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Notes to Accounts of Shipping Corporation of India Ltd.

Mar 31, 2014

Rights/Preference/Restriction attached to Equity Shares

The Company has only one class of Equity shares having par value of Rs. 10. Each shareholder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive the remaining assets of the company after distribution of all preferential allotment in proportion to their shareholding.

1. Notes:

A. Tonnage Tax Reserve (Utilised)

Tonnage Tax Reserve [Statutory Reserve, as per requirement of section 115VT of the Income tax Act, 1961] which has been utilised but awaiting transfer to General Reserve

B. Corporate Social Responsibility Reserve

Reserve created as per the corporate social responsibilty policy of the company. It is created for contribution to betterment of society and environment

C. Staff Welfare Fund

This is a fund created for the welfare activities of the employees

Notes:

(1) Additions to Fleet include Rs. 80082 lakhs (Prev. yr. Rs. 44098 lakhs) on account of currency exchange difference adjusted as per Significant Accounting Policy No. 8 (d)

(2) Borrowing cost and Interest capitalised during the period is Rs. 430 lakhs (Prev. year Rs. 5635 lakhs).

(3) Buildings include cost of Shipping House at Bombay Rs. 134 lakhs (Prev. yr. Rs. 134 lakhs ) which is on leasehold land where in the value of lease is considered at Rs. Nil.

(4) Ownership Flats and Residential Buildings include : Cost of shares and bonds in Cooperative Societies/Company of face value Rs. 0.73 lakhs (Prev. yr. Rs. 0.73 lakhs ).

(5) During the year, the Company has reviewed its fixed assets for impairment loss as required by Accounting Standard 28 - "Impairment of Assets" In the opinion of management no provision for impairment is considered necessary.

** Shares have been pledged to banks against loans given by them

*** The shares are pledged to banks against loans given by them to joint venture companies.

A. The Company entered into a joint venture agreement with Steel Authority of India Ltd. with participation interest in the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an authorised share capital of Rs. 17000 lakhs. The Company has subscribed equity capital of 5,00,000 shares of Rs. 10 each amounting to Rs. 50 lakhs and during the period SCI has made initial payment of Rs. 10 lakhs towards equity capital.

B. Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd, Visakhapatnam Port trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated with an investment of Rs. 5000 lakhs (previous year Rs. 5000 lakhs). The dredging work is temporarily suspended from 17.09.2009 consequent upon the direction of the Hon''ble Supreme Court of India. As there is no progress in the project since then, the Management had provided for dimunition towards the investment in FY 2012-13 and the same is shown at "Nil" Value.

C. India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture companies promoted by the Corporation and three Japanese companies Viz. M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) along with M/S Qatar Shipping Company (Q Ship), Qatar. SCI and MOL are the largest shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line 8.95% & Q Ship holds 15% respectively. The Shares held by the Corporation and other partners in the two joint venture Companies have been pledged against loans provided by lender banks to these companies. India LNG Transport Company No.1 Ltd owns and operates one LNG tanker SS Disha and India LNG Transport Company No. 2 Ltd owns and operates one LNG Tanker SS Raahi. The entire operation and management of the two companies was taken over by SCI from 1st January 2009.

D. India LNG Transport Company No. 3 Ltd. is the 3rd joint venture company which owns and operates one LNG tanker MT Aseem. The company is promoted by the Corporation and its three Japanese partners viz. MOL, NYK Lines, K Line along with M/S Qatar Gas Transport Company (QGTC) and M/s Petronet LNG Limited (PLL) who are the other partners. SCI and MOL are the largest shareholders with 26% share each, while NYK, K Line, QGTC and PLL hold 16.67%, 8.33%, 20% and 3% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to these companies. The entire operation and management of the company was taken over by SCI from April 2013.

E. India LNG Transport Company No. 4 Ltd. is a Joint Venture Company incorporated in Singapore in November 2013 and is promoted by the Corporation with its three Japanese partners viz MOL, NYK and K Line. SCI, NYK, MOL are holding 26% share each, while the balance 22% is with K Line. The company will construct, own and operate one LNG tanker of about 173,000 CBM and would be under a 19-year Time Charter Agreement with charterers M/s Petronet LNG Limited. The tanker will be delivered in September 2016 and will be operating from Barrow Islands, Australia to Kochi, India.

