2.2.2 Expenditure attributable to Construction (EAC) includes ' 1270.60 Crore (Previous year ' 1029.14 Crore) towards borrowing cost capitalised during the year. (Also refer Note-32)
2.2.3 Capital Work in Progress (CWIP) includes a cumulative expenditure of ' 1293.90 Crore (Previous Year ' 1234.99 Crore) on projects under Survey & Investigation stage. Out of this, a sum of ' 964.21 Crore
(Previous Year ' 962.02 Crore) has been provided for in respect of Bursar ' 226.94 Crore (Previous Year ' 226.80 Crore), Kotli Bhel Projects ' 374.12 Crore (Previous Year ' 372.48 Crore), Tawang Basin Projects ' 237.15 Crore (Previous Year ' 237.15 Crore), Dhauliganga Intermediate Project & Goriganga Project ' 82.28 Crore (Previous Year ' 82.07 Crore) and Subansiri Upper Projects ' 43.72 Crore (Previous Year ' 43.52 Crore) where uncertainties are attached. However, remaining amount of ' 329.69 Crore (Previous Year ' 272.97 Crore) pertaining to other projects having reasonable certainty of getting clearance, is carried forward under Capital Work in Progress (CWIP). (Also Refer Note 34(24), 34(25), 34(26) and 34(27)).
2.2.4 Underground Works amounting to ' 3275.45 Crore (Previous Year ' 2838.40 Crore) created on "Land -Right to Use" classified under "Right of Use" Assets, are included under respective heads of Capital Work in Progress (CWIP).
2.2.5 Refer Note no. 34(9) of Standalone Financial Statements for information on non-current assets mortgaged/ hypothecated with banks as security against borrowings.
2.2.6 Refer Note no. 34(18) of Standalone Financial Statements for information regarding Impairment of Assets.
2.2.7 Expenditure Attributable to Construction (EAC) includes '202.93 Crore (Previous Year ' 158.50 Crore) on account of expenses on downstream protection work in respect of Subansiri Lower Project, against which cumulative grant amounting to ' 78.05 Crore (up to Previous Year ' 74.07 Crore) has been received from Government of India. The Grant so received has been recognised under 'Other non current liabilities' (Note-19.1) and shall be amortised on a systematic basis over the useful life of the project in the Statement of Profit and Loss after commissioning of the project.
2.2.2 Expenditure attributable to Construction (EAC) includes ' 1029.14 Crore (Previous year ' 996.87 Crore) towards borrowing cost capitalised during the year. (Also Refer Note-32)
2.2.3 Capital Work in Progress (CWIP) includes a cumulative expenditure of ' 1234.99 Crore (Previous Year ' 1192.72 Crore) on projects under Survey & Investigation stage. Out of this, a sum of ' 962.02 Crore (Previous Year ' 954.58 Crore) has been provided for in respect of Bursar ' 226.80 Crore (Previous Year ' 226.78 Crore), Kotli Bhel Projects ' 372.48 Crore (Previous Year ' 368.72 Crore), Tawang Basin Projects ' 237.15 Crore (Previous Year ' 233.68 Crore), Dhauliganga Intermediate Project & Goriganga Project ' 82.07 Crore (Previous Year ' 81.88 Crore) and Subansiri Upper Projects ' 43.52 Crore (Previous Year ' 43.52 Crore) where uncertainties are attached. However, remaining amount of ' 272.97 Crore (Previous Year ' 238.14 Crore) pertaining to other projects having reasonable certainty of getting clearance, is carried forward under Capital Work in Progress (CWIP). (Also Refer Note 34(24), 34(25), 34(26) and 34(27)).
2.2.4 Underground Works amounting to ' 2838.40 Crore (Previous Year ' 2317.10 Crore) created on "Land -Right to Use" classified under Right of Use Assets, are included under respective heads of Capital Work in Progress (CWIP).
2.2.5 Refer Note no. 34(9) of Standalone Financial Statements for information of non-current assets mortgaged/ hypothecated with banks as security for related borrowings.
2.2.6 Refer Note no. 34(18) of Standalone Financial Statements for information regarding Impairment of Assets.
2.2.7 Expenditure attributable to construction (EAC) includes ' 158.50 Crore on account of expenses on downstream protection work in respect of Subansiri Lower Project, against which grant amounting to ' 74.07 Crore has been received from Government of India. The Grant so received has been recognised under 'Other non current liabilities' (Note-19.1) and shall be amortised on a systematic basis over the useful life of the project in the Statement of Profit and Loss after commissioning of the project.
3.1.1 A The Board of Directors of the Company in its meeting held on 6th January, 2023 accorded in-principle
approval for withdrawal from PTC India Ltd. (PTC). The Company is in discussion with other promoters to finalize the modalities of exit from PTC. Pending final decision in the matter, the investment in PTC has been continued to be classified as non current financial asset.
3.1.2 Investment in Government Securities (Non Current and Current) at cost of ' 212.80 Crore (Previous Year ' 174.31 Crore) is earmarked as security being 15 percent of total redemption value of Bonds maturing during the Financial Year 2023-24.
3.1.3 Particulars of Investments as required in terms of Section 186 (4) of the Companies Act, 2013 have been disclosed under Note 3.1 above.
3.1.4 Market Value of quoted debt instruments in respect of which quotations are not available has been considered based on the value published by Fixed Income Money Market and Derivatives Association of India (FIMMDA).
3.1.5 A Supplementary Promoters Agreement in respect of Chenab Valley Power Projects Private Limited has been signed between NHPC & JKSPDC on 21.11.2022, consequent to which NHPC has gained control of CVPPPL. Accordingly, investment in CVPPPL has been disclosed under investment in Subsidiary.
3.1.6 Impairment in the value of Investment : During the year the company has made impairment provision of ' 105.56 Crore ( Previous Year: ' NIL) in respect of investment in Loktak Downstream Hydroelectric Corporation Limited (LDHCL) and ' 16.33 Crore ( Previous Year ' 14.07 Crore) in respect of investment in National High Power Test Laboratory (P) Limited (NHPTL) respectively. Movement in impairment provision in respect of investment in subsidiary and joint venture are as under:
7.2.6 Due to short-term nature of current receivables, their carrying amount is assumed to be the same as their fair value.
7.2.7 Trade Receivables amounting to ' 948.04 (Previous Year ' 1323.90 Crore ) liquidated by way of discounting of bills from various banks have not been derecognised in view of terms of the bill discounting agreement as per which the Company guarantees to compensate the banks for credit losses that may occur in case of default by the respective beneficiaries. Refer Note 20.1.1 with regard to liability recognised in respect of discounted bills.
7.2.8 Refer Note 34(13) of the Standalone Financial Statements with regard to confirmation of balances.
7.2.9 Central Electricity Regulatory Commission in its order dated 05.02.2020 in petition no. 281/GT/2018 allowed NAPAF of 90% for the period 2010-14 against 80% as allowed in its earlier order dated 06.09.2010 in petition No. 57/2010 with the stipulation that recovery of Incentive shall be allowed beyond 90% instead of beyond 80%. Since the said stipulation is ultra vires to the Tariff Regulations 2009-14, appeal has been filed with the Hon'ble Appellate Tribunal for Electricity (APTEL) against the review order dated 05.02.2020. Pending decision of APTEL, unbilled revenue booked in FY 2021-2022 against the incentive in respect of NAPAF beyond 80%
_and upto 90%, has not been reversed._
(A) Detail of Repayment: Loan amounting to ' 6.00 crore and ' 12.40 crore were released to NHPTL on 11.05.2018 and 31.03.2021 respectively.The loan is interest bearing at the rate of 10% per annum, compounded anually and is repayable in 20 equal half yearly instalments starting from 31.10.2022. Interest is payble half yearly on 30th April and 31st October of every financial year starting from 30.04.2021. Above outstanding amount includes current maturity of loan ' 2.76 Crore and interest accrued ' 0.42 Crore as on 31.03.2023.
(B) Detail of Repayment: Short Term Loan of ' 60.00 Crore was granted on 27.03.2023 at the rate of 8.32% per annum. Loan is repayable within one year from the date of release. The interest shalll be paid on quarterly basis on 1st working day of next quarter. Outstanding amount includes interest accrued ' 0.06 Crore up to 31st March 2023.
(II) Bond Redemption Reserve : As per the Companies (Share Capital and Debentures) Rules, 2014, the Company was required to create a Bond Redemption Reserve out of available profits for the purpose of redemption of bonds. The Companies (Share Capital and Debentures) Amendment Rules, 2019 exempts the Company from creation of Bond Redemption Reserve. The Amendment Rules, 2019 further stipulate that the amount credited to Debenture Redemption Reserve shall not be utilized by the company except for the purpose of redemption of debentures. Accordingly, though the Bond Redemption Reserve created till 31.03.2019 has been carried forward and further utilised for bonds redeemed during the current year, no further accrual to the reserve has been made.
(III) General Reserve : The general reserve is used from time to time to transfer profits from retained earnings for appropriation purposes, as the same is created by transfer from one component of equity to another.The same will be utilised as per the provisions of the Companies Act, 2013
(iv) Surplus/ Retalned Earnlngs : Surplus/ Retained earnings generally represent the undistributed profit/ amount of accumulated earnings of the company and includes remeasurement gain/ losses on defined benefit obligations.
