(r) Provisions and contingent liabilities
Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
A disclosure for contingent liabilities is made when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control
of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
(s) Business combination
Business combination involving entities or businesses under common control are accounted for using the pooling of interest method whereby the assets and liabilities of the combining entities / business are reflected at their carrying value and necessary adjustments , if any, have been given effect to as per the scheme approved by National Company Law Tribunal, as applicable.
(t) Regulatory deferral account balances
The Company is a rate regulated entity and follows Ind AS 114, Regulatory Deferral Accounts. Expenses/ Income are recognized as Regulatory Income/ Expenses in the Statement of Profit and Loss to the extent recoverable or payable in subsequent periods based on the Company's understanding of the provision of the applicable regulations framed by the West Bengal Electricity Regulatory Commission (WBERC/ Commission) and/or their pronouncements/ orders, with corresponding balances shown in the Balance Sheet as Regulatory Deferral Account balances, at their present value duly considering appropriate discounting methodology in consonance with the applicable regulations and prudence. Regulatory Deferral Account balances being estimates are revised based on factual developments, including impact of regulatory orders.
NOTE-2B SUMMARY OF SIGNIFICANT JUDGEMENTS
AND ASSUMPTIONS
The preparation of Standalone financial statements
requires the use of accounting estimates, judgements
and assumptions. Management also needs to exercise judgement in applying the Company's accounting policies.
Estimates and judgements are continually 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.
The areas involving critical estimates or judgements are :-Estimate of useful life of Intangible Assets -Note -2A (e) Estimation of Restoration Liability- Note- 2A (e)
Fair Valuation/Impairment assessment of certain Investments -Note-7 & Note-2 A (g)
Estimation of Regulatory Deferral Account Balances-Note -18 & 39
Impairment of Trade Receivables -Note - 2A (g) Estimates used in Actuarial Valuation of Employee benefits -Note-35
Estimates used in Lease liabilities -Note-50
NOTE-3 CHANGES IN EXISTING IND AS
The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standards) Amendment Rules, 2023 dated 31 March 2023 to amend the following Ind AS which are effective for annual periods beginning on or after 1 April 2023, but do not have any significant impact on the Standalone Financial Statements.
(i) Definition of Accounting Estimates - Amendments to Ind AS 8
(ii) Disclosure of Material Accounting Policies -Amendments to Ind AS 1
(iii) Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to Ind AS 12.
NOTE -19 EQUITY (Contd..)
f. Terms /rights attached to equity shares:
The Company has only one class of equity shares having a par value of ' 1/- per share fully paid up. Holders of equity shares are entitled to one vote per share. An Interim dividend of ' 4.50/- per equity share of ' 1/- each (31.03.2023: ' 4.50 /- per equity share of ' 1/- each) has been paid during the year ended 31st March 2024. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the sale proceeds from remaining assets of the Company after distribution of all preferential amounts, in proportion to the number of equity shares held by the shareholders.
NOTE -21 NON CURRENT BORROWINGS (Contd..)
ii Term Loans amounting to:
(a) ' 5870.84 crore (31.03.2023 - ' 3846.40 crore) are secured, ranking pari-passu inter se, by equitable mortgage / hypothecation of the property, plant and equipment of the Company including its land, buildings and any other constructions thereon, plant and machinery, etc. as a first charge and, as a second charge, by hypothecation of the Company's current assets comprising stock of stores, coal, book debts, monies receivable and bank balances.
(b) ' 913.35 crore (31.03.2023 - ' 700.35 crore) are secured, ranking pari-passu inter se, by equitable mortgage / hypothecation of the property, plant and equipment of the Company as a first charge;
(c) ' 150 crore (31.03.2023- ' 350 crore) are secured, ranking pari-passu inter se, by hypothecation of the movable property, plant and equipment and current assets of the Company as a first charge;
(d) ' 200.00 crore (31.03.2023- ' 340.56 crore) are secured, ranking pari-passu inter se, by hypothecation of the movable property, plant and equipment of the Company as a first charge; and
(e) ' NIL (31.03.2023- ' 375 crore) are secured, ranking pari-passu inter se, by hypothecation of the Company's current assets as a first charge and by equitable mortgage / hypothecation of the property, plant and equipment of the Company as a second charge.
NOTE - 27 CURRENT TRADE PAYABLES (Contd..)
