Annual Report

Board of DirectorsAs on 23.08.2002

Chairman

Shri Arvind Pande

Managing Directors

Bhilai Steel PlantShri B.K. Singh

Durgapur Steel PlantDr. S.K. Bhattacharyya

Bokaro Steel PlantShri S. Pandey

Rourkela Steel PlantDr. Sanak Mishra

Functional Directors

FinanceShri V.S. Jain

ProjectsShri S.C.K. Patne

CommercialShri A.K. Singh

Research & DevelopmentShri R.C. Jha

Directors

Dr. Y.R.K. Reddy

Shri D.V. Singh

Shri R.V. Gupta

Prof. Ram Prasad Sengupta

Shri Pyarimohan Mohapatra

Dr. Atul Sarma

Dr. Surendra Nath Mishra

Shri Dhananjaya Prasad Singh

Secretary

Shri Devinder Kumar

C O N T E N T SBankers

State Bank of India

Bank of Baroda

Canara Bank

Punjab National Bank

United Bank of India

Syndicate Bank

Union Bank of India

Bank of India

Indian Overseas Bank

Oriental Bank of Commerce

Central Bank of India

UCO Bank

State Bank of Patiala

Punjab & Sind Bank Ltd.

Allahabad Bank

Jammu & Kashmir Bank

State Bank of Saurashtra

State Bank of Hyderabad

Bank of Maharashtra

State Bank of Indore

State Bank of Bikaner &

Jaipur

State Bank of Mysore

Statutory AuditorsM/s. S.R. Batliboi & Co.Chartered Accountants

M/s. S.N. Nanda & Co.Chartered Accountant

M/s. Chaturvedi & Co.Chartered Accountants

Registered OfficeIspat Bhawan Lodhi Road, New Delhi - 110003Phone: 4367481; Fax-4367015Gram: STEELINDAInternet: www.sail.co.inE.Mail: [email protected]

Notice ....................................................................... 1

Directors’ Report ..................................................... 5

10 Year Digest ........................................................... 9

Annual Accounts ..................................................... 10

Auditors' Report ..................................................... 44

Comments of C& AG .............................................. 50

Review of Accounts by C & AG .............................. 55

Corporate Governance Report ................................. 64

Management Discussion and Analysis Report ......... 68

Corporate Governance Certificate ............................ 76

Cash Flow Statement ............................................... 76

Consolidated Annual Accounts ................................ 79

Principal Executives ............................................... 102

Subsidiary Companies'Annual Report and Accounts

The Indian Iron & Steel Company Limited ........... 103

Maharashtra Elektrosmelt Limited ......................... 126

Bhilai Oxygen Limited .......................................... 145

1

NOTICE IS HEREBY GIVEN THAT the 30th Annual General Meetingof the Members of Steel Authority of India Limited will be held at 1030hours on Tuesday, the 24th September, 2002 at NDMC Indoor Stadium,Talkatora Garden, New Delhi-110001 to transact the following business:

1. To receive, consider and adopt the audited Profit & Loss Account forthe year ended 31st March, 2002, the Balance Sheet as at that dateand Directors’ and Auditors’ Reports thereon.

2. To appoint a Director in place of Shri V.S. Jain who retires byrotation and is eligible for re-appointment.

3. To appoint a Director in place of Shri A.K. Singh who retires byrotation and is eligible for re-appointment.

4. To appoint a Director in place of Dr. S.K. Bhattacharyya who retiresby rotation and is eligible for re-appointment.

5. To appoint a Director in place of Shri R.C. Jha who retires byrotation and is eligible for re-appointment.

6. To fix the remuneration of Auditors appointed by Comptroller &Auditor General of India.

SPECIAL BUSINESS

7. To consider and, if thought fit, to pass with or without modificationthe following resolution as an ORDINARY RESOLUTION:

“RESOLVED THAT Dr. Y.R.K. Reddy who was appointed as anAdditional Director of the Company by the Board of Directorsunder Section 260 of the Companies Act, 1956, and who holdsoffice upto the date of this Annual General Meeting and in respect ofwhom the Company has received a notice in writing proposing hiscandidature for the office of Director under Section 257 of theCompanies Act, 1956, be and is hereby appointed as a Director ofthe Company, liable to retire by rotation, for a period of three yearsfrom the date of his initial appointment i.e. with effect from 23rd

September, 2001.”


“RESOLVED THAT Shri Surendra Nath Mishra who was appointedas an Additional Director of the Company by the Board of Directorsunder Section 260 of the Companies Act, 1956, and who holdsoffice upto the date of this Annual General Meeting and in respectof whom the Company has received a notice in writing proposinghis candidature for the office of Director under Section 257 of theCompanies Act, 1956, be and is hereby appointed as a Director ofthe Company, liable to retire by rotation, for a period of three yearsfrom the date of his initial appointment i.e. with effect from 26th

December, 2001.”


“RESOLVED THAT Dr. Sanak Mishra who was appointed as anAdditional Director of the Company by the Board of Directorsunder Section 260 of the Companies Act, 1956, and who holdsoffice upto the date of this Annual General Meeting and in respectof whom the Company has received a notice in writing proposinghis candidature for the office of Director under Section 257 of theCompanies Act, 1956, be and is hereby appointed as a Director ofthe Company, liable to retire by rotation.”

10. To consider and, if thought fit, to pass with or without modificationsthe following Resolution as SPECIAL RESOLUTION:“RESOLVED THAT approval of the Shareholders be and is herebyaccorded to the amendment of Articles of Association of the companyby substituting Article 69(a) as follows:

Article 69 (a)

Existing Proposed

The number of Directors of The number of Directors ofthe Company shall be not less the Company shall be not lessthan six and not more than less than six and not moretwenty-one. than twenty-two.

11. To consider and, if thought fit, to pass with or withoutmodifications the following Resolution as an ORDINARYRESOLUTION:Whereas the accumulated losses of the company as at 31st March,2002 have resulted in more than 50% erosion of peak net worthduring the immediately preceding four (4) financial years and thecompany is required to report this fact to the Board for Industrialand Financial Reconstruction under the provision of Section 23 ofthe Sick Industrial Companies (Special Provisions) Act, 1985;And whereas the Board of Directors, after analyzing the reasons forsuch erosion and after discussing the matter in detail have come tothe conclusion that the erosion was mainly on account of economicslow down resulting in considerable stress on prices of steel products.Further, with the visible improvement in market demand, increasein net sales realisation and cost control efforts, the company expectsbetter results during the financial year 2002-03 and onwards.And whereas shareholders of the company have been informed of thesaid erosion and have considered the reasons for such erosion asdetailed in the Explanatory Statement attached hereto.Resolved that in terms of the relevant provisions of Section 23 of theSick Industrial Companies (Special Provisions) Act, 1985 the Boardfor Industrial and Financial Reconstruction be informed of the fact oferosion of more than 50% of its peak net worth during the immediatelypreceding four financial years.

12. To consider and, if thought fit, to pass with or without modificationsthe following Resolution as an ORDINARY RESOLUTION:

Resolved that pursuant to the provisions of Section 293(1)(e) ofthe Companies Act, 1956 and other applicable provisions, if any,the Board of Directors of the Company be and is hereby authorisedto contribute to any charitable and other funds not directly relatingto the business of the Company or the welfare of its employees upto a total amount of Rs.55.25 lakhs.

By order of the Board of Directors

(Devinder Kumar)Secretary

New Delhi23rd August, 2002Registered Office:Ispat Bhawan, Lodi Road,New Delhi-110003.

STEEL AUTHORITY OF INDIA LIMITEDREGISTERED OFFICE : ISPAT BHAWAN, LODI ROAD, NEW DELHI - 110003

Notice

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Notes:

1. The relevant Explanatory Statement, pursuant to Section173(2) of the Companies Act, 1956, in respect of the businessItem Nos. 7 to 12 above are annexed hereto.

2. A MEMBER ENTITLED TO ATTEND AND VOTE ATTHE MEETING IS ENTITLED TO APPOINT A PROXYTO ATTEND AND VOTE INSTEAD OF HIMSELF.SUCH PROXY NEED NOT BE A MEMBER OF THECOMPANY. PROXIES IN ORDER TO BE EFFECTIVEMUST BE RECEIVED BY THE COMPANY NOT LESSTHAN 48 HOURS BEFORE THE COMMENCEMENTOF THE MEETING. THE PROXY FORM IS ENCLOSEDAT THE END OF ANNUAL REPORT.

3. Only members carrying the attendance slips or holders ofvalid proxies registered with the Company will be permittedto attend the meeting. In case of shares held in joint names orshares held under different registered folios wherein the nameof the sole holder/first joint-holder is same, only the firstjoint-holder/sole holder or any proxy appointed by such holder,as the case may be, will be permitted to attend the meeting.

4. Members attending the meeting are requested to bring theircopy of the Annual Report as extra copies will not be supplied.

5. The Register of Members of the Company will remain closedfrom 27th August, 2002 to 24th September, 2002 (both daysinclusive).

6. The Company has appointed M/s. RCMC Share RegistryPrivate Limited as Registrar and Transfer Agent for carryingout its entire share related activities viz. transfer/transmission/transposition/dematerialisation/rematerialisation/split/

consolidation of shares, change of address, bank mandate,filing of nomination, dividend payment and allied activitiesw.e.f. 1st November, 2001. Shareholders are requested to makeall future correspondences related to share transfer and alliedactivities with this agency only at the following address:M/s. RCMC Share Registry Private Limited,1515 (1st Floor), Bhisham Pitamah Marg,Kotla Mubarakpur (Near South Ext.),New Delhi - 110 003.

7. Members should notify change in their addresses, if any,specifying full address in block letters with PIN CODE oftheir post offices, which is mandatory.

8. Members holding shares in identical order of names in morethan one folio are requested to write to the Company’s Registrarand Transfer Agent enclosing their Share Certificates to enablethe Company to consolidate their holdings in one folio.

9. Members who have not encashed the dividend warrant(s) sofar for the years 1994-95, 1995-96, 1996-97 and 1997-98are requested to make their claims to the Companyimmediately for its revalidation and subsequent encashment.

10. Members seeking further information on the Accounts or anyother matter contained in the Notice, are requested to writeto the Company at least 7 days before the meeting so thatrelevant information can be kept ready at the meeting.

11. Entry to the Stadium will be strictly against Entry Slipavailable at the counters at the venue and against exchangeof Attendance Slip.

12. No Brief case or Bag will be allowed to be taken inside theauditorium.

Item No.7On nomination by the President of India vide Government’s NotificationNo.10(16)/97-SAIL-PC dated 23rd August, 2001, Dr. Y.R.K. Reddywas appointed as an Additional Director of the Company with effectfrom 23rd September, 2001 and vacates his office of Directorship at thisAnnual General Meeting, pursuant to section 260 of the Companies Act,1956 and Articles of Association of the Company. The notice underSection 257 of the said Act has been received from a member proposingthe name of Dr. Y.R.K. Reddy as a candidate for the office of Director ofthe Company.

Dr. Y.R.K. Reddy has done MA (Management Studies) from U.K. andPh.D. in Econometric Analysis of Strike activity in India and his area ofspecialization is Strategic Human Resource Management, CorporateGovernance, and Strategy. He is also a Director on the Board of thefollowing companies:l Infotech Enterprises Limitedl Yaga Consulting Private Limitedl Dynam Venture East Private Limitedl Lumley Technologies Private Limited

Board considers it desirable that the Company should continue to availitself of his services as a Director and recommend this Resolution forapproval of the shareholders. None of the Directors other than Dr.Y.R.K. Reddy to the extent of his appointment as Director is concernedor interested in the above resolution.

Item No.8On nomination by the President of India vide Government’s NotificationNo.10(16)/97-SAIL-PC(Vol.III) dated 5th December, 2001, ShriSurendra Nath Mishra was appointed as an Additional Director of theCompany with effect from 26th December, 2001 and vacates his office ofDirectorship at this Annual General Meeting, pursuant to section 260 ofthe Companies Act, 1956 and Articles of Association of the Company.The notice under Section 257 of the said Act has been received from amember proposing the name of Shri Surendra Nath Mishra as a candidatefor the office of Director of the Company.

Shri Surendra Nath Mishra has retired from IAS on Superannuation in1998 after 35 years of service in State and Central Governments. He heldsenior positions in Government of Orissa and inLok Sabha Secretariat where he functioned as Secretary – General. He hasconsiderable experience in the fields of minerals, mineral industries andmetals (both ferrous and non-ferrous) and as Chief Executive of PublicSector Undertakings both at State and Central Levels including ManagingDirector of Food Corporation of India. He is also a Director on theBoard of Word Portfolio Finance & Leasing Limited.

Board considers it desirable that the Company should continue to availitself of his services as a Director and recommend this Resolution forapproval of the shareholders. None of the Directors other than ShriSurendra Nath Mishra to the extent of his appointment as Director isconcerned or interested in the above resolution.

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956.

ANNEXURE TO THE NOTICE

Notice

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Item No. 9

On nomination by the President of India vide Government's NotificationNo.8(7)/2000-SAIL-PC(Vol.III) dated 22nd August, 2002, Dr. SanakMishra was appointed as an Additional Director of the Company witheffect from 23rd August, 2002 and vacates his office of Directorship atthis Annual General Meeting, pursuant to section 260 of the CompaniesAct, 1956 and Articles of Association of the Company. The notice underSection 257 of the said Act has been received from a member proposingthe name of Dr. Sanak Mishra as a candidate for the office of Director ofthe Company.

Dr. Sanak Mishra has done Ph.D. in Metallurgy from University oflllinois, USA. He has considerable experience in Research & Developmentin Iron & Steel, Corporate Planning and Management of an integratedSteel Plant.

Board considers it desirable that the Company should continue to availitself of his services as a Director and recommend this Resolution forapproval of the shareholders.

None of the Directors other than Dr. Sanak Mishra to the extent of hisappointment as Director is concerned or interested in the above resolution.

Item No. 10

Clause 49 of the Listing Agreement relating to Corporate Governance,inter-alia, requires that in case of a non-executive Chairman, at least one-third of Board should comprise of independent directors and in case ofan executive Chairman, at least half of Board should comprise ofindependent directors. The independent Directors were defined to meandirectors who apart from receiving Director’s remuneration do not haveany other material pecuniary relationship or transactions with the company,its promoters, its management or its subsidiaries, which in judgement ofthe Board may affect independence of judgement of the Director. Further,SEBI has clarified that in the case of Public Sector Undertakings, theGovernment nominee Directors cannot be considered as IndependentDirectors for the purpose of constitution of Board of Directors.

The company need minimum of 9 Functional Directors, includingChairman, to represent 4 integrated steel plants; Finance, Personnel,Commercial, and Technical Directorates. With the inclusion of 2Government nominee directors, the number of non-independent directorswould be 11. In order to keep equal number of independent and non-independent directors as per listing requirements and SEBI’s clarification,the strength of the Board may be enhanced to 22.

As per Article 69 (a) of Articles of Association of the company, the maximumnumber of Directors, which can be appointed on SAIL Board, is limitedto 21. As such increasing the number to 22 would require the approval ofShareholders Under Section 31(1) of the Companies Act, 1956.

The members are requested to approve amendment of Article 69 (a) ofthe Articles of Association of the company as under for increasing themaximum number of directors on Board of Directors to 22:

Article 69 (a)

Existing Proposed

The number of Directors of the The number of Directors ofCompany shall be not less than the Company shall be not lesssix and not more than than six and not more thantwenty-one. twenty-two.

The Directors, therefore, recommend the Special Resolution. None ofthe Directors of the Company is interested or concerned in the resolution.

Item No. 11

In terms of provisions under section 23 of Sick Industrial Companies(Special Provisions) Act 1985 (SICA), if the accumulated losses of anindustrial company as at the end of any financial year have resulted inerosion of 50 per cent or more of its peak net worth during the immediatelypreceding four (4) financial years, the company is required to report thefact of such erosion to the Board for Industrial and Financial Reconstruction(BIFR) within the specified time after finalisation of duly audited accounts.Further, the shareholders of the company are also required to considersuch erosion.

The peak net worth of the Company as per SICA as at end of the financialyear 1997-98 was Rs.8553.47 crores which after erosion, due toincurrence of losses during the last four years for the reasons explainedbelow, has come down to Rs.2820.83 crores as at the end of the financialyear 2001-2002.

As the members are aware, the company’s main business is productionand marketing of iron and steel. During the last four to five years, thesteel industry has witnessed a recession in domestic as well as internationalmarket. Demand recession in the user industry, lack of resources both inpublic and private sectors for financing infrastructure projects haveadversely affected financial performance of steel industry. As a result netprofit of SAIL went down from a peak of Rs.1319 crores in the financialyear 1995-96 to a loss of Rs.1707 crores during 2001-2002. The losseshave resulted in erosion of more than 50% of the peak net worth of thecompany.

To overcome the adverse situation, the company had worked out aturnaround plan and identified the areas of intervention and actionsrequired to be taken to ensure the long term viability of the company.With a view to improve its long term competitive position, it had decidedto restructure its activities and to separate non-core business from itsmain business of production and selling steel. Accordingly, a proposalfor financial and business restructuring of the company was submitted tothe Government of India and the same was approved by the Governmentof India. The members approved the Financial and Business Restructuringin the 28th Annual General Meeting. Further, the divestment of CaptivePower Plant-II at Bhilai Steel Plant was also approved by the Governmentand by the members in the year 2001. The company has alreadycompleted the financial restructuring and as a part of BusinessRestructuring divestment of Captive Power Plants at Rourkela Steel Plant,Durgapur Steel Plant, Bhilai Steel Plant and Bokaro Steel Plant has beencompleted. Further efforts on business restructuring are under process.

Though above financial and business restructuring coupled with the costcontrol measures undertaken by the company have resulted inimprovement in the performance but the same was not sufficient tonullify the impact of input cost escalations and stress on prices of steelproducts due to depressed market conditions. The fall in internationalprices and continued sluggishness in the economy resulted in decline inthe price realisation in the domestic market also. The cost control measuresundertaken by the company encompassed all areas of operation in additionto the conventional areas of savings like reduction in consumption ofcoking coal/other raw materials, improvement in yield and techno-economicparameters, reduction in energy consumption, lower consumption ofstores & spares and control on administrative expenditure. Substantialsavings were also achieved in the non-conventional areas like control onarisings, reduction in payment of demurrage/idle freight and savingsthrough optimization of purchases.

4

During current financial year the market is signalling an upward trend.There have been price increases in steel products, which have beenabsorbed by the market. There has been improvement in productionalso and efforts are being made towards achieving maximum capacityutilization matching with the increased market demand. The company isvigorously giving greater thrust on the cost control measures during thecurrent year also. The Board of Directors expects that with theimprovement in market demand, increase in net sales realisation and costcontrol efforts being made, the company is likely to show better resultsduring the financial year 2002-03 and onwards.

The Board recommends the resolution to consider the erosion of networth and the measures being taken by the company to overcome theadverse situation.

None of the Directors is concerned or interested in the above resolution.

Item No.12

In the year 2001 floods in Orissa rendered lakhs of people homeless.Floods caused vide spread devastation to the life and property of severalthousands people across the State. In order to mitigate the suffering andfor rehabilitation of the families affected by the floods, an appeal wasissued to all the employees of SAIL to donate one day’s basic pay toprovide succour to the affected families of Orissa. Based on the pastexperience, it was estimated that an amount of Rs. 2 crores would becollected through employees’ contribution for this noble cause. Pendingrecoveries from the employees an amount of Rs.1 crore was remitted toOrissa Chief Minister’s Relief Fund as an advance contribution to beadjusted against the actual receipt. However, total collection received fromemployees were to the tune of Rs. 44.75 lakhs only leaving shortfall ofRs. 55.25 lakhs. Futher efforts are being made by appealing employeesto contribute for this cause. The amount so received will be adjustedagainst the shortfall.

Section 293(1)(e) of the Companies Act requires that the Board ofDirectors of a Public Company or of a Private Company which is asubsidiary of a Public Company shall not, except with the consent ofsuch Public Company or Subsidiary in General Meeting contribute,after the commencement of this Act, to charitable and other funds notdirectly relating to the business of the Company or the welfare of itsemployees, any amount the aggregate of which will, in any Financial Year,exceed Rs. 50,000/- or 5% of its average net profit as determined inaccordance with the provisions of sections 349 and 350 during the threefinancial years immediately preceding, whichever is greater. The Companyhas incurred loss during the last three Financial Years.

It is proposed that the shortfall upto Rs. 55.25 lakhs due to non-receipt ofthe contribution from employees be considered as contribution by theCompany and accordingly approval of the share holders is being obtainedas required under Section 293(1)(e) of the Companies Act.

The Board recommends the resolution for approval of themembers. None of the Directors is concerned or interested in the aboveresolution.

By order of the Board of Directors

(Devinder Kumar)Secretary

New Delhi23rd August, 2002Registered Office: Ispat Bhawan, Lodi Road,New Delhi-110003

Details of Directors seeking re-appointment in Annual General Meeting furnished in terms of clause 49 of Listing Agreements.

Name of the Director Shri V.S. Jain Shri A.K. Singh Dr. S.K. Bhattacharyya Shri R.C. Jha

Date of Birth 24.07.1946 01.02.1944 25.12.1945 18.10.1942Date of Appointment 07.11.1994 09.12.1996 12.06.1997 27.09.1999

Expertise in Specific Finance Technical, HRD Technical, Research & Technicalfunctional areas and Commercial DevelopmentQualifications B.Com (Hons), B.Tech Ph.D (Metallurgy) B. Tech

FCA, (Electrical) (Metallurgy)FCWA

List of Companies Maharashtra Nil IIM Nilin which outside Elektrosmelt Ltd.Directorship held (MEL)as on 31st March, 2002. UEC-SAIL

InformationTechnology Ltd. (USIT)Indian Iron &Steel Co. Ltd. (IISCO)

Chairman/Member SAIL Nil Nil Nilof the Committees Shareholder/Investorof the Board of the Grievance Committee -Companies on Memberwhich he is a IISCODirector as Audit Committee –on 31st March, 2002. Member

Notice

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Directors’ ReportTo,

The Members,

The Directors have pleasure in presenting the 30th Annual Report of theCompany together with audited accounts for the year ended 31st March,2002.

FINANCIAL REVIEWDuring the year, turnover of the company was Rs.15502 crores (previousyear Rs.16233 crores) showing a decline of 4.5 per cent over previousyear. This decline has resulted from dip in net sales realisation in domestic/export market mainly due to global recession and lower sales of by-products, scrap & secondary products. The net loss was Rs.1706.89crores (previous year Rs.728.66 crores) after providing for interest ofRs.1562.03 crores (previous year Rs.1751.68 crores) and depreciationRs.1155.89 crores (previous year Rs.1143.62 crores). In view of theloss, the directors do not recommend dividend.

Due to fall in international prices coupled with continued sluggishnessin the economy, the price realisation in the domestic market also declined.The Company has recorded a growth of about 5.7% in sales volume ofmild steel.

The efforts in the cost control measures including revenue maximizationcontinued and your company achieved a benefit of about Rs.450 croresduring the year 2001-02. The cost control savings encompasses all areasof operation like reduction in consumption of coking coal/other rawmaterials, improvement in yield and techno-economic parameters,reduction in energy consumption, lower consumption of stores & sparesand control on administrative expenditure. Substantial savings have alsobeen achieved in other areas like control on arisings, reduction in paymentof demurrage/idle freight and savings through optimization of purchases.

In terms of provisions of Sick Industrial Companies (Special Provisions)Act 1985, if the accumulated losses of an industrial company as at theend of any financial year have resulted in erosion of 50 per cent or moreof its peak net worth during the immediately preceding 4 financial years,the company is required to report the fact of such erosion to the Board forIndustrial and Financial Reconstruction (BIFR) within sixty days fromthe date of finalisation of duly audited accounts of the company. As thereis erosion in net worth by over 50 per cent of peak net worth mainly onaccount of stress on prices of steel products, report to BIFR is beingmade.

However, during current financial year the market is signalling an upwardtrend. There have been price increases in steel products, which have beenabsorbed by the market. There has been improvement in productionalso as compared to last year and efforts are being made towards achievingmaximum capacity utilisation matching with the increased marketdemand. Your company is vigorously giving greater thrust on the costcontrol measures during the current year as well.

With the improvement in market demand, increase in net sales realisation,cost control efforts, your company expects much better results during thefinancial year 2002-03.

BUSINESS RESTRUCTURING REVIEWThe Company achieved another landmark in asset restructuring bydivesting its Captive Power Plants at Bokaro to the Joint Venture Company(JVC) namely Bokaro Power Supply Company Limited (BPSCL) withDamodar Valley Corporation (DVC) as the Strategic Alliance Partner inthe JVC. Through this divestment a capital gain of Rs.391 crores wasachieved. The divestment of Captive Power Plant-II at Bhilai was also

completed successfully with NTPC as Strategic Alliance Partner in theJoint Venture Company viz., Bhilai Electric Supply Company Limited.This resulted in capital gain of Rs.99 crores.

The process of divestment of other non-core assets including OxygenPlant-2 of Bhilai Steel Plant, Salem Steel Plant, Visvesvaraya Iron & SteelPlant, Rourkela Fertilizer Plant and Indian Iron & Steel Company Limitedis in different stages. There are certain hurdles like resistance by theemployee unions, political parties etc.

It may be recalled that one other major restructuring task was thereorganization of the company from a functional setup to a StrategicBusiness Units (SBU). Considering the scope of such a major organisationrestructuring and the implications with respect to location of head quartersof SBU, Board structure etc., it has been decided to take up theimplementation in two Phases. In Phase-1, many critical changes such asseparation of branches and stockyards, enhanced Key AccountsManagement process, modified system of Management InformationSystem, improved reward and punishment system etc. have been takenup for implementation. The 2nd Phase consisting of Organisationstructure at top level on Flat Product/Long Product basis will be taken uplater for implementation. Implementation of the other businessrestructuring interventions like Rightsizing of Manpower, Purchase Costreduction, Sales force effectiveness etc. is also progressing satisfactorily.

The Company launched a Scheme for Leasing of Houses to Employees/ex-employees. Over 9000 employees, spouses/legal heirs of deceasedemployees have become proud owners of their own houses in their ownSteel Townships. By leasing of houses in its different townships, thecompany has collected about Rs.200 crores as premium from leaseddwelling units.

SALES & MARKETING REVIEWDuring the year, the steel consumption in the country registered a nominalgrowth of 2.6 per cent and there was a situation of over supply.International prices continued to dip and coupled with protective measuresby several countries including USA, the exports were under stress. Despitethis, the company could export around 5.55 lakhs tonnes of mild steel tovarious destinations across the world, registering a growth of about 17per cent over last year.

However, by adopting aggressive market oriented strategies, the companycould sell 9.3 million tonnes of mild steel registering a growth of 5.7 percent over previous year and has also increased its market share.

There was a significant increase in the sales of Railway material, Plates,HR Coils & HR Sheets. The product mix was continuously reorientedto keep pace with market demand. Higher availability of special gradeproducts like API Grade HR Coils, Plates, Pipes, HR Coils for ColdReducing segments etc. enabled the company to maintain and achievelarger market share in value added segments. The Company hasendeavored to expand the customer base by entering into annual tie upswith major customers and Project authorities. With a market drivenpricing system, emphasis on key customer accounts by special customerservice, increased product focus and constant reviewing of distributionchannels, company could achieve an appreciable growth in sales duringthe year.

PRODUCTION REVIEWDuring the year, the saleable steel production from four main steel plantswas at 9.464 million tonnes, registering a growth of about 1 per cent overthe previous year. Continuous cast production increased by 6 per centover previous year, with proportion of concast going upto 57 per centfrom 54 per cent last year.

6

However, production in the flat products and alloy steel segmentscontinued to be affected by depressed market conditions. The Companyre-oriented the product-mix in favour of long products, as per marketrequirement. There has been significant increase in Rails production atBhilai by 24 per cent to highest ever 584,000 tonnes through in-houseimprovements.

There have also been improvement in important techno-economicparameters, such as:-l Lowest ever coke rate of 557 kg/thm, with 2% reduction over previous

year.l Lowest ever energy consumption of 7.69 Gcal/tcs which is 3% lower

than last year.l Refractory consumption, declined by 6% over previous year.

The Company continued its efforts towards implementation andmaintenance of ISO Quality Assurance System (QAS) standards in itsplants and units. During the year 2001-02 Ore Bedding and BlendingPlant, Calcining Plant II and Steel Melting Shop II of Rourkela SteelPlant and International Trade Division of Central Marketing Organisationreceived ISO 9002:1994 certification. Transition to ISO 9001:2000Quality Management System from ISO 9002:1994 QAS was achievedfor Hot Strip Mill and Plate Mill of Rourkela Steel Plant, Hot Strip Milland Hot Rolled Coil finishing mill of Bokaro Steel Plant and SAILConsultancy Division.

Materials Management

During the year the total iron ore and flux production from captivemines was 17.462 million tonnes and 2.535 million tonnes respectively.Almost the total requirement of iron ore for different steel plants was metfrom the company’s own captive sources.

The Company has undertaken, on experimental basis, procurement ofthree commodities viz. Calcium Carbide, Wire Ropes and Cables throughReverse Auction, by introducing e-Procurement in SAIL. This hasresulted in reduction in procurement prices and substantial benefits areexpected in future. We are possibly the first Public Sector Undertakingin the country to introduce e-Procurement through Reverse Auction.Encouraged by the outcome, the Company has identified additionalcommodities/items for e-Procurement through Reverse Auction.

MODERNISATION AND OTHER CAPITAL SCHEMES

At Bhilai Steel Plant, the Sinter Plant-3 has been dedicated to the nationby the Hon’ble Steel Minister. The sinter charge in BF burden hasincreased to about 70%, resulting in substantial improvement in theperformance of blast furnaces. Additional facilities for meeting enhancedrail requirements of Railways were inaugurated by Hon’ble Minister ofRailways. For Long Rail Facilities, Consultancy agreement with M/s.Corus Consulting Ltd., U.K. has been entered into for providing back-up technological support. Tendering activities for the project are invarious stages of processing.

At Durgapur Steel Plant, Upgradation of Blast Furnace No.3 has beencompleted. With the completion of this project, the hot metal capacityhas enhanced to over 2 Mtpa with 3 Blast Furnace operation. Also thework of INBA Cast House Slag granulation Plant in Blast Furnace-3 isbeing implemented. Further, additional Wheel Testing Facilities at Wheel& Axle Plant to meet enhanced quality requirement of Railways havebeen completed.

At Rourkela Steel Plant, the project for upgradation of ERW Pipe Plant tomeet the quality requirement of pipes and to produce API-5L grade of X-70 pipes has taken-off. The tendering activities for Rebuilding of Coke

Oven Battery No.1 with the necessary facilities for achieving the emissionstandards as per the Central Pollution Control Board (CPCB) normshave started.

At Bokaro Steel Plant, Work Roll spindles of Finishing Stands of HotStrip Mill have been modified to facilitate quick work roll changing, thusimproving the quality & productivity of the Mill. Combined BlowingFacilities in SMS-II has been commissioned in one converter. For ReheatingFurnace-2, dismantling, major concreting work and imported equipmentsupply have been completed. Equipment erection work is in progressand the Furnace is likely to be commissioned by year end. ReheatingFurnace modification will help in achieving better quality of hot rolledcoils besides reducing energy consumption in the Mill. The scheme ofinstallation of Tension Leveler in Slitting Line No.3 of Cold Rolling Millhas been taken up to achieve the required flatness level of cold-rolledproducts to improve their marketability.

IN HOUSE DESIGN & ENGINEERING

Centre for Engineering & Technology (CET) has been providing itsservices in the areas of modernisation, technological upgradation and,additions, modifications and replacement schemes to plants and unitswithin the company and clients outside the company – both in India andabroad.

The major projects implemented during 2001-02 with in-houseconsultancy services include ‘Raw Material Handling System’ of SinteringPlant No. 3 of BSP, ‘Transportation of Sinter from Sintering Plant No. 3to Blast Furnaces’ of BSP, ‘Installation of Combined Blowing Technologyin Converter No. 1 at SMS-II’ of BSL, ‘Upgradation of Blast FurnaceNo. 1’ of RSP, ‘Augmentation of Wheel Testing Facilities in Wheel &Axle Plant’ and upgradation of BF-3 at DSP and ‘Installation of 4.2 mwPower Plant’ at MEL. Some of the ongoing projects being implementedwith in-house consultancy are ‘Finishing of Long Rails at Rail & StructuralMill’ at BSP, ‘Installation of Walking Beam type Reheating Furnace No.2’ at BSL and ‘Installation of Gas Cleaning Plant in BF-4’ at RSP.

