Notes forming Part of Financial Statements NOTE - 1 The operations of the Company are governed by the Electricity Act, 2003 and various Regulations and / or Policies framed thereunder by the appropriate authorities. Accordingly, in brparing the financial statements the relevant provisions of the said Act, Regulations etc. have been duly considered. NOTE - 2 SIGNIFICANT ACCOUNTING POLICIES (a) Accounting Convention Pursuant to section 133 of the Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 till the standard of accounting or any addendum thereto brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under Companies Act, 1956 shall continue to apply. Consequently, these financial statements have been brpared to comply in all material aspects with Accounting Standards notified under section 211(3C)[Companies (Accounting Standards) Rules, 2006,as amended] and other provisions of the Companies Act, 2013 and the regulations under the Electricity Act, 2003 to the extent applicable. A summary of important accounting policies which have been applied consistently are set out below. (b) Basis of Accounting These financial statements have been brpared in accordance with the generally accepted accounting principles in India under historical cost convention, except for certain tangible assets which are being carried at revalued amount. Specific items of capital /revenue matters on which there is bearing of regulatory actions, have been separately disclosed / dealt with in these financial statements. (c) Tangible Assets Tangible Assets other than furniture and vehicles acquired upto 31st March, 2005, have been adjusted for the effect of valuation made by an approved external valuer at the then current replacement cost after necessary adjustment for debrciation / amortisation. Subsequent acquisition of these assets, furniture and vehicles are stated at cost of acquisition together with any incidental expenses related to acquisition and appropriate borrowing costs. In case of a project, cost also includes br-operative expenses and where applicable, expenses during trial run after netting off of revenue earned during trial run and income arising from temporary use of funds pending utilisation. An impairment loss is recognized where applicable, when the carrying value of tangible assets of cash generating unit exceed its market value or value in use, whichever is higher. (d) Intangible Assets Intangible assets comprising computer software, brands/trademarks and mining rights, expected to provide future enduring economic benefits are stated at cost of acquisition / implementation / development less accumulated amortisation. An impairment loss is recognized where applicable, when the carrying value of intangible assets of cash generating unit exceed its market value or value in use, whichever is higher. (e) Debrciation and Amortisation In terms of applicable Regulations under the Electricity Act, 2003, debrciation on tangible assets other than freehold land is provided on straight line method on a prorata basis at the rates specified therein, the basis of which is considered by the West Bengal Electricity Regulatory Commission (Commission) in determining the tariff for the year of the Company. Additional charge of debrciation for the year on increase in value arising from revaluation is recouped from Revaluation Reserve. Leasehold land is amortized over the unexpired period of the lease. Cost of intangible assets, comprising computer software related expenditure, are amortised in three years and those relating to brands/trademarks in twenty years, based on useful life assessed by an independent valuer. Mining rights are also amortised over the estimated useful life of the assets of twenty years. (f) Leasing Lease rentals in respect of assets taken under operating lease are charged to revenue. (g) Investments Current Investments are stated at lower of cost and fair value and Non Current Investments are stated at cost.Provision is made where there is a decline, other than temporary, in the value of Non Current Investment. (h) Inventories Inventories of stores and spares and fuel are valued at lower of cost and net realizable value. Cost is calculated on weighted average basis and comprises expenditure incurred in the normal course of business in bringing such inventories to their location and condition. Obsolete, slow moving and defective inventories are identified at the time of physical verification of inventories and where necessary, adjustment is made for such items. (i) Foreign Currency Transactions Transactions in foreign currency are accounted for at the exchange rate brvailing on the date of transactions. Transactions remaining unsettled are translated at the exchange rate brvailing at the end of the financial year. Exchange gain or loss arising on settlement / translation is recognized in the Statement of Profit and Loss . The outstanding loans repayable in foreign currency are restated at the year-end exchange rate. Exchange gain or loss arising in respect of such restatement is accounted for as an income or expense with recognition of the said amount as refundable or recoverable, which will be taken into consideration in determining the Company's future tariff in respect of the amount settled duly considering as appropriate, the impact of the contracts entered into for managing risks thereunder. (j) Revenue from Operations Earnings from sale of electricity are net of discount for prompt payment of bills and do not include electricity duty payable to the State Government. They also include, as per established practice, consistently followed by the Company in the past, estimated sums recoverable from / adjustable on consumers' account, calculated on the basis of rates approved / specified by the appropriate authorities which are reflected in the subsequent bills. In terms of the applicable regulations and tariff determination process followed by the Commission, advance against debrciation forms part of tariff. Such advance against debrciation of a year is adjusted against earning from sale of electricity for inclusion of the same in subsequent years, based on due consideration by the authorities in the tariff determination process. Income from meter rent is accounted for as per the approved rates. (k) Other Income Income from investments and deposits etc. is accounted for on accrual basis inclusive of related tax deducted at source, where applicable. Delayed Payment Surcharge as a general practice is determined and recognised on a receipt of overdue payment from consumer. (l) Employee Benefits Contributions to Provident Fund and Contributory Pension Fund are accounted for on accrual basis. Provident Fund contributions are made to a fund administered through duly constituted approved independent trust. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and deficiency, if any, is made good by the Company, impact of which is ascertained by way of actuarial valuation as at the year end. The Company, as per its schemes, extend employee benefits current and/or post retirement, which are accounted for on accrual basis and includes actuarial valuation as at the Balance Sheet date in respect of gratuity, leave encashment and certain other retiral benefits, to the extent applicable, made by independent actuary. Actuarial gains and losses, where applicable, are recognised in the Statement of Profit and Loss. Compensation in respect of voluntary retirement scheme is charged off to revenue. (m) Miscellaneous expenditure to the extent not written off or adjusted The erstwhile governing statute for the Company, viz., the Electricity (Supply) Act, 1948 (ESA), provided for amortisation of brliminary expenses and certain capital issue expenses over the unexpired period of licence. The Company, as per the consistently applied accounting policy continues with such amortisation of expenditure incurred upto the year 2004-05. Thereafter, pursuant to repeal of ESA, such expenditures are charged off to revenue. (n) Finance Costs Finance Costs comprise interest expenses, applicable gain / loss on foreign currency borrowings in appropriate cases and other borrowing costs. Such Finance Costs attributable to acquisition and / or construction of qualifying assets are capitalized as a part of cost of such assets upto the date, where such assets are ready for their intended use. The balance Finance Costs is charged off to revenue. Finance Costs in case of foreign currency borrowings is accounted for as appropriate, duly considering the impact of the contracts entered into for managing risks there for. (o) Taxes on Income Current tax rebrsents the amount payable based on computation of tax as per brvailing taxation laws under the Income Tax Act, 1961. Provision for deferred taxation is made using liability method at the current rates of taxation on all timing differences to the extent it is probable that a liability or asset will crystallize. Deferred Tax Assets are recognized subject to the consideration of prudence and are periodically reviewed to reassess realization thereof. Deferred Tax Liability or Asset will give rise to actual tax payable or recoverable at the time of reversal thereof. Since tax on profits forms part of chargeable expenditure under the applicable regulations, deferred tax liability or asset is recoverable or payable through future tariff. Hence, recognition of deferred tax asset or liability is made with corresponding provision of liability or asset, as applicable. NOTE -3 TRADE PAYABLES (a) Rs. 0.02 crore (31.3.2015 - Rs. Nil), Rs. 0.12 crore (31.3.2015 - Rs. 0.08 crore) and Rs. 0.76 crore (31.03.2015- Rs. 