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Accounting Policies of Madras Fertilizers Ltd. Company

Mar 31, 2023

Corporate Information

Madras Fertilizers Limited (''''MFLâ or âthe Companyâ), is a Public Sector Undertaking (''PSU'') under the administrative control of the Department of Fertilizers (''DOF''), Ministryof Chemicals & Fertilizers, Government of India (''GOI'') and is registered under the erstwhile Companies Act, 1956 with its registered office located at Manali industrial area, Chennai-600 068.

The Company''s equity shares are listed on the National Stock Exchange (''NSE''). MFL is engaged in the manufacture of Urea and Complex Fertilizers. It is also engaged in manufacturing Bio-fertilizers and trading eco-friendly Agro Chemicals, Organic Manure and City Compost under the brand name ''Vijay''.

Basis of preparation and Statement of compliance

a. These financial statements have been prepared in accordance with applicable Indian Accounting Standards (''Ind AS'') as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of the Companies Act, 2013 (the ''Act'') and the relevant provisions of the Act and Rules thereunder, as amended time to time.

b. The financial statements have been prepared on a going concern basis, using the historical cost basis and on accrual method of accounting except for the items which are specifically indicated in the concerned accounting policies.

c. These financial statements are prepared in Indian Currency (INR) which is also the company''s functional currency. All amounts disclosed in the financials have been rounded-off to the nearest crores unless otherwise stated.

d. Fair Value Measurement:

The Company''s accounting policies and disclosures require the measurement of fair values for financial assets and liabilities.

The Company has an established control framework with respect to the measurement of fair values. The

Company regularly reviews significant unobservable inputs and valuation adjustments. In cases where fair values are to be computed by third parties, the Company assesses the evidence obtained by such third parties to support the conclusions that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active

markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in

Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3: inputs for the asset or liability that are

not based on observable market data (unobservable inputs).

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Significant Accounting Policies

A. Property, Plant and Equipment (PPE):

Freehold land is carried at historical cost. All other items of Property, Plant and Equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Spare Parts are capitalized when they meet the definition of PPE.

Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognized when replaced. All other repairs and maintenance are charged to Profit or Loss during the reporting period in which they are incurred.

An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in Profit or Loss within other gains/(losses).

Capital Work in progress consists of costs incurred on projects and other capital works under feasibility/ commission stage. Cost includes expenses attributable to the work-in progress. Advances paid towards acquisition of Property, Plant and Equipment outstanding at each Balance sheet date is classified as capital advances under ''Other non-current assets. Assets under construction/Capital Work in Progress included under Property, Plant and equipment are not depreciated as these assets are not yet available for use. However, they are tested for impairment if any.

Depreciation:

Depreciation on property, plant and equipment is provided for under Straight Line Method in conformity with the estimated useful life as specified in Schedule II to the Companies Act, 2013. In respect of plant and equipment, the depreciation is provided estimating the useful life as detailed hereunder.

Life Extension of Plant and Equipment:

With the feedstock conversion from Naphtha to RLNG, a technical assessment of the useful life of plant and machinery was made. As a result of the said assessment, the useful life of Plant and Equipment was extended for a further period of 15 years (except for NPK Plant which has an extended life of 10 years) from 01.04.2021 and depreciation is provided on the extended useful life of the plant and equipment.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Based on technical evaluation and consequent advice, the management believes that its estimates of useful lives best represent the period over which management expects to use these assets.

Assets costing less than INR 5,000 are capitalized and charged to the statement of profit and loss in the year of purchase by retaining a residual value of INR 1.

I n respect of plant and equipment, buildings, roads & bridges and railway siding and capital spares, residual value is considered at 5% of the cost and INR 1 in respect of other property, plant and equipment include asset acquired out of Govt Grant.

In the year of commissioning / retirement of assets, depreciation is calculated on pro-rata basis, for the period the asset is available for use.

De-recognition

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of profit and loss.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

B. Impairment of Non-Financial Assets

The Company assesses at each reporting date whether there is any indication that an asset or a group of assets (cash generating unit) may be impaired. If any such

indication exists, the Company estimates the recoverable amount of the asset, which is the greater of its value in use and its net selling price. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

C. Leases:

The Company, at the inception of a contract, assesses whether the contract is a lease or not lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a time in exchange for a consideration. This policy has been applied to contracts existing and entered into on or after 1 April 2019.

Transition:

Effective April 01, 2019, the company adopted Ind AS 116 âleasesâ and applied the standard to all applicable lease contracts existing on April 1, 2019 using the modified retrospective method with cumulative effect of initially applying the standard recognised on the date of initial application. Accordingly, company has not restated comparative information and recognised right of use assets at an amount equal to lease liability.

Company as a Lessee:

The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently amortised using the straight-line method from the commencement date

to the end of the lease term. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if not readily determinable, using the Company''s incremental borrowing rate.

It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company''s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e., The higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense over the lease term.

Company as a Lessor:

At the inception of the lease, the Company classifies each of its leases as either an operating lease or a finance lease. The Company recognises lease payments received under operating leases as income over the lease term on a straight-line basis.

D. Investment properties:

Properties held to earn rentals and/or capital appreciation are classified as investment property and are measured

and reported at cost, including transaction costs and borrowing cost capitalised for qualifying assets, in accordance with the Company''s accounting policy.

Depreciation is recognised using straight-line method so as to write off the cost of the investment property less their residual values over their useful lives specified in Schedule II to the Companies Act, 2013. Depreciation method is reviewed at each financial year end to reflect the expected pattern of consumption of the future benefits embodied in the investment property. The estimated useful life and residual values are also reviewed at each financial year end and the effect of any change in the estimates of useful life/ residual value is accounted on prospective basis. Freehold land is not depreciated.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of property is recognised in the Statement of Profit and Loss in the same period.

E. Inventories:

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In case of manufactured goods (finished goods) and work in progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity.

The method of determination of cost of various categories of inventories is as follows:

1. Raw materials and packing materials-FIFO;

2. Stores and Spares and Catalyst (yet to be issued) - Monthly Moving Weighted Average Cost;

3. Finished goods - At Cost or NRV whichever is lower

4. Work-in-process (including Ammonia and Manufactured Bulk Urea) - Cost of production. Which comprises of direct material costs, direct wages and applicable overheads.;

4. Traded goods- FIFO;

5. Goods in transit/under inspection are valued at cost;

6. Off-Spec Manufactured products are Estimated at Net Realizable values.

Catalyst issued to productionis charged off over its useful life as assessed by the Technical Department.

Net realizable value represents the estimated selling price, including subsidy income where ever applicable, of inventories less all estimated costs of completion and costs necessary to make the sale.

Non-moving/obsolete stores and spares:

The Technical Committee will review the spares once a year and shortlist such spares as are considered obsolete /non moving, the same is written off from the books wit due approvals of the Board. Provision for obsolete / non-moving stores and spares are made upon the review by the Technical Committee once in a year, to reflect the impact of obsolescence, damage or other diminution in value of such items.

F. Revenue Recognition:

Revenue from sale of goods is measured based on the transaction price, which is the consideration, adjusted for volume discounts, price concessions, incentives, and returns, if any, as specified in the contracts with the customers.

