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Accounting Policies of Bharat Petroleum Corporation Ltd. Company

Mar 31, 2016

BASIS FOR PREPARATION

The financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Corporation has prepared these financial statements to comply in all material respects with the accounting standards prescribed under Section 133 of the Companies Act, 2013 (''Act'') read with Rule (7) of the Companies (Accounts) Rules, 2014 and other provisions of the Act (to the extent notified). The financial statements have been prepared on an accrual basis (unless otherwise stated) and under historical cost convention. The accounting policies are consistent with those used in previous year except for the policy in respect of capitalization of fixed bed catalysts referred to in para 1.2.1(c), the depreciation of Fixed Assets referred to in para 1.5.1(b), (c), (d) and (f) and valuation of inventory referred to in para 1.7.1.

1.1. USE OF ESTIMATES

The preparation of financial statements requires the Management of the Corporation to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences, if any, between actual amounts and estimates are recognised in the period in which the outcome is known.

1.2. FIXED ASSETS

1.2.1. TANGIBLE FIXED ASSETS

a) Fixed Assets are stated at cost net of accumulated depreciation.

b) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.

c) First time procurement cost of fixed bed catalyst is capitalized as a separate ''component'' in the respective Plant and Equipment.

d) Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs. 1,000 per item are charged to revenue.

e) Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

f) Land acquired on lease where period of lease exceeds 99 years is treated as freehold land.

g) Land acquired on lease for 99 years or less is treated as leasehold land.

h) Expenditure during construction period: Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group which are allocated to projects costing Rs. 5 crores and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines are capitalised as part of pipeline cost. Expenditure incurred during construction period on projects like electricity transmission lines, roads, culverts etc. the ownership of which is not with the Corporation are charged to revenue in the accounting period of incurrence of such expenditure.

1.2.2. INTANGIBLE ASSETS

a) Intangible assets are carried at cost less accumulated amortization.

b) Cost of Right of Way which is perpetual and absolute in nature is amortised over a period of 99 years and in other cases, over its estimated useful life.

c) Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 Crore and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit. In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

1.3. IMPAIRMENT OF ASSETS

The values of tangible and intangible assets of respective Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date, if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than higher of net selling price of the asset or present value of estimated future cash flows, the difference is recognized as an impairment loss.

1.4. BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets till the month in which the asset is ready for use. All other borrowing costs are charged to revenue.

1.5. DEPRECIATION

1.5.1. Depreciation on fixed assets is provided on the straight line basis, over the useful lives of assets (after retaining the residual value of upto 5%) as prescribed by the Schedule II of the Act, except in following cases:

a) Cost of leasehold land for lease period not exceeding 99 years, is amortised over the period of lease. Plant & Machinery at Retail Outlets (other than Storage tanks and related equipments) are depreciated over a useful life of 15 years based on the technical assessment.

b) Computer equipments are depreciated over a period of 4 years and Mobile phones are depreciated over a period of 2 years (previously 3 years) based on internal assessment. Furniture, other than computer equipments and mobile phones, provided at the residence of management staff are depreciated over a period of 7 years as per internal assessment.

c) Solar Panels are depreciated over a period of 25 years based on the technical assessment of useful life and applicable warranty conditions.

d) Moulds, used for the manufacturing of the packaging material for Lubricants, are depreciated over a period of 5 years based on technical assessment of useful life.

e) Fixed assets costing not more than Rs. 5,000 each are depreciated @ 100 percent in the year of acquisition except LPG Cylinders and Pressure Regulators which are depreciated over a useful life of 15 years based on the technical assessment.

f) Components of the main asset that are significant in value and have different useful lives as compared to the main asset are depreciated over their estimated useful life. Useful life for such components has been assessed based on historical experience and internal technical assessment.

1.5.2. Depreciation is charged on additions/deletions on pro-rata monthly basis including the month of addition/ deletion.

1.6. INVESTMENTS

1.6.1. Current investments are valued at lower of cost or fair value determined on an individual investment basis.

1.6.2. Long-term investments are valued at cost. Provision for diminution in value is made to recognise a decline, other than of temporary nature, in the value of such investments.

1.7. INVENTORIES

1.7.1 Inventories are stated at cost or net realisable value, whichever is lower. Cost of inventories comprises of expenditure incurred in the normal course of business in bringing inventories to their present location including appropriate overheads apportioned on a reasonable and consistent basis and are determined on the following basis:

a) Crude oil, traded goods and finished products other than lubricants are determined on First in First out basis

b) Other raw materials, packages, lubricants and stores and spares are determined on weighted average basis.

c) The cost of Stock-in-Process is determined at raw material cost plus cost of conversion.

1.7.2. The net realisable value of finished goods and stock in trade are based on the inter-company transfer prices and final selling prices (applicable at the location of stock) for sale to oil companies and retail consumers respectively. For the purpose of stock valuation, the proportion of sales to oil companies and retail sales are determined on all India basis and considered for stock valuation at all locations.

1.7.3. Obsolete, slow moving, surplus and defective stocks are identified at the time of physical verification of stocks and where necessary, provision is made for such stocks.

1.8. REVENUE RECOGNITION

1.8.1. Revenue is recognised when, sufficient risks and rewards incidental to ownership are transferred to the customer, it can be reliably measured and it is reasonable to expect ultimate collection.

1.8.2. Sales represents invoiced value of goods supplied net of trade discounts, and include applicable excise duty, surcharge and other elements as are allowed to be recovered as part of the price but excludes VAT/ Sales Tax. Further, it includes other elements allowed by the Government from time to time.

1.8.3. Claims including subsidy on LPG and SKO from Government of India are booked on in principle acceptance thereof on the basis of available instructions/clarifications subject to final adjustments after necessary audit, as stipulated.

1.8.4. Other claims are booked when there is a reasonable certainty of recovery.

1.8.5. Income from sale of scrap is accounted for on realization.

1.8.6. Dividend income is recognized when the Corporation''s right to receive the dividend is established.

1.8.7. Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

1.9. CLASSIFICATION OF INCOME/EXPENSES

1.9.1. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

1.9.2. Income/expenditure upto Rs. 0.05 crore in each case pertaining to prior year(s) is charged to the current year.

1.9.3. Prepaid expenses upto Rs. 0.05 crore in each case, are charged to revenue as and when incurred.

1.9.4. Deposits placed with Government agencies/local authorities which are perpetual in nature are charged to revenue in the year of payment.

1.10. EMPLOYEE BENEFITS

1.10.1. Contributions to defined contribution schemes such as Pension, Superannuation, Provident Fund, etc. are charged to the Statement of Profit and Loss as and when incurred.

1.10.2. The Corporation also provides for retirement/post-retirement benefits in the form of gratuity, leave encashment, post-retirement benefits and other long-term benefits. Such defined benefits are charged to the Statement of Profit and Loss based on valuations made by independent actuary using the Projected Unit Credit Method, as at the Balance Sheet date.

1.10.3. Expenditure on account of Voluntary Retirement Scheme are charged to Statement of Profit and Loss as and when incurred.

