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Accounting Policies of Power Grid Corporation of India Ltd. Company

Mar 31, 2016

1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared on accrual basis of accounting under the historical cost convention, in accordance with generally accepted accounting principles in India, the relevant provisions of the Companies Act, 2013 (to the extent notified), the Companies Act, 1956 (to the extent applicable) including Accounting Standards notified there under and the provisions of the Electricity Act, 2003 to the extent applicable.

1.2 USE OF ESTIMATES

The preparation of financial statements requires estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses during the reporting period. Although, such estimates and assumptions are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and assumptions and such differences are recognized in the period in which the results are crystallized.

1.3 RESERVES AND SURPLUS

Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed Assets (except assets covered under mega insurance policy) as at the end of the year by appropriating current year profit towards future losses which may arise from un-insured risks. The same is shown as "Self insurance reserve" under ''Reserves & Surplus''.

1.4 GRANTS-IN-AID

1.4.1 Grants-in-aid received from Central Government or other authorities towards capital expenditure for projects, betterment of transmission systems and specific depreciable assets are shown as "grants-in-aid" till the utilization of grant.

1.4.2 On capitalization of related assets, grants received for specific depreciable assets are treated as deferred income and recognized in the Statement of Profit and Loss over the useful life of related asset and in proportion to which depreciation on these assets is provided.

1.5 RATE REGULATED ASSETS & LIABILITIES

Certain expenses and income, allowed under CERC regulations to be reimbursed/passed on by/to from beneficiaries in future, are to be accounted in the statement of Profit and Loss as per the provisions of accounting standards and practices. Such expenses and income, to the extent allowable/payable under CERC regulations, are treated as regulated assets and liabilities.

1.6 SEGMENT REPORTING

The accounting policies adopted for segment reporting are in line with the accounting policies of the company. Segment revenue, segment expenses, segment asset and liabilities are identified on the basis of their relationship to the operating activities of the segment. Revenue, expenses, assets and liabilities which relates to the company as a whole and not allocable to segment on reasonable basis are included under unallocated revenue/expenses/assets/liabilities.

1.7 CASH FLOW STATEMENT

Cash Flow statement is prepared in accordance with the indirect method prescribed in the relevant Accounting Standard.

1.8 FIXED ASSETS

1.8.1 Fixed assets are shown at historical cost comprising of purchase price and any attributable cost of bringing the assets to its working condition for its intended use less accumulated depreciation/amortization.

1.8.2 In the case of commissioned assets, deposit works/cost- plus contracts where final settlement of bills with contractors is yet to be effected, capitalization is done on provisional basis subject to necessary adjustments in the year of final settlement.

1.8.3 Assets and systems common to more than one transmission system are capitalized on the basis of technical estimates/ assessments.

1.8.4 Transmission system assets are considered when they are ''Ready for intended use'', for the purpose of capitalization, after test charging/successful commissioning of the systems/assets and on completion of stabilization period wherever technically required.

1.8.5 The cost of land includes provisional deposits, payments/liabilities towards compensation, rehabilitation and other expenses wherever possession of land is taken.

1.8.6 Expenditure on leveling, clearing and grading of land is capitalized as part of cost of the related buildings.

1.8.7 Insurance spares, which can be used only in connection with an item of fixed asset and whose use is expected to be at irregular intervals and Mandatory spares in the nature of sub-station equipments /capital spares i.e. stand-by/service/rotational equipment and unit assemblies, are capitalized and depreciated over the residual useful life of the related plant & machinery. In case the year of purchase and consumption is same, amount of such spares are charged to revenue.

1.9 CAPITAL WORK-IN-PROGRESS (CWIP)

1.9.1 Cost of material consumed and erection charges thereon along with other related expenses incurred for the projects are shown as CWIP till the date of capitalization.

1.9.2 Cost of material for construction of Substation (including HVDC) is being transferred to Capital Work in Progress during the progress of erection work.

1.9.3 Expenditure of Corporate office, Regional Offices and Projects, attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related assets.

1.9.4 Interest during construction and expenditure (net) allocated to construction as per policy No. 1.9.3 above (allocated to the projects on prorate basis to their capital expenditure), are apportioned to capital work in progress (CWIP) on the closing balance of specific asset or part of asset being capitalized. Balance, if any, left after such capitalization is kept as a separate item under the CWIP Schedule.

1.9.5 Deposit works/cost-plus contracts are accounted for on the basis of statement received from the contractors or technical assessment of work completed.

1.9.6 Unsettled liability for price variation/ exchange rate variation in case of contracts are accounted for on estimated basis as per terms of the contracts.

1.10 INTANGIBLE ASSETS

1.10.1 The cost of software (which is not an integral part of the related hardware) acquired for internal use and resulting in significant future economic benefits, is recognized as an intangible assets in the books of accounts when the same is ready for its use.

1.10.2 Afforestation charges paid for acquiring right-of-way for laying transmission lines are accounted for as intangible assets and same are amortized over the period of thirty five years following the rates and methodology notified by Central Electricity Regulatory Commission (CERC) Tariff Regulation.

1.10.3 Expenditure incurred, eligible for capitalization under the head Intangible Assets, are carried as "Intangible Assets under Development" where such assets are not yet ready for their intended use.

1.10.4 Expenditure incurred on the development of new technology is kept under "Intangible assets under development" till its completion. After satisfactory completion of development stage, the expenditure kept under as "Intangible Assets" to be included in the project cost of new assets.

1.11 CONSTRUCTION STORES

Construction stores are valued at cost.

1.12 BORROWING COST

1.12.1 All the borrowed funds (except short term funds for working capital) are earmarked to specific projects. The borrowing costs (including bond issue expenses, interest, discount on bonds, front end fee, guarantee fee, management fee etc.) are allocated to the projects in proportion to the funds so earmarked.

1.12.2 The borrowing costs so allocated are capitalised or charged to revenue, based on whether the project is under construction or in operation.

1.13 TRANSACTION IN FOREIGN CURRENCY

1.13.1 Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of transaction. Foreign currency monetary items are translated with reference to the rates of exchange ruling on the date of the Balance Sheet. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling on the date of transaction.

1.13.2 Foreign Exchange Rate Variation (FERV) arising on settlement / translation of foreign currency loans relating to fixed assets/ capital work-in-progress are adjusted to the carrying cost of related assets.

1.13.3 FERV accounted for as per policy no 1.13.2 is recoverable/payable from the beneficiaries on actual payment basis as per Central Electricity Regulatory Commission (CERC) norms w.e.f. 1st April, 2004 or Date of Commercial Operation (DOCO) which ever is later. The above FERV to the extent recoverable or payable as per the CERC norms is accounted for as follows:

a) FERV recoverable/payable adjusted to carrying cost of fixed assets is accounted for as ''Deferred foreign currency fluctuation asset/liability a/c'' with a corresponding credit/debit to ''Deferred income/expenditure from foreign currency fluctuation a/c''.

b) ''Deferred income/expenditure from foreign currency fluctuation a/c'' is amortized in the proportion in which depreciation is charged on such FERV.

c) The amount recoverable/payable as per CERC norms on year to year basis is adjusted to the ''Deferred foreign currency fluctuation asset/liability a/c'' with corresponding debit / credit to the trade receivables.

1.13.4 FERV earlier charged to Statement of Profit and Loss & included in the capital cost for the purpose of tariff is adjusted against ''Deferred foreign currency fluctuation asset/liability a/c'' in the following manner:

i) Depreciation component of transmission charges (being 90% of such FERV) is adjusted against Deferred foreign currency fluctuation asset/liability a/c in the transmission charges.

ii) Balance 10% of Deferred foreign currency fluctuation asset/liability a/c is amortised over the tenure of respective loans.

1.13.5 FERV arising out of settlement/translation of long term monetary items (other than foreign currency loans) relating to fixed assets/ CWIP are adjusted in the carrying cost of related assets.

1.13.6 FERV arising during the construction period from settlement/translation of monetary items denominated in foreign currency (other than long term) to the extent recoverable/payable to the beneficiaries as capital cost as per CERC tariff Regulation are accounted as ''Deferred foreign currency fluctuation asset/liability a/c''. Transmission charges recognised on such amount is adjusted against above account.

1.13.7 Other exchange differences are recognized as income or expenses in the period in which they arise.

1.14 INVESTMENTS

1.14.1 Current investments are valued at lower of cost and market value determined on an individual investment basis.

1.14.2 Long term investments are carried at cost. Provision is made for diminution other than temporary, in the value of such investments.

1.15 INVENTORIES

1.15.1. Inventories are valued at lower of the cost, determined on weighted average basis and net realizable value.

1.15.2 Steel scrap and conductor scrap are valued at estimated realizable value or book value, whichever is less.

1.15.3 Mandatory spares of consumable nature and transmission line items are treated as inventory after commissioning of the system.

1.15.4 Surplus materials as determined by the management are held for intended use and are included in the inventory.

1.15.5 The diminution in the value of obsolete, unserviceable and surplus stores and spares is ascertained on review and provided for.

1.16 REVENUE RECOGNITION

1.16.1 Transmission Income is accounted for based on tariff orders notified by the CERC. In case of transmission projects where final tariff orders are yet to be notified, transmission income is accounted for as per tariff norms and other amendments notified by the CERC in similar cases. Difference, if any, is adjusted based on issuance of final notification of tariff orders by the CERC. Transmission Income in respect of additional capital expenditure incurred after the date of commercial operation is accounted for based on actual expenditure incurred on year to year basis as per tariff norms of the CERC. 1.16.2 The Transmission system Incentive / disincentive is accounted for based on certification of availability by the respective Regional Power Committees and in accordance with the norms notified / approved by the CERC.

1.16.3.1 Advance against depreciation (AAD), forming part of tariff pertaining upto the block period 2004-09, to facilitate repayment of loans, is reduced from transmission income and considered as deferred income to be included in transmission income in subsequent years.

1.16.3.2 The outstanding deferred income in respect of AAD is recognized as transmission income, after twelve years from the end of the financial year in which the asset was commissioned, to the extent depreciation recovered in the tariff during the year is lower than depreciation charged in the accounts.

1.16.4 Surcharge recoverable from trade receivables and liquidated damages / warranty claims / interest on advances to suppliers are recognized when no significant uncertainty as to measurability and collectability exists.

1.16.5 Income from Telecom Services are accounted for on the basis of terms of agreements/ purchase orders from the customers.

1.16.6 Income from sole consultancy contracts are accounted for on technical assessment of progress of services rendered.

1.16.7 In respect of ''Cost-plus-consultancy contracts'', involving execution on behalf of the client, income is accounted for (wherever initial advances received) in phased manner as under:

a) 10% on the issue of Notice Inviting Tender for execution

b) 5% on the Award of Contracts for execution

c) Balance 85% on the basis of actual progress of work including supplies

1.16.8 Income from Sale of Goods is recognized on the transfer of significant risks and reward of ownership to the buyer.

1.16.9 Application Fees received on account of Long Term Open Access (LTOA) Charges is accounted for as and when received in accordance with CERC Guidelines.

1.16.10 Scrap other than steel scrap & conductor scrap are accounted for as and when sold.

1.16.11 Dividend income is recognized when right to receive payment is established.

1.17 LEASED ASSETS

1.17.1 State sector unified load dispatch centre (ULDC)/ Fiber Optic Communication Assets (FOC) assets leased to the beneficiaries are considered as Finance Lease. Net investment in such leased assets along with accretion in subsequent years is accounted for as Lease Receivables under Long Term Loans & Advances. Wherever grant-in-aid is received for construction of State Sector ULDC, lease receivable is accounted for net of such grant.

1.17.2 Finance income on leased assets are recognised based on a pattern reflecting a constant periodic rate of return on the net investment as per the tariff notified/to be notified by the CERC.

1.17.3 FERV on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenure of lease. FERV recovery (as per CERC norms) from the constituents is recognised net of such amortised amount.

1.18 DEPRECIATION / AMORTIZATION

1.18.1 Depreciation / amortization on the assets related to transmission business is provided on straight line method following the rates and methodology notified by the CERC for the purpose of recovery of tariff.