Sale of Goods

Revenue from sale of goods including subsidies is recognised upon transfer of the control over the goods to the customers. The performance obligation in case of sale of goods is satisfied at a point in time i.e., when the goods are shipped to the customers or on delivery to the customer, as per applicable terms.

Accounting of Subsidy

The Company recognizes subsidy income as per Ind AS 20 ''Accounting for Government Grants and Disclosure of Government Assistance'' on the basis of the rates notified from time to time by the Government of India in accordance with the notified policies. The subsidy so recognised by the company is considered under ''Revenue from Operations''.

Income from services rendered is recognised based on the agreements/arrangements with the concerned parties and when services are rendered by measuring progress towards satisfaction of performance obligation for such services.

Other Income:

a. Income from rentals for properties given on lease to third parties are recognized on accrual basis.

b. All other claims are recognized when there is a reasonable certainty of recovery.

G. Government Grants (Subsidy from GoI):

Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in statement of profit and loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets or deducting in the carrying amount of the respective assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in the statement of profit and loss in the period in which they become receivable in accordance with the notified policies as under:

i. Subsidy due on urea sales is recognised on the basis of the rates notified from time to time by the Government of India on the quantity of fertilisers sold by the Company for the period for which notification has been issued after adjusting for increase /decrease on account of annual escalation/ de-escalation in input prices as estimated by the Management considering the policy parameters and norms prescribed from time to time . Adjustments are effected in respect of difference, if any, in the Statement of Profit and Loss for the year in which the final notifications received from the Government of India;

ii. Subsidy on Phosphatic and Potassic (P&K) fertilizers is recognized as per concession rates notified by the Government of India under Nutrient Based Subsidy (NBS) Scheme from time to time on the quantity of fertilisers sold by the Company for the period for which notification has been issued;

iii. Uniform freight subsidy on Urea, P&K fertilizers and Imported Urea has been accounted in accordance with the parameters and notified rates;

iv. Subsidy on City Compost is recognized based on rates, as notified by the Government of India

v. Special Compensation due on conversion of feedstock to LNG is recognised in accordance with the the policy and guidelines notified by Government of India

H. Borrowing Costs:

General and Specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets is substantially ready for their intended use.

I nterest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Capitalisation of borrowing costs is suspended when active development activity on the qualifying assets is interrupted other than on temporary basis and charged to the Statement of Profit and Loss during such extended periods.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

I. Foreign Currency Translation:

Functional and Presentation Currency:

Items included in the financial statement of the Company are measured using currency of the primary economic environment in which the entity operates (''the functional currency''). India being the primary economic environment

of the Company, the Financial Statements are presented in Indian Rupee (INR), which is Company''s functional and presentation currency.

Transactions and Balances:

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in Profit or Loss.

J. Financial Instruments:

Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognised immediately in statement of profit and loss.

Financial Assets:

At initial recognition trade accounts receivables (in accordance with Ind AS 115) are measured at their transaction price.

For the purpose of subsequent measurement, financial assets are classified into the following categories:

â¢ amortised cost

â¢ financial assets at fair value through profit or loss (FVTPL)

â¢ financial assets at fair value through other comprehensive income (FVOCI)

All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date.

I nvestments in equity instruments are recognized and subsequently measured at fair value. The Company''s equity investments are not held for trading. In general, changes in the fair value of equity investments are recognized in the income statement. However, at initial recognition the Company elected, on an instrument-byinstrument basis, to represent subsequent changes in the fair value of individual strategic equity investments in other comprehensive income (loss) (âOCIâ).

Cash and Cash Equivalents:

The Company considers all highly liquid financial instruments which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and Cash Equivalents consist of balances with banks which are unrestricted for withdrawal and usage. Restricted cash and bank balances are classified and disclosed as other bank balances.

Financial Assets at Amortised cost:

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

I ncome is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in the statement of profit and loss and is included in the âOther incomeâ line item.

Financial Assets at FVOCI:

On initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments. This election is not permitted if

the equity investment is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the ''Reserve for equity instruments through other comprehensive income''. The cumulative gain or loss is not reclassified to statement of profit and loss on disposal of the investments.

A financial asset is held for trading if:

â¢ i t has been acquired principally for the purpose of selling it in the near term; or

â¢ on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

â¢ it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

Dividends on these investments in equity instruments are recognised in statement of profit and loss when the Company''s right to receive the dividends is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognised in statement of profit and loss are included in the ''Other income'' line item.

Financial Assets at FVTPL:

Financial assets at FVTPL include financial assets that are either do not meet the criteria for amortised cost classification or that are equity instruments held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. All derivative financial instruments also fall into this category. Assets in this category are measured at fair value with gains or losses recognized in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.

Impairment of Financial Assets:

The Company applies the expected credit loss model

for recognising impairment loss on financial assets measured at amortised cost, lease receivables, trade receivables and other contractual rights to receive cash or another financial asset. The expected credit loss approach requires that all impacted financial assets will carry a loss allowance based on their expected credit losses. Expected credit losses are a probability-weighted estimate of credit losses over the contractual life of the financial assets.

For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.

The impairment provisions for trade receivables are based on reasonable and supportable information includinghistoric loss rates, present developments such as liquidity issues and information about future economic conditions, to ensure foreseeable changes in the customer-specific or macroeconomic environment are considered.

Derecognition of financial assets:

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Financial Liabilities:

The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the ''Finance costs'' line item.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Derecognition of financial liabilities:

The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognised in the statement of profit and loss.

Offsetting financial instruments:

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the counterparty.

K. Fair Value Measurement:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement is the use of fair value (i.e., is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants) at the measurement date in measuring the assets and liabilities of an entity. The Company opts to follow fair value measurement as per Ind AS 113 viz, in respect of financial assets and financial liabilities as stated in the notes no. 1.2;

L. Earnings Per Share:

The basic Earnings Per Share (âEPSâ) is computed by dividing the net profit / (loss) after tax for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year, adjusted for bonus elements in equity shares issued during the year and excluding treasury shares. The Company did not have any potentially dilutive securities in the years presented.

M. Employee Benefits:

Short term employee benefits:

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present, legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Short term employee benefits comprise of wages, salaries, incentives, short term leave salary etc.

Post-employment benefits:

a. Defined Contribution Plans:

Contributions paid/payable to defined contribution plans comprising of Superannuation and Provident Funds for employees covered under the respective Schemes are recognised in the profit or loss each year when employees have rendered service entitling them to the contributions.

b. Defined benefit plans:

Contributions towards gratuity and provident fund trust are considered as defined benefit plans and provided for in accordance with the Guidelines issued by Department of Public Enterprises. Out of the defined benefit plans in the Company only gratuity is a funded defined benefit plan.

The Company makes Provident fund contributions to the Trust set up by the company, at a specified percentage of the employees'' salary. The rate at which the annual interest is payable to the beneficiaries by the trust is being administrated by the government. The company has an obligation to make good the short fall, if any, between the return from the investment of the trust and the notified interest rate.

The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of the plan assets.

The amount of defined benefit obligations is computed annually by an independent actuary using the projected unit credit method.

