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Power Grid Corporation of India

BSE: 532898|NSE: POWERGRID|ISIN: INE752E01010|SECTOR: Power - Generation & Distribution
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Mar 16
Notes to Accounts Year End : Mar '17

. Corporate and General Information

Power Grid Corporation of India Limited (‘the Company”) is a public company domiciled and incorporated in India under the provisions of Companies Act and its shares are listed on the National Stock Exchange (NSE) and BSE Limited (BSE) in India. The registered office of the Company is situated at B-9, Qutab Institutional Area, Katwaria Sarai, New Delhi, India and its Corporate Office is located at Saudamini, Plot No. 2, Sector-29, Gurgaon, Haryana.

The Company is notified as the Central Transmission Utility (CTU) under The Electricity Act, 2003. It is principally engaged in planning, implementation, operation and maintenance of Inter-State Transmission System (ISTS), Telecom and consultancy services.

The financial statements of the company for the year ended March 31, 2017 were approved for issue by the Board of Directors on 29.05.2017.

2 Critical Estimates and Judgements

The preparation of financial statements requires the use of accounting estimates which may significantly vary from the actual results. Management also needs to exercise judgment while applying the company’s accounting policies.

This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.

The areas involving critical estimates or judgements are:

Revenue Recognition:

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 regulations and other orders of the CERC in similar cases. Differences, if any, are accounted on issuance of final 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 CERC tariff regulations.

Regulatory Deferral Balances:

Recognition of Regulatory Deferral Balances involves significant judgements including about future tariff regulations since these are based on estimation of the amounts expected to be recoverable/payable through tariff in future.

Estimation of defined benefit obligation

Estimation of defined benefit obligation involves certain significant actuarial assumptions which are listed in Note

Estimates and judgements are periodically evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.

3 Property, Plant and Equipment

Notes:

a) The Company owns 7174 hectare (6988 hectare as on 31st March, 2016; 6704 hectare as on 1st April, 2015) of land amounting to Rs.2312.64 crore (Rs.2236.98 crore as on 31st March, 2016; Rs.2040.97 crore as on 1st April, 2015) which has been classified into freehold land 6129 hectare (5972 hectare as on 31st March, 2016; 5714 hectare as on 1st April, 2015) amounting to Rs.2062.59 crore (Rs.1999.84 crore as on 31st March, 2016; Rs.1807.34 crore as on 1st April, 2015) and leasehold land 1045 hectare(1016 hectare as on 31st March, 2016; 990 hectare as on 1st April, 2015) amounting to Rs.250.05 crore (Rs.237.14 crore as on 31st March, 2016; Rs.233.63 crore as on 1st April, 2015) based on available documentation.

b) i) The land classified as leasehold land held in the state of Jammu and Kashmir with area of 112.35 hectare (112.35 hectare as on 31st March, 2016; 112.35 hectare as on 1st April, 2015) amounting to Rs.57.62 crore (Rs.57.62 crore as on 31st March, 2016; Rs.57.62 crore as on 1st April, 2015) is acquired by state government as per procedures under State Land Acquisition Act. As per prevailing law the state government remains the owner of the land so acquired and company is only given possession for the specific use.

ii) The transmission system situated in the state of Jammu and Kashmir have been taken over by the company w.e.f. 1st April 1993 from National Hydroelectric Power Corporation of India Limited (NHPC) upon mutually agreed terms pending completion of legal formalities.

c) Freehold land acquired by the company includes Rs.159.75 crore (Rs.212.60 crore as on 31st March, 2016; Rs.33.71 crore as on 1st April, 2015) in respect of which conveyance deed in favour of the company is pending and Rs.130.78 crore (Rs.311.05 crore as on 31st March, 2016; Rs.197.38 crore as on 1st April, 2015) in respect of land acquired by the company for which mutation in revenue records is pending.

d) Leasehold land includes area of 2.65 hectare (2.65 hectare as on 31st March, 2016; 2.65 hectare as on 1st April, 2015) amounting to Rs.12.36 crore (Rs.12.36 crore as on 31st March, 2016; Rs.12.36 crore as on 1st April, 2015) in respect of land in Chamba (HP) acquired from NHPC by the company for which legal formalities are pending.

e) Leasehold land includes area of 0.41 hectare (0.41 hectare as on 31st March, 2016; 0.41 hectare as on 1st April, 2015) amounting to Rs.7.64 crore (Rs.7.64 crore as on 31st March, 2016; Rs.7.64 crore as on 1st April, 2015) in respect of land acquired for office complex on perpetual lease basis and hence not amortised.

f) Township building includes Rs.2.95 crore (Rs.2.95 crore as on 31st March, 2016; Rs.2.95 crore as on 1st April, 2015) for 28 flats at Mumbai, for which registration in favour of the company is pending.

g) 5.625 hectare of land (5.625 hectare as on 31st March, 2016; 5.625 hectare as on 1st April, 2015) having value of Rs.0.04 crore (Rs.0.04 crore as on 31st March, 2016; Rs.0.04 crore as on 1st April, 2015) has been transferred to National High Power Test Laboratory Pvt. Ltd. on right to use without granting ownership.

