Notes to Accounts of Mahanagar Telephone Nigam Ltd.
Mar 31, 2023
Provisions, contingent liabilities and contingent assets
A provision is recognised when the Company has a present legal or constructive obligation
as a result of a past event and it is probable that an outflow of economic resources will be
required from the Company and amounts can be estimated reliably. Timing or amount of
the outflow may still be uncertain.
Provisions are measured at the estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at the reporting date, including
the risks and uncertainties associated with the present obligation. Where there are a
number of similar obligations, the likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as a whole. Provisions are discounted
to their present values, where the time value of money is material.
In those cases where the possible outflow of economic resources as a result of present
obligations is considered improbable or remote, no liability is recognized or disclosure is
made.
Contingent liabilities are disclosed in case of present obligation arising from past events,
when it is not probable that an outflow of resources will be required to settle the obligation
or the amount cannot be estimated reliably.
Contingent assets are not recognised. However, when inflow of economic benefit is
probable, related asset is disclosed.
p) Government grants
Government grants are recognised if it is sufficiently certain that the assistance will be
granted and the conditions attached to assistance are satisfied. Where the grant relates to
specified asset, it is recognised as deferred income, and amortized over the expected useful
life of the asset. Other grants are recognised in the statement of profit and loss concurrent
to the expenses to which such grants relate/ are intended to cover.
Where the Company receives non-monetary grants, the asset and the grant are recorded
gross at fair amounts and released to the statement of profit and loss over the expected
useful life and pattern of consumption of the benefit of the underlying asset.
q) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with
other short-term, highly liquid investments (original maturity less than 3 months) that are
readily convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value.
r) Statement of Cash flow
Statement of cash flow is being prepare in accordance with the requirements of Indian
Accounting Standard (Ind AS) 7 "Statement of Cash Flows". Cash flows from operating
activities is reported using the indirect method whereby profit or loss 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 items of income or expense associated with
investing or financing cash flows.
s) Adjustment pertaining to earlier years
Income from services and other income pertaining to prior years is not disclosed as prior
period item for each individual transaction not exceeding '' ?1.00 lakh and similarly items
of expenditure for each individual transaction not exceeding '' ?1.00 lakh are considered as
expenditure of current year.
In respect of other items of income (including operating income and other income) and
expenditure relating to prior periods, the net effect of which on retained earning does not
exceed 1% of turnover is treated as income/expenditure of current year.
t) Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued. Share premium
includes any premiums received on issue of share capital. Any transaction costs associated
with issuing of shares are deducted from share premium account, net of any related income
tax benefits.
Other components of equity include the following:
⢠Re-measurement of defined benefit liability - comprises the actuarial gain or loss from
changes in demographic and financial assumptions and return on plan assets
⢠Reserve for contingencies
⢠Reserve for research and development
⢠Reserve for debenture redemption
⢠General reserve
⢠Other transactions recorded directly in other comprehensive income.
Retained earnings include all current and prior period retained profits. All transactions with
owners of the parent are recorded separately within equity. Dividend distributions payable to
equity shareholders are included in other liabilities when the dividends have been approved in
a general meeting prior to the reporting date.
Standards issued but not yet effective:
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing
standards. Following are amendments to existing standards, which are applicable to the
company and will be effective from 1 April 2023.
Amendment to Ind AS 1, Presentation of Financial Statements
The Ministry of Corporate affairs ("MCA") vide its notification dated 31 March 2023 has issued
an amendment to Ind AS 1 which specifies that companies should disclose material accounting
policy information instead of significant accounting policies. Accounting policy information
together with other information is material when it can reasonably be expected to influence
decisions of primary users of general purpose financial statements.
An entity shall disclose, along with material accounting policy information or other notes, the
judgements, apart from those involving estimations, that management has made in the process
of applying the entity''s accounting policies and that have the most significant effect on the
amounts recognised in the financial statements.
Amendment to Ind AS 8, Accounting Policies, Change in Accounting Estimates and Errors
The Ministry of Corporate affairs ("MCA") vide its notification dated 31 March 2023 has issued
an amendment to Ind AS 101 which substituted the definition of ''change in accounting estimate''
with accounting estimate. The revised definition says that accounting estimates are monetary
amounts in the financial statements that are subject to measurement uncertainty. A company
develops an accounting estimate to achieve the objective set out by an accounting policy.
Accounting estimate includes selection of a measurement technique and selection of inputs to
be used when applying the chosen measurement technique.
An entity uses measurement techniques and inputs to develop an accounting estimate.
Measurement techniques include estimation techniques (for example, techniques used to measure
a loss allowance for expected credit losses applying Ind AS 109) and valuation techniques
An entity may need to change an accounting estimate if changes occur in the circumstances on
which the accounting estimate was based or as a result of new information, new developments
or more experience. By its nature, a change in an accounting estimate does not relate to prior
periods and is not the correction of an error.
The effects on an accounting estimate of a change in an input or a change in a measurement
technique are changes in accounting estimates unless they result from the correction of prior
period errors
Prospective recognition of the effect of a change in an accounting estimate means that the
change is applied to transactions, other events and conditions from the date of that change.
A change in an accounting estimate may affect only the current period''s profit or loss, or the
profit or loss of both the current period and future periods. For example, a change in a loss
allowance for expected credit losses affects only the current period''s profit or loss and therefore
is recognised in the current period. However, a change in the estimated useful life of, or the
expected pattern of consumption of the future economic benefits embodied in, a depreciable
asset affects depreciation expense for the current period and for each future period during the
asset''s remaining useful life. In both cases, the effect of the change relating to the current period
is recognised as income or expense in the current period. The effect, if any, on future periods is
recognised as income or expense in those future periods.
Corrections of errors are distinguished from changes in accounting estimates. Accounting
estimates by their nature are approximations that may need changing as additional information
becomes known. For example, the gain or loss recognised on the outcome of a contingency is
not the correction of an error.
Amendment to Ind AS 12, Income Taxes:
The Ministry of Corporate affairs ("MCA") vide its notification dated 31 March 2023 has issued
an amendment to Ind AS 12 which specifies that the initial recognition of an asset or liability
in a transaction which at the time of the transaction, does not give rise to equal taxable and
deductible temporary differences.
Income recognition exemption does not apply to transactions that give rise to equal and offsetting
temporary differences. Accordingly, companies will need to recognise a deferred tax asset and
deferred tax liability for temporary differences arising on transactions such as initial recognition
of a lease and a decommissioning provision.
The amendment also specifies that if the transaction is not a business combination, affects neither
accounting profit nor taxable profit and does not give rise to equal taxable and deductible
temporary differences, an entity would, in the absence of the exemption provided by paragraphs
15 and 24, recognise the resulting deferred tax liability or asset and adjust the carrying amount of
the asset or liability by the same amount. Such adjustments would make the financial statements
less transparent. Therefore, this Standard does not permit an entity to recognise the resulting
deferred tax liability or asset, either on initial recognition or subsequently. Furthermore, an
entity does not recognise subsequent changes in the unrecognised deferred tax liability or asset
as the asset is depreciated.
A transaction that is not a business combination may lead to the initial recognition of an asset
and a liability and, at the time of the transaction, affect neither accounting profit nor taxable
profit. For example, at the commencement date of a lease, a lessee typically recognises a lease
liability and the corresponding amount as part of the cost of a right-of-use asset. Depending
on the applicable tax law, equal taxable and deductible temporary differences may arise on
initial recognition of the asset and liability in such a transaction. The exemption provided by
paragraphs 15 and 24 does not apply to such temporary differences and an entity recognises any
resulting deferred tax liability and asset.
Amendment to Ind AS 34, Interim Financial Reporting
The Ministry of Corporate affairs ("MCA") vide its notification dated 31 March 2023 has issued
an amendment to Ind AS 101 which specifies that the words "significant accounting policies", is
replaced with "material accounting policy information"
Significant management judgement in applying accounting policies and estimation
uncertainty
The preparation of the Company''s standalone financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the
reporting period. However, uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of the assets or liabilities in
future periods.
Significant management judgements
The following are significant management judgements in applying the accounting policies of
the Company that have significant effect on the financial statements.
Recognition of deferred tax assets - The extent to which deferred tax assets can be recognized
is based on an assessment of the probability of the Company''s future taxable income against
which the deferred tax assets can be utilized. In addition, significant judgement is required in
assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions
Evaluation of indicators for impairment of assets - The evaluation of applicability of indicators
of impairment of assets requires assessment of several external and internal factors which could
result in deterioration of recoverable amount of the assets.
Assessment lease term -Lease term includes non-cancellable periods of lease along with
extension options reasonably certain to be exercised and termination options reasonably certain
not to be exercised. The assessment of whether extension options and termination options
are reasonably certain to be exercised or not to be exercised, involve significant management
judgement based upon economic incentives to extend or terminate the lease.
Activation and installation fees - The Company receives activation and installation fees from
new customers. These fees together with directly attributable costs are amortised over the
estimated duration of customer relationship period. The customer relationship period is reviewed
periodically. The estimated relationship period principally reflects management''s view of the
average economic relationship period of the customer base and is assessed by reference to key
performance indicators (KPIs) which are linked to establishment/ ascertainment of customer
relationship period. A change in such KPIs may lead to a change in the estimated useful life and
an increase/ decrease in the amortisation income/charge. The Company believes that the change
in such KPIs will not have any material effect on the financial statements.
Recoverability of advances/receivables - At each balance sheet date, based on discussions with
the respective counter-parties and internal assessment of their credit worthiness, the management
assesses the recoverability of outstanding receivables and advances. Such assessment requires
significant management judgement based on financial position of the counter-parties, market
information and other relevant factor.
Classification of assets and liabilities into current and non-current - The management classifies
the assets and liabilities into current and non-current categories based on management''s
expectation of the timing of realisation of the assets or timing of contractual settlement of
liabilities.
Impairment of assets - In assessing impairment, management estimates the recoverable
amounts of each asset or cash-generating unit (in case of non-financial assets) based on expected
future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to
assumptions about future cash flows and the determination of a suitable discount rate
Useful lives of depreciable/amortisable assets (tangible and intangible) - Management
reviews its estimate of the useful lives of depreciable/amortisable assets at each reporting date,
based on the expected utility of the assets. Uncertainties in these estimates relate to technical and
economic obsolescence that may change the utility of certain software, customer relationships, IT
equipment and other plant and equipment. During the current year, the Company has changed
its estimate of useful live for mobile handsets used for service connection from 4 years to 3 years.
The impact of such change in useful live is immaterial on the Company''s financial statements.
Inventories - Management estimates the cost of inventories including cost of materials and
overheads considered attributable to the production of such inventories, taking into account
the most reliable evidence available including actual cost of production, etc. Management also
estimates the net realisable values of inventories, taking into account the most reliable evidence
available at each reporting date. The future realisation of these inventories may be affected by
future technology or other market-driven changes that may reduce future selling prices.
Defined benefit obligation (DBO) - Management''s estimate of the DBO is based on a number of
critical underlying assumptions such as standard rates of inflation, medical cost trends, mortality,
discount rate and anticipation of future salary increases. Variation in these assumptions may
significantly impact the DBO amount and the annual defined benefit expenses
Fair value measurements - Management applies valuation techniques to determine the fair value
of financial instruments (where active market quotes are not available) and non-financial assets.
This involves developing estimates and assumptions consistent with how market participants
would price the instrument. Management bases its assumptions on observable data as far as
possible but this is not always available. In that case management uses the best information
available. Estimated fair values may vary from the actual prices that would be achieved in an
arm''s length transaction at the reporting date.
Mar 31, 2021
The Company reviews fair values annually. The following factors have been considered for determination of fair value -
(a) Leasehold properties - These land properties have been allotted to MTNL on perpetual lease from the government for carrying out operations in normal course of business. The Company constantly reviews the utilisation of its facilities and any surplus properties are considered for letting out to earn rental income. Being leasehold properties, the Company is restricted from selling them in an active market, however, such properties can be converted into freehold properties at circle rates at which the government (or other bodies representing the government) would sell such properties in an active market. This is considered to be representative of the fair value of properties as at reporting date.
(b) Freehold land - The circle rates are considered to be a fair representation at which such properties can be sold in an active market.
(c) Buildings - In case of constructed building, cost of construction adjusted with the present day price index has been taken as the basis of valuation. Necessaiy depreciation for age and life of the structure has been taken into account.
Refer note 51 for disclosure of contractual commitments for the acquisition of intangible assets.
(ii) Amortisation for the year has been included in line item ''Depreciation and amortisation expense'' in statement of profit and loss.
(iii) There was no expenditure incurred on research and development during the current and comparative year.
(a) Investments in subsidiaries, associates and joint venture are stated at cost as per Ind AS 27 ''Separate Financial Statements''.
(b) As per article 12.19 (b) of Shareholders'' agreement together with para 27 of the amendatory agreement (together referred to as ''amended agreement'') entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as ''Investors'' pursuant to their investment in United Telecom Limited (''UTL''), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 month''s notice. Pursuant to this exit clause, the Company had issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner had sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. NVPL vide its letter dated 31 March 2021, has requested MTNL to submit its response against the draft Share Purchase Agreement (''SPA'') for acqusition of shares held by Investors at face value of Nepalese Rupees 100 per share and MTNL is in the process of reviewing and finalising the said SPA. Accordingly, such investment has been classified as ''held for sale'' in the financial statements for year ended 31 March 2020 and 31 March 2021. Refer note 21 for details.
(i) '' 11.96 crores ( 31 March 2020 - '' 0.63 crores) representing deposits with original maturity of more than twelve months, held by the entity that are not available for use by the Company, as these are pledged with the banks for issuing bank guarantees to third parties.
(ii) '' 0.30 crores (31 March 2020 - '' nil) representing deposits with original maturity of more than twelve months, held by the entity that are not available for use by the Company, as these are under lien with Honourable Courts.
(iii) Refer note 45 - Fair value disclosures for disclosure of fair value in respect of financial assets measured at amortised cost and note 46 - Financial risk management for assessment of expected credit losses
(i) Trade receivables have been pledged as security for liabilities, for details refer note 54.
(ii) No trade or other receivable are due from director or other officers of the Company either severally or jointly with any other person. Further, no trade or other receivables are due from firms or private companies respectively in which any director is partner, director or a member.
(iii) Trade receivables are secured to the extent of security deposits received from customers, with contractual amounts as at 31 March 2021 of '' 84.02 crores (31 March 2020 - '' 77.36 crores) and related amortised cost as at 31 March 2021 of '' 41.21 crores (31 March 2020 - '' 35.20 crores).
(iv) The carrying values of trade receivables are considered to be a reasonable approximation of fair values.
(i) '' 0.01 crores (31 March 2018 - '' nil) representing deposits with original maturity of less than three months, held by the entity that are not available for use by the Company, as these are pledged with the banks for issuing bank guarantees to third parties.
(ii) Other than as disclosed, there are no repatriation restrictions with respect to cash and cash equivalents as at the end of the reporting period and previous period.
(i) '' 2.22 crores ( 31 March 2020 - '' 13.02 crores) representing deposits with original maturity of more
than three months but less than twelve months, held by the entity that are not available for use by the Company, as these are pledged with the banks for issuing bank guaranteesto third parties.
(i) Refer note 45 - Fair value disclosures for disclosure of fair value in respect of financial assets measured at amortised cost.
(ii) For details on settlement of receivable from related parties refer note 49.
(iii) For details on settlement of receivable from BSNL, refer note 63.
(a) In respect of assets classified as held for sale, the Company was in the process to sell switches and BTS-batteries originally acquired for GSM Services in Mumbai in earlier years. A tender was floated for auction of the asset held for sale, which failed due to technical reasons that was not originally envisaged. Another tender was under process for auction of the asset at the year ending 31 March 2021 and favourable resolution is expected. Therefore, such assets continue to be classified as held for sale.
Non-recurring fair value measurements
Asset classified as held for sale was measured at the lower of its carrying amount and fair value less costs to sell at the time of re-classification, resulting in the recognition of a write down of '' nil (31 March 2020: '' nil) as impairment loss in the statement of profit and loss.
As per article 12.19 (b) of Shareholders'' agreement together with para 27 of the amendatory agreement (together referred to as ''amended agreement'') entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as ''Investors'' pursuant to their investment in United Telecom Limited (''UTL''), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of
other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 month''s notice. Pursuant to this exit clause, the Company had issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner had sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. NVPL vide its letter dated 31 March 2021, has requested MTNL to submit its response against the draft Share Purchase Agreement (''SPA'') for acqusition of shares held by Investors at face value of Nepalese Rupees 100 per share and MTNL is in the process of reviewing and finalising the said SPA. Accordingly, such investment has been classified as ''held for sale'' in the financial statements for year ended 31 March 2020 and 31 March 2021.
Non-recurring fair value measurements
The recoverable amount is expected to be higher than the carrying value of such investment and therefore, no further loss required to be recognised upon classification of such investment as ''held for sale''.
b) Rights/preferences/restrictions attached to equity shares
The Company has only one class of equity shares having par value of '' 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
There are no shares issued for consideration other than cash and no shares have been bought back in last five years.
There are no shares reserved for issue under options or other purpose.
(i) D ebenture redemption reserve
The Company is required to create a debenture redemption reserve out of the profits which is available for payment of dividend for the purpose of redemption of debentures.
(ii) Securities premium
Securities premium represents premium received on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act.
(iii) Contingency reserve
The Company created this reserve for unforeseen tax demands/disallowances by Income tax department under section 80IA of the Income Tax Act, 1961.
(iv) Other Comprehensive Income(OCI)
The Company has recognised remeasurements benefits on defined benefits plans through Other comprehensive income
*Debentures-Series 1A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 8.57 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 28 March 2023. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 2A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 9.38 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 05 December 2023. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 5
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 7.05 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 11th October 2030. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 6
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 6.85 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 20th December 2030. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
(iv) Government of India approved the financial support to the Company in the year 2014 and on surrender of Broadband Wireless Access (BWA) Spectrum by MTNL, upfront charges paid by the Company in the year 2011 for such spectrum amounting to '' 4,533.97 crores were agreed to be funded by way of issuance of debentures by the Company on behalf of Government of India (GOI) and for which GOI provided sovereign guarantee with attendant condition for repayment of principal on maturity as well as the interest payments through DOT. Accordingly, the Company does not have any liability towards repayment of principal and interest on the bonds issued and has been offset against the amount recoverable from DoT of equivalent amount.
(v) For details on repayment schedule of finance lease obligations, refer note 52(B).
(vi) Refer note 45 - Financial instruments for disclosure of fair values in respect of financial liabilities measured at amortised cost and analysis of their maturity profiles.
(vii) Leasehold given as mortgage to Bank of Baroda and Indian bank:
(a) Leasehold land and building situated at Powai Plot-A, Mumbai (CTS No. 6 (PT) of village Powai (18/30), (31) of Village Tirandaz.
(b) Leasehold land and building situated at Powai Plot-A, Mumbai (CTS No. 6 (PT) of village Powai (18/30), (31) of Village Tirandaz.
(c) Plot No.C-71, CTS No.4207, G-Block, BKC, Village- Kolekalyan, Tal. -Andheri, Mumbai Suburban District
(i) Information about individual provisions and significant estimates
(a) Provision for asset retirement obligations
The Company as part of its business installs wireless telecommunication towers and other equipments for facilitating telecommunication services to its customers and is under an obligation to decommission the tower and replenish the site at end of useful life of the tower and other equipment. For the purpose of same Appendix A to Ind AS 16, "Property, Plant and Equipment" states measurement of Property, plant and equipment to include initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Company has estimated the cost of dismantling based on independent bids received from open market and the same have been escalated using the expected inflation rate (6% per annum) and discounted at the rates prevailing at each period end date.
(b) For disclosures required related to provision for employee benefits, refer note 48- Employee benefit obligations
(i) MTNL has unabsorbed depreciation and brought forward business losses amounting to '' 23,405.24 crores as on 31 March 2021 on which no deferred tax asset has been recognised. Deferred tax asset shall be created in the year in which the Company will have reasonable certainty of future taxable income as required by Indian Accounting Standard 12 - "Income Taxes" as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
(ii) The Company has not recognized tax expense/credit (current and deferred tax) in the statement of profit and loss (including other comprehensive income) as the Company is incurring losses and there is no reasonable certainty supported by convincing evidence that sufficient future taxable profits will be available against which unused tax losses can be utilized.
44. Earnings per equity share
The Company''s Earnings Per Share (''EPS'') is determined based on the net profit attributable to the shareholders'' of the Company. Basic earnings per share is computed using the weighted average number of shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the year including share options, except where the result would be anti-dilutive.
Financial assets and financial liabilities measured at fair value in the statement of financial position are divided into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
ii) Financial assets and liabilities measured at fair value - recurring fair value measurements(iii) Fair value of instruments measured at amortised cost
The management assessed that cash and cash equivalents, other bank balances,trade receivables, other receivables, trade payables and short-term borrowings approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as interest rates, individual creditworthiness of the customer and other market risk factors. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.
(ii) The fair values of the Company''s interest-bearing borrowings, loans and receivables are determined by applying discounted cash flows (''DCF'') method, using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own nonperformance risk as at 31 March 2021 was assessed to be insignificant.
46. ''Financial risk management
i) Financial instruments by category
Credit risk is the risk that a counterparty fails to discharge an obligation to the company. The company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The company''s maximum exposure to credit risk is limited to the carrying amount of following types of financial assets.
- cash and cash equivalents,
- trade receivables,
- loans & receivables carried at amortised cost, and
- deposits with banks and financial institutions.
a) Credit risk management
The Company assesses and manages credit risk based on internal credit rating system, continuously monitoring defaults of customers and other counterparties, identified either individually or by the company, and incorporates this information into its credit risk controls. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.
Trade receivables
Credit risk related to trade receivables are mitigated by taking bank guarantees from customers where credit risk is high. The Company closely monitors the credit-worthiness of the debtors through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts. The Group assesses increase in credit risk on an ongoing basis for amounts receivable that become past due and default is considered to have occurred when amounts receivable become past due in each business segment as follows:
(i) Cellular: Six months past due
(i) Basic& other services: Three years past due
Other financial assets measured at amortised cost
Other financial assets measured at amortized cost includes loans and advances to employees, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.
b) Expected credit losses
The Company provides for expected credit losses based on the following:
Trade receivables
(i) The company recognizes lifetime expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analysing historical trend of default relevant to each business segment based on the criteria defined above. And such provision percentage determined have been considered to recognise life time expected credit losses on trade receivables (other than those where default criteria are met).
Other financial assets measured at amortised cost
Company provides for expected credit losses on loans and advances other than trade receivables by assessing individual financial instruments for expectation of any credit losses. Since this category includes loans and receivables of varied natures and purpose, there is no trend that the company can draws to apply consistently to entire population For such financial assets, the Company''s policy is to provides for 12 month expected credit losses upon initial recognition and provides for lifetime expected credit losses upon significant increase in credit risk. The Company does not have any expected loss based impairment recognised on such assets considering their low credit risk nature, though incurred loss provisions are disclosed under each sub-category of such financial assets.
B) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities.Management monitors rolling forecasts of the Company''s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company''s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
b) Maturities of financial liabilities
The tables below analyse the Company''s financial liabilities into relevant maturity Companyings based on their contractual maturities for all non-derivative financial liabilities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances
a) Foreign currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the functional currency of any of the Company entities. Considering the low volume of foreign currency transactions, the Company''s exposure to foreign currency risk is limited and the Company hence does not use any derivative instruments to manage its exposure. Also, the Company does not use forward contracts and swaps for speculative purposes.
b) Interest rate risk i) Liabilities
The Company''s policy is to minimise interest rate cash flow risk exposures on long-term financing. At 31 March 2021 and 31 March 2020, the Company is exposed to changes in interest rates through bank borrowings at variable interest rates. The Company''s investments in fixed deposits carry fixed interest rates.
The Company''s fixed deposits are carried at amortised cost and are fixed rate deposits. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
The Company does not have any significant investments in equity instruments which create an expo sure to price risk.
The Company'' s capital management objectives are
- to ensure the Company''s ability to continue as a going concern
- to provide an adequate return to shareholders
The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of balance sheet.
Management assesses the Company''s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company''s various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service.
For the funded plan, the Company makes contributions to recognised debt base funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected payments. The expected contribution to the plan for next annual reporting period amounts to '' 7.12 crores (previous year - ''7.35 crores). The weighted average duration of the defined benefit obligation as at 31 March 2021 is 12 to 13 years (31 March 2020: 12 to 13 years).
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied which was applied while calculating the defined benefit obligation liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous period.
The leave obligations cover the Company''s liability for sick and earned leaves.The Company does not have an unconditional right to defer settlement for the obligation shown as current provision balance above. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months, therefore based on the independent actuarial report, only a certain amount of provision has been presented as current and remaining as non-current. Amount of '' 9.00 crores (previous year: '' 269.40 crores) has been recognised in the statement of profit and loss.
C. Defined contribution plans
Contributions are made to the Government Provident Fund and Family Pension Fund which cover all regular employees eligible under applicable Acts. Both the eligible employees and the Company make pre-determined contributions to the Provident Fund. The contributions are normally based upon a proportion of the employee''s salary.
The Company has recognized the following amounts in the statement of profit and loss :
*As per article 12.19 (b) of Shareholders'' agreement together with para 27 of the amendatory agreement (together referred to as ''amended agreement'') entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as ''Investors'' pursuant to their investment in United Telecom Limited (''UTL''), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 month''s notice. Pursuant to thisexit clause, the Company had issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner had sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. NVPL vide its letter dated 31 March 2021, has requested MTNL to submit its response against the draft Share Purchase Agreement (''SPA'') for acqusition of shares held by Investors at face value of Nepalese Rupees 100 per share and MTNL is in the process of reviewing and finalising the said SPA. Accordingly, such investment has been classified as ''held for sale'' in the financial statements for year ended 31 March 2020 and 31 March 2021. Refer note 21 for details.
51. Commitments
A. Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
B. In respect of incomplete contracts where the expenditure already incurred has exceeded the contract value, the additional expenditure required to complete the same cannot be quantified.
52. Ind AS 116 Leases
The Company has leases for office building, warehouses and related fcilities and cars. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate are excluded from the initial measurement of the lease liability and right of use assets. The Company classifies its right-of-use assets in a consistent manner to its property, plant and equipment.
Each lease generally imposes a restriction that, unless there is a contractual right for the Company to sublease the asset to another party, the right-of-use asset can only be used by the Company. Some leases contain an option to extend the lease for a further term. The Company is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings and other premises the Company must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Company is required to pay maintenance fees in accordance with the lease contracts.
The Company is in the business of providing telecommunication services in India and has two reportable segments viz. Basic and Cellular. As per para 4 of Ind AS 108 ''Operating Segments", if a financial report contains both the consolidated financial statements as well as the separate financial statements, segment information is required only in the consolidated financial statements.
The Company is in the process of seeking confirmation from its vendors regarding their status under the Micro, Small and Medium Exterprises Development Act, 2006. The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
56A The Company is covered under Section 135 of the Companies Act, 2013 and accordingly constituted a Corporate Social Responsibility Committee of the Board. However, as the Company did not have average net profits based on the immediately preceding three financial years, the Company is not required to spend amounts towards Corporate Social Responsibility in terms of the 2013 Act.
56B During the year the Company has made expenditure in foreign currency equivalent to '' 0.12 crores (previous year '' 2.08 crores). Whereas earnings in foreign currency are ''0.44 crores (previous year '' 1.44 crores).
57. Revenue from contracts with customers
Indian Accounting Standard 115 Revenue from Contracts with Customers ("Ind AS 115"), establishes a framework for determining whether, how much and when revenue is recognised and requires disclosures about the nature, amount, timing and uncertainty of revenues and cash flows arising from customer contracts. Under Ind AS 115, revenue is recognised through a 5-step approach:
(i) Identify the contract(s) with customer;
(ii) Identify separate performance obligations in the contract;
(iii) Determine the transaction price;
(iv) Allocate the transaction price to the performance obligations; and
(v) Recognise revenue when a performance obligation is satisfied.
The Company has adopted the standard on 1 April 2018 using modified retrospective approach with a cumulative catch-up adjustment made in retained earnings at the beginning of the current financial year, ie, 1 April 2018 as if the standard had always been in effect. The standard is applied only to contracts that are not completed as at 1 April 2018. Comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the new standard did not result in any adjustments to the Company''s revenue or net income.
58. Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 01 April 1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.
59. Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and it also included the spectrum given on trial basis to the extent of 4.4 MHz in 1800 MHz frequency while calculating the spectrum charges. The calculations are further subject to change in accordance with the changes in the quantum of spectrum holding and the remaining valid period of license as per DOT MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 MHz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28 February 2016.
Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNLs case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained. The finalisation of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability if any. Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of '' 3,205.71 crores is shown on the basis of the demand raised by DOT in respect of GSM which isvery old and not insisted till date. As per industry related issue in litigation and TDSAT judgment there upon the estimated liability could not be more than '' 455.15 crore. As there is no further demand after the demand of '' 3,205.71 crores dated 08 January 2013 till now, the contingent liablity aslo, if the same fructified, can not be more than '' 455.15 crore. As such the same is disclosed accordingly.
60. Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.
61. The Company had claimed benefit under section 80IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The Company has preferred appeals for the remaining claim before the Hon''ble Court of Delhi. The Company has retained the provision of '' 375.96 crores (previous year '' 375.96 crores) for this claim for the assessment years 1998-99, 1999-00 and 2000-2001, however, the demands on this account amounting to '' 243.22 crores (previous year '' 243.22 crores) for the assessment years 2001-02 to 2006-07
have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.
a) MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04 April 1996. MTNL, Mumbai & Delhi invoked Bank Guaran-teeson 09 April 1996, issued Legal Notice on 22 July 1996 and terminated the contract. Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09 April 2013 partly in favour of MTNL, Mumbai and on 31 July 2013 in favour ofMTNL,Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/payment of the same becomes reasonably certain. M/s. M& N Publicationshasapproachedthe Bombay&Delhi HighCourts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due. The claim of '' 49.04 crores on this account has been shown as contingent liability in Delhi unit.
b) As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai '' 124.93 crores and '' 33.99 crores in 2004-05 and 2005-06 respectively against the claim of '' 158.92 crores. The Company has recognised the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for refund of '' 96.71 crores. MTNL has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India in which Supreme Court directed on 08 May 2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Hon''ble TDSAT vide order dated 27 May 2014 on which MTNL filed CWP no.022764 dated 16 July 2014 in Hon''ble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Hon''ble Supreme Court. The claim of '' 96.71 crores on this account has been shown as contingent liability.
c) MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to '' 20.82 crores. In the opinion of the management, there is remote possibility of the case being settled against MTNL.
d) In respect of Mobile Services Delhi, a sum of '' 25.78 crores claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Hon''ble TDSAT for recovery of the amount, decision for which is awaited. The claim of '' 25.78 crores on this account has been shown as contingent liability.
In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the Company''s financial statements.
a) The amount recoverable from BSNL is '' 5,735.12 crores ( previous year ''5,584.66 crores) and amount payable is '' 2,116.91 crores (previous year '' 2,065.05 crores). The net recoverable of '' 3,618.20 crores (previous year '' 3,519.61 crores) is subject to reconciliation and confirmation. The carrying value of the net recoverable from BSNL is '' 3,608.71 crores (previous year -''3,504.10 crores) measured at amortised cost.
b) Certain claims of BSNL on account of Signalling charges '' 21.93 crores (previous year '' 21.93 crores), Transit tariff '' 25.19 crores (previous yea '' 25.19 crores), MP Billing '' 6.01 crores ('' 6.01 crores), Service Connections '' 40.15 crores (previous year '' 40.15 crores), IUC '' 10.14 crores (previous year '' 10.14 crores) and IUC from Gujrat Circle '' 1.11 crore (previous year '' 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.
c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01 October 2000 to 30 September 2006 to the tune of '' 9.80 crores ( previous year '' 9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of '' 31.27 crores ( previous year '' 31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of '' 21.47 crores ( previous year '' 21.47 crores) is shown as contingent liability.
64. Subscribers'' dues and deposits:
Other current liabilities include credits on account of receipts including service tax/GST from subscribers amounting to '' 88.22 crores ( previous year '' 74.37 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax/GST, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.
65. The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.
66. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.