Re-measurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in Other Comprehensive Income (OCI). Net interest expense / income, service cost and other expenses related to defined benefit plans are recognized in the statement of profit and loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain / loss on curtailment is recognized immediately in the statement of profit and loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

c. Other long-term employee benefits:

Benefits under the Company''s earned leave, postretirement medical benefits and service awards constitute other long term employee benefits and are recognized based on an actuarial valuation using the projected unit credit method. These actuarial gains or losses are recognized in the statement of profit and loss in the period in which they arise.

N. Income Taxes:

Income tax expense comprises current and deferred tax. It is recognized in the statement of profit and loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

Current Tax:

payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred Tax:

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

â¢ temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit and loss;

â¢ temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are adjusted accordingly.

Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

O. Non-Current Assets held for Sale:

Non-current assets and disposal group are classified as âHeld for Saleâ if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of âHeld for Saleâ is met when the non-current asset or the disposal group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as âHeld for Saleâ.

Non-current assets and disposal group held for sale are measured at the lower of carrying amount and fair value less cost to sell. The same are not depreciated or amortized while they are classified as held for sale.

Non-current assets and disposal group that ceases to be classified as âHeld for Saleâ shall be measured at the lower of carrying amount before the non-current asset and disposal group was classified as âHeld for Saleâ adjusted for any depreciation/ amortization and its recoverable amount at the date when the disposal group no longer meets the âHeld for Saleâ criteria.

P. Operating Segments:

In accordance with Ind AS 108 Operating Segments, the operating segments used to present segment information are identified on the basis of internal reports used by the Company''s Management to allocate resources to the segments and assess their performance.

The CMD is the Company''s ''Chief Operating Decision Maker'' or ''CODM'' within the meaning of Ind AS 108. The indicators used for internal reporting purposes may evolve in connection with performance assessment measures put in place.

Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.

Q. Provisions, Contingent Liabilities and Contingent Assets:

provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows. The unwinding of the discount is recognized as finance cost. Expected future operating losses are not provided for.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Contingent assets are not recognized. They are disclosed only when an inflow of economic benefit is probable from such assets.

Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.

R. Exceptional Items:

Exceptional items are disclosed separately in the Financial Statements where it is necessary to do so to provide further understanding of the financial performance of the company. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

S. Current and Non-Current classification:

All the assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in Ind AS 1 Presentation of Financial Statements.

operating cycle: Based on the nature of products

/ activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

T. Cash flow statement

Cash flow statement is prepared in accordance with the indirect method prescribed under Ind AS 7 Statement of Cash Flows.

Cash flows are reported using the indirect method, whereby profit / (Loss) for the period 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 of the Company are segregated.

Critical Accounting estimates and judgements:

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities and related disclosures concerning the items involved as well as contingent assets and liabilities on the date of the financial statements and the reported amount of income and expense during the reporting period. Although

these estimates are based on the management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes, requiring a material adjustment in the carrying amounts of assets or liabilities in future periods. Difference between the actual results and estimates are recognized in the period in which the results are known or materialized.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Mar 31, 2018

1. Significant accounting policies

A summary of the significant accounting policies applied in the preparation of the financial statements are as given below. These accounting policies have been applied consistently to all periods presented in the financial statements.

a. Property, plant and equipment

i. Initial recognition and measurement

I t ems of property, plant and equipment are initially measured at cost. Subsequent measurement is done at cost less accumulated depreciation and accumulated impairment losses, if any. Cost of acquisition is inclusive of taxes, duties, freight, installation allocated incidental expenditure during construction / acquisition and necessary adjustments in the year of final settlement. The cost of property, plant and equipment also includes the present value of obligations arising, if any, from decommissioning, restoration and similar liabilities related to the same.

Cost of an item of property, plant and equipment includes estimated costs of dismantling and removing the item and restoring the site on which it is located. The present value of those costs (decommission or restoration costs) is capitalized as an asset and depreciated over the useful life of the asset.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalized as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

I f significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

Assets costing less than INR 5,000 are capitalized and charged to the statement of profit and loss in the year of purchase by retaining a residual value of INR 1.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in the statement of profit and loss.

Machinery spares

Initial spares purchased along with property, plant and equipment are capitalized and depreciated along with the asset.

Spares purchased subsequent to commission of the asset which meet the requirements set out in Ind AS 16 are treated as property, plant & equipment. Other spare parts are carried as inventory and recognized in the statement of profit and loss on consumption.

Capital work-in-progress

The cost of self-constructed assets includes the cost of materials & direct labor, any other costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management and borrowing costs.

ii. Subsequent expenditure

Subsequent expenditures related to an item of property, plant and equipment are capitalized only if it is probable that future economic benefits would flow from the existing asset to the Company which is beyond its previously assessed standard of performance.

Expenditure on assets on revamp / expansion are capitalized when the respective assets are ready for commercial production and in respect of other assets when they are ready for its intended use. These costs are capitalized only when the recognition criteria as enunciated under Ind AS 16 are met. The costs of the day-to-day servicing of property, plant and equipment are recognized in the statement of profit and loss as incurred.

iii. Depreciation

Depreciation on property, plant and equipment is provided for in conformity with the provisions of Schedule II to the Companies Act, 2013 on the basis of useful life of the asset using the straight line method by retaining a residual value of 5% in respect of plant and machinery, buildings, roads & bridges and railway siding and Rs. 1 in respect of other property, plant and equipment. In the year of commissioning / retirement of assets, depreciation is calculated on pro-rata basis, for the period the asset is available for use.

The estimated useful lives of property, plant and equipment for the current year and the comparative period is as follows:

iv. De-recognition

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment recognized as at April 1, 2016 measured as per the previous GAAP, and use that carrying value as the deemed cost of such property, plant and equipment.

b. Investment property

i. Recognition and measurement

I nvestment property are properties (land / building / both) held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Upon initial recognition, an investment property is measured at cost. Subsequent to initial recognition, investment property is measured at cost less accumulated depreciation and accumulated impairment losses, if any.

Any gain or loss on disposal of an investment property is recognized in the statement of profit and loss

ii. Subsequent expenditure

Subsequent expenditures related to an item of investment property is added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.

iii. Depreciation

Depreciation on an item of investment property is provided on straight line basis in accordance to the useful lives as prescribed in Schedule II to the Companies Act, 2013.

Transition to Ind AS

On transition to Ind AS, the Company has elected to continue with the carrying value of all of its investment property (previously recognized as property, plant and equipment and on the basis of satisfying conditions specified under Ind AS 40 have been classified as investment property under Ind AS) recognized as at April 1, 2016, measured as per the previous GAAP and use that carrying value as the deemed cost of such investment property.

c. Inventories

I nventories are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In case of manufactured inventories and work in progress, cost includes an appropriate share of fixed production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. The net realizable value of work in progress is determined with reference to the selling prices of related finished products. Raw materials, components and other supplies held for use in the production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.

Net realizable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: The least of selling price fixed by the Company to marketers / dealers including excise duty.

- Field warehouse inventories to be brought back to plant for reprocessing: The least of selling price fixed by the Company to marketers / dealers plus final / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the Company to marketers / dealers including excise duty plus final / estimated NBS less estimated warehousing expenses.

