Accounting Policies of NTPC Green Energy Ltd. Company

Mar 31, 2025

C. Material accounting policies

A summary of the material accounting policies applied in
the preparation of the financial statements are as given
below. These accounting policies have been applied
consistently to all periods presented in the financial
statements. It allows for an understanding as to how
material transactions, other events and conditions are
reported. It also describes: (a) judgements, apart from
those involving estimations, that management makes
in applying the policies that have the most significant
effect on the amounts recognised in the Financial
Statements; and (b) estimations, including assumptions
about the future, that management makes in applying
the policies.

1. Property, plant and equipment

1.1. Initial recognition and measurement

a) An item of property, plant and equipment
is recognized as an asset if and only if it is
probable that future economic benefits
associated with the item will flow to the
Company and the cost of the item can be
measured reliably.

b) Items of property, plant and equipment are
initially recognized at cost.

c) Subsequent measurement is done at cost less
accumulated depreciation/amortization and
accumulated impairment losses.

d) When parts of an item of property, plant and
equipment that are significant in value and
have different useful lives as compared to the
main asset, they are recognized separately.

e) Deposits, payments/liabilities made
provisionally towards compensation,
rehabilitation and other expenses relatable to
land in possession are treated as cost of land.

f) In the case of assets put to use, where final
settlement of bills with contractors is yet to be
effected, capitalization is done on provisional
basis subject to necessary adjustment in the
year of final settlement.

g) Items of spare parts, stand-by equipment
and servicing equipment which meet the
definition of property, plant and equipment
are capitalized. Other spare parts are carried
as inventory and recognized as expense in the
statement of profit and loss on consumption.

h) The acquisition or construction of some items
of property, plant and equipment although
not directly increasing the future economic
benefits of any particular existing item of
property, plant and equipment, may be
necessary for the Company to obtain future
economic benefits from its other assets. Such
items are recognized as property, plant and
equipment.

i) Excess of net sale proceed of items produced
while bringing the asset to the location and
condition necessary for it to be capable
of operating in the manner intended by
management is deducted from the directly
attributable cost considered as part of an item
of property, plant and equipment.

1.2. Subsequent costs

a) Subsequent expenditure is recognized in
the carrying amount of the asset when it
is probable that future economic benefits
deriving from the cost incurred will flow to
the enterprise and the cost of the item can be
measured reliably.

b) The cost of replacing major part of an item of
property, plant and equipment is recognized in
the carrying amount of the item if it is probable
that the future economic benefits embodied
within the part will flow to the Company and

its cost can be measured reliably. The carrying
amount of the replaced part is derecognized
regardless of whether the replaced part
has been depreciated separately. If it is not
practicable to determine the carrying amount
of the replaced part, the Company uses the
cost of the replacement as an indication of
what the cost of replaced part was at the time
it was acquired or constructed. The costs of the
day-to-day servicing of property, plant and
equipment are recognized in the statement of
profit and loss as and when incurred.

1.3. De-recognition

Property, plant and equipment is derecognized
when no future economic benefits are expected
from their use or upon their disposal. Gains and
losses on de-recognition of an item of property,
plant and equipment are determined as the
difference between sale proceeds from disposal, if
any, and the carrying amount of property, plant and
equipment and are recognized in the statement of
profit and loss.

1.4. Depreciation/amortization

a) Depreciation on the assets of the generation
of electricity business covered under Part B
of Schedule II of the Companies Act, 2013, is
charged on straight-line method following the
rates and methodology notified by the Central
Electricity Regulatory Commission (CERC)
Tariff Regulations.

Depreciation on the assets of the power
plants and on the assets of Corporate & other
offices of the Company not governed by CERC
Tariff Regulations is charged on straight-line
method following the useful life specified in
Schedule II of the Companies Act, 2013 except
for the assets referred below.

Depreciation on the following assets is
provided on their estimated useful lives, which
are different from the useful lives as prescribed
under Schedule II to the Companies Act,
2013, ascertained on the basis of technical
evaluation/ assessment:

b) Capital spares are depreciated considering the
useful life up to 25 years based on technical
assessment.

c) Right-of-use land and buildings relating to
generation of electricity business governed
by CERC Tariff Regulations are fully amortized
on straight line method over the lease period
or life of the related plant whichever is lower
following the rates and methodology notified
by the CERC Tariff Regulations.

d) Right-of-use land and buildings relating to
generation of electricity business which are
not governed by CERC tariff Regulations are
fully amortized on straight line method over
the lease period or life of the related plant
whichever is lower.

e) Right-of-use buildings relating to corporate,
and other offices are fully amortized on
straight line method over lease period.

f) Depreciation on additions to/deductions from
property, plant and equipment during the
year is charged on pro-rata basis from/up to
the month in which the asset is available for
use/sale, disposal or earmarked for disposal.