Notes:

Pursuant to communication of Ministry of Power vide office memorandum 18/02/2015-PG dated 25th March, 2015 and 29th December, 2015, Board of Directors in its meeting held on 9th March, 2016 had approved to sell and transfer 3,06,40,000 equity shares of Rs.10 each (100% shareholding) held by the company in Power System Operation Corporation Limited (POSOCO) to Government of India. Accordingly, investment in above equity shares were shown as ‘Assets held for sale’ as on 31st March, 2016 in accordance with IND-AS 105 “Non-current Assets held for sale and Discontinued operation”

Ministry of Power vide their order dated 23/09/2016 conveyed sanction for release of Rs.81.21 crore to POWERGRID towards consideration for transfer of above equity shares based on the book value of POSOCO as at 31st March, 2013. The Company has taken up with the GOI for payment of Rs.113.88 crore towards consideration for transfer of shares in POSOCO based on the book value as at 30th September, 2016.

The above shares were transferred to GOI on 2nd January, 2017 after receipt of Rs.81.21 crore and accordingly an amount of Rs.50.57 crore was recognized as profit on sale of investments. Matter is being pursued with Ministry of Power for payment of the balance amount of Rs.32.67 crore (i.e. Rs.113.88 crore - Rs.81.21 crore).

Further notes:

Details of terms of repayment and rate of interest

1 Secured Foreign Currency Loans (Guranteed by GoI) carry floating rate of interest linked to 6M LIBOR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 3 to 5 years.

2 Secured other Foreign Currency Loans carry floating rate of interest linked to 6M LIBOR /EURIBOR/STIBOR. These loans are repayable in semi annual installment,as per terms of the respective loan agreement, commencing after moratorium period of 3 to 5 years.

3 Secured Rupee loan from banks carry floating rate of interest linked to 1 year MCLR and 6M MCLR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 5 years .

4 Unsecured Foreign Currency Loans (Guranteed by GoI) carry fixed rate of interest ranging from 1.63% p.a. to 2.30% p.a. These loans are repayable in semi annual installment as per terms of the respective loan agreement.

5 Unsecured Foreign Currency Loans carry floating rate of interest linked to 6M STIBOR/EURBOR. These loans are repayable in semi annual installment as per terms of the respective loan agreement, commencing after moratorium period of 4 to 5 years.

6 Unsecured Rupee loan from bank carry floating rate of interest linked to 6 months MCLR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 5.5 years.

Details of Securities

1 Domestic Bonds mentioned at A1.1 are Secured by way of Registered Bond Trust Deed ranking pari passu on immovable property situated at Mouje Ambheti Taluka Kaparada in district Valsad Gujarat and floating charge on the assets of the company.

2 Domestic Bonds mentioned at A1.2 are secured by way of Registered Bond Trust Deed ranking pari-passu on immovable property situated at Mouje Ambheti Taluka Kaparada in District Valsad Gujarat and mortgage & hypothecation on assets of Kishenpur Moga & Dulhasti Contingency Transmission System.

3 Domestic Bonds mentioned at A1.3 are secured by way of Registered Bond Trust Deed ranking pari-passu on immovable property situated at Mouje Ambheti Taluka Kaparada in District Valsad Gujarat and mortgage and hypothecation on assets of Kayamkulam & Ramagundam Hyderabad Transmission System.

4 Domestic Bonds mentioned at A1.4 are secured by way of Registered Bond Trust Deed ranking pari-passu on immovable property situated at Mouje Ambheti Taluka Kaparada in District Valsad Gujarat and mortgage & hypothecation on assets of Anta,Auriya, Moga-Bhiwani, Chamera-Kishenpur, Sasaram-Allahbad, LILO of Singraulli-Kanpur and Allahabad Sub-Station

5 Secured Foreign Currency Loans (Guranteed by GoI) at B1.1(i) are secured by pari passu interest in the lien created on the assets as security for the debts.

6 Secured other Foreign Currency Loans and Rupee Loans at B1.1(ii & iii) are secured by way of the pari passu charge on the assets of the company except investments,land and building, roads and bridges, water supply, drainage and sewerage and current assets. Loan from NIB is secured by way of the pari passu charge on the assets of the company except investments and current assets. Loan from Bank of India is secured by floating charge on the immovable properties of the company.

7 Secured Rupees Loan from Other financial institution at B2.1 is secured by floating charge on the fixed assets of the Company.

Notes:

Employee Benefits

Performance Related Pay/Special Incentive

Provision is created for Performance Related Pay to Executives and Non-Executives Wage Revision

Pay revision of employees of the Company is due w.e.f 1st January, 2017. In line with the Report of the 3rd Pay Revision Committee for Central Public Sector Enterprises constituted by the GOI, provision has been made for the impact of the pay revision including towards increase in the ceiling limit of gratuity from the existing limit of Rs.10 lakhs to Rs.20 lakhs as per actuarial valuation.

Other Employee Benefits

Provision is created for the purpose of meeting out leave encashment, settlement allowance and long service award.

Others

Downtime Service Credit -Telecom

Provision is created in case when actual downtime is in excess of the permissible service level agreement, in such cases the necessary credit is passed on to the customer on demand.

However, in some case, the downtime is not claimed by the customer then in such cases necessary provision on account of downtime is made in the books of accounts as per the links availability reports received from National Telecom Control Centre (NTCC) for the period of non-operation of links given to the customers. The calculation of downtime credit is based on the SLA signed with various customers.

Note 4 Revenue from operations

Notes:

a) In exercise of powers u/s 178 of the Electricity Act 2003, Central Electricity Regulatory Commission (CERC) has notified “CERC (Terms and Conditions of tariff) Regulations 2014” vide order dated 21st February, 2014 for the determination of transmission tariff for the block period 2014-19.

b) The company has recognised transmission income during the year as per the following:-

i) Rs.22065.90 crore (previous year Rs.12622.90 crore) as per final tariff orders issued by CERC.

ii) Rs.2345.76 crore (previous year Rs.7109.16 crore) in respect of transmission assets for which final tariff orders are yet to be issued as per CERC Tariff Regulations and other orders in similar cases.

c) Other operating income includes interest on differential between provisional and final tariff and income from finance lease.

