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Notes to Accounts of Power Finance Corporation Ltd.

Mar 31, 2015

1. The Company is a Government Company engaged in extending financial assistance to power sector and is a Non-Banking Finance Company registered with RBI as an Infrastructure Finance Company.

2. Contingent liabilities:

(A) The details are as follows: (Rs. in crore)

S. Particulars No.

(i) Default guarantees issued in foreign currency - US $ 0.74 million (as on 31.03.2014 US $ 4.14 million)

(ii) Guarantees issued in domestic currency

(iii) Claims against the Company not acknowledged as debts

(iv) Outstanding disbursement commitments to the borrowers by way of Letter of Comfort against loans sanctioned

S. As on As on No. 31.03.2015 31.03.2014

(i) 4.69 25.07

(ii) 262.84 299.20

(iii) 0.04 0.04

(iv) 787.32 2,274.96

Total 1,054.89 2,599.27

(B) Additional demands raised by the Income Tax Department totaling to Rs. 64.41 crore (as on 31.03.2014 Rs. 49.87 crore) of earlier years are being contested. Further, the Income Tax Department has filed appeals against the relief allowed by appellate authorities to the Company aggregating to Rs. 85.47 crore (as on 31.03.2014 Rs. 79.26 crore). The same are being contested. The Management does not consider it necessary to make provision, as the probability of tax liability devolving on the Company is negligible.

3. Additional demands raised by the Income Tax Department (net of relief granted by Appellate Authorities) aggregating to Rs. 78.50 crore for Assessment Years 2001-02 to 2012-13 (as on 31.03.2014 Rs. 55.10 crore for Assessment Years 2001-02 to 2011-12) have been provided for and are being contested by the Company.

4. Estimated amount of contract remaining to be executed on account of capital contracts, not provided for, is Rs. 0.33 crore (as on 31.03.2014 Nil).

5. Ministry of Corporate Affairs (MoCA), Government of India, vide its Circular No. 6/3/2001 - CL.V dated 18.04.2002 prescribed adequacy of Debenture Redemption Reserve (DRR) as 50% of the value of debentures issued through public issue; subsequently, the MoCA through its Circular No. 11/02/2012-CL-V(A) dated 11.02.2013 modified the adequacy of DRR to 25%. In this regard, the Company has requested the MoCA for clarification, which is awaited.

Meanwhile, The Companies (Share Capital and Debentures) Rules, 2014, with effect from 01.04.2014, also stated that for NBFCs registered with the RBI under Section 45-IA of the RBI (Amendment) Act, 1997, the adequacy of DRR will be 25% of the value of debentures issued through public issue as per present SEBI (Issue and Listing of Debt Securities) Regulations, 2008, and no DRR is required in the case of privately placed debentures.

In view of above, the Company is creating DRR for public issue of bonds / debentures @ 50% for the issues for which prospectuses had been filed before 11.02.2013 and @ 25% for the subsequent public issues.

6.(A) Transactions with related parties

Managerial remuneration of KMP for the year ended 31.03.2015 is Rs. 2.50 crore (previous year ended 31.03.2014 Rs. 2.30 crore).

(i) The financial statements are consolidated as per Accounting Standard 21 - Consolidated Financial Statements and Accounting Standard 27 - Financial Reporting of Interests in Joint Ventures.

(ii) The subsidiary companies were incorporated as SPVs under the mandate from the Government of India for development of Ultra-Mega Power Projects (UMPPs) with the intention to hand over the same to successful bidders on completion of the bidding process. The financial statements of these subsidiaries are not consolidated, in accordance with paragraph 11 of Accounting Standard-21.

(iii) Board of Directors of the Company, in its 322nd meeting held on 14th August, 2014, decided for winding up Tatiya Andhra Mega Power Limited, subject to approval of Ministry of Power, Government of India.

(iv) The Group of Promoters (GoP) of National Power Exchange Limited (NPEL), comprising of NTPC, NHPC, TCS and PFC in their meeting dated 21.03.2014 decided to recommend voluntary winding up of NPEL to the Board of NPEL. The Board of Directors of PFC in their meeting held on 14th August, 2014 had approved the recommendation of the GoP. The voluntary winding up of NPEL is under process.

The Company as on 31.03.2015 has an investment of Rs. 2.19 crore (as on 31.03.2014 Rs. 2.19 crore) in the equity share capital of NPEL against which a provision for diminution in value amounting to Rs. 1.06 crore (previous year Nil) has been made during the current year.

(v) To firms / companies in which directors are interest : Nil

(vi) Where there is no repayment schedule or repayment beyond seven years : Nil

(vii) Where no interest or interest as per Section 186 of the Companies Act, 2013 : Nil

B. Investment by the loanee in the shares of PFC / Subsidiaries : Nil

7. Investment made in equity shares of Coal India Ltd.:

During the year, the Company has subscribed to 1,39,64,530 fully paid equity shares of Coal India Limited (CIL) of face value of Rs. 10/- per share under Offer for Sale route. The shares have been subscribed at a cost of Rs. 358.58/- per share aggregating to Rs. 500.74 crore.

8. Interest Differential Fund (IDF) - KFW

The agreement between KFW and the Company provides that the IDF belongs to the borrowers solely and will be used to cover the exchange risk variations under this loan and any excess will be used in accordance with the agreement. The balance in the IDF fund has been kept under separate account head titled as Interest Differential Fund - KFW and shown as a liability. The total fund accumulated as on 31.03.2015 is Rs. 58.38 crore (as on 31.03.2014 Rs. 54.63 crore), after transferring exchange difference of Rs. 14.11 crore (as on 31.03.2014 Rs. 16.56 crore).

9.(i) The Company had sanctioned an amount of Rs. 88.90 crore in the year 2004 as finance lease for financing wind turbine generator (commissioned on 19.07.2004). The sanction was reduced to Rs. 88.85 crore in December 2006. The gross investment stood at the level of Rs. 1.78 crore as on 31.03.2015 (Rs. 4.21 crore as on 31.03.2014). The lease rent is to be recovered within a period of 15 Years, starting from 19.07.2004, which comprises of 10 years as a primary period and 5 years as a secondary period. Secondary period is in force with effect from 19.07.2014.

(ii) The Company had sanctioned an amount of Rs. 98.44 crore in the year 2004 as finance lease for financing wind turbine generator (commissioned on 18.5.2004). The gross investment stood at Rs. 4.43 crore as on 31.03.2015 (Rs. 22.53 crore as on 31.03.2014). The lease rent is to be recovered within a period of 20 years, starting from 18.05.2004, which comprises of 10 years as a primary period and a maximum of another 10 years as a secondary period. Secondary period is in force with effect from 01.04.2014.

(iii) The Company had sanctioned an amount of Rs. 93.51 crore in the year 2004 as finance lease for financing wind turbine generator (commissioned on 09.06.2005). The gross investment stood at Rs. 7.62 crore as on 31.03.2015 (Rs. 1.96 crore as on 31.03.2014). The lease rent is to be recovered within a period of 19 years 11 months, starting from 09.06.2005, which comprises of 10 years as a primary period and a maximum of 9 years and 11 months as a secondary period.

(iv) The Company had sanctioned an amount of Rs. 228.94 crore in the year 2008 as finance lease for financing wind turbine generator (commissioned on 18.05.2011). The gross investment stood at Rs. 379.12 crore as on 31.03.2015 (Rs. 404.82 crore as on 31.03.2014). The lease rent is to be recovered within a period of 25 years, starting from 01.01.2012, which comprises of 18 years as a primary period and a maximum of 7 years as a secondary period.