In MTNL Delhiunit, the collections received from the operators are matched in totality against the bills. The allocation of collection to individual operator''s account is pending in the absence of detailed information which is being sought. Therefore although the roaming income and expenditure are booked on actual basis, the roaming debtors are reconciled in totality in the absence of detailed information and such reconciliation is being done on regular basis.
a) Amount recoverable from DoT is '' 898.42 crores (previous year '' 718.34 crores) and amount payable is '' 599.35 crores (previous year ''307.88 crores). The net recoverable of '' 299.07 crores (previous year '' 410.46 crores) is subject to reconciliation and confirmation. There is no agreement between the MTNL and DoT for interest recoverable/payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DoT.
lb) Deposits from applicants and subscribers as on 31 March 1986 were '' 81.32 crores ( previous year '' 81.32 crores) in Mumbai unit as intimated provisionally by DoT. At the year end, these deposits amounted to '' 103.27 crores ( previous year '' 103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31 March 1986. Balance on this account still recoverable from DoT is '' 55.84 crores ( previous year '' 55.85 crores).
c) The total provision for Leave encashment is '' 204.63 crores up to 31 March 2021 ( previous year '' 215.29 crores). Out of this, an amount of '' 45.49 crores ( previous year '' 45.48 crores) and '' 43.37 crores (previous year '' 43.37 crores) is recoverable from DOT in respect of Company C & D and Company B employees respectively for the period prior to their absorption in MTNL.
d) An amount of '' 7.15 crores (previous year ''7.15 crores) towards GPF contribution is recoverable from DOT as on 31 March 2021. The amount pertains to Company C& D and Company B employees absorbed in MTNL w.e.f. 01 November 1998 and 01 October 2000 respectively.
69. As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.
70. There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Indian Accounting Standards - 36"Impairment of assets" as specified under Section 133 of the Companies Act, 2013.
71. As per the accounting policy, Bonus/ Exgratia is paid based on theproductivity linked parameters and it is to be provided accordingly subject to the profitability of the Company. In view of losses, no provision for Bonus/ Exgratia has been made during the year.
72. Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in respect of Redeemable Non-Convertible Debentures since 2014-15 (in the form of Bonds).
73. There is no amount which is required to be transferred to Investor Education and Protection Fund by the Company.
74. The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.
75. The Bank Reconciliation Statements as at 31 March 2021 include unmatched/unlinked credits amounting to '' 11.57 crore (previous year '' 1.32 crore) and unmatched/unlinked debits '' 0.81 crore (previous year '' 6.23 crore) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.
76. The Company has incurred a loss of '' 2,461.79 crores during the year under report. The company has been incurring continuous losses since year 2009-10 (except in FY 2013-14) and the net worth has been fully eroded for the year under report. Considering the continuous losses and negative net worth, the management has made an assessment of its ability1 to continue as a going concern. In pursuance DoT letter No. F.No. 30-04/2019-PSU Affairs dt. 29 October 2019 and decision of Board of Directors of MTNL through circular regulation on 4 November 2019, the MTNL Voluntary Retirement Scheme (''VRS'') has been introduced with effect from 4 November 2019 under which 14,387 number of MTNL employees of all grades opted and granted VRS to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 1 November 1998 and also on 1 October 2000 and the expenditure of ex-gratia on account of compensation was borne by the DOT/Government of India through budgetary supports as per approval of cabinet. The company therefore could reduce the staff expenses from '' 2,400 crores per annum to '' 500 crore per annum which will help the company to reduce its costs and also thereby losses. Balance amount payable to VRS opted employees as on 31 March 2021 is shown in the financial stateements of the company as receivable from DOT and payable to VRS retirees, to reflect the actual position with reference to VRS scheme of 2019 of MTNL. Besides, the Goverment has approved the monetization of the lands and buildings of the company with
the assistance from DIPAM in order the get rid of huge debt burden on the company. The monetization of land and buildings of the company is in process. In addition to this, Govt has approved to provide 4G license to BSNL and infusion of fresh capital by the Govt in lieu of granting 4G license is also being done. As per the deliberations, the maintenance and running of MTNL wireless network is also to be done by BSNL from 01 April 2021 to improve the quality of services and also launching of 4G services of MTNL as and when BSNL launches which also is likely to stabilize the revenue streams . The government has provided sovereign guarantee for issuance of NCD to MTNL vide F.No. 12(16)-B(SD)/2020 dt. 08 July 2020 for '' 6,500 crores. Accordingly MTNL has raised bonds for '' 6,500 crore in 2020-21 and further support from Govt. is also under consultation for grant of '' 5,000 crores soverign guarantee to MTNL by Govt. of India so that till the time the monetisation process is completed and the debt burden is reduced, MTNL can continue its operations smoothly without any issue. As of now since Qtr IV of 2019-20 till date company''s EBIDTA is positive and this is likely to improve further to reduce its negativity in networth in future. Besides these, DOT issued directions to all govt. departments and Ministries to use MTNL services invariably which would pave the way for revenue increase. All of the above, aspects are considered by the management while preparing the financial statements, and an assessment of its ability to continue as a going concern is made accordingly.
77. Due to COVID 19 pandemic, nationwise lockdown was imposed from 24/03/2020 and MTNL being in essntial services the working in MTNL did not hamper in this reporting period. Therefore practically there is no effect of COVID 19 pandemic on the working of MTNL in the year under report..
78. License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till F.Y. 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement.
The issue of deduction claimed in AGR upto F.Y. 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of '' 140.36 crores on this account upto the year 2011-12 has been shown as contingent liability. DOT has assessed the LF calculated on the basis of AGR of MTNL.
Further, DOT has disallowed certain deductions claimed in the AGR e.g. PSTN charges, IUC payment to other operators etc. The deductions claimed in AGR were disallowed for want of documents from MTNL. MTNL has submitted the documents and the revision of assessment of LF is pending at the end of DOT. The provision assessment order of LF from 2006-07 to 2018-19 issued by DOT shows demand of '' 3,565.53 crores. The assessment is under revision in view of documents submitted by MTNL to CCA/ DOT. However an amount of '' 3,565.53 crores is shown as contingent liability. The list of LF related contingent liability is shown hereafter. Calculation of LF demand is not feasible to include in the notes. The Detail of LF Contingent Liability towards License Fee payable to DOT is given below.
Mar 31, 2018
1. Corporate Information
Mahanagar Telephone Nigam Limited (MTNL), a public sector enterprise, is engaged in providing telecom services in the geographical area of Mumbai and Delhi. The registered office of the company is located at Mahanagar Doorsanchar Sadan, 5th Floor, 9, CGO Complex, Lodhi Road, New Delhi - 110003.
Basis of preparation
These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the âInd ASâ) as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
These Financial statements are separate financial statements of the Company. The Company has also prepared consolidated financial statements for the year ended 31 March 2018 in accordance with Ind AS 110 and the same were also approved for issue by the Board of Directors on 30 May 2018.
The financial statements have been prepared on accrual and going concern basis. All assets and liabilities have been classified as current or non-current as per the Companyâs Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
The financial statements have been prepared on going concern basis under the historical cost convention except for the following -
- Certain financial assets and liabilities which are measured at fair value;
- Defined benefit plans - plan assets measured at fair value; and
- Assets held for sale - measured at fair value less cost to sell
Notes:
(a) Investments in subsidiaries, associates and joint venture are stated at cost as per Ind AS 27 âSeparate Financial Statementsâ.
â(b) As per article 12.19 (b) of Shareholdersâ agreement together with para 27 of the amendatory agreement (together referred to as âamended agreementâ) entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as âInvestorsâ pursuant to their investment in United Telecom Limited (âUTLâ), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 monthâs notice. Pursuant to this exit clause, the Company has issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner has sought time extension of another 3 months i.e. till 30 July,2018 for giving effect to the exit requested by the Company. Accordingly, such investment has been classified as âheld for saleâ in the financial statements for year ended 31 March 2018. Refer note 21 for details.â
Notes:
(i) No loans are due from director or other officers of the Company either severally or jointly with any other person. Further, no loans are due from firms or private companies respectively in which any director is partner, director or a member
(ii) Refer note 43 - Fair value disclosures for disclosure of fair value in respect of financial assets measured at amortised cost and note 44 - Financial risk management for assessment of expected credit losses.
(iii) For details on settlement of receivable from BSNL, refer note 63
(iv) For details on settlement of receivable from DoT, refer note 68
(i) Rs. 10.81 crores ( 31 March 2017 - Rs. 10.55 crores) representing deposits with original maturity of more than twelve months, held by the entity that are not available for use by the Company, as these are pledged with the banks for issuing bank guarantees to third parties.
(ii) Refer note 43 - Fair value disclosures for disclosure of fair value in respect of financial assets measured at amortised cost and note 44 - Financial risk management for assessment of expected credit losses
Total current investments
*Receivable in 5 equal instalments, all instalments of Rs. 20 crore each were due in 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 but still not received. Refer note 59 for further details.
(i) Trade receivables have been pledged as security for liabilities, for details refer note 53.
(ii) No trade or other receivable are due from director or other officers of the Company either severally or jointly with any other person. Further, no trade or other receivables are due from firms or private companies respectively in which any director is partner, director or a member
(iii) Trade receivables are secured to the extent of security deposits received from customers, with contractual amounts as at 31 March 2018 of Rs. 51.47 crores (31 March 2017 - Rs. 76.12 crores) and related amortised cost as at 31 March 2018 of Rs. 27.39 crores (31 March 2017 - Rs. 31.06 crores).
(iv) The carrying values of trade receivables are considered to be a reasonable approximation of fair values.
Notes:
(a) In respect of assets classified as held for sale in previous year ended 31 March 2017, the Company was in the process to sell switches and BTS-batteries originally acquired for GSM Services in Mumbai in earlier years. A tender was floated for auction of the asset held for sale, which failed due to technical reasons that was not originally envisaged. Another tender was under process for auction of the asset at the year ending 31 March 2018 and favourable resolution is expected. Therefore, such assets continue to be classified as held for sale.
Non-recurring fair value measurements
Asset classified as held for sale was measured at the lower of its carrying amount and fair value less costs to sell at the time of re-classification, resulting in the recognition of a write down of 0.45 crores as impairment loss in the statement of profit and loss. â(b) As per article 12.19 (b) of Shareholdersâ agreement together with para 27 of the amendatory agreement (together referred to as âamended agreementâ) entered into between MTNL, TCIL, TCL and NVPL (Nepal), together referred to as âInvestorsâ pursuant to their investment in United Telecom Limited (âUTLâ), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors. Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 monthâs notice. Pursuant to this exit clause, the Company has issued notice to UTL on 30 January 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner has sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. Accordingly, such investment has been classified as âheld for saleâ in the financial statements for year ended 31 March 2018. â
Non-recurring fair value measurements
The recoverable amount is expected to be higher than the carrying value of such investment and therefore, no further loss required to be recognised upon classification of such investment as âheld for saleâ.
b) Rights/preferences/restrictions attached to equity shares
The company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
Nature and purpose of other reserves
(i) Debenture redemption reserve
The Company is required to create a debenture redemption reserve out of the profits which is available for payment of dividend for the purpose of redemption of debentures.
(ii) Securities premium reserve
Securities premium reserve represents premium received on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act.
(iii) Contingency reserve
The Company created this reserve for unforeseen tax demands/disallowances by Income tax department under section 80IA of the Income Tax Act, 1961.
(ii) Other Comprehensive Income(OCI)
The Company has recognised remeasurements benefits on defined benefits plans through Other comprehensive income
Notes:
(i) No loans have been guaranteed by the directors and others.
(ii) There is no default as on the balance sheet date in the repayment of borrowings and interest thereon.
(iii) These facilities are securred by floating first pari passu charge on all movable fixed assets (classified under property plant and equipment) and current assets. Further, for securing the above term loans letter of comfort was issued by DoT. For repayment terms of the outstanding long-term borrowings (including current maturities) refer the table below:
*Debentures-Series 1A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 8.57 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 28 March 2023. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
*Debentures-Series 2A
The Debentures as mentioned above are Government of India guaranteed, unsecured, listed, 9.38 % Redeemable Non Convertible Debentures (in the form of Bonds) having tenure/maturity period of 10 years with redemption date being 05 December 2023. The coupon payment frequency is semi annual interest payment. There was no instalment due as on the reporting date.
Rate of interest- The Companyâs total borrowings from banks and others have a effective weighted average rate of 9.99% per annum calculated using the interest rate effective as on 31 March 2017.
(iv) Government of India approved the financial support to the Company in the year 2014 and on surrender of Broadband Wireless Access (BWA) Spectrum by MTNL, upfront charges paid by the Company in the year 2011 for such spectrum amounting to Rs. 4,533.97 crores were agreed to be funded by way of issuance of debentures by the Company on behalf of Government of India (GOI) and for which GOI provided sovereign guarantee with attendant condition for repayment of principal on maturity as well as the interest payments through DOT. Accordingly, the Company does not have any liability towards repayment of principal and interest on the bonds issued and has been offset against the amount recoverable from DoT of equivalent amount.
(v) For details on repayment schedule of finance lease obligations, refer note 50(B).
(vi) Refer note 43 - Financial instruments for disclosure of fair values in respect of financial liabilities measured at amortised cost and analysis of their maturity profiles.
(a) Provision for asset retirement obligations
The Company as part of its business installs wireless telecommunication towers and other equipments for facilitating telecommunication services to its customers and is under an obligation to decommission the tower and replenish the site at end of useful life of the tower and other equipment. For the purpose of same Appendix A to Ind AS 16, âProperty, Plant and Equipmentâ states measurement of Property, plant and equipment to include initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Company has estimated the cost of dismantling based on independent bids received from open market and the same have been escalated using the expected inflation rate (6% per annum) and discounted at the rates prevailing at each period end date.
(b) For disclosures required related to provision for employee benefits, refer note 46- Employee benefit obligations
(i) MTNL has unabsorbed depreciation and brought forward business losses amounting to Rs. 11,234.61 crores as on 31 March 2018 on which no deferred tax asset has been recognised. Deferred tax asset shall be created in the year in which the Company will have reasonable certainty of future taxable income as required by Indian Accounting Standard 12 - âIncome Taxesâ as specified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
(ii) Details of year wise expiry are given below:
2. EARNINGS PER EQUITY SHARE
The Companyâs Earnings Per Share (âEPSâ) is determined based on the net profit attributable to the shareholdersâ of the Company. Basic earnings per share is computed using the weighted average number of shares outstanding during the year. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the year including share options, except where the result would be anti-dilutive.
3. FAIR VALUE DISCLOSURES
I Fair values hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are divided into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
II. Financial assets and liabilities measured at fair value - recurring fair value measurements
III. Fair value of instruments measured at amortised cost
Fair value of instruments measured at amortised cost for which fair value is disclosed is as follows:
The management assessed that cash and cash equivalents, other bank balances, trade receivables, other receivables, trade payables and short-term borrowings approximate their carrying amounts largely due to the short-term maturities of these instruments. The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as interest rates, individual creditworthiness of the customer and other market risk factors. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.
(ii) The fair values of the Companyâs interest-bearing borrowings, loans and receivables are determined by applying discounted cash flows (âDCFâ) method, using discount rate that reflects the issuerâs borrowing rate as at the end of the reporting period. The own non-performance risk as at 31 March 2018 was assessed to be insignificant.
4. FINANCIAL RISK MANAGEMENT
I Financial instruments by category
"Investments in subsidiaries, associate and joint venture are carried at cost per Ind AS 27 - Separate financial statements and therefore, not presented here.
ii Risk Management
The Companyâs activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.
The Companyâs risk management is carried out by a central treasury department (of the Company) under policies approved by the board of directors. The board of directors provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
A. Credit risk
âCredit risk is the risk that a counterparty fails to discharge an obligation to the company. The company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The companyâs maximum exposure to credit risk is limited to the carrying amount of following types of financial assets.
- cash and cash equivalents,
- trade receivables,
- loans & receivables carried at amortised cost, and
- deposits with banks and financial institutions.â
a. Credit risk management
The Company assesses and manages credit risk based on internal credit rating system, continuously monitoring defaults of customers and other counterparties, identified either individually or by the company, and incorporates this information into its credit risk controls. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
A: Low
B: Medium
C: High
Cash & cash equivalents and bank deposits
Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.
Trade receivables
Credit risk related to trade receivables are mitigated by taking bank guarantees from customers where credit risk is high. The Company closely monitors the credit-worthiness of the debtors through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts. The Group assesses increase in credit risk on an ongoing basis for amounts receivable that become past due and default is considered to have occurred when amounts receivable become past due in each business segment as follows:
(i) Cellular: Six months past due
(i) Basic & other services: Three years past due
Other financial assets measured at amortised cost
Other financial assets measured at amortized cost includes loans and advances to employees, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.
b. Expected credit losses
The Company provides for expected credit losses based on the following:
Trade receivables
(i) The company recognizes lifetime expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analysing historical trend of default relevant to each business segment based on the criteria defined above. And such provision percentage determined have been considered to recognise life time expected credit losses on trade receivables (other than those where default criteria are met).
During the periods presented, the Company made no write-offs of trade receivables.
(ii) Reconciliation of loss allowance provision from beginning to end of reporting period:
Other financial assets measured at amortised cost
Company provides for expected credit losses on loans and advances other than trade receivables by assessing individual financial instruments for expectation of any credit losses. Since this category includes loans and receivables of varied natures and purpose, there is no trend that the company can draws to apply consistently to entire population For such financial assets, the Companyâs policy is to provides for 12 month expected credit losses upon initial recognition and provides for lifetime expected credit losses upon significant increase in credit risk. The Company does not have any expected loss based impairment recognised on such assets considering their low credit risk nature, though incurred loss provisions are disclosed under each sub-category of such financial assets.
B. Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities. Management monitors rolling forecasts of the Companyâs liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Companyâs liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
(a) Financing arrangements
The Company had access to the following undrawn borrowing facilities at the end of the reporting period:
b) Maturities of financial liabilities
The tables below analyse the Companyâs financial liabilities into relevant maturity Companyings based on their contractual maturities for all non-derivative financial liabilities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
C. Market Risk
a) Foreign currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the functional currency of any of the Company entities. Considering the low volume of foreign currency transactions, the Companyâs exposure to foreign currency risk is limited and the Company hence does not use any derivative instruments to manage its exposure. Also, the Company does not use forward contracts and swaps for speculative purposes.
i) Foreign currency risk exposure in USD:
The Companyâs exposure to foreign currency risk at the end of the reporting period expressed in â, are as follows
Sensitivity
The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments.
(ii) Foreign currency risk exposure in EURO:
The Companyâs exposure to foreign currency risk at the end of the reporting period expressed in â, are as follows
Sensitivity
The sensitivity of profit or loss to changes in the exchange rates arises mainly from foreign currency denominated financial instruments.
b) Interest rate risk
(i) Liabilities
The Companyâs policy is to minimise interest rate cash flow risk exposures on long-term financing. At 31 March 2018 and 31 March 2017, the Company is exposed to changes in interest rates through bank borrowings at variable interest rates. The Companyâs investments in fixed deposits carry fixed interest rates.
Interest rate risk exposure
Below is the overall exposure of the Company to interest rate risk:
Sensitivity
Below is the sensitivity of profit or loss and equity changes in interest rates.
ii) Assets
The Companyâs fixed deposits are carried at amortised cost and are fixed rate deposits. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
c) Price risk
The Company does not have any significant investments in equity instruments which create an exposure to price risk.
5. CAPITAL MANAGEMENT
The Companyâ s capital management objectives are
- to ensure the Companyâs ability to continue as a going concern
- to provide an adequate return to shareholders
The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of balance sheet.
Management assesses the Companyâs capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Companyâs various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service.
For the funded plan, the Company makes contributions to recognised debt base funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected payments. The expected contribution to the plan for next annual reporting period amounts to Rs. 20.33 crores (previous year - Rs. 19.87 crores). The weighted average duration of the defined benefit obligation as at 31 March 2018 is 7 to 8 years years (31 March 2017: 7 to 8 years).
These assumptions were developed by management with the assistance of independent actuarial appraisers. Discount factors are determined close to each year-end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on managementâs historical experience.
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied which was applied while calculating the defined benefit obligation liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous period.
B. Compensated absences (unfunded)
The leave obligations cover the Companyâs liability for sick and earned leaves. The Company does not have an unconditional right to defer settlement for the obligation shown as current provision balance above. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months, therefore based on the independent actuarial report, only a certain amount of provision has been presented as current and remaining as non-current. Amount of Rs. 146.02 crores (previous year: Rs. 164.53 crores) has been recognised in the statement of profit and loss.
C. Defined contribution plans
Contributions are made to the Government Provident Fund and Family Pension Fund which cover all regular employees eligible under applicable Acts. Both the eligible employees and the Company make pre-determined contributions to the Provident Fund. The contributions are normally based upon a proportion of the employeeâs salary
D. Gratuity and compensated absences is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities, the Actuary has used LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.
E. Mortality in service is assumed on the basis of LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table.
F. The Company has taken an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company.
6. RELATED PARTY DISCLOSURES
Related parties where control exists:
i Key Management Personnel
ii Subsidiaries
Mahanagar Telephone (Mauritius) Limited (âMTMLâ)
Millenium Telecom Limited
MTML International Limited (subsidiary of MTML)
MTML Data Limited (subsidiary of MTML)
iii Joint ventures
MTNL STPI IT Services Limited (âMSISLâ)
iv Associates
United Telecommunications Limited (âUTLâ)
v Other related parties MTNL Leave encashment trust MTNL Gratuity trust
vi Other government entity
Bharat Sanchar Nigam Limited (âBSNLâ)
vii Summary of significant transactions with related parties:
ix The Company has certain transactions with respect to sale and purchase of services and receives reimbursement of expenses (vis-a-vis electricity and water charges) in relation to renting of immovable property from BSNL.
*As per article 12.19 (b) of Shareholdersâ agreement together with para 27 of the amendatory agreement (together referred to as âamended agreementâ) entered into between MTNL, TCIL,TCL and NVPL (Nepal), together referred to as âInvestorsâ pursuant to their investment in United Telecom Limited (âUTLâ), in case NVPL (the local partner in Nepal) decides to sell its stake to any third party, it requires prior consent of other Investors.Further, at such time, per exit clause in the agreement, any of the other Investors other than NVPL can exit the arrangement after 2 years from the amended agreement by issuing 3 monthâs notice. Pursuant to this exit clause, the Company has issued notice to UTL on 30 January, 2018 for making an exit. The notice is valid uptil 30 April 2018 and subsequent to 30 April 2018, the local partner has sought time extension of another 3 months i.e. till 30 July, 2018 for giving effect to the exit requested by the Company. Accordingly, such investment has been classified as âheld for saleâ in the financial statements for year ended 31 March 2018.
7. COMMITMENTS
A Capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
B In respect of incomplete contracts where the expenditure already incurred has exceeded the contract value, the additional expenditure required to complete the same cannot be quantified.
8. LEASES
A. Operating leases - Assets taken on lease
The Group has leased certain towers, land and buildings under operating lease arrangements. The leases are renewable on periodical basis and cancellable at Groupâs option. Total lease payments recognized in the consolidated statement of comprehensive income is Rs. 93.75 crores (31 March 2017: Rs. 88.47 crores).
B. Finance leases - Assets given on lease
The Company has leased land under finance lease arrangements. As at 31 March 2018, the net carrying amount of the leasehold land was Rs. 293.30 crores (31 March 2017: Rs. 294.92 crores).
9. DISCONTINUED OPERATIONS
(a) Description
CDMA Service, which is reported under Cellular Segment as per Ind AS 108, âOperating Segmentâ (Segment Reporting), was discontinued from 01 March 2016 and spectrum used for CDMA services has been surrendered for Rs. 458.04 crores to DoT. During the current year, the Company has made recoveries pertaining to CDMA assets and paid license fee on such recoveries.
(b) Financial performance and cash flow information
The financial performance and cash flow information presented are for the year ended 31 March 2018 and 31 March 2017.
10. SEGMENT INFORMATION
The Company is in the business of providing telecommunication services in India and has two reportable segments viz. Basic and Cellular. As per para 4 of Ind AS 108 âOperating Segmentsâ, if a financial report contains both the consolidated financial statements as well as the separate financial statements, segment information is required only in the consolidated financial statements.
The Company is in the process of seeking confirmation from its vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.
11A The Company is covered under Section 135 of the Companies Act, 2013 and accordingly constituted a Corporate Social Responsibility Committee of the Board. However, as the Company did not have average net profits based on the immediately preceding three financial years, the Company is not required to spend amounts towards Corporate Social Responsibility in terms of the 2013 Act.
11B During the year the Company has made expenditure in foreign currency equivalent to Rs. 3.35 crores. Whereas earnings in foreign currency are Rs. 2.80 crores.
12 Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 01 April 1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.
13 Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and it also included the spectrum given on trial basis to the extent of 4.4 MHz in 1800 MHz frequency while calculating the spectrum charges. The calculations are further subject to change in accordance with the changes in the quantum of spectrum holding and the remaining valid period of license as per DOT MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 MHz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28 February 2016.
Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNLâs case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained. The finalisation of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability. Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs. 3,205.71 crores is shown on the basis of the demand raised by DOT in respect of GSM.
14 License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till FY 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement. The issue of deduction claimed in AGR upto FY 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of â140.36 crores on this account upto the year 2011-12 has been shown as contingent liability.
15 The Company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs. 100 crores during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in five equal instalments. Accordingly, five instalments amounting to Rs. 20 crores each, aggregating to â100 crores have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal instalments. The instalments which were due in 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 have not been paid, therefore necessary provision for the overdue instalments has been made. Though in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI which includes the grants -in -aid for payment of commitments made by M/S ITI and as funds will be made available after budget 2014-15 is passed and hence repayment issue may be held in abeyance till such time. Subsequently M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7 May 2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated. Further DOT has also been reminded to issue directions to M/S ITI to redeem Preference Share capital and make repayment vide letter no. MTNL/CO/ GM (BB & IA)/ITI Inve / 2013-14 dated 06 May 2015, 21 July 2015, 27 August 2015 and 29 January 2016. Further a proposal for conversion of above cumulative Preference Shares to Equity Shares of ITI was given by ITI vide its letter no. K/B3/Pref-Shares/2016 dated 20 January 2016 but the same was rejected by MTNL and communicated to ITI vide letter no. MTNL/CO/GM(BB&IA)/ITI Investment/2013-14 dated 09 February 2016. Subsequently MTNL has initiated the required actions as per Section 55(3) of Companies Act 2013 effected from 1 June 2016 and the issue is taken up again vide letter no. MTNL/ CO/BKG/ITI Investment/2013-14/127 dated 19 May 2017 for issuing of cumulative preference shares for the entire amount due inclusive of dividend.
16 Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.
17 The Company had claimed benefit under section 80IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The Company has preferred appeals for the remaining claim before the Honâble Court of Delhi. The Company has retained the provision of Rs. 375.96 crores (previous year Rs. 400.33 crores) for this claim for the assessment years 1998-99, 1999-00 and 2000-2001, however, the demands on this account amounting to Rs. 243.22 crores (previous year Rs. 345.72 crores) for the assessment years 2000-01 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.
18. Litigations
a) MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04 April 1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09 April 1996, issued Legal Notice on 22 July 1996 and terminated the contract.
Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09 April 2013 partly in favour of MTNL, Mumbai and on 31 July 2013 in favour of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/ payment of the same becomes reasonably certain. M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due.
b As per directions of the Honâble Delhi High Court one UASL operator had paid to MTNL, Mumbai â124.93 crores and Rs. 33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs. 158.92 crores. The Company has recognised the amount realized as revenue in the respective period. The Honâble TDSAT has ordered for refund of Rs. 96.71 crores. MTNL has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Honâble Supreme Court of India in which Supreme Court directed on 08 May 2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Honâble TDSAT vide order dated 27 May 2014 on which MTNL filed CWP no.022764 dated 16 July 2014 in Honâble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Honâble Supreme Court. The claim of Rs. 96.71 crores on this account has been shown as contingent liability C MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Honâble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs. 20.82 crores. In the opinion of the management, there is remote possibility of the case being settled against MTNL.
d) In respect of Mobile Services Delhi, a sum of Rs. 25.89 crores claimed by TCL towards ILD charges for the period 0ct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Honâble TDSAT for recovery of the amount, decision for which is awaited. The claim of Rs. 172.83 crores on this account has been shown as contingent liability.
In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Companyâs management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the Companyâs financial statements.
19 Settlements with BSNL:
a) The amount recoverable from BSNL is Rs. 5,396.52 crores ( previous year Rs. 5,671.54 crores) and amount payable is Rs. 2,009.37 crores (previous year Rs. 1,941.76 crores). The net recoverable of Rs. 3,387.15 crores (previous year Rs. 3,729.78 crores) is subject to reconciliation and confirmation. The carrying value of the net recoverable from BSNL is Rs. 3,282.45 crores (previous year - Rs. 3,422.58 crores) measured at amortised cost.
b) Certain claims of BSNL on account of Signalling charges Rs. 21.93 crores (previous year Rs. 21.93 crores), Transit tariff Rs. 25.19 crores (previous year Rs. 25.19 crores), MP Billing Rs. 6.01 crores (Rs. 6.01 crores), Service Connections Rs. 40.15 crores (previous year Rs. 40.15 crores), IUC Rs. 10.14 crores (previous year Rs. 10.14 crores) and IUC from Gujrat Circle Rs. 1.11 crore (previous year Rs. 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary
c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01 October 2000 to 30 September 2006 to the tune of Rs. 9.80 crores (previous year Rs. 9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs. 31.27 crores (previous year Rs. 31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of Rs. 21.47 crores ( previous year Rs. 21.47 crores) is shown as contingent liability
20 Subscribersâ dues and deposits:
Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs. 36.07 crores (previous year Rs. 34.58 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.
21 The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.
22 The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.
23 In case of Mumbai Unit, the balances with non-scheduled banks comprise of:
24 Settlements with DoT:
a Amount recoverable on current account from DoT is Rs. 6,807.97 crores (previous year Rs. 7,318.54 crores) and amount payable is Rs. 38.71 crores (previous year Rs. 54.93 crores). The net recoverable of Rs. 6,769.26 crores (previous year Rs. 7,263.61 crores) is subject to reconciliation and confirmation. There is no agreement between the MTNL and DoT for interest recoverable/payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DoT
b Deposits from applicants and subscribers as on 31 March 1986 were Rs. 81.32 crores ( previous year Rs. 81.32 crores) in Mumbai unit as intimated provisionally by DoT. At the year end, these deposits amounted to Rs. 103.28 crores (previous year Rs. 103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31 March 1986. Balance on this account still recoverable from DoT is Rs. 55.85 crores (previous year Rs. 55.85 crores).
c The total provision for Leave encashment is Rs. 1,113.39 crores up to 31 March 2018 ( previous year Rs. 1,117.10 crores). Out of this, an amount of Rs. 65.37 crores ( previous year Rs. 65.37 crores ) and Rs. 43.37 crores (previous year Rs. 43.37 crores) is recoverable from DOT in respect of Company C & D and Company B employees respectively for the period prior to their absorption in MTNL.
d An amount of Rs. 1,150.97 crores (previous year Rs. 1,886.76 crores) towards GPF contribution is recoverable from DOT as on 31 March 2018. The amount pertains to Company C& D and Company B employees absorbed in MTNL w.e.f. 01 November 1998 and 01 October 2000 respectively.
25 As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.
26 There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Indian Accounting Standards - 36 âImpairment of assetsâ as specified under Section 133 of the Companies Act, 2013.
27 As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the Company. In view of losses, no provision for Bonus/ Exgratia has been made during the year
28 Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in respect of Redeemable Non-Convertible Debentures since 2014-15 (in the form of Bonds).
29 There is no amount which is required to be transferred to Investor Education and Protection Fund by the Company
30 The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.
31 The Bank Reconciliation Statements as at 31 March 2018 include unmatched/unlinked credits/ debits amounting to Rs. 1.61 crore (previous Rs. 2.33 crore) and Rs. 3.11 crore (Rs. 1.04 crore) respectively Reconciliation and follow up with the bank to match/rectify the same is in process.
32 The Company has incurred a loss of Rs. 2,973.10 crores during the year under report. The company has been incurring continuous losses since year 2009-10 (except in FY 2013-14) and the net worth has been fully eroded for the year under report. Considering the continuous losses and negative net worth, the management has made an assessment of its ability to continue as a going concern. The Company has taken up a VRS proposal with the Government., employees of all grades going to retire in next 10 years to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 1-11-1998 and also on 1-10-2000, which has been under active consideration of Govt. of India. On approval and implementation of the scheme, the company is likely to reduce the staff expenses which will help the company to reduce its costs and thereby losses. Besides, the Company has taken for monetization of the lands and buildings of the company which is also under consideration of the Govt. In addition to this, proposal of Govt to provide 4G license to the company and infusion of fresh capital by the Govt in lieu of granting 4G license is also under consideration All these cases are under consideration of the Govt. Besides, the CMTS License which was earlier valid up to 10 October 2017, the validity is revised by Govt. up to 5 April 2019 which facilitates the continuation of services without any additional upfront Spectrum cost till the year 2019 and in addition the proposal for monetization of assets is also taken up with Govt.. All these aspects are considered by the management while preparing the financial statements, and an assessment of an entityâs ability to continue as a going concern is made accordingly
33 In Mumbai Unit, the Company has been awarded a long duration contract from Larsen & Turbro (L&T) for design, development, implementation & Maintenance of CCTV based surveillance system for Mumbai City. The recognition of profit/loss on the basis of percentage of completion method of accounting as prescribed under Indian Accounting Standard (Ind-AS) - 18 on âRevenueâ is pending till the finalisation of fresh addendum.