1.18.2 ULDC assets commissioned prior to 1st April 2014 are depreciated on Straight Line Method @ 6.67% per annum. Such assets commissioned on or after 1st April 2014 is provided on straight line method following the rates and methodology notified by the CERC for the purpose of recovery of tariff.

1.18.3 Depreciation on assets of telecom and consultancy business is provided for on straight line method as per useful life specified in Schedule II of the Companies Act, 2013.

1.18.4 Depreciation on following assets is provided based on estimated useful life as evaluated by the management.

a. Computers & Peripherals I 3 years

b. Servers & Network Components | 5 years

Residual value of above assets is considered as Nil.

1.18.5 Cost of Softwares capitalized as Intangible Asset is amortized over the period of legal right to use or 3 years, whichever is less with Nil residual value.

1.18.6 Mobile phones are charged off in the year of purchase.

1.18.7 Depreciation/ Amortization on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/upto the date on which the asset is available for use/disposal

1.18.8 Where the cost of depreciable fixed asset has undergone a change due to increase/decrease in long term monetary items on account of exchange rate fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is depreciated prospectively at the rates and methodology as specified by the CERC Tariff Regulations, except for telecom assets where residual life is determined on the basis of useful life of fixed asset as specified in Schedule II of the Companies Act, 2013.

1.18.9 Plant and machinery, loose tools and items of scientific appliances, included under different heads of fixed assets, costing Rs.5,000/- or less, or where the written down value is Rs. 5,000/- or less as at the beginning of the year, are charged off to revenue.

1.18.10 Other fixed assets costing upto Rs.5,000/- are fully depreciated in the year of acquisition.

1.18.11 Leasehold Land is fully amortized over 25 years or lease period whichever is lower in accordance with the rates and methodology specified in the Central Electricity Regulatory Commission (CERC) Tariff Regulation . Lease hold Land acquired on perpetual lease is not amortised.

1.18.12 In the case of fixed assets of National thermal power corporation limited (NTPC), National hydro-electric power corporation limited (NHPC), North-eastern electric power corporation limited (NEEPCO), Neyveli lignite corporation limited (NLC) transferred w.e.f. April 1, 1992, Jammu and Kashmir Lines w.e.f. April 1, 1993, and Tehri hydro development corporation limited (THDC) w.e.f. August 1, 1993, depreciation is charged based on gross block as indicated in transferor''s books with necessary adjustments so that the life of the assets as laid down in the CERC notification for tariff is maintained.

1.19 PRIOR PERIOD ITEMS

Pre-paid/prior-period expenses/Income of items up to Rs.100,000/- are charged to natural heads of account.

1.20 IMPAIRMENT OF ASSETS

Cash generating units as defined in Accounting Standard -28 on ''Impairment of Assets'' are identified at the balance sheet date with respect to carrying amount vis-à-vis recoverable amount thereof and impairment loss, if any, is recognised in Statement of profit & loss. Impairment loss, if need to be reversed subsequently, is accounted for in the year of reversal.

1.21 EMPLOYEE BENEFITS

1.21.1 Company contribution paid/payable during the year to defined pension contribution scheme and provident fund scheme is recognized in the Statement of Profit and Loss. The same is paid to a fund and administered through a separate trust.

1.21.2 The liability for retirement benefits of employees in respect of Gratuity, is ascertained annually on actuarial valuation at the year end, is provided and funded separately.

1.21.3 The liabilities for compensated absences, leave encashment, post retirement medical benefits, settlement allowance & long service awards to employees are ascertained annually on actuarial valuation at the year end and provided for.

1.21.4 Short term employee benefits are recognized at the undiscounted amount in the Statement of Profit and Loss in the year in which the related services are rendered.

1.21.5 Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss.

1.22 PROVISIONS AND CONTINGENT LIABILITIES

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made based on technical valuation and past experience. Provisions are determined based on management estimate required to settle the obligation at the balance sheet date and are not discounted to its present value. No provision is recognized for liabilities whose future outcome cannot be ascertained with reasonable certainties. Such contingent liabilities are not recognized but are disclosed on the basis of judgment of the management / independent expert. These are reviewed at each balance sheet date and adjusted to reflect the current management estimate.

1.23 TAXES ON INCOME

Income Tax comprises of current and deferred tax. Current income taxes are measured at the amount expected to be paid to income tax authorities in accordance with the provisions of Income Tax Act, 1961. Deferred tax resulting from timing difference between accounting and taxable profit is accounted for using the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

1.24 OTHERS

1.24.1 Expenditure of research and development, other than Capital Expenditure, are charged to revenue in the year of incurrence.

1.24.2 Capital expenditure on assets not owned by the company is charged off to revenue as and when incurred.


Mar 31, 2015

1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared on accrual basis of accounting under the historical cost convention, in accordance with generally accepted accounting principles in India, the relevant provisions of the Companies Act, 2013 (to the extent notified), the Companies Act, 1956 (to the extent applicable) including Accounting Standards notified there under and the provisions of the Electricity Act, 2003 to the extent applicable.

1.2 USE OF ESTIMATES

The preparation of financial statements requires estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses during the reporting period. Although, such estimates and assumptions are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and assumptions and such differences are recognized in the period in which the results are crystallized.

1.3 RESERVES AND SURPLUS

Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed Assets (except assets covered under mega insurance policy) as at the end of the year by appropriating current year profit towards future losses which may arise from un-insured risks. The same is shown as "Self insurance reserve" under ''Reserves & Surplus''.

1.4 GRANTS-IN-AID

1.4.1 Grants-in-aid received from Central Government or other authorities towards capital expenditure for projects, betterment of transmission systems and specific depreciable assets are shown as "grants-in-aid" till the utilization of grant.

1.4.2 On capitalization of related assets, grants received for specific depreciable assets are treated as deferred income and recognized in the Statement of Profit and Loss over the useful life of related asset and in proportion to which depreciation on these assets is provided.

1.5 FIXED ASSETS

1.5.1 Fixed assets are shown at historical cost comprising of purchase price and any attributable cost of bringing the assets to its working condition for its intended use less accumulated depreciation/amortization.

1.5.2 In the case of commissioned assets, deposit works/cost- plus contracts where final settlement of bills with contractors is yet to be effected, capitalization is done on provisional basis subject to necessary adjustments in the year of final settlement.

1.5.3 Assets and systems common to more than one transmission system are capitalized on the basis of technical estimates/ assessments

1.5.4 Transmission system assets are considered when they are ''Ready for intended use'', for the purpose of capitalization, after test charging/successful commissioning of the systems/assets and on completion of stabilization period wherever technically required.

1.5.5 The cost of land includes provisional deposits, payments/liabilities towards compensation, rehabilitation and other expenses wherever possession of land is taken.

1.5.6 Expenditure on leveling, clearing and grading of land is capitalized as part of cost of the related buildings.

1.5.7 Insurance spares, which can be used only in connection with an item of fixed asset and whose use is expected to be at irregular intervals and Mandatory spares in the nature of sub-station equipments / capital spares i.e. stand-by/service/rotational equipment and unit assemblies, are capitalized and depreciated over the residual useful life of the related plant & machinery. In case the year of purchase and consumption is same, amount of such spares are charged to revenue.

1.6 CAPITAL WORK-IN-PROGRESS (CWIP)

1.6.1 Cost of material consumed erection charges thereon along with other related expenses incurred for the projects are shown as CWIP till the date of capitalization.

1.6.2 Cost of material for construction of Substation (including HVDC) is being transferred to Capital Work in Progress during the progress of erection work.

1.6.3 Expenditure of Corporate office, Regional Offices and Projects, attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related assets.

1.6.4 Interest during construction and expenditure (net) allocated to construction as per policy No. 1.6.3 above (allocated to the projects on prorate basis to their capital expenditure), are apportioned to capital work in progress (CWIP) on the closing balance of specific asset or part of asset being capitalized. Balance, if any, left after such capitalization is kept as a separate item under the CWIP Schedule.

1.6.5 Deposit works/cost-plus contracts are accounted for on the basis of statement received from the contractors or technical assessment of work completed.

1.6.6 Unsettled liability for price variation/ exchange rate variation in case of contracts are accounted for on estimated basis as per terms of the contracts.

1.7 INTANGIBLE ASSETS

1.7.1 The cost of software (which is not an integral part of the related hardware) acquired for internal use and resulting in significant future economic benefits, is recognized as an intangible assets in the books of accounts when the same is ready for its use.

1.7.2 Afforestation charges paid for acquiring right-of-way for laying transmission lines are accounted for as intangible assets and same are amortized over the period of thirty five years following the rates and methodology notified by Central Electricity Regulatory Commission (CERC) Tariff Regulation.

1.7.3 Expenditure incurred, eligible for capitalization under the head Intangible Assets, are carried as "Intangible Assets under Development" where such assets are not yet ready for their intended use.

1.7.4 Expenditure incurred on the development of new technology is kept under "Intangible assets under development" till its completion. After satisfactory completion of development stage, the expenditure kept under as "Intangible Assets" to be included in the project cost of new assets.

1.8 CONSTRUCTION STORES

Construction stores are valued at cost.

1.9 BORROWING COST

1.9.1 All the borrowed funds (except short term funds for working capital) are earmarked to specific projects. The borrowing costs (including bond issue expenses, interest, discount on bonds, front end fee, guarantee fee, management fee etc.) are allocated to the projects in proportion to the funds so earmarked.

1.9.2 The borrowing costs so allocated are capitalised or charged to revenue, based on whether the project is under construction or in operation.

1.10 TRANSACTION IN FOREIGN CURRENCY

1.10.1 Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of transaction. Foreign currency monetary items are translated with reference to the rates of exchange ruling on the date of the Balance Sheet. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling on the date of transaction.

1.10.2 Foreign Exchange Rate Variation (FERV) arising on settlement / translation of foreign currency loans relating to fixed assets/ capital work-in-progress are adjusted to the carrying cost of related assets.

1.10.3 FERV accounted for as per policy no 1.10.2 is recoverable/payable from the beneficiaries on actual payment basis as per Central Electricity Regulatory Commission (CERC) norms w..e..f. 1st April, 2004 or Date of Commercial Operation (DOCO) which ever is later.

The above FERV to the extent recoverable or payable as per the CERC norms is accounted for as follows:

a) FERV recoverable/payable adjusted to carrying cost of fixed assets is accounted for as "Deferred foreign currency fluctuation asset/liability a/c'' with a corresponding credit/debit to "Deferred income/expenditure from foreign currency fluctuation a/c''

b) "Deferred income/expenditure from foreign currency fluctuation a/c'' is amortized in the proportion in which depreciation is charged on such FERV.

c) The amount recoverable/payable as per CERC norms on year to year basis is adjusted to the "Deferred foreign currency fluctuation asset/liability a/c'' with corresponding debit / credit to the trade receivables.

1.10.4 FERV earlier charged to Statement of Profit and Loss & included in the capital cost for the purpose of tariff is adjusted against "Deferred foreign currency fluctuation asset/liability a/c'' in the following manner:

i) Depreciation component of transmission charges (being 90% of such FERV) is adjusted against Deferred foreign currency fluctuation asset/liability a/c in the transmission charges.

ii) Balance 10% is adjusted against Deferred foreign currency fluctuation asset/liability a/c in the transmission charges over the tenure of respective loans.

1.10.5 FERV arising out of settlement/translation of long term monetary items (other than foreign currency loans) relating to fixed assets/ CWIP are adjusted in the carrying cost of related assets.

1.10.6 FERV arising during the construction period from settlement/translation of monetary items denominated in foreign currency (other than long term) to the extent recoverable/payable to the beneficiaries as capital cost as per CERC tariff Regulation are accounted as "Deferred foreign currency fluctuation asset/liability a/c''. Transmission charges recognised on such amount is adjusted against above account.

1.10.7 Other exchange differences are recognized as income or expenses in the period in which they arise.

1.11 INVESTMENTS

1.11.1 Current investments are valued at lower of cost and fair value determined on an individual investment basis.

1.11.2 Long term investments are carried at cost. Provision is made for diminution other than temporary, in the value of such investments.

1.12 INVENTORIES

1.12.1. Inventories are valued at lower of the cost, determined on weighted average basis and net realizable value.

1.12.2 Steel scrap and conductor scrap are valued at estimated realizable value or book value, whichever is less.

1.12.3 Mandatory spares of consumable nature and transmission line items are treated as inventory after commissioning of the system.