0.64 crore) rebrsenting interest due on amount outstanding as at the year end, interest accrued and due for the period of delay in making payment during the year and interest accrued and remaining unpaid at the year end respectively due to Micro and Small Enterprises, as defined in the Micro, Small and Medium Enterprises Development Act, 2006 on information available with the Company. (b) Trade payables include a sum of Rs. 166.09 crore (31.3.15- Rs. 82.85 crore) on account of sums due to agencies from which electrical energy was purchased. During the year ended 31 March, 2016 billing in respect of the same from Haldia Energy Ltd (HEL) has been made for the period 1 April, 2015 to 31 January, 2016 in consonance with the order of the Commission dated 29 January, 2016 on HEL and in terms of the order dated 4 March, 2015 on the company (the procurer) and billing for the period 1 February to 31 March, 2016 has been made as per the afore-stated order on HEL. Adjustments arising out of the above shall be considered indue course in line with the directive/order of the Commission. Cost of Electrical energy purchased has been netted off against a sum of Rs. 110.17 Crore (Previous Year NIL) pursuant to settlement of provisions made in respect of an agency for procurement of power in the past. NOTE - 4 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR) (a) Claims against the Company not acknowledged as debts: The West Bengal Taxation Tribunal had held meter rentals received by the Company from consumers to be deemed sales under the provisions of the Bengal Finance (Sales Tax) Act, 1941 and that sales tax was payable on such rentals. Based on such findings the Commercial Taxes Directorate assessed Rs. 0.69 crore as sales tax on meter rentals received during the year ended 31st March, 1993 and raised a demand of Rs. 0.36 crore on account of interest. Against the above demand, the Company had deposited a sum of Rs. 0.75 crore with the sales tax authorities and obtained a stay against the balance demand from the Deputy Commissioner of Commercial Taxes. The sales tax authorities also indicated their intention to levy such sales tax on meter rentals for the subsequent years as well, against which, the Company filed a writ petition in the Calcutta High Court and prayed for an interim order, inter alia, restraining the sales tax authorities from proceeding with the assessment for the subsequent years till disposal of the appeal. An interim order has been issued by the High Court permitting the sales tax authorities to carry out assessments but restraining them from serving any assessment order on the Company. The disposal of the case is still pending. (b) Commitments of the Company on account of estimated amount of contracts remaining to be executed on capital account and the same towards borrowing / financing obligations of subsidiaries anda body corporate from banks, not provided for amounting to Rs. 104.22 crore (31.03.2015 : Rs. 162.57 crore), Rs. 1585.33 crore ( 31.03.2015 : Rs. 1597.48 crore) and Rs. 77.07 crore (31.03.2015 : Rs. 104.59 crore) respectively. (c) Other money for which the Company is contingently liable : (i) Income tax matters : Nil (31.03.2015 : Rs. 12.74 crore) (ii) Other matters : Nil (31.03.2015 : Rs. 20.50 crore) (d) The Company has ongoing commitment to extend support and provide equity to the subsidiaries, in respect of various projects and otherwise (where, in certain cases there are restriction on transfer of investments). The future cash outflow in respect of above cannot be ascertained at this stage. (e) For commitment relating to leasing arrangement, refer note 35. NOTE-5 COST OF FUEL (a) The consumption of coal for the year 2015-16 works out to 43,47,348 Tonnes (brvious year 54,19,643 Tonnes) having a value of Rs. 1501.14 crore (brvious year Rs. 1779.82 crore). (b) Cost of fuel shown in the Statement of Profit and Loss includes freight of Rs. 274.08 crore (brvious year Rs. 300.08 crore) and gain of Rs. 0.11 crore (brvious year gain Rs. 1.78 crore) towards exchange fluctuation and is net off write back of Rs. 170.46 crore (brvious year Rs. Nil) pursuant to settlement on this count. (c) The consumption oil for the year 2015-16 works out to 3245.33 Kilolitres (brvious year 3964.21 Kilolitres) having a value of Rs. 16.61 crore (brvious year Rs. 25.10 crore) NOTE -6 In terms of the provisions of the Companies Act, 2013, members of the Company at the 37th Annual General Meeting held on 31st July, 2015 have approved payment of commission to the Non Executive Directors commencing from the Financial Year 201415 at a rate not exceeding 3% p.a. of the net profits of the Company computed in the manner stated in Section 198 read with Section 197(1) of the Act subject to the total managerial remuneration not exceeding 11% of the net profits