(v) Fair value through Other Comprehensive Income (FVTOCI)-Debt Instruments: The Company has elected to recognise changes in the fair value of certain investments in debt securities in other comprehensive income. This reserve represents the cumulative gains and losses arising on the revaluation of debt instruments measured at fair value through other comprehensive income. The Company transfers amounts from this reserve to retained earnings when the relevant debt securities are disposed off or on maturity of these instruments.
(vi) Fair value through Other Comprehensive Income (FVTOCI)-Equity Instruments: The Company has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. This reserve represents the cumulative gains and losses arising on the revaluation of equity instruments measured at fair value through other comprehensive income. The Company transfers amounts from this reserve directly to retained earnings when the relevant equity securities are disposed off.
16.1.2 Term Loan-From Government of India (Subordinate Debts) is net of fair valuation since these loans carry interest rate which is lower than the prevailing market rate. Total Subordinate Debts outstanding as on 31.03.2023 is ' 4737.18 Crore (Previous Year ' 4760.29 Crore). This includes current maturity amounting to ' 23.11 Crore (Previous Year ' 23.11 Crore).
16.1.3.B Particulars of security
1. Secured by pari-passu charge by way of Equitable mortgage/hypothecation against Immovable/ Moveable assets (except for Book Debts and Stores) of Company's Uri-I Power Station situated in the union territory of Jammu & Kashmir.
2. Secured by pari-passu charge by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company's Parbati-II HE Project situated in the state of Himachal Pradesh.
3. Secured by pari-passu charge by way of equitable mortgage/hypothecation against immovable/movable assets (except for Book Debts and Stores) of Company's Teesta Low Dam-III Power Station situated in the state of West Bengal.
4. Secured by pari-passu charge by way of equitable mortgage and charge over all the immoveable and moveable assets (except for Book Debts and Stores) of the Company's Dhauliganga Power Station situated in the state of Uttrakhand.
5. Secured by a first charge on pari-passu basis by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company's Chamera-III Power Station situated in the state of Himachal Pradesh.
6. Secured by pari-passu charge by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company's Parbati -III Power Station situated in the state of Himachal Pradesh.
7. Secured by pari-passu charge by way of equitable mortgage/hypothecation against immovable/movable assets (except for Book Debts and Stores) of Company's Teesta-V Power Station situated in the state of Sikkim.
8. Security creation by pari-passu charge by way of equitable mortgage and hypothecation against the immovable and moveable assets (except for Book Debts and Stores) of the Company's Parbati -II Power Station situated in the state of Himachal Pradesh and Secured by pari-passu charge by way of hypothecation against the moveable assets (except for Book Debts and Stores) of the Company's Dulhasti Power Station situated in the union territory of Jammu & Kashmir.
9. Security creation by pari-passu charge by way of mortgage and hypothecation against the immovable and movable assets (except for Book Debts and Stores) of the Company's Parbati-II Project situated in the state of Himachal Pradesh and secured by pari-passu charge by way of hypothecation against the movable assets (except for book debts and stores) of the company's Kishanganga Power Station situated in the union territory of J & K.
10. Security creation by pari-passu charge, by way of mortgage/hypothecation against the movable and immovable assets (except for book debts and stores) of the Company's Parabati II Project, Parbati III Power Station, Chamera II Power Station situated in the state of Himachal Pradesh and Dhauliganga Power Station situated in the state of Uttrakhand.
11. Security creation by pari-passu charge by way of mortgage/hypothecation against the immovable and movable assets (except for Book Debts and Stores) of the Company's Chamera- II Project situated in the state of Himachal Pradesh .
12. Security creation by pari-passu charge by way of hypothecation against the movable assets (except for Book Debts and Stores) of the Company's Subansiri Lower Project situated in the state of Assam and Arunachal Pradesh.
13. Security creation by pari-passu charge by way of hypothecation against the movable assets (except for Book Debts and Stores) of the Company's TLDP-IV Power Station situated in the state of West Bengal.
14. Security creation by pari-passu charge by way of hypothecation against the movable assets (except for Book Debts and Stores) of the Company's URI-II Power Station situated in the union territory of Jammu & Kashmir.
15. Security creation by First pari-passu charge by way of hypothecation against the Fixed assets (Present and Future) of the Company.
16. Security creation by pari-passu charge by way of hypothecation against the immovable structures of the Company's Subansiri Lower Project situated in the state of Assam and Arunachal Pradesh such as buildings, Dam, Power Tunnel, Tail Race Tunnel and other structures /erections/constructed/ to be constructed.
16.3.1 For meeting funding requirement of Government of India for the Scheme of Power System Development Fund (PSDF) during the financial year 2018-19, the company has raised an amount of ' 2017.20 Crore through private placement of Unsecured Non-cumulative Non-convertible Redeemable, taxable 'Government of India Fully Serviced Bonds- Series- I, with face value of ' 10,00,000/- each , in the nature of debentures (Bonds). As per Ministry of Power (MoP) letter dated 12.03.2019 read with letter of Ministry of Finance (MoF) dated 21.01.2019 & 11.03.2019, the repayment of principal and interest of the above bonds shall be made by Government of India by making suitable budget provisions in the demand of Ministry of Power as per estimated liabilities. Accordingly, the amount of such bonds along with interest payable to Bond Holders is appearing as financial liability. Further, the amount recoverable by the company from Government of India has been shown as " Amount recoverable on Account of Bonds fully Serviced by Government of India" under Non-Current Financial Assets-Others under Note No-3.4.
18.3 Pursuant to the provisions of Section 115BAA of the Income Tax Act 1961 announced by Tax Laws (amended) Ordinance 2019 and promulgated as Taxation Laws (amendment) Act 2019 enacted on 11th December 2019 applicable with effect from 1st April 2019, Domestic Companies have options to pay Income Tax at concessional rates by foregoing certain exemptions/ deductions (the new tax regime) as specified in the said section. The Company has Minimum Alternate Tax (MAT) credit of ' 2095.64 Crore (including unrecognised amount of MAT Credit of ' 528.65 Crore) lying unutilized as on 31st March, 2023 [Previous year ' 2424.58 Crore (including unrecognised amount of MAT Credit of ' 945.96 Crore)] and is availing tax deductions in respect of its profit from generation of power from certain power stations. In view of the same, it has been decided to continue with existing tax structure for Current and Deferred Tax recognition. Necessary decision for exercising the option under section 115BAA will be taken once tax deductions are not available and MAT credit is substantially exhausted. (Refer Note 30.1.5)
Risk management framework
The Company's activities make it susceptible to various risks. The Company has taken adequate measures to address such concerns by developing adequate systems and practices. Company has a well-defined risk management Policy to provide overall framework for risk management in the Company. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.
The Company is exposed to the following risks from its use of financial instruments:
i) Credit risk
Credit risk is the risk that a counter party 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 (primarily trade receivables/leased assets) and from its fi nancing activities including deposits with banks and fi nancial institutions.
ii) Liquidity risk.
Liquidity risk is the risk that the Company may not be able to meet its present and future cash and collateral obligations without incurring unacceptable losses.
iii) Market risk
Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market prices. Market prices comprise of three types of risk: currency rate risk, interest rate risk and other price risks, such as equity and debt price risk. Financial instruments affected by market risk include loans and borrowings, deposits and investments. Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The company operates in a regulated environment. Tariff of the company is fixed by the Central Electricity Regulatory Commission (CERC) through Annual Fixed Charges (AFC) comprising of the following five components: 1. Return on Equity (RoE), 2. Depreciation, 3. Interest on Loans, 4. Operation & Maintenance Expenses and 5. Interest on Working Capital Loans. In addition to the above, Foreign Exchange rate variations and Taxes are
also recoverable from Beneficiaries in terms of the Tariff Regulations. Hence variation in interest rate, currency exchange rate variations and other price risk variations are recoverable from tariff and do not impact the profitability of the company. Further, the company also hedges its medium term foreign currency borrowings by way of interest rate hedge and currency swaps.
(B) Credit Risk
The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and other financial instruments.
Trade Receivables, unbilled revenue and lease receivables
The Company extends credit to customers in normal course of business. The Company monitors the payment track record of the customers. Outstanding receivables are regularly monitored. In the case of the Company, the concentration of risk with respect to trade receivables is low, as its customers are mainly state government companies/DISCOMS and operate in largely independent markets. Unbilled revenue primarily relates to the Company's right to consideration for work completed but not billed at the reporting date and have substantially the same risk characteristics as trade receivables for the same type of contracts.
Lease receivables of the company are with regard to Power Purchase Agreements classified as finance lease as per Ind AS 116- 'Leases' as referred to in Note No. 34. The power purchase agreements are for sale of power to single beneficiary and recoverability of interest income and principal on leased assets i.e. PPE of the power stations are assessed on the same basis as applied for trade receivables.
Financial assets at amortised cost :-
Employee Loans: The Company has given loans to employees at concessional rates as per the Company's Policy which have been measured at amortised cost at Balance Sheet date. The recovery of the loan is on fixed instalment basis from the monthly salary of the employees. Long term loans for acquisition of assets are secured by way of mortgage/hypothecation of the assets for which such loans are given. Management has assessed the past data and does not envisage any probability of default on these loans.
Loans to Government of Arunanchal Pradesh : The Company has given loan to Government of Arunachal Pradesh at 9% rate of interest (compounded annually) as per the terms and conditions of Memorandum of understanding signed between the Company and Government of Arunachal Pradesh for construction of hydroelectric projects in the state. The loan has been measured at amortised cost and is recoverable from the share of free power of the state government from the first hydroelectric project to be commissioned in the state. Management does not envisage any probability of default on the loan.