34 During the year, the Company has booked an income amounting to Rs. 136.74 crores as other income on account of difference between the estimated amounts of Pension Payout Orders (PPO), accounted for in the past years pertaining to Delhi Units and actual arrived on completion of issuance of PPOâs by the Department of Telecommunication (DOT), Government of India (GOI). Similar effect of the same in respect of Mumbai Units is pending due to finalization of detailed report on the basis of PPOs issued in respect of Mumbai unit is under process. On completion of the same necessary effect will be taken to accounts.
35 Certain items of property, plant and equipments such as batteries, Air conditioners, transformers, lifts and cables etc. are capitalized on account of replacement of old assets in existing property, plant and equipments. The removal of WDV of existing assets is pending till the relocation/ decommissioning of existing assets which is under scrutiny and the consequential impact of the residual value will be considered at the time of scrap in the ensuing year
Mar 31, 2017
1. FAIR VALUE DISCLOSURES
I Fair values hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are Companied into three Levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
II. Financial assets and liabilities measured at fair value - recurring fair value measurements
The Company does not have any financial instruments which are measured at Fair value either through statement of profit and loss or through other comprehensive income. instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
(i) Long-term fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as interest rates, individual creditworthiness of the customer and other market risk factors. Based on this evaluation, allowances are taken into account for the expected credit losses of these receivables.
(ii) The fair values of the Company''s interest-bearing borrowings, loans and receivables are determined by applying discounted cash flows (''DCF'') method, using discount rate that reflects the issuer''s borrowing rate as at the end of the reporting period. The own nonperformance risk as at 31 March 2016 was assessed to be insignificant.
The Company''s risk management is carried out by a central treasury department (of the Company) under policies approved by the board of directors. The board of directors provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
A. Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the company. The company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The company''s maximum exposure to credit risk is limited to the carrying amount of following types of financial assets.
- cash and cash equivalents,
- trade receivables,
- loans & receivables carried at amortized cost, and
- deposits with banks and financial institutions.
a. Credit risk management
The Company assesses and manages credit risk based on internal credit rating system, continuously monitoring defaults of customers and other counterparties, identified either individually or by the company, and incorporates this information into its credit risk controls. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.
A: Low
B: Medium
C: High
Cash & cash equivalents and bank deposits
Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.
Trade receivables
Credit risk related to trade receivables are mitigated by taking bank guarantees from customers where credit risk is high. The Company closely monitors the credit-worthiness of the debtors through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts. The Group assesses increase in credit risk on an ongoing basis for amounts receivable that become past due and default is considered to have occurred when amounts receivable become past due in each business segment as follows:
(i) Cellular: Six months past due
(i) Basic & other services: Three years past due
Other financial assets measured at amortized cost
Other financial assets measured at amortized cost includes loans and advances to employees, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.
b. Expected credit losses
The Company provides for expected credit losses based on the following:
Trade receivables
(i) The company recognizes lifetime expected credit losses on trade receivables using a simplified approach, wherein Company has defined percentage of provision by analysing historical trend of default relevant to each business segment based on the criteria defined above. And such provision percentage determined have been considered to recognize life time expected credit losses on trade receivables (other than those where default criteria are met).
Other financial assets measured at amortized cost
Company provides for expected credit losses on loans and advances other than trade receivables by assessing individual financial instruments for expectation of any credit losses. Since this category includes loans and receivables of varied natures and purpose, there is no trend that the company can draws to apply consistently to entire population For such financial assets, the Company''s policy is to provides for 12 month expected credit losses upon initial recognition and provides for lifetime expected credit losses upon significant increase in credit risk. The Company does not have any expected loss based impairment recognized on such assets considering their low credit risk nature, though incurred loss provisions are disclosed under each sub-category of such financial assets.
b. Liquidity risk
âPrudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities. Management monitors rolling forecasts of the Company''s liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company''s liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.â
Maturities of financial liabilities
The tables below analyse the Company''s financial liabilities into relevant maturity Companying based on their contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
C. Market Risk
a) Foreign currency risk
The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from recognized assets and liabilities denominated in a currency that is not the functional currency of any of the Company entities. Considering the low volume of foreign currency transactions, the Company''s exposure to foreign currency risk is limited and the Company hence does not use any derivative instruments to manage its exposure. Also, the Company does not use forward contracts and swaps for speculative purposes.
* Holding all other variables constant
b) Interest rate risk Liabilities
The Company''s policy is to minimize interest rate cash flow risk exposures on long-term financing. At 31 March 2017, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. The Company''s investments in Fixed Deposits all pay fixed interest rates.
Interest rate risk exposure
Below is the overall exposure of the Company to interest rate risk:
* Holding all other variables constant ii) Assets
The Company''s fixed deposits are carried at amortized cost and are fixed rate deposits. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
c) Price risk
The Company does not have any significant investments in equity instruments which create an exposure to price risk.
2. CAPITAL MANAGEMENT
The Company'' s capital management objectives are
- to ensure the Company''s ability to continue as a going concern
- to provide an adequate return to shareholders
The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of balance sheet.
Management assesses the Company''s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company''s various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
The Company has not declared dividend in current year or previous year.
* Owing to equity being negative as at 31 March 2017 and 31 March 2016, debt to equity ratio has been shown as nil.
Gratuity
The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service.
For the funded plan, the Company makes contributions to recognized debt base funds in India. The Company does not fully fund the liability and maintains a target level of funding to be maintained over a period of time based on estimations of expected payments. The expected contribution to the plan for next annual reporting period amounts to Rs, 19.36 crores (previous year - Rs, 20.28 crores). The weighted average duration of the defined benefit obligation as at 31 March 2017 is 7 to 8 years (31 March 2016: 7 to 8 years).
A Disclosure of gratuity
(i) Amount recognized in the statement of profit and loss is as under:
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defind benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied which was applied while calculating the defined benefit obligation liability recognized in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to prior period.
B. Compensated absences (funded)
The leave obligations cover the Company''s liability for sick and earned leaves. The Company does not have an unconditional right to defer settlement for the obligation shown as current provision balance above. However based on past experience, the Company does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months, therefore based on the independent actuarial report, only a certain amount of provision has been presented as current and remaining as non-current.
These assumptions were developed by management with the assistance of independent actuarial appraisers. Discount factors are determined close to each year-end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on management''s historical experience.
C. Defined contribution plans
Contributions are made to the Government Provident Fund and Family Pension Fund which cover all regular employees eligible under applicable Acts. Both the eligible employees and the Company make pre-determined contributions to the Provident Fund. The contributions are normally based upon a proportion of the employee''s salary.
E. Gratuity and compensated absences is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities, the Actuary has used LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.
F. Mortality in service is assumed on the basis of LIC (1994-96) Ultimate table for mortality in service and LIC (199698) table.
G. The Company has taken an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company.
3. RELATED PARTY DISCLOSURES
Related parties where control exists:
i Company having substantial interest: nil
ii Key Management Personnel
Name Designation
Mr. N.K Yadav__C.M.D. upto 07.06.16_
Mr. P. K. Purwar CMD from 02.03.2017 & Director (Finance) upto 02.03.2017 & Additional charge of CMD from
08.06.16 upto 01.03.17 & Additional charge of Director (Finance) from 03.03.17.
Mr. Sunil Kumar Director (HR)
Mr. Sanjeev Kumar Director (Technical) from 02.07.2016
Mr. S.R. Sayal Company Secretary
Mr.Nirmal Kumar Joshi Executive Director, Delhi (01.12.16 to till date)
Mr. Sunil Kumar Executive Director, Delhi (01.05.16 to 30.11.16)
Mr. Harvesh Bhatia Executive Director, Delhi (01.04.16 to 30.04.16)
Mr. Pravin Punj Executive Director, Mumbai
iii Subsidiaries
Mahanagar Telephone (Mauritius) Limited (''MTML'')
Millenium Telecom Limited
MTML International Limited (subsidiary of MTML)
MTML Data Limited (subsidiary of MTML)
iv Joint ventures
MTNL STPI IT Services Limited (''MSISL'')
v Associates
United Telecommunications Limited (''UTL'')
4. SEGMENT INFORMATION
The Company is in the business of providing telecommunication services in India and has two reportable segments viz. Basic and Cellular. As per para 4 of Ind AS 108 ''Operating Segmentsâ, if a financial report contains both the consolidated financial statements as well as the separate financial statements, segment information is required only in the consolidated financial statements.
The above disclosure has been determined to the extent such parties have been identified on the basis of information available with the Group. This has been relied upon by the auditors.
54A The Company is covered under Section 135 of the Companies Act, 2013 and accordingly constituted a Corporate Social Responsibility Committee of the Board. However, as the Company did not have average net profits based on the immediately preceding three financial years, the Company is not required to spend amounts towards Corporate Social Responsibility in terms of the 2013 Act.
5During the year the Company has made expenditure in foreign currency equivalent to Rs, 3.10 crores. Whereas earnings in foreign currency are Rs, 3.83 crores.
6 First time adoption of Ind AS
These are the Group''s first financial statements prepared in accordance with Ind AS.
The accounting policies set out in note 3 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 01 April 2015 (the Company''s date of transition). An explanation of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.
A Ind AS optional exemptions
1 Deemed cost for property, plant and equipment and intangible assets
Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.
2 Leases
Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.
The Company has elected to apply this exemption for such contracts/arrangements.
3 Foreign currency translation reserve
The Group has deemed the cumulative translation differences for foreign operations at the date of transition to be zero. Adjustments to give effect to this are recorded against opening equity. After the date of transition, translation differences arising on translation of foreign operations are recognized in other comprehensive income and included in a separate translation reserve within equity.
4 Arrangements containing lease
The Group has elected to use facts and circumstances existing at the date of transition to determine whether an arrangement contains a lease. No such assessment was done under previous GAAP
5 Assets held for sale
The company has elected to measure non-current assets held for sale at the lower of carrying value and fair value less cost to sell at the date of transition and recognize directly in retained earnings any difference between that amount and the carrying amount of those assets at the date of transition.
6 Provision for decommissioning obligation
The Company shall account for the decommissioning, restoration or similar liabilities in the cost of the asset to which it related at the date of transition. The adjusted depreciable amount of the asset shall then be depreciated prospectively over its remaining useful life.
B Ind AS mandatory exemptions
1 Estimates
An entity''s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 01 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for Impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
2 Classification and measurement of financial assets and liabilities
The classification and measurement of financial assets will be made considering whether the conditions as per Ind AS 109 are met based on facts and circumstances existing at the date of transition.
Financial assets can be measured using effective interest method by assessing its contractual cash flow characteristics only on the basis of facts and circumstances existing at the date of transition and if it is impracticable to assess elements of modified time value of money i.e. the use of effective interest method, fair value of financial asset at the date of transition shall be the new carrying amount of that asset. The measurement exemption applies for financial liabilities as well.
Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. It is impracticable to apply the changes retrospectively if:
a) The effects of the retrospective application or retrospective restatement are not determinable;
b) The retrospective application or restatement requires assumptions about what management''s intent would have been in that period;
The retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that existed at that time.
3 De-recognition of financial assets and liabilities
Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first-time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of the entity''s choosing, provided that the information needed to apply Ind AS 109 to financial assets and financial liabilities derecognized as a result of past transactions was obtained at the time of initially accounting for those transactions.
The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.
C Reconciliations between previous GAAP and Ind AS
Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.
Note - 1
Amortized cost instrument
Under previous GAAP, all financial assets and financial liabilities were carried at cost.
Under Ind AS, certain financial assets and financial liabilities are subsequently measured at amortized cost which involves the application of effective interest method. In applying the effective interest method, an entity identifies fees that are an integral part of the effective interest rate of a financial instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of the financial asset or financial liability. For certain financial liabilities, the fair value of the financial liability at the date of transition to Ind AS has been considered as the new amortized cost of that financial liability at the date of transition to Ind AS.
The aforesaid adjustment has been made for following categories of financial assets and financial liabilities:
(i) Security deposits received
(ii) Security deposits paid
(iii) Long term borrowings (including bonds issued)
(iv) Employee loans
(v) Other long term loans and receivables.
Note - 2
Expected credit loss
Under previous GAAP, provision for doubtful debts was recognized based on the estimates of the outcome and of the financial effect of contingencies determined by the judgment of the management of the Company. This judgment was based on consideration of information available up to the date on which the financial statements were approved and included a review of events occurring after the balance sheet date.
Under Ind AS, a loss allowance for expected credit losses is recognized on financial assets carried at amortized cost. Expected loss on individually significant receivables is assessed when they are past due and based on company''s historical counterparty default rates and forecast of macro-economic factors. Other receivables have been segmented by reference to the industry of the counterparty and other shared credit risk characteristics to evaluate the expected credit loss. The expected credit loss estimate is then based on recent historical counterparty default rates for each identified segment.
Note - 3
Revenue recognition
Under previous GAAP, the amount of revenue was usually determined by agreement between the parties to the transaction.
Under Ind AS -
(i) Where a Company received any upfront fees (like activation or installation charges) which relate to provision of services over the entire term of customer contract, then such upfront charges shall be deferred and recognized over the contract term or where no term is defined, then over the expected customer relationship period.
(ii) Where the Group provides extended credit period to its customers and realization of amount receivable is deferred, then the fair value of consideration may be lower than the cash consideration received or receivable. In such cases, when the arrangement effectively constitutes a financing transaction, then revenue shall be recognized by discounting all future receipts using an imputed rate of interstice, rate that discounts future receipts to cash sales price or market rate of interest for instrument with similar terms.
Note - 4
Asset retirement obligation
The Group hires space for installing towers in the wireless business segment. The Group is under obligation to restore the premises to their original condition upon vacation of such premises at the end of lease term. Such obligation for asset restoration is computed and adjusted in the cost of asset as explained above.
Under Ind AS 16, the cost of an item of property, plant and equipment includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Decommissioning liability is measured at best estimate of cost required to settle the liability, discounted to its present value at the time when asset becomes ready to use, using pre tax discount rate that reflects market assessment of time value of money between date of capitalization and time of settlement of such obligation. The adjustment made in fixed assets is depreciated over its expected useful life and interest recognized on corresponding provision using the aforementioned discount rate that accretes the provision to the amount expected to be settled in future.
Note - 5
Employee benefit obligations
The Group ascertained its employee benefit obligations for gratuity and pension towards combined service pension optees. The estimate for such liability was revised based on information that was available at the time when such estimates were made prior to the transition date. Accordingly, this resulted in prior period adjustment for revision of the estimate.
Further, under Ind AS, such long term provisions are required to be recognized at their present value by discounting future expected cash flows to their present value using pre-tax discount rate for similar liabilities. The unwinding of interest cost on such provisions is recognized as finance cost on a periodical basis.
Note - 6
Other adjustments
Other adjustments comprise of prior period adjustments amounting to Rs, 313.44 crores as at 31 March 2016 (31 March 2015: Rs, 257.23 crores) for transactions that were identified in the year ended 31 March 16 or 31 March 2017 but pertained to earlier periods and accordingly financial statements have been restated for such earlier periods.
Note - 7
Other comprehensive income
Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as ''other comprehensive income'' includes re-measurements of defined benefit plans, foreign exchange differences arising on translation of foreign operations, effective portion of gains and losses on cash flow hedging instruments and fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP
56. Discontinued operations
(a) Description
CDMA Service, which is reported under Cellular Segment as per Ind AS 108, ''Operating Segment'' (Segment Reporting), was discontinued from 01 March 2016 and spectrum used for CDMA services has been surrendered for Rs, 458.04 crores to DoT. As at 31st March 2016, the carrying amount of the assets of CDMA was Rs,23.92 crore (Rs,82.59 crores) and its liabilities were Rs,185.77 crores (Rs,129.30 crores).
(b) Financial performance and cash flow information
The financial performance and cash flow information presented are for the year ended 31 March 2016 and 31 March 2017.
8 Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 01 April 1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.
9 Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and it also included the spectrum given on trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency while calculating the spectrum charges. The calculations are further subject to change in accordance with the changes in the quantum of spectrum holding and the remaining valid period of license as per DOT MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28 February 2016.
Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL''s case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained
The finalization of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability.
Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs, 3,205.71 crores is shown on the basis of the demand raised by DOT in respect of GSM.
10 License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till F.Y. 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement.
The issue of deduction claimed in AGR upto F.Y 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs, 140.36 crores on this account up to the year 2011-12 has been shown as contingent liability.
11 The Company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs, 100 crores during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in five equal installments.
Accordingly, five installments amounting to Rs, 20 crores each, aggregating to Rs, 100 crores have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. The installments which were due in 2012-13 and 2013-14 have not been paid and necessary provision for the overdue installments has been made. Though in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI which includes the grants -in -aid for payment of commitments made by M/S ITI and as funds will be made available after budget 2014-15 is passed and hence repayment issue may be held in abeyance till such time. Subsequently M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7 May 2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated. Further DOT has also been reminded to issue directions to M/S ITI to redeem Preference Share capital and make repayment vide letter no.MTNL/ CO/GM (BB & IA)/ITI Inve / 2013-14 dated 06 May 2015, 21 July 2015, 27 August 2015 and 29 January 2016. Further a proposal for conversion of above cumulative Preference Shares to Equity Shares of ITI was given by ITI vide its letter no.K/B3/Pref-Shares/2016 dated 20 January 2016 but the same was rejected by MTNL and communicated to ITI vide letter no. MTNL/CO/GM(BB&IA)/ITI Investment/2013-14 dated 09 February 2016. Subsequently MTNL has initiated the required actions as per Section 55(3) of Companies Act 2013 effected from 1 June 2016 and the issue is taken up again vide letter no. MTNL/CO/BKG/ITI Investment/2013-14/127 dated 19 May 2017 for issuing of cumulative preference shares for the entire amount due inclusive of dividend.
12 Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.
13 The Company had claimed benefit under section 80IA of the Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The Company has preferred appeals for the remaining claim before the Hon''ble Court of Delhi. The Company has retained the provision of Rs, 375.96 crores (previous year Rs, 400.33 crores) for this claim for the assessment years 1998-99, 1999-00 and 2000-2001, however, the demands on this account amounting to Rs, 243.22 crores (previous year Rs, 345.72 crores) for the assessment years 2000-01 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80IA of Income Tax Act, 1961.
14 Useful life of assets revised in the year 2014-15. However due to computational error in respect of Electrical Installation and Rs, 89.66 crores has been effected in 2015-16 and Rs, 29.20 crores in 2016-17. Depreciation of Rs,49.09 crores on account of assets/component of assets, whose useful life is already exhausted before 01 April 2015, has been adjusted against opening retained earnings.
15 Litigations
a) âMTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04 April 1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09 April 1996, issued Legal Notice on 22 July 1996 and terminated the contract.
Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09 April 2013 partly in favor of MTNL, Mumbai and on 31 July 2013 in favor of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/payment of the same becomes reasonably certain.
M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due.
\b) As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs, 124.93 crores and Rs, 33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs, 158.92 crores. The Company has recognized the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for refund of Rs, 96.71 crores. MTNL has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India in which Supreme Court directed on 08 May 2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Hon''ble TDSAT vide order dated 27 May 2014 on which MTNL filed CWP no.022764 dated 16 July 2014 in Hon''ble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Hon''ble Supreme Court. The claim of Rs, 96.71 crores on this account has been shown as contingent liability.
c) MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs, 20.82 crores. In the opinion of the management, there is remote possibility of the case being settled against MTNL.
d) In respect of Mobile Services Delhi, a sum of Rs, 25.89 crores claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Hon''ble TDSAT for recovery of the amount, decision for which is awaited. The claim of Rs, 172.83 crores on this account has been shown as contingent liability.
In addition, the Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company''s management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the Company''s financial statements.
16 Settlements with BSNL:
a) The amount recoverable from BSNL is Rs, 5,671.54 crores ( previous year Rs, 5,117.82 crore) and amount payable is Rs, 1,941.76 crores ( previous year Rs, 2,019.43 crores). The net recoverable of Rs, 3,729.78 crores (previous year Rs, 3,098.39 crores) is subject to reconciliation and confirmation.
b) Certain claims of BSNL on account of Signaling charges Rs, 21.93 crores (previous year Rs, 21.93 crores), Transit tariff Rs, 25.19 crores ( previous yea Rs, 25.19 crores), MP Billing Rs, 6.01 crores (Rs, 6.01 crores), Service Connections Rs, 40.15 crores (previous year Rs, 40.15 crores), IUC Rs, 10.14 crores ( previous year Rs, 10.14 crores) and IUC from Gujrat Circle Rs, 1.11 crore (previous year Rs, 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.
c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01 October 2000 to 30 September 2006 to the tune of Rs, 9.80 crores ( previous year Rs, 9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs, 31.27 crores ( previous year Rs, 31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of Rs, 21.47 crores ( previous year Rs, 21.47 crores) is shown as contingent liability.
17 Subscribers'' dues and deposits:
a) The total balance in the subscribers'' deposit accounts, in all the units, is to the tune of Rs, 321.75 crores (previous year Rs, 346.63 crores). Out of this, balance in Delhi Unit amounting Rs, 280.78 crores ( previous year Rs, 283.87 crores) is under reconciliation.
b) Interest Accrued and Due on the aforesaid subscriber deposit accounts to the tune of Rs, 0.10 crores (previous year Rs, 0.11 crores) is subject to reconciliation with the relevant subsidiary records in Delhi unit.
c) Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs, 34.58 crores ( previosu year Rs, 13.79 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.
18 The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.
19. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.
20 Settlements with DOT:
a) Amount recoverable on current account from DOT is Rs, 7,318.54 crores (previous year Rs, 8,109.09 crores) and amount payable is Rs, 54.93 crores (previous year Rs, 49.42 crores). The net recoverable of Rs, 7,263.61 crores (previous year Rs, 8,059.67 crores) is subject to reconciliation and confirmation. There is no agreement between the MTNL and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.
b) Deposits from applicants and subscribers as on 31 March 1986 were Rs, 81.32 crores ( previous year Rs, 81.32 crores) in Mumbai unit as intimated provisionally by DOT. At the year end, these deposits amounted to Rs, 103.28 crores (previous year Rs, 103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31 March 1986. Balance on this account still recoverable from DoT is Rs, 55.85 crores (previous year Rs, 55.85 crores).
c) The total provision for Leave Encashment is Rs, 1,091.05 crores up to 31 March 2017 ( previous year Rs, 1,038.43 crores). Out of this, an amount of Rs, 65.37 crores ( previous year Rs, 65.37 crores ) and Rs, 43.37 crores (previous year Rs, 43.37 crores ) is recoverable, from DOT in respect of Company C & D and Company B employees respectively for the period prior to their absorption in MTNL.
d) An amount of Rs, 1,775.54 crores (previous year Rs, 1,946.56 crores) towards GPF contribution is recoverable from DOT as on 31 March 2017. The amount pertains to Company C& D and Company B employees absorbed in MTNL w.e.f. 01 November 1998 and 01 October 2000 respectively.
21 As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.
22 There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Indian Accounting Standards - 36 âImpairment of assetsâ as specified under Section 133 of the Companies Act, 2013.
23 As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the Company. In view of losses, no provision for Bonus/ Exgratia has been made during the year.
24 Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in respect of Redeemable Non-Convertible Debentures since 2014-15 (in the form of Bonds).
25 There is no delay in transferring amount, required to be transferred, to Investor Education and Protection Fund by the Company.
26 The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.
27 The Bank Reconciliation Statements as at 31 March 2017 include unmatched/unlinked credits/debits amounting to Rs, 2.33 crore (previous Rs, 3.31 crore) and Rs, 1.04 crore (Rs, 3.53 crore) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.
28 The Company has incurred a loss of '' 2,941.08 crores during the year under report. Although the net worth continues to be positive at the end of the year, considering the negative net worth resulted at the end of 3rd quarter of the year under report and also the positive net worth at the end of the year being not that tangible, the management has made an assessment of an entity''s ability to continue as a going concern. The company has taken up a VRS proposal with the Govt., in the current financial year for voluntary retirement of around 5,312 employees of all grades going to retire in next 10 years to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 1 November 1998 and also on 1 October 2000, which has been under active consideration of Govt. of India. On approval and implementation of the scheme, the company is likely to reduce the staff expenses which will help the company to reduce its costs and thereby losses. Besides, the Company has taken for monetization of the lands and buildings of the company which is also under consideration of the Govt. In addition to this, the case for approval for sovereign guarantee cover of Rs, 5,500 crores has also been sent to the Government for the purpose of swapping of long term and short term loans by issuance of Govt. Guaranteed bonds. This debt restructuring would bring down the finance costs. All these cases are under consideration of the Govt. Besides, the CMTS License which was earlier valid up to 10 October 2017, the validity is revised by Govt. up to 5 April 2019 which facilitates the continuation of services without any additional upfront Spectrum cost till the year 2019 and in addition the proposal for monetization of assets is also taken up with Govt.. All these aspects are considered by the management while preparing the financial statements, and an assessment of an entity''s ability to continue as a going concern is made accordingly.
29. The diminutions in value of investments in subsidiaries, associates and joint ventures are considered as temporary in nature.
30. The Company has reclassified certain items of assets and liabilities to comply with the requirements of Ind AS. This has no resulting impact on equity and net profit.
Mar 31, 2016
1. Estimated amount of contracts remaining to be executed on capital account is Rs. 12.85 crore (Rs. 13.35 crores). In respect of incomplete contracts where the expenditure already incurred has exceeded the contract value, the additional expenditure required to complete the same cannot be quantified.
2. 3. Certain Lands and Buildings capitalized in the books are pending registration/legal vesting in the name of the company and the landed properties acquired from DOT have not been transferred in the name of the company and in the case of leasehold lands, the documentation is still pending. Stamp Duty on the lands and buildings acquired from DOT is payable by DOT as per sale deed and in respect of properties acquired after 1.4.1986, the documentation shall be contemplated at the time of sale or disposal as and when effected.
3. 4. Department of Telecommunications (DOT) has levied one time spectrum charges for the GSM and CDMA spectrum on MTNL and it also included the spectrum given on trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency while calculating the spectrum charges. The calculations are further subject to change in accordance with the changes in the quantum of spectrum holding and the remaining valid period of license as per DOT MTNL has surrendered some of the spectrum allotted on trial basis and does not require to pay for CDMA spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. DOT has been apprised of the same and the matter is still under correspondence. Apart from this, the issue of charges for spectrum given on trial basis is also to be decided. Further MTNL has finally surrendered CDMA spectrum w.e.f. 28.02.2016.
Besides, ab-initio, the very policy of levy of one time spectrum charges by DOT itself has been challenged by private operators and is sub judice as on date whereas MTNL''s case is also to be decided by DOT on the basis of outcome of the court case and the spectrum surrendered or retained. The finalization of charges and the modalities of payment are therefore to be crystallized yet and as on date the position is totally indeterminable as to the quantum of charges and also the liability.
Pending final outcome of the issue which itself is sub judice and non finality of quantum of charges payable, if at all, to DOT, no provision is made in the books of accounts as the amount is totally indeterminable. However the contingent liability of Rs. 3205.71 crores is shown on the basis of the demand raised by DOT in respect of GSM.
4. License fee on the Adjusted Gross Revenue (AGR) was calculated and accounted for on accrual basis in respect of both revenue and revenue sharing with other operators till F.Y. 2011-12. As per the directions of Supreme Court given earlier in respect of calculation of License Fees and AGR, the matter was referred back to TDSAT. TDSAT vide its judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT was directed to rework the license fee in the light of their findings. However, MTNL is not a party to the dispute and the AGR is calculated as per License Agreement.
The issue of deduction claimed in AGR upto F.Y. 2011-12 in respect of revenue sharing on netting basis with BSNL has been taken up with DOT and BSNL while paying License Fees on actual payment basis from 2012-13 onwards. The impact of Rs.140.36 crores on this account upto the year 2011-12 has been shown as contingent liability.
5. The company had subscribed to 8.75% Cumulative Preference Shares of M/s. ITI Limited, amounting to Rs. 100 crores during the year 2001-02. As per the terms of allotment, the above Preference Shares were proposed to be redeemed in five equal installments. Accordingly, five installments amounting to Rs.20 crores each, aggregating to Rs.100 crores have become redeemable, which have not been redeemed by ITI Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment schedule of the above cumulative Preference Shares was deferred to 2012-13 onwards in five equal installments. M/S ITI vide letter no: ITI/Corp/Fin/MTNL dated 7-5-2014 informed that upon receipt of the financial assistance from the Govt. the redemption process would be initiated. Further DOT has also been reminded to issue directions to M/S ITI to redeem Preference Share capital and make repayment vide letter no.MTNL/CO/GM (BB & IA)/ITI Inve / 2013-14 dated 06.05.2015, 21.07.15, 27.08.15 and 29.01.16. Further a proposal for conversion of above cumulative Preference Shares to Equity Shares of ITI was given by ITI vide its letter no.K/B3/Pref-Shares/2016 dated 20.01.16 but the same was regretted by MTNL and communicated to ITI to pay the due amount at the earliest vide letter no. MTNL/CO/GM(BB&IA)/ITI Investment/2013-14 dated 09.02.2016. The installments which were due in 2012-13, 2013-14 ,2014-15 and 2015-16 have not been paid and necessary provision for the overdue installments as well as for that due in 2016-17 has been made since although in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet Committee on Economic Affairs has approved the financial assistance to M/S ITI( which includes the grants -in -aid for payment of commitments made by M/S ITI) no payment is forthcoming till date and above developments.
6. a) Certain claims in respect of damaged/lost fixed assets and inventory has been lodged with Insurance Companies by MTNL but the settlement of the claims is pending. Final adjustment in respect of difference between amount claimed and assets withdrawn will be made in the year of settlement of claim.
b) Amount of Gross Block, Accumulated Depreciation and value of inventory has been withdrawn in respect of such damaged/lost fixed assets and inventory in the respective years except an amount of Rs.24.52 crores in Mumbai Basic unit. Suitable instructions have been issued and necessary accounting adjustment in respect of such assets will be made after receipt of details.
7. a) The company had claimed benefit under section 80 - IA of the Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06. The appellate authorities have allowed the claim to the extent of 75% of the amount claimed. The company has preferred appeals for the remaining claim before the Hon''ble Courts of Delhi. The company has retained the provision of Rs.400.33 crores (Rs.400.33 crores) for this claim for the financial years 1997-98, 1998-99 and 1999-2000, however, the demands on this account amounting to Rs.345.72 crores (Rs.345.72 crores) for the financial years 1999-2000 to 2005-06 have been shown as contingent reserve to meet the contingency that may arise out of disallowances of claim of benefit u/s 80-IA of Income Tax Act, 1961.
b) Income Tax receivable include appeal effect of Rs.101.54 crores pertaining to financial year 1999-00 which is pending for settlement by the Income Tax Department. This include Tax amount of Rs.60.30 crores and interest accrued thereon amounting to Rs.41.24 crores.
c) The balances appearing in advance tax, provisions for income tax and interest on income tax refunds are subject to reconciliation with the figures of the tax records. The company is in the process of compilation of tax records on yearly basis and reconciliation thereof with the financial records.
8. Company has unabsorbed depreciation and brought forward business losses as on 31.3.2016. However, there is no virtual certainty of availability of sufficient future taxable income. Hence, the Deferred Tax Asset has not been accounted for. Deferred Tax asset shall be created in the year in which the company will have virtual certainty of future taxable income as required by Accounting Standard 22 - âAccounting for Taxes on Incomeâ as per Rule 7 of Companies (Accounts) Rules, 2014.
9. During the year, Company has received an amount of Rs.492.26 crores against the payment of Minimum Alternative Tax (MAT) on back to back basis as financial support on account of liability incurred on book profits in the financial year 2013-14 towards MAT. The same has accordingly been accounted for under the head âTax Adjustment for Earlier years.â
10. In line with the Notification No. G.S.R. 627(E) dated 29th August 2014 issued by Ministry of Corporate Affairs regarding identification of the components having significant cost and/or separate useful life than the main asset and to determine the useful life of that component separately, Company has exercised the option to implement the same during the F.Y. 2015-16. Depreciation of Rs.49.09 crores on account of assets/component of assets, whose useful life is already exhausted before 01.04.2015, has been adjusted against opening retained earnings.
11. Litigations:
a) The MTNL entered into contracts with M/s. M & N Publications Limited for printing, publishing and supply of telephone directories for Delhi and Mumbai unit for a period of 5 years starting from 1993. After printing and issue of 1993 (main & supplementary) and 1994 main directory, M/s. M & N Publications Ltd terminated the contract prematurely on 04.04.1996. MTNL, Mumbai & Delhi invoked Bank Guarantees on 09.04.1996, issued Legal Notice on 22.07.1996 and terminated the contract.
Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator has since given his award on 09.04.2013 partly in favor of MTNL, Mumbai and on 31.07.2013 in favor of MTNL, Delhi. The claim and counter claim under arbitration will be accounted for in the year when the ultimate collection/ payment of the same becomes reasonably certain.
M/s. M & N Publications has approached the Bombay & Delhi High Courts against the arbitration awards and MTNL also approached the Bombay & Delhi High Courts for balance amount due.
The claim of Rs.49.04 crores on this account has been shown as contingent liability in Delhi unit.
b) As per directions of the Hon''ble Delhi High Court one UASL operator had paid to MTNL, Mumbai Rs.124.93 crores and Rs.33.99 crores in 2004-05 and 2005-06 respectively against the claim of Rs.158.92 crores. The company has recognized the amount realized as revenue in the respective period. The Hon''ble TDSAT has ordered for refund of Rs.96.71 crores. The Company has filed a Civil Appeal and application for stay of operation of the order of TDSAT in the Hon''ble Supreme Court of India in which Supreme Court directed on 08.05.2014 that TDSAT will review the impugned order on seeking of it by appellant. MTNL filed review application which had been disposed off by Hon''ble TDSAT vide order dated 27.05.2014 on which MTNL filed CWP no.022764 dated 16.07.2014 in Hon''ble Supreme Court and the same is pending. Meanwhile UASL operator also filed appeal in Hon''ble Supreme Court.
The claim of Rs.96.71 crores on this account has been shown as contingent liability.
c) MTNL Mumbai has received claims from M/s. BEST, Electricity supply provider categorizing MTNL at Commercial tariff instead of Industrial tariff. The claim has been made with retrospective effect for the period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to Apr-2011 in respect of LT connection. MTNL has represented to BEST for reconsideration which has not been accepted by BEST. Hence MTNL has approached Hon''ble Mumbai High Court and got a stay on the arrears claimed by BEST amounting to Rs.20.82 crores.
In the opinion of the management, there is remote possibility of the case being settled against MTNL.
d) In respect of Mobile Services Delhi, a sum of Rs.25.89 crores claimed by TCL towards ILD charges for the period Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic towards M/S TCL. On technical analysis it was found that these calls were made to some dubious and tiny destination. These destinations do not confirm to international numbering plan of the respective countries and are not approved destinations as per approved interconnect agreement. Further these calls have not got physically terminated to the destinations. The observations were shared with M/S TCL. M/S TCL has also been advised that the balance, which relates to fraudulent calls, is not payable and accordingly no provision has been made in the books of accounts. The matter was handed over to the committee for investigation. Subsequently M/S TCL filed a case in Hon''ble TDSAT for recovery of the amount, decision for which is awaited.
The claim of Rs.25.89 crores on this account has been shown as contingent liability.
In addition, the company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company''s management perceives that these legal actions, when ultimately concluded and determined, will not have any material impact on the company''s financial statements.
12. Settlements with BSNL:
a) The amount recoverable from BSNL is Rs.5117.82 crores (Rs.4765.87 crore) and amount payable is Rs.2019.43 crores (Rs.2003.63 crores). The net recoverable of Rs.3098.39 crores (Rs.2762.24 crores) is subject to reconciliation and confirmation.
b) Certain claims of BSNL on account of Signaling charges Rs.21.93 crores (Rs.21.93 crores), Transit tariff '' 25.19 crores (Rs.25.19 crores), MP Billing Rs.6.01 crores (Rs.6.01 crores), Service Connections Rs.40.15 crores (Rs.40.15 crores), IUC Rs.10.14 crores (Rs.10.14 crores) and IUC from Gujrat Circle Rs.1.11 crore (Rs. 1.11 crore) are being reviewed. Pending settlement of similar other claims from BSNL, no provision is considered necessary.
c) Delhi Unit has accounted for the expenditure on account of telephone bills of service connections raised by BSNL towards MTNL for the period from 01.10.2000 to 30.09.2006 to the tune of Rs.9.80 crores (Rs.9.80 crores) on the basis of actual reimbursement made for subsequent periods against the disputed claim of Rs.31.27 crores (Rs.31.27 crores), since no details / justifications are received till date from BSNL in spite of repeated persuasion. The balance amount of Rs.21.47 crores (Rs.21.47 crores) is shown as contingent liability.
13. The Bank Reconciliation Statements as at 31st March 2016 include unmatched/unlinked credits/debits amounting to Rs.3.31 crore (Rs.1.78 crore) and Rs.3.53 crore (Rs.2.21 crore) respectively. Reconciliation and follow up with the bank to match/rectify the same is in process.
14. Subscribersâ dues and deposits:
a) The total balance in the Subscribers'' Deposit Accounts, in all the units, is to the tune of Rs.563.31 crores (Rs.577.12 crores). Out of this, balance in Delhi Unit amounting Rs.283.87 crores (Rs.288.03 crores) is under reconciliation.
b) Interest Accrued and Due on the aforesaid subscriber deposit accounts to the tune of Rs.0.11 crores (Rs.0.13 crores) is subject to reconciliation with the relevant subsidiary records in Delhi unit.
c) Other current liabilities include credits on account of receipts including service tax from subscribers amounting to Rs.13.79 crores (Rs.10.43 crores), which could not be matched with corresponding debtors or identified as liability, as the case may be. Appropriate adjustments/ payments shall be made inclusive of service tax, when these credits are matched or reconciled. Therefore, it could not be adjusted against making provision for doubtful debts.
15. The amounts of receivables and payables (including NLD / ILD Roaming operators) are subject to confirmation and reconciliation.
16. The matching of billing for roaming receivables / payables with the actual traffic intimated by the MACH is being done. Further the roaming income is booked on the basis of actual invoices raised by MACH on behalf of MTNL. Similarly the roaming expenditure is booked on the basis of actual invoices received by MTNL from MACH on behalf of the other operators. However, regarding collection, the payment is directly received in the bank from other operators for varying periods.
In MTNL Delhi unit, the collections received from the operators are matched in totality against the bills. The allocation of collection to individual operator''s account is pending in the absence of detailed information which is being sought. Therefore although the roaming income and expenditure are booked on actual basis, the roaming debtors are reconciled in totality in the absence of detailed information and such reconciliation is being done on regular basis.
17. In case of Mumbai Unit, the balances with non-scheduled banks comprise of:
18. Settlements with DOT:
a) Amount recoverable on current account from DOT is Rs.8109.09 crores (Rs.8360.03 crores) and amount payable is Rs.49.42 crores (Rs.45.71 crores). The net recoverable of Rs.8059.67 crores (Rs.8314.32 crores) is subject to reconciliation and confirmation. There is no agreement between the Company and DOT for interest recoverable/Payable on current account. Accordingly, no provision has been made for interest payable/receivable on balances during the year except charging of interest on GPF claims receivable from DOT.
b) Deposits from applicants and subscribers as on 31st March, 1986 were Rs.81.32 crores (Rs.81.32 crores) in Mumbai unit as intimated provisionally by DOT. At the year end, these deposits amounted to Rs.103.28 crores (Rs.103.28 crores), the difference being attributable to connections/refunds granted in respect of deposits received prior to 31st March, 1986. Balance on this account still recoverable from DoT is Rs.55.85 crores (Rs.55.85 crores).
c) The total provision for Leave Encashment is Rs.1091.05 crores up to 31.3.2016 (Rs.1038.43 crores). Out of this, an amount of Rs.65.37 crores (Rs.65.37 crores ) and Rs.43.37 crores (Rs.43.37 crores ) is recoverable, from DOT in respect of Group C & D and Group B employees respectively for the period prior to their absorption in MTNL.
d) An amount of Rs.1946.56 crores (Rs.1790.76 crores) towards GPF contribution is recoverable from DOT as on 31.3.2016. The amount pertains to Group C& D and Group B employees absorbed in MTNL w.e.f. 01.11.98 and 01.10.2000 respectively.
19. As per gazette notification no.GSR 138(E) dated 3rd March 2014 pensionary benefits in respect of absorbed combined service pension optees are being paid by the Government of India on BSNL pay scales. Gratuity provision for other than combined service pension optee employees of MTNL, and Leave Encashment provision for all of the employees of MTNL has been made on the basis of actuarial valuation.
20. Employee Benefits -AS-15(R)
I. During the year, the Company has recognized the following amounts in the Statement of Profit and Loss:
V. Gratuity is payable to the employees on death or resignation or on retirement at the attainment of superannuation age. To provide for these eventualities, the Actuary has used LIC (1994-96) Ultimate table for mortality in service and LIC (1996-98) table for mortality in retirement.
VI. Mortality in service is assumed on the basis of LIC (1994-96) Ultimate and mortality in retirement is based on LIC (1996-98) table.
21. The Company has taken an Insurance Policy for medical benefits in respect of its retired and working employees. The Insurance Policy is fully funded by the Company. This is in compliance with AS-15(Revised).
Notes:-
1. The company has disclosed Business Segment as the Primary Segment. Segments have been identified taking into account the nature of the services, the deferring risks and returns, the organizational structure and internal reporting system.
2. The company caters to the needs of mainly two metro cities viz. Delhi and Mumbai, wherein the risk and return are not different to each other. As such there are no reportable geographical segments.
3. Segment Revenue, Segment Result, Segment Asset and Segment Liabilities include the respective amount identifiable to each of the segments. Items which are not directly relatable to the business segment are shown as unallowable.
4. In F.Y 2014-15, the Company has not identified the finance cost related to cellular business, therefore the total financial cost was disclosed as unallowable.
22. CDMA Service, which is reported under Cellular Segment as per AS 17 (Segment Reporting), has been discontinued from 01.03.2016 and spectrum used for CDMA services has been surrendered for Rs.458.04 crores to DOT. As at 31st March 2016, the carrying amount of the assets of CDMA was Rs.23.92 crore (Rs.82.59 crores) and its liabilities were Rs.185.77 crores (Rs.129.30 crores). The following statement shows the revenue and expenses of continuing and discontinuing operations:
23. Consolidated Financial Statements - AS-21 & AS-27
The financial statements of Millennium Telecom Limited & Mahanagar Telephone Mauritius Limited (wholly owned subsidiaries of the Company) and MTML Data Ltd & MTML International Ltd. (Step down subsidiaries) are consolidated in accordance with the Accounting Standard - 21. Consolidation of the financial statements of United Telecom Limited & MTNL STPI IT Services Limited (Joint Ventures) has been done in accordance with the Accounting Standard - 27.
MTNL holds 26.68% of Equity Shares in UTL and 50% in MTNL STPI IT Services Limited and consolidated in
24. There is no indication of any impairment of assets of the Company, on the basis of the company as a whole as a CGU under Accounting Standard 28.
25. Disclosures pursuant to General instructions for preparation of Statement of Profit & Loss as per Para 5
(viii)(a), (b) and (e) of Schedule III to the Companies Act, 2013 :
(a) Value of Imports calculated on C.I.F. basis
(ii) Components and Spare Parts -Nil
(b) Expenditure in Foreign Currency
(i) Professional & Consultancy Fees = Rs. NIL (NIL)
(ii) Travel = Rs. NIL (NIL)
(iii) Others = Rs. 5.55 crores (Rs.5.09 crores)
(c) Earning in Foreign Exchange = Rs. 4.29 crores (Rs.5.45 crores)
(d) Additional Information required under paragraphs 5 (viii) (c) of Schedule III to the Companies Act, 2013 is not ascertainable, since (i) consumption of stores is included under the normal heads of capital expenditure and/or repairs and maintenance, and (ii) the issues of imported and indigenous items are not separately priced/ identified.
26. Dues to Micro, Small and Medium Enterprises:
There is no reported Micro, Small and Medium enterprise as defined in the MSMED Act, 2006, to whom the company owes dues as at 31.3.2016. No interest has been paid during the year on account of delayed payments as required under the MSMED Act, 2006.
27. As per the accounting policy, Bonus/ Exgratia is paid based on the productivity linked parameters and it is to be provided accordingly subject to the profitability of the company. In view of losses, no provision for Bonus/ Exgratia has been made during the year.
28. Debenture Redemption Reserve: In view of losses, Debenture Redemption Reserve had not been created in F.Y. 2014-15 and 2015-16 in respect of Redeemable Non-Convertible Debentures (in the form of Bonds).
34. Corporate Social Responsibility: No funds have been spent towards CSR activities by the company during the year as there is no average net profit made by the company during the three immediately preceding financial years as per the requirement of section 135 of Companies Act 2013.
35. There is no delay in transferring amount, required to be transferred, to Investor Education and Protection Fund by the company.
36. The Company has no foreseeable losses, which requires provision under applicable laws or accounting standards on long-term contracts and not dealing into derivative contracts at all.
37. The company has undertaken a project for providing high speed Broadband connection with Wi-Fi facility using FTTH technology at the official residences of Members of Parliament (MPs) in New Delhi which is under progress. An upfront grant of Rs.43 crores to fund the CAPEX requirement has been sanctioned by the Government and out of the same Rs.18.89 crores has been shown as a deduction from the gross value of the concerned assets in arriving at its book value in the balance sheet as per AS 12 (Accounting for Government Grants). For the asset under construction, the unused amount of grant of Rs.24.11 crores is kept separately under Other Current Liabilities in the Balance Sheet.
38. Company has incurred a loss of Rs.2005.74 crores during the year under report. Although the net worth continues to be positive at the end of the year, considering the negative net worth resulted at the end of 3rd quarter of the year under report and also the positive net worth at the end of the year being not that tangible, the management has made an assessment of an entity''s ability to continue as a going concern. The company has taken up a VRS proposal with the Govt., in the current financial year for voluntary retirement of around 5312 employees of all grades going to retire in next 10 years to reduce the legacy staff costs inherited on account of absorption of employees recruited under government w.e.f. 1-11-1998 and also on 1-10-2000, which has been under active consideration of Govt. of India. On approval and implementation of the scheme, the company is likely to reduce the staff expenses which will help the company to reduce its costs and thereby losses. Besides, the Company has taken for monetization of the lands and buildings of the company which is also under consideration of the Govt.
In addition to this, the case for approval for sovereign guarantee cover of Rs.5500 crores has also been sent to the Government for the purpose of swapping of long term and short term loans by issuance of Govt. Guaranteed bonds. This debt restructuring would bring down the finance costs. All these cases are under consideration of the Govt. Besides, the CMTS License which was earlier valid up to 10-10-2017, the validity is revised by Govt. up to 5-4-2019 which facilitates the continuation of services without any additional upfront Spectrum cost till the year 2019. All these aspects are considered by the management while preparing the financial statements, and an assessment of an entity''s ability to continue as a going concern is made accordingly.
39. Figures have been rounded off to the nearest crore. Previous year figures have been regrouped/ recast to confirm to current year''s presentation. Amounts in brackets represent the previous year''s figures.
Mar 31, 2015
Note 1: NOTES TO ACCOUNTS (Rs,in Crore)
1. Contingent Liabilities 2014-15 2013-14
(a) Income Tax Demands disputed
and under appeal 774.87 870.30
(b) Sales Tax, Service Tax, Excise
duty, Municipal Tax 478.90 454.13
Demands Disputed and under Appeal
(c) (i) Interest to DDA on delayed
payments/pending court Amount Amount
cases/Tax cases
Indeterminate Indeterminate
(ii) Stamp duty payable on land and
buildings acquired by Amount Amount
the company Presently Presently
Unascertainable Unascer-
tainable
(d) Claims against the company not
acknowledged as Debts 3227.18 3227.18
(e) Pending arbitration/court cases 1113.43 1000.17
(f) Bank guarantee & Letter of Credit 110.60 109.13
(g) Directory dispute 285.83 285.83
(h) Interest demanded by DOT and
disputed by company on 173.81 173.81
account of delay in payment of
Leave Salary and Pension
Contribution.
(i) Pending court cases against
land Acquisition 4.61 4.61
(j) License Fee related contingent
liability w.r.t. BSNL charges 140.36 140.36
paid on netting basis
(k) Contingent Liability on account of Income Tax as shown in 1(a)
above excludes various notices received from TDS department creating
demand due to non-matching of their records with the returns fled.
2. Estimated amount of contracts remaining to be executed on capital
account - Rs.13.35 crore (Rs. 23.29 crores). In respect of incomplete
contracts where the expenditure already incurred has exceeded the
contract value, the additional expenditure required to complete the
same cannot be quantified.
3. Certain Lands and Buildings capitalized in the books are pending
registration/legal vesting in the name of the company and the landed
properties acquired from DOT have not been transferred in the name of
the company and in the case of leasehold lands, the documentation is
still pending. Stamp Duty on the lands and buildings acquired from DOT
is payable by DOT as per sale deed and in respect of properties
acquired after 1.4.1986, the documentation shall be contemplated at the
time of sale or disposal as and when effected.
4. Department of Telecommunications (DOT) has levied one time spectrum
charges for the GSM and CDMA spectrum on MTNL and the spectrum given on
trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency is also
included in the calculations. The calculations are further subject to
changes in the quantum of spectrum holding and the remaining valid
period of license as per D.O.T. MTNL has surrendered some of the
spectrum allotted on trial basis and does not require to pay for CDMA
spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA. DOT
has been apprised of the same and the matter is still under
correspondence. Apart from this, the issue of charges for spectrum
given on trial basis is also to be decided.
Besides, ab-initio, the very policy of levy of one time spectrum
charges by DOT itself has been challenged by private operators and is
sub juice as on date whereas MTNL''s case is also to be decided by
D.O.T. on the basis of outcome of the court case and the spectrum
surrendered or retained. The finalization of charges and the modalities
of payment are therefore to be crystallized yet and as on date the
position is totally indeterminable as to the quantum of charges and
also the liability.
Pending final outcome of the issue which itself is sub juice and non
finality of quantum of charges payable, if at all, to DOT, no provision
is made in the books of accounts as the amount is totally
indeterminable. However the contingent liability of Rs.3205.71 crores is
shown on the basis of the demand raised by D.O.T.in respect of GSM.
5. License fee on the Adjusted Gross Revenue (AGR) was calculated and
accounted for on accrual basis in respect of both revenue and revenue
sharing with other operators till F.Y. 2011-12. As per the directions
of Supreme Court given earlier in respect of calculation of License
Fees and AGR the matter was referred back to TDSAT. TDSAT vide its
judgment dated 23.04.2015 set aside the impugned demands of DOT and DOT
was directed to rework the license fee in the light of their findings.
However, MTNL is not a party to the dispute and the AGR is calculated
as per License Agreement.
The issue of deduction claimed in AGR up to F.Y. 2011-12 in respect of
revenue sharing on netting basis with BSNL has been taken up with DOT
and BSNL while paying License Fees on actual payment basis from 2012-13
onwards. The impact of Rs.140.36 crores on this account up to the year
2011-12 has been shown as contingent liability.
6. In respect of sundry creditors, in Mobile services Mumbai,
liability of Rs.106.73 crores is provided in the books of accounts. The
available records are showing Rs.42.01 crores only as the liability to be
retained.
Pending reconciliation and review of records spread over from 2006-07
to 2012-13, no impact has been taken in the financial statements for the
year ended 31st March 2015.
7. The company had subscribed to 8.75% Cumulative Preference Shares of
M/s. ITI Limited, amounting to Rs.100 crores during the year 2001-02. As
per the terms of allotment, the above Preference Shares were proposed
to be redeemed in five equal installments. Accordingly, five installments
amounting to Rs.20 crores each, aggregating to Rs.100 crores have become
redeemable, which have not been redeemed by ITI Limited. As per letter
No.U-59011-10/2002-FAC dated 31.07.2009 issued by DOT, the repayment
schedule of the above cumulative Preference Shares was deferred to
2012-13 onwards in five equal installments. The installments which were
due in 2012-13, 2013-14 and 2014-15 have not been paid and necessary
provision for the overdue installments has been made. Though in letter
of Dept. of Telecom No: 20-37/2012-FAC.II dated 25-4-2014, the Cabinet
Committee on Economic Affairs has approved the financial assistance to
M/S ITI which includes the grants -in -aid for payment of commitments
made by M/S ITI and as funds will be made available after budget
2014-15 is passed and hence repayment issue may be held in abeyance
till such time. Subsequently M/S ITI vide letter no: ITI/Corp/Fin/MTNL
dated 7-5-2014 informed that upon receipt of the financial assistance
from the Govt. the redemption process would be initiated. Further DOT
has also been reminded to issue directions to M/S ITI to redeem
Preference Share capital and make repayment vide letter no.MTNL/CO/GM
(BB & IA)/ITI Inve / 2013-14 dated 06.05.2015.
8. Certain claims in respect of damaged/lost fixed assets and inventory
has been lodged with Insurance Companies by MTNL and accordingly gross
block, accumulated depreciation and value of inventory have been
withdrawn in the respective years pending settlement of the claim. The
claims are still pending with Insurance companies. The final adjustment
in respect of difference between amount claimed and assets withdrawn
will be made in the year of settlement of claim.
9. a) The company had claimed benefit under section 80 - IA of the
Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06.
The appellate authorities have allowed the claim to the extent of 75%
of the amount claimed. The company has preferred appeals for the
remaining claim before the Hon''ble Courts of Delhi. The company has
retained the provision of Rs.400.33 crores (Rs.400.33 crores) for this
claim for the financial years 1997-98, 1998-99 and 1999-2000, however,
the demands on this account amounting to Rs.345.72 crores (Rs. 345.72
crores) for the financial years 1999-2000 to 2005-06 have been shown as
contingent reserve to meet the contingency that may arise out of
disallowances of claim of benefit u/s 80-IA of Income Tax Act, 1961.
b) Income Tax receivable include appeal effect of Rs.101.54 crores
pertaining to financial year 1999-00 which is pending for settlement by
the Income Tax Department. This include Tax amount of Rs 60.30 crores
and interest accrued thereon amounting to Rs. 41.24 crores.
c) The balances appearing in advance tax, provisions for income tax and
interest on income tax refunds are subject to reconciliation with the
figures of the tax records. The company is in the process of compilation
of tax records on yearly basis and reconciliation thereof with the
financial records.
10. Company has unabsorbed depreciation and brought forward business
losses as on 31.3.2015. However, there is no virtual certainty of
availability of sufficient future taxable income. Hence, the Deferred
Tax Asset has not been accounted for. Deferred Tax asset shall be
created in the year in which the company will have virtual certainty of
future taxable income as required by Accounting Standard 22 -
"Accounting for Taxes on Income" as per Rule 7 of Companies (Accounts)
Rules, 2014.
11. The Company is entitled for credit for Tax paid as MAT under
section 115JAA of the IT Act, 1961. However the Company has no
convincing evidence that it will pay normal tax during the specified
period as is required to avail MAT Tax Credit entitlement. Accordingly,
the same has not been recognized in the current year. The same will be
reviewed at each balance sheet date and will be appropriately accounted
for.
12. Vacant Land and Guest Houses are valued at original value for the
purpose of wealth tax provisions.
13. Lives of certain fixed assets have been revised consequent upon the
changes in useful life of assets in Schedule-II of Companies'' Act,
2013. Depreciation of Rs.79.89 crores on account of assets, whose useful
life is already exhausted before 01.04.2014, has been adjusted against
opening retained earnings.
14. Litigations:
a) The MTNL entered into contracts with M/s. M & N Publications Limited
for printing, publishing and supply of telephone directories for Delhi
and Mumbai unit for a period of 5 years starting from 1993. After
printing and issue of 1993 (main & supplementary) and 1994 main
directory, M/s. M & N Publications Ltd terminated the contract
prematurely on 04.04.1996. MTNL, Mumbai & Delhi invoked Bank Guarantees
on 09.04.1996, issued Legal Notice on 22.07.1996 and terminated the
contract.
Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator
has since given his award on 09.04.2013 partly in favor of MTNL, Mumbai
and on 31.07.2013 in favor of MTNL, Delhi. The claim and counter claim
under arbitration will be accounted for in the year when the ultimate
collection/ payment of the same becomes reasonably certain.
M/s. M & N Publications has approached the Bombay & Delhi High Courts
against the arbitration awards and MTNL also approached the Bombay &
Delhi High Courts for balance amount due.
The claim of Rs.285.83 crores on this account has been shown as
contingent liability.
b) As per directions of the Hon''ble Delhi High Court one UASL operator
had paid to MTNL, Mumbai Rs.124.93 crores and Rs.33.99 crores in 2004-05
and 2005-06 respectively against the claim of Rs.158.92 crores. The
company has recognized the amount realized as revenue in the respective
period. The Hon''ble TDSAT has ordered for refund of Rs.96.71 crores. The
Company has filed a Civil Appeal and application for stay of operation
of the order of TDSAT in the Hon''ble Supreme Court of India in which
Supreme Court directed on 08.05.2014 that TDSAT will review the
impugned order on seeking of it by appellant. MTNL fled review
application which had been disposed off by Hon''ble TDSAT vide order
dated 27.05.2014 on which MTNL fled CWP no.022764 dated 16.07.2014 in
Hon''ble Supreme Court and the same is pending. Meanwhile UASL operator
also fled appeal in Hon''ble Supreme Court.
The claim of Rs.96.71 crores on this account has been shown as contingent
liability.
c) MTNL Mumbai has received claims from M/s. BEST, Electricity supply
provider categorizing MTNL at Commercial tariff instead of Industrial
tariff. The claim has been made with retrospective effect for the
period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to
Apr-2011 in respect of LT connection. MTNL has represented to BEST for
reconsideration which has not been accepted by BEST. Hence MTNL has
approached Hon''ble Mumbai High Court and got a stay on the arrears
claimed by BEST amounting to Rs.20.82 crores.
In the opinion of the management, there is remote possibility of the
case being settled against MTNL.
d) In respect of Mobile Services Delhi, a sum of Rs. 25.89 crores (Rs.
25.89 crores) claimed by TCL towards ILD charges for the period Oct-09
to March-10 has not been paid due to heavy spurt in ILD traffic towards
M/S TCL. On technical analysis it was found that these calls were made
to some dubious and tiny destination. These destinations do not confirm
to international numbering plan of the respective countries and are not
approved destinations as per approved interconnect agreement. Further
these calls have not got physically terminated to the destinations. The
observations were shared with M/S TCL. M/S TCL has also been advised
that the balance, which relates to fraudulent calls, is not payable and
accordingly no provision has been made in the books of accounts. The
matter was handed over to the committee for investigation. Subsequently
M/S TCL fled a case in Hon''ble TDSAT for recovery of the amount,
decision for which is awaited.
The claim of Rs.25.89 crores on this account has been shown as contingent
liability.
In addition, the company is subject to legal proceedings and claims,
which have arisen in the ordinary course of business. The company''s
management perceive that these legal actions, when ultimately concluded
and determined, will not have any material impact on the company''s
financial statements.
15. Settlements with BSNL:
a) The amount recoverable from BSNL is Rs.4765.87 crores (Rs.4192.26 crore)
and amount payable is Rs.2003.63 crores (Rs. 1828.25 crores). The net
recoverable of Rs.2762.24 crores (Rs. 2364.01 crores) is subject to
reconciliation and confirmation.
b) Certain claims of BSNL on account of Signaling charges Rs.21.93 crores
(Rs. 21.93 crores), Transit tariff Rs.25.19 crores (Rs. 25.19 crores), MP
Billing Rs.6.01 crores (Rs. 6.01 crores), Service Connections Rs.40.15 crores
(Rs. 40.15 crores), IUC Rs.10.14 crores (Rs. 10.14 crores) and IUC from
Gujrat Circle Rs.1.11 crore (Rs. 1.11 crore) are being reviewed. Pending
settlement of similar other claims from BSNL, no provision is
considered necessary
c) Delhi Unit has accounted for the expenditure on account of telephone
bills of service connections raised by BSNL towards MTNL for the period
from 01.10.2000 to 30.09.2006 to the tune of Rs. 9.80 crores (Rs. 9.80
crores) on the basis of actual reimbursement made for subsequent
periods against the disputed claim of Rs.31.27 crores (Rs. 31.27 crores),
since no details / justifications are received till date from BSNL in
spite of repeated persuasion. The balance amount of Rs. 21.47 crores (Rs.
21.47 crores) is shown as contingent liability.
d) Based on expert opinion, the company has not been deducting tax
deducted at source on IUC services rendered by BSNL.
16. The Bank Reconciliation Statements as at 31st March 2015 include
unmatched/unlinked credits/debits amounting to Rs.1.55 crore (Rs. 1.48
crore) and Rs.1.38 crore (Rs. 1.63 crore) respectively. Reconciliation and
follow up with the bank to match/rectify the same is in process.
17. Subscribers'' dues and deposits:
a) The total balance in the Subscribers'' Deposit Accounts, in all the
units, is to the tune of Rs.577.12 crores (Rs. 597.39 crores).Out of this,
balance in Delhi Unit amounting Rs. 288.03 crores (Rs. 293.12 crores) is
under reconciliation.
b) Interest Accrued and Due on the aforesaid subscriber deposit
accounts for both the units of Rs.0.13 crores (Rs. 2.12 crores) is subject
to reconciliation with the relevant subsidiary records.
c) In Mumbai unit, on reconciliation of balance outstanding under
refund due to subscribers account with actual amount due for refund,
Rs.37.13 crores (Rs. 37.13 crores) was identified as excess liability
appearing in the financial books. Pending decision on final treatment of
this excess amount, the same is retained as liability in the financial
books.
d) Other current liabilities include credits on account of receipts
including service tax from subscribers amounting to Rs.10.43 crores (Rs.
21.24 crores), which could not be matched with corresponding debtors or
identified as liability, as the case may be. Appropriate adjustments/
payments shall be made inclusive of service tax, when these credits are
matched or reconciled. Therefore, it could not be adjusted against
making provision for doubtful debts.
18. The amounts of receivables and payables (including NLD / ILD
Roaming operators) are subject to confirmation and reconciliation.
19. The matching of billing for roaming receivables / payables with
the actual traffic intimated by the MACH is being done. Further the
roaming income is booked on the basis of actual invoices raised by MACH
on behalf of MTNL. Similarly the roaming expenditure is booked on the
basis of actual invoices received by MTNL from MACH on behalf of the
other operators. However, regarding collection, the payment is directly
received in the bank from other operators for varying periods. The
collection received from the operators are matched in totality against
the total bill wise but the allocation of collection to individual
operator''s account is pending in the absence of detailed information
which is being sought. Therefore although the roaming income and
expenditure are booked on actual basis, the roaming debtors are
reconciled in totality in the absence of detailed information. Efforts
are being made to allocate the collection on individual basis.
20. Settlements with DOT:
a) Amount recoverable on current account from DOT is Rs.8360.03 crores (Rs.
8458.07 crores) and amount payable is Rs.45.71 crores (Rs. 37.82 crores).
The net recoverable of Rs.8314.32 crores (Rs. 8420.25 crores) is subject to
reconciliation and confirmation. There is no agreement between the
Company and DOT for interest recoverable/Payable on current account.
Accordingly, no provision has been made for interest payable/receivable
on balances during the year except charging of interest on GPF claims
receivable from DOT.
b) Deposits from applicants and subscribers as on 31st March, 1986 were
Rs.81.32 crores (Rs.81.32 crores) in Mumbai unit as intimated provisionally
by DOT. At the yearend these deposits amounted to Rs.103.28 crores (Rs.
103.28 crores), the difference being attributable to
connections/refunds granted in respect of deposits received prior to
31st March, 1986. In case of Delhi Unit, balance on this account still
recoverable is Rs.12.36 crores (Rs.12.36 crores).
c) The total provision for Leave Encashment is Rs.1038.43 crores up to
31.3.2015 (Rs. 1034.96 crores). Out of this, an amount of Rs. 65.37 crores
(Rs. 65.37 crores ) and Rs. 43.37 crores (Rs. 43.37 crores ) is recoverable,
from DOT in respect of Group C & D and Group B employees respectively
for the period prior to their absorption in MTNL.
d) An amount of Rs.1645.82 crores (Rs. 1514.08 crores) towards GPF
contribution is recoverable from DOT as on 31.3.2015. The amount
pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
01.11.98 and 01.10.2000 respectively.
21. As per gazette notification no.GSR 138(E) dated 3rd March 2014
pensioner benefits in respect of absorbed combined service pension
optees are being paid by the Government of India on BSNL pay scales.
Gratuity provision for other than combined service pension opted
employees of MTNL, and Leave Encashment provision for all of the
employees of MTNL has been made on the basis of actuarial valuation.
22. Employee Benefits ÂAS-15(R)
I. During the year, the Company has recognized the following amounts
in the Statement of Profit and Loss:
V. Gratuity is payable to the employees on death or resignation or on
retirement at the attainment of superannuation age. To provide for
these eventualities, the Actuary has used Mortality: 1994-96 LIC
Ultimate table for mortality in service and LIC (1996-98) table for
mortality in retirement.