2. 30 Shares are held in the name of SCI Directors and are with Irano Hind Shipping Co. Ltd, Tehran

A. The Company holds 49% interest in Irano Hind Shipping Co. Ltd. a joint venture company incorporated in Iran on which sanction has been imposed by United Nations Organisation (UN). The exposure of the Company in the Joint Venture is limited to Rs. 39 lakhs towards investment. It has been decided by the JV partners to dissolve this company.

B. SCI Forbes Ltd. is a joint venture between SCI, Forbes & Co. & Sterling Investment Pvt. Ltd where SCI has a 50% shareholding.The Management has provided Rs. 7180 lakhs towards dimunition in the value of the investment in SCI Forbes Ltd as it has been decided to sell its entire stake in the joint venture company to other partners.

** Represents provision for expected losses on unfinished voyages. In FY 2012-13, a provision of Rs. 407 lakhs had been made which was reversed as the same has been adjusted in the current year. The provision for FY 2013-14 is Rs. 70 lakhs

NOTE -"3"- Contingent liabilities & Commitments

As at As at Particulars 31st March, 31st March, 2014 2013 Rs. In lakhs Rs. In lakhs

Contingent Liabilities i Claim against the company not acknowledged as debts - A Claim made by M/s. Chokhani International Ltd. towards dry dock expenses 4,443 4,225 pending before High Court, Chennai B Cargo Loss, Freight, Demurrage, Slot Payments, Fuel Cost, other operational 5,927 5,890 claims and Custom duty disputed demand. (As certified by the Management) C Disputed demand of Statutory Dues 18,753 13,566 (As certified by the Management) a) Income Tax & Sales Tax 18,516 8,027 b) Service Tax 237 5,539

ii Guarantees given by the Banks

A on behalf of the Company 4,216 3,453 B on behalf of the Joint Venture to the extent of the Company''s share 6,458 3,896

iii Undertaking cum Indemnity given by Company 1,000 1,000

iv Cargo Claims covered by P&I Club 346 89

v Bonds/Undertakings given by the Company to Customs Authorities 17,677 23,330

vi Corporate Guarantees/Undertakings

A In respect of Joint Ventures Not Not Ascertainable Ascertainable B Others 5,457 6,405

Commitments: Estimated amount of contracts on capital account, remaining to be executed 1,14,404 2,30,475 and hence not provided for (Net of Advance paid) (As certified by the Management)

Notes:-

1. Segment definitions - Liner segment includes break bulk and container transport. Bulk segment includes tankers (both crude and product), dry bulk carriers, gas carriers and phosphoric acid carriers. Others include offshore vessels, passenger vessels and services and ships managed on behalf of other organisations. Unallocable items and interest income / expenses are disclosed separately.

2. All assets/liabilities and revenue items are allocated vessel wise wherever possible. Assets/liabilities and revenue items that cannot be allocated vessel wise are allocated on the basis of unit cum GRT method i.e. 50% allocated on the basis of units and balance 50% on the basis of adjusted GRT. GRT is adjusted to one third of GRT or 20000 GRT, whichever is more in case of vessels which are bigger than 20000 GRT.

3. The components of capital employed that cannot be directly identified are allocated on the basis of GRT method

4. None of the financial assets of SCI have been considered in the fair value of plan assets.

5. The expected rate of return on plan assets has been estimated on the basis of actual returns of the trust in the past years. The assets of the trust are in the nature of investments in securities, fixed deposits, Interest accrued, and balances in current accounts with Bank. The securities of trust have an effect on the fair value of plan assets as the value of the securities vary with the changes in the market interest rates.

6. Actual Return on plan assets Rs. 1532 lakh. (Prev. period Rs. 1519 lakhs)

7. Contribution expected to be paid in the next year Rs. NIL

8. Effect of an increase of one percentage point and the effect of a decrease of one percentage point in the assumed medical cost trend rates on:

(i) the aggregate of the current service cost and interest cost components of net periodic post-employment medical costs; and

(ii) the accumulated post-employment benefit obligation for medical costs. (Rs. In Lakhs)

9. The estimates of future salary increases, considered in the actuarial valuation, takes into account inflation, security, promotion and other relevant factors.

