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Notes to Accounts of NHPC Ltd.

Mar 31, 2015

1. Secured by pari-passu charge by way of equitable mortgage/hypothecation against the assets (except for Book Debts and Stores) of Company''s Loktak Power Station situated in the state of Manipur.

2. Secured by pari-passu charge by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company''s Parbati-II HE Project situated in the state of Himachal Pradesh.

3. Secured by pari-passu charge by way of equitable mortgage/hypothecation against immovable/movable assets (except for Book Debts and Stores) of Company''s Teesta Low Dam-III Project situated in the state of West Bengal.

4. Secured by pari-passu charge by way of equitable mortgage and charge over all the immoveable and moveable assets (except for Book Debts and Stores) of the Company''s Dhauliganga Power Station situated in the state of Uttrakhand.

5. Secured by way of frst charge on pari-passu basis by way of hypothecation on whole of the Company''s movable assets(except for Book Debts and Stores), both present and future, of Dulhasti Power Station situated in the state of Jammu & Kashmir.

6. Secured by exclusive charge by way of equitable mortgage against the assets (except for Book Debts and Stores) of Company''s Bairasiul Power Station situated in the state of Himachal Pradesh.

7. Secured by a frst charge on pari-passu basis by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company''s Chamera-III HE Project-situated in the state of Himachal Pradesh.

8. Secured by way of frst charge on pari-passu basis by way of hypothecation on whole of the Company''s movable assets (except for Book Debts and Stores), both present and future, of Salal Power Station situated in the state of Jammu & Kashmir, Sewa-II Power Station situated in the state of Jammu & Kashmir, Chutak Power Station situated in the state of Jammu & Kashmir, Nimmo-Bazgo Power Station situated in the state of Jammu & Kashmir, Uri-II HE Project situated in the state of Jammu & Kashmir & TLDP-IV HE Project situated in the state of West Bengal.

9. Secured by pari-passu charge by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company''s Parbati -III Power Station situated in the state of Himachal Pradesh.

10. Secured by pari-passu charge by way of equitable mortgage/hypothecation against immovable/movable assets (except for Book Debts and Stores) of Company''s Teesta-V project situated in the state of Sikkim.

11. Loans mentioned at sl. nos. C(i),C(ii),C(iii),C(iv) and E(i) above are guaranteed by Government of India.

Explanatory Note: -

The Board has resolved to implement the directions of the Ministry of Power (MOP) vide its letter no. 11/17/2009-NHPC/Vol. III dated 27th December 2013 conveying the approval of Competent Authority about pay scales in respect of below Board level Executives that the pay scales shall be fxed w.e.f. 01.01.2007 after correcting the aberrations in pay scales fxed w.e.f. 01.01.1997 and the deviant pay scales fxed w.e.f. 01.01.1997 shall not be regularized. The MoP has been intimated vide letter no.PWA-504-Vol-IV/62 dated 14.05.2014 to confrm that the recovery of personal adjustment w.e.f. 01.02.2014 is in conformity with the said directive of the Competent Authority. In the meanwhile, NHPC Offcers Association has got a stay from Hon''ble High Court of Delhi against the implementation of stoppage of Personal Pay Adjustment (ftment benefts). In view of the directions of the Hon''ble High Court, Personal Pay Adjustments to the employees is continued to be paid along with the Salary. Thus, the cumulative amount provided towards the Personal Pay Adjustment under the head Provision for Wage Revision is Rs. 33.78 crore (including provision for the current year Rs. 6.19 crore) with corresponding amount shown as Advance paid.

Explanatory Note: -

1) Expenditure during Construction (EDC) includes Rs. 330.43 crore (Previous year Rs. 472.52 crore) towards borrowing cost capitalised during the year.

2) Capital Work in Progress (CWIP) includes a cumulative expenditure of Rs. 941.18 crore (Previous Year Rs. 798.99 crore) on projects under Survey & Investigation stage. Of this, a sum of Rs. 43.52 crore pertains to Subansiri Upper Project, which had been decided by Govt. of Arunachal Pradesh to be handed over to a Private Developer, however pending handing over of the project & recovery of expenditure incurred on it, the said amount is already provided for in the books as an abundant precaution. Out of the balance of Rs. 897.66 crore (Previous Year Rs. 755.47 crore) pertaining to projects with the company, a sum of Rs. 161.15 crore (Previous Year Rs. 114.34 crore) has been provided as an abundant precaution in respect of projects, where uncertainties are attached and Rs. 736.51 crore (Previous Year Rs. 641.13 crore), pertaining to other projects having reasonable certainty of getting clearance, is carried over.

3 Siang Basin, Subansiri Basin & Dibang Multipurpose Projects were taken over from Brahmaputra Board. Pending settlement of accounts with Brahmaputra Board, assets and liabilities have been accounted for to the extent of amounts incurred by the Company on these projects. Siang Lower & Siyom HE Projects (in Siang Basin) & Subansiri Middle (in Subansiri Basin) have since been handed over to Private Developer and liability arising out of settlement of accounts with Brahmaputra Board towards these projects is recoverable from respective Private Developers.

4) Underground Works amounting to Rs. 3995.69 crore (Previous Year Rs. 3774.90 crore) created on Land - Right to use, are included under respective heads of Capital Work in Progress (CWIP).

5) Capital Expenditure on projects approved by the competent authority undergoes revision over period of time as hydroelectric projects are time intensive and some takes longer period than envisaged. As a consequence the cost escalation occur, which requires approval of competent authority. Pending such approval the expenditure incurred during the period is carried forward in Capital Work in Progress (CWIP).

Previous year

* On account of transition provision to recognise rate regulatory assets in respect of expenditure incurred during the period of interruption of construction activities i.e. from 16.12.2011 to 31.3.2014 by corresponding credit to opening balance of Surplus.

Explanatory Note: -

National Power Exchange Limited (A Joint Venture of the Company) is under liquidation. Accordingly, upto date provision of Rs. 1.06 Cr (Previous Year Rs. 1.06 Cr.) towards the diminunition in the value of investment in the said joint venture has been made.

Explanatory Note: -

1) Out of the Initial Public Offering (IPO) proceeds of Rs. 6038.55 crore made during fnancial year 2009-10, sale proceeds of Rs. 2012.85 crore was paid to Ministry of Power, Govt. of India and Rs. 4025.70 crore was retained by the company. Out of Rs. 4025.70 crore, a sum of Rs. 3986.99 crore has been utilised up to 31.03.2015 for re-coupment of capital expenditure already incurred from internal accruals on the projects specifed for utilisation and Rs. 38.71 crore recouped for meeting IPO expenditure.

2) Cash and Bank Balances include Rs. 268.05 crore (Previous Year Rs. 320.63 crore), held for Rural Road and Rural Electrifcation works being executed by Company on behalf of other agencies and are not freely available for the business of the Company.

* includes an amount of Rs. 3.80 crore on account of Self Insurance Fund.

Explanatory Note: -

1) Interest accrued on Loan to State Government in settlement of dues from customers includes Rs. 32.97 crore (Previous Year Rs. 32.97 crore) on account of payment of incentive to M/s Delhi Transco Limited. The equivalent amount is appearing as liability under other liabilities in Note-9 (Other Current Liabilities) since the issue of payment of incentive to M/s Delhi Transco has not been resolved yet.

2) Receivable on account of Unbilled Revenue represents i) J&K water cess Rs. 216.38 crore (Previous Year Rs. 210.27 crore) ii) Tax Adjustment Rs. 63.04 crore (Previous Year Rs. (-) 10.34 crore) iii) MEA sales Rs. 4.71 crore (Previous Year Rs. 1.72 crore) iv) Other Rs. 318.34 crore (Previous Year Rs. 224.39 crore)

3) Receivable from Subsidiaries / JV''s mainly includes claim of the company towards capital expenditure incurred on Pakaldul, Kiru & Kawar HE Projects which has been transferred to M/s CVPPPL (a joint venture company of NHPC, JKSPDC and PTC).

4) Surplus Assets / Obsolete Assets held for disposal are shown at lower of book value and net relizable value.

Explanatory Note: -

1) CERC tariff notifcation for the period 2014-19 has been notifed vide notifcation no No.L-1/144/2013/CERC dt 21st February 2014. However, Pending approval of tariff for the period 2014-19 by Central Electricity Regulatory Commission (CERC), sales have been recognized provisionally as per tariff notifed by CERC for the period 2009-14 and taking into account provision towards truing up of capital cost of the power stations in line with CERC tariff regulations 2014. Further for the purpose of recognizing sales, Return on equity ( a component of tariff) has been grossed up using effective tax rate for FY 2014-15.

2) Sales includes Rs. 18.76 crore (Previous year Rs. 60.50 crore ) on account of earlier year sales arising out of fnalisation of tariff in current year.

3) Sales includes Rs. 86.80 crores (Previous year Rs. 20.09 crores) on account of ''deemed generation'' in respect of Chutak and NimmoBazgo Power stations as allowed by ''CERC''.

