Mar 31, 2023
(iii) There are differences in balance lease receivable as at year end as per accounts and tariff records on account of Undischarged liabilities & Unamortized FERV on loans amounting to f81.17crore (Previous Year f101.28crore). Undischarged liabilities become part of project cost only on discharge of such liabilities & FERV are allowed to be recovered as part of tariff on actual payment basis.
b) As a Lessee:
The company has taken assets on lease such as dark fibre, colocation & repeater shelter spaces and office buildings etc. for various periods which are assessed and accounted as per the requirements of Ind AS 116 -"Leases" and required disclosures as per the said Ind AS are as follows:
(i) ROU Assets:
Additions, termination/disposal and depreciation charge on right of use assets for the year and carrying amount of the same as at the end of the financial year by class of underlying asset has been disclosed in note no. 4 as a separate line item.
(ii) Lease Liabilities:
Interest expense on lease liabilities for the year is shown under note no. 38 and total cash outflow for leases for the year has been disclosed in statement of cash flow under financing activities as separate line item and maturity analysis of lease liabilities has been disclosed in note no. 61.
(iii) Short term leases:
The company, during the financial year, has incurred f31.53crore (Previous Year f32.90crore) with respect to short term leases.
The company was committed to short term leases and the total commitment of such leases at the end of financial year was f4.45crore (Previous Year f7.09crore).
51. Disclosures relating to Regulatory Deferral Account Balances
i) Nature of rate regulated activities
The company is mainly engaged in the business of transmission of power. The tariff for transmission of power is determined by the CERC through tariff regulations. The tariff is based on capital cost admitted by CERC and provides for transmission charges recovery of annual fixed cost consisting of Return on equity, Interest on loan capital, Depreciation, interest on working capital and Operation & Maintenance expenses.
ii) Recognition and measurement
FERV arising during the construction period for settlement/translation of monetary items (other than noncurrent loans) denominated in foreign currency to the extent recoverable/payable to the beneficiaries as capital cost as per CERC Tariff Regulations are accounted as Regulatory Deferral Account Balances. In respect of long term foreign currency loan drawn on or after 01.04.2016, exchange difference to the extent recoverable as per CERC Tariff Regulations are recognised as Regulatory Deferral Account Balances. The company expects to recover these amounts through depreciation component of the tariff over the life of the asset or as exchange rate variation on repayment of the loan.
The tariff norms for the block period 2019-2024 notified by the Central Electricity Regulatory Commission (CERC) provide for grossing up of the return on equity based on effective tax rate for the financial year based on the actual tax paid during the year on the transmission income. Accordingly, deferred tax provided during the year
ended 31.03.2023 on the transmission income is accounted as ''Deferred Assets against Deferred Tax Liability''. Deferred Assets against Deferred Tax Liability for the year will be reversed in future years (including tax holiday period) when the related deferred tax liability forms a part of current tax.
During the current year, CERC vide order dated 26.12.2022 has disallowed the claim amounting to S134.16 crore on account of pay revision (2017) which was accounted as Regulatory Deferral Account Balances. Accordingly, the company has reversed the amount shown as recoverable from the beneficiaries in the current year under the head Net Movement in Regulatory Deferral Account Balances-Income/(Expenses)(Net of Tax). An appeal against order dated 26.12.2022 has been filed before Hon''ble Appellate Tribunal for Electricity baring Appeal No. 236 of 2023. Hon''ble Appellate Tribunal has issued notice to respondents.
The cumulative amount of f 4.10 crore (cumulative previous year amount of f1.60 crore) is recoverable on account of other expenses which are not capitalised but allowed as capital cost as per CERC Tariff Regulations and was accounted as Regulatory Deferral Account Balances. Amount of regulatory deferral account balances is on undiscounted basis.
iii) Risk associated with future recovery/ reversal of regulatory deferral account balances
(a) regulatory risk on account of changes in regulations.
(b) other risks including currency or other market risks, if any.
Any change in the Tariff regulations beyond the current tariff period ending on 31.03.2024 may have an impact on the recovery of Regulatory Deferral Account Balances.
The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature. The carrying values for finance lease receivables approximates the fair value as these are periodically evaluated based on credit worthiness of customer and allowance for estimated losses is recorded based on this evaluation.
For financial assets that are measured at fair value, the carrying amounts are equal to the fair values.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity bonds which are traded in the stock exchanges, valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets included in level 3.
There are no transfers between levels 1 and 2 during the year. The company''s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Valuation technique used to determine fair value:
Specific valuation techniques used to value financial instruments include:
⢠the use of quoted market prices or dealer quotes for similar instruments
⢠the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 apart from equity instruments of PTC India Limited and POWERGRID Infrastructure Investment Trust which is included in Level 1 fair value hierarchy.
Fair value of financial instruments has been determined by an independent valuer.
2 The Company has invested W 407.49 crore during the previous year in Energy Efficiency Services Limited (EESL), thereby increasing its shareholding from 5.71% to 33.33%. EESL has been considered as Joint Venture w.e.f. 01.09.2021 being the Joint control has been reinstated vide Agreement dated 01.09.2021.
3 The Board of Directors of the company have, in its meeting held on 01 May 2022, approved the proposal for purchase of 77,30,225 no. equity shares held by IL&FS Energy Development Company Limited in Cross Border Power Transmission Company Limited (Joint venture of the company). Presently, the proposal is under review by NCLAT.
4 POWERGRID''s Board of Directors in its meeting held on 01.05.2018 accorded in principle approval to close RINL Powergrid TLT Private Limited (RPTPL) and seek consent of other JV Partner Rashtriya Ispat Nigam Limited (RINL). RINLs Board of Directors in its meeting held on 08.03.2019 has agreed in principle for winding up proceedings of RPTPL & to seek the approval from Ministry of Steel(MoS), Government of India, for closure of RPTPL. The approval for closure of RPTPL was received on 11.07.2022 from MoS. However, winding up process could not be initiated, as contractor for Site Enabling works has served notice on 17-12-2022 for invocation of Arbitration. Conciliator has been appointed & conciliation proceedings are under progress.
5 Incorporated on 31.08.2022 as a Joint Venture between the company and Nepal Electricity Authority (NEA) with equity participation of 50:50 for implementation of Indian Portion of New Butwal - Gorakhpur 400 kV Double Circuit (Quad Moose) Cross Border Transmission Line.
The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 51.34% (Previous Year 51.34%) of equity shares capital issued and paid up.
The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on arms-length basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items.
The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively.
The loans to key management personnel are on the same terms and conditions as applicable to all other employees.
All other transactions were made on normal commercial terms and conditions and at market rates. All outstanding balances are unsecured and are repayable in cash.
Loans to Subsidiaries & JVs are provided with interest rate ranging from 6.35% to 10.00% repayable as per agreed terms & conditions.
In addition to the above remuneration, the whole time directors have been allowed to use the staff car (including
for private journeys) on payment of f 2000/- p.m. as contained in the Department of Public Enterprises (DPE) OM
No. 2 (23)/l1-DPE (WC)-GL-V/13 dated 21/01/2013.
a) Business Segment
The Board of Directors is the Company''s Chief Operating Decision Maker (CODM) who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Three reportable segments have been identified on the basis of services provided.
⢠Transmission Services: Company''s principal business is transmission of bulk power across different states of India.
⢠Telecom Services: The Company utilizes the spare Optical fibres available in the Optical Ground Wire (OPGW) laid on the transmission network for providing telecom services. It operates as a neutral carrier in the point to point bandwidth leasing business. Refer note no. 65 for disclosure on formation of wholly owned subsidiary of the company to undertake Telecommunications and Digital Technology Business of the company.
⢠Consultancy Services: provides Consultancy Services in the Transmission, Distribution and Telecom sectors, including Planning Design, Engineering, Load Dispatch, OPGW on intra state Transmission network, Procurement Management, Operation & Maintenance, Financing and Project Management.
b) The operations of the company are mainly carried out within the country and therefore there is no reportable geographical segment.
c) Information about major customer: Revenue from any single customer is not equal to or exceeds 10% of the company''s total revenue.
d) Segment Revenue and Expenses
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.
Revenue from external customer in India is f43,857.41crore (Previous Year f40,511.50crore) and outside India is f57.28crore (Previous Year f47.12crore).
e) Segment Assets and Liabilities
Segment assets include all operating assets comprising of Property, Plant and Equipment, current assets and loan and advances. Construction, Work-in-progress, construction stores and advances and investments are included in unallocated assets. Segment liabilities include operating liabilities and provisions.
58. Contingent Liabilities and contingent assets
A. 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 equipment and execution of works at our projects have lodged claims on the company 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. In such cases, contingent liability of f2,945.71crore (Previous Year f2,780.93crore) has been estimated.
(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 f2,541.50crore (Previous Year ?1,688.69crore) 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 f6.71crore (Previous Year f5.81crore) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to f435.83crore (Previous Year f476.15crore) are being contested before various Appellate Authorities. Many of these matters have been disposed of in favour of the company but are disputed before higher authorities by the concerned departments. Against claims of f210.34crore (Previous Year f201.22crore), provision of f174.64crore (Previous Year f165.52crore) is made and balance of f35.70crore (Previous Year f35.70crore) towards penalty is shown as contingent liability as it is not a wilful default and in management opinion, same is not expected to be upheld by the court.
(v) Others
a) Contingent liability in respect of bills discounted with banks against trade receivables is amounting to f1,528.11crore (Previous Year f3,720.37crore). In case of any claim on the company from the banks in this regard, entire amount shall be recoverable from the beneficiaries along with surcharge.
b) Other contingent liabilities amounts to f820.75crore (Previous Year f663.71crore) which includes claim of f563.25crore (Previous Year f394.14crore) related to Arbitration cases/ROW cases.
c) 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.
d) 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.
2. Details of Bank guarantees given by the company on behalf of SPV companies, which were taken over to carry out the business awarded under tariff based bidding, towards performance of the work awarded are as under:
(f in crore) |
||
Name of SPV |
As at 31.03.2023 |
As at 31.03.2022 |
Powergrid Jabalpur Transmission Limited |
- |
2.23 |
Powergrid Southern Interconnector Transmission System Limited |
- |
110.04 |
Powergrid Medinipur Jeerat Transmission Limited |
27.11 |
55.93 |
Powergrid Mithilanchal Transmission Limited |
12.69 |
23.61 |
Powergrid Jawaharpur Firozabad Transmission Limited |
- |
16.44 |
Powergrid Bhuj Transmission Limited |
- |
23.55 |
Powergrid Bhind Guna Transmission Limited |
25.63 |
25.63 |
Powergrid Rampur Sambhal Transmission Limited |
28.14 |
28.14 |
Powergrid Meerut Simbhavali Transmission Limited |
33.75 |
33.75 |
Powergrid Ramgarh Transmission Limited |
14.04 |
14.04 |
Powergrid Bikaner Transmission System Limited |
34.65 |
34.65 |
Powergrid Sikar Transmission Limited |
37.13 |
37.13 |
Powergrid Bhadla Transmission Limited |
10.50 |
10.50 |
Powergrid Aligarh Sikar Transmission Limited |
17.33 |
17.33 |
Powergrid Narela Transmission Limited |
31.01 |
- |
Powergrid Gomti Yamuna Transmission Limited |
15.33 |
- |
Powergrid Neemuch Transmission System Limited |
18.60 |
- |
Powergrid ER NER Transmission Limited |
6.84 |
- |
Powergrid ERWR Power Transmission Limited |
4.80 |
- |
Khavda RE Transmission Limited |
24.00 |
- |
Khavda II-B Transmission Limited |
30.00 |
- |
Khavda II-C Transmission Limited |
39.90 |
- |
Powergrid KPS2 Transmission System Limited |
18.00 |
- |
Powergrid KPS3 Transmission Limited |
15.90 |
- |
Raipur Pool Dhamtari Transmission Limited |
4.80 |
- |
Dharamjaigarh Transmission Limited |
9.00 |
- |
Bhadla Sikar Transmission Limited |
16.28 |
- |
manages its capital structure and makes adjustments in light of changes in economic conditions, regulatory framework and requirements of financial covenants with lenders. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, regulate investments in new projects, return capital to shareholders or issue new shares. The company monitors capital using debt-equity ratio, which is the ratio of long term debt to total net worth. The policy is to keep the debt-equity ratio wherein the debt is less than 75% of total capital employed (i.e. debt to equity ratio less than 75:25). The company includes within long term debt, interest bearing loans and borrowings and current maturities of long term debt.
While determining the tariff for some of the Company''s Transmission Systems, CERC has disallowed certain capital expenditure incurred by the Company. The Company aggrieved over such issues has filed appeals with the Appellate Tribunal for Electricity (APTEL)/Hon''ble Supreme Court against the tariff orders issued by the CERC. Based on past experience, the Company believes that a favourable outcome is probable. However, it is impracticable to estimate the financial effect of the same as its receipt is dependent on the outcome of the judgement.
59. Capital managementa) Risk Management
The company''s objectives when managing capital are to
⢠maximize the shareholder value;
⢠safeguard its ability to continue as a going concern;
⢠maintain an optimal capital structure to reduce the cost of capital.
For the purpose of the company''s capital management, equity capital includes issued equity capital, securities premium Account and all other equity reserves attributable to the equity holders of the company. The company
The Company''s principal financial liabilities comprise loans and borrowings denominated in Indian rupees or foreign currencies, trade payables and other payables. The main purpose of these financial liabilities is to finance the Company''s capital investments and operations.
The Company''s principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that are generated from its operations.
The Company''s activities expose it to the following financial risks, namely,
(a) Credit risk,
(b) Liquidity risk,
(c) Market risk.
This note presents information regarding the company''s exposure, objectives, policies and processes for measuring and managing these risks.
The Company has a duly constituted Risk Management Committee headed by Director (Projects) with Director (Operations), Director (Finance) and an independent director as members. For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in the Company. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes / risks are monitored and controlled through various Key Performance Indicators (KPIs). The Committee meets at regular intervals and reviews KPIs and provides updates to the Audit Committee/Board.
The management of financial risks by the Company is summarized below:
(a) credit risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities on account of trade receivables and loans and advances and from its financing activities due to deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined considering the business environment in which the Company operates and other macro-economic factors.
Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where such recoveries are made, these are recognized in the statement of profit and loss.
The Company primarily provides transmission facilities to inter-state transmission service customers (DICs) comprising mainly state utilities owned by State Governments and the main revenue is from transmission charges. CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020 ("CERC Sharing Regulations") entrusts Central Transmission Utility (CTUIL) with the function of Billing, Collection and disbursement functions on behalf of transmission licensees including POWERGRID.
CERC Sharing regulation allow payment against monthly bills towards transmission charges within due date i.e., 45 days from the date of presentation of the bill and levy of surcharge on delayed payment beyond 45 days. However, in order to improve the cash flows of transmission licensee, CTUIL provides a graded rebate for payments made within 45 days. If a DIC fails to pay any bill or part thereof by the Due Date, the Central Transmission Utility (CTUIL) may encash the Letter of Credit provided by the DIC and utilise the same towards the amount of the bill or part thereof that is overdue plus Late Payment Surcharge, if applicable.
CTUIL has a robust payment security mechanism in the form of Letter of Credit (lc) backed by the Tripartite Agreements (TPA). The TPA was signed among the GOI, Reserve Bank of India and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of State Electricity Boards dues during 2001-02 by the GOI. The TPA also provides that if there is any default in payment of current dues by any State Utility and on fulfilment of condition under TPA, the outstanding dues can be deducted from the State''s RBI account and paid to the concerned CPSU including POWERGIRD.
As per provisions of CERC Sharing Regulations, in case tripartite agreement exists, the Letter of Credit to be submitted to CTUIL shall be for an amount equal to 1.05 (one point zero five) times the average amount of the first bill of a year; Provided that where such tripartite agreement does not exist, the DIC shall open the Letter of Credit for an amount equal to 2.10 (two point one times) the average amount of the first bill of a year.
In addition to the encashment of letter of credit, on non-payment of outstanding dues, the CTUIL has power to regulate the power supply or deny Short Term Open Access on the defaulting entity as per Electricity (LPS & Related matter) Rules, 2022 notified by Ministry of Power.
Trade receivables consist of receivables relating to transmission services of f12,938.21crore (Previous Year f8,790.37crore), receivables relating to consultancy services of f182.11crore (Previous Year f167.37crore) and receivables relating to telecom business of f250.77crore (Previous Year f179.80crore).
Contract Assets primarily relates to the Company''s right to consideration for work completed but not billed at the reporting date and has substantially the same risk characteristics as the trade receivables for the same type of contracts.
(ii) Other Financial Assets (excluding trade receivables and contract assets)
⢠Cash and cash equivalents
The Company held cash and cash equivalents of f1,583.77crore (Previous Year f746.01crore). The cash and cash equivalents are held with public sector banks and high rated private sector banks and do not have any significant credit risk.
⢠Deposits with banks and financial institutions
The Company held deposits with banks and financial institutions of f3,190.23crore (Previous Year f2,291.05crore). Term deposits are placed with public sector banks and have negligible credit risk.
The Company has given loans to employees, subsidiaries, Joint Venture companies, Government of India and other parties. House building loans and conveyance advance to the employees are secured against the mortgage of the house properties or hypothecation of vehicles for which such loans have been given in line with the policies of the Company. The loans provided to group companies are for projects under Tariff Based Competitive Bidding route and Public private partnership. The risk of default in respect of these loans is considered negligible.
(a) Financial assets for which loss allowance is measured using 12 month expected credit losses
The Company has assets where the counter- parties have sufficient capacity to meet the obligations and where the risk of default is very low. At initial recognition, financial assets (excluding trade receivables and contract assets) are considered as having negligible credit risk and the risk has not increased from initial recognition. Therefore, no loss allowance for impairment has been recognised except as specified in this note.
(b) Financial assets for which loss allowance is measured using life time expected credit losses
In respect of trade receivables and contract assets from Telecom and Consultancy, customer credit risk is managed by regular monitoring of the outstanding receivables and follow-up with the consumer for realization. With regard to transmission segment, the Company has customers most of whom are state government utilities with capacity to meet the obligations and therefore the risk of default is negligible. Further, management believes that the unimpaired amounts that are 30 days past due date are still collectible in full, based on the payment security mechanism in place and historical payment behaviour.
Considering the above factors and the prevalent regulations, the trade receivables and contract assets continue to have a negligible credit risk on initial recognition and thereafter on each reporting date.
During the year, allowance for impairment amounting to f52.14 crore has been provided towards impairment of investment in and Loan to National High Power Test Laboratory Private Ltd. Based on historic default rates, the Company believes that, apart from the above, no impairment allowance is necessary in respect of any other assets as the amounts are insignificant.
(b) liquidity risk
Liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company has access to a variety of sources of funding such as commercial paper, bank loans, bonds and external commercial borrowings and retains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company''s liquidity position comprising the undrawn borrowing facilities below and cash and cash equivalents on the basis of expected cash flows.
The Company depends on both internal and external sources of liquidity to provide working capital and to fund capital expenditure.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:
(i) Currency risk
(ii) Interest rate risk
(iii) Other price risk, such as equity price risk and commodity risk.
(i) Currency risk
The Company is exposed to currency risk mainly in respect of foreign currency denominated loans and borrowings and procurement of goods and services whose purchase consideration is denominated in foreign currency. Transmission tariff is regulated by the CERC. According to the CERC tariff regulations for the block 2019-24 the Company may hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the transmission system, in part or full in its discretion and recover the cost of hedging of foreign exchange rate variation corresponding to the normative foreign debt, in the relevant year.
If hedging of the foreign exchange exposure is not undertaken, the extra rupee liability towards interest payment and loan repayment corresponding to the normative foreign currency loan in the relevant year is permissible to be recovered as part of transmission tariff provided it is not attributable to the generating Company or the transmission licensee or its suppliers or contractors. During the Current financial year, no hedging for foreign exchange exposure has been undertaken by the Company. In respect of goods and services procured for Capital Investment, the exchange rate variation is part of the project cost, for determination of transmission tariff. The currency risk in respect of goods and services procured for operation activities is not significant.
Since the impact of strengthening or weakening of Indian rupee against USD, Euro, JPY and other currencies on the statement of profit and loss would not be very significant; therefore, sensitivity analysis for currency risk is not disclosed.
The Company is exposed to interest rate risk arising mainly from long term borrowings with floating interest rates. The Company is exposed to interest rate risk because the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The Company manages the interest rate risks by maintaining a debt portfolio comprising a mix of fixed and floating rate borrowings in domestic and foreign currencies.
As per CERC Regulations, interest on loan during construction forms part of project cost for the purpose of tariff and after the date of commercial operation, interest on loans is recoverable through tariff calculated on the normative average loan of the year by applying the weighted average rate of interest of the actual loan portfolio.
Accordingly, the Company''s interest rate risk is not considered significant; hence sensitivity analysis for the risk is not disclosed.
(iii) Other price risk
The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.
Considering the magnitude of equity investments, no significant risk is expected to arise.
A. Leave Obligations
The Company provides for earned leave benefit (including compensated absences) and half-pay leave to the employees of the company which accrue annually at 30 days and 20 days respectively. Earned leave is encashable while in service. Half pay leaves (HPL) are encashable only on separation beyond the age of 55 years upto the maximum of 300 days (HPL). However, total number of leave that can be encashed on superannuation shall be restricted to 300 days and no commutation of half pay leave shall be permissible. The liability for same is recognized on the basis of actuarial valuation.
B. Other employee benefits - POWERGRID Employee family rehabilitation scheme
The company has introduced POWERGRID Employees Family Economic Rehabilitation Scheme on 24.06.2017. The Objective of the scheme is to provide monetary assistance and support to an employee in case of his/ her permanent total disablement and to his/her family in case of death while in service. The beneficiary would be entitled to monthly payment equivalent to the employee''s 50% of one month pay last drawn provided the beneficiary deposits with the company an amount equal to PF (excluding VPF) balance, Gratuity amount and Group Insurance (EDLI) amount. Such monthly payment would continue till the normal notional date on which the employee concerned would have attained the age of superannuation had the employee continued in the service of the company. The scheme is optional. Provision for POWERGRID Employees Family Economic Rehabilitation Scheme amounting to f 2.52 crore (up to Previous Year f 5.96 crore) for the year has been made during the year based on actuarial valuation.
A. 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 empaneled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fixed by the company. The liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date. The scheme is funded by the company and is managed by a separate trust constituted on 01 May 2018.
B. Other employee benefits - Long Service Award
This benefit is applicable to all regular employees of the company (except for Directors and CMD) who have superannuated after completing at least 10 years of service. This scheme is unfunded and liability for the same is recognised on the basis of actuarial valuation on annual basis on the balance sheet date.
C. 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 f 20 lacs. The scheme is funded by the company and is managed by a separate trust. The liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date. Company has carried out the actuarial valuation of Gratuity benefit considering ceiling of f20 Lakhs.
D. Other Defined Retirement Benefits (ODRB)/Baggage Allowance
The Company has a scheme for settlement at the time of superannuation at anywhere in India and dependents to superannuated employees. The scheme is unfunded and liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
E. 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 and EPS scheme for the year amounting to f 134.88 crore (previous year f 130.74 crore) has been recognized as expense. 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 the last year report of actuary the provision of f171.06 crore was included in OCI in previous year. During the current financial year amount f 161.59 crore has been paid to Provident Fund Trust to meet out guaranteed statutory interest rate by Provident Fund Trust, and the balance provision amount f 9.47 crore has been written back during year. Further, as per the current report of actuary, overall interest earning and cumulative surplus is more than statutory interest payment requirement. Therefore, no further provision is considered necessary. Since the company does not have unconditional right over the PF corpus, the surplus has not been recognized in the Balance Sheet.
Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.
The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. This analysis may not be representative of the actual change in the defined benefit obligations as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The methods and types of assumptions used in preparing sensitivity analysis did not change compared to previous year.
Valuation is based on certain assumptions which are dynamic in nature and vary over time. As such company is
exposed to various risks as follows:
A) Salary Increases (except for PF) - Actual salary increase will increase the plan''s liability. Increase in salary increase rate assumptions in future valuation will also increase the liability.
B) Investment risk - If plan is funded then assets liabilities mismatch and actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability
C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the plan''s liability.
D) Mortality & disability - Actual deaths and disability cases proving lower or higher than assumed in the valuation can impact the liabilities.
E) Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan''s liability.
m) The company has not received/advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) through Intermediaries during the financial year.
n) The Company does not have any transaction that was not recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
o) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
A. Exceptional Items:
During the previous year, the Company has monetised five (05) of its Subsidiaries through POWERGRID Infrastructure Investment Trust (''PGInvIT/ Trust''). The 74% shares in the above five SPVs was transferred to PGInvIT in May 2021 and balance 26% shares of PVTL was transferred in March 2022. The balance 26% of remaining SPVs will be transferred in line with Transmission Service Agreement (TSA) & the same has been classified as "Assets Classified as Held for Sale". The Profit on said transactions (net of related expenses) has been disclosed under "Exceptional items" in previous year.
B. Incorporation of wholly owned subsidiary of POWERGRID to undertake Telecommunications and Digital Technology Business of the company
A company "Powergrid Teleservices Limited" was incorporated on 25.11.2021 as a wholly owned subsidiary of the company with an objective to undertake Telecommunications and Digital Technology business. CERC vide order dated 17 May 2023 accorded its approval to undertake existing Telecommunications and Digital Technology business though Powergrid Teleservices Limited. The Company is evaluating the methodology/ Transaction Scheme for transfer of said business including but not limited to identification of assets and liabilities.
The Company will continue to operate the Telecommunication and Digital Technology business until the above significant activities are completed. As the said business is not available for immediate sale in its present condition, hence the same is not classified as "disposal group held for sale".
C. Central Electricity Regulatory Commission (CERC) vide order dated 25.02.2022 stated that expenses related to employees and other related expenses of Central Transmission Utility of India Limited (CTUIL) shall continue to be taken care of by the company for the period till 31.03.2024 or until further orders, whichever is earlier as the same was allowed through various tariff orders. Hence, the expenses related to functions of CTU are being borne by the company. For impact on employee cost, other expenses and other comprehensive income refer note no. 37, 40 and 42 respectively.
On 31.03.2023, Ministry of Corporate Affairs ("MCA") has notified the Companies (Indian Accounting Standards) Amendment Rules, 2023 applicable from 01.04.2023. The Company will assess and implement the amendments in the FY 2023-24, as applicable.
66. a) Figures have been rounded off to nearest rupees in crore up to two decimals.
b) Previous year figures have been regrouped/ rearranged wherever considered necessary.
Mar 31, 2022
1. Materials with Contractors amounting to ?1.30 crore (Previous Year ?175.71 crore) in respect of commissioned lines is pending for reconciliation. However reconciliation are carried out on ongoing basis.
2. Refer Note No 64 (b) for ageing of Capital Work in Progress (CWIP) & Refer Nore No 64 (c) for CWIP completion schedule for the projects whose completion is overdue or has exceeded its cost compared to original plan.
The property is now being used for administrative/business purposes of the company and not held for rentals or capital appreciation. As there is a change in use of property as per Ind AS 40 "Investment property", the property is reclassified as Owner-occupied property by transferring from Investment Property to Property, Plant and Equipment.
The fair value of investment property has been determined by independent valuer. The main inputs used are the rental growth rates, expected vacancy rates, terminal yields and discount rates based on comparable transactions and industry data. All resulting fair value estimates for investment property are included in level 2.
Investments have been valued as per accounting policy no. 2.13, 2.14 & 2.15.
POWERGRID''s Board of Directors in its meeting held on 01.05.2018 accorded in principle approval to close RINL Powergrid TLT Private Limited (RPTPL) and seek consent of other JV Partner Rashtriya Ispat Nigam Limited (RINL). RINL''s Board of Directors in its meeting held on 08.03.2019 has agreed in principle for winding up proceedings of RPTPL & to seek the approval from Ministry of Steel, Government of India, for closure of RPTPL. RINL''s Board of Directors in its meeting held on 05.11.2019 has advised to put up the closure proposal again to Ministry of steel for onward submission to NITI Ayog. The Ministry of Steel vide letter dated 29.09.2020 informed RINL that closure of RPTPL is being examined and seeks further clarifications from RINL. Accordingly, relevant information was forwarded by RINL to The Ministry of Steel. The Approval from Government is still awaited.
Refer remarks at Note No 11 for Powergrid Vemagiri Transmission Limited.
The Company has invested ? 407.49 crore during the year in Energy Efficiency Services Limited (EESL), thereby increasing its shareholding from 5.71% to 33.33%. EESL has been considered as Joint Venture w.ef. 01.09.2021 as the Joint control has been reinstated vide Agreement dated 01.09.2021.
# Bank deposits against designated accounts for consultancy work.
## In the FY 2018-19, the Company issued ''GoI fully serviced bonds'' for an amount of ? 3487.50 crore for raising of Extra Budgetary Resources (EBR) for GoI scheme of Power System Development Fund (PSDF) in terms of letter No: 7/1/2018-OM dated 21st January, 2019 of Ministry of Power, Govt. of India (GoI) for meeting accrued liabilities for creation of Capital Assets. The repayment of principal and the interest payment on such bonds shall be met by GoI. An amount of ? 3487.50 Crore from bond issue has been recognised as Grant in aid in Previous Years.
* Details of advances to related parties are provided in Note 55.
** CERC vide order dated 06/04/2015 in petition no.127/2012 had directed that 80% of the acquisition price incurred by the Company for Vemagiri Transmission Company Limited (VTSL) shall be reimbursed by the Long Term Transmission Customers (LTTCs) and balance 20% along with the expenditure incurred by VTSL from the date of acquisition till the liquidation of the company shall be borne by the Company. Subsequently, on a review petition filed by the Company, CERC vide order dated 20/10/2016 held that there are sufficient reasons to review the liability of the Company to pay 20% of the acquisition price and accordingly, directed that the issue shall be decided afresh by taking a holistic view in the matter after disposal of appeals filed by the LTTCs on the issue in Appellate Tribunal of Electricity (ATE).
The final hearing in the appeals filed in APTEL was held on 02.03.2020 and Hon''ble APTEL directed all parties to file written submission and reserved the Judgement. However, due to COVID pandemic lock down during Mar''20-May''20, the matter was relisted & heard on 24.08.2020 and Hon''ble APTEL directed all the parties to file concise comprehensive written submissions through email and reserved the Judgement again. Accordingly, concise comprehensive written submissions were filed in APTEL.
As one of the Hon''ble Members of APTEL retired during Dec''20 before pronouncement of the judgement, the matter may need to be heard again. An application for early hearing of the appeal was filed in APTEL in Mar''21 to expedite the matter. The said IA for Early Hearing (IA No. 599 of 2021) was listed and allowed on 5.7.2021, and matter was listed on 27.08.2021. Further, the hearing was adjourned and listed on 20.09.2021, 27.09.2021, 11.01.2022, 11.03.2022 and 02.05.2022. However, the matter was adjourned as the quorum for the bench did not assemble due to vacancies on each of those occasions. The next hearing is scheduled on 25.07.2022.
### Others include amount recoverable from Customers.
a) Refer note no. 46 for disclosure as per Ind AS 115 ''Revenue from Contracts with Customers'' & note no. 55. for details of trade receivables from related parties.
b) Trade Receivables includes Unbilled Receivables relating to transmission segment amounting to ? 4,446.93 Crores (Previous Year ? 4,807.27 Crores) out of which transmission charges for the month of March including arrear bills for previous quarters, of the financial year amounting to ? 2941.38 crore (Previous Year ? 2512.28 crore) billed to beneficiaries in the month of April of subsequent financial year.
c) Based on arrangements between the Company, banks and beneficiaries, the bills of the beneficiaries have been discounted. Accordingly, trade receivables have been disclosed net off bills discounted amounting to ? 4180.23 crore (Previous Year ? 2871.49 crore). Refer note no. 58 for details.
Note 19A Assets classified as held for sale (Contd.)
The Company has monetised five (05) of its Subsidiaries, namely Powergrid Vizag Transmission Limited (PVTL), Powergrid Kala Amb Transmission Limited (PKATL), Powergrid Jabalpur Transmission Limited (PJTL), Powergrid Warora Transmission Limited (PWTL) and Powergrid Parli Transmission Limited (PPTL) through POWERGRID Infrastructure Investment Trust (''PGInvIT/ Trust''). PGInvIT has been registered by SEBI under SEBI (Infrastructure Investment Trusts) Regulations, 2014 (''InvIT Regulations'') as an Infrastructure Investment Trust vide registration no. IN/InvIT/20-21/0016 dated 07 January 2021. The company is the Sponsor of PGInvIT and acts as the Project Manager to PGInvIT. IDBI Trusteeship Services Limited is the Trustee and Powergrid Unchahar Transmission Limited (PUTL), a wholly owned subsidiary of the company, has been appointed as Investment Manager to PGInvIT. The Offer Document for initial public offer was filed by PGInvIT with the SEBI and Stock Exchanges on 22 April 2021 and units got listed on stock exchanges on 14 May 2021. The 74% shares in the above five SPVs have been transferred to PGInvIT in May, 2021 and balance 26% shares of PVTL has been transferred in March 2022. The balance 26% of remaining SPVs i.e. PKATL, PJTL, PWTL & PPTL will be transferred in line with Transmission Service Agreement (TSA) & the same has been classified as âAssets Classified as Held for Sale" as on 31.03.2022.
