1.1 Cash equivalent of deemed export benefits availed of Rs. 209.99
crore in respect of supplies affected for East South Inter Connector-II
Transmission Project (ESI) and Sasaram Transmission Project (STP), were
paid to the Customs and Central Excise Authorities in accordance with
direction from Ministry of Power (Govt. of India) during 2002-03 due to
non availability of World Bank loan for the entire supplies in respect
of ESI project and for the supplies prior to March 2000 in respect of
STP project and the same was capitalised in the books of accounts.
Thereafter, World Bank had financed both the ESI project and STP
project as originally envisaged and they became eligible for deemed
export benefits. Consequently, the company has lodged claims with the
Customs and Excise Authorities.
During the year, Company has recovered deemed export benefits to the
extent of Rs. Nil (Previous year Rs. 0.78 crore). The cumulative amount
received and de-capitalized upto 31st March 2012 is Rs. 12.12 crore
(Previous year Rs. 12.12 crore). The Company continued to show the
balance of Rs. 197.87 crore as at 31st March 2012 (Previous year Rs. 197.87
crore) in capital cost of the respective assets / projects pending
receipt of the same from Customs and Excise Authorities.
1.2 Out of the proceeds of Follow on Public Offer (FPO) made in
Financial Year 2010-11, a sum of Rs. 1371.17 crore (Previous Year Rs. 1600
crore) has been utilised during the year for part financing of capital
expenditure on the projects specified for utilization and the balance
amount of Rs. 750crore (Previous year Rs. 2121.17 crore) has been invested
in Terms Deposits with Banks.
1.3 a) Certain balances in Loans and Advances & Trade Payable are
subject to confirmation and consequential adjustments, if any.
b) In the opinion of the management, the value of any of the assets
other than fixed assets and non current investments on realization in
the ordinary course of business will not be less than value at which
they are stated in the Balance Sheet.
1.4 The company has been entrusted with the responsibility of billing
collection and disbursement (BCD) of the transmission charges on behalf
of all the interstate transmission licensees(ISTS) through the
mechanism of the Point of Connection charges(POC) introduced w.e.f.
01-07-2011 which involves billing based on approved drawl/injection of
power in place of old mechanism based on Mega Watt allocation of power
by Ministry of Power. By this mechanism, revenue of the company will
remain unaffected.
Some of the beneficiaries aggrieved by the POC mechanism have preferred
appeal before various High Courts of India and continue to make payment
as per old system of billing. Due to this, an unrealized amount of Rs.
141.56 crore is included in Trade Receivables. The company has
preferred an appeal before the Supreme Court for transferring all the
cases in the Delhi High Court and also requested for directing the
agitating states to pay full transmission charges as per new
methodology pending settlement of the matter.
1.5 i) Foreign Exchange Rate Variation (FERV) loss (to the extent not
exceeding the difference between the Interest on foreign currency
borrowings and local currency borrowings) has been adjusted to
borrowing cost amounting to Rs. 672.44 crore (net of Rs. 246.01 crore FERV
loss for the construction projects) {previous year FERV loss of Rs. 74.19
crore (net of Rs. 0.27 crore FERV loss for the construction projects)}
towards loan liabilities attributable to fixed assets/CWIP.
ii) FERV Loss of Rs. 882.14 crore (previous year FERV loss Rs. 15.71 crore)
has been adjusted in the respective carrying amount of Fixed
Assets/Capital work in Progress (CWIP)/lease receivables.
iii) FERV Gain of Rs. Nil ( previous year FERV gain of Rs. 77.96 crore) has
been recognized in the Statement of Profit and Loss in respect of loans
contracted on or after 1st April, 2004 in terms of provisions of AS-11
(revised 2003)
1.6 FERV Loss of Rs. 588.01 crore (previous year FERV loss Rs. 0.71 crore)
has been shown as FERV Recoverable in statement of Profit and Loss.