Financial instruments and cash deposits :-
The Company considers factors such as track record, size of the bank, market reputation and service standards to select banks with which balances and deposits are maintained. Generally, the balances are maintained with banks with which the Company has also availed borrowings. The Company invests surplus cash in short term deposits with scheduled banks. The company has balances and deposits with banks which are well diversified across private and public sector banks with limited exposure to any single bank.
Corporate Guarantee issued by the Company: -
The Company has issued following irrevocable and unconditional Corporate Guarantees to Subsidiary Companies of NHPC Limited for a Guarantee Fee of 1.20% plus applicable GST. Exposure of the Company from the Guarantee shall be the principal outstanding under the said credit facility including any interest, commission, charges etc. payable to the Bank by subsidiaries.
(a) The Company has issued Corporate Guarantee in favour of HDFC Bank Limited for Term Loan Facility for Bundelkhand Saur Urja Ltd (BSUL) amounting to ' 213.25 Crore. The outstanding balance of said term loan is ' 134.01 Crore including interest as on 31.03.2023.
(b) The Company has issued Corporate Guarantee in favour of J&K Bank Limited and Bank of Baroda limited for Term Loan Facility for Lanco Teesta Hydro Power Limited (LTHPL) amounting to ' 200 Crore and ' 350 crores respectively. The outstanding balance of said term loan is ' 201.36 crore and ' 352.22 crore respectively (including interest) as on 31.03.2023.
(c) The Company has issued Corporate Guarantee in favour of J&K Bank Limited for Term Loan Facility for Jal Power Corporation Limited amounting to ' 313.00 Crore. The outstanding balance of said term loan is ' 280.00 Crore as on 31.03.2023.
(ii) Provision for expected credit losses
(a) Financial assets for which loss allowance is measured using 12 month expected credit losses
The Company assesses outstanding receivables on an ongoing basis considering changes in payment behaviour and provides for expected credit loss on case-to-case basis.
(b) Financial assets for which loss allowance is measured using life time expected credit losses
A default in recovery of fi nancial assets occurs when in there is no signifi cant possibility of recovery of receivables after considering all available options for recovery as per assessment of the management. As the power stations and beneficiaries of the company are spread over various states of India, geographically there is no concentration of credit risk.
The Company primarily sells electricity to bulk customers comprising mainly of 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) signed among the Govt. of India, RBI and the individual State Governments subsequent to the issuance of the One Time Settlement Scheme of SEBs dues during 2001-02 by the GOI, which was valid till October 2016. Government of India has approved the extension of these TPAs for another period of 10 years and the same has been signed by most of the States. As per the provisions of the TPA and Power Purchase Agreements (PPA), the customers are required to open LCs 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 Central Plan Assistance of the State and paid to the concerned CPSU. Also, Electricity (Late Payment Surcharge & Related Matters) Rules, 2022 provides for regulation of power by the Company in a gradual manner in case of non-payment of dues beyond 30 days of the due date, i.e. when payment is not made by any beneficiary even after 75 days (being due period of 45 days plus 30 days) from the date of presentation of the bill.
CERC Tariff Regulations 2019-24 allow the Company to raise bills on beneficiaries for late-payment surcharge,
which adequately compensates the Company for time value of money due to delay in payment. Further, the fact that beneficiaries are primarily State Governments/ State Discoms and considering the historical credit loss experience for trade receivables, the Company does not envisage either impairment in the value of receivables from beneficiaries or loss due to time value of money due to delay in realization of trade receivables. However, the Company assesses outstanding trade receivables on an ongoing basis considering changes in operating results and payment behaviour and provides for expected credit loss on case-to-case basis. As at the reporting date company does not envisage any default risk on account of non-realization of trade receivables.
(C) Liquidity Risk
Prudent 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. i) The Company's objective is to maintain optimum levels of liquidity at all times to meet its cash and collateral requirements. The Company relies on a mix of borrowings and excess operating cash flows to meet its need for funds. The current committed lines of credit and internal accruals are sufficient to meet its short to medium term expansion needs. The Company monitors rolling forecasts of its liquidity requirements to ensure that it has sufficient cash to meet capital expenditure and operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the borrowing limits or covenants (where applicable) are not breached on any of its borrowing facilities.
(D) Market Risk:
The sensitivity analysis excludes the impact of movements in market variables on the carrying value of post-employment benefi t obligation provisions and on the non-fi nancial assets and liabilities. The sensitivity of the relevant item of the Statement of Profit and Loss is the effect of the assumed changes in the respective market risks. The Company's activities expose it to a variety of financial risks, including the effects of changes in interest rates.
(i) Interest rate risk and sensitivity
The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long term debt obligations with fl oating interest rates. Company's Policy is to maintain most of its borrowings at fixed rate. Company's fixed rate borrowings are carried at amortised cost and are not subject to interest rate risk. Further the company refinances these debts as and when favourable terms are available. The company is also compensated for variability in f oating rate through recovery by way of tariff adjustments under CERC tariff regulations.
Interest Rate Sensitivity Analysis
Profi t or loss is sensitive to higher/lower interest expense from borrowings as a result of change in interest rates. The majority of the borrowings of the company are at fixed interest rate. In case of f oating rate borrowings there is no impact on Statement of Profit and Loss of the company due to increase/decrese in interest rates, as the same is recoverable from beneficiaries through tariff .
(ii) Interest Rate Benchmark reform rate:
During the Previous year, the Company has transitioned the outstanding Foreign Currency (JPY) Loan amounting to ' 688.75 Crore repayable in one instalment bullet on 25.07.2024 from foating rate of 6 month (LIBOR 0.75 % ) to Compounded Reference Rate (i.e. TONA CAS) 0.75%.
Contractual terms of the Company's bank borrowings stands amended as a direct consequence of the change in interest rate benchmark reform and the new basis for determining the contractual cash f ows is economically equivalent to the basis immediately preceding the change.
The Company has opted for the practical expedient in Ind AS 109 i.e. Changes to cash fow fows that are directly required by the reform, to be treated as changes to a foating interest rate, equivalent to a movement in a market rate of interest.
The total outstanding amount of exposure that is directly affected by the Interest rate benchmark reform (IBOR) is ' 688.75 Crore. Further, the total amount of exposure on account of principal and Interest is hedged by derivative instruments.
Accordingly, there is no material impact on the Statement of Profi t and Loss of the Company due to interest rate benchmark reforms.
(ii) Price Risk:
(a) Exposure
The company's exposure to price risk arises from investment in equity shares and debt instruments classified in the financial statements as Fair Value Through OCI. Company's investment in equity shares are listed in recognised stock exchange and are publicly traded in the stock exchanges. Company's investment in debt instruments comprise quoted Government Securities and Public Sector Bonds and are publicly traded in the market. The investment has been classified under current/ non-current investment in Balance Sheet.
(b) Sensitivity Analysis
There is no impact of foreign currency fluctuations on the profit of the company as these are either adjusted to the carrying cost of respective fixed asset/Capital Work-in-Progress or recovered through tariff as per CERC Tariff Regulation. Accordingly, sensitivity analysis for currency risk is not disclosed.
(3) Capital Management
(a) Capital Risk Management
The primary objective of the Company's capital management is to maximize the shareholder value. CERC Tariff Regulations prescribe Debt : Equity ratio of 70:30 for the purpose of fixation of tariff of Power Projects. Accordingly, the company manages its capital structure to maintain the normative capital structure prescribed by the CERC.
The Company monitors capital using Debt : Equity ratio, which is total debt divided by total capital. The Debt : Equity ratio are as follows:
1. Disclosures relating to Contingent Liabilities:
Contingent Liabilities to the extent not provided for -
a) Claims against the Company not acknowledged as debts in respect of:
(i) Capital works
Contractors have lodged claims aggregating to ' 9971.13 Crore (Previous year ' 10240.95 Crore) against the Company on account of rate and quantity deviation, cost relating to extension of time, idling charges due to stoppage of work/delays in handing over the site etc. These claims are being contested by the Company as being not admissible in terms of provisions of the respective contracts or are lying at arbitration tribunal/other forums/under examination with the Company. These include ' 6393.01 Crore (Previous year ' 6040.86 Crore) towards arbitration awards including updated interest thereon, against the Company, which have been challenged/decided to be challenged in the Court of Law.
Management has assessed the above claims and recognized a provision of ' 1116.93 Crore (Previous year ' 418.63 Crore) based on probability of outflow of resources embodying economic benefits and estimated ' 8556.95 Crore (Previous year ' 9546.17 Crore) as the amount of contingent liability i.e. amounts for which Company may be held contingently liable. In respect of such estimated contingent claims either the outflow of resources embodying economic benefits is not probable or a reliable estimate of the amount required for settling the obligation cannot be made. In respect of the rest of the claims/obligations, possibility of any outflow in settlement is considered remote.
(ii) Land Compensation cases
In respect of land acquired for the projects, some of the erstwhile land owners have filed claims for higher compensation amounting to ' 241.19 Crore (Previous year ' 260.87 Crore) before various authorities/ Courts. Pending settlement, the Company has assessed and provided an amount of ' 16.22 Crore (Previous year ' 43.86 Crore) based on probability of outflow of resources embodying economic benefits and estimated ' 224.97 Crore (Previous year ' 217.01 Crore) as the amount of contingent liability as outflow of resources is considered not probable.