Besides the above, CET also provided consultancy through SAILConsultancy Division for some of the projects under implementation forclients outside the company. The Wire Rod Mill at NICCO, Kolkata wascommissioned during the year and installation of 3rd Cowper Stove atChanderiya Zinc Smelter of M/s Hindustan Zinc Ltd is underimplementation.

MARKETING OF SERVICES

During the year, the company executed orders worth Rs.469 lakhs infields like consulting, engineering, operational assistance and trainingservices to clients in India and abroad. These services, inter-alia, includedconducting 21 training programmes in Spatial Environmental Planningfor Central Pollution Control Board, India under a multilateral projectassisted by the World Bank and CDG, Germany; participation in aUNDP project for Energy Efficiency Improvement in the Steel RerollingMill Sector in India; training of over 300 technical personnel of SaudiIron and Steel Company in Saudi Arabia; successful completion ofTechnical Assistance for Performance Improvement of Delta Steel MillsCo., Egypt and providing engineering services to Hindustan Zinc Limited,India etc.

RESEARCH & DEVELOPMENT

Research & Development Centre for Iron & Steel (RDCIS), of thecompany completed 66 R&D projects during the year. These projectsprovided technological inputs to the plants/units with thrust on costreduction, value addition, quality improvement and development of new

Directors’ Report

7

products. The Centre has filed 20 patents and 20 copyrights proposalsduring the year.

During the year, 10 prestigious national awards were bagged by RDCIScollective and 118 technical papers were published /presented.

HUMAN RESOURCES MANAGEMENT REVIEWYour Company has always believed that Human resource is one of themost important resources and continues to work for its development.Ongoing restructuring process of the organisation also focuses greatly onproper utilization of human resource and its rightsizing to make thecompany healthy.

With the above in view, effective two-way communication on issuesarising out of the change process, was launched. This helped in ironingout the road blocks which normally emerge in any restructuring exercise.Besides creating proper awareness and urgency amongst the employeesfor carrying out the large scale organizational changes, it has helped thecompany in getting support for facilitating the restructuring processparticularly the divestment of power plants. Similar communicationexercise has been accepted as a continuous process to keep the employeesinformed of the realities being faced by the Company, and also motivatethem to take up higher responsibilities, in tune with the requirements ofthe Company.

The manpower strength as on 31 st March 2002 was 1,47,601comprising of 16,003 executives and 131,598 non-executives registeringa reduction of 9118 employees during the year. The manpowerproductivity at 111 tonnes of crude steel per man per year registeredincrease of 6 per cent over the previous year. With a view to optimizingthe manpower and reducing the labour cost, a Voluntary RetirementScheme based on Department of Public Enterprises (DPE) guidelineswith lumpsum payment was launched whereby over 6500 employeeswere separated. Further efforts on manpower rationalization throughVoluntary Retirement Scheme are continuing in the current year also.

To make incentive and reward schemes more meaningful, a modifiedscheme was implemented during 2001-02 putting greater thrust onprofitability as a parameter.

Need-based training was provided to employees to equip them to meetthe challenges of the competitive environment. Over 70,000 employeeswere trained during the year.

One of our colleagues from BSP was selected for Prime Minister’s ShramVir Award for the year 2000. A teacher from BSP was awarded Presidentaward on Teacher’s day. Besides, a Principal from Bokaro Steel Plant wasawarded Rashtriya Shikshak Samman from the Vice-President and anotherteacher from BSP was awarded the Shikshak Samman by the HRDMinister.

Presidential Directives on Scheduled Castes and Scheduled Tribescontinued to be implemented and monitored on regular basis. Out ofthe total manpower,14.6 per cent were Scheduled Castes and 11.5 percent were Scheduled Tribes.

The Company continued its efforts in the implementation of OfficialLanguage Policy of the Government of India. Emphasis was laid oncreating an environment in which employees adopt Hindi in their officework. Official Language shield and cup was awarded to your companyfor excellent performance in this area.

A new Vision and Credo statements for the Company were adoptedduring the year. The vision statement speaks of making the company arespected world-class organization in quality, productivity, profitabilityand customer satisfaction. HRD initiatives in the company are directed

towards the Vision of the Company and creating and nurturing a culturethat supports flexibility, learning and is proactive to change. It alsostrives to work towards charting a challenging career for employees withopportunities and rewards. Through its actions and belief, it is committedto make a meaningful difference in the employees’ lives.

Your company continued its thrust in the sports arena. The companywas represented in the CII National Committee on Sports and alsofeatured in the national sports promotion body of the Ministry of Sportsand Youth Affairs. The company participated in the prestigious sportsevents like IFA League, Beighton Cup and NN Mohan Memorial CricketTournament.

There was overall improvement in the safety performance of the companyduring the year. The declining trend of all categories of accidents wasmaintained. Adequate emphasis was laid upon safety of human resourcesand assets of the Company along with production and productivity.Systematic approach to safety management was adopted through closemonitoring of adherence to safety norms & procedures.

VIGILANCE ACTIVITIESPosition in the sensitive departments were identified and transfers as perthe rotation policy effected during the year. Surprise checks andinvestigation of the complaints were carried out for continuousimprovement in the existing systems. Continuous efforts have beenmade to streamline the system and provide flexibility to perform as perBusiness requirement in the present competitive scenario. Clearance for‘Reverse Auction’ was obtained from CVC for purchases to keep pacewith recent trend of e-commerce.Regular interaction were organised between the vigilance and the linemanagers of Plants/Units in a structured manner to sensitize the managersabout the importance of vigilance administration.

ENVIRONMENT MANAGEMENTSAIL has put in concerted efforts for pollution control and environmentalprotection over a decade. During this span of time, tangible improvementshave been achieved in environmental indices like reduction in ParticulateMatter (PM) emission, water consumption, energy consumption andremarkable increase in solid waste utilisation.Bhilai and Bokaro Steel Plants have received the prestigious Lal BahadurShastri Memorial Gold Awards for “Best Pollution ControlImplementation” and “Best Environmental and EcologicalImplementation” respectively from International Greenland Society forExcellence in Indian Industries. Durgapur Steel Plant has bagged theIndo German Green Tech Excellence Award on Environment for the year2000-01.Efforts to introduce structured Environments Management System (EMS)at various units of SAIL has resulted in ISO 14001 certification for 5units of SAIL so far. Further two more units viz. Rail & Structural Millof Bhilai Steel Plant and Sinter Plant II of Rourkela Steel Plant are due toget accreditation to ISO 14001 shortly.Life Cycle Assessment (LCA) study has been completed at Bhilai SteelPlant and the draft report has been submitted to MoEF. First interimreport on the assignment from Central Pollution Control Board for“Description of Clean Technology and Development of EnvironmentStandards for Iron Ore Mines in India” has been submitted to CPCBand further work is in progress.Environment training programmes are continually being taken up atvarious units to create awareness among its employees and integrate itinto operational and maintenance practices. Apart from this, observance

8

of World Environment Day, Environment Month, Mines Environment& Mineral Conservation Week etc. are regular features across SAIL units.In order to inculcate awareness among school children, over 250 Ecoclubs have been made actively functional. Green belt development andplanned afforestation programmes have continued to receive specialattention in plants and mines this year too.

SUBSIDIARIESThe Indian Iron & Steel Company Limited (IISCO)The Company recorded a turnover of Rs.911.94 crores. The net loss forthe year after charging depreciation of Rs.23.94 crores and interest ofRs.11.63 crores was Rs.179.87 crores compared to net loss of Rs.187.31crores during 2000-01.The Company produced 346 thousand tonnes of crude steel, 292thousand tonnes of saleable steel and 288 thousand tonnes of pig ironduring the year.IISCO was declared a sick industrial company by the Board for Industrial& Financial Reconstruction (BIFR) on 17th August, 1994. Yourcompany has appointed the Industrial Development Bank of India(IDBI) as a global advisor for disinvestment of IISCO to a suitablestrategic partner with the company holding minority stake. Parallely, arevival package approved by the Government of India is under examinationof IDBI, the operating agency appointed by BIFR.IISCO-Ujjain Pipe & Foundry Company Limited, a wholly ownedsubsidiary of IISCO, was decided to be wound up by BIFR in June’96.The Official Liquidator has initiated the liquidation process.Maharashtra Elektrosmelt Limited (MEL)MEL achieved a turnover of Rs.155.64 crores during the year as againstRs.186.97 crores during the previous year. MEL has incurred a net loss ofRs.8.38 crores as compared to the loss of Rs.17.84 crores during theprevious year. The major factor contributing to the loss is high power cost.Bhilai Oxygen Limited (BOL)As a part of the business restructuring plan, a separate subsidiary companywith a nominal authorised capital of Rs.1 lakh was incorporated underthe name of Bhilai Oxygen Limited (BOL) on 9th February, 1999. Theprocess of identification/ selection of strategic alliance(s) partner andtransfer of Oxygen Plant-II of Bhilai Steel Plant to BOL is under way.Audited Accounts of SubsidiariesAudited Accounts of the Indian Iron & Steel Company Limited,Maharashtra Elektrosmelt Limited and Bhilai Oxygen Limited for theyear ending 31st March, 2002 are enclosed.

Auditors ReportThe Statutory Auditors’ Report on the Accounts of the Company for thefinancial year ended 31st March, 2002 alongwith Management’s repliesare enclosed at Annexure-I. The comments and the review on accountsfor the year ended 31st March, 2002 by the Comptroller & AuditorGeneral of India under Section 619 (4) of the Companies Act, 1956alongwith Management’s replies are placed at Annexure-II.

Report on Conservation of Energy, Technology Absorption, etc.Information in accordance with the provisions of Section 217(1)(e) ofthe Companies Act, 1956 read with the Companies (Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988 regardingConservation of Energy, Technology Absorption and Foreign ExchangeEarnings and Outgo is given at Annexure-III to this report.Particulars of EmployeesThere was no employee of the Company who received remuneration inexcess of the limits prescribed under Section 217(2A) of the Companies Act,

1956 read with the Companies (Particulars of Employees) Rules, 1975.Directors’ Responsibility StatementPursuant to Section 217(2AA) of the Companies Act, 1956, it is herebyconfirmed:(i) that in the preparation of the annual accounts, the applicable

accounting standards had been followed alongwith properexplanation relating to material departures;

(ii) that the directors had selected such accounting policies and appliedthem consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the stateof affairs of the company at the end of the financial year and of theprofit or loss of the company for that period;

(iii) that the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with theprovisions of this Act for safeguarding the assets of the companyand for preventing and detecting fraud and other irregularities;

(iv) that the directors had prepared the annual accounts on a goingconcern basis.

Corporate GovernanceIn terms of listing agreement with the Stock Exchanges, a compliancereport on Corporate Governance is given at Annexure-IV. TheManagement Discussion & Analysis Report is given at Annexure-V. Acertificate from Auditors of the company regarding compliance ofconditions of Corporate Governance is placed at Annexure-VI.Consolidated Financial StatementsIn terms of listing agreement with the Stock Exchanges, the duly auditedconsolidated financial statements are placed at Annexure–VII.DirectorsShri D. Basu ceased to be Director on completion of tenure w.e.f.22.9.2001 (A.N.).Dr. Y.R.K. Reddy ceased to be Director on 22.9.2001 (A/N) oncompletion of his tenure of three years. However, on nomination byGovernment of India he was reappointed on 23.9.2001.On nomination by Government of India, Shri S.N. Mishra was appointedas part-time non-official Director w.e.f. 26.12.2001.On nomination by Government of India, Dr. Sanak Mishra was appointedas Director w.e.f. 23.8.2002Shri C.S. Rao ceased to be Director on 31.12.2001.Shri Deepak Parekh resigned from the Board w.e.f. 18.01.2002.Shri D.P. Singh, Additional Secretary & Financial Advisor, Governmentof India, Ministry of Steel was appointed as Director w.e.f. 31.01.2002.Shri M.K. Moitra, Director (P&CP) ceased to be Director of the Companyon attaining the age of superannuation w.e.f. 28.02.2002.Dr. Isher Judge Ahluwalia resigned from the Board w.e.f. 30.07.2002.AcknowledgmentThe Board of Directors wish to place on record their appreciation for thesupport and cooperation extended by every member of the SAIL family.The Directors are thankful to the State Governments, Electricity Boards,Railways, Banks, Suppliers, Customers and Shareholders for theircontinued cooperation. The Directors also wish to acknowledge thecontinued support and guidance received from the different wings of theGovernment of India and more particularly from the Ministry of Steel.

For and on behalf of the Board of Directors

New Delhi (ARVIND PANDE)Dated: 23rd August, 2002 Chairman

Directors’ Report

9

10 - Year Digest

Shareholding Pattern(Taking Account of the Beneficiary Position of Dematerialised Shares) (As on 31.3.2002)

CATEGORY NO. OF EQUITY NUMBER OF AMOUNT % OFSHARES HELD HOLDERS RS. IN CRORES EQUITY

Government of India 3544690285 1 3544.690 85.820

Financial Institutions 346343181 13 346.343 8.385

Banks 7171700 23 7.172 0.174

Mutual Funds 20476355 23 20.476 0.496

Foreign Institutional Investors (FIIs) 24961612 35 24.962 0.604

Global Depository Receipts (GDRs) 3745105 2 3.745 0.091

Companies (Including Society & Trust) 25195712 3138 25.196 0.610

Individuals (Including Employee & NRI) 157816595 213950 157.817 3.821

Total 4130400545 217185 4130.401 100.00

Financial Highlights2001-02 2000-01 99-2000 98-99 97-98 96-97 95-96 94-95 93-94 92-93

(Rupees in crores)

Sales 15502 16233 16250 14994 14624 14131 14710 13867 11671 10175

Other Income 852 888 -974 -31 1788 2057 1027 346 656 1422(Net of stock Accretion/Depletion)

Expenditure 15343 14954 14075 13460 13914 13730 13025 11816 10507 9776

Operating Profit (PBDIT) 1011 2167 1202 1503 2498 2458 2712 2397 1820 1821

Depreciation 1156 1144 1133 1104 795 691 585 524 510 727

Interest & Finance charges 1562 1752 1789 2017 1554 1179 808 710 765 671

Profit before tax -1707 -729 -1720 -1618 149 588 1319 1163 545 423

Provision for tax/Income Tax Refund 0 0 0 -44 16 73 – 55 – –

Profit After tax -1707 -729 -1720 -1574 133 515 1319 1108 545 423

Equity Capital 4130 4130 4130 4130 4130 4130 4130 3986 3986 3986

Reserves & Surplus (Net of DRE) -1878 34 635 2756 4359 3868 3807 2570 1677 1286

Net Worth 2252 4165 4765 6886 8489 7998 7937 6556 5663 5272

Total Loans 14012 14251 15082 21017 20015 17421 14574 12214 11331 9521

Net Fixed Assets 14798 15177 15873 18307 14137 12624 8771 7557 7011 5398

Production StatisticsItem 2001-02 2000-01 99-2000 98-99 97-98 96-97 95-96 94-95 93-94 92-93

Main Integrated Steel Plant (Thousand tonnes)

Hot Metal 11327 11202 10939 11180 11615 11393 10901 10868 10172 9918Crude Steel 10467 10306 9788 9858 10297 10319 9986 9821 9506 9464Pig Iron 353 358 574 731 772 673 574 750 586 335Saleable Steel

Semi Finished Steel 2149 2141 2592 2293 3110 2104 1784 1680 1434 1321Finished Steel 7315 7269 6637 6034 5602 6798 7136 6951 6877 6616Saleable Steel (4 -Plants) 9464 9410 9229 8327 8712 8902 8920 8631 8311 7937

Alloy & Special Steel Plants (Sal. Steel)* 234 293 301 275 331 333 239 210 206 199

Total Saleable Steel* 9697 9703 9530 8602 9043 9235 9159 8841 8517 8136

* Includes VISL, merged with SAIL from 1998-99 onwards

10

Balance Sheet AS AT 31ST MARCH, 2002

Schedule As at As atNo. 31st March, 2002 31st March, 2001

SOURCES OF FUNDS (Rupees in crores)

Shareholders’ FundsShare Capital 1.1 4130.40 4130.40Reserves and Surplus 1.2 1159.97 5290.37 1160.21 5290.61

Loan FundsSecured Loans 1.3 7051.38 7961.02Unsecured Loans 1.4 6960.25 14011.63 6289.66 14250.68

19302.00 19541.29APPLICATION OF FUNDS

Fixed Assets 1.5Gross Block 27198.88 26915.59Less: Depreciation 12400.73 11738.19

Net Block 14798.15 15177.40Capital Work-in-Progress 1.6 555.94 15354.09 1220.59 16397.99

Investments 1.7 538.62 435.30Current Assets, Loans & Advances

Inventories 1.8 4041.83 4518.99Sundry Debtors 1.9 1389.41 1687.59Cash & Bank Balances 1.10 416.37 667.43Interest Receivable/Accrued 1.11 93.52 174.69Loans & AdvancesSubsidiary Company 1.12 23.37 14.31Others 1.13 1165.42 1313.01

7129.92 8376.02

Less: Current Liabilities & ProvisionsCurrent Liabilities 1.14 4653.58 4838.66Provisions 1.15 2105.32 1955.08

6758.90 6793.74Net Current Assets 371.02 1582.28Miscellaneous Expenditure 1.16 577.65 371.99

(to the extent not written off or adjusted)Profit & Loss Account Debit Balance 2460.62 753.73

19302.00 19541.29Accounting Policies and Notes on Accounts 3Schedules 1 and 3 annexed hereto, form part of the Balance Sheet.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(Devinder Kumar) (V.S. Jain) (Arvind Pande)

Secretary Director (Finance) Chairman

In terms of our report of even dateFor and on behalf of

S.R. Batliboi & Co. S.N. Nanda & Co. Chaturvedi & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-(R.K. Agrawal) (S.N. Nanda) (S.C. Chaturvedi)

Partner Partner PartnerPlace : New DelhiDated : May 28, 2002

11

Schedule Year ended Year endedNo. 31st March, 2002 31st March, 2001

INCOME (Rupees in crores)Sales 2.1 15502.00 16232.63Finished products internally consumed 181.68 167.21Interest earned 2.2 105.30 99.76Other revenues 2.3 920.38 482.78Provisions no longer required written back 2.4 76.81 16786.17 31.14 17013.52

EXPENDITUREAccretion(-)/Depletion to stocks 2.5 422.38 -103.93Raw materials consumed 2.6 5652.44 5420.20Purchase of semi/finished products 18.09 41.66Employees’ Remuneration & Benefits 2.7 3249.78 3105.88Stores & Spares Consumed 1587.97 1649.91Power & Fuel 2.8 1700.67 1579.68Repairs & Maintenance 2.9 162.07 186.05Excise duty 1982.62 2122.91Freight outward 552.85 531.21Other expenses 2.10 1234.30 1097.72Interest & finance charges 2.11 1562.03 1751.68Depreciation 1155.89 1143.62

Total 19281.09 18526.59Less : Transferred to Inter Account Adjustments 2.12 798.55 18482.54 781.99 17744.60

Loss for the year -1696.37 -731.08Adjustments pertaining to earlier years 2.13 -10.52 2.42

Net Loss for the year -1706.89 -728.66Debit Balance brought forward from previous year -753.73 -796.90Transferred from Investment Allowance Reserve — 771.83

Loss carried over to Balance Sheet -2460.62 -753.73

Accounting Policies and Notes on Accounts 3Schedules 2 and 3 annexed hereto, form part of the Profit & Loss Account.

Profit and Loss Account FOR THE YEAR ENDED 31ST MARCH, 2002








12

1.2 : RESERVES & SURPLUS

As at As at 31st March, 2002 31st March, 2001

(Rupees in crores)

Capital ReserveAs per last Balance Sheet 1.58 1.70Less: Adjustment during the year 0.14 1.44 0.12 1.58

Prime Minister’s Trophy Award FundAs per last Balance Sheet 6.89 5.37Add : Additions during the year 0.71 1.64

7.60 7.01Less : Adjustments towards expenses 0.12 7.48 0.12 6.89

incurred during the year

Share Premium AccountAs per last Balance Sheet 236.84 237.64Less : Adjustment towards Bond Issue Expenses 0.69 236.15 0.80 236.84

Investment Allowance ReserveAs per last Balance Sheet — 771.83Less : Transferred to Profit & Loss Account — — 771.83 —

Bond Redemption Reserve 914.90 914.90

1159.97 1160.21

1.1 : SHARE CAPITAL


(Rupees in crores)

Authorised5,00,00,00,000 equityshares of Rs. 10 each 5000.00 5000.00

Issued, Subscribed & Paid-up4,13,04,00,545 equity sharesof Rs.10 each fully paid. 4130.40 4130.40

Note : 1,24,43,82,900 equity shares ofRs.10 each (net of adjustments onreduction of capital) were allotted as fullypaid up for consideration other than cash.

Schedules (FORMING PART OF THE BALANCE SHEET)

13

1.3 : SECURED LOANS


(Rupees in crores)Working Capital Borrowings from Banks * 4026.65 3546.86( Including Foreign Currency Non - Resident ( Bank )Loan of Rs.661.74 crores (Previous Year Rs.473.17crores)Rupee Term Loan from banks / Financial Institution# 718.33 1097.50Foreign Loans# 366.45 350.92 Non Convertible Bonds@Interest Rate Face value of Bond Date of Redemption ( % ) ( Rs. ) 17 % 100,000/- 1st April 2001 — 281.9817 % 100,000/- 5th August 2001 — 486.0016.75% 100,000/- 1st November 2001 — 274.0013.5% 100,000/- 1st Dec. 2002 270.00 270.0016% 100,000/- 14th Jan 2002 — 200.0013.75% 500,000/- 1st July 2003 175.55 175.5514.5% 100,000/- 21st May 2004 497.00 497.0014.0% 500,000/- 1st July 2005 394.45 394.4514.5% 500,000/- 1st April 2006 226.90 226.9012.95% 500,000/- 1st December 2007 100.05 100.0511.30% 500,000/- 1st June 2008 7.25 —11.60% 500,000/- 1st June 2008 33.95 —11.10% 500,000/- 1st December 2008 6.50 —11.50% 500,000/- 1st December 2008 0.30 —13.05% 500,000/- 1st December 2010 59.80 59.8012.10% 500,000/- 1st June 2011 91.30 —12% 500,000/- 1st December 2011 76.90 1939.95 — 2965.73

From Karnataka Housing Board — 0.017051.38 7961.02

* Secured by hypothecation of Company’s inventories, book debts and other current assets.# Secured by hypothecation of all tangible movable machinery at Bokaro Steel Plant Rs. 366.45 crores, Sinter Plant III of Bhilai Steel Plant Rs.205.83 crores and selective units of

Rourkela Steel Plants Rs.325 crores, all movable plant and machinery at Durgapur Steel Plant Rs.150 crores and current assets of the company Rs. 37.50 crores.@ Secured by charges ranking pari-passu inter se, on all the present and future immovable and movable assets except for Bonds of face value of Rs. 5,00,000/= each which are

secured on immovable property only at Mouje - wadej of city Taluka, District Ahmedabad, Gujarat and company’s plant and machinery including the land on which itstands, pertaining to Durgapur Steel Plant.

1.4 : UNSECURED LOANS


(Rupees in crores)Public Deposits 1272.46 1337.16Interest accrued and due thereon 2.60 1275.06 2.78 1339.94Government of India 0.27 0.27Interest accrued and due thereon 0.35 0.62 0.28 0.55Steel Development Fund 204.16 204.16Interest accrued and due thereon 454.41 658.57 317.24 521.40Foreign LoansLong Term 1548.37 1742.03

(Guaranteed by Govt. of India / State Bank of IndiaRs.913.22 crores (Previous Year Rs.1041.32 crores)

Short Term Loans from Banks 544.03 2092.40 331.29 2073.32Term Loans From Financial Institution 150.00 300.00Non Convertible Bonds@@Interest Rate Face value of Bond Date of Redemption ( % ) ( Rs. )10 % 500,000/- 18th September, 2003 100.00 —10 % 500,000/- 24th September, 2003 400.00 —12% 500,000/- 1st Feburary, 2007 100.00 100.0012.15% 500,000/- 1st Feburary, 2007 400.00 400.0011.10% 500,000/- 30th March, 2007 60.00 60.0011.25% 500,000/- 30th March, 2007 99.00 99.0011.25% 500,000/- 15th April, 2007 400.00 400.0011.10% 500,000/- 15th April, 2007 50.00 50.0012.15% 500,000/- 1st September, 2007 152.35 152.3511.30% 500,000/- 12th March, 2008 105.00 105.0011.60% 500,000/- 12th March, 2008 15.00 15.0010.10% 500,000/- 1st August, 2008 35.00 —10.50% 500,000/- 1st August, 2008 35.00 —11.50% 500,000/- 30th March, 2010 43.50 43.5011.50% 500,000/- 15th April, 2010 21.00 21.0012.45% 500,000/- 1st September, 2010 38.15 38.1512.55% 500,000/- 1st September, 2010 39.40 39.4012.65% 500,000/- 1st September, 2010 96.60 96.6012.10% 500,000/- 12th March, 2011 195.00 195.0011% 500,000/- 1st August, 2011 115.00 —Others 2500.00 1815.00Bond Application Money 83.60 39.45Housing Finance Loans 200.00 283.60 200.00 239.45

6960.25 6289.66@@ Guaranteed by Government of India and also secured by charges ranking paripassu-inter se on immovable property (book value as on 31.03.2002 Rs. 0.58 crores)

at Mouje-wadej, Ahemdabad,Gujarat.Note : Secured / unsecured Loans repayable within one year Rs. 2522.80 crores (Previous year Rs. 2859.00 crores).

14

1.5 : FIXED ASSETS

GROSS BLOCK (AT COST)

Description As at Additions / Less : Sales / As at31st Adjustments Adjustments 31st

March during the during the March2001 year year 2002

A. PLANTS, MINES, OTHERS (Rupees in crores)Land (including cost of development)— Freehold Land 54.70 0.15 0.24 54.61— Leasehold Land 32.60 -0.01 2.59 30.00Right and Patents 6.59 2.53 — 9.12Railway Lines & Sidings 220.43 -0.27 0.60 219.56Roads, Bridges & Culverts 145.48 0.11 0.57 145.02Buildings 1656.27 0.97 39.45 1617.79Plant & Machinery— Steel Plant 21295.52 1013.32 621.95 21686.89— Others 1440.17 -12.69 26.50 1400.98Furniture & Fittings 71.50 0.05 1.92 69.63Vehicles 412.39 1.98 6.44 407.93Water Supply & Sewerage 283.40 1.17 1.03 283.54EDP Equipments 196.73 3.50 1.23 199.00Miscellaneous Articles 215.59 2.56 1.78 216.37

Sub-total ‘A’ 26031.37 1013.37 704.30 26340.44

Figures for the Previous Year 25927.25 596.81 492.69 26031.37

B. SOCIAL FACILITIESLand (including cost of development)— Freehold Land 8.80 — 0.13 8.67— Leasehold Land 6.95 0.27 — 7.22Roads, Bridges & Culverts 43.14 — — 43.14Buildings 559.79 0.18 26.45 533.52Plant & Machinery-Others 71.91 0.06 1.57 70.40Furniture & Fittings 11.40 0.07 0.07 11.40Vehicles 6.97 -0.02 0.20 6.75Water Supply & Sewerage 92.06 0.06 0.02 92.10EDP Equipments 1.99 0.02 — 2.01Miscellaneous Articles 81.21 2.27 0.25 83.23

Sub-total ‘B’ 884.22 2.91 28.69 858.44

Figures for the Previous Year 896.07 -7.41 4.44 884.22

Total (‘A’+’B’) 26915.59 1016.28 732.99 27198.88

Figures for the Previous Year 26823.32 589.40 497.13 26915.59


15

1.5 : FIXED ASSETS

DEPRECIATION NET BLOCK

Description Up to For Less : On Sales Up to As at As at31st the Adjustments 31st 31st 31st

March Year during the March March March2001 year 2002 2002 2001

A. PLANTS, MINES, OTHERS (Rupees in crores)Land(including cost of development)— Freehold Land — — — — 54.61 54.70— Leasehold Land 7.55 0.60 0.29 7.86 22.14 25.05Right and Patents 5.78 1.19 — 6.97 2.15 0.81Railway Lines & Sidings 113.14 8.13 0.51 120.76 98.80 107.29Roads, Bridges & Culverts 27.70 2.46 0.17 29.99 115.03 117.78Buildings 581.29 49.47 19.28 611.48 1006.31 1074.98Plant & Machinery— Steel Plant 9155.47 966.50 441.80 9680.17 12006.72 12140.05— Others 813.97 61.45 22.10 853.32 547.66 626.20Furniture & Fittings 43.99 3.22 0.94 46.27 23.36 27.51Vehicles 268.12 17.44 6.20 279.36 128.57 144.27Water Supply & Sewerage 165.17 9.50 0.26 174.41 109.13 118.23EDP Equipments 145.97 14.74 0.95 159.76 39.24 50.76Miscellaneous Articles 107.55 9.22 1.21 115.56 100.81 108.04

Sub-total ‘A’ 11435.70 1143.92 493.71 12085.91 14254.53 14595.67

Figures for the Previous Year 10669.23 1128.70 362.23 11435.70 14595.67

B. SOCIAL FACILITIESLand(including cost of development)— Freehold Land — — — — 8.67 8.80— Leasehold Land 3.93 0.26 — 4.19 3.03 3.02Roads, Bridges & Culverts 11.74 0.78 — 12.52 30.62 31.40Buildings 128.00 8.27 7.03 129.24 404.28 431.79Plant & Machinery-Others 44.70 2.86 0.91 46.65 23.75 27.21Furniture & Fittings 9.95 0.25 0.03 10.17 1.23 1.45Vehicles 5.33 0.17 0.17 5.33 1.42 1.64Water Supply & Sewerage 55.31 3.24 — 58.55 33.55 36.75EDP Equipments 1.70 0.07 0.01 1.76 0.25 0.29Miscellaneous Articles 41.83 4.69 0.11 46.41 36.82 39.38

Sub-total ‘B’ 302.49 20.59 8.26 314.82 543.62 581.73


Total (‘A’+’B’) 11738.19 1164.51 501.97 12400.73 14798.15 15177.40


Note : Allocation of depreciation Current PreviousYear Year

(a) Charged to Profit & Loss Account 1155.89 1143.62(b) Charged to expenditure during construction 0.39 0.46(c) Debited to adjustments pertaining to earlier years 8.23 7.00

Total 1164.51 1151.08

16

1.6 : CAPITAL WORK-IN-PROGRESS


(Rupees in crores)

Expenditure during constructionpending allocation (Schedule 1.6.1) 40.43 39.76

Capital Work-in-progressSteel Plants & Units 278.79 364.60Township 4.68 5.49Ore Mines and Quarries 0.55 284.02 0.48 370.57

Capital equipments pending erection, 56.36 68.46installation, commissioning and adjustments

Construction – Stores and Spares 22.62 24.53Less: Provisions 2.51 20.11 2.48 22.05

Advances 156.70 725.29Less: Provisions 1.68 155.02 5.54 719.75

555.94 1220.59

Particulars of advancesUnsecured, Considered Good 155.02 719.75

(including advances backed byBank Guarantees Rs.13.85 crores,Previous year Rs.19.28 crores)

Unsecured, Considered Doubtful & provided for 1.68 5.54

156.70 725.29


17

1.6.1 : EXPENDITURE DURING CONSTRUCTION (pending allocation)


(Rupees in crores)

Opening balance (a) 39.76 53.94

Expenditure incurred during the yearEmployees’ Remuneration & Benefits

Salaries, Wages & Bonus 16.37 15.18Company’s contribution to Provident 1.12 1.17

and other FundsTravel Concession 0.01 0.03Welfare Expenses 0.02 0.15Gratuity 0.39 17.91 1.12 17.65

Technical Consultants’ fees & know-how — 1.62Repairs & Maintenance

Buildings — 0.02Plant & Machinery 0.10 0.03Others 0.37 0.47 0.24 0.29

Stores and Spares 3.05 0.08Power & Fuel 5.82 2.50Raw Material 3.21 0.00Rates & Taxes 0.01 0.01Other Expenses 2.30 2.34Interest & Finance Charges 39.81 87.55Depreciation 0.39 0.46

72.97 112.50Less: Income

Interest Earned 1.14 1.91Liquidated Damages 0.91 0.75Hire Charges 1.45 1.10Internal consumption of sinter 15.55 0.00Sundries 0.77 19.82 2.97 6.73

Net expenditure during the year (b) 53.15 105.77

Total (a)+(b) 92.91 159.71

Amount allocated to Fixed Assets/Capital Work-in-progress 52.48 119.95

Balance carried forward 40.43 39.76

Total 92.91 159.71

18

1.7 : INVESTMENTS (AT COST) — LONG TERM

Number of Face As at As atFully Paid up value per 31st March, 31st March,Equity Shares Share 2002 2001

(Rs.)

