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Notes to Accounts of Madras Fertilizers Ltd.

Mar 31, 2015

A. Pending appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty, CESTAT has waived pre-deposit of the duty and penalty on deposit of Rs. 5 lacs.which the Company has complied with.'

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 230.83 Cr (Previous Year Rs.181.35 Cr). However, the same is shown under Contingent Liabilities per practice.

c. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2015-16 was given for the entire insured value of Rs. 1661 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 200 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited.This note is provided per AS-4 (Contingencies and Events occurring after the Balance Sheet date).

d. During turnaround a minor fire accident occurred in April 2014 which resulted in stoppage of production. The Company preferred a claim with their insurers for the loss and the surveyor assessed the loss at Rs. 10.13 Cr. Based on the surveyor's final assessment, the Company has accounted the said amount under the head Other Income.

e. As MOU with DOF has been signed by the Company for the financial year 2015-16 indicating financial and operational support by DOF, GOI, in the opinion of the Company, the concept of Going concern has not been affected.

f. An amount of Rs. 4.39 Cr being VAT on Naphtha charged by CPCL between 7th Jan 2015 and 22nd Feb 2015 has been considered as receivable from Government of Tamil Nadu based on its commitment given to GOI on 31st Dec 2014 willing to forego VAT on Naphtha. This is also confirmed by GOI vide notification dated 7th Jan 2015.

g. Other Income includes a sum of Rs. 0.58 Cr being the rent receivable from CPCL for the area let out for their LPG pipeline, for which the renewal of agreement is under negotiation.

h. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

i. Figures for the previous year have been regrouped wherever necessary to conform to Current Year's classification.


Mar 31, 2014

1. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2013-14 2012-13

(a) Contingent Liabilities in respect of claims against the Company not acknowledged as 274,82,40,997 221,01,91,119 debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes Customs Duty on Imported Urea Rs. 65.86 Cr, Penal Interest on GOI Loans Rs. 181.35 Cr and interest on delayed payment of Excise Duty Rs. 5.42 Cr).

(b) L/Cs outstanding (not provided for) 13,97,55,664 1,07,54,814

(c) Estimated amount of contracts remaining to be executed on Capital Account and not 11,20,56,347 6,55,30,814 provided for (after adjusting advance made therefor)

(d) ESI Liability (interest) not provided for, based on Court''s interim injunction. 62,76,790 -

2. GENERAL INFORMATION:

a. The appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty is still pending. CESTAT has waived pre-deposit of the duty and penalty during the pendency of the appeal on deposit of Rs. 5 lacs by the Company which was complied with.

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 181.35 Cr (Previous Year Rs. 138.51 Cr). However, the same is shown under Contingent Liabilities per practice.

c. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2014-15 was given for the entire insured value of Rs. 1699 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 160 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited.

This note is provided per AS-4 (Contingencies and Events occurring after the Balance Sheet date).

d. Out of the total Claims Recoverable of Rs. 1248 Cr pending as at the year end, Rs. 306 Cr has been received subsequently in the month of April 2014. Further an amount of Rs. 497 Cr was released to the Company vide Special Banking Arrangement approved by GOI as a loan by a consortium of Bankers. This amount has been subsequently discharged in full by GOI vide discharge letter dated April 02, 2014 as per the Special Banking Arrangement. Pending such discharge the above amount of Rs. 497 Cr has been reckoned as Claims Recoverable with corresponding amount payable to the consortium of bankers which is shown under Short term Trade payables - Unsecured.

e. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

f. Figures for the previous year have been regrouped wherever necessary to conform to Current Year''s classification.


Mar 31, 2013

I. Information required under AS 15 (Revised) on "Employee Benefit Expenses" is provided in Annexure-1 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 defined 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 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 2012-13. Hence no provision is made for Income Tax during the year.

b) Deferred tax asset (Net) as at 31.03.2013 has not been recognized since there are no taxable profits in view of the set-bifbf the carry forward loss and depreciation benefits available to the Company'' under the Income-Tax " Act.

viii. The Draft Rehabilitation Scheme (DRS) submitted by the Operating Agency to BIFR is presently under the perusal and consideration ofGOI. The next BIFR hearing is posted on July 01,2013.

ix. In respect ofjfihe verification of movable fixed assets, the outside professional firm of Chartered Accountants have reviewed the reconciliation made by the Company after identifying and locating the high value items. Other small value items shall be taken up for a final review during 2013-14 in the current cycle of verification.

In view of the above, as there is no material financial impact, no provision was considered necessary during the year.

