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Power Grid Corporation of India

BSE: 532898|NSE: POWERGRID|ISIN: INE752E01010|SECTOR: Power - Generation & Distribution
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« Mar 15
Notes to Accounts Year End : Mar '16
1.1 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 (Govt. of India) 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 2016 is Rs. 12.12 crore
 (previous year Rs. 12.12 crore).  The company continued to show the
 balance of Rs. 197.87 crore as at 31st March 2016 (previous year Rs.
 197.87 crore) in the capital cost of the respective assets / projects
 pending receipt of the same from Customs and Excise Authorities.
 
 1.2 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 fixed assets 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.
 
 1.3 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.
 
 1.4 CERC issued tariff order dated 29.04.2011 in respect of Barh-Balia
 Transmission line considering the date of commercial operation (DOCO)
 01.07.10 in line with their Regulation. Against this tariff order, one
 of the beneficiaries filed appeal before the Appellate Tribunal for
 Electricity (ATE) challenging the tariff approved by CERC based on
 above DOCO claimed by the company. The ATE vide its order dated
 02.07.2012 observed that the DOCO of 01.07.2010 was not appropriate as
 the appellant had reported that the transmission line was put in
 regular service from August 2011 i.e. when it was put in regular
 service when the other end in the scope of the generating company viz.
 NTPC was completed i.e. August 2011 though Company had completed its
 scope as on 01.07.2010. Accordingly, the ATE remanded CERC for
 redetermination of DOCO and tariff of the Transmission line. Upon this,
 the company filed an appeal in the Supreme Court explaining that the
 DOCO of 01.07.2010 was as per CERC Regulations. The Hon''ble Supreme
 Court on 15.03.2013 had stayed all the proceedings before the CERC for
 the said Transmission System based on the appeal filed by the Company.
 
 The Company had also filed another petition on 28.02.2013 before the
 Central Electricity Regulatory Commission (CERC) for determination of
 revised transmission tariff on the basis of revised cost estimate
 approved by its Board of Directors. Subsequently on 08.10.2013, in its
 interim order, the Hon''ble Supreme Court has directed the CERC to
 proceed with determination of tariff for the said Transmission System
 pending disposal of the appeal regarding determination of DOCO date.
 The CERC has vide its order dated 30.06.2015 has re-determined the DOCO
 w.e.f 01.09.2011 and revised the tariff as per decision of the Honb''le
 ATE.
 
 The Honb''le Supreme Court, has vide its order dated 03.03.2016 has
 upheld the judgement of the Hon''ble ATE. Review application filed by
 the company against the order dt. 03.03.2016 has also been dismissed by
 Honb''le Supreme Court vide order dt. 12.05.2016. in accordance with the
 above order of the Hon''ble Supreme Court, revenue for this TL has been
 recognised w.e.f. 01.09.2011 in place of earlier DOCO of 01.07.2010 and
 transmission income for the period from 01.07.2010 to 31.08.2011
 amounting to Rs.112.57 crore (net of Rs.18.63 crore recovered from NTPC
 as per order of CERC) has been reversed during the year.
 
 1.5 As per CERC Grant of Connectivity, Long-term Access and
 Medium-term Open Access in inter-State Transmission and related matters
 Regulations, 2009 as amended from time to time, all transmission
 elements are constructed as per the requirement of the long term
 customers (LTA) up to 25 years and transmission charges are recoverable
 from such long term customers. For medium term open access (MTOA), no
 additional transmission element is constructed but only the existing
 surplus transmission capacities are utilised. The charges recovered
 from the MTOA customers, upon utilisation of the surplus capacity which
 is very small and temporary in nature, are used to reduce the charges
 of the LTA customers. The company is revenue neutral.
 
 One of the MTOA customer, signed an agreement for MTOA for a period of
 3 years from 16.06.2013 but did not utilise the capacity. The company,
 however, billed the customer as per the agreement. But the MTOA
 customer defaulted on its dues of Rs.15.64 crore billed during the
 period from 16.06.2013 to 31.01.2014. Due to non-recovery of dues, the
 company has cancelled the MTOA w.e.f. 01.02.2014 as per order of the
 ATE. The total transmission charges are being recovered from other
 customers since then. An application, iled by the company is pending
 before CERC for allowing recovery of the dues of such MTOA customer for
 the period from 16.06.2013 to 31.01.2014 from other customers during
 this period.
 
