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Notes to Accounts of Bharat Heavy Electricals Ltd.

Mar 31, 2015

1 Contingent liabilities:

Claims against the company not acknowledged as debt :

i) a) Income Tax Pending Appeals Rs. in Crore 16.50 0.90

b) Against which paid under protest included under the head "Deposits " Rs. in Crore 0.70 0.00

ii) a) Sales Tax Demand Rs. in Crore 1519.28 1343.70

b) Against which paid under protest included under the head "Deposits" Rs. in Crore 267.66 190.51

iii) a) Excise Duty demands Rs. in Crore 530.85 489.55

b) Against which paid under protest included under the head "Deposits" Rs. in Crore 23.40 17.75

iv) a) Custom Duty demands Rs. in Crore 2.93 3.14

b) Against which paid under protest included under the head "Deposits" Rs. in Crore 2.83 2.89

v) Court & Arbitration cases Rs. in Crore 862.72 1033.93

vi) a) Liquidated Damages Rs. in Crore 4107.19 4347.41

b) Amount deducted by customers towards LD included in vi)a Rs. in Crore 2405.13 2672.49

vii) Counter Claim by contractors Rs. in Crore 0.61 0.77

viii) a) Service Tax Demand Rs. in Crore 458.95 291.71

b) Against which paid under protest Rs. in Crore 4.36 0.61

ix) Others Rs. in Crore 102.23 65.26

(In view of the various court cases, litigations and claims disputed by the company, the outflow of resources is not ascertainable at this stage).

2 a) Cash credit limit from banks aggregating to Rs. 5000 Crore (previous year Rs. 5000 Crore) and Companys counter guarantee / indemnity obligations in regard to bank guarantee / letters of credit limit aggregating to Rs. 55000 Crore (previous year Rs. 50000 Crore) sanctioned by the consortium banks are secured by first charge by way of hypothecation of raw materials, components, work in progress, finished goods, stores, trade receivables and other current assets both present and future. The outstanding bank guarantees as at 31.03.2015 is Rs. 44915 Crore (previous year Rs. 45007 Crore).

b) Corporate Guarantees outstanding as on 31.03.2015 is Rs. 2752.27 Crore (Previous year Rs. 3312.07 Crore).

3 Other payable/ liabilities include a sum of Rs. 100.51 Crore (previous year Rs. 100.51 Crore) towards guarantee fee demanded by the Government of India in respect of foreign currency loans taken by the Company at the instance of the Government up to 1990-91. The matter for its waiver has been taken up with the Government since there was no stipulation for payment of such guarantee fee at the time the loans (guaranteed by Government) were taken by the company. The Company vide letter dated 09.02.15 has again requested Department of Heavy Industries (DHI) for waiver of the guarantee fee.

4 Amorphous Silicon Solar Cell Plant (ASSCP), Gurgaon was taken on April 1, 1999 from Ministry of New and Renewable Energy (MNRE) on lease for a period of 30 years. The formal lease agreement with the Ministry of New and Renewable Energy (MNRE) is yet to be finalised.

5 Balances shown under Trade Receivables, Long term Trade receivable, Trade payables, contractors advances, deposits and stock/ materials lying with sub-contractors/ fabricators are subject to confirmation, reconciliation & consequential adjustment, if any. As the Company is in the business of long term construction contracts, bills are raised on the customers as per contract by the units located at various places as per the approved billing schedule by the customer and the reconciliation is carried out on ongoing basis & provisions made, wherever considered necessary. Final reconciliation with customer is done on completion of project (Trial Operation and PG Test completed). The total receivables (including long term) are Rs. 42717 Crore, (including deferred debts Rs. 17267 Crore not due for payment). The amount reconciled with customer is around Rs. 1900 Crore against the outstanding amount of Rs. 5412 Crore in completed projects.

6 The disclosure relating to AS-15 (R) - Employee Benefits

a) Gratuity Plan

The gratuity liability arises on account of future payments, which are required to be made in the event of retirement, death in service or withdrawal. The liability has been assessed using projected unit credit actuarial method.

7 Related Party Transactions:

i) Related Parties where control exists (Joint Ventures):

Powerplant Performance Improvement Ltd.

BHEL-GE Gas Turbine Services Pvt. Ltd.

NTPC-BHEL Power Projects Pvt. Ltd.

Raichur Power Corporation Ltd.

Dada Dhuniwale Khandwa Power Ltd.