10. Subsidy under Accelerated Generation & Supply Programme (AG&SP):

(i) The Company claimed subsidy from Govt. of India at net present value calculated at indicative interest rates in accordance with the GOI's letter vide D.O.No.32024 / 17 / 97 - PFC dated 23.09.1997 and O.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of the actual repayment schedule, moratorium period and duration of repayment. The amount of interest subsidy received and to be passed on to the borrower is retained as Interest Subsidy Fund Account. The impact of difference between the indicative rate and period considered at the time of claims and at the time of actual disbursement can be ascertained only after the end of the respective schemes. However, on the basis of the projections made for each project (based upon certain assumptions that these would remain same over the projected period of each loan / project), the Company estimated the net excess amount of Rs. 7.02 crore and Rs. 61.32 crore as on 31.03.2015 (Rs. 6.32 crore and Rs. 74.53 crore as on 31.03.2014) for IX and X Plan, respectively under AG&SP schemes, and there is no shortfall. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre-payment, interest rate reset etc. Any excess / shortfall in the interest subsidy fund will be refunded or adjusted / charged off on completion of the respective scheme.

11. The Company had exercised the option under para 46A of the AS-11 - 'The Effects of Changes in Foreign Exchange Rates', to amortize the exchange differences on the long term foreign currency monetary items over their tenure. Consequently, as on 31.03.2015 the debit balance under Foreign Currency Monetary Item Translation Difference Account (FCMITDA) amounting to Rs. 380.56 crore (as on 31.03.2014 Rs. 709.21 crore) is shown on the "Equity and Liabilities" side of the balance sheet under the head "Reserve and Surplus", as a separate line item.

12. Implementation of GoI Scheme:

(A) Re-structured Accelerated Power Development and Reforms Programme (R - APDRP):

(i) The Company is the Nodal Agency for operationalisation and associated service for implementation of the R - APDRP under which projects are being taken up in two parts. Part - A includes the projects for establishment of baseline data and IT applications for energy accounting as well as IT based customer care centers. Part - B includes regular distribution strengthening projects. GoI provides 100% loan for Part A and up to 25% (up to 90% for special category States) loan for Part - B. Balance funds for Part - B projects can be raised by the utilities from PFC / REC / multi-lateral institutions and / or own resources. The loans under Part A- along with interest thereon are convertible into grant as per applicable guidelines. Similarly, up to 50% (up to 90% for special category states) of the loan against Part -B project would be convertible in to grant as per applicable guidelines. Enabling activities of the programme are covered under Part - C.

Amounts received from the Government of India under R - APDRP as a Nodal agency for on-lending to eligible borrowers are back to back arrangements with no profit or loss arising to the Company. The amount on-lended but not converted in to grants as per applicable guidelines will become payable along with interest to the GoI on receipt from the borrowers.

(ii) In line with the R - APDRP scheme approved by MoP, GoI , vide Office Memorandum No. 14 / 03 / 2008 - APDRP dated 20th August, 2010, till 31.03.2013, Nodal Agency Fees under R - APDRP had been accounted for @ 1% of the sanctioned project cost in three stages - 0.40% on sanction of the project, 0.30% on disbursement of the funds and remaining 0.30% after completion of the sanctioned project (for Part - A) and verification of AT&C loss of the project areas (for Part - B). Further, actual expenditure, including expenditure allocable on account of PFC manpower, incurred for operationalising the R- APDRP were reimbursed / reimbursable by Ministry of Power, Government of India. As per Office Memorandum No. 14 / 03 / 2008 - APDRP dated 20th August, 2010 of the MoP, GoI, the total amount receivable against the nodal agency fee plus the reimbursement of actual expenditure will not exceed Rs. 850 crore or 1.7 % of the likely outlay under Part A & B of R - APDRP, whichever is less.

Ministry of Power (MoP) vide letter dated 15.07.2013 informed that as per Department of Expenditure (DoE), Nodal Agency Fee for R-APDRP scheme for 12th Plan may be restricted to 0.5% of the sanctioned project cost or actual expenditure, whichever is less.

Pursuant to various correspondence with MoP, GoI a revised proposal was submitted to MoP, GoI vide letter dated 26.12.2014, wherein Company agreed to restrict its claims only to reimbursements of actual expenditure in line with norms indicated by Department of Expenditure (DoE) through MoP communication dated 15.07.2013 excluding Company's own manpower (Salary only) / administrative charges during XII / XIII Plan under R-APDRP. MoP vide letter dated 05.01.2015 directed the Company to intimate its final claim based on revised proposal of the Company. The Company, vide letter dated 02.02.2015, submitted its claim including balance claim pertaining to XIth plan and claim for the period from 01.04.2012 to 31.12.2014 (earlier shown as other expenses of the Company) which has been approved by MoP vide its letter dated 31.03.2015

Accordingly, the Company has reversed Nodal Agency Fee for R-APDRP scheme for XIIth Plan (upto FY 2013-14) amounting to Rs. 35.86 crore and has not recognized the fee pertaining to the current year.

(B) Integrated Power Development Scheme (IPDS)

Govt. of India (GoI) has launched IPDS for the Urban areas with the (i) Strengthening of Sub-transmission and Distribution network in urban areas including provisioning of solar panels on Govt. buildings including Net-metering, (ii) Metering of feeders / distribution transformers / consumers in urban areas and (iii) IT enablement of distribution sector and strengthening of distribution network, as per CCEA approval dated 21.06.2013 for completion of the targets laid down under R-APDRP for XIIth and XIIIth Plans by subsuming R-APDRP in IPDS and carrying forward the approved outlay for R-APDRP to IPDS.

As per guidelines, approved by IPDS Monitoring Committee, constituted by Ministry of Power (MoP), GoI, the company has been designated as the Nodal Agency for operationalization and implementation of the scheme under the overall guidance of the MoP. The role of the Nodal agency is mentioned in IPDS scheme which inter-alia includes administration of GoI grant to the eligible utilities which can be recalled / pre closed subject to certain conditions mentioned in the IPDS guidelines.

The Company will be eligible for 0.5% of the total project cost approved by Monitoring Committee or award cost, whichever is lower, as nodal agency fee to be claimed / accrued as under:

i. 1st installment: 40% of the nodal agency fee (i.e. 40% of 0.5% of approved project cost) in the financial years in which the projects are approved by the Monitoring Committee under IPDS.

ii. 2nd installment: 30% of the nodal agency fee (i.e. 30% of 0.5% of approved project cost) on award of approved projects.

iii. 3rd installment: 20% of the nodal agency fee (i.e. 20% of 0.5% of approved project cost) after one year of claiming 2nd installment.

13. The Company has been creating provision @ 0.25% of the outstanding standard loan assets excluding outstanding restructured standard loan assets on which separate provision has been started during the year. As on 31.03.2015, the Standard Asset provision stands at Rs. 486.57crore (Rs. 469.42 crore as on 31.03.2014).

14. The Company being a Government owned Non-Banking Financial Company is exempt from the RBI directions relating to Prudential Norms. RBI has directed the Company, vide its letter dated 25.07.2013, to take steps to comply with RBI's Prudential Norms by 31.03.2016. Further, RBI vide its letter dated 03.04.2014 has allowed exemption from credit concentration norms in respect of exposure to Central / State Government entities till 31.03.2016.

The Company follows its own prudential norms approved by the Ministry of Power (MoP), Govt.of India (GoI) (including revisions approved by BoD in its meeting held on 09.03.2015 subject to the approval of MoP) which inter-alia includes norms for Restructuring / Reschedulement / Renegotiation (R/R/R) of loans which allows (i) two times restructuring before COD, (ii) exemption to the loans having central / state government guarantee and loans to government department, and (iii) dispensation not to consider extension of repayment schedule without sacrifice as restructuring for government sector borrowers. For R/R/R norms, RBI has advised the Company to follow the instructions contained in RBI circular DNBS.CO.PD.No. 367/03.10.01/2013- 14 dated 23.01.2014, vide its letter dated 03.04.2014 inter-alia allowing maximum period of delay in DCCO for which a loan can be restructured. The matter regarding applicability of RBI's R/R/R norms was taken up with RBI. In this regard, RBI vide its letter dated 11.06.2014 has allowed exemption from application of its restructuring norms for Transmission & Distribution, Renovation & Modernization and Life Extension projects and also the hydro projects in Himalayan region or affected by natural disasters for a period of 3 years i.e. till 31.03.2017. Further, for new project loans to generating companies restructured w.e.f. 01.04.2015, the provisioning requirement would be 5% and for stock of such outstanding loans as on 31.03.2015 to all generating companies, the provisioning shall commence with a provision of 2.75% with effect from 31.03.2015 and reaching 5% by 31.03.2018. This provision is in addition to the provision for diminution in fair value.