In lieu of consideration of shareholding so transferred, 41,06,50,900 Units at the price of ? 100 each were allotted by PGInvIT to the company and ?330.78 crore towards transfer of 26% share of PVTL. Further, the Company received ?304.15 crore on relinquishment of right on additional revenue in PPTL, PWTL & PJTL. The company retained 13,65,00,100 units being 15% of total units of PGInvIT outstanding on post issue basis pursuant to I nvIT Regulations and remaining 27,41,50,800 units were sold by way of ''Offer for Sale (OFS)''. The company received an amount of ?2736.02 crore (net of STT) against the OFS. The Profit on above transactions (net of related expenses) amounting to ? 3759.51 crore has been disclosed under âExceptional items"
* During the year, the Company has issued 174,38,63,216 equity shares of ? 10/- each as fully paid bonus shares in the ratio of one equity share of ? 10/- each for every three equity shares held on record date of 30 July 2021 by utilising Securities Premium.
2) The Company has only one class of equity shares having a par value of ?10/- per share.
3) The holders of equity shares are entitled to receive dividends as declared from time to time and to voting rights proportionate to their shareholding at meetings of the Shareholders.
4) Shareholding of Promoters and Shareholders holding more than 5% equity shares of the Company
1 Secured Foreign Currency Loans (Guaranteed by GoI) carry floating rate of interest linked to 6M SOFR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 3 to 5 years except for one loan ? 376.13 Crore (Previous year ? 364.64 Crore) which carry fixed rate of interest of 0.25% p.a.
2 Secured other Foreign Currency Loans carry floating rate of interest linked to 6M (LIBOR/SOFR/EURIBOR). These loans are repayable in semi annual installment, as per terms of the respective loan agreements, commencing after moratorium period of 3 to 5 years.
3 Secured Rupee loan from banks carry floating rate of interest linked to 3M MCLR. These loans are repayable in semi annual installments, as per terms of the respective loan agreements, commencing after moratorium period of 5 years.
4 Unsecured Foreign Currency Loans (Guaranteed by GoI) carry fixed rate of interest ranging from 1.63%p.a. to 2.30%p.a. These loans are repayable in semi annual installments as per terms of the respective loan agreements.
5 Unsecured Foreign Currency Loans carry floating rate of interest linked to 6M (STIBOR/EURIBOR). These loans are repayable in semi annual installments as per terms of the respective loan agreements, commencing after moratorium period as per terms of the respective loan agreements.
6 Unsecured Foreign Currency Loans carry floating rate of interest linked to 3M TONA. This loan is repayable in five equal annual installment as per the terms of the loan agreement.
7 Unsecured Rupee loan from bank carry floating rate of interest linked to 3 months MCLR or Repo rate. These loans are repayable in semi annual installments, as per terms of the respective loan agreements, commencing after moratorium period as per terms of the respective loan agreements.
8 There has been no default in repayment of loans or payment of interest thereon as at the end of the year.
9 The company has used the borrowings from banks and financial institutions for the specified purpose for which it was taken as at balance sheet date.
1 Domestic Bonds are Secured by way of Registered Bond Trust Deed ranking pari passu on immovable property situated at Mouje Ambheti Taluka Kaparada in district Valsad Gujarat and floating charge on the assets of the company.
2 Secured Foreign Currency Loans (Guaranteed by GoI) are secured by pari passu interest in the lien created on the assets as security for the debts.
3 Secured Other Foreign Currency Loans and Rupee Loans are secured by the way of
(i) pari passu charge on the assets of the company except investments, land and building, roads and bridges, water supply, drainage and sewerage and current assets or
(ii) pari passu charge on the assets of the company except investments and current assets or
(iii) floating charge on the immovable properties of the company. as per the terms of respective loan agreements.
Disclosure with regard to Micro and Small enterprises as required under "The Micro, Small and Medium Enterprises Development Act, 2006" is given in Note No 49.
* Govt. of India fully serviced bonds issued @ 8.24% redeemable at par on 14.02.2029. Refer Note No 11 for details.
# Others includes amount payable to Customers upon recovery.
a) In the opinion of the management, it is probable that future economic benefits will flow to the company in the form of availability of set off against future income tax liability by recognizing MAT credit as follows:
Future taxable profits will be adjusted against (a) tax holiday u/s 80-IA of Income Tax Act, 1961 for the projects commissioned up to 31.03.2017 (b) initial depreciation on the assets to be commissioned in future and (c) regular income tax depreciation u/s 32 of Income Tax Act, 1961 and thereafter tax amount will be set off against MAT credit to the extent of ?3,288.36crore (Previous Year ?2,158.77 crore). Hence, the same has been recognised as Deferred Tax Assets during the year.
Disclosure with regard to Micro and Small enterprises as required under "The Micro, Small and Medium Enterprises Development Act, 2006" is given in Note No 49.
* No amount is due for payment to Investor Education and Protection Fund.
** Details of amount payable to related parties are provided in Note 55.
# Others include liability for payment against Long Term Access (LTA), Short Term Open Access (STOA), ISTS License recovery, Price variation, etc.
A) Employee Benefits
i) Performance Related Pay/Special Incentive:
Provision is created for Performance Related Pay to Executives and Non-Executives
ii) Other Employee Benefits:
Provision is created for the purpose of meeting out leave encashment, settlement allowance, long service award and POWERGRID Employee Family Rehabilitation Scheme. Refer Note No 63 for detailed disclosure related to Employee Benefit Obligations.
i) Downtime Service Credit -Telecom:
Provision is created in case when actual downtime is in excess of the permissible service level agreement, in such cases the necessary credit is passed on to the customer on demand.
However, in some cases, the downtime is not claimed by the customers then in such cases necessary provision on account of downtime is made in the books of accounts as per the links availability reports received from National Telecom Control Centre (NTCC) for the period of non-operation of links given to the customers. The calculation of downtime credit is based on the SLA signed with various customers.
ii) Provision Others:
It includes provision for entry tax ?165.24crore (Previous Year ?156.98crore) as per demand raised by revenue authorities disputed by the company and are under litigation. An amount of ?8.94crore (Previous Year ?8.24crore) has been paid under court order and shown as "Balance with custom port trust and other authorities" in note no. 19.
Also includes provision of ?0.00crore (Previous Year ?0.46crore) towards demand raised by the commercial taxes department of Telangana in relation to absence of statutory form and other evidence on account of inter-state sale not covered by ''C'' form.
1. Grant in Aid of ?0.00crore (Previous Year ?5.95crore) was received from Power System Development Fund (PSDF) under Ministry of Power (MoP), Govt. of India (Gol) for installation of STATCOM in ER (ERSS-XI) and SR (System Strengthening in SR-XXI). In addition to Grant received, an interest of ?0.02crore (Previous Year ?1.43crore) credited to the Grant. An amount of ? 8.99 crore is repayable to Ministry of Power (MoP), Govt. of India (GoI) on account of cost savings in the projects. Accordingly, the said amount is shown as payable under Other Current Financial Liabilities.
2. Grant in Aid of ?0.41crore (Previous Year ?0.75crore) including interest has been recognised, from Power System Development Fund (PSDF) under MoP, GoI for establishment of Unified Real Time Dynamic State Measurement (URTDSM).
3. Grant in Aid, of ?27.59crore (Previous Year ?99.83crore) including interest has been recognised, from Ministry of New & Renewable Energy (MNRE), GoI for establishment of transmission system associated with Ultra Mega Solar Parks in Andhra Pradesh, Karnataka, Madhya Pradesh, Rajasthan and Gujarat.
4. Grant in Aid of ?0.02crore (Previous Year ?0.03crore) has been recognised under achievement linked/incentive award scheme for Government Sector by Ministry of New & Renewable Energy (MNRE), GoI for establishing solar roof top plants in various buildings of the company.
5. Grant in Aid of ? 2.99Crore (Previous Year ? 0.00crore) was received from Ministry of New & Renewal Energy (MNRE) for creating awareness activities for Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan(PM KUSUM) in Andhra Pradesh, Kerala and Rajasthan.
a) In exercise of powers u/s 178 of the Electricity Act 2003, Central Electricity Regulatory Commission (CERC) has notified "CERC (Terms and Conditions of Tariff) Regulations, 2019" vide order dated 07.03.2019 for the determination of transmission tariff for the block period 2019-24.
b) The company has recognised transmission income during the year as per the following:
i) ?20,297.33 crore (Previous Year ?9,407.16 crore) as per final tariff orders issued by CERC for block period 2019-24 and
ii) ?17,509.81 crore (Previous Year ?26,713.76 crore) provisionally as per CERC Tariff Regulations for the block period 2019-24 and other orders in similar cases, in respect of transmission assets for which final tariff orders are yet to be issued.
c) Consequent to the final order issued by CERC, transmission income includes ?628.80 crore (increase) (Previous Year ?538.30 crore (increase)) pertaining to earlier years.
d) Refer note no. 66 for disclosure on formation of wholly owned subsidiary of the company to undertake Telecommunications and Digital Technology Business of the company.
e) Refer note no. 46 for disclosure as per Ind AS 115 "Revenue from Contracts with Customers".
Cash equivalent of deemed export benefits availed of ?209.99crore in respect of supplies effected 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 (GOI) 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.
In this regard the Cumulative amount received and de-capitalized up to 31.03.2022 is ?12.12crore (Previous Year ?12.12crore). The company continued to show the balance of ?197.87crore (Previous Year ?197.87crore) in the capital cost of the respective assets / projects pending receipt of the same from Customs and Excise Authorities.
a) Some balances of Trade Receivables and recoverable shown under Assets and Trade and Other Payables shown under Liabilities include balances subject to confirmation/ reconciliation and consequential adjustments if any. However, reconciliations are carried out on ongoing basis. The management does not expect any material adjustment in the books of accounts as a result of the reconciliation.
b) In the opinion of the management, the value of any of the assets other than Property, Plant and Equipment and non-current investments on realization in the ordinary course of business will not be less than the value at which they are stated in the Balance Sheet.
d) The entity determines transaction price based on expected value method considering its past experiences of refunds or significant reversals in amount of revenue. In estimating significant financing component, management considers the financing element inbuilt in the transaction price based on imputed rate of return. Reconciliation of Contracted Price vis-a-vis revenue recognized in profit or loss statement is as follows:
47. (i) FERV Loss of ?568.13crore (Previous Year FERV Gain of ?450.57crore) has been adjusted in the respective carrying amount of
Property, Plant and Equipment/Capital work in Progress (CWIP)/Lease Receivables.
(ii) FERV Loss of ?6.69crore (Previous Year FERV Loss of ?60.66crore) has been recognised in the Statement of Profit and Loss.
48. Borrowing cost capitalised during the year is ?283.26crore (Previous Year ?431.55crore) in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP) as per Ind AS 23 ''Borrowing Costs''
The Company has classified and accounted for the arrangements for state sector ULDC assets and bilateral assets as finance leases. Agreements for State Sector ULDC are for a period of 15 years and Bilateral Line Assets with the beneficiary are for the period as specified in CERC Regulations.
Other Non-Current Financial Assets and Other Current Financial Assets 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 and Bilateral Line Assets. Disclosure requirements of Ind AS 116 ''Leases'' notified under the Companies Act, 2013 are given as under:
(i) Details of gross investment in lease, un-earned finance income and present value of minimum lease payments receivables at the end of financial year are given as under:
(iii) There are differences in balance lease receivable as at year end as per accounts and tariff records on account of Undischarged liabilities & Unamortized FERV on loans amounting to ?101.28crore (Previous Year ?105.02crore). Undischarged liabilities become part of project cost only on discharge of such liabilities & FERV are allowed to be recovered as part of tariff on actual payment basis.
The company has taken assets on lease such as dark fibre, colocation & repeater shelter spaces and office buildings etc. for various periods which are assessed and accounted as per the requirements of Ind AS 116 - "Leases" and required disclosures as per the said Ind AS are as follows:
(i) ROU Assets:
Additions, termination/disposal and depreciation charge on right of use assets for the year and carrying amount of the same as at the end of the financial year by class of underlying asset has been disclosed in note no. 4 as a separate line item.
(ii) Lease Liabilities:
Interest expense on lease liabilities for the year is shown under note no. 38 and total cash outflow for leases for the year has been disclosed in statement of cash flow under financing activities as separate line item and maturity analysis of lease liabilities has been disclosed in note no. 61.
(iii) Short term leases:
The company, during the financial year, has incurred ?32.90crore (Previous Year ?37.56crore) with respect to short term leases.
The company was committed to short term leases and the total commitment of such leases at the end of financial year was ?7.09crore (Previous Year ?5.94crore).
The company is mainly engaged in the business of transmission of power. The tariff for transmission of power is determined by the CERC through tariff regulations. The tariff is based on capital cost admitted by CERC and provides for transmission charges recovery of annual fixed cost consisting of Return on equity, Interest on loan capital, Depreciation, interest on working capital and Operation & Maintenance expenses.
ii) Recognition and measurement
FERV arising during the construction period for settlement/translation of monetary items (other than non-current loans) denominated in foreign currency to the extent recoverable/payable to the beneficiaries as capital cost as per CERC Tariff Regulations are accounted as Regulatory Deferral Account Balances. In respect of long term foreign currency loan drawn on or after 01.04.2016, exchange difference to the extent recoverable as per CERC Tariff Regulations are recognised as Regulatory Deferral Account Balances. The company expects to recover these amounts through depreciation component of the tariff over the life of the asset or as exchange rate variation on repayment of the loan.
The tariff norms for the block period 2019-2024 notified by the Central Electricity Regulatory Commission (CERC) provide for grossing up of the return on equity based on effective tax rate for the financial year based on the actual tax paid during the year on the transmission income. Accordingly, deferred tax provided during the year ended 31.03.2022 on the transmission income is accounted as ''Deferred Assets against Deferred Tax Liability'' Deferred Assets against Deferred Tax Liability for the year will be reversed in future years (including tax holiday period) when the related deferred tax liability forms a part of current tax.
The cumulative amount of ? 135.76 crore (cumulative previous year amount of ?134.16 crore) on account of pay revision and other expenses which are not capitalised but allowed as capital cost as per CERC Tariff Regulations is recoverable from the beneficiaries is included in Regulatory Deferral Account Balances and will be adjusted in the year in which they become recoverable from beneficiaries as per CERC. Amount of regulatory deferral account balances is on undiscounted basis.
iii) Risk associated with future recovery/ reversal of regulatory deferral account balances
(a) regulatory risk on account of changes in regulations.
(b) other risks including currency or other market risks, if any.
Any change in the Tariff regulations beyond the current tariff period ending on 31.03.2024 may have an impact on the recovery of Regulatory Deferral Account Balances.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are measured at fair value and financial instruments that are measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature. The carrying values for finance lease receivables approximates the fair value as these are periodically evaluated based on credit worthiness of customer and allowance for estimated losses is recorded based on this evaluation.
For financial assets that are measured at fair value, the carrying amounts are equal to the fair values.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity bonds which are traded in the stock exchanges, valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets included in level 3.
There are no transfers between levels 1 and 2 during the year. The company''s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Specific valuation techniques used to value financial instruments include:
â¢the use of quoted market prices or dealer quotes for similar instruments
â¢the fair value of Energy Efficiency Services Limited for the previous year has been determined by making qualitative adjustment to trading multiples such as P/E, EV/EBITDA of comparable listed prices. The same has been included in Level 2 fair value hierarchy.
â¢the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 apart from equity instruments of PTC India Limited and POWERGRID Infrastructure Investment Trust which is included in Level 1 fair value hierarchy.
Fair value of financial instruments has been determined by an independent valuer.
1 POWERGRID & Teesta Urja Ltd are the Joint venture partners in Teestavalley Power Transmission Limited & holds 26% & 74 % equity, respectively as per Shareholding agreement. On call of additional equity by Teestavalley Power Transmission limited, POWERGRID contributed their share while the other JV partner has not yet contributed their share of money. Consequently, the holding of POWERGRID increased to 30.92% against 26% provided in shareholding agreement.
2 The Company has invested ? 407.49 crore during the year in Energy Efficiency Services Limited (EESL), thereby increasing its shareholding from 5.71% to 33.33%. EESL has been considered as Joint Venture w.e.f. 01.09.2021 being the Joint control has been reinstated vide Agreement dated 01.09.2021.
3 The Board of Directors of the company have, in its meeting held on 01 May 2022, approved the proposal for purchase of 77,30,225 no. equity shares held by IL&FS Energy Development Company Limited in Cross Border Power Transmission Company Limited (Joint venture of the company).
4 POWERGRID''s Board of Directors in its meeting held on 01.05.2018 accorded in principle approval to close RINL Powergrid TLT Private Limited (RPTPL) and seek consent of other JV Partner Rashtriya Ispat Nigam Limited (RINL). RINL''s Board of Directors in its meeting held on 08.03.2019 has agreed in principle for winding up proceedings of RPTPL & to seek the approval from Ministry of Steel, Government of India, for closure of RPTPL. RINL''s Board of Directors in its meeting held on 05.11.2019 has advised to put up the closure proposal again to Ministry of steel for onward submission to NITI Ayog. The Ministry of Steel vide letter dated 29.09.2020 informed RINL that closure of RPTPL is being examined and seeks further clarifications from RINL. Accordingly, relevant information was forwarded by RINL to The Ministry of Steel. The Approval from Government is still awaited.
The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 51.34% (Previous Year 51.34%) of equity shares capital issued and paid up.
The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on arms-length basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items.
The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively.
The loans to key management personnel are on the same terms and conditions as applicable to all other employees.
All other transactions were made on normal commercial terms and conditions and at market rates. All outstanding balances are unsecured and are repayable in cash.
Loans to Subsidiaries & JVs are provided with interest rate ranging from 6.52% to 10.00% repayable as per agreed terms & conditions.
In addition to the above remuneration, the whole time directors have been allowed to use the staff car (including for private journeys) on payment of ? 2000/- p.m. as contained in the Department of Public Enterprises (DPE) OM No. 2 (23)/11-DPE (WC)-GL-V/13 dated 21/01/2013.
The Board of Directors is the Company''s Chief Operating Decision Maker (CODM) who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Three reportable segments have been identified on the basis of services provided.
⢠Transmission Services- Company''s principal business is transmission of bulk power across different states of India.
⢠Telecom Services- The Company utilizes the spare Optical fibres available in the Optical Ground Wire (OPGW) laid on the transmission network for providing telecom services. It operates as a neutral carrier in the point to point bandwidth leasing business. Refer note no. 66 for disclosure on formation of wholly owned subsidiary of the company to undertake Telecommunications and Digital Technology Business of the company.
⢠Consultancy Services- Provides Consultancy Services in the Transmission, Distribution and Telecom sectors, including Planning Design, Engineering, Load Dispatch, OPGW on intra state Transmission network, Procurement Management, Operation & Maintenance, Financing and Project Management.
b) The operations of the company are mainly carried out within the country and therefore there is no reportable geographical segment.
c) Information about major customer: Revenue from any single customer is not equal to or exceeds 10% of the company''s total revenue.
d) Segment Revenue and Expenses
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.
Revenue from external customer in India is ?40,511.50crore (Previous Year ?38,615.03crore) and outside India is ?47.12crore (Previous Year ?22.86crore).
Segment assets include all operating assets comprising of Property, Plant and Equipment, current assets and loan and advances. Construction, Work-in-progress, construction stores and advances and investments are included in unallocated assets. Segment liabilities include operating liabilities and provisions.
58. Contingent Liabilities and contingent assets
A. 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 equipment and execution of works at our projects have lodged claims on the company 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. In such cases, contingent liability of ?2,780.93crore (Previous Year ?2,540.73crore) has been estimated.
(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 ?1,688.69crore (Previous Year ?1,604.98crore) 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 ?5.81crore (Previous Year ?5.22crore) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to ?502.68crore (Previous Year ?248.36crore) are being contested before various Appellate Authorities. Many of these matters have been disposed of in favour of the company but are disputed before higher authorities by the concerned departments. Against total claim of ?201.22crore (Previous Year ?191.42crore), provision of ?165.52crore (Previous Year ?156.98crore) is made and balance of ?35.70crore (Previous Year ?34.44crore) towards penalty is shown as contingent liability as it is not a wilful default and in management opinion, same is not expected to be upheld by the court.
(v) Others
a) Contingent liability in respect of bills discounted with banks against trade receivables is amounting to ?3,720.37crore (Previous Year ?2,533.96crore). In case of any claim on the company from the banks in this regard, entire amount shall be recoverable from the beneficiaries along with surcharge.
b) Other contingent liabilities amounts to ?663.71crore (Previous Year ?784.48crore) which includes claim of ?357.11crore (Previous Year ?397.01crore) related to Arbitration cases/ROW cases.
c) 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.
d) 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.
2. Details of Bank guarantees given by the company on behalf of SPV companies, which were taken over to carry out the business awarded under tariff based bidding, towards performance of the work awarded are as under:
58. Contingent Liabilities and contingent assets (Contd.) |
(? in crore) |
|
Name of SPV |
As at 31.03.2022 |
As at 31.03.2021 |
Powergrid Jabalpur Transmission Limited |
2.23 |
6.09 |
Powergrid Southern Interconnector Transmission System Limited |
110.04 |
110.04 |
Powergrid Medinipur Jeerat Transmission Limited |
55.93 |
141.89 |
Powergrid Mithilanchal Transmission Limited |
23.61 |
84.32 |
Powergrid Varanasi Transmission System Limited |
- |
30.38 |
Powergrid Jawaharpur Firozabad Transmission Limited |
16.44 |
41.85 |
Powergrid Khetri Transmission System Limited |
- |
66.15 |
Powergrid Bhuj Transmission Limited |
23.55 |
58.95 |
Powergrid Bhind Guna Transmission Limited |
25.63 |
65.48 |
Powergrid Ajmer Phagi Transmission Limited |
- |
14.85 |
Powergrid Fatehgarh Transmission Limited |
- |
17.55 |
Powergrid Rampur Sambhal Transmission Limited |
28.14 |
70.65 |
Powergrid Meerut Simbhavali Transmission Limited |
33.75 |
85.05 |
Powergrid Ramgarh Transmission Limited |
14.04 |
35.46 |
Powergrid Bikaner Transmission System Limited |
34.65 |
89.10 |
Powergrid Sikar Transmission Limited |
37.13 |
- |
Powergrid Bhadla Transmission Limited |
10.50 |
- |
Powergrid Aligarh Sikar Transmission Limited |
17.33 |
- |
While determining the tariff for some of the Company''s Transmission Systems, CERC has disallowed certain capital expenditure incurred by the Company. The Company aggrieved over such issues has filed appeals with the Appellate Tribunal for Electricity (APTEL)/Hon''ble Supreme Court against the tariff orders issued by the CERC. Based on past experience, the Company believes that a favourable outcome is probable. However, it is impracticable to estimate the financial effect of the same as its receipt is dependent on the outcome of the judgement.
The company''s objectives when managing capital are to
⢠maximize the shareholder value;
⢠safeguard its ability to continue as a going concern;
⢠maintain an optimal capital structure to reduce the cost of capital.
For the purpose of the company''s capital management, equity capital includes issued equity capital, securities premium Account and all other equity reserves attributable to the equity holders of the company. The company manages its capital structure and makes adjustments in light of changes in economic conditions, regulatory framework and requirements of financial covenants with lenders. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, regulate investments in new projects, return capital to shareholders or issue new shares. The company monitors capital using debt-equity ratio, which is the ratio of long term debt to total net worth. The policy is to keep the debt-equity ratio wherein the debt is less than 75% of total capital employed (i.e. debt to equity ratio less than 75:25). The company includes within long term debt, interest bearing loans and borrowings and current maturities of long term debt.
The debt -equity ratio of the Company was as follows: |
||
Particulars |
As at 31.03.2022 |
As at 31.03.2021 |
Total borrowings (? in crore) |
1,34,665.27 |
1,43,051.48 |
Equity (? in crore) |
76,151.57 |
69,578.84 |
Debt - Equity ratio |
1.77 |
2.06 |
Under the terms of the major borrowing facilities, the company is required to comply with the financial covenants. Breaches in meeting the financial covenants would permit the lenders to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current reporting period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31.03.2022 and 31.03.2021.
*The Company has issued 1743863216 equity shares of ? 10/- each as fully paid bonus shares during the year in the ratio of 1 equity share of ? 10/- each for every 3 equity shares held. This has been considered for calculating weighted average number of equity shares for all comparative periods. In line with the above, EPS for the year ended 31.03.2021 has been restated.
The Company''s principal financial liabilities comprise loans and borrowings denominated in Indian rupees or foreign currencies, trade payables and other payables. The main purpose of these financial liabilities is to finance the Company''s capital investments and operations.
The Company''s principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that are generated from its operations.
The Company''s activities expose it to the following financial risks, namely,
(A) Credit risk,
(B) Liquidity risk,
(C) Market risk.
This note presents information regarding the company''s exposure, objectives, policies and processes for measuring and managing these risks.
Risk management framework
The Company has a duly constituted Risk Management Committee headed by Director (Projects) with Director (Operations), Director (Finance) and 2 independent directors as members. For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in the Company. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes / risks are monitored and controlled through various Key Performance Indicators (KPIs). The Committee meets at regular intervals and reviews KPIs and provides updates to the Audit Committee/Board.
The management of financial risks by the Company is summarized below:
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities on account of trade receivables and loans and advances and from its financing activities due to deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined considering the business environment in which the Company operates and other macro-economic factors.
Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where such recoveries are made, these are recognized in the statement of profit and loss.
(i) Trade Receivables and Contract Assets
The Company primarily provides transmission facilities to inter-state transmission service customers (DICs) comprising mainly state utilities owned by State Governments and the main revenue is from transmission charges. CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020 ("CERC Sharing Regulations") allow payment against monthly bills towards transmission charges within due date i.e., 45 days from the date of presentation of the bill and levy of surcharge on delayed payment beyond 45 days. However, in order to improve the cash flows of company, a graded rebate is provided for payments made within 45 days. If a DIC fails to pay any bill or part thereof by the Due Date, the Central Transmission Utility (CTU) may encash the Letter of Credit provided by the DIC and utilise the same towards the amount of the bill or part thereof that is overdue plus Late Payment Surcharge, if applicable.
The Company has a robust payment security mechanism in the form of Letter of Credit (LC) backed by the Tri-Pa rtite Agreements (TPA). The TPA was signed among the GOI, Reserve Bank of India and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of State Electricity Boards dues during 2001-02 by the GOI. The TPA also provides that if there is any default in payment of current dues by any State Utility, the outstanding dues can be deducted from the State''s RBI account and paid to the concerned CPSU.
As per provisions of CERC Sharing Regulations, in case tripartite agreement exists, the Letter of Credit shall be for an amount equal to 1.05 (one point zero five) times the average amount of the first bill of a year; Provided that where such tripartite agreement does not exist, the DIC shall open the Letter of Credit for an amount equal to 2.10 (two point one times) the average amount of the first bill of a year.
In addition to the encashment of letter of credit, on non-payment of outstanding dues, the CTU has power to regulate the power supply on the defaulting entity as per CERC (Regulation of Power Supply) Regulation, 2010 or deny Short Term Open Access.
Trade receivables consist of receivables relating to transmission services of ?9,060.38crore (Previous Year ?8,248.42crore), receivables relating to consultancy services of ?167.37crore (Previous Year ?200.91crore) and receivables relating to telecom business of ?179.80crore (Previous Year ?321.27crore).
Contract Assets primarily relates to the Company''s right to consideration for work completed but not billed at the reporting date and has substantially the same risk characteristics as the trade receivables for the same type of contracts.
The Company held cash and cash equivalents of ?746.01crore (Previous Year ?1,000.18crore). The cash and cash equivalents are held with public sector banks and high rated private sector banks and do not have any significant credit risk.
The Company held deposits with banks and financial institutions of ?2,291.05crore (Previous Year ?4,366.02crore). Term deposits are placed with public sector banks and have negligible credit risk.
The Company has given loans to employees, subsidiaries, Joint Venture companies, Government of India and other parties. House building loans and conveyance advance to the employees are secured against the mortgage of the house properties or hypothecation of vehicles for which such loans have been given in line with the policies of the Company. The loans provided to group companies are for projects under Tariff Based Competitive Bidding route and Public private partnership. The risk of default in respect of these loans is considered negligible.
The Company has assets where the counter- parties have sufficient capacity to meet the obligations and where the risk of default is very low. At initial recognition, financial assets (excluding trade receivables and contract assets) are considered as having negligible credit risk and the risk has not increased from initial recognition. Therefore, no loss allowance for impairment has been recognised.
In respect of trade receivables and contract assets from Telecom and Consultancy, customer credit risk is managed by regular monitoring of the outstanding receivables and follow-up with the consumer for realization.
With regard to transmission segment, the Company has customers most of whom are state government utilities with capacity to meet the obligations and therefore the risk of default is negligible. Further, management believes that the unimpaired amounts that are 30 days past due date are still collectible in full, based on the payment security mechanism in place and historical payment behaviour.
Considering the above factors and the prevalent regulations, the trade receivables and contract assets continue to have a negligible credit risk on initial recognition and thereafter on each reporting date.
Based on historic default rates, the Company believes that, apart from the above, no impairment allowance is necessary in respect of any other assets as the amounts are insignificant.
Liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company has access to a variety of sources of funding such as commercial paper, bank loans, bonds and external commercial borrowings and retains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company''s liquidity position comprising the undrawn borrowing facilities below and cash and cash equivalents on the basis of expected cash flows.
The Company depends on both internal and external sources of liquidity to provide working capital and to fund capital expenditure.
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have remaining availability period of 1 to 5 years (Previous Year 1 to 5 years).
Mar 31, 2021
a) The Company owns 7,368.00 hectare (Previous Year 7,350.00 hectare) of land amounting to '' 2,734.15 crore (Previous Year '' 2,713.14 crore) which has been classified into freehold land 6,256.00 hectare (Previous Year 6,257.00 hectare) amounting to '' 2,264.49 crore (Previous Year '' 2,252.71 crore) and Right of Use - Land 1,112.00 hectare (Previous Year 1,093.00 hectare) amounting to ''469.66crore (Previous Year '' 460.43 crore) based on available documentation.
b) Freehold land acquired by the company includes 170.26 hectare (Previous Year 188.93 hectare) amounting to '' 151.63 crore (Previous Year '' 149.17 crore) in respect of which conveyance deed in favour of the company is pending and 80.57 hectare (Previous Year 84.59 hectare) amounting to '' 49.92 crore (Previous Year '' 52.03 crore) in respect of land acquired by the company for which only mutation in revenue records is pending.
c) i) The land classified as Right of Use - Land held in the state of Jammu and Kashmir with area of 113.88 hectare (Previous
Year 113.88 hectare) amounting to '' 129.18 crore (Previous Year '' 94.01 crore) is acquired by state government as per procedures under State Land Acquisition Act. As per prevailing law the state government remains the owner of the land so acquired and company is only given possession for the specific use.
ii) The transmission system situated in the state of Jammu and Kashmir have been taken over by the company w.e.f. 01.04.1993 from National Hydroelectric Power Corporation of India Limited (NHPC) upon mutually agreed terms pending completion of legal formalities.
iii) Right of Use - Land includes area of 2.65 hectare (Previous Year 2.65 hectare) amounting to '' 12.36 crore (Previous Year '' 12.36 crore) in respect of land in Chamba (HP) acquired from NHPC by the company for which legal formalities are pending.
iv) Right of Use - Land other than above includes 135.28 hectare (Previous Year 142.87 hectare) amounting to '' 134.83 crore (Previous Year '' 185.88 crore) in respect of which lease agreements/ legal formalities are pending.
d) Right of Use - Land includes area of 0.41 hectare (Previous Year 0.41 hectare) amounting to '' 7.64 crore (Previous Year '' 7.64 crore) in respect of land acquired for office complex on perpetual lease basis and hence not amortised.
e) Township building includes '' 2.96 crore (Previous Year '' 2.96 crore) for 28 flats (Previous Year 28 flats) at Mumbai, for which registration in favour of the company is pending. Out of the above flats, 17 flats are occupied by employees of M/S Power System Operation Corporation Ltd.
f) 5.63 hectare (Previous Year 5.63 hectare) having value of '' 0.04 crore (Previous Year '' 0.04 crore) has been transferred to National High Power Test Laboratory Pvt. Ltd. on right to use without granting ownership.
g) Refer note no. 50 for disclosure on Right of Use Assets as per Ind AS 116 - âLeasesâ.
h) Refer note no. 23 for information on property, plant and equipment pledged as security by the company.
During the previous financial year, the pledge on 229319997 equity shares held by POWERGRID in M/s Powerlinks Transmission Limited has been released from IDFC FIRST Bank (formerly IDFC Ltd) being the Trustee on behalf of Security lenders in terms of Share pledge agreement dated 15.04.2004.
Investments have been valued as per accounting policy no. 2.13, 2.14 & 2.15.