1.11. DUTIES ON BONDED STOCKS

1.11.1. Customs duty on Raw materials/Finished goods lying in bonded warehouse are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

1.11.2. Excise duty on finished stocks lying at manufacturing locations is provided for at the assessable value applicable at each of the locations based on end use.

1.12. FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

1.12.1. Transactions in foreign currency are accounted in the reporting currency at the exchange rate prevailing on the date of transaction.

1.12.2. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

1.12.3. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Statement of Profit and Loss either as Profit or Loss on Foreign Currency transactions and translations or Finance Cost, as the case may be.

1.12.4. Foreign exchange differences on long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of the asset or liability.

1.12.5. Premium/discount arising at the inception of the forward exchange contracts to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss.

1.12.6. Gains/losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Statement of Profit and Loss. Provision for losses in respect of outstanding contracts as on Balance Sheet date is made based on mark to market valuations of such contracts.

1.13. GOVERNMENT GRANTS

1.13.1. When the grant relates to an expense item or depreciable fixed assets, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. Grants relating to depreciable fixed assets are reflected as Capital Grants under Reserves & Surplus in Balance Sheet and recognised in the Statement of Profit and Loss on a systematic and rational basis over the useful life of the asset.

1.13.2. Government grants of the nature of promoters'' contribution or relating to non-depreciable assets are credited to Capital Reserve in Balance Sheet.

1.14. PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

1.14.1. A provision is recognized when the Corporation has a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made.

1.14.2. Contingent Liabilities are not recognized but are disclosed in the Notes. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

1.14.3. Contingent liabilities and Capital Commitments disclosed are in respect of items which exceed Rs. 0.05 crore in each case.

1.15. TAXES ON INCOME

1.15.1. Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

1.15.2. Deferred tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date.

1.15.3. Deferred Tax Assets are recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be realized in future. However, in respect of unabsorbed depreciation or carry forward losses, deferred tax asset is recognized and carried forward only to the extent that there is a virtual certainty that the assets will be realized in future.

1.15.4. The carrying amount of deferred tax assets and unrecognized deferred tax assets are reviewed at each Balance Sheet date.

1.16. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends, if any, and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.

1.17. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash at bank, cash, cheque and draft on hand. The Corporation considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

1.18. CLASSIFICATION OF ASSETS AND LIABILITIES AS CURRENT AND NON-CURRENT

All assets and liabilities are classified as current or non-current as per the Corporation''s normal operating cycle (determined at 12 months) and other criteria set out in Schedule III of the Act.

1.19. ACCOUNTING FOR LEASES

For operating leases, rentals are expensed with reference to lease terms and other relevant considerations.

1.20. CASH FLOWS

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities are segregated.


Mar 31, 2015

BASIS FOR PREPARATION

The financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Corporation has prepared these financial statements to comply in all material respects with the accounting standards prescribed under Section 133 of the Companies Act, 2013 ('Act') read with Rule (7) of the Companies (Accounts) Rules, 2014 and other provisions of the Act (to the extent notified). The financial statements have been prepared on an accrual basis (unless otherwise stated) and under historical cost convention. The accounting policies are consistent with those used in previous year except for the policy in respect of the depreciation of Fixed Assets referred to in para 1.5.1.

1.1 USE OF ESTIMATES

The preparation of financial statements requires the management of the Corporation to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences, if any, between actual amounts and estimates are recognised in the period in which the results are known.

1.2 FIXED ASSETS

1.2.1. TANGIBLE FIXED ASSETS

a) Fixed Assets are stated at cost net of accumulated depreciation.

b) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.

c) First time procurement cost of catalyst is capitalized along with the project cost and the cost of subsequent replacements are charged off in the year of issuance to consumption.

d) Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs. 1,000 per item are charged to revenue.

e) Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

f) Land acquired on lease where period of lease exceeds 99 years is treated as freehold land.

g) Expenditure during construction period: Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group which are allocated to projects costing Rs. 5 crores and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines are capitalised as part of pipeline cost. Expenditure incurred during construction period on projects like electricity transmission lines, roads, culverts etc. the ownership of which is not with the Corporation are charged to revenue in the accounting period of incurrence of such expenditure.

1.2.2. INTANGIBLE ASSETS

a) Intangible assets are carried at cost less accumulated amortization.

b) Cost of Right of Way which is perpetual and absolute in nature is amortised over a period of 99 years and in other cases, over its estimated useful life.

c) Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 Crore and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit. In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

1.3 IMPAIRMENT OF ASSETS

The values of tangible and intangible assets of respective Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date, if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than higher of net selling price of the asset or present value of estimated future cash flows, the difference is recognized as an impairment loss.

1.4 BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets till the month in which the asset is ready for use. All other borrowing costs are charged to revenue.

1.5 DEPRECIATION

1.5.1. Depreciation on fixed assets is provided on the straight line basis, over the useful lives of assets (after retaining the residual value of upto 5% ) as prescribed by the Schedule II of the Act, except in following cases:

a) Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised over the period of lease.

b) Plant & Machinery at Retail Outlets (other than Storage tanks and related equipments) are depreciated over a useful life of 15 years based on the technical assessment.

c) Computer equipments are depreciated over a period of 4 years and Mobile phones are depreciated over a period of 3 years based on internal assessment. Furniture, other than computer equipments and mobile phones, provided at the residence of management staff are depreciated over a period of 7 years as per internal assessment.

d) Fixed assets costing not more than Rs. 5,000 each are depreciated at 100 percent in the year of acquisition except LPG Cylinders and Pressure Regulators which are depreciated over a useful life of 15 years based on the technical assessment.

1.5.2. Depreciation is charged on addition / deletion on pro-rata monthly basis including the month of addition / deletion.

1.6 INVESTMENTS

1.6.1. Current investments are valued at lower of cost or fair value determined on an individual investment basis.

1.6.2. Long-term investments are valued at cost. Provision for diminution in value is made to recognise a decline, other than of temporary nature, in the value of such investments.

1.7 INVENTORY

1.7.1. Inventories are stated at cost or net realisable value, whichever is lower. Cost is determined on weighted average basis (determined on periodical basis as appropriate) and comprises of expenditure incurred in the normal course of business in bringing inventories to their present location including appropriate overheads apportioned on a reasonable and consistent basis.

1.7.2. The net realizable value of finished goods and stock-in-trade are based on the inter-company transfer prices and final selling prices (applicable at the location of stock) for sale to oil companies and retail consumers respectively. For the purpose of stock valuation, the proportion of sales to oil companies and retail sales are determined on all India basis and considered for stock valuation at all locations.

1.7.3. The cost of Stock-in-Process is determined at raw material cost plus cost of conversion.

1.7.4. Obsolete, slow moving, surplus and defective stocks are identified at the time of physical verification of stocks and where necessary, provision is made for such stocks.

1.8 REVENUE RECOGNITION

1.8.1. Revenue is recognised when, sufficient risks and rewards incidental to ownership are transferred to the customer, it can be reliably measured and it is reasonable to expect ultimate collection.

1.8.2. Sales represents invoiced value of goods supplied net of trade discounts, and include applicable excise duty, surcharge and other elements as are allowed to be recovered as part of the price but excludes VAT / Sales Tax. Further, it includes other elements allowed by the Government from time to time.