(iii) Disputed Tax Demands
Disputed Income Tax/Sales Tax/Service Tax/Goods & Services Tax/Water Cess/ Green Energy Cess/other taxes/duties matters pending before various appellate authorities amount to ' 1954.09 Crore (Previous year ' 1905.72 Crore). Pending settlement, the Company has assessed and provided an amount of ' 17.52 Crore (Previous year ' 17.52 Crore) based on probability of outflow of resources embodying economic benefits and ' 746.92 Crore (Previous year ' 704.29 Crore) are being disclosed as contingent liability as outflow of resources is considered not probable. In respect of the rest of the claims/obligations, possibility of any outflow in settlement is considered remote.
(iv) Others
Claims on account of other miscellaneous matters amount to ' 834.10 Crore (Previous year ' 765.02 Crore). These claims are pending before various forums. Pending settlement, the Company has assessed and provided an amount of ' 102.16 Crore (Previous year ' 102.24 Crore) based on probability of outflow of resources embodying economic benefits and estimated ' 723.38 Crore (Previous year ' 653.45 Crore) as the amount of contingent liability as outflow of resources is considered as not probable. In respect of the rest of the claims/obligations, possibility of any outflow in settlement is considered remote.
(b) The above do not include contingent liabilities on account of pending cases in respect of service matters relating to employees (including ex-employees) and others where the amount cannot be quantified.
(c) It is not practicable to ascertain and disclose the uncertainties relating to outflow in respect of contingent liabilities.
(d) There is possibility of reimbursement to the Company of ' 502.25 Crore (Previous year ' 462.67 Crore) against the above Contingent Liabilities.
(e) (i) An amount of ' 1231.31 Crore (Previous year ' 1140.40 Crore) stands paid towards above
Contingent Liabilities in respect of Capital Works, pursuant to Niti Aayog directions issued vide OM No. 14070/14/2016-PPPAU dated 5th September 2016, in cases where Arbitral Tribunals have passed orders in favour of contractors and such awards/orders have been further challenged/being challenged by the Company in a Court of Law. The amount so paid has been shown under Other Non-Current Assets (Also refer Note No. 5).
(ii) An amount of ' 1654.84 Crore (Previous year ' 1656.11 Crore) stands paid /deposited with courts/paid as per Court Order towards above contingent liabilities to contest the cases and has been shown under Other Non-Current/ Current Assets/ adjusted against other liabilities of the claimants.
(f) The Management does not expect that the above claims/obligations (including under litigation), when ultimately concluded and determined, will have a material and adverse effect on the Company's results or operations or financial condition.
2. Contingent Assets: Contingent assets in respect of the Company are on account of the following:
a) Counter Claims lodged by the Company on other entities:
The Company has lodged counter claims aggregating to ' 1397.96 Crore (Previous year ' 1067.90 Crore) against claims of other entities. These claims have been lodged on the basis of contractual provisions and are being contested at arbitration tribunal/other forums/under examination with the counterparty. It includes counter claims of ' 36.13 Crore (Previous year ' 26.74 Crore) towards arbitration awards including updated interest thereon.
Based on Management assessment, a favourable outcome is probable in respect of the claims aggregating ' 1106.28 Crore (Previous year ' 828.50 Crore) and for rest of the claims, the possibility of any inflow is remote. Accordingly, these claims have not been recognised.
b) Late Payment Surcharge:
CERC (Terms and Conditions of Tariff) Regulations 2014-19/2019-24 provide for levy of Late Payment Surcharge by generating company in case of delay in payment by beneficiaries beyond specified days from the date of presentation of bill. In view of significant uncertainties in the ultimate collection from beneficiaries, an amount of ' 23.76 Crore (previous year ' 25.61 Crore) as estimated by the management has not been recognised.
c) Revenue to the extent not recognised in respect of power stations:
Tariff orders on account of petition fee for 2019-24 are pending in respect of twelve Power stations. Management has assessed that additional revenue of ' 5.69 Crore (Previous year ' 7.26 Crore) is likely to accrue which has not been recognised due to significant uncertainty for approval thereof.
d) Business Interruption Losses
Insurance Claims due to Business Interruption Losses in respect of Power Stations are recognised when no significant uncertainty of ultimate collection exists. Management has assessed the claims of ' 128.97 Crore (Previous Year ' 192.71 Crore) in this respect which have not been recognised. Power Station-wise details of claims are given at Note 34(23) of the Standalone Financial Statements.
e) Other Cases
Claims on account of other miscellaneous matters comprising of interest on amounts deposited as per NITI Aayog directions/ Court Orders in respect of cases pending in Court, liquidated damages, dues from exemployees etc. estimated by Management at ' 1041.79 Crore (Previous year ' 826.00 Crore) have not been recognised.
(C) Other notes to related party transactions:
(i) Terms and conditions of transactions with the related parties:
(a) Transactions with the state governments and entities controlled by the Government of India are carried out at market terms on arms- length basis (except subordinate debts received from Central Government at concessional rate) through a transparent price discovery process against open tenders, except in a few cases of procurement of spares/services from Original Equipment Manufacturers (OEMs) for proprietary items 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.
(b) Unsecured loan of ' 18.40 crore (Previous Year ' 18.40 crore) granted to NHPTL is interest bearing @ 10% p.a. to be compounded annually. Impairment provision amounting to ' 18.82 crore (Previous Year NIL) along with accrued interest has been recognised due to significant uncertainty in realisation.
(c) Outstanding Short Term Loan of ' 60.00 crore was granted to LTHPL on 27.03.2023 at the rate of 8.32% p.a. compounded annually.
(d) Consultancy services provided by the Company to subsidiary and joint venture companies are generally on nomination basis at the terms, conditions and principles applicable for consultancy services provided to other parties.
(e) Outstanding balances of subsidiary and joint venture companies as at 31.03.2023 are unsecured and settlement occurs through banking transactions. These balances other than loans are interest free. Assessment of impairment is undertaken at each financial year through examining the financial position of the related party and the market in which the related party operates.
(f) Contributions to post-employment benefit plans are net of refunds from trusts.
(ii) Commitment towards further investments in the Subsidiary Companies and Joint Venture companies are
disclosed at Note 34(3).
10. Disclosures Under Ind AS-19" Employee Benefits":
(A) Defined Contribution Plans-
(i) Social Security Scheme: The Company has a Social Security Scheme in lieu of the erstwhile scheme of compassionate appointment which has been is in operation i.e. 01.06.2007. Contribution to the fund is made by employees at a fixed amount per month and a matching contribution for the same amount is also made by the Company. The scheme has been created to provide financial help to bereaved families in the event of death or permanent total disability of its employee. The expenses recognised during the year towards social security scheme are ' 2.47 Crore (Previous year ' 2.70 Crore). The funds of the scheme have been invested in the NHPC Limited Employees Social Security Scheme Trust and the same is managed by the Life Insurance Corporation (LIC) of India.
(ii) Employees Defined Contribution Superannuation Scheme (EDCSS): The scheme has been created for providing pension benefits to employees. As per the scheme, each employee contributes @ 5% of Basic Pay and Dearness Allowance. The company contributes to the extent of balance available after deducting employers' contribution to Provident Fund, contribution to Gratuity Trust and REHS Trust, from the amount worked out @ 30% of the Basic Pay and DA. The Scheme is managed by the LIC of India. Expense recognised during the year towards EDCSS are ' 96.89 Crore (Previous year ' 98.13 Crore).
(B) Defined Benefit Plans- Company has following defined post-employment benefit obligations :
(a) Description of Plans:
(i) Provident Fund: The Company pays fixed contribution to Provident Fund at predetermined rates to a separate Trust, which invests the funds in permitted securities. The contribution to the fund for the year is recognised as expense and is charged to the Statement of Profi t and Loss/Expenditure Attributable to Construction. The obligation of the Company is to make a fixed contribution and to ensure a minimum rate of return to the members as specified by the Government of India (GoI).
(ii) Gratuity: The Company has a defined benefit gratuity plan. The ceiling limit of gratuity is fixed as per the Payment of Gratuity Act, 1972, whereby every employee who has rendered continuous service of five years or more is entitled to gratuity at 15 days salary (15/26 X last drawn basic salary plus dearness allowance) for each completed year of service subject to a maximum of ' 0.20 Crore on superannuation, resignation, termination, disablement or death. Such ceiling limit of gratuity shall, however, increase by 25% when Industrial Dearness Allowance increases by 50%. The plan is being managed by a separate Trust created for the purpose and obligation of the Company is to make contribution to the Trust based on actuarial valuation. The funds of the trust are managed by the LIC of India.
(iii) Retired Employees Health Scheme (REHS): The Company has a Retired Employee Health Scheme, under which retired employee and/or spouse of retiree and eligible dependent children of deceased/retired employees are provided medical facilities in the Company hospitals / empanelled hospitals. They can also avail treatment as Out-Patient subject to a ceiling limit fixed by the Company. The liability for REHS is recognised on the basis of actuarial valuation. The Scheme is being managed by a separate Trust created for the purpose and obligation of the company is to make contribution to the Trust based on such actuarial valuation. The funds of the Trust are managed by the LIC of India.
(iv) Allowances on Retirement/Death: Actual cost of shifting from place of duty at which employee is posted at the time of retirement to any other place where he / she may like to settle after retirement is paid as per the rules of the Company. In case of death, family of deceased employee can also avail this facility. Liability for the same is recognised on the basis of actuarial valuation.