The present status of the M/s Kalinga Bidyut Prasaran Nigam Private Limited as per MCA website is â Strike Offâ. Investment of '' 0.01 crore in Kalinga Bidyut Prasaran Nigam Private Limited has been written off during the Previous Year. POWERGRID''s Board of Directors in its meeting held on 01.05.2018 accorded in principle approval to close RINL Powergrid TLT Private Limited (RPTPL) and seek consent of other JV Partner Rashtriya Ispat Nigam Limited (RINL). RINL''s Board of Directors in its meeting held on 08.03.2019 has agreed in principle for winding up proceedings of RPTPL & to seek the approval from Ministry of Steel, Government of India, for closure of RPTPL. RINL''s Board of Directors in its meeting held on 05.11.2019 has advised to put up the closure proposal again to Ministry of steel for onward submission to NITI Ayog. The Ministry of Steel vide letter dated 29.09.2020 informed RINL that closure of RPTPL is being examined and seeks further clarifications from RINL. Accordingly, relevant information was forwarded by RINL to The Ministry of Steel. The Approval from Government is still awaited.
Refer remarks at Note No 11 for Powergrid Vemagiri Transmission Limited.
Wholly owned subsidiary w.e.f. 26.03.2021 (Joint venture till 25.03.2021)
# Bank deposits against designated accounts for consultancy work.
## In the FY 2018-19, the Company issued âGoI fully serviced bonds'' for an amount of '' 3487.50 crore for raising of Extra Budgetary Resources (EBR) for GoI scheme of Power System Development Fund (PSDF) in terms of letter No: 7/1/2018-OM dated 21st January, 2019 of Ministry of Power, Govt. of India (GoI) for meeting accrued liabilities for creation of Capital Assets. The repayment of principal and the interest payment on such bonds shall be met by GoI. An amount of '' 3487.50 Crore from bond issue has been recognised as Grant in aid in Previous Years.
*Details of advances to related parties are provided in Note 55.
**CERC vide order dated 06/04/2015 in petition no.127/2012 had directed that 80% of the acquisition price incurred by the Company for Vemagiri Transmission Company Limited (VTSL) shall be reimbursed by the Long Term Transmission Customers (LTTCs) and balance 20% along with the expenditure incurred by VTSL from the date of acquisition till the liquidation of the company shall be borne by the Company. Subsequently, on a review petition filed by the Company, CERC vide order dated 20/10/2016 held that there are sufficient reasons to review the liability of the Company to pay 20% of the acquisition price and accordingly, directed that the issue shall be decided afresh by taking a holistic view in the matter after disposal of appeals filed by the LTTCs on the issue in Appellate Tribunal of Electricity (ATE).
The final hearing in the appeals filed in APTEL was held on 02.03.2020 and Hon''ble APTEL directed all parties to file written submission and reserved the Judgement. However, due to Covid pandemic lock down during Mar''20-May''20, the matter was relisted & heard on 24.08.2020 and Hon''ble APTEL directed all the parties to file concise comprehensive written submissions through email and reserved the Judgement again. Accordingly, concise comprehensive written submissions were filed in APTEL.
As one of the Hon''ble Members of APTEL retired during Dec''20 before pronouncement of the judgement, the matter may need to be heard again. An application for early hearing of the appeal was filed in APTEL in Mar''21 to expedite the matter, which is still to be listed for hearing.
### Equity Share allotted on 5th May, 2020.
^Unbilled revenue includes transmission charges for the month of March including bill 3 for previous quarter, of the financial year amounting to '' 2512.28 crore (Previous Year '' 3924.36 crore) billed to beneficiaries in the month of April of subsequent financial year. Further refer note no 46 for disclosure as per Ind AS 115 âRevenue from Contracts with Customers''. Unbilled revenue includes '' 6.54 Crore (Previous Year '' Nil ) from related parties (refer Note 55).
# Details of related parties are provided in Note 55.
## Others include:-
(a) an amount of '' 59.88 crore (Previous Year '' 30.85 crore) recoverable from M/s Delhi Transco Limited towards transfer of 2.427 hectare (Previous Year 1.167 hectare) land at Tughlaqabad and Dwarka Sub-station pending completion of legal formalities for transfer of title.
(b) amount recoverable from Customers, Advance rent for Residential and Office accommodation, Other advance etc.
The company has monetised five (05) of its Subsidiaries, namely Powergrid Vizag Transmission Limited, Powergrid Kala Amb Transmission Limited, Powergrid Jabalpur Transmission Limited, Powergrid Warora Transmission Limited and Powergrid Parli Transmission Limited through POWERGRID Infrastructure Investment Trust (âPGInvIT/ Trust''). PGInvIT has been registered by SEBI under SEBI (Infrastructure Investment Trusts) Regulations, 2014 (âInvIT Regulations'') as an Infrastructure Investment Trust vide registration no. IN/InvIT/20-21/0016 dated 07.01.2021. The company is the Sponsor of PGInvIT and shall also act as the Project Manager to PGInvIT. IDBI Trusteeship Services Limited is the Trustee and Powergrid Unchahar Transmission Limited (PUTL), a wholly owned subsidiary of the company, has been appointed as Investment Manager to PGInvIT. The Offer Document for initial public offer has been filed by PGInvIT with the SEBI and Stock Exchanges on 22.04.2021 and units got listed on stock exchanges on 14.05.2021. The 74% shares in the above five SPVs have been transferred to PGInvIT in May, 2021 and balance 26% will be transferred in line with Transmission Service Agreement (TSA). In lieu of consideration of shareholding so transferred, 41,06,50,900 Units were allotted by PGInvIT to the company. The company retained 13,65,00,100 units being 15% of total units of PGInvIT outstanding on post issue basis. pursuant to InvIT Regulations and remaining 27,41,50,800 units were sold by way of âOffer for Sale (OFS)''. The company received an amount of '' 2736.02 crore (net of STT) against the OFS.
As the said investments are being sold in FY 2021-22, the investments in the above mentioned five Subsidiaries have been classified as âAssets Classified as Held for Saleâ as on 31.03.2021.
Secured Foreign Currency Loans (Guaranteed by GoI) carry floating rate of interest linked to 6M LIBOR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 3 to 5 years except for one loan '' 364.64 Crore (Previous year '' 374.16 Crore) which carry fixed rate of interest of 0.25% p.a.
Secured other Foreign Currency Loans carry floating rate of interest linked to 6M (LIBOR /EURIBOR/STIBOR). These loans are repayable in semi annual installment, as per terms of the respective loan agreements, commencing after moratorium period of 3 to 5 years.
Secured Rupee loan from banks carry floating rate of interest linked to 3M MCLR. These loans are repayable in semi annual installments, as per terms of the respective loan agreements, commencing after moratorium period of 5 years.
Unsecured Foreign Currency Loans (Guaranteed by GoI) carry fixed rate of interest ranging from 1.63%p.a. to 2.30%p.a.These loans are repayable in semi annual installments as per terms of the respective loan agreements.
Unsecured Foreign Currency Loans carry floating rate of interest linked to 6M (STIBOR/EURIBOR). These loans are repayable in semi annual installments as per terms of the respective loan agreements, commencing after moratorium period as per terms of the respective loan agreements.
Unsecured Foreign Currency Loans carry floating rate of interest linked to 6M JPYLIBOR. This loan is repayable in five equal annual installment as per the terms of the loan agreement.
Unsecured Rupee loan from bank carry floating rate of interest linked to 3 months MCLR or Repo rate. These loans are repayable in semi annual installments, as per terms of the respective loan agreements, commencing after moratorium period as per terms of the respective loan agreements.
There has been no default in repayment of loans or payment of interest thereon as at the end of the year.
Domestic Bonds are Secured by way of Registered Bond Trust Deed ranking pari passu on immovable property situated at Mouje Ambheti Taluka Kaparada in district Valsad Gujarat and floating charge on the assets of the company.
Secured Foreign Currency Loans (Guaranteed by GoI) are secured by pari passu interest in the lien created on the assets as security for the debts.
Secured Other Foreign Currency Loans and Rupee Loans are secured by the way of
(i) pari passu charge on the assets of the company except investments, land and building, roads and bridges, water supply, drainage and sewerage and current assets or
(ii) pari passu charge on the assets of the company except investments and current assets or
(iii) floating charge on the immovable properties of the company. as per the terms of respective loan agreements.
i) Performance Related Pay/Special Incentive:
Provision is created for Performance Related Pay to Executives and Non-Executives
ii) Other Employee Benefits:
Provision is created for the purpose of meeting out leave encashment, settlement allowance, long service award and POWERGRID Employee Family Rehabilitation Scheme.
i) Downtime Service Credit -Telecom:
Provision is created in case when actual downtime is in excess of the permissible service level agreement, in such cases the necessary credit is passed on to the customer on demand.
However, in some case, the downtime is not claimed by the customer then in such cases necessary provision on account of downtime is made in the books of accounts as per the links availability reports received from National Telecom Control Centre (NTCC) for the period of non-operation of links given to the customers. The calculation of downtime credit is based on the SLA signed with various customers.
ii) Provision Others:
It includes provision for entry tax '' 156.98 crore (Previous Year '' 147.69 crore) as per demand raised by revenue authorities disputed by the company and are under litigation. An amount of '' 8.24 crore (Previous Year '' 8.24 crore) has been paid under court order and shown as âBalance with custom port trust and other authoritiesâ in note no. 19.
Also includes provision of '' 0.46 crore (Previous Year '' 0.46 crore) towards demand raised by the commercial taxes department of Telangana in relation to absence of statutory form and other evidence on account of inter-state sale not covered by âC'' form. The Company has filled the appeal before Appellate Deputy Commissioner (ADC) and later on ADC remanded back to the assessing authority for reassessment & decision is awaited.
Grant in Aid of '' 5.95 crore (Previous Year '' 74.68 crore) was received from Power System Development Fund (PSDF) under Ministry of Power (MoP), Govt. of India (GoI) for installation of STATCOM in ER (ERSS-XI) and SR (System Strengthening in SR-XXI). In addition to Grant received, an interest of '' 1.43 crore (Previous Year '' 4.44 crore) credited to the Grant.
Grant in Aid of '' 0.00 crore (Previous Year '' 30.27 crore) was received from Power System Development Fund (PSDF) under MoP, GoI for establishment of Unified Real Time Dynamic State Measurement (URTDSM). In addition to Grant received, an interest of '' 0.75 crore (Previous Year '' 1.41 crore) credited to the Grant.
Grant in Aid, of '' 99.83 crore (Previous Year '' 122.89 crore) including interest has been recognised, from Ministry of New & Renewable Energy(MNRE), GoI for establishment of transmission system associated with Ultra Mega Solar Parks in Andhra Pradesh, Karnataka, Madhya Pradesh, Rajasthan and Gujarat.
Grant in Aid of '' 0.03 crore (Previous Year '' 0.25 crore) has been recognised under achievement linked/incentive award scheme for Government Sector by Ministry of New & Renewable Energy (MNRE), GoI for establishing solar roof top plants in various buildings of the company.
In exercise of powers u/s 178 of the Electricity Act 2003, Central Electricity Regulatory Commission (CERC) has notified âCERC (Terms and Conditions of Tariff) Regulations, 2019â vide order dated 07.03.2019 for the determination of transmission tariff for the block period 2019-24.
The company has recognised transmission income during the year as per the following:
i) '' 9,407.16 crore (Previous Year '' 0.00 crore) as per final tariff orders issued by CERC for block period 2019-24 and
ii) '' 26,713.76 crore (Previous Year '' 33,932.94 crore) provisionally as per CERC Tariff Regulations for the block period 2019-24 and other orders in similar cases, in respect of transmission assets for which final tariff orders are yet to be issued.
Consequent to the final order issued by CERC, transmission income includes '' 538.30 crore (increase) (Previous Year '' 173.30 crore (increase) ) pertaining to earlier years.
Refer note no. 65 for disclosure on formation of wholly owned subsidiary of the company to undertake Telecommunications and Digital Technology Business of the company and wholly owned subsidiary of the company to undertake Energy Management services and Consultancy Business of the company.
Refer note no. 46 for disclosure as per Ind AS 115 âRevenue from Contracts with Customerâ.
¦. Cash equivalent of deemed export benefits availed of '' 209.99 crore in respect of supplies effected 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 (GOI) 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.
In this regard the Cumulative amount received and de-capitalized upto 31.03.2021 is '' 12.12 crore (Previous Year '' 12.12 crore). The company continued to show the balance of '' 197.87 crore (Previous Year '' 197.87 crore) in the capital cost of the respective assets / projects pending receipt of the same from Customs and Excise Authorities.
i. a) Some balances of Trade Receivables and recoverable shown under Assets and Trade and Other Payables shown under Liabilities include balances subject to confirmation/ reconciliation and consequential adjustments if any. However, reconciliations are carried out on ongoing basis. The management does not expect any material adjustment in the books of accounts as a result of the reconciliation.
b) In the opinion of the management, the value of any of the assets other than Property, Plant and Equipment and noncurrent investments on realization in the ordinary course of business will not be less than the value at which they are stated in the Balance Sheet.
Disclosure as per Ind AS 116 - âLeasesâ
The Company has classified and accounted for the arrangements for state sector ULDC assets and bilateral assets as finance leases. Agreements for State Sector ULDC are for a period of 15 years and Bilateral Line Assets with the beneficiary are for the period as specified in CERC Regulations.
Other Non-Current Financial Assets and Other Current Financial Assets 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 and Bilateral Line Assets. Disclosure requirements of Ind AS 116 âLeases'' notified under the Companies Act, 2013 are given as under:
(i) Details of gross investment in lease, un-earned finance income and present value of minimum lease payments receivables at the end of financial year are given as under:
The company has taken assets on lease such as dark fibre, colocation & repeater shelter spaces and office buildings etc. for various periods which are assessed and accounted as per the requirements of Ind AS 116 - âLeasesâ and required disclosures as per the said Ind AS are as follows:
ROU Assets:
Additions, termination/disposal and depreciation charge on right of use assets for the year and carrying amount of the same as at the end of the financial year by class of underlying asset has been disclosed in note no. 4 as a separate line item.
) Lease Liabilities:
Interest expense on lease liabilities for the year is shown under note no. 38 and total cash outflow for leases for the year has been disclosed in statement of cash flow under financing activities as separate line item and maturity analysis of lease liabilities has been disclosed in note no. 61.
i) Short term leases:
The company, during the financial year, has incurred '' 37.56 crore (Previous Year '' 48.85 crore) with respect to short term leases.
The company was committed to short term leases and the total commitment of such leases at the end of financial year was '' 5.94 crore (Previous Year '' 4.83 crore).
1. Disclosures relating to Regulatory Deferral Account Balances
The company is mainly engaged in the business of transmission of power. The tariff for transmission of power is determined by the CERC through tariff regulations. The tariff is based on capital cost admitted by CERC and provides for transmission charges recovery of annual fixed cost consisting of Return on equity, Interest on loan capital, Depreciation, interest on working capital and Operation & Maintenance expenses.
FERV arising during the construction period for settlement/translation of monetary items (other than non-current loans) denominated in foreign currency to the extent recoverable/payable to the beneficiaries as capital cost as per CERC Tariff Regulations are accounted as Regulatory Deferral Account Balances. In respect of long term foreign currency loan drawn on or after 01.04.2016, exchange difference to the extent recoverable as per CERC Tariff Regulations are recognised as Regulatory Deferral Account Balances. The company expects to recover these amounts through depreciation component of the tariff over the life of the asset or as exchange rate variation on repayment of the loan.
The tariff norms for the block period 2019-2024 notified by the Central Electricity Regulatory Commission (CERC) provide for grossing up of the return on equity based on effective tax rate for the financial year based on the actual tax paid during the
Disclosures relating to Regulatory Deferral Account Balances (Contd.)
year on the transmission income. Accordingly, deferred tax provided during the year ended 31.03.2021 on the transmission income is accounted as âDeferred Assets against Deferred Tax Liability''. Deferred Assets against Deferred Tax Liability for the year will be reversed in future years (including tax holiday period) when the related deferred tax liability forms a part of current tax.
The cumulative amount of '' 134.16 crore (cumulative previous year amount of '' 134.16 crore) on account of pay revision is recoverable from the beneficiaries is included in Regulatory Deferral Account Balances and will be adjusted in the year in which they become recoverable from beneficiaries as per CERC. Amount of regulatory deferral account balances is on undiscounted basis.
(a) regulatory risk on account of changes in regulations.
(b) other risks including currency or other market risks, if any.
Any change in the Tariff regulations beyond the current tariff period ending on 31.03.2024 may have an impact on the recovery of Regulatory Deferral Account Balances.
54. Fair Value Measurement (Contd.)
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets included in level 3.
There are no transfers between levels 1 and 2 during the year. The company''s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Specific valuation techniques used to value financial instruments include:
⢠the use of quoted market prices or dealer quotes for similar instruments
⢠the fair value of Energy Efficiency Services Limited has been determined by making qualitative adjustment to trading multiples such as P/E, EV/EBITDA of comparable listed prices. The same has been included in Level 2 fair value hierarchy.
⢠the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 apart from equity instruments of PTC India Limited which is included in Level 1 fair value hierarchy.
Fair value of financial instruments has been determined by an independent valuer.
1Joint venture till 25.03.2021 (Wholly owned subsidiary from 26.03.2021).
2POWERGRID & Teesta Urja Ltd are the Joint venture partners in Teestavalley Power Transmission Limited & holds 26% & 74 % equity, respectively as per Shareholding agreement. On call of additional equity by Teestavalley Power Transmission limited, POWERGRID contributed their share while the other JV partner has not yet contributed their share of money. Consequently, the holding of POWERGRID increased to 30.92% against 26% provided in shareholding agreement.
3The present status of the Company (M/s KBPNL) as per MCA website is âStrike Offâ.
4POWERGRID''s Board of Directors in its meeting held on 01.05.2018 accorded in principle approval to close RINL Powergrid TLT Private Limited (RPTPL) and seek consent of other JV Partner Rashtriya Ispat Nigam Limited (RINL). RINL''s Board of Directors in its meeting held on 08.03.2019 has agreed in principle for winding up proceedings of RPTPL & to seek the approval from Ministry of Steel, Government of India, for closure of RPTPL. RINL''s Board of Directors in its meeting held on 05.11.2019 has advised to put up the closure proposal again to Ministry of steel for onward submission to NITI Ayog. The Ministry of Steel vide letter dated 29.09.2020 informed RINL that closure of RPTPL is being examined and seeks further clarifications from RINL. Accordingly, relevant information was forwarded by RINL to The Ministry of Steel. The Approval from Government is still awaited.
55. Disclosure as per Ind AS 24 - âRelated Party Disclosuresâ (Contd.)
The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 51.34% (Previous Year 51.34%) of equity shares capital issued and paid up.
The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on arms-length basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items.
The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively.
a) Business Segment
The Board of Directors is the Company''s Chief Operating Decision Maker (CODM) who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Three reportable segments have been identified on the basis of services provided.
⢠Transmission Services- Company''s principal business is transmission of bulk power across different states of India.
⢠Telecom Services- The Company utilizes the spare Optical fibres available in the Optical Ground Wire (OPGW) laid on the transmission network for providing telecom services. It operates as a neutral carrier in the point to point bandwidth leasing business. Refer note no. 65 for disclosure on formation of wholly owned subsidiary of the company to undertake Telecommunications and Digital Technology Business of the company.
⢠Consultancy Services- provides Consultancy Services in the Transmission, Distribution and Telecom sectors, including Planning Design, Engineering, Load Dispatch, OPGW on intra state Transmission network, Procurement Management, Operation & Maintenance, Financing and Project Management. Refer note no. 65 for disclosure on formation of wholly owned subsidiary of the company to undertake Energy Management services and Consultancy Business of the company.
b) The operations of the company are mainly carried out within the country and therefore there is no reportable geographical segment.
c) Information about major customer: Revenue from any single customer is not equal to or exceeds 10% of the company''s total revenue.
d) Segment Revenue and Expenses
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.
Revenue from external customer in India is '' 38,615.03 crore (Previous Year '' 36,850.28 crore) and outside India is '' 22.86 crore (Previous Year '' 42.99 crore).
e) Segment Assets and Liabilities
Segment assets include all operating assets comprising of Property, Plant and Equipment, current assets and loan and advances. Construction, Work-in-progress, construction stores and advances and investments are included in unallocated assets. Segment facilities include operating liabilities and provisions.
58. Contingent Liabilities and contingent assets
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 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. In such cases, contingent liability of '' 2,540.73 crore (Previous Year '' 3,401.71 crore) has been estimated.
(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 '' 1,604.98 crore (Previous Year '' 1,893.16 crore) has been estimated.
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 '' 19.90 crore (Previous Year '' 27.41 crore) has been estimated.
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to '' 224.66 crore (Previous Year '' 290.18 crore) are being contested before various Appellate Authorities. Many of these matters have been disposed of in favour of the company but are disputed before higher authorities by the concerned departments. Against total claim of '' 191.42 crore (Previous Year '' 182.13 crore), provision of '' 156.98 crore (Previous Year '' 147.69 crore) is made and balance of '' 34.44 crore (Previous Year '' 34.44 crore) towards penalty is shown as contingent liability as it is not a wilful default and in management opinion, same is not expected to be upheld by the court.
a) Contingent liability in respect of bills discounted with banks against trade receivables is amounting to '' 2,533.96 crore (Previous Year '' 1,030.24 crore). In case of any claim on the company from the banks in this regard, entire amount shall be recoverable from the beneficiaries along with surcharge.
b) Other contingent liabilities amounts to '' 793.50 crore (Previous Year '' 722.17 crore) which includes claim of '' 397.01 crore (Previous Year '' 417.46 crore) related to Arbitration cases/ROW cases.
c) 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.
d) 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 âPOWERGRID event of defaultâ or on âforce majeure eventâ prescribed under TSA. No contingent liability on this account has been considered as the same is not ascertainable.
While determining the tariff for some of the Company''s Transmission Systems, CERC has disallowed certain capital expenditure incurred by the Company. The Company aggrieved over such issues has filed appeals with the Appellate Tribunal for Electricity (APTEL)/Hon''ble Supreme Court against the tariff orders issued by the CERC. Based on past experience, the Company believes that a favourable outcome is probable. However, it is impracticable to estimate the financial effect of the same as its receipt is dependent on the outcome of the judgement.
The company''s objectives when managing capital are to
⢠maximize the shareholder value;
⢠safeguard its ability to continue as a going concern;
⢠maintain an optimal capital structure to reduce the cost of capital.
For the purpose of the company''s capital management, equity capital includes issued equity capital, securities premium Account and all other equity reserves attributable to the equity holders of the company. The company manages its capital structure and makes adjustments in light of changes in economic conditions, regulatory framework and requirements of financial covenants with lenders. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, regulate investments in new projects, return capital to shareholders or issue new shares. The company monitors capital using debt-equity ratio, which is the ratio of long term debt to total net worth. The policy is to keep the debt-equity ratio wherein the debt is less than 75% of total capital employed (i.e. debt to equity ratio less than 75:25). The company includes within long term debt, interest bearing loans and borrowings and current maturities of long term debt.
The Company''s principal financial liabilities comprise loans and borrowings denominated in Indian rupees or foreign currencies, trade payables and other payables. The main purpose of these financial liabilities is to finance the Company''s capital investments and operations.
The Company''s principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that are generated from its operations.
The Company''s activities expose it to the following financial risks, namely,
(A) Credit risk,
(B) Liquidity risk,
(C) Market risk.
This note presents information regarding the company''s exposure, objectives, policies and processes for measuring and managing these risks.
The Company has a duly constituted Risk Management Committee headed by Director (Projects) with Director (Operations), Director (Finance) and independent director as members. For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in the Company. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes / risks are monitored and controlled through various Key Performance Indicators (KPIs). The Committee meets at regular intervals and reviews KPIs and provides updates to the Audit Committee/Board.
The management of financial risks by the Company is summarized below:-
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities on account of trade receivables and loans and advances and from its financing activities due to deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined considering the business environment in which the Company operates and other macroeconomic factors.
Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where such recoveries are made, these are recognized in the statement of profit and loss.
The Company primarily provides transmission facilities to inter-state transmission service customers (DICs) comprising mainly state utilities owned by State Governments and the main revenue is from transmission charges. CERC (Sharing of Inter-State Transmission Charges and Losses) Regulations, 2020 (âCERC Sharing Regulationsâ) allow payment against monthly bills towards transmission charges within due date i.e., 45 days from the date of presentation of the bill and levy of surcharge on delayed payment beyond 45 days. However, in order to improve the cash flows of company, a graded rebate is provided for payments made within 45 days. If a DIC fails to pay any bill or part thereof by the Due Date, the Central Transmission Utility (CTU) may encash the Letter of Credit provided by the DIC and utilise the same towards the amount of the bill or part thereof that is overdue plus Late Payment Surcharge, if applicable.
The Company has a robust payment security mechanism in the form of Letter of Credit (LC) backed by the Tri-Partite Agreements (TPA). The TPA was signed among the GOI, Reserve Bank of India and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of State Electricity Boards dues during 2001-02 by the GOI. The TPA also provides that if there is any default in payment of current dues by any State Utility, the outstanding dues can be deducted from the State''s RBI account and paid to the concerned CPSU.
As per provisions of CERC Sharing Regulations, in case tripartite agreement exists, the Letter of Credit shall be for an amount equal to 1.05 (one point zero five) times the average amount of the first bill of a year; Provided that where such tripartite agreement does not exist, the DIC shall open the Letter of Credit for an amount equal to 2.10 (two point one times) the average amount of the first bill of a year.
In addition to the encashment of letter of credit, on non-payment of outstanding dues, the CTU has power to Regulate the power supply on the defaulting entity as per CERC (Regulation of Power Supply) Regulation, 2010 or deny Short Term Open Access.
Trade receivables consist of receivables relating to transmission services of '' 3,441.14 crore (Previous Year '' 4,664.93 crore), receivables relating to consultancy services of '' 176.55 crore (Previous Year '' 197.77 crore) and receivables relating to telecom business of '' 304.05 crore (Previous Year '' 321.02 crore).
Unbilled revenue primarily relates to the Company''s right to consideration for work completed but not billed at the reporting date and has substantially the same risk characteristics as the trade receivables for the same type of contracts.
⢠Cash and cash equivalents
The Company held cash and cash equivalents of '' 1,000.18 crore (Previous Year '' 570.72 crore). The cash and cash equivalents are held with public sector banks and high rated private sector banks and do not have any significant credit risk.
⢠Deposits with banks and financial institutions
The Company held deposits with banks and financial institutions of '' 4,366.02 crore (Previous Year '' 4,849.79 crore). Term deposits are placed with public sector banks and have negligible credit risk.
The Company has given loans to employees, subsidiaries, Joint Venture companies, Government of India and other parties. House building loans and conveyance advance to the employees are secured against the mortgage of the house properties or hypothecation of vehicles for which such loans have been given in line with the policies of the Company. The loans provided to group companies are for projects under Tariff Based Competitive Bidding route and Public private partnership. The risk of default in respect of these loans is considered negligible.
(a) Financial assets for which loss allowance is measured using 12 month expected credit losses
The Company has assets where the counter- parties have sufficient capacity to meet the obligations and where the risk of default is very low. At initial recognition, financial assets (excluding trade receivables and unbilled revenue) are considered as having negligible credit risk and the risk has not increased from initial recognition. Therefore, no loss allowance for impairment has been recognised.
(b) Financial assets for which loss allowance is measured using life time expected credit losses
In respect of trade receivables and unbilled revenue from Telecom and Consultancy, customer credit risk is managed by regular monitoring of the outstanding receivables and follow-up with the consumer for realization.
With regard to transmission segment, the Company has customers most of whom are state government utilities with capacity to meet the obligations and therefore the risk of default is negligible. Further, management believes that the unimpaired amounts that are 30 days past due date are still collectible in full, based on the payment security mechanism in place and historical payment behaviour.
Considering the above factors and the prevalent regulations, the trade receivables and unbilled revenue continue to have a negligible credit risk on initial recognition and thereafter on each reporting date.
Liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company has access to a variety of sources of funding such as commercial paper, bank loans, bonds and external commercial borrowings and retains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company''s liquidity position comprising the undrawn borrowing facilities below and cash and cash equivalents on the basis of expected cash flows.
The Company depends on both internal and external sources of liquidity to provide working capital and to fund capital expenditure.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:
(i) Currency risk
(ii) Interest rate risk
(iii) Other price risk, such as equity price risk and commodity risk.
The Company is exposed to currency risk mainly in respect of foreign currency denominated loans and borrowings and procurement of goods and services whose purchase consideration is denominated in foreign currency. Transmission tariff is regulated by the CERC. According to the CERC tariff regulations for the block 2019-24 the Company may hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the transmission system, in part or full in its discretion and recover the cost of hedging of foreign exchange rate variation corresponding to the normative foreign debt, in the relevant year.
If hedging of the foreign exchange exposure is not undertaken, the extra rupee liability towards interest payment and loan repayment corresponding to the normative foreign currency loan in the relevant year is permissible to be recovered as part of transmission tariff provided it is not attributable to the generating Company or the transmission licensee or its suppliers or contractors. During the Current financial year, no hedging for foreign exchange exposure has been undertaken by the Company. In respect of goods and services procured for Capital Investment, the exchange rate variation is part of the project cost, for determination of transmission tariff. The currency risk in respect of goods and services procured for operation activities is not significant.
Since the impact of strengthening or weakening of Indian rupee against USD, Euro, JPY and other currencies on the statement of profit and loss would not be very significant; therefore, sensitivity analysis for currency risk is not disclosed.
The Company is exposed to interest rate risk arising mainly from long term borrowings with floating interest rates. The Company is exposed to interest rate risk because the cash flows associated with floating rate borrowings will fluctuate with changes in interest
As per CERC Regulations, interest on loan during construction forms part of project cost for the purpose of tariff and after the date of commercial operation, interest on loans is recoverable through tariff calculated on the normative average loan of the year by applying the weighted average rate of interest of the actual loan portfolio.
Accordingly, the Company''s interest rate risk is not considered significant; hence sensitivity analysis for the risk is not disclosed.
The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.
Considering the magnitude of equity investments, no significant risk is expected to arise.
This note provides an analysis of the company''s income tax expense, and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Company''s tax position.
A. Leave Obligations
The Company provides for earned leave benefit (including compensated absences) and half-pay leave to the employees of the company which accrue annually at 30 days and 20 days respectively. Earned leave is encashable while in service. Half pay leaves (HPL) are encashable only on separation beyond the age of 55 years upto the maximum of 300 days (HPL). However, total number of leave that can be encashed on superannuation shall be restricted to 300 days and no commutation of half pay leave shall be permissible. The liability for same is recognized on the basis of actuarial valuation.
B. Other employee benefits - POWERGRID Employee Family Rehabilitation Scheme
The company has introduced POWERGRID Employees Family Economic Rehabilitation Scheme on 24.06.2017. The Objective of the scheme is to provide monetary assistance and support to an employee in case of his/her permanent total disablement and to his/her family in case of death while in service. The beneficiary would be entitled to monthly payment equivalent to the employee''s 50% of one month pay last drawn provided the beneficiary deposits with the company an amount equal to PF (excluding VPF) balance, Gratuity amount and Group Insurance (EDLI) amount. Such monthly payment would continue till the normal notional date on which the employee concerned would have attained the age of superannuation had the employee continued in the service of the company. The scheme is optional. Provision for POWERGRID Employees Family Economic Rehabilitation Scheme amounting to '' 1.58 crore (up to Previous Year '' 8.09 crore) for the year has been made during the year based on actuarial valuation.
A. 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 empaneled hospitals. They can also avail treatment as Out-Patient subject to a ceiling fixed by the company. The liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date. The scheme is funded by the company and is managed by a separate trust constituted on 01 May 2018.
B. Other employee benefits - Long Service Award
This benefit is applicable to all regular employees of the company (except for Directors and CMD) who have superannuated after completing at least 10 years of service. This scheme is unfunded and liability for the same is recognised on the basis of actuarial valuation on annual basis on the balance sheet date.
C. 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 '' 20 lacs. The scheme is funded by the company and is managed by a separate trust. The liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date. Company has carried out the actuarial valuation of Gratuity benefit considering ceiling of '' 20 Lakhs.
D. Other Defined Retirement Benefits (ODRB)/Baggage Allowance
The Company has a scheme for settlement at the time of superannuation at anywhere in India and dependents to superannuated employees. The scheme is unfunded and liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
E. 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 and EPS scheme for the year amounting to '' 128.30 crore (previous year '' 124.43 crore) has been 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 the report of actuary overall interest earning and cumulative surplus is more than statutory interest payment requirement. Hence, no further provision is considered necessary. Since the company does not have unconditional right over the PF corpus, the surplus has not been recognized in the Balance Sheet.
Valuation is based on certain assumptions which are dynamic in nature and vary over time. As such company is exposed to
various risks as follows:
A) Salary Increases (except for PF) - Actual salary increase will increase the plan''s liability. Increase in salary increase rate assumptions in future valuation will also increase the liability.
B) Investment risk - If plan is funded then assets liabilities mismatch and actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability
C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the plan''s liability.
D) Mortality & disability - Actual deaths and disability cases proving lower or higher than assumed in the valuation can impact the liabilities.
E) Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan''s liability.
64. Disclosure of material impact of COVID-19 pandemic on listed entities under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
The Company is mainly engaged in the business of transmission of electricity and the tariffs for the transmission services are regulated in terms of the CERC Tariff Regulations which provide for recovery of the annual transmission charges based on system availability.