1.12.4 Surplus materials as determined by the management are held for intended use and are included in the inventory.

1.12.5 The diminution in the value of obsolete, unserviceable and surplus stores and spares is ascertained on review and provided for.

1.13 REVENUE RECOGNITION

1.13.1 Transmission Income is accounted for based on tariff orders notified by the CERC. In case of transmission projects where final tariff orders are yet to be notified, transmission income is accounted for as per tariff norms and other amendments notified by the CERC in similar cases. Difference, if any, is adjusted based on issuance of final notification of tariff orders by the CERC. Transmission Income in respect of additional capital expenditure incurred after the date of commercial operation is accounted for based on actual expenditure incurred on year to year basis as per tariff norms of the CERC.

1.13.2 The Transmission system Incentive/ disincentive is accounted for based on certification of availability by the respective Regional Power Committees and in accordance with the norms notified / approved by the CERC.

1.13.3.1 Advance against depreciation (AAD), forming part of tariff pertaining upto the block period 2004-09, to facilitate repayment of loans, is reduced from transmission income and considered as deferred income to be included in transmission income in subsequent years.

1.13.3.2 The outstanding deferred income in respect of AAD is recognized as transmission income, after twelve years from the end of the financial year in which the asset was commissioned, to the extent depreciation recovered in the tariff during the year is lower than depreciation charged in the accounts.

1.13.4 Surcharge recoverable from trade receivables and liquidated damages / warranty claims / interest on advances to suppliers are recognized when no significant uncertainty as to measurability and collectability exists.

1.13.5 Income from Telecom Services are accounted for on the basis of terms of agreements / purchase orders from the customers.

1.13.6 Income from sole consultancy contracts are accounted for on technical assessment of progress of services rendered.

1.13.7 In respect of ''Cost-plus-consultancy contracts'', involving execution on behalf of the client, income is accounted for (wherever initial advances received) in phased manner as under:

a) 10% on the issue of Notice Inviting Tender for execution

b) 5% on the Award of Contracts for execution

c) Balance 85% on the basis of actual progress of work including supplies

1.13.8 Income from Sale of Goods is recognized on the transfer of significant risks and reward of ownership to the buyer.

1.13.9 Application Fees received on account of Long Term Open Access (LTOA) Charges is accounted for as and when received in accordance with CERC Guidelines.

1.13.10 Scrap other than steel scrap & conductor scrap are accounted for as and when sold.

1.13.11 Dividend income is recognized when right to receive payment is established.

1.14 LEASED ASSETS

1.14.1 State sector unified load dispatch centre (ULDC)/ Fiber Optic Communication Assets (FOC) assets leased to the beneficiaries are considered as Finance Lease. Net investment in such leased assets along with accretion in subsequent years is accounted for as Lease Receivables under Long Term Loans & Advances. Wherever grant-in-aid is received for construction of State Sector ULDC, lease receivable is accounted for net of such grant.

1.14.2 Finance income on leased assets are recognised based on a pattern reflecting a constant periodic rate of return on the net investment as per the tariff notified/to be notified by the CERC.

1.14.3 FERV on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenure of lease. FERV recovery (as per CERC norms) from the constituents is recognised net of such amortised amount.

1.15 DEPRECIATION / AMORTIZATION

1.15.1 Depreciation / amortization on the assets related to transmission business and communication system of ULDC commissioned on or after 1st April 2014 are provided on straight line method following the rates and methodology notified by the CERC for the purpose of recovery of tariff.

1.15.2 ULDC assets commissioned prior to 1st April 2014 are depreciated on Straight Line Method @ 6.67% per annuam.

1.15.3 Depreciation on assets of telecom and consultancy business is provided for on straight line method as per useful life specified in Schedule II of the Companies Act, 2013.

1.15.4 Depreciation on following assets is provided based on estimated useful life as evaluated by the management.

a Computers & Peripherals 3 years

b Mobile Phones 3 years

c Software 3 years

Residual value in respect of Computers & Peripherals of Transmission and ULDC Segment is considered as specified in CERC tariff regulation and for other Segments, as specified in Schedule II of the Companies Act, 2013. Residual value in respect of Mobile Phones & Software is considered as "Nil".

1.15.5 Depreciation/ Amortization on additions to/deductions from fixed assets during the year is charged on pro-rata basis.

1.15.6 Where the cost of depreciable fixed asset has undergone a change due to increase/decrease in long term monetary items on account of exchange rate fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is depreciated prospectively at the rates and methodology as specified by the CERC Tariff Regulations, except for telecom assets where residual life is determined on the basis of useful life of fixed asset as specified in Schedule II of the Companies Act, 2013.

1.15.7 Plant and machinery, loose tools and items of scientific appliances, included under different heads of fixed assets, costing Rs. 5,000/- or less, or where the written down value is Rs. 5,000/- or less as at the beginning of the year, are charged off to revenue.

1.15.8 Other fixed assets costing upto Rs.5,000/- are fully depreciated in the year of acquisition.

1.15.9 Leasehold Land is fully amortized over 25 years or lease period whichever is lower in accordance with the rates and methodology specified in the Central Electricity Regulatory Commission (CERC) Tariff Regulation . Lease hold Land acquired on perpetual lease is not amortised.

1.15.10 In the case of fixed assets of National thermal power corporation limited (NTPC), National hydro-electric power corporation limited (NHPC), North-eastern electric power corporation limited (NEEPCO), Neyveli lignite corporation limited (NLC) transferred w.e.f. April 1, 1992, Jammu and Kashmir Lines w.e.f. April 1, 1993, and Tehri hydro development corporation limited (THDC) w.e.f. August 1, 1993, depreciation is charged based on gross block as indicated in transferor''s books with necessary adjustments so that the life of the assets as laid down in the CERC notification for tariff is maintained.

1.16 EXPENDITURE

1.16.1 Pre-paid/prior-period expenses/Income of items up to Rs. 100,000/- are charged to natural heads of account.

1.16.2 Expenditure of research and development, other than Capital Expenditure , are charged to revenue in the year of incurrence.

1.16.3 Capital expenditure on assets not owned by the company is charged off to revenue as and when incurred

1.17 IMPAIRMENT OF ASSETS

Cash generating units as defined in Accounting Standard -28 on "Impairment of Assets'' are identified at the balance sheet date with respect to carrying amount vis-a-vis. recoverable amount thereof and impairment loss, if any, is recognised in Statement of profit & loss. Impairment loss, if need to be reversed subsequently, is accounted for in the year of reversal.

1.18 EMPLOYEE BENEFITS

1.18.1 Company contribution paid/payable during the year to defined pension contribution scheme and provident fund scheme is recognized in the Statement of Profit and Loss. The same is paid to a fund and administered through a separate trusts.

1.18.2 The liability for retirement benefits of employees in respect of Gratuity, is ascertained annually on actuarial valuation at the year end, is provided and funded separately.

1.18.3 The liabilities for compensated absences, leave encashment, post retirement medical benefits, settlement allowance & long service awards to employees are ascertained annually on actuarial valuation at the year end and provided for.

1.18.4 Short term employee benefits are recognized at the undiscounted amount in the Statement of Profit and Loss in the year in which the related services are rendered.

1.18.5 Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss.

1.19 PROVISIONS AND CONTINGENT LIABILITIES

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made based on technical valuation and past experience. Provisions are determined based on management estimate required to settle the obligation at the balance sheet date and are not discounted to its present value. No provision is recognized for liabilities whose future outcome cannot be ascertained with reasonable certainties. Such contingent liabilities are not recognized but are disclosed on the basis of judgment of the management / independent expert. These are reviewed at each balance sheet date and adjusted to reflect the current management estimate.

1.20 TAXES ON INCOME

Income Tax comprises of current and deferred tax. Current income taxes are measured at the amount expected to be paid to the provisions of income tax authorities in accordance with Income Tax Act, 1961. Deferred tax resulting from timing difference between accounting and taxable profit is accounted for using the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.


Mar 31, 2014

1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared on accrual basis of accounting under the historical cost convention and in accordance with generally accepted accounting principles in India and the relevant provisions of the Companies Act, 2013 (to the extent notified) and the Companies Act, 1956 (to the extent applicable) including Accounting Standards notified there under.

1.2 USE OF ESTIMATES

The preparation of financial statements requires estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses during the reporting period. Although, such estimates and assumptions are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and assumptions and such differences are recognized in the period in which the results are crystallized.

1.3 RESERVES AND SURPLUS

Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed Assets (except assets covered under mega insurance policy) as at the end of the year by appropriating current year profit towards future losses which may arise from un-insured risks. The same is shown as "Self insurance reserve" under ''Reserves & Surplus''.

1.4 GRANTS-IN-AID

1.4.1 Grants-in-aid received from Central Government or other authorities towards capital expenditure for projects, betterment of transmission systems and specific depreciable assets are shown as "grants-in-aid" till the utilization of grant.

1.4.2 on capitalization of related assets, grants received for specific depreciable assets are treated as deferred income and recognized in the Statement of Profit and Loss over the useful life of related asset and in proportion to which depreciation on these assets is provided.

1.5 FIXED ASSETS

1.5.1 Fixed assets are shown at historical cost comprising of purchase price and any attributable cost of bringing the assets to its working condition for its intended use.

1.5.2 In the case of commissioned assets, deposit works/cost- plus contracts where final settlement of bills with contractors is yet to be affected, capitalization is done on provisional basis subject to necessary adjustments in the year of final settlement.

1.5.3 Assets and systems common to more than one transmission system are capitalized on the basis of technical estimates/ assessments

1.5.4 Transmission system assets are considered when they are ''Ready for intended use'', for the purpose of capitalization, after test charging/successful commissioning of the systems/assets and on completion of stabilization period wherever technically required.

1.5.5 The cost of land includes provisional deposits, payments/liabilities towards compensation, rehabilitation and other expenses wherever possession of land is taken,

1.5.6 Expenditure on leveling, clearing and grading of land is capitalized as part of cost of the related buildings.

1.5.7 Insurance spares, which can be used only in connection with an item of fixed asset and whose use is expected to be at irregular intervals and Mandatory spares in the nature of sub-station equipments /capital spares i.e. stand-by/service/rotational equipment and unit assemblies, are capitalized and depreciated over the residual useful life of the related plant & machinery. In case the year of purchase and consumption is same, amount of such spares are charged to revenue.

1.6 CAPITAL WORK-IN-PROGRESS (CWIP)

1.6.1 Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CwIP till the date of capitalization.

1.6.2 Expenditure of Corporate office, Regional offices and Projects, attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related assets.

1.6.3 Interest during construction and expenditure (net) allocated to construction as per policy No. 1.6.2 above (allocated to the projects on prorate basis to their capital expenditure), are apportioned to capital work in progress (CwIP) on the closing balance of specific asset or part of asset being capitalized. Balance, if any, left after such capitalization is kept as a separate item under the CwIP Schedule

1.6.4 deposit works/cost-plus contracts are accounted for on the basis of statement received from the contractors or technical assessment of work completed.

1.6.5 Unsettled liability for price variation/ exchange rate variation in case of contracts are accounted for on estimated basis as per terms of the contracts.

1.7 INTANGIBLE ASSETS

1.7.1 The cost of software (which is not an integral part of the related hardware) acquired for internal use and resulting in significant future economic benefits, is recognized as an intangible assets in the books of accounts when the same is ready for its use.

1.7.2 Afforestation charges paid for acquiring right-of-way of laying transmission lines are accounted for as intangible assets and same are amortized over the period of 35 years following the rates and methodology notified by Central Electricity Regulatory Commission (CERC) Tariff Regulation.

1.7.3 Expenditure incurred, eligible for capitalization under the head Intangible Assets, are carried as "Intangible Assets under development" where such assets are not yet ready for their intended use.

1.7.4 Expenditure incurred on the development of new technology is kept under "Intangible assets under development" till its completion. After satisfactory completion of development stage, the expenditure is named as "Intangible Assets" to be included in the project cost of new assets.

1.8 CONSTRUCTION STORES

Construction stores are valued at cost.