Further Notes

a) Employee benefits expense include the following for the whole time directors and Key Managerial Personnel including Chairman and Managing Director and excluding arrears paid to ex-directors.

In addition to the above remuneration, the whole time directors have been allowed to use the staff car (including for private journeys) on payment of Rs.2000/- p.m. as contained in the Department of Public Enterprises (DPE) OM No. 2 (23)/11-DPE (WC)-GL-V/13 dated 21/01/2013.

b) Employee benefits expense includes Rs.204.51 crore (net of amount transferred to Expenditure during Construction) towards Pay Revision of employees of the Company due w.e.f. 1st January, 2017, of which Rs.107.75 crore is towards proposed increase in the ceiling limit of gratuity from Rs.10 lakhs to Rs.20 lakhs.

c) Pending approval of Ministry of Power and Department of Public Enterprises, special allowance upto 10% of basic pay amounting to Rs.12.34 crore for the Financial Year 2016-17 (Rs.17.67 crore for F.Y. 2015-16) (Cumulative amounting to Rs.126.35 crore upto 31st March, 2017) is being paid to employees who are posted in the difficult and far flung areas. The above allowance is in addition to the maximum ceiling of 50% of basic Pay as per DPE office memorandum No. 2(70)/08-DPE (WC)-GL-XVI/08 dated 26th November, 2008.

5. Cash equivalent of deemed export benefits availed of Rs.209.99 crore in respect of supplies effected for East South Inter Connector-II Transmission Project (ESI) and Sasaram Transmission Project (STP), were paid to the Customs and Central Excise Authorities in accordance with direction from Ministry of Power (GOI) during 2002-03 due to non-availability of World Bank loan for the entire supplies in respect of ESI project and for the supplies prior to March 2000 in respect of STP project and the same was capitalised in the books of accounts. Thereafter, World Bank had financed both the ESI project and STP project as originally envisaged and they became eligible for deemed export benefits. Consequently, the company has lodged claims with the Customs and Excise Authorities.

In this regard the Cumulative amount received and de-capitalized upto 31st March, 2017 is Rs.12.12 crore (Rs.12.12 crore as on 31st March, 2016; Rs.12.12 crore as on 1st April, 2015). The company continued to show the balance of Rs.197.87 crore as at 31st March, 2017 (Rs.197.87 crore as on 31st March, 2016; Rs.197.87 crore as on 1st April, 2015) in the capital cost of the respective assets / projects pending receipt of the same from Customs and Excise Authorities.

6. a) Balances of Trade Receivables and recoverable shown under Assets and Trade and Other Payables shown under Liabilities include balances subject to confirmation/reconciliation and consequential adjustments if any. However reconciliations are carried out on ongoing basis.

b) In the opinion of the management, the value of any of the assets other than Property, Plant and Equipment and non-current investments on realization in the ordinary course of business will not be less than value at which they are stated in the Balance Sheet.

7. Information in respect of cost plus consultancy contracts, considering the same as consultancy business as required under Ind AS-11 ‘Construction Contracts’ is provided as under:

8. The company has been entrusted with the responsibility of billing collection and disbursement (BCD) of the transmission charges on behalf of all the ISTS (Interstate transmission System) licensees through the mechanism of the POC (Point of Connection) charges introduced w.e.f. 01st July, 2011 which involves billing based on approved drawl/injection of power in place of old mechanism based on Mega Watt allocation of power by Ministry of Power. By this mechanism, revenue of the company will remain unaffected.

Some of the beneficiaries aggrieved by the POC mechanism have preferred appeal before various High Courts of India. All such appeals have been transferred to Delhi High Court as per order of the Supreme Court on the appeal preferred by the company and company has also requested for directing agitating states to pay full transmission charges as per new methodology pending settlement of the matter. Honorable Delhi High Court has directed all the above beneficiaries to release payments and accordingly the beneficiaries have started making payments as per the said directions.

9. (i) FERV gain of Rs.810.37 crore (Previous Year loss of Rs.1841.03 crore ) has been adjusted in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP)/lease receivables

(ii) FERV gain of Rs.31.05 crore (Previous Year loss of Rs.4.56 crore) has been recognised in the Statement of Profit and Loss.

10. Borrowing cost capitalised during the year is Rs.1824.91 crore (previous year Rs.2239.91 crore) in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP) as per Ind AS 23 ‘Borrowing Costs’.

11. Based on information available with the company, there are few suppliers/service providers who are registered as micro, small or medium enterprise under The Micro, Small and Medium Enterprises Development Act,2006 (MSMED Act, 2006). Information in respect of micro and small enterprises as required by MSMED Act, 2006 is given as under:

12. Disclosure as per IND AS 17 ‘Leases’

a) Finance Leases:-

Other Non-Current Financial Assets and Other Current Financial Assets include lease receivables representing the present value of future lease rentals receivable on the finance lease transactions entered into by the company with the constituents in respect of State Sector ULDC. Disclosure requirements of Ind AS 17 ‘Leases’ notified under the Companies Act, 2013 are given as under:

(i) The reconciliation of the lease receivables (as per project cost data submitted to / approved by the CERC for tariff fixation) is as under:

(ii) Details of gross investment in lease, un-earned finance income and present value of minimum lease payments receivables at the end of financial year is given as under:

(iii) The value of contractual maturity of such leases is as under:

(iv) There are differences in balance lease receivable as at year end as per accounts and tariff records on account of:

(a) Undischarged liabilities amounting to Rs.66.41 crore (Rs.68.52 crore as on 31st March, 2016; Rs.17.33 crore as on 1st April, 2015). Such cost become part of project cost only on discharge of such liabilities.