Due to the continuing COVID-19 pandemic, various lockdowns were declared by the Central/ State Governments/ Local Authorities from time to time. However, as per the Government guidelines, transmission units and services were exempted from the said lockdown restrictions. The Company has issued guidelines and protocols to be followed by its various units for the operation and maintenance of its transmission network during the pandemic. The Company has also implemented digital solutions such as e-office, ERP systems, Virtual Private Network, Video Conferencing etc. to facilitate Work from Home of its employees. Due to the various steps taken by the Company, there has been no significant impact due to the pandemic on the availability of the transmission system of the Company.
In the above backdrop, the Company has considered various internal and external information available up to the date of approval of financial statements in assessing the impact of COVID-19 pandemic on the financial statements for the year ended 31 March 2021.
64. Disclosure of material impact of COVID-19 pandemic on listed entities under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Contd.)
Based on the above, there has been no material impact on the operations or profitability of the company during the financial year due to the pandemic except a consolidated one-time rebate of '' 1,078.64 crore given to DISCOMs and Power Departme
Mar 31, 2018
1. Critical Estimates and Judgments
The preparation of financial statements requires the use of accounting estimates which may significantly vary from the actual results. Management also needs to exercise judgment while applying the company''s accounting policies.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
The areas involving critical estimates or judgments are:
Revenue Recognition:
Transmission income is accounted for based on tariff orders notified by the CERC. In case of transmission projects where final tariff orders are yet to be notified, transmission income is accounted for as per tariff regulations and other orders of the CERC in similar cases. Differences, if any, are accounted on issuance of final tariff orders by the CERC. Transmission income in respect of additional capital expenditure incurred after the date of commercial operation is accounted for based on expenditure incurred on year to year basis as per CERC tariff regulations.
Regulatory Deferral Balances:
Recognition of Regulatory Deferral Balances involves significant judgments including about future tariff regulations since these are based on estimation of the amounts expected to be recoverable/payable through tariff in future.
Estimation of defined benefit obligation
Estimation of defined benefit obligation involves certain significant actuarial assumptions which are listed in Note 67.
Estimates and judgments are periodically evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.
Useful life of property, plant and equipment
The estimated useful life of property, plant and equipment is based on a number of factors including the effects of obsolescence, demand, competition and other economic factors (such as the stability of the industry and known technological advances) and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.
The Company reviewes at the end of each reporting date the useful plant and equipment, other than the assets of transmission business which are governed by CERC Regulations, and are adjusted prospectively, if appropriate.
Provisions and contingencies
The assessments undertaken in recognizing provisions and contingencies have been made in accordance with Ind AS 37 "Provisions, Contingent Liabilities and Contingent Assets". The evaluation of the likelihood of the contingent events has required best judgment by management regarding the probability of exposure to potential loss. Should circumstances change following unforeseeable developments, this likelihood could alter.
Note 2/Property, Plant and Equipment (Contd.)
Further Notes:
a) The Company owns 7232 hectare (Previous Year 7174 hectare) of land amounting to Rs, 2484.92 crore (Previous Year Rs, 2312.64 crore) which has been classified into freehold land 6197 hectare (Previous Year 6129 hectare) amounting to Rs, 2179.20 crore (Previous Year Rs, 2062.59 crore) and leasehold land 1035 hectare (Previous Year 1045 hectare) amounting to Rs, 305.72 crore (Previous Year Rs, 250.05 crore) based on available documentation.
b) i) The land classified as leasehold land held in the state of Jammu and Kashmir with area of 113.88 hectare (Previous Year 112.35 hectare) amounting to Rs, 96.60 crore (Previous Year Rs, 57.62 crore) is acquired by state government as per procedures under State Land Acquisition Act. As per prevailing law the state government remains the owner of the land so acquired and company is only given possession for the specific use.
ii) The transmission system situated in the state of Jammu and Kashmir have been taken over by the company w.e.f. 1st April 1993 from National Hydroelectric Power Corporation of India Limited (NHPC) upon mutually agreed terms pending completion of legal formalities.
c) Freehold land acquired by the company includes 268.50 hectare (Previous Year 266.42 hectare) amounting to Rs, 230.05 crore (Previous Year Rs, 159.75 crore) in respect of which conveyance deed in favour of the company is pending and 289.81 hectare (Previous Year 256.28 hectare) amounting to Rs, 224.78 crore (Previous Year Rs, 130.78 crore) in respect of land acquired by the company for which mutation in revenue records is pending.
d) Leasehold land includes area of 2.65 hectare (Previous Year 2.65 hectare) amounting to Rs, 13.97 crore (Previous Year Rs, 12.36 crore) in respect of land in Chamba (HP) acquired from NHPC by the company for which legal formalities are pending.
e) Leasehold land includes area of 0.41 hectare (Previous Year 0.41 hectare) amounting to Rs, 7.64 crore (Previous Year Rs, 7.64 crore) in respect of land acquired for office complex on perpetual lease basis and hence not amortized.
f) Township building includes Rs, 2.95 crore (Previous Year Rs, 2.95 crore) for 28 flats at Mumbai, for which registration in favour of the company is pending. Out of the above flats, 17 flats are occupied by employees of M/S Power System Operation Corporation Ltd.
g) 5.625 hectare of land (Previous Year 5.625 hectare) having value of Rs, 0.04 crore (Previous Year Rs, 0.04 crore) has been transferred to National High Power Test Laboratory Pvt. Ltd. on right to use without granting ownership.
h) Office space acquired by the Company of 389 Sq Mtr. at Mumbai Rs, 6.42 crore ( Previous Year Rs, Nil crore)for which Lease Deed/agreement not yet executed in favour of the Company.
2) 229319997 Equity Shares (Previous Year 229319997 Equity Shares) of Powerlinks Transmission Limited held by the Company have been pledged as security with consortium offinancial institutions against financial assistance obtained by Powerlinks Transmission Limited.
3) Investments have been valued as per accounting policy no. 2.13, 2.14 & 2.15.
4) Investment of Rs, 0.05 crore in Grid Conductor Limited has been written off during the year as per the approval of the Board of Directors.
5) POWERGRID''s Board of Directors in its meeting held on 16th August, 2017 accorded approval for initiating procedure for winding up/ removal of the name of Kalinga Bidyut Prasaran Nigam Private Ltd under fast track Exit mode of Registrar of Companies (ROC). Provision for diminution in the value of Investment of Rs, 0.01 crore had been made in the previous year.
6) Number of shares as at 31st March, 2018 does not include 130000 bonus shares declared in the Annual General Meeting held on 10th January, 2018 and allotted after 31st March, 2018.
Further notes:
# Bank deposits against designated accounts for consultancy work.
Rs,Details of advances to related parties are provided in Note 59.
**CERC vide order dated 06/04/2015 in petition no.127/2012 had directed that 80% of the acquisition price incurred by the Company for Vemagiri Transmission Company Limited (VTSL) shall be reimbursed by the Long Term Transmission Customers (LTTCs) and balance 20% along with the expenditure incurred by VTSL from the date of acquisition till the liquidation of the company shall be borne by the Company. Subsequently, on a review petition filed by the Company, CERC vide order dated 20/10/2016 held that there are sufficient reasons to review the liability of the Company to pay 20% of the acquisition price and accordingly, directed that the issue shall be decided afresh by taking a holistic view in the matter after disposal of appeals filed by the LTTCs on the issue in Appellate Tribunal of Electricity (ATE). The matter is still pending before ATE/CERC.
## Equity Shares allotted on 10th April, 2017.
Note 3/ Borrowings (Contd.)
3 Secured Rupee loans from banks carry floating rate of interest linked to 3M MCLR. These loans are repayable in semiannual installments, as per terms of the respective loan agreements, commencing after moratorium period of 5 years.
4 Unsecured Foreign Currency Loans (Guranteed by Gol) carry fixed rate of interest ranging from 1.63% p.a. to 2.30% p.a. These loans are repayable in semiannual installments as per terms of the respective loan agreements.
5 Unsecured Foreign Currency Loans carry floating rate of interest linked to 6M STIBOR/EURIBOR. These loans are repayable in semiannual installments as per terms of the respective loan agreements, commencing after moratorium period as per terms of the respective loan agreements.
6 Unsecured Rupee loans from banks carry floating rate of interest linked to 3 months MCLR & 6 months MCLR. These loans are repayable in semiannual installments, commencing after moratorium period as per terms of the respective loan agreements.
7 There has been no default in repayment of loans or payment of interest thereon as at the end of the year.
Details of Securities
1 Domestic Bonds are Secured by way of Registered Bond Trust Deed ranking pari passu on immovable property situated at Mouje Ambheti Taluka Kaparada in district Valsad Gujarat and floating charge on the assets of the company.
2 Secured Foreign Currency Loans (Guranteed by Gol) are secured by pari passu interest in the lien created on the assets as security for the debts.
3 Secured Other Foreign Currency Loans and Rupee Loans are secured by the way of
(i) pari passu charge on the assets of the company except investments, land and building, roads and bridges, water supply, drainage and sewerage and current assets or;
(ii) pari passu charge on the assets of the company except investments and current assets or;
(iii) floating charge on the immovable properties of the company as per the terms of respective loan agreements.
Further Notes:
Provision is created for the purpose of leave encashment, Settlement Allowance, Long Service Award and other benefits. Detailed disclosure related to Employee Benefit Obligations is given in Note No 67.
a) Charge of Rs, 18.96 crore (Previous year Rs, 61.16 crore) has been made in the Statement of Profit & Loss.
b) The tariff norms for the block period 2014-2019 notified by the Central Electricity Regulatory Commission (CERC) provide for grossing up of the return on equity based on effective tax rate for the financial year based on the actual tax paid during the year on the transmission income. Accordingly, deferred tax provided during the year ended 31st March, 2018 on the transmission income is accounted as ''Deferred Assets against Deferred Tax Liability''. Deferred Assets against Deferred Tax Liability for the year will be reversed in future years (including tax holiday period) when the related deferred tax liability forms a part of current tax. This is in line with Guidance Note on Rate Regulated Activities, issued by ICAI.
c) Matter regarding presentation of'' Deferred Assets against Deferred Tax Liability'' in Balance Sheet and Statement of Profit and loss has been referred to Expert Advisory Committee (EAC) of Institute of Chartered Accountant of India, opinion of which is still awaited.
Note 4/Provisions (Contd.)
Wage Revision
Pay revision of employees of the Company is due w.e.f 1st January, 2017. Provision has been made in line with circular of Department of Public Enterprises, Government of India for the impact of the pay revision including towards increase in the ceiling limit of gratuity from the existing limit of Rs, 10 lakhs to Rs, 20 lakhs as per actuarial valuation pending approval of Board of Directors for implementation of pay revision in terms of presidential directives dated 10th May 2018.
Other Employee Benefits
Provision is created for the purpose of meeting out leave encashment, settlement allowance, long service award and POWERGRID Employee Family Rehabilitation Scheme.
Others
Downtime Service Credit -Telecom
Provision is created in case when actual downtime is in excess of the permissible service level agreement, in such cases the necessary credit is passed on to the customer on demand.
However, in some case, the downtime is not claimed by the customer then in such cases necessary provision on account of downtime is made in the books of accounts as per the links availability reports received from National Telecom Control Centre (NTCC) for the period of non-operation of links given to the customers. The calculation of downtime credit is based on the SLA signed with various customers.
Further Notes:
1. Grant in Aid of Rs, 141.27 crore (Previous Year NIL) was received from Power System Development Fund (PSDF) for installation of STATCOM in ER (ERSS-XI) and SR (System Strengthening in SR-XXI).
2. Grant in Aid of Rs, 115.99 crore (Previous Year 63.02 crore) was received from Power System Development Fund (PSDF) for Unified Real Time Dynamic State Measurement (URTDSM).
3. Grant in Aid of Rs, 164.13 crore (Previous Year NIL) was received from Ministry of Natural Resources & Environment (MNRE) for establishment oftransmission system associated with Ultra Mega Solar Parks in Andhra Pradesh, Karnataka, Madhya Pradesh, Rajasthan and Gujarat.
Further notes:
a) In exercise of powers u/s 178 of the Electricity Act 2003, Central Electricity Regulatory Commission (CERC) has notified "CERC (Terms and Conditions of tariff) Regulations 2014" vide order dated 21st February, 2014 for the determination of transmission tariff for the block period 2014-19.
b) The company has recognized transmission income during the year as per the following:-
i) Rs, 24212.99 crore (previous year Rs, 22065.90 crore) as per final tariff orders issued by CERC.
ii) Rs, 4234.17 crore (previous year Rs, 2345.76 crore) in respect of transmission assets for which final tariff orders are yet to be issued as per CERC Tariff Regulations and other orders in similar cases.
c) Consequent to the final order issued by CERC, transmission income includes Rs, 79.33 crore (decrease) (Previous Year Rs, 125.08 crore (increase) pertaining to earlier years.
d) Other operating income includes interest on differential between provisional and final tariff and income from finance lease.
In addition to the above remuneration, the whole time directors have been allowed to use the staff car (including for private journeys) on payment of Rs, 2000/- p.m. as contained in the Department of Public Enterprises (DPE) OM No. 2 (23)/ll-DPE (WC)-GL-V/13 dated 21/01/2013.
b) Employee benefit expense (net of amount transferred to Expenditure during construction) includes Rs, 348.52 crore (Previous Year Rs, 204.51 crore) towards Pay Revision of employees of the Company due w.e.f 1st January,2017.
c) Pending approval of Ministry of Power and Department of Public Enterprises, special allowance upto 10% of basic pay amounting to Rs, 12.88 crore for the Financial Year 2017-18 (Rs, 12.34 crore for F.Y. 2016-17) (Cumulative amounting to Rs, 139.23 crore upto 31st March, 2018) is being paid to employees who are posted in the difficult and far flung areas. The above allowance is in addition to the maximum ceiling of 50% of basic Pay as per DPE office memorandum No. 2(70)/08-DPE (WC)-GL-XVI/08 dated 26th November, 2008.
5. Cash equivalent of deemed export benefits availed of Rs, 209.99 crore in respect of supplies effected 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 (GOI) 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.
In this regard the Cumulative amount received and de-capitalized upto 31st March, 2018 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, 2018 (Previous Year Rs, 197.87 crore) in the capital cost of the respective assets / projects pending receipt of the same from Customs and Excise Authorities.
6. a) Balances of Trade Receivables and recoverable shown under Assets and Trade and Other Payables shown under Liabilities include balances subject to confirmation/reconciliation and consequential adjustments if any. However reconciliations are carried out on ongoing basis.
b) In the opinion of the management, the value of any of the assets other than Property, Plant and Equipment 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.
7. Information in respect of cost plus consultancy contracts, considering the same as consultancy business as required under Ind AS-11 ''Construction Contracts'' is provided as under:
8. The company has been entrusted with the responsibility of billing collection and disbursement (BCD) of the transmission charges on behalf of all the ISTS (Interstate transmission System) licensees through the mechanism of the POC (Point of Connection) charges introduced w.e.f. 01st July, 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. All such appeals have been transferred to Delhi High Court as per order of the Supreme Court on the appeal preferred by the company and company has also requested for directing agitating states to pay full transmission charges as per new methodology pending settlement of the matter. Honorable Delhi High Court has directed all the above beneficiaries to release payments and accordingly the beneficiaries have started making payments as per the said directions.
9. (i) FERV Loss of Rs, 146.36 crore (Previous Year Gain of Rs, 810.37 crore) has been adjusted in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP)/Lease Receivables.
(ii) FERV Loss of Rs, 161.76 crore (Previous Year Gain of Rs, 31.05 crore) has been recognized in the Statement of Profit and Loss.
10. Borrowing cost capitalized during the year is Rs, 1645.65 crore (Previous Year Rs, 1824.91 crore) in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP) as per Ind AS 23 ''Borrowing Costs''.
11. Disclosure as per IND AS 17 ''Leases''
a) Finance Leases: -
Other Non-current Financial Assets and Other Current Financial Assets 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 and Bilateral Line Assets. Disclosure requirements of Ind AS 17 ''Leases'' notified under the Companies Act, 2013 are given as under:
(iv) There are differences in balance lease receivable as at year end as per accounts and tariff records on account of:
(a) Undercharged liabilities amounting to Rs, 52.19 crore (Previous Year Rs, 66.41 crore). Such cost become part of project cost only on discharge of such liabilities.
(b) Unamortized FERV on loans included in lease receivable amounting to Rs, 17.15 crore (Previous Year Rs, 28.65 crore). Such FERV are allowed to be recovered as part of tariff on actual payment basis.
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 which are usually renewable on mutually agreed terms but are not non cancellable. Employee benefits expense include Rs, 26.12 crore (previous year Rs, 40.59 crore) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments of Rs, 14.60 crore (previous year Rs, 12.42 crore) in respect of premises for offices and guest house/transit camps are shown under the head Rent in Note 41- Other expenses
2. Disclosures relating to Regulatory Deferral Account Balances
The company is mainly engaged in the business of transmission of power. The tariff for transmission of power is determined by the CERC through tariff regulations. The tariff is based on capital cost admitted by CERC and provides for transmission charges recovery of annual fixed cost consisting of Return on equity, Interest on loan capital, Depreciation, interest on working capital and Operation & Maintenance expenses.
FERV arising during the construction period for settlement/translation of monetary items (other than non-current loans) denominated in foreign currency to the extent recoverable/payable to the beneficiaries as capital cost as per CERC Tariff Regulations are accounted as Regulatory Deferral Account Balances. In respect of long term foreign currency loan drawn on or after 1st April,2016, exchange difference to the extent recoverable as per CERC Tariff Regulations are recognized as Regulatory Deferral Account Balances. The company expects to recover these amounts through depreciation component of the tariff over the life of the asset or as exchange rate variation on repayment of the loan.
The company has recognized an amount of Rs, 11.31 crore (Previous Year Rs, 103.18 crore) on account of pay revision as recoverable from the beneficiaries in subsequent periods under Regulatory Deferral Account Balances. These balances are to be adjusted in the year in which they become recoverable from beneficiaries as per CERC.
Any change in the Tariff regulations beyond the current tariff period ending on 31st March, 2019 may have an impact on the recovery of Regulatory Deferral Account Balances.
2. To firms/companies in which directors are interested : NIL
B. Investment by the loanee (as detailed above) in the shares of Power Grid Corporation of India Ltd: NIL
This section explains the judgments and estimates made in determining the fair values of the financial instruments that are measured at amortized cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity bonds which are traded in the stock exchanges, valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification assets included in level 3.
There are no transfers between levels 1 and 2 during the year. The company''s policy is to recognize transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 apart from equity instruments of PTC India Limited which is included in Level 1 fair value hierarchy.
The fair value of Energy Efficiency Services Limited has been determined by making qualitative adjustment to trading multiples such as P/E, EV/EBITDA of comparable listed prices. The same has been included in Level 2 fair value hierarchy.
Fair value of financial Instrument has been determined by an independent valuer.
Fair value of financial assets and liabilities measured at amortized cost:
The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.
For financial assets that are measured at fair value, the carrying amounts are equal to the fair values.
(c) Key Managerial Personnel
Name Designation
Shri I.S. Jha Chairman and Managing Director
Shri Ravi P. Singh Director (Personnel)
Shri K. Sreekant Director (Finance)
Shri R.P. Sasmal Director (Operations) retired on 28.02.2018
Sh. Prabhakar Singh Director (Projects)
Ms. Seema Gupta Director (Operations) w.e.f 01.03.2018
Dr. Pradeep Kumar Government Nominee Director Ceased to be Director w.e.f 31.07.2017
Ms. Jyoti Arora Government Nominee Director Ceased to be Director w.e.f 05.07.2017
Shri Jagdish Ishwar Bhai Patel Independent Director
Shri Tse Ten Dorji Independent Director
Ms. Shalini Prasad Government Nominee Director w.e.f. 14.08.2017 to 30.08.2017
Ms. Bharati Government Nominee Director w.e.f. 31.08.2017
Ms. Jyotika Kalra Independent Director Ceased to be Director w.e.f 06.04.2017
Shri. Manoj Kumar Mittal Independent Director w.e.f. 12.09.2017
Smt. Divya Tandon Company Secretary
(d) List of Other Related Parties
Name of Entity Place of business/country Nature of Relationship
of incorporation
Powergrid Employees P.F. Trust India Post-employment benefit plan of Powergrid
Powergrid Self Contributory Superannuation India Post-employment benefit plan of Powergrid
Benefit (Pension) Fund Trust
Powergrid Employees Gratuity Fund Trust India Post-employment benefit plan of Powergrid
(e) Government Related Entities
The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 56.91% of equity shares capital issued and paid up (previous year 57.90%).
The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on arms-length basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items.
The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively.
(f) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
13. Operating Segments
a) Business Segment
The Board of Directors is the company''s Chief operating decision maker who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Three reportable segments have been identified on the basis of services provided.
- Transmission Services- Company''s principal business is transmission of bulk power across different states of India.
- Telecom Services-The company Utilizes the spare Optical fibres available in the Optical Ground Wire (OPGW) laid on the transmission network for providing telecom services. It operates as a neutral carrier in the point to point bandwidth leasing business.
- Consultancy Services- provides Consultancy Services in the Transmission, Distribution and Telecom sectors, including Planning Design, Engineering, Load Dispatch, OPGW on intra state Transmission network, Procurement Management, Operation & Maintenance, Financing and Project Management.
b) The operations of the company are mainly carried out within the country and therefore there is no reportable geographical segment.
c) Information about major customer: Revenue from any single customer is not equal to or exceeds 10% of the company''s total revenue.
Segment Revenue and Expenses
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.
Segment Assets and Liabilities
Segment assets include all operating assets comprising of Property, Plant and Equipment, current assets and loan and advances. Construction, Work-in-progress, construction stores and advances and investments are included in unallocated assets. Segment facilities include operating liabilities and provisions.
14 Contingent Liabilities and contingent assets 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 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. In such cases, contingent liability of Rs, 1440.68 crore (Previous Year Rs, 1381.17 crore) has been estimated.
(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, 2490.90 crore (Previous Year Rs, 2671.53 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, 4.12 crore (Previous Year Rs, 4.00 crore) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to Rs, 432.64 crore (Previous Year Rs, 388.38 crore) are being contested before various Appellate Authorities. Many of these matters have been disposed of in favour of the company but are disputed before higher authorities by the concerned departments.
(v) Others
a) Other contingent liabilities amounts to Rs, 403.95 crore (Previous Year Rs, 201.32 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.
c) Under the Transmission Service Agreement (TSA) with Power links Transmission Ltd, the company has an obligation to purchase the JV company (Power links Transmission Ltd) at a buyout price determined in accordance with the TSA. Such an obligation may result in case JV company (Power links 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.
b) The Company has given guarantee for the dues & punctual payment and discharge of the obligations amounting to Rs, 290 crore (Previous Year Rs, 290 crore) against bond issued by Powergrid Vizag Transmission Company Ltd.
15. Capital management
a) Risk Management
The company''s objectives when managing capital are to
- maximize the shareholder value;
- safeguard its ability to continue as a going concern;
- maintain an optimal capital structure to reduce the cost of capital.
For the purpose of the company''s capital management, equity capital includes issued equity capital, securities premium Account and all other equity reserves attributable to the equity holders of the company. The company manages its capital structure and makes adjustments in light of changes in economic conditions, regulatory framework and requirements of financial covenants with lenders. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, regulate investments in new projects, return capital to shareholders or issue new shares. The company monitors capital using debt-equity ratio, which is the ratio of long term debt to total net worth. The policy is to keep the debt-equity ratio wherein the debt is less than 75% of total capital employed (i.e. debt to equity ratio less than 75:25). The company includes within long term debt, interest bearing loans and borrowings and current maturities of long term debt.
Under the terms of the major borrowing facilities, the company is required to comply with the financial covenants. Breaches in meeting the financial covenants would permit the lenders to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current reporting period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31st March, 2018 and 31st March, 2017.
b) Dividends
16. Financial Risk Management
The Company''s principal financial liabilities comprise loans and borrowings denominated in Indian rupees or foreign currencies, trade payables and other payables. The Company has also provided financial guarantee in respect of bonds issued by its wholly owned subsidiary, Powergrid Vizag Transmission Limited. The main purpose of these financial liabilities is to finance the Company''s capital investments and operations.
The Company''s principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that are generated from its operations.
The Company''s activities expose it to the following financial risks, namely,
a) Credit risk,
b) Liquidity risk,
c) Market risk.
This note presents information regarding the company''s exposure, objectives, policies and processes for measuring and managing these risks. Risk management framework
The Company has a duly constituted Risk Management Committee headed by Director (Projects) with Director (Finance) and Director (Personnel) as members. For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in the Company. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes/risks are monitored and controlled through various Key Performance Indicators (KPIs). The Committee meets at regular intervals and reviews KPIs and provides updates to the Audit Committee/Board.
The management offinancial risks bythe Company is summarized below:-
A) Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities on account of trade receivables and loans and advances and from its financing activities due to deposits with banks and financial institutions, foreign exchange transactions and other financial instruments and for its investment activities due to investment in State Government Bonds.
A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined considering the business environment in which the Company operates and other macro-economic factors.
Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where such recoveries are made, these are recognized in the statement of profit and loss.
(i) Trade Receivables
The Company primarily provides transmission facilities to inter-state transmission service customers (DICs) comprising mainly state utilities owned by State Governments. The Company has a robust payment security mechanism in the form of Letters of Credit (LC) backed by the Tri-Partite Agreements (TPA). The TPA was signed among the GOI, Reserve Bank of India and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of State Electricity Boards dues during 2001-02 by the GOI, which was valid till October 2016. GOI has approved the extension of these TPAs for a further period of 10 years. Majority of the States have executed the agreements for extension of TPAs and matter is being pursued with the remaining states.
As per the provisions of the TPA, the customers are required to establish LC covering 105% of the average monthly billing of the Company for last 12 months. The TPA also provides that if there is any default in payment of current dues by any State Utility, the outstanding dues can be deducted from the State''s RBI account and paid to the concerned CPSU. There is also provision for regulation of power by the Company in case of non-payment of dues and non-establishment of LC.
CERC tariff regulations allow payment against monthly bills towards transmission charges within a period of 60 days from the date of the bill and levy of surcharge on delayed payment beyond 60 days. A graded rebate is provided by the Company for payments made within 60 days.
Trade receivables consist of receivables relating to transmission services of Rs, 3257.37 crore (Previous Year Rs, 2835.17 crore), receivables relating to consultancy services of Rs, 253.79 crore (Previous Year Rs, 315.92 crore) and receivables relating to telecom business of Rs, 175.95 crore (Previous Year Rs, 102.42 crore).
(ii) Other Financial Assets (excluding trade receivables)
- Cash and cash equivalents
The Company held cash and cash equivalents of Rs, 502.48 crore (Previous Year Rs, 1401.57 crore). The cash and cash equivalents are held with public sector banks and high rated private sector banks and do not have any significant credit risk.
- Deposits with banks and financial institutions
The Company held deposits with banks and financial institutions of Rs, 1853.80 crore (Previous Year Rs, 2097.25 crore). Term deposits are placed with public sector banks and have negligible credit risk.
- Investments
The Company holds investment of Rs, Nil (Previous Year Rs, 2.50 crore) in 8.5% tax free State government bonds issued under the One Time Settlement Scheme The Company does not expect the counterparty to fail to meet its obligations, and has not experienced any impairment losses in respect of these investments.
- Loans
The Company has given loans to employees, subsidiaries and other parties. House building loans and conveyance advance to the employees are secured against the mortgage of the house properties or hypothecation of vehicles for which such loans have been given in line with the policies of the Company. The loans provided to group companies are for projects under Tariff Based Competitive Bidding route. The risk of default in respect of these loans is considered negligible.
o Provision for expected credit losses
(a) Financial assets for which loss allowance is measured using 12 month expected credit losses
The Company has assets where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is very low. At initial recognition, financial assets (excluding trade receivables) are considered as having negligible credit risk and the risk has not increased from initial recognition. Therefore expected credit loss provision is not required.
(b) Financial assets for which loss allowance is measured using life time expected credit losses
In respect oftrade receivables from Telecom and Consultancy, customer credit risk is managed by regular monitoring of the outstanding receivables and follow-up with the consumer for realization.
With regard to transmission segment, the Company has customers most of whom are state government utilities with capacity to meet the obligations and therefore the risk of default is negligible. Further, management believes that the unimpaired amounts that are 30 days past due date are still collectible in full, based on the payment security mechanism in place and historical payment behavior.
Considering the above factors and the prevalent regulations, the trade receivables continue to have a negligible credit risk on initial recognition and thereafter on each reporting date.
Based on historic default rates, the Company believes that, apart from the above, no impairment allowance is necessary in respect of any other assets as the amounts are insignificant.
B) Liquidity risk
Liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company has access to a variety of sources of funding such as commercial paper, bank loans, bonds and external commercial borrowings and retains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Company''s liquidity position comprising the undrawn borrowing facilities below and cash and cash equivalents on the basis of expected cash flows.
The Company depends on both internal and external sources of liquidity to provide working capital and to fund capital expenditure,
i) Financial Arrangement
The Company had access to the following undrawn borrowing facilities at the end of the reporting period.
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have remaining availability period oflto5 years (Previous Year lto5 years).
C) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:
i. Currency risk
ii. Interest rate risk
iii. Other price risk, such as equity price risk and commodity risk,
i) Currency risk
The Company is exposed to currency risk mainly in respect of foreign currency denominated loans and borrowings and procurement of goods and services whose purchase consideration is denominated in foreign currency. Transmission tariff are regulated by the CERC. According to the CERC tariff regulations for the block 2014-19 the Company may hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the transmission system, in part or full in its discretion and recover the cost of hedging of foreign exchange rate variation corresponding to the normative foreign debt, in the relevant year.
If hedging of the foreign exchange exposure is not undertaken, the extra rupee liability towards interest payment and loan repayment corresponding to the normative foreign currency loan in the relevant year is permissible to be recovered as part of transmission tariff provided it is not attributable to the generating Company or the transmission licensee or its suppliers or contractors. During the financial year 2017-18, no hedging for foreign exchange exposure has been undertaken by the Company. In respect of goods and services procured for Capital Investment, the exchange rate variation is part of the project cost, for determination of transmission tariff. The currency risk in respect of goods and services procured for operation activities is not significant.
The Company''s exposure to foreign currency risk at the end of the reporting period expressed in INR is provided in Note No. 53.
Sensitivity
Since the impact of strengthening or weakening of Indian rupee against USD, Euro, JPY and other currencies on the statement of profit and loss would not be very significant; therefore, sensitivity analysis for currency risk is not disclosed.
ii) Interest rate risk
The Company is exposed to interest rate risk arising mainly from long term borrowings with floating interest rates. The Company is exposed to interest rate risk because the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The Company manages the interest rate risks by maintaining a debt portfolio comprising a mix offlxed and floating rate borrowings in domestic and foreign currencies.
Fair value sensitivity analysis for interest-rate risk
As per CERC Regulations, interest on loan during construction forms part of project cost for the purpose of tariff and after the date of commercial operation, interest on loans is recoverable through tariff calculated on the normative average loan of the year by applying the weighted average rate of interest of the actual loan portfolio.
Accordingly, the Company''s interest rate risk is not considered significant; hence sensitivity analysis for the risk is not disclosed.
iii) Other price risk
The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.
Considering the magnitude of equity investments, no significant risk is expected to arise.
17. Income Tax expense
This note provides an analysis of the company''s income tax expense, and how the tax expense is affected by non-assessable and nondeductible items. It also explains significant estimates made in relation to the Company''s tax position.
(i) Long Term Employee Benefits
A. Leave Obligations
The Company provides for earned leave benefit (including compensated absences) and half-pay leave to the employees of the company which accrue annually at 30 days and 20 days respectively. Earned leave is encashable while in service. Half pay leaves (HPL) are en-cashable only on separation beyond the age of 55 years upto the maximum of 300 days (HPL). However, total number of leave that can be encashed on superannuation shall be restricted to 300 days and no commutation of half pay leave shall be permissible. The liability for same is recognized on the basis of actuarial valuation.
B. Other employee benefits - POWERGRID Employee family rehabilitation scheme
The company has introduced POWERGRID Employees Family Economic Rehabilitation Scheme during the year. The Objective of the scheme is to provide monetary assistance and support to an employee in case of his/her permanent total disablement and to his/her family in case of death while in service. The beneficiary would be entitled to monthly payment equivalent to the employee''s 50% of one month pay last drawn provided the beneficiary deposits with the company an amount equal to PF (excluding VPF) balance, Gratuity amount and Group Insurance (EDLI) amount, Such monthly payment would continue till the normal notional date on which the employee concerned would have attained the age of superannuation had the employee continued in the service of the company. The schme is optional. Provision for POWERGRID Employees Family Economic Rehabilitation Scheme amounting to Rs, 6.62 crore (Previous Year Rs, Nil crore) for the year has been made during the year based on actuarial valuation.
18. Employee Benefit Obligations (Contd.)
(ii) Post-employment obligations(Defined Employee Benefit/Contribution Schemes)
A. Post-retirement Medical Facility fPRMR
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 recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
B. Other employee benefits - Long Service Award
This benefit is applicable to all regular employees of the company (except for Directors and CMD) who have superannuated after completing at least 10 years of service.