1.7 Accounting of FERV as stated in note no. 2.38 and 2.39 above, has
resulted in decrease in profit for the year by Rs. 84.43 crore (previous
year increase in profit by Rs. 4.48 crore).
1.8 Effect due to change in accounting policies during the year -
i) In view of option allowed by Ministry of Corporate Affairs vide its
notification dated 29.12.2011 on Accounting
Standard-11, the Company, during the year, has capitalized the Foreign
Exchange Rate Variation (FERV) loss arising on account of
settlement/restatement of long term monetary liabilities relating to
depreciable capital assets. Consequently, FERV loss, which has hitherto
charged to Profit &Loss Account has been adjusted in cost of related
Fixed Assets/Capital work-in-progress. As a result, profit before tax
for the year ended 31.03.2012 after considering the amount of FERV loss
recoverable from beneficiaries as per CERC Tariff Regulations 2009 is
higher by Rs. 11.93 crore.
ii) Intangible Assets -Right of Way (Afforestation expense) were
hitherto amortised over the useful life of related assets. During the
year company has changed accounting policy in this regard and now these
assets are being amortised following the rates and methodology notified
by CERC Tariff Regulation with retrospective effect from 01.04.2009.
This has resulted in increase in amortisation for the year and Prior
Period amortisation of Rs. 7.62 crore and Rs. 11.40 crore respectively.
1.9 Unspent expenditure of Rs. 2.04 crore out of the budget for the year
towards corporate social responsibility(CSR) which was hitherto
transferred to CSR reserve by appropriating profit is now provided for
by way of charge to statement of Profit and Loss. An amount of Rs. 13.22
crore appropriated to CSR reserve in earlier years has been treated as
prior period item .
1.10 Borrowing cost capitalised during the year is Rs. 1667.14 crore
(previous Year Rs. 1057.41 crore)
1.11 The guidelines issued by the Department of Public Enterprises
(DPE) provide for ceiling of percentage of Performance Related Pay
(PRP) payable to executives and non-unionized supervisors within the
overall limit of 5% of the year's Profit Before Tax. Provision for PRP
in the accounts from financial year 2007-08 onwards are made based on
the basis of guidelines issued by DPE. Pending approval of the PRP
scheme for non-unionized supervisors, payment are made to executives on
provisional basis as per PRP scheme and payment to supervisor is being
made in accordance to the old "Performance linked Incentive scheme".
Provision net of payment outstanding as on 31.03.2012 is Rs. 215.10 crore
(previous year Rs. 190.71 crore)
In respect of Workmen, incentive is being paid as per old "Performance
linked incentive scheme".
1.12 Disclosures as per Accounting Standards (AS) 15
Defined employee benefit schemes are as under:- A. Provident Fund
Company pays fixed contribution to Provident Fund at predetermined rate
to a separate trust, which invests the funds in permitted securities.
Contribution to family pension scheme is paid to the appropriate
authorities. The contribution to the fund for the period is Rs. 60.69
crore (previous year Rs. 58.01 crore) recognized as expense and is
charged to Statement of Profit and Loss. The obligation of the Company
is limited to such fixed contribution and to ensure a minimum rate of
interest on contributions to the members as specified by GOI. As per
report of actuary over all interest earning and cumulative surplus 'is
more' than statutory interest payment requirement. Hence, no further
provision is considered necessary.
B. Gratuity
The company has a defined benefit gratuity plan. Every employee who has
rendered continuous service of five years or more is entitled to get
gratuity at 15 days salary (15/26 X last drawn basic salary plus,
dearness allowance) for each completed year of service on
superannuation, resignation, termination, disablement or on death
subject to a maximum of Rs. 10 lacs. The scheme is funded by the Company
and is managed by a separate trust. The liability for the same is
recognised on the basis of actuarial valuation on annual basis on the
Balance Sheet date.
C. Post-Retirement Medical Facility (PRMF)
The Company has Post-Retirement Medical Facility (PRMF), under which
retired employees and the spouse are provided medical facilities in the
empanelled hospitals. They can also avail treatment as Out-Patient
subject to a ceiling fixed by the Company. The scheme is unfunded and
liability for the same is recognised on the basis of actuarial
valuation on annual basis on the Balance Sheet date.