VI. Mortality in service is assumed on the basis of LIC (1994-96)
Ultimate and mortality in retirement is based on LIC (1996-98) table.
23. During the year, the Company has made an Insurance Policy for
medical benefits in respect of its retired and working employees. The
Insurance Policy is fully funded by the Company. This is in compliance
with AS- 15(Revised).
24. Information regarding Primary Business Segments: - AS Â 17
25. Consolidated Financial Statements  AS-21 & AS-27
The financial statements of Millennium Telecom Limited & Mahanagar
Telephone Mauritius Limited (wholly owned subsidiaries of the Company)
and MTML Data Ltd & MTML International Ltd. (Step down subsidiaries)
are consolidated in accordance with the Accounting Standard  21.
Consolidation of the financial statements of United Telecom Limited &
MTNL STPI IT Services Limited (Joint Ventures) has been done in
accordance with the Accounting Standard  27.
26. There is no indication of any impairment of assets of the Company,
on the basis of the company as a whole as a CGU under Accounting
Standard 28. However during the year, provision towards difference of
W.D.V. and expected realizable value of CDMA exchange, Delhi amounting
to Rs.17.19 crores has been provided towards impairment based on value in
use consequent upon closure of CDMA operations.
27. Disclosures pursuant to General instructions for preparation of
Statement of Proft & Loss as per Para 5 (viii)(a), (b) and (e) of
Schedule III to the Companies Act, 2013 :
28. Dues to Micro, Small and Medium Enterprises:
There is no reported Micro, Small and Medium enterprise as defend in
the MSMED Act, 2006, to whom the company owes dues as at 31.3.2015. No
interest has been paid during the year on account of delayed payments
as required under the MSMED Act, 2006.
29. As per the accounting policy, Bonus/ Excreta is paid based on the
productivity linked parameters and it is to be provided accordingly
subject to the profitability of the company. In view of losses, no
provision for Bonus/ Excreta has been made during the year.
30. Debenture Redemption Reserve: In view of losses, Debenture
Redemption Reserve had not been created in current financial year in
respect of Redeemable Non-Convertible Debentures (in the form of
Bonds).
31. Corporate Social Responsibility: No funds have been spent towards
CSR activities by the company during the year as there is no average
net profit made by the company during the three immediately preceding
financial years as per the requirement of section 135 of Companies Act
2013.
32. There is no delay in transferring amount, required to be
transferred, to Investor Education and Protection Fund by the company.
33. The Company has no foreseeable losses, which requires provision
under applicable laws or accounting standards on long-term contracts
and not dealing into derivative contracts at all.
34. Addition under the head ''Building'' in the Note No.11 (Tangible
Fixed Assets) includes Rs.1.18 crores being cost of tenements in the
building at Govandi, Mumbai (MMRDA), which is not yet registered in the
name of the company. However, the possession thereof has already been
given to the company.
35. Figures have been rounded off to the nearest crore. Previous year
figures have been regrouped / recast to confirm to current year''s
presentation. Amounts in brackets represent the previous year''s figures.
Mar 31, 2014
(Rs. in Million)
1. Contingent Liabilities 2013-14 2012-13
(a) Income Tax 8703.00 13176.91
Demands disputed and under appeal
(b) Sales Tax, Service Tax,
Excise duty, Municipal Tax Demands
Disputed and under Appeal 4541.31 5761.60
(c) (i) Interest to DDA on delayed Amount Amount
payments/pending court cases/Tax cases Indeterminate Indeterminate
(ii) Stamp duty payable on land and buildings acquired by the Amount
Amount Company Presently Presently
Unascertainable Unascertainable
(d) Claims against the company
not acknowledged as Debts 32271.82 32271.82
(e) Pending arbitration/court cases 10001.72 8231.50
(f) Bank guarantee & Letter of Credit 1091.28 1243.46
(g) Directory dispute 2858.34 2858.34
(h) Interest demanded by DOT and
disputed by company 1738.10 1738.10
on account of delay in payment
of Leave Salary and
Pension Contribution
(i) Pending court cases against land 46.07 53.78
Acquisition
(j) License Fee related contingent
liability w.r.t. BSNL charges
paid on netting basis 1403.63 1403.63
(k) Contingent Liability on account of
Income Tax as shown in 1(a) above
excludes various notices
received from TDS department creating
demand due to non-matching of their
records with the returns
filed.
2. Estimated amount of contracts remaining to be executed on capital
account is Rs. 232.94 Million (Previous year Rs. 1341.83 million). In
respect of contracts where the expenditure already incurred has
exceeded the contract value and the contract remains incomplete, the
additional expenditure required to complete the same cannot be
quantified.
3. Change in Accounting Policy:
During F.Y. 2013-14, in case of landline services, provision to the
extent of 50% has been made for debtors outstanding for more than 1
year but upto 3 years and to the extent of 100% in respect of more than
3 years but upto F.Y. 2012-13 provision was made only for debtors
outstanding for more than 3 years.
Impact: The amount of Rs. 393.83 million has been charged to the
Statement of Profit and Loss during the current year on account of
provision made to the extent of 50% for debtors outstanding for more
than 1 year but up to 3 years. Due to change in the policy, the profit
for the year as well as net trade receivables have been reduced to that
extent.
4. In view of gazette notification no.GSR 138(E) dated 3rd March 2014
vide which pensionary benefits in respect of absorbed combined service
pension optees will be paid by the Government of India, no provision
has been made for the pensionary benefits viz pension and gratuity for
such employees except for the amount due to difference in pay scales of
MTNL and BSNL which is payable by MTNL to the Government till next wage
revision by which time MTNL and BSNL shall achieve pay scale parity.
However, MTNL shall make pension contribution to the Govt. as per
FR-116 as in BSNL with equivalent BSNL pay scales. Earlier provision
for all such employees was made on actuarial basis.
Besides, actuarial valuation is made for gratuity provision for other
than combined service pension optee employees of MTNL.
5. a) The company had claimed benefit under section 80 - IA of the
Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06.
The appellate authorities have allowed the claim to the extent of 75%
of the amount claimed. The company has preferred appeals for the
remaining claim before the Hon''ble Courts of Delhi. The company has
retained the provision of Rs. 4003.32 million (Rs. 4003.32 million) for
this claim for the financial years 1997-98, 1998-99 and 1999-2000,
however, the demands on this account amounting to Rs. 3457.16 million
(Rs. 3457.16 million) for the financial years 1999-2000 to 2005-06 have
been shown as contingent reserve to meet the contingency that may arise
out of disallowances of claim of benefit u/s 80IA of Income Tax Act,
1961.
b) Income Tax receivable include appeal effect of Rs. 1015.43 million
pertaining to financial year 1999- 00 which is pending for settlement
by the Income Tax Department. This include Tax amount of Rs. 603.03
million and interest accrued thereon amounting to Rs. 412.40 million.
c) The balances appearing in advance tax, provisions for income tax and
interest on income tax refunds are subject to reconciliation with the
figures of the tax records.
6. In accordance with Accounting Standard 22 - "Accounting for Taxes
on Income", the Company has deferred tax assets on account of
unabsorbed depreciation and brought forward business losses as on
31.3.2014. However, there is no virtual certainty of availability of
sufficient future taxable income against which the above asset can be
realized. Hence, the Deferred Tax asset has not been accounted for.
Deferred Tax asset shall be created in the year in which the company
will have virtual certainty of future taxable income as required by
AS-22 issued under the Companies (Accounting Standards) Rules, 2006.
7. The Company has provided for Minimum Alternate Tax (MAT) to the
tune of Rs. 4971.79 million as per section 115JB of Income Tax Act,
1961. The same has been provided on provisional basis based on the
estimated income and expenditure till the date the financial statements
for the year 2013-14 are approved by the Board of MTNL. The same might
undergo revision at the time of filing of Income Tax return of the
Company for the A.Y. 2014-15. The Company is entitled for credit for
Tax paid as MAT under section 115JAA of the IT Act, 1961. However the
Company has no convincing evidence that it will pay normal tax during
the specified period as is required to avail MAT Tax Credit
entitlement. Accordingly, the same has not been recognized in the
current year. The same will be reviewed at each balance sheet date and
will be appropriately accounted for.
8. (a) The supplemental agreement entered into between United India
Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling
Computers Ltd and the company for printing of telephone directories was
struck down by the Hon''ble High Court of Delhi on 30.9.92 and the said
decision was upheld by the Hon''ble Supreme Court of India on 12.01.93.
A claim against the Company has been raised by Sterling Computers Ltd.
for Rs. 258.2 Million which being under dispute, has not been provided
for. The company has filed its counter claims of Rs. 228.7 Million
before the Hon''ble High Court against Sterling/UDI/UIP and has also
filed arbitration claims of Rs. 561.8 Million plus interest @ 21% per
annum against these parties under the original agreement. Pending
finalisation of this dispute, the company has raised and recorded as
ÂClaims Recoverable'', a claim for Rs. 154.91 Million (Rs. 154.91
Million) on account of royalty, interest and billing charges and on
payments made through Letter of Credit; Rs. 130.47 Million (Rs. 130.47
Million) recovered there against by the company from subscribers for
the issue of directories, is carried under ÂCurrent Liabilities''.
Further claims of the company for interest and service charges
aggregating Rs. 143.67 Million (Rs. 143.67 Million) have not been
accounted for. Financial implication of the claim raised against the
company, adjustment of the sums received against outstanding claims,
any non-realisation of claim and further claims recoverable shall be
effected upon determination based on the outcome of the proceedings in
the court of law.
MTNL has filed OMP No. 151/1996 seeking enlargement of time under
Section 28 of the Arbitration Act for the Arbitrator to publish the
award. The case is still pending and will be listed along with OMP
No.135/94 for final hearing. The petitioner M/s United India Periodical
(Ltd.) filed OMP No.135/ 94 in the High Court of Delhi challenging the
appointment of Arbitrator under Section 33 of the Arbitration Act 1940.
The Petition is pending from 24.10.1994 in the High Court of Delhi. Now
the petitioner has filed an application for amendment in the petition
filed in the year 1994 with the prayer that the arbitration clause 20
of the original contract dated 14.3.1987 be determined by the Hon''ble
Court of the subsequent events. During the financial year 2011-12, the
Hon''ble High Court pass an order on 07.12.2011 directing to stop
arbitration proceedings against M/s Sterling regarding the arbitration
case of M/s UIP also and it is informed by learned arbitrator that this
proceeding stand still in the SLP filed by UIP. However, MTNL has not
received the certified copy of the order. On receipt of the same MTNL
will file further to the court. The petitioner has also taken plea of
res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and
the same is pending before the Bombay High Court. The case is now
listed in the category of final matter and is on regular board of the
Court for both the aforesaid OMP''s.
The suit filed by MTNL against M/s Sterling Computers and others is
pending in the High Court of Mumbai in which claims to the tune of Rs.
228.7 million towards Royalty, Interest on Royalty amount upto
31.8.1994, amount paid against LC, Interest on amount of LC, L/D for
non-performance and other charges etc. for Delhi and Mumbai both units.
This suit is filed after non-performance of supplementary agreement
dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is
still pending at Mumbai High Court.
(b) MTNL entered into contracts with M/s. M & N Publications Limited
for printing, publishing and supply of telephone directories for Delhi
and Mumbai unit for a period of 5 years starting from 1993. After
printing and issue of 1993 (main & supplementary) and 1994 main
directory, M/s. M & N Publications Ltd terminated the contract
prematurely on 04.04.1996. MTNL, Mumbai invoked Bank Guarantee on
09.04.1996 and issued Legal Notice on 22.07.1996 and terminated the
contract.
Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator
has since given his award on 09.04.2013 partly in favor of MTNL,
Mumbai. The claim and counter claim under arbitration will be accounted
for in the year when the ultimate collection/payment of the same
becomes reasonably certain. M/s. M & N Publications has approached the
Bombay High Court against the award vide ARBP/926/2013 and MTNL also
approached the Bombay High Court vide ARBPL/14/07/2013 for balance
amount due and the same is in admission stage.
9. Certain Lands and Buildings capitalized in the books are pending
registration/legal vesting in the name of the company and the landed
properties acquired from DOT have not been transferred in the name of
the company and in the case of leasehold lands, the documentation is
still pending. Stamp Duty on the lands and buildings acquired from DOT
is payable by DOT as per sale deed and in respect of properties
acquired after 1.4.1986, the documentation shall be contemplated at the
time of sale or disposal as and when needed.
10. The Mumbai Unit had applied for amnesty under the Maharashtra Kar
Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs. 8.10
Million (Rs. 8.10 Million). The application for amnesty towards demands
aggregating Rs. 2.09 Million (Rs. 2.09 Million) has been accepted. The
balance applications relating to demands of Rs. 6.02 Million (Rs. 6.02
Million) are under process and are not included under Contingent
Liabilities.
11. a) The amount recoverable from BSNL is Rs. 41922.59 Million (Rs.
36097.39 Million) and amount payable is Rs. 18282.54 Million (Rs.
16345.13 Million). The Net recoverable of Rs. 23640.05 Million (Rs.
19752.26 Million) is subject to reconciliation and confirmation.
b) Certain claims of BSNL on account of Signaling charges Rs. 219.30
million. (Rs. 219.30 million), Transit tariff Rs. 251.90 million (Rs.
251.90 million), MP Billing Rs. 60.10 million(Rs. 60.10 million),
Service Connections Rs. 401.48 million (Rs. 401.48 million), IUC Rs.
101.40 million (Rs. 101.40 million) and IUC from Gujrat Circle Rs.
11.14 million (Rs. 11.14 million) are being reviewed. Pending
settlement of similar other claims from BSNL, no provision is
considered necessary
c) Delhi Unit has accounted for the expenditure on account of telephone
bills of service connections raised by BSNL towards MTNL for the period
from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01 million (Rs.
98.01 million) on the basis of actual reimbursement made for subsequent
periods against the disputed claim of Rs. 312.72 million (Rs. 312.72
million), since no details / justifications are received from BSNL in
spite of repeated persuasion till date. The balance amount of Rs.
214.72 million (Rs. 214.72 million) is shown as contingent liability.
d) In both Delhi and Mumbai Unit an amount of Rs. 4428.35 million (Rs.
3782.25 million) and Rs. 4630.63 million (Rs. 2748.67 million) has been
accounted as receivable and payable from BSNL respectively on account
of IUC charges which is included in the recoverable & payable amounts
as shown above.
e) During the year in Delhi Unit out of the Access calls and other
charges Rs. 44.59 million (Rs. 76.94 million) towards interconnect
charges on rate prescribed by TRAI in IUC regulation in the absence of
any interconnect agreement between MTNL & BSNL. BSNL is also charging
the same and the claim raised by both parties are under dispute. Direct
connectivity traffic expenditure with BSNL has been booked on the basis
of billing system of Delhi Unit.
f) During the year an amount of Rs. 380.72 million (Rs. 1296.55
million) have been accounted for as Infrastructure Usage charges
receivable from BSNL for using the various office building and spaces
of MTNL and Rs. 2.91 million (Rs. 3.27 million) is payable to BSNL in
case of Mumbai Unit.
g) During the year an amount of Rs. 261.10 million (Rs. 184.02 million)
has been accounted as receivable from BSNL on account of Property Tax,
Electricity, water and fuel charges by both Delhi and Mumbai Units.
12. As per directions of the Hon''ble Delhi High Court one UASL
operator had paid to MTNL, Mumbai Rs. 1249.30 million and Rs. 339.90
million in 2004-05 and 2005-06 respectively against the claim of Rs.
1589.20 million. The company has recognised the amount realized as
revenue in the respective period. The Hon''ble TDSAT has ordered for
reconciliation of the bills. The Company has filed a Civil Appeal and
application for stay of operation of the order of TDSAT in the Hon''ble
Supreme Court of India in which Supreme Court directed on 08.05.2014
that TDSAT will review the impugned order on seeking of it by appellant
and the same is in process.
13. The Bank Reconciliation Statements as at 31st March 2014 include
unmatched/unlinked credits/ debits given by the banks in the Mumbai,
Delhi and Corporate office units'' bank accounts amounting to Rs. 14.78
million (Rs. 2.40 million) and Rs. 16.26 million (Rs. 1.41 million)
respectively. Reconciliation and follow up with the bank to
match/rectify the same is in process.
14. The company had subscribed to 8.75% Cumulative Preference Shares
of M/s. ITI Limited, amounting to Rs. 1000 Million during the year 2001
-02. As per the terms of allotment, the above Preference Shares were
proposed to be redeemed in 5 equal installments. Accordingly, five
installments amounting to Rs. 200 Million each, aggregating to Rs. 1000
Million have become redeemable, which have not been redeemed by ITI
Limited. As per letter No.U-59011 -10/2002-FAC dated 31.07.2009 issued
by DOT, the repayment schedule of the above cumulative Preference
Shares was deferred to 2012-13 onwards in five equal installments. The
installments which were due in 2012-13 and 2013-14 have not been paid
and necessary provision for the overdue installments has been made.
Though in letter of Dept. of Telecom No: 20-37/2012-FAC.II dated
25-4-2014, the Cabinet Committee on Economic Affairs has approved the
financial assistance to M/S ITI which includes the grants -in -aid for
payment of commitments made by M/S ITI and as funds will be made
available after budget 2014-15 is passed and hence repayment issue may
be held in abeyance till such time. Subsequently M/S ITI vide letter
no: ITI/Corp/Fin/MTNL dated 7-5-2014 informed that upon receipt of the
financial assistance from the Govt. the redemption process would be
initiated.
15. Amount recoverable on current account from DOT is Rs. 84580.73
Million (Rs. 35183.13 Million) and amount payable is Rs. 378.22 Million
(Rs. 756.02 Million). The net recoverable of Rs. 84202.51 Million (Rs.
34427.11 Million) is subject to reconciliation and confirmation.
Deposits from applicants and subscribers as on 31st March, 1986 were
Rs. 813.21 million in Mumbai unit as intimated provisionally by DOT.
At the year end these deposits amounted to Rs 1032.79 million (Rs.
1032.79 million), the difference being attributable to
connections/refunds granted in respect of deposits received prior to 31
st March, 1986. Out of the said amount of Rs. 1032.79 million, claims
of Rs. 597.94 million (Rs. 597.94 million) have been settled and Rs.
434.85 million (Rs. 434.85 million) is due at the end of the year.
In case of Delhi Unit, balance on this account still recoverable is Rs.
123.60 million (Rs. 123.60 million).
16. a) The balance in the Subscribers Deposit Accounts is to the tune
of Rs. 5973.94 million (Rs. 5979.81 million).Out of this balance in
Delhi Unit an amount of Rs. 2931.21 Million (Rs. 3017.12 Million) on
account of subscriber deposits is under reconciliation.
b) The reconciliation of deposits pertaining to Mumbai unit is done and
on reconciliation of Balances of customer''s deposits in the CSMS
billing system with financial books (WFMS), an amount of Rs. 1348.04
million (Rs. 1348.04 million) was found excess in financial books.
Pending decision on final treatment of this excess amount, the same is
retained as liability in the financial books.
c) Interest Accrued and Due on the aforesaid subscriber deposit
accounts for both the units of Rs. 21.15 Million (Rs. 21.80 Million) is
subject to reconciliation with the relevant subsidiary records.
d) In Mumbai unit, on reconciliation of balance outstanding under
refund due to subscribers account with actual amount due for refund,
Rs. 371.28 million (Rs. 371.28 million) was identified as excess
liability appearing in the financial books. Pending decision on final
treatment of this excess amount, the same is retained as liability in
the financial books.
e) Other current liabilities include credits on account of receipts
including service tax from subscribers amounting to Rs. 212.42 Million
(Rs. 420.30 Million), which could not be matched with corresponding
debtors or identified as liability, as the case may be. Appropriate
adjustments/ payments shall be made inclusive of service tax, when
these credits are matched or reconciled. Therefore, it could not be
adjusted against making provision for doubtful debts.
f) The balance of sundry debtors as per ageing summary under subsidiary
records is lower by Rs. 66.56 million (Rs. 73.83 million) as compared
to the balance in general ledger and is under reconciliation. The
resultant impact of the above on the account is not ascertainable.
17. License fee on the Adjusted Gross Revenue (AGR) was calculated and
accounted for on accrual basis in respect of both revenue and revenue
sharing with other operators till 2011-12. As per the directions of
Supreme Court given earlier in respect of calculation of License Fees
and AGR the matter has been referred back to TDSAT and is pending in
respect of other private telecom operators. However, MTNL is not a
party to the dispute and the AGR is calculated as per License
Agreement. In respect of revenue sharing with BSNL, the issue has been
taken up with DOT while paying License Fees on actual payment basis
from 2012-13 onwards. The impact of Rs. 1403.63 Million on this account
upto the year 2011-12 has been shown as contingent liability and issue
is also taken up with BSNL and DOT by MTNL.
18. In case of Mumbai Unit, the balances with non-scheduled banks
comprise of:
20. MTNL Mumbai has received claims from M/s. BEST, Electricity supply
provider categorizing MTNL at Commercial tariff instead of Industrial
tariff. The claim has been made with retrospective effect for the
period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to
Apr-2011 in respect of LT connection. MTNL has represented to BEST for
reconsideration which has not been accepted by BEST. Hence MTNL has
approached Hon''ble Mumbai High Court and got a stay on the arrears
claimed by BEST amounting to Rs. 208.20 million. In the opinion of the
management, there is remote possibility of the case being settled
against MTNL.
21. a) Consequent upon the decision of Govt. to take over the
liability of pensionary benefits of combined service pension optees,
out of the total Gratuity provision of Rs. 14181.74 million, the
provision to the extent of 3062.74 millions for the period upto
31-03-2014 is retained towards the liability of employees other than
combined service pension optees and Rs. 729.58 million for Combined
pension optees to meet the liability due to difference in BSNL and MTNL
pay scales. The remaining excess provision pertaining to the combined
service pension optees is written back. As on 31.03.2014 Rs. 3062.74
Millions (Rs. 14181.74 millions) is to be retained by the Gratuity
Trust and excess amount to the extent of Rs. 8001.60 million is to be
returned to MTNL out of its corpus being the amount pertaining to the
combined service pension optees available with it due to the above
decision of Government of India.
Similarly out of the total pension provision in the books as on
31.03.2013 of Rs. 101561.59 million, only Rs. 8837.16 miilion has been
retained to meet out the liability due to difference in MTNL and BSNL
pay scales.
b) The total provision for Leave Encashment is Rs. 10349.61 Million up
to 31.3.2014 (Rs. 9386.31 Million). Out of this, an amount of Rs.
653.68 Million (Rs. 653.68 Million ) and Rs. 433.74 Million (Rs. 433.74
Million) is recoverable, from DOT in respect of Group C & D and Group B
employees respectively for the period prior to their absorption in
MTNL.
c) An amount of Rs. 15140.82 Million (Rs. 14732.72 Million) towards GPF
contribution is recoverable from DOT as on 31.3.2014. The amount
pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
01.11.98 and 01.10.2000 respectively.
d) In view of the Government of India decision for payment of
pensionary benefits to Combined service pension optees as in the case
of BSNL as per which the payment of pensionary benefits will be made by
Govt. as per the BSNL pay scales. Correspondingly MTNL will pay pension
contribution as per the BSNL pay scales to DOT. The difference in
pensionary benefits on account of difference in BSNL and MTNL pay
scales to combine service pension optees will be borne by MTNL.
Gratuity provision for other than combined service pension optee
employees of MTNL, and Leave Encashment provision for all of the
employees of MTNL has been made on the basis of actuarial valuation.
22. The diminutions in value of investments in Subsidiaries & Joint
Ventures are considered as temporary in nature.
23. The amount of receivables and payables (including NLD / ILD
Roaming operators) is subject to confirmation and reconciliation.
Pending such confirmation/ reconciliation, the impact on the account is
not ascertainable at this stage.
24. Certain claims in respect of damaged/lost fixed assets and
inventory has been lodged with Insurance Companies by MTNL and
accordingly gross block, accumulated depreciation and value of
inventory have been withdrawn in the respective years pending
settlement of the claim. The claims are still pending with insurance
company. The final adjustment in respect of difference between amount
claimed and assets withdrawn will be made in the year of settlement of
claim.
25. There is no agreement between the Company and DOT for interest
recoverable/Payable on current account. Accordingly, no provision has
been made for interest payable/receivable on balances during the year
except charging of interest on GPF claims receivable from DOT.
26. Vacant Land and Guest Houses are valued at original value for the
purpose of wealth tax provisions.
27. Exceptional items of Rs. 116209.31 million (NIL) appearing in the
Statement of Profit & Loss Account represent the following :
Pension/Gratuity provision has been written back consequent on the
issue of Notification by DOP & PW vide GSR No.138 (E) dt.03/03/2014
granting pensionary benefits by the Government to erstwhile Government
employees absorbed in MTNL and opted for pension on combined service in
the same manner as in BSNL.
Pension payouts (net of pension contribution) made by MTNL on behalf of
DOT for the period from 01. 10.2000 to 31.03.2013 have been written
back in view of aforesaid notification.
Recoverable from Gratuity Trust is due to reversal of liability in
respect of Combined Service Pension optee employees of MTNL in view of
aforesaid notification.
Amortised amount of BWA Spectrum upto F.Y. 2012-13 has been written
back during the year consequent to the decision of the Government of
India to refund the one time entry fees for spectrum for BWA services
initially allotted to MTNL consequent upon its return by MTNL. The
Company had capitalized the one time spectrum fees for BWA services to
the tune of Rs. 45339.70 Millions during the year 2009-10.The Company
had amortized an amount of Rs. 14048.81 Million in the books up to
F.Y.2012- 13. The amount of Rs. 45339.70 million has been shown as
recoverable from DoT.
28. In respect of Mobile Services Delhi, a sum of Rs. 258.94 Million
(Rs 258.94 Million) claimed by TCL towards ILD charges for the period
Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic
towards M/S TCL. On technical analysis it was found that these calls
were made to some dubious and tiny destination. These destinations do
not confirm to international numbering plan of the respective countries
and are not approved destinations as per approved interconnect
agreement. Further these calls have not got physically terminated to
the destinations. The observations were shared with M/S TCL. M/S TCL
has also been advised that the balance which relates to fraudulent
calls is not payable and accordingly no provision has been made in the
books of accounts. However the units have shown the above as contingent
liability. The matter has been handed over to committee for
investigation.
29. Disclosures pursuant to Para 5(viii) of General Instructions for
preparation of Statement of Profit & Loss Account under Revised
Schedule VI of the Companies Act, 1956:
(a) Value of Imports calculated on C.I.F. basis
(i) Raw Material - Nil
(ii) Components and Spare Parts -Nil
(iii) Capital Goods -Nil
(b) Expenditure in Foreign Currency
(i) Professional & Consultancy Fees =Rs. NIL(Rs. 1.25 million)
(ii) Travel =Rs. NIL (Rs. 0.30 million)
(iii) Others =Rs. 44.48 million(Rs. 42.54 million)
(c) Earning in Foreign Exchange(roaming)=Rs. 87.48 million (Rs. 105.89
million)
(d) Consumption of stores is included under the normal heads of Capital
Expenditure and/or Repairs & Maintenance, and the issue of imported and
indigenous items are not separately priced/ identified.
30. (a) In case of Delhi Unit NIL (Rs. 4.83 million) is outstanding
against Micro, Small and Medium enterprises as defined in the Micro,
Small and Medium Enterprise Development Act, 2006, to whom the company
owes dues as at 31.3.2014. No interest has been paid during the year on
account of delayed payments as required under the MSMED Act, 2006.
The details of amount outstanding to Micro, Small and Medium
Enterprises based on available information with the company are as
under:-
Notes:-
1. The company has disclosed Business Segment as the Primary Segment.
Segments have been identified taking into account the nature of the
services, the deferring risks and returns, the organizational structure
and internal reporting system.
2. The company caters mainly to the needs of the two metro cities viz.
Delhi and Mumbai, wherein the risk and return are not different to each
other. As such there are no reportable geographical segments.
3. Segment Revenue, Segment Result, Segment Asset and Segment
Liabilities include the respective amount identifiable to each of the
segments. The expenses, which are not directly relatable to the
business segment, are shown as unallocable corporate assets and
liabilities respectively.
4. Finance cost is not allocated segment wise and is considered on
over all basis.
31. During the year, the Company has made an Insurance Policy for
medical benefits in respect of its retired and working employees. The
Insurance Policy is fully funded by the Company. This is in compliance
with AS-15(Revised
32. Based on expert opinion, the company has not been deducting tax
deducted at source on IUC services rendered by BSNL.
39. Dept. of Telecom has levied one time spectrum charges for the GSM
and CDMA spectrum on MTNL and the spectrum given on trial basis to the
extent of 4.4 Mhz in 1800 Mhz frequency is also included in the
calculations. The calculations are further subject to changes in the
quantum of spectrum holding and the remaining valid period of license
as per D.O.T. MTNL proposed to surrender some of the spectrum allotted
on trial basis and does not require to pay for CDMA spectrum since it
holds only 2.5 Mhz spectrum in respect of CDMA. D.O.T. has been
apprised of the same and the matter is still under correspondence.Apart
from this, the issue of charges for spectrum given on trial basis is
also to be decided. Besides, ab-initio, the very policy of levy of one
time spectrum charges by DOT itself has been challenged by private
operators and is sub judice as on date whereas MTNL''s case is also to
be decided by D.O.T. on the basis of outcome of the court case and the
spectrum surrendered or retained. The finalisation of charges and the
modalities of payment are therefore to be crystallized yet and as on
date the position is totally indeterminable as to the quantum of
charges and also the liability.
Pending final outcome of the issue which itself is subjudice and non
finality of quantum of charges payable, if at all, to D.O.T. , no
provision is made in the books of accounts as the amount is totally
indeterminable. However the contingent liability of Rs.32057.10 million
is shown on the basis of the demand raised by D.O.T.in respect of GSM.
33. The matching of billing for roaming receivables / payables with the
actual traffic intimated by the MACH is being done. Further the Roaming
Income is booked on the basis of actual invoices raised by MACH on
behalf of MTNL. Similarly the Roaming Expenditure is booked on the
basis of actual invoices received by MTNL from MACH on behalf of the
other operators. However, regarding collection, the payment is
directly made in the bank by the other operators. The payment is made
by various operators and for varying periods. The collection received
from the operators are matched in totality against the total bill wise
but the allocation of collection to individual operatorÂs account is
pending in the absence of detailed information which is being sought.
Therefore although the Roaming Income and Expenditure are booked on
actual basis, however in the absence of detailed information, the
roaming debtors are reconciled in totality. Efforts are being made to
allocate the collection on individual basis.
34. In view of losses, Debenture Redemption Reserve had not been
created for the financial year 2012-13 in respect of 8.57% Redeemable
Non-Convertible Debentures (in the form of Bonds). However, during the
current year, provision for DRR have been made to the extent required
under the Companies Act, 1956 and related rules etc. in this regard.
During the current financial year the Company has created DRR to the
tune of Rs.452.71 million which includes the provision for DRR pertaining
to F.Y.2012-13.
35. As per the accounting policy, Bonus/ Exgratia is paid based on the
productivity linked parameters and it is to be provided accordingly
subject to the profitability of the company. However, during the
current year, no provision for Bonus/ Exgratia has been made. The
profits for the current year accrued not on account of increase in
productivity but on the reversal of accounting entries made during the
previous accounting period(s).
36. In Delhi MS unit, IUC-SMS Income and Expenditure for eight months
amounting Rs.20.86 Millions and Rs.124.67 Millions respectively has been
accounted for on provisional basis due to nonprocessing of data for
technical problems.
37. Figures have been rounded off to the nearest million. Previous year
figures have been regrouped / recast to confirm to current yearÂs
presentation. Amounts in brackets represent the previous yearÂs
figures.
Mar 31, 2013
1. Change in Accounting Policy
No change in the Accounting Policy has been made during the year .
2. Estimated amount of contracts remaining to be executed on capital
account is Rs. 1341.83 Million (Previous yearRs. 2004.16 million). In
respect of contracts where the expenditure already incurred has
exceeded the contract value and the contract remains incomplete, the
additional expenditure required to complete the same cannot be
quantified.
3. Other liabilities include credits on account of receipts including
service tax from subscribers amounting to Rs.420.30 Million (Rs.412.24
Million), which could not be matched with corresponding debtors or
identified as liability, as the case may be. Appropriate adjustments/
payments shall be made inclusive of service tax, when these credits are
matched or reconciled. Therefore, it could not be adjusted against
making provision for doubtful debts.
4. a) The company had claimed benefit under section 80 - IA of the
Income Tax Act, 1961 for the financial years from 1997-98 to 2005-06.