4) Due to non payment of dues by some of the benefciaries, share of power allocated to them has been regulated in terms of CERC Regulation No.L-1/42/2010-CERC Dated 28th September 2010 and accordingly sales includes an amount of Rs. 122.01 crore (Previous year Rs. 11.01 crore) towards regulated power, which has been sold through bidding at Power Exchange. ibid regulation further provides that margin earned on such sale after adjusting expenditure for effecting sale of regulated power should be passed on to benefciaries, whose power has been regulated. Accordingly an amount of Rs. 67.50 crore (Previous year Rs. 4.94 crore) has been adjusted against the outstanding dues of those benefciaries.

5) Sales includes Rs. 658.21 crore (Previous year Rs. 502.80 crore ) which is yet to be billed.

6) Tariff regulation notifed by CERC vide notifcation dated 21.02.2014 inter-alia provides that capital cost considered for fxation of tariff for current tariff period shall be subject to truing up at the end of the tariff period, which may result in increase or decrease in tariff. Accordingly, an amount of Rs. 143.03 crore (Previous year Rs. 1.13 crore) has been provided in the books during the year as an abundant precaution.

7) In terms of regulation No. 49 of tariff regulation issued vide Central Electricity Regulatory Commission (CERC) notifcation No. L-1/144/2013-CERC dated 21.02.2014, deferred tax liabilities for the period upto 31st March 2009 whenever it materializes is recoverable directly from the benefciaries and are accounted for on yearly basis. Accordingly current year sale includes Rs. 146.11 crore (Previous year Rs. 114.05 crore) on account of deferred tax materialised during the year.

2) Total carried forward to Statement of Proft & Loss includes Rs. 107.02 crore (Previous year Rs. 58.72 crore) relating to Subansiri Lower Project & Teesta Low Dam IV Project as explained in Explanatory Note no 29, para 10 (read with para 23) & para 11 repectively. However Rate Regulatory Assets for an equivalent amount of Rs. 72 crore pertaining to Subansari Lower Project has been recognised in compliance to Guidenance Note on Accounting for Rate Regulated Activities issued by ICAI.

Explanatory Note: -

1) The Company''s signifcant leasing arrangements are in respect of operating leases of premises for offces, guest houses & transit camps. These leasing arrangements, which are not non-cancellable, are usually renewable on mutually agreeable terms. Lease payments in respect of premises for offces, guest house & transit camps are shown in Rent.

2) Pending notifcation of revision order by CERC in respect of truing up application fled by the company under CERC notifcation dated 19.01.2009, an amount of Rs. 20.51 crore (Previous year Rs. 9.29 crore) has been provided in the books during the year ended 31.03.2015 towards Interest to Benefciary States,which may have to be paid in case of reduction in tariff as a result of said revision order.

3) Detail of Audit Expenses are as under: -

4) Total carried forward to Statement of Proft & Loss includes Rs. 68.69 crore (Previous year Rs. 220.70 crore) relating to Subansiri Lower Project & Teesta Low Dam IV Project as explained in Explanatory Note no 29, para 10 (read with para 23) & para 11 repectively. However Rate Regulatory Assets for an equivalent amount of Rs. 62.71 crore pertaining to Subansari Lower Project has been recognised in compliance to Guidenance Note on Accounting for Rate Regulated Activities issued by ICAI.

* Refer para no. 24 to Note No. 29 for the necessary disclosures relating to expenditure on CSR.

NOTE NO. : 12 – OTHER EXPLANATORY NOTES TO ACCOUNTS

1. Disclosure relating to Contingent Liabilities:-

a) Claims against the Company not acknowledged as debts in respect of:

(i) Capital works

Contractors have lodged claims aggregating to Rs. 9014.70 crore (previous year Rs. 8,752.57 crore) against the Company on account of rate & quantity deviation, cost relating to extension of time and idling charges due to stoppage of work/ delays in handing over the site etc. These claims are being contested by the company as being not admissible in terms of provisions of the respective contracts or are lying at arbitration tribunal/other forums/under examination with the Company. It includes Rs. 1,491.31crore (previous year Rs. 761.66 crore) towards arbitration awards including updated interest thereon, against the Company, which have been challenged/decided to be challenged in the Court of Law.

The Management has assessed the above claims and recognized a provision of Rs. 429.61 crore (previous year Rs. 154.56 crore) based on probability of outfow of resources embodying economic benefts and estimated Rs. 8,207.65 crore (previous year Rs. 8,598.01 crore) as the amount of contingent liability i.e. amounts for which Company may be held contingently liable. In respect of such estimated contingent claims either outfow of resources embodying economic benefts is not probable or a reliable estimate of the amount required for settling the obligation cannot be made. In respect of the rest of the claims/obligations, possibility of any outfow in settlement is considered as remote.

(ii) Land Compensation cases

In respect of land acquired for the projects, some of the land losers have fled claims for higher compensation amounting to Rs. 47.53 crore (previous year Rs. 40.28 crore) before various authorities/courts. Pending settlement, the Company has assessed and provided an amount of Rs. 35.16 crore (previous year Rs. 28.63 crore) based on probability of outfow of resources embodying economic benefts and estimated Rs. 12.37 crore (previous year Rs. 11.65 crore) as the amount of contingent liability as outfow of resources is considered as not probable. In respect of the rest of the claims/obligations, possibility of any outfow in settlement is considered as remote.

(iii) Disputed Tax Demands

Disputed Income Tax/Sales Tax/Service Tax/ other taxes/duties matters pending before various appellate authorities amount to Rs. 307.95 crore (previous year Rs. 337.51 crore). Pending settlement, the Company has assessed and provided an amount of Rs. 25.40 crore (previous year Rs. 7.78 crore) based on probability of outfow of resources embodying economic benefts and rest of the claims i.e. Rs. 282.26 crore (previous year Rs. 329.73 crore) are being disclosed as contingent liability as outfow of resources is considered not probable. In respect of the rest of the claims/obligations, possibility of any outfow in settlement is considered as remote.

(iv) Others

Claims on account of other matters amount to Rs. 655.15 crore (previous year Rs. 417.47 crore). These claims are pending before various forums. Pending settlement, the Company has assessed and provided an amount of Rs. 28.94 crore (previous year Rs. Nil crore) based on probability of outfow of resources embodying economic benefts and estimated Rs. 624.43 crore (previous year Rs. 417.47 crore) as the amount of contingent liability as outfow of resources is considered as not probable. In respect of the rest of the claims/obligations, possibility of any outfow in settlement is considered as remote.

The above is summarized as below: (Rs. in crore)

S. Particulars Claims as on Provision Contingent Contingent Addition of No. 31.03. 2015 against the liability as on liability as on contingent claims 31.03.2015 31.03.2014 liability for the year

1. Capital Works 9014.70 429.61 8207.65 8598.01 (390.36)

2. Land Compensation 47.53 35.16 12.37 11.65 0.72

3. Disputed tax matters 307.95 25.40 282.26 329.73 (47.47)

4. Others 655.15 28.94 624.43 417.47 206.96

Total 10025.33 519.11 9126.71 9356.86 (230.15)

(b) The above contingent liabilities do not include contingent liabilities on account of pending cases in respect of service matters & others where the amount cannot be quantifed.

(c) It is not practicable to ascertain and disclose the uncertainties relating to outfow in respect of contingent liabilities.

(d) There is possibility of reimbursement to the company of Rs. 240.85 crore (previous year Rs. 52.24 crore) towards above contingent liabilities.

(e) An amount of Rs. 53.19 crore (previous year Rs. 10.86 crore) stands paid towards above contingent liabilities to contest the cases and is being shown as Current Assets.

The company''s management does not reasonably expect that the above claims/obligations (including under litigation), when ultimately concluded and determined, will have a material and adverse effect on the company''s results of operations or fnancial condition.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 3560.38 crore (Previous year Rs. 3,473.95 crore).

3. Pending approval of competent authority, provisional payments / provisions made towards executed quantities of works of some of the items beyond the approved quantities as also for extra items totalling to Rs. 42.71 crore (Previous year Rs. 38.61 crore) are included in Capital Work-in-Progress/Fixed Asset.

4. a) Balances shown under material issued to contractors, claims recoverable including insurance claims, advances for Capital expenditure, Sundry Debtors, Advances to Contractors, Sundry Creditors and Deposits/Earnest money from contractors are subject to reconciliation/ confrmation and respective consequential adjustments. Claims recoverable also include claims in respect of projects handed over or decided to be handed over to other agencies in terms of Government of India directives. Trade receivables of Rs. 2497.10 crore are outstanding as on 31.03.2015. In the opinion of the management, an amount of Rs. 1714.86 crore was reconciled periodically during the year and unconfrmed balance will not have any material impact.

b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.

5. During the year, following accounting policies have been modifed/deleted:

(Rs. in crore)

Policy Description Impact on Profit for No. the year

2.5 Policy deleted due to presentation of Fixed Assets declared surplus/ awaiting disposal No impact action in "Other current assets" instead of presenting them as Fixed Assets.