(v) Memento to employees on attaining the age of superannuation: The Company has a Policy of providing Memento valuing ' 10,000/- to employees on superannuation. Liability for the same is recognised on the basis of actuarial valuation
(vi) NHPC Employees Family Economic Rehabilitation Scheme: NHPC Limited has introduced "NHPC Employees Family Economic Rehabilitation Scheme" w.e.f. 01.04.2021. The objective of this scheme is to provide monetary assistance and support to an employee in case of permanent total disablement of the employee and to his family in case of death of the employee, provided the permanent total disablement / death as the case may be, takes place while the employee is in service of the Company. On the separation of an employee from the service of the Company on account of death / permanent total disablement, the beneficiary is entitled to monthly payment equivalent to 50% of one month Basic Pay & DA last drawn by the employee and other benefits including HRA, Children's Education Allowance, etc. provided the beneficiary surrenders with the Company the death/ disablement benefits received under Social Security Scheme. Liability for the Scheme is recognised on the basis of actuarial valuation.
B) Investment Risk - For funded plans, asset-liability mismatch and actual return on assets at a rate 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 and 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.
(f) Defined benefit liability and employer contributions: Funding levels are monitored on an annual basis and the current contribution rate is 30% of basic salary and dearness allowance. The Company considers that the contribution rates set at the last valuation date are sufficient to eliminate the deficit over the agreed period and that regular contributions, which are based on service costs, will not increase significantly.
Expected contributions to defi ned-benefit plans for the year ending March 31, 2024 are ' 138.80 Crore.
The weighted average duration of the defined benefit obligations is 10.37 Years as at 31st March, 2023 (31st March, 2022: 10.49 years).
(a) The Company has a system of obtaining periodic confirmation of balances from banks and other parties. There are no unconfi rmed balances in respect of bank accounts and borrowings from banks & financial institutions. With regard to receivables for energy sales, the Company sends demand intimations to the beneficiaries with details of amount paid and balance outstanding which can be said to be automatically confi rmed on receipt of subsequent payment from such benefi ciaries. In addition, reconciliation with beneficiaries and other customers is generally done on quarterly basis.
(i) Accounting Treatment of Leases as per Ind AS 116:
The Company assesses whether a contract is or contains a lease, at the inception of the contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
The Company had applied the following practical expedients on initial application of Ind AS 116:
a. Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date.
b. Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application.
c. Excluded the initial direct costs, if any from the measurement of the right-of-use asset at the date of recognition of right-of-use asset.
d. Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
The weighted average incremental borrowing rate applied to leases recognised during FY 2022-23 is 6.58%.
(ii) Nature of lease: The Company's significant leasing arrangements are in respect of the following assets:
(a) Premises under cancellable lease arrangements for residential use of employees ranging from 3-4 months to three years.
(b) Premises for offices, guest houses and transit camps on lease which are not non-cancellable and are usually renewable on mutually agreeable terms.
(c) Land obtained on lease for construction of projects and / or administrative offices.
(d) Vehicles on operating leases generally for a period of 1 to 2 years and such leases are not noncancellable.
B) Finance Lease - Company as Lessor -Power Stations as Finance Lease
The Company has entered into lease arrangements with a single beneficiary, Power Development Department, Jammu & Kashmir for sale of the entire power generated by two power stations, namely Nimmo Bazgo and Chutak Power Stations for the substantial period of the stipulated life of these Power Stations. Under the agreements, the customer is obligated to purchase the entire output at prices determined by the Central Electricity Regulatory Commission (CERC). Further, the Company has entered into a supplementary PPA with M/s West Bengal State Electricity Development Corporation Limited (WBSEDCL) for offtake of the entire power generated by TLDP-III Power Station for its balance useful life of 35 years on mutually agreed tariff w.e.f 1st April, 2019. The arrangements have been assessed by the Company and classified as a Finance Lease. Other financial assets (Current and NonCurrent) include lease receivables representing the present value of future lease rentals receivable on the finance lease arrangements entered into by the company.
The Company has entered into Power Purchase Agreements (PPA) with WBSEDCL for sale of power from TLDP-IV power station for a period of 10 years and with Jodhpur Vidyut Vitran Nigam Limited (JVVNL) for sale of power from 50 MW Wind Power Project, Jaisalmer for a period of 3 years. Power Purchase Agreement with JVVNL has expired on March 31,2019 and extension of PPA is under process, though power is being scheduled to the customer. As per the PPAs, the customer is obligated to purchase the entire output of these Power Stations/Power Projects at mutually agreed tariff in case of TLDP-IV Power Station and on the basis of pooled cost of power for 50 MW Wind Power Project. The Company has determined that these arrangements are in the nature of an Operating Lease.
17.1 The Board of Directors of the Company in its meeting held on December 7, 2021 has approved the merger/ amalgamation of Lanco Teesta Hydro Power Limited (a wholly owned subsidiary of NHPC Limited) with NHPC Limited under Section 230-232 of the Companies Act, 2013 and other statutory provisions as per the terms and conditions mentioned in the Scheme of Amalgamation (Scheme). Application for approval of the "Scheme of Merger/Amalgamation of Lanco Teesta Hydro Power Limited (LTHPL) with NHPC Limited" has been filed before the Ministry of Corporate Affairs (MCA) on August 10, 2022 after receiving consent from the Government of India. In this regard MCA has issued certain directions and the Company is in the process of compliance of these directions.
17.2 The Board of Directors of the Company in its meeting held on September 24, 2021 has approved the proposal to initiate the process of merger of Jalpower Corporation Limited (a wholly owned subsidiary of NHPC Limited) with NHPC Limited as per applicable provisions of the Companies Act, 2013. Approval of the Ministry of Power, Government of India has been conveyed on 26th April, 2023. Application for approval of the Scheme of Merger/ Amalgamation of shall be filed before the Ministry of Corporate Affairs (MCA) in due course.
17.3 Company has incorporated a wholly owned subsidiary company in the name of NHPC Renewable Energy Limited (NREL) on 16.02.2022 for development of renewable energy, small hydro and green hydrogen projects. There was no investments in NREL during FY 2021-22.
17.4 During FY 2021-22, the Company had acquired 2% equity of PTC India Limited (PTC) in Chenab Valley Power Projects Private Limited (A Joint Venture Company between NHPC (49%), Jammu and Kashmir State Power Development Corporation Limited (JKSPDCL) (49%) and PTC (2%)). Subsequent to this, shareholding of NHPC had crossed 50%. However pending modification in the Promoter's Agreement, during FY 2021-22, CVPPPL was accounted for as a Joint Venture owing to control being exercised jointly with the other joint venturer (JKSPDCL) in terms of the Joint Venture agreement. During FY 2022-23, the Supplementary Promoters' Agreement of Chenab Valley Power Projects Private Ltd. (CVPPPL) has been signed between NHPC and JKSPDC on 21.11.2022. As per the said agreement, NHPC has majority representation on the Board of CVPPPL and has gained control over CVPPPL
18. Ind AS 36- Impairment of Assets requires an entity to assess on each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the entity is required to estimate the recoverable amount of the asset. If there is no indication of a potential impairment loss, the Standard does not require an enterprise to make a formal estimate of the recoverable amount.
Management has determined that each Project / Power Station of the Company is the smallest identifiable group of assets that generate cash inflows from continuing use that is largely independent of the cash inflows from other assets or groups of assets and accordingly qualifies to be designated as a Cash Generating Unit (CGU). Impairment indicators applicable to these CGUs have been assessed and based on such assessment, Management is of the opinion that no significant change with an adverse effect on the Company has taken place during the year, or is expected to take place in the near future, in the technological, economic or legal environment in which the Company and its Subsidiaries and Joint Ventures operate. This includes the regulations notified by CERC for the tariff period 2019-24 where there are no major amendments that can have a significantly adverse impact on the future cash flow from the CGUs. There is no evidence available from internal reporting that indicates that the economic performance of a CGU is, or will be, worse than expected.
Further, seven CGUs of the Company and two CGUs of one of the subsidiaries were assessed for impairment as on 31st March, 2023. The CGUs of the Company were selected based on criteria like capital cost per MW, tariff, etc. and include the two major construction projects of the Company, one Renewable Energy Generation Station and the four most recently commissioned Power Stations over 100 MW capacity. Regulatory Deferral Account balances to be recovered in future through tariff as part of capital cost recognised in one of the CGUs has also been considered along with the carrying amount of the CGU for impairment assessment. In respect of the subsidiary, both the operating power stations have been considered for impairment assessment.
The impairment analysis was carried out on the basis of value-in-use calculation by measuring the recoverable amount of the CGUs as per cash flow projections based on the applicable CERC Tariff Regulations adjusted for the risks specific to each CGU and a pre-tax discount rate arrived at on the basis of the Capital Asset Pricing Model that reflects market assessments of the time value of money.