(Rupees in crores)Quoted

Housing Development Finance Corporation 6,000 10 0.01 0.01Limited (Market Value Rs 41,07,600 ;Previous year Rs. 32,69,100)

HDFC Bank Limited 500 10 —* 0.01 —* 0.01(Market Value Rs 1,17,575 ;Previous year Rs. 1,15,000)

Unquoted

Trade InvestmentsTata Refractories Limited 10,00,000 10 1.12 1.12Almora Magnesite Limited 40,000 100 0.40 0.40North Bengal Dolomite Limited 97,900 100 0.98 0.98Indian Potash Limited 2,40,000 10 0.18 0.18SAIL Power Supply Company Pvt. Limited 5,86,50,050 10 58.65 58.65Bokaro Power Supply Company Limited 8,40,25,000 10 84.02 —Bhilai Electric Supply Company Limited 1,66,00,000 10 16.60 —SAIL- Bansal Service Centre Pvt. Limited 27,23,200 10 2.72 0.04

(40,000)Metaljunction.Com Pvt. Limited 4,000 10 —* 164.67 —* 61.37

Other Investments -Subsidiary Companies

Indian Iron & Steel Company Limited 38,76,65,757 10 374.94 374.94Maharashtra Elektrosmelt Limited 2,37,87,935 10 23.79 23.79Bhilai Oxygen Limited 98 10 —* 398.73 —* 398.73

Other CompaniesManagement & Technology Application

(India) Limited 16,334 10 0.02 0.02UEC SAIL Information Technology Limited 1,80,000 10 0.18 0.18Cement & Allied Products (Bihar) Limited 2 10 —* —*Chemical & Fertilizer Corporation

(Bihar) Limited 1 10 —* —*Bhilai Power Supply Company Limited 5 10 —* —*Romelt SAIL (India) Limited 63000 10 0.06 0.02

(18,000)MSTC Limited 20,000 10 0.01 0.01

Shares in Co-operative Societies (1.7.1) 0.14 0.41 0.14 0.37

563.82 460.48Less : Provision for diminution in value of investments 25.20 25.18

538.62 435.30

* Cost being less than Rs. 50,000/-, figures not given.


19

1.7.1 : SHARES IN CO-OPERATIVE SOCIETIES

Number of Face As at As atFully Paid-up value per 31st March, 31st March,

Shares Share 2002 2001(Rs.)

(In Rupees)

Rajhara Employees’ Co-operativeStores Limited 25 100 2500 2500

Nandini Employees’ Co-operativeStores Limited 25 100 2500 2500

BSP Employees’ Consumers’ Co-operativeStores (Sector 4) Limited 25 100 2500 2500

Bhilai Steel Employees’ Consumers’Co-operative Society Limited (Sector-8) 250 10 2500 2500

Bokaro Steel Employees’ Co-operative 6,250 20Credit Society Limited 1,16,500 10 1290000 1290000

BSP Kamgar Consumers’ Co-operativeStores Limited (Sector-7) 250 10 2500 2500

Bokaro Steel City Central Consumers’Co-operative Stores Limited 250 10 2500 2500

NMDC Meghahatuburu Employees’Consumers Co-operative Society Limited 25 100 2500 2500

DSP Employees’ Co-operativeSociety Limited 1377 100 137700 137700

Bolani Ores Employees’ ConsumerCo-operative Society Limited 200 25 5000 5000

1450200 1450200

20

1.8 : INVENTORIES*


(Rupees in crores)

Stores & spares 888.82 942.00Add: In-transit 76.20 63.67

965.02 1005.67Less: Provision 77.89 887.13 76.36 929.31

Raw materials 496.75 523.39Add: In-transit 138.73 128.23

635.48 651.62Less: Provision 2.41 633.07 1.15 650.47

Semi/finished products 2500.12 2922.50(including scrap)

Salvaged/Scrapped fixed assets 21.51 16.71

4041.83 4518.99

* Valued as per Accounting Policy No. 1.6

1.9 : SUNDRY DEBTORS


(Rupees in crores)

Debts over six months 367.94 399.92Other debts 1183.35 1414.43

1551.29 1814.35Less: Provision for doubtful debts 161.88 126.76

1389.41 1687.59

ParticularsUnsecured, considered good 1389.41 1687.59

(Including debts backed bybank guarantees Rs.353.80 crores);Previous year Rs.426.15 crores)

Unsecured, considered doubtful 161.88 126.76

1551.29 1814.35


21

1.10 : CASH & BANK BALANCES


(Rupees in crores)

Cash and Stamps on hand 1.49 2.32Cheques on hand 261.68 305.95

With Scheduled Banks on :Current Account 19.40 21.55Unpaid Dividend Account 0.42 0.42Term Deposits Account * 132.83 152.65 336.70 358.67

With post office 0.01 0.01(Deposits pledged with excise authorities)

Remittances-in-transit 0.54 0.48

416.37 667.43

* Includes Rs. 58 crores held in escrow account for Voluntary Retirement Payments (previous year Rs.315 crores)

1.1 1 : INTEREST RECEIVABLE/ACCRUED


(Rupees in crores)

Loans to subsidiary company 0.67 0.28Loans to other companies 0.53 77.51Employees 82.60 84.32Others 15.91 17.93

99.71 180.04Less: Provision for doubtful interest 6.19 5.35

93.52 174.69ParticularsUnsecured, considered good 93.52 174.69Unsecured, considered doubtful & provided for 6.19 5.35

99.71 180.04

1.12 : LOANS AND ADVANCES TO SUBSIDIARY COMPANY


(Rupees in crores)

Loans 9.33 0.27Stores issued on loan 14.04 14.04

23.37 14.31

ParticularsUnsecured, considered good 23.37 14.31

22

1.13 : LOANS & ADVANCES – OTHERS


(Rupees in crores)

LoansEmployees 204.76 241.84Others 115.87 320.63 109.00 350.84

Advances recoverable in cash or inkind or for value to be received

Claims recoverable 305.23 410.55Contractors & suppliers 75.07 116.88Employees 1.42 18.03Advance Income Tax and Tax deducted at source* 84.27 53.78For purchase of shares** 4.00 —Export Incentives Receivable 58.74 69.75Others 212.59 741.32 206.47 875.46

DepositsPort Trust, Excise Department, Railways, etc. 85.06 110.25Others 111.06 196.12 108.69 218.94

1258.07 1445.24Less : Provision for doubtful Loans & Advances 92.65 132.33

1165.42 1313.01

* (Including Rs. 82.65 crores paid against disputed demands ; previous year Rs.52.65 crores)** For Metalijunction.com Pvt. Ltd. a joint venture Company

Particulars of Loans & Advances – OthersSecured, considered good 201.04 235.39Unsecured, considered good 964.38 1077.62

(Including loans & advances backed bybank guarantees Rs. 0.77 crores,Previous year Rs. 0.86 crores)

Unsecured, considered doubtful & provided for 92.65 132.33

1258.07 1445.24

Amount due from— Directors 0.02 0.04— Officers — 0.02

Maximum amount due at any time during the year from— Directors 0.04 0.05— Officers 0.02 0.02


23

1.14 : CURRENT LIABILITIES


(Rupees in crores)

Sundry creditorsCapital works 253.95 263.41Others (Including Rs. 3.61 crores

due to subsidiary companies,Previous year Rs.63.80 crores) 1596.02 1849.97 1650.17 1913.58

Advances fromCustomers 223.81 246.92Others 32.96 256.77 33.25 280.17

Security deposits 183.01 173.41Less : Investments received as

security deposit 0.21 182.80 0.07 173.34

Interest accrued but not due on Loans 1082.10 1240.44

Dividend warrants - unencashed 0.42 0.42Other liabilities 1281.52 1230.71

4653.58 4838.66

1.15 : PROVISIONS FOR


(Rupees in crores)

Gratuity 1090.06 877.84Accrued Leave Liability 557.70 378.72Pollution control & peripheral development Opening Balance 30.08 21.36 Add : Provision during the year 14.48 14.74 Less : Amount utilised during the year 1.40 43.16 6.02 30.08Exchange Fluctuation Opening Balance 22.93 11.61 Add : Provision during the year 11.10 11.32 Less : Amount utilised during the year 18.10 15.93 — 22.93Voluntary Retirement Compensation 246.79 289.75Employee Family Benefit Scheme 86.58 —Wage Revision 9.03 268.84Others 56.07 86.92

2105.32 1955.08

24

1.16 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted)

Balance Additions Total Amount Balanceas at during Charged as at31st the Off 31st

March year during the March2001 year 2002

(Rupees in crores)

(i) Development Expenditure

(a) On Mines 29.22 18.15 47.37 15.92 31.45

(b) On New Projects 0.38 — 0.38 0.10 0.28

Total (i) 29.60 18.15 47.75 16.02 31.73

(ii) Deferred Revenue Expenditure

(a) Voluntary Retirement 297.53 328.70 626.23 170.90 455.33Compensation

(b) Employee Family Benefit Scheme — 86.58 86.58 17.32 69.26

(c) Others 44.86 4.77 49.63 28.30 21.33

Total (ii) 342.39 420.05 762.44 216.52 545.92

Total (i+ii) 371.99 438.20 810.19 232.54 577.65

Previous year 499.97 14.34 514.31 142.32 371.99

Current PreviousYear Year

Charged Off to:

Raw Materials 13.16 9.67

Other Expenses & Provisions 219.38 133.29

Prior Period Adjustments/EDC — -0.64

232.54 142.32


24 25

2.1 : SALES

Year ended Year ended31st March, 2002 31st March, 2001

(Rupees in crores)

Direct 8716.43 9303.79From Stockyards 6180.10 6259.91Exports 530.97 556.11Export Incentive 52.89 66.38Others 21.61 46.44

15502.00 16232.63

2.2 : INTEREST EARNED


(Rupees in crores)

Loans & advances to subsidiary companies 0.51 —Loans & advances to other companies 8.39 15.48Customers 37.66 51.45Employees 16.55 18.65Term Deposits 35.28 8.39Others 6.91 5.79

105.30 99.76

2.3 : OTHER REVENUES


(Rupees in crores)

Social amenities-recoveries 92.84 93.95Sale of empties etc. 30.67 26.12Liquidated damages 8.76 12.01Service charges * 3.51 4.28Subsidy 7.70 7.23Hire charges etc. 0.79 0.82Claims for finished products 4.19 0.71

(Shortages & missing wagons)Dividend from Other investments 5.74 0.26Profit on sale of fixed assets (net) 0.25 8.36Profit on sale of power plants 490.58 286.89Profit on sale/lease of houses 171.64 —Sundries * 103.71 42.15

* (Tax deducted at source Rs.0.10 croresprevious year Rs. 0.07 crores) 920.38 482.78

Schedules (FORMING PART OF THE PROFIT & LOSS ACCOUNT)

2626

2.4 : PROVISIONS NO LONGER REQUIRED WRITTEN BACK


(Rupees in crores)

Loans & advances 19.55 2.58Sundry debtors 12.79 9.79Stores & spares 5.87 9.77Others 38.60 9.00

76.81 31.14

2.5 : ACCRETION(-)/DEPLETION TO STOCK OF SEMI/FINISHED PRODUCTS


(Rupees in crores)

Opening stock 2922.50 2818.57Less : Closing stock 2500.12 2922.50

422.38 -103.93

2.6 : RAW MATERIALS CONSUMED


Quantity Value Quantity Value

Tonnes Rs./crores Tonnes Rs./crores

Iron ore 18565736 833.47 18352721 825.79Coal 11502422 3473.06 11385432 3112.00Coke 128215 70.38 127831 67.36Limestone 3165910 322.59 3107173 314.33Dolomite 2305359 122.53 2376860 126.79Naphtha 18730 25.53 51954 72.17Ferro Manganese 51842 118.42 50059 107.85Ferro Silicon 16329 52.96 16742 56.36Silico Magenese 71384 157.92 70205 149.68Hot Rolled Stainless Steel Coils 15856 58.16 7148 37.45Intermediary Products 13817 85.23 28276 195.62Zinc 10977 68.85 11766 90.74Aluminium 13544 111.13 11132 96.34Others 152.21 167.72

5652.44 5420.20

NOTES :1. Consumption of raw materials includes shortages Rs. 4.44 crores (previous year Rs. 5.06 crores) to the extent not coveredby normal handling losses and excess to the extent of Rs. 5.35 crores (previous year Rs. 2.00 crores).

2. Value of raw materials consumed is after adjustments relating to Inter Plant Transfers.

Schedules (FORMING PART OF THE PROFIT & LOSS ACCOUNT)

26 27

2.7 : EMPLOYEES’ REMUNERATION & BENEFITS


(Rupees in crores)

Salaries, wages & annual bonus 2567.99 2649.51Contribution to provident fund 240.81 179.99

& other fundsTravel concession 7.69 3.37Welfare expenses 104.96 101.61Gratuity 328.33 177.60

3249.78 3112.08Less : Grants-in-Aid received from National Renewal Fund — 6.20

3249.78 3105.88Note :Expenditure on Employees’Remuneration and Benefits notincluded above and charged to:

a) Expenditure During Construction 17.91 17.65b) Deferred Revenue Expenditure 170.90 101.46c) Net expenditure on Social Amenities charged to various primary revenue heads 176.22 153.79

365.03 272.90

2.8 : POWER & FUEL


(Rupees in crores)

Purchased power 1388.11 1018.43Duty on own generation 25.08 36.37Boiler Coal/Middling 211.08 428.27Furnace Oil/LSHS/LDO 60.24 78.65Others 16.16 17.96

1700.67 1579.68Note :Expenditure on Power & Fuel notincluded above & charged off to:— Expenditure During Construction 5.82 2.50

2828

2.9 : REPAIRS & MAINTENANCE


(Rupees in crores)

Buildings 23.03 23.44

Plant & Machinery 89.54 105.70

Others 49.50 56.91

162.07 186.05

Note :

Expenditure on repairs & maintenancenot included above and charged to:

a) Employees’ Remuneration & Benefits

Buildings 35.94 28.83


Others 55.37 55.26

499.40 424.52

b) Stores & Spares

Buildings 8.87 8.76


Others 33.31 45.26

672.45 806.66

c) Expenditure during Construction

Buildings — 0.02


Others 0.37 0.24

0.47 0.29

Total (a+b+c) 1172.32 1231.47

Schedules (FORMING PART OF PROFIT & LOSS ACCOUNT)

28 29

2.10 : OTHER EXPENSES


(Rupees in crores)

Commission to selling agents 11.50 7.62Directors’ Fees 0.03 0.01Export sales expenses 24.28 27.98

Handling expenses— Raw Material 75.59 82.28— Finished goods 59.89 54.34— Scrap recovery expenses 62.80 198.28 67.32 203.94

Insurance 6.96 8.08Postage, telegram & telephone 17.32 19.69Printing & stationery 7.39 7.10

Provisions— Doubtful debts, loans and advances 72.65 61.16— Investments 0.02 0.01— Stores, Spares and Sundries 35.70 108.37 44.33 105.50

Rates & Taxes 21.59 20.32

Remuneration to Auditors— Audit fees 0.47 0.32— Tax Audit fees 0.12 0.08— Out of pocket expenses 0.62 0.56— In other capacities 0.20 1.41 0.11 1.07

Cost Audit Fees 0.01 0.01Rent 24.55 20.83Royalty and cess 35.79 36.05Security expenses 73.28 85.31Travelling expenses 96.91 94.64

Write Offs— Miscellaneous & Deferred Revenue Expenditure 219.38 133.29— Others (Net of provision of Rs.29.08 crores) 7.08 226.46 13.28 146.57

Cash Discount 52.96 40.31Training expenses 5.34 5.02Conversion charges 26.21 35.43Foreign Exchange Fluctuation (net) 45.80 53.35Water charges & Cess on water pollution 23.24 24.50Contribution to Joint Plant Committee Funds 2.27 2.14Miscellaneous (include Donation Rs. 0.50 lakhs, 224.35 152.25

previous year Rs.0.35 lakhs)

1234.30 1097.72

3030

2.11 : INTEREST & FINANCE CHARGES


(Rupees in crores)

Public Deposits 167.61 220.84Foreign Currency Loans 136.42 181.12Non Convertible Bonds 576.73 653.53Bank Borrowings - working capital 453.28 440.40Steel Development Fund Loans 37.48 23.82Others 176.11 201.08Finance Charges 40.64 30.89

Less : Interest subsidy received from GOI 1588.27 1751.6826.24 —

1562.03 1751.68

Note :Expenditure on interest not included above & charged to:Expenditure During ConstructionPublic Deposit — 4.92Foreign Currency Loans 1.69 5.32Non Convertible Bonds 24.56 54.05Steel Development Fund Loans 9.48 13.39Others 3.43 9.86Finance Charges 0.65 0.01

39.81 87.55

2.12 : INTER ACCOUNT ADJUSTMENTS


(Rupees in crores)

Raw materials 560.31 552.82Departmentally manufactured stores 211.68 207.32Services transferred to capital works 21.30 21.01Coke subsidy to Employees 0.51 0.34Others(Net) 4.75 0.50

798.55 781.99

2.13 : ADJUSTMENTS PERTAINING TO EARLIER YEARS


(Rupees in crores)

Sales 0.73 5.69Other revenues 0.66 -4.97Raw materials consumed -1.88 -0.25Purchase of semi/finished products — 0.03Employees’ remuneration & benefits 1.42 -5.35Stores & spares consumed -5.01 -5.63Power & fuel -5.30 -0.92Repairs & Maintenance -0.24 -0.20Excise duty -1.56 0.34Freight Outward — 0.92Other Expenses & Provisions 10.01 -3.83Interest 3.46 4.75Depreciation 8.23 7.00

Net Debit 10.52 -2.42* (-) indicate credit items

Schedules (FORMING PART OF THE PROFIT & LOSS ACCOUNT

30 31

SCHEDULE 3 : ACCOUNTING POLICIES & NOTES ON ACCOUNTS

1. ACCOUNTING POLICIES

1.1 BASIS OF ACCOUNTINGThe Company prepares its accounts on accrual basis under historical cost convention as per the generally accepted accountingprinciples.

1.2 FIXED ASSETSAll fixed assets are stated at historical cost less depreciation.

Land gifted by the State Governments is valued notionally/nominally and the corresponding amount is credited to ‘Capital Reserve’.The expenditure on development of land including lease-hold land, is capitalised as a part of the cost of land.

Interest on Loans for additions, modifications and replacement schemes is capitalised, based on the mean of the balances under‘Capital work-in-progress’ at the beginning and close of the year under each scheme.

Fixed assets whose actual costs cannot be accurately ascertained, are initially capitalised on the basis of estimated costs and finaladjustments for costs and depreciation, if any, are made retrospectively on ascertainment of actual costs.

Expenditure incurred during the trial run period are capitalised till the concerned assets are ready for commercial production.

The Company’s contribution/expenditure towards construction/development of assets on land owned by the Government/Semi-Government authorities, is capitalised under appropriate assets account.

Grants-in-aid related to specific fixed assets are shown as deduction from the gross value of the assets concerned in arriving at theirbook value. Grants-in-aid related to revenue items are netted against the related expenses.

Machinery spares which can be used only in connection with an item of fixed assets and whose use as per technical assessment isexpected to be irregular, are capitalised and depreciated over the residual useful life of the respective assets.

Items of fixed assets that have been retired from active use are exhibited under fixed assets at their book value till the acceptance ofdisposal proposals thereagainst, and due provisions are made to take care of the shortfall, if any, in their respective realisable value.However, fixed assets that have been retired from active use and whose disposal proposals have been accepted, are de-capitalised andincluded under “Inventories” at lower of book value and estimated realisable value.

1.3 BORROWING COSTSBorrowing costs relating to the acquisition/construction of qualifying assets are capitalised until the time all substantial activitiesnecessary to prepare the qualifying assets for their intended use are complete.

A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.

All other borrowing costs are charged to revenue.

1.4 DEPRECIATIONDepreciation is provided on straight line method at the rates specified in Schedule-XIV to the Companies Act, 1956. However,where the historical cost of a depreciable asset undergoes a change, the depreciation on the revised unamortised depreciable amountis provided prospectively over the residual useful life of the asset based on the rates specified in Schedule XIV as stated above.

Depreciation on assets installed/disposed off during the year is provided with respect to the month of addition/disposal thereof.

Cost of acquiring mining rights is amortised over the lease period.

1.5 INVESTMENTSInvestments held/intended to be held for a period exceeding one year are classified as long term investments, while other investmentsare classified as current investments.Current quoted investments are valued at lower of cost or market value on individual investment basis.Investments in subsidiary Companies and other long-term and unquoted investments are valued at cost. However, provision fordiminution in the value of such investments is made to recognise a decline, other than temporary, on individual investment basis.

1.6 INVENTORIESSemi/Finished products, are valued at lower of cost and net realisable value of the respective plants.Raw-materials are valued at lower of cost and net realisable value.Iron scrap and steel/skull scrap at the integrated plants, are valued at 75% and 90% respectively of the previous year’s realisable valueof pig iron.

3232

The stocks of wear scrap lying unconsumed at the plant and mixed coke and middlings/rejects, are valued at the estimated netrealisable value.

In the case of special products, which have a realisable value at the finished stage only, the realisable value of process materials isarrived at by applying the ratio of finished product’s realisable value and its cost, to the cost upto the stage of process.

Stores and spares are valued at cost. However, in the case of stores and spares declared obsolete/surplus and also those which havenot moved for five years or more, provision is made at 75% and 10% respectively of the book value and charged to revenue.

In respect of inter-unit transfers: (i) the closing stock of semi/finished products is valued at lower of cost or realisable value of thetransferor plant. Materials out of inter-plant transfers, lying in stock after further processing, are valued at transfer price plusprocessing cost of the transferee plant or realisable value, whichever is lower. Such inter-plant transferred materials used forcapitalisation have, however, been considered at cost (ii) Stores and spares are valued at cost of the transferor plant(iii) Raw materials at plants are valued at lower of cost and net realisable value. Cost is determined based on the average of purchasecost and transfer price.

Cost is arrived on weighted average basis.

1.7 DEVELOPMENT/DEFERRED REVENUE EXPENDITUREExpenditure incurred on development of new projects, removal of over-burden at mines, cost of feasibility studies for new projectsand payments for technical know-how/documentation is treated as development expenditure.

Expenditure incurred on removal of over-burden in mines is written off in five years. Expenditure on feasibility studies, technicalknow-how/documentation and other development expenditure is added to the capital cost of the project, if implemented. In case theproject is abandoned, such expenses are written off in five years.

Voluntary retirement compensation liability ascertained on actuarial valuation, is treated as deferred revenue expenditure andwritten-off in five years. Further, annual increase/decrease to the above liability actuarially ascertained, is taken to Profit & LossAccount, after adjustment of payments thereof during the year. Incremental payments against Voluntary Retirement Schemes due towage revision is charged corresponding to the period for which deferred revenue expenditure relating to such Voluntary RetirementScheme is amortised, with the first charge being made for the entire lapsed period in the year in which such wage agreement isfinalised. In case of Voluntary Retirement Schemes which envisage monthly payments, the payments are charged off as percontractual terms, while the future liability to the disabled employee/legal heirs of deceased employees under the Family BenefitSchemes is treated as deferred revenue expenditure and written-off over a period of 5 years.

Other deferred revenue expenditure including expenditure on consultancy/ technological assistance for strategic cost reduction andquality improvements is written-off in five years.

1.8 FOREIGN CURRENCY TRANSACTIONSForeign currency assets and liabilities (other than those covered by forward contracts) as on the Balance Sheet date are converted atthe year end exchange rates and loss or gain arising thereon, is adjusted in the carrying amount of fixed assets or charged to Profit &Loss Account, as the case may be.

Transactions in foreign currencies other than those covered by forward contracts are recorded at the rates prevailing on the date oftransactions.

In case of foreign currency transactions covered by forward contracts, the difference between contract rate and exchange rateprevailing on the date of transactions, is adjusted to the cost of fixed assets or charged to the Profit & Loss Account, as the case maybe, proportionately over the contract period.

1.9 RESEARCH & DEVELOPMENT EXPENDITUREResearch and Development Expenditure is charged to Profit and Loss Account in the year of incurrence. However, expenditure onfixed assets relating to research and development, is treated in the same way as other fixed assets.

1.10 CLAIMS FOR LIQUIDATED DAMAGES/ESCALATIONClaims for liquidated damages are accounted for as and when these are deducted and/or considered recoverable by the Company.These are treated as income on completion of the projects/final settlement.Suppliers’/Contractors’ claims for price escalation are accounted for, to the extent such claims are accepted by the Company.

1.11 RETIREMENT BENEFITSThe provisions for gratuity and leave encashment liabilities are made on the basis of year end actuarial valuation.

Schedules

32 33

1.12 ADJUSTMENTS PERTAINING TO EARLIER YEARS AND PREPAID EXPENSESIncome/expenditure relating to prior period and prepaid expenses which do not exceed Rs.5 lakhs in each case, are treated asincome/expenditure of current year.

1.13 SALESSales include Excise Duty and are net of rebates/price concessions/sales tax.

Materials sold in domestic market are treated as sales on delivery to carriers including the cases where delivery documents are in thecompany’s name, pending collection of payments, since the significant risks and rewards in such cases are passed on to the buyers ondespatch of materials. Export sales are treated as sales on issue of Bills of lading.

1.14 EXPORT INCENTIVESExport incentives in the form of Special/Advance Licences, credit earned under Duty Entitlement Pass Book Scheme and dutydrawback, are treated as income in the year of export, at estimated realisable value/actual credit earned on exports made during theyear.

1.15 LEASES

(a) Where the Company is lessorAssets given under finance lease are recognised as receivable at an amount equal to the net investment in the lease. Leaserentals are apportioned between principal and interest on the basis of internal rate of return. The principal amount receivedis reduced from the net investment in the lease while interest recovery is recognised as revenue. In those cases where the entirelease premium/consideration is received up front, the difference between consideration money and net book value of the assetsis recognised as income in the Profit & Loss Account.

Assets subject to operating lease are included in fixed assets and the lease income is recognised in the Profit & Loss Accounton a straight line basis over the lease term. Expenses including depreciation in relation thereto, are recognised as an expensein the Profit & Loss Account.

(b) Where the Company is lesseeFinance leases which effectively transfer to the Company substantially all the risks and rewards incidental to the ownership ofthe leased items, are capitalised at the lower of the face value and present value of the minimum lease payments at the inceptionof the lease term. Leased payments are apportioned between the finance charges and reduction of the lease liability so as toachieve a constant rate of interest on the remaining liability. Capitalised leased assets are depreciated over the lease term orestimated useful life of the relevant assets, whichever is shorter.

All leases except for those specified above, are classified as operating leases. Lease payments, in such cases, are recognised asan expense in the Profit & Loss Account on a straight line basis over the lease term.

1.16 TAXATIONProvision for income tax comprises of current tax and deferred tax charged or realised. Deferred tax is recognised, subject toconsideration of prudence on timing differences, being the differences between taxable and accounting income/expenditure thatoriginate in one period and are capable of reversal in one or more subsequent period(s). Deferred tax assets are not recognised unlessthere is virtual certainty that sufficient future taxable income will be available, against which such deferred tax assets will be realised.

1.17 SEGMENT REPORTING

(a) Identification of SegmentsThe Company has identified that its operating segments are primary segments. The Company’s operating business areorganised and managed separately for all the manufacturing units, with each business unit representing a strategic segment.Accordingly, each manufacturing unit has been identified as an operating segment for reporting purposes.

The analysis of geographical segments is based on the areas in which the customers of the Company are located.

(b) Allocation of Common costsCommon expenses are allocated to each segment on appropriate basis. Revenue and expenses not allocated to segments, havebeen included under the head “unallocated – common expenses”.

The Accounting Policies adopted for segment reporting are in line with those of the Company.

3434

NOTES ON ACCOUNTS

2.1 CONTINGENT LIABILITIESAs at 31st As at 31st

March, 2002 March, 2001(Rs. in crores)

i) Claims against the Company pending appellate/judicial decisions 1445.12 1150.85ii) Other claims against the Company not acknowledged as debt 572.71 562.91iii) Guarantee given to Banks on behalf of a subsidiary Company 28.85 28.85iv) Bills drawn on customers and discounted with banks 30.30 29.51 v) Claims by certain employees and escalation claims, — —

extent whereof is not ascertainable

2.2 Sales Tax authorities have raised demands for Rs.1041.86 crores (As at 31st March, 2001 - Rs. 989.38 crores) on account of sales taxon stock transfers made by the plants over the years to stockyards situated in different States, under various marketing schemes. Thedemands of Sales Tax authorities at plants have been contested by the Company which are pending at various stages of appeal. As salestax liability has been discharged by the respective stockyards on sale of such stocks by depositing sales tax with the respective Sales

Tax authorities in different States, no liability is expected to arise, as sales tax is leviable only once.

3. FIXED ASSETS3.1 Land includes:

i) 61473.20 acres (As at 31st March 2001 – 61510.27 acres) owned/ leased/ possessed by the Company, in respect of which title/lease deeds are pending for registration.

ii) 4442.30 acres (As at 31st March 2001 – 4442.30 acres) gifted by State Governments, which are pending for registration andincluded in (i) above.

iii) 4991.43 acres (As at 31st March 2001 - 3860.46 acres) given on lease to various agencies/ employees/ex-employees.iv) 14459.72 acres (As at 31st March, 2001 – 14459.72 acres) transferred/agreed to be transferred or made available for settlement

to various Central/State/Semi-Government authorities, in respect of which conveyance deeds remain to be executed/registered.Out of the above, 10626.73 acres (As at 31st March, 2001- 10626.73 acres) have already been adjusted in the accounts.

v) 13117.70 acres (As at 31st March, 2001 - 13117.70 acres) in respect of which title is unascertained.

3.2 Fixed assets include Rs.8000/- (As at 31st March, 2001: Rs.8000/-) being the cost of shares in a Co-operative Housing Society.

3.3 Foreign exchange variations aggregating to Rs. 56.95 crores (net debit) [previous year Rs 67.56 crores (net debit)] have beenincluded in the carrying amount of fixed assets during the year.

3.4 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) – Rs.254.79

crores (As at 31st March, 2001 - Rs.358.45 crores).

4. INVESTMENTS, CURRENT ASSETS, LOANS & ADVANCES AND CURRENT LIABILITIES& PROVISIONS

4.1 The Company has equity investments aggregating to Rs.374.94 crores (As at 31st March 2001 - Rs.374.94 crores) in its subsidiarycompany, the Indian Iron & Steel Co. Ltd. (IISCO), a sick company, the proposal for revival of which is pending with BIFR. Thevalue of IISCO’s land and buildings as on 31st March, 2000 has been determined by an independent agency which, if taken togetherwith the value of assets like plant & machinery, mines etc. is quite adequate to cover the company’s investments in IISCO. In viewof the above and also considering the long-term nature of these investments, there is no permanent diminution in the value ofinvestments and thus no provision thereof is called for in the accounts.

4.2 Sundry debtors, Loans & Advances include Rs. 16.59 crores (including Government of India loan and interest thereon amountingto Rs. 0.62 crores) due from IISCO Ujjain Pipe & Foundry Co. Ltd., a subsidiary company of IISCO, for which the OfficialLiquidator has been appointed and who has taken over the possession of the assets. The company has got the land and buildings ofIISCO Ujjain Pipe & Foundry Co. Ltd. as on 31st March, 2000, re-valued by an independent agency and the re-valued amount ofthe above assets, along with the value of other assets like plant & machinery, etc. is quite adequate to cover the above loans andadvances made by the company which are, therefore, considered to be recoverable.