- Inventories at plant ready for sale: The least of selling price fixed by the Company to marketers / dealers plus final / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: The least of selling price to marketers / dealers including excise duty.

- Inventories in transit: The least of selling price to marketers / dealers including excise duty plus final / estimated subsidy less estimated warehousing expenses.

- Inventories at plant ready for sale: The least of selling price to marketers / dealers plus final / estimated subsidy less estimated freight and warehousing expenses.

- Bulk urea at plant: Least of selling price to marketers / dealers plus final / estimated subsidy less estimated bagging, freight and warehousing expenses.

Others

- Warehousing expenses have been distributed over sales and closing stock.

- Ammonia is valued at cost as the same is captive consumed and not intended for sale.

- Off-spec products intended for disposal are valued at estimated realizable value.

- Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

- Inventory of pesticides manufactured and lying at factory under loan licensing scheme are valued at cost excluding excise duty.

- Goods in transit / under inspection are valued at cost.

d. Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction, development or erection of qualifying assets are capitalized as cost of such asset until the assets are substantially ready for their intended use. Qualifying assets are those that take a substantial period of time to get ready for their intended use or sale.

When the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the borrowing costs incurred are capitalized. When Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the capitalization of the borrowing costs is computed based on the weighted average cost of general borrowing that are outstanding during the period and used for the acquisition, construction, development or erection of the qualifying asset.

Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Income earned on temporary investment of the borrowings pending their expenditure on the qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing costs include exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Other borrowing costs are recognized as an expense in the year in which they are incurred.

e. Financial Instruments

1. Recognition and initial measurement

All financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

i. Financial assets

Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at

- amortized cost;

- Fair value through other comprehensive income (FVOCI)

- Fair value through profit or loss (FVTPL)

Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

- t he asset is held within a business model whose objective is to hold assets to collect contractual cash flows and

- t he contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

- t he asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

- t he contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investmentâs fair value in OCI (designated as FVOCI - equity investment). This election is made on an investment by investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets: Business model assessment

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management.

ii. Financial liabilities

Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in the statement of profit and loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in the statement of profit and loss. Any gain or loss on de-recognition is also recognized in the statement of profit and loss.

The Companyâs financial liabilities currently include trade and other payables and borrowings.

2. De-recognition

i. Financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.

ii. Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognized in the statement of profit and loss.

3. Offsetting of financial instruments

Financial asset and financial liability are offset and the net amount presented in the balance sheet when, and only when the Company:

- currently has a legally enforceable right to set off the recognized amounts; and

- i ntends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

4. Impairment

i. Financial assets (including receivables)

The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost.

All financial assets are assessed for credit impairment at each reporting date. Evidence that a financial asset is credit impaired includes the following observable data:

- significant financial difficulty of the borrower

- a breach of contract such as a default or being past due for 90 days or more

- it is probable that the borrower will enter bankruptcy or other financial reorganization

The Company measures loss allowances at an amount equal to lifetime expected credit losses except for certain financial assets such as bank balances for which the credit risk has not increased significantly since initial recognition. Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses. Lifetime credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument.

Expected credit losses are a probability weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive).

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery

ii. Non-financial assets

The Company assesses at each balance sheet date whether there is any indication that an asset or a group of assets (cash generating unit) may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset, which is the greater of its value in use and its net selling price. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.

5. Fair value measurement

f. Government grants / subsidies

Related to assets

Grants related to assets are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. Subsidiary conditions may also be attached restricting the type or location of the assets or the periods during which they are to be acquired or held.

Grants related to assets are presented in the balance sheet by setting up the grant as deferred income.

Related to income

Grants related to income are those which are not related to assets.

Government grants in the form of fertilizer and freight subsidies are recognized when there is reasonable assurance that the Company will comply with the conditions relating to them and that the subsidy will be received. The point of recognition in the case of the Company is on the goods being moved outside the factory.

Grants are recognized in the statement of profit and loss on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate or over the period during which the conditions related to the grant is fulfilled.

g. Employee benefits

i. Short term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present, legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Short term employee benefits comprises of wages, salaries, incentives, short term leave salary etc.

ii. Post-employment benefits Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into separate entities and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefits expense in the statement of profit and loss in the period during which services are rendered by employees.

Contribution towards superannuation and provident fund are treated as defined contribution plans.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.

Contributions towards gratuity are considered as defined benefit plans and provided for in accordance with the Guidelines issued by Department of Public Enterprises. Out of the defined benefit plans in the Company only gratuity is a funded defined benefit plan.

The Companyâs net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of the plan assets.

The amount of defined benefit obligations is computed annually by an independent actuary using the projected unit credit method.

Other long-term employee benefits

Benefits under the Companyâs earned leave, post-retirement medical benefits and service awards constitute other long term employee benefits and are recognized based on an actuarial valuation using the projected unit credit method. These actuarial gains or losses are recognized in the statement of profit and loss in the period in which they arise.

h. Prior period items, accounting estimates and effect of change in accounting policies

Prior period errors, are corrected retrospectively by restating the comparative amounts for the prior period(s) presented in which the error occurred or if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented.

The effect of change in accounting estimate is recognized prospectively in the statement of profit and loss except where they relate to assets and liabilities, the same is recognized by adjusting the carrying amount of related assets/liability/ equity in the period of change.

Changes in accounting policy due to initial application of Ind AS are dealt with in accordance with specific transitional provisions, if any in Ind AS. In other cases, the changes in accounting policy are done retrospectively, the application of such change is limited to the earliest period practicable.

i. Events occurring after the balance sheet date

Events occurring after the balance sheet date are those events that occur between the end of the reporting period and the date when the financial statements are approved by the Board of Directors. Such events are disclosed or given effect to in the financial statements as provided for in Ind AS 10 Events after the Reporting Period.

j. Revenue

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made.

Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment. Cash discounts for prompt payments are accounted as and when the related dues are settled and presented net of revenue.

Revenue from sale of manufactured and traded fertilizers

Revenue from sale of manufactured and traded fertilizers are recognized when the significant risk and rewards of ownership are transferred. In the current case, the issuance of warehouse release order come product acceptance, by the respective authorities, is considered as the point when risk and reward is transferred and revenue is recognized at that particular point.

The Company estimates the amount of volume rebates, early payment rebates at the point of sale and accounts for revenue net of such amounts. The Company also provides cash discounts and fixed transport rebates which is also netted against revenue while presenting.

Revenue is presented net of goods and service tax (effective 1 July, 2017)

Other operating revenue

Urea subsidy under NPS is accounted on receipt at the warehouses per procedure prescribed by the Government. Increase / decrease on account of annual escalation / deescalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

Subsidy for phosphatic and potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government.

Other income

Dividend income is recognized in the statement of profit and loss on the date on which the Companyâs right to receive payment is established.

I nterest income with respect to financial assets at amortized cost is recognized using the effective interest method. The

âeffective interest rateâ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the gross carrying amount of the financial asset.

I ncome from rentals for properties given on lease to third parties are recognized on accrual basis.

Claims by the Company on underwriters are accounted as income on acceptance of the claim / certainty of realisation, pending settlement.