Latur Power Company Ltd.

ii) Other related parties (Key Management Personnel- Functional Directors: existing & Company Secretary):

CMD : Shri B. Prasada Rao,

Functional Directors : S/Shri P. K. Bajpai, R Krishnan, W. V. K. Krishnashankar, Atul Sobti,

T.N. Veeraraghavan (from 07.01.2015) & Company Secretary : Shri I.P. Singh

8 Assets and Liabilities are classified between Current and Non-current considering 12 months period as operating Cycle.

9 Item of expense and income less than Rs. one Lakh are not considered for booking under Prior Period Items.

10 a) The Company has revised the accounting policy for depreciation in line with Schedule II of the Companies Act, 2013. Assets, for which the estimated useful life based on the technical evaluation is different from the life given in the Schedule II, have been disclosed in significant accounting policy no. 7. Wherever applicable, depreciation is charged at the increased rate for double and triple shift as prescribed in Note no. 6 of Schedule II of the Companies Act 2013.

b) Due to the revision in depreciation policy, the depreciation for the year is higher by Rs. 77.58 Crore and profit before tax for the year is lower to this extent. Further, an amount of Rs. 40.50 Crore (net of deferred tax Rs. 21.44 Crore) for assets, whose remaining useful life is NIL as at 1st April 2014, has been adjusted with the opening balance of retained earnings.

11 There is an outstanding of Rs. 3376 Crore pertaining to 20 projects on hold due to various reasons like environment clearance, fuel linkage, land acquisition, fund constraints, force majeure etc. mainly hold imposed by BHEL due to strategic reasons. This includes Rs. 1845 Crore outstanding for more than 3 years in respect of 11 projects. Total advance available against these 20 hold projects is Rs. 1109 Crore.

12 Previous year''s figures have been regrouped/ rearranged wherever considered necessary.


Mar 31, 2014

S. Description 2013-2014 2012-2013 No.

1 Contingent liabilities:

Claims against the company not acknowledged as debt :

i) a) Income Tax Pending Appeals Rs. in Crore 0.90 34.05

b) Against which paid under protest included under the head "Deposits " Rs. in Crore 0.00 0.00

ii) a) Sales Tax Demand Rs.in Crore 1343.70 876.47

b) Against which paid under protest included under the head "Deposits" Rs. in Crore 190.51 121.85

iii) a) Excise Duty demands Rs.in Crore 489.55 333.56

b) Against which paid under protest included under the head "Deposits" Rs.in Crore 17.75 8.52

iv) a) Custom Duty demands Rs.in Crore 3.14 0.21

b) Against which paid under protest included under the head "Deposits" Rs.in Crore 2.89 0.06

v) Court & Arbitration cases Rs.in Crore 1033.88 726.38

vi) a) Liquidated Damages Rs.in Crore 4347.41 3376.67

b) Amount deducted by customers towards LD included in vi)a Rs. in Crore 2672.49 2004.98

vii) Counter Claim by contractors Rs.in Crore 0.77 0.61

viii) a) Service Tax Demand Rs.in Crore 291.71 165.41

b) Against which paid under protest Rs.in Crore 0.61 0.01

ix) Others Rs.in Crore 65.31 56.54

x) Corporate Guarantee given on behalf of subsidiary company Rs.in Crore 0.00 6.56

(In view of the various court cases and litigations and claims disputed by the company financial impact as to outflow of resources is not ascertainable at this stage).

2 a) Cash credit limit from banks aggregating to Rs. 5000 Crore (previous year Rs. 5000 Crore) and Companys counter guarantee / indemnity obligations in regard to bank guarantee / letters of credit limit aggregating to Rs. 50000 Crore (previous year Rs. 50000 Crore) sanctioned by the consortium banks are secured by first charge by way of hypothecation of raw materials, components, work in progress, finished goods, stores, trade receivables and other current assets both present and future. The outstanding bank guarantees as at 31.03.2014 is Rs. 45007 Crore (previous year Rs. 41786 Crore).

b) Corporate Guarantees outstanding as on 31.03.2014 isRs.3312.07 Crore (Previous yearRs.4717.71 Crore).

3 Other payable/ liabilities include a sum of Rs. 100.51 Crore (previous year Rs. 100.51 Crore) towards guarantee fee demanded by the Government of India in respect of foreign currency loans taken by the Company at the instance of the Government upto 1990-91. The matter for its waiver has been taken up with the Government since there was no stipulation for payment of such guarantee fee at the time the loans (guaranteed by Government) were taken. Vide BHEL letter dated 05.09.2013, Department of Heavy Industries (DHI) has been again requested for waiver of the guarantee fee.

4 Amorphous Silicon Solar Cell Plant (ASSCP), Gurgaon was taken on April 1, 1999 from Ministry of Non- conventional Energy Sources on lease for a period of 30 years. The formal lease agreement with the Ministry of Non-Conventional Energy Sources is yet to be finalised.

5 Balances shown under Long term Trade receivable, Trade Receivables, Trade payables, contractors advances, deposits and stock/materials lying with sub-contractors/fabricators are subject to confirmation, reconciliation & consequential adjustment, if any. The reconciliation is carried out on ongoing basis as the Company is in the business of long term construction contracts & provisions, wherever considered necessary, have been made in line with the guidelines.

6 The operations of the Tishreen Syrian project site, Libyan project site, Afganistan, Vietnam, Belarus have been consolidated based on the unaudited accounts maintained at the regional headquarter at Noida.