Schedules

34 35

4.3 At Durgapur Steel Plant, recoverable advances/dues of Rs. 138.37 crores from Hindustan Steel Works Construction Limited(HSCL) include (i) Rs. 133.40 crores (As at 31st March, 2001 - Rs.133.40 crores) paid over the years in excess of contractualobligations included in Capital Work-in-Progress (ii) Rs. 2.54 crores (As at 31st March, 2001- Rs.2.54 crores) paid against futurejobs to be awarded (iii) Estate dues of Rs. 2.43 crores (As at 31st March, 2001 -Rs.1.45 crores). HSCL has disputed the aboveadvances and has made further claims against the Company and the Company, in turn, has also made counter claims. These mattershave been referred to a conciliator. Pending conciliation and HSCL being Government of India Undertaking, the advances and otherdues have been considered recoverable. Adjustment/provision, if any, required with regard to such advances/dues shall be carried outon finalisation of conciliation proceedings/settlement of claims/counter claims.Further, an amount of Rs. 42.75 crores (net) is due from HSCL at Bokaro Steel Plant and Bhilai Steel Plant towards advances againstfuture jobs to be executed, estate dues etc. These are considered as recoverable, since the Company has continuous dealings withHSCL and expects to recover these advances in due course

4.4 At Bhilai Steel Plant, advances of Rs. 9.84 crores due from Bharat Refractory Ltd., under BIFR, are considered as recoverable, sincethe Company has continuous dealings with these companies and expects to recover these advances in due course.

4.5 Claims recoverable (Schedule-1.13) include Rs.44.76 crores due from M/s TPE, Russia towards claims for short weight of equipments(less than contractual estimates) and equipments getting shipped through shorter route resulting in freight refunds to Bhilai SteelPlant during the years 1976 to 1984. The above claims have already been accepted by the party in Nov.’97 and recovery thereof isbeing followed up through Inter-Governmental meetings/protocol.

4.6 The Capital Work-in-progress (Schedule 1.6) includes Rs.16.31 crores towards expenditure incurred on Hot Dip Galvanising Lineproject in Assam. The Company has initialled an MOU for entering into a joint venture with M/s N E Steel Private Limited toundertake the above project. Based on the terms & conditions for such joint venture, a sum of Rs.15.90 crores is recoverable fromthe Joint Venture company, the balance has been provided for.

4.7 Unlike previous years, the future liability for benefits payable to the disabled employees / legal heirs of deceased employees under theEmployee Family Benefit Scheme have been provided and treated as deferred revenue expenditure as referred to in Accounting Policy1.7 above, resulting into an increase in loss for the year by Rs. 17.32 crores.

4.8 Sundry creditors, other liabilities, sundry debtors, claims recoverable, deposits and advances to parties include some old unlinkedbalances pending reconciliation/confirmation/adjustments. Adequate provisions wherever considered necessary have been made forsuch old balances. Further adjustments as necessary, will be accounted for in the year of reconciliation/settlement/realisation of therespective balances.

4.9 The Company has substantial carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961 and accordinglydeferred tax asset of about Rs.2117.00 crores has arisen as on 31.3.2002 (including Rs.675.00 crores for the current period) as perAccounting Standard-22 on ‘Accounting for taxes on income’. However, in consideration of prudence, the above deferred tax assethas not been recognised in the financial statements and the same would be considered at appropriate time keeping in view theavailability of sufficient taxable income against which such deferred tax asset can be realised.

4.10 On behalf of employees, an amount of Rs. 1 crore was paid during the year to Orissa Chief Minister Relief Fund to provide relief tothe affected families caused by the devastating flood in Orissa during July 2001 in anticipation of recoveries from the employees forthis cause. Rs. 44.62 lakhs were recovered from the employees during the year and efforts are on for the recovery of the balance

amount.

5. PROFIT & LOSS ACCOUNT

5.1 The Company has transferred and assigned for Rs. 670.50 crores, its Captive Power Plants at Bokaro and Bhilai on 18th September,2001 and 19th March, 2002 to the then subsidiary companies, Bokaro Power Supply Company Limited and Bhilai Electric SupplyCo. Ltd. respectively, which later converted into joint venture companies with Damodar Valley Corporation and National ThermalPower Corporation Limited respectively for generation and sale of power to the company. The profit of Rs. 490.58 crores on suchtransfer has been included under ‘Other Revenues’ as 'Profit on sale of Power Plants’.

5.2 The long term agreements for employees’ salaries & wages had expired on 31.12.1996. The Company has implemented the revisedsalaries & wages payment w.e.f. 1.1.2001 with fitment on the basis of notional increment over the period from 1.1.1997 to31.12.2000 and appropriate adjustments thereof have been carried out in the accounts. However, the issue of wage revision(including other benefits) for the period from 1.1.1997 to 31.12.2000 is to be discussed separately with the employees. Liability,

3636

if any, in this regard is unascertainable. Further, following the past practice, adhoc adjustable advances/Interim Relief of Rs.420.35crores for the above period (including Rs.127.62 crores during the year) have been charged to “Employees’ Remuneration andBenefits” in the respective years.

5.3 Power & Fuel does not include expenses for generation of power and consumption of certain fuel elements produced by the plantswhich have been included under the primary heads of account.

5.4 The Research and Development costs charged to Profit & Loss Account and fixed assets during the year amount to Rs. 48.15 crores(previous year - Rs 50.15 crores) and Rs.1.70 crores (previous year - Rs.1.68 crores) respectively.

5.5 Sundry creditors include Rs.3.40 crores due to small scale and ancillary undertakings to the extent such parties have been identified.The Company has normally made payments to SSI units in due time and also there being no claims from the parties, interest, if any,on overdue payments is unascertainable and thus not provided for. There are no SSI units to whom amounts in excess of Rs.1 lakhare due for more than 30 days.

5.6 Amount of foreign exchange differences in respect of forward exchange contracts to be recognised in the Profit & Loss Account forsubsequent periods is Rs. 15.43 crores (net debit).

5.7 The Company vide a Resolution passed by its Board of Directors at the meeting held on 26th April 2002, has withdrawn the benefitsrelating to Leave Travel Concession (LTC)/Liberalised Leave Travel Concession (LLTC) for the block calendar years of 1998-99,2000-01 and 2002-03. Accordingly, there exists no liability towards LTC/LLTC for the above periods.

5.8 The Central Board of Direct Taxes vide its Notification dated 25th September 2001 has revised the rules for computation of certainperquisites. The Employees’ Union/Association have filed writ petitions with the Hon’ble High Court at Kolkata challenging theabove Notification. The Hon’ble High Court, Vide it’s Order dated 25.1.2002, has directed that the Income Tax calculated on theperquisites shall be deducted and kept separately and not deposited with the Income Tax Department and vide order dt. 30.1.2002has granted an interim stay restraining the Company from deduction of tax on perquisite on accommodation provided to theemployees by the Company. Accordingly the company has not deducted tax on house perquisite and tax on other perquisites hasbeen deducted and kept in separate account for all employees. Necessary accounting adjustments in the above matter would becarried out on the disposal of appeals filed by the Employees’ Union/Association.

5.9 The Company has granted long term lease, in respect of certain residential premises at its various units to the employees, ex-employees etc. and profit of Rs. 171.64 crores arising on leasing of such assets has been included under ‘Other Revenues’ as 'Profiton sale/lease of houses’.

5.10 In order to comply with Accounting Standard-2, unlike previous years, the stocks of iron ore, limestone, dolomite, etc. raised at theCompany’s Mines for captive consumption, have been valued as lower of cost or net realisable value, resulting into an increase in lossfor the year by Rs. 5.87 crores.

5.11 The amount of public deposits as per the computerised list, containing depositor-wise details is higher by Rs.2.14 croresas compared to the overall balance as per financial records. The above difference has been adjusted in the books through credit todeposits and charged as prior period expense. Adjustments, if any, in this regard would be carried out after further verification/reconciliation.

5.12 The classification of plant and machinery into continuous and non-continuous has been made on the basis of technical opinion anddepreciation thereon is provided accordingly.

6. GENERAL

6.1. Segment Reportingi) Business Segment: The four integrated steel plants and three alloy steel plants, being manufacturing units, have been considered

as primary business segments for reporting under ‘Accounting Standard–17–Segment Reporting’ issued by the Institute ofChartered Accountants of India.

ii) Geographical segments have been considered for Secondary Segment Reporting. The whole of India has beenconsidered as a geographical segment and exports as other segments. The disclosures of segment-wise information is given atAnnexure-I.

Schedules

36 37

6.2 Related partyAs per Accounting Standard - 18 - ‘Related party disclosures’ issued by the Institute of Chartered Accountants of India, the name of

the related parties are given below:

Name of the related parties

Joint Venture SAIL Bansal Service Centre LimitedMetaljunction.Com Pvt. LimitedUEC SAIL Information Technology Limited

Key Management Personnel: Shri Arvind PandeShri V.S.JainShri S.C.K.PatneShri B.K.SinghDr. S.K.BhattacharyyaShri A.K.SinghShri Suresh PandeyShri Barun GhoshalDr. Sanak MishraShri R.P.SinghShri Sudhakar JhaShri D.A.PikleShri S.PanigrahiShri S.N.P.SinghShri M.N.ThakurShri M.Roy

The details of transactions between the company and the related parties, as defined in the Accounting Standard, are given below :

Sl. Nature of transactions Amount Ref. Schedule & AccountNo. Rs./crores head of the Accounts

Joint Venture KeyManagementPersonnel

I) Advances for purchase 4.00 1.13: Loans &of Shares Advances – Others

ii) Other Advances 0.10 0.08 1.13: Loans &Advances – Others

iii) Investments 2.68 1.7: Investmentsiv) Payments made against 0.05

services rendered duringprevious year

v) Managerial Remuneration 1.23 2.7: Employees’Remuneration and Benefits

6.3. Earning Per Share (EPS)In terms of Accounting Standard-20 issued by the Institute of Chartered Accountants of India, the calculation of EPS is given below:

2001-02 2000-01

i. Loss as per Profit & Loss Account (Rs. in crores) -1706.89 -728.66ii. Weighted average number of equity shares 4,13,04,00,000 4,13,04,00,000

outstanding during the yeariii. Basic and diluted EPS (In Rupees) -4.13 -1.76

6.4 Figures have been rounded off to the nearest rupee in crores as approved by the Company Law Board.6.5 Previous year’s figures are given in brackets and these have been re-arranged/ re-grouped wherever necessary.

3838

7(a). Licensed Capacity, Installed Capacity, Production

Own Products Licensed Installed ProductionCapacity (i) Capacity

(Quantity : Tonnes)Main Steel PlantsPig Iron 1797000 353242

(1797000) (358394)Crude Steel (ii) 11987000 10466919

(11987000) (10306241)Saleable Steel 10190000 9463747

(10190000) (9410240)Alloy Steels PlantsPig Iron 205000 21544

(205000) (25757)Crude Steel 301078 209838

(301078) (230977)Saleable Steel 435000 233660

(435000) (292840)OthersCalcium Ammonium Nitrate 360000 315(in terms of 25% N) (360000) (9618)

Notes: i) “Licensed Capacity” Not applicable(N.A.) in terms of Government of India Notification No.S.O.477(E) dated 25th July, 1991.ii) Crude Steel installed capacity is in terms of solid steel as per IISI requirements.

7(b). Opening Stock, Purchases, Turnover and Closing Stock

Opening Stock Purchases Sales Closing Stock

Quantity Value Quantity Value Quantity Value Quantity Value

(Quantity : Tonnes)OWN PRODUCTS (Value : Rs./crores)Main Steel PlantsPig Iron 23458 13.93 — — 279914 197.80 23080 14.95

(41672) (23.78) (—) (—) (258557) (183.03) (23458) (13.93)Steel Ingots 226742 170.03 — — 26895 22.46 128128 114.81

(253131) (200.61) (—) (—) (14775) (12.14) (226742) (170.03)Saleable Steel 1328881 1772.20 — — 9255359 13548.75 997147 1344.97

(1238891) (1587.32) (—) (—) (8755303) (13837.22) (1328881) (1772.20)

ALLOY STEELS PLANTSPig Iron 196 0.14 — — 20826 15.49 189 0.14

(2) (—) (—) (—) (25173) (18.49) (196) (0.14)Steel Ingots 13138 33.57 — — 0 — 10288 34.03

(8847) (23.10) (—) (—) (0) (—) (13138) (33.57)Saleable Steel 52252 272.97 — — 210284 736.55 53735 268.24

(51183) (276.36) (—) (—) (279732) (930.04) (52252) (272.97)OTHERSCalcium Ammonium 4857 — — — 250 0.19 4921 —Nitrate (in terms of 25% N) (7160) (1.16) (—) (—) (11739) (7.67) (4857) (—)

SUNDRIESCinders 21601 — — — 0 — 21601 —

(21601) (—) (—) (—) (0) (—) (21601) (—)Others 659.58 — 962.38 722.69

(706.01) (—) (1202.04) (659.58)TRADING ACTIVITIESIndigenous Steel 50 0.08 9679 18.09 9638 18.38 91 0.29

(139) (0.23) (24988) (41.66) (25077) (42.00) (50) (0.08)

2922.50 18.09 15502.00 2500.12(2818.57) (41.66) (16232.63) (2922.50)

Notes: i) The classification of the company’s own products for the purpose of quantitative data is in accordance with the Company Law Board’sOrder No.3/19/80—CL VI dated 16th July 1980. However, in respect of an item (Sundries), the particulars of installed capacity andproduction have not been given, as this being an omnibus head, clubbing of various products and by-products under one head wouldnot give meaningful information.

ii) Sales are net of rebates / price concessions allowed on certain Iron & Steel products.iii) Figures of closing stock are after adjustment for inter-plant transfers, internal consumption, transfer to capital works etc.

Schedules

38 39

7(c). Pig Iron and Saleable Steel Quantitative Reconciliation

Pig Iron Saleable Steel

(Main Steel (Alloy Steels (Main Steel (Alloy SteelsPlants) Plants) Plants) Plants)

(Quantity : Tonnes)

Opening Stock 23458 196 1328881 52252(41672) (2) (1238891) (51183)

Production 353242 21544 9463747 233660(358394) (25757) (9410240) (292840)

Total 376700 21740 10792628 285912(400066) (25759) (10649131) (344023)

Sales 279914 20826 9255359 210284(258557) (25173) (8755303) (279732)

Inter Plant Transfers 15580 0 208192 16586(20316) (0) (290368) (13240)

Internal Consumption (incl. 62383 581 68543 482for capital works) (94451) (299) (58083) (439)

Assorted length/Cuttings/Ingot etc. 0 0 99541 940(0) (0) (178129) (0)

Depletion/Accretion (-) in 0 0 134166 4617In-process stock (including (-1775) (0) (14768) (-2635)of inter plant transfers)

Shortages/excesses(-) due to -4257 144 29680 -732sectional weight variation (5059) (91) (23599) (995)transportation, handling etc.

Closing Stock 23080 189 997147 53735(23458) (196) (1328881) (52252)

Total 376700 21740 10792628 285912(400066) (25759) (10649131) (344023)

Notes to 7(a), 7(b) & 7(c)Figures in brackets pertain to previous year and have been rearranged/regrouped inter-se wherever necessary.

4040


(Rupees in crores)8. Expenditure incurred in foreign

currency on account ofKnow-how 10.79 24.52Interest 106.76 142.77Training expenses & payments to 15.74 19.03Foreign TechniciansOthers 0.05 2.14

Total 133.79 188.46

9. Earnings in foreign exchange on account ofExport of goods(Calculated on FOB basis) 531.55 552.91Royalty, Know-how, professional 3.43 1.72and consultation feesInterest and Dividend — 0.06

534.98 554.69

10. Value of imports during the period(Calculated on CIF basis)Raw materials 1775.25 1630.92Capital goods 33.23 26.60Stores, Spares and Components 130.81 134.36

Total 1939.29 1791.88

11. Value of raw materials consumed during the year

Rs/crores % Rs/crores %

Imported 2394.74 42.37 2215.39 40.87Indigenous 3257.70 57.63 3204.81 59.13

5652.44 100.00 5420.20 100.00

12. Value of stores/spares & components consumed during the year

Rs/crores % Rs/crores %


1591.02 100.00 1649.99 100.00

13. Particulars of Directors’ RemunerationCurrent Previous

Year Year

Salaries 0.44 0.29Company’s contribution to provident 0.05 0.02fund & other fundsMedical benefits 0.01 0.01Provision for gratuity / Accrued Leave 0.23 0.28

Total 0.73 0.60

Schedules

40 41

I. REGISTRATION DETAILS

Registration No. State Code

Balance Sheet Date

Date Month YearII. CAPITAL RAISED DURING THE YEAR

(Amount in Rs. lakhs)

Public Issue Rights Issue

Bonus Issue Private Placement

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS(Amount in Rs. lakhs)

TOTAL LIABILITIES TOTAL ASSETS

SOURCES OF FUNDS

Paid-up Capital Reserves & Surplus

Secured Loans Unsecured Loans

APPLICATION OF FUNDS

Net Fixed Assets Investments

Net Current Assets Misc. Expenditure

Accumulated Losses

IV. PERFORMANCE OF THE COMPANY (Amount in Rs. lakhs)

Turnover/Other Income Total Expenditure

Loss Before Tax Loss After Tax

Earnings Per Share (Rs.) Dividend Rate (%)

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY(As per Monetary Terms)

Item Code No. (ITC Code) :

Product Description : HOT ROLLED PLATES


Product Description : SEMI-FINISHED PRODUCT


Product Description : RAILWAY RAILS

5 5

N I L

N I L

1 9 3 0 2 0 0

4 1 3 0 4 0

7 0 5 1 3 8

1 5 3 5 4 0 9

3 7 1 0 2

2 4 6 0 6 2

- 1 7 0 6 8 9

1 6 7 8 6 1 7

N I L

N I L

1 9 3 0 2 0 0

1 1 6 0 2 1

6 9 6 0 2 5

5 3 8 6 2

5 7 7 6 5

- 1 7 0 6 8 9

1 8 4 9 3 0 6

6 4 5 4

3 1 0 3 0 2

N I L N I L

14. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE :

7 3 0 2 1 0 0 1

7 2 0 8 3 9 0 0

7 2 0 7 1 9 0 5 / 7 2 0 7 1 9 0 0

7 2 0 8 3 7 0 0 / 7 2 0 8 3 8 0 0

4242


(Rupees in crores)

Expenditure on public relations departmentsEmployees remuneration & benefits 5.11 3.62Expenditure on institutional publicity 1.29 1.45Other items of expenditure under publicity 2.23 4.36

Total 8.63 9.43

Turnover 15502.00 16232.63Percentage 0.06 0.06

SOCIAL AMENITIES

Expenses Township Education Medical Social & Co- Transport Total Previouscultural operative & year

activities societies dairy

(Rupees in crores)

Employees’ Remuneration & Benefits

— Salaries, wages &Annual Bonus 81.19 70.29 94.70 3.24 0.63 11.67 261.72 223.99

— Company contribution 7.59 7.11 9.66 0.31 0.05 1.07 25.79 22.84to PF & other funds

— Travel concessions 0.44 0.31 0.53 0.02 0.01 0.18 1.49 1.11

— Welfare expenses 2.69 3.02 15.04 2.27 3.88 0.46 27.36 26.18

— Consumption of medicines 0.29 — 21.93 — — — 22.22 23.52

— Coke & Other Subsidy — — — — 0.11 — 0.11 0.27

— Gratuity 4.97 3.46 4.66 0.31 0.02 0.80 14.22 8.12

Total 97.17 84.19 146.52 6.15 4.70 14.18 352.91 306.03

Stores & Spares 9.29 0.27 1.14 0.08 0.01 1.69 12.48 13.49

Repair & maintenance 22.87 0.30 1.20 0.13 0.02 2.20 26.72 31.79

Power & fuel 172.48 1.12 3.37 0.74 0.07 0.21 177.99 142.17

Miscellaneous expenses 20.97 2.69 4.96 0.38 0.03 2.25 31.28 37.91

Depreciation 15.98 0.52 3.71 0.16 0.01 0.21 20.59 22.38

Total 338.76 89.09 160.90 7.64 4.84 20.74 621.97 553.77

Less: Income 66.71 3.32 22.39 0.06 — 0.36 92.84 93.95

Net Deficit 272.05 85.77 138.51 7.58 4.84 20.38 529.13 459.82

Schedules

42 43

Annexure - ISegment information as at and for the year ended 31st March, 2002 (Refer to para 6.1 of Schedule 3)

A. BUSINESS SEGMENT

( Rs. in crores )

PARTICULARS BSP DSP RSP BSL ASP SSP VISL Other Inter SAILUnallocated Segment

Sales

REVENUE

- External Sales 5428.97 2089.80 2309.84 4857.15 199.20 334.58 262.80 19.66 15502.00

- Inter-Segmental Sales 127.32 104.98 15.54 125.18 88.35 4.10 2.76 334.90 -803.13 —

- Total Revenue 5556.29 2194.78 2325.38 4982.33 287.55 338.68 265.56 354.56 -803.13 15502.00

RESULT

- Operating profit / 812.75 -119.33 -645.78 69.92 -120.06 -72.18 -85.13 14.95 -144.86 (-) loss ( Before Interest Expenses )

- Interest expenses 1562.03 1562.03

- Net Loss ( - ) -1706.89

OTHER INFORMATION

- Segment assets 4055.23 4607.69 5104.81 4871.30 390.35 836.48 348.12 3386.30 23600.28

- Segment Liabilities 1250.46 627.07 798.80 1375.18 194.07 48.01 123.34 2341.97 6758.90

- Capital expenditure 137.89 95.04 30.20 55.07 0.21 9.33 2.54 21.35 351.63

- Depreciation 217.57 293.72 278.58 253.50 10.70 45.77 10.66 45.39 1155.89

B. GEOGRAPHICAL SEGMENT

PARTICULARS AMOUNT(Rs. in crores)

Sales Revenue

India 14971.03

Foreign Countries 530.97

Total 15502.00

Note :

1. Segment assets/Liabilities exclude inter-unit balances.2. Total carrying amount of segment assets by geographical location of assets, for the Company's overseas operation are below 10% of

the total assets of all segments, and hence not disclosed.

44

ANNEXURE-I TO THE DIRECTORS’ REPORT

COMMENTS MANAGEMENT’S REPLIES

To

The Members of Steel Authority of India Limited

We have audited the attached Balance Sheet of STEEL AUTHORITY OFINDIA LIMITED, as on 31st March 2002 and the annexed Profit &Loss Account of the Company, for the year ended on that date, in whichare incorporated the accounts of Plants, Units, Branches and other Officesaudited by the Branch Auditors in accordance with the letter ofappointment of Comptroller & Auditor General of India. These financialstatements are the responsibility of the Company’s Management. Ourresponsibility is to express an opinion on these financial statementsbased on our audit.

We conducted our audit in accordance with the auditing standardsgenerally accepted in India. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether thefinancial statements are free of material mis-statement. An Audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by themanagement, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis forour opinion.

As required by the Manufacturing and Other Companies (Auditors’Report) Order, 1988 issued by the Company Law Board in terms ofSection 227(4A) of the Companies Act, 1956, we enclose in the Annexurea statement on the matters specified in paragraphs 4 & 5 of the saidOrder.

Further to our comments in the Annexure referred to above, we reportthat :

1. The reports on the accounts of the Plants, Units, Branches and OtherOffices audited by the Branch Auditors have been forwarded to usand we have duly considered the same in preparing this Report;

2. We have obtained all the information and explanations, which tothe best of our knowledge and belief were necessary for the purposeof our audit;

3. In our opinion, proper books of account as required by law havebeen kept by the Company so far as appears from our examinationsof the books;

4. The Balance Sheet and the Profit & Loss Account dealt with by thisreport, are in agreement with the books of account;

5 In our opinion, read with our comments in Paragraphs 7(a) & 7(c)herein below regarding investments in terms of Accounting Standard-13 and deferment of future liability payable under Employee FamilyBenefit Scheme in terms of Accounting Standard-15, the BalanceSheet and the Profit & Loss Account have been drawn up inaccordance with the accounting standards referred to in sub-section(3C) of Section 211 of the Companies Act, 1956;

6. On the basis of the written representations received from the directors,and taken on record by the Board of Directors, we report that noneof the directors is disqualified as on 31st March, 2002 from beingappointed as a director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956. However in terms of

Auditors' Report

Reply as at 7(a) and 7(c)

45

letter dated 22nd March 2002 from the Department of CompanyAffairs, the provisions of Section 274(1)(g) are not applicable tothe directors nominated by the Government of India.

7. (a) No provision has been made for the likely shortfall in the valueof equity investments of Rs.374.94 crores in Indian Iron &Steel Co. Ltd. (under BIFR) as stated in Note No. 4.1 inSchedule 3 whose impact on the company’s loss is not presentlyascertainable.

(b) Advances, claims etc. to the extent of Rs. 252.31 crores asindicated in Note Nos. 4.2 to 4.5 in Schedule 3 are consideredfully recoverable by the management. However, since all theitems referred to are outstanding since long, we are unable tooffer our comments on the recoverability thereof.

(c) Liability of Rs. 86.58 crores for future benefits payable underFamily Benefit Scheme as referred to in Note no. 4.7 in Schedule:3 has been deferred over a period of 5 years instead of chargingit off fully in the current year. Because of the above, the loss forthe year is understated by Rs. 69.26 crores.

(d) Loans and advances include Rs. 0.55 crore being the balanceamount of Rs. 1 crore given to the Orissa Chief Minister’sRelief Fund as stated in Note No. 4.10 of Schedule 3.The Management has stated that efforts are being made torecover the above amount from the employees and, anyshortfall in this regard will be treated as ‘donation’ and dueapproval thereof u/s 293 of the Companies’ Act 1956 will beobtained.

(e) Pending finalisation and ascertainment of the arrear salaries andwages of employees for the period from 1.1.1997 to 31.12.2000,we are unable to comment on the adequacy of the provision ofRs. 420.35 crores (including Rs. 127.62 crores provided duringthe year) as referred to in Note No.5.2 in Schedule 3.


IISCO, being in losses, was taken over by the Government of India andlater on made a subsidiary company of SAIL in 1978. Provision fordiminution in value of investments is made to recognise a decline, otherthan temporary, on individual investment basis. The value of IISCO’sassets including mines, plant & machinery, land & building etc. isconsidered adequate to cover the company’s investment in it. In ourview, there is no permanent diminution in the value of company’sinvestment in IISCO and hence no provision is required. Governmenthas recently approved IISCO’s revival plan, including VR compensationand the same is under detailed evaluation/ implementation.

Advances of Rs. 16.59 crores paid to IISCO Ujjain Pipe & Foundry Co.Ltd, a subsidiary company of IISCO, under liquidation is consideredrealisable as the value of land and buildings of IISCO Ujjain Pipe &Foundry Co. Ltd., re-valued by an independent agency is adequate tocover these advances.The advances/dues of Rs. 138.37 crores relate to Hindustan SteelworksConstruction Limited (HSCL), a public sector undertaking. The matterhas been referred to a conciliator. Adjustment as required shall be carriedout on finalisation of conciliation proceedings/ settlement of claim withthe party. Further, adjustable/recoverable advances to the tune ofRs. 42.75 crores given to M/s HSCL are considered as recoverable, sincethe Company has continuous dealings with it and also considering thatGovernment has recently provided relief to HSCL.In respect of Rs. 9.84 crores as advance given to BRL, the Company hascontinuous dealings with the party. Govt. has also recently approvedrevival/relief package for BRL.Claim of Rs. 44.76 crores has been agreed to by TPE, Russia. Recoverythereof is being followed up through Inter-Governmental meetings/protocol.

The expenditure incurred upto 31st March 2002 has been fully chargedto Profit and Loss Account and the future liability has been treated asdeferred revenue expenditure to be written-off in five years as in the caseof compensation payable under the Voluntary Retirement Scheme.

Efforts are been made for the recovery of the balance amount.

Wage agreements have been finalised with employees, notionally from1.1.97 to 31.12.2000 and implemented from 1.1.2001. The liabilityhas been provided accordingly including towards adhoc advances paidfor the period 1.1.97 to 31.12.2000. Arrears for this period are to bediscussed separately, keeping in view the financial health of the company.Liability if any will be provided only on settlement.

46

(f) The company has withdrawn the benefits relating to Leave TravelConcession (LTC)/Liberalised Leave Travel Concession (LLTC)for various block periods from 1998-99 to 2002-03 as indicatedin Note No. 5.7 in Schedule: 3. Because of the above withdrawal,no liability towards LTC/LLTC has been provided in theaccounts. However, in view of specific agreements with theunions and terms of employment for extension of above benefitsto the employees, we are unable to comment whether, suchliabilities have accrued or not. (amount unascertained).

(g) The amount of public deposits as per the detailed computerizedlist was higher by Rs 2.14 crore as compared to the financialrecords as on the Balance Sheet date as indicated in Note No.5.11 in Schedule 3. The deposits have been increased by thisamount and debited to Profit & Loss Account as a ‘Prior PeriodExpense’. Internal control procedures in this regard are requiredto be strengthened. The above account having not yet beenreconciled/ verified and in the absence of adequate detail/supportings justifying the above adjustment we are unable tooffer comments in this matter.

Without considering item Nos (a), (b) and (d) to (g) ofparagraph 7 above, whose effect on the Company’s loss/Profitand Loss Account Debit Balance, is not presently ascertainable,had the impact of item (c) of paragraph 7 above been considered,the loss for the year would have been Rs. 1776.15 crores asagainst reported loss of Rs.1706.89 crores and the Debit Balancewould have been Rs.2529.88 crores, as against the reportedfigures of Rs. 2460.62 crores.

8. Subject to the above and read with the accounting policies andnotes appearing in the Schedule 3, give the information requiredby the Companies Act, 1956 in the manner so required andgive a true and fair view in confirmity with the accountingprinciples generally accepted in India:

i. in case of Balance Sheet, of the state of affairs of the Companyas at 31st March 2002 and

ii. in case of Profit & Loss Account, of the Loss of the Companyfor the year ended on that date.


As the Company has withdrawn the benefits relating to Leave TravelConcession (LTC)/Liberalised Leave Travel Concession (LLTC) for theblock calendar years of 1998-99, 2000-01 and 2002-03, there exists noliability towards LTC/LLTC for these periods.

Liability of Rs.2.14 crores has been provided pending reconciliation/verification. Internal controls are being further strengthened.

S.R. Batliboi & Co. S.N. Nanda & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/-(R.K. Agrawal) (S.N. Nanda)

Partner Partner

Chaturvedi & Co.Chartered Accountants

Sd/-(S.C. Chaturvedi)

Partner

Place : New DelhiDated : 28th May, 2002

Auditors' Report


Sd/-(Arvind Pande)

Chairman

Place : New DelhiDated : 23rd August, 2002

47


ANNEXURE TO THE AUDITORS’ REPORT[Referred to in paragraph 2 of our Report of even date]

1. (a) The Company has maintained proper records showing in most cases, fullparticulars including quantitative details and situation of its fixed assets,except for Durgapur Steel Plant where such records are under preparation/updation.

(b) The fixed assets of the Company, except in some cases have been physicallyverified by the management during the year in accordance with a regularprogramme of verification which, in our opinion requires strengtheninghaving regard to the size of the Company and the nature of its assets. Asinformed to us, no material discrepancies have been noticed with respectto those fixed assets where the reconciliation has so far been completed,and the same have been duly adjusted in the books. As regards the fixedassets not yet verified/reconciled, the discrepancies are not presentlyascertainable.

2. The fixed assets of the Company have not been revalued during the year.

3. Except in a few cases, the stocks of semi/finished products and raw materialshave been physically verified by the management at all its locations withreasonable frequency during the year. Stores and spare parts, except ina few cases, are verified in accordance with a regular programme ofverification which in our opinion, is generally reasonable. In certain cases,the stocks of scraps and middlings have been verified on the basis of visualsurvey/estimates.

4. In our opinion and according to the information and explanations given to us,the procedures for physical verification of stocks followed by the managementare generally reasonable and adequate in relation to the size of the company andthe nature of its business.

5. The discrepancies between physical stocks and book records arising out ofphysical verification, which were not material, have been dealt with in thebooks of account.

6. In our opinion and on the basis of our examination, the valuation of stocks is fairand proper in accordance with the normally accepted accounting principles andread with Note No. 5.10 in Schedule 3, is on the same basis as in the precedingyear.

7. The Company has not taken any loans, secured or unsecured, from companies,firms or other parties listed in the register maintained under Section 301 of theCompanies Act, 1956. In terms of Sub-section (6), the provisions of Section370 of the aforesaid Act, are not applicable to a company on or after 31stOctober, 1998.

8. The Company has granted loans to certain companies listed in theregister maintained under Section 301 of the Companies Act, 1956 andaccording to the information and explanations given to us, the rate ofinterest and the terms and conditions thereof, are not prejudicial to the interestof the Company.

At Durgapur Steel Plant, steps have been takenfor updation of fixed assets register coveringrecently commissioned modernized facilities.

Physical verification of fixed asset are carried outin a cycle of three years. This is a continuousprocess.