Claims on railways are accounted on settlement.

Claims for liquidated damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

All other liquidated damages / penalties are accounted on realization basis.

k. Foreign currency transactions and translation

Initial recognition and measurement

Foreign currency transactions are recorded in the functional currency, by applying to the foreign currency exchange rate between the functional currency and the foreign currency at the date of the transaction.

Subsequent measurement

Foreign currency monetary items are translated using the closing rate at the end of each reporting period.

Foreign currency non-monetary items are carried at historical cost and translated using the exchange rate at the date of the transaction.

Recognition of exchange gain /loss

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were recorded on initial recognition during the period or translated in previous financial statements are recognized in the statement of profit and loss in the period in which they arise.

l. Income taxes

I ncome tax expense comprises current and deferred tax. It is recognized in the statement of profit and loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax

- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit and loss;

- temporary differences related to investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset only if certain criteria(s) set out in Ind AS 12 Income Taxes are met.

m. Leases

Finance lease

Leases of property, plant and equipment that transfer to the Company substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Operating lease

Assets held under other leases are classified as operating leases. Payments / receipts which are made / received under operating leases are generally recognized in the statement of profit and loss on a straight-line basis over the term of the lease unless such payments / receipts are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease.

n. Operating segments

i n accordance with Ind AS 108 Operating Segments, the operating segments used to present segment information are identified on the basis of internal reports used by the Companyâs Management to allocate resources to the segments and assess their performance.

The Board of Directors is collectively the Companyâs âChief Operating Decision Makerâ or âCODMâ within the meaning of Ind AS 108. The indicators used for internal reporting purposes may evolve in connection with performance assessment measures put in place.

Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.

o. Provisions (other than employee benefits), contingent liability and contingent assets

A provision is recognized when the Company has 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 and in respect of which a reliable estimate can be made. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows. The unwinding of the discount is recognized as finance cost. Expected future operating losses are not provided for.

Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.

Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.

p. Cash and cash equivalents

Cash and cash equivalents comprise of cash in hand, current and short term deposit accounts which are held for the purpose of meeting short-term cash commitments. The deposits have an original maturity of three months or less.

q. Earnings per share

The Company presents basic and diluted earnings per share (âEPSâ) data for its ordinary shares.

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the FY, adjusted for own shares held.

Diluted EPS is calculated by taking the weighted average number of ordinary shares which is calculated for basic earnings per share and adjusted to the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Dilutive potential ordinary shares are deemed to have been converted into ordinary shares at the beginning of the FY or, if later, the date of the issue of the potential ordinary shares.

r. Exceptional items

These are items of income or expense the nature of which warrants a disclosure to enhance the understanding of the performance of the Company. Such income or expense is classified as exceptional items and accordingly, disclosed in the notes accompanying the financial statements.

s. Cash flow statement

Cash flow statement is prepared in accordance with the indirect method prescribed under Ind AS 7 Statement of Cash Flows.

Cash flows are reported using the indirect method, whereby profit for the period 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 of the Company are segregated.

Mar 31, 2016

[SIGNIFICANT ACCOUNTING POLICIES

1 GENERAL

The financial statements are prepared under the historical cost convention and ongoing concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 2013 and

iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period up to the capitalization of the respective asset as reduced by liquidated damages.

Assets acquired under Hire Purchase Agreements are capitalized to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp/expansion are capitalized when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilization) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule II to the Companies Act, 2013 on the basis of Useful life of the Asset on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery, Buildings, Roads & Bridges and Railway siding and Rs. 1 in respect of other tangible assets.

4 NON CURRENT INVESTMENTS

Non-Current Investments are stated at cost. Any diminution in the value of Non-Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets/capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realizable value including final / estimated subsidy.

Net realizable value is taken as under :

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: The Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- inventories in transit : The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus final / estimated NBS less estimated warehousing expenses.

- inventories at Plant ready for sale : The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: The Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit : The least of selling price to Marketers / Dealers including Excise Duty plus final / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant : Least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(vii) Ammonia is valued at cost as the same is captivity consumed and not intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES /LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers''/marketers'' margin, Sales Tax (VAT)collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognized in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company''s contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees'' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post -retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 TAXES

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

b) Deferred tax assets are not recognized unless, in the management judgment 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 realized.

c) Accounting of value added tax is in line with the provisions of statute in force.

Mar 31, 2015

1 GENERAL

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 2013 and iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent, of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule 11 to the Companies Act, 2013 on the basis of Useful life of the Asset by leaving a residual value of 5% in respect of Plant and Machinery, Buildings and Roads & Bridges and Rs. 1 in respect of other tangible assets.

4 NON CURRENT INVESTMENTS

Non-Current Investments are stated at cost. Any diminution in the value of Non-Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets/capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realisable value including final / estimated subsidy.

Net realisable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: The Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus final /estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus final / estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: The Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers / Dealers including Excise Duty plus final / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus final/ estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(vii) Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES /LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency'are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis. (ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company's contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post -retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated- damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 TAXES

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

b) Deferred tax assets are not recognized unless, in the management judgment 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 realized.

c) Accounting of value added tax is in line with the provisions of statute in force.

Mar 31, 2014

1 GENERAL

The fi nancial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 1956 and iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition / construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory / insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition / construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp / expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Rs. 1 in respect of other tangible assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of Rs. 1.

4 NON CURRENT INVESTMENTS

Non Current Investments are stated at cost. Any diminution in the value of Non Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets / capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realisable value including fi nal / estimated subsidy.

Net realisable value is taken as under :

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: The Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus fi nal / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit : The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus fi nal / estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price fi xed by the Company to Marketers / Dealers plus fi nal / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: The Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit : The least of selling price to Marketers / Dealers including Excise Duty plus fi nal / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus fi nal / estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant : Least of selling price to Marketers / Dealers plus fi nal / estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of fi nished products.

(vii) Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) Inventory of traded products are valued at lower of location specifi c cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES / LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers'' / marketers'' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit / Debit for Annual Escalation / De-escalation in input prices is considered based on realistic estimates pending issue of notifi cation by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notifi cation by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the Profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES (i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company''s contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees'' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specifi ed minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defi ned benefit plan for gratuity. The cost of providing such defi ned benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defi ned contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers / contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials / works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of fi nancial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 TAXES

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

b) Deferred tax assets are not recognized unless, in the management judgment there is a virtual certainty supported by convincing evidence that suffi cient future taxable income will be available against which such deferred tax assets can be realized.

c) Accounting of value added tax is in line with the provisions of statute in force.

ii. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA

Escalation / De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 32.99 Cr (Previous year Rs. 37.72 Cr) has been reckoned as receivable from FICC for the year 2013-14 towards annual escalation of input prices in line with the Accounting policy Â Note 24 (A) 10 (i).

iii. NUTRIENT BASED SUBSIDY (NBS) FOR PHOSPHATIC AND POTASSIC FERTILIZERS

The NBS dues reckoned as receivable from DOF for using costlier inputs is Rs. 20.80 Cr (Previous year Rs. 47.40 Cr) in line with the Accounting policy Â Note 24 (A) 10 (ii).

iv. EXCHANGE RATE FLUCTUATION

Exchange rate fl uctuation included in other expenses is Rs. 0.96 Cr (Previous year Rs. 2.11 Cr)

v. CENTRAL EXCISE 25/70 NOTIFICATION

The Company has pre deposited Rs. 2 Cr on 11.03.2013 based on the Miscellaneous Order of CESTAT for taking up the appeal for hearing which is yet to take place.