The appellate authorities have allowed the claim to the extent of 75%
of the amount claimed. The company has preferred appeals for the
remaining claim before the Hon''ble Courts of Delhi. The company has
retained the provision of Rs.4003.32 million (Rs.4003.32 million) for
this claim for the financial years 1997-98, 1998-99 and 1999-2000,
however, the demands on this account amounting to Rs.3457.16 million
(Rs.3948.46 million) for the financial years 1997-98 to 2005-06 have
been shown as contingent reserve to meet the contingency that may arise
out of disallowances of claim of benefit u/s 80IA of Income Tax
Act,1961.
b) Income Tax receivable include appeal effect of Rs.1015.43 million
pertaining to financial year 1999-00 which is pending for settlement by
the Income Tax Department. This include Tax amount of Rs.603.03 million
and interest accrued thereon amounting to Rs.412.4 million. Efforts are
being made to recover the same at the earliest.
c.) The balances appearing in Advance tax, Provisions for income tax
and Interest on income tax refunds are subject to reconciliation with
the figures of the tax records.
5. In accordance with Accounting Standard 22, accounting for taxes on
Income, the company has deferred tax assets amounting to Rs. 40173.90
million (Rs. 25850.97 million) including Rs.9204.16 million (Rs.6897.96
million ) on account of unabsorbed depreciation and Rs.28859.41 million
(Rs.16896.27 million) brought forward business losses as on 31.3.2013.
However, in the current Telecom Industry Scenario, there is no virtual
certainty of availability of sufficient future taxable income against
which the above asset can be realized. Hence, the Deferred Tax asset
has not been accounted for. DTA amounting to Rs.40173.90 million
(Rs.25850.97 million) shall be created in the year in which the company
will have virtual certainty of future taxable income as required by
AS-22 issued under the Companies (Accounting Standards) Rules, 2006.
6. a) Provision for taxation for the current year comprises of Income
Tax ofRs. Nil (Rs.Nil), Wealth Tax of Rs.1.65 Millions (Rs.2.37
million).
b) During the year, the company has suffered a business loss of
Rs.53211.23 millions (Rs.41097.84 million). The company intends to
carry forward its business loss including unabsorbed depreciation/
amortization to the tune of Rs.46179.10 million (Rs.35538.41 million)
as per calculation made under Income Tax Act, 1961.
7. (a) The supplemental agreement entered into between United India
Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling
Computers Ltd and the company for printing of telephone directories was
struck down by the Hon''ble High Court of Delhi on 30.9.92 and the said
decision was upheld by the Hon''ble Supreme Court of India on 12.1.93. A
claim against the Company has been raised by Sterling Computers Ltd.
for Rs.258.2 Millions which being under dispute, has not been provided
for. The company has filed its counter claims of Rs.228.7 Millions
before the Hon''ble High Court against Sterling/ UDI/UIP and has also
filed arbitration claims of Rs.561.8 Millions plus interest @ 21% per
annum against these parties under the original agreement. Pending
finalisation of this dispute, the company has raised and recorded as
''Claims Recoverable'', a claim for Rs.154.91 Millions (Rs.154.91
Millions) on account of royalty, interest and billing charges and on
payments made through Letter of Credit; Rs.130.47 Millions (Rs.130.47
Millions) recovered there against by the company from subscribers for
the issue of directories, is carried under ''Current Liabilities''.
Further claims of the company for interest and service charges
aggregating Rs.143.67 Millions (Rs.143.67 Millions) have not been
accounted for.
Financial implication of the claim raised against the company,
adjustment of the sums received against outstanding claims, any
non-realisation of claim and further claims recoverable shall be
effected upon determination based on the outcome of the proceedings in
the court of law.
MTNL has filed OMP No.151/1996 seeking enlargement of time under
Section 28 of the Arbitration Act for the Arbitrator to publish the
award. The case is still pending and will be listed along with OMP
No.135/94 for final hearing. The petitioner M/s United India Periodical
(Ltd.) filed OMP No.135/94 in the High Court of Delhi challenging the
appointment of Arbitrator under Section 33 of the Arbitration Act 1940.
The Petition is pending from 24.10.1994 in the High Court of Delhi. Now
the petitioner has filed an application for amendment in the petition
filed in the year 1994 with the prayer that the arbitration clause 20
of the original contract dated 14.3.1987 be determined by the Hon''ble
Court of the subsequent events. During the financial year 2011-12, the
Hon''ble High Court pass an order on 7.12.2011directing to stop
arbitration proceedings against M/s Sterling regarding the arbitration
case of M/s UIP also and it is informed by learned arbitrator that this
proceeding stand still in the SLP filed by UIP. However, MTNL is not
received the certified copy of the order. On receipt of the same MTNL
will file further to the court. The petitioner has also took plea of
res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and
the same is pending before the Bombay High Court. The case is now
listed in the category of final matter and is on regular board of the
Court for the both the aforesaid OMP''s.
The suit filed by MTNL against M/s Sterling Computers and others is
pending in the High Court of Mumbai in which claims to the tune of
Rs.228.7 millions towards Royalty, Interest on Royalty amount upto
31.8.1994, amount paid against LC, Interest on amount of LC, L/D for
non-performance and other charges etc. for Delhi and Mumbai both units.
This suit is filed after non-performance of supplementary agreement
dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is
still pending at Mumbai High Court.
(b) MTNL entered into contracts with M/s. M & N Publications Limited
for printing, publishing and supply of telephone directories for Delhi
and Mumbai unit for a period of 5 years starting from 1993. After
printing and issue of 1993 (main & supplementary) and 1994 main
directory, M/s. M & N Publications Ltd terminated the contract
prematurely on 04.04.1996. MTNL, Mumbai invoked Bank Guarantee on
09.04.1996 and issued Legal Notice on 22.07.1996 and terminated the
contract.
Sole Arbitrator has been appointed by CMD, MTNL. The Sole Arbitrator
has since given his award on 09.04.2013 partly in favor of MTNL,
Mumbai. The claim and counter claim under arbitration will be accounted
for in the year when the ultimate collection/payment of the same
becomes reasonably certain.
8. Certain Lands and Buildings capitalized in the books are pending
registration/legal vesting in the name of the company and the landed
properties acquired from DOT have not been transferred in the name of
the company and in the case of leasehold lands, the documentation is
still pending. Stamp Duty and the lands and buildings acquired from DOT
is payable by DOT as per sale deed and in respect of properties
acquired after 1.4.1986, the documentation shall be contemplated at the
time of sale or disposal as and when needed.
9. The Mumbai Unit had applied for amnesty under the Maharashtra Kar
Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs.8.10
Millions (Rs.8.10 Millions). The application for amnesty towards
demands aggregating Rs.2.09 Millions (Rs.2.09 Millions) has been
accepted. The balance applications relating to demands of Rs.6.02
Millions (Rs.6.02 Millions) are under process and are not included
under Contingent Liabilities.
10. The amount recoverable from BSNL is Rs.36097.39 Millions
(Rs.30679.67 Millions) and amount payable is Rs.16345.13 Millions
(Rs.15205.76 Millions). The Net recoverable of Rs.19752.26 Millions
(Rs.15473.91 Millions) is subject to reconciliation and confirmation.
a) Certain claims of BSNL on account of Signaling charges Rs.219.30
millions (Rs.219.30 millions), Transit tariff Rs.251.90 millions
(Rs.251.90 millions), MP Billing Rs.60.10 millions(Rs.60.10 millions),
Service Connections Rs.401.48 millions (Rs.401.48 millions), IUC
Rs.101.40 millions (Rs.101.40 millions) and IUC from Gujrat Circle
Rs.11.14 millions (Rs.11.14 millions) are being reviewed. Pending
settlement of similar other claims from BSNL, no provision is
considered necessary.
b) Delhi Unit has accounted for the expenditure on account of telephone
bills of service connections raised by BSNL towards MTNL for the period
from 01.10.2000 to 30.09.2006 to the tune of Rs.98.01 millions
(Rs.98.01 millions) on the basis of actual reimbursement made for
subsequent periods against the disputed claim of Rs.312.72 millions
(Rs.312.72 millions), since no details / justifications are received
from BSNL in spite of repeated persuasion till date. The balance amount
of Rs.214.72 millions (Rs. 214.72 millions) is shown as contingent
liability.
c) In both Delhi and Mumbai Unit an amount of Rs.3782.25 millions
(3375.84 millions) and Rs.2748.67 millions (Rs.2750.38 millions) has
been accounted as receivable and payable from BSNL respectively on
account of IUC charges which is included in the recoverable & payable
amounts as shown above.
d) During the year in Delhi Unit out of the Access calls and other
charges Rs.76.94 millions (Rs.104.69 millions) towards interconnect
charges on rate prescribed by TRAI in IUC regulation in the absence of
any interconnect agreement between MTNL & BSNL. BSNL is also charging
the same and the claim raised by both parties are under dispute. Direct
connectivity traffic expenditure with BSNL has been booked on the basis
of billing system of Delhi Unit.
e) During the year an amount of Rs.1296.55 millions (Rs.868.65 million)
have been accounted for as Infrastructure Usage charges receivable from
BSNL for using the various office building and spaces of MTNL. In case
of Mumbai Unit, Rs.3.27 millions (Rs.39.72 million) as payable to BSNL.
f) During the year an amount of Rs.184.02 million (Rs.190.58 million)
has been accounted as receivable from BSNL on account of Property Tax,
Electricity, water and fuel charges by both Delhi and Mumbai Units.
11. As per directions of the Hon''ble Delhi High Court one UASL
operator had paid to MTNL, Mumbai Rs.1249.30 million and Rs.339.90
million in 2004-05 and 2005-06 respectively against the claim of
Rs.1589.20 million. The company has recognised the amount realized as
revenue in the respective period. The Hon''ble TDSAT has ordered for
reconciliation of the bills. The Company has filed a Civil Appeal and
application for stay of operation of the order of TDSAT in the Hon''ble
Supreme Court of India which is admitted by the court on 10-5-2013 for
further course of action.
12. The Bank Reconciliation Statements as at 31st March 2013 include
unmatched/unlinked credits/ debits given by the banks in the Mumbai
Unit''s bank accounts amounting to Rs.2.40 million (Rs.1.59m) and
Rs.1.41 million (Rs.2.02m) respectively. Reconciliation and follow up
with the bank official to match/ rectify the same is in process.
Necessary adjustments have been made in the books of accounts.
13. The company had subscribed to 8.75% Cumulative Preference Shares
of M/s. ITI Limited, amounting to Rs.1000 Millions during the year
2001-02. As per the terms of allotment, the above Preference Shares
were proposed to be redeemed in 5 equal installments. Accordingly, five
installments amounting to Rs.200 Millions each, aggregating to Rs.1000
Millions have become redeemable, which have not been redeemed by ITI
Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued
by DOT, the repayment schedule of the above cumulative Preference
Shares was deferred to 2012-13 onwards in five equal installments. The
first installment which was due in 2012-13 has not been paid. As per
the information, Dept. of Telecom''s proposal to revive the company is
in an advanced stage and DOT planned to send the case for cabinet
approval before 31-12-2013. In view of the revival plan being in an
advanced stage the provision for the installment due in 2012-13 is only
considered.
14. Amount recoverable on current account from DOT is Rs.35183.13
Millions (Rs.34328.25 Millions) and amount payable is Rs.756.02
Millions (Rs.516.44 Millions). The net recoverable of Rs.34427.11
Millions (Rs.33811.81 Millions) is subject to reconciliation and
confirmation.
a) In both the units, deposits from applicants and subscribers as on 31
st March, 1986 were Rs.1503.59 million as intimated provisionally by
DOT. In Mumbai Unit, at the year end these deposits amounting to
Rs.1032.79 millions (Rs.1032.79 millions), the difference being
attributable to connections/refunds granted in respect of deposits
received prior to 31st March, 1986. Out of the said amount of
Rs.1032.79 million, claims of Rs.597.94 millions (Rs.597.94 million)
have been settled and Rs.434.85 millions (Rs.434.85 million) is due at
the end of the year. In case of Delhi Unit, balance on this account is
still recoverable is Rs.123.60 millions (Rs.123.60 millions).
b) The balance in the Subscribers'' Deposit Accounts is to the tune of
Rs.5979.81 million (Rs.6588.81 million).Out of this balance in Delhi
Unit an amount of Rs.3017.12 Millions (Rs.3133.56 Millions) on account
of subscriber deposits is under reconciliation.
c) Interest Accrued and Due on the aforesaid subscriber deposit
accounts for both the units ofRs. 21.80 Millions (Rs.23.97 Millions) is
subject to reconciliation with the relevant subsidiary records.
d) The reconciliation of deposits pertaining to Mumbai unit is done and
on reconciliation of Balances of customer''s deposits in the CSMS
billing system with financial books (WFMS), an amount of Rs.1348.04
million is found excess in financial books. Pending decision on final
treatment of this excess amount, the same is retained as liability in
the financial books.
e) On reconciliation of balance outstanding under refund due to
subscribers account with actual amount due for refund, Rs.371.28
million was identified as excess liability appearing in the financial
books. Pending decision on final treatment of this excess amount, the
same is retained as liability in the financial books.
f) In both of the units there are unlinked receipts to the tune of
Rs.420.30 millions(Rs. 412.60 millions).
g) The balance of sundry debtors as per ageing summary under subsidiary
records lower by Rs.73.83 millions (Rs.94.70 millions) as compared to
the balance in general ledger and is under reconciliation. The
resultant impact of the above on the account is not ascertainable.
h) In Mumbai Unit, the balances under sundry debtors includes accrued
surcharge of Rs.3.01 millon (Rs.3.87m) for late payments.
i) In Delhi unit, provision of Debtors including spill over has been
made amounting to Rs.922.94 millions (Rs.1014.53 m) against the total
debtors excluding service tax amounting to Rs.1274.03 million
(Rs.1321.61 m) on the basis of financial books.
15. License Fees were calculated on the AGR accounted for on accrual
basis in respect of both revenue and revenue sharing with other
operators till 2011-12. As regards the directions of Supreme Court
given earlier in respect of calculation of License Fees and AGR the
matter has been referred back to TDSAT and is pending in respect of
other private telecom operators. However, MTNL is not a party to the
dispute and the AGR is calculated as per License Agreement. In respect
of revenue sharing with BSNL, the issue is taken up with DOT while
paying License Fees on actual payment basis from 2012-13 onwards. The
impact of Rs.1403.63 Million on this account upto the year 2011-12 has
been shown as contingent liability and issue is also taken up with BSNL
and DOT by MTNL.
16. In case of Mumbai Unit, the balances with non-scheduled banks
comprise of:
17. MTNL Mumbai has received claims from M/s.BEST, Electricity supply
provider categorising MTNL at Commercial tariff instead of Industrial
tariff. The claim has been made with retrospective effect for the
period Feb-2007 to May-2009 in respect of HT connection and Jan-2002 to
Apr-2011 in respect of LT connection. MTNL has represented to BEST for
reconsideration which has not been accepted by BEST. Hence MTNL has
approached Hon''ble Mumbai High Court and got a stay on the arrears
claimed by BEST amounting to Rs. 208.20 million. In the opinion of the
management, there is remote possibility of the case being settled
against MTNL.
18 a) Out of total provision of Gratuity of Rs.14181.74 Millions up to
31.3.2013 (Rs.13790.64 Millions), an amount of Rs.1943.73
Millions(Rs.1943.73 Millions) and Rs.665.40 Millions (Rs.665.40
Millions) is recoverable from DOT, in respect of Group C & D and Group
B employees respectively, for the period prior to their absorption. As
on 31.03.2013 Rs.12236.61 Millions (Rs.10386.13 million) is available
with the Gratuity Trust.
b) The total provision of Leave Encashment is Rs.9386.31 Millions up to
31.3.2013 (Rs.7370.75 Millions). Out of this, an amount of Rs.653.68
Millions (Rs.653.68 Millions ) and Rs.433.74 Millions (Rs.433.74
Millions ) is recoverable, from DOT in respect of Group C & D and Group
B employees respectively for the period prior to their absorption in
MTNL.
c) An amount of Rs.14732.72 Millions (Rs.13541.11 Millions) towards GPF
contribution is recoverable from DOT as on 31.3.2013. The amount
pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
01.11.98 and 01.10.2000 respectively.
d) The total provision of Pension is Rs.101561.59 Millions (Rs.78991.46
Millions) upto 31.3.2013. Out of this an amount of Rs.7546.2 Millions
(Rs.7546.2 Millions ) and Rs.2201.02 Millions (Rs.2201.02 Millions) is
recoverable from DOT in respect of Group C&D and Group B employees for
the period prior to their absorption.
The provisions of Pension, Gratuity & Leave Encashment for absorbed
employees have been made on actuarial valuation.
e) The DOT has given commitment vide GOI Ministry of Communication & IT
Deptt. of Telecom vide letter No. 40-29/2002-Pen(T) dated 29th August,
2002 that it has been agreed in principle that the payment of
pensionary benefits including the family pension to the government
employees absorbed in MTNL and who have opted for government scheme of
pension shall be paid by the government. The exact modalities in this
regard are being worked out by Deptt. Of Pension and Pensioners
welfare. Pending decisions on the modalities of liabilities payable to
DOT towards pension contribution on MTNL, so as to have a prudent
method, on conservative basis, MTNL has adopted the method of valuation
as per AS-15 (Revised) through actuarial valuation for defined benefit
plan of Central Govt. Pension Scheme and the provision is kept
separately in the books. The necessary adjustments will be made in the
books on finalization of modalities.
19. Certain works have been carried out for defence network in respect
of Alternate Communication System. In respect of usage of the same in
Mumbai unit Rs.338.30 million has been received at Corporate Office.
Out of this Rs.59.82 million has been decapitalised in 2011-12 accounts
and ATD sent to Corporate Office. The AT for the balance amount of
Rs.278.48 million has been received from Corporate Office in 2012-13.
Out of this amount Rs.18.98 million has been decapitalised in 2012-13,
Rs.32.33 million has been reduced from prior period expenses. Balance
amount of Rs.227.17 million is relating to revenue for usage of the
ducts. The work was completed in March-2011, the revenue is to be
spread over a period of 18 years which is the life considered for
depreciation of Cables. During the year Rs.25.24 million has been
booked as income and balance of Rs.201.93 million is taken as unearned
revenue to be recognised as income in the next 16 years.However the
accounting is under review at corporate level.This being the revenue
pertaining to usage of MTNL ducts etc. by defence the issue is taken up
with D.O.T. for payment of annual charges to MTNL and pending decision
on this , no revenue is booked for the period from 1-4-2010 to
31-3-2013 and pending finality on the issue the accounting treatment at
Mumbai unit is not changed.
20. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K &
50K have been decommissioned by the management during financial year
2008-09. The liability on this project amounting to Rs.736.20 millions
(includes 13973820 US dollars) lying in the books for more than three
years and not paid to vendors due to issue arising out of contract
agreement, is not written back in view of pending arbitration case
filed by vendor.
21. The diminutions in value of investments in Subsidiaries & Joint
Ventures are considered as temporary in nature.
22. The amount of receivables and payables (including NLD / ILD
Roaming operators) is subject to confirmation and reconciliation.
Pending such confirmation/ reconciliation, the impact on the account is
not ascertainable at this stage.
23. In respect of Delhi Unit, Certain claims in respect of
damaged/lost fixed assets and inventory has been lodged with Insurance
Companies and accordingly gross block, accumulated depreciation and
value of inventory have been withdrawn in the respective years pending
settlement of the claim. The claims are still pending with insurance
company. The final adjustment in respect of difference between amount
claimed and assets withdrawn will be made in the year of settlement of
claim.
24. There is no agreement between the Company and DOT for interest
recoverable/Payable on current account. Accordingly, no provision has
been made for interest payable/receivable on balances during the year
except charging of interest on GPF claims receivable from DOT.
25. Vacant Land and Guest Houses are valued at original value for the
purpose of wealth tax provisions.
26. The company has incurred a loss of Rs.53211.23 million during the
year under report and as a result thereof the net worth has become
negative. The company has moved the case for reference to BRPSE(Board
for Reconstruction of Public Sector Enterprises) seeking revival. The
company has also moved proposals for refund of one time spectrum fees
paid in 2010 towards BWA spectrum to the tune of Rs.45370 million with
interest to the extent of Rs.14960 million, support of govt. for VRS of
19000 employees and approval for monetization of MTNL land. All these
cases are in an advanced stage of govt. approvals and are likely to be
settled in the coming months. Besides, the settlement of pension
payment through Govt. trust in 2013 -14 also would reduce the liability
on MTNL very drastically as the annual pension out go around Rs. 5000
million would be met by Govt. pension trust and the actuarial liability
of around Rs. 20000 million also comes down to annual contribution to
trust as per Fundamental Rule 116. All these actions being actively
considered by Govt. could neutralize the negative net worth. As at the
balance sheet while preparing financial statements, management has made
an assessment of an entity''s ability to continue as an on going concern
taking into account all these facts and also into the fact that these
approvals are in active consideration of Govt. and also that out of
expected sovereign guarantee cover ofRs. 80000 million. MTNL has
already got Rs. 10050 million in 2012-13 and expects to raise balance
bonds in 2013-14 to steer out of the negative net worth.
27. In case of Delhi Unit a sum of Rs.91.25 million (Rs.91.25 million)
accounted for as income in financial year 2007-08 being ADCC
recoverable from Project Development Company (PDC) towards development
of Core knowledge park at Noida is still to be recovered and interest
there on for the current period is not accounted for as the issue of
funding of the project by MTNL is raised by the PDC and pending
decision by corporate management and also as there is no explicit
agreement for interest as such no interest income has been accounted
for. Out of Rs.91.25 million, Rs.60.00 million are secured against Bank
Guarantee and for rest amount ofRs. 31.25 millions, a provision has
been made in year 2012-13.
28.(a) In respect of Mobile Services Delhi, a sum ofRs. 258.94 Million
(Rs. 258.94 Million) claimed by TCL for ILD charges for the period
Oct-09 to March-10 has not been paid due to heavy spurt in ILD traffic
towards M/S TCL. On technical analysis it was found that these calls
were made to some dubious and tiny destination. These destinations do
not confirm to international numbering plan of the respective countries
and are not approved destinations as per approved interconnect
agreement. Further these calls have not got physically terminated to
the destinations. The observations were shared with M/S TCL. M/S TCL
has also been advised that the balance which relates to fraudulent
calls is not payable and accordingly no provision has been made in the
books of accounts. However the units have shown the above as
contingent liability. The matter has been handed over to committee for
investigation.
(b) The fire accident claim in respect of data centre at CGO Complex
Delhi for Rs.40 million is already lodged with Insurance Company and is
pending for settlement for full claim as major element of claims is for
software which is not excluded from the courage of insurance. The
insurance company''s contentions to the contrary are under challenge
with IRDA and subsequently in the current year the insurance company
has come up with a proposal to settle the case for Rs. 27 million which
is not acceptable since MTNL is demanding the full payment.
29. Disclosures pursuant to Para 5(viii) of General Instructions for
preparation of Statement of Profit & Loss Account under Revised
Schedule VI of Companies Act, 1956.
(a) Value of Imports calculated on C.I.F. basis
(i) Raw Material - Nil
(ii) Components and Spare Parts -Nil
(iii) Capital Goods -Nil
(b) Expenditure in Foreign Currency
(i) Professional & Consultancy Fees = Rs.1.25 million (Rs.7.51 million)
(ii) Travel = Rs.0.30 million (Rs.1.20 million)
(iii) Others = Rs.29.24 million (Rs.27.60 million)
(c) Earning in Foreign Exchange(roaming) = Rs.39.50 million (Rs.57.90
million)
(d) Consumption of stores is included under the normal heads of Capital
Expenditure and/or Repairs & Maintenance, and the issue of imported and
indigenous items are not separately priced/ identified.
30.(a) In case of Delhi Unit Rs.4.83 millions is outstanding against
Micro, Small and Medium enterprise as defined in the Micro, Small and
Medium enterprise development Act, 2006, to whom the company owes dues
as at 31.3.2013. No interest has been paid during the year on account
of delayed payments as required under the MSMED Act, 2006.
The details of amount outstanding to Micro, Small and Medium
Enterprises based on available information with the company are as
under:-
31. During the year, the Company has made an Insurance Policy for
medical benefits in respect of its retired and working employees. The
Insurance Policy is fully funded by the Company. This is in compliance
with AS-15(Revised).
32. During the year no provision has been made for any loss on account
of impairment of assets under Accounting Standard 28 as there is no
indication of any impairment of assets of the Company, on the basis of
the company as a whole as a CGU.
33. Consolidated Financial Statements - AS-21 & AS-27
The financial statements of Millennium Telecom Limited & Mahanagar
Telephone Mauritius Limited (wholly owned subsidiaries of the Company)
and United Telecom Limited & MTNL STPI IT Services Limited (Joint
Ventures) are consolidated in accordance with the Accounting Standard -
21 and Accounting Standard - 27 respectively.
34. Based on expert opinion, the company has not been deducting tax
deducted at source for IUC services rendered by BSNL. Besides,
liability provided on account of pension contribution expenditure on
the basis of actuarial valuation is considered as an allowable
expenditure based on expert opinion.
35. During the year, Dept. of Telecom has levied one time spectrum
charges for the GSM and CDMA spectrum on MTNL and the spectrum given on
trial basis to the extent of 4.4 Mhz in 1800 Mhz frequency is also
included in the calculations. The calculations are further subject to
changes in the quantum of spectrum holding and the remaining valid
period of license as per D.O.T. MTNL proposed to surrender some of the
spectrum allotted on trial basis and does not require to pay for CDMA
spectrum since it holds only 2.5 Mhz spectrum in respect of CDMA.
D.O.T. has been apprised of the same and the matter is still under
correspondence .Apart from this , the issue of charges for spectrum
given on trial basis is also to be decided. Besides, ab-initio,the
very policy of levy of one time spectrum charges by DOT itself has been
challenged by private operators and is sub judice as on date whereas
MTNL''s case is also to be decided by D.O.T. on the basis of outcome of
the court case and the spectrum surrendered or retained. The
finalisation of charges and the modalities of payment are therefore to
be crystallized yet and as on date the position is totally
indeterminable as to the quantum of charges and also the liability.
Pending final out come of the issue which itself is subjudice and non
finality of quantum of charges payable, if at all, to D.O.T. , no
provision is made in the books of accounts as the amount is totally
indeterminable. However the contingent liability of Rs.32057.10
millions is shown on the basis of the demand raised by D.O.T.in respect
of GSM.
36. The matching of billing for roaming receivables / payables with
the actual traffic intimated by the MACH is being done. Further the
Roaming Income is booked on the basis of actual Invoices raised by MACH
on behalf of MTNL. Similarly the Roaming Expenditure is booked on the
basis of actual Invoices received by MTNL from MACH on behalf of the
other operators. However, regarding collection,the payment is directly
made in the bank by the other operators. The payment is made by various
operators and for varying periods. The collection received from the
operators are matched in totality against the total bill wise but the
allocation of collection to individual operator''s account is pending in
the absence of detailed information which is being sought. Therefore
although the Roaming Income and Expenditure are booked on actual basis,
however in the absence of detailed information, the roaming debtors are
reconciled in totality. Efforts are being made to allocate the
collection on individual basis.
37. In view of losses, Debenture Redemption Reserve has not been
created for the financial year 2012-13 in respect of 8.57% Redeemable
Non-Convertible Debentures (in the form of Bonds).
38. In respect of Delhi unit out of the amount of Rs.2850 millions
accounted for as income from CW games in 2010-11 an amount of Rs. 430
milloins is yet to be paid. The services rendered by MTNL as per the
demand of Organising Committee of CWG and sports ministry are to be
paid and are under correspondence with the authorities concerned for
payment .
39. Previous year figures have been regrouped / recast to confirm to
current year''s presentation. Amounts in brackets represent the previous
year''s figures.
Mar 31, 2012
(Rs. in Millions)
1. Contingent Liabilities 2011-12 2010-11
(a) Income Tax 11017.99 9774.02
Demands disputed and
under appeal
(b) Sales Tax, Service Tax, Excise duty,
Municipal Tax Demands
Disputed and under Appeal 5761.43 4906.0
(c) Disputed Demand under Lease Act 49.92 37.39
(d) Interest to DDA on delayed Amount Amount
payments/pending court
cases/Tax cases Indeterminate Indeterminate
ii Stamp duty payable on land and
buildings acquired by the Amount Amount
Company Presently Presently
Unascertainable Unascertainable
(e) Claims against the company not
acknowledged as Debts 9859.69 10003.92
(f) Bank guarantee & Letter of Credit 981.62 951.15
(g) Directory dispute 2858.34 2858.34
(h) Interest demanded by DOT and disputed
by company on account 1738.10 1738.10
of delay in payment of Leave Salary
and Pension Contribution
(i) Pending court cases against land Indeterminate Indeterminate
Acquisition
(j) Contingent Liability on account of Income Tax as shown in 1(a)
above excludes various notices received from TDS department creating
demand due to non-matching of their records with the returns filed and
notices u/s115 WG(c) of I.T. Act for FBT for the Assessment year
2007-08 to 2009-10 and a notice u/s 148 of I.T. Act for the assessment
year 2007-08, as the same are Indeterminable.
(k) BSNL IUC contingent liability 1403.63
2. Change in Accounting Policy
During the year the company has decided to merge the CDMA units with
the Mobile (GSM) Units which were earlier merged with the Basic Units.
The resultant change in provision for doubtful debts and CDMA
instrument for older more than 180 days in line with the Mobile (GSM)
units in comparison of provision for balances older more than three
years in accordance with the policy of the Basic Units. Due to this
change an additional provision of Rs..56.55 millions and Rs..65.70 millions
for provision for doubtful debts and CDMA instruments respectively has
been made during the year.
3. Presentation and disclosure of financial statements:
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements. However,
it has significant impact on presentation and disclosures made in the
financial statements. The bifurcation of assets and liabilities into
current and non-current basis has been made on best judgement basis in
consonance with the operating cycle of MTNL. The previous year figures
have been regrouped on judgmental basis. The company has also
reclassified the previous year figures in accordance with the
requirements applicable in the current year.
4. Estimated amount of contracts remaining to be executed on capital
account is Rs..2004.16 Millions (Previous year Rs. 4467.43 millions). In
respect of contracts where the expenditure already incurred has
exceeded the contract value and the contract remains incomplete, the
additional expenditure required to complete the same cannot be
quantified.
5. Other liabilities include credits on account of receipts including
service tax from subscribers amounting to Rs..412.24 Millions (Rs..417.45
Millions), which could not be matched with corresponding debtors or
identified as liability, as the case may be. Appropriate adjustments/
payments shall be made inclusive of service tax, when these credits are
matched or reconciled. Therefore, it could not be adjusted against
making provision for doubtful debts.
6. a) The company had claimed benefit under section 80 - IA of the
Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06.
The appellate authorities have allowed the claim to the extent of 75%
of the amount claimed. The company has preferred appeals for the
remaining claim before the Hon'ble Court of Delhi. The company has
retained the provision of Rs..4003.32 million (Rs..4003.32 million) for
this claim for the years 1997-98, 1998-99 and 1999-2000, however, the
demands on this account amounting to Rs..3948.46 millions (Rs..4138.30
million) for the years 1999-00 to 2005-06 have been shown as contingent
reserve to meet the contingency that may arise out of disallowances of
claim of benefit u/s 80IA of Income Tax Act,1961.
b) Income Tax receivable include appeal effect of Rs..1015.43 millions
pertaining to assessment year 2000- 01 which is pending for settlement
by the Income Tax Department. This include Tax amount of Rs. 603.03
millions and interest accrued thereon amounting to Rs. 412.4 millions (
including Rs. 101.86 millions for the year). Efforts are being made to
recover the same at the earliest.
c)In accordance with Accounting Standard 22, accounting for taxes on
Income, the company has deferred tax assets amounting to Rs..25850.97
million (Rs..15932.20 million) including Rs..4483.76 (Rs..3251.23) million
on account of unabsorbed depreciation and Rs..21367.21 million (Rs. 12680.97
million) brought forward business losses as on 31.3.2012. However, in
the current Telecom Industry Scenario, there is no virtual certainty of
availability of sufficient future taxable income against which the
above asset can be realized. Hence, the Deferred Tax asset has not been
accounted for. DTA amounting to Rs25849.66 million shall be created in
the year in which the company will have virtual certainty of future
taxable income as required by AS-22 issued by ICAI.
7. a) Provision for taxation for the current year comprises of Income
Tax of Rs. Nil Millions, Wealth Tax of Rs..2.37 Millions.
b) During the year, the company has suffered a business loss of Rs.
41097.84 millions. The company intends to carry forward its business
loss including unabsorbed depreciation/amortization to the tune of
Rs..35538.41 million as per calculation made under Income Tax 1961.