10. The Company''s Provident Fund is exempted under section 17 of Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulate that the employer shall make good deficiency, if any, in the interest rate declared by the trust vis-a-vis statutory rate.

NOTE - "4"

During the year the Company has changed its policy for provisions relating to insurance claims covered by Hull Insurance. Expenses on account of general average claims/ damages to ships which were being erstwhile provided for to the extent of deductible limit in the year of claim are now written off in the year in which they are actually incurred. Due to this change the expenditure booked under the head "Insurance and Protection "is lower by Rs. 1090 lakhs and the profit for the year is higher by Rs. 1090 lakhs.

NOTE - "5"

During the year the Company has changed its estimates of recognizing Demurrage Income related to Tankers. Due to this change, the Income booked under "Demurrage income" and Profit for the year are higher by 2884 lakhs.

NOTE - "6"

(i) The Company has been exempted from complying with Para 5 (viii) (a), (b), (c) & (e) of Part II of Schedule VI of the Companies Act, 1956 vide notification no. F. No 51/12/2007-CL.III dated 08.02.2011 issued by Ministry of Corporate Affairs, Government of India.

(ii) Remittance of dividends in foreign currency Rs. NIL (Previous year Rs. Nil).

NOTE - "7"

Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various parties by the Company and the same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes.

NOTE - "8"

The figures of previous year have been regrouped or rearranged wherever necessary/practicable to conform to current year''s presentation based on new Schedule VI notified by the Ministry of Corporate Affairs. Further, the figures are rounded off to the nearest lakh rupees.


Mar 31, 2013

NOTE 1 : RELATED PARTY DISCLOSURES

Related Party disclosures, as required by AS - 18 "Related Party Disclosures" are given below: Names of related party entities with whom transactions were carried out during the period: Joint Venture Companies:

1. Irano Hind Shipping Co. Ltd.

2. India LNG Transport Co. (No. 1) Ltd.

3. India LNG Transport Co. (No. 2) Ltd.

4. India LNG Transport Co. (No. 3) Ltd.

5. SCI Forbes Ltd.

6. SAIL SCI Shipping Pvt. Ltd.

Key Management Personnel:

Functional Directors

1. Shri S. Hajara, CMD (up to 31.12.2012)

2. Shri B. K. Mandal, Director (Finance) and CMD (w.e.f. 01.01.2013)

3. Shri Kailash Gupta (up to 31.12.2012)

4. Shri. J. N. Das

5. Shri. A. K. Gupta

6. Shri. S. Thapar

7. Shri. B. B. Sinha (w.e.f. 01.01.2013)

NOTE 2

(i) The Company has been exempted from complying with Para 5 (viii) (a), (b), (c) & (e) of Part II of Schedule VI of the Companies Act, 1956 vide notification no. F. No 51/12/2007-CL.III dated 08.02.2011 issued by Ministry of Corporate Affairs, Government of India.

(ii) Remittance of dividends in foreign currency Rs. NIL (Previous year Rs. Nil).

NOTE 3

Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various parties by the Company and the same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes.

NOTE 4

The figures of previous year have been regrouped or rearranged wherever necessary / practicable to conform to current year''s presentation based on new Schedule VI notified by the Ministry of Corporate Affairs. Further, the figures are rounded off to the nearest lakh rupees.


Mar 31, 2012

NOTE 29 : CONTINGENT LIABILITIES & COMMITMENTS

As at As at Particulars 31.03.2012 31.03.2011 (Rs. in lakhs) (Rs. in lakhs)

Contingent Liabilities

i. Claim against the company not acknowledged as debts -

A. Claim made by M/s. Chokhani International Ltd. towards dry dock expenses pending before High Court, Chennai 4225 4006

B. Forfeiture of Earnest Money Deposit, Cargo Loss, Freight, Demurrage, Slot Payments, Fuel Cost, other operational claims and Custom duty disputed demand. (As certified by the Management) 8204 9217