48

9. Loans and advances in the nature of loans have been given by theCompany to the employees, their co-operative societies and other partiesand they are repaying, in most cases, the principal amounts as stipulatedand are also generally regular in payment of interest, where applicable except forRs.207.55 crores due from certain public sector undertakings where recovery ofprincipal and interest as stipulated has not been made during the year. The aboveamount includes an advance of Rs.165.24 crores, which has been given in excessof the contractual amount to a public sector undertaking, for recovery of which nostipulations have been agreed to (Refer Note No.4.3 in Schedule 3). We areinformed that reasonable steps have been taken for recovery in thedefaulting cases.

10. In our opinion and according to the information and explanations given to us,having regard to the explanation that some of the items purchased are of specialnature and suitable alternative sources do not exist for obtaining comparablequotations thereof, there are adequate internal control procedures commensuratewith the size of the Company and the nature of its business for the purchase ofstores, raw materials including components, plant and machinery, equipmentand other assets and for the sale of goods.

11. According to the information and explanations given to us, the transactions ofpurchase of goods and materials and sale of goods, materials and services madein pursuance of contracts or arrangements entered in the Register maintainedunder Section 301 of the Compaines Act, 1956 and aggregating during the yearto Rs.50,000 or more in respect of each party, have been made at prices whichare reasonable having regard to the prevailing market prices for such goods,materials or services or the prices at which such transactions for similar goods orservices have been made with other parties.

12. As explained to us, the Company has a regular procedure for the determinationof unserviceable or damaged stores, raw materials and finished goods and onsuch basis, adequate amounts have been written off or provided for in theaccounts against such stocks.

13. In our opinion and according to the information and explanations given to us,the Company has complied with the provisions of Section 58A of the CompaniesAct, 1956 and the applicable rules framed thereunder with regard to the depositsaccepted from the public.

14. In our opinion, reasonable records have been maintained by the Company forthe sale and disposal of scraps and by-products where applicable and significant,.

15. In our opinion, the Company’s internal audit system is commensurate with thesize and nature of its business. However, it needs to be further strengthened andits scope to be enlarged.

16. We have broadly reviewed the records maintained by the Plants for productionof Fertilisers (Ammonium Sulphate & Calcium Ammonium Nitrate), Chemicals(Benzene & Tolune), Industrial gases and Steel products pursuant to the rulesmade by the Central Government for the maintenance of cost records underSection 209(1)(d) of the Companies Act, 1956 and are of the opinion thatprima facie, the prescribed accounts and records have been maintained. Wehave not however, made a detailed examination of the records with a view todetermine whether these are accurate and complete.

Auditors' ReportThe amount of Rs. 207.55 crores pertains toadvances given to IISCO Ujjain Pipe and FoundryCo. Ltd., HSCL and BRL. Reply given at 7(b) ofthe Auditors’ Report.

49

S.R. Batliboi & Co. S.N. Nanda & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/-(R.K. Agrawal) (S.N. Nanda)

Partner Partner

Chaturvedi & Co.Chartered Accountants

Sd/-(S.C. Chaturvedi)

Partner



Sd/-(Arvind Pande)

Chairman

Place : New DelhiDated : 23rd August, 2002

17. According to the records of the Company Provident Fund dues have generallybeen regularly deposited during the year with the appropriate authorities. Asinformed to us, the Employees’ State Insurance Act is not applicable to theCompany.

18. According to the information and explanations given to us, except forRs. 2.64 crores in respect of excise duty and sales tax, there are no undisputedamounts payable in respect of income-tax, sales tax, custom duty andexcise duty which have remained outstanding as at 31st March, 2002 for aperiod of more than six months, from the date they became payable.

19. According to information and explanations given to us and the records of theCompany examined by us, no personal expenses have been charged to revenueaccount, other than those payable under contractual obligations or in accordancewith the generally accepted business practices.

20. The Company is not a sick industrial company within the meaning of Clause (0)of sub-section 3 of the Sick Industrial Companies (Special Provisions) Act,1985.

21. In respect of the Company’s trading activities, damaged goods as explained to usby the management, have been ascertained and adequately dealt with in theaccounts.

22. In respect of service activities carried out by the Company, which are notsignificant in view of the size of the Company, in our opinion there is a reasonablesystem of recording receipts, issues and consumption of materials and storesand allocation of materials and man-hours to the relative jobs. There is also areasonable system of authorisation at proper levels and adequate system ofinternal controls, commensurate with the size of the Company and the natureof its business, on the issue of stores and allocation of stores and man-hours tothe relative jobs.

An amount of Rs. 2.60 crores against excise dutywill be paid at the time of raising of supplementaryinvoices. As regards Rs. 0.04 crores on account ofsales tax, the same has since been paid.

50

Comments of C&AGANNEXURE - II TO THE DIRECTORS’ REPORT

COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIAUNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE

ACCOUNTS OF STEEL AUTHORITY OF INDIA LIMITEDFOR THE YEAR ENDED 31ST MARCH, 2002


A. PROFIT & LOSS ACCOUNT

A reference is invited to item 7 of the StatutoryAuditors’ Report dated 28th May, 2002 wherein ithas been stated that the loss for the year wouldhave been Rs.1776.15 crore as against reportedloss of Rs.1706.89 crore. Loss of the company forthe year would increase further in view of thefollowing :

1. Expenses have been understated by Rs.307.67crore due to the following :

(i) Under/non-provision towards stores & sparesnot moved for more than 5 years (Rs.57.63 crore).

(ii) Non-charging of the foreign supervision cost,training and storage expenses incurred forreconstruction of Blast Furnace-I of Durgapur SteelPlant which was abandoned (Rs.7.88 crore)

(iii) Non-provision of liability for entry tax, interestand penalty on procurement of low silica limestone(Rs.59.84 crore)

There is a well defined procedure in the company for declaration of items asobsolete/surplus stores and spares. Usability of materials in other shops / sisterunits / subsidiary companies is ascertained before such declaration. As perAccounting policy for stores and spares declared obsolete/surplus and alsothose which have not moved for five years or more, provision is made at 75%and 10% respectively of the book value and charged to revenue. This policy isbeing followed consistently. As on 31st March, 2002, there is a provision ofRs.76.35 crore in the books towards stores and spares which have not movedfor five years and more and which are surplus/obsolete, which is consideredadequate.

Plant and equipment structurals, refractories, designs, drawings etc. initiallymeant for Blast Furnance (BF)-1 were transferred and utilised for reconstructionof BF-3 which is now in operation. The items which could not be used, havebeen provided for. Foreign supervision costs pertaining to manufacturing theplant and equipment and controlling the quality, storage expenses etc. are partof capital costs. As regards training cost, employees have been trained foroperating all the three blast furnaces at the plant which are of similar type. Thetrained people are now operating the furnace. Thus, all the expenditureincurred as part of the reconstruction of BF No.1, and utilised in BF No.3 up-gradation, has been properly capitalised.

The Hon’ble High Court of Chhatisgarh has admitted the writ petition filed byBhilai Steel Plant against the orders of Additional Commissioner of CommercialTax. The Operation of the Department’s orders has also been stayed. As thedispute on classification of low-silica limestone is unresolved, the amount ofdemand has been shown as ‘Contingent Liability’ as per consistent practice.

51


(iv) Non-provision against doubtful and disputedadvance of Rs.133.40 crore paid in excess ofcontractual obligation, outstanding for more than5 to 10 years, payment of Rs.2.54 crore for futurejob and irrecoverable estate dues of Rs.2.43 crorein case of Durgapur Steel Plant and financialassistance of Rs.34.11 crore given to M/s HSCLby Bokaro Steel Plant.

(v) Non-provision for the amount due from BhilaiRefractory Plant (a unit of BRL) which is underBIFR and its closure has already been approved byBIFR (Rs.9.84 crore).

2. Inventories have been overstated by Rs.106.20crore due to:

(i) Overvaluation of closing stock of rollable slab/steel skull scrap/defective G.P. Sheets/HR&CRCoil sheets due to valuation of materials at theprice applicable to the prime product or at costhigher than the NSR, etc. (Rs.29.36 crore).

(ii) Valuation of residual, accumulated,unmarketable mixed coke embedded with soil atBokaro Steel Plant (Rs.65.63 crore).

(iii) Overvaluation of closing stock of semi-finishedproduct/scrap either not covered by order orreturned by the customers due to valuation at listedprice/cost instead of market price (Rs.11.21 crore).

In the interest of early completion of the Projects, time to time adjustable/recoverable advances were given to M/s HSCL, being a Public SectorUndertaking. All the issues regarding adjustment/recovery of advances toM/s HSCL were envisaged to be settled on closure of contracts. In order tosettle the issue alongwith the disputed claims of HSCL relating to DurgapurSteel Plant, the matter has been referred to a conciliator. The conciliationproceedings are under progress and appropriate adjustments would be madebased on the decision arising out of conciliation proceedings. As regards duesof Bokaro Steel Plant, as there are continuous dealings with M/s HSCL, thesewould be recovered in due course. Adjustments/ recovery of advances is beingfollowed up. The matter has been duly disclosed in the Notes on Accounts atNote No.4.3 of Schedule-3. Government has also recently provided financialrelief to M/s HSCL.

The Government of India has recently approved a revival package of M/s BhilaiRefractory Plant (BRP), which includes financial support for working capitaland manpower restructuring support. On implementation of revival packageand resumption of supply of refractory bricks, the outstanding receivables shallbe adjusted/recovered from their supply bills. The matter has been duly disclosedin the ‘Notes on Accounts’ at Note No.4.4 of Schedule 3.

The inventory of Semi/Finished products is valued at lower of cost or netrealisable value of the respective plants as per consistent accounting policyfollowed by the company. For arriving at net realisable value of the products,average discounts/rebates for the year are considered which inter-alia takescare of the price reduction due to quality defects besides other rebates. However,stock of defective steel materials has been valued at lower of cost or net salesrealisation of defective steel products. The derived net sales realisation forrollable slabs not meant for sale are arrived at on the basis of net sales realisationof the tested quality finished materials. As regards valuation of iron and steelscrap, it has been valued as per the accounting policy No. 1.6 forming part ofschedule 3 to the accounts. This accounting treatment has been consistentlyfollowed.

Mixed Coke lying at Bokaro Steel Plant is usable within the plant and has alsoa good market outside. Mixed Coke lying in the yard is being continuouslydrawn and used in the sinter plant. M/s MECON, an independent agency,during the year have also surveyed the stock and confirmed the availability,usability and valuation of the same.

The Semi/Finished products are valued at lower of cost or net realisable valueof the respective plants as per consistent accounting policy followed by thecompany. There is no change in the status or nature of materials lying in stockwhich are not covered by order. These are sold as prime products in normalcourse and are accordingly valued. The materials returned by customers fornon-conformance to specifications are re-processed/re-conditioned and suppliedagainst same order/matching order. However, the valuation of returned materialshas been made at 60% of the prime product price on a conservative basis.Thus, there is no overvaluation of inventory.

52

Comments of C&AGCOMMENTS MANAGEMENT’S REPLIES

3. Accountal of excess subsidy on account of intereston loan raised for VRS (Rs.16.02 crore).

4. Depreciation has been understated due to adoptionof lower rate of depreciation at Bokaro Steel Plant(Rs.18.11. crore).

5. Income of the company has been overstated byRs.9.74 crore due to accountal of material worthRs.179.03 crore as sales although the company hadnot endorsed the railway receipts in favour of thecustomer or materials were not delivered or bill oflading was not issued within 31 March, 2002.

B. BALANCE SHEET

1. Fixed Assets include the following idle/surplus assets:

(i) Ferro Silicon Furnaces, D.G. Set, Stampingmachine, Tundish Feeder Skids of RHF-1, loadcells, IPU Schemes and computerized combustioncontrol system lying unused at Bokaro Steel Plantfor last 3-10 years due to non-completion of thescheme/premature failure/for want of requirement,etc. (Rs.62.12 crore).

(ii) ID Motor for Rail & Structural Mill of BhilaiSteel Plant imported in 1997 lying unused sinceprocurement (Rs.8.83 crore).

(iii) Rotary Kiln of RSP, weigh bridge, Twin HearthFurnace and Railway track at DSP lying unused forthe last 5-10 years (Rs.42.02 crore)

The Financial & Business Restructuring proposal of SAIL approved by theGOI in February 2000, inter-alia, provided for GOI’s guarantees of Rs.1500crores, with 50% interest subsidy on the funds, to be raised from the market bySAIL for reduction in manpower through VRS. In line with the decision of theGOI, the funds were raised during 2000-01 and 2001-02 from the market andsubsidy @ 50% of the interest paid to the Bond holders from the date ofallotment of Bonds was claimed and received from the GOI.

As per company’s rules, employees are released after they settle their dues,vacate company’s accommodation etc. Thus, the employees were released overa period of time and the VRS funds parked in the escrow account were withdrawnand utilised in phases. Interest subsidy has been correctly claimed in line withfund raised and interest paid thereon.

The assets mentioned by the Audit were capitalised during 1992 to 1997 andthere is no change in the rates of depreciation adopted during the year. Basedon the actual nature and utilisation of the respective assets like single/double/triple shifts, continuous process plant etc., the depreciation rates have beenapplied as per Schedule XIV of the Companies Act, 1956.

Sales are accounted for consistently based on the delivery of goods to thecarriers wherein significant risks and rewards of ownership have been passed onto the customers. In the cases referred, the despatches have been made to thecustomers and accordingly included in the sales. However, the documentswere held in the custody of the company for securing the payments.

It is a normal accounting principle that a transaction of sale/revenue getsrecognised even when an enterprise retains an insignificant risk of ownershipi.e. legal title to the goods by delaying endorsement of RRs etc. to protect thecollectability of amount due. Further, the position is adequately clarifiedthrough the accounting policy of the company which states that ‘Materials soldin domestic market are treated as sales on delivery to carriers including thecases where delivery documents are in the company’s name, pending collectionof payments’.

Some facilities/assets do remain idle for some time due to technical or commercialreasons or as a standby equipment. As per normal accounting practice,depreciation continues to be charged on such assets. Some items also remainunder work-in-progress on account of disputes with the contractors, mid-termreview of schemes and other market related considerations. Status of eachscheme is being reviewed regularly.

53


(iv) HDGL Project at Assam which has becomecommercially unviable and has been kept inabeyance for more than 2 years (Rs.17.64 crore).

(v) PSP of OPP at Bolani which is damaged andlying unused for the last 5 years (Rs.2.34 crore).

C. NOTES ON ACCOUNTS

(a) Contingent liabilities do not include thefollowing:

(i) Arrears of pay & allowances for the period from1.1.1997 to 31.12.2000 in respect of employees(Rs.1500 crore).

(ii) Claims lodged by HSCL and BTS on DurgapurSteel Plant under modernization packages(Rs.394.70 crore).

(iii) Claims made by contractors on Bokaro SteelPlant relating to modernization of Bokaro SteelPlant (Rs.238.24 crore).

(b) The profit of Rs.171.64 crore towards leasingof houses/flats has been accounted for withouttransfer of ownership of houses/flats to the lessee.

D. GENERAL

Following disclosure though significant have notbeen made in the Accounts:

(i) Undertaking/commitment given by the companyto the lenders of SAIL Power Supply CompanyLtd. (SPSCL) regarding its obligation towardsSPSCL.

(ii) Initial disclosure about the plan for divestmentof Alloy Steels Plant.

The company has entered into a Memorandum of Understanding (MOU)with another company for formation of joint venture for execution of Hot DipGalvanising Line (HDGL) at Assam. The JV partner has provided a securitydeposit to SAIL towards this project. The HDGL project is under activeconsideration for commercial use.

The Primary Stock Pile (PSP) of Ore Processing Plant, except for minorportion, is in use and cannot be treated as an idle asset.

Wage agreements have been finalised with the employees, notionally from1.1.1997 to 31.12.2000 and implemented from 1.1.2001. The liability hasbeen provided accordingly as the matter relating to arrears, if any, for theperiod from 1.1.1997 to 31.12.2000 is to be discussed separately, keeping inview the financial health of the company. Liability if any, will be provided onlyon settlement. Contingent liability arises when there are disputes on existingagreement/contract. There is no agreement for wage revision prior to 1.1.2001.The matter has also been adequately disclosed in Note No.5.2 of Schedule 3 tothe Notes on Accounts.

The claims of HSCL and BTS against Durgapur Steel Plant and counter claimsof DSP alongwith advances and other dues recoverable against them are underconciliation process. Claims of HSCL and BTS get off-set against our counterclaims. Position with regard to HSCL is adequately disclosed in Note No.4.3of Schedule 3 - 'Notes on Accounts'.

The counter claims of BSL are more than the claims of Rs.173.81 crores madeby VAI and its consortium members with regard to CCD Package which areunder conciliation proceedings. As regards balance claims of Rs.64.43 crores ofSMS (AG) and its consortium members, we are of the view that these areuntenable on contractual grounds.

As per Accounting Standard-19, Lease transactions and other events areaccounted for and presented in accordance with their substance and financialreality and not merely with their legal form. In the leasing of houses, the riskand rewards incidental to ownership have been transferred to lessees and thetransactions have been properly accounted for. Appropriate disclosure hasbeen made in the notes on accounts at Note No. 5.9 of Schedule 3.

The undertaking/commitment given by SAIL to lender of SPSCL to makepriority payment, is not significant and does not require any separate disclosurein the accounts.

Alloy Steels Plant is having continuous operations and its activities are beingproperly accounted for as a going concern.

54

Comments of C&AGCOMMENTS MANAGEMENT’S REPLIES

(iii) Valuation of inventory of raw materials at costat Bhilai Steel Plant, which is a deviation from theaccounting policy of the company.

(iv) Idle/abnormal costs have been included in thevaluation of inventory of iron ore/limestone/magcarbon bricks.

(v) The Company does not have any AccountingPolicy for accounting of waste material coming outalongwith ore in its mines based on some technicalevaluation or on scientific basis.

(vi) the company has transferred its captive powerplants of Durgapur, Rourkela, Bokaro and Bhilaito the joint venture companies. As a result oftransfer of captive power plants, the liability of payand allowance etc. of surplus/redundant manpower(1918) returned or likely to be returned to SAILwould have to be borne by the company.

(vii) Liabilities on account of post retirementmedical facilities and settlement expenses are notbeing recognised in accordance with AS 15.

As per Accounting Standard-2, materials and other supplies held for use in theproduction of inventories are not written down below cost if the finishedproducts in which they will be used are expected to be sold at or above cost.Accordingly, at Bhilai Steel Plant, the inventory of raw-materials are valued atcost.

Idle/abnormal costs have not been considered for valuation of inventory of ironore/limestone/mag carbon bricks. As per Accounting Standard-2, the allocationof production overheads for the purpose of their inclusion in the cost ofconversion is based on the normal capacity of production facilities and theactual level of production may be used if it approximates normal capacity.Therefore, actual level of production has been considered as normal capacityfor valuation of inventory.

The accounting for mining operation has been carried out with reference toactual operations. Waste/over-burden removal is essential part for the operationof a mine and is carried out as and when required. The expenditure of overburden/ waste removal has been properly accounted for on actual basis.

Such employees of the company who are not absorbed by the Joint Venturecompanies, continue to be regular employees of SAIL and their remunerationis charged to revenue like expenses on other employees.

Accounting Standard (AS)-15 applies to retirement benefits in the nature ofeither a defined contribution scheme or defined benefit scheme. The medicalfacilities and settlement expenses as provided by the company to retiredemployees do not fall within the definition of defined contribution scheme ordefined benefit scheme.

Sd/-(R.B. Sinha) For and on behalf of

Principal Director of the Board of DirectorsCommercial Audit &Ex-Officio Member, Sd/-

Audit Board, Ranchi (Arvind Pande)Chairman

Place : Ranchi Place : New DelhiDate : 20th August, 2002 Date : 21st August, 2002

55

Review of AccountsREVIEW OF ACCOUNTS OF STEEL AUTHORITY OF INDIA LIMITED FOR THE YEAR ENDED

31ST MARCH, 2002 BY THE COMPTROLLER & AUDITOR GENERAL OF INDIA(Review of Accounts has been prepared without taking into account the impact of comments of the COMPTROLLER & AUDITOR GENERALOF INDIA under Section 619( 4 ) of the Companies Act, 1956 and qualifications contained in the Statutory Auditors’ Report).

1. Financial PositionThe table below summarises the financial position of the Company under broad headings for the last three years :-

Description 1999-00 2000-01 2001-02

(Rs. in crore)LIABILITIES(a) Paid up-Capital

i) Government 3544.69 3544.69 3544.69ii) Others 585.71 585.71 585.71

(b) Reserves & Surplusi) Free Reserves & Surplus — — —ii) Share Premium Account 237.64 236.84 236.15iii) Specific Reserves 1693.80 923.37 923.82

(c) Borrowings fromi) (a) Government of India 0.27 0.27 0.27

(b) Steel Development Fund 204.16 204.16 204.16ii) Foreign Sources - Long-term 2230.78 2092.95 1914.82

iii) Term Loan 1487.50 1397.50 868.33iv) Non Convertible Bonds 4431.40 4780.73 4439.95v) Bond Application Money 400.00 39.45 83.60vi) Housing Finance Loans 115.99 200.01 200.00vii) Deferred Credit 0.01 — —viii) Public Deposits 2095.14 1337.16 1272.46ix) Working capital borrowings from Banks 3604.98 3546.86 4026.65x) Foreign Sources - Short-term 305.27 331.29 544.03

Total Borrowings ( i to x ) 14875.50 13930.38 13554.27xi) Interest accrued and due 206.92 320.30 457.36

(d) i) Trade dues, Current Liabilities and Provisions(excluding Gratuity & Accrued Leave Provisions) 5026.88 5273.77 4857.19

ii) Provision for Gratuity & Accrued leave 782.33 1256.56 1647.76iii) Sundry Creditors for capital works 340.91 263.41 253.95

Total (a to d) 27294.38 26335.03 26060.90

Rs. 2522.80 crore of loans fall due for repayment in next financial year.

ASSETS(e) Gross Block 26823.32 26915.59 27198.88(f) Less : Cumulative Depreciation 10950.53 11738.19 12400.73(g) Net Block 15872.79 15177.40 14798.15(h) Capital Work-in-Progress 1474.62 1220.59 555.94(i) Investments 376.62 435.30 538.62(j) Loans & Advances to Subsidiary Companies 14.31 14.31 23.37(k) Current Assets, Loans and Advances 8259.17 8361.71 7106.55(l) Miscellaneous Expenditure ( to the extent

not written-off or adjusted) 499.97 371.99 577.65(m) Profit & Loss Account Debit Balance 796.90 753.73 2460.62

Total (e to m) 27294.38 26335.03 26060.90

(n) Working Capital [k-d(i)-c(xi)] 3025.37 2767.64 1792.00(o) Capital Employed (g + n) 18898.16 17945.04 16590.15(p) Net Worth [(a)+b(i)+b(ii)-l-m] 3071.71 3241.52 1328.28*(q) Net Worth per Rupee of Paid-up Capital (Re.) 0.74 0.78 0.32(r) Profit / Loss ( - ) before Tax -1720.02 -728.66 -1706.89(s) Profit / Loss ( - ) after Tax -1720.02 -728.66 -1706.89N:B. The figures for the previous years wherever necessary have been re-arranged / regrouped wherever necessary.* The Company has become a potential sick company in terms of section 23 of the Sick Industrial Companies Act, 1985

ANNEXURE - II TO THE DIRECTORS’ REPORT

56

Review of Accounts2. Ratio Analysis

Some important financial ratios on the financial health and working of the Company at the end of last 3 years are as under :-

1999-00 2000-01 2001-02

(In Percentages)A. Liquidity

i) Current ratio (current assets to current liabilities &provisions and interest accrued & due but excludingprovisions for Gratuity and accrued leave [k/(d(i)+c(xi)] 157.80 149.47 133.72

ii) Acid Test Ratio (quick assets i.e. cash and bank balances,sundry debtors and loans and advances (excluding balanceswith Customs, Excise, Port Trust and Railways, etc., andstores issued on loan) to current liabilities (excludingprovisions and deferred credits and stores received on loan) 71.60 72.67 59.42

The deterioration in Acid Test Ratio to 59.42% in 2001-02 from72.67% in 2000-01 was due to reduction in Cash & Bank Balance andSundry Debtors.

B. Debt Equity RatioLong term debt to Equity[c(i) to (viii)/(a+b(i)+b(ii)] 2.51 2.30 2.06

The decrease in debt equity ratio during 2001-02 is due todecrease in Long-term Borrowing by Rs.1068.64 crore.

C. Profitability Ratios Due to Loss Profitability Figures are in negative.

3. Working Capital

i) The following indicates the percentage of working capital to Sales during the last three years :-

1999-00 2000-01 2001-02

(Rupees in crore)

a) Working capital 3025.37 2767.64 1792.00b) Sales 16250.16 16232.63 15502.00c) % of Working capital to Sales 18.62 17.05 11.56

The working capital of the Company decreased by 35.25% during the year 2001-02 as compared to 2000-01.

ii) The Company has made credit arrangements with consortium of Banks, lead Bank being the State Bank of India, secured by Company’sinventories, book debts and other current assets. The actual utilisation at the year end, during the last three years, was as under :

Years Utilisation

(Rs. in crore)

1999-00 3604.982000-01 3546.862001-02 4026.65

4. Sources and Utilisation of Funds

Funds amounting to Rs. 849.88 crore from internal and external sources were realised and utilised during the year ended31st March, 2002 as given below :

(Rs. in crore)I. Sources of Funds

a) Loss after tax -1706.89Add : Depreciation (including Rs. 8.23 crores relating to prior period) 1164.12Less: Increase in miscellaneous expenditure 205.66Less : Profit on sale of fixed assets 662.47 -1410.90

b) Decrease in working capital 975.64c) Sale of fixed assets 32.67d) Sale of Power Plants 670.50e) Sales/Lease of houses 190.32f) Increase in Gratuity/Accrued Leave Provision 391.20g) Increase in Capital Reserve( incl. P.M’s Trophy Award Fund) 0.45

Total ( a to g ) 849.88

57

II. Utilisation of Fundsa) Additions to fixed assets 1016.28

Less : Decrease in Capital W-I-P ( excl. depreciation on own 665.04 351.24equipments used for construction)

b) Decrease in borrowed funds 376.11c) Decrease in sundry creditors for capital works 9.46d) Decrease in share premium (Net) 0.69e) Increase in Investment 103.32f) Increase in loans and advances of Subsidiary Company 9.06

Total (a to e ) 849.88

5. Working Results

5.1 The working results of the Company for the last three years are tabulated below :

1999-00 2000-01 2001-02

(Rs. in crore)

a) Sales 16250.2 16232.63 15502.00b) Cash profit / loss ( Profit/Loss before depreciation and tax) -587.23 414.96 -551.00c) Net profit / loss before tax -1720.02 -728.66 -1706.89d) % of Cash profit to Sales -ve 2.56 -vee) % of Net profit to Sales -ve -ve -ve

(i) The Company recorded a net loss of Rs. 1706.89 crore in 2001-02 against the loss of Rs. 728.66 crore in 2000-01mainlydue to decrease in turnover arising out of reduction in sales price.

(ii) The net loss of Rs. 1706.89 crore include profit of Rs. 622.22 crore on sale of power plant/lease of houses which was notrelated to normal business operation of the company.

(iii) The cash loss of Rs. 551 crore is not sufficient to meet the repayment obligation of loans amounting to Rs. 2522.80 crore whichfalls due for repayment in the next financial year.

5.2 Trends

The percentage of finished/semi-finished goods in stock at the end of the year to sales has increased from 17.34 in 1999-00 to 18.00 in2000-01 and decreased to 16.13 in 2001-02 as indicated below :

Year Semi/Finished Stock Sales Percentage

(Rs. in crore) (Rs. in crore)

1999-00 2818.57 16250.16 17.342000-01 2922.50 16232.63 18.002001-02 2500.12 15502.00 16.13

6 (a) Cost Trends

The table below indicates the percentage of cost of sales to net sales realisation during the last three years :

Particulars 1999-00 2000-01 2001-02

(Rs. in crore)

Sales 16250.16 16232.63 15502.00Less :

Excise duty 1938.71 2122.91 1982.62Freight outward 474.97 531.21 552.85JPC Cess 2.25 2.14 2.27Other Export Sales Expenses 51.04 35.6 35.78

Total Deductions 2466.97 2691.86 2573.52

Net Sales Realisation 13783.19 13540.77 12928.48

Add : Loss -1720.02 -728.66 -1706.89Cost of Sales 15503.21 14269.43 14635.37Percentage of Cost of Sales to 112.48 105.38 113.20Net Sales Realisation

(Rs. in crore)

58

Review of Accounts6 (b) Value of Production

The value of production including excise duty, freight outwards, etc. during the last three years is indicated below :

1999-00 2000-01 2001-02(Rs. in crore)

i) Sales 16250.16 16232.63 15502.00ii) Closing stock of finished/semi-finished products 2818.57 2922.50 2500.12iii) Opening stock of finished/semi- finished products 4781.60 2818.57 2922.50iv) Value of Production (i+ii-iii) 14287.13 16336.56 15079.62

The percentage of value of production to Net Worth is 465.20 in 1999-00 and 503.98 in 2000-01 and 1135.27 in 2001-02. The percentageof value of production to total net assets of the company was 52.34 in 1999-00 and 62.03 in 2000-01 and 57.86 in 2001-02.

7. The following table gives the comparative position of Inventory (net of provisions ) and its broad details at the close of the last three years :1999-00 2000-01 2001-02

(Rs. in crore)

i) Stores & Spares (excluding in-transit) 961.82 865.64 810.93ii) Raw Materials (excluding in-transit) 513.70 522.24 494.34iii) Stock in trade 2818.57 2922.50 2500.12iv) Others 52.36 16.71 21.51

Total 4346.45 4327.09 3826.90

The stock of stores & spares is equivalent to 6.67 months’ consumption of stores and spares in 1999-00, 6.30 months’ consumption in2000-01 and 6.13 months’ consumption in 2001-02. The stock of raw materials represents 2.08 months’ consumption in 1999-00, 1.16months’ consumption in 2000-01 and 1.05 months’ consumption in 2001-02 . The stock in trade is equivalent to 2.08 months’ sales in1999-00, 2.16 months’ sales in 2000-01 and 1.94 months’ sales in 2001-02.

8. Sundry Debtors and Turnovera) The following table indicates the volume of book debts and sales for the last three years:

As on Total Book Debts Sales Percentage of total31st March Considered good Considered doubtful Total Debts to Sales

(Rs. in crore)

2000 1817.36 104.03 1921.39 16250.16 11.822001 1687.59 126.76 1814.35 16232.63 11.182002 1389.41 161.88 1551.29 15502.00 10.01

Though the percentage of Sundry debtors to sales has decreased, the percentage of doubtful debt to sundry debtors increased substantiallyfrom 5.41 in 1999-00 to 6.99 in 2000-01 and to 10.43 in 2001-02. This indicates deteriorating position so far as recoverability of debtorsis concerned.

b) The following table indicates the details of the debts outstanding for more than one year as on 31st March, 2002:

Government Departments/Undertakings Private Parties

(Rs. in crore)

1. Debts outstanding for more than one year but less than 2 years 66.50 26.722. Debts outstanding for more than two year but less than 3 years 26.04 14.673. Debts outstanding for three years or more 93.75 84.85

9. Contingent LiabilitiesThe following table indicates the details of contingent liabilities and net current assets for the last three years:

1999-00 2000-01 2001-02(Rs. in crore)

(i) Contingent Liabilities 2627.83 2813.98 3118.84(ii) Net Current Assets 2123.35 1582.28 371.02(iii) Percentage of contingent liabilities to net current assets 123.76 177.84 840.61The percentage of Contingent liabilities to net current assets which was 123.76 in 1999-00 increased to 177.84 in 2000-01 and furtherincreased to 840.16 in 2001-02.

Sd/-(R.B. Sinha)

Dated : 20th August, 2002 Principal Director of Commercial AuditPlace : Ranchi & Ex-officio Member, Audit Board, Ranchi

59

ANNEXURE - III TO THE DIRECTORS’ REPORT

(A) CONSERVATION OF ENERGY

(a) Energy Conservation Measures Taken

The overall specific energy consumption in SAIL (4 integrated steelplants) during 2001-02 has been 7.69 Gcal/tcs, which is less thanprevious year figure of 7.96 Gcal/tcs. Few important energyconservation schemes implemented during the year 2001-02 arelisted below:

Bhilai Steel Plant (BSP)

• Coal injection in BF-6

• Introduction of computer control in the soaking pits of BBM

• Introduction of improved design of ladle heating stands in SMS-I

• Improvement in the heat treatment of MgO-C bricks in RMP-II

Durgapur Steel Plant (DSP)

• Reduction of lime consumption in BOF

• Computerisation of Merchant Mill reheating furnace

• Computerisation of Section Mill reheating furnace

Rourkela Steel Plant (RSP)

• Optimisation of operation of blast furnaces for coke rate reduction.