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

a. Dues to CPCL195.68 Cr (Previous Year Rs. 0.02 Cr) for which mortgage and First charge on Guindy land is given fort 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC X 49.67 Cr (Previous Year Rs. 49.60 Cr) for which First charge on Plant and Machinery is given for Rs.50.Cr..''.

xi. During the year, the catalysts .in process were charged off in full amounting to Rs. 18.75 Cr to be in line with the requirement of AS-26 (Intangible Assets). Had the last year method been followed, the charge would have been less by Rs. 12.62 Cr and correspondingly the profit would have been more by the same extent.

1. GENERAL INFORMATION:

a. The appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty is still pending.

Based on the restoration application filed by the Company before CESTAT, which waived pre-deposit of the duty and penalty during the pendency of the appeal on deposit of Rs. 5 lacs by the Company which was complied with.

b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 138.51 Cr (Previous Year Rs. 104.20 Cr). However, the same is shown under Contingent Liabilities per practice.

c. The total borrowings as Of 31st March 2013 are Rs. 554.25 Cr (Previous Year Rs. 554.25 Cr) are exclusive loans from Government of India. The pre-approved limits per Article 44 of Articles of Association are Rs. 550 Cr.

The necessary approval for increase in limits shall be obtained from the shareholders in the Annual General Meeting.

d. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2013-14 was given for the entire insured value ofRs. 1,699 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 105 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited.

This note is provided per AS4 (Contingencies and Events occurring after the Balance Sheet date).

e. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances.

f. Figures for the previous year have been regrouped wherever necessary to conform to Current Year''s classification.


Mar 31, 2012

I. 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.85.89 Cr. (Previous year Rs. 50.99 Cr.) has been reckoned as receivable from FICC for the year 2011-12 towards annual escalation of input prices.

ii. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation included in other expenses is Rs. 4.06 Cr (Previous year Rs. 7,362).

iii. CENTRAL EXCISE 25/70 NOTIFICATION

With due permission of COD, the Company has preferred an appeal with CESTAT on 18.07.2011 against (I) demand for delayed payment interest of Rs. 5.42 Cr. for refund of the excess Excise Duty of Rs. 3.10 Cr. collected by the Department and (ii) to quash the order of Commissioner (Appeals).The hearings are yet to take place.

No provision is considered necessary in the Books by the Company as the matter is subjudice. However the same is shown under Contingent Liability.

iv. 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. The Company has already filed Writ Appeal No. 1228/2010 against the orders passed in WP No. 14642/2006. The Hon. Court on 29.06.2010 granted interim stay until further orders and notice. Pending disposal of the case the amount is shown under advances as of 31.3.2012.

v GOI has approved the 2007 pay revision vide letter No: 84/1/2009-HR-I dated April 18,2011. In terms of the order the perks and allowances on the revised scales are effective 18.04.2011. Accordingly, perks and allowances for the period from 18.04.2011 to 31.03.2012 amounting to Rs. 3.41 Cr. has been provided in the books of accounts to enable implementation of revised perks and allowances per GOI order.

vi. OTHER DISCLOSURES

i. Information required under AS-15 (Revised) on "Employee Benefit Expenses" is provided in Annexure -1 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 defined 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 defined in AS-27. Hence AS-27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vi. The movement of Provisions as required under AS- 29 "Provisions, Contingent Liabilities and Contingent Assets" is given below:

Mar 31,2012 Mar 31,2011 (Rs. Cr) (Rs. Cr)

a. Leave Encashment

Provision at the beginning of the year 6.25 5.66

Provision made during the year 4.98 2.48

Utilisation/withdrawal during the year 1.83 1.89

Provision at the end of the year 9.40 6.25

b Retired Medical Benefits

Provision at the beginning of the year 1.43 1.34

Provision made during the year 0.05 0.23

Utilisation/withdrawal during the year 0.15 0.14

Provision at the end of the year 1.33 1.43

c. Service Awards

Provision at the beginning of the year 0.93 0.58

Provision made during the year 0.33 0.35

Utilisation/withdrawal during the year - -

Provision at the end of the year 1.26 0.93

d. Gratuity

Provision at the beginning of the year 12.19 3.72

Provision made during the year 7.40 10.47

Utilisation / withdrawal during the year 4.00 2.00

Provision at the end of the year 15.59 12.19

e. Bad and Doubtful Debts

Provision at the beginning of the year 5.17 4.33

Provision made during the year 0.15 0.98

Utilisation/withdrawal during the year 0.54 0.14

Provision at the end of the year 4.78 5.17

f. Claims Recoverable

Provision at the beginning of the year 0.82 -

Provision made during the year 0.19 0.82

Utilisation/withdrawal during the year

Provision at the end of the year 1.01 0.82

vii. a) Considering the carry forward losses and allowances available for set off, there is no Income Tax liability for the year 2011-12. Hence no provision is made for Income Tax during the year.