1.9 BORROWING COST

1.9.1 All the borrowed funds (except short term funds for working capital) are earmarked to specific projects. The borrowing costs (including bond issue expenses, interest, discount on bonds, front end fee, guarantee fee, management fee etc.) are allocated to the projects in proportion to the funds so earmarked.

1.9.2 The borrowing costs so allocated are capitalised or charged to revenue, based on whether the project is under construction or in operation.

1.10 TRANSACTION IN FOREIGN CURRENCY

1.10.1 Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of transaction. Foreign currency monetary items are translated with reference to the rates of exchange ruling on the date of the Balance Sheet. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling on the date of transaction.

1.10.2 Foreign Exchange Rate Variation (FERV) arising on settlement / translation of foreign currency loans relating to fixed assets/ capital work-in-progress are adjusted to the carrying cost of related assets.

1.10.3 FERV accounted for as per policy no 1.10.2 is recoverable/payable from the beneficiaries on actual payment basis as per Central Electricity Regulatory Commission (CERC) norms w..e..f. 1st April, 2004 or date of Commercial operation (doCo) which ever is later.

The above FERV to the extent recoverable or payable as per the CERC norms is accounted for as follows:

a) FERV recoverable/payable adjusted to carrying cost of fixed assets is accounted for as ''deferred foreign currency fluctuation asset/ liability a/c'' with a corresponding credit/debit to ''deferred income/expenditure from foreign currency fluctuation a/c''

b) ''Deferred income/expenditure from foreign currency fluctuation a/c'' is amortized in the proportion in which depreciation is charged on such FERV.

c) The amount recoverable/payable as per CERC norms on year to year basis is adjusted to the ''deferred foreign currency fluctuation asset/liability a/c'' with corresponding debit / credit to the trade receivables.

1.10.4 FERV earlier charged to Statement of Profit and Loss & included in the capital cost for the purpose of tariff is adjusted against ''deferred foreign currency fluctuation asset/liability a/c'' in the following manner:

i) Depreciation component of transmission charges (being 90% of such FERV) is adjusted against deferred foreign currency fluctuation asset/liability a/c in the transmission charges.

ii) Balance 10% is adjusted against deferred foreign currency fluctuation asset/liability a/c in the transmission charges over the tenure of respective loans.

1.10.5 FERV arising out of settlement/translation of long term monetary items (other than foreign currency loans) relating to fixed assets/ CwIP are adjusted in the carrying cost of related assets.

1.10.6 FERV arising during the construction period from settlement/translation of monetary items denominated in foreign currency (other than long term) to the extent recoverable/payable to the beneficiaries as capital cost as per CERC tariff Regulation are accounted as ''deferred foreign currency fluctuation asset/liability a/c''. Transmission charges recognised on such amount is adjusted against above account.

1.10.7 Other exchange differences are recognized as income or expenses in the period in which they arise.

1.11 INVESTMENTS

1.11.1 Current investments are valued at lower of cost and fair value determined on an individual investment basis.

1.11.2 Long term investments are carried at cost. Provision is made for diminution other than temporary, in the value of such investments.

1.12 INVENTORIES

1.12.1. Inventories are valued at lower of the cost, determined on weighted average basis and net realizable value.

1.12.2 Steel scrap and conductor scrap are valued at estimated realizable value or book value, whichever is less.

1.12.3 Mandatory spares of consumable nature and transmission line items are treated as inventory after commissioning of the system.

1.12.4 Surplus materials as determined by the management are held for intended use and are included in the inventory.

1.12.5 The diminution in the value of obsolete, unserviceable and surplus stores and spares is ascertained on review and provided for.

1.13 REVENUE RECOGNITION

1.13.1 Transmission Income is accounted for based on tariff orders notified by the CERC. In case of transmission projects where final tariff orders are yet to be notified, transmission income is accounted for as per tariff norms and other amendments notified by the CERC in similar cases. difference, if any, is adjusted based on issuance of final notification of tariff orders by the CERC. Transmission Income in respect of additional capital expenditure incurred after the date of commercial operation is accounted for based on actual expenditure incurred on year to year basis as per tariff norms of the CERC.

1.13.2 Income from short term open access is accounted for on the basis of regulations notified by the CERC.

1.13.3 The Transmission system Incentive / disincentive is accounted for based on certification of availability by the respective Regional Power Committees and in accordance with the norms notified / approved by the CERC.

1.13.4.1 Advance against depreciation (AAd), forming part of tariff pertaining upto the block period 2004-09, to facilitate repayment of loans, is reduced from transmission income and considered as deferred income to be included in transmission income in subsequent years.

1.13.4.2 The outstanding deferred income in respect of AAd is recognized as transmission income, after twelve years from the end of the financial year in which the asset was commissioned, to the extent depreciation recovered in the tariff during the year is lower than depreciation charged in the accounts.

1.13.5 Surcharge recoverable from trade receivables and liquidated damages / warranty claims / interest on advances to suppliers are recognized when no significant uncertainty as to measurability and collectability exists.

1.13.6 Income from Telecom Services are accounted for on the basis of terms of agreements/ purchase orders from the customers.

1.13.7 Income from sole consultancy contracts are accounted for on technical assessment of progress of services rendered.

1.13.8 In respect of ''Cost-plus-consultancy contracts'', involving execution on behalf of the client, income is accounted for (wherever initial advances received) in phased manner as under:

a) 10% on the issue of Notice Inviting Tender for execution

b) 5% on the Award of Contracts for execution

c) Balance 85% on the basis of actual progress of work including supplies

1.13.9 Income from Sale of Goods is recognized on the transfer of significant risks and reward of ownership to the buyer.

1.13.10 Application Fees received on account of Long Term open Access (LToA) Charges is accounted for as and when received in accordance with CERC Guidelines.

1.13.11 Scrap other than steel scrap & conductor scrap are accounted for as and when sold.

1.13.12 dividend income is recognized when right to receive payment is established.

1.14 LEASED ASSETS – UNIFIED LOAD DESPATCH CENTRE (ULDC)

1.14.1 State sector unified load dispatch centre (ULDC) assets leased to the beneficiaries are considered as Finance Lease. Net investment in such leased assets along with accretion in subsequent years is accounted for as Lease Receivables under Long Term Loans & Advances. wherever grant-in-aid is received for construction of State Sector ULdC, lease receivable is accounted for net of such grant.

1.14.2 Finance income on leased assets are recognised based on a pattern reflecting a constant periodic rate of return on the net investment as per the levellised tariff notified/to be notified by the CERC.

1.14.3 FERV on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenure of lease. FERV recovery (as per CERC norms) from the constituents is recognised net of such amortised amount.

1.15 DEPRECIATION / AMORTIZATION

1.15.1 depreciation / amortization on Fixed assets is provided on straight line method following the rates and methodology notified by the CERC for the purpose of recovery of tariff except for the following assets in respect of which depreciation / amortization is provided at the rates mentioned below:

a) Computers & Peripherals 30%

b) Mobile Phones 33.33%

c) Software 33.33%

1.15.2 ULDC assets are depreciated on Straight Line Method @ 6.67% per annum as determined by the CERC for levellized tariff.

1.15.3 Depreciation/ Amortization on Fixed assets of telecom and consultancy business, is provided for on straight line method as per rates specified in Schedule XIV of the Companies Act, 1956.

1.15.4 Dreciation/ Amortization on additions to/deductions from fixed assets during the year is charged on pro-rata basis.

1.15.5 Where the cost of depreciable asset has undergone a change due to increase/decrease in long term monetary items on account of exchange rate fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is depreciated prospectively at the rates and methodology as specified by the CERC Tariff Regulations, except for telecom assets where residual life is determined on the basis of rates of depreciation as specified in Schedule XIV of the Companies Act, 1956.

1.15.6 Plant and machinery, loose tools and items of scientific appliances, included under different heads of fixed assets, costing Rs.5,000/- or less, or where the written down value is Rs.5,000/- or less as at the beginning of the year, are charged off to revenue.

1.15.7 Other fixed assets costing upto Rs.5,000/- are fully depreciated in the year of acquisition.

1.15.8 Leasehold Land is fully amortized over 25 years or lease period whichever is lower in accordance with the rates and methodology specified in the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009. Lease hold Land acquired on perpetual lease is not amortised.

1.15.9 In the case of assets of National thermal power corporation limited (NTPC) , National hydro-electric power corporation limited (NHPC), North-eastern electric power corporation limited (NEEPCo), Neyveli lignite corporation limited (NLC) transferred w.e.f. April 1, 1992, Jammu and Kashmir Lines w.e.f. April 1, 1993, and Tehri hydro development corporation limited (THdC) w.e.f. August 1, 1993, depreciation is charged based on gross block as indicated in transferor''s books with necessary adjustments so that the life of the assets as laid down in the CERC notification for tariff is maintained.

1.16 EXPENDITURE

1.16.1 Pre-paid/prior-period expenses/Income of items up to Rs.100,000/- are charged to natural heads of account.

1.16.2 Expenditure of research and development, other than Capital Expenditure , are charged to revenue in the year of incurrence. 1.16.3 Capital expenditure on assets not owned by the company is charged off to revenue as and when incurred

1.17 IMPAIRMENT OF ASSETS

Cash generating units as defined in Accounting Standard -28 on ''Impairment of Assets'' are identified at the balance sheet date with respect to carrying amount vis-à-vis. recoverable amount thereof and impairment loss, if any, is recognised in Statement of profit & loss. Impairment loss, if need to be reversed subsequently, is accounted for in the year of reversal.

1.18 EMPLOYEE BENEFITS

1.18.1 Company contribution paid/payable during the year to defined pension contribution scheme and provident fund scheme is recognized in the Statement of Profit and Loss. The same is paid to a fund administered through a separate trusts.

1.18.2 The liability for retirement benefits of employees in respect of Gratuity, is ascertained annually on actuarial valuation at the year end, is provided and funded separately.

1.18.3 The liabilities for compensated absences, leave encashment, post retirement medical benefits, settlement allowance & long term awards to employees are ascertained annually on actuarial valuation at the year end and provided for.

1.18.4 Short term employee benefit are recognized at the undiscounted amount in the Statement of Profit and Loss in the year in which the related services are rendered.

1.18.5 Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss.

1.19 PROVISIONS AND CONTINGENT LIABILITIES

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made based on technical valuation and past experience. Provisions are determined based on management estimate required to settle the obligation at the balance sheet date and .are not discounted to its present value. No provision is recognized for liabilities whose future outcome cannot be ascertained with reasonable certainties. Such contingent liabilities are not recognized but are disclosed on the basis of judgment of the management / independent expert. These are reviewed at each balance sheet date and adjusted to reflect the current management estimate.

1.20 INCOME TAX

Income Tax comprises of current and deferred tax. Current income taxes are measured at the amount expected to be paid to the provisions of income tax authorities in accordance with Income Tax Act, 1961. deferred tax resulting from timing difference between accounting and taxable profit is accounted for using the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

2.33 Cash equivalent of deemed export benefits availed of Rs. 209.99 crore in respect of supplies affected for East South Inter Connector- II Transmission Project (ESI) and Sasaram Transmission Project (STP), were paid to the Customs and Central Excise Authorities in accordance with direction from Ministry of Power (Govt. of India) during 2002-03 due to non availability of world Bank loan for the entire supplies in respect of ESI project and for the supplies prior to March 2000 in respect of STP project and the same was capitalised in the books of accounts. Thereafter, world Bank had financed both the ESI project and STP project as originally envisaged and they became eligible for deemed export benefits. Consequently, the company has lodged claims with the Customs and Excise Authorities.

In this regard the Cumulative amount received and de-capitalized upto 31st March 2014 is Rs. 12.12 crore (previous year Rs. 12.12 crore). The company continued to show the balance of Rs. 197.87 crore as at 31st March 2014 (previous year Rs. 197.87 crore) in the capital cost of the respective assets / projects pending receipt of the same from Customs and Excise Authorities.