7 The details of Research & Development Expenditure incurred during the year which is deductible (other than land & building) under section 35 (2AB) of the Income Tax Act, 1961.

8 The disclosure relating to derivative instruments:

a) The derivative instruments that are hedged and outstanding as on 31.03.2014 is Nil (previous year Nil).

9 The disclosure relating to AS-15 (R) – Employee Benefits

a) Gratuity Plan

The gratuity liability arises on account of future payments, which are required to be made in the event of retirement, death in service or withdrawal. The liability has been assessed using projected unit credit actuarial method.

c) Long Term Leave Liability (EL/NEL/HPL)

The company provides for earned leave benefit and half pay leave to the employees of the company which accrue half yearly at 15 days (maximum) and 10 days respectively. 73.33% of the earned leave is encashable while in service and upto a maximum of 300 days on retirement. Half pay leave is encashable within 3 months prior to superannuation or on separation beyond the age of 50 years subject to the overall ceiling of 480 days. The leave liability has been treated as other long term benefits and has been assessed using projected unit credit actuarial method.

10 Related Party Transactions:

i) Related Parties where control exists (Joint Ventures): Powerplant Performance Improvement Ltd.

BHEL-GE Gas Turbine Services Pvt. Ltd.

NTPC-BHEL Power Projects Pvt. Ltd.

Raichur Power Corporation Ltd.

Dada Dhuniwale Khandwa Power Ltd.

Latur Power Company Ltd.

ii) Other related parties (Key Management Personnel- Functional Directors: existing & retired):

S/Shri B.P Rao, Atul Saraya (upto 30.11.2013), O.P Bhutani (upto 31.05.2013), M.K. Dube (upto 31.07.2013), PK. Bajpai, R. Krishnan, W.V.K. Krishnashankar (w.e.f. 01.08.2013) and Atul Sobti (w.e.f. 01.12.2013)

11 Joint Ventures

Pursuant to compliance of Accounting Standard-27 issued by the Institute of Chartered Accountants of India, relevant disclosures relating to Joint ventures are as follows:

b) The provision for diminution in value of investment in Powerplant Performance Improvement Ltd. has been made since the company is under liquidation and the amount paid as equity is not recoverable.

b) Liquidated damages are provided in line with the Accounting Policy of the Company and the same is dealt suitably in the accounts on settlement or otherwise. Contingent liability relating to liquidated damages is shown in item No. 5 of Note no. 31

c) The provision for contractual obligation is made at the rate of 2.5% of the contract revenue in line with significant Accounting Policy No.15 to meet the warranty obligations as per the terms and conditions of the contract. The same is retained till the completion of the warranty obligations of the contract. The actual expenses on warranty obligation may vary from contract to contract and on year to year depending upon the terms and conditions of the respective contract.

12 Assets and Liabilities are classified between Current and Non-current considering 12 months period as operating Cycle.

13 Item of expense and income less than Rs. One Lakh are not considered for booking under Prior Period Items.

14 Amalgamation of erstwhile Bharat Heavy Plate & Vessels Limited , Visakhapatnam with the Company

a) The Board for Industrial and Financial Reconstruction (BIFR) vide its order dated August 29, 2013 sanctioned the Modified Draft Rehabilitation Scheme (MDRS) for envisaging merger of Bharat Heavy Plate & Vessels Limited (BHPV) (100 % subsidiary of BHEL) with the Company under Section 18(5) of Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA") with effect from appointed date i.e. October 01, 2011.

b) The Company has made necessary filings with the Registrar of Companies on August 30, 2013 (effective date). The scheme of merger has accordingly been given effect in these accounts.

c) Pursuant to the merger the assets and liabilities of the erstwhile Bharat Heavy Plate & Vessels Limited (whose principle business was design, fabrication, supply and erection of heat exchanges, columns, storage spheres, reactors and related products)were transferred to and vested on going concern basis in the Company with effect from the appointed date i.e. October 01, 2011.

d) In terms of the Accounting Standard (AS) 14 - "Accounting for Amalgamations", the scheme of amalgamation has been accounted for under the "Pooling of Interests method" wherein all the assets, liabilities and reserves & surplus/losses of the erstwhile BHPV Limited have been taken over at their book values as appearing in the books of accounts as on October 01, 2011.

e) On the amalgamation of the BHPV with the Company, the share capital of BHPV stand cancelled without any further act or deed or instrument, from the Appointed Date. Since the Company holds 100% (along with its nominees) of the issued, subscribed and paid-up capital of BHPV, neither allotment of any new shares nor any payment was made to any person whatsoever in consideration or in lieu of the transfer and vesting of the Undertaking/ Business of BHPV in the Company.

f) The paid up Equity Share Capital of Rs. 33.80 Crore appearing in the books of account of BHPV and the corresponding Investments of Rs. 1 in respect thereof appearing in the books of account of the Company stand cancelled and the difference arising there from amounting to Rs. 33.80 Crore has been adjusted with capital reserves of the Company.

g) Debit balance of Profit and Loss Account of the BHPV amounting to Rs. 278.05 Crore as on 01.10.2011 have been adjusted against surplus balance in Statement of Profit and Loss of the Company.