C. Disputed demand of Statutory Dues (As certified by the Management) 12392 9175

a) Income Tax 5874 9175

b) Service Tax* 6518 Nil

ii. Guarantees given by the Banks

A. On behalf of the Company 3436 1892

B. On behalf of the Joint Venture to the extent of the Company's share. 3661 3200

iii. Undertaking cum Indemnity given by Company 1000 1000

iv. Cargo Claims covered by P&I Club 66 20

v. Bonds / Undertakings given by the Company to Customs Authorities. 8686 10140

vi. Corporate Guarantees / Undertakings

A. In respect of Joint Ventures Not Not Ascertainable Ascertainable

B. Others 5617 5023

COMMITMENTS :

i. Estimated amount of contracts on capital account, remaining to be executed and hence not provided for (Net of Advance paid) (As certified by the Management) 410101 455490

ii. Commitment towards subscription of shares 40 40

*Service tax department issued show cause notices to the Company proposing to impose levy of service tax under the category of "Storage and Warehousing Service" aggregating to (a) Rs. 2679 lakhs (Prev. Yr. Rs. 2679 lakhs) for the period from 01/10/2002 to 31/12/2007 (b) Rs. 754 lakhs (Prev. Yr. Rs. 754 lakhs) for the period from 01/01/2008 to 31/01/2009 and (c) Rs. 405 lakhs (Prev. Yr. Rs. 405 lakhs) for the period from 01/02/2009 to 30/09/2009 (d) Rs. 274 lakhs (Prev. Yr. Nil) for the period from 01/10/2009 to 31/03/2010 (e) Rs. 660 lakhs (Prev. Yr. Nil) for the FY 2010-11 and also interest and penalty alleging that Company has provided storage & warehousing services to Oil & Natural Gas Corporation (ONGC) in respect of vessels given to ONGC under Time Charter arrangement.

Though order dated 13.02.2012 has recently been passed with reference to show cause notice for the period from 01/10/2002 to 31/12/2007 partly confirming the levy of Service Tax, according to the management, service tax is not leviable for such chartering arrangement under the category of "Storage and warehousing Service" and therefore SCI has challenged the applicability of service tax under this category and has not accepted any liability towards service tax on this account.

NOTE 30 : RELATED PARTY DISCLOSURES

Related Party disclosures, as required by AS - 18 "Related Party Disclosures" are given below : Names of related party entities with whom transactions were carried out during the period : Joint Venture Companies :

1) Irano Hind Shipping Co. Ltd.

2) India LNG Transport Co. (No. 1) Ltd.

3) India LNG Transport Co. (No. 2) Ltd.

4) India LNG Transport Co. (No. 3) Ltd.

5) SCI Forbes Ltd.

6) SAIL SCI Shipping Pvt. Ltd.

Key Management Personnel : FUNCTIONAL DIRECTORS

1) Shri S. Hajara, CMD

2) Shri B. K. Mandal

3) Shri Kailash Gupta

4) Shri J. N. Das

5) Shri A. K. Gupta

6) Shri S. Thapar

NOTE 34 : DISCLOSURES OF EMPLOYEE BENEFITS AS PER ACCOUNTING STANDARD-15 "EMPLOYEES BENEFITS", AS DEFINED THERE IN ARE GIVEN BELOW

A. Description of type of employee benefits

The Company offers to its employee's defined benefits plans in the form of Gratuity, leave encashment and post retirement Medical Scheme

The details under the plan are as follows :

i) Gratuity

a) Represents benefits to employee on the basis of number of years of service rendered by employee. The employee is entitled to receive the same on retirement or resignation.

b) SCI has formed a trust for gratuity which is funded by the Company on a regular basis. The assets of the trust have been considered as plan assets.

ii) Leave Encashment

Represents unavailed leave to the credit of the employee and carried forward in accordance with terms of agreement.

iii) Post Retirement Medical Benefit Scheme

Represents benefits given to employees subsequent to retirement on the happening of any unforeseen event resulting in medical costs to the employee.

NOTE 36 : CHANGES IN ACCOUNTING POLICIES

The Corporation has with effect from 1st April 2011 changed the following accounting policies :

a. All foreign currency transactions are recorded at the exchange rate of the second last Friday of the preceding month published in Financial Times, London which were earlier recorded at the rate of the last Friday of the preceding month. As a result of this change, there is no material impact on profit for the year.

b. The value of stock of bunker is arrived at after charging consumption on daily "Moving Average Price" method against FIFO (First In First Out) method followed upto 31st March 2011. This has resulted decrease in bunker consumption by Rs. 132 lakhs during the year ended 31st March, 2012.