1.8.3. Claims including subsidy on LPG and SKO from Government of India are booked on in principle acceptance thereof on the basis of available instructions/clarifications subject to final adjustments after necessary audit, as stipulated.

1.8.4. Other claims are booked when there is a reasonable certainty of recovery. Claims are reviewed on a periodical basis and if recovery is uncertain, provision is made in the accounts.

1.8.5. Income from sale of scrap is accounted for on realisation.

1.8.6. Dividend income is recognized when the Corporation's right to receive the dividend is established.

1.8.7. Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

1.9. CLASSIFICATION OF INCOME/EXPENSES

1.9.1. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

1.9.2. Income/expenditure upto Rs. 0.05 crore in each case pertaining to prior year(s) is charged to the current year.

1.9.3. Prepaid expenses upto Rs. 0.05 crore in each case, are charged to revenue as and when incurred.

1.9.4. Deposits placed with Government agencies/ local authorities which are perennial in nature are charged to revenue in the year of payment.

1.10. EMPLOYEE BENEFITS

1.10.1. Contributions to defined contribution schemes such as Pension, Superannuation, Provident Fund, etc. are charged to the Statement of Profit and Loss as and when incurred.

1.10.2. The Corporation also provides for retirement / post-retirement benefits in the form of gratuity, leave encashment, post retirement benefits and other long term benefits. Such defined benefits are charged to the Statement of Profit and Loss based on valuations made by independent actuary using the Projected Unit Credit Method, as at the Balance Sheet date.

1.10.3. Expenditure on account of Voluntary Retirement Scheme are charged to Statement of Profit and Loss as and when incurred.

1.11. DUTIES ON BONDED STOCKS

1.11.1. Customs duty on Raw materials/Finished goods lying in bonded warehouse are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

1.11.2. Excise duty on finished stocks lying at manufacturing locations is provided for at the assessable value applicable at each of the locations based on end use.

1.12. FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

1.12.1. Transactions in foreign currency are accounted in the reporting currency at the exchange rate prevailing on the date of transaction.

1.12.2. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

1.12.3. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Statement of Profit and Loss either as Profit or Loss on Foreign Currency transactions and translations or Finance Cost, as the case may be.

1.12.4. However, foreign exchange differences on long term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of the asset or liability.

1.12.5. Premium/discount arising at the inception of the forward exchange contracts to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss.

1.12.6. Gains / losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Statement of Profit and Loss. Provision for losses in respect of outstanding contracts as on Balance Sheet date is made based on mark to market valuations of such contracts.

1.13. GOVERNMENT GRANTS

1.13.1. When the grant relates to an expense item or depreciable fixed assets, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. Grants relating to depreciable fixed assets are reflected as Capital Grants under Reserves & Surplus in Balance Sheet and recognised in the Statement of Profit and Loss on a systematic and rational basis over the useful life of the asset.

1.13.2. Government grants of the nature of promoters' contribution or relating to non-depreciable assets are credited to Capital Reserve in Balance Sheet.

1.14. PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

1.14.1. A provision is recognized when the Corporation has a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made.

1.14.2. Contingent Liabilities are not recognized but are disclosed in the Notes. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

1.14.3. Capital commitments and Contingent liabilities disclosed are in respect of items which exceed Rs. 0.05 crore in each case.

1.15. TAXES ON INCOME

1.15.1. Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

1.15.2. Deferred tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date.

1.15.3. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be realized in future. However, in respect of unabsorbed depreciation or carry forward losses, the deferred tax asset is recognized and carried forward only to the extent that there is a virtual certainty that the assets will be realized in future.

1.15.4. The carrying amount of deferred tax assets and unrecognized deferred tax assets are reviewed at each Balance Sheet date.

1.16. EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity share holders (after deducting preference dividends, if any, and attributable taxes) by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.

1.17. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash at bank and on hand. The Corporation considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

1.18. CLASSIFICATION OF ASSETS AND LIABILITIES AS CURRENT AND NON-CURRENT:

All assets and liabilities are classified as current or non-current as per the Corporation's normal operating cycle (determined at 12 months) and other criteria set out in Schedule III of the Act.

1.19. ACCOUNTING FOR LEASES

For operating leases, rentals are expensed with reference to lease terms and other relevant considerations.

1.20. CASH FLOW

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities are segregated.


Mar 31, 2014

1.1. BASIS FOR PREPARATION

The financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Corporation has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956 (which continue to be applicable in respect of section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September 2013, issued by the Ministry of Corporate Affairs). The financial statements have been prepared on an accrual basis (unless otherwise stated) and under historical cost convention. The accounting policies are consistent with those used in previous year except for the policy in respect of depreciation on computer equipments and mobile phones provided at the residence of management staff referred to in para 1.6.1 (c).

1.2. USE OF ESTIMATES

The preparation of financial statements requires the management of the Corporation to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences, if any, between actual amounts and estimates are recognised in the period in which the results are known.

1.3. FIXED ASSETS

1.3.1. TANGIBLE FIXED ASSETS

a) Fixed Assets are stated at cost net of accumulated depreciation.

b) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.

c) First time procurement cost of catalyst is capitalized along with the project cost and the cost of subsequent replacements are charged off in the year of issuance to consumption.

d) Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs. 1,000 per item are charged to revenue.

e) Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

f) Land acquired on lease where period of lease exceeds 99 years is treated as freehold land.

g) Expenditure during construction period : Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group which are allocated to projects costing Rs. 5 crores and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines are capitalised as part of pipeline cost. Expenditure incurred during construction period on projects like electricity transmission lines, roads, culverts etc. the ownership of which is not with the Corporation are charged to revenue in the accounting period of incurrence of such expenditure.

1.3.2 INTANGIBLE ASSETS

a) Intangible assets are carried at cost less accumulated amortization.

b) Cost of Right of Way which is perpetual and absolute in nature is amortised over a period of 99 years and in other cases, over its estimated useful life.

c) Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 Crore and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit. In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

1.4. IMPAIRMENT OF ASSETS

The values of tangible and intangible assets of respective Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date, if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than higher of net selling price of the asset or present value of estimated future cash flows, the difference is recognized as an impairment loss.

1.5. BORROWING COSTS

Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets till the month in which the asset is ready for use. All other borrowing costs are charged to revenue.

1.6. DEPRECIATION

1.6.1. Depreciation on fixed assets is provided under the straight line method, at rates prescribed under Schedule XIV to the Companies Act, 1956, except in following cases:

a) Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised over the period of lease.

b) Fixed assets costing not more than Rs. 5,000 each, LPG cylinders and pressure regulators are depreciated at 100 percent in the year of acquisition.

c) Computer equipments are depreciated over a period of 4 years. Mobile phones are depreciated over a period of 3 years. Furniture, other than computer equipments and mobile phones, provided at the residence of management staff is depreciated over a period of 7 years.

d) Paver Blocks and Canopy capitalised under Buildings are depreciated based on the estimated useful life of 30 years.

1.6.2. Depreciation is charged on addition / deletion on pro-rata monthly basis including the month of addition / deletion.