for the relevant Financial Year. The said commission has been fully provided for the year 2015-16. NOTE - 7 Outstanding foreign currency loans as on 31st March, 2016 as disclosed in Note 5, stands fully hedged in Indian Rupee. Trade Payables include Nil (31.03.2015 : Rs. 18.25 crore) rebrsenting amount payable in United States Dollar which have not been hedged. NOTE - 8 Based on a review of the projected business prospects of the Company's subsidiaries, inspite of brsent losses in many of them, the management does not foresee any diminution, other than temporary, in the value of the Company's investments and share application money placed therein. NOTE - 9 Future rentals payable in respect of non-cancellable leases for assets comprising various equipment and vehicles acquired under operating leases for the period ranging between 36-60 months work out to Rs. 3.45 crore (brvious year: Rs. 3.50 crore) and Rs. 5.78 crore (brvious year: Rs. 10.21 crore) during next one year and thereafter till five years respectively. There are no restrictions in respect of such leases. NOTE -10 The Company is engaged in generation and distribution of electricity and does not operate in any other reportable segment. NOTE - 11 Additional levy amounting to Rs. 998 crore paid to the account of the Central Government, in terms of the provisions of the Coal Mines (Special Provisions) Ordinance, 2014, read with the Coal Mines (Special Provisions) Rules, 2014 framed thereunder, Coal Mines (Special Provisions) Second Ordinance, 2014 and Coal Mines (Special Provisions) Act, 2015, relatable to the output of Sarisatolli Coal block for meeting part of the Company's coal requirement since inception to 31st March, 2015, has been considered as recoverable ( accounted for in the year ended 31st March 2015 as exceptional item and partly fuel cost) by way of tariff in terms of the applicable laws / regulations, for which appropriate reference has been made to West Bengal Electricity Regulatory Commission, and being pursued by the management, the nature of payment being in the form of levy and given the facts and circumstances of the incidence thereof. NOTE - 12 Part A of Schedule II to the Companies Act, 2013 (the "Act"), inter alia, provides that debrciable amount of an asset is the cost of an asset or other amount substituted for cost. Part B of the said Schedule deals with the useful life or residual value of an asset as notified for accounting purpose by a Regulatory Authority constituted under an act of Parliament or by the Central Government for calculating debrciation to be provided for such asset irrespective of the requirement of Schedule II. In terms of applicable Regulations under the Electricity Act, 2003, debrciation on tangible assets other than freehold land is provided on straight line method on a pro-rata basis at the rates specified therein, the basis of which is considered by the West Bengal Electricity Regulatory Commission (Commission) in determining the Company's tariff for the year, which is also required to be used for accounting purpose as specified in the said Regulations. The Company has considered the implication of withdrawal of the Guidance Note on Treatment of Reserves arising on revaluation of assets, by the Institute of Chartered Accountants of India, from 14 October, 2015 and announced on 21 October, 2015 in its financial statements and based on legal opinions and independent accounting opinions obtained, continues with the consistently followed practice of recouping from the Revaluation Reserve the additional charge of debrciation relatable to the increase in value arising from revaluation, which for the year ended 31st March, 2016 amounts to Rs. 112.00 crore (brvious year Rs. 109.76 crore). NOTE -13 In terms of the provisions of Companies Act, 2013, the required Corporate Social Responsibility (CSR) spending works out to Rs. 16.53 crore ( brvious year: Rs. 15.17 crore ), which has been met by way of contribution to a trust set up for the said purpose and direct expenditure of Rs. 14.57 crore ( brvious year: Rs. 12.11crore ) and Rs. 2.02 crore ( Rs. 3.06 crore ) respectively. NOTE - 14 The derated installed capacity of the Generating Stations of the Company (as per certification of technical expert) as on 31st March, 2016 was 1125000 kW (31st March, 2015 : 1125000 kW). NOTE-15 The Company has reclassified brvious year's figures to conform to this year's classification alongwith other regrouping/ rearrangement wherever necessary. For Lovelock & Lewes Firm Registration Number: 301056E Chartered Accountants Sougata Mukherjee Partner Membership No.: 057084 For and on behalf of the Board of Directors Subhasis Mitra Company Secretary SanjivGoenka Chairman Aniruddha Basu Managing Director Rajarshi Banerjee Executive Director & CFO Kolkata, 19th May, 2016 |