notified by the CERC for the purpose of
recovery of tariff.
1.15.2 ULDC assets commissioned prior to 1st April 2014 are depreciated
on Straight Line Method @ 6.67% per annuam.
1.15.3 Depreciation on assets of telecom and consultancy business is
provided for on straight line method as per useful life specified in
Schedule II of the Companies Act, 2013.
1.15.4 Depreciation on following assets is provided based on estimated
useful life as evaluated by the management.
a Computers & Peripherals 3 years
b Mobile Phones 3 years
c Software 3 years
Residual value in respect of Computers & Peripherals of Transmission
and ULDC Segment is considered as specified in CERC tariff regulation
and for other Segments, as specified in Schedule II of the Companies
Act, 2013. Residual value in respect of Mobile Phones & Software is
considered as Nil.
1.15.5 Depreciation/ Amortization on additions to/deductions from fixed
assets during the year is charged on pro-rata basis.
1.15.6 Where the cost of depreciable fixed 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 useful life of fixed asset as specified in
Schedule II of the Companies Act, 2013.
1.15.7 Plant and machinery, loose tools and items of scientific
appliances, included under different heads of fixed assets, costing Rs.
5,000/- or less, or where the written down value is Rs. 5,000/- or less
as at the beginning of the year, are charged off to revenue.
1.15.8 Other fixed assets costing upto Rs.5,000/- are fully depreciated
in the year of acquisition.
1.15.9 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 (CERC)
Tariff Regulation . Lease hold Land acquired on perpetual lease is not
1.15.10 In the case of fixed 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.
100,000/- 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 and
administered through a separate trusts.
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 & long service awards
to employees are ascertained annually on actuarial valuation at the
year end and provided for.
1.18.4 Short term employee benefits 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 determined based on management estimate
required to settle the obligation at the balance sheet date and are not
discounted to its present value. 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 TAXES ON INCOME
Income Tax comprises of current and deferred tax. Current income taxes
are measured at the amount expected to be paid to the provisions of
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.