D. Other Defined Retirement Benefits (ODRB)
The Company has a scheme for settlement at the time of superannuation
at home town for employees and dependents to superannuated employees.
The scheme is unfunded and liability for the same is recognised on the
basis of actuarial valuation on annual basis on the Balance Sheet date.
f) During the year the company has provided liability for pension
contribution payable as superannuation benefits as per DPE Guidelines
amounting to Rs. 30.36 crore (previous year reversal of Rs. 44.26 crore).
The Scheme of superannuation benefits is yet to be finalized.
E. Other Employee Benefits
Provision for Leave encashment amounting to Rs. 60.33 crore (previous
Year Rs. 16.52 crore) for the year has been made on the basis of
actuarial valuation at the year end and charged to Statement of Profit
and Loss.
Provision for Long Service Award amounting to Rs. 8.67 crore (including
for earlier years Rs. 7.43 crore) have been made on the basis of
actuarial valuation at the year end.
G. Actuarial Assumptions
Principal assumptions used for actuarial valuation are:
i) Method used - Projected unit credit (PUC)
ii) Discount rate - 8.5% (previous Year 8%)
ii) Expected rate of return on assets (Gratuity only) - 8.50 %
(previous Year 8.50%)
iv) Future salary increase - 6% (previous Year 5.5%)
The estimate of future salary increases, considered in actuarial
valuation, takes into account (i) inflation, (ii) Seniority (iii)
Promotion and (iv) Other relevant factors, such as supply and demand in
the employment market. Further the expected return on plan assets is
determined considering several applicable factors mainly the
composition of plan assets, assessed risk of asset management and
historical return for plan assets.
H. The Company's best estimate of contribution towards gratuity for
the financial year 2012-13 is Rs. 22.36 crore (previous year Rs. 9.14
crore)
1.13 Segment information:
a) Business Segments
The Company's principal business is transmission of bulk power across
different States of India. However, Power System Operation Assets,
ULDC, RLDC, telecom and consultancy business are also treated as a
reportable segment in accordance with para 28 of AS-17 "Segment
Reporting".
b) Segment Revenue and Expense
Revenue directly attributable to the segments is considered as Segment
Revenue. Expenses directly attributable to the segments and common
expenses allocated on a reasonable basis are considered as segment
expenses.
c) Segment Assets and Liabilities
Segment assets include all operating assets comprising of net fixed
assets, construction work-in-progress, construction stores,
investments, loans and advances and current assets. Segment liabilities
include long term and short term borrowings, current and non current
liabilities and provisions This does not include transactions with
respect to an agreement with Powerlinks Transmission Ltd. Under which
transmission charges for transmission line associated with Tala hydro
electric power project are raised by Powerlinks Transmission Ltd. to
the company which pay the same and collect from the respective
beneficiaries.
c) Remuneration to whole time directors including chairman and managing
director is Rs. 2.10 crore previous year Rs. 1.77 crore) and amount of dues
outstanding to the Company as on 31st March, 2012 are Rs. 0.05 crore
(previous year Rs. 0.07 crore).
1.14 Disclosures regarding leases a) Finance Leases :- Long Term Loans
and Advances and Short Term Loans and Advances include lease
receivables representing the present value of future lease rentals
receivable on the finance lease transactions entered into by the
company with the constituents in respect of State Sector ULDC, as per
the Accounting Standard (AS) - 19 "Leases" notified under the Companies
Act, 1956.
b) Operating leases:-
The Company's significant leasing arrangements are in respect of
operating leases of premises for residential use of employees, offices
and guest houses/transit camps are usually renewable on mutually agreed
terms but are not non-cancellable. Employees' remuneration and
benefits include Rs. 32.40 crore (previous Year Rs. 26.67 crore) towards
lease payments, net of recoveries, in respect of premises for
residential use of employees. Lease payments of Rs. 8.14 crore (previous
Year Rs. 6.27 crore) in respect of premises for offices and guest
house/transit camps are shown under Rent in Note 2.30 Transmission,
Administration and Other expenses.