As the matter is subjudice, no provision is considered necessary in the Books by the Company. However the same is shown under "Contingent Liability".

vii. The Company has leased out its Bio-fertilizer Plant at Vijayawada, having a written down value of Rs. 28.91 lacs (Previous year Rs. 30.23 lacs). The depreciation recognized in the books during the year for the above asset is Rs. 1.10 lacs (previous year Rs. 1.10 lacs).

ix. OTHER DISCLOSURES

i. Information required under AS 15 (Revised) on "Employee Benefit Expenses" is provided in Annexure Â I to this note.

ii. The amount of borrowing costs capitalised for the year is ''NIL'' (Previous year ''NIL'') per AS 16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS 17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defi ned in AS 18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 25.

v. The Company has not entered into joint venture activities as defi ned in AS 27. Hence AS 27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vii. A provision of Rs. 5.76 Cr towards Income Tax liability has been made during the year as the entire carried forward losses and unabsorbed depreciation available for set off have been fully wiped off.

viii. The draft rehabilitation scheme (DRS) submitted by the Operating Agency to BIFR is presently under the perusal and consideration of GOI. The BIFR hearing scheduled to be held on Jan 13, 2014 stands postponed and the date for the next hearing is yet to be announced.

ix. In respect of the verifi cation of movable fixed assets, the outside professional fi rm of Chartered Accountants have submitted their fi nal report during the last week of March 2014. Management is reviewing the same along with the respective groups to identify the differences reported which is expected to be insignifi cant. After detailed verifi cation and reconciliation necessary adjustments if any, required will be made during 2014-15 with due approvals.

x. Included in Short term Trade Payables under ''Note 9a'' are:

a. Dues to CPCL Rs. 93.37 Cr (Previous Year Rs. 95.68 Cr) for which mortgage and First charge on Guindy land is given for Rs. 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC Rs. 43.61 Cr (Previous Year Rs. 49.67 Cr) for which First charge on Plant and Machinery is given for Rs. 50 Cr.

Disclosure requirements under AS-15 (Revised) as per Note No: 24 B ix (i)

Defined Contribution Schemes:

The net amounts expended in respect of employer''s contribution to the provident fund and superannuation fund during the year, are Rs. 5.46 Cr (Previous year Rs. 5.01 Cr) and Rs. 6.00 Cr (Previous year Rs. 5.37 Cr) respectively.

Mar 31, 2013

1 GENERAL

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 1956 and iii) the Accounts Manual of the Company. *

2 FIXEDASSETS

Fixed Assets are stated at cost of acquisition / construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory / insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition / construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp / expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Rs. 1 in respect of other tangible assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of Rs. 1.

4 NON CURRENT INVESTMENTS

Non Current Investments are stated at cost. Any diminution in the value of Non Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets / capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realisable value including final / estimated subsidy.

Net realisable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus final / estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price fixed by the Company to Marketers/Dealers plus final / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers / Dealers including Excise Duty plus final / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated freight and warehousing expenses.

Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(vii) Ammonia is valued at cost as the same is captively consumed and not-intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES /LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSSSALES

Gross Sales is net of sales return, dealers'' / marketers'' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit / Debit for Annual Escalation / De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES (i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis. (ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company''s contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees''.salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post retirement medical benefits, compensated absences and service awards are provided using the projected.unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers / contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials I works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 VALUE ADDED TAX

Accounting of value added tax is in line with the provisions of statute in force.

ii. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA

Escalation / De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 37.72 Cr (Previous year Rs. 65.69 Cr) has been reckoned as receivable from FICC for the year 2012-13 towards annual escalation of input prices in line with the Accounting policy - Note 24 (A) 10 (i).

iii. NUTRIENT BASED SUBSIDY (NBSj FOR PHOSPHATIC AND POTASSIC FERTILIZERS

The NBS dues reckoned as receivable from DOF for using costlier inputs is Rs. 47.40 Cr (Previous year Rs. 17.91 Cr) in line with the Accounting policy - Note 24 (A) 10 (ii).

iv. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation included in other expenses is Rs. 2.11 Cr (Previous year Rs. 4.06 Cr)

-v. CENTRAL EXCISE 25/70 NOTIFICATION

The Company has complied with the Miscellaneous Order of CESTAT to pre deposit a sum of Rs. 2 Cr by 11.03.2013 for taking up the appeal for hearing and disposal.

As the matter is subjudice, no provision is considered necessary in the Books by the Company. However the same is shown under "Contingent Liability".

Per AS - 28, net recoverable amount is the higher of net selling price or value in use, As the value in use could not be assessed with reasonable accuracy, the Company has considered net selling price for ascertaining impairment loss.

vii. The Company has leased out its Bio-fertilizer Plant at Vijayawada, having a written down value of Rs. 30.23 lacs (Previous year Rs. 31.33 lacs). The depreciation recognized in the books during the year for the above asset is Rs. 1.10 lacs (previous yearRs. 1.11 lacs).

As the lease was short closed during 2012-13, there is no future lease rental receivable under non-transferable operating lease. The lease rent received during the year is Rs. 1.04 Lacs (Previous year Rs. 1.94 Lacs) as against Rs. 2.23 lacs for the full year.

viii. The total amount payable to Micro, Small and Medium Enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 as at March 31,2013 as identified by the Management and relied upon by the Auditors is provided below:

Mar 31, 2012

1 GENERAL

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 1956 and iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are put to use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and RS.1 in respect of other tangible assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of RS. 1.

4 NON CURRENT INVESTMENTS

Non Current Investments are stated at cost. Any diminution in the value of Non Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION - EXPANSION SCHEMES

All expenditure during construction till the Plant is ready for commercial production net of income are allocated to the respective tangible assets on completion of construction/erection. Expenditure during construction awaiting allocation to tangible Assets is included under Capital Work in Progress.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets/capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Catalysts in process are valued based on the estimated life of each catalyst.

(iv) Loose tools and reconditioned spares are revalued on WDV basis annually.

(v) Finished products are valued at lower of cost or net realisable value including final/estimated subsidy.

Net realisable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: Least of selling price fixed by the Company to Marketers/Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the company to Marketers/Dealers plus final/estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the company to Marketers/Dealers including Excise Duty plus final/ estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price fixed by the company to Marketers/Dealers plus final/estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: Least of selling price to Marketers/ Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers/ Dealers including Excise Duty plus final/estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers/Dealers plus final/estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant: Least of selling price to Marketers/Dealers plus final/estimated subsidy less estimated bagging, freight and warehousing expenses.

(vi) Warehousing expenses have been distributed over sales and closing stock.

(vii) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(viii) Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(ix) Off-spec products intended for disposal are valued at estimated realizable value.