5.2.3 Policy on charging of depreciation in respect of items for which the Company (0.69) assessed rates are used. The policy has been changed to adopt the useful life and residual value as per Schedule-II of the Companies Act, 2013 with effect from 01.04.2014.

5.3 Policy on charging of depreciation in respect of items (excluding immovable assets) 0.58 with written down value of Rs. 5000/- or less at the beginning of the year are fully depreciated during the year with Rs. 1/- as WDV.

7.3 Policy on writing off loose tools in use having value of Rs. 5000/- or more have been (0.10) deleted.

9.3 Policy on expenses on Ex-gratia payments & Notice Pay under Voluntary Retirement No impact as the policy Scheme has been deleted. was redundant.

Besides above, certain other accounting policies have been reworded/re-classifed for the purpose of better disclosure which has no impact on proft.

6. Signifcant Accounting policy No. 2.3.4 (4.4 of FY 2013-14), which was introduced during FY 2013-14, has been referred to Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI) for its opinion. Pending receipt of opinion, the same accounting treatment has been continued and an amount of Rs. 173.61 crore (Previous year Rs. 167.85 crore) has been capitalised/charged to Expenditure during construction till 31.03.2015 as per ibid policy.

7. The Ministry of Environment, Forests & Climate Change (MoEF & CC) vide letter No. F.No.8-85/2011-FC dated 15.04.2015 has accorded the in-principle approval for diversion of forest land for construction of Dibang Multipurpose Project (3000 MW). Further, Environment clearance to the Project has been accorded by MoEF & CC vide letter dated 19.05.2015. In view of above, a sum of Rs. 169.47 crore incurred on the Project is being carried forward as Capital Work in Progress.

8. Kotlibhel-1A project is one of the 24 hydro-electric projects located in the State of Uttarakhand which is covered by the order dated 13.08.2013 of Hon''ble Supreme Court of India directing MoEF not to grant these projects environmental/forest clearance until further order and to examine the signifcant impact on the bio-diversity of Alaknanda & Bhagirathi river basin. Pending adjudication about the fate of this project, the expenditure incurred upto the date of the above order amounting to Rs. 125.53 crore has been kept under capital work in progress. However, subsequent expenditure incurred on this project has been provided for.

9. Board of Directors in its meeting held on 20.03.2014 discussed that the viability of Bursar HE Project is dependent upon fnancial support from Govt. of India and Govt. of Jammu & Kashmir. Ministry of Power (MoP), Govt. of India, was approached to provide funding of Survey & Investigation Expenditure of Bursar Project to make it viable. As advised by the MoP, Ministry of Water Resources (MoWR) was approached to provide funds. In the meeting held in MoWR on 27.04.2015, it has been informed by representatives of MoWR that the request of NHPC for release of funds for preparation of DPR is under consideration for approval of Govt. of India. Accordingly, the preliminary investigations of the project are continued and the expenses of Rs. 177.07 crore incurred thereon are being carried forward as Capital Work in Progress.

10. Construction activities at site of Subansiri Lower Project have been interrupted w.e.f. 16.12.2011 due to protest of anti dam activists. Technical and administrative work is however continuing. Management is making all out efforts to restart the work at site. In line with the opinion of Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI), borrowing cost of Rs. 406.83 crore (up to previous year Rs. 766.90 crore) and administration and other cost of Rs. 115.12 crore (up to previous year Rs. 341.54 crore) have been charged to the Statement of Proft & Loss.

The company has, however, adopted the accounting as per Guidance Note on Rate Regulated Activities issued by the Institute of Chartered Accountants of India which allows recognition of ''Regulatory Asset'' and corresponding ''Regulatory Income'' of the right to recover such expense which are not allowed to be capitalized as part of cost of relevant fxed asset in accordance with the Accounting Standards, but are nevertheless permitted by Central Electricity Regulatory Commission(CERC), the regulator, to be recovered from the benefciaries in future through tariff,. (Detailed disclosure as per the ibid Guidance Note is given at para no. 23 below of this Note.)

11. Active construction work at Teesta Low Dam-IV project, which was interrupted due to stoppage of work by one of the contractors w.e.f. 20.03.2013, has resumed on 01.11.2014. Accordingly, borrowing cost and administrative & other cost amounting to Rs. 43.72 crore for the period from 01.04.2014 upto 31.10.2014 (previous fnancial year Rs. 156.79 crore) has been charged to the Statement of Proft & Loss.

12. The company, under mega insurance policy, has lodged insurance claim, as on date amounting to Rs. 191.58 crore and Rs. 291.56 crore towards Loss of Assets and Business Interruption Loss respectively, in respect of Dhauliganga Power Station, where generation was shut down due to fash foods during June,2013. Till date, interim payment of Rs. 70.10 crore towards loss of assets and Rs. 99.99 crore towards Business Interruption loss has been received. Loss beyond excess clause, if any, to be borne by the company shall be determined after receipt of the fnal survey report and impact thereof shall be accounted for accordingly.

13. On 20th November 2014, accidental fre broke out in the transformer cavern of Uri-II Power Station (240 MW) causing major damages to Electro & Mechanical Equipments and Civil Structures in power house area, resulting in stoppage of generation. Assets of the power station and business interruption loss are covered under mega insurance policy. However, losses upto excess clause as well as beyond the provisions of the insurance policy amounting to Rs. 28.26 crore have been accounted for on estimated basis. Further losses, if any, to be borne by the company shall be determined after receipt of the fnal survey report and impact thereof shall be accounted for accordingly. Restoration work for resumption of generation by the Power Station are underway.

14. The disclosure under Accounting Standard – 7 on Construction Contracts are as under:

(Rs. in crore)

Sl. Particulars 31.03.2015 31.03.2014

1. Aggregate amount of costs incurred and recognised profts (less 409.32 415.65 recognised losses) on contracts in progress upto reporting date.

2. Amount of advances received. 411.55 422.01

3. Amount of retention. Nil Nil

4. The gross amount due from customers for contract works as an asset. Nil 8.82

5. The gross amount due to customers for contract works as a liability. Nil 6.30

15. The effect of foreign exchange fuctuation during the year is as under:

(Rs. in crore)

For the year ended For the year ended 31.03.201 5 31.03.2014

(i) Amount charged to Statement of Proft & Loss excluding depreciation (20.50) 0.60 (as FERV)

(ii) Amount charged to Statement of Proft & Loss excluding depreciation - 29.65 (as Borrowing Cost)*

(iii) Amount charged to Expenditure During Construction (as FERV) 0.63 14.19

(iv) Amount charged to Capital work-in-progress (as FERV) 1.28 (0.02)

(v) Amount adjusted by addition to the carrying amount of fxed assets 215.94 -

* There is however no impact on proftability of the Company, as the impact of change in foreign exchange rates is recoverable from benefciaries in terms of prevailing CERC (terms & conditions of tariff) Regulations. The exchange rate variation for the year is transferred to deferred foreign currency fuctuation assets (recoverable from benefciaries) as per opinion of EAC of ICAI.

16. Disclosure as required by Accounting Standard-15 on ''Employee Benefts'': General description of various employee beneft schemes are as under:

A. Provident Fund

The Company pays fxed contribution to Provident Fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the year is recognised as expense and is charged to the Statement of Proft & Loss/expenditure during construction. The obligation of the Company is to make fxed contribution and to ensure a minimum rate of return to the members as specifed by GoI.

B. Social Security Scheme

The Company has a Social Security Scheme in lieu of compassionate appointment. The Company also makes a matching contribution per month per employee and such contribution is to be made for 8 years to build up corpus from the date the scheme is in operation i.e. 01.06.2007. The scheme has been created to take care of and helping bereaved families in the event of death or permanent total disability of its employee.

C. Employees Defined Contribution Superannuation Scheme

The Company has an employee defned contribution superannuation scheme for providing pension benefts to employees. As per the scheme, each employee contributes @ 5% of Basic Pay & Dearness Allowance. The company contributes to the extent of balance available after deducting employers'' contribution to Provident Fund, contribution to Gratuity trust and REHS, from the amount worked out @ 30% of the Basic Pay & DA. The Scheme is managed by Life Insurance Corporation of India.

D. Gratuity

The Company has a defned beneft gratuity plan. Every employee who has rendered continuous service of fve years or more is entitled to get gratuity at 15 days salary (15/26 X last drawn basic salary plus dearness allowance) for each completed year of service subject to a maximum of Rs. 0.10 crore, on superannuation, resignation, termination, disablement or on death. The plan is being managed by a separate Trust created for the purpose and obligation of the company is to make contribution to the Trust based on actuarial valuation.

E. Leave

The Company provides for earned leave and half-pay leave to the employees which accrue annually @ 30 days and 20 days respectively. The maximum ceiling of encashment of earned leave is limited to 300 days. However, any shortfall in the maximum limit of 300 days in earned leave on superannuation shall be regulated as per the clarifcation issued by the Department of Public Enterprises (DPE), Government of India. The liability for the same is recognised on the basis of actuarial valuation.