g) Where it is probable that future economic
benefits deriving from the expenditure
incurred will flow to the Company and the
cost of the item can be measured reliably,
subsequent expenditure on a property,
plant and equipment along-with its
unamortized depreciable amount is charged
off prospectively over the revised useful life
determined by technical assessment.

h) The residual values, useful lives and method of
depreciation of assets other than the assets of
generation of electricity business governed by
CERC Tariff Regulations, are reviewed at each
financial year end and adjusted prospectively,
wherever required.

i) Depreciation of an asset ceases at the earlier
of the date that the asset is classified as held
for sale (or included in a disposal group that

is classified as held for sale) in accordance
with Ind AS 105 and the date that the asset is
derecognized.

j) Refer policy no. C.12 in respect of depreciation/
amortization of right-of-use assets other than
land and buildings.

2. Capital work-in-progress

a) Cost incurred for property, plant and
equipment that are not ready for their
intended use as on the reporting date, is
classified under capital work- in-progress.

b) The cost of self-constructed assets includes
the cost of materials & direct labour, any
other costs directly attributable to bringing
the assets to the location and condition
necessary for it to be capable of operating in
the manner intended by management and the
borrowing costs attributable to the acquisition
or construction of qualifying asset.

c) Expenses directly attributable to construction
of property, plant and equipment incurred
till they are ready for their intended use are
identified and allocated on a systematic basis
on the cost of related assets.

d) Deposit works/cost plus contracts are
accounted for on the basis of statements of
account received from the contractors.

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

f) The Company periodically reviews its Capital
work-in-progress and in case of abandoned
works, provision for unserviceable cost is
provided for, as required, basis the technical
assessment. Further, provisions made are
reviewed at regular intervals and in case
work has been subsequently taken up, then
provision earlier provided for is written back
to the extent the same is no longer required.

g) Net pre-commissioning income/expenditure
is adjusted directly in the cost of related assets
and systems.

3. Intangible assets and intangible assets under
development

3.1. Initial recognition and measurement

Intangible assets that are acquired by the Company,
which have finite useful lives, are recognized at
cost. Subsequent measurement is done at cost
less accumulated amortization and accumulated
impairment losses.

3.2. Subsequent costs

Subsequent expenditure is recognized as an
increase in the carrying amount of the asset when it
is probable that future economic benefits deriving
from the cost incurred will flow to the enterprise
and the cost of the item can be measured reliably.

3.3. De-recognition

An intangible asset is derecognized when no
future economic benefits are expected from their
use or upon their disposal. Gain or loss on de¬
recognition of an intangible asset is determined as
the difference between the net disposal proceeds,
if any, and the carrying amount of intangible assets
and are recognized in the statement of profit and
loss.

3.4. Amortization

a) Cost of software recognized as intangible
asset, is amortized on straight-line method
over a period of legal right to use or 3 years,
whichever is less.

b) The amortization period and the amortization
method of intangible assets with a finite useful
life is reviewed at each financial year end and
adjusted prospectively, wherever required.

4. Borrowing costs

a) Borrowing costs consist of (a) interest expense
calculated using the effective interest method
as described in Ind AS 109 - ''Financial
Instruments'' (b) interest expense on lease
liabilities recognized in accordance with Ind
AS 116- ''Leases''.

b) Borrowing costs that are directly attributable
to the acquisition, construction/exploration/
development or erection of qualifying assets
are capitalized as part of cost of such asset
until such time the assets are substantially
ready for their intended use. Qualifying assets
are assets which necessarily take substantial
period of time to get ready for their intended
use or sale.

c) When the Company borrows funds specifically
for the purpose of obtaining a qualifying asset,
the borrowing costs incurred are capitalized.
When Company borrows funds generally
and uses them for the purpose of obtaining
a qualifying asset, the capitalization of the
borrowing costs is computed based on the
weighted average cost of all borrowings that
are outstanding during the period and used
for the acquisition, construction/exploration
or erection of the qualifying asset. However,
borrowing costs applicable to borrowings
made specifically for the purpose of obtaining
a qualifying asset, are excluded from this
calculation, until substantially all the activities
necessary to prepare that asset for its intended
use or sale are complete.

d) Income earned on temporary investment
made out of the borrowings pending
utilization for expenditure on the qualifying
assets is deducted from the borrowing costs
eligible for capitalization.

e) Capitalization of borrowing costs ceases when
substantially all the activities necessary to
prepare the qualifying assets for their intended
use are complete.

f) Other borrowing costs are recognized as an
expense in the year in which they are incurred

g) The Company can incur borrowing costs
during an extended period in which it
suspends the activities necessary to prepare
an asset for its intended use or sale. Such costs
are costs of holding partially completed assets
and is not eligible for capitalisation. However,
the Company does not normally suspend
capitalising borrowing costs during a period
when it carries out substantial technical and
administrative work. The Company also does
not suspend capitalising borrowing costs
when a temporary delay is a necessary part
of the process of getting an asset ready for its
intended use or sale.