2.34 during the year company made Follow on Public offer (FPo) and allotted 601,864,295 fresh equity shares of face value of Rs. 10 each at a premium of Rs. 80 each (Rs. 75.50 for retail investors and employees) and further company has made an offer for Sale of 185,189,014 equity shares of Rs. 10 each for a consideration of Rs. 90 each (Rs. 85.50 each to retail investors and employees) being disinvestment on behalf of President of India on 16th december 2013. The company received Rs. 5321.31 crore through fresh issue of shares including share premium of Rs. 4719.45 crore and sale proceeds of equity of Government of India amounting to Rs. 1637.33 crore which was paid to Government of India. The issue proceeds of Rs. 2346.31 crore have been utilized during the year (Rs. 2332.16 crore for part financing of capital expenditure on the projects specified for utilization and Rs. 14.15 crore for share issue expenses spent out of total amount of Rs. 31.64 crore) and the balance amount of Rs. 2975.00 crore is kept in the banks as term deposits.

Issue expenses of Rs. 16.31 crore (Net after adjustment of Share of expenses recoverable from Government of India Rs. 6.93 crore and tax benefit Rs. 8.40 crore respectively) has been adjusted against Securities Premium Reserve (Note - 2.2).

2.35 a) Certain balances in Loans and Advances & Trade Payables are subject to confirmation and consequential adjustments, if any.

b) In the opinion of the management, the value of any of the assets other than fixed assets and non current investments on realization in the ordinary course of business will not be less than value at which they are stated in the Balance Sheet.

2.37 The company has been entrusted with the responsibility of billing collection and disbursement (BCd) of the transmission charges on behalf of all the ISTS (Interstate transmission System) licensees through the mechanism of the PoC (Point of Connection) charges introduced w.e.f. 01st July 2011 which involves billing based on approved drawl/injection of power in place of old mechanism based on Mega watt allocation of power by Ministry of Power. By this mechanism, revenue of the company will remain unaffected.

Some of the beneficiaries aggrieved by the PoC mechanism have preferred appeal before various High Courts of India. All such appeals have been transferred to delhi High Court as per order of the Supreme Court on the appeal preferred by the company and company has also requested for directing agitating states to pay full transmission charges as per new methodology pending settlement of the matter. Honorable delhi High Court has directed all the above beneficiaries to release payments and accordingly the beneficiaries have started making payments as per the said directions. Unrealized amount of Rs. 151.09 crore (Previous Year Rs. 273.27 crore) is included in trade receivables.

2.38 (i) FERV Loss of Rs. 2258.13 crore (Previous Year Rs. 1660.02 crore ) has been adjusted in the respective carrying amount of Fixed Assets/

Capital work in Progress (CwIP)/lease receivables.

(ii) FERV Loss of Rs. 8.34 crore (Previous Year FERV Gain Rs. 1.16 crore) has been recognised in the Statement of Profit and Loss.

2.39 Borrowing cost capitalised during the year is Rs. 2274.62 crore (previous year Rs. 1824.93 crore) as per AS 16- "Borrowing Costs".

2.40 Based on information available with the company, there are few suppliers/service providers who are registered as micro, small or medium enterprise under The Micro, Small and Medium Enterprises development Act,2006 (MSMEd Act, 2006). Information in respect of micro and small enterprises as required by MSMEd Act, 2006 is given as under:

2.41 Disclosures as per Accounting Standard (AS) 15 -"Employee benefits"

Defined employee benefit/ contribution schemes are as under:-

A. Provident Fund

Company pays fixed contribution to Provident Fund at predetermined rate to a separate trust, which invests the funds in permitted securities. Contribution to family pension scheme is paid to the appropriate authorities. The contribution to the fund for the year amounting to Rs.74.88 crore(previous year Rs.66.57 crore) has been recognized as expense and is charged to Statement of Profit and Loss. The obligation of the company is limited to such fixed contribution and to ensure a minimum rate of interest on contributions to the members as specified by GoI. As per the report of actuary over all interest earning and cumulative surplus ''is more'' than statutory interest payment requirement. Hence, no further provision is considered necessary.

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 X last drawn basic salary plus, dearness allowance) for each completed year of service on superannuation, resignation, termination, disablement or on death subject to a maximum of Rs. 10 lacs. The scheme is funded by the company and is managed by a separate trust. The liability for the same is recognised on the basis of actuarial valuation on annual basis on the Balance Sheet date.

C. Pension

The Company has scheme of employees defined Pension Contribution. Company contribution is paid to separate trust. Amount of contribution paid/payable for the year is Rs. 60.08 crore (previous year Rs. 52.24 crore) has been recognised as expense and is charged to statement of profit & loss.

D. Post-Retirement Medical Facility (PRMF)

The company has Post-Retirement Medical Facility (PRMF), under which retired employees and the spouse are provided medical facilities in the empanelled hospitals. They can also avail treatment as out-Patient subject to a ceiling fixed by the company. The scheme is unfunded and liability for the same is recognised on the basis of actuarial valuation on annual basis on the Balance Sheet date.

E. Other Defined Retirement Benefits (ODRB)

The Company has a scheme for settlement at the time of superannuation at home town for employees and dependents to superannuated employees. The scheme is unfunded and liability for the same is recognised on the basis of actuarial valuation on annual basis on the Balance Sheet date.

The summarised position of various defined benefits recognized in the Statement of Profit & Loss and Balance Sheet and funded status is as under:- a) Expenses recognised in Statement of profit and loss:

F. Other Employee Benefits

Provision for Leave encashment (including compensated leave) amounting to Rs. 51.84 crore (previous year Rs. -11.65 crore) for the year has been made on the basis of actuarial valuation at the year end and same is recognised in the Statement of Profit and Loss.

Provision for Long Service Award amounting to Rs. 0.84 crore (previous year Rs. 1.19 crore) has been made on the basis of actuarial valuation at the year end.

H. Actuarial Assumptions

Principal assumptions used for actuarial valuation are:

i) Method used - Projected unit credit ( PUC) (Previous Year (PUC))

ii) discount rate - 8.50 % (previous year 8 %)

iii) Expected rate of return on assets (Gratuity only) – 8.50 % (previous year 8.50%)

iv) Future salary increase- 6.50 % (previous year 6%)

The estimate of future salary increases, considered in actuarial valuation, takes into account (i) inflation, (ii) Seniority (iii) Promotion and (iv) other relevant factors, such as supply and demand in the employment market. Further the expected return on plan assets is determined considering several applicable factors mainly the composition of plan assets, assessed risk of asset management and historical return for plan assets.

I. The Company''s best estimate of contribution towards gratuity for the financial year 2014-15 is Rs. 4.65 crore (previous year Rs. 8.13 crore)

2.42 Disclosure as per AS 17-" Segment Reporting"

a) Business Segments

The company''s principal business is transmission of bulk power across different States of India. However, telecom and consultancy business are also treated as a reportable segment in accordance with para 28 of AS-17 "Segment Reporting".

b) Segment Revenue and Expense

Revenue directly attributable to the segments is considered as Segment Revenue. Expenses directly attributable to the segments and common expenses allocated on a reasonable basis are considered as segment expenses.

c) Segment Assets and Liabilities

Segment assets include all operating assets comprising of net fixed assets, current assets and loan and advances. Construction work- in-progress, construction stores & advances and investments are included in unallocated assets. Segment liabilities include operating liabilities and provisions.

2.44 Disclosure as per AS 18- "Related Party Disclosure" a) List of Related Parties:-

i) Key Management Personnel

Sh. R.N. Nayak Chairman and Managing director

Sh. I.S. Jha Director (Projects)

Sh. R.T. Agarwal Director (Finance)

Sh. Ravi P Singh Director (Personnel)

Sh. R.P. Sasmal Director (Operations)

ii) Subsidiaries:- Wholly Owned

i) Power System operation Corporation Limited (POSOCO)

ii) POWERGRID NM Transmission Limited

iii) POWERGRID Vemagiri Transmission Limited

iv) Vizag Transmission Limited (w.e.f 30th August 2013)

v) Unchahar Transmission Limited (w.e.f 24th March 2014)

iii) Joint Ventures:-

i) Powerlinks Transmission Limited

ii) Torrent Power Grid Limited

iii) Jaypee POWERGRID Limited

iv) Parbati Koldam Transmission Company Limited

v) Teestavalley Power Transmission Limited

vi) North East Transmission Company Limited

vii) National High Power Test Laboratory Private Limited

viii) Energy Efficiency Services Limited.

ix) Bihar Grid Company Limited

x) Kalinga Bidyut Prasaran Nigam Private Limited

xi) Cross Border Power Transmission Company Limited

2.45 Disclosure as per AS 19-"Leases"

a) Finance Leases :- Long Term Loans and Advances and Short Term Loans and Advances include lease receivables representing the present value of future lease rentals receivable on the finance lease transactions entered into by the company with the constituents in respect of State Sector ULdC. disclosure requirements of Accounting Standard (AS) – 19 "Leases" notified under the Companies Act, 1956 are given as under:

2.47 Disclosure as per AS 28-" Impairment of assets"

In accordance with Accounting Standard (AS-28) "Impairment of Assets", the company has assessed as on the Balance Sheet date whether there are any indications with regard to impairment of any of the assets. Based on such assessment, it has been ascertained that no potential loss is present. Accordingly, no impairment loss has been provided in the books of accounts.

2.48 Capital and Other Commitments

i) Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 30175.65 crore (previous year Rs. 43190.76 crore).

ii) As at 31st March,2014, the company has commitment of Rs. 812.82 crore (previous year Rs. 1005.31 crore) towards further investment in joint venture entities.

iii) As at 31st March,2014, the company has commitment of Rs. 730.00 crore (previous year Rs. 183.33 crore) towards further investment in subsidiary companies.


Mar 31, 2013

1.1 BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared on accrual basis of accounting under the historical cost convention and in accordance with generally accepted accounting principles in India and the relevant provisions of the Companies Act, 1956 including Accounting Standards notified there under.

1.2 USE OF ESTIMATES

The preparation of financial statements requires estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses during the reporting period. Although, such estimates and assumptions are made on a reasonable and prudent basis taking into account all available information, actual results could differ from these estimates and assumptions and such differences are recognized in the period in which the results are crystallized.

1.3 RESERVES ANDSURPLUS

Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed Assets (except assets covered under mega insurance policy) as at the end of the year by appropriating current year profit towards future losses which may arise from un-insured risks. The same is shown as "Self insurance reserve" under ''Reserves & Surplus''.

1.4 GRANTS-IN-AID

1.4.1 Grants-in-aid received from Central Government or other authorities towards capital expenditure for projects, betterment of transmission systems and specific depreciable assets are shown as "grants-in-aid" till the utilization ofgrant.

1.4.2 On capitalization of related assets, grants received for specific depreciable assets are treated as deferred income and recognized in the Statement of Profit and Loss overthe useful life of related asset and in proportion to which depreciation on these assets is provided.

1.5 FIXED ASSETS

1.5.1 Fixed assets are shown at historical cost comprising of purchase price and any attributable cost of bringing the assets to its working condition for its intended use.

1.5.2 In the case of commissioned assets, deposit works/cost- plus contracts where final settlement of bills with contractors is yet to be affected, capitalization is done on provisional basis subject to necessary adjustments in the year offinal settlement.

1.5.3 Assets and systems common to more than one transmission system are capitalised on the basis of technical estimates/ assessments

1.5.4 Transmission system assets are considered when they are ''Ready for intended use'', for the purpose of capitalization, after test charging/successful commissioning of the systems/assets and on completion of stabilization period wherever technically required.

1.5.5 The cost of land includes provisional deposits, payments/liabilities towards compensation, rehabilitation and other expenses wherever possession of land is taken.

1.5.6 Expenditure on levelling, clearing and grading of land is capitalised as part of cost of the related buildings.

1.5.7 Insurance spares, which can be used only in connection with an item of fixed asset and whose use is expected to be at irregular intervals are capitalized and depreciated overthe residual useful life ofthe related plant & machinery. In case the year of purchase and consumption is same, amount of insurance spares are charged to revenue.

1.5.8 Mandatory spares in the nature of sub-station equipments /capital spares i.e. stand-by/service/rotational equipment and unit assemblies either procured along with the equipments or subsequently, are capitalized and depreciation is charged in accordance with the relevant accounting standard. In case the year of purchase & consumption is same, amount of mandatory spares are charged to revenue.

1.6 CAPITAL WORK - IN - PROGRESS (CWIP)

1.6.1 Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIPtill the date of capitalization.

1.6.2 Expenditure of Corporate office, Regional Offices and Projects, attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related assets.

