We have audited the attached Balance Sheet of STEEL AUTHORITY OF INDIA
 LIMITED, as on 31st March 2012, the Statement of Profit & Loss Account
 and the Cash Flow Statement of the company for the year ended on that
 date annexed thereto, in which are incorporated the accounts of Plants,
 Units, Branches and other Offices audited by the Branch Auditors in
 accordance with the letter of appointment of Comptroller & Auditor
 General of India.  These financial statements are the responsibility of
 the company''s management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement.  An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 3.  As required by the Companies (Auditors'' Report) Order, 2003 as
 amended by the Companies (Auditors'' Report) (Amendment) Order, 2004
 (hereinafter referred to as the Order) issued by the Government of
 India in terms of Section 227(4A) of the Companies Act, 1956, we
 enclose in the Annexure a statement on the matters specified in
 paragraphs 4 & 5 of the said Order.
 
 4.  Since the matter regarding provision of pension under
 superannuation benefits for non executives remains undecided and the
 amount also not ascertained, we are therefore unable to express our
 opinion on the same and the effect on the accounts, if any (Refer Note
 No.32.7).
 
 5.  Without qualifying our opinion, we draw attention to Note Numbers
 32.1 & 32.11 of notes to financial statements.
 
 6.  Further to our comments in the Annexure referred to above, we
 report that:
 
 i).  We have obtained all the information and explanations, which to
 the best of our knowledge and belief, were necessary for the purpose of
 our audit.
 
 ii). In our opinion, proper books of account as required by law have
 been kept by the company so far as appears from our examination of the
 books, and proper returns adequate for the purpose of our audit have
 been received from the plants/ units/ branches/other units not visited
 by us. The branch auditors'' reports have been forwarded to us and have
 been appropriately dealt with.
 
 iii).  The Balance Sheet, the Statement of Profit & Loss Account and
 the Cash Flow Statement dealt with by this report are in agreement with
 the books of account and with the audited returns from the branches.
 
 iv). In our opinion, the Balance Sheet, the Statement of Profit & Loss
 Account and the Cash Flow Statement dealt with by this report comply
 with the accounting standards referred to in sub-section (3C) of
 Section 211 of the Companies Act, 1956.
 
 v).  In terms of Government of India, Department of Company Affairs
 Notification No. GSR 829(E) dated 21st October, 2003, Government
 companies are exempt from the applicability of provisions of Section
 274(1)(g) of the Companies Act, 1956.
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the said accounts subject to our observation
 given in point no.4 above and read with significant accounting policies
 and notes on accounts appearing in Note 28-41, give the information
 required by the Companies Act, 1956 in the manner so required and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India:
 
 i) in case of Balance Sheet, of the state of affairs of the Company as
 on 31st March 2012;
 
 ii) in case of Statement of Profit & Loss Account, of the Profit of the
 Company for the year ended on that date; and
 
 iii) in case of the Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 1.  a) The Company has maintained proper records showing in most cases,
 full particulars including quantitative details and situation of its
 fixed assets.
 
 b) The fixed assets of the Company have been physically verified by the
 management at reasonable intervals in a phased manner so as to
 generally cover all the assets once in three years. As informed to us,
 no material discrepancies have been noticed on such verification
 wherever reconciliation has been carried out.
 
 c) In our opinion and according to the information and explanations
 given to us, there is no substantial disposal of fixed assets during
 the year.
 
 2.  a) The inventories have been physically verified by the management
 with reasonable frequency during the year. In certain cases, the stocks
 have been verified on the basis of visual survey/estimates.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures for physical verification of inventories
 followed by the management are generally reasonable and adequate in
 relation to the size of the company and the nature of its business.
 
 c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventory. The discrepancies between physical stocks and book records
 arising out of physical verification, which were not material, have
 been dealt with in the books of account.
 
 3.  According to information and explanations given to us, the Company
 has not granted or taken any secured or unsecured loans, to or from
 companies, firms, or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956. Consequently, clauses
 (iii) (a) to (iii)(g) of paragraph 4 are not applicable.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business for the
 purchase of inventory and fixed assets and for the sale of goods and
 services.  During the course of our audit, we have not observed any
 major failures in the internal control system.
 
 5.  a) According to the information and explanations given to us, we
 are of the opinion that there are no contract or arrangement of the
 Company, referred to in section 301 of the Companies Act, 1956, which
 requires to be entered in the register required to be maintained under
 that section.  b) According to the information and explanations given
 to us, there are no transactions of purchase of goods and materials and
 sale of goods, materials and services made in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act 1956, exceeding the value of Rs.5,00,000 in respect
 of any party.
 
 6.  The Company has not accepted any public deposits during the year.
 In respect of public deposits accepted in earlier years, there are no
 unmatured outstanding deposits.
 