The Company vide its letter dated 03.07.2014 has communicated the manner of its implementation to RBI, further reiterated vide Company's letter dated 27.11.2014, inter-alia stating that all new project loans sanctioned with effect from 01.04.2015 to generating companies would be regulated by RBI norms on R/R/R. RBI vide its letter dated 04.02.2015 has informed that the Company's request is under examination.

Pending decision by RBI regarding implementation of R/R/R norms, the Company is following its own norms read with the manner of implementation as stated above.

Accordingly, the Accounting policy related to Prudential Norms on R/R/R has been amended during the year ended 31.03.2015 which inter-alia requires provision @ 2.75% on restructured standard assets. Thus, during the year ended 31.03.2015 a provision has been made amounting to Rs. 564.44 crore, on qualifying loans. As on 31.03.2015, these loans comprise of private sector loan Rs. 20,524.91 crore and Govt. Sector loan Nil. Consequently, profit for the year ended 31.03.2015 has been reduced by Rs. 513.12 crore, after considering the existing provision on standard loan assets on these restructured loans.

15. Provision for shortfall in security of Restructured/Rescheduled/Renegotiated (R/R/R)Loans:

The Restructured Standard Assets as on 31.03.2015 includes 3 loan assets amounting to Rs. 2,753.50 crore, classified as unsecured. These loans carry adequate security as on 31.03.2015 in form of charge on assets etc., but require completion of full security creation process as per the sanction terms. Hence, these are classified as unsecured. As these loans carry adequate security coverage as on 31.03.2015, there is no short fall in security. Provision on these R/R/R assets has been created @2.75% and no further provision for any shortfall in security is required.

16. The Company has no outstanding liability towards Micro, Small and Medium Enterprises.

17. Leasehold land is not amortized, as it is a perpetual lease.

18. Disclosures as per Accounting Standard -15 :-

A. Provident fund

The Company pays fixed contribution to provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognized as expense and is charged to the statement of profit and loss. The trust to ensure a minimum rate of return to the members as specified by GoI. However, any short fall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will take place in this regard in the near future and hence no further provision is considered necessary.

B. Gratuity

The Company has a defined gratuity scheme and is managed by a separate trust. The provision for the same has been made on actuarial valuation based upon total number of years of service rendered by an employee subject to a maximum amount of Rs. 10 lakh.

C. Pension

The Company has a defined contribution pension scheme which is in line with guidelines of the Department of Public Enterprise (DPE) and is managed by a separate trust. Employer contribution to the fund has been contributed on monthly basis. Pension is payable to the employees of the Company as per the scheme.

D. Post Retirement Medical Scheme (PRMS)

The Company has Post-Retirement Medical Scheme (PRMS), under which retired employees and their dependent family member are provided with medical facilities in empanelled hospitals. They can also avail reimbursement of out-patient treatment subject to a ceiling fixed by the Company.

E. Terminal Benefits

Terminal benefits include settlement in home town for employees & their dependents.

F. Leave

The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrue on half yearly basis @ 15 days and 10 days, respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. Earned leave is en-cashable during the service; while half pay leave is not en-cashable during the service or on separation / superannuation before 10 years. On separation after 10 years of service or on superannuation, earned leave plus half pay leave together can be en-cashed subject to a maximum of 300 days. However, there is no restriction in the number of years of service for earned leave encashment on separation from the service.

The above mentioned schemes (D, E and F) are unfunded and are recognized on the basis of actuarial valuation.

The summarised position of various defined benefits recognized for 31.03.2015 in the statement of profit and loss account, balance sheet are as under {Figures in brackets ( ) are for 31.03.2014}

i) One percent increase / decrease in the inflation rate would impact liability for medical cost of PRMS, as under:-

Cost increase by 1% Rs. 2.09 crore

Cost decrease by 1% Rs. (2.19) crore

ii) During the year, the Company has provided liability towards contribution to the Gratuity Trust of Rs. 0.21 crore, to PRMS of Rs. 3.63 crore, to leave Rs. 5.06 crore and to pension Nil (during the year ended 31.03.2014 towards contribution to the Gratuity Trust of Rs. 0.86 crore, to PRMS of Rs. 2.75 crore, to leave Rs. 6.17 crore and to pension Rs. Nil crore). Above amount includes Rs. 0.02 crore (as on 31.03.2014 Rs. 0.07 crore), Rs. 0.42 crore (as on 31.03.2014 Rs. 0.58 crore) and Rs. 0.34 crore (as on 31.03.2014 Rs. 0.11 crore) for gratuity, leave and PRMS respectively allocated to subsidiary companies.

G. Other Employee Benefits:-

During the year, provision of Rs. 0.01 crore (during the year ended 31.03.2014 Rs. -0.05 crore) has been made for Economic Rehabilitation Scheme (ERS) for Employees and provision of Rs. 0.92 crore has been made for Long Service Award (LSA) for employees (during the year ended 31.03.2014 Rs. 0.74 crore) on the basis of actuarial valuation made at the end of the year by charging / crediting the statement of profit and loss.

H. Till FY 2013-14, the employee benefits (viz. Gratuity, PRMS, Terminal Benefits, Leave encashment and other employee benefits) in respect of Company's employees working in PFCCAS, PFC GEL and PFCCL on deputation / secondment basis were being allocated on actuarial basis and recognized as recoverable (from these subsidiaries) by the Company. During the FY 2014-15, the practice has been changed with effect from 01.01.2007, whereby amount recoverable from subsidiaries, on account of above stated employee benefits, has been mutually worked out at a fixed percentage of employee cost.

19. Pursuant to the requirements of the Companies Act 2013, followed by clarification from Department of Public Enterprises (DPE), the Company amended its CSR and Sustainability policy during the year. Accordingly, during the year, a CSR provision amounting to Rs. 117.49 crore (previous year Rs. 63.23 crore including reversal of CSR and SD reserve amounting to Rs. 18.85 crore as on 31.03.2013) has been made at the rate 2% of the average net Profit Before Tax (PBT) of the Company earned during the three immediately preceding financial years. During the FY 2014-15, an amount of Rs. 49.90 crore (previous year Rs. 46.52 crore) has been disbursed against CSR activities.

As on 31.03.2015, the CSR and SD provisions stands at Rs. 114.30 crore(previous year Rs. 32.33 crore) after adjusting an amount of Rs. 35.52 crore (previous year Rs. 30.90 crore) during the year on account of CSR claims.

20. Disclosure as per Accounting Standard - 1 on 'Disclosure of Accounting Policies.

During the FY ended 31.03.2015, following changes in Part - B- Significant accounting policies have been made:

(i) Policy no. 1, Basis for Preparation of Financial Statements, has been aligned with the Companies Act, 2013. There is no financial impact due to this change.

(ii) Policy no. 2.7, regarding adjustment of repayment against earliest disbursement is deleted since the same is covered under Policy no. 2.6. There is no financial impact due to this change.

(iii) Policy no. 3.3, Fixed assets / Depreciation, has been aligned with the Companies Act, 2013. There is no financial impact due to this change. The financial impact on account of change in estimate has been disclosed at note 35.

(iv) Policy no. 4.1, Intangible Assets / Amortization, has been aligned with the presentation followed by the Company. There is no financial impact due to this change.

(v) Policy no. 5, Investments, has been modified to bring in more clarity. There is no financial impact due to this change.