1.6.3 Interest during construction and expenditure (net) allocated to construction as per policy No. 1.6.2 above (allocated to the projects on prorate basis to their capital expenditure), are apportioned to capital work in progress (CWIP) on the closing balance of specific asset or part of asset being capitalized. Balance, if any, left after such capitalization is kept as a separate item under the CWIPSchedule .

1.6.4 Deposit works/cost-plus contracts are accounted for on the basis of statement received from the contractors or technical assessment of work completed.

1.6.5 Unsettled liability for price variation/ exchange rate variation in case of contracts are accounted for on estimated basis as per terms ofthe contracts.

1.7 INTANGIBLE ASSETS

1.7.1 The cost of software (which is not an integral part of the related hardware) acquired for internal use and resulting in significant future economic benefits, is recognized as an intangible assets in the books of accounts when the same is ready for its use.

1.7.2 Afforestation charges paid for acquiring right-of-way of laying transmission lines are accounted for as intangible assets and same are amortized following the rates and methodology notified by Central Electricity Regulatory Commission (CERC) Tariff Regulation.

1.8 CONSTRUCTION STORES

Construction stores are valued at cost.

1.9 BORROWING COST

1.9.1 All the borrowed funds (except short term funds for working capital) are earmarked to specific projects. The borrowing costs (including bond issue expenses, interest, discount on bonds, front end fee, guarantee fee, management fee etc.) are allocated to the projects in proportion to the funds so earmarked.

1.9.2 The borrowing costs so allocated are capitalised or charged to revenue, based on whether the project is under construction or in operation.

1.10 TRANSACTION IN FOREIGN CURRENCY

1.10.1 Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of transaction. Foreign currency monetary items are translated with reference to the rates of exchange ruling on the date of the Balance Sheet. Non-monetary items denominated in foreign currency are reported at the exchange rate ruling on the date of transaction.

1.10.2 Foreign Exchange Rate Variation (FERV) arising on settlement / translation of foreign currency loans relating to fixed assets/ capital work-in-progress are adjusted to the carrying cost of related assets.

1.10.3 FERV accounted for as per policy no 1.10.2 is recoverable/payable from the beneficiaries on actual payment basis as per Central Electricity Regulatory Commission (CERC) norms w.e.f. 1st April, 2004 or Date of Commercial Operation (DOCO) which ever is later.

The above FERV to the extent recoverable or payable as per the CERC norms is accounted for as follows:

a) FERV recoverable/payable adjusted to carrying cost of fixed assets is accounted for as ''Deferred foreign currency fluctuation asset/liability a/c'' with a corresponding credit/debit to ''Deferred income/expenditure from foreign currency fluctuation a/c''.

b) ''Deferred income/expenditure from foreign currency fluctuation a/c'' is amortized in the proportion in which depreciation is charged on such FERV.

c) The amount recoverable/payable as per CERC norms on year to year basis is adjusted to the ''Deferred foreign currency fluctuation asset/liability a/c'' with corresponding credit/ debit to the trade receivables.

1.10.4 FERV earlier charged to Statement of Profit and Loss & included in the capital cost for the purpose of tariff is adjusted against ''Deferred foreign currency fluctuation asset/liability a/c'' in the following manner:

i) Depreciation component of transmission charges (being 90% of such FERV) is adjusted against Deferred foreign currency fluctuation asset/liability a/c in the transmission charges.

ii) Balance 10% is adjusted against the transmission charges over the tenure of respective loan.

1.10.5 FERV arising out of settlement/translation of long term monetary items (other than foreign currency loans) relating to fixed assets/CWIP are adjusted in the carrying cost of related assets.

1.10.6 FERV arising during the construction period from settlement/translation of monetary items denominated in foreign currency (other than long term) to the extent recoverable/payable to the beneficiaries as capital cost as per CERC tariff Regulation are accounted as ''Deferred foreign currency fluctuation asset/liability a/c''. Transmission charges recognised on such amount is adjusted against above account.

1.10.7 Other exchange differences are recognized as income or expenses in the period in which they arise.

1.11 INVESTMENTS

1.11.1 Current investments are valued at lower of cost and fairvalue determined on an individual investment basis.

1.11.2 Long term investments are carried at cost. Provision is made for diminution other than temporary, in the value of such investments.

1.12 INVENTORIES

1.12.1. Inventories are valued at lower of the cost, determined on weighted average basis and net realizable value.

1.12.2 Steel scrap and conductor scrap are valued at estimated realizable value or book value, whichever is less.

1.12.3 Mandatory spares of consumable nature and transmission line items are treated as inventory after commissioning ofthe system.

1.12.4 Surplus materials as determined by the management are held for intended use and are included in the inventory.

1.12.5 The diminution in the value of obsolete, unserviceable and surplus stores and spares is ascertained on review and provided for.

1.13 REVENUE RECOGNITION

1.13.1 Transmission Income is accounted for based on tariff orders notified by the CERC. In case of transmission projects where final tariff orders are yet to be notified, transmission income is accounted for as per tariff norms and other amendments notified by the CERC in similar cases. Difference, if any, is adjusted based on issuance of final notification of tariff orders by the CERC. Transmission Income in respect of additional capital expenditure incurred after the date of commercial operation is accounted based on actual expenditure incurred on year to year basis as per tariff norms of the CERC.

1.13.2 Income from short term open access is accounted for on the basis of regulations notified by the CERC.

1.13.3 The Transmission system Incentive / disincentive is accounted for based on certification of availability by the respective Regional Power Committees and in accordance with the norms notified / approved by the CERC.

1.13.4 ADVANCE AGAINST DEPRECIATION

1.13.4.1 Advance against depreciation (AAD), forming part of tariff pertaining upto the block period 2004-09, to facilitate repayment of loans, is reduced from transmission income and considered as deferred income to be included in transmission income in subsequent years.

1.13.4.2 The outstanding deferred income in respect of AAD is recognized as transmission income, after twelve years from the end of the financial year in which the asset was commissioned, to the extent depreciation recovered in the tariff during the year is lower than depreciation charged in the accounts.

1.13.5 Surcharge recoverable from trade receivables and liquidated damages / warranty claims / interest on advances to suppliers are recognized when no significant uncertainty as to measurability and collectability exists.

1.13.6 Telecom income is accounted for on the basis of terms of agreements/ purchase orders from the customers.

1.13.7 Income from sole consultancy contracts are accounted for on technical assessment of progress of services rendered.

1.13.8 In respect of ''Cost-plus-consultancy contracts'', involving execution on behalf of the client, income is accounted for (wherever initialadvancesreceived) inphasedmanneras under:

a. 10% ontheissueofNoticelnvitingTenderforexecution

b. 5% on the Award of Contracts for execution

c. Balance 85% on the basis of actual progress of work including supplies

1.13.9 Income from Sale of Goods is recognized on the transfer of significant risks and reward of ownership to the buyer.

1.13.10 Application Fees received on account of Long Term Open Access (LTOA) Charges is accounted for as and when received in accordance with CERC Guidelines.

1.13.11 Scrap other than steel scrap & conductor scrap are accounted for as and when sold.

1.13.12 Dividend income is recognized when right to receive payment is established.

1.14 LEASED ASSETS - UNIFIED LOAD DESPATCH CENTRE (ULDC)

1.14.1 State sector unified load dispatch centre (ULDC) assets leased to the beneficiaries are considered as Finance Lease. Net investment in such leased assets along with accretion in subsequent years is accounted for as Lease Receivables under long term loans & advances. Wherever grant-in-aid is received for construction of State Sector ULDC, lease receivable is accounted for net of such grant.

1.14.2 Finance income on leased assets are recognised based on a pattern reflecting a constant periodic rate of return on the net investment as per the levellised tariff notified/to be notified by the CERC.

1.14.3 FERV on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenure of lease. FERV recovery (as per CERC norms) from the constituents is recognised net of such amortised amount.

1.15 DEPRECIATION/AMORTIZATION

1.15.1 Depreciation / amortization is provided on straight line method following the rates and methodology notified by the CERC for the purpose of recovery of tariff except for the following assets in respect of which depreciation / amortization is provided at the rates mentioned below:

a) Computers & Peripherals 30%

b) Mobile Phones 33.33%

c) Software 33.33%

1.15. 2 ULDC assets are depreciated on Straight Line Method @ 6.67% per annum as determined by the CERC for levellized tariff.

1.15. 3 Depreciation on assets of telecom and consultancy business, is provided for on straight line method as per rates specified in Schedule XIV of the Companies Act, 1956.

1.15.4 Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis.

1.15.5 Where the cost of depreciable asset has undergone a change due to increase/decrease in long term monetary items on account of exchange rate fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is depreciated prospectively at the rates and methodology as specified by the CERC Tariff Regulations, except for telecom assets where residual life is determined on the basis of rates of depreciation as specified in Schedule XIV of the Companies Act, 1956.

1.15.6 Plant and machinery, loose tools and items of scientific appliances, included under different heads of assets, costing Rs. 5000/- or less, orwhere the written down value isRs. 5000/- or less as at the beginning ofthe year, are charged off to revenue.

1.15.7 Other fixed assets costing upto Rs. 5000/- are fully depreciated in the year of acquisition.

1.15.8 Leasehold Land is fully amortized over 25 years or lease period whichever is lower in accordance with the rates and methodology specified in the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2009. Lease hold Land acquired on perpetual lease is not amortised.

1.15.9 In the case of assets of National thermal power corporation limited (NTPC), National hydro-electric power corporation limited (NHPC), North-eastern electric power corporation limited (NEEPCO), Neyveli lignite corporation limited (NLC) transferred w.e.f. April 1,1992, Jammu and Kashmir Lines w.e.f. April 1,1993, and Tehri hydro development corporation limited (THDC) w.e.f. August 1,1993, depreciation is charged based on gross block as indicated in transferor''s books with necessary adjustments so that the life of the assets as laid down in the CERC notification for tariff is maintained.

1.16 EXPENDITURE

1.16.1 Pre-paid/prior-period expenses/income of items up to Rs.100000/- are charged to natural heads of account.

1.16.2 Expenditure of research and development, other than Capital Expenditure , are charged to revenue in the year of incurrence.

1.16.3 Capital expenditure on assets not owned by the company is charged off to revenue as and when incurred

1.17 IMPAIRMENT OF ASSETS

Cash generating units as defined in Accounting Standard -28 on ''Impairment of Assets'' are identified at the balance sheet date with respect to carrying amount vis-a-vis. recoverable amount thereof and impairment loss, if any, is recognised in Statement of profit & loss. Impairment loss, if need to be reversed subsequently, is accounted for in the year of reversal.

1.18 EMPLOYEE BENEFITS

1.18.1 Company contribution paid/payable during the year to defined pension contribution scheme and provident fund scheme is recognized in the Statement of Profit and Loss. The same is paid to a fund administered through a separate trust.

1.18.2 The liability for retirement benefits of employees in respect of Gratuity, is ascertained annually on actuarial valuation at the year end, is provided and funded separately.

1.18.3 The liabilities for compensated absences, leave encashment, post retirement medical benefits, settlement allowance & farewell gift to employees are ascertained annually on actuarial valuation at the year end and provided for.

1.18.4 Short term employee benefit are recognized at the undiscounted amount in the Statement of Profit and Loss in the year in which the related services are rendered.

1.18.5 Actuarial gains/losses are recognized immediately in the Statement of Profit & Loss.

1.19 PROVISIONS AND CONTINGENT LIABILITIES

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made based on technical valuation and past experience. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. No provision is recognized for liabilities whose future outcome cannot be ascertained with reasonable certainties. Such contingent liabilities are not recognized but are disclosed on the basis of judgment of the management /independent expert. These are reviewed at each balance sheet date and adjusted to reflect the current management estimate.

1.20 INCOME TAX

Income Tax comprises of current and deferred tax. Current income taxes are measured at the amount expected to be paid to the income tax authorities in accordance with Income Tax Act, 1961. Deferred tax resulting from timing difference between accounting and taxable profit is accounted for using the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.


Mar 31, 2010

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared under the historical cost convention and in accordance with generally accepted accounting principles and applicable Accounting Standards in India.