C. 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 recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date. Company has carried out the actuarial valuation of Gratuity benefit considering enhanced ceiling of Rs, 20 Lakhs as notified vide order No. W-02/0020/2018-DPE(WC)-GL-XII/18 dated 11th April 2018.
D. Other Defined Retirement Benefits fODRBVBaggage Allowance
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 recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
E. 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 and EPS scheme for the year amounting to Rs, 93.07 crore (previous year Rs, 89.47 crore) has been 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 the report of actuary overall interest earning and cumulative surplus is more than statutory interest payment requirement. Hence, no further provision is considered necessary. Since the company does not have unconditional right over the PF corpus, the surplus has not been recognized in the Balance Sheet.
*Fair valuation as per actuarial valuation is Rs, 579.51 crore.
Fair value of company''s own transferable financial instruments held as plan assets is Rs, 87.53 crore (Previous Year Rs, 103.38 crore).
(vi) Description of Risk exposures
Valuation is based on certain assumptions which are dynamic in nature and vary over time. As such company is exposed to various risks as follows:
A) Salary Increases (except for PF) - Actual salary increase will increase the plan''s liability. Increase in salary increase rate assumptions in future valuation will also increase the liability.
B) Investment risk - If plan is funded then assets liabilities mismatch and actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.
C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the plan''s liability.
D) Mortality & disability - Actual deaths and disability cases proving lower or higher than assumed in the valuation can impact the liabilities.
E) Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Plan''s liability.
19 Recent Accounting Pronouncements:
Standard issued but not yet effective
In March 2018, the Ministry of Corporate Affairs issued the Company (Indian Accounting Standards) (Amendment Rules, 2017) notifying Ind AS 115, ''Revenue from Contracts with Customers''. This Ind AS is applicable to the company from 1st April, 2018.
Introduction to Ind AS 115 ''Revenue from Contracts with Customers '':
With the introduction to Ind AS 115 ''Revenue from Contracts with Customers'', Ind AS 11 ''Construction Contracts'' and Ind AS 18 ''Revenue'' will ceases to be applicable to the entities. There is a shift from the present'' transfer of risk and rewards model to transfer of control of goods and services by the entity. The company is evaluating the requirements of the amendment and the effect on the financial statements.
20. 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.
Mar 31, 2017
. Corporate and General Information
Power Grid Corporation of India Limited (âthe Companyâ) is a public company domiciled and incorporated in India under the provisions of Companies Act and its shares are listed on the National Stock Exchange (NSE) and BSE Limited (BSE) in India. The registered office of the Company is situated at B-9, Qutab Institutional Area, Katwaria Sarai, New Delhi, India and its Corporate Office is located at Saudamini, Plot No. 2, Sector-29, Gurgaon, Haryana.
The Company is notified as the Central Transmission Utility (CTU) under The Electricity Act, 2003. It is principally engaged in planning, implementation, operation and maintenance of Inter-State Transmission System (ISTS), Telecom and consultancy services.
The financial statements of the company for the year ended March 31, 2017 were approved for issue by the Board of Directors on 29.05.2017.
2 Critical Estimates and Judgements
The preparation of financial statements requires the use of accounting estimates which may significantly vary from the actual results. Management also needs to exercise judgment while applying the companyâs accounting policies.
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.
The areas involving critical estimates or judgements are:
Revenue Recognition:
Transmission income is accounted for based on tariff orders notified by the CERC. In case of transmission projects where final tariff orders are yet to be notified, transmission income is accounted for as per tariff regulations and other orders of the CERC in similar cases. Differences, if any, are accounted on issuance of final tariff orders by the CERC. Transmission income in respect of additional capital expenditure incurred after the date of commercial operation is accounted for based on actual expenditure incurred on year to year basis as per CERC tariff regulations.
Regulatory Deferral Balances:
Recognition of Regulatory Deferral Balances involves significant judgements including about future tariff regulations since these are based on estimation of the amounts expected to be recoverable/payable through tariff in future.
Estimation of defined benefit obligation
Estimation of defined benefit obligation involves certain significant actuarial assumptions which are listed in Note
Estimates and judgements are periodically evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.
3 Property, Plant and Equipment
Notes:
a) The Company owns 7174 hectare (6988 hectare as on 31st March, 2016; 6704 hectare as on 1st April, 2015) of land amounting to Rs.2312.64 crore (Rs.2236.98 crore as on 31st March, 2016; Rs.2040.97 crore as on 1st April, 2015) which has been classified into freehold land 6129 hectare (5972 hectare as on 31st March, 2016; 5714 hectare as on 1st April, 2015) amounting to Rs.2062.59 crore (Rs.1999.84 crore as on 31st March, 2016; Rs.1807.34 crore as on 1st April, 2015) and leasehold land 1045 hectare(1016 hectare as on 31st March, 2016; 990 hectare as on 1st April, 2015) amounting to Rs.250.05 crore (Rs.237.14 crore as on 31st March, 2016; Rs.233.63 crore as on 1st April, 2015) based on available documentation.
b) i) The land classified as leasehold land held in the state of Jammu and Kashmir with area of 112.35 hectare (112.35 hectare as on 31st March, 2016; 112.35 hectare as on 1st April, 2015) amounting to Rs.57.62 crore (Rs.57.62 crore as on 31st March, 2016; Rs.57.62 crore as on 1st April, 2015) is acquired by state government as per procedures under State Land Acquisition Act. As per prevailing law the state government remains the owner of the land so acquired and company is only given possession for the specific use.
ii) The transmission system situated in the state of Jammu and Kashmir have been taken over by the company w.e.f. 1st April 1993 from National Hydroelectric Power Corporation of India Limited (NHPC) upon mutually agreed terms pending completion of legal formalities.
c) Freehold land acquired by the company includes Rs.159.75 crore (Rs.212.60 crore as on 31st March, 2016; Rs.33.71 crore as on 1st April, 2015) in respect of which conveyance deed in favour of the company is pending and Rs.130.78 crore (Rs.311.05 crore as on 31st March, 2016; Rs.197.38 crore as on 1st April, 2015) in respect of land acquired by the company for which mutation in revenue records is pending.
d) Leasehold land includes area of 2.65 hectare (2.65 hectare as on 31st March, 2016; 2.65 hectare as on 1st April, 2015) amounting to Rs.12.36 crore (Rs.12.36 crore as on 31st March, 2016; Rs.12.36 crore as on 1st April, 2015) in respect of land in Chamba (HP) acquired from NHPC by the company for which legal formalities are pending.
e) Leasehold land includes area of 0.41 hectare (0.41 hectare as on 31st March, 2016; 0.41 hectare as on 1st April, 2015) amounting to Rs.7.64 crore (Rs.7.64 crore as on 31st March, 2016; Rs.7.64 crore as on 1st April, 2015) in respect of land acquired for office complex on perpetual lease basis and hence not amortised.
f) Township building includes Rs.2.95 crore (Rs.2.95 crore as on 31st March, 2016; Rs.2.95 crore as on 1st April, 2015) for 28 flats at Mumbai, for which registration in favour of the company is pending.
g) 5.625 hectare of land (5.625 hectare as on 31st March, 2016; 5.625 hectare as on 1st April, 2015) having value of Rs.0.04 crore (Rs.0.04 crore as on 31st March, 2016; Rs.0.04 crore as on 1st April, 2015) has been transferred to National High Power Test Laboratory Pvt. Ltd. on right to use without granting ownership.
Notes:
Pursuant to communication of Ministry of Power vide office memorandum 18/02/2015-PG dated 25th March, 2015 and 29th December, 2015, Board of Directors in its meeting held on 9th March, 2016 had approved to sell and transfer 3,06,40,000 equity shares of Rs.10 each (100% shareholding) held by the company in Power System Operation Corporation Limited (POSOCO) to Government of India. Accordingly, investment in above equity shares were shown as âAssets held for saleâ as on 31st March, 2016 in accordance with IND-AS 105 âNon-current Assets held for sale and Discontinued operationâ
Ministry of Power vide their order dated 23/09/2016 conveyed sanction for release of Rs.81.21 crore to POWERGRID towards consideration for transfer of above equity shares based on the book value of POSOCO as at 31st March, 2013. The Company has taken up with the GOI for payment of Rs.113.88 crore towards consideration for transfer of shares in POSOCO based on the book value as at 30th September, 2016.
The above shares were transferred to GOI on 2nd January, 2017 after receipt of Rs.81.21 crore and accordingly an amount of Rs.50.57 crore was recognized as profit on sale of investments. Matter is being pursued with Ministry of Power for payment of the balance amount of Rs.32.67 crore (i.e. Rs.113.88 crore - Rs.81.21 crore).
Further notes:
Details of terms of repayment and rate of interest
1 Secured Foreign Currency Loans (Guranteed by GoI) carry floating rate of interest linked to 6M LIBOR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 3 to 5 years.
2 Secured other Foreign Currency Loans carry floating rate of interest linked to 6M LIBOR /EURIBOR/STIBOR. These loans are repayable in semi annual installment,as per terms of the respective loan agreement, commencing after moratorium period of 3 to 5 years.
3 Secured Rupee loan from banks carry floating rate of interest linked to 1 year MCLR and 6M MCLR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 5 years .
4 Unsecured Foreign Currency Loans (Guranteed by GoI) carry fixed rate of interest ranging from 1.63% p.a. to 2.30% p.a. These loans are repayable in semi annual installment as per terms of the respective loan agreement.
5 Unsecured Foreign Currency Loans carry floating rate of interest linked to 6M STIBOR/EURBOR. These loans are repayable in semi annual installment as per terms of the respective loan agreement, commencing after moratorium period of 4 to 5 years.
6 Unsecured Rupee loan from bank carry floating rate of interest linked to 6 months MCLR. These loans are repayable in semi annual installment, as per terms of the respective loan agreement, commencing after moratorium period of 5.5 years.
Details of Securities
1 Domestic Bonds mentioned at A1.1 are Secured by way of Registered Bond Trust Deed ranking pari passu on immovable property situated at Mouje Ambheti Taluka Kaparada in district Valsad Gujarat and floating charge on the assets of the company.
2 Domestic Bonds mentioned at A1.2 are secured by way of Registered Bond Trust Deed ranking pari-passu on immovable property situated at Mouje Ambheti Taluka Kaparada in District Valsad Gujarat and mortgage & hypothecation on assets of Kishenpur Moga & Dulhasti Contingency Transmission System.
3 Domestic Bonds mentioned at A1.3 are secured by way of Registered Bond Trust Deed ranking pari-passu on immovable property situated at Mouje Ambheti Taluka Kaparada in District Valsad Gujarat and mortgage and hypothecation on assets of Kayamkulam & Ramagundam Hyderabad Transmission System.
4 Domestic Bonds mentioned at A1.4 are secured by way of Registered Bond Trust Deed ranking pari-passu on immovable property situated at Mouje Ambheti Taluka Kaparada in District Valsad Gujarat and mortgage & hypothecation on assets of Anta,Auriya, Moga-Bhiwani, Chamera-Kishenpur, Sasaram-Allahbad, LILO of Singraulli-Kanpur and Allahabad Sub-Station
5 Secured Foreign Currency Loans (Guranteed by GoI) at B1.1(i) are secured by pari passu interest in the lien created on the assets as security for the debts.
6 Secured other Foreign Currency Loans and Rupee Loans at B1.1(ii & iii) are secured by way of the pari passu charge on the assets of the company except investments,land and building, roads and bridges, water supply, drainage and sewerage and current assets. Loan from NIB is secured by way of the pari passu charge on the assets of the company except investments and current assets. Loan from Bank of India is secured by floating charge on the immovable properties of the company.
7 Secured Rupees Loan from Other financial institution at B2.1 is secured by floating charge on the fixed assets of the Company.
Notes:
Employee Benefits
Performance Related Pay/Special Incentive
Provision is created for Performance Related Pay to Executives and Non-Executives Wage Revision
Pay revision of employees of the Company is due w.e.f 1st January, 2017. In line with the Report of the 3rd Pay Revision Committee for Central Public Sector Enterprises constituted by the GOI, provision has been made for the impact of the pay revision including towards increase in the ceiling limit of gratuity from the existing limit of Rs.10 lakhs to Rs.20 lakhs as per actuarial valuation.
Other Employee Benefits
Provision is created for the purpose of meeting out leave encashment, settlement allowance and long service award.
Others
Downtime Service Credit -Telecom
Provision is created in case when actual downtime is in excess of the permissible service level agreement, in such cases the necessary credit is passed on to the customer on demand.
However, in some case, the downtime is not claimed by the customer then in such cases necessary provision on account of downtime is made in the books of accounts as per the links availability reports received from National Telecom Control Centre (NTCC) for the period of non-operation of links given to the customers. The calculation of downtime credit is based on the SLA signed with various customers.
Note 4 Revenue from operations
Notes:
a) In exercise of powers u/s 178 of the Electricity Act 2003, Central Electricity Regulatory Commission (CERC) has notified âCERC (Terms and Conditions of tariff) Regulations 2014â vide order dated 21st February, 2014 for the determination of transmission tariff for the block period 2014-19.
b) The company has recognised transmission income during the year as per the following:-
i) Rs.22065.90 crore (previous year Rs.12622.90 crore) as per final tariff orders issued by CERC.
ii) Rs.2345.76 crore (previous year Rs.7109.16 crore) in respect of transmission assets for which final tariff orders are yet to be issued as per CERC Tariff Regulations and other orders in similar cases.
c) Other operating income includes interest on differential between provisional and final tariff and income from finance lease.
Further Notes
a) Employee benefits expense include the following for the whole time directors and Key Managerial Personnel including Chairman and Managing Director and excluding arrears paid to ex-directors.
In addition to the above remuneration, the whole time directors have been allowed to use the staff car (including for private journeys) on payment of Rs.2000/- p.m. as contained in the Department of Public Enterprises (DPE) OM No. 2 (23)/11-DPE (WC)-GL-V/13 dated 21/01/2013.
b) Employee benefits expense includes Rs.204.51 crore (net of amount transferred to Expenditure during Construction) towards Pay Revision of employees of the Company due w.e.f. 1st January, 2017, of which Rs.107.75 crore is towards proposed increase in the ceiling limit of gratuity from Rs.10 lakhs to Rs.20 lakhs.
c) Pending approval of Ministry of Power and Department of Public Enterprises, special allowance upto 10% of basic pay amounting to Rs.12.34 crore for the Financial Year 2016-17 (Rs.17.67 crore for F.Y. 2015-16) (Cumulative amounting to Rs.126.35 crore upto 31st March, 2017) is being paid to employees who are posted in the difficult and far flung areas. The above allowance is in addition to the maximum ceiling of 50% of basic Pay as per DPE office memorandum No. 2(70)/08-DPE (WC)-GL-XVI/08 dated 26th November, 2008.
5. Cash equivalent of deemed export benefits availed of Rs.209.99 crore in respect of supplies effected 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 (GOI) 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.
In this regard the Cumulative amount received and de-capitalized upto 31st March, 2017 is Rs.12.12 crore (Rs.12.12 crore as on 31st March, 2016; Rs.12.12 crore as on 1st April, 2015). The company continued to show the balance of Rs.197.87 crore as at 31st March, 2017 (Rs.197.87 crore as on 31st March, 2016; Rs.197.87 crore as on 1st April, 2015) in the capital cost of the respective assets / projects pending receipt of the same from Customs and Excise Authorities.
6. a) Balances of Trade Receivables and recoverable shown under Assets and Trade and Other Payables shown under Liabilities include balances subject to confirmation/reconciliation and consequential adjustments if any. However reconciliations are carried out on ongoing basis.
b) In the opinion of the management, the value of any of the assets other than Property, Plant and Equipment 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.
7. Information in respect of cost plus consultancy contracts, considering the same as consultancy business as required under Ind AS-11 âConstruction Contractsâ is provided as under:
8. The company has been entrusted with the responsibility of billing collection and disbursement (BCD) of the transmission charges on behalf of all the ISTS (Interstate transmission System) licensees through the mechanism of the POC (Point of Connection) charges introduced w.e.f. 01st July, 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. All such appeals have been transferred to Delhi High Court as per order of the Supreme Court on the appeal preferred by the company and company has also requested for directing agitating states to pay full transmission charges as per new methodology pending settlement of the matter. Honorable Delhi High Court has directed all the above beneficiaries to release payments and accordingly the beneficiaries have started making payments as per the said directions.
9. (i) FERV gain of Rs.810.37 crore (Previous Year loss of Rs.1841.03 crore ) has been adjusted in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP)/lease receivables
(ii) FERV gain of Rs.31.05 crore (Previous Year loss of Rs.4.56 crore) has been recognised in the Statement of Profit and Loss.
10. Borrowing cost capitalised during the year is Rs.1824.91 crore (previous year Rs.2239.91 crore) in the respective carrying amount of Property, Plant and Equipment/Capital work in Progress (CWIP) as per Ind AS 23 âBorrowing Costsâ.
11. Based on information available with the company, there are few suppliers/service providers who are registered as micro, small or medium enterprise under The Micro, Small and Medium Enterprises Development Act,2006 (MSMED Act, 2006). Information in respect of micro and small enterprises as required by MSMED Act, 2006 is given as under:
12. Disclosure as per IND AS 17 âLeasesâ
a) Finance Leases:-
Other Non-Current Financial Assets and Other Current Financial Assets 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. Disclosure requirements of Ind AS 17 âLeasesâ notified under the Companies Act, 2013 are given as under:
(i) The reconciliation of the lease receivables (as per project cost data submitted to / approved by the CERC for tariff fixation) is as under:
(ii) Details of gross investment in lease, un-earned finance income and present value of minimum lease payments receivables at the end of financial year is given as under:
(iii) The value of contractual maturity of such leases is as under:
(iv) There are differences in balance lease receivable as at year end as per accounts and tariff records on account of:
(a) Undischarged liabilities amounting to Rs.66.41 crore (Rs.68.52 crore as on 31st March, 2016; Rs.17.33 crore as on 1st April, 2015). Such cost become part of project cost only on discharge of such liabilities.
(b) Unamortized FERV on loans included in lease receivable amounting to Rs.28.65 crore (Rs.57.79 crore as on 31st March, 2016; Rs.61.14 crore as on 1st April, 2015). Such FERV are allowed to be recovered as part of tariff on actual payment basis.
b) Operating leases:-
The companyâs significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices and guest houses/transit camps which are usually renewable on mutually agreed terms but are not non-cancellable. Employee benefits expense include Rs.40.59 crore (previous year Rs.40.59 crore) towards lease payments, net of recoveries, in respect of premises for residential use of employees. Lease payments of Rs.12.42 crore (previous year Rs.10.33 crore) in respect of premises for offices and guest house/transit camps are shown under the head Rent in Note 42-Other expenses.
13. Disclosures relating to Regulatory Deferral Account Balances
The company is mainly engaged in the business of transmission of power. The tariff for transmission of power is determined by the CERC through tariff regulations. The tariff is based on capital cost admitted by CERC and provides for transmission charges recovery of annual fixed cost consisting of Return on equity, Interest on loan capital, Depreciation, interest on working capital and Operation & Maintenance expenses.
FERV arising during the construction period for settlement/transmission of monetary items (other than non-current loans) denominated in foreign currency to the extent recoverable/payable to the beneficiaries as capital cost as per CERC Tariff Regulations are accounted as Regulatory Deferral Account Balances. In respect of long term foreign currency loan drawn on or after 1st April, 2016, exchange difference to the extent recoverable as per CERC Tariff Regulations are recognised as Regulatory Deferral Account Balances. The company expects to recover these amounts through depreciation component of the tariff over the life of the asset or as exchange rate variation on repayment of the loan.
The impact of pay revision effective from 1st January, 2017 was not considered while fixing the norms for recovery of Operation and Maintenance charges under the CERC Tariff Regulations 2014, which are valid for the period 1st April, 2014 to 31st March, 2019. Keeping in view the provisions of the Ind AS 114 âRegulatory Deferral Accountsâ, CERC Tariff Regulations 2014, the company has recognized an amount of Rs.103.18 crore as recoverable from the beneficiaries in subsequent periods under Regulatory Deferral Account Balances. These balances are to be adjusted in the year in which they become recoverable from beneficiaries as per approval of the CERC.
The Regulatory Deferral Account Balances (assets) recognized in the books to be recovered from the beneficiaries in future periods are as follows:
Any change in the Tariff regulations beyond the current tariff period ending on 31st March, 2019 may have an impact on the recovery of Regulatory Deferral Account Balances.
14. Corporate Social Responsibility Expenses (CSR)
As per Section 135 of the Companies Act, 2013 along with Companies (Corporate Social Responsibility Policy) Rules, 2014 read with DPE guidelines no F.No.15 (13)/2013-DPE (GM), the Company is required to spend, in every financial year, at least two per cent of the average net profits of the Company made during the three immediately financial years in accordance with its CSR Policy. The details of CSR expenses for the year are as under:-58. In view of massive expansion of business considering uncertainty of paying normal tax MAT credit is not recognised as an asset.
This section explains the judgements and estimates made in determining the fair values of the financial instruments that are measured at amortised cost and for which fair values are disclosed in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level follows underneath the table.
15. Fair Value Measurements
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity bonds which are traded in the stock exchanges, valued using the closing price as at the reporting period.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.
There are no transfers between levels 1 and 2 during the year.
The companyâs policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.
Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of quoted market prices or dealer quotes for similar instruments
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
All of the resulting fair value estimates are included in level 2 apart from equity instruments of PTC India Limited which is included in Level 1 fair value hierarchy.
The fair value of Energy Efficiency Services Limited has been determined by making qualitative adjustment to trading multiples such as P/E, EV/
EBITDA of comparable listed prices. The same has been included in Level 2 fair value hierarchy.
Fair value of financial instruments has been determined by an independent valuer.
Fair value of financial assets and liabilities measured at amortized cost:
The carrying amounts of trade receivables, trade payables, cash and cash equivalents and other current financial liabilities are considered to be the same as their fair values, due to their short-term nature.
For financial assets that are measured at fair value, the carrying amounts are equal to the fair values.
The company is controlled by the Government of India (GOI), being a Central Public Sector Enterprise (CPSE) under the Ministry of Power, with GOI holding 57.90% of equity shares capital issued and paid up (previous year 57.90%).
The Company has business transactions with other entities controlled by the GOI for procurement of capital equipment, spares and services. Transactions with these entities are carried out at market terms on arms-length basis through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturer (OEM) for proprietary items/or on single tender basis due to urgency, compatibility or other reasons. Such single tender procurements are also done through a process of negotiation with prices benchmarked against available price data of same/similar items.
The above transactions are in the course of normal day-to-day business operations and are not considered to be significant keeping in view the size, either individually or collectively.
a) Business Segment
The Board of Directors is the companyâs Chief operating decision maker who monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Three reportable segments have been identified on the basis of product/services.
- Transmission- Companyâs principal business is transmission of bulk power across different states of India.
- Telecom- leverages Powergridâs nationwide transmission infrastructure and operates as a neutral carrier in the point to point Bandwidth Leasing Business.
- Consultancy- provides in-house expertise in the Transmission, Distribution and Telecom sectors, including Planning Design, Engineering, Load Dispatch, OPGW on intra state Transmission network, Procurement Management, Operation & Maintenance, Financing and Project Management.
b) The operations of the company are mainly carried out within the country and therefore there is no reportable geographical segment
Segment Revenue and Expenses
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.
Segment Assets and Liabilities
Segment assets include all operating assets comprising of Property, Plant and Equipment, current assets and loan and advances. Construction, Work-in-progress, construction stores and advances and investments are included in unallocated assets. Segment facilities include operating liabilities and provisions.
16. Contingent Liabilities and contingent assets 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 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. In such cases, contingent liability of Rs.1381.17 crore (Rs.1666.86 crore as on 31st March, 2016; Rs.219.14 crore as on 1st April, 2015) has been estimated.
(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.2671.53 crore (Rs.4041.30 crore as on 31st March, 2016; Rs.2253.11 crore as on 1st April, 2015) 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.4.00 crore (Rs.28.66 crore as on 31st March, 2016; Rs.44.09 crore as on 1st April, 2015) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to Rs.388.38 crore (Rs.359.03 crore as on 31st March, 2016; Rs. 391.22 crore as on 1st April, 2015) are being contested before various Appellate Authorities. Many of these matters are disposed of in favour of the company but are disputed before higher authorities by the concerned departments.
(v) Others
a) Other contingent liabilities amounts to Rs.201.32 crore (Rs.342.33 crore as on 31st March, 2016; Rs.303.56 crore as on 1st April, 2015)
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.
c) 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 âPOWERGRID event of defaultâ or on âforce majeure eventâ prescribed under TSA. No contingent liability on this account has been considered as the same is not ascertainable.
2. a) Details of Bank guarantees given by the company on behalf of SPV companies, which were taken over to carry out the business awarded under tariff based bidding, towards performance of the work awarded are as under:
b) The Company has given guarantee for the dues & punctual payment and discharge of the obligations amounting to Rs.290 crore (Rs.290 crore as on 31st March, 2016; NIL as on 1st April, 2015) against bond issued by Powergrid Vizag Transmission Company Ltd.
17. Capital management
a) Risk Management
The companyâs objectives when managing capital are to
- maximize the shareholder value;
- safeguard its ability to continue as a going concern;
- maintain an optimal capital structure to reduce the cost of capital.
For the purpose of the companyâs capital management, equity capital includes issued equity capital, securities premium reserve and all other equity reserves attributable to the equity holders of the company. The company manages its capital structure and makes adjustments in light of changes in economic conditions, regulatory framework and requirements of financial covenants with lenders. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, regulate investments in new projects, return capital to shareholders or issue new shares. The company monitors capital using debt-equity ratio, which is the ratio of long term debt to total net worth. The policy is to keep the debt-equity ratio wherein the debt is less than 75% of total capital employed (i.e. debt to equity ratio less than 75:25). The company includes within long term debt, interest bearing loans and borrowings and current maturities of long term debt.
Under the terms of the major borrowing facilities, the company is required to comply with the financial covenants. Breaches in meeting the financial covenants would permit the lenders to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current reporting period.
No changes were made in the objectives, policies or processes for managing capital during the years ended 31st March, 2017 and 31st March, 2016.
Dividend not recognized at the end of the reporting period
In addition to above dividend, the Board of Directors on 29th May, 2017 recommended the payment of a final dividend of Rs.3.35 per fully paid equity share. This proposed dividend is subject to the approval of shareholders in the ensuing Annual general meeting.
18. Financial Risk Management
The Companyâs principal financial liabilities comprise loans and borrowings denominated in Indian rupees or foreign currencies, trade payables and other payables. The Company has also provided financial guarantee in respect of bonds issued by its wholly owned subsidiary, Powergrid Vizag Transmission Limited. The main purpose of these financial liabilities is to finance the Companyâs capital investments and operations.
The Companyâs principal financial assets include loans and advances, trade and other receivables, and cash and cash equivalents that are generated from its operations.
The Companyâs activities expose it to the following financial risks, namely,
a) Credit risk,
b) Liquidity risk,
c) Market risk.
This note presents information regarding the companyâs exposure, objectives, policies and processes for measuring and managing these risks.
Risk management framework
The Company has a duly constituted Risk Management Committee headed by Director (Operations) with Director (Finance) and Director (Personnel) as members. For the purpose of evaluating and managing the uncertainties the enterprise faces, Enterprise Risk Management framework has been implemented in the Company. The framework is a structured, consistent and continuous process for identification, assessment, monitoring and management of risks. As per this framework, the significant business processes / risks are monitored and controlled through various Key Performance Indicators (KPIs). The Committee meets at regular intervals and reviews KPIs and provides updates to the Audit Committee/Board.
The management of financial risks by the Company is summarized below:-
A) Credit Risk
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities on account of trade receivables and loans and advances and from its financing activities due to deposits with banks and financial institutions, foreign exchange transactions and other financial instruments and for its investment activities due to investment in State Government Bonds.
A default on a financial asset is when the counterparty fails to make contractual payments within 3 years of when they fall due. This definition of default is determined considering the business environment in which the Company operates and other macro-economic factors.
Assets are written-off when there is no reasonable expectation of recovery, such as a debtor declaring bankruptcy or failing to engage in a repayment plan with the Company. Where loans or receivables have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in the statement of profit and loss.
(i) Trade Receivables
The Company primarily provides transmission facilities to inter-state transmission service customers (DICs) comprising mainly state utilities owned by State Governments. The Company has a robust payment security mechanism in the form of Letters of Credit (LC) backed by the Tri-Partite Agreements (TPA). The TPA was signed among the GOI, Reserve Bank of India and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of State Electricity Boards dues during 2001-02 by the GOI, which was valid till October 2016. GOI has approved the extension of these TPAs for a further period of 10 years. Majority of the States have executed the agreements for extension of TPAs and matter is being pursued with the remaining states.
As per the provisions of the TPA, the customers are required to establish LC covering 105% of the average monthly billing of the Company for last 12 months. The TPA also provides that if there is any default in payment of current dues by any State Utility, the outstanding dues can be deducted from the Stateâs RBI account and paid to the concerned CPSU. There is also provision for regulation of power by the Company in case of non-payment of dues and non-establishment of LC.
CERC tariff regulations allow payment against monthly bills towards transmission charges within a period of 60 days from the date of the bill and levy of surcharge on delayed payment beyond 60 days. A graded rebate is provided by the Company for payments made within 60 days.
Trade receivables consist of receivables relating to transmission services of Rs.2835.17 crore (31st March, 2016: Rs.2607.39 crore, 1st April, 2015: Rs.2014.13 crore), receivables relating to consultancy services of Rs.315.92 crore (31st March 2016: Rs.77.10 crore, 1st April, 2015: Rs.81.03 crore) and receivables relating to telecom business of Rs.102.42 crore (31st March 2016: Rs.83.10 crore, 1st April, 2015: Rs.50.82 crore)
(ii) Other Financial Assets (excluding trade receivables)
- Cash and cash equivalents
The Company held cash and cash equivalents of Rs.1401.57 crore (31st March, 2016: Rs.908.89 crore, 1st April, 2015: Rs.627.97 crore). The cash and cash equivalents are held with public sector banks and high rated private sector banks and do not have any significant credit risk.
- Deposits with banks and financial institutions
The Company held deposits with banks and financial institutions of Rs.2097.25 crore (31st March, 2016: Rs.1544.84 crore, 1st April, 2015: Rs.1435.01 crore). Term deposits are placed with public sector banks and have negligible credit risk.
- Investments
The Company holds investment of Rs.2.50 crore (31st March 2016: Rs.7.50 crore, 1st April, 2015: Rs.192.92 crore) in 8.5% tax free State government bonds issued under the One Time Settlement Scheme The Company does not expect the counterparty to fail to meet its obligations, and has not experienced any impairment losses in respect of these investments.
- Loans
The Company has given loans to employees, subsidiaries and other parties. House building loans and conveyance advance to the employees are secured against the mortgage of the house properties or hypothecation of vehicles for which such loans have been given in line with the policies of the Company. The loans provided to group companies are for projects under Tariff Based Competitive Bidding route. The risk of default in respect of these loans is considered negligible.
- Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
- Provision for expected credit losses
(a) Financial assets for which loss allowance is measured using 12 month expected credit losses
The Company has assets where the counter-parties have sufficient capacity to meet the obligations and where the risk of default is very low. At initial recognition, financial assets (excluding trade receivables) are considered as having negligible credit risk and the risk has not increased from initial recognition. Therefore expected credit loss provision is not required.
(b) Financial assets for which loss allowance is measured using life time expected credit losses
In respect of trade receivables from Telecom and Consultancy, customer credit risk is managed by regular monitoring of the outstanding receivables and follow-up with the consumer for realization.
With regard to transmission segment, the Company has customers most of whom are state government utilities with capacity to meet the obligations and therefore the risk of default is negligible. Further, management believes that the unimpaired amounts that are 30 days past due date are still collectible in full, based on the payment security mechanism in place and historical payment behavior.
Considering the above factors and the prevalent regulations, the trade receivables continue to have a negligible credit risk on initial recognition and thereafter on each reporting date.
B) Liquidity risk
Liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. The Company monitors its risk of a shortage of funds using a liquidity planning tool. The Company has access to a variety of sources of funding such as commercial paper, bank loans, bonds and external commercial borrowings and retains flexibility in funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Companyâs liquidity position comprising the undrawn borrowing facilities below and cash and cash equivalents on the basis of expected cash flows.
The Company depends on both internal and external sources of liquidity to provide working capital and to fund capital expenditure.
i) Financial Arrangement
The Company had access to the following undrawn borrowing facilities at the end of the reporting period.
The bank overdraft facilities may be drawn at any time and may be terminated by the bank without notice. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time and have remaining availability period of 1 to 5 years (2 to 4 years in 2016, and 1 to 5 years in 2015).
The table below analyses the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities.
The amount disclosed in the table is the contractual undiscounted cash flows.
C) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk:
i. Currency risk
ii. Interest rate risk
iii. Other price risk, such as equity price risk and commodity risk.
i) Currency risk
The Company is exposed to currency risk mainly in respect of foreign currency denominated loans and borrowings and procurement of goods and services whose purchase consideration is denominated in foreign currency. Transmission tariff are regulated by the CERC. According to the CERC tariff regulations for the block 2014-19 the Company may hedge foreign exchange exposure in respect of the interest on foreign currency loan and repayment of foreign loan acquired for the transmission system, in part or full in its discretion and recover the cost of hedging of foreign exchange rate variation corresponding to the normative foreign debt, in the relevant year.
If hedging of the foreign exchange exposure is not undertaken, the extra rupee liability towards interest payment and loan repayment corresponding to the normative foreign currency loan in the relevant year is permissible to be recovered as part of transmission tariff provided it is not attributable to the generating Company or the transmission licensee or its suppliers or contractors. During the financial year 2016-17, no hedging for foreign exchange exposure has been undertaken by the Company. In respect of goods and services procured for Capital Investment, the exchange rate variation is part of the project cost, for determination of transmission tariff. The currency risk in respect of goods and services procured for operation activities is not significant.
The Companyâs exposure to foreign currency risk at the end of the reporting period expressed in INR is provided in Note No.54.
Sensitivity
Since the impact of strengthening or weakening of Indian rupee against USD, Euro, JPY and other currencies on the statement of profit and loss would not be very significant; therefore, sensitivity analysis for currency risk is not disclosed.
ii) Interest rate risk
The Company is exposed to interest rate risk arising mainly from long term borrowings with floating interest rates. The Company is exposed to interest rate risk because the cash flows associated with floating rate borrowings will fluctuate with changes in interest rates. The Company manages the interest rate risks by maintaining a debt portfolio comprising a mix of fixed and floating rate borrowings in domestic and foreign currencies.
At the reporting date, the interest rate profile of the Companyâs variable interest rate-bearing financial instruments is as follows:
Fair value sensitivity analysis for interest-rate risk
As per CERC Regulations, interest on loan during construction forms part of project cost for the purpose of tariff and after the date of commercial operation, interest on loans is recoverable through tariff calculated on the normative average loan of the year by applying the weighted average rate of interest of the actual loan portfolio.
Accordingly, the Companyâs interest rate risk is not considered significant; hence sensitivity analysis for the risk is not disclosed.
iii) Other price risk
The Companyâs exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as fair value through OCI.
Considering the magnitude of equity investments, no significant risk is expected to arise.
19. Income Tax expense
This note provides an analysis of the companyâs income tax expense, and how the tax expense is affected by non-assessable and non deductible items. It also explains significant estimates made in relation to the Companyâs tax position.
(a) Income tax expense
(i) Long Term Employee Benefits Leave Obligations
The Company provides for earned leave benefit (including compensated absences) and half-pay leave to the employees of the company which accrue annually at 30 days and 20 days respectively. Earned leave is encashable while in service. Half pay leaves (HPL) are en-cashable only on separation beyond the age of 55 years upto the maximum of 300 days (HPL). However, total number of leave that can be encashed on superannuation shall be restricted to 300 days and no commutation of half pay leave shall be permissible. The liability for same is recognized on the basis of actuarial valuation.
(ii) Post-employment obligations (Defined Employee Benefit/Contribution Schemes)
A. 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 recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
B. Other employee benefits - Long Service Award
This benefit is applicable to all regular employees of the company (except for Directors and CMD) who have superannuated after completing at least 10 years of service.
C. 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 lakhs. As per recommendation of the 3rd Pay Revision Committee for CPSEs, the limit is proposed to be revised to Rs.20 lakhs w.e.f. 1st January, 2017. The scheme is funded by the company and is managed by a separate trust. The liability for the same is recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
D. Other Defined Retirement Benefits (ODRB)/Baggage Allowance
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 recognized on the basis of actuarial valuation on annual basis on the Balance Sheet date.
E. 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 and EPS scheme for the year amounting to Rs.89.47 crore (previous year Rs.84.57 crore) has been 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 the report of actuary overall interest earning and cumulative surplus is more than statutory interest payment requirement. Hence, no further provision is considered necessary. Since the company does not have unconditional right over the PF corpus, the surplus has not been recognised in the Balance Sheet.
The Company has scheme of employees defined Pension Contribution. Company contribution is paid to separate trust. Amount of contribution paid/payable for the year is Rs.109.83 crore (previous year Rs.102.19 crore) has been recognized as expense and is charged to Statement of Profit & Loss.
(vi) Description of Risk exposures
Valuation is based on certain assumptions which are dynamic in nature and vary over time. As such company is exposed to various risks as follows:
A) Salary Increases (except for PF) - Actual salary increase will increase the planâs liability. Increase in salary increase rate assumptions in future valuation will also increase the liability.
B) Investment risk - If plan is funded then assets liabilities mismatch and actual investment return on assets lower than the discount rate assumed at the last valuation date can impact the liability.
C) Discount Rate - Reduction in discount rate in subsequent valuations can increase the planâs liability.
D) Mortality & disability - Actual deaths and disability cases proving lower or higher than assumed in the valuation can impact the liabilities.
E) Withdrawals - Actual withdrawals proving higher or lower than assumed withdrawals and change of withdrawal rates at subsequent valuations can impact Planâs liability.
(vii) Defined benefit liability and employee contribution
The weighted average duration of the defined benefit obligations is 43.08 years (2015-16â42.85 years, 2014-15â42.99 years). The expected maturity analysis of undiscounted pension, gratuity, other defined retirement benefit and post-employment medical benefits is as follows:
20. Recent Accounting Pronouncements:
Standard issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Company (Indian Accounting Standards) (Amendment Rules, 2017) notifying amendment to Ind AS 7, âStatement of cash flowsâ. This amendment is in accordance with the recent amendment made by International Accounting Standards Board (IASB) to IAS 7, âStatement of cash flowsâ. This amendment is applicable to the company from 1st April, 2017.
Amendment to Ind AS 7 âStatement of cash flowsâ:
The amendment to Ind AS 7 âStatement of cash flowsâ requires the entities to provide disclosures that would enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirements. The company is evaluating the requirements of the amendment and the effect on the financial statements.
21. First time adoption of Ind AS Transition to Ind AS
These are the companyâs first financial statements prepared in accordance with Ind AS. The accounting policies set out in Note 2 have been applied in preparing the financial statements for the year ended 31st March, 2017, the comparative information presented in these financial statements for the year ended 31st March 2016 and in the preparation of an opening Ind AS balance sheet as at 1st April 2015 (The date of transition). In preparing its opening Ind AS Balance Sheet, the company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 ( as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP).
A. Note to First Time adoption Note I: Fair Value Investments
Under the previous GAAP, investments in equity instruments were classified as long term investments or current investments based on the intended holding period and realisability. Long term investments were carried at cost less provisions for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under IND-AS, these investments are required to be measured at fair value.
Fair value changes with respect to investments in equity instruments designated as FVOCI have been recognized in Other Comprehensive Income as at the date of transition and subsequently in the other comprehensive income for the year ended 31st March 2016. This increased other comprehensive reserve by Rs.64.80 crore as at 31st March 2016 (1st April 2015 Rs.85.08 crore).
Consequent to the above, the total equity as at 31st March, 2016 increased by Rs.64.80 crore (1st April 2015 Rs.85.08 crore) and other comprehensive income for the year ended 31st March 2016 decreased by Rs.20.28 crore.
Note II: Deferred Tax
Deferred tax has been recognized on the adjustments made on transition to Ind AS.
Note III. Borrowings:
Ind AS 109 âFinancial Instrumentsâ requires transaction costs incurred for borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method.
Under previous GAAP, these transaction costs were recognized in Statement of Profit and Loss as and when incurred. Accordingly, borrowing as at 31st March, 2016 have been reduced by Rs.66.50 crore (1st April, 2015 Rs.64.21 crore) with a corresponding adjustment to Other Equity, Capital work in progress and Property, Plant and Equipment The total equity increased by an equivalent amount. The profit for the year ended 31st March, 2016 reduced by Rs.6.81 crore as a result of the additional interest expense.
Note IV. Investment property
Under the previous GAAP, investment properties were presented as part of Property, Plant and Equipment. Under Ind AS, investment properties are required to be separately presented on the face of the balance sheet. There is no impact on the total equity and on profit as a result of this adjustment.
Note V. Proposed Dividend
Under the previous GAAP dividend proposed by the Board of Directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs.950.79 crore as at 31st March, 2016 (1st April, 2015 Rs.821.74 crore) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.
Note VI. Re measurement of post-employment benefit obligations
Under Ind AS, re measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these re measurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31st March, 2016 increased by Rs.8.31 crore. There is no impact on the total equity as at 31st March, 2016.
Note VII. Fair valuation of employee loans
Under the previous GAAP, employee loans at concessional rates are recorded at their transaction value. Under Ind AS these are required to be recognized at fair value. Difference between the fair value and transaction value of the employee loans has been recognized as deferred employee cost. Consequent to the change, the amount of employee loans decreased by Rs.52.75 crore as at 31st March, 2016 (1st April, 2015 Rs.49.71 crore). The deferred employee cost increased by Rs.51.45 crore as at 31st March, 2016 (1st April, 2015 Rs.49.71 crore).
The profit for the year and total equity as at 31st March, 2016 decreased by Rs.1.35 crore due to amortization of the deferred employee cost which is partially offset by the interest income recognized on employee loans.
Note VIII. Retained earnings
Retained earnings as at 1st April, 2015 has been adjusted consequent to the above Ind AS transition adjustments.
Note IX. Other comprehensive income
Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as âother comprehensive incomeâ includes re measurements of defined benefit plans, fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.
Note X. Retention Money Adjustment
Under the previous GAAP, retention money on capital expenditure is recorded at face value. Under Ind AS financial liabilities are measured at fair value, if the effect of time value is material. Accordingly, retention money has been discounted to their present values with corresponding decrease in other equity and capital work in progress. This change reduced the retention money liability as at 1st April, 2015 and 31st March, 2016 by Rs.64.87 crore and Rs.53.95 crore with corresponding increase in other equity and capital work in progress by Rs.63.29 crore and Rs.1.57 crore as at 1st April, 2015 and by Rs.49.66 crore and Rs.4.29 crore as at 31st March, 2016. The profit for the year ended 31st March, 2016 decreased by Rs.13.63 crore due to charging of notional interest on retention money liability.
Note XI. Recognition of Bilateral Lines as Finance Leases
Under the previous GAAP, bilateral lines are recorded as assets in the books of the company under Property, Plant and Equipment.
Mar 31, 2015
1.1 Cash equivalent of deemed export benefits availed of Rs. 209.99
crore in respect of supplies effected 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.
In this regard the Cumulative amount received and de-capitalized upto
31st March 2015 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 2015 (previous year Rs. 197.87 crore) in the 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 2013-14, a sum of Rs. 2975 crore (Previous Year Rs.
2346.31 crore) has been utilised during the year for part financing of
capital expenditure on the projects and general corporate purpose as
per objects of the issue resulting in complete utilisation of funds
amounting to Rs. 5321.31 crore raised through FPO.
1.3 a) Certain balances in Loans and Advances & Trade Payables 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 Information in respect of cost plus consultancy contracts,
considering the same as consultancy business as required under
Accounting Standard (AS)-7 (Revised 2002) "Construction Contracts " is
provided as under :
1.5 The company has been entrusted with the responsibility of billing
collection and disbursement (BCD) of the transmission charges on behalf
of all the ISTS (Interstate transmission System) licensees through the
mechanism of the POC (Point of Connection) charges introduced w.e.f.
01st July 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. All such appeals have been
transferred to Delhi High Court as per order of the Supreme Court on
the appeal preferred by the company and company has also requested for
directing agitating states to pay full transmission charges as per new
methodology pending settlement of the matter. Honorable Delhi High
Court has directed all the above beneficiaries to release payments and
accordingly the beneficiaries have started making payments as per the
said directions.
1.6 CERC issued tariff order dated 29.04.2011 in respect of Barh-Balia
Transmission line considering the date of commercial operation (DOCO)
01.07.10 in line with their Regulation. Against this tariff order, one
of the beneficiaries filed appeal before the Appellate Tribunal for
Electricity (ATE) challenging the tariff approved by CERC based on
above DOCO claimed by the company. The ATE vide its order dated
02.07.2012 observed that the DOCO of 01.07.2010 was not appropriate as
the appellant had reported that the transmission line was put in
regular service from August 2011 i.e. when it was put in regular
service when the other end in the scope of the generating company viz.
NTPC was completed i.e. August 2011 though Company had completed its
scope as on 01.07.2010. Accordingly, the ATE remanded CERC for
redetermination of DOCO and tariff of the Transmission line. Upon this,
the company filed an appeal in the Supreme Court explaining that the
DOCO of 01.07.2010 was as per CERC Regulations. The Hon''ble Supreme
Court on 15.03.2013 had stayed all the proceedings before the CERC for
the said Transmission System based on the appeal filed by the Company.
The Company had also filed another petition on 28.02.2013 before the
Central Electricity Regulatory Commission (CERC) for determination of
revised transmission tariff on the basis of revised cost estimate
approved by its Board of Directors. Subsequently on 08.10.2013, in its
interim order, the Hon''ble Supreme Court has directed the CERC to
proceed with determination of tariff for the said Transmission System
pending disposal of the appeal regarding determination of DOCO date.The
decision of redetermination of DOCO is awaited from CERC.
Since the decision of the date of DOCO is pending before the Supreme
Court, and also considering that 01.07.2010 as the correct DOCO as per
CERC Regulations, no adjustment has been made in respect of Revenue of
Rs. 144.91 crore recognised for the period 01.07.2010 to 31.08.2011.
1.7 As per CERC Grant of Connectivity, Long-term Access and
Medium-term Open Access in inter-State Transmission and related matters
Regulations, 2009 as amended from time to time, all transmission
elements are constructed as per the requirement of the long term
customers (LTA) up to 25 years and transmission charges are recoverable
from such long term customers. For medium term open access (MTOA), no
additional transmission element is constructed but only the existing
surplus transmission capacities are utilised. The charges recovered
from the MTOA customers, upon utilisation of the surplus capacity which
is very small and temporary in nature, are used to reduce the charges
of the LTA customers. The company is revenue neutral.
One of the MTOA customer, signed an agreement for MTOA for a period of
3 years from 16.06.2013 but did not utilise the capacity. The company,
however, billed the customer as per the agreement. But the MTOA
customer defaulted on its dues of Rs.15.64 crore billed during the
period from 16.06.2013 to 31.01.2014. Due to non-recovery of dues, the
company has cancelled the MTOA w.e.f. 01.02.2014 as per order of the
APTEL. The total transmission charges are being recovered from other
customers since then. An application, filed by the company is pending
before CERC for allowing recovery of the dues of such MTOA customer for
the period from 16.06.2013 to 31.01.2014 from other customers during
this period. The revenue of the company is not impacted
(increase/decrease) due to grant of MTOA or cancellation thereof.
Considering that the company is entitled to recover total transmission
charges as per CERC sharing regulations, no provision has been made in
the accounts for the year ended on 31.03.2015 towards the above dues of
the MTOA charges for the period from 16.06.2013 to 31.01.2014
1.8 (i) FERV Loss of Rs. 510.52 crore (Previous Year Rs. 2258.13crore)
has been adjusted in the respective carrying amount of Fixed Assets/
Capital work in Progress (CWIP)/lease receivables.
(ii) FERV Gain of Rs. 12.46 crore (Previous Year FERV Loss Rs. 8.34
crore) has been recognised in the Statement of Profit and Loss.
1.9 Change in accounting policy/accounting practice
a) During the Year, material for construction of Substations (including
HVDC) is being transferred to Capital Work in Progress (CWIP) during
the progress of erection work as against earlier practice of
transferring the same on the completion of erection work. The change of
practice has resulted in increase in CWIP amount by Rs. 234.43 Crore
with corresponding reduction in Construction Stores.
b) The Company has revised depreciation rates on certain fixed assets
w.e.f. 01st April, 2014 as per useful life specified in schedule II of
the Companies Act, 2013 as reassessed by the company. Accordingly, the
company has accounted for additional depreciation charge of Rs.22.31
Crore during the year ended 31st March, 2015 and Rs. 0.05 Crores (net
of deferred tax) in reserves in terms of the transitional provisions of
said schedule II. Thus, by charging depreciation at the revised
depreciation rates, the depreciation charge for the year ended 31st
March, 2015 is higher by Rs. 22.31 Crore and profit before tax for the
year is lower by Rs. 22.31 Crore.
1.10 Borrowing cost capitalised during the year is Rs. 2459.60 crore
(previous year Rs. 2274.62 crore) as per AS 16- "Borrowing Costs".
1.11 Based on information available with the company, there are few
suppliers/service providers who are registered as micro, small or
medium enterprise under The Micro, Small and Medium Enterprises
Development Act,2006 (MSMED Act, 2006). Information in respect of micro
and small enterprises as required by MSMED Act, 2006 is given as under:
1.12 Disclosures as per Accounting Standard AS 15 -"Employee Benefits"
Defined employee benefit/ contribution 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 and EPS scheme for the year
amounting to Rs. 76.48 crore(previous year Rs.74.88 crore) has been
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 the 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. Pension
The Company has scheme of employees defined Pension Contribution.
Company contribution is paid to separate trust. Amount of contribution
paid/payable for the year is Rs. 73.11 crore (previous year Rs. 60.08
crore) has been recognised as expense and is charged to statement of
profit & loss. In addition to above provision for additional
contribution of Rs. 87.28 crore for the period from January 2007 to
March 2012 has been made during the year as approved by the management.
D. 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.
E. Leave Encashment
The Company provides for earned leave benefit (including compensated
absences) and half-pay leave to the employees of the Company which
accrue annually at 30 days and 20 days respectively. Earned leave is
en-cashable while in service. Half-pay leaves (HPL) are en-cashable
only on separation beyond the age of 55 years up to the maximum of 300
days (HPL). However, total amount of leave that can be encashed on
superannuation shall be restricted to 300 days and no commutation of
half-pay leave shall be permissible. The liability for the same is
recognised on the basis of actuarial valuation.
F. 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.
The above schemes (D,E and F) are unfunded.
G. The summarised position of various defined benefits recognized in
the Statement of Profit & Loss and Balance Sheet is as under:- a)
Expenses recognised in Statement of profit and loss:
H. Other Employee Benefits
Provision for Long Service Award amounting to Rs. 1.24 crore (previous
year Rs. 0.84 crore) has been made on the basis of actuarial valuation
at the year end.
J. Actuarial Assumptions
Principal assumptions used for actuarial valuation are:
i) Method used - Projected unit credit ( PUC) (Previous Year (PUC))
ii) Discount rate - 8.00 % (previous year 8.50 %)
iii) Expected rate of return on assets (Gratuity only) - 8.00 %
(previous year 8.50%)
iv) Future salary increase- 6.50 % (previous year 6.50%)
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.
K. The Company''s best estimate of contribution towards gratuity for
the financial year 2015-16 is Rs. 1.51crore (previous year Rs. 4.65
crore)
L. The effect of the percentage point increase/decrease in the medical
cost of PRMF will be as under:-
1.13 Disclosure as per AS 17-" Segment Reporting"
a) Business Segments
The company''s principal business is transmission of bulk power across
different States of India. However, 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, current assets and loan and advances. Construction
work-in-progress, construction stores & advances and investments are
included in unallocated assets. Segment liabilities include operating
liabilities and provisions.
1.14 Disclosure as per AS 18- "Related Party Disclosure" a) List of
Related Parties:-
i) Key Management Personnel
Sh. R.N. Nayak Chairman and Managing Director
Sh. I.S. Jha Director (Projects)
Sh. R.T. Agarwal Director (Finance)
Sh. Ravi P Singh Director(Personnel)
Sh. R.P. Sasmal Director(Operations)
Smt. Divya Tandon Company Secretary
ii) Subsidiaries:- Wholly Owned
i) Power System Operation Corporation Limited (POSOCO)
ii) Powergrid NM Transmission Limited
iii) Powergrid Vemagiri Transmission Limited
iv) Powergrid Vizag Transmission Limited
v) Powergrid Unchahar Transmission Limited
vi) Powergrid Kala Amb Transmission Limited (w.e.f 12 May 2014)
vii) Vindhyachal Jabalpur Transmission Limited (w.e.f 26 Feb 2015)
iii) Joint Ventures:-
i) Powerlinks Transmission Limited
ii) Torrent Power Grid Limited
iii) Jaypee Powergrid Limited
iv) Parbati Koldam Transmission Company Limited
v) Teestavalley Power Transmission Limited
vi) North East Transmission Company Limited
vii) National High Power Test Laboratory Private Limited
viii) Energy Efficiency Services Limited.
ix) Bihar Grid Company Limited
x) Kalinga Bidyut Prasaran Nigam Private Limited
xi) Cross Border Power Transmission Company Limited
xii) Power Transmission Company Nepal Ltd
1.15 Disclosure as per AS 19-"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.
Disclosure requirements of Accounting Standard (AS) - 19 "Leases"
notified under the Companies Act, 2013 are given as under:
(i) The reconciliation of the lease receivables (as per project cost
data submitted to / approved by the CERC for tariff fixation) is as
under:
(iii) The unearned finance income as at 31st March, 2015 is Rs. 157.42
crore (previous year Rs. 152.09 crore). (iv) The value of contractual
maturity of such leases as per AS-19 are as under :
(v) There are differences in balance lease receivable as at year end as
per accounts and tariff records on account of :
(a) Undischarged liabilities amounting to Rs.17.33 crore (Previous Year
Rs. 79.62 crore). Such cost become part of project cost only on
discharge of such liabilities.
(b) Unamortized FERV on loans included in lease receivable amounting to
Rs. 61.14 crore (Previous Year Rs. 62.91 crore). Such FERV are allowed
to be recovered as part of tariff on actual payment basis
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. 31.87 crore (previous year Rs. 33.80 crore) towards lease
payments, net of recoveries, in respect of premises for residential use
of employees. Lease payments of Rs. 10.52 crore (previous year Rs.
11.23 crore) in respect of premises for offices and guest house/transit
camps are shown under the head 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 company''s share in assets, liabilities, contingent liabilities and
capital commitment as on 31st March 2015 and income and expenses for
the year in respect of above joint venture entities based on their
accounts are given below:-
The figures pertaining to FY 2014-15 are compiled based on unaudited
accounts except for Powerlinks Transmission Limited, National High
Power Test Laboratory Private Limited and Cross Border Power
Transmission Company Limited which are audited.
1.16 Disclosure as per AS 28-" Impairment of assets"
In accordance with Accounting Standard (AS-28) "Impairment of Assets",
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. Accordingly, no impairment loss has been provided in the books
of accounts.
1.17 Capital and Other Commitments
i) Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs. 24189.22 crore (previous year Rs.
30175.65 crore).
ii) As at 31st March,2015, the company has commitment of Rs. 427.61
crore (previous year Rs. 812.82 crore) towards further investment in
joint venture entities.
iii) As at 31st March,2015, the company has commitment of Rs. 4261.42
crore (previous year Rs. 730.00crore) towards further investment in
subsidiary companies.
1.18 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. 219.14 crore (previous year Rs. 211.73 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. 2253.11
crore (previous year Rs. 2393.45 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. 44.09crore
(previous year Rs. 5.80 crore ) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to
Rs. 391.22 crore (previous year Rs. 474.74 crore) are being 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. 303.56 crore (previous
year Rs. 778.54 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) companies (wholly owned subsidiaries)
namely Powergrid NM Transmission Company Ltd (erstwhile Nagapattinam
Madugiri Transmission Company Ltd.) , Powergrid Vemagiri Transmission
Company Ltd. ( erstwhile Vemagiri Transmission System Limited), Vizag
Transmission Limited Unchahar Transmission Limited Kala Amb
Transmission Limited and Vindhyachal Jabalpur Transmission Limited has
been taken over to carry over the business awarded under Tariff based
bidding. Details of Bank guarantees given by the company on behalf of
SPV companies towards performance of the work awarded are as under:
1.19 Disclosure as required by Clause 32 of Listing Agreements:
A. Loans and Advances in nature of Loans:
1. To Subsidiary Companies
2. To firms/companies in which directors are interested : NIL
3. Where there is no repayment schedule or repayment beyond seven
years or no interest or interest as per Section 186 of The Companies
Act 2013 : Rs. 229.70 Crore (Repayment schedule is beyond seven years)
B. Investment by the loanee (as detailed above) in the shares of Power
Grid Corporation of India Ltd : NIL
1.20 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.
Mar 31, 2014
1.1 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. 211.73 crore (previous year Rs. 172.60 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. 2393.45
crore (previous year Rs. 2522.64 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. 5.80 crore
(previous year Rs.2.73 crore ) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to
Rs. 474.74 crore (previous year Rs. 294.86 crore) are pending before
various Appellate Authorities 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. 778.54 crore (previous
year Rs. 89.78 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) companies namely POWERGRID NM
Transmission Company Ltd. (wholly owned subsidiary) (erstwhile
Nagapattinam Madugiri Transmission Company Ltd.) , POWERGRID Vemagiri
Transmission Company Ltd. (wholly owned subsidiary) (erstwhile Vemagiri
Transmission System Limited), Vizag Transmission Limited and Unchahar
Transmission Limited has been taken over to carry over the business
awarded under Tariff based bidding. Bank guarantee of Rs. 45.00 crore
(previous year Rs. 45.00 crore ), Rs. Nil (previous year Rs. 36.00 crore), Rs.
45.00 crore and Rs. 5.40 crore respectively has been given by the company
on behalf of SPV companies towards performance of the work awarded.
2.50 Vemagiri Transmission Limited was acquired for execution of
Vemagiri Transmission system based on Tariff Based Competitive Bidding
(TBCB).CERC vide order dated 09.05.2013 and 27.09.2013 interalia stated
that Vemagiri Transmission system cannot be executed in its present
form and directed CTU to return the bank guarantees of identified long
term transmission customers and also directed the customer to return
the contract performance guarantee given by POWERGRID. Based on the
CERC order, action for winding up Special Purpose Vehicle and recovery
of cost incurred by POWERGRID will be taken. Pending any decision for
recovery of cost incurred, provision of Rs. 19.40 crore has been made in
respect of Investment and advances made by POWERGRID.
1.2 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.
Mar 31, 2013
1.1 Cash equivalent of deemed export benefits availed of Rs. 209.99
crore in respect of supplies affected for East South Inter Connector-ll
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.
In the regard the Cumulative amount received and de-capitalized upto
31st March 2013 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 2013 (Previous year Rs. 197.87 crore) in the capital cost ofthe
respective assets / projects pending receipt ofthe 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. 750 crore (Previous Year
Rs.1371.17 crore) has been utilised during the year for part financing
of capital expenditure on the projects specified for utilization
resulting in complete utilisation of funds amounting to Rs. 3721.17
crore raised through FPO.
1.3 a) Certain balances in Loans and Advances & Trade Payables 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) ofthe transmission charges on behalf
of all the ISTS (Interstate transmission System) licensees through the
mechanism ofthe POC (Point of Connection) charges introduced w.e.f.
01-07-2011 which involves billing based on approved drawal/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.
273.27 crore (previous yearRs. 141.56 crore) is included in Trade
Receivables. All such appeals have been transferred to Delhi High Court
as per order ofthe Supreme Court on the appeal preferred by the company
and company has also requested for directing agitating states to pay
full transmission charges as per new methodology pending settlement of
the matter.
1.5 (i) FERV Loss ofRs. 1660.02 crore includingRs. 671.89 crore for
Previous Year (previous year FERV loss Rs.882.14 crore) has been
adjusted in the respective carrying amount of Fixed Assets/Capital work
in Progress (CWIP)/lease receivables.
(ii) FERV Gain of Rs.1.16 crore (Previous Year FERV Loss Rs.2.23 crore)
has been recognised in the Statement of Profit and Loss.
1.6 Effect due to change in accounting policies during the year -
i) Ministry of Corporate Affairs, Government of India through circular
no.25/2012 dated 9th August 2012 has clarified that Para 6 of
Accounting Standard (AS)-ll and para 4(e) of AS 16 shall not apply to
company which is applying para 46A of AS 11. Consequently, exchange
differences arising on settlement/translation of foreign currency loans
to the extent regarded as an adjustment to interest cost as per para
4(e) of AS 16 and charged to the statement of profit and loss have now
been adjusted in the cost of related capital assets. This change in
accounting policy is made effective from 01 April 2011.This change has
resulted in increase in Profit before tax for the year byRs. 122.95
crore (includingRs. 66.12 crore for FY 11-12).
ii) In view of opinion ofthe Expert Advisory Committee ofthe Institute
of Chartered Accountants of India, unspent expenditure, out ofthe
budget for the year towards Corporate Social Responsibility(CSR), which
was hitherto being provided for in the statement of Profit & Loss is
now being transferred to CSR reserve by appropriating profit. The
change has resulted in increase in profit before tax for the year by
Rs. 26.06 crore (including Rs.15.26 crore write back of provision for
earlier years ).
1.7 Borrowing cost capitalised during the year is Rs. 1824.93 crore
(previous Year Rs. 1667.14 crore) as per AS 16- "Borrowing Cost".
1.8 Pending approval ofthe Performance Related Pay ( PRP ) scheme for
workmen, provision of Rs.41.48 crore (includingRs. 21.87 crore for
earlier years) has been made net of payments made as per old
Performance Linked Incentive Scheme.
1.9 Disclosures as per Accounting Standard (AS) 15
Defined employee benefit/ contribution schemes are as under:-
A. ProvidentFund
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 year amounting to Rs.
66.57 crore(previous yearRs.60.69 crore) has been 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 the 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 ofRs. 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
ontheBalanceSheetdate.
C. Pension
The Company has scheme of employees defined Pension Contribution.
Company contribution is paid to separate trust. Amount of contribution
paid/payable for the year isRs. 52.24 crore (Previous Year Rs. 30.36
crore) has been recognised as expense and is charged to statement of
profit & loss.
D. 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.
E. 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.
1.10 Segment information (AS 17):
a) Business Segments
The company''s principal business is transmission of bulk power across
different States of India. However, telecom and consultancy business
are also treated as a reportable segment in accordance with para 28
ofAS-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
d) The operation of the company mainly carried out within the country
and therefore there is no reportable geographical segment.
1.11 Related Party Disclosures:-
a) List of Related Parties:-
i) Key Management Personnel
Sh. R.N. Nayak Chairman and Managing Director
Sh.I.S.Jha Director(Projects)
Sh. R.T. Agarwal Director (Finance)
Sh. Ravi P Singh Director(Personnel) w.e.f. 01.04.2012
Sh. R.P. Sasmal Director(Operations) w.e.f. 01.08.2012
ii) Subsidiaries:-WhollyOwned
i) Power System Operation Corporation Limited (POSOCO)
ii) Powergrid NM Transmission Limited
iii) Powergrid Vemagiri Transmission Limited
iii)JointVentures:-
i) PowerlinksTransmissionLimited
ii) Torrent Power Grid Limited
iii) Jaypee Powergrid Limited
iv) Parbati Koldam Transmission Company Limited
v) TeestavalleyPowerTransmission Limited
vi) North East Transmission Company Limited
vii) National High Power Test Laboratory Private Limited
viii) Energy Efficiency Services Limited.
ix) BiharGridCompany Limitedw.e.f . 04.01.2013
x) Kalinga Bidyut Prasaran Nigam Private Limited w.e.f. 31.12.2012
xi) Cross Border Power Transmission Company Limited w.e.f. 11.08.2012
1.12 In accordance with Accounting Standard (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.
1.13 Capital and Other Commitments
i) Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs. 43190.76 crore (previous
yearRs.41800.14 crore).
ii) As at 31st March,2013, the company has commitment ofRs.1005.31
crore (previous yearRs.149.36 crore) towards further investment in
joint venture entities.
iii) As at 31st March,2013, the company has commitment of Rs. 183.33
crore towards further investment in subsidiary companies.
1.14 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
forRs. 172.60 crore (previous yearRs. 73.15 crore) seeking enhancement
of the contract price, revision of work schedule with price escalation,
compensation forthe extended period of work, idle charges etc. These
claims are being contested bythe Company as being not admissible in
terms ofthe provisions ofthe 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. 2522.64
crore (previous year Rs.1765.09 crore) has been estimated.
(iii) Otherclaims
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.2.73 crore
(previous year Rs.11.72 crore ) has been estimated.
(iv) Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters
Disputed Income Tax/Sales Tax/Excise/Municipal Tax Matters amounting to
Rs. 294.86 crore (previous year Rs. 257.86 crore) are pending before
various Appellate Authorities 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. 89.78 crore (previous
yearRs. 80.16 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 Powergrid NM
Transmission Company Ltd. (wholly owned subsidiary) (erstwhile
Nagapaffinam Madugiri Transmission Company Ltd.) and Powergrid Vemagiri
Transmission Company Ltd. (wholly owned subsidiary) (erstwhile Vemagiri
Transmission System Limited) has been taken over to carry over the
business awarded under Tariff based bidding. Bank guarantee ofRs.
45.00 crore (previous yearRs. 45.00 crore) and Rs. 36.00 crore
(previous year Nil) respectively has been given by the company on
behalf of SPV towards performance of the work awarded.
1.15 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.
Mar 31, 2012
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 ÃRight 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) Ã 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) Ã 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.