• Introduction of slit burners in the sinter ignition hood at SinterPlant-I

Bokaro Steel Plant (BSL)

• Improvement of thermal efficiency of bell annealing furnaces inthe Annealing Line #1 of Cold Rolling Mills

• Development of process model for BF stove operation

• Optimsation of heating and rolling regimes in Hot Strip Mill

• Introduction of coke oven and and PCM dual fuel burners in therotary kilns of RMP

(b) ADDITIONAL INVESTMENT AND PROPOSAL, IF ANY,BEING IMPLEMENTED FOR REDUCTION IN ENERGYCONSUMPTION

Bhilai Steel Plant (BSP)

• Introduction of slit burners in the ignition hood at Sinter Plant-2

• Enhancement of coal dust injection in Blast Furnace # 6

• Increased sinter charge in the Blast Furnaces

• Utilisation of excess Blast Furnace Gas in Boiler # 6 at PowerPlant-I

Durgapur Steel Plant (DSP)

• Improvement in performance of Coal Washery

• Improvement in the operation of reheating furnace in Skelp Mill

• Improvement in the design of furnaces in Wheel and Axle Plant

Rourkela Steel Plant (RSP)

• Utilisation of wash oil in place of furnace oil in the boiler andreheating furnaces

• Optimisation of operation of reheating furnace in the Hot StripMill

• Improvement in the design and operation of continuous annealingfurnaces in CRM

• Optimisation of burden distribution using MTA inBlast Furnace # 1

Bokaro Steel Plant (BSL)

• Introduction of slit burners in the ignition hood at Sinter Plant

• Measures for improving performance of Blast Furnace # 3

Visveswaraya Iron and Steel Plant (VISL)

• Increase in utilisation of BF gas in the boilers for saving oil

• Introduction of BF gas firing in the tempering furnace of HTS

• Introduction of BF gas firing in the continuous annealing furnaceof IAS

(c) Impact of measures on energy consumption

The overall Specific energy consumption during the year has reducedas compared to previous year.

(d) Total Energy Consumption & Energy Consumption per unitof Production

Form ‘A’ enclosed.

(B) TECHNOLOGY ABSORPTION

Efforts made in Technology Absorption are given in Form ‘B’.

(C) FOREIGN EXCHANGE EARNINGS AND OUTGO

(Rs. in crores)

i) Foreign exchange earned fromexports and other activities 534.98

ii)Foreign exchange used:

(a) CIF value of import 1939.29(b) Other expenditure in foreign currency 133.79

For and on behalf of theBoard of Directors

Sd/-(Arvind Pande)

ChairmanPlace : New DelhiDated : 23rd August, 2002

60


FORM AFORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO

CONSERVATION OF ENERGY

Particulars 2001-02 2000-01

A. 1. ELECTRICITY

a) Total Power PurchasedUnits (Million KWH) 4559 2679Total amount (Rs. crores) 1344 938Average Rate per Unit (Rs./KWH) 2.95 3.50

b) Own Generation

i) Through Diesel GeneratorUnits (Thousand KWH) 0.463 0.076Units per litre of Diesel Oil (KWH) 3.44 3.64Average Cost per Unit (Rs./KWH) 3.20 3.02

ii) Through Steam Turbine/GeneratorUnit (Million KWH) 1839 4126Units per Gega Calories of Energy Input 284 261Average Cost per Unit (Rs./KWH) 2.19 1.65

2. COAL

i) Coking CoalQuantity (Million Tonnes) 11.50 11.39Total Cost (Rs. crores) 3473 3112Average Rate (Rs./Tonne) 3019 2733

ii) Non-coking CoalQuantity (Million Tonnes) 1.91 4.34Total Cost (Rs. crores) 212 428Average Rate (Rs./Tonne) 1108 987

3. FUEL - OILSQuantity (‘000 Kilo.Liters) 56 73Total Cost (Rs. crores) 60 79Average Rate (Rs./Kilo Liters) 10775 10714

4. OTHERSi) Purchased Coke,

LPG, Oxygen, Gases, Steam, etc. (Rs. in crores) 87 82

B. CONSUMPTION PER TONNE OF PRODUCTION

STEEL ALLOY & SPL. GROSS CAN(4 Integrated STEELS AT ROURKELASteel Plants) (ASP, SSP & VISL)* FERTILIZER PLANT

Purchased Electricity (kwh) 435 1265 1079(241) (905) (646)

Fuel-oils (Litres) 3 286(6) (108)

Coking Coal (kgs.) 1183(1182)

Non-coking Coal (kgs.) 197(451)

* ASP, SSP & VISL stand for Alloy Steels Plant, Salem Steel Plant and Visvesvaraya Iron & Steel Plant.Note : 1. Purchase power quantity consists of power from Joint Venture also.

2. Figures in brackets are for the previous year. In view of divestment of Power Plants, the last year's figures are not comparable.

61

FORM’B’

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

1. Specific areas in which R&D activities were carried out by the companyl Quality Improvementl Yield / Productivity improvementl Energy Conservationl New Technology/Product Development

2. Benefits Derived as a result of R&D efforts

Quality Improvement

l Various technological measures including reduction of BOF tapping temperature from 16600C to 16450C, minimisation of slag carry over,introduction of delayed deoxidation practice and partial replacement of aluminium with coke were introduced in SMS-II at BSL. Theseimprovements enabled control of nitrogen and total oxygen content to <45 ppm each in special steels, like EDD/API/WTCR & LPG. Further,aluminium consumption decreased by more than 20%.

l A modified roll coolant application system has been designed and commissioned in all the stands of TCM-I, CRM at BSL with optimumimpact density of the coolant on to the roll surface for achieving higher heat transfer. The total coolant flow has been redistributed for intensecooling of work rolls and mild cooling of back-up rolls. Introduction of these measures resulted in reduction of : temperature difference betweencentre to edge of roll from 7-8 to 3-40C; premature roll spalling by 50%; specific roll consumption by 30% and specific oil consumption by10%.

l An innovative loop sensor has been designed, and installed in all the five loopers of finishing stands of Hot Strip Mill, RSP, to measure looperangle with accuracy upto ±0.350. The sensor has been interfaced with the existing looper position control system. Average cobble generationhas reduced by 30% after installation of the system.

l In order to upgrade the quality of conventional 90 UTS rails, five micro alloyed rail heats with addition of Nb were made through BOF-LF-RH route at BSP and processed into R-52/R-60 rails as per IRS-T-12/96 specification. The properties of these rails showed higher yield ratioof 0.59 in comparison to a value of 0.52 (achievable for standard C-Mn 90 UTS rails). The other improvements in the properties are higheryield strength and higher fracture toughness properties attained through formation of reduced interlamellar spacing in the pearlite structure.

l In order to improve the end-straightness of rails and minimise generation of Cut Bar and Refinishing (CBRF), a number of measures wereadopted at BSP, which include elimination of impact of hot rails against stopper bar; controlling temperature of rails in the range 400–5000Cbefore transferring to slow cooling pit, modification of slow cooling pit bottom surface etc. The implementation of these measures helped inimproving the end-straightness of rails as well as in reducing the generation of CBRF by 10%.

Cost Reduction

l The bed height of sinter machine at SP II, RSP was increased from 550 to 600 mm along with installation of “Permeability Bars” in the lowerlayer in the bed. The productivity improved by about 5% and the +10 mm fraction in sinter increased from 58 to 63%.

l A low alloy wear resistant steel was developed for sinter screen decks substituting AISI 304 grade stainless steel presently used. The decks wereinstalled in all the 10 large cold sinter screens of BF shop at BSL, which increased the life of screens by two times. The screening efficiency wasalso improved by arresting over size fraction in return sinter. The sinter return load reduced by 13 %.

l A system was designed and installed to ensure uniform discharge of Tar Decanter Sludge (TDS) on coal charge over conveyor at BSL. Thesystem resulted in elimination of TDS disposal in the dump yard. Incorporation of this eco-friendly system has led to the savings of coal chargeto the tune of 3000 TPA.

l Technology for injection of ilmenite sand through tuyeres was developed and implemented in BF-7 at BSP and BFs #3 & 4 at IISCO. Therate of ilmenite injection varied between 700-900 kg/hr. through different tuyeres. Average heat flux after ilmenite sand injection decreased inthe critical coolers by 1500–3000 kcal/hr (15–20%) in BF #7 at BSP and about 20–25% in IISCO’s BFs. Hearth erosion was kept undercheck by uniform coating at the eroded area of hearth by localised deposition.

l The Process technology was developed for use of iron ore as a substitute of scrap, to the extent of 25 kg/t in the charge for BOF at BSL. Properaddition sequence along with modified lance practice has resulted in an increase in yield by about 1% and reduction in specific oxygenconsumption by 3 Nm3/t.

l Extensive trials were carried out to reveal the major cause of cold return heat from CCP at DSP. With corrective measures, the incidence of coldreturn heat reduced from 4.37% to 2.04%.

l A width measurement system was commissioned at Roughing Stand of Plate Mill at BSP based on principle of digital pulse encoders for lineardistance measurement replacing the earlier width meter. The new system ensures the measuring tolerance band within ±10mm for all sizes ofplates as against ±50 mm. The trials indicated that the new system enable Plate Mill to reduce trimming allowance from 60 mm to 25 mm oneither side of the plate. Rejection on account of No Trimming Allowance decreased from 0.82% to 0.46%.

l A mill set up system was developed and implemented in the 6 stand Continuous Billet Mill at BSP. It calculates the tension / compressionvalues in the five inter-stands by measuring and comparing the main armature current of all stands and maintains the desired tension levelsby real time speed corrections. It minimises the initial shock of the roll & stand assembly through speed adjustment at suitable time. Benefitsof the system include reduction in average deviation in length of billets by 20-25%, and cobbles by 23%.

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Energy Conservation

l A dual fuel burner was designed and installed in rotary kiln # 4 of RMP at BSL for firing coke oven gas and tar firing. With tar firing, theproduction of calcined limestone/dolomite has been achieved in the range of 95-100 t/shift with 2-5% L.O.I. Using coke oven gas firing, theproduction has been achieved in the range of 80-95 t/shift with L.O.I. in the range of 1.2 to 4.5%. Now rotary kiln # 3 has been alsomodified with the new design of dual fuel burner, in view of the encouraging results obtained.

l An innovative pressure control system was introduced in the ignition hood of M/C-8, of SP II at BSP by installation of modified dampers inthe wind legs under the hood. This resulted in 25% reduction of gaseous fuel consumption from 1600 to 1200 m3/hr.

l A highly energy efficient multi-slit burner system was developed & installed in one machine in SP-I at RSP. The system provides a curtain typeflame across the width of sinter bed, facilitating efficient heat transfer & effective ignition of the top layer of sinter mix. The new burner systembeing compact has reduced the size of the ignition hood substantially utilizing lower volume of gas for sintering process. The new systemyielded following benefits :

l Reduction in gas consumption by about 67% (from 60 Mcal/t to 20 Mcal/t)

l Increase in productivity by around 10%

l Elimination of over heating of side plates of the pallets

l In the galvanising furnace No.2 in CRM at RSP, lining was modified with insulating veneering modules of ceramic fibres. The synthesis gasconsumption as a result of this modification has reduced to 140–150 Nm3/hr from earlier consumptin level of 250–300 Nm3/hr. Further,a decrease in the shell temp. of the furnace (85-1000C) has improved the working environment as well as reduced the chances of shell buckling.

New Technology/Product Development

l Technology development for commercial production of API X–60 & X–65 grade plates, was taken up at BSP & RSP. The basic considerationsfor production of these grades of steels were design of a suitable steel chemistry, micro-alloying with Nb+V and appropriate selection of steelmaking and concast processing parameters to achieve a sound defect free cast structure. The other equally concerned area had been to achieve thedesired strength – ductility – toughness combination through controlled rolling and accelerated cooling of plates. A combination of both thepractices was used while processing plates with thickness more than 15 mm at BSP.

l Based on standard operating practices established, BSP has supplied more than 50,000 tons of API X-60 & X-65 grades of plates in differentgauges with mechanical properties conforming to the requirements of customers.

l At RSP, the technology has been established for commercial production of API X-60 plates up to 20 mm thickness in spite of the limitationsof a low powered plate mill (~3000 tons) and absence of accelerated cooling facility. More than 5000 tons of API X-60 grade plates have beensupplied. The overall yield of accepted plates from OK steel for API X–60 & X–65 grades were greater than 70% & 65% respectively. Suchhigh level of yields was achieved primarily by controlling steel chemistry and modification of casting practise.

l A corrosion resistant variety of copper-phosphorus bearing TMT ribbed bar, fulfilling the stipulations of revised specification of IS:1786 Gr.Fe 415/Fe 500 has been developed at BSP and DSP, to meet the demand of the construction sector. This rebar has C=0.15 (max) and ischaracterized by a hard tempered martensitic rim and a soft ferrite-pearlite core, produced through on-line thermo-mechanical treatment in aTHERMEXTM unit. The corrosion resistance of this rebar is over two times that of conventional TMT rebar, besides having adequate elevatedtemperature strength up to 6000C and good ambient temperature impact toughness. Over 1500 tonnes of rebar (diameter 16 to 32 mm) havebeen dispatched to different regions.

l In order to improve the formability property, fixing of nitrogen by addition of Ti (0.015 – 0.02%) was considered as a viable option forcommercial production of LPG grade steel at BSL. A number of Ti bearing heats with reduced Mn content (0.35%) was made through BOF-LF-CC route and rolled under optimised parameters. The test results of newly developed steel show that formability property improvedsignificantly in comparison to that of conventional grade (non Ti) of LPG steel. This is reflected by lower strain ageing index, higher percentageof elongation and strain hardening index (n). The major advantages realized include : Reduction in incidence of failure in both halves of LPGcylinder, Minimization of die wear & forming load, Uniformity in mechanical property of the formed component, and Higher yield (60 nos./ton as against 59 nos./ton).

l A new variety of high strength superior corrosion resistant structural steel has been commercially produced through SMS-1 route at BSP. Thecorrosion resistance property of this steel has been imparted by addition of copper along with phosphorus. The later element is known tosegregates above grain boundary and affect toughness property. This problem has been addressed by maintaining minimum ratio ofphosphorus to nitrogen in the steel. Corrosion index of this grade (as per ASTM G-101) was found to vary in the range of 6.3 to 6.9 againstminimum requirements of 6.

3. Future Plan of ActionR&D programmes identified for the next five years are as follows:

Technology Areas Objectives

Coal, Coke & Improvement in performance of coal washery and coke oven; Improvement in coal carbonization practice and coke quality;Chemicals Introduction of process automation for improvement in quality and yield of by-products; Improvement in service life of coke

oven battery.

Mineral Engg. & Development of newer beneficiation and agglomeration schemes through lab/pilot studies; Technological up gradation ofAgglomeration beneficiation plants, Improvement in sintering technology to achieve performance of sinter plant to international level;

Optimisation of sintering process parameters to improve sinter quality/yield; Introduction of innovative agglomerationtechnologies and their horizontal transfer.

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Technology Areas Objectives

Iron Making Maximising of BF productivity; Reduction in coke rate; Assimilation of new iron making technologies; Improvement inprocess parameter for increasing productivity and reducing cost of BF hot metal.

Steel Making & Production of cast billets for automotive/engineering sector through introduction of EMS technology; Control of steelCasting making & casting parameters for production of quality slabs of Line Pipe/EDD steels; Thermo-mechanical simulation of

continuous casting process.Refractories Improvement in life of ladles for handling hot metal and steel by using better refractory lining; Introduction of low/ultra low

cement castables in SAIL plants; Laboratory development of refractory cement from dolomite; Development and applicationof models for state-of-art customised lining design and life prediction aimed at reduction of specific refractory consumption;Introduction of self flow castable in BF tuyere stock lining to increase campaign life.

Rolling Technology Improvement in the operational efficiency of Rolling Mills; Elimination of surface defects; Improvement in the productivityand surface quality of cold rolled products; Control of process parameters for improving the quality of rails and yieldimprovement of primary mills.

Product Development of process for advanced hot dip coated products using hot dip process. Production of low aluminium wheelDevelopment and optimization of heat treatment practice; Improvement in yield and quality of special quality plates; Development of

special steel grades for automobile, agriculture and oil segments, corrosion resistant rail steel, auto body quality sheets & coils;Improvement in the performance of lubrication systems to enhance life of critical equipment; Promoting the application ofnew SAIL products in different sectors like - agriculture, automobile and construction.

Energy Conservation Development and introduction of fuel efficient burners; Optimisation of heating and rolling regime for reduction in energyconsumption; Modifications of combustion system in heating/ heat treatment furnaces; Improvement in utilization of BFgas; Energy conservation using computerised process and combustion control systems.

Automation & Development of integrated coking control system in coke oven battery and Bell Annealing Furnace; Introduction ofComputerisation automation and control systems for productivity, yield and quality improvement in steel plant units like – reheating furnaces,

heat treatment furnaces, finishing lines and rolling mills; Development of integrated communication and instrumentationsystem; Development and application of softwares for various applications.

Environment & Assessment of PAH and NOX in coke oven working zone of different steel plants; Evaluation of impact of hazardous wastesPollution Control and studies on their reuse/safe disposal.

4. Expenditure on R&DRs. in crores

Capital 1.70Revenue 48.15

Total 49.85

% of Turnover 0.32

TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION

Through Technology Strategy and intensive R&D efforts, Technology development, absorption, adaptation and further improvement are continuouslytaking place in various units of SAIL Plants. The following new technologies are installed/being installed as a part of modernisation/continuousimprovement:l Coal Dust Injection in Blast Furnace (for reduction in cost of hot metal), Slag Splashing in BOF Converter (for improved lining life of vessel), RH

Degassing of liquid steel (for improved quality of rail steel), Ladle Furnace (for sequence casting of steel in concast), Facilities for production of longrails (for market retention) and Ultrasonic & Eddy Current testing facilities (for quality assurance of rails) at BSP.

l Selective Crushing of Coal (for improved coke quality),Slag Splashing in BOF Converter(for improved lining life of vessel), Continuous Castingof billets (for cost reduction and product improvement), Electromagnetic Stirrer in the caster (for improved product quality) and Slit Rolling inMerchant Mill (for increased productivity and broader product range) at DSP.

l Base Blending for Sinter mix (for improved sinter quality), Partial Briquetting of Coal Charge (for improved coke quality), Two Stage Gas CleaningPlant for Blast Furnace (for improved quality of BF gas), Post Mixer Desulphurisation of hot metal (for improved product quality), ContinuousCasting of slabs (for cost reduction and product improvement), Slag Splashing in BOF Converter (for improved lining life of vessel) and LadleFurnace (for sequence casting of steel in concast) at RSP.

l Coal Dust Injection in Blast Furnace (for reduction in cost of hot metal), Combined Blowing in 300t Converter (for improvement in yield andquality of steel), Slag Splashing in BOF Converter (for improved lining life of vessel), Laminar Strip Cooling, Hydraulic Automatic GaugeControl, Work Roll Bending (all for improved product quality) in Hot Strip Mill at BSL.

l Electromagnetic Stirrer in the caster(for improved product quality) at VISL.These technologies are /will be gradually absorbed by the plants.No other major technologies were imported by the company during the last five years.

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Corporate Governance ANNEXURE - IV TO THE DIRECTORS’ REPORT

(a) Company’s philosophy

The company is committed to attain the highest standard ofCorporate Governance. It recognises that the Board isaccountable to all shareholders for good governance. Thephilosophy of the company in relation to corporate governanceis to ensure transparency in all its operations, make disclosuresand enhance shareholders value without compromising in anyway in compliance with laws and regulations.

(b) Board of DirectorsThe Board of Directors comprises of a full time Chairman, 7Whole Time Directors (WTD) and 9 non-executive Directors(Non-ED). During the year, 9 Board meetings were held on28.05.2001, 06.07.2001, 31.07.2001, 28.08.2001, 21.09.2001,31.10.2001, 26.12.2001, 29.01.2002 and 21.03.2002.The composition of directors and their attendance at the boardmeetings during the year and at the last Annual General Meetingas also number of other directorships are as follows:

Name of the Director Category of No. of Board Attendance No. of otherDirectorship Meetings at last directorship

attended AGM held as on31.3.2002*

Shri Arvind Pande Chairman 9 Yes 1Shri V.S. Jain WTD 9 Yes 3Shri S.C.K. Patne WTD 9 Yes 4Shri B.K. Singh WTD 8 Yes 4Shri A.K. Singh WTD 8 Yes -Dr. S.K. Bhattacharyya WTD 8 Yes -Shri S. Pandey WTD 9 Yes 1Dr.Y.R.K. Reddy Non-ED 9 Yes 5Shri D.V. Singh Non-ED 9 - 1Shri R.C. Jha WTD - - -Shri R.V. Gupta Non-ED 8 Yes 4Prof. Ram Prasad Sengupta Non-ED 7 Yes -Shri Pyarimohan Mohapatra Non-ED 4 - 2Dr. Atul Sarma Non-ED 7 - -Dr. Isher Judge Ahluwalia Non-ED 4 - -Shri S.N. Mishra Non-ED 2 - 1(w.e.f. 26.12.01)Shri D.P. Singh Non-ED 1 - 3(w.e.f.31.1.2002)Shri D. Basu Non-ED 3 Yes(upto 22.09.2001)Shri Deepak Parekh Non-ED - -(upto 18.01.2002)Shri V. Gujral (demitted WTD -office on 7.4.2001)Shri C.S. Rao Non-ED 6 -(upto 31.12.2001)Shri M.K. Moitra WTD 8 Yes(upto 28.02.2002)

* Includes Directorships in Private companies. The details in respect of diretors who are not in officeas on 31st March, 2002 are not available.

(c) Audit Committee:

i) Terms of reference:

The primary function of the Audit Committee is to assist theBoard of Directors in fulfilling its oversight responsibilitiesby reviewing the financial reports; the Company’s systems ofinternal controls regarding finance, accounting and legal com-pliance that management and the Board have established;

and the Company’s auditing, accounting and financial re-porting process generally.

The Audit Committee reviews reports of the Internal Audi-tors, meets Statutory Auditors and discusses their findings,suggestions and other related matters and reviews major ac-counting policies followed by the Company. The Audit Com-mittee reviews with management, the quarterly and annualfinancial statements before their submission to the Board.

The minutes of the audit committee meetings are circulatedto the Board, discussed and taken note of.

ii) Composition:

The Audit Committee of the Board was formed in 1998.However, the Audit Committee was reconstituted on 21stMarch, 2001, consisting of four non-executive Directors. Atpresent Shri R.V. Gupta, Shri D.V. Singh, Dr. Atul Sarma andProf. Ram Prasad Sengupta are the members of the AuditCommittee.

During the last year, the committee met 8 times and attendanceat the meetings are as follows:

Name of the Director Status No. of meetingsattended

Shri R.V. Gupta Chairman 8Shri D.V. Singh Member 7Dr. Atul Sarma Member 7Prof. Ram Prasad Sengupta Member 2(since 23.1.2002)Shri D. Basu (upto 22.9.2001) Chairman 4

(d) Nomination & Compensation Committee

i) Being a Government company, the nomination and fixationof terms and conditions for appointment as Director is madeby Government of India. As such, the Nomination andCompensation Committees has not been constituted.

ii) The details of remuneration to whole time directors aregiven below:

(Rs. in crores)

Name of Salary Retirement & Totalthe Director other Benefits

Shri Arvind Pande 0.06 0.05 0.11Shri S.C.K. Patne 0.05 0.05 0.10Shri V.S.Jain 0.05 0.04 0.09Shri M.K. Moitra 0.05 0.04 0.09Shri A.K. Singh 0.05 0.03 0.08Shri S. Pandey 0.05 0.02 0.07Shri B.K. Singh 0.05 0.03 0.08Shri R.C. Jha 0.02 - 0.02Dr. S.K. Bhattacharyya 0.05 0.03 0.08Shri V. Gujral 0.01 - 0.01

Total 0.44 0.29 0.73

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iii) The non-executive Directors are paid only sitting fees ofRs.5,000/- for each Board/Board Sub-Committee Meetingsattended by them.

iv) The salary of the whole time directors is fixed and does notinclude performance linked incentive except amount payableas per the Productivity Linked Incentive Scheme of theCompany.

v) Terms & Conditions

The whole time directors are nominated by Government ofIndia for appointment as Director for a period of 5 years ortill the age of Superannuation, which ever is earlier. Theyare initially appointed by the Board as Additional Directorsand thereafter by the shareholders in the Annual GeneralMeeting in terms of the provisions of the Companies Act,1956.

The appointment may, however, be terminated by eitherside on three months notice or on payment of three monthssalary in lieu thereof.

(e) Shareholders/Investors Grievance Committee

i) A Shareholders/Investors Grievance Committee underthe Chairmanship of a non-executive director namelyShri R.V. Gupta and comprising of two whole timedirectors namely Shri V.S. Jain and Shri S.C.K. Patne asmembers has been formed to look into the redressal ofshareholders and investors complaints like non-transfer ofshares, non-receipt of balance sheet, non-receipt ofdeclared dividend etc.

ii) Name of compliance officer: Shri Devinder Kumar, CompanySecretary

iii) Number of shareholder complaints received during theperiod from 01.04.2001 to 31.03.2002:

Nature of the Complaint Source from whichcomplaint was received

Direct SEBI Exchanges TOTAL

(A) Non-receipt of shares 2 - - 2after Transfer

(B) Delay in issuing Duplicate - - - -share certificates

(C) Non-receipt of - - 1 1Dividend Warrants

(D) Non-receipt of - - - -Annual Reports

TOTAL 2 - 1 3

l Complaints not solved to the satisfaction of shareholders : NIL

(f ) General Body Meetings:

Location and time where last three AGMs held:

Financial Date Time LocationYear

2000-2001 21.09.2001 10.30 a.m. NDMC Indoor Stadium,Talkatora Garden,New Delhi

1999-2000 22.09.2000 10.30 a.m. NDMC Indoor Stadium,Talkatora Garden,New Delhi

1998-1999 22.09.1999 10.30 a.m. Air Force Auditorium,Subroto Park, New Delhi

(g) Disclosures:

There were no transactions of material nature with its promoters,the directors or the management, their subsidiaries or relativesetc. that may have potential conflict with the interests of companyat large. The non-executive Directors had no pecuniaryrelationships or transactions vis-à-vis the company during theyear except receipt of sitting fee for attending the meetings ofthe Board/Board Sub-Committee.There were no instances of non-compliance by the company,penalties, strictures imposed on the company by Stock Exchangeor SEBI or any statutory authority, on any matter related tocapital markets, during the last three years.

(h) Means of Communication:

Quarterly results are published in prominent daily newspapersas per requirements. The quarterly/Annual results are madeavailable at the website of the Company. The Management’sDiscussion & Analysis Report forms part of the annual report.

(i) General Shareholders Information:

i) Annual General Meeting is proposed to be held on24th September, 2002 at NDMC Indoor Stadium,Talkatora Garden, New Delhi.

ii) Dates of Book Closure - 27th August to 24thSeptember, 2002

iii) The shares of the Company are listed at the followingstock exchanges:

The Delhi Stock Exchange Association Limited,DSE House, 3/1, Asaf Ali Road, New Delhi-110002.

The Stock Exchange, MumbaiPhiroze Jeejeebhoy Towers, Dalal Street, FortMumbai-400001(Stock Code No.113)

The National Stock Exchange of India Limited,Mahindra Towers, A Wing, 1st Floor, RBC, Worli,Mumbai-400018.

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Corporate GovernanceThe Calcutta Stock Exchange Association Limited,7, Lyons Range, Kolkata-700001.

Madras Stock Exchange Limited,Exchange Building, Post Box No.183, 11, Second LineBeach, Chennai-600001.

The Stock Exchange Ahmedabad,Kamdhenu Complex, Near Polytechnic, Panjara Pole,Ahmedabad-380015.

The London Stock Exchange,London EC2N 1HP, UKIt is confirmed that Annual Listing Fee has been paid toeach of the stock exchanges.

iv) The monthly high and low quotation of the company’sshares during each month in the last financial year at theMumbai Stock Exchange (BSE) and its comparativeperformance with the broad base BSE Sensex during theyear 2001-02 are indicated below :

MONTH SENSEX SAIL at BSE & YEAR

HIGH LOW HIGH LOW

APR '01 3676.82 3096.51 6.35 5.20

MAY '01 3759.96 3420.14 6.20 5.35

JUN '01 3651.32 3287.94 5.95 5.35

JUL '01 3513.79 3241.66 5.50 4.95

AUG '01 3359.07 3241.12 5.15 4.90

SEP '01 3267.93 2594.87 4.95 3.95

OCT '01 3083.65 2718.41 4.95 4.05

NOV '01 3377.81 3003.95 6.00 4.40

DEC '01 3500.20 3100.57 5.30 4.50

JAN '02 3466.73 3236.76 5.15 4.70

FEB '02 3758.11 3290.00 6.70 4.85

MAR '02 3758.27 3454.27 5.30 4.70

v) Registrar and Share Transfer Agent

M/s. RCMC Share Registry Private Limited,1515 (1st Floor), Bhisham Pitamah Marg,Kotla Mubarakpur,New Delhi - 110 003.

vi) Share Transfer System:

The Share Transfer Committee of the Board meets atregular intervals, almost every fortnight, so that shareslodged for transfer are despatched back well within thetime limit prescribed in this respect under the listingagreements.

vii) Distribution of Shareholdings as on 31st March, 2002

Share holding Share holders Amount

Number % to Total (In Rupees) % to Total

(1) (2) (3) (4) (5)

Upto 5,000 175,630 80.8785 336,984,970 0.8159

5,001 - 10,000 20,188 9.2967 185,892,860 0.4501

10,001 - 20,000 10,046 4.6262 169,590,870 0.4106

20,001 - 30,000 3,467 1.5966 92,945,400 0.2250

30,001 - 40,000 1,541 0.7096 57,422,020 0.1390

40,001 - 50,000 2,075 0.9555 101,211,680 0.2450

50,001 - 1,00,000 2,288 1.0536 177,853,720 0.4306

1,00,001 and above 1,918 0.8832 40,182,103,930 97.2838

TOTAL 217,153 100.0000 41,304,005,450 100.0000

viii) Shareholding pattern as on 31st March, 2002

Category No. of %age ofShares held Holding

A. Promoters’ holding

1 Promoters- Indian Promoters viz, 3,544,690,285 85.820

the Govt of India- Foreign Promoters - -

2 Persons acting in Concert - -

Sub-Total 3,544,690,285 85.820

B. Non-Promoters Holding

3 Institutional Investors

a Mutual Funds and UTI 301,466,836 7.299

b Banks, Financial Institutions,Insurance Companies (Central/State Govt. Institutions/Non-Govt. Institutions) 72,524,400 1.756

c FIIs 24,961,612 0.604

Sub-Total 398,952,848 9.659

4 Others

a Private Corporate Bodies 22,038,910 0.534

b Indian Public 157,360,264 3.810

c NRIs/OCBs 3,613,133 0.087

d Any other (Please specify) 3,745,105 0.091 - GDR

Sub-Total 186,757,412 4.522

GRAND TOTAL 4,130,400,545 100.000

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ix) Status of dematerialisation as on 31.03.2002

Particulars No. of shares % of No. ofcapital Accounts

NSDL 558048103 13.51 82847

CDSL 540750 0.01 1988

Total Dematerialised 558588853 13.52 84835

Physical - Government 3544690285 85.82 1of India

Physical - Other 27121407 0.66 132349shareholders

Total 4130400545 100.00 217185

Apart from the shares held by the Government of India, 95.37% ofthe disinvested shares have already been dematerialised by31.03.2002.

x) The Company’s plants/units/subsidiaries are located at:

STEEL PLANTSBhilai Steel Plant,Bhilai-490001,Chhatisgarh

Durgapur Steel Plant,Durgapur-713203,West Bengal

Rourkela Steel Plant,Rourkela-769011,Orissa

Bokaro Steel Plant,Bokaro Steel City-827001,Jharkhand.

Salem Steel Plant,Salem-636013,Tamil Nadu

Alloy Steels Plant,Durgapur-713208,West Bengal

Visvesvaraya Iron & Steel Plant,Bhadravati.Karnataka

UNITSCentre Marketing Organisation,Ispat Bhawan,40, Jawahar Lal Nehru Road,Kolkata-700071,West Bengal.