b) Deferred tax asset (Net) as at 31.03.2012 has not been recognized since there are no taxable profits in view of the set-off of the carry forward loss and depreciation benefits available to the Company under the Income-Tax Act.

viii. Eight hearings of BIFR have taken place since 02.04.2009 on which date, the Company was declared sick under SIC (SP) Act, 1985. The Operating Agency (SBI, Commercial Branch, Chennai) has submitted a Draft Rehabilitation Scheme (DRS) to BIFR. In the BIFR hearing held on 07.5.2012, the Board wanted certain clarifications/modifications in the DRS and directed the operating agency to resubmit the fully tied up DRS. Next hearing is posted on 27.08.2012.

ix. Based on the preliminary report of the outside professional firm of Chartered Accountants, the Company identified the disposal documents for most of the items reported short under Air Conditioners & Water Coolers and Lab Equipment. In respect of Furniture & Fittings, Office Equipment and Automotive & Service Equipment, the reconciliation is in progress. However, as most of the items reported short are fully depreciated, there is no material financial impact on Accounts.

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

a. Dues to CPCL - Rs. 0.02 Cr (Previous Year Rs. 82.27 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. 49.60 Cr (Previous Year Rs. 49.92 Cr) for which First charge on Plant and Machinery is given for Rs. 50 Cr

xi. The Company settled the dues to LICHFL through One Time Settlement and the benefit of Rs. 1.31 Cr (Previous year Rs. 124.69 Cr with Financial Institutions) has been accounted under extra ordinary items.

xii. The Annual maintenance of Plants was taken up from March 05, 2012. Per normally accepted Accounting Principles, all spares drawn from stores up to March 31,2012 together with connected labour costs were charged in 2011-12 Accounts, though the Plants have not restarted as of year end.

1. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2011-12 2010-11 (RS. ) (RS. )

(a) Contingent Liabilities in 183,58,01,504 156,72,77,307 respect of claims against the Company not acknowledged as debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes Customs Duty on Imported Urea Rs. 65.86 Cr, Penal Interest on GOI Loans Rs. 104.20 Cr, and interest on delayed payment of Excise Duty Rs. 5.42 Cr).

(b) L/Cs outstanding (not provided for) 18,12,30,479 21,72,90,258

(C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for (after adjusting advance made therefor) 19,28,08,775 96,222

(d) ESI Liability (interest) not provided for, based on Court's interim injunction. 38,41,925 42,53,871

2. GENERAL INFORMATION:

a. The Company has filed an appeal before the Commissioner of Customs (Appeals) over the denial of concessional rate of duty for imported Urea for use as manure by the Commissioner of Customs who demanded Rs. 65.86 Cr as differential duty including equal penalty. The appeal is pending.

Based on COD clearance, the Company has filed a restoration application before CESTAT, which vide order No: 66/12 dated 31.01.2012 waived pre-deposit of the duty and penalty during the pendency of the appeal. CESTAT also directed the Company to deposit an amount of Rs. 5 lacs which the Company has complied with. Further hearings are to take place.

b. During the year, the Company has moved 4,86,750 MT of Urea from current year production and 10,615 MTfrom the opening stock totaling to 4,97,365 MT. The Company is eligible for full subsidy upto 100% capacity i.e. 4,86,750 MT and for the balance quantity at the rates notified for the earlier years during which the stock got accumulated. Further, the balance quantity of unmoved opening stock of 4,142 MT is also eligible for subsidy as above. The valuation is done accordingly pending notification from FICC.

c. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables/Payables and Loans and Advances.

d. Figures for the previous year have been regrouped wherever necessary to conform to Current Year's classification.

Information to Investors Dear Shareholders

Dematerilisation of Madras Fertilizers Limited (MFL) Shares

As you may be aware that the shares of MFL are under compulsory dematerialisation (demat) segment of trading as per SEBI directives. This means, MFL shares can be purchased/sold at the Stock Exchanges only in demat form. Shareholders are therefore advised to avail the demat facility.

Dematerialisation

Dematerialisation is the process of converting physical share certificates into electronic form i.e. crediting of equivalent number of shares to your depository account electronically.

Depository Account

For dematerialisation of shares you have to open a depository account with a Depository Participant (DP) having connectivity with National Securities Depository Ltd (NSDL)/Central Depository Services (I) Ltd (CSDL). You are free to open an account with any of the DPs for demat.

