i) Basis of Accounting
The company maintains its accounts on accrual basis following the
historical cost conventions in accordance with Generally Accepted
Accounting Principles (GAAP) and in compliance with the Accounting
Standards referred to in section 211(3C) and other requirements of the
Companies Act, 1956.
The preparation of the financial statements in conformity with GAAP
requires that the management of the company makes estimates and
assumptions that affect the reported amounts of income and exper :es of
the year, the reported balances of assets and liabilities and the
disclosures relating to conti; ent liabilities as of the date of the
financial statements. Examples of such estimates include the usefu;
:ife of fixed assets and intangible assets, provisions for doubtful
debts/advances, future obligations in respect of retirement benefit
plans, etc. actual results could differ from these estimates.
ii) Revenue Recognition
Revenue is recognized based on the nature of activity when
consideration can be reasonably measured and there exists reasonable
certainty of its recovery.
(a) Revenue from sale of goods is recognized when the substantial risks
and rewards of ownership are transferred to the buyer under the terms
of the contract.
(b) Sale of power to Punjab State Power Corporation Limited (PSPCL),
Uttar Pradesh Power Corporation Limited (UPPCL) & merchant power
purchasers is accounted for based on the meter reading as per metering
equipments of PSPCL and UPPCL installed at the Power Grid.
(c) Other income is accounted for on accrual basis as and when the
right to receive arises.
Inventories except molasses and bagasse being by-products, are valued
at lower of cost and net realizable value. The by-products are valued
at net realizable value. Cost of inventories is determined using
Weighted Average Cost method. In respect of finished goods and work in
process appropriate overheads are considered.
iv) Fixed Assets
Fixed assets are stated at cost, net of Excise Duty, less accumulated
depreciation and impairment loss, if any. All costs directly related to
the acquisition and installation of fixed assets are capitalized and
added to the respective assets. Borrowing costs relating to acquisition
of fixed assets which takes substantial period of time to get ready for
its intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
Depreciation is provided on all the fixed assets using the
straight-line method in accordance with and in the manner specified in
Schedule XIV to the Companies Act, 1956.
vi) Foreign Currency Transactions
Transactions denominated in foreign currency are normally recorded at
the exchange rates prevailing at the time of the transactions. Monetary
items denominated in foreign currencies at the year end are translated
at the year end exchange rates. Any income or expenses on account of
exchange difference either on settlement or on translation is
recognized in the Statement of Profit & Loss.
vii) Expenditure on new projects & substantial expansions
Expenditure directly relating to construction/substantial expansion
activity is capitalized. Indirect expenditure incurred during
construction period is capitalized as part of the indirect construction
cost to the extent to which the expenditure is indirectly related to
construction or is incidental thereto. Income earned during the
construction period is deducted from the total of the indirect
As regards indirect expenditure on expansion, only that portion is
capitalized which represents the
marginal increase in such expenditure involved as a result of capital
expansion. Both direct and indirect expenditure are capitalized only if
they increase the value of the asset beyond its original standard of
viii) Impairment of Assets
At each balance sheet date, the carrying amount of fixed assets are
reviewed by the management to determine whether there is any indication
that those assets suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment loss (recoverable amount is the
higher of an asset''s net selling price or value in use). In assessing
the value in use, the estimated future cash flow expected from the
continuing use of the assets and from their disposal are discounted to
their present value using a pre discounted rate that reflects the
current market assessment of time value of money and risks specific to
Reversal of impairment loss is recognized immediately as income in the
Statement of Profit and Loss.
ix) Government Grants and Subsidies
Grants and subsidies from the government are recognized when there is
reasonable assurance that the grant/subsidy will be received and all
attaching conditions will be complied with.
When grant or subsidy relates to an expense item, it is recognized as
income over the periods necessary to match them on a systematic basis
with the related cost, which it rs intended to compensate. Where
grant/subsidy relates to an asset, its value is deducted in arriving at
the carrying amount of the related asset against which grant/subsidy
has been received and further where the grant/subsidy is in the nature
of promoters contribution the amount of grant/subsidy is accounted for
as a capital reserve.