(b) Unamortized FERV on loans included in lease receivable amounting to Rs.28.65 crore (Rs.57.79 crore as on 31st March, 2016; Rs.61.14 crore as on 1st April, 2015). Such FERV are allowed to be recovered as part of tariff on actual payment basis.

b) Operating leases:-

The company’s significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices and guest houses/transit camps which are usually renewable on mutually agreed terms but are not non-cancellable. Employee benefits expense include Rs.40.59 crore (previous year Rs.40.59 crore) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments of Rs.12.42 crore (previous year Rs.10.33 crore) in respect of premises for offices and guest house/transit camps are shown under the head Rent in Note 42-Other expenses.

13. Disclosures relating to Regulatory Deferral Account Balances

The company is mainly engaged in the business of transmission of power. The tariff for transmission of power is determined by the CERC through tariff regulations. The tariff is based on capital cost admitted by CERC and provides for transmission charges recovery of annual fixed cost consisting of Return on equity, Interest on loan capital, Depreciation, interest on working capital and Operation & Maintenance expenses.

FERV arising during the construction period for settlement/transmission of monetary items (other than non-current loans) denominated in foreign currency to the extent recoverable/payable to the beneficiaries as capital cost as per CERC Tariff Regulations are accounted as Regulatory Deferral Account Balances. In respect of long term foreign currency loan drawn on or after 1st April, 2016, exchange difference to the extent recoverable as per CERC Tariff Regulations are recognised as Regulatory Deferral Account Balances. The company expects to recover these amounts through depreciation component of the tariff over the life of the asset or as exchange rate variation on repayment of the loan.

The impact of pay revision effective from 1st January, 2017 was not considered while fixing the norms for recovery of Operation and Maintenance charges under the CERC Tariff Regulations 2014, which are valid for the period 1st April, 2014 to 31st March, 2019. Keeping in view the provisions of the Ind AS 114 ‘Regulatory Deferral Accounts’, CERC Tariff Regulations 2014, the company has recognized an amount of Rs.103.18 crore as recoverable from the beneficiaries in subsequent periods under Regulatory Deferral Account Balances. These balances are to be adjusted in the year in which they become recoverable from beneficiaries as per approval of the CERC.

The Regulatory Deferral Account Balances (assets) recognized in the books to be recovered from the beneficiaries in future periods are as follows:

Any change in the Tariff regulations beyond the current tariff period ending on 31st March, 2019 may have an impact on the recovery of Regulatory Deferral Account Balances.

14. Corporate Social Responsibility Expenses (CSR)

As per Section 135 of the Companies Act, 2013 along with Companies (Corporate Social Responsibility Policy) Rules, 2014 read with DPE guidelines no F.No.15 (13)/2013-DPE (GM), the Company is required to spend, in every financial year, at least two per cent of the average net profits of the Company made during the three immediately financial years in accordance with its CSR Policy. The details of CSR expenses for the year are as under:-58. In view of massive expansion of business considering uncertainty of paying normal tax MAT credit is not recognised as an asset.

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.

15. Fair Value Measurements

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity bonds which are traded in the stock exchanges, valued using the closing price as at the reporting period.

Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

There are no transfers between levels 1 and 2 during the year.

The company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

Valuation technique used to determine fair value

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments

- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.

All of the resulting fair value estimates are included in level 2 apart from equity instruments of PTC India Limited which is included in Level 1 fair value hierarchy.

The fair value of Energy Efficiency Services Limited has been determined by making qualitative adjustment to trading multiples such as P/E, EV/

EBITDA of comparable listed prices. The same has been included in Level 2 fair value hierarchy.

Fair value of financial instruments has been determined by an independent valuer.

Fair value of financial assets and liabilities measured at amortized cost:

The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.

For financial assets that are measured at fair value, the carrying amounts are equal to the fair values.

The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 57.90% of equity shares capital issued and paid up (previous year 57.90%).

The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on arms-length basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items.

The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively.

a) Business Segment

The Board of Directors is the company’s Chief operating decision maker who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Three reportable segments have been identified on the basis of product/services.

- Transmission- Company’s principal business is transmission of bulk power across different states of India.

- Telecom- leverages Powergrid’s nationwide transmission infrastructure and operates as a neutral carrier in the point to point Bandwidth Leasing Business.

- Consultancy- provides in-house expertise in the Transmission, Distribution and Telecom sectors, including Planning Design, Engineering, Load Dispatch, OPGW on intra state Transmission network, Procurement Management, Operation & Maintenance, Financing and Project Management.

b) The operations of the company are mainly carried out within the country and therefore there is no reportable geographical segment

Segment Revenue and Expenses

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.

Segment Assets and Liabilities

Segment assets include all operating assets comprising of Property, Plant and Equipment, current assets and loan and advances. Construction, Work-in-progress, construction stores and advances and investments are included in unallocated assets. Segment facilities include operating liabilities and provisions.

16. Contingent Liabilities and contingent assets Contingent Liabilities

1. 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 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 contract for settlement of these claims. In such cases, contingent liability of Rs.1381.17 crore (Rs.1666.86 crore as on 31st March, 2016; Rs.219.14 crore as on 1st April, 2015) has been estimated.