' 0.09 crore (31.03.2023- ' 0.08 crore ), Nil (31.03.2023 - Nil), ' 0.90 crore (31.03.2023 - ' 0.75 crore), ' 4.65 crore (31.03.2023 - ' 3.75 crore) and Nil (31.03.2023- Nil) representing interest due on amount outstanding as at the year end, interest paid along with amount of payment made beyond the appointed day, interest due and payable for the period of delay in making payment during the year, amount of interest accrued and remaining unpaid at the year end, amount of further interest remaining due and payable in the succeeding years, respectively due to Micro and Small Enterprises, as defined in the Micro, Small and Medium Enterprises Development Act, 2006 based on information available with the Company.
NOTE -31 CONTINGENT LIABILITIES AND COMMITMENTS
a. Estimated amount of contracts remaining to be executed on capital account and letter of comforts towards borrowing / financing obligations of subsidiaries from banks, not provided for amount to ' 34.68 crore (31.03.2023 : ' 23.87 crore) and ' 1263.87 crore (31.03.2023 : ' 1648.57 crore) respectively.
b. The Ministry of Coal had encashed the bank guarantee of the Company amounting to ' 66.15 crore in April 2018, in terms of its letter dated 25.04.2018, alleging non-compliance with the mining plan for the years 2015-16 and 201617 as per the Coal Mine Development and Production Agreement (CMDPA). Further, in terms of the above letter, the Ministry had directed the Company to top-up the bank guarantee with the aforesaid encashed amount. The Hon'ble High Court of Delhi while disposing the petition filed by the Company against the Ministry's letter dated 25.04.2018, stayed the operation of this letter and further directed the Company to approach the Tribunal. The Company has filed a petition before the Special Tribunal at Godda, Jharkhand challenging the letter dated 25.04.2018 and further seeking refund of the encashed amount. Based on a legal opinion, the Company expects a favourable outcome in the matter, and no provision has been considered necessary.
c. The Company has given bank guarantee of ' 202.80 crore (31.03.2023 : ' 143.95 crore) for procurement of coal, etc. which is outstanding as on the reporting date.
NOTE -31 CONTINGENT LIABILITIES AND COMMITMENTS (Contd..)
d. The Company has ongoing commitment to extend support and provide equity to the subsidiaries, in respect of various projects and otherwise where, in certain cases there are restriction on transfer of investments.
e. i) The Company had received a Show Cause cum demand notice of ' 14.71 crores for Service Tax on Additional
Premium together with other charges being paid for coal mining to Government of India as per the terms of allocation of the Sarisatoli Coal Mine. The aforesaid demand has been confirmed by The Commissioner Central Tax & Central Excise, Howrah Commissionerate. The Company has filed an Appeal against the said Order at Customs, Excise and Service Tax Appellate Tribunal which is pending disposal as on date. Based on legal opinion obtained, the Company expects a favourable outcome in the matter and no provision has been considered necessary in the books of accounts.
ii) The Company had received a Show Cause cum demand notice of ' 16.32 crores for Goods and Services Tax (GST) on Additional Premium together with other charges being paid for coal mining to Government of India as per the terms of allocation of the Sarisatolli Coal Mine. The case is pending before The Additional Commissioner/ Joint Commissioner, CGST Kolkata North Commissionerate. Based on legal opinion obtained, the Company expects a favourable outcome in the matter and no provision has been considered necessary.
(iii) The Company had received order under section 270A of the Income Tax Act for ' 0.96 crore in respect of Assessment Year 2018-19 on certain disallowances made during the course of assessment proceedings and filed necessary appeal. Based on legal opinion obtained, the Company expects a favourable outcome in the matter and no provision has been considered necessary in the books of accounts.