Research & Development Centrefor Iron & Steel,Ranchi-834002,Jharkhand

Centre for Engineering & Technology,Ranchi-834002,Jharkhand

Central Coal Supply Organisation,Dhanbad-828127,Jharkhand

Growth Division,97, Park Street, Kolkata-700016,West Bengal

Management Training Institute,Ranchi-834002,Jharkhand

Raw Materials Division,10, Camac Street, Industry House,Kolkata-700017, West Bengal

Environment Management Division,6, Ganesh Chandra Avenue,(5th Floor), Kolkata-700013,West Bengal

SAIL Safety Organisation,Ranchi-834002,Jharkhand

SAIL Consultancy Division,Hindustan Times House,14th Floor, 18-20 Kasturba Gandhi Marg,New Delhi-110001.

SUBSIDIARIESThe Indian Iron & Steel Company Limited,Burnpur-713325,West Bengal

Maharashtra Elektrosmelt Limited,Chandamul Road, Chandrapur-442401,Maharashtra.

Bhilai Oxygen Limited,Ispat Bhawan, Lodi Road,New Delhi – 110 003.

xi) Address for correspondence from shareholders for queriescomplaints, if any:

M/s. RCMC Share Registry Private Limited,1515 (1st Floor), Bhisham Pitamah Marg,Kotla Mubarakpur, New Delhi - 110 003.

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ANNEXURE - V TO THE DIRECTORS' REPORTManagement Discussion and Analysis ReportThe Management of Steel Authority of India Limited presents itsanalysis report covering performance and outlook of the Company.

A. INDUSTRY STRUCTURE & DEVELOPMENTSGeneral Economic Environment

The Financial Year 2001-02 witnessed yet another difficult period inthe steel industry world-wide. Prices nose dived, consumptionremained stagnant and export was hindered through tariff and nontariff barriers in the foreign countries. All these factors have lead tounprecedented crisis in steel sector and almost all the major steelproducers have reported huge loss/substantial reduction in profitsfrom operation.

During the last two years (2000-01 and 2001-02), GDP growth isestimated to have been 4.0% and 5.4% respectively. Themanufacturing sector, which grew by 6.7% in 2000-01, grew by only3.3% in 2001-02 (source: Economic Survey). Construction sectoraverage growth was 2.9% but in the second half of the year thegrowth rate was about 5%. The growth in finished steel consumptionwas 5.7% in 2000-01 but dropped to 2.6% in 2001-02, thus affecting,financial health of Steel companies. However, there are signs ofimprovement in the economy and indications of a growth in demandfor steel products. International prices have started picking up. Thegovernment has also responded to the sluggish economic conditionby taking a number of fiscal and non-fiscal measures. All these factorshave stimulated the domestic price sentiment in the country.

Production vis-à-vis Demand for Steel in India.

The low growth of investment in infrastructure and manufacturingactivities, led to a comparatively low growth in steel consumption.Domestic consumption of finished steel was 26.5 million tonnes in2000-01 and is estimated to have been 27.2 million tonnes in 2001-02. Capacity for steel production is estimated to be 33 million tonnes.Total import of finished steel in 2001-02 is estimated at 1.37 milliontonnes and export of finished steel 3.0 million tonnes. The demandsupply mismatch is one of the major reasons for decline in theprofitability of steel industry.

Position of SAIL

Steel Authority of India Limited (SAIL) is the 14th largest steelproducer in the world in 2001 (source : IISI Report) and is thelargest producer in India with about 39% share of domestic crudesteel production in 2001-02.

B. OPPORTUNITIES & THREATS FOR SAIL

Opportunities

SAIL has a total capacity of 10.2 million tonnes for saleable steel. Inthe past decade SAIL has substantially modernised its facilities at theintegrated steel plants. The modernised facilities provide scope forcost reduction as well as capability to produce superior qualityproducts. SAIL is progressively increasing the volume of high value/special products. Thus, SAIL has the opportunity to increase thepercentage of special/high value products in its product-mix. SAIL

has the advantage of producing steel of requisite quality, type, size,grade etc.

Increased orders from the Railways resulted in a production rise of24% in rails from Bhilai Steel Plant to 5.8 lakh tonnes in 2001-02.The supply of rails from Bhilai is expected to reach 6.5 lakh tonnes in2002-03 on account of expansion plan of the Railways.

SAIL would be benefited from further incentives provided to theconstruction sector through an improved offtake of long steel products.In the area of long products, there is a extensive scope for growthfrom likely investment in infrastructure particularly construction ofroadways, bridges, over-bridges etc.

SAIL has traditionally supplied hot rolled coils to the steel tube-making sector. Steel tubes are used widely for rural and urban watersupply, an activity which is likely to grow as water supply – andparticularly drinking water - becomes increasingly critical. In addition,the growing white goods and automobile sectors present a market forcold rolled coils and sheets.

The oil and gas sector presents a major area of growth through therequirement of pipelines. Rourkela Steel Plant (RSP) is presentlymanufacturing API 5L-65 quality pipes, which are standardrequirements for the sector. RSP is upgrading its pipe productionfacilities for production of higher category/quality pipes.

In the last few years, the Company has effected substantial operationalcost reduction, which has helped in neutralizing the impact of inputcost escalations. This trend will continue and further improve thecost competitiveness of SAIL plants.

Threats

Surplus indigenous capacity particularly for flat steel products is anarea of concern for steel industry. In 2001-02 the surplus capacityis estimated to have been 4.4 million tonnes for hot rolled coilsand sheets, 2.2 million tonnes for cold rolled coils and sheets and0.8 million tonnes for plain and corrugated galvanised sheetsand coils.

In the countries like USA, Canada and European Union, anti dumpingmeasures have been taken. Besides, USA has also imposed safeguardduty. Such developments may adversely affect the Indian steel industrythrough restricted market access to these countries and due to likelydiverted imports in the Indian market from such protection.

Recently, China has also taken safeguard measures against imports.This will further affect the Indian steel industry as China has beenthe major steel market after closure of the market in the westerncountries.

Reduction in peak level of customs duty from 35% to 30% in Indiawould also encourage imports.

The substitution of steel by plastics is a threat in the areas of tubesand packaging material.

Entry of new players in production of rails, a monopoly item for SAILwill be a potential source of competition for SAIL.

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C. RISKS AND CONCERNS

The international steel prices have remained weak for a considerableperiod in recent past. If this trend persists, the domestic prices maynot firm up, as they are governed by global scenario under openmarket conditions. In such a scenario escalations in key inputs/salaries etc. are likely to squeeze margins.

The integrated steel plants of SAIL consume around 6 million tonnesof imported coal. Any adverse movement in foreign exchange willimpact operating margins. Increase in exchange rate will also impactoutstanding foreign exchange debt liabilities.

The business and financial restructuring initiated in 2000, inter-alia,included measures such as divestment of non-core assets, viz. – SpecialSteel Plants, Rourkela Fertiliser Plant and Oxygen Plant at BSP. Theimplementation of these divestment measures has been affected dueto socio-political climate/resistance of unions.

For historical reasons, the public sector steel plants arecarrying excess manpower. SAIL plans to reduce the manpower toaround 100,000 in next few years. The manpower reduction wouldbe effected both by natural and voluntary separations. However, ifthe VRS is unable to attract requisite number of people or is affecteddue to resource constraints, planned rightsizing of manpower maybe affected.

SAIL has regulated production as per customer/market demand.This has led to lower utilization of assets in steel plants, some ofwhich have made substantial investment during the modernisation.

D. OUTLOOK

Indian demand, which had suffered from sluggish conditions for longperiod, has also begun to show some signs of improvement. There aresigns of firming up of global prices and expectation of rise in globaldemand. With the sign of recent recovery, the sentiment in the steelindustry is upbeat as is evident from the pick up in sales. The markethas absorbed increase in the price announced in the recent past.

For the next year (2002-03) the thrust is on higher production tooptimize the inherent potential of the plant. The increased productionlevel would also help in achieving better techno-economic parameters.The thrust is on exploiting the full potential of the plant and increasecost competitiveness of various production shops.

In the longer term, measures taken by Government are expected tostimulate investment in infrastructure, construction and industry,which is essential for increasing demand for steel.

The re-structuring programme of SAIL is also expected to improvethe financial health and cost competitiveness of the company.

With all these developments, Company expects to turnaround soon.

E. REVIEW OF FINANCIAL PERFORMANCE

1. FINANCIAL OVERVIEW OF SAIL

Steel Industry has been going through very difficult phase forlast six years and the growth of steel sector has been very subdued.

The average growth in steel consumption in the last six years hasbeen only about 4% against the average growth of over 18% inearlier years.

Year Steel Consumption % Growth over (Qty in MT) Previous Year

2001-02 27.21 2.56

2000-01 26.53 5.71

1999-00 25.09 6.6

1998-99 23.55 4.0

1997-98 22.63 2.3

1996-97 22.13 3.9

1995-96 21.29 14.9

1994-95 18.53 22.0

1.1 The business performance of SAIL also reflects the cyclic natureof the steel business. Overall profits, which peaked at Rs.1319crores in 1995-96, declined to a loss of Rs. 1720 crores in1999-00 and Rs. 729 crores during 2000-01. During the year2001-02 SAIL has incurred a loss of Rs.1707 crores. Majorreasons are :

Ø General slow down in the economy resulting in stagnationin steel consumption

Ø Fall in international prices due to global recession has alsoadversely affected sales realisation in the domestic marketby about 8% during the year

Ø Higher manpower cost : As the steel plants were set upabout 4 decades back in areas where infrastructure facilitieswere hardly available and regional development &employment generation being major objectives, largenumber of persons were provided employment. Though,the number has reduced from 1,89,506 (31.03.1995) to1,47,601 (31.03.2002), labour cost is still higher at about19% of cost of production as against 4-5% of new entrantsin the steel market.

Ø Social cost/township – Since steel plants were green fieldprojects, the townships were set up, which are by anystandard well kept and provide good amenities to itsresidents. The expenditure on providing social amenities inthe townships was Rs.529 crores for 2001-02.

1.2 Initiatives taken to put it back on the path of profitability

In view of the SAIL’s pre-eminent position in the domestic steelindustry, its large number of employees and also the large numberof suppliers and ancillaries dependant on it, the financial healthof SAIL is important. The corrective steps taken by theManagement in the recent past are as under:

Ø Business Restructuring, which envisaged:

70

Management Discussion and Analysis ReportØ Divestment of following non-core assets while protecting

jobs of existing employees.Ø Captive Power Plants at BSL, DSP, RSP and BSP.

] 2x60 MW Captive Power Plant-II at RSP and theCentral Power Training Institute at Rourkela

] 2x60 MW Captive Power Plant-II at DSP.] 122 MW (2x55 MW + 12 MW back pressure turbine)

Captive Power Plant-I, 3x60 MW Captive Power Plant-II and steam generating capacity of 660 MT/hour atBSL.

] 74 MW captive power plant (CPP II) at BSP Bhilai.

Ø Oxygen Plant-II of BSP.

Ø Salem Steel Plant (SSP), Salem.Ø Alloy Steels Plant (ASP), Durgapur.

Ø Visvesvaraya Iron & Steel Plant (VISL), Bhadravati.

Ø Fertiliser Plant at Rourkela.Ø Conversion of IISCO into a joint venture with SAIL holding

minority share holding.

During financial year 2000-01, power plants at DSP and RSPhave been transferred and assigned to the then subsidiary company“ SAIL Power Supply Company Limited later converted intojoint venture company with National Thermal PowerCorporation Limited for generation and sale of entire power tothe Company.

During current financial year (2001-02) power plant (includingsteam generation facilities) of Bokaro has been divested tosubsidiary of SAIL – Bokaro Power Supply Company Ltd. injoint venture with DVC(profit on sale/divestment Rs.391crores). Power Plant at BSP has been divested to a joint venturecompany with NTPC(profit on sale/divestment Rs. 99 crores.)

Sale/lease of houses to employees/ex-employees in the steeltownships resulted in profit on sale/divestment of Rs.172 croresduring 2001-02.

Ø Intensive cost controlTo improve the financial position of the Company in theshort and long term, number of initiatives have been takento combat the present market scenario, cost controlmeasures being one of them. The cost control savings havebeen achieved in almost all the major areas of operation:

]] Reduction in consumption of coking coal & other rawmaterials; lower expenditure on stores & spares/contractual maintenance and savings in power & fuelconsumptions.

]] Improvement in techno-economic factors viz. blastfurnace productivity, energy consumption, mill yields.

]] Purchase cost reduction in areas like ferro-alloys,refractories, rolls etc.

]] Austerity measures have also been adopted whichinclude trimming/closure of Liaison Offices, judicious

use of telecommunication facilities instead ofundertaking journeys, withdrawal of leave travelconcession facility, reduction of other administrativeexpenses.

]] For the financial year 2001-02, cost control savings ofRs. 450 crores (including Rs. 99 crores of revenuemaximization) has been achieved.

The major impact of cost control measures is that inspiteof substantial increase in almost all the major inputs likeindigenous coal price, imported coal price, power rate etc.in the last five years, variable cost of production during2001-02 has been contained within 1996-97 level.

Ø Control on capital expenditure

]] Fresh investment proposals are virtually on hold exceptongoing schemes and schemes relating to customerneeds, pollution control/safety etc. The capitalexpenditure (cash basis) during the year 2001-02 wasrestricted to about Rs. 350 crores. The capitalexpenditure during last two years was restricted toRs.426 crores (2000-01) and Rs. 777 crores (1999-00) as against about Rs. 2000 crores/year in earlieryears when the modernisation was in full swing.

]] Based on availability of resources, some importantcapital schemes like long rails at BSP, Pipe Plant atRourkela are being taken up to improve competitivestrength of the Company.

Ø Market oriented product-mix, reinforcing sales andmarketing efforts, greater focus on customer satisfaction.

]] Central Marketing Organisation (CMO),SAIL havebeen giving special emphasis on customer contact andnurturing customer loyalty to increase sales. CMO hasalso adopted a focused marketing strategy on varioussteel consuming segments, e.g., tube makers,automobiles, cold rolling units, white good segment,oil and gas sectors, railways, machinery manufacturers,re-rollors, wire drawing units, etc.

]] CMO has introduced the Key Account Management(KAM) process in most of its major branches. TheKAM process calls for special attention towards thecustomers to understand and meet their requirementsto their satisfaction covering all marketing aspectsincluding marketing services.

]] CMO has been reorganized into Flat products andlong products structure.

Rightsizing of Manpower

Ø SAIL introduced Voluntary Retirement Schemes (VRS)in 1998 and 1999 on deferred payment basis whichresulted in separation of about 19600 employees.

Ø New VR Scheme based on DPE pattern envisaging lump-

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sum payment was opened for employees in 2001. Underthis scheme about 6500 persons have opted for VR.SAIL has launched another VR Scheme on similar pattern(with minor modification) in 2002 envisaging lump-sumpayment and also expects that 6500 employees wouldfurther separate.

2. FINANCIAL PERFORMANCE OF SAIL DURING THEYEAR 2001-02

Rs./crs

2001-02 2000-01 Variation

Turnover 15502 16233 -731

Operating Profit 1011 2167 -1156(PBDIT)

Interest 1562 1752 190

Cash Profit -551 415 -966

Depreciation 1156 1144 -12

Net Profit/Loss(-) -1707 -729 -978[PBT]

Ø Net loss has increased by Rs. 978 crores over previous yearmainly due to decline in net sales realization (NSR) ofsaleable steel in domestic market by about 8% in thecurrent year. The steep decline in prices of steel productsare mainly due to sluggishness in Indian economy, fall ininternational prices, over supply situation in domesticmarket.

Ø Besides there have been increase in prices of major inputslike coal, power, and also expenses on salaries which couldpartly be neutralized due to cost control savings achievedduring the year.

Ø During current year (2001-02) power plant of Bokaro hasbeen divested to subsidiary of SAIL – Bokaro Power SupplyCompany Ltd. in joint venture with DVC(profit Rs. 391crores). Power Plant at BSP has been divested to a jointvenure company with NTPC (profit Rs. 99 crores.). Inaddition to above sale/lease of houses to employees/ex-employees in the steel townships resulted in profit ofRs.172 crores during 2001-02.

2.1 INCOME

a) Sales Turnover

Ø The product mix of SAIL is evenly balanced and cater tothe entire gamut of mild steel business – flat products inthe form of HR Coils/sheet, CR Coils/Sheets, GP/GCsheets, long products comprising, rails, semis, structurals,wire rods, merchant products etc. In addition, tubularproducts viz. pipes (ERW & SW), Electrical steel sheets

and Tin plates also form part of the rich product mix ofSAIL’s mild steel business. The sales turnover of variousgroup of products during 2001-02 is as under :

Saleable steel – 4 Integrated steel plants

Flat Products 47%

Long Products 38%

PET Products 2%(Pipes, Electrical sheets, Tin plates)

Total mild steel 87%

Alloy & Special Steel Plants 5%

Secondary products comprising ingots,pig iron, scrap etc. and coal chemicalsincluding fertilizers 8%

The sales turnover of the company mainly consists of salesof various iron & steel products from the four integratedsteel plants and special/alloy products from three Alloys/Special steels plants. The sales turnover during the yearwas Rs.15502 crores (Previous year : Rs.16233 crores)inspite of increase in the sales volume of saleable steel by 5lakh tonnes and better product/sales mix over previousyear. Sales turnover is 4.5% lower over previous year mainlyon account of 8% dip in net sales realization (NSR), lowersales of secondary products and special steel plants duringthe year. The decline in flat products NSR was high at 17%due to over supply situation in the flat market. SAIL hassold 9.255 million tonnes of mild steel as compared to8.755 million tonnes in the previous year. Sales of secondaryproducts like pig iron, ingot steel, coal chemicals and otherby-products were lower than the previous year. Domesticmarket continues to be the main source of sales turnoverfor SAIL which constitutes about 96% of the total salesturnover. Export sales (including export incentive) duringthe year was at Rs.584 crores (Previous year : Rs. 622crores.) Exports were also adversely affected due tocountervailing/antidumping/ safeguard levies in US market.

b) Interest Earned

SAIL earns its interest income from advances to customersand employees. During the year 2001-02, SAIL earnedinterest of Rs. 105 crores (Previous year : Rs. 100 crores).

c) Other Revenue

Other revenue mainly comprises social amenities recoveriestowards township facilities, sale of empties, subsidy, profit/capital gain from sale of assets, dividend income, etc. Duringthe year other revenue was Rs.920 crores as against Rs. 483crores in the previous year. Other income for the year 2001-02 includes Rs.491 crores being capital gain from divestmentof power plants at BSL and BSP and Rs.172 crores onaccount of sale/lease of houses/land in SAIL township.

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Management Discussion and Analysis Report2.2 EXPENDITURE ANALYSIS

The total expenditure (including stock depletion) during theyear was Rs.18,483 crores which is Rs. 738 crores higher w.r.t.previous year (2000-01). The major variation are explained asunder :a) Stock depletion of semi/finished steel

The stock depletion in semi/finished steel during the yearwas Rs.422 crores. In terms of quantity, the depletion inmild steel inventory (four integrated steel plants) was about3.32 lakh tonnes, whereas in the previous year, there wasaccretion in stock by about 0.90 lakh tonnes.

b) Raw material

The raw material expenditure has increased during the yearby Rs.232 crores on account of higher production of hotmetal by 1%, increase in the price of indigenous/importedcoal and variation in exchange rate. Part of the input costescalation has been neutralized by cost control efforts inoperational areas such as improvement in yields, reductionin specific consumption of raw materials etc.

c) Employees Remuneration and BenefitsThe salary & wages expenditure during the year 2001-02was Rs. 3250 crores as against Rs. 3106 crores in theprevious year. The increase in Salary & wages by Rs. 144crores during the year 2001-02 was due to wage revisiongiven to employees with effect from 1.1.2001, normalincrease on account of inflations/increments, VRS, etc.

d) Stores & SparesDespite increase in the production level, the stores & sparesexpenditure during the year was about Rs. 1588 croreswhich is lower than last year expenditure of Rs. 1650 crores.This has been possible mainly due to increased utilisationof captive engineering shops and foundry shops resulting inreduced procurement of stores & spares from externalsources, reduction in refractory consumption, etc.

e) Power & FuelPower & Fuel expenditure during the year was Rs. 1701crores and is higher as compared to previous year by aboutRs.121 crores. While a part of the increase is due to increasein the level of production, it is also due to increase in thepower tariff by state electricity Boards. In addition, part ofthe increase in power & fuel expenditure is also due toformation of joint venture companies because of whichsome of the fixed expenses viz. salary & wages, stores &spares, depreciation, interest etc. are now forming part ofthe power & fuel expenditure which were earlier bookedunder respective primary heads.

f) ExciseExcise duty during the year 2001-02 was Rs. 1983 crores ascompared to Rs.2123 crores during 2000-01. The declinein duty is due to dip in net sales realisation.

g) InterestAs a result of reduction in total borrowing by Rs. 239crores and substitution of high cost borrowings with lowcost borrowings, the total interest & finance charges(including interest charged to capital items) have reducedby about Rs.239 crores. The reduction in interest chargeson operation account is for Rs.190 crores.

2.3 BALANCE SHEET ANALYSIS

a) Equity

The issued, subscribed & paid up equity of SAIL ason 31.03.2002 is Rs.4130 crores which is same asprevious year. 85.82% of equity is held by Governmentof India.

b) Loans

The borrowing position of SAIL as on 31.3.2002 and as on31.03.2001 is as detailed below :

(Rs./crores)

Items 31.3.2002 31.3.2001

Working Capital Borrowings 4027 3547from banks

Bonds (Unguaranteed) 2025 3005

Bonds (Guaranteed) 2500 1815

Term Loan from banks/Institutions 868 1398

Foreign currency borrowings 2458 2424

GOI /SDF loans 659 522

Public Deposit Scheme 1275 1340

Housing loans 200 200

Total 14012 14251

During the year there is a net reduction in borrowings byRs.239 crores and also high cost borrowings have beensubstituted with low cost borrowings.

c) Gross Block

The total gross block of the company as on 31.03.2002 isat Rs. 27199 crores as against Rs. 26916 crores as on31.03.2001. During the year, about Rs. 1016 crores of theongoing schemes were capitalized which includes Rs. 793crores of capitalization of Sinter Plant-III at BSP. However,assets of about Rs. 733 crores were sold/disposed off whichincluded divestment of power plant at BSL and BSP andsale/lease of houses/land in SAIL township.

d) Capital Work-in-progress

As on 31st March’2002, the capital work-in-progress is Rs.556 crores. Major schemes in progress include upgradationof BF 3 at DSP.

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e) Investments

Total investment of SAIL as on 31.3.2002 is Rs.539 croresas against Rs. 435 crores as on 31.3.2001. During the yearSAIL has made an investment of Rs. 84 crores in BokaroPower Supply Company Ltd, a joint venture companyformed in association with DVC with 50:50 equity holding.SAIL also made investment of Rs. 16.60 crores in BhilaiElectric Supply Company a Joint Venture Company withNTPC.

f) Working capital

(Rs./crores)

As on As on Reduction31.03.2002 31.03.2001

Current Assets

Inventory

Semi-finished 2500 2923 423

Stores & Spares 887 902 15

Raw Materials 633 650 17

Other 22 44 22

Total Inventory 4042 4519 477

Sundry debtors 1389 1688 299

Cash & bank balance 416 667 251

Interest receivable/accrues 94 175 81

Loans and advance – others 1165 1313 148

Total current assets 7107 8362 1255

Current Liabilities

Current liabilities 4400 4575 175(excl. for capital works)

Provisions 458 699 241(excl. gratuity/leave)

Total current liabilities 4857 5274 417

Working capital 2249 3088 839

The working capital has reduced by Rs. 839 crores. The reasonsfor variation are as under :

During the year there was reduction of Rs. 477 crores in theinventory of which Rs.422 crores reduction is in the semi/finished inventory. In terms of quantity, the depletion in saleablesteel inventory was about 3.3 lakh tonnes.

Sundry debtors have been reduced by Rs. 299 crores as a resultof special thrust given on debt realization and selective creditextension.

2.4 PLANTWISE PROFIT & LOSSRs./crs.

2001-02

BSP 477DSP -262RSP -1036BSL -459ASP -149SSP -153VISL -103Other Units -22

SAIL -1707

F. HUMAN RESOURCES/INDUSTRIAL RELATIONS

Human resource is one of the most important resources forSAIL. Personnel activities across the company are orientedtowards implementation of business goals of the company.Ongoing restructuring process of SAIL also focuses greatly onproper utilization of human resource and its rightsizing to makethe company healthy.

With the above in view, effective two-way communication onissues arising out of the change process, was launched. Thishelped in ironing out the road blocks which normally emerge inany restructuring exercise. Besides creating proper awarenessand urgency amongst the employees for carrying out the largescale organizational changes, it has helped the company in gettingsupport for facilitating the restructuring process particularly thedivestment of power plants. Similar communication exercisehas been accepted as a continuous process in SAIL to keep theemployees informed of the realities facing the Company andalso motivate them to take up higher responsibilities, in tunewith the requirements of the Company.

The manpower employed by SAIL as on 31st March 2002 is147601 comprising 16,003 executives and 131,598 non-executives. The manpower productivity at 111 tonnes of crudesteel per man per year registered increase of 6 % percent overthe previous year. With a view to optimizing the manpower andreducing the labour cost, implementation of VoluntaryRetirement Schemes (VRS) for employees in 1998 and 1999 ondeferred payment basis resulted in separation of about 19,600employees. A Voluntary Retirement Scheme based onDepartment of Public Enterprises (DPE) guidelines withlumpsum payment was introduced in 2001 and about 6500employees were separated. Another VR scheme has beenlaunched in 2002 which is under operation currently.

To make incentive and reward schemes more meaningful, a newscheme was implemented during 2001-02 introducingprofitability also as a parameter and this facilitated bringing in afocus towards profitability for the company.

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Management Discussion and Analysis ReportSAIL has always believed that objective evaluation and appraisalagainst pre-set tasks and targets are crucial for instilling resultorientation in the organization. The new performance appraisalsystem evolved by Public Enterprises Selection Board for toplevel executives of the Company was accepted well in theCompany.

After extensive deliberations, new schemes have been introducedto give greater thrust on ‘performance orientation’ in theCompany. Changes in the Promotion Policy were also madeduring 2001-02, especially for the senior management positions,where interview based selections have been introduced forplacement to the next higher grade.

A new Vision and Credo statements for the Company wereadopted during the year. The vision statement speaks of makingSAIL a respected world-class organization in quality, productivity,profitability and customer satisfaction.

HRD Function of SAIL is committed to contributing its mitetowards the Vision of the Company and creating and nurturinga culture that supports flexibility, learning and is proactive tochange. It also strives to works towards charting a challengingcareer for employees with opportunities and rewards.

G. INTERNAL CONTROL SYSTEM

The Company has an adequate system of internal controlsimplemented by the management towards achieving the followingobjectives:

Ø Efficiency of operations

Ø Protection of resources

Ø Accuracy and promptness of financial reporting

Ø Compliance with the laid down policies and procedures

Ø Compliance with laws and regulations.

In SAIL, Internal Audit is a multi-disciplinary function whichreviews, evaluates and appraises the various systems, procedures/policies laid down by the Company and suggests meaningful anduseful improvements. It helps management to accomplish itsobjectives by bringing a systematic and disciplined approach toimprove the effectiveness of risk management towards goodcorporate governance.

SAIL has taken a number of steps in the recent past to makeaudit function more effective viz. establishment of a Board levelAudit Committee, independence of internal audit function,emphasis on transparency in the systems and internal controls,placement of right type of skill mix of people in the InternalAudit etc. Continuous efforts are being made to make internalaudit a meaningful exercise and be an effective tool tomanagement.

Internal Audit prepares audit programs of the plants/units ofthe company to cover vital areas and ensures its compliance.Audit reports giving details of control factors, identification/management of risk factors and preventive suggestions, aresubmitted to Management.

H. PROJECT MANAGEMENT

SAIL incurred a capital expenditure of about Rs. 350 croreduring 2001-02.The capital expenditure has been regulated byexercising control over sanction of new schemes and by exercisingcontrol over expenditure on account of reduced availability ofresources. However, essential schemes are being taken up toimprove organisational competitive strength. 8 AMR schemesvalued at Rs.132 crore were approved during the year forimplementation. Upgradation of ERW Pipe Plant at RSP tomeet the quality requirement of Pipes and to produce API-5Lgrade of X-70 Pipes is being taken up.

Ten schemes costing around Rs.331 crore have also been accorded‘In-principle’ approval. This includes Coke Oven Battery - 1 atRSP, Long Rails Project at BSP, Automation of Tandem Mill - II& Upgradation of Tandem Mill - I of CRM and Coke OvenBattery - 5 at BSL.

Addition/ Modification/ Replacement (AMR) schemes valuedat Rs.990 crore were completed during the year. Withcommissioning of Sinter Plant-3 at Bhilai, the sinter charge inBF burden has increased to about 70%, resulting in substantialimprovement in the performance of blast furnaces. Also, atRourkela, Thyristorisation of DC Drives of CRM involvingreplacement of MG sets of DC drives by thyristors has beencompleted. This will enable higher level of automation, extensiveself-diagnostic fault-finding and saving of energy. With thecompletion of the scheme of upgradation of BF-3 at DSP inJuly, 2002, DSP is now in a position to provide 2 million tonnesof Hot Metal per annum with 3 BF operation.

The major scheme under implementation includes Upgradationof ERW Pipe Plant at RSP.

I. ENVIRONMENT MANAGEMENT

SAIL linked its business activities to environment managementby adopting a Corporate Environment Policy and environmentmanagement as one of the key areas of operations.

Environment Management Division has been pursuing andachieving environmental goals through implementation ofeffective Environment Management System (EMS) linked toISO 14001 minimisation of resource utilization, reduction inwaste generation and above all through adoption of cleanertechnologies/processes. Resource conservation is being takenup as one of the thrust areas and considerable reduction in

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water, energy and raw material consumption has been achievedover the past five years.

Solid waste utilization is continuously on the increase throughthe adoption of innovative reuse/recycle schemes. Recycling offerruginous sludge after mixing with hot sintered dolomite finesat RMP-I and recycling of waste refractory bricks from BF stovesat BSP are a couple of examples on solid waste utilization duringthe year.

Pollution control/prevention schemes are taken up at the plantsand mines on regular basis to comply with statutory norms.Some of the specific pollution control schemes implementedduring the year include:

Ø Commissioning of coke-oven gas firing system in kilns ofRMP-I at BSP.

Ø Installation and commissioning of a Vapoclave for treatmentof Bio-medical wastes at Ispat General Hospital, RSP.

Ø Commissioning of a facility for recycling of Decanter TarSludge into coke-oven at BSL.

This is manifested by bagging of the Indo-German Green TechExcellence Award on Environment for the year 2000-01 byDurgapur Steel Plant and the prestigious Lal Bahadur ShastriMemorial Gold Awards for ‘Best Pollution ControlImplementation’ and ‘Best Environmental Implementation’ byBhilai and Bokaro Steel Plants respectively.

Efforts to obtain ISO-14001 Certification for Rail and StructuralMill of BSP, Cold Rolling Mill of BSL and Sinter Plant-II ofRSP are progressing satisfactorily.

SAIL employees at all levels are being continually impartedtraining for bringing them up-to-date not only with the latesttechnologies but also for inculcating environmental awareness

in various aspects of operations. World Environment Day, EarthDay, Environment Month, Mines Environment and MineralConservation Week, etc. are being organized in various units ofSAIL to enhance consciousness towards better and cleanerenvironment.

A MOU has been signed with the Indian Council of ForestResearch and Education (ICFRE), Dehradun to undertake afive year project on eco-restoration of mined out areas of SAILin Bihar-Orissa region.

J. ENERGY CONSERVATION

SAIL has given a major impetus in the area of energyconservation which has contributed to significant reduction inenergy consumption from a level of 11.27 G.cal/tcs in mid 80’sto 7.69 G.cal/tcs in 2001-2002 inspite of increase in theproduction of quality steel which consumes more energy.

Measures have been taken not only to reduce the energyconsumption in different units of iron and steel making, butalso to improve generation of by-product fuels and recovery ofwaste heat. This has resulted in a considerable reduction ofpetro-fuels consumption in SAIL steel plants. Reduction inspecific energy consumption is primarily due to reduction incoke consumption in Blast Furnace, closure of high heatconsumption processes and through the increased use ofcontinuous casting machines, efficient reheating furnaces andthrough automation and computerization of various processes.Adoption of improved operational practices and implementationof various energy conservation schemes have contributed furtherin the reduction of specific energy consumption.