 Due to default made by the same customer in their agreement with the
 company for LTA, the company has encashed during the year construction
 bank guarantees worth Rs.48.00 crore, and adjusted the proceeds of the
 same against its dues of Rs. 15.64 crore and outstanding surcharge of
 Rs..6.80 crore up to 31.03.2016.
 
 1.6 Pursuant to communication of ministry of Power vide office
 memorandum 18/2/2015-PG dated 25th March 2015 and 29th Dec 2015, Board
 of Directors in its meeting held on 9th march 2016 has approved to sell
 & transfer 30640000 equity shares (100% share holding) held by the
 company in Power System Operation Corporation Limited (POSOCO) to Govt.
 Of India. Cabinet has approved for transfer of shares of POSOCO to the
 Government of India. Board has further approved that purchase
 consideration be calculated based on the balance sheet of POSOCO as on
 date preceding the date of transfer. Shares are yet to be transferred.
 
 1.7 (i) FERV Loss of Rs. 1841.03 crore (Previous Year Rs. 510.52
 crore) has been adjusted in the respective carrying amount of Fixed
 Assets/ Capital work in Progress (CWIP)/lease receivables.  (ii) FERV
 Loss of Rs. 4.56 crore (Previous Year FERV Gain Rs. 12.46 crore) has
 been recognised in the Statement of Profit and Loss.
 
 1.8 Change in accounting policy/accounting practice
 
 a) Cost of Mobile Phones which were hitherto capitalised and being
 depreciated over the useful life of the asset is now being charged to
 statement of profit and loss. The change has resulted in decrease in
 profit by Rs. 1.89 crore with corresponding decrease in Gross Block and
 Accumulated Depreciation by Rs. 7.13 crore and Rs. 5.24 crore
 respectively.
 
 b) In Telecom and Consultancy Segment Residual Value in respect of
 Computer & Peripherals and Server & Network Components is considered as
 Nil instead of as specified in Schedule II of Companies Act 2013. The
 change has resulted in decrease in profit by Rs. 0.30 crore with
 corresponding increase in depreciation.
 
 c) Cost of Server which were hitherto depreciated over the useful life
 of 3 years is now being depreciated over the useful life of 5 years.
 The change has resulted in increase in profit by Rs. 1.10 crore with
 corresponding decrease in depreciation.
 
 1.9 Borrowing cost capitalised during the year is Rs. 2238.91 crore
 (previous year Rs. 2459.60 crore) as per AS 16- Borrowing Costs.
 
 1.10 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:
 
 1.11 Disclosures as per Accounting Standard AS 15 -Employee Benefits 
 
 Defined employee benefit/ contribution schemes are as under:- 
 
 A.  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. 84.57 crore(previous year Rs. 76.48 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 over all interest
 earning and cumulative surplus ''is more'' than statutory interest
 payment requirement. Hence, no further provision is considered
 necessary.
 
 B.  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 lacs. The scheme is funded by the
 company and is managed by a separate trust. The liability for the same
 is recognised on the basis of actuarial valuation on annual basis on
 the Balance Sheet date.
 
 C.  Pension
 
 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. 102.19 crore (previous year Rs. 73.11
 crore) has been recognised as expense and is charged to statement of
 profit& loss.
 
 D.  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 recognised on the basis of actuarial
 valuation on annual basis on the Balance Sheet date.
 
 E.  Leave Encashment
 
 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
 en-cashable while in service. Half-pay leaves (HPL) are en-cashable
 only on separation beyond the age of 55 years up to the maximum of 300
 days (HPL). However, total amount 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 the same is
 recognised on the basis of actuarial valuation.
 
 F.  Other Defined Retirement Benefits (ODRB)
 
 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 recognised on the
 basis of actuarial valuation on annual basis on the Balance Sheet date.
 The above schemes (D,E and F) are unfunded.
 