Benefits of Dematerialisation

- No risk of loss/misplacement/theft/damage of share certificates

- No risk of bad deliveries

- No stamp duty on transfer of shares

- Faster transfer of shares

Steps involved for Dematerialisation of shares

1. Open a demat account with any of the Depository Participants (DPs)

2. Submit demat request form (DRF) (duly signed by all the holders) along with the share certificates to the DP.

3. Obtain acknowledgement from the DP for having delivered the share certificates

4. Receive a confirmation statement of holding from your DP.

5. PLEASE DO NOT SEND THE SHARE CERTIFICATES/DOCUMENTS FOR DEMAT TO THE COMPANY OR SHARE TRANSFER AGENT OF THE COMPANY.

Some of the DP names are furnished under for your reference.

You may contact nearest DP in this regard.

- Appollo Sindhoori Capital Investments Ltd

- Cholamandalam Securities Ltd

- Fortis Securities Ltd

- Geojit Financial Services Ltd

- HDFC Bank Ltd

- ICICI Bank Ltd

- IDBI Bank Ltd

- India Infoline Securities P Ltd

- Indian Bank

- Induslnd Bank Ltd

- Integrated Enterprises India Ltd

- Kotak Securities Ltd

- State Bank of India

- Stock Holding Corporation of India Ltd

- Union Bank of India

- UTI Bank of India

- UTI Securities Ltd

In order to obtain the complete list of DP locations and other related information you may log on www.nsdl.co.in/ www.cdslindia.com

In case you need any additional information on this matter, please feel free to contact:

G Alagarsamy

Company Secretary Madras Fertilizers Limited Manali,Chennai-600068 Phone: 044-25941001 /25941201 Extn 3456 Fax : 044-25943613


Mar 31, 2010

1. CONTINGENT LIABILITIES, CAPITAL COMMITMENTS AND L/Cs OUTSTANDING:

2009-10 2008-09

Rs Rs

(a) Contingent Liabilities in respect of claims against the Company not acknowledged as debts in respect of Income Tax, Excise Duty, Sales Tax and others (Includes 135,42,21,875 111,97,51,955

Customs duty on Imported Urea Rs 65.86 Cr., Penal Interes on GOI Loans Rs 54.79 Cr., and interest on delayed payment of Excise Duty Rs 5.42 Cr).

(b) L/Cs outstanding (not provided for) 2,38,17,475 4,68,51,983

(c) Estimated amount of contracts remaining to be executed on Capital Account and not provided for (after adjusting vance made therefor) 3,07,14,074 3,13,02,655

(d) ESI Liability not provided for the period Oct. 1999 to Sep. 2000 based on Courts interim injunction and interest for the earlier period. 42,53,871 42,53,871

2. GENERAL INFORMATION:

a. SALARY/WAGE REVISION :

(i) GOI have approved Salary/Wage revision effective January 1, 1997 for Supervisors and Non-Supervisors vide OM No.118/3/2000-HR-1 dated October 12, 2000 and the same had been implemented effective April 1, 2000. However, arrears for the period January 1,1997 to March 31,2000 shall be paid in 8 instalments subject to the Company making a minimum profit of Rs. 10.50 Cr. The instalments will be spaced to the extent of a maximum of 50% of the profit which shall be permitted to be appropriated for payment of arrears.

In line with the GOI approval as above, since the Company has earned a profit of Rs. 13.68 Cr. during 2009-10, an amount of Rs. 6.80 Cr. has been appropriated from the profit for the year 2009-10 towards partial arrears.

(ii) GOI accepted the 2nd CPSE Pay Revision Committee recommendations and issued an Office Memorandum No.2(70)/ 08-DPE(WC) dated November 26,2008, January 14,2009 and April 02,2009 regarding pay revision effective January 01, 2007 for Executives and Non-unionised Supervisors of CPSEs. The Board approved proposal for Pay Revision has been forwarded to GOI. The amount of Arrears is not quantifiable at this stage as the proposal is yet to be approved by GOI.

b. Department of Fertilizers, permitted the Company to use Imported Urea as a source of Nitrogen in the production of complex fertilizers after revamp from 1998 onwards. Licenses were issued by DGFT subject to the condition that only specified quantity of Urea produced indigenously by the Company would be eligible for direct sales under ECA allocation.

The Commissioner of Customs vide his adjudication order denied concessional rate of duty available for Imported Urea for use as manure but diverted for direct sale and demanded differential Customs Duty with equal amount of penalty totaling to Rs.65.86 Cr. The Company has filed an appeal before the Commissioner of Customs (Appeals), which is still pending. In its hearing held on April 8, 2010, CoD has accorded permission to the Company to represent the matter before CESTAT.

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

c. Confirmation of balances has not been received in respect of Loans from GOI/ Financial Institutions, Debtors, Creditors, Claims Recoverable and other parties included under Loans and advances.

d. Figures for the previous year have been regrouped wherever necessary to conform to Current Years classification.

e. Additional information as required under Part IV of Schedule VI to the Companies Act, 1956 is furnished in AnnexureII.

 
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