8. (a) The supplemental agreement entered into between United India
Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling
Computers Ltd and the company for printing of telephone directories was
struck down by the Hon'ble High Court of Delhi on 30.9.92 and the said
decision was upheld by the Hon'ble Supreme Court of India on 12.1.93. A
claim against the Company has been raised by Sterling Computers Ltd.
for Rs. 258.2 Millions which being under dispute, has not been provided
for. The company has filed its counter claims of Rs. 228.7 Millions
before the Hon'ble High Court against Sterling/ UDI/UIP and has also
filed arbitration claims of Rs. 561.8 Millions plus interest @ 21% per
annum against these parties under the original agreement. Pending
finalisation of this dispute, the company has raised and recorded as
'Claims Recoverable', a claim for Rs. 154.91 Millions (Rs. 154.91 Millions)
on account of royalty, interest and billing charges and on payments
made through Letter of Credit;Rs..130.47 Millions (Rs..130.47 Millions)
recovered there against by the company from subscribers for the issue
of directories, is carried under 'Current Liabilities'. Further claims
of the Nigam for interest and service charges aggregating Rs..143.67
Millions (Rs..143.67 Millions) have not been accounted for. Financial
implication of the claim raised against the company, adjustment of the
sums received against outstanding claims, any non-realisation of claim
and further claims recoverable shall be effected upon determination
based on the outcome of the proceedings in the court of law.
MTNL has filed OMP No.151/1996 seeking enlargement of time under
Section 28 of the Arbitration Act for the Arbitrator to publish the
award. The case is still pending and will be listed along with OMP
No.135/94 for final hearing. The petitioner M/s United India Periodical
(Ltd.) filed OMP No.135/94 in the High Court of Delhi challenging the
appointment of Arbitrator under Section 33 of the Arbitration Act 1940.
The Petition is pending from 24.10.1994 in the High Court of Delhi. Now
the petitioner has filed an application for amendment in the petition
filed in the year 1994 with the prayer that the arbitration clause 20
of the original contract dated 14.3.1987 be determined by the Hon'ble
Court of the subsequent events. During the financial year 2011-12, the
Hon'ble High Court pass an order on 7.12.2011directing to stop
arbitration proceedings against M/s Sterling regarding the arbitration
case of M/s UIP also and it is informed by learned arbitrator that this
proceeding stand still in the SLP filed by UIP. However, MTNL is not
received the certified copy of the order. On receipt of the same MTNL
will file further to the court. The petitioner has also took plea of
res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and
the same is pending before the Bombay High Court. The case is now
listed in the category of final matter and is on regular board of the
Court for the both the aforesaid OMP's.
The suit filed by MTNL against M/s Sterling Computers and others is
pending in the High Court of Mumbai in which claims to the tune of
Rs..228.7 millions towards Royalty, Interest on Royalty amount upto
31.8.1994, amount paid against LC, Interest on amount of LC, L/D for
non-performance and other charges etc. for Delhi and Mumbai both units.
This suit is filed after non-performance of supplementary agreement
dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is
still pending at Mumbai High Court.
(b) MTNL entered into contracts with M/s M & N Publications Limited for
printing, publishing and supply of telephone directories for Delhi and
Mumbai units for a period of 5 years starting from 1993. In view of the
breaches of the terms and conditions of the contracts committed by the
contractor in publishing first issue of the directories of both units
and their failure to execute the remaining part of the contracts, both
the contracts were terminated by MTNL on 22.07.1996. Income from
royalty and other applicable recoveries, for first issue published by
contractor,Rs. 181.2 Millions have been accounted for and received. As
regards Delhi Unit, MTNL has claimed to the extent of Rs..2110 millions
(approx.) plus interest thereon at various rates while M/s M&N
Publications have counter claim of Rs..2860 millions (approx.) plus
interest thereon. Sole Arbitrator has been appointed by both the
parties. The effect of claims under the contract for remaining issues
published by contractor will be accounted for in the year of issuing of
award by the Sole Arbitrator.
9. Certain Lands and Buildings capitalized in the books, are pending
registration/legal vesting in the name of the company and the landed
properties acquired from DOT have not been transferred in the name of
the company and in the case of leasehold lands, the documentation is
still pending. Stamp Duty and the lands and buildings acquired from DOT
is payable by DOT as per sale deed and in respect of properties
acquired after 1.4.1986, the documentation shall be contemplated at the
time of sale or disposal when and if needed.
10. The Mumbai Unit had applied for amnesty under the Maharashtra Kar
Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs. 8.10
Millions (Rs. 8.10 Millions). The application for amnesty towards demands
aggregating Rs..2.09 Millions (Rs..2.09 Millions) has been accepted. The
balance applications relating to demands of Rs..6.02 Millions (Rs..6.02
Millions) are under process and are not included under Contingent
Liabilities.
11. The amount recoverable from BSNL is Rs..30679.67 Millions
(Rs..24365.92 Millions) and amount payable is Rs..15205.76 Millions
(Rs..12062.01 Millions). The Net recoverable of Rs..15473.91 Millions
(Rs..12303.91 Millions) is subject to reconciliation and confirmation. In
the absence of agreement with BSNL the sharing is on the basis of 70:30
ratio.
a) Certain claims of BSNL on account of Signaling charges Rs..219.30
millions, Transit tariff Rs..251.90 millions, MP Billing Rs..60.10
millions, Service Connections Rs..401.48, IUC Rs..101.40 millions and IUC
from Gujrat Circle Rs..11.14 millions are being reviewed. Pending
settlement of similar other claims from BSNL, no provision is
considered necessary.
b) Delhi Unit has accounted for the expenditure on account of telephone
bills of service connections raised by BSNL towards MTNL for the period
from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01 millions on the
basis of actual reimbursement made for subsequent periods against the
disputed claim of Rs..312.72 millions, since no details / justifications
are received from BSNL in spite of repeated persuasion till date. The
balance amount of Rs. 214.72 millions is shown as contingent liability.
c) In both Delhi and Mumbai Unit an amount of Rs. 3375.84 (3335.88 m) and
Rs..2750.38 (2625.19 m) has been accounted as receivable and payable from
BSNL respectively on account of IUC charges which is included in the
recoverable & payable amounts as shown above.
d) During the year in Delhi Unit an amount of Rs..104.69 millions
(Rs..142.60 million) including service tax towards interconnect charges
on rate prescribed by TRAI in IUC regulation in the absence of any
interconnect agreement between MTNL & BSNL. BSNL is also charging the
same and the claim raised by both parties are under dispute. Direct
connectivity traffic expenditure with BSNL has been booked on the basis
of billing system of Delhi Unit.
e) During the year an amount of Rs..868.65 millions (Rs. 586.65 m) have
been accounted for as Infrastructure Usage charges receivable from BSNL
for using the various office building and spaces of MTNL.
f) During the year an amount of Rs..190.58 million (Rs..184.91 million) has
been accounted as receivable from BSNL on account of Property Tax,
Electricity, water and fuel charges by both Delhi and Mumbai Units.
12. As per directions of the court one UASL operator has deposited
Rs..1249.30 million and Rs..339.90 million in 2004-05 and 2005-06
respectively against the claim of Rs..1589.20 million. The company has
recognized the amount realized as revenue in the respective period. The
UASL operator has filed an application in the Hon. TDSAT in which case
TDSAT delivered a judgment on 2.8.2011 wherein the petitioner has been
permitted to file 6 CDRs giving the complete call record and MTNL
respondent are allowed to file their reply thereafter for further
review by TDSAT.
13. The company had subscribed to 8.75% Cumulative Preference Shares
of M/s. ITI Limited, amounting to Rs..1000 Millions during the year
2001-02. As per the terms of allotment, the above Preference Shares
were proposed to be redeemed in 5 equal installments. Accordingly, five
installments amounting to Rs..200 Millions each, aggregating to Rs..1000
Millions have become redeemable, which have not been redeemed by ITI
Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued
by DOT, the repayment schedule of the above cumulative Preference
Shares was deferred to 2012-13 onwards in five equal installments.
Moreover, no dividend income has been booked in the accounts for the
same, as ITI Limited has not declared any dividend.
14. Amount recoverable on current account from DOT is
Rs..34328.25Millions (Rs. 33207.87 Millions) and amount payable is
Rs..516.44 Millions (Rs..528.11 Millions). The net recoverable of
Rs..33811.81 Millions (Rs..32679.76 Millions) is subject to
reconciliation and confirmation.
a) Deposits from applicants and subscribers as on 31st March, 1986
wereRs. 1503.59 million (Rs..1503.59 million) as intimated provisionally by
DOT. Corresponding assets shown under claims recoverable are being
reduced by the amount of recovery of rebate on rental and by the amount
of recovery of application deposit for which connections have been
released to subscribers w.e.f. 1.4.1986. Balance still recoverable from
DOT on this account is Rs..558.45 million (Rs..558.45 million).
b) The balance in the Subscribers' Deposit Accounts is to the tune of
Rs..6588.81 million (Rs..7206.33 million). Out of this the balance
pertaining to Mumbai unit of Rs. 3211.94 millions (3756.61millions) has
been reconciled during the year with the relevant subsidiary record
maintained under CSMS package. Pending management decision, a total
excess credit amount of Rs.,1341.92 million in General Ledger than CSMS
package on account of reconciliation is being kept as long term
provision as at 31st March, 2012. In Delhi Unit an amount of Rs. 3133.56
Millions (Rs3368.55Millions) on account of subscriber deposits is under
reconciliation and overall Interest Accrued and Due thereon for both
the units of Rs..23.97 Millions (Rs..22.25 Millions) is subject to
reconciliation with the relevant subsidiary records. The unlinked
receipt is of the tune of Rs..412.60 millions of both the units.
c) The aggregate balance of sundry debtors as per the subsidiary
records is higher by Rs..94.70 millions (Rs.-17.69 millions) as compared to
the balance in general ledger and under reconciliation. The resultant
impact of the above on the account is not ascertainable.
d) In Delhi unit, in circuits, provision of Debtors including spill
over has been made amounting to Rs..1014.53 millions (Rs..803.23 m) against
the total debtors excluding service tax amounting to Rs..1321.61 million
(Rs..1307.61 m) on the basis of financial books.
15. License Fees is calculated on the AGR accounted for on accrual
basis in respect of both revenue and revenue sharing with all other
operators. As regards the directions of Supreme Court in respect of
calculation of License Fees and AGR the matter has been referred back
to TDSAT and is pending.
However, MTNL is not a party to the dispute and the AGR is calculated
as per License Agreement. In respect of revenue sharing with BSNL the
issue is taken up with DOT. The impact of Rs.1403.63 Million on this
account has been shown as contingent liability.
16. a) Out of total provision of Gratuity of Rs. 13790.64 Millions up to
31.3.2012 (Rs. 12107.42 Millions), an amount of Rs. 1943.73 Millions(Rs.
1943.73 Millions) and Rs. 665.40 Millions (Rs. 665.40 Millions) is
recoverable from DOT, in respect of Group C & D and Group B employees
respectively, for the period prior to their absorption. As on
31.03.2012 Rs.10386.13 Millions is available with the Gratuity Trust.
b)The total provision of Leave Encashment is Rs. 7370.75 Millions up to
31.3.2012 (Rs. 6943.12 Millions). Out of this, an amount of Rs. 433.74
Millions (Rs. 433.74 Millions ) and Rs. 653.68 Millions (Rs. 653.68 Millions
) is recoverable, from DOT in respect of Group B and Group C & D
employees respectively for the period prior to their absorption in
MTNL.
c)An amount of Rs. 13541.11 Millions (Rs. 12780.66 Millions) towards GPF
contribution is recoverable from DOT as on 31.3.2012. The amount
pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
01.11.98 and 01.10.2000 respectively.
d)The total provision of Pension is Rs. 78991.46 Millions (Rs. 66560.93
Millions) upto 31.3.2012. Out of this an amount of Rs. 7546.2 Millions (Rs.
7546.2 Millions ) and Rs. 2201.02 Millions (Rs. 2201.02 Millions) is
recoverable from DOT in respect of Group C&D and Group B employees for
the period prior to their absorption.
e)The DOT has given commitment vide GOI Ministry of Communication & IT
Deptt. Of Telecom vide letter No. 40-29/2002-Pen(T) dated 29th August,
2002 that it has been agreed in principle that the payment of
pensionary benefits including the family pension to the government
employees absorbed in MTNL and who have opted for government scheme of
pension shall be paid by the government. The exact modalities in this
regard are being worked out by Deptt. Of Pension and Pensioners
welfare. Pending decisions on the modalities of liabilities payable to
DOT towards pension contribution on MTNL, so as to have a prudent
method, on conservative basis, MTNL has adopted the method of valuation
as per AS-15 (Revised) through actuarial valuation for defined benefit
plan of Central Govt. Pension Scheme and the provision is kept
separately in the books. The necessary adjustments will be made in the
books on finalization of modalities.
17. The diminutions in value of investments in Subsidiaries & Joint
Ventures are considered as temporary in view of making of profit by the
Joint Ventures and one subsidiary and accumulated losses earlier and
nominal loss in other subsidiary, hence no provision is made.
18. The amount of receivables and payables (including NLD / ILD
Roaming operators) is subject to confirmation and reconciliation.
Pending such confirmation/ reconciliation, the impact on the account is
not ascertainable at this stage.
19. In respect of Delhi Unit, Certain claims in respect of
damaged/lost fixed assets and inventory has been lodged with Insurance
Companies and accordingly gross block, accumulated depreciation and
value of inventory have been withdrawn in the respective years pending
settlement of the claim. The claims are still pending with insurance
company. The final adjustment in respect of difference between amount
claimed and assets withdrawn will be made in the year of settlement of
claim.
20. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K &
50K have been decommissioned during financial year 2008-09 by the
management. The liability on this project amounting to Rs..736.20
millions (includes 13973820 US dollars) lying in the books for more
than three years and not paid to vendor due to issue arising out of
contract agreement, is not written back in view of pending arbitration
case filed by vendor.
21. There is no agreement between the Company and DOT for interest
recoverable/Payable on current account. Accordingly, no provision has
been made for interest payable/receivable on balances during the year
except charging of interest on GPF claims receivable from DOT.
22. Vacant Land and Guest Houses are valued at original value for the
purpose of wealth tax provisions.
23. In case of Delhi Unit a sum of Rs..91.25 millions (Rs..131.25
millions) accounted for as income in financial year 2007-08 being ADCC
recoverable from Project Development Company (PDC) towards development
of Core knowledge park at Noida is still to be recovered and interest
there on for the current period is not accounted for as the issue of
funding of the project by MTNL is raised by the PDC and pending
decision by corporate management and also as there is no explicit
agreement for interest as such no interest income has been accounted
for.
24. In respect of Mobile Services Delhi, A sum of Rs. 258.94 Million
(Previous year Rs. 243.55 Million) claimed by TCL for ILD charges for the
period Oct-09 to March-10 has not been paid due to heavy spurt in ILD
traffic towards M/S TCL. On technical analysis it was found that these
calls were made to some dubious and tiny destination. These
destinations do not confirm to international numbering plan of the
respective countries and are not approved destinations as per approved
interconnect agreement. Further these calls have not got physically
terminated to the destinations. The observations were shared with M/S
TCL. M/S TCL has also been advised that the balance which relates to
fraudulent calls is not payable and accordingly no provision has been
made in the books of accounts. However the units have shown the above
as contingent liability. The matter has been handed over to committee
for investigation.
The fire accident claim in respect of data centre at CGO Complex Delhi
is already lodged with Insurance Company and is pending for settlement
for full claim and the insurance company's contentions are under
challenge with IRDA.
25 Disclosures pursuant to Para 5(viii) of General Instructions for
preparation of Statement of Profit & Loss Account under Revised
Schedule VI of Companies Act, 1956.
(a) Value of Imports calculated on C.I.F. basis
(i) Raw Material - Nil
(ii) Components and Spare Parts -Nil
(iii) Capital Goods -Nil
(b) Expenditure in Foreign Currency
(i) Professional & Consultancy Fees =Rs. 7.51 million (ii) Travel =Rs. 1.20
million
(iii) Others =Rs..27.60 million
(c) Earning in Foreign Exchange =Rs..57.90 million
(d)Consumption of stores is included under the normal heads of Capital
Expenditure and/or Repairs & Maintenance, and the issue of imported and
indigenous items are not separately priced/ identified.
26. There is no reported Micro, Small and Medium enterprise as defined
in the Micro,Small and Medium enterprise development Act, 2006, to whom
the company owes dues. No interest has been paid during the year on
account of delayed payments as required under the MSMED Act, 2006.
27. Employee Benefits -AS-15(R)
I. During the year, the Company has recognized the following amounts
in the Profit and loss Account.
28. During the year, the Company has made an Insurance Policy for
medical benefits in respect of its retired employees. The Insurance
Policy is fully funded by the Company. This is in compliance with
AS-15(Revised).
1. Segment Revenue, Segment Result, Segment Asset and Segment
Liabilities include the respective amount identifiable to each of the
segments. The expenses, which are not directly relatable to the
business segment, are shown as unallocable corporate assets and
liabilities respectively.
29. During the year no provision has been made for any loss on account
of impairment of assets under Accounting Standard 28 as there is no
indication of any impairment of assets of the Company.
30. Consolidated Financial Statements - AS-21 & AS-27
The financial statements of Millennium Telecom Limited & Mahanagar
Telephone Mauritius Limited (wholly owned subsidiaries of the Company)
and United Telecom Limited & MTNL STPI IT Service Limited (Joint
Ventures) have been consolidated in accordance with the Accounting
Standard - 21 and Accounting Standard - 27 respectively.
31. Based on expert opinion, the company has not been deducting tax
deducted at source for IUC services rendered from BSNL. Besides
liability provided on account of pension contribution expenditure on
the basis of actuarial valuation is considered as on allowable
expenditure based on expert opinion.
32. Previous year figures have been regrouped / recast to confirm to
current year's presentation. Amounts in brackets represent the previous
year's figures.
Mar 31, 2011
2010-11 2009-10
(Rs. in Million) (Rs. in Million)
1. Contingent Liabilities
(a) Income Tax
Demands disputed and under appeal 9774.02 12161.97
(b) Sales Tax, Service Tax, Excise duty,
Municipal Tax Demands Disputed and under
Appeal 4906.00 9429.22
(c) Disputed Demand under Lease Act 37.39 -
(d) i Interest to DDA on delayed Amount Amount
payments/pending court Indeterminate Indeterminate
cases/Tax cases
ii Stamp duty payable on land and Amount Amount
buildings acquired by the company Presently Presently
Unascertainable Unascertainable
(e) Claims against the company not
acknowledged as Debts 10003.92 10372.83
(f) Bank guarantee & Letter of Credit 951.15 950.89
(g) Directory dispute 2858.34 2858.34
(h) Interest demanded by'DOT and disputed by
company on account of delay in payment of
Leave Salary and Pension Contribution 1738.10 1738.10
(i) Pending court cases against land Indeterminate Indeterminate
acquisition
2. Estimated amount of contracts remaining to be executed on capital
account in respect of Purchase order/sanctioned estimate is Rs.4467.43
Millions (Previous year Rs. 9515.40 millions). The above figure has
been arrived at on the basis of capital sanction instead of Purchase
Order issued. In respect of contracts where the expenditure already
incurred has exceeded the contract value and the contract remains
incomplete, the additional expenditure required to complete the same
cannot be quantified.
3. Other liabilities include credits on account of receipts including
service tax from subscribers amounting to Rs.417.45 Million (Rs.385.21
Million), which could not be matched with corresponding debtors or
identified as liability, as the case may be. Appropriate adjustments/
payments shall be made inclusive of service tax, when these credits are
matched or reconciled.Therefore, it could not be adjusted against
making provision for doubtful debts.
4. a) The company had claimed benefit under section 80 - IA of the
Income Tax Act, 1961 for the financial year from 1996-97 to 2005-06.
The appellate authorities have allowed the claim to the extent of 75%
of the amount claimed. The company has preferred appeals for the
remaining claim before the Hon'ble Court of Delhi. The company has
retained the provision of Rs.4003.32 million for this claim for the
years 1997-98,1998- 99 and 1999-2000, however, the demands on this
account amounting to Rs.4138.30 million for the years 1999-00 to
2005-06 have been shown as contingent reserve. / 'peal effect for the
same has been received during this year except 2004-05. However, on
reconciliation certain discrepancies are noticed. Rectification
application has been filed for Rs.4979.36 million.
b) A Contingency Reserve of Rs.4138.30 million was created from the
Profit & Loss Appropriation Account to meet the contingency that may
arise out of disallowances of claim of benefit u/s 80IA of Income Tax
Act,1961 .The contingency reserve so created excludes an amount of
Rs.4003.31 million for which the provision was created from the years
1996-97 to 2000-01 and the same is still maintained in the books of
accounts after considering the benefit as allowed by ITAT in the
current year.
c) In accordance with Accounting Standard 22, accounting for taxes on
Income, the company has deferred tax assets amounting to Rs. 15932.20
million (Rs. 10571.36 million) including Rs.3251.23 million (Rs.2269.51
million) on account of unabsorbed depreciation and Rs.12680.97 million
(Rs.4081.13 million) brought forward business losses as on 31.3.2011.
However, in the current Telecom Industry Scenario, there is no virtual
certainty of availability of sufficient future taxable income against
which the above asset can be realized. Hence, the Deferred Tax asset
has not been accounted for. DTA amounting to Rs. 15932.20 million shall
be created in the year in which the company will have virtual certainty
of future taxable income as required by AS-22 issued by ICAI.
d) Based on expert opinion, the company has not been deducting tax
deducted at source for IUC services rendered from BSNL. Besides
liability provided on account of pension contribution expenditure on
the basis of actuarial valuation is considered as an allowable
expenditure based on expert opinion.
5. a) Provision for taxation for the current year comprises of Income
Tax of Rs. Nil Million, Wealth.Tax of Rs.i .91 Million.
b) During the year, the company has suffered a business loss of Rs.
28019.15 million. The company intends to carry forward its business
loss including unabsorbed depreciation/amortization* to the tune of Rs.
22170.49 million as per calculation made under Income Tax 1961.
6. (a) The supplemental agreement entered into between United India
Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling
Computers Ltd and the company for printing of telephone directories was
struck down by the Hon'ble High Court of Delhi on 30.9.92 and the said
decision was upheld by the Hon'ble Supreme Court of India on 12.1.93. A
claim against the Company has been raised by Sterling Computers Ltd.
for Rs. 258.2 Million which being under dispute, has not been provided
for. The company has filed its counter claims of Rs. 228.7 Million
before the Hon'ble High Court against Sterling/UDI/UIP and has also
filed arbitration claims of Rs. 561.8 Million plus interest @ 21% per
annum against these parties under the original agreement. Pending
finalisation of this dispute, the company has raised and recorded as
'Claims Recoverable', a claim for Rs. 154.91 Million (Rs. 154.91
Million) on account of royalty, interest and billing charges and on
payments made through Letter of Credit; Rs. 130.47 Million (Rs.130.47
Million) recovered there against by the company from subscribers for
the issue of directories, is carried under 'Current Liabilities'.
Further claims of the Nigam for interest and service charges
aggregating Rs. 143.67 Million (Rs. 143.67 Million) have not been
accounted for. Financial implication of the claim raised against the
company, adjustment of the sums received against outstanding claims,
any non- realisation of claim and further claims recoverable shall be
effected upon determination based on the outcome of the proceedings in
the court of law.
MTNL has filed OMP No.151/1996 seeking enlargement of time under
Section 28 of the Arbitration Act for the Arbitrator to publish the
award. The case' is still pending and will be listed along with OMP No.
135/94 for final hearing. The petitioner M/s United India Periodical
(Ltd.) filed OMP No. 135/94 in the High Court of Delhi challenging the
appointment of Arbitrator under Section 33 of the Arbitration Act
'1940. The Petition is pending from 24.10.1994 in the High Court of
Delhi. Now the petitioner has filed an application for amendment in the
petition filed in the year 1994 with the prayer that the arbitration
clause 20 of the original contract dated 14.3.1987 be determined by the
Hon'ble Court of the subsequent events. The petitioner has also took
plea of res- judicata as the MTNL filed the Suit No.4628 of 1994 in
Mumbai and the same is pending before the Bombay High Court. The case
is now listed in the category of finaf matter and is on regular board
of the Court for the both the aforesaid OMP's.
The suit filed by MTNL against M/s Sterling Computers and others is
pending in the High Court of Mumbai in which claims to the tune of
Rs.228.7 million towards Royalty, Interest on Royalty amount upto
31.8.1994, amount paid against LC, Interest on amount of LC, L/D for
non-performance and other charges etc. for Delhi and Mumbai both units.
This suit is filed after non-performance of supplementary agreement
dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is
still pending at Mumbai High Court.
(b) MTNL entered into contracts with M/s M & N Publications Limited for
printing, publishing and supply of telephone directories for Delhi and
Mumbai units for a period of 5 years starting from 1993. In view of the
breaches of the terms and conditions of the contracts committed by the
contractor in publishing first issue of the directories of both units
and their failure to execute the remaining part of the contracts, both
the contracts were terminated by MTNL on 22.07.1996. Income from
royalty and other applicable recoveries, for first issue published by
contractor, Rs. 181.2 Millions have been accounted for and received. As
regards Delhi Unit, MTNL has claimed to the extent of Rs.2110 million
(approx.) plus interest thereon at various rates while M/s M&N
Publications have counter claim of Rs.2860 million (approx.) plus
interest thereon. Sole Arbitrator has been appointed by both the
parties. The effect of claims under the contract for remaining issues
published by contractor will be accounted for in the year of issuing of
award by the Sole Arbitrator.
7. Certain Lands and Buildings capitalized in the books, are pending
registration/legal vesting in the name of the company and the landed
properties acquired from DOT have not been transferred in the name of
the company and in the case of leasehold lands, the documentation is
still pending. In case of Mumbai Unit legal vesting of land and
building of the value of Rs. 31.42 Million acquired after 1 st April,
1986 is under process.
8. The Mumbai Unit had applied for amnesty under the Maharashtra Kar
Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs 8.10
Million (Rs. 8.10 Million). The application for amnesty towards demands
aggregating Rs.2.09 Million (Rs.2.09 Million) has been accepted.The
balance applications relating to demands of Rs.6.02 Million (Rs.6.02
Million) are under process and are not included under Contingent
Liabilities.
9. a) Delhi Unit has accounted for the expenditure on account of
telephone bills of service connections raised by BSNL towards MTNL for
the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01
million on the basis of actual reimbursement made for subsequent
periods against the disputed claim of Rs.312.72 million, since no
details / justifications are received from BSNL in spite of repeated
persuasion till date. The balance amount of Rs. 214.72 million is shown
as contingent liability.
b) No Trunk Automatic Exchange (TAX) charges has been billed to BSNL
for usage of MTNL TAX vide letter No.MTNL/CO/TR/BSNL/2009-11/81 dated
11.05.2011. (Previous year Rs.700.83 Million).
c) In both Delhi and Mumbai Unit an amount of Rs.3335.88
million(Rs.3336.21 million) and Rs.2625.19 million (Rs.2616.20 million)
has been accounted as receivable and payable from BSNL respectively on
account of IUC charges.
d) During the year an amount of Rs.586.65 million (Rs. 403.17 million)
have been accounted for as Infrastructure Usage charges receivable from
BSNL for using the various office building and spaces of MTNL and
Rs.33.27 million (Rs'12.62 million) vice-versa.
e) During the year an amount of Rs. 184.91 million (Rs.86.12 million)
has been accounted as receivable from BSNL on account of Property Tax,
Electricity, water and fuel charges by both Delhi and Mumbai Units.
10. As per directions of the court one UASL operator has deposited
Rs.3412.74 million against the claim of the same amount. The company
has recognized revenue of Rs.2367.90 million in the year 2004-05 and
Rs. 1044.84 million in the year 2005-06. The petition filed by UASL
Operator before Hon'ble High Court, Delhi is dismissed as withdrawn
with a liberty to the UASL operator to take steps in accordance with
the Law. The matter is presently pending with the Hon'ble Court/TDSAT
11. The company had subscribed to 8.75% Cumulative Preference Shares
of M/s. ITI Limited, amounting to Rs.1000 Million during the year
2001-02. As per the terms of allotment, the above Preference Shares
were proposed to be redeemed in 5 equal installments. Accordingly,
five installments amounting to Rs.200 Million each, aggregating to
Rs.1000 Million have become redeemable, which have not been redeemed by
ITI Limited. As per letter No.U-59011 -10/2002-FAC dated 31.07.2009
issued by DOT, the repayment schedule of the above cumulative
Preference Shares was deferred to 2012-13 onwards in five equal
instalments/Moreover, no dividend income has been booked in the
accounts for the same, as ITI Limited has not declared any dividend.
12. In respept of Mumbai Unit, the bank reconciliation statements as
at 31st March, 2011 include unmatched/ unlinked credits/ debits given
by the banks in the Mumbai Unit's bank accounts amounting to Rs.78.03
million (Rs.56.09 million) and Rs. 71.36 million (Rs.69.16 million)
respectively, which could not be properly accounted for in the absence
of adequate particulars. *
13. In respect of Mumbai MS Unit, sundry debtors as per billing system
is Rs.681.73 million (excluding service tax) (Rs 697.78 million).
Sundry Debtors as per WFMS is Rs.753.~55 million (excluding service
tax) ( Rs.715.47 million). Difference is frozen to Rs 71.82 million (Rs
17.70 million). Out of total sundry debtors of Rs.753.55 million (Rs
715.47 million), an amount of Rs.81.09 million (Rs 84.17 million) is
secured against the deposit available as *on 31.03.2011.
14. a) Deposits from applicants and subscribers as on 31st March 1986
were Rs. 1503.59 Million as intimated provisionally by DOT.
Corresponding assets showr under claims recoverable are being reduced
by the amount of recovery of rebate on rental and by the amount of
recovery of application deposit for which connections have been
released to subscribers with effect from 1.4.1986. Balance still
recoverable from DOT on this account is Rs. 558.45 Million.
b) The balance in the Subscribers' Deposit Accounts of Rs. 7206.33
Million (Rs. 7386.71 Million) and Interest Accrued and Due thereon of
Rs.22.25 Million (Rs. 25.51 Million) is subject to reconciliation with
the relevant subsidiary records.
c) The aggregate balance of sundry debtors as per the subsidiary
records is short by Rs.17.69million (Rs.57.55 million) as compared to
the balance in general ledger and under reconciliation. The resultant
impact of the above on the account is not ascertainable.
d) In circuits provision of Debtors has been made on the basis of
financial books which includes provision of spill over Debtors of Rs.
133.74 million including of earlier year of Rs.90.08 million.
15. a) Amount recoverable on current account from DOT is Rs.33207.87
Million (Rs. 32330.54 Million) and amount payable is Rs.528.11 Million
(Rs.112265.01 Million). The net recoverable of Rs.32679.76 Million
(Rs.(-) 79934.47 Million) is subject to reconciliation and
confirmation.
b) The amount recoverablelrom BSNL is Rs.24365.92 Million (Rs.20318.25
Million) and amount payable is Rs. 12062.01 Million (Rs.4517.21
Million). The Net recoverable of Rs,12303.91 Million (Rs.15801.04
Million) is subject to reconciliation and confirmation.
16. Certain claims of BSNL on account of Signaling charges Rs.219.30
million, Transit tariff Rs.251.90 million, MP Billing Rs.60.10 million,
Service Connections Rs.401.48 million, IUC Rs.101,40 million and IUC
from Gujrat Circle Rs.11.14 million are being reviewed. Pending
settlement of similar other claims from BSNL, no provision is
considered necessary.
17. a) License Fees is calculated on the AGR accounted for on accrual
basis in respect of both revenue and revenue sharing with other
operators. Pending judgment from Supreme Court on appeal by DOT against
TDSAT judgment, the claim of refund of License Fees on other income is
not accounted for and shall be made in the year of supreme court
judgment.
b) Liquidated damages recovered from M/s ITI Limited and convergent
billing cases are accounted for in other income as per terms of
agreement.
c) (i) In respect of Delhi Unit there is a difference of Rs.62.88
million in the cenvat credit receivable in books as compared to
statutory balance for want of necessary detail from certain areas. The
impact, if any, on the loss for the year cannot be ascertained at this
stage.
(ii) S. Tax on Income/expenditure in respect,of transaction with BSNL
has been accounted on accrual basis in financial books without
corresponding entries in the cenvat records which are being done on
actual settlement.