(iv) The Company has received an adjudication order for ' 14.95 crore confirming GST on road restoration charges paid by the Company to municipal authorities. The Company is in process of filing an appeal against the aforesaid Order before the Commissioner Appeal. Based on legal opinion obtained, the Company expects a favourable outcome in the matter and no provision has been considered necessary in the books of accounts.
f. Bharat Coking Coal Limited (BCCL) and Mahanadi Coalfields Limited (MCL) raised demands on the Company amounting to ' 111 crore and ' 12 crore respectively with respect to alleged excess supply of coal during 2015-16 and 2016-17 under respective Fuel Supply Agreements (FSAs) towards levy of premium beyond the notified and settled price. Such levy of premium is not in consonance with the FSAs and accordingly the Company has moved the Hon'ble Calcutta High Court and obtained interim protection against the aforesaid demands. Based on a legal opinion, the Company expects a favourable outcome in the matter, and no provision has been considered necessary.
g. With regard to the Company's power purchase from one of its subsidiaries (provider), West Bengal Electricity Regulatory Commission (WBERC) has issued the tariff order (considering applicable Annual Performance Review (APR) orders for Generation and Transmission Project) for the years 2018-19 to 2024-25, wherein certain underlying matters have been dealt with in deviation from past practices of tariff determination and kept for disposal through future truing up exercise, impact of which is not ascertained. The said provider not being in agreement with the same, has since filed appeal in respect of the above Tariff Order before the Hon'ble Appellate Tribunal for Electricity (APTEL) on the grounds interalia, that the orders have been passed after substantial period of delay, the applicable periods are long over and directions passed are impossible to comply because of significant delay in passing the said orders. However, since the Tariff Order for the financial year 2022-23 and 2023-24 were issued during applicable financial years, the said provider has given effect to the same from 2022-23 onwards with application of principles in terms of applicable Regulations. With respect to APR orders of the said provider from WBERC for the years 2014-15 to 2016-17 in respect of Generation Project and for the years 2014-15 to 2019-20 in respect of Transmission Project including refund orders for the aforesaid APR Orders, the said provider not being in agreement with the same, has filed appeals in the matter before the Hon'ble APTEL in respect of APR Orders and Review Petitions before the Hon'ble WBERC in respect of the refund orders. The said provider has since received the APR Order for 2017-18 for Generation project and the provider is in the process of filling necessary appeal thereagainst. Based on legal opinion obtained, the provider is confident of the matter being adjudicated in its favour. Accordingly, necessary adjustment, if any, will be made on the matter reaching finality.
h. Commitments relating to leasing arrangement , refer note 50.
NOTE - 35 EMPLOYEE BENEFITS EXPENSE (Contd..)
(i) Defined contribution plans
The Company makes contributions for provident fund and family pension schemes (including for superannuation) towards retirement benefit plans for eligible employees. Under the said plan, the Company is required to contribute a specified percentage of the employees' salaries to fund the benefits. The fund has the form of trust and is governed by the Board of Trustees. During the year, based on applicable rates, the Company has contributed and charged ' 63.44 crore (previous year : ' 65.96 crore) on this count in the Statement of Profit and Loss .
The Company also sponsors the Gratuity plan, which is governed by the Payment of Gratuity Act, 1972. The Company makes annual contribution to independent trust, who in turn, invests in the Employees Group Gratuity Scheme of eligible funds for qualifying employees.
Liabilities at the year end for gratuity, leave encashment and other retiral benefits including post-retirement medical benefits have been determined on the basis of actuarial valuation carried out by an independent actuary.
viii) Risk exposure
The Plans in India typically expose the Company to some risks, the most significant of which are detailed below: Discount Rate risk: Decrease in discount rate will increase the value of the liability. However, this will partially offset by the increase in the value of plan assets.
Demographic Risk: In the valuation of the liability certain demographic (mortality and attrition rates) assumptions are made. The Company is exposed to this risk to the extent of actual experience eventually being worse compared to the assumptions thereby causing an increase in the scheme cost.
Future Salary Increase Risk: In case of gratuity & leave the scheme cost is sensitive to the assumed future salary escalation rates for all last drawn salary linked defined benefit Schemes. If actual future salary increases are higher than the future salary increases assumed in the valuation estimation, then the value of the liability will be higher than that estimated. This will also enhance the scheme cost. But PRMB & pension are not dependant on future salary levels. Regulatory Risk: New Act/Regulations may come up in future which could increase the liability significantly in case of Leave obligation, PRMB & Pension. Gratuity Benefit must comply with the requirements of the Payment of Gratuity Act, 1972 (as amended up-to-date). Also in case of interest rate guarantee Exempt Provident Fund must comply with the requirements of the Employees Provident Funds and Miscellaneous Provisions Act 1952 as amended up-to-date.
NOTE-39 REGULATORY INCOME (Contd..)
