We have audited the attached Balance Sheet of STEEL AUTHORITY OF INDIA
 LIMITED, as on 31st March 2011, the 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. 5.8).
 
 5.  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 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 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.
 
 The position has been adequately explained in Note No. 5.8 of the
 Rs.Schedule 3: Accounting policies and notes to accounts'' forming part of
 the accounts.
 
 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 Schedule 3, 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 2011;
 
 ii) in case 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. In few cases of fixed
 assets, verified but not reconciled, the discrepancies are yet to be
 ascertained.
 
 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.
 
 Physical verification of fixed assets and its reconciliation with the
 books is a continuous process.
 
 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, 2011.
 
 c) According to the information and explanations given to us, there are
 disputed statutory dues, which have not been deposited as on 31st
 March, 2011, as given herein below:
 
 Statute             Nature of Dues       Amount        Forum where
                                      (Rs. in crore)   disputes are pending
 
 Sales Tax          Demand by            113.81        High Courts
                    Appellate            531.56        Sales Tax Tribunals
 
                    Authorities          195.07        Sales Tax Depar
                                                       -tments
 
                                         840.44
 
 Central Excise     Excise duty         1016.58        Supreme Court
 Act, 1944                                17.54        High Courts
 
                                         675.61        CESTAT
 
                                         274.04        Department of
                                                       Excise
 
                                           0.32        Settlement 
                                                       Commission
 
                                        1984.09
 
 Income Tax 
 Act, 1961         TDS on perks          161.74        High Courts
 
                   Income Tax            256.56        Department of 
                                                       Income
 
                                         418.30
 
 Other Statutes    Other statutory dues 1272.74        Supreme Court
                   (including cess)      434.68        High Courts
 
                                          42.25        Lower Courts
 
                                          42.04        Concerned 
                                                       Department
 
                                        1791.71
                       TOTAL            5034.54
 
 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
 misappropriation of Rs. 1 crore by an employee of the Company. We have
 been informed that the amount has been subsequently recovered in May,
 2011 and employee has been placed under suspension.
 
 The matter has been reported to Central Bureau of nvestigation and the
 investigation is going on. First nformation Report also has been lodged
 with Police Proceedings by the management in the case are also in
 progress. As the Company has recovered the entire amount in May, 2011,
 there is no effect on the financial results of the Company for the
 year.
 
 For T.R. Chadha & Co.      For Tej Raj & Pal     For S.K. Mittal & Co.
 
 Chartered Accountants   Chartered Accountants   Chartered Accountants
 
 Firm Registration No.:  Firm Registration No.:   Firm Registration No.:
 
 006711N                           304124E                  001135N
 
 Sd/-                             Sd/-                       Sd/-
 
 (Ajesh Tuli)               (B. Gangaraju)             (S.K. Mittal)
 
 Partner                         Partner                    Partner
 
 (M. No. 86424)            (M. No. 7605)               (M. No. 8506)
 
 Place : New Delhi
 Dated : 24th June, 2011
 
 For and on behalf of the
 Board of Directors
 
 Sd/-
 
 (C. S. Verma)
 
 Chairman
 
 Place: New Delhi
 Dated: 29th July, 2011