1.7. INVESTMENTS

1.7.1. Current investments are valued at lower of cost or fair value determined on an individual investment basis.

1.7.2. Long-term investments are valued at cost. Provision for diminution in value is made to recognise a decline, other than of temporary nature, in the value of such investments.

1.8. INVENTORY

1.8.1. Inventories are stated at cost or net realisable value, whichever is lower. Cost is determined on weighted average basis (determined on periodical basis as appropriate) and comprises of expenditure incurred in the normal course of business in bringing inventories to their present location including appropriate overheads apportioned on a reasonable and consistent basis.

1.8.2. The net realizable value of finished goods and stock-in-trade are based on the inter-company transfer prices and final selling prices (applicable at the location of stock) for sale to oil companies and retail consumers respectively. For the purpose of stock valuation, the proportion of sales to oil companies and retails sales are determined on all India basis and considered for stock valuation at all locations.

1.8.3. The cost of Stock-in-Process is determined at raw material cost plus cost of conversion.

1.8.4. Obsolete, slow moving, surplus and defective stocks are identified at the time of physical verification of stocks and where necessary, provision is made for such stocks.

1.9. REVENUE RECOGNITION

1.9.1. Revenue is recognised when, sufficient risks and rewards incidental to ownership are transferred to the customer, it can be reliably measured and it is reasonable to expect ultimate collection.

1.9.2. Sales represents invoiced value of goods supplied net of trade discounts, and include applicable excise duty, surcharge and other elements as are allowed to be recovered as part of the price but excludes VAT / Sales Tax. Further, it includes other elements allowed by the Government from time to time.

1.9.3. Claims including subsidy on LPG and SKO from Government of India are booked on in principle acceptance thereof on the basis of available instructions/clarifications subject to final adjustments after necessary audit, as stipulated.

1.9.4. Other claims are booked when there is a reasonable certainty of recovery. Claims are reviewed on a periodical basis and if recovery is uncertain, provision is made in the accounts.

1.9.5. Income from sale of scrap is accounted for on realisation.

1.9.6. Dividend income is recognized when the Corporation''s right to receive the dividend is established.

1.9.7. Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

1.10. CLASSIFICATION OF INCOME / EXPENSES

1.10.1. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

1.10.2. Income/expenditure upto Rs. 0.05 crore in each case pertaining to prior year(s) is charged to the current year.

1.10.3. Prepaid expenses upto Rs. 0.05 crore in each case, are charged to revenue as and when incurred.

1.10.4. Deposits placed with Government agencies / local authorities which are perennial in nature are charged to revenue in the year of payment.

1.11. EMPLOYEE BENEFITS

1.11.1. Contributions to defined contribution schemes such as Pension, Superannuation, Provident Fund, etc. are charged to the Statement of Profit and Loss as and when incurred.

1.11.2. The Corporation also provides for retirement / post-retirement benefits in the form of gratuity, leave encashment, post retirement benefits and other long term benefits. Such defined benefits are charged to the Statement of Profit and Loss based on valuations made by independent actuary using the Projected Unit Credit Method, as at the Balance Sheet date.

1.11.3. Expenditure on account of Voluntary Retirement Scheme are charged to Statement of Profit and Loss as and when incurred.

1.12. DUTIES ON BONDED STOCKS

1.12.1. Customs duty on Raw materials / Finished goods lying in bonded warehouse are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

1.12.2. Excise duty on finished stocks lying at manufacturing locations is provided for at the assessable value applicable at each of the locations based on end use.

1.13. FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

1.13.1. Transactions in foreign currency are accounted in the reporting currency at the exchange rate prevailing on the date of transaction.

1.13.2. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

1.13.3. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Statement of Profit and Loss either as Profit or Loss on Foreign Currency transactions and translations or Finance Cost, as the case may be.

1.13.4. However, foreign exchange differences on long term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of the asset or liability.

1.13.5. Premium / discount arising at the inception of the forward exchange contracts to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts arerecognised in the Statement of Profit and Loss.

1.13.6. Gains / losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Statement of Profit and Loss. Provision for losses in respect of outstanding contracts as on Balance Sheet date is made based on mark to market valuations of such contracts.

1.14. GOVERNMENT GRANTS

1.14.1. When the grant relates to an expense item or depreciable fixed assets, it is recognized as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. The grant relating to future years are treated as Deferred Income and reflected as Capital Reserve in Balance Sheet.

1.14.2. Government grants of the nature of promoters'' contribution or relating to non-depreciable assets are credited to Capital Reserve in Balance Sheet.

1.15. PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

1.15.1. A provision is recognized when the Corporation has a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made.

1.15.2.Contingent Liabilities are not recognized but are disclosed in the Notes. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

1.15.3.Capital commitments and Contingent liabilities disclosed are in respect of items which exceed Rs. 0.05 crore in each case.

1.16. TAXES ON INCOME

1.16.1.Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

1.16.2.Deferred tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date.

1.16.3.The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be realized in future. However, in respect of unabsorbed depreciation or carry forward losses, the deferred tax asset is recognized and carried forward only to the extent that there is a virtual certainty that the assets will be realized in future.

1.16.4.The carrying amount of deferred tax assets and unrecognized deferred tax assets are reviewed at each Balance Sheet date.

1.17. EARNINGS PER SHARE

1.17.1 Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity share holders (after deducting preference dividends, if any, and attributable taxes) by the weighted average number of equity shares outstanding during the period.

1.17.2 For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.

1.18. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash at bank and on hand. The Corporation considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.

1.19. CLASSIFICATION OF ASSETS AND LIABILITIES AS CURRENT AND NON-CURRENT

All assets and liabilities are classified as current or non-current as per the Corporation''s normal operating cycle (determined at 12 months) and other criteria set out in Revised Schedule VI to the Companies Act, 1956.

1.20. ACCOUNTING FOR LEASES

For operating leases, rentals are expensed with reference to lease terms and other relevant considerations.

2. SHARE CAPITAL

iii The Corporation has only one class of shares namely equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Corporation, the holders of equity shares will be entitled to receive the remaining assets of the Corporation in proportion to the number of equity shares held.

The Corporation declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

iv During the period ended 31st March 2014, proposed dividend per share is Rs. 17 (previous year Rs. 11). The total dividend appropriation for the year ended 31st March 2014 amounted to Rs. 1,425.82 crores (previous year Rs. 922.86 crores) including Corporate Dividend Tax of Rs. 196.58 crores (previous year Rs. 127.47 crores)

v During Financial Year 2012-13, the Corporation had issued Bonus Shares in the ratio of 1:1 by capitalisation of General Reserve. The total number of Bonus Shares issued is 36,15,42,124 equity shares having face value of Rs. 10 each.


Mar 31, 2013

1.1 BASIS FOR PREPARATION

The financial statements of the Corporation have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Corporation has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis (unless otherwise stated) and under historical cost convention. The accounting policies are consistent with those used in previous year except for the policy in respect of amortisation of Right of Way referred to in para 1.3.(ii) (b) and depreciation on Paver blocks and Canopy referred to in para 1.6 (d).