(x) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(xi) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xii) Goods in Transit/Under Inspection are valued at cost.

8 TRADE RECEIVABLES/LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision1 is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided/paid in line with the DPE guidelines.

b. The Company's contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains/losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(I) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages/penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 VALUE ADDED TAX

Accounting of value added tax is in line with provisions of statute in force.

Mar 31, 2011

1. GENERAL:

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with applicable mandatory Accounting Standards and relevant presentational requirements of Companies Act, 1956.

2. FIXED ASSETS:

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Fixed Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are put to use.

3. DEPRECIATION:

Depreciation on Fixed Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Rs. 1 in respect of other fixed assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of Rs. 1.

4. INVESTMENTS:

Long term Investments are stated at cost. Any diminution in the value of Long term Investments, other than temporary in nature, are provided for.

5. EXPENDITURE DURING CONSTRUCTION - EXPANSION SCHEMES:

All expenditure during construction till the Plant is ready for commercial production net of income are allocated to the respective fixed assets on completion of construction/erection. Expenditure during construction awaiting allocation to Fixed Assets is included under Capital Work in Progress.

6. GRANTS:

Grants from Government are shown as a deduction from the Gross Value of Fixed Assets/Capital Work in Progress.

7. INVENTORY VALUATION:

(i) Raw materials and packing materials are valued at cost on FlFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Catalysts in process are valued based on the estimated life of each catalyst.

(iv) Loose tools and reconditioned spares are revalued on WDV basis annually.

(v) Finished products are valued at lower of cost or net realisable value including final price concession or estimated price concession for the unannounced period.

Net realisable value is taken as under:

Phosphatic / Potassic Fertilizers

- Field warehouse inventories: Least of selling price fixed by the company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the company to Marketers /Dealers plus, estimated/final price concession less estimated reprocessing costs and freight incurred.

- inventories in transit: The least of selling price fixed by the company to Marketers / Dealers including Excise duty plus estimated/final price concession less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price fixed by the company to Marketers/ Dealers plus estimated/final price concession less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers / Dealers including Excise Duty plus estimated/final concession less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price to Marketers / Dealers plus estimated/final concession less estimated freight and warehousing expenses.

- Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus estimated/final concession less estimated bagging, freight and warehousing expenses.

- Warehousing expenses have been distributed over sales and closing stock.

- The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

- Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(vi) Off-spec products intended for disposal are valued at estimated realizable value.

(vii) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(viii) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(ix) Goods in Transit / Under Inspection are valued at cost.

8. DEBTORS/LOANS AND ADVANCES:

Sundry Debtors, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9. GROSS SALES:

Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes Excise Duty for fertilizers.

10. UREA CONCESSION UNDER NEW PRICING:

Urea Concession is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered in the concession based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11. FOREIGN CURRENCY TRANSACTIONS:

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount, the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss account.

12. EMPLOYEE BENEFITS:

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. The Company's contribution to the Provident Fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss account on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss Account.

b. The Company operates defined benefit plan for Gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss account.

c. The Liability of the Company in respect of Superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit and Loss account on accrual basis.

d. Obligations on Post Retirement Medical Benefits, Compensated absences and Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under Voluntary Retirement Scheme is treated in line with the revised AS-15 (Employee Benefits).

13. CLAIMS:

(i) Claims by the Company on Underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on Railways towards transit loss are accounted on settlement.

(iii) Claims for liquidated damages against suppliers / contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realisation basis.

14. PRIOR PERIOD ADJUSTMENTS:

Income/Expenditure which arise in the Current Year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as Prior Period Adjustments.

15. CONTINGENT LIABILITY:

Depending on facts of each case and after due evaluation of relevant legal aspects, claims again the company as debts are disclosed as contingent liabilities.

16. VALUE ADDED TAX (VAT):

Accounting of VAT is in line with provisions of statute in force.

Mar 31, 2010

1 GENERAL:

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with applicable mandatory Accounting Standards and relevant presentational requirements of Companies Act, 1956.

2 FIXED ASSETS:

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Fixed Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are put to use.

3 DEPRECIATION:

Depreciation on Fixed Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Re.1 in respect of other fixed assets.

Assets costing not more than Rs.5,000 each are depreciated in full in the year of addition by leaving a residual value of Re.1.

4 INVESTMENTS:

Long term Investments are stated at cost. Any diminution in the value of Long term Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION Ã EXPANSION SCHEMES:

All expenditure during construction till the Plant is ready for commercial production net of income are allocated to the respective fixed assets on completion of construction/erection. Expenditure during construction awaiting allocation to Fixed Assets is included under Capital Work in Progress.

6 GRANTS:

Grants from Government are shown as a deduction from the Gross Value of fixed assets/capital work in progress.

7 INVENTORY VALUATION:

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Catalysts in process are valued based on the estimated life of each catalyst.

(iv) Loose tools and reconditioned spares are revalued on WDV basis annually.

(v) Finished products are valued at lower of cost or net realisable value including final price concession or estimated price concession for the unannounced period.

Net realisable value is taken as under:

Phosphatic / Potassic Fertilizers

. Field warehouse inventories: Least of selling price fixed by the company to Marketers / Dealers.

. Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the company to Marketers / Dealers plus estimated/final price concession less estimated reprocessing costs and freight incurred.

. Inventories in transit: The least of selling price fixed by the company to Marketers / Dealers plus estimated/final price concession less estimated warehousing expenses.

. Inventories at Plant ready for sale : The least of selling price fixed by the company to Marketers / Dealers plus estimated/final price concession less estimated freight and warehousing expenses.

Urea

. Field warehouse inventories: Least of selling price to Marketers / Dealers.

. Inventories in transit: The least of selling price to Marketers / Dealers plus estimated/final concession less estimated warehousing expenses.

. Inventories at Plant ready for sale: The least of selling price to Marketers / Dealers plus estimated/final concession less estimated freight and warehousing expenses.

. Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus estimated/final concession less estimated bagging, freight and warehousing expenses.

. Warehousing expenses have been distributed over sales and closing stock.

. The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

. Ammonia is valued at cost as the same is captively consumed and not intended for sale. (vi) Off-spec products intended for disposal are valued at estimated realizable value. (vii) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(viii) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(ix) Goods in Transit / Under Inspection are valued at cost.

8 DEBTORS/LOANS AND ADVANCES:

Sundry Debtors, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 SALES:

Sales is net of sales return, dealers/marketers margin and Sales Tax.

10 UREA CONCESSION UNDER NEW PRICING:

Urea Concession is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered in the concession based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS:

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss account.

12 EMPLOYEE BENEFITS:

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis. (ii) Post-employment Benefits and other Long Term Employee Benefits

a. The Companys contribution to the Provident Fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees salary and charged to Profit and Loss account on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss Account.

b. The Company operates defined benefit plan for Gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss account.

c. The Liability of the Company in respect of Superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation.of India, which is charged to Profit & Loss account on accrual basis.

d. Obligations on Post Retirement Medical Benefits, Compensated absences and Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under Voluntary Retirement Scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS:

(i) Claims by the Company on Underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on Railways towards transit loss are accounted on settlement.