Based on the assessment, there exists no significant indicator that would suggest an impairment of the carrying amounts of the CGUs of the company including Regulatory Deferral Account Balances and its investment in subsidiaries and Joint Venture during FY 2022-23, except for impairment of investment/ Loan in one Subsidiary Company and one Joint Venture Company as under:
(i) Impairment in respect of Investment in Loktak Downstream Hydroelectric Corporation Limited (Subsidiary Company): Considering the delay in investment sanction (PIB & CCEA) and high projected tariff, impairment provision of ' 105.56 crore being the investment made in Loktak Downstream
Hydroelectric Corporation Limited has been recognized in the books of the Company during the FY 2022-23
(ii) Impairment in respect of Investment in National High Power Test Laboratory Pvt. Ltd. (Joint Venture Company): During the current year, the Company has recognized additional impairment provision of ' 16.33 crore (Previous year ' 14.07 crore) against total investment of ' 30.40 crore in National High Power Test Laboratory Pvt. Ltd. (NHPTL), a Joint Venture Company. Accordingly, the entire investment of the Company in NHPTL stands provided for as on 31st March, 2023
(iii) Impairment in respect of Loan to National High Power Test Laboratory Pvt. Ltd. (Joint Venture Company): During FY 2020-21, the Company had granted loan of ' 18.40 crore with interest bearing at the rate of 10% p.a. compounded annually to NHPTL. The interest is payable half yearly on 30th April and 31st October in every financial year starting from 30.04.2021. The loan was repayable in 20 equal half-yearly instalments starting from 31.10.2022. However, considering default in repayment of interest and instalment due on 31.10.2022, the Company has recognized an impairment provision of ' 18.40 crore during the year due to significant uncertainty in realisation.
Further, there exists no impairment in respect of the Projects / Power Stations of the company and its subsidiaries tested for impairment during FY 2022-23.
19. As per Hydro Policy 2008, 100 units of electricity is to be provided to each Project Affected Family (PAF) notified by the State Government for a period of 10 years from the date of commissioning of a project. Notification by the respective State Governments regarding PAFs is yet to be made. Since the electricity to be provided to the PAFs is to be deducted from free power to the State Government, there shall not be any impact on the profit of the Company.
20. The Code on Social Security, 2020 ('Code') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020 and has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will account for any related impact in the year the Code becomes effective.
21. Nature and details of provisions (refer Note No. 17 and 22)
(i) General
Provisions are recognised when the company has a present obligation (legal or constructive) 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. When the company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When a provision is discounted, the increase in the provision due to the passage of time is recognised as a Finance Cost.
ii) Provision for employee benefits (Other than provisions for defined contribution and defined benefit plans which have been disclosed as per Ind AS-19 at S. No. 10 of Note No. 34 of Standalone Financial Statements):
a) Provision for Performance Related Pay/Incentive:
Short-term Provision has been recognised in the accounts towards Performance Related Pay/ incentive to employees on the basis of Management estimates as per company's rules in this regard which are based on the guidelines of the Department of Public Enterprises, Government of India.
(iii) Other Provisions:
a) Provision for Tariff Adjustment:
Provision for tariff adjustment is made on estimated basis against probable refund to benefi ciaries on reassessment of tariff billed, pending approval of Tariff/ truing up for the Year 2014-19/ 2019-24 by the Central Electricity Regulatory Commission (CERC).
b) Provision for Livelihood Assistance:
Provision has been recognised at discounted value adjusted for average inflation in the accounts towards special f nancial package f nalised in consultation with the State Government and approved by the Board of Directors of NHPC for livelihood assistance of the project affected families (PAFs) in Parbati-II and Parbati-III. As per the package, pending f nalisation of modalities of payment, one eligible person from each PAF shall be provided livelihood assistance equivalent to minimum wage of unskilled category as per the Government of Himachal Pradesh/ Central Government whichever is higher, on monthly instalment basis, for the following periods:
i) Till the date of superannuation for PAFs eligible for employment.
ii) For 2000 days to those PAFs left with zero balance land but excluded for employment.
iii) For 1000 days to all remaining PAFs.
c) Provision for Committed Capital Expenditure:
Provision has been recognised at discounted value in case of non- current amount of Capital Expenditure to be incurred towards environment, compensatory afforestation, local area development, etc. which was a pre-condition for granting approval for construction of the project and expenditure towards which had not been completed till commissioning of the project. Such provisions are adjusted against the incurrence of actual expenditure as per demand raised by the concerned State Government Authorities.
d) Provision for restoration expenses of insured assets:
Provision has been recognised in the accounts based on Management Estimates for restoration of damaged assets insured under Mega Policy and Construction Plant and Machinery Policy. Utilization of the provision is to be made against incurrence of actual expenditure towards restoration of the assets.
e) Provisions for expenditure in respect of Arbitration Award/Court cases:
This includes provisions created on the basis of management assessment as to probable outflow in respect of contractors claims against which arbitration award/Court decision have been received and which have been further challenged in a Court of Law. Utilization/outflow of the provision is to be made on the outcome of the case.
f) Provisions- Others: This includes provisions towards:-
(i) Contractor claims, Land compensation cases, disputed tax demands and other cases created on the basis of management assessment towards probable outflow. Utilization/outflow of the provision is to be made on the outcome of the case.
(ii) Wage revision of Central Government Employees whose services are utilised by the company.
(iii) Provision for interest to benefciaries on excess tariff recovered in terms of Tariff Regulations for the Year 2014-19 where the capital cost considered for f xation of tariff by the CERC on the basis of projected capital cost as on Commercial Operation Date or the projected additional capital expenditure exceeds the actual capital cost incurred.
(iv) Upfront provision for rebate towards interest on House Building Advance provided to employees based on the historical trend of rebate allowed.
(v) Upfront provision for rebate to customers for sale of power based on the historical trend of rebate allowed.
(vi) Provision for impairment of investment by Employees Provident Fund Trust in certain interest-bearing Financial Instruments including interest accrued thereon but not received.
(vii) Provision for cost of Carbon Credits / Certifi ed Emission Reductions (CERs)/ Verifi ed Carbon Units (VCUs) as per Management estimate.
22. Disclosures relating to creation of Regulatory Deferral Account (RDA) balances as per Ind AS 114:
The Company is principally engaged in the construction and operation of hydroelectric power projects. The price (tariff) to be charged by the company for electricity sold to its customers is determined by Central Electricity Regulatory Commission (CERC) under applicable CERC (terms and conditions of tariff) Regulations. The said price (tariff) is based on allowable costs like interest costs, depreciation, operation and maintenance charges plus a stipulated return. This form of rate regulation is known as cost-of-service regulations. The basic objective of such regulations is to give the entity the opportunity to recover its costs of providing the goods or services plus a fair return.
For the purpose, the Company is required to make an application to CERC based on capital expenditure incurred duly certified by the Auditors or already admitted by CERC or projected to be incurred upto the date of commercial operation and additional capital expenditure duly certified by the Auditor or projected to be incurred during tariff year. The tariff determined by CERC is recovered from the customers (beneficiaries) on whom the same is binding.
The above rate regulation results in creation of right (asset) or an obligation (liability) as envisaged in the accounting framework which is not the case in other industries. Guidance Note on Accounting for Rate Regulated Activities (Previous GAAP) issued by the ICAI is applicable to entities that provide goods or services whose prices are subject to cost-of-service regulations and the tariff determined by the regulator is binding on the customers (beneficiaries). As per guidance note, a regulatory asset is recognized when it is probable (a reasonable assurance) that the future economic benefits associated with it will flow to the entity as a result of the actual or expected actions of the regulator under applicable regulatory framework and the amount can be measured reliably.
The Guidance Note also provides that in some cases, a regulator permits an entity to include in the rate base, as part of the cost of self-constructed (tangible) fixed assets or internally generated intangible assets, amounts that would otherwise be recognized as expense in the statement of profit and loss in accordance with Accounting Standards.
With effect from 01.04.2016, such rate regulated items are to be accounted for as per Ind AS 114 'Regulatory Deferral Accounts.' Ind AS 114 allows an entity to continue to apply previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances. For this purpose, Guidance Note of the ICAI on 'Accounting for Rate Regulated Activities' shall be considered to be the previous GAAP.
A) Regulatory Deferral Account balances in respect of Subansiri Lower Project:
Construction activities at site of Subansiri Lower Project were interrupted from 16.12.2011 to 30.09.2019 due to cases fi led before the National Green Tribunal. Technical and administrative work at the project, however, continued.
Vide order dated 31st July 2019, the Hon'ble NGT held that there is no justification in the petitions of the applicants pleading bias in the constitution of the Expert Committee by the MoEF & CC and accordingly, the cases against Subansiri Lower Project pending with the NGT were dismissed. Active construction work at the project was resumed from October 2019.
In line with the opinion of Expert Advisory Committee (EAC) of the Institute of Chartered Accountants of India (ICAI), borrowing cost of ' 2735.61 Crore (upto Previous year ' 2735.61 Crore), employee benefits expense, depreciation and other expense of ' 1427.67 crore (upto Previous year ' 1427.67 Crore), net of other income
of ' 322.60 Crore (upto Previous year ' 322.60 Crore) incurred till 30th September 2019 was charged to the Statement of Profit and Loss.
CERC Tariff Regulations allows inclusion of such costs for fixation of tariff in case the cessation of construction activities were beyond the control of the Project Developer. Accordingly, and in line with Guidance Note on Rate Regulated Activities and Ind AS 114, the aforesaid expenditure has further been recognized as Regulatory Deferral Account (Debit) balances
As active construction work at the project has been resumed during FY 2019-20, borrowing cost, employee benefits expense, depreciation and other expense (net of other income) incurred with effect from 01.10.2019 has been capitalized as Expenditure attributable to Construction.
No regulatory deferral account balances in respect of Subansiri Lower Project has been recognized during the year 2022-23.
As per management assessment, there is no impairment in the carrying amount of ' 13947.17 crore (Previous Year ' 10479.22 crore) included under Capital Work in Progress of the Project including the regulatory deferral account balances recognized therein.