(vi) Policy no. 6.4.(ii)(a) has been modified to avoid overlapping with policy no. 6.3.(iii). There is no financial impact due to this change.

(vii) Policy no. 6.7.(i), Restructuring, Reschedulement or Renegotiation of term(s) of loan, has been aligned with the changes in the Prudential Norms of the Company. There is no financial impact due to this change.

(viii) Policy no. 6.7.(vii), Eligibility for Upgradation of Restructured / Rescheduled / Renegotiated Sub-standard Infrastructure loan, has been aligned with the changes in the Prudential Norms of the Company. There is no financial impact due to this change.

ix) Policy no. 6.7.(xii), regarding provisioning on Restructured / Rescheduled / Renegotiated standard asset, has been added to align with the changes in the Prudential Norms of the Company. The financial impact has been disclosed at note18 supra.

x) Policy no. 9, Accounting of Government of India Schemes, has been amended to align with the nature of transaction governed under the policy related to GoI schemes such as R-APDRP, IPDS. There is no financial impact due to this change.

(xi) Policy no. 11, R-APDRP Fund, has been deleted since the same is covered under amended Policy no. 9. There is no financial impact due to this change.

(xii) Policy no. 12.5, regarding income on development of Request for Qualification (RFQ) document / Request for Proposal (RFP) document, has been deleted since the same is no more relevant. There is no financial impact due to this change.

(xiii) Policy no. 16, Cash and Cash Equivalents, has been added to bring in more clarity. There is no financial impact due to this change.

21. (A) Interim Dividend

The Board of Directors in their 330th meeting held on 27.02.2015 declared interim dividend at the rate of 85% i.e. Rs. 8.50/- per equity share of Rs. 10/- each amounting to Rs. 1,122.04 crore for the FY 2014-15.

22. The Company got registered with Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) in April, 2012 for filing and registering the records of equitable mortgages created in its favour, in the web portal of CERSAI. On facing the practical difficulties, the Company has since then continuously taken up the matter with CERSAI and RBI.

The Company vide letter dated 24.12.2014 has also requested Department of Financial Services to exempt the Company from reporting of equitable mortgage transactions contemplated under Section 23 of SARFAESI Act, 2002. The Company vide letter dated 05.01.2015 has also sought RBI's intervention in the matter. The response in this regard is still awaited.

Meanwhile, the Company vide letter dated 19.02.2015 has again requested CERSAI to remove the practical difficulties in entering the data in the web portal of CERSAI. The response is still awaited.

23. As required under Section 205C of the Companies Act, 1956, Rs. 0.21 crore (Previous Year Rs. Nil) became due and was transferred to the Investor Education and Protection Fund (IEPF) during the FY ended 31.03.2015. However, an amount of Rs. 0.56 crore (Previous Year Rs. 0.56 crore) remains unpaid pending completion of transfer formalities by the claimants.

24. During the year, the Company has sent letters seeking confirmation of balances as on 31.12.2014 to the borrowers and confirmation from all the borrowers (except one case which is sub-judice) have been received.

25. Effective from 1st April 2014, depreciation on assets is provided on original cost of the asset reduced by its residual value estimated from time to time, as per written down value method, over the useful lives of the assets as per Companies Act, 2013. In respect of life expired assets, an amount of Rs. 1.92 crore (net of deferred tax) has been charged to retained earnings as per Companies Act, 2013.

26. The Company does not have more than one reportable segment in terms of Accounting Standard-17 on Segment Reporting.

27. Previous year's figures have been re-grouped / re-arranged, wherever practicable to make them comparable.

28. Figures have been rounded off to the nearest crore of rupees with two decimals.

29(A) Disclosures related to Securitisation

I. The Company has not entered into any securitization transaction during the year and there is no exposure on account of securitisation as on 31.03.2015 (Previous year Nil).

II. The Company has not sold any financial assets to Securitisation / Reconstruction Company for asset construction during the year ended 31.03.2015 (Previous Year Nil).

III. The Company has not undertaken any assignment transaction during the year ended 31.03.2015 (Previous Year Nil).

IV. The Company has neither purchased nor sold any non-performing financial assets during the year ended 31.03.2015 (Previous Year Nil)

V. Unsecured Advances

Total amount of advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken is Nil as on 31.03.2015 (As on 31.03.2014 Nil).

(B) Registration obtained from other financial sector regulators

The Company is a Government Company and is registered with RBI as NBFC-ND-IFC (Non-Banking Finance Company - Non Deposit Accepting - Infrastructure Finance Company).

(C) Disclosure of Penalties imposed by RBI and other regulators

During the year ended 31.03.2015, no penalty has been imposed on the Company by SEBI and RBI (Previous Year Nil).

(D) Net Profit or Loss for the period, prior period items and changes in accounting policies

Reference may be made to Part A-18 and C-29 of notes to accounts regarding prior period items and changes in accounting policies respectively.

(E) Circumstances in which revenue recognition has been postponed pending the resolution of significant uncertainties Reference may be made to note Part B - 2.1 of Significant Accounting Policy.

(F) The Company is preparing Consolidated Financial Statements in accordance with Accounting Standard - 21. Reference may be made to Part C - 8 (A) of notes to accounts in this regard.


Mar 31, 2014

1. SHARE CAPITAL

Under the Company stock, option plan titled as PFC-ESOP 2010, the Remuneration Committee and there meeting held on 23rd December, 2011 had given the approval for FY 2009-10 for grant of 88,040 options, effective from 29th July, 2011 and in their meeting held on 30th April 2012 had given as approval for FY 2010-11 for the grant of 92,964 options, effective from 30th April, 2012 to regular employees of the Company through PFC Employees Welfare Trust at a price of Rs.176.05/- per option for FY 2009-10 and Rs.180.75/- per option FY 2010-11, exclusive of the face value of Rs.10/- per share, convertible into equivalent number of equity shares of Rs.10/- each on payment of Rs.10/- per share.

For FY 2009-10, out of 88,040 options, 87,888 options has been granted, 83,306 equity shares have been alloted during the previous financial year and 4,255 equity shares during the current year upon exercising the stock option under the scheme. For FY 2010-11, out of 92,964 options granted, 69,964 options have been settled in cash and 1,572 options have been cancelled during the previous financial year and alloted 21,438 equity shares during the current year upon exercising the stock option under the scheme.

2. Additional demands raised by the income Tax Department totaling to Rs. 49.87 crore (as on 31.03.2013 Rs. 55.93 crore) of earlier years are being contested. Further, the Income Tax Department has filed appeals before ITAT against the orders of CIT (A) allowing relief to the Company totaling to Rs. 79.26 crore (as on 31.03.2013 Rs. 67.96 crore). The same are being contested. The Management does not consider it necessary to make provision, as the probability of tax liability devolving on the Company is negligible.

3. Additional demands raised by the Income Tax Department (net of relief granted by Appellate Authorities) amounting to Rs. 55.10 crore for Assessment Years 2001 -02 to 2011 -12 have been provided for and are being contested by the Company.

4. Ministry of Corporate Affairs (MoCA), Government of India, vide its Circular No. 6/3/2001 -CL.V dated 16.04.2002 prescribed adequacy of Debenture Redemption Reserve (DRR) as 50% of the value of debentures issued through public issue; subsequently, the MoCA through its circular No. 11/02/2012-CL-V(A) dated 11.02.2013 modified the adequacy of DRR to 25%.

In this regard, the Company has requested the MoCA for clarification, which is awaited. Pending receipt of clarification, the Company is creating DRR for public issue of bonds / debentures @ 50% for the issues for which prospectuses had been filed before 11.02.2013 and @ 25% for the subsequent public issues.