F. Retired Employee Health Scheme (REHS)

The Company has a Retired Employee Health Scheme, under which retired employee and spouse of retiree, spouse and eligible dependent children of deceased employees are provided medical facilities in the Company hospitals / empanelled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fxed by the Company. The liability for the same is recognised on the basis of actuarial valuation.

G. Allowance on Retirement / Death

Actual cost of shifting from place of duty at which employee is posted at the time of retirement to any other place where he / she may like to settle after retirement is paid as per the rules of the Company. In case of death, family of deceased employee can also avail this facility. The liability for the same is recognised on the basis of actuarial valuation.

H. Memento to employees on attaining the age of superannuation.

The Company has a policy of providing Memento valuing Rs. 5000/- to employee on superannuation. The liability for the same is recognised on the basis of actuarial valuation.

Schemes described as above at A, B, C & D are funded and rest are unfunded.

Summary of various defned benefts as on 31.03.2015 is as under:

Note: { } contains previous year''s fgures.

Liabilities as on 31.03.2015 on account of Baggage Allowance on retirement & Memento are Rs. 4.95 crore & Rs. 2.75 crore (Previous year Rs. 5.04 crore & Rs. 2.96 crore) respectively.

17. a) Electricity generation is the principal business activity of the Company. Other operations viz., Contracts, Project Management and Consultancy works do not form a reportable segment as per the Accounting Standard-17 on ''Segment Reporting''.

b) The Company is having a single geographical segment as all its Power Stations are located within the Country.

18. In compliance of Accounting Standard-18 on ''Related Party Disclosures'', the required information is as under: -

a) Related Parties

(i) Joint Venture Companies

National Power Exchange Ltd. (The Company is under liquidation).

(ii) Key Management Personnel

Shri R.S.T.Sai Assumed additional charge of the post of CMD w.e.f. 08.06.2014 in addition to his own

duties as CMD,THDC India Ltd.

Shri G. Sai Prasad Former Joint Secretary, Ministry of Power. Held additional charge of CMD of the Company

from 24.07.2012 to 07.06.2014. Ceased to be a director on the Board w.e.f. 08.06.2014.

Shri D. P. Bhargava Director (Technical).

Shri R. S. Mina Director (Personnel). Additional charge of Director (Finance) from 15.09.2014 to

26.05.2015.

Shri Jayant Kumar Director (Finance) w.e.f. 26.05.2015.

Shri Vijay Gupta Company Secretary.

Shri A. B. L.Srivastava Director (Finance) up to 15.09.2014.

Shri J. K. Sharma Director (Projects) up to 11.03.2015.

Remuneration to key management personnel (excluding CMD) for the current year is Rs. 2.21crore (corresponding previous year Rs. 2.08 crore).

b) Transaction carried out with the related parties as at a(i) above - Nil.

14. Disclosure relating to creation of Rate Regulated Assets & recognition of Rate Regulated Income as per the ''Guidance Note on Accounting for Rate Regulated Activities'' issued by the Institute of Chartered Accountants of India (ICAI) :

The company is engaged in construction & operation of hydro electric power projects. The price (tariff) to be charged by the company for electricity sold to its customers, is determined by Central Electricity Regulatory Commission (CERC) under applicable CERC (terms & conditions of tariff) Regulations. The said price (tariff) is based on allowable costs like interest costs, depreciation, operation & maintenance including a stipulated return. This form of rate regulation is known as cost-of-service regulations. The basic objective of such regulations is to give the entity the opportunity to recover its costs of providing the good or service plus a fair return.

For the purpose, the company is required to make an application to CERC based on capital expenditure incurred duly certifed by the Auditors or already admitted by CERC or projected to be incurred upto date of commercial operation and additional capital expenditure duly certifed by the Auditor or projected to be incurred during tariff year. The tariff determined by CERC is recovered from the customers (benefciaries) on whom the same is binding.

The above rate regulation does result into creation of right (asset) or an obligation (liability) as envisaged in the accounting framework which is not the case in other industries. The ICAI has issued a Guidance Note on accounting for Rate Regulated Activities, which is applicable to entities that provide goods or services whose prices are subject to cost-of-service regulations and the tariff determined by the regulator is binding on the customers (benefciaries). As per guidance note, a regulatory asset is recognised when it is probable (a reasonable assurance) that the future economic benefts associated with it will fow to the entity as a result of the actual or expected actions of the regulator under applicable regulatory framework and the amount can be measured reliably.

As explained above, all operating activities of the Company are subject to cost-of-service regulations as it meets the criteria set out in the guidance note hence it is applicable to the Company. Though the Guidance Note is effective from 01.04.2015, the Company has opted to adopt it from the Financial Year 2014-15, since earlier adoption is permitted.

The guidance note also provides that in some cases, a regulator permits an entity to include in the rate base, as part of the cost of self-constructed (tangible) fxed assets or internally generated intangible assets, amounts that would otherwise be recognised as expense in the statement of proft and loss in accordance with Accounting Standards. After the construction is completed, the resulting cost is the basis for depreciation or amortisation and unrecovered investment for rate determination. A regulatory asset is to be recognised by the entity in respect of such costs since the same is recoverable from the customers (benefciaries) in future through tariffs.

As stated in para 10 above, the borrowing cost of Rs. 406.83 crore (up to previous year Rs. 766.90 crore) and administration and other cost of Rs. 115.12 crore (up to previous year Rs. 341.54 crore) incurred on ''Subansiri Lower Project'', wherein the active construction is interrupted since 16.12.2011, have been charged to the Statement of Proft & Loss in compliance of provision of Accounting Standard 10, Accounting for fxed asset & Accounting Standard-16, Borrowing Cost as notifed under the Companies Act, 2013. However such expenditure is permitted under CERC (Terms and Conditions of Tariff) Regulations, 2014 to be recovered through future tariffs.

In pursuance of the above, the company has created regulatory assets and has recognized corresponding regulatory income for the Financial Year 2014-15/credit to the opening balance of surplus against the amount pertaining to the period 16.12.2011 to 31.03.2014 using transition provision as per the ibid Guidance Note as below:

* by corresponding credit to opening balance of Surplus by Rs. 876.10 crore (Rs. 1108.44 crore less provision for Income Tax for Rs. 232.34 crore) [refer- Note No.3-Reserves and Surplus].

** by corresponding credit to current year''s proft through "Regulatory Income".

15. Disclosure related to Corporate Social Responsibility (CSR) (refer Note No.22)

(i) The breakup of CSR expenditure under various heads of expenses incurred during FY 2014-15 is as below:-

(ii) Other disclosures:-

(a) Board of Directors has allocated total budget of Rs. 65.57 crore for FY 2014-15 which consisted of Rs. 47.65 crore based on 2% of average net proft of preceding three fnancial years in terms of Section 135 of Companies Act 2013 and Rs. 17.92 crore out of unspent amount upto FY 2013-14.

(b) Details of expenditure incurred during FY 2014-15 in cash and yet to be paid in cash along with the nature of expenditure (capital or revenue nature) is as under:-


Mar 31, 2014

NOTE NO. 1 OTHER EXPLANATORY NOTES TO ACCOUNTS

1. Disclosure relating to Contingent Liabilities:-

a) Claims against the Company not acknowledged as debts in respect of: (i) Capital works

Contractors have lodged claims aggregating to Rs. 8,752.57 crore (previous year Rs.10,106.82 crore) against the Company on account of rate & quantity deviation, cost relating to extension of time and idling charges due to stoppage of work/ delays in handing over the site etc. These claims are being contested by the company as being not admissible in terms of provisions of the respective contracts or are lying at arbitration tribunal/other forums/under examination with the Company. It includes Rs. 761.66 crore (previous year Rs. 323.70 crore) towards arbitration awards including updated interest thereon against the Company, which has been challenged in the Court of Law. However, out of these claims, the management has assessed and has made consequential provision of Rs.154.56 crore being probable outflow and Rs. 8,598.01 crore has been considered as contingent liability in respect of which either the possibility of outflow is not there or a reliable estimate of probable outflow cannot be made.

(ii) Land Compensation cases

In respect of land acquired for the projects, some of the land losers have fi led claims for higher compensation amounting to Rs. 40.28 crore (previous year Rs. 38.37 crore) before various authorities/courts. Pending settlement, the Company has assessed and provided an amount of Rs. 28.63 crore being probable outflow. In respect of rest of the claims, outflow of resources is considered as not probable.

(iii) Disputed Tax Demands

Disputed Income Tax/Sales Tax/Service Tax matters pending before various appellate authorities amount to Rs. 337.51 crore (previous year Rs. 331.42 crore), in respect of which no outflow of resources is considered probable. Pending their settlement, Company has assessed and provided an amount of Rs. 7.78 crore being probable outflow. In respect of rest of the claims, outflow of resources is considered as not probable.