Investments that are readily realizable and intended to be held for
less then one year are classified as current investments, Current
investments are carried at lower of cost or market value, whereas long
term investments are carried at historical cost. The provision for
diminution in the value of investment other than temporary is provided
'' xi) Miscellaneous Expenditure
Preliminary expenses and cost incurred in raising funds are written off
to the Statement of profit and loss in the year in which the same are
xii) Employees Benefits
- The liability on account of gratuity is provided in accordance with
LICs Group Gratuity Scheme and Actuarial Valuation certificate basis.
- Provision for Leave encashment liability is made on Actuarial
valuation certificate basis.
- Provident Fund: Contribution to provident fund is made in accordance
with the provisions of the Employees Provident Fund Act, 1952.
xiii) Tax Expenses
Tax expenses comprises of current and deferred income tax, and wealth
tax. Current income tax is calculated at the amount expected to be paid
to the tax authorities in accordance with the Indian Income Tax Act,
1961. Deferred income taxes reflects the impact of current year timing
differences between taxable income and accounting income for the year
and reversal of timing differences of earlier years.
Deferred tax is measured based on 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 virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realized. If the company has carry forward of unabsorbed
depreciation and tax losses, deferred tax, assets are recognized only
if there is virtual certainty supported by convincing evidence that
such deferred tax assets can be realized against further taxable
profits. Unrecognized deferred tax assets of earlier years are
re-assessed and recognized to the extent that it has become reasonably
certain that further taxable income will be available against which
such deferred tax assets can be realized.
xiv) Earnings per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividend & taxes) by the weighted average number
of equity shares outstanding during the year. Equity shares that are
partly paid up are treated as a fraction of an equity share to the
extent they entitled to participate in dividends. The weighted average
numbers of equity shares outstanding during the year are adjusted for
events such as bonus issue, bonus element in a right issue to the
existing shareholders, share split and consolidation of shares.
For the purpose of calculating diluted EPS, the net profit or loss
attributable to equity share holders and weighted average number of
equity shares outstanding during the period are adjusted for the
effects of all dilutive potential equity shares.
xv) Segment Reporting
a). Segment accounting policies are in line with the accounting
policies of the company. In addition, the following specific accounting
policies have been followed for segment reporting.
(1) Segment revenue includes sales and other income directly
identifiable with/allocable to the segment including inter segment
(2) Expenses that are directly identifiable with/allocable to segment
are considered for determining the segment result. Expenses which
relate to the company as a whole and not allocable to segment are
included under Un-allocable corporate expenditure.
(3) Income which relates to the company as a whole and not allocable to
segments is included in un-allocable corporate income.
(4) Segment assets and liabilities include those directly identifiable
with the respective segments. Un-allocable corporate assets and
liabilities represent the assets and liabilities that relate to company
as a whole and not allocable to any segment. Un-allocable assets mainly
comprise corporate head office assets, investments and tax deposited
with the Income Tax Authorities. Un-allocable liabilities include
mainly Unsecured Loans and Tax Payable to Income Tax authorities. .
b). Inter Segment transfer pricing
Segment revenue resulting from transactions with other business
segments is accounted on the basis of market price, xvi.) Provisions &
a) Provisions are recognized when an enterprises has
(1) A present obligation as a result of past events.
(2) It is probable that an outflow of resources will be required to
settle the obligations.
(3) In respect of which a reliable estimate can be made.
The provisions are determined based on the best estimates required to
fulfill the obligations on the balance sheet date. The provisions are
reviewed at each balance sheet date and adjusted to reflect the current
b) Contingent liability is
(1) A possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the enterprise: or
(2) A present obligation that arises from past events but is not
The Contingent Liabilities are not recognized but are disclosed in the
notes. The Contingent Assets are neither recognized nor disclosed in
financial statements, xvii) Cash and Cash equivalents
Cash and cash equivalents in the balance sheet comprises cash at bank,
cash in hand & short term investments.