5. i. Investment in "Small is Beautiful" Fund: -

The Company has outstanding investment of Rs. 7.68 crore (as on 31.03.2013 Rs. 7.68 crore) in units of Small is Beautiful Fund. The face value of the Fund is Rs.10 per unit. The NAV as on 31.03.2014 is Rs. 9.70 per unit (Rs. 9.77 per unit as on 31.03.2013). As investment in Small is Beautiful Fund is long term investment, the fluctuation in NAV in the current scenario is considered as temporary.

ii. Investment in equity (unquoted) in Power Exchange India Umlted:-

Power Exchange India Ltd. (PXIL) has been promoted by National Stock Exchange (NSE) and National Commodity and Derivatives Exchange Limited (NCDEX). The authorized share capital is Rs. 100 crore consisting of 8 crore equity shares of Rs.10/- each and 2 crore preference shares of Rs. 10/- each as on 31.03.2014. The paid up equity share capital of PXIL is Rs. 46.47 crore, as on 31.03.2014. The Company has subscribed Rs. 3,22 crore (Rs. 2.80 crore as on 31.03.2013) of the paid up capital of PXIL.

6. Interest Differential Fund (IDF)-KFW

The agreement between KFW and PFC provides that the IDF belongs to the borrowers solely and will be used to cover the exchange risk variations under this loan and any excess will be used in accordance with the agreement. The balance in the IDF fund has been kept under separate account head titled as Interest Differential Fund - KFW and shown as a liability. The total fund accumulated as on 31.03.2014 is Rs. 54.63 crore (as on 31.03.2013 Rs. 54.73 crore), after transferring exchange difference of Rs. 16.56 crore (as on 31.03.2013 Rs. 15.21 crore).

6.i. The Company had sanctioned an amount of Rs. 88.90 crore in the year 2004 as finance lease for financing wind turbine generator (commissioned on 19.07.2004). The sanction was reduced to Rs. 88.85 crore in December 2006. The gross investment stood at the level of Rs. 4.21 crore as on 31.03.2014. The lease rent is to be recovered within a period of 15 Years, starting from 19.07.2004, which comprises of 10 years as a primary period and 5 years as a secondary period.

ii. The Company had sanctioned an amount of Rs. 98.44 crore in the year 2004 as finance lease for financing wind turbine generator (commissioned on 18-05-2004). The gross investment stood at Rs. 22.53 crore as on 31.03.2014. The lease rent is to be recovered within a period of 20 years, starting from 18.05.2004, which comprises of 10 years as a primary period and a maximum of another 10 years as a secondary period.

iii. The Company had sanctioned an amount of 7 93.51 crore in the year 2004 as finance lease for financing wind turbine generator (commissioned on 09.06.2005). The gross investment stood at Rs. 1.96 crore as on 31.03.2014. The lease rent is to be recovered within a period of 19 years 11 months, starting from 09.06.2005, which comprises of 10 years as a primary period and a maximum of 9 years and 11 months as a secondary period.

iv. The Company had sanctioned an amount of Rs. 228.94 crore in the year 2008 as finance lease for financing wind turbine generator (commissioned on 18,05.2004). The gross investment stood at Rs. 404.82 crore as on 31.03.2014, The lease rent is to be recovered within a period of 25 years, starting from 01.01.2012. which comprises of 18 years as a primary period and a maximum of 7 years as a secondary period.

7. Operating Lease:

The Company''s operating leases consists:-

Premises for offices and for residential use of employees are lease arrangements, and are usually renewable on mutually agreed terms, and are cancellable. Rent for residential accommodation of employees include Rs. 4.19 crore (during year ended 31.03.2013 Rs. 3.84 crore) towards lease payments, net of recoveries in respect of premises for residential use of employees. Lease payments in respect of premises for employees are shown as rent for residential accommodation of employees in Note Part A 16 - Employee Benefit Expenses. Lease payments in respect of premises for offices are shown as office rent in Note Part A 17-Other Expenses.

8. Subsidy under Accelerated Generation & Supply Programme (AG & SP):

The Company claimed subsidy from Govt. of India at net present value calculated at indicative interest rates in accordance with the GOI''s letter vide D.O.No.32024 / 17 / 97 - PFC dated 23.09.1997 and O.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of the actual repayment schedule, moratorium period and duration of repayment. The amount of interest subsidy received and to be passed on to the borrower is retained as Interest Subsidy Fund Account. The impact of difference between the indicative rate and period considered at the time of claims and at the time of actual disbursement can be ascertained only after the end of the respective schemes. However on the basis of the projections made for each project (based upon certain assumptions that these would remain same over the projected period of each loan / project), the Company estimated the net excess amount of Rs. 6.32 crore and Rs. 74.53 crore as at 31.03.2014 for IX and X Plan, respectively under AG&SP schemes, and there is no shortfall. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions. If any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre-payment, interest rate reset etc. Any excess/shortfall in the interest subsidy fund will be refunded or adjusted / charged off on completion of the respective scheme.

9. The Company had exercised the option under para 46A of the AS-11 - The Effects of Changes in Foreign Exchange Rates'', to amortize the exchange differences on the long term foreign currency monetary items over their tenure. Consequently, as on 31.03.2014 the balance under Foreign Currency Monetary item Translation Difference Account (FCMITDA) is Rs. 709.21 crore (as on 31.03.2013 Rs.477.97 crore) and shown on the “Equity and Liabilities'' side of the balance sheet under the head “Reserve and Surplus”, as a separate line item.

10. (i) The Company has been designated as the Nodal Agency for operationalisation and associated service for implementation of the Re structured Accelerated Power Development and Reforms Programme (R - APDRP) during XI Plan by the Ministry of Power, Government of India (GOI) under its overall guidance. Further, MoP vide order dated 06.07.2013 had agreed to continue R-APDRP in XII / XIII Plan, inter-alia including extension of Part-A projects completion period from 3 to 5 years.

Projects under the scheme are being taken up in two parts. Part-A includes the projects for establishment of baseline data and IT applications for energy accounting as well as IT based customer care centers. Part - B includes regular distribution strengthening projects. Gol provides 100% loan for Part A and up to 25% (up to 90% for special category States) loan for Part - B. Balance funds for Part-8 projects can be raised by the utilities from PFC / REC / multi-lateral institutions and / or own resources. The loans under Part A- along with interest thereon are convertible into grant as per R-APDRP guidelines. Similarly, up to 50% (up to 90% for special category states) of the loan against Part-B project would be convertible in to grant as per R - APDRP guidelines. Enabling activities of the programme are covered under Part-C.

The loans under R - APDRP are routed through the Company for disbursement to the eligible utilities. The a mount so disbursed but not converted in to grants as per R - APDRP guidelines will be repaid along with interest to the Gol on receipt from the borrowers.

(ii) As per Office Memorandum No. 14 /03 / 2008-APDRP dated 20th August, 2010 of the MoP, Gol, the total amount receivable against the nodal agency fee plus the reimbursement of actual expenditure will not exceed Rs. 850 crore or 1.7 % of the likely outlay under Part A & B of R-APDRP, which ever is less.

(iii) In line with the R-APDRP scheme approved by MoP, Gol, vide Office Memorandum No. 14 / 03/2008-APDRP dated 20th August, 2010, till 31.03.2013, Nodal Agency Fees under R - APDRP had been accounted for @ 1% of the sanctioned project cost in three stages - 0.40% on sanction of the project, 0.30% on disbursement of the funds and remaining 0.30% after completion of the sanctioned project (for Part-A) and verification of AT&C loss of the project areas (for Part - B), Further, actual expenditure, including expenditure allocable on account of PFC manpower, incurred for operationalising the R- APDRP were reimbursed / reimbursable by Ministry of Power, Government of India.

Ministry of Power (MoP) vide letter dated 15.07.2013 informed that as per Department of Expenditure (DoE), Nodal Agency Fee for R-APDRP scheme for 12th plan may be restricted to 0.5% of the sanctioned project cost or actual expenditure, whichever is less.