1.2 USE OF ESTIMATES

The preparation of financial statements requires the management of the Corporation to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences, if any, between actual amounts and estimates are recognised in the period in which the results are known.

1.3 FIXED ASSETS

i) TANGIBLE FIXED ASSETS

a) Fixed Assets are stated at cost net of accumulated depreciation.

b) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.

c) Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs. 1,000 per item are charged to revenue.

d) Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

e) Land acquired on lease where period of lease exceeds 99 years is treated as freehold land.

f) Expenditure during construction period: Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group are also capitalised and (which are allocated to projects costing Rs. 5 crores and above). Crop compensation expenses incurred in the process of laying pipelines are capitalised as part of pipeline cost. Expenditure incurred during construction period on projects like electricity transmission lines, roads, culverts etc. the ownership of which is not with the Corporation are charged to revenue in the accounting period of incurrence of such expenditure.

ii) INTANGIBLE ASSETS

a) Intangible assets are carried at cost less accumulated amortisation.

b) Cost of right of way is amortised over the period of 99 years as it is perpetual and absolute in nature.

c) Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 crores and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit.

d) In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

1.4 IMPAIRMENT OF ASSETS

The values of tangible and intangible assets of respective Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date, if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than the net selling price of the asset or present value, the difference is recognised as an impairment loss.

1.5 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 till the month in which the asset is ready for use. All other borrowing costs are charged to revenue.

1.6 DEPRECIATION

i. Depreciation on fixed assets is provided under the straight line method, at rates prescribed under Schedule XIV to the Companies Act, 1956, except in following cases :

a) Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised over the period of lease.

b) Fixed assets costing not more than Rs. 5,000 each, LPG cylinders and pressure regulators are depreciated @ 100 percent in the year of acquisition.

c) Computer equipments and peripherals, and mobile phones are depreciated over a period of four years. Furniture provided at the residence of management staff is depreciated over a period of seven years.

d) Paver Blocks and Canopy capitalised under Buildings are depreciated based on the estimated useful life of 30 years.

ii. Depreciation is charged on addition / deletion on pro-rata monthly basis including the month of addition / deletion.

1.7 INVESTMENTS

i. Current investments are valued at lower of cost or fair value determined on an individual investment basis.

ii. Long-term investments are valued at cost. Provision for diminution in value is made to recognise a decline, other than of temporary nature, in the value of such investments.

1.8 INVENTORY

i. Inventories are stated at cost or net realisable value, whichever is lower. Cost is determined on weighted average basis and comprises of expenditure incurred in the normal course of business in bringing inventories to their present location including appropriate overheads apportioned on a reasonable and consistent basis.

ii. The net realisable value of finished goods and stock in trade are based on the inter-Company transfer prices and final selling prices (applicable at the location of stock) for sale to oil companies and retail consumers respectively. For the purpose of stock valuation, the proportion of sales to oil companies and retail sales are determined on all India basis and considered for stock valuation at all locations.

iii. The cost of Stock-in-Process is determined at raw material cost plus cost of conversion.

iv. Obsolete, slow moving, surplus and defective stocks are identified at the time of physical verification of stocks and where necessary, provision is made for such stocks.

1.9 REVENUE RECOGNITION

i. Sales represents invoiced value of goods supplied net of trade discounts, and include applicable excise duty, surcharge and other elements as are allowed to be recovered as part of the price but excludes VAT / Sales Tax. Further, it includes other elements allowed by the Government from time to time.

ii. Claims including subsidy on LPG and SKO from Government of India are booked on in principle acceptance thereof on the basis of available instructions/clarifications subject to final adjustments after necessary audit, as stipulated.

iii. Other claims are booked when there is a reasonable certainty of recovery. Claims are reviewed on a periodical basis and if recovery is uncertain, provision is made in the accounts.

iv. Income from sale of scrap is accounted for on realisation.

v. Dividend income is recognised when the Corporation''s right to receive the dividend is established.

vi. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

1.10 CLASSIFICATION OF INCOME/EXPENSES

i. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

ii. Income/expenditure upto Rs. 0.05 crore in each case pertaining to prior year(s) is charged to the current year.

iii. Prepaid expenses upto Rs. 0.05 crore in each case, are charged to revenue as and when incurred.

iv. Deposits placed with Government agencies/ local authorities which are perennial in nature are charged to revenue in the year of payment.

1.11 EMPLOYEE BENEFITS

i. Contributions to defined contribution schemes such as Pension, Superannuation, Provident Fund, etc. are charged to the Statement of Profit and Loss as and when incurred.

ii. The Corporation also provides for retirement/ post-retirement benefits in the form of gratuity, leave encashment, post retirement benefits and other long term benefits. Such defined benefits are charged to the Statement of Profit and Loss based on valuations made by independent actuaries using the Projected Unit Credit Method, as at the balance sheet date.

iii. Payments made under Voluntary Retirement Scheme are charged to Statement of Profit and Loss as and when incurred.

1.12 DUTIES ON BONDED STOCKS

i. Customs duty on Raw materials/Finished goods lying in bonded warehouse are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

ii. Excise duty on finished stocks lying in bond is provided for at the assessable value applicable at each of the locations at maximum rates based on end use.

1.13 FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

i. Transactions in foreign currency are accounted in the reporting currency at the exchange rate prevailing on the date of transaction.

ii. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

iii. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Statement of Profit and Loss either under foreign exchange fluctuation or interest, as the case may be.

iv. However, foreign exchange differences on long term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of the asset or liability.

v. Premium/discount arising at the inception of the forward exchange contracts to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit and Loss.

vi. Gains / losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Statement of Profit and Loss. Provision for losses in respect of outstanding contracts as on balance sheet date is made based on mark to market valuations of such contracts.

1.14 GOVERNMENT GRANTS

i. When the grant relates to an expense item or depreciable fixed assets, it is recognised as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. The grant relating to future years are treated as Deferred Income and reflected as Capital Reserve in Balance Sheet.

ii. Government grants of the nature of promoters'' contribution or relating to non-depreciable assets are credited to capital reserve and treated as a part of shareholders'' funds.

1.15 PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

i. A provision is recognised when an enterprise has a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made.

ii. Contingent Liabilities are not recognised but are disclosed in the Notes. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

iii. Capital commitments and Contingent liabilities disclosed are in respect of items which exceed Rs. 0.05 crore in each case.

1.16 TAXES ON INCOME

i. Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

ii. Deferred tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date.

iii. The deferred tax asset is recognised and carried forward only to the extent that there is a reasonable certainty that the assets will be realized in future. However, in respect of unabsorbed depreciation or carry forward losses, the deferred tax asset is recognised and carried forward only to the extent that there is a virtual certainty that the assets will be realized in future.

iv. The carrying amount of deferred tax assets and unrecognised deferred tax assets are reviewed at each balance sheet date.

1.17 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 dividends, if any, and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.


Mar 31, 2012

1.1 BASIS FOR PREPARATION

The financial statements of the company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on an accrual basis (unless otherwise stated) and under historical cost convention. The accounting policies are consistent with those used in previous year except for the policy in respect of foreign exchange differences referred to in para 1.13.iv.