(iv) Others

Other contingent liabilities amount to Rs. 417.47 crore (previous year Rs. 128.53 crore). These claims are pending before various forums, in respect of which no outflow of resources is considered probable.

(b) The above contingent liabilities do not include contingent liabilities on account of pending cases in respect of service matters & others where the amount cannot be quantifi ed.

(c) It is not practicable to ascertain and disclose the uncertainties relating to outflow in respect of contingent liabilities.

(d) There is possibility of reimbursement to the company of Rs. 52.24 Crore (previous year Rs. 40.71 crore) towards above contingent liabilities.

(e) An amount of Rs.10.86 crore (previous year Rs. 22.31 crore) stands paid towards above contingent liabilities to contest the cases and is being shown as Current Assets.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 3,473.95 Crore (Previous year Rs. 3,958.36 Crore).

3. Consequent upon commissioning of Chamera-III Power Station, some seepage was noticed during the year 2012-13 in hill slopes thereby affecting the houses & fields of local habitats of nearby village. A proposal to acquire the affected land is under consideration of management for which compensation is estimated at Rs.13.76 crore. Further the cost of rectification of seepage is yet to be ascertained.

4. Pending approval of competent authority, provisional payments / provisions made towards executed quantities of works of some of the items beyond the approved quantities as also for extra items totalling to Rs. 38.61 Crore (Previous year Rs.177.81 Crore) are included in Capital Work-in-Progress/Fixed Asset.

5. a) Balances shown under material issued to contractors, claims recoverable including insurance claims, advances for Capital expenditure, Sundry Debtors, Advances to Contractors, Sundry Creditors and Deposits/Earnest money from contractors are subject to reconciliation/ confirmation and respective consequential adjustments. Claims recoverable also include claims in respect of projects handed over or decided to be handed over to other agencies in terms of Government of India directives.

b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.

6. Company issued Secured, Redeemable, Non-Convertible Tax Free Bonds amounting to Rs. 1,000 Crore during the year with varying tenors. The issue opened on 18.10.2013 and closed on 23.10.2013.The allotment was completed on 02.11.2013 and the security got listed on the stock exchanges on 07.11.2013. Issue proceeds have been utilized for the purpose mentioned in the offer document.

7. Buy-back of 1,230,074,277 equity shares of Rs.10/- each (being 10% of the pre buy-back paid up equity shares) at a price of Rs.19.25 per share from the existing shareholders/ beneficial owners on proportionate basis has been done through Tender Offer Process. Post buy-back, the number of equity share of the company has been reduced to 1,107,06,68,496 from 1,230,07,42,773 and an amount of Rs.1,230.07 Crore equal to face value of the shares bought back has been transferred to Capital Redemption Reserve Account.

8. Tawang HE Project has given capital advance of Rs.1.24 Crore to State Compensatory Afforestation Fund Management & Planning Authority towards bio-diversity study to be conducted through North Eastern Hill University (NEHU) for all proposed hydroelectric projects in Tawang Basin. On receipt of expenditure statement, the above advance shall be adjusted and recoverability from Government of Arunachal Pradesh (GoAP) towards expenditure pertaining to projects other than those undertaken by NHPC would be known. Further, the reimbursement towards expenditure pertaining to projects other than those undertaken by NHPC is receivable as and when other projects come-up for construction.

9. The Forest Advisory Committee (FAC) of the Ministry of Environment & Forest (MoEF) in its meeting held on 12.07.2013 has recommended for rejection of forest clearance in respect of Dibang Multipurpose Project. However on a review request, the Cabinet Committee on Investment (CCI) in its meeting held on 09.12.2013 has decided that MoEF, the competent authority, may grant the requisite clearance for diversion of forest land expeditiously. Accordingly, revised proposal was submitted to MoEF. Although FAC in its meeting held on 29/30.04.2014 has reiterated and recommended rejection of proposal yet MoEF has asked for additional information from the Company for reconsideration of the Project. Pending final clearance, a sum of Rs.149.04 Crore incurred on the Project is being carried forward as Capital Work in Progress.

10. Construction activities at site of Subansiri Lower Project have been interrupted w.e.f. 16.12.2011 due to protest of anti dam activists, however substantial technical and administrative work is continuing. Although construction activities at site are expected to be resumed shortly since the matter is being pursued at the level of Government of India, yet in line with the opinion of Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI), the borrowing cost of Rs.766.90 crore (including previous year amount of Rs. 386.88 crore) and administration and other cost of Rs. 341.54 crore (including previous year fi gure of Rs.139.69 crores) have been charged to the Statement of profit & Loss during the year.

11. Construction activities at Teesta Low Dam-IV Project are progressing at a slow pace w.e.f. 20.03.2013 due to stoppage of work by one of the contractors to whom notice for recovery of the possession of site at risk & cost of contractor have been issued. Under such facts and circumstances, borrowing costs of Rs. 91.35 crore and administration and other cost of Rs. 67.91 crores have been charged to Statement of profit & Loss during the year.

12. Due to cloud burst and unprecedented high fl ood in Uttarakhand in the early hours of June 17, 2013, water entered into Dhauliganga Power Station (280 MW) and submerged all the system resulting into stoppage of generation from the plant and damage to Generating Plant and Machinery and various ancillary structures of the power station. The Assets of the power station and Loss of Generation are covered under Mega Insurance Policy. However, loss beyond excess clause, if any, to be borne by the Company shall be determined after receipt of the Final Survey Report and impact thereof shall be accounted for accordingly. Further, Unit No. 4 & 3 of the power station has been test synchronised with the grid on 30.04.2014 and 01.05.2014 respectively. Northern Region Load Despatch Centre (NRLDC) has approved the Injection Schedule for Unit No. 4 & 3 w.e.f. 03.05.2014 & 06.05.2014 respectively. Pending final settlement, on-account payments of Rs. 35 Crore and Rs. 99.99 Crore have been received from the Insurance Company till date against claim for material damage and business interruption respectively.

13. Kotlibhel-1A project is one of the 24 hydro-electric projects located in the State of Uttarakhand which is covered by the order dated 13.08.2013 of Hon''ble Supreme Court of India directing MoEF not to grant these projects environmental/forest clearance until further order and to examine the significant impact on the bio-diversity of Alaknanda & Bhagirathi river basin. Pending adjudication about the fate of this project, the expenditure incurred upto the date of the above order amounting to Rs.126.37 Crore has been kept under capital work in progress. However, subsequent expenditure incurred on this project has been provided for.

14. Board of Directors in its meeting held on 20.03.2014 discussed that the viability of Bursar HE Project is dependent upon financial support from Govt. of India and Govt. of Jammu & Kashmir. It was accordingly decided to approach Ministry of Power (MoP) for seeking commitment from Govt. of India and Govt. of J&K for financial assistance to make the project viable. It was confi rmed by the Board that if the project is not found viable, the expenses incurred on the project will have to be written off. Subsequently, a meeting was held in MoP on 23.05.2014 in which representative of Ministry of Water Resources (MoWR) and Govt of Jammu & Kashmir were also present and decided to re-submit the proposal to MoP for further taking up the matter with MoWR. It has also been indicated that MoWR would reconsider the proposal for providing funds for preparation of DPR of Bursar HE Project considering it as a National Project. In line with the resolution of the Board, the preliminary investigations of the project are continued and the expenses of Rs.154.64 crore incurred thereon are being carried forward as Capital Work in Progress.

15. Capital expenditure on assets where neither the land nor the asset is owned by the company was being reflected as a distinct item in capital work-in-progress till the period of completion and thereafter in the fixed assets to be amortised over a period of five years from the year in which the first unit of project concerned comes into commercial operation, in accordance with erstwhile accounting policy nos. 2.3 & 5.8 on the issue upto financial year 2012-13. However, during current financial year, the Company has introduced a new accounting policy no. 4.4 on the issue, by virtue of which capital expenditure incurred during construction of project for creation of facilities, over which the company does not have control but the creation of which is essential principally for construction of the project, is charged to ''expenditure during construction''. Accordingly, the following accounting policies have been introduced/ modifi ed/ deleted during the year ended 31.03.2014:

16. During the current year, Company has received opinion from EAC of ICAI on applicability & disclosure under Accounting Standard – 7 on Construction Contracts in respect of Rural Electrification and Rural Road Projects. As per said opinion, disclosure in respect of such works may be given in respect of agency fee/service charges only as that is considered as the revenue of the Company. In view of above, disclosure in respect of previous year has also been revised. The relevant disclosure are as follows:

* There is however no impact on profitability of the Company, as the impact of change in foreign exchange rates is recoverable from benefi ciaries in terms of prevailing CERC (terms & conditions of tariff) Regulations. The exchange rate variation for the year is transferred to deferred foreign currency fl uctuation assets (recoverable from benefi ciaries) as per opinion of EAC of ICAI.