(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.2671.53 crore (Rs.4041.30 crore as on 31st March, 2016; Rs.2253.11 crore as on 1st April, 2015) has been estimated.

(iii) Other claims

In respect of claims made by various State/Central Government Departments/Authorities towards building permission fees, penalty on diversion of agriculture land to non-agriculture use, Nala tax, water royalty etc. and by others, contingent liability of Rs.4.00 crore (Rs.28.66 crore as on 31st March, 2016; Rs.44.09 crore as on 1st April, 2015) has been estimated.

(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters

Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to Rs.388.38 crore (Rs.359.03 crore as on 31st March, 2016; Rs. 391.22 crore as on 1st April, 2015) are being contested before various Appellate Authorities. Many of these matters are disposed of in favour of the company but are disputed before higher authorities by the concerned departments.

(v) Others

a) Other contingent liabilities amounts to Rs.201.32 crore (Rs.342.33 crore as on 31st March, 2016; Rs.303.56 crore as on 1st April, 2015)

b) Some of the beneficiaries have filed appeals against the tariff orders of the CERC. The amount of contingent liability in this regard is not ascertainable.

c) Under the Transmission Service Agreement (TSA) with Powerlinks Transmission Ltd, the company has an obligation to purchase the JV company (Powerlinks Transmission Ltd) at a buyout price determined in accordance with the TSA. Such an obligation may result in case JV company (Powerlinks Transmission Ltd) serves a termination notice either on “POWERGRID event of default” or on “force majeure event” prescribed under TSA. No contingent liability on this account has been considered as the same is not ascertainable.

2. a) Details of Bank guarantees given by the company on behalf of SPV companies, which were taken over to carry out the business awarded under tariff based bidding, towards performance of the work awarded are as under:

b) The Company has given guarantee for the dues & punctual payment and discharge of the obligations amounting to Rs.290 crore (Rs.290 crore as on 31st March, 2016; NIL as on 1st April, 2015) against bond issued by Powergrid Vizag Transmission Company Ltd.

17. Capital management

a) Risk Management

The company’s objectives when managing capital are to

- maximize the shareholder value;

- safeguard its ability to continue as a going concern;

- maintain an optimal capital structure to reduce the cost of capital.

For the purpose of the company’s capital management, equity capital includes issued equity capital, securities premium reserve and all other equity reserves attributable to the equity holders of the company. The company manages its capital structure and makes adjustments in light of changes in economic conditions, regulatory framework and requirements of financial covenants with lenders. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, regulate investments in new projects, return capital to shareholders or issue new shares. The company monitors capital using debt-equity ratio, which is the ratio of long term debt to total net worth. The policy is to keep the debt-equity ratio wherein the debt is less than 75% of total capital employed (i.e. debt to equity ratio less than 75:25). The company includes within long term debt, interest bearing loans and borrowings and current maturities of long term debt.

Under the terms of the major borrowing facilities, the company is required to comply with the financial covenants. Breaches in meeting the financial covenants would permit the lenders to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current reporting period.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31st March, 2017 and 31st March, 2016.

Dividend not recognized at the end of the reporting period

In addition to above dividend, the Board of Directors on 29th May, 2017 recommended the payment of a final dividend of Rs.3.35 per fully paid equity share. This proposed dividend is subject to the approval of shareholders in the ensuing Annual general meeting.

18. Financial Risk Management

The Company’s principal financial liabilities comprise loans and borrowings denominated in Indian rupees or foreign currencies, trade payables and other payables. The Company has also provided financial guarantee in respect of bonds issued by its wholly owned subsidiary, Powergrid Vizag Transmission Limited. The main purpose of these financial liabilities is to finance the Company’s capital investments and operations.

The Company’s principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that are generated from its operations.

The Company’s activities expose it to the following financial risks, namely,

a) Credit risk,

b) Liquidity risk,

c) Market risk.

This note presents information regarding the company’s exposure, objectives, policies and processes for measuring and managing these risks.

Risk management framework

The Company has a duly constituted Risk Management Committee headed by Director (Operations) with Director (Finance) and Director (Personnel) as members. For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in the Company. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes / risks are monitored and controlled through various Key Performance Indicators (KPIs). The Committee meets at regular intervals and reviews KPIs and provides updates to the Audit Committee/Board.

The management of financial risks by the Company is summarized below:-

A) Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities on account of trade receivables and loans and advances and from its financing activities due to deposits with banks and financial institutions, foreign exchange transactions and other financial instruments and for its investment activities due to investment in State Government Bonds.

A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined considering the business environment in which the Company operates and other macro-economic factors.

Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in the statement of profit and loss.

(i) Trade Receivables

The Company primarily provides transmission facilities to inter-state transmission service customers (DICs) comprising mainly state utilities owned by State Governments. The Company has a robust payment security mechanism in the form of Letters of Credit (LC) backed by the Tri-Partite Agreements (TPA). The TPA was signed among the GOI, Reserve Bank of India and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of State Electricity Boards dues during 2001-02 by the GOI, which was valid till October 2016. GOI has approved the extension of these TPAs for a further period of 10 years. Majority of the States have executed the agreements for extension of TPAs and matter is being pursued with the remaining states.

As per the provisions of the TPA, the customers are required to establish LC covering 105% of the average monthly billing of the Company for last 12 months. The TPA also provides that if there is any default in payment of current dues by any State Utility, the outstanding dues can be deducted from the State’s RBI account and paid to the concerned CPSU. There is also provision for regulation of power by the Company in case of non-payment of dues and non-establishment of LC.