c. The method of providing depreciation on offshore vessels has been changed. Up to last year, off shore vessels were being written off over a period of 12 years. In view of the fact that as per SCI's scrapping guidelines, the life of offshore vessels is to be taken as 20 years, it has been decided to depreciate these vessels over 20 years w.e.f FY 2011-12. This is in compliance with the rates prescribed in Schedule XIV to the Companies Act, 1956. Due to this change, the depreciation for FY 2011-12 is lower by Rs. 440 lakhs and the profit is higher by Rs. 440 lakhs. Consequently, the book value of fixed assets is higher by Rs. 440 lakhs.

d. Spares

The Company had a policy of making provision for consumption of spares which remain in transit for more than three months. However, with the introduction of SAP this practice is no more required. The financial implication due to change in policy is Rs. 79 lakhs.

NOTE 37

The Company has been exempted from complying with Para 4 (D) (a), (b), (c) & (e) of Part II of Schedule VI of the Companies Act, 1956 vide notification no. F. No 51/12/2007-CL.III dated 08.02.2011 issued by Ministry of Corporate Affairs, Government of India.

NOTE 38

Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various parties by the Company and the same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes.

NOTE 39

The figures of previous year have been regrouped or rearranged wherever necessary / practicable to conform to current year's presentation based on new Schedule VI notified by the Ministry of Corporate Affairs. Further, the figures are rounded off to the nearest lakh rupees.


Mar 31, 2011

1. The Company being a shipping company, its activities are based both in shore and in floating ships. The Company have implemented three different ERP packages to take care of both shore and the ship related transactions and they have gone live from 28.02.2011. The accounts for the period 01.04.2010 to 31.01.2011 (i.e for ten months) are prepared in the legacy system and for the period 01.02.2011 to 31.03.2011 (i.e for two months) are prepared in the new system. With all efforts, the system has been implemented and the accounts for the 4th quarter and year ending 31.03.2011 are for the first time prepared under the new system.

In addition to above, supporting documents for income and expenses are not received by the Company from the agents and transactions have been recorded based on the amount of the advance released / data received from the agents for the month of March 2011.

Necessary accounting effects to rectify the migration errors have been carried out by the management where ever the instances have been observed and the exercise is continuing and the necessary rectification will be made appropriately.

Further to above the company is unable to make certain adjustment in respect of following due to issues arising on migration and uploading of data in the new system:

i) Translation of certain balances as per policy No. 8(c), where ever rectification entries have been passed post revaluation of the balances of the assets and liabilities,

ii) The segmental results disclosed segment report may consist certain inter segment compensating issues,

iii) In some of the assets, depreciation is accounted where instances of classification in inter assets class is noticed and date of capitalisation is taken based on best available information,

iv) Certain transaction relating to payments etc reflected in the bank reconciliation statements could not be incorporated,

v) During the current year aggregate Net Credit balance of Rs. 25375.49 Lakhs in vendor and accounts payable are shown as Sundry creditors and other liabilities, which up to previous year were disclosed vendor wise-Debit and credit separately,

vi) The Foreign currency revaluation effects of various assets and liabilities are included in the debtors, instead of grouping the same with the respective assets and liabilities,

vii) The 2nd phase of audit by the Comptroller & Auditor General of India, has not been completed due to limitation of time.

The impact of items stated in para (i) to (iv) is not material on the result of the Company. Further the matters stated in para (iv) to (vi) relates to assets and liabilities and grouping there of under the various heads of the Balance sheet.

As at As at

31.03.2011 31.03.2010

(Rs. in lakhs) (Rs. in lakhs)

2 Contingent Liabilities not provided for:-

(i) Claim against the company not acknowledged as debts -

(a) Claim made by M/s. Chokhani International Ltd. towards dry dock expenses pending before High Court, Chennai 4,006 3,788

(b) Forfeiture of Earnest Money Deposit, Cargo Loss, Freight, Demurrage, Slot Payments, Fuel Cost, other operational claims and Custom duty disputed demand. (As certified by the Management) 9,217 9,437

(c) Disputed demand of Income tax (As certified by the Management) 9,175 5,205

(ii) Guarantees given by the Banks

(a) on behalf of the Company 1,892 2,685

(b) on behalf of the Joint Venture to the extent of the Companys share. 3,200 3,232