17. Disclosure as required by Accounting Standard-15 on ''Employee Benefits'': a) General description of various employee benefit schemes are as under: defined Contribution Schemes

A. Provident Fund

The Company pays fixed contribution to Provident Fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognised as expense and is charged to the Statement of profit & Loss/expenditure during construction. The obligation of the Company is to make fixed contribution and to ensure a minimum rate of return to the members as specifi ed by GoI.

B. Social Security Scheme

The Company has a Social Security Scheme in lieu of compassionate appointment. The Company also makes a matching contribution per month per employee and such contribution is to be made for 8 years to build up corpus from the date the scheme is in operation i.e. 01.06.2007. The scheme has been created to take care of and helping bereaved families in the event of death or permanent total disability of its employee.

C. Employees Defined Contribution Superannuation Scheme

The Company has an employee defined contribution superannuation scheme for providing pension benefits to employees. As per the scheme, each employee contributes @ 5% of Basic Pay & Dearness Allowance. The company contributes to the extent of balance available after deducting employers'' contribution to Provident Fund, contribution to Gratuity trust and REHS, from the amount worked out @ 30% of the Basic Pay & DA. The Scheme is managed by Life Insurance Corporation of India.

Defined Benefits Schemes

D. Gratuity

The Company has a defined benefit gratuity plan. Every employee who has rendered continuous service of five years or more is entitled to get gratuity at 15 days salary (15/26 X last drawn basic salary plus dearness allowance) for each completed year of service subject to a maximum of Rs. 0.10 Crore, on superannuation, resignation, termination, disablement or on death. The plan is being managed by a separate Trust created for the purpose and obligation of the company is to make contribution to the Trust based on actuarial valuation.

E. Leave

The Company provides for earned leave and half-pay leave to the employees which accrue annually @ 30 days and 20 days respectively. The maximum ceiling of encashment of earned leave is limited to 300 days. However, any shortfall in the maximum limit of 300 days in earned leave on superannuation shall be regulated as per the clarifi cation issued by the Department of Public Enterprises (DPE), Government of India. The liability for the same is recognised on the basis of actuarial valuation.

F. Retired Employee Health Scheme (REHS)

The Company has a Retired Employee Health Scheme, under which retired employee and spouse of retiree, spouse and eligible dependent children of deceased employees are provided medical facilities in the Company hospitals / empanelled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fixed by the Company. The liability for the same is recognised on the basis of actuarial valuation.

G. Allowance on Retirement / Death

Actual cost of shifting from place of duty at which employee is posted at the time of retirement to any other place where he / she may like to settle after retirement is paid as per the rules of the Company. In case of death, family of deceased employee can also avail this facility. The liability for the same is recognised on the basis of actuarial valuation.

H. Memento to employees on attaining the age of superannuation.

The Company has a policy of providing Memento valuing Rs. 5000/- to employee on superannuation. The liability for the same is recognised on the basis of actuarial valuation.

Schemes described as above at A, B, C & D are funded and rest are unfunded.

17. a) Electricity generation is the principal business activity of the Company. Other operations viz., Contracts, Project Management and Consultancy works do not form a reportable segment as per the Accounting Standard-17 on ''Segment Reporting''.

b) The Company is having a single geographical segment as all its Power Stations are located within the Country.

18. In compliance of Accounting Standard-18 on ''Related Party Disclosures'', the required information is as under: -

a) Related Parties

(i) Joint Venture Companies

National Power Exchange Ltd.

(ii) Key Management Personnel

Shri G. Sai Prasad

Joint Secretary, Ministry of Power, Government of India. Assigned additional charge of CMD of the Company w.e.f. 24.07.2012.

Shri A. B. L. Srivastava Director (Finance).

Shri D. P. Bhargava Director (Technical)

Shri J. K. Sharma Director (Projects)

Shri R. S. Mina Director (Personnel)

Remuneration to key management personnel (excluding CMD) for the current year is Rs. 2.08 Crore (Previous year Rs. 3.01 Crore).

b) Transaction carried out with the related parties at a(i) above - Nil.

19. a) Interest in Joint Ventures:

* The Company has decided to come out of this joint venture.

** Company is joint venture entity of NHPC, Jammu & Kashmir State Power Development Corporation (JKSPDC) and PTC India Ltd. with equity participation of 49:49:02. During last year, due to less than proportionate contribution by other joint venture partners, proportionate holding of NHPC in the said entity had increased from 49% to 82%. As such, said entity was considered as subsidiary instead of joint venture as at 31.03.2013. However during current year, other partners have also brought in their proportionate share and the said entity has been considered as joint venture of NHPC.

20. The Management is of the opinion that no case of impairment of assets exists under the provision of Accounting Standard-28 on ''Impairment of Assets'' as at 31st March 2014.

21. Opening balances/corresponding figures for previous year have been re-grouped/re-arranged/re-cast, wherever necessary.

22. Subsequent to the approval of accounts for the year ended 31st March 2014 by the Board of Directors on 30th May, 2014, the board of Directors have recommended a dividend @ Rs. 0.30 per share (subject to rounding off to nearest Rupee in terms of Rule 23 of Companies (Central Government''s) General Rules & Forms, 1956) in the meeting held on 07.07.2014. Accordingly the company has made a provision for dividend and dividend distribution tax thereon amounting to Rs. 332.12 Crore and Rs. 56.44 crore respectively. The accounts approved earlier by the Board of Directors have been revised to that extent.


Mar 31, 2013

1. a) Contingent Liabilities as on:- (Rs.in Crore)

Description Opening Balance Closing Balance 01/04/2012 31/03/2013

Claims against the Company not acknowledged as debts in respect of

-Capital Works

-Land Compensation Cases 7615.68 10322.99

-Others 28.18 38.37

-Disputed Income Tax Demand 10.57 24.93

-Disputed Sales Tax Demand 264.01 277.27

-Disputed Service Tax Demand 29.22 29.22

-Others 116.29 128.53

Total 8063.95 10821.31

b) The above contingent liabilities do not include contingent liabilities on account of pending cases in respect of service matters & others where the amount cannot be quantified.

c) Contingent liabilities towards capital works include claims of contractors regarding rate & quantity deviation, cost relating to extension of time and idling charges due to stoppage of work / delays in handing over the site etc. These claims are being contested by the company as being not admissible in terms of provisions of the respective contracts or are lying at Arbitration tribunal/other forums. The above also includes claims of contractors which are under scrutiny at various levels of Management but yet to achieve finality.

d) The Contingent liabilities under the head "Capital Works" includes Rs.323.70 Crore (previous year Rs.347.85 Crore), towards arbitration awards received against the company as outflow is not considered probable in respect of these awards since the same stands challenged in the court of law.

e) It is not practicable to disclose the uncertainties relating to any outflow.

f) There is a possibility of reimbursement to the Company ofRs.40.71 Crore (Previous year Rs.45.17 Crore) towards above contingent liabilities.

g) An amount of Rs.22.31 Crore (Previous year Rs.10.06 Crore) stands paid towards above contingent liabilities to contest the cases and is being shown as Current Assets.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.3958.36 Crore (Previous year Rs.5335.27 crore).

3. Consequent upon commissioning of Chamera-lll Power Station, some seepage has been noticed in hill slopes thereby affecting the houses & fields of local habitants ofthe nearby village. A proposal to acquire the affected land is under consideration of management for which compensation is estimated at Rs.8.40 crore. Further the cost of rectification ofseepage is yet to be ascertained.

4. Pending approval of the competent authority, provisional payments / provisions made towards executed quantities of some of the items beyond the approved quantities as also for extra items totalling to Rs.177.81 Crore (Previous year Rs.241.16 Crore), are included in Capital Work-in-Progress/Fixed Asset.

5. a) Balances shown under material issued to contractors, claims recoverable including insurance claims, advances for Capital expenditure, Sundry Debtors, Advances to Contractors, Sundry Creditors and Deposits/Earnest money from contractors are subject to reconciliation/ confirmation and respective consequential adjustments. Claims recoverable also include claims in respect of projects handed over or decided to be handed over to other agencies in terms of Government of India directives.

b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.

6. During F.Y 2010-11 Company had received an opinion from the Expert Advisory Committee ofthe Institute of Chartered Accountants of India (EAC of ICAI), according to which the expenditure incurred for creation of assets not within the control of company should be charged to Statement of Profit & Loss in the year of incurrence itself, consequent upon withdrawal of Guidance Note on Expenditure During Construction. The Company has represented to the EAC of ICAI in earlier year that such expenditure, being essential for setting up of a hydro project, should be allowed to be capitalised. The Company is further of the view that capitalization of such expenditure is supported by Exposure Draft on Limited Revision to AS-10 and Guidance Note on Rate Regulated Entity issued by ICAI. Pending receipt of further opinion from the EAC, notification of limited revision to AS-10 and announcement regarding implementation of guidance note on rate regulated entity, the accounting treatment as per existing accounting practices / policies has been continued.