15 a) Revenue from operations and Profit before tax includes Rs. 105.04 Crore and Rs. (-)186.55 Crore respectively of HPVP Unit (erstwhile BHPV) for the current year 2013-14.

b) On account of amalgamation of Bharat Heavy Plate & Vessels Limited, the Companys wholly-owned subsidiary, with the company with effect from 01 October, 2011, the results pertaining to the year ended 31st March, 2014 are not comparable with that of the corresponding previous year.

c) Previous years figures have been regrouped/rearranged wherever considered necessary.


Mar 31, 2013

1 Cash credit limit from banks aggregating to Rs. 5000 Crore (previous year Rs. 3000 Crore) and Company''s counter guarantee / indemnity obligations in regard to bank guarantee / letters of credit limit aggregating to Rs. 50000 Crore (previous year Rs. 52000 Crore) sanctioned by the consortium banks are secured by first charge by way of hypothecation of raw materials, components, work in progress, finished goods, stores, trade receivables and other current assets both present and future. The outstanding bank guarantees as at 31.03.2013 is Rs. 41786 Crore (previous year Rs. 38200 Crore) and Corporate Guarantee as on 31.03.2013 is Rs. 4717.71 Crore (Previous year Rs. 4448.14 Crore).

2 Other payable/ liabilities include a sum of Rs. 100.51 Crore (previous year Rs. 100.51 Crore) towards guarantee fee demanded by the Government of India in respect of foreign currency loans taken by the Company at the instance of the Government upto 1990-91. The matter for its waiver has been taken up with the Government since there was no stipulation for payment of such guarantee fee at the time the loans (guaranteed by Government) were taken. Vide BHEL letter dated 19.09.2012, Department of Heavy Industries (DHI) has been again requested for waiver of the guarantee fee. The matter is under discussions with DHI.

3 Amorphous Silicon Solar Cell Plant (ASSCP), Gurgaon was taken on April 1, 1999 from Ministry of Non-conventional Energy Sources on lease for a period of 30 years. The formal lease agreement with the Ministry of Non-Conventional Energy Sources is yet to be finalised.

4 Balances shown under Trade receivables, Trade payables, contractor''s advances, deposits and stock/materials lying with sub-contractors/fabricators are subject to confirmation, reconciliation & consequential adjustment, if any. The reconciliation is carried out on ongoing basis as the Company is in the business of long term construction contracts & provisions wherever considered necessary have been made in line with the guidelines.

5 a) The operations of the Libyan project site have been consolidated based on the unaudited accounts maintained at the regional headquarter at Noida, in view of the turnmoil in Libya.

b) The operations of the Tishreen Syrian project site have been consolidated based on the unaudited accounts maintained at the regional headquarter at Noida, as force majeure condition was invoked in Syria in the second week of June 2012 and the same condition prevails as on 31st March 2013.

6 The disclosure relating to derivative instruments:

a) The derivative instruments that are hedged and outstanding as on 31.03.2013 is Nil (previous year Nil).

b) The foreign currency exposures that are not hedged by a derivative instrument or otherwise are as under:

7 The disclosure relating to AS-15 (R) - Employee Benefits a) Gratuity Plan

The gratuity liability arises on account of future payments, which are required to be made in the event of retirement, death in service or withdrawal. The liability has been assessed using projected unit credit actuarial method.

Reconciliation of opening and closing balances of the present value of the defined benefit obligation as at the year ended are as follows:

8 Related Party Transactions:

i) Related Parties where control exists (Joint Ventures): Powerplant Performance Improvement Ltd.

BHEL-GE Gas Turbine Services Pvt. Ltd.

NTPC-BHEL Power Projects Pvt. Ltd.

Udangudi Power Corporation Ltd. (Upto 26.03.2013) Raichur Power Corporation Ltd.

Dada Dhuniwale Khandwa Power Ltd.

Latur Power Company Ltd.

ii) Other related parties (Key Management Personnel- Functional Directors: existing & retired):

S/Shri B.P. Rao , Atul Saraya, O. P. Bhutani, M.K. Dube , P. K. Bajpai and R Krishnan (w.e.f. 01.04.2012)

9 During the year the Company has included policies on Use of estimates, Taxes on income, impairment and Segment reporting. The impact due to this is NIL as these were already in practice.

10 Assets and Liabilites are classified between Current and Non-current considering 12 months period as operating cycle.

11 Item of expense and income less than Rs. one Lakh are not considered for booking under Prior Period Items.


Mar 31, 2012

A) Terms / rights attached to the equity shares:

The company has only one class of equity shares having a par value of Rs. 2 per share (previous year Rs. 10 per share). Each holder of the equity shares is entitled to one vote per share.