1.2 USE OF ESTIMATES

The preparation of financial statements requires the management of the company to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences, if any, between actual amounts and estimates are recognised in the period in which the results are known.

1.3 FIXED ASSETS

i) TANGIBLE FIXED ASSETS

a) Fixed Assets are stated at cost net of accumulated depreciation.

b) Subsequent expenditure related to an item of fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance.

c) Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs. 1,000 per item are charged to revenue.

d) Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

e) Land acquired on lease where period of lease exceeds 99 years is treated as freehold land.

f) Expenditure during construction period: Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group which are allocated to projects costing Rs. 5 crores and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines are capitalised. Expenditure incurred generally during construction period of projects on assets like electricity transmission lines, roads, culverts etc. the ownership of which is not with the company are charged to revenue in the accounting period of incurrence of such expenditure.

ii) INTANGIBLE ASSETS

a) Intangible assets are carried at cost less accumulated amortisation.

b) Cost of right of way that is perennial in nature is not amortised as no finite useful life can be identified for the same.

c) Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 crores and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit.

d) In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

1.4 IMPAIRMENT OF ASSETS

The values of tangible and intangible assets of respective Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date, if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than the net selling price of the asset or present value, the difference is recognised as an impairment loss.

1.5 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 till the month in which the asset is ready for use. All other borrowing costs are charged to revenue.

1.6 DEPRECIATION

i. Depreciation on fixed assets is provided under the straight line method, at rates prescribed under Schedule XIV to the Companies Act, 1956, except in following cases :

a) Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised over the period of lease.

b) Fixed assets costing not more than Rs. 5,000 each, LPG cylinders and pressure regulators are depreciated @ 100 percent in the year of acquisition.

c) Computer equipment and peripherals, and mobile phones are depreciated over a period of 4 years. Furniture provided at the residence of management staff is depreciated over a period of seven years.

ii. Depreciation is charged on addition / deletion on pro-rata monthly basis including the month of addition / deletion.

1.7 INVESTMENTS

i. Current investments are valued at lower of cost or fair value determined on an individual investment basis.

ii. Long-term investments are valued at cost. Provision for diminution in value is made to recognise a decline, other than of temporary nature, in the value of such investments.

1.8 INVENTORY

i. Inventories are stated at cost or net realisable value, whichever is lower. Cost is determined on weighted average basis and comprises of expenditure incurred in the normal course of business in bringing inventories to their present location including appropriate overheads apportioned on a reasonable and consistent basis.

ii. The net realisable value of finished goods and stock in trade are based on the inter-company transfer prices and final selling prices (applicable at the location of stock) for sale to oil companies and retail consumers respectively. For the purpose of stock valuation, the proportion of oil companies sales and retail sales are determined on all India basis and this is considered for stock valuation at all locations.

iii. Stock-in-process is valued at raw material cost plus cost of conversion.

iv. Obsolete, slow moving, surplus and defective stocks are identified at the time of physical verification of stocks and where necessary, provision is made for such stocks.

1.9 REVENUE RECOGNITION

i. Sales represents invoiced value of goods supplied net of trade discounts, and include applicable excise duty, surcharge and other elements as are allowed to be recovered as part of the price but excludes VAT / Sales Tax. Further, it includes other elements allowed by the Government from time to time.

ii. Claims including subsidy on LPG and SKO from Government of India are booked on ' in principle acceptance' thereof on the basis of available instructions/clarifications subject to final adjustments after necessary audit, as stipulated.

iii. Other claims are booked when there is a reasonable certainty of recovery. Claims are reviewed on a periodical basis and if recovery is uncertain, provision is made in the accounts.

iv. Income from sale of scrap is accounted for on realisation.

v. Dividend income is recognised when the company's right to receive the dividend is established.

vi. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

1.10 CLASSIFICATION OF INCOME / EXPENSES

i. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

ii. Income/expenditure upto Rs. 0.05 crore in each case pertaining to prior years is charged to the current year.

iii. Prepaid expenses upto Rs. 0.05 crore in each case, are charged to revenue as and when incurred.

iv. Deposits placed with Government agencies/ local authorities which are perennial in nature are charged to revenue in the year of payment.

1.11 EMPLOYEE BENEFITS

i. Contributions to defined contribution schemes such as Pension, Superannuation, Provident Fund, etc. are charged to the Statement of Profit and Loss as and when incurred.

ii. The Company also provides for retirement/ post-retirement benefits in the form of gratuity, leave encashment, post retirement benefits and other long term benefits. Such defined benefits are charged to the Profit and Loss account based on valuations made by independent actuaries using the Projected Unit Credit Method, as at the balance sheet date.

iii. Payments made under Voluntary Retirement Scheme are charged to Statement of Profit and Loss.

1.12 DUTIES ON BONDED STOCKS

i. Customs duty on Raw materials/Finished goods lying in bonded warehouse are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

ii. Excise duty on finished stocks lying in bond is provided for, at the assessable value applicable at each of the locations at maximum rates based on end use.

1.13 FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

i. Transactions in foreign currency are accounted in the reporting currency at the exchange rate prevailing on the date of transaction.

ii. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

iii. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Statement of Profit & Loss either under foreign exchange fluctuation or interest, as the case may be.

iv. However, foreign exchange differences on long term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised over the balance period of the asset or liability.

v. Premium / discount arising at the inception of the forward exchange contracts to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Statement of Profit & Loss.

vi. Gains / losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Statement of Profit and Loss. Provision for losses in respect of outstanding contracts as on balance sheet date is made based on mark to market valuations of such contracts.

1.14 GOVERNMENT GRANTS

i. When the grant relates to an expense item or depreciable fixed assets, it is recognised as income over the periods necessary to match them on a systematic basis to the costs, which it is intended to compensate. The grant relating to future years are treated as Deferred Income and reflected as Capital Reserve in Balance Sheet.

ii. Government grants of the nature of promoters' contribution or relating to non depreciable assets are credited to capital reserve and treated as a part of shareholders' funds.

1.15 PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

i. A provision is recognised when an enterprise has a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made.

ii. Contingent Liabilities are not recognised but are disclosed in the Notes. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

iii. Capital commitments and Contingent liabilities disclosed are in respect of items which exceed Rs. 0.05 crore in each case.

1.16 TAXES ON INCOME

i. Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

ii. Deferred tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date.

iii. The deferred tax asset is recognised and carried forward only to the extent that there is a reasonable certainty that the assets will be realised in future. However, in respect of unabsorbed depreciation or carry forward losses, the deferred tax asset is recognised and carried forward only to the extent that there is a virtual certainty that the assets will be realised in future.

iv. The carrying amount of deferred tax assets and unrecognised deferred tax assets are reviewed at each balance sheet date.

1.17 EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity share holders (after deducting preference dividends, if any, and attributable taxes) by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effect of all dilutive potential equity shares.


Mar 31, 2011

1. BASIS FOR PREPARATION

The financial statements are prepared under historical cost convention to comply in all material aspects with the mandatory Accounting Standards notified by the Companies (Accounting Standards) Rules 2006 and the provisions of the Companies Act, 1956, adopting accrual system of accounting unless otherwise stated.

