1.(a) Significant accounting policies 1 GENERAL The financial statements are brpared under the historical cost convention and on going concern basis. These statements have been brpared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 2013 and iii) the Accounts Manual of the Company. 2 FIXED ASSETS Fixed Assets are stated at cost of acquisition/construction less accumulated debrciation. Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period up to the capitalisation of the respective asset as reduced by liquidated damages. Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably. Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable. Expenditure on Tangible Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use. 3 DEbrCIATION Debrciation on Tangible Assets is provided for in conformity with the provisions of Schedule II to the Companies Act, 2013 on the basis of Useful life of the Asset by leaving a residual value of 5% in respect of Plant and Machinery, Buildings and Roads & Bridges and X1 in respect of other tangible assets. 4 NON CURRENT INVESTMENTS Non-Current Investments are stated at cost. Any diminution in the value of Non-Current Investments, other than temporary in nature, are provided for. 5 EXPENDITURE DURING CONSTRUCTION Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note. 6 GRANTS Grants from Government are shown as a deduction from the gross value of tangible assets/capital work in progress. 7 INVENTORY VALUATION (i) Raw materials and packing materials are valued at cost on FIFO basis. (ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis. (iii) Loose tools and reconditioned spares are revalued on WDV basis annually. (iv) Finished products are valued at lower of cost or net realisable value including final / estimated subsidy. Phosphatic and Potassic Fertilizers • Field warehouse inventories: The Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty. • Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred. • I nventories in transit : The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus final / estimated NBS less estimated warehousing expenses. • I nventories at Plant ready for sale : The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated NBS less estimated freight and warehousing expenses. Urea • Field warehouse inventories: The Least of selling price to Marketers / Dealers including Excise Duty. • Inventories in transit : The least of selling price to Marketers / Dealers including Excise Duty plus final / estimated subsidy less estimated warehousing expenses. • Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated freight and warehousing expenses. • Bulk Urea at Plant : Least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated bagging, freight and warehousing expenses. (v) Warehousing expenses have been distributed over sales and closing stock. (vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products. (vii)Ammonia is valued at cost as the same is captivity consumed and not intended for sale. (viii) Off-spec products intended for disposal are valued at estimated realizable value. (ix) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses. (x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty. (xi) Goods in Transit / Under Inspection are valued at cost. 8 TRADE RECEIVABLES /LOANS AND ADVANCES Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery. 9 GROSS SALES Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers. 10 SUBSIDY (i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure brscribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt. (ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt. 11 FOREIGN CURRENCY TRANSACTIONS All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or brvalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement. 12 EMPLOYEE BENEFIT EXPENSES (i) Short Term Benefits Short Term Employee Benefits are accounted on accrual basis. (ii) Post-employment Benefits and other Long Term Employee Benefits a. These are limited to and provided / paid in line with the DPE guidelines. b. The Company's contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement. c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement. d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis. e. Obligations on post -retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year. (iii) Termination Benefits Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits). 13 CLAIMS (i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement. (ii) Claims on railways are accounted on settlement. (iii) Claims for liquidated damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be. (iv) All other liquidated damages / penalties are accounted on realization basis. 14 PRIOR PERIOD ADJUSTMENTS I ncome/Expenditure which arise in the current year as a result of errors or omissions in the brparation of financial statements of earlier years are treated as prior period adjustments. 15 CONTINGENT LIABILITY Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities. 16 TAXES a) Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961 b) Deferred tax assets are not recognized unless, in the management judgment there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized. c) Accounting of value added tax is in line with the provisions of statute in force. ii. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA Escalation/De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 159.17 Cr (Previous year receivable Rs.32.99 Cr) has been reckoned as payable to FICC for the year 2014-15 towards annual de-escalation of input prices in line with the Accounting policy - Note 24 (A) 10 (i). iii. NUTRIENT BASED SUBSIDY (NBS) FOR PHOSPHATIC AND POTASSIC FERTILIZERS The NBS dues reckoned as receivable from DOF for using costlier inputs is Rs. 23.80 Cr (Previous year Rs.20.80Cr) in line with the Accounting policy - Note 24 (A) 10 (ii). iv. EXCHANGE RATE FLUCTUATION Exchange rate fluctuation included in other expenses is Rs. 0.63 Cr(Previous year Rs. 0.96 Cr) v. CENTRAL EXCISE 25/70 NOTIFICATION Based on the Miscellaneous Order of CESTAT, the Company has paid Rs. 2 Cr as br deposit on 11.03.2013 for taking up the appeal for hearing which is yet to take place. ix. OTHER DISCLOSURES i. Information required under AS 15 (Revised) on "Employee Benefit Expenses" is provided in Annexure - I to this note. ii. The amount of borrowing costs capitalised for the year is 'NIL' (Previous year 'NIL') per AS 16 (Borrowing Costs). iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS 17 (Segment Reporting). iv. During the year, there were no transactions with related parties as defined in AS 18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 25. v. The Company has not entered into joint venture activities as defined in AS 27. Hence AS 27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at brsent vii. No provision towards Income Tax liability has been made during the year as the operations resulted in loss and being a Sick Company, the Company is not liable for MAT. viii. The draft rehabilitation scheme (DRS) submitted by the Operating Agency to BIFR is brsently under the perusal and consideration of GOI. The last hearing of BIFR scheduled on February 12, 2015 stands postponed and the next hearing date is yet to be announced. ix. (a) I n respect of the verification of movable fixed assets, the outside professional firm of Chartered Accountants have submitted their final report and is under review by the Management with the respective groups which resulted in differences which are insignificant. After detailed reconciliation necessary adjustments if any, required will be made during 2015-16 with due approvals. (b) The Company has engaged an outside professional agency to evaluate the effectiveness of its inventory management and their report is awaited as on the date of brparation of Financial Statement. On receipt of their report, necessary adjustments, if any, will be made in the Books of Accounts. As the said exercise was not completed till the date of brparation of the Financial Statements, the effect of the same on the Financial Statements for the year ended March 31, 2015 is not ascertainable. x. I ncluded in Short term Trade Payables under 'Note 9a' are: a. Dues to CPCL Rs. 90.38 Cr (Previous Year Rs. 93.37 Cr) for which mortgage and First charge on Guindy land is given for Rs.100 Cr till the date of sanction of a rehabilitation scheme for the Company. b. Dues to IOC Rs. 48.42 Cr (Previous Year Rs. 43.61 Cr) for which First charge on Plant and Machinery is given for Rs.50 Cr. 29. GENERAL INFORMATION: a. Pending appeal before the Commissioner of Customs (Appeals) against the demand of the Commissioner of Customs amounting to Rs. 65.86 Cr as differential duty including penalty, CESTAT has waived br-deposit of the duty and penalty on deposit of Rs. 5 lacs,which the Company has complied with. b. Government of India has not so far exercised its right to levy penal interest amounting to Rs. 230.83 Cr (Previous Year Rs. 181.35 Cr). However, the same is shown under Contingent Liabilities per practice c. Due to EU and US sanctions on Iran, the insurance companies could not get reinsurance abroad and consequently though the coverage for the year 2015-16 was given for the entire insured value of Rs. 1661 Cr, nevertheless the aggregate annual claim settlement shall be restricted to Rs. 200 Cr. The Company has taken up the issue with Department of Financial Services through Department of Fertilizers and the feedback is awaited. This note is provided per AS-4 (Contingencies and Events occurring after the Balance Sheet date). d. During turnaround a minor fire accident occurred in April 2014 which resulted in stoppage of production. The Company brferred a claim with their insurers for the loss and the surveyor assessed the loss at Rs. 10.13 Cr. Based on the surveyor's final assessment, the Company has accounted the said amount under the head Other Income. e. As MOU with DOF has been signed by the Company for the financial year 2015-16 indicating financial and operational support by DOF, GOI, in the opinion of the Company, the concept of Going concern has not been affected. f. An amount of Rs. 4.39 Cr being VAT on Naphtha charged by CPCL between 7th Jan 2015 and 22nd Feb 2015 has been considered as receivable from Government of Tamil Nadu based on its commitment given to GOI on 31st Dec 2014 willing to forego VAT on Naphtha. This is also confirmed by GOI vide notification dated 7th Jan 2015. g. Other Income includes a sum of Rs. 0.58 Cr being the rent receivable from CPCL for the area let out for their LPG pipeline, for which the renewal of agreement is under negotiation. h. Confirmation of balances has not been received in respect of Loans from GOI, Trade Receivables / Payables and Loans and Advances. i. Figures for the brvious year have been regrouped wherever necessary to conform to Current Year's classification. /For and on behalf of the Board/ Dr. I VIJAYAKUMAR ALIREZA ZAMANI Director V MURALIDHARAN Chairman and Managing Director General Manager - Finance & Accounts and Company Secretary As per our Report of even date For B THIAGARAJAN & CO. Chartered Accountants FRN 004371S CA RAM SRINIVASAN Partner M No 220112 Date : May 29, 2015 |