1 Contingent liabilities :

Claims against the company not acknowledged as debt :

i) a Income Tax Pending Appeals Rs. Crore 45.20 32.61

b Against which paid under protest included under the head "deposits others" Rs. Crore 0.00 0.02

ii) a Sales Tax Demand Rs. Crore 732.70 509.84

b Against which paid under protest included under the head "Advances Recoverable" Rs. Crore 98.39 92.97

iii) a Excise Duty demands Rs. Crore 320.08 216.14

b Against which paid under protest included under the head "Advances Recoverable" Rs. Crore 7.84 8.41

iv) a Custom Duty demands Rs. Crore 0.21 0.21

b Against which paid under protest included under the head "Advances Recoverable" Rs. Crore 0.06 0.06

v) Court & Arbitration cases Rs. Crore 559.23 375.07

vi) a Liquidated Damages Rs. Crore 2283.63 1401.11

b Amount deducted by customers towards LD included in vi) a Rs. Crore 1579.19 825.70

vii) Counter Claim by contractors Rs. Crore 0.61 0.61

viii) a Service Tax Demand Rs. Crore 132.17 214.13

b Against which paid under protest Rs. Crore 0.00 0.22

ix) Others Rs. Crore 106.34 120.58

x) Corporate Guarantee given on behalf of subsidiary company (BHPV) Rs. Crore 9.57 -

(In view of the various court cases and litigations and claims disputed by the company financial impact as to outflow of resources is not ascertainable at this stage).

2 Cash credit limit from banks aggregating to Rs. 3000 crore (previous year Rs. 600 crore) and Company's counter guarantee / indemnity obligations in regard to bank guarantee / letters of credit limit aggregating to Rs. 52000 Crore (previous year Rs. 49400 Crore) sanctioned by the consortium banks are secured by first charge by way of hypothecation of raw materials, components, work in progress, finished goods, stores, book debts and other current assets both present and future. The outstanding bank guarantees as at 31.03.2012 is Rs. 38200 Crore (previous year Rs. 37474 Crore) and Corporate Guarantee as on 31.03.2012 is Rs. 4448.14 Crore (Previous year Rs. 4192 Crore).

3 Other payable/ liabilities include a sum of Rs. 100.51 Crore (previous year Rs.100.51 Crore) towards guarantee fee demanded by the Government of India in respect of foreign currency loans taken by the company at the instance of the Government upto 1990-91. The matter for its waiver has been taken up with the Government since there was no stipulation for payment of such guarantee fee at the time the loans (guaranteed by Government) were taken. Vide BHEL letter dated 18.02.2011, Department of Heavy Industries (DHI) has been again requested for waiver of the guarantee fee. The matter is under discussions with DHI.

4 Amorphous Silicon Solar Cell Plant (ASSCP), Gurgaon was taken on April 1, 1999 from Ministry of Non- conventional Energy Sources on lease for a period of 30 years. The formal lease agreement with the Ministry of Non-Conventional Energy Sources is yet to be finalised.

5 Balances shown under debtors, creditors, contractor's advances, deposits and stock/materials lying with sub- contractors/fabricators are subject to confirmation, reconciliation & consequential adjustment, if any. The reconciliation is carried out ongoing basis as the company is in the business of long term construction contracts & provisions wherever considered necessary have been made in line with the guidelines.

a) The estimates of total costs and total revenue in respect of construction contracts entered on or after 1st April 2003 in accordance with Accounting Standard (AS) -7 (R) Construction Contracts are reviewed and up dated periodically to ascertain the percentage completion for revenue recognition. However, it is impracticable to quantify the impact of change in estimates.

6 The company has accounted for leave encashment expenditure with 30 days a month as base for computation of encashment of leave as per specific instructions from Department of Public Enterprises (DPE) on the subject. This is against the earlier formula of computation of leave encashment on 26 days a month as base. The impact due to this change, is increase in Profit before tax by Rs.180.46 crore for the year 2011-12. However, in some of the units the workers union has filed an appeal against the change and court has given interim stay order. The consequentail impact, if any, will be accounted for in the year of settlement.

7 The operations of the Libyan project site have been consolidated based on the unaudited accounts maintained at the regional headquarter at Noida, in view of the ongoing turmoil in Libya.

*The above amount include leave encashment on payment basis & excludes group insurance premium.

The CMD and functional directors have been allowed the use of staff car for both duty and non-duty journeys. The ceiling of non duty journey is 1000 kms p.m against recovery of prescribed amount in accordance with terms and condition of appointment. The monetary value of the perquisite for the use of car, if calculated in accordance with the provisions of I.T. Rules 1962 would amount to Rs.0.02 Crore (Previous Year Rs.0.01 Crore)

8 The disclosure relating to AS-15 (R) - Employee Benefits

a) Gratuity Plan

The gratuity liability arises on account of future payments, which are required to be made in the event of retirement, death in service or withdrawal. The liability has been assessed using projected unit credit actuarial method.