2. USE OF ESTIMATES

The preparation of financial statements requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences between actual amounts and estimates are recognised in the period in which they materialise.

3. FIXED ASSETS

3.1 LAND

Land acquired on lease where period of lease exceeds 99 years is treated as freehold.

3.2 FIXED ASSETS OTHER THAN LAND

3.2.1. Fixed Assets are stated at cost of acquisition (including incidental expenses) less accumulated depreciation.

3.2.2 Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs 1,000 per item is charged to revenue.

3.2.3 Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

3.3 EXPENDITURE DURING CONSTRUCTION PERIOD

Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group which are allocated to projects costing Rs 5 crores and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines are capitalised. Expenditure incurred generally during construction period of projects on assets like electricity transmission lines, roads, culverts etc. the ownership of which is not with the Company are charged to revenue in the accounting period of incurrence of such expenditure.

3.4 INTANGIBLE ASSETS

3.4.1 Cost of right of way that is perennial in nature is not amortised.

3.4.2 Expenditure incurred for creating/acquiring other intangible assets of Rs 0.50 crores and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit.

3.4.3 In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

4. IMPAIRMENT OF ASSETS

The values of fixed assets in respect of Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than the net selling price of the asset or present value, the difference is recognized as an impairment loss.

5. BORROWING COSTS

Borrowing costs attributable to acquisition, construction or production of qualifying asset are capitalised as part of the cost of that asset, till the month in which the asset is ready for use. Other borrowing costs are recognised as an expense in the period in which these are incurred.

6. DEPRECIATION

6.1 Depreciation on fixed assets is provided under the straight line method, at rates prescribed under Schedule XIV to the Companies Act, 1956, except in following cases:

6.1.1. Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised over the period of lease.

6.1.2. LPG cylinders, pressure regulators and other fixed assets costing not more than Rs 5,000 each are depreciated @ 100 percent in the year of capitalisation.

6.1.3. Computer equipments and peripherals, and mobile phones are depreciated over a period of 4 years. Furniture provided at the residence of management staff is depreciated over a period of seven years.

6.2 Depreciation is charged on addition / deletion on pro-rata monthly basis including the month of addition / deletion.

7. INVESTMENTS

7.1 Current investments are valued at lower of cost or fair market value.

7.2 Long-term investments are valued at cost. Provision for diminution is made to recognise a decline, other than of temporary nature, in the value of such investments.

8. INVENTORY

8.1. Raw material and Intermediates are valued at cost or net realisable value whichever is lower. Cost is determined as follows:

8.1.1. Raw materials on weighted average cost. Purchased raw materials in transit are carried at cost.

8.1.2. Intermediate Stocks at raw material cost plus cost of conversion.

8.2. Finished products are valued at weighted average cost or at net realisable value, whichever is lower.

8.3. Stores are valued at weighted average cost. Obsolete stores are valued at Rs Nil. Slow moving stores/ other materials identified as surplus and no longer usable are valued at Rs Nil.

8.4. Packages are valued at weighted average cost or at net realisable value, whichever is lower.

9. REVENUE RECOGNITION

9.1. Sales are net of trade discounts and include, inter alia, excise / customs duties / claim from Petroleum Planning and Analysis Cell, Government of India and other elements allowed by the Government from time to time.

9.2 Claims/Surrenders including subsidy on LPG and SKO on/to Petroleum Planning and Analysis Cell, Government of India are booked on 'in principle acceptance' thereof on the basis of available instructions/ clarifications subject to final adjustments after necessary audit, as stipulated. Adjustments if any, on completion of audit are recognised.

9.3. Other claims are booked when there is a reasonable certainty of recovery. Claims are reviewed on a periodical basis and if recovery is uncertain, provision is made in the accounts.

9.4. Income from sale of scrap is accounted for on realisation.

10. CLASSIFICATION OF INCOME/EXPENSES

10.1. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

10.2. Income/expenditure upto Rs 0.05 crore in each case pertaining to prior years is charged to the current year.

10.3. Prepaid expenses upto Rs 0.05 crore in each case, are charged to revenue as and when incurred.

10.4. Deposits placed with Government agencies/ local authorities which are perennial in nature are charged to revenue in the year of payment.

11. EMPLOYEE BENEFITS

11.1. Contributions to Provident Fund for the year are recognised in the Profit & Loss Account. Liability towards superannuation benefits is charged to the Profit & Loss Account.

11.2. The liability towards gratuity, leave encashment, post retirement benefits and other long term benefits are provided for in the accounts based on actuarial valuation as at the end of the year. To determine the present value of the defined benefit obligations and the current and past service costs, the Projected Unit Credit Method is used. Actuarial gains and losses are recognised in the Profit & Loss Account as income or expense.

12. DUTIES ON BONDED STOCKS

12.1. Customs duty on Raw materials/Finished goods lying in bond are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

12.2. Excise duty on finished stocks lying in bond is provided for, at the assessable value applicable at each of the locations at maximum rates based on end use.

13. FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

13.1. Transactions in foreign currency are accounted at the exchange rate prevailing on the date of transaction.

13.2. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

13.3. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Profit & Loss Account either under foreign exchange fluctuation or interest as the case may be.

Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Profit & Loss Account.

13.4. Gains / losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Profit & Loss Account. Provision for losses in respect of outstanding contracts as on balance sheet date is made based on mark to market valuations of such contracts.

14. GOVERNMENT GRANTS

14.1. In case of depreciable assets, the cost of the asset is shown at gross value and grant thereon is taken to Capital Reserve as deferred income, which is recognised in the Profit & Loss Account over the useful life of the asset.

14.2. Government grants of the nature of promoters' contributions are credited to Capital Reserve and treated as part of Shareholders' Funds.

15. PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

15.1. Provision is recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.

15.2. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

15.3. Capital commitments and Contingent liabilities disclosed are in respect of items which exceed Rs 0.05 crore in each case.

15.4. Contingent liabilities are considered only on conversion of show cause notices issued by various Government authorities into demand.

16. TAXES ON INCOME

16.1. Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961.

16.2. Deferred tax on account of timing difference between taxable and accounting income is provided using the tax rates and tax laws enacted or substantively enacted by the Balance Sheet date.

16.3. Deferred tax assets are not recognised unless, in the management judgement there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.


Mar 31, 2010

1. BASIS FOR PREPARATION

The financial statements are prepared under historical cost convention to comply in all material aspects with the mandatory Accounting Standards notified by the Companies (Accounting Standards) Rules 2006 and the provisions of the Companies Act, 1956, adopting accrual system of accounting unless otherwise stated.

2. USE OF ESTIMATES

The preparation of financial statements requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Differences between actual amounts and estimates are recognised in the period in which they materialise.

3. FIXED ASSETS 3.1 LAND

Land acquired on lease where period of lease exceeds 99 years is treated as freehold.

3.2. FIXED ASSETS OTHER THAN LAND

3.2.1. Fixed Assets are stated at cost of acquisition (including incidental expenses) less accumulated depreciation.

3.2.2. Expenditure on assets, other than plant and machinery, LPG cylinders and pressure regulators, not exceeding Rs.1,000 per item is charged to revenue.