The said income/(expenses) for the previous year included adjustment of Advance against Depreciation amounting to ' (11.36) crore which has been discontinued in terms of applicable Regulations effective from 01 April, 2023. The cumulative sum as described above have been shown as Regulatory Income/(Expenses) with corresponding sums, reflected in Balance Sheet as Regulatory Deferral Account Balances (refer Note 18).
During the current financial year, the Company has received orders from WBERC in respect of its Annual Performance Review (APR) for the year ended 31st March 2019. The impact of aforesaid order has been considered in these financial statements, including estimated impact for subsequent periods till date, under Regulatory income/(expense) for the year ended 31st March 2024.
Regulatory deferral account debit balance comprise the effect of (a) Deferred tax, (b) cost of fuel and purchase of power and other adjustments having bearing on revenue account amounting to ' 3,207.94 crore (31.03.2023: ' 3,334.61 crore) and ' 2,564.04 crore (31.03.2023: ' 2,510.23 crore) respectively and that relating to credit balance as on 31.03.2023, comprise of advance against depreciation amounting to ' 1,569.21 crore. Upon discontinuation of AAD as per the revised Regulations with effect from 1st April, 2023, the same has been adjusted with Regulatory Deferral Account debit balance during the current year. These balances have been recognised with discounting methodology, assuming recovery over a period of time using such rate in accordance with regulations and application of prudence.
Accordingly, the accurate quantification and disposal of the matters with regard to Regulatory Deferral Account balances, shall be given effect to, from time to time, on receipt of necessary direction from the appropriate authorities, including those attributable to the mining of coal from Sarisatolli mine which commenced operations from 10th April 2015.
c) The following methods and assumptions were used to estimate the fair values
i. The fair value of preference share is determined on the basis of discounted cash flow wherein future cash flows are based on the terms of preference share discounted at rate that reflects market rate.
ii. The carrying amounts of trade receivables, trade payables, receivable towards claims and services rendered, receivable from related parties, other bank balances, interest accrued payable/receivable, other receivables/ payables, cash and cash equivalents are considered to be the same as their fair values, due to their short term nature.
iii. Loans, non-current borrowings, lease receivable/payable and security deposits are based on amortised cost using effective interest rate method.
iv. Fair Value of financial Intruments is determined on the basis of discounted cash flow analysis, considering the nature, risk profile and other qualitative factors.The carrying amounts are a reasonable approximation of the fair value.
NOTE-41 FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT
The Company's operations of generation and distribution of electricity are governed by the provisions of the Electricity Act 2003 and Regulations framed thereunder by the West Bengal Electricity Regulatory Commission and accordingly the Company, being a licensee under the said statute, is subject to regulatory provisions/ guidelines and issues evolving therefrom, having a bearing on the Company's liquidity, earning, expenditure and profitability, based on efficiency parameters provided therein including timing of disposal of applications / regulatory matters by the authority.
The Company being the sole provider of electricity in the licenced area has been managing the operations keeping in view its profitability and liquidity in terms of above regulations. In order to manage credit risk arising from sale of electricity, multipronged approach is followed like maintenance of security deposit, precipitation of action against defaulting consumers, obtaining support of the administrative authority. Credit risk towards Investment of surplus funds is managed by obtaining support of credit rating and appraisal by external agencies and lending bodies. The Company extends financial support to its subsidiaries including that of letter of comforts etc. to their lenders.
NOTE-41 FINANCIAL RISK MANAGEMENT AND CAPITAL MANAGEMENT (Contd..)
The Company manages its liquidity risk on financial liabilities by maintaining healthy working capital and liquid fund position keeping in view the maturity profile of its borrowings and other liabilities as disclosed in the respective notes.
The Company's market risk relating to variation of foreign currency, interest rate and commodity price is mitigated through relevant regulations and availability of bulk commodity namely coal generally sourced from own captive mine, domestic long term linkage and Special Forward E-Auction conducted by Coal India Limited and/or its subsidiaries.
While managing the capital, the Company ensures to take adequate precaution for providing returns to the shareholders and benefit for other stakeholders, including protecting and strengthening the balance sheet. Availability of capital and liquidity is also managed, in consonance with the applicable regulatory provisions.