(iii) Undertaking cum Indemnity given by Company 1,000 1,000

(iv) Cargo Claims covered by P&I Club 120 177

(v) Bonds / Undertakings given by the Company to Customs Authorities. 10,140 7,347

(vi) Corporate Guarantees / Undertakings

- In respect of Joint Ventures Not Ascertainable Not Ascertainable

- Others 5,023 5,064

(vii) Commitment towards subscription of shares 40 NIL

3. RELATED PARTY DISCLOSURES:

Related Party disclosures, as required by AS - 18 "Related Party Disclosures" are given below: (a) Names of related party entities with whom transactions were carried out during the period: (i) Joint Venture Companies

1. Irano Hind Shipping Co. Ltd.

2. India LNG Transport Co. (No. 1) Ltd.

3. India LNG Transport Co. (No. 2) Ltd.

4. India LNG Transport Co. (No. 3) Ltd.

5. SCI Forbes Ltd.

6. SAIL SCI Shipping Pvt. Ltd.

(ii) Key Management Personnel Functional Directors

1. Shri S. Hajara, CMD

2. Shri B.K. Mandal

3. Shri Kailash Gupta

4. Shri U.C. Grover (up to 31.08.2010)

5. Shri. J.N. Das

6. Shri K.S. Nair (up to 31.12.2010)

7. Shri. A. K. Gupta (w.e.f. 25.10.2010)

8. Shri. S. Thapar (w.e.f. 11.01.2011)

9. Sethusamudram Corporation Ltd. (SCL),

a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd., Visakhapatnam Port Trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated for an investment not exceeding Rs. 5,000 lakhs (previous year Rs. 5,000 lakhs).The dredging work is temporarily suspended from 17.09.2009, consequent to the direction of the Hon'ble Supreme Court of India. The Management does not consider any diminution in the value of the investment and the same has been carried at cost.

10. The depreciation on additions to / deductions from fixed assets other than Ships is charged on pro-rata basis which were hitherto provided for full year in case of additions and no depreciation was provided in the year the assets were sold / discarded. In respect of Ships, depreciation on additions to existing fleet is now charged on pro-rata basis which was hitherto provided for the full year irrespective of the date of addition. Due to this change, the profit is higher by Rs. 1321 lakhs.

11. The Company entered into a joint venture agreement with Steel Authority of India Ltd. with participation interest in the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an authorised share capital of Rs. 17000 lakhs. The Company has subscribed equity capital of 500000 shares of Rs. 10 each amounting to Rs. 50 lakhs and during the period SCI has made initial payment of Rs. 10 lakhs towards equity capital. Pending remittance towards the balance subscribed capital the same has not been considered as investment and the consequent liability.

12. During the financial year 2010-11, the Company made an investment of Rs. 1230 lakhs towards acquiring 0% Redeemable preference shares and further paid an amount of Rs. 1330 lakhs towards partly-paid Equity share capital in Joint Venture, SCI Forbes Ltd.

13. The Company holds 49% interest in a joint venture company incorporated in Iran on which sanction has been imposed by United Nations Organisation (UN). The exposure of the Company in the Joint Venture is limited to Rs. 39 lakhs towards investment made and Rs. 27 lakhs towards the recoverable expenses. No provision is considered necessary by the management on the same and the company maintains status quo as far as investment in JV is concerned.

1) Segment definitions - Liner segment includes break bulk and container transport. Bulk segment includes tankers (both crude and product), dry bulk carriers, gas carriers and phosphoric acid carriers. Others include offshore vessels, passenger vessels and services and ships managed on behalf of other organisations. Unallocable items and interest income / expenses are disclosed separately.

2) All assets / liabilities and revenue items are allocated vessel wise wherever possible. Assets / liabilities and revenue items that cannot be allocated vessel wise are allocated on the basis of unit cum GRT method i.e. 50% allocated on the basis of units and balance 50% on the basis of adjusted GRT. GRT is adjusted to one third of GRT or 20000 GRT, whichever is more in case of vessels which are bigger than 20000 GRT.

3) The components of capital employed that cannot be directly identified are allocated on the basis of GRT method.

14. Disclosures of Employee benefits as per Accounting Standard-15 "Employees benefits", as defined there in are given below

A) Description of type of employee benefits

The Company offers to its employees defined benefits plans in the form of Gratuity, leave encashment and post retirement Medical Scheme.