CERC tariff regulations allow payment against monthly bills towards transmission charges within a period of 60 days from the date of the bill and levy of surcharge on delayed payment beyond 60 days. A graded rebate is provided by the Company for payments made within 60 days.

Trade receivables consist of receivables relating to transmission services of Rs.2835.17 crore (31st March, 2016: Rs.2607.39 crore, 1st April, 2015: Rs.2014.13 crore), receivables relating to consultancy services of Rs.315.92 crore (31st March 2016: Rs.77.10 crore, 1st April, 2015: Rs.81.03 crore) and receivables relating to telecom business of Rs.102.42 crore (31st March 2016: Rs.83.10 crore, 1st April, 2015: Rs.50.82 crore)

(ii) Other Financial Assets (excluding trade receivables)

- Cash and cash equivalents

The Company held cash and cash equivalents of Rs.1401.57 crore (31st March, 2016: Rs.908.89 crore, 1st April, 2015: Rs.627.97 crore). The cash and cash equivalents are held with public sector banks and high rated private sector banks and do not have any significant credit risk.

- Deposits with banks and financial institutions

The Company held deposits with banks and financial institutions of Rs.2097.25 crore (31st March, 2016: Rs.1544.84 crore, 1st April, 2015: Rs.1435.01 crore). Term deposits are placed with public sector banks and have negligible credit risk.

- Investments

The Company holds investment of Rs.2.50 crore (31st March 2016: Rs.7.50 crore, 1st April, 2015: Rs.192.92 crore) in 8.5% tax free State government bonds issued under the One Time Settlement Scheme The Company does not expect the counterparty to fail to meet its obligations, and has not experienced any impairment losses in respect of these investments.

- Loans

The Company has given loans to employees, subsidiaries and other parties. House building loans and conveyance advance to the employees are secured against the mortgage of the house properties or hypothecation of vehicles for which such loans have been given in line with the policies of the Company. The loans provided to group companies are for projects under Tariff Based Competitive Bidding route. The risk of default in respect of these loans is considered negligible.

- Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

- Provision for expected credit losses

(a) Financial assets for which loss allowance is measured using 12 month expected credit losses

The Company has assets where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is very low. At initial recognition, financial assets (excluding trade receivables) are considered as having negligible credit risk and the risk has not increased from initial recognition. Therefore expected credit loss provision is not required.

(b) Financial assets for which loss allowance is measured using life time expected credit losses

In respect of trade receivables from Telecom and Consultancy, customer credit risk is managed by regular monitoring of the outstanding receivables and follow-up with the consumer for realization.

With regard to transmission segment, the Company has customers most of whom are state government utilities with capacity to meet the obligations and therefore the risk of default is negligible. Further, management believes that the unimpaired amounts that are 30 days past due date are still collectible in full, based on the payment security mechanism in place and historical payment behavior.

Considering the above factors and the prevalent regulations, the trade receivables continue to have a negligible credit risk on initial recognition and thereafter on each reporting date.

B) Liquidity risk

Liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company has access to a variety of sources of funding such as commercial paper, bank loans, bonds and external commercial borrowings and retains flexibility in funding by maintaining availability under committed credit lines.

Management monitors rolling forecasts of the Company’s liquidity position comprising the undrawn borrowing facilities below and cash and cash equivalents on the basis of expected cash flows.

The Company depends on both internal and external sources of liquidity to provide working capital and to fund capital expenditure.

i) Financial Arrangement

The Company had access to the following undrawn borrowing facilities at the end of the reporting period.

The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have remaining availability period of 1 to 5 years (2 to 4 years in 2016, and 1 to 5 years in 2015).

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities.

The amount disclosed in the table is the contractual undiscounted cash flows.

C) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:

i. Currency risk

ii. Interest rate risk

iii. Other price risk, such as equity price risk and commodity risk.

i) Currency risk

The Company is exposed to currency risk mainly in respect of foreign currency denominated loans and borrowings and procurement of goods and services whose purchase consideration is denominated in foreign currency. Transmission tariff are regulated by the CERC. According to the CERC tariff regulations for the block 2014-19 the Company may hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the transmission system, in part or full in its discretion and recover the cost of hedging of foreign exchange rate variation corresponding to the normative foreign debt, in the relevant year.

If hedging of the foreign exchange exposure is not undertaken, the extra rupee liability towards interest payment and loan repayment corresponding to the normative foreign currency loan in the relevant year is permissible to be recovered as part of transmission tariff provided it is not attributable to the generating Company or the transmission licensee or its suppliers or contractors. During the financial year 2016-17, no hedging for foreign exchange exposure has been undertaken by the Company. In respect of goods and services procured for Capital Investment, the exchange rate variation is part of the project cost, for determination of transmission tariff. The currency risk in respect of goods and services procured for operation activities is not significant.

The Company’s exposure to foreign currency risk at the end of the reporting period expressed in INR is provided in Note No.54.

Sensitivity

Since the impact of strengthening or weakening of Indian rupee against USD, Euro, JPY and other currencies on the statement of profit and loss would not be very significant; therefore, sensitivity analysis for currency risk is not disclosed.

ii) Interest rate risk

The Company is exposed to interest rate risk arising mainly from long term borrowings with floating interest rates. The Company is exposed to interest rate risk because the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The Company manages the interest rate risks by maintaining a debt portfolio comprising a mix of fixed and floating rate borrowings in domestic and foreign currencies.