2. RESERVES AND SURPLUS

2.1 Self insurance reserve is created @ 0.1% p.a. on Gross Block of Fixed Assets (except valve halls of HVDC Bi- pole, HVDC equipments, SVC substations and series compensators) as at the end of the year by appropriating current year profit towards future losses which may arise from un-insured risks. The same is shown as "Self insurance reserve" under Reserves & Surplus.

2.2 LDC Development fund shall be created in respect of charges collected on account of return on equity, interest on loan, depreciation and other income of the Regional Load Despatch Centre and National Load Despatch Centre such as registration fee, application fee, short-term open access charges etc. The funds shall be utilized for loan repayment, servicing the capital raised in the form of interest and dividend payment, meeting stipulated equity portion in asset creation and margin money for raising loan from the financial institutions and funding R&D projects.

2.3 In accordance with the scheme of earmarking 0.75% of net profits of the preceding financial year towards Corporate Social Responsibility (CSR), unutilized money during an year shall be credited to CSR reserves. Any expenditure above 0.75% of the preceding year shall be adjusted against such reserve.

3. GRANTS-IN-AID

3.1 Grants-in-aid received from Central Government or other authorities towards capital expenditure for projects, betterment of transmission systems and specific depreciable assets are shown as "grants-in-aid" till the utilization of grant.

3.2 On capitalisation of related assets, grants received for specific depreciable assets are treated as deferred income and recognised in the profit and loss account over the useful period of life and in proportion to which depreciation on these assets is provided.

4. FIXED ASSETS

4.1 Fixed assets are shown at historical cost comprising of purchase price and any attributable cost of bringing the assets to its working condition for its intended use.

4.2 In the case of commissioned assets, deposit works/cost- plus contracts where final settlement of bills with contractors is yet to be affected, capitalisation is done on provisional basis subject to necessary adjustments in the year of final settlement.

4.3 Assets and systems common to more than one transmission system are capitalised on the basis of technical estimates/ assessments.

4.4 Transmission system assets are considered Ready for intended use, for the purpose of capitalisation, after test charging/successful commissioning of the systems/assets and on completion of stablization period wherever technically required.

4.5 The cost of land includes provisional deposits, payments/liabilities towards compensation, rehabilitation and other expenses wherever possession of land is taken.

4.6 Expenditure on levelling, clearing and grading of land is capitalised as part of cost of the related buildings.

4.7 Capital expenditure on assets not owned by the company is reflected as a distinct item in capital work-in- progress till completion and thereafter in Fixed Assets.

4.8 Insurance spares, other than mentioned in 4.10 below, which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the residual useful life of the related plant & machinery.

4.9 Mandatory spares, other than mentioned in 4.10 below, in the nature of sub-station equipments /capital spares i.e. stand-by/service/rotational equipment and unit assemblies either procured along with the equipments or subsequently, are capitalised and depreciation is charged in accordance with the relevant accounting standard.

4.10 Items of Insurance / Mandatory spares, covered under 4.8 & 4.9 above, are charged to revenue, if the year of purchase and consumption is same.

5. CAPITAL WORK IN PROGRESS (CWIP)

5.1 Cost of material consumed, erection charges thereon along with other related expenses incurred for the projects are shown as CWIP till capitalisation.

5.2 Expenditure of Corporate office, Regional Offices and Projects, attributable to construction of fixed assets are identified and allocated on a systematic basis to the cost of the related assets.

5.3 Interest during construction and expenditure (net) allocated to construction as per policy No. 5.2 above (allocated to the projects on prorata basis to their capital expenditure), are apportioned to capital work in progress (CWIP) on the closing balance of Specific asset or part of asset being capitalised. Balance, if any, left after such capitalisation is kept as a separate item under the CWIP Schedule .

5.4 Deposit works/cost-plus contracts are accounted for on the basis of statement received from the contractors or technical assessment of work completed.

5.5 Claims for price variation/ exchange rate variation in case of contracts are accounted for on acceptance/ receipt of claims.

6. CONSTRUCTION STORES

6.1 Construction stores are valued at cost.

7. BORROWING COST

7.1 All the borrowed funds (except short term funds for working capital) are earmarked to specific projects. The borrowing costs (including bond issue expenses, interest, front end fee, guarantee fee, management fee etc.) are allocated to the projects in proportion to the funds so earmarked.

7.2 The borrowing costs so allocated are capitalised or charged to revenue, based on whether the project is under construction or in operation.

7.3 Foreign exchange rate variation (FERV) (Unfavorable) on foreign currency borrowings, to the extent it does not exceed the difference between the local currency borrowing cost and foreign currency borrowing cost, is treated as borrowing cost.

8. TRANSACTION IN FOREIGN CURRENCY

8.1 Transactions in foreign currencies are initially recorded at the exchange rate prevailing on the date of transaction. Foreign currency loans, deposits and liabilities are translated or converted with reference to the rates of exchange ruling on the date of the Balance Sheet.

8.2 FERV (except the amount considered as borrowing cost under para 7.3 above) arising on transactions contracted prior to April 1, 2004 is adjusted to carrying cost of capital work-in-progress/fixed assets in case of capital assets. For the transactions contracted on or after April 1, 2004, the same is charged to profit & loss account irrespective of whether the project is under construction or operation.

8.3 FERV (excluding FERV during construction period for the transaction contracted on or after Ist April, 2004), accounted for as per policy no 7.3 & 8.2 is recoverable/payable from the beneficiaries on actual payment basis as per Central electricity regulatory commission (CERC) norms w.e.f 1st April, 2004 or Date of Commercial Operation (DOCO) which ever is later.

The above FERV to the extent recoverable or payable as per CERC norms is accounted for as follows:

a) FERV recoverable or payable is apportioned into (i) amount adjusted to carrying cost of fixed assets and (ii) amount recognised as income/expense in profit and loss account in the same proportion in which FERV is apportioned between carrying cost of fixed assets and profit and loss account.

b) FERV recoverable/payable adjusted to carrying cost of fixed assets, as referred in (a) above is accounted for as Deferred foreign currency fluctuation asset/liability a/c with a corresponding credit/debit to Deferred income/expenditure from foreign currency fluctuation a/c.

c) FERV recoverable/payable adjusted in profit and loss referred in (a) above is accounted for as Deferred foreign currency fluctuation asset/liability a/c with a corresponding credit/debit to Profit & loss account.

d) Deferred income/expenditure from foreign currency fluctuation a/c is amortized in the proportion in which depreciation is charged on such FERV.

e) The amount recoverable/payable as per CERC norms on year to year basis is adjusted to the Deferred foreign currency fluctuation asset/liability a/c with corresponding credit/debit to the debtors.

8.4 FERV upto the date of commercial operation in respect of transactions contracted on or after Ist April,2004, is included in the capital cost for the purpose of tariff. Such FERV and transmission charges received thereon are accounted for as under:

a) Such FERV is accounted for as Deferred foreign currency fluctuation asset/liability a/c with a corresponding credit/debit to Profit & loss account.

b) Depreciation component of transmission charges (being 90% of such FERV) is adjusted against Deferred foreign currency fluctuation asset/liability a/c.

c) Balance 10% is adjusted against the transmission charges over the tenure of respective loan.

8.5 FERV in respect of current assets is taken to Profit & Loss a/c.

9. INVESTMENTS

9.1 Long term investments are carried at cost less provisions, if any, for permanent diminution in the value of such investments.

10. INVENTORIES

10.1. Inventories are valued at lower of the cost, determined on weighted average basis, and net realizable value.

10.2 Steel scrap and conductor scrap are valued at estimated realizable value or book value, whichever is less.

10.3 Mandatory spares of consumable nature and transmission line items are treated as inventory after commissioning of the system.

10.4 Surplus materials as determined by the management are held for intended use and are included in the inventory.

11. DEFERRED REVENUE EXPENDITURE

Deferred revenue expenditure created up to March 31, 2003 (prior to the date AS-26 became mandatory) are amortized over a period of 5 years from the year of commercial operation/earning of revenue.

12. REVENUE RECOGNITION

12.1.1 Transmission Income is accounted for based on tariff orders notified by CERC. In case of transmission projects where tariff orders are yet to be notified, transmission income is accounted for as per tariff norms and other amendments notified by CERC in similar cases. In such cases, the shortage/excess, if any, is adjusted based on issuance of final notification of tariff orders by CERC. Transmission income on account of additional capitalisation, if any, is accounted for on the basis of specific order by the CERC.

12.1.2. Income from short term open access is accounted for on the basis of regulations notified by CERC.

12.1.3. The Transmission system Incentive / disincentive is accounted for based on certification of availability by the respective Regional power committees and in accordance with the norms notified / approved by CERC.

12.1.4. ADVANCE AGAINST DEPRECIATION

12.1.4.1 Advance against depreciation (AAD), forming part of tariff pertaining upto the block period 2004-09, to facilitate repayment of loans, is reduced from transmission income and considered as deferred income to be included in transmission income in subsequent years.

12.1.4.2 The Outstanding deferred income in respect of AAD is recognised as transmission income, after 12 years from the end of the financial year in which the asset was commissioned, to the extent of difference between charge of depreciation and recovery of depreciation as tariff component.

12.1.5 Surcharge recoverable from debtors is not treated as accrued due to uncertainty of its realization and is, therefore, accounted for on receipt/certainty of receipt.

12.1.6 Liquidated damages / warranty claims and Interest on advances to suppliers are accounted for on certainty.

12.1.7 Telecom income is accounted for on the basis of terms of agreements/ purchase orders from the customers.

12.1.8 Income from sole consultancy contracts are accounted for on technical assessment of progress of services rendered.

12.1.9 In respect of Cost-plus-consultancy contracts, involving execution on behalf of the client, income is accounted for (wherever initial advances received) in phased manner as under:

a. 10% on issue of Notice Inviting Tender for execution

b. 5% on Award of Contracts for execution

c. Balance 85% on the basis of actual progress of work including supplies

12.2.1 Scrap other than steel scrap & conductor scrap are accounted for as and when sold.

12.2.2 Dividend income including interim dividend is recognised in the year of declaration.

13. LEASED ASSETS - UNIFIED LOAD DESPATCH CENTRE (ULDC)

13.1 State sector unified load dispatch centre (ULDC) assets leased to the SEBs are considered as Finance Lease. Net investment in such leased assets along with accretion in subsequent years is accounted for as Lease Receivables under Loans & Advances. Wherever grant in-aid is received for construction of State Sector ULDC, lease receivable is accounted for net of such grant.

13.2 Finance income on leased assets are recognised based on a pattern reflecting a constant periodic rate of return on the net investment as per the levellised tariff notified/to be notified by CERC.

13.3 FERV on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenor of lease. FERV recovery (as per CERC norms) from the constituents is recognised net of such amortised amount.

14. DEPRECIATION

14.1.1 Depreciation is provided on straight line method at the rates specified in the norms notified by CERC for the purpose of recovery of tariff except for the following assets in respect of which depreciation is charged at the rates mentioned below:

a) Computers & Peripherals 30%

b) Mobile Phones 33.33%

c) Software 33.33%

14.1.2 ULDC assets other than assets identified to be transferred to Power System Operation Corporation Limited are depreciated @ 6.67% per annum as determined by CERC for levellized tariff.

14.1.3 Depreciation on assets identified to be transferred to Power System Operation Corporation Limited is provided on straight line method at the rates specified in the norms notified by CERC for the purpose of recovery of RLDC Fee and Charges.

14.1.4 Depreciation on assets of telecom and consultancy business, is provided for on straight line method as per rates specified in Schedule XIV of the Companies Act, 1956.

14.1.5 Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to the month in which the asset is available for use/disposal.

14.1.6 Where the cost of depreciable asset has undergone a change due to increase/decrease in long term liabilities on account of exchange rate fluctuation, price adjustment, change in duties or similar factors, the unamortized balance of such asset is depreciated prospectively over the residual life determined on the basis of the rate of depreciation as specified by the CERC.

14.1.7 Capital expenditure on assets not owned by the company is amortized over a period of four years from the year in which the first line/sub-station of the project comes into commercial operation and, thereafter, from the year in which the relevant assets are completed and become available for use.

14.1.8 Plant and machinery, loose tools and items of scientific appliances, included under different heads of assets, costing Rs. 5000/- or less, or where the written down value is Rs. 5000/- or less as at the beginning of the year, are charged off to revenue.

