1 Basis of Preparation of Financial Statements
 
 The Financial Statements have been prepared under the historical cost
 convention in accordance with the generally accepted accounting
 principles in India and the provisions of the Companies Act, 1956.
 
 2 Use of Estimates
 
 The preparation of financial statements requires estimates and
 assumptions to be made that affect the reported amount of assets and
 liabilities on the date of the financial statements and the reported
 amount of revenues and expenses during the reporting period. Difference
 between the actual results and estimates are recognised in the period
 in which the results are known/ materialised.
 
 3 Fixed Assets
 
 i) Fixed Assets are stated at cost net of CENVAT/ Value Added Tax,
 rebates, less accumulated depreciation and impairment loss, if any.  
 
 ii) All costs, including financing costs till commencement of
 commercial production, net charges on foreign exchange contracts and
 adjustments arising from exchange rate variations attributable to fixed
 assets are capitalised.
 
 iii) Expenses incurred relating to project prior to commencement of
 commercial production are classified as Project Development Expenditure
 and disclosed under Capital Work-in-Progress (net of income earned
 during project development stage).
 
 4 Depreciation
 
 Depreciation on fixed assets is provided on straight line method at the
 rate and in the manner prescribed in Schedule XIV to the Companies Act,
 1956.
 
 5 Intangible Assets
 
 Intangible Assets are stated at cost of acquisition less accumulated
 amortisation. Technical know how is amortised over the useful life of
 the underlying plant. Computer Software is amortised over a period of
 five years. Amortisation is done on straight line basis.
 
 6 Impairment of Assets
 
 An asset is treated as impaired when the carrying cost of assets
 exceeds its recoverable value. An impairment loss is charged for when
 an asset is identified as impaired. The impairment loss recognised in
 prior accounting period is reversed if there has been a change in the
 estimate of recoverable amount.
 
 7 Foreign Currency Transactions
 
 i) Transactions denominated in foreign currencies are normally recorded
 at the exchange rates prevailing on the date of the transaction.
 
 ii) Monetary items denominated in foreign currencies at the year end
 are restated at year end rates. In case of monetary items which are
 covered by forward exchange contracts, the difference between the year
 end rate and rate on the date of the contract is recognised as exchange
 difference and the premium paid on forward contracts is recognised over
 the life of the contract.
 
 iii) Non monetary foreign currency items are carried at cost.
 
 iv) Any income or expense on account of exchange difference either on
 settlement or on translation is recognised as Revenue except in cases
 where they relate to acquisition of fixed assets in which case they are
 adjusted to the carrying cost of such assets.
 
 8 Investments
 
 Current Investments are carried at lower of cost or quoted/ fair value,
 computed category wise. Long Term Investments are stated at cost.
 Provision for diminution in the value of long-term investments is made
 only if such a decline is other than temporary in the opinion of the
 management.
 
 9 Inventories
 
 Items of inventories are measured at lower of cost or net realisable
 value after providing for obsolescence, if any. Cost of inventories are
 determined on weighted average basis and comprises of cost of purchase
 and other costs incurred in bringing them to their respective present
 location and condition.
 
 10 Borrowing Costs
 
 Borrowing costs that are attributable to the acquisition or
 construction of qualifying assets are capitalised as part of the cost
 of such assets. A qualifying asset is one that necessarily takes
 substantial period of time to get ready for intended use. All other
 borrowing costs are charged to revenue.
 
 11 Employee Benefits
 
 i) Short term employee benefits are charged off at the undiscounted
 amount in the year in which the related service is rendered.
 
 ii) Post employment and other long term employee benefits are charged
 off in the year in which the employee has rendered services. The amount
 charged off is recognised at the present value of the amounts payable
 determined using actuarial valuation techniques. Actuarial gain and
 losses in respect of post employment and other long term benefits are
 charged to Profit and Loss Account/ Project Development Expenditure
 Account.
 
 12 Derivative Transactions
 
 In respect of Derivative Contracts, premium paid, provision for losses
 on restatement and gains/ losses on settlement are recognised alongwith
 the underlying transactions and charged to Profit and Loss Account/
 Project Development Expenditure Account.
 
 13 Provision for Current and Deferred Tax
 
 Provision for current tax is made after taking into consideration
 benefits admissible under the provisions of the Income- tax Act, 1961.
 Deferred tax resulting from timing differences between taxable and
 accounting income is accounted for using the tax rates and laws that
 are enacted or substantively enacted as on the balance sheet date. The
 deferred tax asset is recognised and carried forward only to the extent
 that there is a reasonable/ virtual certainty that the asset will be
 realised in future.
 
 14 Provision, Contingent Liabilities and Contingent Assets
 
 Provisions involving substantial degree of estimation in measurement
 are recognised when there is a present obligation as a result of past
 events and it is probable that there will be an outflow of resources.
 Contingent Liabilities are not recognised but are disclosed in the
 Notes. Contingent Assets are neither recognised nor disclosed in the
 financial statements.