5. Inventories

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

The diminution in the value of obsolete/,
unserviceable/, surplus stores and spares and non¬
moving unserviceable inventories is ascertained on
review and provided for.

6. Government grants

Government grants are recognized when there is
reasonable assurance that they will be received
and the Company will comply with the conditions
associated with the grant. Grants that compensate
the Company for the cost of depreciable asset are
recognized as income in statement of profit and
loss on a systematic basis over the period and in
the proportion in which depreciation is charged.
Grants that compensate the Company for expenses
incurred are recognized over the period in which
the related costs are incurred and the same is
deducted from the related expenses.

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Mar 31, 2024

C. Material accounting policies

A summary of the material accounting policies applied in the preparation of the financial statements are as given
below. These accounting policies have been applied consistently to all periods presented in the financial statements.

1. Property, plant and equipment

1.1. Initial recognition and measurement

An item of property, plant and equipment is recognized as an asset if and only if it is probable that future economic
benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

Items of property, plant and equipment are initially recognized at cost.. Subsequent measurement is done at cost
less accumulated depreciation/amortization and accumulated impairment losses.

When parts of an item of property, plant and equipment that are significant in value and have different useful
lives as compared to the main asset, they are recognized separately.

Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expenses
relatable to land in possession are treated as cost of land.

In the case of assets put to use, where final settlement of bills with contractors is yet to be effected, capitalization
is done on provisional basis subject to necessary adjustment in the year of final settlement.

Assets and systems common to more than one generating unit are capitalized on the basis of engineering estimates/
assessments.

Items of spare parts, stand-by equipment and servicing equipment which meet the definition of property, plant
and equipment are capitalized. Other spare parts are carried as inventory and recognized as expense in the
statement of profit and loss on consumption.

The acquisition or construction of some items of property, plant and equipment although not directly increasing
the future economic benefits of any particular existing item of property, plant and equipment, may be necessary
for the Company to obtain future economic benefits from its other assets. Such items are recognized as property,
plant and equipment.

Excess of net sale proceed of items produced while bringing the asset to the location and condition necessary for
it to be capable of operating in the manner intended by management is deducted from the directly attributable
cost considered as part of an item of property, plant and equipment.

1.2. Subsequent costs

Subsequent expenditure is recognized in the carrying amount of the asset when it is probable that future economic
benefits deriving from the cost incurred will flow to the enterprise and the cost of the item can be measured
reliably.

The cost of replacing major part of an item of property, plant and equipment is recognized in the carrying amount
of the item if it is probable that the future economic benefits embodied within the part will flow to the Company
and its cost can be measured reliably. The carrying amount of the replaced part is derecognized regardless of
whether the replaced part has been depreciated separately. If it is not practicable to determine the carrying
amount of the replaced part, the Company uses the cost of the replacement as an indication of what the cost of
replaced part was at the time it was acquired or constructed. The costs of the day-to-day servicing of property,
plant and equipment are recognized in the statement of profit and loss as and when incurred.

1.3. De-recognition

Property, plant and equipment is derecognized when no future economic benefits are expected from their use or
upon their disposal. Gains and losses on de-recognition of an item of property, plant and equipment are determined
as the difference between sale proceeds from disposal, if any, and the carrying amount of property, plant and
equipment and are recognized in the statement of profit and loss.

1.4. Depreciation/amortization

Depreciation on the assets of the generation of electricity business covered under Part B of Schedule II of the
Companies Act, 2013, is charged on straight-line method following the rates and methodology notified by the
Central Electricity Regulatory Commission (CERC) Tariff Regulations.

Depreciation on the assets of the power plants and on the assets of Corporate & other offices of the Company not
governed by CERC Tariff Regulations is charged on straight-line method following the useful life specified in Schedule
II of the Companies Act, 2013 except for the assets referred below.

Depreciation on the following assets is provided on their estimated useful lives, which are different from the
useful lives as prescribed under Schedule II to the Companies Act, 2013, ascertained on the basis of technical
evaluation/ assessment:

Capital spares are depreciated considering the useful life up to 25 years based on technical assessment.

Right-of-use land and buildings relating to generation of electricity business which are not governed by CERC
tariff Regulations are fully amortized on straight line method over the lease period or life of the related plant
whichever is lower.

Depreciation on additions to/deductions from property, plant and equipment during the year is charged on pro¬
rata basis from/up to the month in which the asset is available for use/sale, disposal or earmarked for disposal.