Under the Transmission Service Agreement (TSA) with Powerlinks
Transmission Ltd, the company has an obligation to purchase the JV
company (Powerlinks Transmission Ltd) at a buyout price determined in
accordance with the TSA. Such an obligation may result in case JV
company (Powerlinks Transmission Ltd) serves a termination notice
either on "POWERGRID event of default" or on "force majeure event"
prescribed under TSA. No contingent liability on this account has been
considered as the same is not ascertainable.
The above joint venture companies are incorporated in India. The
company's share in assets, liabilities, contingent liabilities and
capital commitment as on 31st March 2012 and income and expenses for
the year in respect of above joint venture entities based on their
accounts are given below:-
1.15 In accordance with AS-28 "Impairment of Assets", impairment
analysis of assets of transmission activity & telecom activity of
the company by evaluation of its cash generating units, was carried out
by an outside agency in the year 2004-05 & 2006-07 respectively and
since recoverable amount was more than the carrying amount thereof, no
impairment loss was recognised. The company has assessed as on the
Balance Sheet date whether there are any indications with regard to
impairment of any of the assets. Based on such assessment it has been
ascertained that no potential loss is present and therefore no formal
estimate of recoverable amount has been made. Accordingly, no
impairment loss has been provided in the accounts.
1.16 Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs. 41949.50 crore (previous year Rs.
30612.06 crore).
1.17 Contingent Liabilities
1. Claims against the Company not acknowledged as debts in respect of
:
i) Capital Works
Some of the contractors for supply and installation of equipments and
execution of works at our projects have lodged claims on the company
for Rs. 73.15 crore (previous year Rs. 1780.92 crore) seeking enhancement
of the contract price, revision of work schedule with price escalation,
compensation for the extended period of work, idle charges etc. These
claims are being contested by the Company as being not admissible in
terms of the provisions of the respective contracts.
The Company is pursuing various options under the dispute resolution
mechanism available in the contract for settlement of these claims. It
is not practicable to make a realistic estimate of the outflow of
resources, if any, for settlement of such claims pending resolution.
ii) Land Compensation cases
In respect of land acquired for the projects, the land losers have
claimed higher compensation before various authorities/ courts which
are yet to be settled. In such cases, contingent liability of Rs. 1765.09
crore (previous year Rs. 1328.87 crore) has been estimated.
iii) Other claims
In respect of claims made by various State/Central Government
Departments/Authorities towards building permission fees, penalty on
diversion of agriculture land to non-agriculture use, Nala tax, water
royalty etc. and by others, contingent liability of Rs. 11.72 crore
(previous year Rs. 52.92 crore ) has been estimated.
iv) Disputed Tax/Sales Tax/Excise Matters
Disputed Income Tax/Sales Tax/Excise Matters are pending before various
Appellate Authorities amounting to Rs. 257.86 crore (previous year Rs.
102.57 crore ) are disputed by the Company and contested before various
Appellate Authorities. Many of these matters are disposed off in favour
of the company but are disputed before higher authorities by the
concerned departments.
v) Others
a) Other contingent liabilities amounts to Rs. 80.16 crore (previous year
Rs. 105.98 crore)
b) Some of the beneficiaries have filed appeals against the tariff
orders of the CERC. The amount of contingent liability in this regard
is not ascertainable.
2. Special purpose vehicle(SPV) company namely Nagapattinam Madugiri
Transmission Company Ltd. (wholly owned subsidiary) has been taken over
to carry over the business awarded under Tariff based bidding. Bank
guarantee of Rs. 45.00 crore has been given by the company on behalf of
SPV towards performance of the work awarded.
1.18 a) Figures have been rounded off to nearest rupees in crore up to
two decimal.
b) Previous year figures have been regrouped / rearranged wherever
considered necessary.