 G.  The summarised position of various defined benefits recognized in
 the Statement of Profit & Loss and Balance Sheet is as under:- 
 
 a) Expenses recognised in Statement of profit and loss:
 
 H.  Other Employee Benefits
 
 Provision for Long Service Award amounting to Rs. 0.95 crore (previous
 year Rs. 1.24 crore) has been made on the basis of actuarial valuation
 at the year end.
 
 I.  Plan Asset (Gratuity)
 
 The details of the plan assets at cost are as follows:-
 
 J.  Actuarial Assumptions
 
 Principal assumptions used for actuarial valuation are:
 
 i) Method used - Projected unit credit ( PUC) (Previous Year (PUC))
 
 ii) Discount rate - 8.00 % (previous year 8.00 %)
 
 iii) Expected rate of return on assets (Gratuity only) – 8.00 %
 (previous year 8.00%)
 
 iv) Future salary increase- 6.50 % (previous year 6.50%) The estimate
 of future salary increases, considered in actuarial valuation, takes
 into account (i) inflation, (ii) Seniority (iii) Promotion and (iv)
 Other relevant factors, such as supply and demand in the employment
 market. Further the expected return on plan assets is determined
 considering several applicable factors mainly the composition of plan
 assets, assessed risk of asset management and historical return for
 plan assets.
 
 K. The Company''s best estimate of contribution towards gratuity for the
 financial year 2015-16 is Nil (previous year Rs. 1.51 crore) L. The
 effect of the percentage point increase/decrease in the medical cost of
 PRMF will be as under:-
 
 1.12 Disclosure as per AS 17- Segment Reporting
 
 a) Business Segments
 
 The company''s principal business is transmission of bulk power across
 different States of India. However, telecom and consultancy business
 are also treated as a reportable segment in accordance with para 28 of
 AS-17 Segment Reporting.
 
 b) Segment Revenue and Expense
 
 Revenue directly attributable to the segments is considered as Segment
 Revenue. Expenses directly attributable to the segments and common
 expenses allocated on a reasonable basis are considered as segment
 expenses.
 
 c) Segment Assets and Liabilities
 
 Segment assets include all operating assets comprising of net fixed
 assets, current assets and loan and advances. Construction
 work-in-progress, construction stores & advances and investments are
 included in unallocated assets. Segment liabilities include operating
 liabilities and provisions.
 
 1.13 Disclosure as per AS 18- Related Party Disclosure  
 
 a) List of Related Parties:- 
 
 i) Key Management Personnel
 
 Sh. I.S. Jha Chairman and Managing Director (w.e.f 10th November 2015)
 
 Sh. R.N. Nayak Chairman and Managing Director (superannuated on 30th
 September 2015)
 
 Sh. R.T. Agarwal Director (Finance) 
 
 Sh. Ravi P Singh Director(Personnel)
 
 Sh. R.P. Sasmal Director(Operations)
 
 Smt. Divya Tandon Company Secretary
 
 ii) Subsidiaries:- Wholly Owned
 
 i) Power System Operation Corporation Limited (POSOCO)
 
 ii) PowergridNM Transmission Limited
 
 iii) Powergrid Vemagiri Transmission Limited
 
 iv) Powergrid Vizag Transmission Limited
 
 v) Powergrid Unchahar Transmission Limited
 
 vi) Powergrid Kala Amb Transmission Limited
 
 vii) Powergrid Jabalpur Transmission Limited (erstwhile Vindhyachal
 Jabalpur Transmission Limited)
 
 viii) Powergrid Warora Transmission Limited (erstwhile Gadarwada (A)
 Transco Limited)
 
 ix) Powergrid Parli Transmission Limited (erstwhile Gadarwada (B)
 Transco Limited)
 
 x) Powergrid Southern Interconnector Transmission System Limited.
 (erstwhile Vemagiri II Transmission Limited)
 
 xi) Grid Conductors Limited*
 
 *Share Capital of Rs. 0.05 crs in Grid Conductors Limited has been paid
 in April 2016. However based on control of composition of board of
 directors by Power Grid Corporation of India Limited, the company has
 been considered as wholly owned subsidiary company.
 