(iii) Claims for liquidated damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

14 PRIOR PERIOD ADJUSTMENTS:

Income/Expenditure which arise in the Current Year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as Prior Period Adjustments.

15 CONTINGENT LIABILITY:

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the company not acknowledged as debts are disclosed as contingent liabilities.

16 VALUE ADDED TAX (VAT):

Accounting of VAT is in line with provisions of statute i.e. tax on output is netted off against tax on input. Generally, in Fertilizer Industry, the tax on input is higher than the tax on output due to the subsidy regime and the input tax credit shall be carried forward to get refund per statutory provisions.

17 ii. CONCESSION UNDER NEEW PRICING SCHEME FOR UREA

Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs.28.62 Cr. (Previous year payable Rs.53.10 Cr.) has .been reckoned as receivable from FICC for the year 2009-10 towards annual escalation of input prices.

iii. PRICE CONCESSION SCHEME

The status of claims under the Price Concession Scheme in respect of Phosphatic and Potassic fertilizers which is included in "Claims Recoverable" is given below:

iv. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation loss of Rs.0.01 Cr is included in other expenses (Previous year gain - Rs.0.01 Cr).

v. CENTRAL EXCISE 25/70 NOTIFICATION

Central Excise claimed Rs. 5.42 Cr. as interest on the belated payment of duty of Rs.3.10Cr.inexcessofthedues.Based on the reference by the Company, CoD accorded permission on 08.07.08 to proceed for appeal to the Commissioner (Appeals) and directed that the Department should ensure no coercive action in the matter before disposal of the appeal by the Commissioner.

Accordingly an appeal against demand for delayed payment interest of Rs.5.42 Cr. and for refund of the excess Excise Duty of Rs.3.10 Cr. collected by the Department has been preferred with Commissioner.(Appeals) on 26.09.08 and is yet to be heard.

As the matter is subjudice, no provision is considered necessary in the Books by the Company. However the same is shown under Contingent Liability.

vi. The non moving and redundant spares identified by the Company amounting to Rs.6.77 Cr. have been fully provided for. (Previous year Rs.1.90 Cr.)

vii. Advances include a sum of Rs.63.09 Lacs deposited with ESI authorities being employer contribution to ESI as per the direction of Hon. Madras High Court. Pending disposal of the case, the amount is shown under Deposits as of 31.3.2010.

viii. The case filed by separated employees with Hon. Madras High Court for differential Gratuity arising on account of Pay Revision is stii! pending. Pending disposal of the case, the amount of Rs.1.16 Cr. paid to the ex-employees on interim basis, in line with the order of the Asst. Labour Commissioner is treated as Claims Recoverable as of 31.3.2010.

ix. Claims Recoverable include Rs.81.74 Lacs recoverable from Seashore Logistics Limited, ex C & F agent of the Company. The Company has filed a suit in the Hon. Madras High Court in this regard which is still pending. Hence the amount is retained under Claims Recoverable as of 31.3.2010.

x. As defined under AS - 28 on "Impairment of Assets" market valuation has been done by a reputed Chartered Engineer and Valuer. As per his report, no adjustment towards impairment loss is considered necessary by the Company as on 31.03.2010. Market value of the major Plant and Machinery has been assessed as against the book value on that date as detailed below:

xi. The Company has leased out its Bio-fertilizer Plant at Vijayawada, having a written down value of Rs. 33.54 Lacs (Previous Year - Rs. 35.04 Lacs). The lease rent received during the year is Rs. 1.70 Lacs (Previous Year - Rs. 1.48 Lacs).

xii. VALUE ADDED TAX (VAT)

The Company has paid lax on inputs amounting to Rs.81.11 Cr. (Previous Year Rs.51.92 Cr.) upto 31.03.2010. After adjusting the output tax payable of Rs. 16.52 Cr. (Previous year Rs. 10.88 Cr.), the balance amount of Rs.64.59 Cr. (Previous year Rs. 41.04 Cr.) is shown under Claims Recoverable. A claim for refund of Rs.41.04 Cr. being the input Tax Crediit . carried forward up to 31.03.2009 has been lodged with VAT authorities during the year.

xiv. OTHER DISCLOSURES

i. Information required under AS 15 (Revised) on "Employee Benefits" is provided in Annexure -1 to this schedule.

ii. The amount of borrowing costs capitalised for the year is NIL (Previous year NIL) per AS 16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per

AS 17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defined in AS 18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 21.

v. The Company has not entered into joint venture activities as defined in AS 27. Hence AS 27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vii. a) Considering the carry forward losses and allowances available for set off, there is no Income Tax liability for the year 2009-10. Hence no provision is made for Income Tax during the year.

b) Deferred tax asset (Net) as at 31.03.2010 has not been recognized as there is no taxable profits and set-off of the carry forward loss and depreciation benefits are available to the Company under the Income-Tax Act.

viii. The Company has made a reference to BIFR under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the same has been registered as Case No. 501/2007. In the hearing held on 02.04.09, BIFR declared the Company as a sick Company as per the provisions of SICA and appointed State Bank of India as the Operating Agency for further course of action. The hearings are in progress.

ix. The Company is still in the process of locating the shortages in Movable Fixed Assets observed by an outside professional firm on physical verification. Substantial value of the items declared short have since been located. The remaining value of the items will be located or provided for in the year 2010-11.

x. The change in the method of inventory valuation consequent upon change in Government Policy on phosphatic / potassic fertilizers during 2009-10 does not have any impact on inventory valuation.

Nutrient Based Subsidy scheme (NBS) which has replaced the price concession scheme for phosphatic / potassic fertilizers effective 01.04.10 does not have any impact on inventory valuation.

xi. Included in Other Creditors under Schedule 10-Current Liabilities and Provisions are:

a. Dues to CPCL - Rs.87.56 Cr. for which mortgage and First charge on Guindy land is given for Rs.100 Cr. from 22.12.2009 for a period of one year or till the date of sanction of a rehabilitation scheme for the Company whichever is earlier.

b. Dues to IOC - Rs.47.27 Cr. for which First charge on Plant and Machinery is given for Rs.50 Cr. along with Financial Institutions.

xii. During the year, the Company entered into One Time Settlement (OTS) with IFCI for Rs. 44.06 Cr. in full and final settlement of its total dues of Rs. 91.57 Cr. as of 31.03.2010. Accordingly, in terms of OTS an initial payment of Rs.20 Cr. was paid on 31.03.2010. Balance amount of Rs. 24.06 Cr. shall be paid in 6 instalments from July - December 2010. The benefit arising out of OTS shall be accounted on full settlement.

xiii. During March 2010, the Company has started production of NPKS 20-20-0-13 on tolling basis with Indian Potash Limited (IPL). In terms of the agreement, IPL shall provide all raw materials and conversion cost shall be paid by IPL to the Company.

Disclosure requirements under AS-15 (Revised) as per Note No: 20 B xiv(i)

Defined Contribution Schemes:

The net amounts expended in respect of employers contribution to the provident fund and superannuation fund during the year, are Rs.2.77 Cr. (Previous year: Rs.2.60 Cr.) and Rs.2.97 Cr. (Previous year: Rs. 2.81 Cr.) respectively.

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