It was also indicated in the MoP letter dated 15.07.2013 that proposal for any higher nodal agency fee may be considered, if agreed by the DoE. Accordingly, the Company has submitted a proposal to MoP (vide our letter dated 22.08.2013) for consideration of Nodal Agency Fee @ 0.50% on R-APDRP sanctions and reimbursement of actual expenditure incurred under R-APDRP (excluding PFC manpower expenditure), from 12th plan onward. The proposal is under consideration by MoP, Gol, Pending finalization, nodal agency fee / reimbursement of expenditure for 12th plan has been accounted for during the year (with effect from 01.04.2012) on provisional basis as indicated by DoE through MoP communication dated 15.07.2013. Accordingly, nodal agency fee income amounting to Rs. 18.50 crore (Rs.18.43 crore for FY 2013-14 and Rs. 0.07 crore for FY 2012-13) has been recognised during the year. Further, Rs. 42.59 crore on account of expenditure allocable to R-APDRP has been accounted for separately and appearing under Note Part-A-17-other expenses (including Rs. 21.81 crore of FY 2012-13 earlier booked as recoverable from MoP, Gol).

11.1. The Company has been creating provision for standard assets in phases with effect from FY 2012-13, in three years period @ of 0.0833% p.a. in order to bring it to 0.25% on 31st March, 2015 in line with the accounting policy introduced during the financial year 2012-13, Further, RBI vide its letter dated 25-07-2013 has directed that provision may be made @ 0.25% ab-initio for all new assets. Accordingly, the Company has changed its accounting policy to create provision @ 0.25% for all new standard assets created in the current year, while finalisation of half yearly financial statements as at 30.09.2013. The Board of Directors'' in its meeting dated 27.03.2014 decided to accelerate the provisioning for Standard Assets, so as to bring it to 0.25% as on 31.03.2014 instead of on 31.03.2015. Therefore, the accounting policy has again been changed, during the quarter ended as at 31.03.2014, with effect from 01.04.2013 to create provision for standard assets @0.25% of the outstanding as the end of the financial year. As on 31.03.2014, the Standard Asset provision stands at Rs. 469.42 crore (Rs.132.79 crore as on 31.03.2013). Due to this change in accounting policy, the profit for the year ended 31.03.2014 has decreased by Rs. 156.47 crore,

11.2 The Company being a Government owned Non-Ban king Financial Company is exempt from the RBI directions relating to Prudential Norms. The Company, however, formulated its own set of Prudential Norms with effect from 01.04.2003, which are revised from time to time. Ministry of Power (MoP), Government of India (Gol) initially accorded its approval to the Prudential Norms of the Company vide letter dated 19.04.2007 and thereafter extended validity of the same for subsequent financial years. The prudential norms applicable for financial year 2013-14 are approved by MoP, Gol, vide its letter dated 23.05.2012 as per which the Prudential Norms as applicable to the Company upto 31,03.2012 will continue to be applicable up to 31.03.2013 or till further orders.

Further, RBI vide its notification dated 12.12.2006 proposed to bring all deposit taking and systemically important government owned NBFCs under the RBI''s direction on Prudential Norms from a date to be decided later and advised Government companies to submit a roadmap for compliance with various elements of the NBFCs regulation in consultation with Government. Accordingly, PFC has been submitting roadmaps as advised by RBI from time to time on the basis of which exemption was granted by RBI upto FY 2012-13.

In response to the Road Map and subsequent correspondence, RSI vide its letter dated 25.07.2013 advised on certain issues relating to Provisioning of Standard assets, etc. and informed that the matters relating to the Restructuring / Reschedulement/ Renegotiation (R/R/R) of assets and the credit concentration norms are under its consideration and it will revert back in due course, RBI has also advised the Company to take steps to comply with RBI Prudential Norms by 31.03.2016. The Company has informed to RSI its implementation strategy for the above directions of RBI vide letter dated 07.10.2013 wherein for matter relating to the R/R/R of assets and the credit concentration norms, it has been informed that the Company shall continue to follow its extant norms for these matters till further directions from RSI.

Now, RBI vide letter dated 3rd April, 2014 has allowed the exemption from credit concentration norms in respect of exposure to Central / State Government entities till 31.03.2016 and for the matter relating to R/R/R, RBI has advised the Company to follow the instructions contained in RBI circular DNBS.CO.PD.No. 367/03.10.01/2013-14 dated 23.01.2014. In this regard the Company vide letter dated 25.04.2014 has submitted an implementation strategy to comply with RBI directions on R/R/R of assets for the consideration of RBI and also stated that PFC will follow the restructuring provisions contained in its extant prudential norms till such time RBI may issue further instructions in this respect. MoP, Gol, vide its letter dated 15.05.2014 has also requested RSI to consider the implementation strategy as communicated by the Company. The response from RBI is awaited. Since the Company is following norms relating to R/R/R duly approved by MoP, Gol, the management is of the view that RBI norms on R/R/R are not applicable to the Company for the financial year 2013-14.

In-case of specific provision in the loan agreement for a rate other than SBI TT selling rate, the rate has been taken as prescribed in the respective loan agreement.

12.1 The Company has made the public issue of 75,00,000 tax free bonds (secured) with an option to re tain oversubscription upto 3,87,59,000 bonds at the face value of Rs. 1,000/- each during the current financial year and has mobilized Rs. 3875.90 crore. The security has been created on 14-Nov-2013 and bonds have been allotted on 16-Nov-2013. The bonds have been listed in the BSE on 19-Nov- 2013. The proceeds of the bond issue have been utilized for the purpose mentioned in the offer document.

12.2 During the financial year 2013-14, Government of India (Gol) has set up a fund called Goldman Sachs CPSE Exchange Traded Scheme (“GS CPSE BeES") launched by Goldman Sachs Asset Management (India) Private Limited (AMC). Accordingly, in March 2014, Government of India, Ministry of Power, acting through Department of Disinvestment, has disinvested 1,21,06,076 equity shares of face value of Rs. 10/- each by selling it to the AMC. After disinvestment, the holding of Government of India in the paid up equity share capital of the Company has come down to 72.80% (As on 31.03.2013, 73.72%).

13.1 Disclosures as per Accounting Standard-15:-

A. Provident fund

The Company pays fixed contribution to provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognized as expense and is charged to the statement of profit and loss. The trust to ensure a minimum rate of return to the members as specified by Gol. However, any short fall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will take place in this regard in the near future and hence no further provision is considered necessary.

B. Gratuity

The Company has a defined gratuity scheme and is managed by a separate trust. The provision for the same has been made on actuarial valuation based upon total number of years of service rendered by the employee subject to a maximum amount of Rs. 10 lakh.

C. Pension

The Company has a defined contribution pension scheme which is in line with guidelines of the Department of Public Enterprise (DPE) and is managed by a separate trust. Employer contribution to the fund has been contributed on monthly basis. Pension is payable to the employee of the corporation as per the scheme.

D. Post Retirement Medical Scheme (PRMS)

The Company has Post-Retirement Medical Scheme (PRMS), under which retired employees and their dependent family member are provided with medical facilities in empanelled hospitals. They can also avail reimbursement of out-patient treatment subject to a ceiling fixed by the Company.

E. Terminal Benefits

Terminal benefits include settlement in home town for employees & their dependents.

F. Leave

The Company provides for earned leave benefit and half-pay leave benefit to the credit of the employees, which accrue on half yearly basis @ 15 days and 10 days, respectively. A maximum of 300 days of earned leave can be accumulated at any point of time during the service. There is no limit for accumulation of half pay leave. Earned leave is en-cashable during the service, while half pay leave is not en-cashable during the service or on separation/superannuation before 10 years. On separation after 10 years of service or on superannuation, earned leave plus half pay leave together can be en-cashed subject to a maximum of 300 days.