In view of above Rs.37.42 Crore (Previous year Rs.25.54 Crore) (WDV) and Rs.103.58 Crore (Previous year Rs.106.66 Crore) are appearing under the Tangible Asset (Note No.11.1) and Capital work in progress (Note No. 12) respectively towards creation/construction of such assets. In addition, a sum of Rs.123.25 Crore (Previous year Rs.117.81 Crore) incurred after withdrawal of guidance note on capitalisation of EDC is also appearing in Expenditure during Construction under Capital work in progress (Note No. 12).

7. Construction activities at site of Subansiri Lower Project have been interrupted w.e.f 16.12.2011 due to protest of anti dam activists, however substantial technical and administrative work is continuing. As such administration and other general overheads including borrowing cost directly attributable to Project has continued to be capitalised. The construction activities at site are expected to be resumed shortly since the matter is being pursued at the level of Government of India.

8. Disclosure as required by Accounting Standard (AS) 15:

General description of various employee benefit schemes are as under:

Defined Contribution Schemes

A. Provident Fund

The Company pays fixed contribution to Provident Fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognised as expense and is charged to the Statement of Profit & Loss/expenditure during construction. The obligation of the Company is to make fixed contribution and to ensure a minimum rate of return to the members as specified by Gol.

B. Social Security Scheme

The Company has a Social Security Scheme in lieu of compassionate appointment, subject to the condition that the scheme will be withdrawn on introduction of pension scheme. However the proposal for continuation of scheme is under consideration of the Management. As per scheme, employees make monthly contribution at prescribed rates. The Company also makes a matching contribution per month per employee and such contribution is to be made for 8 years to build up corpus from the date the scheme is in operation i.e. 01.06.2007. The scheme has been created to take care of and helping bereaved families in the event of death or permanent total disability of its employee.

C. Employees Defined Contribution Superannuation Scheme

The Company has an employee defined contribution superannuation scheme for providing pension benefits to employees. As per the scheme, each employee contributes @ 5% of Basic Pay & Dearness Allowance. The company contributes to the extent of balance available after deducting employers'' contribution to Provident Fund, contribution to Gratuity trust and REHS, from the amount worked out @ 30% of the Basic Pay & DA. The Scheme is managed by Life Insurance Corporation of India.

Defined Benefits Schemes

D. Gratuity

The Company has a defined benefit gratuity plan. Every employee who has rendered continuous service of five years or more is entitled to get gratuity at 15 days salary (15/26 X last drawn basic salary plus dearness allowance) for each completed year of service subject to a maximum of Rs.0.10 Crore, on superannuation, resignation, termination, disablement or on death. The plan is being managed by a separate Trust created for the purpose and obligation of the company is to make contribution to the Trust based on actuarial valuation.

E. Leave

The Company provides for earned leave and half-pay leave to the employees which accrue annually @ 30 days and 20 days respectively. The maximum ceiling of encashment of earned leave is limited to 300 days. However, any shortfall in the maximum limit of 300 days in earned leave on superannuation shall be regulated as per the clarification issued by the Department of Public Enterprises (DPE), Government of India. The liability for the same is recognised on the basis of actuarial valuation.

F. Retired Employee Health Scheme (REHS)

The Company has a Retired Employee Health Scheme, under which retired employee and spouse of retiree, spouse and eligible dependent children of deceased employees are provided medical facilities in the Company hospitals / empanelled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fixed by the Company.

G. Allowance on Retirement / Death

Actual cost of shifting from place of duty at which employee is posted at the time of retirement to any other place where he / she may like to settle after retirement is paid as per the rules of the Company. In case of death, family of deceased employee can also avail this facility.

H. Memento to employees on attaining the age of superannuation.

The Company has a policy of providing Memento valuing Rs.5000/- to employee on superannuation.

Schemes described as above atA,B,C&D are funded and rest are un-funded.

Summary of various defined benefits ason 31.03.2013 is as under:-

9. a) Electricity generation is the principal business activity of the Company. Other operations viz., Contracts, Project Management and Consultancy works do not form a reportable segment as per the Accounting Standard - 17 on Segment Reporting notified under the Companies Accounting Standard Rules, 2006.

b) The Company is having a single geographical segment as all its Power Stations are located within the country.

10. In compliance of Accounting Standard - 18 on related party disclosures notified under the Companies Accounting Standard Rules, 2006, the required information is given as under: -

a) Related Parties

(i) Joint Venture Companies

National Power Exchange Ltd.

(ii) Key Management Personnel

Shri G. Sai Prasad Joint Secretary (Hydro), Ministry of Power, Government of India. Assigned additional charge of

CMD of the Company w.e.f. 24.07.2012.

Shri A. B. L.Srivastava Director (Finance). Additional charge of CMD upto 23.07.2012.

Shri D. P. Bhargava Director (Technical)

Shri J. K. Sharma Director (Projects)

Shri R. S. Mina Director (Personnel)

Remuneration to key management personnel is Rs.3.01 Crore (Previous year Rs.1.08 Crore), which is inclusive of arrears of Rs.1.59 Crore to existing as well as retired directors.

b) Transaction carried out with the related parties at a(i) above - Nil.

11. EarningsPerShare:-

The elements considered for calculation of Earnings Per Share (Basic and Diluted) are as under:

12. The Management is of the opinion that no case of impairment of assets exists under the provision of Accounting Standard (AS) - 28 on Impairment ofAssets as at 31st March 2013.

13. Opening balances/ Corresponding figures for previous year have been regrouped/re-arranged/re-cast wherever necessary.


Mar 31, 2010

1. a) Contingent Liabilities as on: -

(Rs. in Crore)

Description Opening Closing Balance Balance 01/04/2009 31/03/2010

Claims against the Company not acknowledged as debts in respect of

- Capital Works 3870.55 4452.69

-Land Compensation Cases 94.61 82.82

-Others

-Disputed Income Tax Demand 0.09 --

-Disputed Sales Tax Demand 2062.41 2099.20

-Others 409.06 288.96

Total 6436.63 6923.76

b) The above contingent liabilities do not include contingent liabilities on account of pending cases in respect of service matters & others where the amount cannot be quantified.

c) The amount of claims where arbitration /court awards have been received but are under examination in the company are continuing as contingent liability and no provision has been created in the books.

d) It is not practicable to disclose the uncertainties relating to any outflow.

e) There is a possibility of reimbursement to Corporation, of Rs. 41.96 Crore (Previous year Rs. 31.58 Crore) towards above contingent liabilities.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 8265.86 Crore (Previous year Rs. 9709.30 crore).

3. a) During the year ended 31.03.2010, the company made initial public offering (IPO) of 167,73,74,015 Shares of Rs. 10/- each for cash at a price of Rs. 36/- per share including premium of Rs. 26/- per share consisting of fresh issue of 111,82,49,343 equity shares by the company including reservation of 4,19,34,350 equity shares for its employees and offer for sale of 55,91,24,672 equity shares by the President of India acting through Ministry of Power, Government of India aggregating to Rs. 6038.55 Crore including premium. The Company retained Rs. 4025.70 Crore as its share proceeds including share premium of Rs. 2907.45 Crore and sale proceeds of the equity of Government of India amounting to Rs. 2012.85 Crore was paid to the Ministry of Power, Government of India. Out of the proceeds, a sum of Rs. 616.06 Crore has been utilised during the year ended 31.03.2010 for re-coupment of capital Expenditure already incurred from internal accruals on the projects specified for utilisation, Rs. 3288 Crore has been invested as per eRs.tant investment policy of the company, Rs. 50 Crore recouped provisionally for meeting IPO Expenditure and balance of Rs. 71.64 Crore is lying in bank account under Corporate Liquidity Term Deposit (CLTD).

b) An amount of Rs. 49.07 Crore has been incurred as Share Issue expenses for IPO, which includes Rs. 10.36 Crore as Government of Indias share, being the selling share holder. Rs. 10.34 Crore has since been recovered from Government of India. NHPCs share of expenses has been adjusted against the Share Premium Account (Schedule 2) in terms of Section 78 of the Companies Act, 1956.

4. a) Title deeds/title in respect of Land of some Projects/Units amounting to Rs. 56.89 Crore (Previous year Rs. 92.69 Crore), covering an area of 1864.13 hectare (Previous year 2046.46 hectare), are yet to be executed/passed. expenses on stamp duty etc. relating to registration thereof will be accounted for as and when incurred.

b) Land does not include the land taken from Sashatra Seema Bal (SSB) for Subansiri Upper Project on lease for a period of 99 years @ notional rent of Re.1/- per annum.

5. a) Central Electricity Regulatory Commission (CERC) has notified by Regulations the terms and conditions for determination of tariff applicable with effect from 1st April 2009 for a period of five years vide notification dated 19.01.2009.

The company has filed tariff petitions up to 31.03.2010 with CERC for determination of tariff for the period 2009-14 in respect of 10 out of 11 power stations. Pending determination of station wise tariff as per aforesaid notification, sales for the current year have been provisionally recognised at Rs. 3306.63 Crore on the basis of the principles enunciated in the said notification. The principle of conservatism has also been kept in view, as the tariff petitions are subject to prudence check by CERC.