Reconciliation of opening and closing balances of the present value of the defined benefit obligation as at the year ended are as follows:

9 Related Party Transactions:

i) Related Parties where control exists (Joint Ventures):

Powerplant Performance Improvement Ltd.

BHEL-GE Gas Turbine Services Pvt. Ltd.

NTPC-BHEL Power Projects Pvt. Ltd.

Udangudi Power Corporation Ltd.

Barak Power Pvt. Ltd. (wound up w.e.f. 11.10.2011)

Raichur Power Corporation Ltd.

Dada Dhuniwale Khandwa Power Ltd.

Latur Power Company Ltd. (w.e.f. 06.04. 2011)

ii) Other related parties (Key Management Personnel- Functional Directors: existing & retired):

S/Shri B.P. Rao , Anil Sachdev (upto 31.03.2012), Atul Saraya, O. P. Bhutani, M.K. Dube (w.e.f. 25.06.2011) and P. K. Bajpai (w.e.f. 01.07.2011)

a) During the year company has sub-divided existing equity shares of face value of Rs. 10/- into 5 equity shares of face value of Rs. 2/- each and the record date was fixed 04.10. 2011. Hence, previous year Basic and Diluted earning per share has been restated accordingly.

10.1 The company has filed Draft Red Herring Prospectus (DRHP) dated 28.09.2011 with Securities and Exchange Board of India (SEBI) on 30.09.2011 for disinvestment of 5% of the paid up equity capital out of Government of India's shareholding. Consequent upon the receipt of 'no-objection' for withdrawal of DRHP for FPO, from Department of Heavy Industry/ Department of Disinvestment, the Board of Directors in its meeting held on 03.04. 2012 has approved the withdrawal of DRHP filed by the company with (SEBI).

b) The provision for diminution in value of investment in PPIL has been made since the company is under liquidation and the amount paid as equity is not recoverable, the investment in Barak Power Pvt. Ltd. is written off as the company has been wound up w.e.f. 11.10.2011.

c) Aggregate amount of company's interest in Joint Ventures as per accounts is as under:

Latur power company Ltd. was incorporated on 06.04.2011. Therefore, first account of the company are made for the period from 06.04.2011 to 31.03.2012.

11 As per the listing agreement with the Stock Exchanges, the requisite details of loans and advances in the nature of loans, given by the Company are given below:

ii) No loans have been given (other than loans to employees), wherein there is no repayment schedule or repayment is beyond seven years; and

iii) There are no loans and advances in the nature of loans, to firms/companies, in which directors are interested.

b) Liquidated damages are provided in line with the Accounting Policy of the company and the same is dealt suitably in the accounts on settlement or otherwise. Contingent liability relating to liquidated damages is shown in item No. 5 of Note no. 31

c) The provision for contractual obligation is made at the rate of 2.5% of the contract revenue in line with significant Accounting Policy No.14 Note no. 1 to meet the warranty obligations as per the terms and conditions of the contract. The same is retained till the completion of the warranty obligations of the contract. The actual expenses on warranty obligation may vary from contract to contract and on year to year depending upon the terms and conditions of the respective contract.

12 The financial statements have been prepared in line with the requirements of Revised Schedule VI of Companies Act, 1956 as introduced by the Ministry of Corporate Affairs from financial year ended on 31st March 2012. Accordingly, assets and liabilities are classified between current and non-current considering 12 months period as operating cycle. The adoption of Revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. Consequently, the company has re-classified previous year figures to comfirm to this year classification.

13 Item of expense and income less than Rs. one Lakh are not considered for booking under Prior Period Items.


Mar 31, 2010

1. Estimated amount of contracts, net of advances, remaining to be executed on capital account and not provided for is Rs. 1623.14 crore (previous year Rs. 1783.78 crore) including Rs. 3.98 crore (previous year Rs. 24.78 crore) for acquisition of intangible assets.

2. Land and buildings include:

a) 8648.91 acres of land (previous year 9713.445 acres), 36 flats (previous year 36 flats) and one building (previous year one building) for which formal transfer/lease deeds have not been executed including for 71.44 acres of land (previous year 71.44 acres) for which the cost paid is provisional; registration charges and stamp duty net of provision already made thereon, would be accounted for on payment.

b) 28.676 acres of land (previous year 28.676 acres) leased to Ministry of Defence, Government Departments and others.

c) 180 acres of land (previous year 180 acres) being used by the Ministry of Defence and for which further approval of the competent authority for continuance of licensing of the land is awaited.

d) 116.365 acres (previous year 116.365 acres) of land is under adverse possession.

3. Sales and despatches to customers :

(a) Includes Rs. 20.38 crore (previous year Rs. 766.64 crore) based on provisional prices and Rs. 96.86 crore (previous year Rs. 72.82 crore) additional claim for despatches made in earlier year in accordance with price settlement with railways during the year.