 iii) Joint Ventures:-
 
 i) Powerlinks Transmission Limited
 
 ii) Torrent Power Grid Limited
 
 iii) Jaypee Powergrid Limited
 
 iv) Parbati Koldam Transmission Company Limited
 
 v) Teestavalley Power Transmission Limited
 
 vi) North East Transmission Company Limited
 
 vii) National High Power Test Laboratory Private Limited
 
 viii) Energy Efficiency Services Limited.
 
 ix) Bihar Grid Company Limited
 
 x) Kalinga Bidyut Prasaran Nigam Private Limited
 
 xi) Cross Border Power Transmission Company Limited
 
 xii) Power Transmission Company Nepal Ltd
 
 xiii) RINL Powergrid TLT Pvt. Ltd
 
 1.14 Disclosure as per AS 28- Impairment of assets 
 
 In accordance with Accounting Standard (AS-28) Impairment of Assets,
 the company has assessed as on the Balance Sheet date whether there are
 any indications with regard to impairment of any of the assets. Based
 on such assessment, it has been ascertained that no potential loss is
 present. Accordingly, no impairment loss has been provided in the books
 of accounts.
 
 1.15 Capital and Other Commitments
 
 i) Estimated amount of contracts remaining to be executed on capital
 account and not provided for is Rs. 23502.87 crore (previous year Rs.
 24189.22 crore).
 
 ii) As at 31st March,2016, the company has commitment of Rs. 336.24
 crore (previous year Rs. 427.61 crore) towards further investment in
 joint venture entities.
 
 iii) As at 31st March,2016, the company has commitment of Rs. 12260.25
 crore (previous year Rs. 4261.42 crore) towards further investment in
 subsidiary companies.
 
 1.16 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
 for Rs. 1666.86 crore (previous year Rs. 219.14 crore) seeking
 enhancement of the contract price, revision of work schedule with price
 escalation, compensation for the extended period of work, idle charges
 etc. These claims are being contested by the Company as being not
 admissible in terms of the provisions of the respective contracts.  The
 company is pursuing various options under the dispute resolution
 mechanism available in the contract for settlement of these claims. It
 is not practicable to make a realistic estimate of the outflow of
 resources, if any, for settlement of such claims pending resolution.
 
 (ii) Land Compensation cases
 
 In respect of land acquired for the projects, the land losers have
 claimed higher compensation before various authorities/ courts which
 are yet to be settled. In such cases, contingent liability of Rs.
 4041.30 crore (previous year Rs. 2253.11 crore) 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 ofRs. 28.66 crore
 (previous year Rs. 44.09 crore ) 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. 359.03 crore (previous year Rs. 391.22 crore) are being contested
 before various Appellate Authorities. Many of these matters are
 disposed off in favour of the company but are disputed before higher
 authorities by the concerned departments.
 
 (v) Others
 
 a) Other contingent liabilities amounts to Rs. 342.33 crore (previous
 year Rs. 303.56 crore)
 
 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.
 
 1.17 Guidance Note (GN) on Rate Regulated Activities issued by ICAI is
 applicable from the financial year 2015-16.
 
 The company is mainly engaged in Transmission of power. The price to be
 charged by the company for transmission of power to its customer is
 determined by the CERC through tariff regulations. The tariff is based
 on cost like depreciation, interest, return on equity, operation and
 maintenance Expenses etc. This form of regulation is known as cost of
 service regulations which provides the company to recover its cost of
 providing the services plus stipulated return. The company has adopted
 GN in preparation of financial statements for the year, considering the
 provisions of tariff regulations issued by CERC.
 
 The CERC tariff regulations provide that exchange differences arising
 from settlement/ translation of monetary items denominated in foreign
 currency (other than long term) are recoverable from or payable to the
 beneficiaries in subsequent periods. Such exchange differences are
 recognized as ''Regulatory Asset/Liability by credit/debit to
 ''Regulatory income/Expense'' during construction period and adjusted
 from the year in which the same becomes recoverable from or payable to
 beneficiaries.
 
 1.18 a) Figures have been rounded off to nearest rupees in crore up to
 two decimal.
 
 b) Previous year figures have been regrouped / rearranged wherever
 considered necessary.
Source : Dion Global Solutions Limited
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