14.1.9 Assets costing upto Rs. 5,000/- are fully depreciated in the year of acquisition.

14.2.1 Leasehold land is depreciated over the tenure of the lease.

14.2.2 In the case of assets of National thermal power corporation limited (NTPC) , National hydro-electric power corporation limited (NHPC), North-eastern electric power corporation limited (NEEPCO), Neyveli lignite corporation limited (NLC) transferred w.e.f. April 1, 1992, Jammu and Kashmir Lines w.e.f. April 1, 1993, and Tehri hydro development corporation limited (THDC) w.e.f. August 1, 1993, depreciation is charged based on gross block as indicated in transferors books with necessary adjustments so that the life of the assets as laid down in the CERC notification for tariff is maintained.

14.2.3 Expenditure, except the cost of equipment capitalised, incurred for activating the last mile connectivity of telecom links are amortized over the period of agreement with the customer.

15. EXPENDITURE

15.1 Pre-paid/prior-period items up to Rs. 100000/- are accounted for to natural heads of account.

15.2 Expenditure of research and development, other than Capital Expenditure, are charged to revenue in the year of incurrence.

16. IMPAIRMENT OF ASSETS

Cash generating units as defined in AS-28 on Impairment of Assets are identified at the balance sheet date with respect to carrying amount vis-aRs.-vis. recoverable amount thereof and impairment loss, if any, is recognised in the profit & loss account. Impairment loss, if need to be reversed subsequently, is accounted for in the year of reversal.

17. EMPLOYEE BENEFITS

17.1 The liability for retirement benefits of employees in respect of Gratuity, which is ascertained annually on actuarial valuation at the year end, is provided and funded separately.

17.2 The liabilities for compensated absence (both for Earned & Half Pay Leave), leave encashment, post retirement medical benefits & Settlement Allowance to employees are ascertained annually on on actuarial valuation at the year end and provided for.

18. PROVISIONS AND CONTINGENT LIABILITIES

A provision is recognised when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made based on technical valuation and past experience. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. No provision is recognised for liabilities whose future outcome cannot be ascertained with reasonable certainties. Such contingent liabilities are not recognised but are disclosed in the schedule of contingent liability on the basis of judgment of the management /independent expert. These are reviewed at each balance sheet date and adjusted to reflect the current management estimate.

1 a) The company owns 4703 hectare (Previous Year 4138 hectare) of land valuing Rs. 536.56 crore (Previous Year 438.27 crore) which has been classified into freehold and leasehold based on available documentation.

b) The companys land in the State of Jammu & Kashmir amounting to Rs. 19.89 crore (Previous Year Rs. 18.78 crore) and in certain other cases (value not ascertainable), the conveyancing of title to the freehold land and execution/ registration of lease agreements in favour of the company is pending for completion of legal formalities.

c) Freehold land includes Rs. 33.71 crore (previous year Rs. 31.91 crore) in respect of land acquired for residential complex at Gurgaon for which conveyance deed in favour of the Company is yet to be executed.

d) Leasehold land includes Rs. 7.64 crore (previous year Rs. 7.64 crore) in respect of land acquired for office complex on perpetual lease basis with an unlimited useful life at Katwaria Sarai, New Delhi and hence no depreciation is charged.


Mar 31, 2003

1. GRANTS - IN - AID

Grants-in-aid received from Central Government or other authorities towards capital expenditure for Projects and betterment of transmission systems are shown as grants-in-aid under Reserves and Surplus till the utilisation of grant. However, grants received for specific depreciable assets are shown under Reserves and Surplus while the assets are under construction. On capitalisation of assets, such grants-in-aid are treated as deferred income and recognised in the Profit and Loss Account over the period and in the proportion in which depreciation on these assets is provided.

2. FIXED ASSETS

2.1 In the case of commissioned assets, deposit works/cost- plus contracts where final settlement of bills with contractors is yet to be effected, capitalisation is made on provisional basis subject to necessary adjustments in the year of final settlement.

2.2 Assets and Systems common to more than one Transmission System are capitalised on the basis of technical estimates and /or assessments.

2.3. The cost of land includes provisional deposits, payments/liabilities towards compensation, rehabilitation and other expenses but does not include the deposits/advances/expenditure incurred wherever possession of land is not taken.

2.4 Expenditure on levelling, clearing and grading of land is capitalised as part of cost of the buildings.

2.5 Capital expenditure on assets not owned by the company, reflected as a distinct item in Capital Work-in-Progress, pending completion, is thereafter shown as a distinct item in fixed assets.

3. MANDATORY SPARES

3.1 Mandatory spares in the nature of sub-station equipments /capital spares i.e. stand-by/service/rotational equipment and unit assemblies, either procured along with the equipments or subsequently, are capitalised and depreciation charged as per relevant rates. Mandatory spares of consumable nature and transmission line items are treated as inventory after commissioning of the line.

3.2 Insurance Spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular are capitalised and depreciated over the residual useful life of the related plant & machinery.

4. EXPENDITURE DURING CONSTRUCTION

4.1 i) Corporate Office expenses, chargeable to Revenue, are allocated to Regional Load Despatch Centres (RLDCs) and Accelerated Power Development and Reform Programme (APDRP) in the proportion the RLDC O&M and APDRP expenses bear to the O&M expenditure of the Company (excluding Corporate Office expenses).

ii) Regional Office expenses are allocated to Accelerated Power Development and Reform Programme (APDRP) in the proportion the APDRP expenses bear to the O&M expenditure of the Region (excluding Regional Office expenses).

iii) Expenses of Corporate Office, as reduced by the amount allocated to APDRP and RLDCs, common to operation and construction activities, are allocated to Profit and Loss Account and Incidental Expenditure during Construction in the proportion of Transmission Income to Annual Capital Outlay.

iv) Expenses of the projects, common to operation and construction activities, are allocated to Profit and Loss Account and Incidental Expenditure during Construction in the proportion of Transmission Income to Accretion to Capital Work-in- Progress.

v) Consultancy expenditure incurred for Telecom Business is allocated to different links based on revised estimated cost submitted to Govt. for approval. Other expenditure is allocated as per the above accounting policies.

vi) The Transmission system is capitalised when it is ready for intended use. However, in case of delay in commercial operation/ earning of revenue, the revenue expenditure (excluding interest charges) incurred during the intervening period are treated as Deferred Revenue Expenditure (DRE) and amortised over a period of 5 years from the year of commercial operation / earning of revenue. The depreciation charge is postponed till the year of commercial operation.

vii) (a) All the borrowed funds are earmarked to specific projects. The borrowing cost (including Bond Issue expenses, Front End fee, Management fee etc.) is allocated to the projects in proportion to the funds so earmarked.

(b) The borrowing costs so allocated are capitalised or charged to revenue, based on whether the project is under construction or operation.

4.2 Incidental Expenditure during Construction (net) including Corporate Office expenses, allocated to the projects pro-rata to the capital expenditure for the year, is apportioned to capital work in progress (CWIP) on the basis of accretion thereto. Interest during construction is apportioned on the closing balance of CWIP.

4.3 Deposit works/cost-plus contracts are accounted for on the basis of statement of account received from the contractors.

4.4 Claims for price- variation/exchange rate variation in case of contracts are accounted for on acceptance.

5. FOREIGN CURRENCY CONVERSION OR TRANSLATION OF ITEMS

Foreign Currency loans/deposits/liabilities are translated/converted with reference to the rates of exchange ruling at the year- end. Difference is adjusted to Capital Work-in-Progress/Fixed Assets in case of Capital Assets and is charged off to revenue, in the case of Current Assets.

6. VALUATION OF INVENTORIES

6.1 Inventories, other than scrap, are valued at cost on weighted- average basis.

6.2 Steel scrap and conductor scrap are valued at estimated realisable value or book value, whichever is less. Other scrap is accounted for as and when sold.

7. RECOGNITION OF INCOME

7.1. Transmission Income is accounted for based on tariff rates notified by Central Electricity Regulatory Commission (CERC). In case of transmission projects where tariff has not been notified, transmission income is accounted as per tariff norms notified by CERC.

7.2. Sale of power purchased from Chukha Hydel Power Corp. Ltd. and Kurichhu Hydel Power Corp. Ltd., Bhutan, is accounted for on the basis of power tariff as notified by Government of India from time to time.

7.3 Surcharge / development surcharge recoverable from debtors is not treated as accrued due to uncertainty of its realisation and is, therefore, accounted for on receipt / certainty of receipt.

7.4 Liquidated damages/Warranty claims and Interest on advances to suppliers are not treated as accrued due to uncertainty of realisation, and are, therefore, accounted for on receipt/ acceptance.

7.5 Income from Consultancy/Contract Services is accounted for on the basis of actual progress / technical assessment of work executed, except in cases where contracts provide otherwise.

7.6 The Transmission system Incentive/Disincentive is accounted for based on the norms notified/approved by Central Electricity Regulatory Commission from 01.04.2001 and as per notification No. 2/3/Powergrid/Tariff/98 dated 04.02.99 of Government of India upto 31.03.2001 on certification of availability by the respective Regional Electricity Boards.

7.7 Dividend including interim dividend is accounted for in the year of declaration.

8. LEASED ASSETS - STATE SECTOR ULDC

8.1 State Sector ULDC assets leased to the SEBs are considered as Finance Lease. Net investment in the leased assets is accounted as Lease Receivables under Loans & Advances.

8.2 Finance income on leased assets is recognised based on a pattern reflecting a constant periodic rate of return on the net investment.

8.3 Exchange Rate Variation (ERV) on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenor of lease. ERV recovery (as per CERC norms) from the constituents is recognised net of such amortised amount.

9. EXPENDITURE

9.1 a) Depreciation is provided on Straight Line Method at the rates specified in Central Electricity Regulatory Commission (CERC) notification for tariff under the Electricity Regulatory Commission Act, 1998 on pro-rata basis. In respect of assets, where rates have not been specified in the said notification, depreciation is provided on straight line method as per rates prescribed under the Income Tax Act, 1961, except in case of computers and peripherals, where rates as assessed by the Company are adopted.

b) Depreciation on assets, procured specifically for telecom business, is provided on straight line method as per rates specified in Schedule XIV of the Companies Act, 1956.

c) Where the cost of depreciable asset has undergone a change due to increase/decrease in long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortised balance of such asset is depreciated prospectively over the residual life determined on the basis of the rate of depreciation.

d) Capital expenditure on assets not owned by the company is amortised over a period of four years from the year in which the first line/sub-station of the project comes into commercial operation and, thereafter, from the year in which the relevant assets are completed and become available for use.

9.2 In the case of assets of National Thermal Power Corporation Limited (NTPC), National Hydro-electric Power Corporation Limited (NHPC), North-Eastern Electric Power Corporation Limited (NEEPCO), Neyveli Lignite Corporation Limited (NLC) transferred w.e.f. 01.04.92, Jammu and Kashmir Lines w.e.f. 01.04.93, and Tehri Hydro Development Corporation Limited (THDC) w.e.f. 01.08.93, depreciation is charged based on Gross Block as indicated in transferors books with necessary adjustments so that the life of the assets as laid down in the CERC notification for tariff is maintained.

9.3 Plant and Machinery, Loose Tools and items of scientific appliances, included under different heads of assets, costing Rs.5000/- or less or with written down value of Rs.5000/- or less as at the beginning of the year, are charged off to revenue.

9.4 Insurance reserve is created @ 0.1 % on gross value of Fixed Assets as at the close of the year in respect of future losses which may arise from uninsured risks except for machinery breakdown for valve halls of HVDC Bi-pole and fire risk for HVDC equipments, and SVC sub-stations.

9.5 Expenses on Training and Recruitment, Research and Development are charged to revenue.

9.6 Pre-paid/prior-period items upto Rs.100000/- are accounted to natural heads of account.

10. INVESTMENTS

Long term investments are carried at cost less provisions, if any, for permanent diminution in the value of such investments. Current investments are carried at the cost or fair value, whichever is lower.

11. RETIREMENT BENEFITS

The liability for gratuity, leave-encashment, and post retirement medical benefits of employees is accounted for on accrual basis based on acturial valuation.

 
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