Mar 31, 2011
1 a) The company owns 5377 hectare (Previous Year 4703 hectare) of land
amounting to Rs.845.81 crore (Previous Year Rs.536.56 crore) which has been
classified into freehold and leasehold based on available
documentation.
b) The company's land in the State of Jammu & Kashmir amounting to
Rs.22.91 crore (Previous Year Rs.19.89 crore) and in certain other cases
(value not ascertainable), the conveyancing of title to the freehold
land and execution/registration of lease agreements in favour of the
company is pending for completion of legal formalities.
c) Freehold land includes Rs.33.71 crore (previous year Rs.33.71 crore) in
respect of land acquired for residential complex at gurgaon for which
conveyance deed in favour of the Company is yet to be executed.
d) Leasehold land includes Rs.7.64 crore (previous year Rs.7.64 crore) in
respect of land acquired for office complex on perpetual lease basis
with an unlimited useful life at Katwaria Sarai, New Delhi and hence no
depreciation is charged.
2. Township buildings includes Rs.7.27 crore (previous year Rs.7.27 crore)
for 28 flats at Mumbai, for which registration in favour of the company
is pending.
3. Plant and machinery under substation in fixed assets (Schedule No
6) includes company's share of Rs.3.80 crore (previous year Rs.3.80 crore)
in common services and facilities of 400 Kv sub-stations of Uttar
Pradesh state electricity board (UPSEB) and Rajasthan state electricity
board (RSEB) pending execution of formal agreements for joint
ownership.
4. 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. Thereafter, world Bank had financed both the ESI project and STP
as originally envisaged and they became eligible for deemed export
benefits. Consequently, the company lodged claims with the Customs and
Excise Authorities.
During the year, company recovered deemed export benefits to the extent
of Rs.0.78 crore (Previous year Rs.1.49 crore) and de-capitalized in
respective assets. The cumulative amount received and de-capitalized
upto 31st March 2011 is Rs.12.12 crore (Previous year Rs.11.34 crore). The
company continued to show the balance of Rs.197.87 crore as at 31st March
2011 (Previous year Rs.198.65 crore) in capital cost of the respective
assets / projects pending receipt of the same from Customs and Excise
Authorities.
5. Pending reconciliation, materials amounting to Rs.34.68 crore
(previous year Rs.106.33 crore) (included under Construction Stores Ã
schedule 8) in commissioned lines is shown as construction stores lying
with contractors.
6. The transmission systems situated in Jammu and Kashmir have been
taken over by the Company w.e.f. 1st April,1993 from National
Hydroelectric Power Corporation Ltd. (NHPC) upon mutually agreed terms,
pending completion of legal formalities.
7. Hon'ble High Court of Karnataka has declared the Karnataka Special
Tax on Entry of Certain goods Act,2004 as illegal and directed the
concerned authority to refund the amount of Entry Tax collected since
inception of the Act. The government of Karnataka has filed a writ
petition before divisional bench of Hon'ble Karnataka High Court which
has stayed the refund of Entry Tax collected by it. The Company
capitalised Rs.13.62 crore paid towards entry tax in earlier years. The
same will be decapitalised upon final resolution of the issue.
8. a) Balances in Loans and Advances, material with contractors,
Sundry Creditors, Advances from customers and Sundry Debtors are
subject to confirmation and consequential adjustments, if any.
b) In the opinion of the management, the value of Current Assets, Loans
and Advances, on realisation in the ordinary course of business, will
not be less than the value at which these are stated in the Balance
Sheet.
9. During the year, 400 Kv Koldam -Nalagarh (D/C QUAD conductor) line
along with 400 Kv Line Bays at Nalagarh end have become ready for
intended use of evacuation of power from Koldam Hydro Electric Project
of National Thermal Power Corporation (NTPC) from
01.04.2010.Accordingly the asset was capitalized in accordance with the
Accounting Policy No. 4.4 of the Company and net revenue expenditure
of Rs.22.07 crore (including Depriciation of Rs.9.66 crore ) has been
charged to Profit and loss Account.
The generation unit of Koldam HEP is yet to be commissioned. Clause 3
(12) (c ) of the CERC (Terms and Conditions of Tariff) Regulations 2009
applicable for the block period 2009-14 provides for approval of the
Date of Commercial operation (DoCo), prior to the element coming into
regular service for evacuation of power. A petition has been filed by
the Company before CERC for approval of DoCo w.e.f. 01/04/2010 and the
corresponding transmission charges. Pending approval of DoCo and the
transmission charges of the asset by CERC no revenue has been
recognized during the year.
10. Cash and Bank Balances include Rs.38.41 crore (previous year Rs.34.53
crore) on account of tax deducted at source on perquisites to employees
as per the provisions of the Income Tax Act, 1961, which was deposited
in a separate bank account as per orders of the Hon'ble Calcutta High
Court.
11. a) The company has been providing for depreciation at the rates
notified for the purpose of recovery of tariff, by CERC.
MoP has issued tariff policy which provides that rates of depreciation
notified by CERC would be applicable for the purpose of tariff as well
as accounting.
In accordance with the Tariff Policy, CERC has notified norms for the
block period 2009-14 which provides for specified depreciation rates in
first 12 years and thereafter amortisation of residual value over the
residual life. Accordingly, depreciation on the transmission assets for
the year has been provided as per rates and methodology notified under
CERC Regulations. b) Depreciation charge for the year is lower by
Rs.64.82 crore (previous year Rs.50.69 crore) as compared to the
depreciation as per rates provided in the Schedule XIv of the Companies
Act, 1956.
12. Effects due to changes in accounting policies during the year
a) In view of an opinion of the expert advisory committee (EAC) of the
Institute of Chartered Accountants of India, capital expenditure on
assets not owned by the company, which was hitherto amortized over a
period of four years, is now charged off to revenue as and when
incurred. The unamortized balance as on 01/04/2010 under Fixed Assets
and CwIP Schedule has been written off as prior period expenditure.
This has resulted in decrease in profit by Rs.3.56 crore (including prior
period impact of Rs.4.22 crore) with corresponding decrease in CwIP/Fixed
Asset. The matter has been referred to EAC for reconsideration.
b) Leasehold land, which was hitherto depreciated over the tenure of
the lease, is now depreciated in 25 years or tenure of the lease
whichever is less in accordance with the rate and methodology specified
in CERC (Terms & Conditions of Tariff) Regulations, 2009 with
retrospective effect from 01/04/2009. This has resulted in decrease in
profit by Rs.5.21 Crore (including prior period impact of Rs.2.10 Crore).
c) Liabilities for price variation/ exchange rate variation in case of
contracts which were hitherto accounted for on acceptance/receipt of
claims are now being accounted for on estimated basis as per terms of
the contracts. The above change has resulted in increase in liability
by Rs.191.26 Crore with corresponding increase in CwIP/Fixed Assets. The
above has also resulted in decrease in Profit by Rs.10.49 crore.
d) Liquidated damages / warranty claims which were hitherto being
accounted for on receipt / certainty of receipt, are now recognized
when no significant uncertainty as to measurability and collectability
exists. The above has resulted in Decrease in liability by Rs.59.70 crore
with corresponding decrease in CwIP/Fixed Assets. The above has also
resulted in decrease in Profit by Rs.2.98 Crore.
e) CERC Tariff Regulations 2009 for block period 2009-14 provide that
tariff for additional capital expenditure incurred after the date of
commercial operation shall be allowed based on the projected
expenditure. In view of the above, Transmission income in respect of
additional capitalization, which was hitherto accounted for on the
basis of specific order by the CERC, is now being accounted for on
accrual basis based on actual expenditure incurred from year to year
after date of commercial operation. This has resulted in increase in
transmission income amounting to Rs.57.17 crore (including Rs.17.47 crore
for financial year 2009-10).
f) The expenditure on Corporate Social Responsibility (CSR) which was,
hitherto, incurred / appropriated out of profit to the extent of 0.75%
of net profit of the preceding financial year, is now being incurred /
appropriated to the extent of 1.00% of such profit. This has resulted
in additional expenditure/appropriation of Rs.5.10 crore for the year.
g) Surcharge, which was, hitherto, accounted for on receipt / certainty
of receipt, is now being accounted for when no significant uncertainty
as to measurability and collectability exists. The above change has
resulted in increase in profit due to accounting of additional
surcharge of Rs.5.14 crore for the year.
13. In accordance with the CERC Tariff Regulations, 2009
a) The Company has billed and recognized transmission income as per
tariff orders issued by CERC applicable for the block period 2009-14.
b) where tariff has not been approved under block period 2009-14, in
respect of assets commissioned upto 31.03.2009, the Company has billed
transmission charges as approved by CERC for the block period 2004-09
as applicable as on 31.03.2009 and recognized revenue as per norms for
the block period 2009-14.
c) where tariff has not been approved by CERC under block period
2009-14 in respect of assets commissioned after 01/04/2009, the Company
has recognized revenue of Rs.1207.39 crore based on Tariff Norms 2009-14
and the same is yet to be billed pending issuance of tariff orders by
CERC for which petitions have been filed by the Company. However, CERC
has amended the regulation 5 of the principal regulations vide its
notification dated 02.05.2011 to the effect that Commission may
consider in its discretion to grant provisional tariff upto 95% of the
annual fixed cost of the project claimed in the application subject to
adjustment after the final tariff order has been issued.
d) Pending certification of monthly transmission system availability by
the Regional Power Committee (RPC) of some of the regions, transmission
incentive of Rs.16.14 Crore has been recognized provisionally based on
latest month's availability.
e) Transmission income of Rs.172.79 crore (previous year Rs.180.77 crore)
has been recognised as income of the year, on issuance of final tariff
orders by CERC in respect of provisional recognition of revenue in
earlier years.
f) The Company has allowed rebate against payment received through LC /
cheques / RTgS for effecting better and timely recovery of dues from
State Power Utilities on consistent basis.
g) The Sundry Debtors - other Debts in schedule à 11 includes an amount
of Rs.2152.71 crore (previous year Rs.1582.32 Crore) on account of unbilled
revenue in view of recognition of revenue as per CERC Tariff Norms
applicable for 2009-14.
14. Following the CERC order dated 03/08/2010, wherein the staff of
the Commission was directed to prepare and submit draft amendment to
the tax rate as per the Finance Act for the relevant year, various
formalities for amending regulations including issue of draft
amendments inviting comments from the stake holders and holding of
public hearing in this respect has been completed but the final
amendment is yet to be notified by CERC. Pending notification of the
amendments by CERC, Return on Equity (RoE) component of transmission
charges amounting to Rs.241.52 crore for the year has been recognized by
grossing up the RoE using the applicable MAT rate of 19.9305%
applicable for the year as against MAT rate of 11.33% applicable for
the F.Y. 2008-09 ( on the basis of which billing is being made).
Revenue of Rs.132.47crore pertaining to F.Y. 2009-10 on account of above
using the applicable MAT rate of 16.995% applicable for the year as
against MAT rate of 11.33% applicable for the F.Y. 2008-09 ( on the
basis of which billing is being made). has also been recognised during
the year.
The total amount on account of above of Rs.373.99 crore is yet to be
billed by the Company
b) Loans and Advances includes Rs.49.04 Crore (including interest of
Rs.0.34 Crore charged on estimated bases) advanced to PoSoCo for day to
day operations pending realisation of dues by PoSoCo.
15. During the year company made Follow on Public offer (FPo) and
allotted 420,884,123 fresh equity shares of face value of Rs.10 each at a
premium of Rs.80 each (Rs.75.50 each for retail investors) and further
allotted 420,884,123 equity shares of Rs.10 each for a consideration of
Rs.90 each (Rs.85.50 each to retail investors) being disinvestment on
behalf of President of India on 23 rd November 2010. The company
received Rs.3721.17 crore through fresh issue of shares including share
premium of Rs.3300.29 crore and sale proceeds of equity of government of
India amounting to Rs.3721.17 crore which was paid to government of
India. out of the proceeds, a sum of Rs.1600 crore has been utilized
during the year for part financing of capital expenditure on the
projects specified for utilization and the balance amount has been
invested as per the investment policy of the company.
Issue expenses of Rs.8.28 crore (Net after adjustment of government of
India share of Issue expenses of Rs.7.64 crore) has been adjusted against
Share Premium account (Schedule -2).
16. a) (i) 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.74.19
crore (net of Rs.0.27 crore FERv loss for the construction projects)
{previous year FERv loss of Rs.2.17 crore (net of Rs.1.05 crore FERv loss
for the construction projects)} towards loan liabilities attributable
to fixed assets.
(ii) FERV Loss of Rs.15.71 crore (previous year FERv gain Rs.704.85 crore)
has been adjusted in the respective carrying amount of Fixed
Assets/Capital work in Progress (CwIP)/lease receivables.
(iii) FERv gain of Rs.77.96 crore ( previous year FERv gain of Rs.475.54
crore) has been recognized in the profit and loss Account in respect of
loans contracted on or after 1st April, 2004 in terms of provisions of
AS-11 (revised 2003)
b) other Income for the year include an amount of Rs.0.07 crore being the
FERv gain on Current Assets (previous year FERv gain of Rs.0.34 crore).
17. FERv Loss of Rs.0.71 crore (previous year FERv gain Rs.471.30 crore)
has been shown as FERv Recoverable and Rs.(1.49) crore has been shown as
depreciation amortisation (previous year Rs.1.47 crore depreciation
amortisation ) as per Accounting Policy No.9.3 and 9.4.
19. Accounting of FERv as stated in note nos. 18 and 19 above, has
resulted in increase in profit for the year by Rs.4.48 crore ( previous
year increase in profit by Rs.3.54 crore).
20. other Income includes Rs.20.26 crore (previous year Rs.26.53 crore)
being the amount transferred from grants- in- Aid received in respect
of Chandrapur HvDC, NER ULDC (for six months ended on 30.09.2010) and
Salakati as per Accounting Policy No. 3.1.
21. The company is following AS-15 (revised 2005) 'Employee Benefits'.
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.
The contribution to the fund for the period is recognized as expense
and is charged to profit and loss a/c. The obligation of the company is
limited to such fixed contribution. However, the trust is required to
pay a minimum rate of interest on contributions to the members as
specified by goI. The fair value of the assets of the provident fund
including the return on the assets thereof, as on the balance sheet
date is greater than the obligations under the defined contribution
plan.
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. The
additional gratuity liability provision under wage revision as on
31.03.2010 on enhanced limit from Rs.3.5 lacs to Rs.10 lacs on account of
pay revision due for Supervisors and workmen amounting to Rs.54.88 crore
was reversed. After revision of the limit from Rs.3.5 lacs to Rs.10 lacs
during the FY 2010-11, the impact on valuation due to enhanced limit
for Supervisors and workmen is Rs.78.32 crore.
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
is recognised in profit and loss a/c on the basis of actuarial
valuation on annual basis.
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. The scheme is unfunded and
is recognised in profit and loss a/c on the basis of actuarial
valuation on annual basis.
b) weighted average rate of return on plan assets during the year is
8.79% (previous year 8.73%)
f) During the year the company has provided liability towards
contribution to the gratuity Trust of Rs.93.84 crore (Previous Year
Rs.81.23 crore) out of which 2.70 Crore is recoverable from PoSoCo, PRMF
of Rs.37.99 crore (Previous Year Rs.13.15 crore) and to oDRB of Rs.0.82 crore
(Previous Year Rs.1.76 crore). Consequent upon settlement of wage
revision of workmen & Supervisiors, provision of Rs.60.22 crore, has been
reversed by crediting salary after retaining provision made in the
earlier years Rs.67.52 crore towards superannuation benefits as per DPE
guidelines. The scheme of superannuation benefits is yet to be
finalised.
E. other Employee Benefits
Provision for Leave encashment amounting to Rs.16.52 crore (Previous Year
Rs.4.00 crore) for the year has been made on the basis of actuarial
valuation at the year end and charged to Profit and Loss Account.
g. Actuarial Assumptions
Principal assumptions used for actuarial valuation are:
i) Method used - Projected unit credit ( PUC)
ii) Discount rate: 8% (Previous Year 7.5%)
iii) Expected rate of return on assets (gratuity only): 8.50 %
(Previous Year 8.50%)
iv) Future salary increase: 5.5% (Previous Year 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.
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. Consultancy allowance paid to all the employees has been
considered as expense of 'Consultancy Segment'.
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 loan liabilities, current liabilities and provisions.
d) The company has transmission projects located within the country and
no geographical segment is distinguishable.
22. related Party Disclosures:-
a) Joint Ventures:-
i) Powerlinks Transmission Limited
ii) Torrent Power grid Limited
iii) Jaypee Powergrid Limited
iv) Parbati Koldam Transmission Company Ltd
v) Teestavalley Power Transmission Limited
vi) North East Transmission Company Limited
vii) National High Power Test Laboratory Private Limited
viii) Energy efficiency Services Limited.
b) subsidiaries:-
Power System operation Corporation Limited (PoSoCo)
The name of another subsidiary, namely Byrnihat Transmission Company
Ltd. has been struck off from the Register and the
Company has been dissolved during the year.
23. a) Key management Personnel
Sh. S.K. Chaturvedi Chairman and Managing Director
Sh. J. Sridharan Director (Finance) (Superannuated on 30th April, 2011)
Sh. v.M. Kaul Director (Personnel)
Sh. R.N.Nayak Director (operations)
Sh. I.S.Jha Director (Projects)
Sh. Rakesh Jain Director
Dr. M. Ravi Kant Director
Dr. P.K. Shetty Director (Retired on 9th July 2010 and re-appointed
vide order dated 19th october 2010 w.e.f 10th July, 2010)
Dr. A.S. Narag Director (Retired on 9th July 2010 and re-appointed vide
order dated 19th october 2010 w.e.f 10th July, 2010)
Sh. Anil K. Agarwal Director (Retired on 9th July 2010 and re-appointed
vide order dated 19th october 2010 w.e.f 10th July, 2010)
Sh. F.A. vanderavala Director (Retired on 9th July 2010 and
re-appointed vide order dated 19th october 2010 w.e.f 10th July, 2010)
Sh. S.C. Tripathi Director (ceased to be Director w.e.f. 24th April,
2011)
Dr. Ashok Khanna Director (ceased to be Director w.e.f. 24th April,
2011)
Smt. Sarita Prasad Director
c) Transactions with the related parties at 24 (b) above are as
follows:
In addition to transactions disclosed at note no. 16, company has paid
System and Market operation and other charges of Rs.7.79 Crore and
availed a rebate of Rs.0.11 Crore. Company has also recovered Rs.2.57 Crore
from PoSoCo towards dark fiber lease charges.
24. Remuneration to whole time directors including chairman and
managing director is Rs.1.77 crore (previous year Rs.1.58 crore) and amount
of dues outstanding to the company as on 31st March, 2011 are Rs.0.07
crore (previous year Rs.0.09 crore). Director's sitting fee Rs.0.28 crore
(Previous Year Rs.0.25 crore) for independent directors.
25. Employees' remuneration and benefits include the following for the
directors, including chairman and managing director and excluding
arrears paid to ex-directors.
26. In addition to the above remuneration, the whole time directors
have been allowed to use the staff car (including for private journeys)
on payment of Rs.780/- p.m. as contained in the Ministry of Finance (BPE)
Circular No.2(18)/pc/64 dt. 29th November, 1964 as amended.
27. Disclosures regarding leases
a) Finance Leases :- Loans and Advances (Schedule 14) 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) Ã 19 "Leases" issued by the Institute of
Chartered Accountants of India.
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.26.67 crore (Previous Year Rs.19.61
crore) towards lease payments, net of recoveries, in respect of
premises for residential use of employees. Lease payments of Rs.6.27
crore (Previous Year Rs.5.40 crore) in respect of premises for offices
and guest house/transit camps are shown under Rent in Schedule-23 Ã
Transmission, Administration and other expenses.
28. Joint venture entities:-
In addition, the share application money of Rs.8.92 crore and Rs.24.38
crore given to North East Transmission Company Ltd. and Energy
Efficiency Services Limited respectively, has been included in Advance
à others in Schedule no. 14 pending allotment of shares.
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.
29. In accordance with AS-28 "Impairment of Assets", impairment
analysis of assets of transmission activity of the company by
evaluation of its cash generating units, was carried out by an outside
agency in the year 2004-05 and since recoverable amount was more than
the carrying amount thereof, no impairment loss was recognised.
Similarly, impairment analysis of telecom assets was carried out during
2006-07 and since the recoverable amount was more than the carrying
amount of assets, no impairment loss was recognized. In the current
year, there is no indication of impairment which requires re-
estimating the recoverable amount of the assets.
30. Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs.30612.06 crore (previous year
Rs.20952.14 crore).
31. No provision has been made for tax demands amounting to Rs.102.57
crore (previous year Rs.194.68 crore) and other demands (amount not
ascertainable), for which appeals / litigation are pending, and the
same have been shown as contingent liabilities
32. Disclosure in respect of contingent liabilities as required in AS
29 of 'Provisions, Contingent Liabilities and Contingent Assets':
Contingent Liabilities:
a) Contingent Liabilities as stated in Schedule 18 are dependent upon
the outcome of court/appellate authorities/ out of court settlement,
the amount being called up, terms of contractual obligations,
devolvement and raising of demand by concerned parties, disposal of
appeals.
b) Reimbursement of outflow in respect of 'Claims against the Company
not acknowledged as debt' and 'Disputed tax demands-Income Tax'
(limited to Income Tax on core activity only) as stated in Schedule 18
- Contingent Liability, is dependent on the admittance of petition to
be filed with CERC and in remaining cases no reimbursement is expected.
33. a) Based on the information available with the company, there are
no suppliers/service providers who are registered as micro, small or
medium enterprises under "The Micro, Small and Medium Enterprises
Development Act, 2006" as on 31st March, 2011.
b) No payment is due for more than 30 days as at 31st March, 2011 in
respect of purchases / services made from small scale/ancillary
industries.
34. a) Figures have been rounded off to nearest rupees in crore.
b) Previous year figures have been regrouped / rearranged wherever
necessary.
Mar 31, 2010
1 Township buildings includes Rs. 7.27 crore (previous year Rs. 7.27 crore)
for 28 flats at Mumbai, for which registration in favour of the company
is pending.
2 Plant and machinery under substation in fixed assets (Schedule No 6)
includes companys share of Rs. 3.80 crore (previous year Rs. 3.80 crore)
in common services and facilities of 400 KV sub-stations of Uttar
Pradesh state electricity board and Rajasthan state electricity board
pending execution of formal agreements for joint ownership.
3 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. Thereafter, World Bank had financed both the ESI project and STP
as originally envisaged and they became eligible for deemed export
benefits. Consequently, the company lodged claims with the Customs and
Excise Authorities.
During the year, company recovered deemed export benefits to the extent
of Rs. 1.49 crore (Previous year Rs. 4.39 crore) and de-capitalised in
respective assets. The cumulative amount received and de-capitalised
upto 31st March 2010 is Rs. 11.34 crore (Previous year Rs. 9.85 crore). The
company continued to show the balance of Rs. 198.65 crore as at 31st
March 2010 (Previous year Rs. 200.14 crore) in capital cost of the
respective assets / projects pending receipt of the same from Customs
and Excise Authorities.
4 Pending reconciliation, materials amounting to Rs. 106.33 crore
(previous year Rs. 47.81 crore) is included under construction stores Ã
schedule 8 as construction stores with contractors in commissioned
lines.
5 The transmission systems situated in Jammu and Kashmir have been
taken over by the Company w.e.f. 1st April,1993 from National
Hydroelectric Power Corporation Ltd. (NHPC) upon mutually agreed terms,
pending completion of legal formalities.
6 Honble High Court of Karnataka has declared the Karnataka Special
Tax on Entry of Certain Goods Act,2004 as illegal and directed the
concerned authority to refund the amount of Entry Tax collected since
inception of the Act. The government of Karnataka has filed a writ
petition before divisional bench of Honble Karnataka High Court which
is yet to come up for hearing. The Company capitalised Rs. 13.62 crore
paid towards entry tax. The same will be decapitalised upon final
resolution of the issue.
7 During the year 400kV Kudankulam-Tirunelveli D/C (Quad) Lines I & II
have become ready for intended use of evacuation of power from the
Kudankulam Atomic Power Project of Nuclear Power Corporation of India
Ltd (NPC) from 01.04.2009. Accordingly these Transmission Lines were
capitalised w.e.f 01.04.2009 in accordance with the Accounting Policy
No. 4.4 of the Company. The generating unit of NPC is not yet
commissioned. The Company has an agreement dated 13th December 2004
with NPC for indemnification of the expenditure towards interest during
construction (IDC) including FERV and Govt Guarantee fees for the delay
in commissioning of the generating unit for a period upto one year from
the date of capitalisation.
However, the tariff regulations 2009 for the block period 2009-14
provides for approving the Date of Commercial Operation (DOCO) by CERC
prior to the transmission line coming into regular service for
evacuation of power in respect of which petition has been filed by the
Company. Pending approval of DOCO of the transmission lines by CERC and
settlement of indemnification amount with NPC, no revenue has been
recognised during the year.
1 a) The company owns 4703 hectare (Previous Year 4138 hectare) of land
valuing Rs. 536.56 crore (Previous Year Rs. 438.27 crore) which has been
classified into freehold and leasehold based on available
documentation.
b) The companys land in the State of Jammu & Kashmir amounting to Rs.
19.89 crore (Previous Year Rs. 18.78 crore) and in certain other cases
(value not ascertainable), the conveyancing of title to the freehold
land and execution/ registration of lease agreements in favour of the
company is pending for completion of legal formalities.
c) Freehold land includes Rs. 33.71 crore (previous year Rs. 31.91 crore)
in respect of land acquired for residential complex at Gurgaon for
which conveyance deed in favour of the Company is yet to be executed.
d) Leasehold land includes Rs. 7.64 crore (previous year Rs. 7.64 crore) in
respect of land acquired for office complex on perpetual lease basis
with an unlimited useful life at Katwaria Sarai, New Delhi and hence no
depreciation is charged.
2 Township buildings includes Rs. 7.27 crore (previous year Rs. 7.27 crore)
for 28 flats at Mumbai, for which registration in favour of the company
is pending.
3 Plant and machinery under substation in fixed assets (Schedule No 6)
includes companys share of Rs. 3.80 crore (previous year Rs. 3.80 crore)
in common services and facilities of 400 KV sub-stations of Uttar
Pradesh state electricity board and Rajasthan state electricity board
pending execution of formal agreements for joint ownership.
4 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. Thereafter, World Bank had financed both the ESI project and STP
as originally envisaged and they became eligible for deemed export
benefits. Consequently, the company lodged claims with the Customs and
Excise Authorities.
During the year, company recovered deemed export benefits to the extent
of Rs. 1.49 crore (Previous year Rs. 4.39 crore) and de-capitalised in
respective assets. The cumulative amount received and de-capitalised
upto 31st March 2010 is Rs. 11.34 crore (Previous year Rs. 9.85 crore). The
company continued to show the balance of Rs. 198.65 crore as at 31st
March 2010 (Previous year Rs. 200.14 crore) in capital cost of the
respective assets / projects pending receipt of the same from Customs
and Excise Authorities.
5 Pending reconciliation, materials amounting to Rs. 106.33 crore
(previous year Rs. 47.81 crore) is included under construction stores Ã
schedule 8 as construction stores with contractors in commissioned
lines.
6 The transmission systems situated in Jammu and Kashmir have been
taken over by the Company w.e.f. 1st April,1993 from National
Hydroelectric Power Corporation Ltd. (NHPC) upon mutually agreed terms,
pending completion of legal formalities.
7 Honble High Court of Karnataka has declared the Karnataka Special
Tax on Entry of Certain Goods Act,2004 as illegal and directed the
concerned authority to refund the amount of Entry Tax collected since
inception of the Act. The government of Karnataka has filed a writ
petition before divisional bench of Honble Karnataka High Court which
is yet to come up for hearing. The Company capitalised Rs. 13.62 crore
paid towards entry tax. The same will be decapitalised upon final
resolution of the issue.
8 During the year 400kV Kudankulam-Tirunelveli D/C (Quad) Lines I & II
have become ready for intended use of evacuation of power from the
Kudankulam Atomic Power Project of Nuclear Power Corporation of India
Ltd (NPC) from 01.04.2009. Accordingly these Transmission Lines were
capitalised w.e.f 01.04.2009 in accordance with the Accounting Policy
No. 4.4 of the Company. The generating unit of NPC is not yet
commissioned. The Company has an agreement dated 13th December 2004
with NPC for indemnification of the expenditure towards interest during
construction (IDC) including FERV and Govt Guarantee fees for the delay
in commissioning of the generating unit for a period upto one year from
the date of capitalisation. However, the tariff regulations 2009 for
the block period 2009-14 provides for approving the Date of Commercial
Operation (DOCO) by CERC prior to the transmission line coming into
regular service for evacuation of power in respect of which petition
has been filed by the Company. Pending approval of DOCO of the
transmission lines by CERC and settlement of indemnification amount
with NPC, no revenue has been recognised during the year.
9. Service Tax is leviable on services notified under section 65 of the
Finance Act, 1994. "Transmission of Power" is not a specified service
in the said list. However, The Service Tax Authorities are interpreting
Transmission of Power as taxable service under the head "Business
Support Service" w.e.f 1st May 2006 given in the list of taxable
services. Accordingly, the company has received Order-in-Original from
Central Excise Department at Shillong (Rs. 66 crore) & appealed before
CESTAT, Kolkata.A Show Cause Notices from Service Tax / Central Excise
Department at New Delhi (Rs. 413 crore & Rs. 241 crore) Nagpur (Rs. 237
crore) and Patna (Rs. 209 crore) along with interest and penalties
leviable thereon. All the cases were transferred before Commissioner
Service Tax, New Delhi vide CBEC Order No. 2/2010 dated 22.01.2010. In
addition, the Service Tax Authorities are gathering information from
other regional offices of the company. The company has obtained legal
opinion in the matter and necessary reply and appeal have been filed
with the concerned authorities.
Based on the legal opinion and the fact that transmission of power is
not covered in the list of taxable services under section 65 of the
Finance Act, the company has not provided for the liability on account
of Service Tax on transmission charges.
CBEC vide Notification No. 11/2010 dated 27.02.2010 has exempted
Transmission of Power from the Service Tax net. As the notification is
silent about the past period, the matter has been referred by Ministry
of Power to Ministry of Finance. The same is still pending with
Ministry of Finance. The estimated amount of Service Tax liability of
Rs. 2,820.68 crore (including interest of Rs. 537.71 crore) for the period
from 1st May, 2006 to February 2010 (Previous year Rs. 2041 Crore
including interest of Rs. 308 crore) is shown as contingent liability for
the company as a whole. Moreover, petition has been filed with the
Central Electricity Regulatory Commission (CERC) for reimbursement of
service tax, if levied by revenue authorities, since service tax is an
Indirect Tax and is a pass through item in transmission tariff.
10. a) Balances in Loans and Advances, material with contractors,
Sundry Creditors, Advances from customers and Sundry Debtors are
subject to confirmation and consequential adjustments, if any.
b) In the opinion of the management, the value of Current Assets, Loans
and Advances, on realisation in the ordinary course of business, will
not be less than the value at which these are stated in the Balance
Sheet.
11. Cash and Bank Balances include Rs. 34.53 crore (previous year Rs. 30.72
crore) on account of tax deducted at source on perquisites to employees
as per the provisions of the Income Tax Act, 1961, which was deposited
in a separate bank account as per Orders of the Honble Calcutta High
Court.
12. Bonds Series XXXI & XXXII amounting to Rs. 2047.50 crore & Rs. 1035
crore respectively issued during the year, have been classified as
Secured upon execution of trust deed on 19 May 2010 (previous year
Bonds Series XXIX amounting to Rs. 1297.50 crore classified as unsecured
pending execution of trust deed).
13. a) The company has been providing for depreciation at the rates
notified for the purpose of recovery of tariff, by CERC. The issue of
charging depreciation at rates different from the rates specified under
Companies Act, 1956 has been referred by the Comptroller & Auditor
General of India (C&AG) to the Ministry of Power (MOP) during the block
year 2004-09 and the same is pending for disposal. However, MOP has
issued tariff policy for the block year 2009-14, which provides that
rates of depreciation notified by CERC would be applicable for the
purpose of tariff as well as accounting.
In accordance with the Tariff Policy, CERC has notified norms for the
block period 2009-14 which provides for specified depreciation rates in
first 12 years and thereafter amortisation of residual value over the
residual life as against average 2.91% in the block period 2004-09.
Accordingly, depreciation on the transmission assets for the year has
been provided as per above rates and methodology. Thus, by charging
depreciation at the aforesaid rates, the depreciation charge for the
year is higher by Rs. 675.23 crore as compared to the depreciation charge
as per rates notified by CERC for the block year 2004-09 which were
being followed upto 31/03/2009.
b) Depreciation charge for the year is lower by Rs. 50.69 crore (previous
year Rs. 781.29 crore) as compared to the depreciation as per rates
provided in the Schedule XIV of the Companies Act, 1956.