Liability in respect of the security deposit collected by the Company, in terms of applicable regulations of the WBERC, has been classified as non - current, given the nature of its business in the license area, excepting to the extent of the sum refundable / payable within a year, based on experience.
Interest on Consumers' Security Deposits (being in the nature of trade deposits) is included in Other Expenses, as per consistent practice followed by the Company. This is paid to the consumers at the applicable rates in terms of the Regulations framed, under the Electricity Act, 2003,
NOTE- 46
Miscellaneous Expenditure in Note 38, includes a Contribution of ' 60 crore to Prudent Electoral Trust in accordance with Sec. 182 of the Companies Act, 2013 and provision for demand of ' 103.30 crore received from lessor in respect of certain leasehold properties, which is pending final settlement.
The Company is primarily engaged in generation and distribution of electricity which is the only reportable business segment in line with the segment wise information which is being presented to the Chief Operating Decision Maker (CODM). There are no reportable geographical segments, since all business is within India.
The Company is also running a single retail store in state of Gujarat which is not significant for the CODM and hence not considered as reportable segment.
NOTE- 49
Part A of Schedule II to the Companies Act. 2013 (the Act), inter alia, provides that depreciable amount of an asset is the cost of an asset or other amount substituted for cost. Part B of the said Schedule deals with the useful life or residual value of an asset as notified for accounting purpose by a Regulatory Authority constituted under an act of Parliament or by the Central Government for calculating depreciation to be provided for such asset irrespective of the requirement of Schedule II. In terms of applicable Regulations under the Electricity Act, 2003, depreciation on tangible assets other than freehold land is provided on straight line method on a pro-rata basis at the rates specified therein, the basis of which is considered by the West Bengal Electricity Regulatory Commission (Commission) in determining the Company's tariff for the year, which is also required to be used for accounting purpose as specified in the said Regulations. Based on legal opinions and accounting interpretations obtained, the Company continues with the consistently followed practice of recouping from the retained earnings an additional charge of depreciation relatable to the increase in value of assets arising from fair valuation, which for the current year amounts to ' 249.18 crore (31.03.2023 : ' 214.08 crore) and corresponding withdrawal of ' 0.07 crore ( 31.03.2023 : ' 0.50 crore ) consequent to sale / disposal of such assets.
Consequent to change in WBERC regulations relating to Advance Against Depreciation (AAD), the net depreciation charge for the year has been computed after necessary adjustments of AAD computed in terms of the Tariff regulations, as amended from time to time. Consequently, the depreciation amount to be claimed for the year for tariff purposes, is reduced by ' 0.02 crore (previous year: Nil). Also refer Note 2A(c).
NOTE- 53 OTHER STATUTORY INFORMATION (Contd..)
on a daily basis. The Company has used various accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. However, audit trail feature is not enabled for direct changes to data when using certain access rights for all applications, due to technical reasons. Further no instance of audit trail feature being tampered with, was noted in respect of those accounting software.
(x) The quarterly returns or statements filed by the Company with the banks or financial institutions are in agreement with the books of accounts.
NOTE- 54 DISCLOSURE UNDER SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015.
The Company has given loans and advances from time to time to its two wholly owned subsidiaries, Kota Electricity Distribution Limited (KEDL) and Bharatpur Electricity Services Limited (BESL) amounting to ' 82.30 crore and ' 6.30 crore respectively. Out of the said loans and advances, a sum of ' 21 Crore was converted to equity by KEDL, while BESL has converted the entire amount of ' 6.30 crore into equity during the year. A sum of ' 73 crore was refunded to the Company by KEDL thereby leaving an outstanding balance as on March 31, 2024 of ' 26.30 crore (31.03.2023: ' 38 crore for KEDL).
NOTE- 56
The above financial statements were approved by the Board of Directors at their meeting held on 23rd May, 2024.
For S.R. BATLIBOI & Co. LLP For and on behalf of Board of Directors
Chartered Accountants
Firm Registration Number -301003E/E300005
Chairman Dr. Sanjiv Goenka DIN: 00074796 Navin Agrawal Managing Director - Generation Rabi Chowdhury DIN: 06601588
Partner Managing Director - Distribution Debasish Banerjee DIN: 06443204
Membership No.: 056102 Executive Director & CFO Rajarshi Banerjee
Kolkata, 23rd May, 2024 Company Secretary Jagdish Patra
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