 7.  In our opinion, the Company''s internal audit system is generally
 commensurate with the size and nature of its business.
 
 8.  We have broadly reviewed the records maintained by the Company
 pursuant to the rules made by the Central Government for the
 maintenance of cost records under Section 209(1)(d) of the Companies
 Act, 1956, and are of the opinion that prima facie, the prescribed
 accounts and records have been made and maintained in respect of the
 applicable products. We have not, however, made a detailed examination
 of the records with a view to determine whether these are accurate and
 complete.
 
 9.  According to the information and explanations given to us in
 respect of statutory and other dues:
 
 a) The Company has been generally regular in depositing undisputed
 statutory dues including Provident Fund, Investors Education and
 Protection Fund, Employees State Insurance, Income Tax, Sales Tax,
 Wealth Tax, Service Tax, Custom duty, Excise duty, Cess and other
 statutory dues, with appropriate authorities.
 
 b) According to the information and explanations given to us, there are
 no undisputed statutory dues outstanding for a period of more than six
 months from the date they became payable, as per books of accounts as
 at 31st March, 2012.
 
 c) According to the information and explanations given to us, there are
 disputed statutory dues, which have not been deposited as on 31st
 March, 2012, as given herein below:
 
 Statutes          Nature of Dues       Amount      Forum where disputes
                                                    are 
                                       (Rs.in 
                                        crore)      pending.
 
 Sales Tax         Demand by Appellate    149.00    High Courts
                   Authorities            509.40    Sales tax tribunals
 
                                          138.64    Sales tax departments
 
                                          797.04
 
 Central Excise    Excise duty           1055.09    Supreme Court
 Act, 1944                                 69.44    High Courts
 
                                          607.52    CESTAT
 
                                          224.00    Department of Excise
 
                                            0.32    Settlement Commission
 
                                         1956.37
 
 Income Tax Act,   TDS on perks Income    175.37    High Courts
 1961              Tax                    200.13    Department of Income
                                                    Tax
  
                                          375.50
 
 Other Statutes    Other statutory dues   646.63    Supreme Court
                  (including cess) 
                                          464.24    High Courts
 
                                           48.98    Lower Courts 
 
                                          177.59    Concerned Department
 
                                         1337.44
 
                   TOTAL                 4466.35
 
 10.  There are no accumulated losses of the company as at the end of
 the year. The Company has not incurred cash losses during the financial
 year covered by our audit and the immediately preceding financial year.
 
 11.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to a
 financial institution or bank or bond holder.
 
 12.  According to the information and explanations given to us, the
 Company has not granted loans and advances on the basis of security by
 way of pledge of shares, debentures and other securities.
 
 13.  The Company is not a chit fund or a Nidhi / mutual benefit fund /
 society. Therefore, the provisions of clause 4 (xiii) of the Order, are
 not applicable to the Company.
 
 14.  The Company is not dealing in or trading in shares, securities,
 debentures and other investments.  Accordingly, the provisions of
 clause 4(xiv) of the Order, are not applicable to the Company.
 
 15.  According to the information and explanations given to us, the
 terms and conditions of the guarantees given by the Company for loans
 taken by others from banks or financial institutions are not
 prima-facie prejudicial to the interest of the Company.
 
 16.  To the best of our knowledge and belief, and according to the
 information and explanations given to us, in our opinion, the term
 loans availed by the Company were, prima facie, applied by the Company
 during the year for the purpose for which the loans were obtained other
 than temporary deployment pending application.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment of the company.
 
 18.  According to the information and explanations given to us, the
 Company has not made any preferential allotment of shares to parties
 and companies covered in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 19.  According to the information and explanations given to us and
 records examined by us, charges have been created in respect of secured
 bonds issued.
 
 20.  The Company has not raised any money by public issue during the
 year.
 
 21.  To the best of our knowledge and belief and according to the
 information and explanations given to us, we report that no fraud on or
 by the Company has been noticed or reported during the year except for
 frauds on the Company for an amount of Rs.0.77 crore by employees of the
 Company, out of which Rs.0.52 crore have been recovered and for the
 balance amount of Rs.0.25 crore, as informed, necessary action has been
 taken for recovery.
 
 For Tej Raj & Pal       For S.K. Mittal & Co.   For O.P. Totla & Co.
 
 Chartered Accountants   Chartered Accountants   Chartered Accountants
 
 Firm Registration       Firm Registration       Firm Registration
 
 No.304124E              No.001 135N             No.000734C
 
        Sd/-                  Sd/-                    Sd/-
 
 [Dinakar Mohanty]       [S. K. Mittal]          [S.R. Totla]
 
      Partner               Partner                 Partner
 
 (M. No. 059390)         (M. No. 8506)          (M. No. 071774)
 
 Place : New Delhi
 
 Dated : 29th May, 2012