18 a) Out of total provision of Gratuity of Rs. 12107.42 Million up to
31.3.2011 (Rs. 10444.63 Million), an amount of Rs. 1943.73 Million and
Rs. 665.40 Million is recoverable from DOT, in respect of Group C & D
and Group B employees respectively, for the period prior to their
absorption. As on 31.03.2011 Rs.8578.84 Million is available with the
Gratuity Trust.
b) The total provision of Leave Encashment is Rs. 6943.12 Million up to
31.3.2011 (Rs. 5573.00 Million). Out of this, an amount of Rs. 433.74
Million and Rs. 653.68 Million is recoverable, from DOT in respect of
Group B and Group C & D employees respectively for the period prior to
their absorption in MTNL.
c) An amount of Rs. 12780.66 Million (Rs. 11793.88 Million) towards GPF
contribution is recoverable from DOT as on 31.3.2011. The amount
pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
01.11.98 and 01.10.2000, respectively.
d) The total provision of Pension is Rs. 66560.93 Million (Rs. 56972.43
Million) upto 31.3.2011. Out of this an amount of Rs. 7546.2 Million
and Rs. 2201.02 Million is recoverable from DOT in respect of Group C&D
and Group B employees for the period prior to their absorption.
e) The DOT has given commitment vide GOI Ministry of Communication & IT
Deptt. Of Telecom vide letter No. 40-29/2002-Pen(T) dated 29th August,
2002 that it has been agreed in principal that the payment of
pensionary benefits including the family pension to the government
employees absorbed in MTNL and who have opted for government scheme of
pension shall be paid by the government. The exact modalities in this
regard are being worked out by Deptt. Of Pension and Pensioners
welfare. Pending decisions on the modalities of liabilities payable to
DOT towards pension contribution on MTNL, so as to have a prudent
method, on conservative basis, MTNL has adopted the method of valuation
as per AS-15 (Revised) through actuarial valuation for defined benefit
plan of Central Govt. Pension Scheme and the provision is kept
separately in the books under schedule 'M' as a basis of payment at any
time to DOT on final decision of the issue. The above liability is
subject to modalities to be finalized by DOT and may go
upward/downward.The necessary adjustments will be made in the books on
finalization.
19. The diminutions in value of investments in Subsidiaries & Joint
Ventures are considered as temporary hence no provision is made.
20. The amount of receivables and payables (including NLD / ILD
Roaming operators) is subject to confirmation and reconciliation.
Pending such confirmation/ reconciliation, the impact on the account is
not ascertainable at this stage.
21. In respect of Delhi Unit, Certain claims in respect of
damaged/lost fixed assets and inventory has been lodged with Insurance
Companies and accordingly gross block, accumulated depreciation and
value of inventory have been withdrawn in the respective years pending
settlement of the claim. The claims are still pending with insurance
company. The final adjustment in respect of difference between amount
claimed and assets withdrawn will be made in the year of settlement of
claim.
22. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K &
50K have been decommissioned during financial year 2008-09 by the
management and necessary provision has been made for Rs. 1210.28
millions as loss of assets in accordance with accounting policy. The
liability on this project amounting to Rs.925.98 millions (includes
13973820 US dollars) lying in the books for more than three years and
not paid to vendor due to issue arising out of contract agreement, is
not written back in view offending arbitration case filed by vendor.
23. There is no agreement between the Company and DOT for interest
recoverable/Payable on current account. Accordingly, no provision has
been made for interest payable/receivable on balances during the year
except charging of interest on GPF claims receivable from DOT.
24. Vacant Land is valued at original value for the purpose of wealth
tax provisions.
25. In case of Delhi Unit a sum of Rs.131.25 millions accounted for as
income in financial year 2007-08 being ADCC recoverable from Project
Development Company (PDC) towards development of Core knowledge park at
Noida is still to be recovered and interest there on for the current
period is not accounted for as the issue of funding of the project by
MTNL is raised by the PDC and pending decision by corporate management
and also as there is no explicit agreement for interest, no provision
as such is made.
26. In respect of MTNL Delhi unit an amount of Rs.2850.00 million is
accounted for by MTNL towards wet lease for infrastructure and other
services provided by MTNL in respect of Commonwealth Games during the
year out of which Rs.2420.00 million has been received during the year
and Rs.430.00 million is subject to final settlement. Additional claim
of Rs.410 million towards additional work executed, is not accounted
for pending acceptance and final settlement.
27. (a) In respect of Mobile Services Delhi, A sum of Rs. 258.94
Million (Previous year Rs. 243.55 Million) payable to TCL for JLD
charges for the period Oct-09 to March-10 has not been paid due to
heavy spurt in ILD traffic towards M/S TCL. On technical analysis it
was found that these calls were made to some dubious-and tiny
destination. These destinations do not confirm to national numbering
plan of the respective countries and are not approved destinations as
per approved interconnect agreement. Further these calls have not got
physically terminated to the destinations. The observations were shared
with M/S TCL. M/S TCL has also been advised that the balance which
relates to fraudulent calls is not payable and accordingly no provision
has been made in the books of accounts. However the units have shown
the above as contingent liability. The matter has been handed over to
committee for investigation.
(b) A CBI inquiry is under way at Mumbai Mobile Unit for excess payment
of franchise commission due to misinterpretation of circular regarding
commission payment. The impact thereof is not ascertainable at this
stage as the inquiry is still continuing.
28. In respect of accounting for billing of subscribers for Mobile
services and collection made thereon, the GSM Mumbai unit has
implemented computerized billing system and the financial entries for
booking of income and debtors accounting have been incorporated in the
books of accounts based on the output generated through computer
system.
29. There is no reported Micro, Small and Medium enterprise as defined
in the Micro.Small and Medium enterprise development Act, 2006, to whom
the company owes dues. No interesthasbeen paid during the year on
account of delayed payments as required under the MSMED Act, 2006.
30. Additional information required under Paragraphs 3(x)(a) and 4D(c)
of Part II of Schedule VI to the Companies Act* 1956 is not
ascertainable, since (i) consumption of stores is included under the
normal heads of Capital Expenditure and/or Repairs & Maintenance, and
(ii) the issue of imported and indigenous items are not separately
priced/ identified.
V. Gratuity is payable to the employees on death or resignation or on
retirement at the attainment of superannuation age. To provide for
these eventualities we have use Mortality: 1994-96 LIC Ultimate table
for mortality in service and LIC (1996-98) table for mortality in
retirement.
VI. Mortality in service is assumed on the basis of LIC (1994-96).
Ultimate and mortality in retirement is based on LIC(1996-98) table.
31. During the year, the Company has made an Insurance Policy for
medical benefits in respect of its retired employees. The Insurance
Policy is fully funded by the Company. This is in compliance with
AS-15 (Revised).
32. Related Parties Disclosure under AS-18
a) List of Related Parties and Relationships
Party Relation
Department of Telecommunications Holding 56.25% shares of the Company
Millennium Telecom Limited Wholly owned Subsidiary
Mahanagar Telecom Mauritius Ltd. Wholly owned Subsidiary -
United Telecom Limited Joint Venture
MTNL STPI IT Services Ltd. Joint Venture
b) Key Management Personnel
Mr. Kuldip Singh Director (Tech.) & CMD
Mrs. Anita Soni Director (Finance)
Mr. S.P. Pachauri Director (HR)
Mr. A K Pathak Executive Director (Technical), CO
Mr. Manjit Singh Executive Director, Delhi
Mr. J Gopal (Part of the year) Executive Director, Mumbai
Mr. Peeyush Aggarwal (Part of the year) Executive Director, Mumbai
Mr. A K Bhargava (Part of the year) Executive Director, WS
33. Consolidated Financial Statements - AS - 21 & AS - 27
The financial statements of Millennium Telecom Limited & Mahanagar
Telephone Mauritius Limited (wholly owned subsidiaries of the Company)
and United Telecom Limited & MTNL STPI IT Service Limited (Joint
Ventures) have been consolidated in accordance with the Accounting
Standard - 21 and Accounting Standard - 27, respectively.
34. During the year no provision has been made for any loss on account
of impairment of assets under Accounting Standard 28 as there is no
indication of any impairment of assets of the Company.
35. Previous year figures have been regrouped / recast to confirm to
current year's presentation. Amounts in brackets represent the previous
year's figures.
36. Schedules "A" to "T" form an integral part of the Balance Sheet
and the Profit and Loss Account.
Mar 31, 2010
2009-10 2008-09
(Rs. in Million) (Rs. in Million)
1. Contingent Liabilities
(a) Income Tax
Demands disputed and under appel 12161.97 10977.29
(b) Sales Tax, Service Tax,
Excise duty,
Municipal Tax Demands Disputed and 9429.22 1580.84
under Appeal
(c) Disputed Demand under Lease Act* -- 682.02
(d) i Interest to DDA on
delayed Amount Amount
payments/Pending Court Cases/
Indeterminate Indeterminate
Tax cases
ii Stamp duty payable on land and Amount Amount
buildings acquired by the Company Presently Presently
Unascertainable Unascertainable
(e) Claims against the Company not
acknowledged as Debts. 10372.83 6987.48
(f) Bank guarantee & Letter of
Credit 950.89 941.88
(g) Directory dispute 2858.34 2858.34
(h) Interest demanded by DOT and
disputed by company on account of
delay in payment of Leave Salary
and Pension Contribution 1738.10 1738.10
(i) Pending court cases against land acquisition Indeterminate
Indeterminate
2. Estimated amount of contracts remaining to be executed on capital
account in respect of Purchase order is Rs.9515.40 Millions (Previous
year Rs. 4915.17 millions). In respect of contracts where the
expenditure already incurred has exceeded the contract value and the
contract remains incomplete, the additional expenditure required to
complete the same cannot be quantified.
3. Other liabilities include credits on account of receipts including
service tax from subscribers amounting to Rs.385.21 Millions (Rs.352.04
Millions), which could not be matched with corresponding debtors or
identified as liability, as the case may be. Appropriate adjustments/
payments shall be made inclusive of service tax, when these credits are
matched or reconciled. Therefore, it could not be adjusted against
making provision for doubtful debts.
4. Change in Accounting Policy for the year 2009-10:
(i) Provision is made for disputed claims from subscribers pending more
than 3 years excluding operators covered under the agreements related
to IUC/Roaming/MOU. There is no impact on the accounts due to the
change in the policy.
(ii) As per Revised AS-15, VRS expenditure deferred cannot be carried
forward to accounting periods commencing on or after 1st April 2010.
Hence Para 5 of the Accounting Policy of the last year in respect of
Deferred Revenue Expenditure is deleted. Due to the change in the
policy, an amount of Rs.340.31 Million has been additionally charged in
the accounts. Accordingly the net losses include this amount and Misc.
Expenditure in the Application of Funds in Balance Sheet is reduced to
NIL due to this amount.
(iii) In respect of closed connection provision is made for outstanding
for more than 3 years along with spill over amount less than 3 years.
The impact on the accounts due to the change in the policy is under:-
a. In basic service additional provision for Rs.18.11 Million has been
made.
b. In circuits no provision is made as reconciliation is under process
and as such impact on loss due to change is not ascertained.
(iv) Change in method of calculation of ISP license fee implemented for
the financial year 2009-10 vide MTNL CO letter No. MTNL/RA/AGR/2009/Pt
dated 29th March, 2010 is also extended for the previous years also.
The same is approved in the ECM held on 12th June, 2010 and accordingly
the license fees is reduced by Rs.105.53 millions. For the financial
year 2009-10 the license fees is reduced by Rs.35.11 millions.
5. a) The company had claimed benefit under section 80 - IA of the
Income Tax Act, 1961 for the financial
year from 1996-97 to 2005-06. The provision of Income Tax for the
financial year 1996-97 to 1998- 99 was made without considering the
benefit u/s 80IA. For the F.Y. 1997-98 to 2001-02 and 2004- 05, the
benefits under section 80IA of the Income Tax Act were allowed to the
extent of 75% by ITAT.
b) A Contingency Reserve of Rs.6526.25 millions was created from the
Profit & Loss Appropriation Account to meet the contingency that may
arise out of disallowances of claim of benefit u/s 80IA of Income Tax
Act,1961. The contingency reserve so created excludes an amount of
Rs.4020.35 millions for which the provision was created from the years
1996-97 to 2000-01 and the same is still maintained in the books of
accounts after considering the benefit as allowed by ITAT in the
current year.
c) During the year an amount of Rs.2579.58 million has been written
back from contingency reserve to Profit & Loss Appropriation Account on
account of decrease in contingent reserve as a result of allowance of
75% of 80IA claim by ITAT.
d) In accordance with Accounting Standard 22, accounting for taxes on
Income, the company has
deferred tax assets amounting to Rs.10571.36 million including
Rs.6350.64 million on account of unabsorbed depreciation and brought
forward losses as on 31.3.2010 as against the deferred tax liability of
Rs.3552.96 million as on 31.3.2009. However, in the current Telecom
Industry Scenario, there is no virtual certainty of availability of
sufficient future taxable income in the near future against which the
above asset can be realized. Hence, the Deferred Tax asset has been
accounted for only upto the extent of existing DTL Rs.3552.96 million.
Balance amount of Rs.7018.40 millions for prospective DTA shall be
created in the year in which the company will have virtual certainty of
future taxable income as required by AS-22 issued by ICAI.
e) Based on expert opinion, the company has not been deducting tax
deducted at source for IUC services rendered from BSNL. Besides
liability provided on account of pension contribution expenditure on
the basis of actuarial valuation is considered as an allowable
expenditure based on expert opinion.
6. a) Provision for taxation for the current year comprises of Income
Tax of Rs. Nil, Wealth Tax of Rs.1.82 Millions.
b) During the year Company received ITAT order for allowance of 75% of
claims U/s 80IA against the claims of the company for the assessment
year 1998-99 to 2002-03 and 2005-06. As a result of which refund of Rs
17676.5 million is expected from Income tax department. Out of this, Rs
7708.4 million are attributable towards interest income and accounted
for in the current financial year pending appeal effects.
c) During the year, the company has suffered a business loss of
Rs.26109.72 millions. The company intends to carry forward its business
loss including unabsorbed depreciation/amortization to the tune of
Rs.20945.49 million as per calculation made under Income Tax 1961.
7. (a) The supplemental agreement entered into between United India
Periodicals Pvt. Ltd. / United Data Base (India) Pvt. Ltd/ Sterling
Computers Ltd and the company for printing of telephone directories
was struck down by the Honble High Court of Delhi on 30.9.92 and the
said decision was upheld by the Honble Supreme Court of India on
12.1.93. A claim against the Company has been raised by Sterling
Computers Ltd. for Rs. 258.2 Millions which being under dispute, has
not been provided for. The company has filed its counter claims of
Rs. 228.7 Millions before the Honble High Court against Sterling/
UDI/UIP and has also filed arbitration claims of Rs. 561.8 Millions
plus interest @ 21% per annum against these parties under the
original agreement. Pending finalization of this dispute, the company
has raised and recorded as Claims Recoverable, a claim for
Rs. 154.91 Millions (Rs. 154.91 Millions) on account of royalty,
interest and billing charges and on payments made through Letter of
Credit; Rs.130.47 Millions (Rs.130.47 Millions) recovered there against
by the company from subscribers for the issue of directories, is
carried under Current Liabilities. Further claims of the Nigam for
interest and service charges aggregating Rs.143.67 Millions (Rs.143.67
Millions) have not been accounted for. Financial implication of the
claim raised against the company, adjustment of the sums received
against outstanding claims, any non-realization of claim and further
claims recoverable shall be effected upon determination based on the
outcome of the proceedings in the court of law.
MTNL has filed OMP No.151/1996 seeking enlargement of time under
Section 28 of the Arbitration Act for the Arbitrator to publish the
award. The case is still pending and will be listed along with OMP
No.135/94 for final hearing. The petitioner M/s United India Periodical
(Ltd.) filed OMP No.135/ 94 in the High Court of Delhi challenging the
appointment of Arbitrator under Section 33 of the Arbitration Act 1940.
The Petition is pending from 24.10.1994 in the High Court of Delhi. Now
the petitioner has filed an application for amendment in the petition
filed in the year 1994 with the prayer that the arbitration clause 20
of the original contract dated 14.3.1987 be determined by the Honble
Court of the subsequent events. The petitioner has also took plea of
res-judicata as the MTNL filed the Suit No.4628 of 1994 in Mumbai and
the same is pending before the Bombay High Court. The case is now
listed in the category of final matter and is on regular board of the
Court for the both the aforesaid OMPs.
The suit filed by MTNL against M/s Sterling Computers and others is
pending in the High Court of Mumbai in which claims to the tune of
Rs.228.7 millions towards Royalty, Interest on Royalty amount upto
31.8.1994, amount paid against LC, Interest on amount of LC, L/D for
non-performance and other charges etc. for Delhi and Mumbai both units.
This suit is filed after non-performance of supplementary agreement
dated 19.7.1991 & 26.9.1991 by M/s Sterling Computers Ltd. The case is
still pending at Mumbai High Court.
(b) MTNL entered into contracts with M/s M & N Publications Limited for
printing, publishing and supply of telephone directories for Delhi and
Mumbai units for a period of 5 years starting from 1993. In view of the
breaches of the terms and conditions of the contracts committed by the
contractor in publishing first issue of the directories of both units
and their failure to execute the remaining part of the contracts, both
the contracts were terminated by MTNL on 22.07.1996. Income from
royalty and other applicable recoveries, for first issue published by
contractor, Rs. 181.2 Millions have been accounted for and received. As
regards Delhi Unit, MTNL has claimed to the extent of Rs.2110 millions
(approx.) plus interest thereon at various rates while M/s M&N
Publications have counter claim of Rs.2860 millions (approx.) plus
interest thereon. Sole Arbitrator has been appointed by both the
parties. The effect of claims under the contract for remaining issues
published by contractor will be accounted for in the year of issuing of
award by the Sole Arbitrator.
8. Certain Lands and Buildings capitalized in the books, are pending
registration/legal vesting in the name of the company and the landed
properties acquired from DOT have not been transferred in the name of
the company and in the case of leasehold lands, the documentation is
still pending. In case of Mumbai Unit legal vesting of land and
building of the value of Rs. 69.26 Millions acquired after 1st April,
1986 is under process.
9. The Mumbai Unit had applied for amnesty under the Maharashtra Kar
Nivaran Yojana, 1999 in respect of the Sales Tax demands of Rs 8.10
Millions (Rs. 8.10 Millions). The application for amnesty towards
demands aggregating Rs.2.09 Millions (Rs.2.09 Millions) has been
accepted. The balance applications relating to demands of Rs.6.02
Millions (Rs.6.02 Millions) are under process and are not included
under Contingent Liabilities.
10. a) Delhi Unit has accounted for the expenditure on account of
telephone bills of service connections raised by BSNL towards MTNL for
the period from 01.10.2000 to 30.09.2006 to the tune of Rs. 98.01
millions on the basis of actual reimbursement made for subsequent
periods against the disputed claim of Rs.312.72 millions, since no
details / justifications are received from BSNL in spite of repeated
persuasion till date. The balance amount of Rs. 214.72 millions is
shown as contingent liability.
b) During the year, the units have accounted for Rs.700.83 millions (Rs
1223.45 m) including service tax toward interconnect charges for usage
of TAX for carriage of traffic on the rates prescribed by TRAI in IUC
regulations in the absence of any inter connect agreement with MTNL and
BSNL. BSNL is also charging the same and the claims raised by both
parties are under reconciliation.
c) During the year an amount of Rs.403.17 millions (Rs. 2199.36 m) have
been accounted for as Infrastructure Usage charges receivable from BSNL
for using the various office building and spaces of MTNL and Rs.12.62
million (Rs 89.79 m) vice-versa.
d) In respect of Delhi Unit, claim receivables includes Rs.22.5
millions towards ADC charges receivable from certain operators
accounted for on adhoc basis in the financial year 2007-08 and is
subject to change on settlement/acceptance.
e) During the year an amount of Rs.86.12 millions (Rs. 364.18 m) has
been accounted as receivable from BSNL on account of Property Tax,
Electricity, water and fuel charges by both Delhi and Mumbai Units.
11. As per directions of the court one UASL operator has deposited
Rs.3412.74 million against the claim of the same amount. The company
has recognized revenue of Rs.2367.90 millions in the year 2004-05 and
Rs.1044.84 millions in the year 2005-06. The petition filed by UASL
Operator before Honble High Court, Delhi is dismissed as withdrawn
with a liberty to the UASL operator to take steps in accordance with
the Law. The matter is presently pending with the Honble Court.
12. The company had subscribed to 8.75% Cumulative Preference Shares
of M/s. ITI Limited, amounting to Rs.1000 Millions during the year
2001-02. As per the terms of allotment, the above Preference Shares
were proposed to be redeemed in 5 equal installments. Accordingly, five
installments amounting to Rs.200 Millions each, aggregating to Rs.1000
Millions have become redeemable, which have not been redeemed by ITI
Limited. As per letter No.U-59011-10/2002-FAC dated 31.07.2009 issued
by DOT, the repayment schedule of the above cumulative Preference
Shares was deferred to 2012-13 onwards in five equal installments.
Moreover, no dividend income has been booked in the accounts for the
same, as ITI Limited has not declared any dividend.
13. In respect of Mumbai Unit, the bank reconciliation statements as
at 31st March, 2010 include unmatched/ unlinked credits/ debits given
by the banks in the Mumbai Units bank accounts amounting to Rs.56.09
million (Rs.55.25 million) and Rs. 69.16 million.(Rs.63.23 million)
respectively, which could not be properly accounted for in the absence
of adequate particulars.
14. In respect of Mumbai MS Unit, sundry debtors as per billing system
is Rs.697.78 millions (excluding service tax) (Rs 697.9 m). Sundry
Debtors as per WFMS is RS.715.47 millions (excluding service tax) ( Rs
694.2 m). Difference is Rs 17.70 millions (Rs 3.7 m). Out of total
sundry debtors of Rs.715.47 millions (Rs 694.2 m), an amount of
Rs.84.17 millions (Rs 92.8 m) is secured against the deposit available
as on 31.03.2010.
15. a) Deposits from applicants and subscribers as on 31st March 1986
were Rs.1503.59 Millions as intimated provisionally by DOT.
Corresponding assets shown under claims recoverable are being reduced
by the amount of recovery of rebate on rental and by the amount of
recovery of application deposit for which connections have been
released to subscribers with effect from 1.4.1986. Balance still
recoverable from DOT on this account is Rs. 558.45 Millions.
b) The balance in the Subscribers Deposit Accounts of Rs.7386.71
Millions (Rs. 8036.07 Millions) and Interest Accrued and Due thereon of
Rs.25.51 Millions (Rs. 26.54 Millions) is subject to reconciliation
with the relevant subsidiary records.
c) The aggregate balance of sundry debtors as per the subsidiary
records is short by Rs. 44.39 millions (Rs.57.55 millions) as compared
to the balance in general ledger and under reconciliation. The
resultant impact of the above on the account is not ascertainable.
16. a) Amount recoverable on current account from DOT is Rs.32330.54
Millions (Rs. 31543.80 Millions) and amount payable is Rs.112265.01
Millions (Rs.658.69 Millions). The net recoverable of Rs.(-) 79934.47
Millions (Rs. 30885.11 Millions) is subject to reconciliation and
confirmation.
b) The amount recoverable from BSNL is Rs.20318.25 Millions
(Rs.16785.67 Millions) and amount payable is Rs.4517.21 Millions (Rs.
2498.54 Millions). The Net recoverable of Rs.15801.04 Millions
(Rs.14287.13 Millions) is subject to reconciliation and confirmation.
17. Certain claims of BSNL on account of Signaling charges Rs.219.30
millions, Transit tariff Rs.251.90 millions, MP Billing Rs.60.10
millions, Service Connections Rs.401.48, IUC Rs.101.40 millions and IUC
from Gujarat Circle Rs.11.14 millions are being reviewed. Pending
settlement of similar other claims from BSNL, no provision is
considered necessary.
18. a) License Fees is calculated on the AGR accounted for on accrual
basis in respect of both revenue and revenue sharing with other
operators. Pending judgment from Supreme Court on appeal by DOT against
TDSAT judgment, the claim of refund of License Fees on other income is
not accounted for and shall be made in the year of supreme court
judgment.
b) Liquidated Damages recovered from M/s ITI Ltd. and convergent
billing cases are accounted for in other income is as per terms of
agreement.
19. a) In accordance with DOT Guide lines dated 1.8.2008 on 3G
spectrum and BWA and on finalization of the price on spectrum vide DOT
letter No. F No P-11014/13/2008-PP dated 21st May, 2010 for 3G & DOT
letter No. P-11014/13/2008-PP dated 12th June, 2010 on BWA Spectrum,
the liability for Rs.110979.7 millions has been accounted by creating
intangible assets on one time charges payable to DOT for 3G & BWA
Spectrum in accordance with AS-26 and to be amortized for 20 years/15
years respectively on straight line basis. Accordingly, the amortized
amount for the period from 08.08.2008 to 31.03.2010 is provided as
under:
For 2008-09 For Both Delhi & Mumbai 3869.10 million
For 2009-10 -do- 6304.60 million
Though, a claim has been lodged with DOT vide DO
No.MTNL/CO/GM(Tech.)/Spectrum allocation/09- 10/Vol.III dated 2nd July,
2010 for refund of Rs.110979.7 million towards 3G/BWA Spectrum which
has been paid by MTNL to DOT in May/June, 2010. This claim is not
accounted for in the books as the same is yet to be acknowledged by
DOT.
b) Annual Spectrum charges of 1% on the incremental revenue due to 3G
services after a period of 1 year is not accounted for pending receipt
of method of calculation from DOT vide DOT Letter No.P-11014/16/2008-PP
dated 11.09.2008.
20. a) Out of total provision of Gratuity of Rs. 10444.63 Millions up
to 31.3.2010 (Rs. 8380.22 Millions), an amount of Rs. 1943.73 Millions
and Rs. 665.40 Millions is recoverable from DOT, in respect of Group C
& D and Group B employees respectively, for the period prior to their
absorption. As on 31.03.2010 Rs. 7835.50 Millions is available with the
Gratuity Trust.
b) The total provision of Leave Encashment is Rs. 5573.00 Millions up
to 31.3.2010 (Rs. 4306.23 Millions). Out of this, an amount of Rs.
816.18 Millions and Rs. 274.53Millions is recoverable, from DOT in
respect of Group B and Group C & D employees respectively for the
period prior to their absorption in MTNL.
c) An amount of Rs. 11793.88 Millions (Rs. 11357.08 Millions) towards
GPF contribution is recoverable from DOT as on 31.3.2010. The amount
pertains to Group C& D and Group B employees absorbed in MTNL w.e.f.
01.11.98 and 01.10.2000, respectively.
d) The total provision of Pension is Rs. 56972.43 Millions (Rs.
33486.60 Millions) upto 31.3.2010. Out of this an amount of Rs. 7546.2
Millions and Rs. 2201.02 Millions is recoverable from DOT as principal
in respect of Group C&D and Group B employees for the period prior to
their absorption.
e) The DOT has given commitment vide GOI Ministry of Communication &
IT, Deptt. Of Telecom vide letter No.40-29/2002-Pen(T) dated 29th
August, 2002 that it has been agreed in principal that the payment of
pensionary benefits including the family pension to the government
employees absorbed in MTNL and who have opted for government scheme of
pension shall be paid by the government. The exact modalities in this
regard are being worked out by Deptt. Of Pension and Pensioners
welfare. Pending decision on the modalities of liabilities payable to
DOT towards pension contribution on MTNL, so as to have a prudent
method, on conservative basis, MTNL has adopted the method of valuation
as per AS-15 (Revised) through actuarial valuation for defined benefit
plan of Central Govt. Pension Scheme and the provision for Rs.56972.43
millions as on 31.03.2010 is kept separately in the books under
Schedule M pending final decision of the issue. The above liability
is subject to modalities to be finalized by DOT and may vary. The
necessary adjustment will be made in the books on finalization.
21. The diminutions in value of investments in Subsidiaries & Joint
Ventures are considered as temporary hence no provision is made.
22. The amount of receivables and payables (including NLD / ILD
Roaming operators) is subject to confirmation and reconciliation.
Pending such confirmation/ reconciliation, the impact on the account is
not ascertainable at this stage.
23. In respect of Delhi Unit, Certain claims in respect of
damaged/lost fixed assets and inventory has been lodged with Insurance
Companies and accordingly gross block, accumulated depreciation and
value of inventory have been withdrawn in the respective years pending
settlement of the claim. The claims are still pending with insurance
company. The final adjustment in respect of difference between amount
claimed and assets withdrawn will be made in the year of settlement of
claim.
24. In both units, Delhi Unit & Mumbai Unit, CDMA exchanges of 100K &
50K have been decommissioned during financial year 2008-09 by the
management and necessary provision has been made for Rs.1210.28
millions as loss of assets in accordance with accounting policy. The
liability on this project amounting to Rs.925.98 millions (includes $
13973820) lying in the books for more than three years and not paid to
vendor due to issue arising out of contract agreement, is not written
back in view of pending arbitration case filed by vendor.
25. There is no agreement between the Company and DOT for interest
recoverable/Payable on current account. Accordingly, no provision has
been made for interest payable/receivable on balances during the year
except charging of interest on GPF claims receivable from DOT.
26. Vacant Land is valued at original value for the purpose of wealth
tax provisions.
27. A sum of Rs.131.25 millions accounted for as income in financial
year 2007-08 being ADCC recoverable from Project Development Company
(PDC) towards development of Core knowledge park at Noida is still to
be recovered and interest there on for the current period is not
accounted for as the issue of funding of the project by MTNL is raised
by the PDC and pending decision by corporate management and also as
there is no explicit agreement for interest no provision as such is
made.
28. MTNL Delhi unit has received a sum of Rs.1000.0 Million wet lease
towards telecom infrastructure of common wealth games-2010 project
(CWG-2010) which has been booked as advance from customer. The
expenditure being incurred against this project is being booked as
Work-in-progress. The final adjustment will be done on completion of
the project.
29. In respect of MS Delhi Unit, IUC Income and Expenditure from
August 2009 to March 2010 has been accounted for on estimation basis
based on average of actual from April 2009 to July 2009 due to non-
processing of data due to technical problems.
30. In respect of MS Delhi, a sum of Rs. 243.55 million payable to TCL
for ILD charges for the period Oct- 09 to March-10 has not been paid
due to heavy spurt in ILD traffic towards M/S TCL. On technical
analysis it was found that these calls were made to some dubious and
tiny destination. These destinations do not confirm to national
numbering plan of the respective countries and are not approved
destinations as per approved interconnect agreement. Further these
calls has not got physically terminated to the destinations The
observations were shared with M/S TCL. M/S TCL has also been advised
that the balance which relates to fraudulent calls is not payable and
accordingly no provision has been made in the books of accounts.
However the above has been shown as part of contingent liability.
31. In respect of accounting for billing of subscribers for Mobile
services and collection made thereon, the GSM Mumbai unit has
implemented computerized billing system and the financial entries for
booking of income and debtors accounting have been incorporated in the
books of accounts based on the output generated through computer
system.
32.There is no reported Micro, Small and Medium enterprise as defined
in the Micro,Small and Medium enterprise development Act, 2006, to whom
the company owes dues. No interest has been paid during the year on
account of delayed payments as required under the MSMED Act, 2006.
33. Additional information required under Paragraphs 3(x)(a) and 4D(c)
of Part II of Schedule VI to the Companies Act 1956 is not
ascertainable, since (i) consumption of stores is included under the
normal heads of Capital Expenditure and/or Repairs & Maintenance, and
(ii) the issue of imported and indigenous items are not separately
priced/ identified.
34. During the year, the Company has made an Insurance Policy for
medical benefits in respect of its retired employees. The Insurance
Policy is fully funded by the Company. This is in compliance with AS-
15 (Revised).
35. Related Parties Disclosure under AS-18 a) List of Related Parties
and Relationships Party Relation Department of Telecommunications
Holding 56.25% shares of the Company Millennium Telecom Limited Wholly
owned Subsidiary Mahanagar Telecom Mauritius Ltd. Wholly owned
Subsidiary United Telecom Limited Joint Venture MTNL STPI IT Services
Ltd. Joint Venture
b) Key Management Personnel Mr. Kuldip Singh Director (Tech.) & CMD
Mrs. Anita Soni Director (Finance) Mr. S.P. Pachauri Director (HR) Mr.
A K Pathak (Part of the year) Executive Director (Technical), CO Mr.
Manjit Singh (Part of the year) Executive Director, Delhi Mr. S M
Talwar (Part of the year) Executive Director, Delhi Mr. J Gopal (Part
of the year) Executive Director , Mumbai
36. Consolidated Financial Statements - AS - 21 & AS - 27
The financial statements of Millennium Telecom Limited & Mahanagar
Telephone Mauritius Limited (wholly owned subsidiaries of the Company)
and United Telecom Limited & MTNL STPI IT Service Limited (Joint
Ventures) have been consolidated in accordance with the Accounting
Standard - 21 and Accounting Standard - 27, respectively in a separate
consolidated financial statement.
37. During the year no provision has been made for any loss on account
of impairment of assets under Accounting Standard 28 as there is no
indication of any impairment of assets of the Company.
38. Previous year figures have been regrouped / recast to confirm to
current years presentation. Amounts in brackets represent the previous
years figures.
39. Schedules "A" to "T" form an integral part of the Balance Sheet
and the Profit and Loss Account.
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