After Commercial Operation Date (COD) of the Project, amount recognized as Regulatory Deferral Account balances in respect of Subansiri Lower Project shall be amortized/ liquidated in proportion to depreciation following the rates and methodology notified under CERC Tariff Regulations over the life of the Project, i.e. 40 years.
Tariff Regulations for the period 2019-2024 have been notified by the CERC. In addition to the earlierTariff Regulations (2014-19) authorizing capitalisation of borrowing and other attributable costs incurred due to uncontrollable factors including force majeure events like blockade/ embargo, the Tariff Regulations for the period 2019-2024 also include delay in obtaining statutory approval for projects as one of the force majeure events. Accordingly, Management considers that adverse changes in Tariff Regulations are not likely to be a significant area of risk for the future recovery of RDA balances recognized in respect of Subansiri Lower Project.
Risks and uncertainties that might affect the future recovery of the Regulatory Deferral Account balances being created in respect of Subansiri Lower Project are:
a) Demand Risk: Recovery of the Regulatory Deferral Account Balances shall be by way of depreciation through tariff. Accordingly, the same is affected by the normal risks and uncertainties impacting sale of electricity in India like difficulty in signing of long term Power Purchase Agreements (PPAs), at the rate covering the cost and required return ensuring the viability of the Project.
b) Regulatory Risk: Tariff regulations further provide that if the delay is not attributable to the generating company but is due to uncontrollable factors, IEDC may be allowed after due prudence check. Any disallowance of expenditure after prudence check can affect the quantum of regulatory deferral account balances to be recovered from beneficiaries.
B) Regulatory Deferral Account balances in respect of expenditure recognized due to 3rd Pay Revision of Central Public Sector Units (CPSUs):
Pay of employees of CPSUs including Central Govt. Employees under IDA pay scale has been revised from 1st January, 2017. As approved by the Government of India, in addition to enhancing Basic Pay, DA and allowances with effect from 01.01.2017, the ceiling limit of Gratuity has been enhanced from the existing ' 0.10 crores to ' 0.20 crores with effect from 01.01.2017. Pay revision for all employees have been implemented.
CERC Tariff Regulations 2014-19 read with the Statement of Reasons CERC (Terms and Conditions of Tariff ) Regulations, 2014 provides that the impact of actual increase in employee cost on account of wage revision of operational Power Stations including employees of Kendriya Vidyalaya and CISF Personnel is recoverable from the beneficiaries in future through tariff. Further, during the tariff period 2004-09, CERC had allowed recovery of the actual increase in employee cost on account of wage revision (with effect from 01.01.2007) upto 50% of the salary and wages (Basic DA) of the employees of the petitioner company as on 31.12.2006 from the beneficiaries in twelve equal monthly installments. Tariff Regulations for the period 2019-2024 read with corrigendum dated 15th March 2019 notified by the CERC also provide for recoverability of pay revision from the beneficiaries in future through tariff.
Keeping in view the provisions of Ind AS 114- "Regulatory Deferral Accounts", additional expenditure on employee benefits (including employees of Kendriya Vidyalaya and CISF Personnel) due to revision of pay/gratuity ceiling, to the extent charged to the Statement of Profit and Loss and to Other Comprehensive Income till 31st March 2019, amounting to ' 631.90 Crore have been recognized as 'Regulatory Deferral Account balances'.
As opposed to tariff period 2014-19 where RDA balances of pay revision had been created based on the expectation that CERC would allow the same in tariff in line with that allowed earlier for pay revision during FY 2009, tariff regulation 2019-24 specifically allows for recovery of additional expenditure on account of pay revision. Accordingly, additional expenditure due to 3rd PRC from FY 2019-20 has been recognized as revenue with corresponding Trade Receivables.
C) Regulatory Deferral Account balances due to moderation of tariff of Kishanganga Power Station:
As per CERC Tariff Regulations 2014-19/2019-24, depreciation on capital cost of a Power Station forms one of the components of tariff. Depreciation is charged in the books as per the rates provided in the Tariff Regulations 2014-19/2019-24 in the initial operating period of 12 years and thereafter the balance depreciation is spread over equally in the remaining 23/28 years so as to recover 90 percent of the capital cost of the Power Station by way of depreciation. As per Tariff regulations 2019-24, the operating life of a hydro-power station is 40 years.
As per CERC Tariff Regulations, 2019-24, tariff for sale of electricity by the generating company may also be determined in deviation of the norms specified in the Regulations provided the levelised tariff over the useful life of the project on the basis of the norms in deviation does not exceed the levelised tariff calculated on the basis of
the norms specified in the Regulations. Similar provisions exist in the Tariff Regulations for the period 2019-2024 notified by the CERC.
In the case of Kishanganga Power Station (Commercial Operation Date: 17th May, 2018), the Company has made moderation in tariff of Kishanganga Power Station by fixing lower tariff in the initial ten years and then fixing higher tariff in the remaining 30 years by way of charging 1.5% depreciation from the 1st to the 10th year and 2.5% depreciation from 11th to the 40th year, thus aggregating 90 percent of the Capital Cost of the Power Station. This moderation, with the intent to reduce tariff in the initial years of operation, has been duly approved by the CERC.
Moderation of depreciation rates for tariff determination in Kishanganga Power Station gives rise to a significant mismatch by way of higher depreciation charged in the books (as per CERC Tariff Regulations, 2019-24) during the first 12 years of commercial operation and recovery by way of tariff as per Tariff Order of the Power Station approved by the CERC. The lower recovery during the first 12 years would, however, be compensated over the balance period of the operational life of the Power Station by way of higher recovery of depreciation through tariff than that charged in the books. This deferment of recovery of costs with the intent to reduce tariff in the initial years and its recovery in subsequent years demonstrates that an asset exists by way of the right to recover current costs in future through tariff and such right is enforceable.
Keeping in view the provisions of Ind AS 114- "Regulatory Deferral Accounts", difference between depreciation charged to the Statement of Profi t and Loss Account as per Tariff Regulations 2019-24 and the depreciation allowed by way of tariff and which is recoverable from the beneficiaries in subsequent periods is being recognized as 'Regulatory Deferral Account balances' with effect from Commercial Operation Date of the Power Station. RDA balances created during the first 12 years of commercial operation shall be recovered from beneficiaries by way of higher depreciation as a component of tariff over the balance useful life of the Power Station, i.e. over a period of 28 years.
The Company has long term Power Purchase Agreements in respect of Kishanganga Power Station. Since the proposal for moderation of tariff already stands approved by the CERC, the Company does not envisage any signifi cant risk as regards recoverability of the Regulatory Deferral Account balances created in respect of Kishanganga Power Station.
However, as depreciation charge in the books and recovery thereof through tariff are dependent on the Capital Cost of the Power Station as allowed by CERC, recovery of the regulatory deferral account balances in respect of Kishanganga Power Station would be subject to Regulatory Risk. Approval of actual capital expenditure on the Power Station including expenditure on account of time and cost overruns etc. are subject to prudence check by the CERC. Any disallowance of expenditure after prudence check can affect the quantum of regulatory deferral account balances to be recovered from beneficiaries.
D) Regulatory Deferral Account balances in respect of exchange differences on Foreign Currency Monetary items:
As per Ind AS 23- "Borrowing Costs", borrowing cost on foreign currency loans to the extent treated as an adjustment to interest costs is allowed to be capitalised during construction period. Further, Ind AS 21-"The Effects
of Changes in Foreign Exchange Rates" provides that exchange differences arising on settlement or translation of monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognized in the Profit and Loss in the period in which they arise.
Para D13AA of Ind AS 101- "First Time Adoption of Ind AS" provides that a first-time adopter may continue the existing accounting Policy adopted for accounting of exchange differences arising from translation of longterm foreign currency monetary items. Accordingly, for periods beginning on or after 01.04.2016, all exchange differences arising on translation/ settlement of monetary items other than exchange difference on borrowings to the extent treated as an adjustment to interest cost during construction period are to be charged to the Statement of Profit and Loss.
As per the CERC Tariff Regulations 2014-19, any gain or loss on account of exchange risk variation shall be recoverable as part of capital cost for calculation of tariff on Commercial Operation Date (COD) of a project and on actual payment basis during Operation and Maintenance (O&M) period. Further, CERC in previous tariff orders has allowed exchange differences incurred during the construction period as a part of capital cost.
Keeping in view the provisions of Ind AS 114- "Regulatory Deferral Accounts" as regards recognition and CERC Tariff Regulations 2014-19 as regards recoverability, exchange differences arising on translation/ settlement of foreign currency monetary items to the extent charged to the Statement of Profit and Loss are being recognized as 'Regulatory Deferral Account balances' with effect from 01.04.2016. These balances are adjusted from the year in which the same become recoverable from or payable to the beneficiaries after Commercial Operation Date (COD) of the Project.
Tariff Regulations for the period 2019-2024 have been notified by the CERC. Regulations regarding recoverability of Foreign Exchange rate Variation (FERV) as part of capital cost for calculation of tariff on Commercial Operation Date (COD) of a project and on actual payment basis during O&M period of a Power Station as per Tariff Regulations 2014-19 have been continued for the tariff period 2019-24 also. Accordingly, Management considers that adverse changes in Tariff Regulations are not likely to be a significant area of risk for the future recovery of RDA balances recognized in respect of exchange differences on Foreign Currency Monetary items.