The aforesaid CERC notification provides that pending determination of tariff by the CERC, the Company has to provisionally bill the beneficiaries at the tariff approved by the CERC as applicable as on 31st March 2009. The amount provisionally worked out for billing for the year ended 31st March 2010 on this basis is Rs. 2901.49 Crore, which also includes Rs. 194.28 Crore towards Income Tax recoverable.

b) Net Sales for the current year include Rs. 816.51 Crore (excluding income Tax of Rs. 27.63 Crore) towards earlier year sales arising because of finalisation and revision of tariff in respect of Power Stations.

6. Pending approval of the competent authority, provisional payments made towards executed quantities of some of the items beyond approved quantities as also for eRs.tra items, are included in Capital Work-in-Progress/FiRs.ed Asset.

7. a) Balances shown under Material issued to contractors, claims recoverable including insurance claims, advance for Capital Expenditure, Sundry Debtors, Advances to Contractors, Sundry Creditors and Deposits/Earnest money from contractors are subject to reconciliation/ confirmation and respective consequential adjustments. Claims recoverable also include claims in respect of projects handed over or decided to be handed over to other agencies in terms of Government of India Directives.

b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will not be less than the value at which these are stated in the Balance Sheet.

c) Since the issue of payment of incentive to M/s Delhi Transco Limited has not been resolved, Rs. 32.97 Crore is continuing under "Other current Assets" (Schedule-9) as well as under "Other Liabilities" (Schedule-10).

d) Debtors include an amount of Rs. 120.81 Crore, being recoverable from M/s Delhi Transco Limited (erstwhile DESU) pertaining to period prior to Financial Year 1996-97. The case for recovery of the same has been taken up through Ministry of Power with Ministry of Finance, Govt. of India. However, a provision for entire amount has been made in the books during 2008-09 as an abundant precaution.

8. a) Siang Basin, Subansiri Basin & Dibang Multipurpose Projects were taken over from Brahmputra Board. Pending settlement of account with Brahmputra Board, assets and liabilities have been booked to the extent of amounts incurred by the Corporation on these projects. Of the Siang Basin Projects, Siang Lower & Siyom HE Projects have since been handed over to private developer and liability arising out of settlement of accounts with Brahmputra Board towards these projects is recoverable from respective private developer. Upper Siang HE project, a project of Siang Basin, has since been allotted to other agency for preparation of Pre- feasibility report and as such Expenditure incurred on this project till 31.03.2010 amounting to Rs. 37.06 Crore has been provided in the books as abundant precaution.

b) Pakal Dul, Kiru & Kwar HE Projects are to be executed through Joint Venture Company with participation from State Government. Pending formation of Joint Venture Company, Expenditure amounting to Rs. 121.87 Crore & Rs. 42.61 Crore respectively incurred by NHPC on these projects upto 31.03.2010 is appearing under Capital Work-in-Progress.

9. a) Govt. of Arunachal Pradesh has shown their inclination to hand over Subansiri Upper & Subansiri Middle projects to Independent Power Producer (IPP), on which NHPC has solicited the intervention of Govt. of India. Pending final decision for eRs.ecution of these projects, capital Expenditure amounting to Rs. 2.15 Crore and Rs. 0.72 Crore incurred on these projects for current financial year has been charged to Profit & Loss Account as an abundant precaution, which is in addition to the provision of Rs. 32.03 Crore, already created till last year towards Expenditure incurred on these projects during from 20.04.2004 to 31.03.2009, the period in which these projects were under suspension due to Supreme Court Injunction.

b) Pursuant to the order of Govt. of Uttarakhand (GoUK)/ Govt. of India, Corporation has decided to hand over Lakhawar Vyasi Project to Uttrakhand Jal Vidyut Nigam Ltd. (UJVNL). UJVNL has paid Rs. 73.07 Crore, being the reimbursement of Expenditure (including cost of capital & overheads / supervision charges) incurred by NHPC towards the creation of assets/CWIP of the project till 31.03.2009. Pending handing over of the project, the aforesaid amount has been adjusted to the extent of Expenditure incurred by NHPC till said date and balance is appearing as "Other Liabilities" in Schedule 10 - Current Liabilities & Provisions. Further an amount of Rs. 5.88 Crore, being the Expenditure incurred by NHPC on this project during 2009-10 has been provided as an abundant precaution as the date beyond 31.03.2009, up to which Expenditure is reimbursable from UJVNL is yet to be decided.

10. Pending implementation of wage revision of Employees w.e.f 01.01.2007, a provision of Rs. 291.93 Crore (previous year Rs. 202.36 Crore) has been made in the books for current year on reasonable estimate basis.

11. a) Corporation has taken Industrial All Risk (IAR) Insurance Policy w.e.f. 31.07.2009 in lieu of Self Insurance Policy. Accordingly, Self Insurance Reserve for the current year as per Significant Accounting Policy No. 11 (Schedule 23) has been created only up to 30.07.2009 on proportionate basis on the value of Gross Block as at 30.06.2009.

12. Disclosure as required by Accounting Standard (AS) 15:

General description of various defined employee benefit schemes are as under:

A. Provident Fund

Company pays fiRs.ed contribution to Provident Fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognised as eRs.pense and is charged to the profit & loss account. The obligation of the Company is to make such fiRs.ed contribution and to ensure a minimum rate of return to the members as specified by GOI.

B. Gratuity

The Company has a defined benefit gratuity plan. Every employee who has rendered continuous service of five years or more is entitled to get gratuity at 15 days salary (15/26 Rs. last drawn basic salary plus dearness allowance) for each completed year of service subject to a maximum of Rs. 0.035 Crore, on superannuation, resignation, termination, disablement or on death. The liability for the same is recognised on the basis of actuarial valuation considering the maximum limit as Rs. 0.10 crore.

C. Retired Employee Health Scheme

The Company has a Retired Employee Health Scheme, under which retired employee and the spouse are provided medical facilities in the Company hospitals / empanelled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fiRs.ed by the Company.

D. Allowance on Retirement / Death

Actual cost of shifting from place of duty at which employee is posted at the time of retirement to any other place where he / she may like to settle after retirement is paid as per the rules of the corporation. In case of death, family of deceased employee can also avail this facility.

E. Leave

The Company provides for earned leave benefit (including compensated absences) and half-pay leave to the employees of the Company which accrue annually at 30 days and 20 days respectively. 75 % of the earned leave is en-cashable while in service and a maximum of 300 days on superannuation. Half-pay leave is en-cashable only on superannuation up to the maximum of 240 days as per the rules of the Company. The liability for the same is recognised on the basis of actuarial valuation.

F. LTC

Employees are entitled to avail LTC in a block of 2 years. Liability for LTC as at 31.03.2010 is provided on the basis of actuarial valuation. The above mentioned schemes (B, C, D, E and F) are unfunded and are recognised on the basis of actuarial valuation.

13. a) Electricity generation is the principal business activity of the Corporation. Other operations viz., Contracts, Project Management and Consultancy works do not form a reportable segment as per the Accounting Standard - 17 on Segment Reporting issued by the Institute of Chartered Accountants of India. b) The Corporation has power stations located within the country and therefore, geographical segments are inapplicable.

14. In compliance of Accounting Standard - 18 on related party disclosures issued by the Institute of Chartered Accountants of India, the required information is given as under: -

a) Related Parties

(i) Joint Venture Companies

National Power exchange Ltd.

(ii) Key Management Personnel

Shri S.K. Garg Chairman & Managing Director

Shri A. B. L. Srivastava Director (Finance)

Shri D. P. Bhargava Director (Technical)

Shri J. K. Sharma Director (Projects) - assumed office w.e.f. 10.04.2009

Shri R. S. Mina Director (Personnel) - assumed office w.e.f. 28.04.2009

15. The Companys significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices, guesthouses & transit camps. These leasing arrangements, which are not non-cancellable, are usually renewable on mutually agreeable terms. The Schedule of Employees remuneration and benefits includes Rs. 14.40 Crore (Previous year Rs. 12.59 Crore) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments in respect of premises for offices, guest house & transit camps are shown as Rent / Hiring charges under Schedule of Generation, Administration and other expenses.

16. The Management is of the opinion that no case of impairment of assets exists under the provision of Accounting Standard (AS)-28 on Impairment of assets as at 31st March 2010.

17. (a) Cash & Cash equivalents include an amount of Rs. 14.34 Crore (Previous year Rs. Nil) towards margin money kept with banks for opening Letter of Credit or similar facility, which is not available for use as on 31.03.2010.

(b) Cash & cash equivalents include Rs. 488.41 Crore, held for Rural Road and Rural Electrification works being executed by Corporation on behalf of other agencies and are not freely available for the business of the Corporation. Similarly "Loans & Advances" under Schedule 9 include Rs. 93.58 Crore given as Advance to Contractors & Suppliers in respect of these works.

18. Previous years figures/opening balances have been regrouped/re-arranged/re-cast wherever necessary.

 
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