3.2.3. Machinery spares that are specific to a fixed asset are capitalised along with the fixed asset. Replacement of such spares is charged to revenue.

3.3. EXPENDITURE DURING CONSTRUCTION PERIOD

Direct expenses including borrowing cost incurred during construction period on capital projects are capitalised. Indirect expenses of the project group which are allocated to projects costing Rs. 5 crores and above are also capitalised. Crop compensation expenses incurred in the process of laying pipelines are capitalised.

3.4. INTANGIBLE ASSETS

3.4.1. Cost of right of way that is perennial in nature is not amortised.

3.4.2. Expenditure incurred for creating/acquiring other intangible assets of Rs. 0.50 crores and above, from which future economic benefits will flow over a period of time, is amortised over the estimated useful life of the asset or five years, whichever is lower, from the time the intangible asset starts providing the economic benefit.

3.4.3. In other cases, the expenditure is charged to revenue in the year the expenditure is incurred.

4. IMPAIRMENT OF ASSETS

The values of fixed assets in respect of Cash Generating Units are reviewed by the management for impairment at each Balance Sheet date if events or circumstances indicate that the carrying values may not be recoverable. If the carrying value is more than the net selling price of the asset or present value, the difference is recognized as an impairment loss.

5. BORROWING COSTS

Borrowing costs attributable to acquisition, construction or production of qualifying asset are capitalised as part of the cost of that asset, till the month in which the asset is ready for use. Other borrowing costs are recognised as an expense in the period in which these are incurred.

6. DEPRECIATION

6.1. Depreciation on fixed assets is provided under the straight line method, at rates prescribed under Schedule XIV to the Companies Act, 1956, except in following cases:

6.1.1. Premium paid for acquiring leasehold land for lease period not exceeding 99 years, is amortised over the period of lease.

6.1.2. LPG cylinders, pressure regulators and other fixed assets costing not more than Rs 5,000 each are depreciated @ 100 percent in the year of capitalisation.

6.1.3. Assets not owned by the Corporation are amortised over a period of five years from the year of capitalisation.

6.1.4. Computer equipments and peripherals, and mobile phones are depreciated over a period of four years. Furniture provided at the residence of management staff is depreciated over a period of seven years.

6.2. Depreciation is charged on addition / deletion on pro-rata monthly basis including the month of addition / deletion.

7. INVESTMENTS

7.1. Current investments are valued at lower of cost or fair market value.

7.2. Long-term investments are valued at cost. Provision for diminution is made to recognise a decline, other than of temporary nature, in the value of such investments.

8. INVENTORY

8.1. Raw material and Intermediates are valued at cost or net realisable value whichever is lower. Cost is determined as follows:

8.1.1. Raw materials on weighted average cost. Purchased raw materials in transit are carried at cost.

8.1.2. Intermediate Stocks at raw material cost plus cost of conversion.

8.2. Finished products are valued at weighted average cost or at net realisable value, whichever is lower.

8.3. Stores are valued at weighted average cost. Obsolete stores are valued at Re. Nil. Slow moving stores/ other materials identified as surplus and no longer usable are valued at Re. Nil.

8.4. Packages are valued at weighted average cost or at net realisable value, whichever is lower.

9. REVENUE RECOGNITION

9.1. Sales are net of trade discounts and include, inter alia, excise / customs duties / claim from Petroleum Planning and Analysis Cell, Government of India and other elements allowed by the Government from time to time

9.2. Claims/Surrenders including subsidy on LPG and SKO on/to Petroleum Planning and Analysis Cell, Government of India are booked on `in principle acceptance’ thereof on the basis of available instructions/clarifications subject to final adjustments after necessary audit, as stipulated. Adjustments if any, on completion of audit are recognised.

9.3. Other claims are booked when there is a reasonable certainty of recovery. Claims are reviewed on a periodical basis and if recovery is uncertain, provision is made in the accounts.

9.4. Income from sale of scrap is accounted for on realisation.

10. CLASSIFICATION OF INCOME/EXPENSES

10.1. Expenditure on Research, other than capital expenditure, is charged to revenue in the year in which the expenditure is incurred.

10.2. Income/expenditure upto Rs. 0.05 crore in each case pertaining to prior years is charged to the current year.

10.3. Prepaid expenses upto Rs. 0.05 crore in each case, are charged to revenue as and when incurred.

10.4. Deposits placed with Government agencies/ local authorities which are perennial in nature are charged to revenue in the year of payment.

11. EMPLOYEE BENEFITS

11.1. Contributions to Provident Fund for the year are recognised in the Profit & Loss Account.

11.2. The liability towards gratuity, leave encashment, post retirement benefits and other long term benefits are provided for in the accounts based on actuarial valuation as at the end of the year. To determine the present value of the defined benefit obligations and the current and past service costs, the Projected Unit Credit Method is used. Actuarial gains and losses are recognised in the Profit & Loss Account as income or expense.

12. DUTIES ON BONDED STOCKS

12.1. Customs duty on Raw materials/Finished goods lying in bond are provided for at the applicable rates except where liability to pay duty is transferred to consignee.

12.2. Excise duty on finished stocks lying in bond is provided for, at the assessable value applicable at each of the locations at maximum rates based on end use.

13. FOREIGN CURRENCY & DERIVATIVE TRANSACTIONS

13.1. Transactions in foreign currency are accounted at the exchange rate prevailing on the date of transaction.

13.2. Monetary items denominated in foreign currency are converted at exchange rates prevailing on the date of Balance Sheet.

13.3. Foreign Exchange differences arising at the time of translation or settlement are recognised as income or expense in the Profit & Loss Account either under foreign exchange fluctuations or interest as the case may be.

Premium/discount arising at the inception of the forward exchange contracts entered into to hedge foreign currency risks are amortised as expense or income over the life of the contract. Exchange differences on such contracts are recognised in the Profit & Loss Account.

13.4. Gains / losses arising on settlement of Derivative transactions entered into by the Corporation to manage the commodity price risk and exposures on account of fluctuations in interest rates and foreign exchange are recognised in the Profit & Loss Account. Provision for losses in respect of outstanding contracts as on balance sheet date is made based on mark to market valuations of such contracts.

14. GOVERNMENT GRANTS

14.1. In case of depreciable assets, the cost of the asset is shown at gross value and grant thereon is taken to Capital Reserve as deferred income, which is recognised in the Profit & Loss Account over the useful life of the asset.

14.2. Government grants of the nature of promoters’ contributions are credited to Capital Reserve and treated as part of Shareholders’ Funds.

15. PROVISIONS, CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS

15.1. Provision is recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made.

15.2. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Corporation.

15.3. Capital commitments and Contingent liabilities disclosed are in respect of items which exceed Rs.0.05 crores in each case.

15.4. Contingent liabilities are considered only on conversion of show cause notices issued by various Government authorities into demand.

16. TAXES ON INCOME

16.1. Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961.

16.2. Deferred tax on account of timing difference between taxable and accounting income is provided using the tax rates and tax laws enacted or substantively enacted by the Balance Sheet date.

16.3. Deferred tax assets are not recognised unless, in the management judgement there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.

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