(b) Includes Rs. 1108.07 crore (previous year Rs. 923.93 crore) for escalation claims raised in accordance with the sales contracts, inclusive of escalation claims on accrual basis to the extent latest indices were available;

(c) Includes despatches of equipment valued at Rs. 15.57 crore (previous year Rs. 25.45 crore) held on behalf of customers at their request for which payment has been received by the Company; and

(d) Excludes Rs. 23.01 crore (previous year Rs. 15.65 crore) for price reduction due to delay in delivery as per terms of the contract.

4. Contingent Liabilities:

(a) Claims against the company not acknowledged as debt:

(i) Income Tax pending appeals (net of provisions) Rs. 28.77 crore (previous year Rs. 28.57 crore) against which Rs 0.03 crore (previous year Rs 0.01 crore) has been paid under protest and included under the head deposits- others.

(ii) Sales Tax demands Rs. 353.06 crore (previous year Rs. 326.39 crore) against which Rs. 76.91 crore (previous year Rs. 71.56 crore) has been paid under protest/court orders and included under the head advances recoverable.

(iii) Excise Duty demands Rs.195.47 crore (previous year Rs. 169.16 crore), against which Rs.5.01 crore (previous year Rs. 5.11 crore) has been paid under protest/court orders and included under the head advances recoverable.

(iv) Custom Duty demands Rs. 0.21 crore (previous year Rs. 0.21 crore) against which Rs. 0.06 crore (previous year Rs. 0.06 crore) has been paid under protest.

(v) Court / Arbitration cases Rs. 251.34 crore (previous year Rs. 86.06 crore)

(vi) Liquidated Damages Rs. 1287.94 crore (previous year Rs. 1363.44 crore).

(vii) Counter claim by contractors Rs. 0.61 crore (previous year Rs. 40.99 crore).

(viii) Service Tax demand Rs. 105.74 crore (previous year Rs. 70.31 crore) against which Rs. 0.22 crore (previous year Rs. 0.08 crore) has been deposited against protest.

(ix) Others Rs. 62.02 crore (previous year Rs. 58.77 crore).

In view of the various court cases / litigations and claims disputed by the company financial impact as to outflow of resources is not ascertainable at this stage.

(b) Bills discounted under IDBI scheme outstanding at the close of the year amount to Rs. Nil (previous year Rs. 0.06 crore).

5. The company invested a sum of Rs. 5 crore (previous year Rs. 5 crore) towards equity shares of Rs. 10/- each (at par) in erstwhile Konark Met Coke Ltd. (KMCL) Bhubneshwar, to secure orders for equipment being supplied by the company to erstwhile KMCL and Neelachal Ispat Nigam Ltd. (NINL). Pursuant to order passed by Honble Orissa High Court, KMCL was amalgamated with NINL u/s 391 read with section 394 of the Companies Act, 1956 & in terms of the scheme of amalgamation sanctioned by the Honble High Court, Orissa, NINL had allotted equity shares aggregating to Rs. 5 crore (previous year Rs. 5 crore) to the company. The equity participation in NINL is restricted to 7.5% of the value of the orders received with a maximum of Rs. 17.32 crore (previous year Rs. 17.32 crore).

6. Cash credit limit (including bills discounting limit in respect of IDBI Scheme) from banks aggregating to Rs. 100 crore (previous year Rs. 100 crore) and Companys counter guarantee / indemnity obligations in regard to bank guarantee / letters of credit limit aggregating to Rs. 40000 crore (previous year Rs. 30000 crore ) sanctioned by the consortium banks are secured by first charge by way of hypothecation of raw materials, components, work in progress, finished goods, stores, book debts and other current assets both present and future. The outstanding bank guarantee as at 31.03.2010 is Rs. 31541 crore (previous year Rs. 26752 crore) and Corporate Guarantee as on 31.03.2010 is Rs. 1685 crore (previous year Rs.1528 crore).

7. Other liabilities include a sum of Rs. 100.51 crore (previous year Rs. 100.51 crore) towards guarantee fee demanded by the Government of India in respect of foreign currency loans taken by the company at the instance of the Government upto 1990-91. The matter for its waiver has been taken up with the DHI, Government since there was no stipulation for payment of such guarantee fee at the time the loans (guaranteed by Government) were taken. DHI has vide its letter dated 17.03.10 has intimated that the issue is being examined further.

8. Amorphous Silicon Solar Cell Plant (ASSCP), Gurgaon was taken on April 1, 1999 from Ministry of Non-Conventional Energy Sources on lease for a period of 30 years. The lease agreement with the Government is yet to be finalised.

9. Balances shown under debtors, creditors, contractors advances, deposits and stock/materials lying with sub- contractors/fabricators are subject to confirmation, reconciliation & consequential adjustment, if any. The reconciliation is carried out ongoing basis & provisions wherever considered necessary have been made in line with the guidelines.