At the reporting date, the interest rate profile of the Company’s variable interest rate-bearing financial instruments is as follows:

Fair value sensitivity analysis for interest-rate risk

As per CERC Regulations, interest on loan during construction forms part of project cost for the purpose of tariff and after the date of commercial operation, interest on loans is recoverable through tariff calculated on the normative average loan of the year by applying the weighted average rate of interest of the actual loan portfolio.

Accordingly, the Company’s interest rate risk is not considered significant; hence sensitivity analysis for the risk is not disclosed.

iii) Other price risk

The Company’s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.

Considering the magnitude of equity investments, no significant risk is expected to arise.

19. Income Tax expense

This note provides an analysis of the company’s income tax expense, and how the tax expense is affected by non-assessable and non deductible items. It also explains significant estimates made in relation to the Company’s tax position.

(a) Income tax expense

(i) Long Term Employee Benefits Leave Obligations

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. Earned leave is encashable while in service. Half pay leaves (HPL) are en-cashable only on separation beyond the age of 55 years upto the maximum of 300 days (HPL). However, total number of leave that can be encashed on superannuation shall be restricted to 300 days and no commutation of half pay leave shall be permissible. The liability for same is recognized on the basis of actuarial valuation.

(ii) Post-employment obligations (Defined Employee Benefit/Contribution Schemes)

A. Post-Retirement Medical Facility (PRMF)

The Company has Post-Retirement Medical Facility (PRMF), under which retired employees and the spouse are provided medical facilities in the empanelled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fixed by the company. The scheme is unfunded and liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.

B. Other employee benefits - Long Service Award

This benefit is applicable to all regular employees of the company (except for Directors and CMD) who have superannuated after completing at least 10 years of service.

C. Gratuity

The company has a defined 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 on superannuation, resignation, termination, disablement or on death subject to a maximum of Rs.10 lakhs. As per recommendation of the 3rd Pay Revision Committee for CPSEs, the limit is proposed to be revised to Rs.20 lakhs w.e.f. 1st January, 2017. The scheme is funded by the company and is managed by a separate trust. The liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.

D. Other Defined Retirement Benefits (ODRB)/Baggage Allowance

The Company has a scheme for settlement at the time of superannuation at home town for employees and dependents to superannuated employees. The scheme is unfunded and liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.

E. Provident Fund

Company pays fixed contribution to Provident Fund at predetermined rate to a separate trust, which invests the funds in permitted securities. Contribution to family pension scheme is paid to the appropriate authorities. The contribution to the fund and EPS scheme for the year amounting to Rs.89.47 crore (previous year Rs.84.57 crore) has been recognized as expense and is charged to Statement of Profit and Loss. The obligation of the company is limited to such fixed contribution and to ensure a minimum rate of interest on contributions to the members as specified by GOI. As per the report of actuary overall interest earning and cumulative surplus is more than statutory interest payment requirement. Hence, no further provision is considered necessary. Since the company does not have unconditional right over the PF corpus, the surplus has not been recognised in the Balance Sheet.

The Company has scheme of employees defined Pension Contribution. Company contribution is paid to separate trust. Amount of contribution paid/payable for the year is Rs.109.83 crore (previous year Rs.102.19 crore) has been recognized as expense and is charged to Statement of Profit & Loss.

(vi) Description of Risk exposures

Valuation is based on certain assumptions which are dynamic in nature and vary over time. As such company is exposed to various risks as follows:

A) Salary Increases (except for PF) - Actual salary increase will increase the plan’s liability. Increase in salary increase rate assumptions in future valuation will also increase the liability.

B) Investment risk - If plan is funded then assets liabilities mismatch and actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.

C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the plan’s liability.

D) Mortality & disability - Actual deaths and disability cases proving lower or higher than assumed in the valuation can impact the liabilities.

E) Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan’s liability.

(vii) Defined benefit liability and employee contribution

The weighted average duration of the defined benefit obligations is 43.08 years (2015-16—42.85 years, 2014-15—42.99 years). The expected maturity analysis of undiscounted pension, gratuity, other defined retirement benefit and post-employment medical benefits is as follows:

20. Recent Accounting Pronouncements:

Standard issued but not yet effective

In March 2017, the Ministry of Corporate Affairs issued the Company (Indian Accounting Standards) (Amendment Rules, 2017) notifying amendment to Ind AS 7, ‘Statement of cash flows’. This amendment is in accordance with the recent amendment made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows’. This amendment is applicable to the company from 1st April, 2017.

Amendment to Ind AS 7 ‘Statement of cash flows’:

The amendment to Ind AS 7 ‘Statement of cash flows’ requires the entities to provide disclosures that would enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirements. The company is evaluating the requirements of the amendment and the effect on the financial statements.

21. First time adoption of Ind AS Transition to Ind AS

These are the company’s first financial statements prepared in accordance with Ind AS. The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended 31st March, 2017, the comparative information presented in these financial statements for the year ended 31st March 2016 and in the preparation of an opening Ind AS balance sheet as at 1st April 2015 (The date of transition). In preparing its opening Ind AS Balance Sheet, the company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 ( as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).

A. Note to First Time adoption Note I: Fair Value Investments

Under the previous GAAP, investments in equity instruments were classified as long term investments or current investments based on the intended holding period and realisability. Long term investments were carried at cost less provisions for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under IND-AS, these investments are required to be measured at fair value.

Fair value changes with respect to investments in equity instruments designated as FVOCI have been recognized in Other Comprehensive Income as at the date of transition and subsequently in the other comprehensive income for the year ended 31st March 2016. This increased other comprehensive reserve by Rs.64.80 crore as at 31st March 2016 (1st April 2015 Rs.85.08 crore).