14. The Company has formulated a Corporate Social Responsibility & Sustainable Development (CSR & SD) policy In line with the guidelines issued by the Ministry of Heavy Industries and Public Enterprises (Department of Public Enterprises) from time to time. As per the CSR policy approved by the Company in October 2013, a minimum of 1% of the consolidated profit after tax of the previous period will be allocated every financial year for CSR & SD activities. Any unspent / unutilized CSR & SD allocation of a particular year will be carried forward to the following years and will have to be spent within the next 2 financial years, failing which it would be transferred to Sustainable Development fund to be created separately.

As there is an obligation under the policy to spend the amount allocated for CSR & SD activities within a specified time, in line with AS 29, the allocation for CSR & SO activities for the current year has been provided for by charging to profits; the CSR and SO reserves as on 31.03.2013 amounting to Rs.18.85 crore have also been reversed and provided for by charging to profits. As on 31.03.2014, the CSR and SD provision stands at Rs.32.33 crore after adjusting for the amount spent.

15. (i) During the year, the Company has sent letters seeking confirmation of balances as on 31.12.2013 to the borrowers and confirmation from all the borrowers have been received.

(ii) There are no unpaid / unclaimed bonds, interests on bonds and dividends, which are over 7 years as on 31.03.2014 (previous period Rs. Nil). However, an amount of Rs. 0.56 crore (previous year Rs. 0.56 crore) remaining unpaid pending completion of transfer formalities by the claimants.


Mar 31, 2013

1. The Company is a government company engaged in extending financial assistance to power sector.

2. Contingent liabilities:

(a) (Rs. in crore)

S. No Particulars Amount as on 31.03.2013 Amount as on 31.03.2012

1. Default guarantees issued in foreign currency - 41.34 56.40 US $ 7.54 million (as on 31.03.2012 US $ 10.94 million)

2. Guarantees issued in domestic currency 335.57 371.93

3. Claims against the Company not acknowledged 0.04 0.00 as debts

4. Outstanding disbursement commitments to the 4,247.61 5,730.38 borrowers by way of Letter of Comfort against loans sanctioned

Total 4,624.56 6,158.71

(b) Additional demands raised by the Income Tax Department totaling to Rs. 55.93 crore (as on 31.03.2012 Rs. 40.01 crore) of earlier years are being contested. Further, the Income Tax Department has filed appeals before ITAT against the orders of CIT(A) allowing relief totaling to Rs. 67.96 crore (as on 31.03.2012 Rs. 65.03 crore). The same are being contested. The Management does not consider it necessary to make provision, as the probability of tax liability devolving on the Company is negligible.

3. Estimated amount of contract remaining to be executed on account of capital contracts, not provided for, is Nil crore (as on 31.03.2012 Rs. 0.57 crore).

4. Additional demands raised by the Income Tax Department (net of relief granted by Appellate Authorities) amounting to Rs. 31.24 crore for Assessment Years 2001-02 to 2010-11 have been provided for and are being contested by the Company.

5. In line with circular No. 6 / 3 / 2001 - CL.V dated 18.04.2002 of the Government of India, then Ministry of Law, Justice Company Affairs, and Department of Company Affairs, the Company had been creating till FY 2011-12, Debenture Redemption Reserve (DRR) upto 50% of the value of, debentures issued through public issue, over the maturity period of such debentures and no DRR in case of privately placed debentures.

In recent circular no 11/02/2012-CL-V(A) dated 11.02.2013, MoCA (Ministry of Corporate Affairs) has prescribed that adequacy of DRR will be 25% of the value of debentures issued through public issue and no DRR is required in the case of privately placed debentures.

In this regard, the Company has requested the MoCA for clarification, which is awaited. Pending receipt of clarification, the Company has created and maintained DRR in line with the circular dated 18.04.2002.

6.1 (i) Investment in "Small is Beautiful" Fund: -

The Company has outstanding investment of Rs. 7.68 crore (as on 31.03.2012 Rs. 7.83 crore) in units of Small is Beautiful Fund. The face value of the Fund is Rs. 10 per unit. The NAV as on 31.03.2012 was Rs. 10.33 per unit and as on 31.03.2013 is Rs. 9.77 per unit. As investment in Small is Beautiful Fund is long term investment, the fluctuation in NAV in the current scenario is considered as temporary.

(ii) Investment in equity (unquoted) in Power Exchange India Limited:-

Power Exchange India Ltd. (PXIL) has been promoted by National Stock Exchange (NSE) and National Commodity and Derivatives Exchange Limited (NCDEX). The authorized share capital is Rs. 100 crore consisting of 80 crore equity shares of Rs. 10/- each and 20 crore preference shares of Rs. 10/- each as on 31.03.2013. The paid up equity share capital of PXIL is Rs. 46.05 crore, as on 31.03.2013. The Company has subscribed Rs. 2.80 crore of the paid up capital of PXIL.

7. Interest Differential Fund (IDF) - KFW

The agreement between KFW and PFC provides that the IDF belongs to the borrowers solely and will be used to cover the exchange risk variations under this loan and any excess will be used in accordance with the agreement. The balance in the IDF fund has been kept under separate account head titled as Interest Differential Fund - KFW and shown as a liability. The total fund accumulated as on 31.03.2013 is Rs. 54.73 crore (as on 31.03.2012 Rs. 52.01crore), after transferring exchange difference of Rs. 15.21 crore (as on 31.03.2012 Rs. 15.66 crore).

8. (a) Asset under finance lease after 01.04.2001:

(i) The gross investment in the leased assets and the present value of the minimum value receivable at the balance sheet date and the value of unearned financial income are given in the table below:

The future lease rentals are given below:-

9. Subsidy under Accelerated Generation & Supply Programme (AG&SP) :

(i) The Company claimed subsidy from Govt. of India at net present value calculated at indicative interest rates in accordance with the GOI''s letter vide D.O.No.32024 / 17 / 97 - PFC dated 23.09.1997 and O.M.No.32024 / 23 / 2001 - PFC dated 07.03.2003, irrespective of the actual repayment schedule, moratorium period and duration of repayment. The amount of interest subsidy received and to be passed on to the borrower is retained as Interest Subsidy Fund Account. The impact of difference between the indicative rate and period considered at the time of claims and at the time of actual disbursement can be ascertained only after the end of the respective schemes. However on the basis of the projections made for each project (based upon certain assumptions that these would remain same over the projected period of each loan / project), the Company estimated the net excess amount of Rs. 5.69 crore and Rs. 68.30 crore as at 31.03.2013 for IX and X Plan, respectively under AG&SP schemes, and there is no shortfall. This net excess amount is worked out on overall basis and not on individual basis and may vary due to change in assumptions, if any, during the projected period such as changes in moratorium period, repayment period, loan restructuring, pre-payment, interest rate reset etc. Any excess / shortfall in the interest subsidy fund will be refunded or adjusted / charged off on completion of the respective scheme.

(ii) The balance under the head Interest Subsidy Fund shown as liability, represents the amount of subsidy received from Ministry of Power, Govt. of India which is to be passed on to the borrowers against their interest liability arising in future, under Accelerated Generation & Supply Programme (AG&SP), which comprises of the following : -

10. The Company had exercised the option under para 46A of the amended AS-11 ''The Effects of Changes in Foreign Exchange Rates'' to amortize the exchange differences on the long term foreign currency monetary items over their tenure. Consequently, as on 31.03.2013, Rs. 477.97 crore (as on 31.03.2012 Rs. 515.41 crore) has been carried forward in the Foreign Currency Monetary Item Translation Difference Account (FCMITDA) and shown on the asset side of the balance sheet, as a separate line item.

As per the recent announcement dated 30.03.2013 of the ICAI, the debit or credit balance in FCMITDA should be shown on the "Equity and Liabilities" side of the balance sheet under the head "Reserve and Surplus", as a separate line item.

The Company has requested (vide letter dated 09.05.2013) for clarification from the Government of India, Ministry of Corporate Affairs (MoCA) on the applicability of ICAI announcement. The clarification is awaited.

Pending receipt of clarification from the MoCA, the FCMITDA is continued to be shown on the asset side of the balance sheet, as a separate line item, in line with presentation made in previous year.