The details under the plan are as follows:

i Gratuity

(a) Represents benefits to employee on the basis of number of years of service rendered by employee. The employee is entitled to receive the same on retirement or resignation.

(b) SCI has formed a trust for gratuity which is funded by the Company on a regular basis. The assets of the trust have been considered as plan assets.

ii Leave Encashment Represents unavailed leave to the credit of the employee and carried forward in accordance with terms of agreement.

iii. Post Retirement Medical Benefit Scheme Represents benefits given to employees subsequent to retirement on the happening of any unforeseen event resulting in medical costs to the employee.

G) (i) Percentage of category of plan assets to fair value of plan assets

(i) None of the financial assets of SCI have been considered in the fair value of plan assets.

(ii) The expected rate of return on plan assets have been estimated on the basis of actual returns of the trust in the past years. The assets of the trust are in the nature of investments in securities, fixed deposits, Interest accrued, and balances in current accounts with Bank. The securities of trust have an effect on the fair value of plan assets as the value of the securities vary with the changes in the market interest rates.

(iii) Actual return on plan assets: Rs. 1168 Lakhs (Previous period Rs. 1703 lakhs).

I) Effect of an increase of one percentage point and the effect of a decrease of one percentage point in the assumed medical cost trend rates on:

(i) the aggregate of the current service cost and interest cost components of net periodic post-employment medical costs; and (ii) the accumulated post-employment benefit obligation for medical costs.

J) The estimates of future salary increases, considered in the actuarial valuation, takes into account inflation, security, promotion and other relevant factors.

K) The Guidance on implementing AS 15, Employee benefits (revised 2005) issued by Accounting Standard Board (ASB) states benefit involving employer established provident funds, which requires interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, the Company's actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly the Company is unable to exhibit the related information. However, such interest shortfall has been recompensed by the Company up to the current period on accrual basis.

15. Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various parties by the Company and same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes.

16. Pending implementation of pay revision of employees retrospectively from 1st January, 2007, the Company has made adequate provisions in the books of accounts as per Managements decision based on DPE OM dated 26th November, 2008. During the year ended 31st March, 2011, a provision of Rs. 1825 (Prev. Yr. Rs. 3710 lakhs) has been made and the cumulative balance of provision in this regard stands at Rs. 10736 lakhs (Prev. Yr. Rs. 8911 lakhs).

17. Service tax department has issued show cause notices to the Company proposing to impose levy of service tax under the category of "Storage and Warehousing Service" aggregating to (a) Rs. 2679 lakhs for the period from 01/10/2002 to 31/12/2007 (b) Rs. 754 lakhs for the period from 01/01/2008 to 31/01/2009 and (c) Rs. 405 lakhs for the period from 01/02/2009 to 30/09/2009 and also interest and penalty alleging that Company has provided storage & warehousing services to Oil & Natural Gas Corporation (ONGC) in respect of vessels given to ONGC under Time Charter arrangement.

According to the management, service tax is not leviable for such chartering arrangement under the category of "Storage and warehousing Service" and therefore SCI has challenged the applicability of service tax under this category and has not accepted any liability towards service tax on this account.

18. Borrowing cost and Interest capitalised during the period is Rs. 1562 lakhs (Prev. year Rs. 1514 lakhs).

19. The Company has been exempted from complying with Para 4 (D) (a), (b), (c) & (e) of Part II of Schedule VI of the Companies Act,1956 vide notification no. F.No 51/12/2007-CL.III dated 08.02.2011 issued by Ministry of Corporate Affairs, Government of India.

20. During the year, the Company has reviewed its fixed assets for impairment loss as required by Accounting Standards 28 - "mpairment of Assets" In the opinion of management no provision for impairment is considered necessary.

21. During the quarter ended 31st December, 2010 the government disinvested 10% of the paid up share capital of the company through a Follow on Public Offer and the company issued 42345365 equity shares of Rs. 10 each generating proceeds of Rs. 58245 lakhs including a premium of Rs. 54010 lakhs. The expenses of the Follow on Public Offer like commissions, advertisement etc amounting to Rs. 1644 lakhs have been adjusted against this Securities premium account.

22. The figures of previous year have been regrouped or rearranged wherever necessary / practicable to conform to current year's presentation. Further the figures are rounded off to the nearest lakh rupees.

 
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