Recoverability of the Regulatory Deferral account balances is however, subject to Demand Risk since recovery/ payment of the regulatory deferral debit/credit balance shall be by way of billing to the beneficiaries. Accordingly, the same is affected by the normal risks and uncertainties impacting sale of electricity in India like difficulty in signing of long term PPAs, etc.
E) Regulatory Deferral Account balances on account of deferred tax recoverable from beneficiaries / Payable to beneficiaries:
As per CERC Tariff Regulations, deferred tax arising out of generating income for the tariff period 2004-09 is recoverable from benefi ciaries in the year the same materializes as current tax. For the tariff period 2014-19, deferred tax is recoverable by way of grossing up the Return on Equity by the effective tax rate based on actual tax paid. Till 31st March, 2018 the deferred tax recoverable from beneficiaries in future years was presented as an adjustment to deferred tax liability and was not recognised as RDA.
The practice was reviewed based on an opinion of the Expert Advisory Committee of the Institute of Chartered Accountants of India (EAC of the ICAI) obtained during FY 2018-19. Such deferral account balance which as per EAC of ICAI is not a deductible temporary difference resulting into deferred tax asset under Ind AS 12 ,rather fulfils the definition of regulatory deferral account balance in terms of Ind AS 114.
Accordingly, the Company had reclassified the deferred tax recoverable upto 2009 and deferred tax adjustment against deferred tax liabilities pertaining to tariff period 2014-19 earlier presented as an adjustment to Deferred Tax Liability, as a Regulatory Deferral Account balance during FY 2019-20.
As per Tariff Regulations 2019-24 notified by the CERC, there is no change in mode of recovery of current tax and deferred tax as provided in the earlier Tariff Regulations 2014-19.
The regulated assets ( )/liability (-) recognized in the books to be recovered from or payable to beneficiaries in future periods are as follows:
Regulatory Deferral Account Credit balances on account of Minimum Alternative Tax (MAT) Credit:
The Company has recognised Deferred Tax Assets on account of MAT Credit entitlement amounting to ' 1895.93 Crore upto FY 2022-23 (upto previous year ' 1478.62 crore) based on management estimate that sufficient taxable profit will be available in future to utilize the amount of recognised MAT Credit in the Books of Accounts.
MAT Credit arising out of generating income as and when utilized by the Company is to be passed on to the beneficiaries. Accordingly, Regulatory Deferral Account (Credit) Balance of ' 1438.86 crore upto the current year (previous year ' 1313.27 crore) has been recognised in respect of MAT Credit to be utilised in future and further passed on to the beneficiaries.
Out of the above, an amount of ' 125.59 crore has been used during the current year (previous year NIL) and on review, ' 390.07 crore has been reversed being regulatory liability recognized in respect of Power Stations where tariff has been fixed on negotiated basis with the beneficiaries.
24. As per deliberations of the Board of Directors in its meeting held on 20.03.2014, the viability of Bursar HE Project is dependent upon financial support from Government of India and Government of Jammu & Kashmir. Ministry of Power (MOP), Government of India was approached to provide funding for Survey and Investigation of Bursar Project to make it viable. As advised by the MoP, Ministry of Water Resources (MoWR) was approached to provide funds. In the meeting held with MoWR on 27.04.2015, it was informed by the representatives of MoWR that the request of the company for release of funds for preparation of DPR is under consideration for approval of Government of India. Detailed Project Report (DPR) of the project was submitted to CEA and expenditure of ' 226.94 Crore (previous year ' 226.78 Crore) incurred have been carried forward as Capital Work in Progress. However, as an abundant precaution, provision in respect of ibid expenditure had been recognised in earlier years and the same has been continued in the books of accounts.
25. Kotlibhel-IA, Kotlibhel-IB and Kotlibhel-II projects are three of the 24 hydro-electric projects located in the State of Uttarakhand which are covered by the order dated 13.08.2013 of Hon'ble Supreme Court of India directing MoEF not to grant environmental/forest clearance to these projects until further order and to examine the significant impact on the bio-diversity of Alaknanda and Bhagirathi river basin. In accordance with the direction of Hon'ble Supreme Court dated 24.11.2015, MoEF&CC has filed an affidavit in the Hon'ble Court on 17.08.2021, based on consensus of MoEF&CC, Ministry of Power, Ministry of Jal Shakti and State Govt. of Uttarakhand for construction of 7 hydroelectric projects, which does not include Kotli Bhel IA, IB & II projects. Pending final decision of the Hon'ble Supreme Court about the outcome of these projects, the expenditure incurred upto 31.03.2023 amounting to ' 279.75 crore (previous year ' 278.11 Crore), ' 42.95 crore (previous year ' 42.95 Crore)and ' 51.42 crore (previous year ' 51.42 Crore) have been carried forward as Capital Work in Progress in respect of Kotlibhel-1A, Kotlibhel-IB and Kotlibhel-II projects respectively. However, as an abundant precaution, provision for these amounts totalling ' 374.12 crore (previous year ' 372.48 Crore) up to 31.03.2023 has been made in the books of accounts.
26. Expenditure incurred on Tawang Stage-I and Stage-II Hydroelectric Projects amounting to ' 237.15 crore (previous year ' 237.15 Crore) has been carried forward as Capital Work in Progress. However, considering delay in receipt of clearances, difficulty in acquisition of land and overall uncertainties associated with these projects, provision for expenditure incurred in these projects up to 31.03.2023 amounting to ' 237.15 crore (previous year ' 237.15 crore) has been made in the accounts as an abundant precaution. Further, the Company is in the process of handing over these projects to NEEPCO subject to fulfilment of requisite conditions.
27. a) Implementation of Dhauliganga Intermediate, Chungar Chal and Kharmoli Lumti Tulli Hydroelectric Projects
has been temporarily put on hold. Pending final decision to hand over these projects to the Government of Uttarakhand, the expenditure incurred upto 31.03.2023 amounting to ' 35.91 Crore (previous year ' 35.70 Crore) have been carried forward as Capital Work in Progress. However, as an abundant precaution, provision for ' 35.91 Crore (previous year ' 35.70 Crore) has been made in the books of accounts.
b) Measures to reduce capital cost and optimise tariff of Goriganga IIIA Project are being explored. Pending decision on the same, the expenditure incurred upto 31.03.2023 amounting to ' 46.37 Crore (previous year ' 46.37 Crore) have been carried forward as Capital Work in Progress. However, as an abundant precaution, provision for ' 46.37 Crore (previous year ' 46.37 Crore) has been made in the books of accounts.
28. Disclosure regarding Monetization/ Securitisation:
Monetization/ Securitisation during FY 2022-23 :
During FY 2022-23, the Company has entered into an agreement with State Bank of India for monetization of free cash (consisting Return on Equity, revenue from Secondary Energy and Capacity Incentive) of Uri-I Power Station for 10 years under the National Monetisation Pipeline issued by the NITI Aayog for an amount of ' 1876.37 Crore which is repayable to the Bank over a period of 10 years in the following manner:
(a) Fixed Component: Rs 22.42 Crore per month @ 7.65% discount rate (3M MCLR of SBI plus spread of 0.05%). The applicable discount rate from the date of disbursement till date of first reset shall be the rate based on benchmark rate one day prior to date of disbursement and spread as quoted by bidder. First such reset shall take place on 1st April 2023 and every three months thereafter.
(b) Variable Component: 5% of revenue on account of secondary energy of the Power Station, payable annually. Monetization/ Securitisation during FY 2021-22 :
During FY 2021-22, the Company has entered into an agreement with HDFC Bank Limited for securitisation of Return on Equity (ROE) of Chamera-I Power Station under the National Monetisation Pipeline issued by the NITI Aayog for an amount of ' 1016.39 crore which is repayable to the Bank over a period of 10 years in the following manner:
a) Fixed Component: ' 10.90 crore per month @ 5.24% discount rate (3-month T- bill 3.71% as on 31-Jan-2022 plus spread of 1.53%). The discount rate shall be reset every three months based on the benchmark rate. First such reset was done on the first day of April 2022 and every three months thereafter.
b) Variable Component: 5% of revenue on account of secondary energy of the Power Station, payable annually.
The amount realized on monetization has been initially recognised as a Financial Liability (Borrowings) at fair value in accordance with Ind AS 109. Interest expense has been recognised under Finance Cost/Expenditure Attributable to Construction as per the Effective Interest Rate method.
29. Disclosure required as per Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:
34. Other Disclosure required under Schedule-III of the Companies Act, 2013:
(i) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(ii) The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
(iii) The Company has not been declared wilful defaulter by any bank or financial institution or other lender.
(iv) There were no scheme of Arrangements approved by the competent authority during the year in terms of sections 230 to 237 of the Companies Act,2013. However current status of the ongoing amalgamation process of LTHPL and JPCL (subsidiaries of the Company) are given at Note No. 17.1 & 17.2 of Note 34 the Standalone Financial Statements.
(v) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.
(vi) The provisions of clause (87) of Section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017 are not applicable to the company as per Section 2(45) of the Companies Act, 2013.
(vii) No proceedings have been initiated or are pending against the company under the Benami Transactions (Prohibition) Act, 1988.
(viii) The quarterly returns / statement of current assets filed by the company with banks / financial institutions are in agreement with the books of accounts.
(ix) The Company does not have any transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961.
35. Figures for the previous year have been re-grouped/re-arranged/re-classified/re-stated wherever necessary.
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