11. (i) The Company has been designated as the Nodal Agency for operationalisation and associated service for implementation of the Re-structured Accelerated Power Development and Reforms Programme (R - APDRP) during XI Plan by the Ministry of Power, Government of India (GOI) under its overall guidance.

Projects under the scheme are being taken up in two parts. Part - A includes the projects for establishment of baseline data and IT applications for energy accounting as well as IT based customer care centers. Part - B includes regular distribution strengthening projects. GoI provides 100% loan for Part A and up to 25% (up to 90% for special category States) loan for Part - B. Balance funds for Part - B projects can be raised by the utilities from PFC / REC / multi-lateral institutions and / or own resources. The loans under Part - A alongwith interest thereon is convertible into grant as per R - APDRP guidelines. Similarly, upto 50% (up to 90% for special category states) of the loan against Part -B project would be convertible in to grant as per R - APDRP guidelines. Enabling activities of the programe are covered under Part - C.

The loans under R - APDRP are routed through the Company for disbursement to the eligible utilities. The amount so disbursed but not converted in to grants as per R - APDRP guidelines will be repaid along with interest to the GoI on receipt from the borrowers.

12. The net deferred tax liabilities of Rs. 219.79 crore (as on 31.03.2012 Rs. 87.43 crore) have been computed as per Accounting Standard 22 Accounting for Taxes on Income.

13. The Company has no outstanding liability towards Micro, Small and Medium enterprises.

14. Leasehold land is not amortized, as it is a perpetual lease.

In-case of specific provision in the loan agreement for a rate other than SBI TT selling rate, the rate has been taken as prescribed in the respective loan agreement.

15.1 The Company has made the public issue of 69,97,468 tax free bonds (secured) tranche - I at the face value of Rs. 1,000 each during the current financial year and has mobilized Rs. 699.75 crore. The security has been created on 03-Jan- 2013 and bonds have been allotted on 04-Jan-2013. The bonds have been listed in the BSE on 10-Jan-2013. The proceeds of the bond issue have been utilized for the purpose mentioned in the offer document.

15.2 The Company has made public issue of 16,53,680 tax free bonds (secured) tranche - II at the face value of Rs. 1,000 each during the current financial year and has mobilized Rs. 165.37 crore. The Bonds have been allotted on 28-Mar-2013 and have been listed in the BSE on 03-April-2013. The security has been created in April 2013. As on 31.03.2013, the proceeds of the bond issue were in Public Issue Account of the escrow collection banker. Subsequent to listing and security creation, the bonds issue proceeds have been transferred in April 2013 by the escrow collection banker to the regular current account of the Company and the Company has utilized the proceeds in April 2013 for the purpose mentioned in the offer document.

16. Disclosures as per Accounting Standard -15 :-

A. Provident fund

The Company pays fixed contribution to provident fund at prescribed rates to a separate trust, which invests the funds in permitted securities. The contribution to the fund for the period is recognized as expense and is charged to the statement of profit and loss account. The obligation of the Company is to make such fixed contribution and to ensure a minimum rate of return to the members as specified by GoI. Any short fall for payment of interest to members as per specified rate of return has to be compensated by the Company. The Company estimates that no liability will take place in this regard in the near future and hence no further provision is considered necessary.

B. Gratuity

The Company has a defined gratuity scheme and is managed by a separate trust. The provision for the same has been made on actuarial valuation based upon total number of years of service rendered by the employee subject to a maximum amount of Rs.10 lakh.

C. Pension

The Company has a defined contribution pension scheme introduced in line with guidelines of the Department of Public Enterprise (DPE) and is managed by a separate trust. Employer contribution to the fund has been contributed on monthly basis. Pension is payable to the employee of the corporation as per the scheme.

D. Post Retirement Medical Scheme (PRMS)

The Company has Post-Retirement Medical Scheme (PRMS), under which retired employees and their dependent family member are provided with medical facilities in empanelled hospitals. They can also avail reimbursement of out-patient treatment subject to a ceiling fixed by the Company.

E. Terminal Benefits

Terminal benefits include settlement in home town for employees & their dependents.

F. Leave

The Company provides for earned leave benefit and half-pay leave to the credit of the employees, which accrue on half yearly basis @ 15 days and 10 days, respectively. Maximum of 300 days of earned leave can be accumulated during the service of an employee which can be availed or encashed. There is no limit in accumulation of half pay leave during the service. However, at the time of separation / superannuation, half pay leave and earned leave can be encashed subject to limit of 300 days. The liability for the same is recognized, based on actuarial valuation.

The above mentioned schemes (D, E and F) are unfunded and are recognized on the basis of actuarial valuation.

The summarised position of various defined benefits recognized in the statement of profit and loss account, balance sheet are as under {Figures in brackets ( ) represents to as on 31.03.2012}

17.1 The Company has formulated a Corporate Social Responsibility (CSR) policy in line with the guidelines issued by the Ministry of Heavy Industries and Public Enterprises (Department of Public Enterprises) vide Office Memorandum F.No.15(3)/2007 -DPE(GM)-GL-99 dated 09.04.2010.

As per the CSR policy of the Company, a minimum of 0.5% of the consolidated profit after tax of the previous year will be allocated every financial year for CSR Activities, and Company was creating CSR provision for this purpose up to FY 2011-12.

Now, the Expert Advisory Committee of the Institute of Chartered Accountants of India (ICAI) has given opinion that unspent expenditure on CSR activities should not be recognized as provision, but a reserve may be created as an appropriation of profits.

Accordingly, CSR provision of Rs. 16.39 crore (amount unspent as at 01.04.2012) has been reversed to the credit of the statement of profit & loss through prior period account, and CSR reserve of Rs. 18.36 crore has been created as appropriation of profit, the details of which are as under:

17.2 The Company has formulated a Sustainable Development (SD) policy in line with the guidelines issued by the Ministry of Heavy Industries and Public Enterprises (Department of Public Enterprises) vide Office Memorandum No.3(9)/2010 -DPE(MoU) dated 23.09.2011.

As per the SD policy approved by the Company, a minimum of Rs. 50 lakh plus 0.1% of profit after tax (consolidated) exceeding Rs. 100 crore of the previous year will be allocated every financial year for SD Projects/ Activities. The unspent amount of Rs. 0.49 crore has been appropriated from profits as SD reserve.

18. Board of Directors in its meeting held on 09.11.2012 amended the prudential norms of the Company, subject to approval of Ministry of Power, and accorded approval to create provision on standard assets in phases with effect from FY 2012-13 in 3 year period (i.e. 0.0833% p.a.), in order to bring it to 0.25% by 31.03.2015.

Accordingly, the Company has amended the accounting policy to this effect and has made provision of Rs. 132.79 crore for the FY ended 31.03.2013.

If the company had followed the earlier policy, the net profit for the FY ended 31.03.2013 would have been higher by Rs. 132.79 crore (net of taxes).

The approval for the change in prudential norms by the Ministry of Power, Government of India is under process.

19. (i) During the year, the Company has sent letters seeking confirmation of balances as on 31.12.2012 to the borrowers and confirmation from all, except from two borrowers, have been received.

(ii) There are no unpaid / unclaimed bonds, interests on bonds and dividends, which are over 7 years as on 31.03.2013 (previous period Rs. Nil). However, an amount of Rs. 0.56 crore (previous year Rs. 0.47 crore) remaining unpaid pending completion of transfer formalities by the claimants.

20. The Company has no exposure to real estate sector as on 31.03.2013.

21. The Company does not have more than one reportable segment in terms of Accounting Standard 17 on Segment Reporting.

22. Previous year''s figures have been re-grouped / re-arranged, wherever practicable to make them comparable.

23. Figures have been rounded off to the nearest crore of rupees with two decimals.

Notes at Part A (1 to 18), Part B and Part C form an integral part of Balance Sheet and Statement of Profit & Loss.

 
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