Consequent to the above, the total equity as at 31st March, 2016 increased by Rs.64.80 crore (1st April 2015 Rs.85.08 crore) and other comprehensive income for the year ended 31st March 2016 decreased by Rs.20.28 crore.

Note II: Deferred Tax

Deferred tax has been recognized on the adjustments made on transition to Ind AS.

Note III. Borrowings:

Ind AS 109 ‘Financial Instruments’ requires transaction costs incurred for borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method.

Under previous GAAP, these transaction costs were recognized in Statement of Profit and Loss as and when incurred. Accordingly, borrowing as at 31st March, 2016 have been reduced by Rs.66.50 crore (1st April, 2015 Rs.64.21 crore) with a corresponding adjustment to Other Equity, Capital work in progress and Property, Plant and Equipment The total equity increased by an equivalent amount. The profit for the year ended 31st March, 2016 reduced by Rs.6.81 crore as a result of the additional interest expense.

Note IV. Investment property

Under the previous GAAP, investment properties were presented as part of Property, Plant and Equipment. Under Ind AS, investment properties are required to be separately presented on the face of the balance sheet. There is no impact on the total equity and on profit as a result of this adjustment.

Note V. Proposed Dividend

Under the previous GAAP dividend proposed by the Board of Directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs.950.79 crore as at 31st March, 2016 (1st April, 2015 Rs.821.74 crore) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

Note VI. Re measurement of post-employment benefit obligations

Under Ind AS, re measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these re measurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31st March, 2016 increased by Rs.8.31 crore. There is no impact on the total equity as at 31st March, 2016.

Note VII. Fair valuation of employee loans

Under the previous GAAP, employee loans at concessional rates are recorded at their transaction value. Under Ind AS these are required to be recognized at fair value. Difference between the fair value and transaction value of the employee loans has been recognized as deferred employee cost. Consequent to the change, the amount of employee loans decreased by Rs.52.75 crore as at 31st March, 2016 (1st April, 2015 Rs.49.71 crore). The deferred employee cost increased by Rs.51.45 crore as at 31st March, 2016 (1st April, 2015 Rs.49.71 crore).

The profit for the year and total equity as at 31st March, 2016 decreased by Rs.1.35 crore due to amortization of the deferred employee cost which is partially offset by the interest income recognized on employee loans.

Note VIII. Retained earnings

Retained earnings as at 1st April, 2015 has been adjusted consequent to the above Ind AS transition adjustments.

Note IX. Other comprehensive income

Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes re measurements of defined benefit plans, fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.

Note X. Retention Money Adjustment

Under the previous GAAP, retention money on capital expenditure is recorded at face value. Under Ind AS financial liabilities are measured at fair value, if the effect of time value is material. Accordingly, retention money has been discounted to their present values with corresponding decrease in other equity and capital work in progress. This change reduced the retention money liability as at 1st April, 2015 and 31st March, 2016 by Rs.64.87 crore and Rs.53.95 crore with corresponding increase in other equity and capital work in progress by Rs.63.29 crore and Rs.1.57 crore as at 1st April, 2015 and by Rs.49.66 crore and Rs.4.29 crore as at 31st March, 2016. The profit for the year ended 31st March, 2016 decreased by Rs.13.63 crore due to charging of notional interest on retention money liability.

Note XI. Recognition of Bilateral Lines as Finance Leases

Under the previous GAAP, bilateral lines are recorded as assets in the books of the company under Property, Plant and Equipment. Appendix C of Ind AS 17 ‘Leases’ specified criteria for determining at the inception of an arrangement, whether the arrangement contains a lease. As per Ind AS 101 ‘First Time Adoption of Indian Accounting Standards’ entities may determine whether arrangements in existence on the date of transition to Ind AS contains leases by applying the requirement of Appendix C to Ind AS 17 ‘Leases’ to those arrangements on the basis of the facts and circumstances existing at the date of transition. Accordingly such bilateral lines have been assessed as finance leases by the company and to be recorded as finance leases (lessors).

Note XII. Change in policy for recognition of Property, Plants & Equipments

Impact of change in accounting policy for spares qualifying as asset as per Ind AS 16- ‘Property, Plant & Equipment’ on the date of transition has been recognized in opening reserves and changes thereafter are recognized in Statement of Profit and Loss. This increased the Property, Plant and Equipment as at 1st April, 2015 and 31st March, 2016 by Rs.46.07 crore and Rs.45.32 crore respectively with decrease in inventory by Rs.88.43 crore and Rs.112.59 crore and other equity as on 1st April, 2015 by Rs.42.36 crore. The profit for the year ended 31st March, 2016 increased by Rs.21.22 crore.

Note XIII. Restatement due to Prior Period error

Under Ind AS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ material prior period error shall be corrected by retrospective restatement. A Prior period income was recognised in the Financial Year 2015-16 which is restated at 1st April, 2015. This decreased the accumulated depreciation by Rs.60.07 crore with the corresponding increase in total equity as at 1st April, 2015. The profit for the year ended 31st March, 2016 decreased by Rs.60.07 crore.

Note XIV. Self-Insurance Reserve

Under the previous GAAP, in case of loss of fixed asset an amount was transferred to Statement of Profit and Loss as income. Under Ind AS Self-insurance reserve is to be transferred to General Reserve instead of taking as income. Due to this the profit for the year ended 31stMarch, 2016 decreased by Rs.5.29 crore.

22. (a) Figures have been rounded off to nearest rupees in crore up to two decimals.

(b) Previous year figures have been regrouped / rearranged wherever necessary.

Source :
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