14. Effects due to changes in accounting policies during the year
The matter regarding allocation of Common Expenses of Corporate office,
Regional Offices and Projects, common to operation and construction
activities, was referred to Expert Advisory Committee (EAC) of
Institute of Chartered Accountant of India (ICAI). Upon receipt of
Opinion from EAC, such expenses which were hitherto allocated to
various diversified activities of the company viz. transmission,
telecom, consultancy and Accelerated Power Development and Reform
Program (APDRP) in the ratio of the respective income/reimbursement of
each activity and further allocated between revenue and Incidental
Expenditure during Construction in the proportion of Transmission
Charges and Telecom Income to annual capital outlay have now been
identified and allocated on systematic basis with retrospective effect
from 1st April, 2008.
The above has resulted in increase in current year expenditure by Rs.
86.35 crore & prior period expenditure by Rs. 91.92 crore and thereby
reduction in profit for the year by Rs. 178.27 crore with corresponding
decrease in CWIP and Gross Block.
15. a) Upon the implementation of the revised pay scales as per the
guidelines issued by Department of Public Enterprise (DPE) from time to
time, the company has revised the pay scales for the executives
effective from 01.01.2007 and the payments made during the current
financial year have been adjusted against the provision held on
31.03.2009 for pay revision amounting to Rs. 249.41 crore for executives.
b) Further, a provision of Rs. 6.20 crore (previous year Rs. 56.82 crore)
has been made towards superannuation benefit scheme for executives
being the balance permissible amount under DPE guidelines for which
scheme is yet to be finalized.
c) Pending the implementation of Pay revision for the supervisors and
workmen, the company has made a provision of Rs. 106.79 crore (Previous
Year Rs. 45.09 crore) aggregating to Rs. 279.90 crore as on 31.03.2010
(previous year Rs. 173.11 crore) on an estimated basis having regard to
the guidelines issued from time to time by DPE and principles of wage
revision implemented in respect of executives of the company. Against
the above provision, adhoc advance of Rs. 57.01 crore (previous year Rs.
40.44 crore) has been paid which has been included under loans and
advances- Schedule no 14.
d) Further Provision for Performance Related Pay (PRP) of Rs. 74.96 crore
(net of adjustment of Rs. 32.02 crore being excess provision made last
year) (Previous Year Rs. 76.78 crore) has been made as per DPE
guidelines, as part of wage revision in respect of Executives and
Supervisors.
16. a) Central Electricity Regulatory Commission (CERC), constituted
under erstwhile Electricity Regulatory Commission Act, 1998, issued
orders in December, 2000 with respect to the norms, principles and
availability based tariff. An appeal was filed by the Company against
the above orders before the Honble Delhi High Court which was
subsequently transferred to the Appellate Tribunal for Electricity
(ATE) on its formation. The ATE has dismissed the appeal on the ground
of its power to deal with regulations notified by CERC. Against the
said dismissal order of ATE, NTPC Ltd. preferred an appeal before the
Honble Supreme Court impleading POWERGRID as one of the respondents.
Since the subject matter of the appeal is for restoration of certain
components of tariff on par with the erstwhile Government of India
(GOI) norms, which will be more favourable than CERC norms, the impact
of the appeal shall not result in reduction of revenue.
The Company has followed the CERC Tariff regulations, 2001 and 2004 for
recognition of revenue for block period 2001-04 & 2004-09 respectively.
b) In exercise of powers u/s 178 of Electricity Act 2003, Central
Electricity Regulatory Commission (CERC) has notified CERC (Terms and
Conditions of Tariff) Regulations 2009 vide order dated 19th January,
2009 for determination of transmission tariff for the block period
2009-14. The norms include the following major items:
i) Return on Equity to be allowed @ 17.48% pre tax (15.5% post tax) in
place of 14% post tax in the block of 2004-09.
ii) Additional return on equity @0.5% if projects are completed within
the time limits specified by CERC against nil in block of 2004-09.
iii) Recovery of Depreciation @ 5.28% (T/L and S/S) in first 12 years
and there after recovery based on residual value over the residual life
in place of average 2.91% in the block of 2004-09.
iv) Availability Incentives linked with monthly transmission charges
instead of increased return on equity in the block period 2004-09.
Transmission charges of Rs. 4985.18 crore for the year have been
provisionally recognised based on the above norms for the block period
2009-14 and as per accounting policy of the Company pending filing of
petitions. Further Rs. 1014.15 crore has been recognised awaiting
issuance of project specific tariff orders by CERC for which petitions
have been filed.
c) As prescribed by the CERC Tariff Regulations, 2009, pending final
determination of tariff by CERC as per the Tariff norms, 2009, billing
has been made provisionally on the basis of tariff as approved by CERC
and applicable as on 31.03.2009. The difference between recognition of
income for the year 2009-10 and provisional billing has resulted in an
increase in sundry debtors by an amount of Rs. 883.48 crore
d) Transmission income of Rs. 180.77 crore (previous year 219.37 crore)
has been recognised as income of the year on issuance of final tariff
orders by CERC in respect of provisional recognition of revenue in
earlier years. e) The tariff norms for the block period 2009-14
notified by CERC provides that the rate of return on equity (ROE) shall
be computed by grossing up the base rate of 15.5% with the tax rate
applicable to the Company (MAT @ 11.33%) for the year 2008-09 which
shall be trued up separately for each year with respect to the actual
tax rate applicable, in line with the provisions of the relevant
Finance Act of the respective year, for the tariff period alongwith the
tariff petition for the next tariff period. An application has filed
with CERC for grossing of ROE based on the MAT rate applicable for the
respective financial year. Pending disposal of application by CERC, ROE
amounting to Rs. 132.47 crore, being the difference of grossing up @
16.995% (being the MAT rate for financial year 2009-10) and @ 11.33% as
aforesaid, has not been recognised.
17. Advance Against Depreciation (AAD) was included in the Transmission
income on repayment of entire loan deployed in the specific project by
spreading the AAD over the residual life of the project upto
31.03.2009. Due to change of tariff norms w.e.f. 01/04/2009, the same
has now been taken to transmission income after 12 years from the year
of commercial operation. The above income is recognised being the lower
of AAD outstanding and the difference between the depreciation charge
in accounts and depreciation recovery through tariff.
The change has resulted in increase in transmission income by Rs. 7.20
crore and profit by same amount.
18. a) The Regional Load Despatch Centres (RLDCs) of Central
Electricity Authority were transferred to the company (along with
associated manpower) during the earlier years as per orders of Ministry
of Power, Government of India (GOI). The Assets of RLDCs are being used
by the company pending transfer of ownership and determination of cost
of assets so taken over.
b) The company had set up a wholly owned subsidiary company on 20th
March 2009 namely "Power System Operation Corporation Limited" (POSOCO)
for taking over Power System Operation Segment. The same is considered
as Discontinuing Operation as per Accounting Standard 24. The System
Operation segment of the company along with associated manpower are in
the process of being transferred w.e.f 01.04.2010. An amount of Rs. 0.05
crore (Previous Year Share application money of Rs. 0.05 crore) has been
subscribed towards share capital. The amount of Rs. 1.28 crore, incurred
by the Company towards incorporation and other administrative expenses
of POSOCO, has been shown as advance recoverable.
c) The Company has identified assets (Gross Block) of Rs. 269.98 crore as
on 31.03.2010 to be transferred to POSOCO. Revenue of Rs. 224.58 crore
(including other income mainly STOA charges and bank interest)
emanating from such assets has been recognised based on the CERC (fees
and charges of Regional Load Despatch Centre and other related matters)
Regulations, 2009 dt 18.09.2009 notified by CERC. Pending transfer of
Assets/Liabilities to POSOCO, the revenue, expenses, assets and
liabilities have been depicted as a separate segment. d) After
transfer of such identified assets to POSOCO, part of the ULDC assets
of the Central portion mainly communication systems and the SLDC
systems consisting of the entire state portion would continue to be
operated and maintained by the Company as per the committees
constituted for the purpose. An application has been filed before CERC
under Regulation- 44 (Power to Relax), for extending the CERC (Terms
and Conditions of Tariff) Regulations, 2009 for the "Communication
Systems and "SLDC System" with certain modifications in Depreciation,
O&M etc. Pending finalisation of the decision of CERC in this regard,
tariff for "Communication Systems and "SLDC System" have been
accounted as per rates applicable during the previous block 2004-09.
19. a) (i) 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. 2.17
crore (net of Rs. 1.05 crore FERV loss for the construction projects)
{previous year FERV loss of Rs. 404.86 crore (net of 190.47 core FERV
loss for the construction projects)} towards loan liabilities
attributable to fixed assets.
(ii) FERV Gain of Rs. 704.85 crore (previous year FERV Loss Rs. 967.71
crore) has been adjusted in the respective carrying amount of Fixed
Assets/Capital work in Progress (CWIP)/lease receivables. (iii) FERV
Gain of Rs. 475.54 crore (previous year FERV Loss of Rs. 538.48 crore) has
been recognised in the profit and loss Account in respect of loans
contracted on or after 1st April,2004 in terms of provisions of AS-11
(revised 2003)
b) Other Income for the year include an amount of Rs. 0.34 crore being
the FERV gain on Current Assets (previous year FERV loss of Rs. 1.69
crore included in Finance Charges).
20. FERV Gain of Rs. 471.30 crore (previous year FERV Loss Rs. 889.82
crore) has been shown as FERV Payable and Rs. 1.47 crore has been shown
as depreciation amortisation (previous year Rs. 17.55 crore depreciation
write back) as per Accounting Policy No.8.3 and 8.4. In the Previous
Year, Rs. 51.02 crore was shown as FERV Payable on account of Prior
Period Expenditure
21. Accounting of FERV as stated in note nos. 20 and 21 above has
resulted in increase in profit for the year by Rs. 3.54 crore (previous
year reduction in profit by Rs. 86.99 crore).
22. Other Income includes Rs. 26.53 crore (previous year Rs. 18.42 crore)
being the amount transferred from Grants- in- Aid received in respect
of Chandrapur HVDC, NER ULDC and Salakati as per Accounting Policy No.
3.1.
23. The company is following AS-15 (revised 2005) Employee Benefits
from 1st April, 2007. 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.
The contribution to the fund for the period is recognised as expense
and is charged to profit and loss a/c. The obligation of the company is
limited to such fixed contribution. However, the trust is required to
pay a minimum rate of interest on contributions to the members as
specified by GOI. The fair value of the assets of the provident fund
including the return on the assets thereof, as on the balance sheet
date is greater than the obligations under the defined contribution
plan.
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. 3.50 Lacs on pre revised pay scales due for
revision effective from 01.01.2007 for supervisors and workmen and Rs. 10
Lacs for executives on revised pay scales implemented from 01.01.2007.
The provision for additional gratuity liability on enhanced limit from
Rs. 3.50 lacs to Rs. 10 lacs on revised scales due for revision for
supervisors and workmen amounting to Rs. 54.88 crore has been provided
under wage revision. 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.
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
is recognised in profit and loss a/c on the basis of actuarial
valuation on annual basis.
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. The scheme is unfunded and is recognised in profit and
loss a/c on the basis of actuarial valuation on annual basis.
24. In the pay revision implemented for executives, expenditure on
account of Leave Travel Concession (LTC) has been included as one of
the component of perquisites w.e.f. 26.11.2008. Now a fixed sum is
being paid to executives on account of LTC on monthly basis. Similar
provision has also been made in respect of wage revision due for the
supervisors and workmen category of employees. Accordingly, LTC which
was hitherto being accounted for on the basis of actuarial valuation on
annual basis is now being accounted based on actual expenditure
incurred. Provision for unclaimed LTC of Rs. 17.45 crore has been written
back including a sum of Rs. 14.72 crore (adjusted against the General
Reserve as per the transitional provisions of AS-15 in the Financial
Year 2007-08) which has been directly credited to General Reserve.
a) Business Segments
The companys principal business is transmission of bulk power across
different States of India. However, Power System Operation Assets,
ULDC, 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. Consultancy allowance paid to all the employees has been
considered as expense of Consultancy Segment.
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 loan liabilities, current
liabilities and provisions.
d) The company has transmission projects located within the country and
no geographical segment is distinguishable.
25. Related Party Disclosures:-
a) Related Parties:-i)
List of Joint Ventures:-Powerlinks
Transmission Limited, Torrent Power Grid Limited, Jaypee Powergrid
Limited, Parbati Koldam Transmission Company Ltd, POWERGRID IL&FS
Transmission Pvt. Ltd.*, Teestavalley Power Transmission Limited, North
East Transmission Company Limited, National High Power Test Laboratory
Private Limited, Energy efficiency Services Limited.
ii) Subsidiaries:-
Byrnihat Transmission Company Limited**
Power System Operation Corporation Limited
* JV is under liquidation u/s 560 of Companies Act 1956
** Filing of liquidation of the subsidiary is under process.
28. Key Management Personnel
Sh. S.K. Chaturvedi Chairman and Managing Director
Sh. J. Sridharan Director (Finance)
Sh. V.M. Kaul Director (Personnel)
Sh. R.N.Nayak Director (Operations) (w.e.f. 16th May, 2009)
Sh. I.S.Jha Director (Projects) (w.e.f. 1st September, 2009)
Dr. P.K. Shetty Director
Dr. A.S. Narag Director
Sh. Anil K. Agarwal Director
Sh. F.A. Vanderavala Director
Sh. S.C. Tripathi Director
Sh. Ashok Khanna Director
Smt. Sarita Prasad Director
Sh. Sudhir Kumar Director (w.e.f. 22nd May,2009 to 10th December,2009)
Sh. Rakesh Jain Director (w.e.f. 09th June, 2009)
Sh. I.C.P Keshari Director (from 6th March,2009 to 21st May,2009)
Sh. M. Ravi Kant Director (w.e.f. 11th December,2009)
Sh. S. Majumdar Director (Projects) (Superannuated on 31st August,
2009)
26. Remuneration to whole time directors including chairman and
managing director is Rs. 1.58 crore (previous year Rs. 0.45 crore) and
amount of dues outstanding to the company as on 31st March, 2010 are Rs.
0.09 crore (previous year Rs. 0.06 crore). Directors sitting fee Rs. 0.25
crore (Previous Year Rs. 0.13 crore) for independent directors.
27. In addition to the above remuneration, the whole time directors
have been allowed to use the staff car (including for private journeys)
on payment of Rs. 780/- p.m. as contained in the Ministry of Finance
(BPE) Circular No.2(18)/pc/64 dt. 29th November, 1964 as amended.
28. Disclosures regarding leases
a) Finance Leases :-Loans and Advances (Schedule 14) 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) Ã 19 "Leases" issued by the Institute of
Chartered Accountants of India.
29. Consolidated Financial Statements
The company has made investments of Rs. 0.05 crore each in the equity
shares of wholly owned subsidiary companies
(i) Byrnihat Transmission Company Ltd. (liquidation proceedings
initiated) and (ii) Power System Operation Corporation Limited
(POSOCO).
No consolidated financial statements are prepared since the
transactions of the subsidiaries are not material.
30. In accordance with AS-28 "Impairment of Assets", impairment
analysis of assets of transmission activity of the company by
evaluation of its cash generating units, was carried out by an outside
agency in the year 2004-05 and since recoverable amount was more than
the carrying amount thereof, no impairment loss was recognised.
Similarly, impairment analysis of telecom assets was carried out during
2006-07 and since the recoverable amount was more than the carrying
amount of assets, no impairment loss was recognised. In the current
year, there is no indication of impairment which requires re-estimating
the recoverable amount of the assets.
31. Estimated amount of contracts remaining to be executed on capital
account and not provided for is Rs. 20952.14 crore (previous year Rs.
16418.24 crore).
32. No provision has been made for tax demands amounting to Rs. 194.68
crore (previous year Rs. 172.69 crore) and other demands (amount not
ascertainable), for which appeals / litigation are pending, and the
same have been shown as contingent liabilities under schedule no 18.
33. Disclosure in respect of contingent liabilities as required in AS
29 of Provisions, Contingent Liabilities and Contingent Assets:
Contingent Liabilities:
a) Contingent Liabilities as stated in Schedule 18 are dependent upon
the outcome of court/appellate authorities/ out of court settlement,
the amount being called up, terms of contractual obligations,
devolvement and raising of demand by concerned parties, disposal of
appeals.
b) Reimbursement of outflow in respect of Claim against the Company
not acknowledged as debt and Disputed tax demands-Income Tax
(limited to Income Tax on core activity only)/and service tax on
transmission charges as stated in Schedule 18 of Contingent Liability,
is dependent on the admittance of petition to be filed with CERC and in
remaining cases no reimbursement is expected.
34. a) Based on the information available with the company, there are
no suppliers/service providers who are registered as micro, small or
medium enterprises under "The Micro, Small and Medium Enterprises
Development Act, 2006" as on 31st March, 2010.
b) No payment is due for more than 30 days as at 31st March, 2010 in
respect of purchases / services made from small scale/ancillary
industries.
35. a) Figures have been rounded off to nearest rupees in crore. b)
Previous year figures have been regrouped / rearranged wherever
necessary.
Mar 31, 2003
1. The Transmission Systems situated in Jammu and Kashmir associated
with National Hydroelectric Power Corporation Ltd. (NHPC) have been
taken over by the Company w.e.f. 01.04.93 as mutually agreed upon with
NHPC but regularisation is pending for completion of legal formalities.
2. The Regional Load Despatch Centres (RLDCs) of Central Electricity
Authority were transferred to the Company (alongwith associated
manpower) during the earlier years as per the orders of Ministry of
Power, Government of India. The Assets of RLDCs are used by the company
pending transfer of ownership and determination of cost of assets so
taken over.
3. a) The land owned by the Company has been classified into freehold
and leasehold to the extent possible based on available documentation
and the balance has been shown as unclassified.
b) In certain cases, the conveyancing of title to the freehold land and
execution of lease agreement (value not ascertained) in favour of the
company is pending for completion of legal formalities.
c) Leasehold land includes Rs. 764 lacs (previous year Rs.764 lacs) for
land acquired in Katwaria Sarai, New Delhi. As the land is acquired on
perpetual lease and does not have a limited useful life, no
depreciation has been charged.
d) Value of buildings include Rs. 722 lacs (previous year Rs.722 lacs)
for 28 flats at Mumbai, for which registration in favour of the company
is pending.
e) Freehold land includes Rs. 4604 lacs (previous year Rs. 4092 lacs)
for land acquired for Corporate Office / Residential Complex at Gurgaon
for which transfer deed in favour of the company is yet to be executed.
4. Pending reconciliation, materials amounting to Rs. 78 lacs(previous
year Rs. 80 lacs) in commissioned lines is shown as construction stores
lying with contractors.
5. Fixed Assets include companys share of Rs. 562 lacs (previous year
Rs.562 lacs) in common services and facilities-of 400 KV sub- stations
of Uttar Pradesh State Electricity Board (UPSEB) and Rajasthan State
Electricity Board (RSEB) pending execution of formal agreements for
joint ownership.
6. a) An amount of Rs. 23547 lacs (previous year - Rs. 10968 lacs)
being exchange rate difference in respect of Fixed Assets and Capital
Work in Progress has been adjusted in the carrying amount during the
year.
b) Other Finance charges for the year include an amount of Rs. 146 lacs
(previous year Rs. 29 lacs) being the negative exchange rate difference
on Current Assets. Other Income for the year include an amount of Rs.
Nil (previous years - Rs. 11 lacs) being the favorable exchange rate
difference on current assets.
7. a) i) Balances in Sundry Debtors, Loans, Advances and Material with
Contractors are confirmed and reconciled except in some cases.
ii) Balances in Sundry Creditors are pending confirmation from the
parties.
b) In the opinion of the management, the value of Current Assets, Loans
and Advances, on realisation in the ordinary course of business, will
not be less than the value at which these are stated in the Balance
Sheet.
8. I. CANBANK FINANCIAL SERVICES LIMITED (CANFINA)
a) During the year 1991-92, pursuant to a contract with CANFINA, the
company allotted Bonds worth Rs. 12000 lacs and placed a deposit of Rs.
11080 lacs with them (net of front -end fee of Rs. 920 lacs) as a
condition of the same contract. CANFINA defaulted on deposit repayment
after making repayment of Rs. 1680 lacs. Pursuant to such default in
1993-94, the company forfeited bonds worth Rs.10320 lacs against
deposit of Rs.9400 lacs and write-back of front-end fee of Rs. 920
lacs. Subsequently, during 1994-95, the company restored deposits of
Rs. 9400 lacs by credit to Capital Reserve in accordance with legal
advice.
b) During 1998-99, on maturity of Rs. 1680 lacs worth of bonds not
forfeited, the company repaid Rs. 103.34 lacs to third parties duly
recognised by the company as holders, and in exercise of its lien on
balance Rs.1576.66 lacs, set it off against deposits with CANFINA.
c) The company has neither accounted for interest income of Rs. 939
lacs (previous year Rs.939 lacs), cumulative Rs. 11709 lacs on deposit
with CANFINA, nor has accounted for cumulative interest of Rs. 1876
lacs payable upto maturity on bonds worth Rs.1576.66 lacs which were
set-off against deposit with CANFINA in the year 1998-99.
d) An adhoc provision of Rs. 5000 lacs against amount recoverable from
CANFINA is held pending settlement of the above matters.
II. ANDHRA BANK FINANCIAL SERVICES LTD.(ABFSL)
a) During the year 1991-92, pursuant to a contract with ABFSL, the
company allotted Bonds worth Rs. 2500 lacs and placed a deposit of Rs.
2150 lacs with them (net of front-end fee of Rs. 350 lacs) as a
condition of the same contract. ABFSL defaulted on deposit repayment.
Pursuant to such default, during 1993-94, the company forfeited bonds
worth Rs.2100 lacs by adjustment of deposit of Rs.1806 lacs and
write-back of front-end fee of Rs.294 lacs. Subsequently, during
1994-95, the company restored deposit of Rs. 1806 lacs by credit to
Capital Reserve in accordance with legal advice.
b) The company has neither accounted for interest income of Rs. 296
lacs (previous year Rs.296 lacs), cumulative Rs. 3272 lacs, on deposit
with ABFSL, nor has accounted for cumulative interest of Rs. 360 lacs,
payable upto maturity on bonds worth Rs.400 lacs held by ABFSL.
c) Bonds worth Rs. 400 Lacs held in the name of ABFSL have matured on
10.03.2002. Since the matter is under dispute / subjudice, the maturity
proceeds have been shown under Other Liabilities.
9. Share Capital Deposit of Rs. 3881 lacs (previous year Rs. 3881
lacs) represents the value of shares to be allotted against purchase
consideration payable to Government of India for ex-NHPC lines.
10. a) Cash & Bank Balance includes Rs. 327 lacs on account of
deduction of Tax at Source on perquisites to employees as per the
provisions of the Income Tax Act, 1961 and deposited in a separate bank
account as per Orders of the Honble Kolkata High Court.
b) Balance with Scheduled Banks in term deposits include Rs. 855 lacs
(previous year Rs. 803 lacs) FDR pledged with Principal Chief
Conservator of Forest, Shimla (Himachal Pradesh) against compensatory
afforestation.
11. Estimated amount of contracts remaining to be executed on capital
account and not provided for (net of advances and payments) is Rs.
262336 lacs (previous year Rs. 219261 lacs).
12. No payment is overdue for the purchases made from small
scale/ancillary industries. Hence, no-provision for interest has been
made in the accounts.
13. Provision has not been made for entry tax and sales tax on works
contracts and materials issued to contractors, for which appeals are
pending and/or the amounts are not ascertainable.
14. a) Central Electricity Regulatory Commission (CERC), constituted
under Electricity Regulatory Commission Act, 1998, issued orders in
December, 2000 with respect to the norms, principles and availability
based tariff. An appeal was filed by the Company against the above
orders before the Honble Delhi High Court, which is yet to be
disposed. Pending disposal of appeal, CERC notified tariff norms
effective from 1st April, 2001. The transmission income for the year
has been accounted for provisionally on the basis of tariff determined
as per CERC norms, subject to adjustment after final notification of
tariff.
b) Transmission Income for NER constituents has been accounted for at
the UCPTT rate of 35 paise per unit, as frozen in the 43rd NEREB
meeting. In 47th NEREB meeting, it was decided that if the generation
is less, the balance amount shall be kept separately and shall be
adjusted when generation is more. Based on normative energy, tariff is
Rs. 9118 lacs. Because of more powerflow, an amount of Rs. 10000 lacs
(previous year Rs. 9313 lacs) has been accounted for as Transmission
Income from NER Constituents.
c) Consequent upon disallowance of depreciation on Grant utilised for
Chandrapur HVDC project by CERC, an amount of Rs. 10050 lacs accounted
for as Transmission Income upto last year has been reduced from the
Transmission Income in the current year.
15. The Company had been providing depreciation upto 31.03.2001 as per
the rates notified by Govt. of India (GOI) u/s 75A of the Electricity
(Supply) Act which correspond to the depreciation rates considered in
the GOI norms for tariff. Central Electricity Regulatory Commission
(CERC) notified tariff norms effective from 01.04.2001 which provide
for amended rates of depreciation for the purpose of recovery of
tariff. However, the rates of depreciation notified by the GOI u/s 75A
of the Electricity (Supply) Act, 1948, have not been amended to
correspond with the CERC rates. Pending amendment of GOI notification
of rates of depreciation as recommended by CERC, the depreciation on
fixed assets has been provided at the rates specified in the CERC
notification for recovery of tariff. The depreciation charged for the
year is lower by Rs. 46106 lacs (previous year Rs. 42340 lacs) as
compared to rates prescribed under Electricity (Supply) Act, 1948.
16. a) Trading of Power generated by Chukha Hydel Power Corporation
Limited and Kurichhu Hydel Power Corporation Limited has been
transferred to Power Trading Corporation Ltd. with effect from
01.10.2002. A sum of Rs. 16246 lacs is outstanding under Sundry Debtors
as on 31.03.2003 for the Power sold.
b) Purchase of power is net of subsidy of Rs. 4240 lacs (Previous year
Rs. 4134 lacs) from Ministry of External Affairs.
17. Certain accounting policies have undergone change during the year
The impact of change in accounting policies, on the accounts for the
year, is as under:
a) Surcharge, which was hitherto accounted for on receipt basis is now
accounted for on receipt / certainty of receipt. This change in policy
has resulted in increase in other income and profit by Rs. 19229 lacs.
b) In line with the Accounting Standard (AS) - 2 on Valuation of
Inventories and Accounting Standard (AS) -10 on Accounting for Fixed
Assets, during the year the company has capitalised w.e.f 01.04.1999,
insurance spares which were previously treated as inventory, resulting
in increase in fixed assets and decrease in current assets by Rs. 1878
lacs. This change has also resulted in increase in depreciation by Rs.
50 lacs, prior period depreciation by Rs. 182 lacs and decrease in
profit by Rs. 232 lacs.
c) Levelling, clearing and grading charges of land, which were hitherto
included in the cost of land, have been capitalised as part of the cost
of the buildings retrospectively. This change has resulted in increase
in the cost of Buildings and decrease in the cost of land by Rs. 2556
lacs. This change has also resulted in increase in depreciation by Rs.
67 lacs, prior period depreciation by Rs. 738 lacs and decrease in
profit by Rs. 805 lacs.
18. Some of the beneficiaries have not reimbursed the Income Tax
recovery billed for the period upto 31.03.2003. Considering this aspect
as significant uncertainty of recovery, Income- tax recovery billed to
such beneficiaries amounting to Rs. 209 lacs (Grossed up Rs. 227 lacs)
{previous year Rs. 565 lacs (Grossed up Rs. 612 lacs)} has not been
accounted for.
19. Other Income includes Rs. 1156 lacs (previous year- Rs. 1156 lacs)
being the amount transferred from Capital Reserve (Grants- in- Aid) as
per Accounting Policy No. 1.0.
20. The Government of India Scheme of April, 2002, for one-time
settlement of the dues of State Electricity Boards (SEBs) envisages "
issue of 8.50 % tax-free bonds by the respective State Government for
the outstanding amount due and settlement of surcharge outstanding to
the Company as on September 30, 2001.
a) No bonds have been issued by any State Government as per the scheme
so far. Pending issue of bonds, the terms and conditions of the
settlement scheme have not been given effect to in the accounts.
b) The bonds issued by SEBs after March 1,1998 and outstanding as on
September 30, 2001 (existing bonds), are also eligible for conversion
into 8.50% tax-free bonds. The existing bonds carry a higher coupon and
continue to be legally valid till withdrawn / replaced by SEBs.
Revenue has been recognised as per the coupon of the existing bonds.
However, provision of Rs. 2207 lacs (previous year Rs. 3360 lacs)has
been made during the year towards interest differential on the said
bonds.
21. The deferred tax liability for the year amounting to Rs. 2944 lacs
(previous year Rs. 3440 lacs) has been provided after adjusting the
amount recoverable from beneficiaries. The deferred tax liability of
Rs. 19403 lacs upto the year ended 31.03.2002 has been revised to Rs.
20342 lacs resulting in total deferred tax liability as on 31.03.2003
to Rs. 23286 lacs. Major components of deferred tax liabilities and
assets are given as under:
22. Tariff Notifications provide for availability based incentive to
be recovered from the SEBs. As required in MOP letter no F. NO.2/3/
Powergrid/Tariff/98 dt. 04.02.99 availability in respect of all the
Regions for the year has been certified by the concerned Regional
Electricity Boards. Based on certification, incentive of Rs. 7962 lacs
(previous year Rs. 6735 lacs) has been accounted for during the year.
In addition, a sum of Rs. 1466 lacs for earlier years has also been
accounted as incentive on final certification of availability.
23. a) Consequent upon diversification into Telecom business, the
company has incurred capital expenditure of Rs. 31461 lacs upto
31.03.2003 (previous year Rs. 22911 lacs) which has been included under
Gross Block, Capital Work in Progress, Construction Stores and
Advances. Out of this, Rs. 17091 lacs have been capitalised on
commisioning of two (previous year Rs. 4720 lacs for three) telecom
links. Operation of telecom links has resulted in net loss during the
year of Rs. 471 lacs (previous year Rs. 42 lacs).
b) Revenue expenditure of Rs. 102 lacs relating to Telecom Business,
which was included under Miscellaneous Expenditure (to the extent not
written off) in the financial year 2000-01, is being amortised over
five years starting from the financial year 2001 -02.
c) In respect of Telecom Business, a Bank Guarantee of Rs. 10000 lacs
has been issued favouring Department of Telecommunication by creating a
charge on the Current Assets.
24. The Electricity Act, 2003 has replaced the Electricity (Supply)
Act, 1948 and the Electricity Regulatory Commission Act, 1998
applicable to the company, with effect from 10.06.2003.
a) Business Segments
The Companys principal business is transmission of bulk power across
different States of India and sale of Power. Other business includes
provides consultancy, RLDC, Telecom etc.
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 and current assets, loans and advances. Construction
work-in-progress, construction stores and advances are included in
unallocated corporate and other assets. Segment liabilities include
current liabilities and provisions.
d) The company has Transmission Projects located within the country and
no geographical segment is distinguishable.
27. A. Related Party Transactions
a) Related parties:
i) Joint ventures: Power Trading Corporation of India Limited,
Investment in equity shares during the year - NIL, Cumulative
Investment: Rs. 1200 lacs.
ii) Subsidiary : Tala Delhi Transmission Limited, Investment in equity
shares during the year - NIL, Cumulative Investment: Rs. 5 lacs.
Certificate of Commencement of Business not yet received.
iii) Subsidiary : Bina Dehgam Transmission Company Limited, Investment
in Equity shares during the year - Rs. 5 lacs. Certificate of
Commencement of Business not yet received.
iv) Directors: Sh. R.P. Singh, Dr. V.K. Garg, Sh. Bhanu Bhushan, Sh.
S.C. Misra, Sh. U.C. Misra, Sh. A.K. Kutty, Sh. M. Sahoo, Sh. A.I.
Bunet, Sh. P. l. Suvrathan, Sh. R. Ramanujam, Sh. V.V.R.K. Rao.
b) Remuneration to whole time Directors including Chairman & Managing
Director is disclosed in Note No. 29.
c) Advances due from whole time Directors including Chairman and
Managing Director are disclosed under Schedule-8 - Current assets,
loans and advances.
d) There are no non-official part time Directors in this Financial
Year. Last year non-official part-time Directors were paid a sitting
fee of Rs.0.20 lac.
B. Consolidated Financial Statements
The Company has made investment of Rs. 5 lacs each in the Equity shares
of Tala Delhi Transmission Limited and Bina Dehgam Transmission Company
Limited, subsidiary companies. As the Company intends to transfer the
control in the near future, the accounts of these subsidiaries are not
consolidated.
28. a) Figures have been rounded off to nearest rupees in lacs.
b) Previous year figures have been regrouped/rearranged wherever
necessary.
29. a) Employees remuneration and benefits include the following for
the Directors, including Chairman and Managing Director:
b) In addition to the above remuneration, the Whole time Directors have
been allowed to use the staff car (including for private journeys) on
payment of Rs. 780/- p.m. as contained in the Ministry of Finance (BPE)
Circular No.2(18)/pc/64 dt. 29.11.64 as amended.
32. ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI OF
THE COMPANIES ACT, 1956. BALANCE SHEET ABSTRACT AND COMPANYS GENERAL
BUSINESS PROFILE.
v) GENERIC NAMES OF PRINCIPAL PRODUCT/SERVICE OF COMPANY
Item code No. NOT APPLICABLE
Product Description: Transmission, Central Transmission Utility
function and Sale of Power