10. The company has changed the accounting practice of provision for doubtful debts during the year. As against earlier practice of creating provision on a case to case basis, the company has revised it that wherever trial operation has been conducted and the debtors are outstanding for more than three years from the date of trial operation, provisions (including contractual obligations) shall be equal to the debtors as prevalent on that date. In line with this any shortfall in provision with regard to total outstanding has been provided and excess if any, has been withdrawn. The impact due to change in this accounting practice is decrease in profit before tax by Rs. 124.61 crore for the year 2009-10.

11. Further, Bank Guarantees given against release of outstanding payment from the customer but undischarged, after 3 years from the date of trial operation, has been reviewed on a case to case basis, for creating provision, if required. The effect of this for the year is decrease in profit before tax by Rs. 57 crore.

12. With the introduction of "Cafeteria approach" for perks & allowances as part of wage revision, earlier practice of LTC/LTA claim by all employees has been dispensed with and now LTC is one of the perks & allowances under the cafeteria and employee has an option to select any of perks & allowances listed under cafeteria approach subject to a maximum of 46% of basic pay. Hence no separate provision for LTC for the blocks 2010-11 (as per earlier practice) has been provided. The effect of this change on Profit before tax for the year 2009-10 is an increase by Rs. 16.71 crore.

13. The company accounts the leave encashment expenditure with 26 days a month as base. The company proposed a change in the base as 30 days a month in line with the directives of Government of India, Department of Public enterprise vide their O.M. dated 20.9.2005. However, some of the workers unions have raised a dispute under section 9(A) of the Industrial Dispute Act 1947 against the proposed changes in the calculation of leave encashment with 30 days month base instead of 26 days month. As per section 33 (3) of the Industrial dispute Act no employer can alter the service conditions during the pendency of such proceedings with the Conciliation Officer. Pending final disposal of the dispute by the Conciliation officer the status quo is being continued. However, keeping in view the large number of recruitment envisaged in BHEL, the proposed change has been effected for the employees who have joined/ joining BHEL on or after 1st January 2010.

14. The details of Research & Development Expenditure (excluding cost of land & building) incurred during the year which is deductible under section 35 (2AB) of the Income Tax Act,1961. The registration formalities for availing such deductions with DSIR has been completed by March 2010, formal approval letter is awaited from DSIR. However, the weighted deduction @150% on account of R&D expenses incurred during the year has been considered while working out the provision for tax / deferred tax for the year 2009-10.

15. The disclosure relating to AS-15 (R) - Employee Benefits

a) Effective April 1,2006 the company adopted the revised Accounting Standard 15 (R) on Employee Benefits. The following disclosure sets out the status as required under AS 15 (R).

b) Gratuity Plan

The gratuity liability arises on account of future payments, which are required to be made in the event of retirement, death in service or withdrawal. The liability has been assessed using projected unit credit actuarial method.

16. Related Party Transactions:

i) Related Parties where control exists (Joint Ventures):

Powerplant Performance Improvement Ltd.

BHEL-GE Gas Turbine Services Pvt. Ltd.

NTPC-BHEL Power Projects Pvt. Ltd.

Udangudi Power Corporation Ltd.

Barak Power Pvt. Ltd.

Raichur Power Corporation Ltd.

Dada Dhuniwale Khandwa Power Ltd. ii) Other related parties (Key Management Personnel- Functional Directors: existing & retired):

S/Shri B.P. Rao , C.S.Verma, Anil Sachdev, Atul Saraya, O. P. Bhutani and K.Ravi Kumar

17. Joint ventures / Subsidiaries:

(i) An MoU has been signed on 12th Aug., 2009 between BHELand Mahagenco for setting up a joint venture company to build, own and operate a 2x660 MW thermal power plant with Supercritical parameters at Latur in Maharastra.

(ii) An MoU was entered into on 20lh August 2009 with General Electric, USA for participating in Indian Railways tender for setting up of Diesel Loco Factory at Marhowra, Bihar.

(iii) An MoU was made on 27th January 2010 with Alstom Transport S.A., France for participating in Indian Railways tender regarding setting up of Electric Loco Assembly and Ancillary unit of Chittaranjan Locomotive Works (CLW) at Dankuni, WB.

(iv) Company has signed an MoU on 17th February 2010 with Toshiba Corporation, Japan to expolore the possibility of forming JV Company for transmission and distribution business in India and other mutually agreed countries.

(v) A Joint venture company between BHEL and MPPGCL has been formed on 25th February 2010, to Build, Own and Operate a 2x800 MW Thermal power plant with Supercritical parameters at Khandwa in Madhya Pradesh, namely Dada Dhuniwale Khandwa Power Ltd.

18. Item of expense and income less than Rs. one Lakh are not considered for booking under Prior Period Items.

19. Previous years figures have been regrouped/reclassified wherever practicable to conform to current years presentation.

 
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