Where it is probable that future economic benefits deriving from the expenditure incurred will flow to the Company
and the cost of the item can be measured reliably, subsequent expenditure on a property, plant and equipment
along-with its unamortized depreciable amount is charged off prospectively over the revised useful life determined
by technical assessment.

The residual values, useful lives and method of depreciation of assets other than the assets of generation of
electricity business governed by CERC Tariff Regulations, are reviewed at each financial year end and adjusted
prospectively, wherever required.

Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale (or included in
a disposal group that is classified as held for sale) in accordance with Ind AS 105 and the date that the asset is
derecognized.

Refer policy no. C.13 in respect of depreciation/amortization of right-of-use assets other than land and buildings.

2. Capital work-in-progress

Cost incurred for property, plant and equipment that are not ready for their intended use as on the reporting
date, is classified under capital work- in-progress.

The cost of self-constructed assets includes the cost of materials & direct labour, any other costs directly attributable
to bringing the assets to the location and condition necessary for it to be capable of operating in the manner
intended by management and the borrowing costs attributable to the acquisition or construction of qualifying
asset.

Expenses directly attributable to construction of property, plant and equipment incurred till they are ready for
their intended use are identified and allocated on a systematic basis on the cost of related assets.

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

Unsettled liabilities for price variation in case of contracts are accounted for on estimated basis as per terms of the
contracts.

3. Intangible assets and intangible assets under development

3.1. Initial recognition and measurement

Intangible assets that are acquired by the Company, which have finite useful lives, are recognized at cost. Subsequent
measurement is done at cost less accumulated amortization and accumulated impairment losses.

3.2. Subsequent costs

Subsequent expenditure is recognized as an increase in the carrying amount of the asset when it is probable that
future economic benefits deriving from the cost incurred will flow to the enterprise and the cost of the item can
be measured reliably.

3.3. De-recognition

An intangible asset is derecognized when no future economic benefits are expected from their use or upon their
disposal. Gain or loss on de-recognition of an intangible asset is determined as the difference between the net
disposal proceeds, if any, and the carrying amount of intangible assets and are recognized in the statement of
profit and loss.

3.4. Amortization

Cost of software recognized as intangible asset, is amortized on straight-line method over a period of legal right to
use or 3 years, whichever is less.

The amortization period and the amortization method of intangible assets with a finite useful life is reviewed at
each financial year end and adjusted prospectively, wherever required.

4. Borrowing costs

Borrowing costs consist of (a) interest expense calculated using the effective interest method as described in Ind
AS 109 - ''Financial Instruments'' (b) interest expense on lease liabilities recognized in accordance with Ind AS
116- ''Leases''.

Borrowing costs that are directly attributable to the acquisition, construction/exploration/ development or erection
of qualifying assets are capitalized as part of cost of such asset until such time the assets are substantially ready
for their intended use. Qualifying assets are assets which necessarily take substantial period of time to get ready
for their intended use or sale.

When the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the borrowing
costs incurred are capitalized. When Company borrows funds generally and uses them for the purpose of obtaining
a qualifying asset, the capitalization of the borrowing costs is computed based on the weighted average cost of all
borrowings that are outstanding during the period and used for the acquisition, construction/exploration or erection
of the qualifying asset. However, borrowing costs applicable to borrowings made specifically for the purpose of
obtaining a qualifying asset, are excluded from this calculation, until substantially all the activities necessary to
prepare that asset for its intended use or sale are complete.

Income earned on temporary investment made out of the borrowings pending utilization for expenditure on the
qualifying assets is deducted from the borrowing costs eligible for capitalization.

Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying
assets for their intended use are complete.

Other borrowing costs are recognized as an expense in the year in which they are incurred

The Company can incur borrowing costs during an extended period in which it suspends the activities necessary
to prepare an asset for its intended use or sale. Such costs are costs of holding partially completed assets and is
not eligible for capitalisation. However, the Company does not normally suspend capitalising borrowing costs
during a period when it carries out substantial technical and administrative work. The Company also does not
suspend capitalising borrowing costs when a temporary delay is a necessary part of the process of getting an
asset ready for its intended use or sale.

5. Inventories

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

Non-moving items of stores and spares are reviewed and diminution in the value of obsolete, unserviceable,
surplus spares is ascertained and provided for.

6. Government grants

Government grants are recognized when there is reasonable assurance that they will be received and the Company
will comply with the conditions associated with the grant. Grants that compensate the Company for the cost of

depreciable asset are recognized as income in statement of profit and loss on a systematic basis over the period
and in the proportion in which depreciation is charged. Grants that compensate the Company for expenses incurred
are recognized over the period in which the related costs are incurred and the same is deducted from the related
expenses.