SAIL has drawn up its corporate plan to bring down specificenergy consumption further through it’s R&D input byimplementing energy conservation schemes in all steel plants.

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ToThe Members ofSteel Authority of India Limited

We have examined the compliance of the conditions of Corporate Governance by Steel Authority of India Limited for the yearended 31st March , 2002, as stipulated in clause 49 of the Listing Agreements of the said company with the various stock exchanges.

The compliance of the conditions of corporate governance is the responsibility of the management. Our examination was limited tothe procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of theCorporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company.

We certify that, in our opinion, and to the best of our information and according to explanations given to us, the company hascomplied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements.

We state that no investor grievance is pending for a period exceeding one month against the company, as per the records maintainedby the Shareholders/Investors Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency oreffectiveness with which the management has conducted the affairs of the company.



Partner Partner Partner

Place : New DelhiDated : May 28, 2002

Corporate Governance Certificate

The Board of Directors,Steel Authority of India Limited

We have examined the attached Cash Flow Statement of Steel Authority of India Limited for the year ended 31st March, 2002.The Statement has been prepared by the Company in accordance with the requirements of listing agreements with various StockExchanges in India and is based on and in agreement with the corresponding Profit and Loss Account and Balance Sheet of theCompany covered by our report of 28th May, 2002 to the members of the Company.



Partner Partner Partner

Place : New DelhiDated : May 28, 2002

Cash Flow Statement

ANNEXURE - VI TO THE DIRECTORS' REPORT

77

Cash Flow Statement for the year 2001-02 2000-01

(Rupees in crores)A. Cash flow from Operating Activities

Net loss (-) before taxation, and extraordinary items -1706.89 -728.66Add : Adjustments for :

Depreciation 1164.12 1150.62Profit on sale of Fixed Assets 662.47 295.25Provision for diminution in value of investments 0.02 0.01Interest Expenses 1562.03 1751.68Bad debts written-off 7.08 13.28Deferred revenue expenditure (Charged during the year) 232.54 142.32

Less : Adjustments for :-Interest Income 105.30 99.76Dividend Income 5.74 0.26

Operating profit before working capital change 485.39 1933.98Less : Adjustments for :-

Inventories -477.16 -104.00Sundry Debtors -291.10 -116.49Loans and Advances -138.53 51.16Current Liabilities and Provisions -132.96 -956.11Deferred Revenue Expenditure (Additions) 438.20 14.34

Net Cash from Operating Activities 1086.94 3045.08

B. Cash flow from Investing ActivitiesPurchase of Fixed Assets 322.03 326.77Fixed Assets sold /discarded -32.67 -37.96Sale of Captive Power Plants -670.50 -391.00Sale / Lease of houses -190.32 0.00Purchase / Sale of investments (net) 103.34 58.69Interest received -186.47 -89.36Dividend received -5.74 -0.26

Net Cash from Investing Activities -660.33 -133.12

C. Cash flow from Financing ActivitiesBond Issue Expenses -0.69 -0.80Prime Minister's Trophy Award Fund 0.59 1.52Capital Reserve -0.14 -0.12Proceeds from Borrowings (net) -239.05 -831.73Interest and Finance Charges paid 1716.43 1975.49Interest and Finance Charges (Capitalised) 42.61 96.83

Net Cash from Financing Activities -1998.33 -2903.45

Net Increase / Decrease (-) in Cash & Cash Equivalents (A-B+C) -251.06 274.75

Cash & Cash Equivalents (Opening) 667.43 392.68Cash & Cash Equivalents (Closing) * 416.37 667.43

(Represented by Cash & Bank balances)* Includes Rs.58 crores held on escrow account for Voluntary Retirement payments (previous year Rs.315 crores)

Cash Flow Statement








78

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT,1956, RELATING TO SUBSIDIARY COMPANIES

NAME OF THE SUBSIDIARY INDIAN IRON & MAHARASHTRA BHILAICOMPANY STEEL COMPANY ELEKTROSMELT OXYGEN

LIMITED LIMITED LIMITED

1. Financial year of the subsidiary ended on 31st March, 2002 31st March, 2002 31st March, 2002

2. Date from which they became subsidiary 1st May,1978 18th October, 1986 9th Feburary, 1999

3. Share of the subsidiary held by thecompany as on 31st March, 2002

a) Number & face value 38,76,65,757 equity 2,37,87,935 equity 98 equity shares ofshares of Rs.10/- shares of Rs.10/- Rs.10/- each fullyeach fully paid-up. each fully paid-up. paid-up.

b) Extent of holding 100% 99.12% 98%

4. The Net aggregate amount of the subsidiarycompanies Profit/(loss) so far as it concernsthe member of the holding company : (Rupees in Crores ) ( In Rupees )

a) Not dealt with in the holdingcompany’s accounts

i) For the financial year ended (179.87) (8.38) (11080)31st March, 2002

ii) Upto the previous financial years ( 617.27 ) (39.70) (20649)of the subsidiary companies

b) Dealt with in the holdingcompany’s accounts

i) For the financial year ended Nil Nil Nil31st March, 2002

ii) For the previous financial years Nil Nil Nilof the subsidiary companiessince they became the holdingcompany’s subsidiaries

Notes :Indian Iron & Steel Company Limited holds 30,00,000 equity shares of Rs.10 each in IISCO Ujjain Pipe & Foundry Co. Ltd. Thecumulative loss of IISCO Ujjain Pipe & Foundry Co. Ltd. upto 10th July’ 97 was Rs.17.05 crores. The Hon’ble High Court of Calcuttavide its order dated 10th July, 1997 had directed winding-up of the Company from the said date i.e. 10.7.1997 and the official liquidatorhas taken over the possession of the assets of the Company.




79

Consolidated Balance Sheet AS AT 31ST MARCH, 2002

Schedule As atNo. 31st March, 2002

SOURCES OF FUNDS (Rupees in crores)

Shareholders’ FundsShare Capital 1.1 4130.40Reserves and Surplus 1.2 1163.63 5294.03

Loan FundsSecured Loans 1.3 7200.22Unsecured Loans 1.4 7013.84 14214.06

19508.09APPLICATION OF FUNDS

Fixed Assets 1.5Gross Block 28699.68Less: Depreciation 13569.00

Net Block 15130.68Capital Work-in-Progress 1.6 567.99 15698.67

Investments 1.7 163.75Current Assets, Loans & Advances

Inventories 1.8 4253.44Sundry Debtors 1.9 1458.72Cash & Bank Balances 1.10 441.33Interest Receivable/Accrued 1.11 94.17Loans & Advances 1.12 1223.29

7470.95

Less: Current Liabilities & ProvisionsCurrent Liabilities 1.13 5360.97Provisions 1.14 2325.44

7686.41Net Current Assets -215.46Miscellaneous Expenditure 1.15 591.64

(to the extent not written off or adjusted)Minority Interest 1.16Profit & Loss Account Debit Balance 0.24

3269.25

19508.09Accounting Policies and Notes on Accounts 3Schedules 1 and 3 annexed hereto, form part of the Consolidated Balance Sheet.


Sd/- Sd/- (V.S. Jain) (Arvind Pande)

Director (Finance) Chairman




Partner Partner PartnerPlace : New DelhiDated : June 25, 2002

ANNEXURE - VII TO THE DIRECTORS' REPORT

80

Schedule Year endedNo. 31st March, 2002

INCOME (Rupees in crores)Sales 2.1 16323.27Finished products internally consumed 184.97Interest earned 2.2 105.49Other revenues 2.3 938.44Provisions no longer required written back 2.4 103.08 17655.25

EXPENDITUREDepletion to stocks 2.5 450.75Raw materials consumed 2.6 6141.87Purchase of semi/finished products and others 69.87Employees’ Remuneration & Benefits 2.7 3608.96Stores & Spares Consumed 1674.92Power & Fuel 2.8 1887.69Repairs & Maintenance 2.9 175.67Excise duty 2085.03Freight outward 574.47Other expenses 2.10 1369.38Interest & finance charges 2.11 1575.49Depreciation 1181.09

Total 20795.19Less : Transferred to Inter Account Adjustments 2.12 1256.44 19538.75

Loss for the year -1883.50Adjustments pertaining to earlier years 2.13 -11.65

Net Loss for the year -1895.15Less : Minority Interest 0.07Balance brought forward from previous year (net) -1895.08(Refer Note No.3.4 in schedule - 3) -1374.17

Loss carried over to Balance Sheet -3269.25

Accounting Policies and Notes on Accounts 3Schedules 2 and 3 annexed hereto, form part of the Consolidated Profit & Loss Account.

Consolidated Profit and Loss Account FOR THE YEAR ENDED 31ST MARCH, 2002


Sd/- Sd/- (V.S. Jain) (Arvind Pande)

Director (Finance) Chairman




Partner Partner PartnerPlace : New DelhiDated : June 25, 2002

81

1.2 : RESERVES & SURPLUS

As at 31st March, 2002

(Rupees in crores)

Capital ReserveAs per last Balance Sheet 4.88Less: Adjustment during the year 0.14 4.74

Prime Minister’s Trophy Award FundAs per last Balance Sheet 6.89Add : Additions during the year 0.71

7.60Less : Adjustments towards expenses 0.12 7.48

incurred during the year

Share Premium AccountAs per last Balance Sheet 237.20Less : Adjustment towards Bond Issue Expenses 0.69 236.51

Bond Redemption ReserveAs per last Balance Sheet 914.30

1163.63

1.1 : SHARE CAPITAL

As at31st March, 2002

(Rupees in crores)

Authorised5,00,00,00,000 equityshares of Rs. 10 each 5000.00

Issued, Subscribed & Paid-up4,13,04,00,545 equity sharesof Rs.10 each fully paid. 4130.40

Note : 1,24,43,82,900 equity shares ofRs.10 each (net of adjustments onreduction of capital) were allotted as fullypaid up for consideration other than cash.

Schedules (FORMING PART OF THE CONSOLIDATED BALANCE SHEET)

82

1.3 : SECURED LOANS


(Rupees in crores)Working Capital Borrowings from Banks (a) 4101.63[ Including Foreign Currency Non - Resident ( Bank )Loan of Rs.661.74 crores]Term Loan from Banks / Financial Institutions 749.28Interest accrued and due thereon 41.42 790.70 (b)Foreign Loans (b) ` 366.45

Non Convertible Bonds (c)Interest Rate Face value of Bond Date of Redemption ( % ) ( Rs. )13.5 % 100,000/- 1st December, 2002 270.0013.75% 500,000/- 1st July, 2003 175.5514.5% 100,000/- 21st May, 2004 497.0014.0% 500,000/- 1st July, 2005 394.4514.5% 500,000/- 1st April, 2006 226.9012.95% 500,000/- 1st December, 2007 100.0511.30% 500,000/- 1st June, 2008 7.2511.60% 500,000/- 1st June, 2008 33.9511.10% 500,000/- 1st December, 2008 6.5011.50% 500,000/- 1st December, 2008 0.3013.05% 500,000/- 1st December, 2010 59.8012.10% 500,000/- 1st June, 2011 91.3012 % 500,000/- 1st December, 2011 76.90 1939.95Housing Development Finance Corporation Limited 1.45Interest Accrued and due thereon 0.04 1.49 (d)Notes : 7200.22(a) Secured by hypothecation of inventories, book debts and other current assets.(b) Includes Rs.1157.15 crores as follows : Hypothecation of all tangible movable machinery at Bokaro Steel Plant Rs. 366.45 crores. Sinter Plant III of Bhilai Steel Plant Rs.205.83

crores. Selective units of Rourkela Steel Plants Rs.325 crores. All movable plant and machinery at Durgapur Steel Plant Rs.150 crores. Current assets of SAIL Rs. 37.50 crores.Rs.72.37 crores secured by First Mortagage of the properties and undertakings of IISCO together with a floating charge on the whole of the undertakings and assets of IISCOranking pari-passu interse of the Consortium Members.

(c) Secured by charges ranking pari-passu inter se, on all the present and future immovable and movable assets of SAIL except for Bonds of face value of Rs.5,00,000/- each whichare secured by immovable property only at Mouje-wadej of city Taluka, District Ahmedabad, Gujarat and company's plant and machinery including the land on which it stands,pertaining to Durgapur Steel Plant, SAIL.

(d) Secured against documents of title of the house property of the Employees.

1.4 : UNSECURED LOANS


(Rupees in crores)Public Deposits 1272.46Interest accrued and due thereon 2.60 1275.06Government of India 0.27Interest accrued and due thereon 0.35 0.62Steel Development Fund 248.84Interest accrued and due thereon 454.41 703.25Foreign LoansLong Term 1548.37

(Guaranteed by Govt. of India / State Bank of IndiaRs.913.22 crores

Short Term 544.03 2092.40Term Loans From UTI 1.00Interest accrued and due thereon 2.00 3.00Term Loans From Financial Institutions 155.91Non Convertible Bonds*Interest Rate Face value of Bond Date of Redemption ( % ) ( Rs. )10 % 500,000/- 18th September, 2003 100.0010 % 500,000/- 24th September, 2003 400.0012% 500,000/- 1st Feburary, 2007 100.0012.15% 500,000/- 1st Feburary, 2007 400.0011.10% 500,000/- 30th March, 2007 60.0011.25% 500,000/- 30th March, 2007 99.0011.25% 500,000/- 15th April, 2007 400.0011.10% 500,000/- 15th April, 2007 50.0012.15% 500,000/- 1st September, 2007 152.3511.30% 500,000/- 12th March, 2008 105.0011.60% 500,000/- 12th March, 2008 15.0010.10% 500,000/- 1st August, 2008 35.0010.50% 500,000/- 1st August, 2008 35.0011.50% 500,000/- 30th March, 2010 43.5011.50% 500,000/- 15th April, 2010 21.0012.45% 500,000/- 1st September, 2010 38.1512.55% 500,000/- 1st September, 2010 39.4012.65% 500,000/- 1st September, 2010 96.6012.10% 500,000/- 12th March, 2011 195.0011% 500,000/- 1st August, 2011 115.00 2500.00

OthersBond Application Money 83.60Housing Finance Loans 200.00 283.60

7013.84* Guaranteed by Government of India and also secured by charges ranking pari-passu inter se on immovable property (book value as on 31.03.2002 Rs. 0.58 crores)

at Mouje-wadej, Ahemdabad,Gujarat.Note : Secured / unsecured Loans repayable within one year Rs. 2524.37 crore.


83

1.5 : FIXED ASSETS


Description As at Additions / Less : Sales / As at31st Adjustments Adjustments 31st

March during the during the March2001 year year 2002

A. PLANTS, MINES, OTHERS (Rupees in crores)Goodwill * — 651.42 — 651.42Land (including cost of development)— Freehold Land 113.04 0.15 0.24 112.95— Leasehold Land 33.39 0.04 2.59 30.84Right and Patents 6.59 2.53 — 9.12Railway Lines & Sidings 226.27 -0.27 0.60 225.40Roads, Bridges & Culverts 148.42 0.11 0.57 147.96Buildings 1688.91 3.37 39.45 165283Plant & Machinery— Steel Plant 21790.69 1029.55 622.09 22198.15— Others 1523.05 -7.75 25.10 1490.20Furniture & Fittings 74.90 0.10 1.92 73.08Vehicles 454.67 2.01 7.37 449.31Water Supply & Sewerage 288.38 1.17 1.03 288.52EDP Equipments 200.68 3.55 1.23 203.00Miscellaneous Articles 220.83 2.61 1.78 221.66

Sub-total ‘A’ 26769.82 1688.59 703.97 27754.44

B. SOCIAL FACILITIESLand (including cost of development)— Freehold Land 9.00 — 0.13 8.87— Leasehold Land 6.95 0.27 — 7.22Roads, Bridges & Culverts 45.77 — — 45.77Buildings 608.30 0.26 26.45 582.11Plant & Machinery-Others 80.44 0.06 1.57 78.93Furniture & Fittings 12.68 0.07 0.07 12.68Vehicles 8.51 -0.02 0.25 8.24Water Supply & Sewerage 111.65 0.06 0.02 111.69EDP Equipments 2.00 0.02 — 2.02Miscellaneous Articles 85.65 2.31 0.25 87.71

Sub-total ‘B’ 970.95 3.03 28.74 945.24

Total (‘A’+’B’) 27740.77 1691.62 732.71 28699.68

84

1.5 : FIXED ASSETS

DEPRECIATION/AMORTISATION NET BLOCK

Description Up to For Less : On Sales Up to As at31st the Adjustments 31st 31st

March Year during the March March2001 year 2002 2002

A. PLANTS, MINES, OTHERS (Rupees in crores)

Goodwill * — 651.42 — 651.42 —Land(including cost of development)— Freehold Land — — — — 112.95— Leasehold Land 7.75 0.60 0.29 8.06 22.78Right and Patents 5.78 1.19 — 6.97 2.15Railway Lines & Sidings 117.43 8.23 0.51 125.15 100.25Roads, Bridges & Culverts 29.22 2.52 0.17 31.57 116.39Buildings 600.36 50.16 19.30 631.22 1021.61Plant & Machinery— Steel Plant 9492.01 983.64 442.96 10032.69 12165.46— Others 876.70 64.42 22.06 919.06 571.14Furniture & Fittings 46.44 3.35 0.94 48.85 24.23Vehicles 298.69 18.76 6.75 310.70 138.61Water Supply & Sewerage 167.78 9.61 0.26 177.13 111.39EDP Equipments 149.27 14.91 0.95 163.23 39.77Miscellaneous Articles 110.22 9.44 1.21 118.45 103.21

Sub-total ‘A’ 11901.65 1818.25 495.40 13224.50 14529.94

B. SOCIAL FACILITIESLand(including cost of development)— Freehold Land — — — — 8.87— Leasehold Land 3.93 0.26 — 4.19 3.03Roads, Bridges & Culverts 12.18 0.82 — 13.00 32.77Buildings 139.68 9.11 7.03 141.76 440.35Plant & Machinery-Others 48.72 3.23 0.91 51.04 27.89Furniture & Fittings 10.72 0.31 0.03 11.00 1.68Vehicles 6.78 0.19 0.27 6.70 1.54Water Supply & Sewerage 61.78 4.04 — 65.82 45.87EDP Equipments 1.71 0.07 0.01 1.77 0.25Miscellaneous Articles 44.43 4.90 0.11 49.22 38.49

Sub-total ‘B’ 329.93 22.93 8.36 344.50 600.74

Total (‘A’+’B’) 12231.58 1841.18 503.76 13569.00 15130.68

Note : Allocation of depreciation/Amortisation CurrentYear

(a) Charged to Profit & Loss Account 1181.09(b) Charged to expenditure during construction 0.44(c) Debited to adjustments pertaining to earlier years 8.23(d) Debited to Accumulated losses as on 31.03.2001 651.42

(Refer Note No.3.4 in Schedule 3)Total 1841.18

* Arising out of Consolidation of Subsidiary Accounts


85

1.6 : CAPITAL WORK-IN-PROGRESS


(Rupees in crores)

Expenditure during constructionpending allocation (Schedule 1.6.1) 40.43

Capital Work-in-progressSteel Plants & Units 290.66Township 4.71Ore Mines and Quarries 0.55 295.92

Capital equipments pending erection, 56.36installation, commissioning and adjustments

Construction – Stores and Spares 22.62Less: Provisions 2.51 20.11

Advances 161.14Less: Provisions 5.97 155.17

567.99

Particulars of advancesUnsecured, Considered Good 155.17

(including advances backed byBank Guarantees Rs.13.85 crores)

Unsecured, Considered Doubtful 5.97

161.14

86

1.6.1 : EXPENDITURE DURING CONSTRUCTION (pending allocation)


(Rupees in crores)

Opening balance (a) 43.58

Expenditure incurred during the yearEmployees’ Remuneration & Benefits

Salaries, Wages & Bonus 17.34Company’s contribution to Provident 1.21

and other FundsTravel Concession 0.02Welfare Expenses 0.04Gratuity 0.43 19.04

Technical Consultants’ fees & know-how 0.02Repairs & Maintenance

Plant & Machinery 0.10Others 0.37 0.47

Stores and Spares 3.05Power & Fuel 5.82Rent 3.21Rates & Taxes 0.01Other Expenses 2.30Interest & Finance Charges 39.81Depreciation 0.44

74.17Less: Income

Interest Earned 1.14Liquidated Damages 0.95Hire Charges 1.45Internal consumption of sinter 15.55Sundries 0.77 19.86

Net expenditure during the year (b) 54.31

Total (a)+(b) 97.89

Amount allocated to Fixed Assets/Capital Work-in-progress 57.46

Balance carried forward 40.43

Total 97.89


87

1.7 : INVESTMENTS (AT COST) — LONG TERM

Number of Face As atFully Paid up value per 31st March,Equity Shares Share 2002

(Rs.)

(Rupees in crores)Quoted

Housing Development Finance Corporation 6,000 10 0.01Limited (Market Value Rs 41,07,600 )

HDFC Bank Limited 500 10 —*(Market Value Rs 1,17,575 )Industrial Credit & Investment Corporation 57,200 10 0.05 0.06of India Ltd. (Market value Rs.34,86,340)

UnquotedTrade Investments

Tata Refractories Limited 10,00,000 10 1.12Almora Magnesite Limited 40,000 100 0.40North Bengal Dolomite Limited 97,900 100 0.98Indian Potash Limited 2,40,000 10 0.18SAIL Power Supply Company Pvt. Limited 5,86,50,050 10 58.65Bokaro Power Supply Company Limited 8,40,25,000 10 84.02Bhilai Electric Supply Company Limited 1,66,00,000 10 16.60SAIL–Bansal Service Centre Pvt. Limited 27,23,200 10 2.72Metaljunction.Com Pvt. Limited 4,000 10 —*South India Export Co. (P) Limited 7,500 10 0.01India Standard Wagon Company Limited 130 100 —*Hoogly Docking and Engg. Company Limited 1,433 100 0.02Satna Stone Lime Company Limited 33,804 10 0.03 164.73

Other Investments -Subsidiary Companies

IISCO Ujjain Pipe & Foundray Company Ltd. 30,00,000 10 3.00 3.00(Refer Note No.5.2.3 of schedule 3)

Other CompaniesManagement & Technology Application

(India) Limited 16,334 10 0.02UEC SAIL Information Technology Limited 1,80,000 10 0.18Cement & Allied Products (Bihar) Limited 2 10 —*Chemical & Fertilizer Corporation

(Bihar) Limited 1 10 —*Bhilai Power Supply Company Limited 5 10 —*Romelt SAIL (India) Limited 63000 10 0.06MSTC Limited 20,000 10 0.01

Bihar State Financial Corporation 500 100 0.01Government Securities 0.06

Shares in Co-operative Societies (1.7.1) 0.19 0.53

Less : Provision for diminution in value of investments 168.324.57

163.75* Cost being less than Rs. 50,000/-, figures not given.

88

1.7.1 : SHARES IN CO-OPERATIVE SOCIETIES

Number of Face As atFully Paid-up value per 31st March,

Shares Share 2002(Rs.)

(In Rupees)

Rajhara Employees’ Co-operativeStores Limited 25 100 2500

Nandini Employees’ Co-operativeStores Limited 25 100 2500

BSP Employees’ Consumers’ Co-operativeStores (Sector 4) Limited 25 100 2500

Bhilai Steel Employees’ Consumers’Co-operative Society Limited (Sector-8) 250 10 2500

Bokaro Steel Employees’ Co-operative 6,250 20Credit Society Limited 1,16,500 10 1290000

BSP Kamgar Consumers’ Co-operativeStores Limited (Sector-7) 250 10 2500

Bokaro Steel City Central Consumers’Co-operative Stores Limited 250 10 2500

NMDC Meghahatuburu Employees’Consumers Co-operative Society Limited 25 100 2500

DSP Employees’ Co-operativeSociety Limited 1377 100 137700

Bolani Ores Employees’ ConsumerCo-operative Society Limited 200 25 5000

Barajamda Iron Ore Mines Central Co-operativeStores Limited 400 25 10000

IISCO Employees Primary Co-operativeStores Limited 23000 20 460000

1920200


89

1.8 : INVENTORIES*


(Rupees in crores)

Stores & spares 947.47Add: In-transit 78.51

1025.98Less: Provision 88.51 937.47

Raw materials 517.54Add: In-transit 142.36

659.90Less: Provision 2.91 656.99

Semi/finished products 2627.56(including scrap)

Salvaged/Scrapped fixed assets 77.94Less : Provision 46.52

31.42

4253.44

* Valued as per Accounting Policy No. 1.6 in schedule No.3

1.9 : SUNDRY DEBTORS


(Rupees in crores)

Debts over six months 409.20Other debts 1232.40

1641.60Less: Provision for doubtful debts 182.88

1458.72

ParticularsUnsecured, considered good 1458.72

(Including debts backed bybank guarantees Rs.353.80 crores);Previous year Rs.426.15 crores)

Unsecured, considered doubtful 182.88

1641.60

1.10 : CASH & BANK BALANCES


(Rupees in crores)

Cash and Stamps on hand 1.77Cheques on hand 261.81

With Scheduled Banks on :Current Account 37.91Unpaid Dividend Account 0.42Margin Money Account 0.95Term Deposits Account * 133.06 172.34

With post office 0.01(Deposits pledged withexcise authorities)

Remittances-in-transit 5.40

441.33

* Includes Rs. 58 crores held in escrow account for VoluntaryRetirement Payments)

1.11 : INTEREST RECEIVABLE/ACCRUED


(Rupees in crores)

Loans to subsidiary company 0.35(Refer Note No.5.2.1 of schedule 3)Loans to other companies 0.53Employees 83.34Others 16.19

100.41Less: Provision for doubtful interest 6.24

94.17

ParticularsUnsecured, considered good 94.17Unsecured, considered doubtful 6.24

100.41

90


1.12 : LOANS & ADVANCES


(Rupees in crores)

LoansEmployees 207.81Stores issued 14.14Subsidiary company 2.38(Refer Note No.5.2.1 of schedule 3)Others 115.87

340.20Less : Provision 2.11 338.09

Advances recoverable in cash or inkind or for value to be received

Claims recoverable 326.37Contractors & suppliers 86.65Employees 4.30Advance Income Tax and 84.92Tax deducted at source*Bills Receivable 0.10For purchase of shares** 4.00Export Incentives Receivable 58.74Others 216.05 781.13

DepositsPort Trust, Excise 90.92Department, Railways, etc.Others 120.33 211.25

1330.47

Less : Provision for doubtfulLoans & Advances 107.18

1223.29

* (Including Rs. 82.65 crores paidagainst disputed demands.

** For Metalijunction.com Pvt. Ltd.a joint venture Company

Particulars of Loans & Advances– OthersSecured, considered good 203.88Unsecured, considered good 1019.41

(Including loans & advances backedby bank guarantees Rs. 0.77 crores)

Unsecured, considered doubtful 107.18

1330.47Amount due from

— Directors 0.02— Officers —

Maximum amount due at any timeduring the year from

— Directors 0.04— Officers 0.02

1.13 : CURRENT LIABILITIES


(Rupees in crores)

Sundry creditorsCapital works 259.68Others 1991.53 2251.21

Advances fromCustomers 273.01Others 33.57 306.58

Security deposits 199.64Less : Investments received as

security deposit 0.26 199.38

Interest accrued but not due on Loans 1082.53

Dividend warrants - unencashed 0.42Other liabilities 1520.85

5360.97

1.14 : PROVISIONS


(Rupees in crores)

Gratuity 1258.17Accrued Leave Liability 591.13Taxation 0.04Pollution control & peripheraldevelopmentOpening Balance 30.08Add : Provision during the year 14.48Less : Amount utilised during the year 1.40 43.16

Exchange FluctuationOpening Balance 22.93Add : Provision during the year 11.10Less : Amount paid during the year 18.10 15.93

Voluntary Retirement Compensation 248.78Employee Family Benefit Scheme 87.90Wage Revision 9.03Others 71.30

2325.44

91

1.15 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted)

Balance Additions Total Amount Balanceas at during Charged as at31st the Off 31st

March year during the March2001 year 2002

(Rupees in crores)

(i) Development Expenditure

(a) On Mines 29.94 18.41 48.35 16.71 31.64

(b) On New Projects 0.38 0.20 0.58 0.14 0.44

Total (i) 30.32 18.16 48.93 16.85 32.08

(ii) Deferred Revenue Expenditure

(a) Voluntary Retirement 299.88 329.02 628.90 171.89 457.01Compensation

(b) Employee Family Benefit Scheme — 101.53 101.53 20.31 81.22

(c) Others 44.86 4.77 49.63 28.30 21.33

Total (ii) 344.74 435.32 780.06 220.50 559.56

Total (i+ii) 375.06 453.93 828.99 237.35 591.64

CurrentYear

Charged Off to:

Raw Materials 13.16

Other Expenses & Provisions 223.60

Prior Period Adjustments/EDC 0.59

237.35

CurrentYear

1.16 : MINORITY INTEREST

Balance of Equity as on the date of Investment -0.43Add : Movement in Equity and proportionate share of losses from the date of investment 0.19

upto to 31.03.2002 -0.24

92

c:\sail\sail02\sail-sc1 p65 01 08 02 (92)

92

2.1 : SALES

Year ended31st March, 2002

(Rupees in crores)

Direct 9243.04From Stockyards 6460.21Exports 554.33Export Incentives 53.32Others 12.37

16323.27

2.2 : INTEREST EARNED


(Rupees in crores)

Loans & Advances 8.39Customers 37.81Employees 16.74Term Deposits 35.29Others 7.26

105.49

2.3 : OTHER REVENUES


(Rupees in crores)

Social amenities-recoveries 102.10Sale of empties etc. 30.17Liquidated damages 9.01Service charges * 3.23Grant-in-aid 0.03Subsidy 9.45Hire charges etc. 0.88Claims for finished products 4.62 (Shortages & missing wagons)Dividend (Gross) from investments 5.80Profit on sale of fixed assets (net) 0.25Profit on sale of power plants 490.58Profit on sale of houses 171.64Sundries * 110.68

938.44

* (Tax deducted at source Rs.0.10 crores)

Schedules(FORMING PART OF THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

2.4 : PROVISIONS NO LONGER REQUIREDWRITTEN BACK


(Rupees in crores)

Loans & advances 20.78Sundry debtors 13.50Stores & spares 9.39Others 59.41

103.08

2.5 : DEPLETION TO STOCK OF SEMI/FINISHEDPRODUCTS


(Rupees in crores)

Opening stock 3079.47Less : Closing stock 2628.72

450.75

2.6 : RAW MATERIALS CONSUMED


Quantity Value

Tonnes Rs./crores

Iron Ore 19820153 911.12Coal 12813926 3774.57Coke 127077 72.09Limestone 3306876 338.91Dolomite 2454931 130.33Naphtha 18730 25.53Ferro Manganese 57784 129.90Ferro Silicon 17359 56.21Silico Magenese 71384 157.96Hot Rolled Stainless Steel Coils 15856 58.16Intermediary Products 3082 85.95Zinc 10977 68.85Aluminium 13544 111.63Others 220.66

6141.87

Note : Consumption of raw materials includes shortages Rs. 6.07crores to the extent not covered by normal handling losses andexcess to the extent of Rs.16.82 crores.


92 93

2.7 : EMPLOYEES’ REMUNERATION & BENEFITS


(Rupees in crores)

Salaries, wages & annual bonus 2846.29Contribution to provident fund 269.84 & other fundsTravel concession 9.17Welfare expenses 120.94Gratuity 362.72

3608.96

Note :Expenditure on Employees’Remuneration and Benefits notincluded above and charged to:

a) Expenditure during Construction 19.04b) Deferred Revenue Expenditure 171.89c) Net expenditure on Social Amenities charged

to various primary revenue heads 183.55

374.48

2.8 : POWER & FUEL


(Rupees in crores)

Purchased power 1557.30Duty on own generation 25.66Boiler Coal/Middlings 226.22Furnace Oil/LSHS/LDO 60.30Others 18.21

1887.69

Note :Expenditure on Power & Fuel notincluded above & charged off to:— Expenditure during Construction 5.82

2.9 : REPAIRS & MAINTENANCE


(Rupees in crores)

Buildings 25.88

Plant & Machinery 96.29

Others 53.50

175.67

Note :

Expenditure on repairs & maintenancenot included above and charged to:

a) Employees’ Remuneration & Benefits

Buildings 43.69


Others 62.46

556.49

b) Stores & Spares

Buildings 11.40


Others 33.63

704.10

c) Expenditure during Construction


Others 0.37

0.47

Total (a+b+c) 1261.06

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2.10 : OTHER EXPENSES


(Rupees in crores)

Commission to selling agents 12.44Directors’ Fees 0.03Export sales expenses 24.33

Handling expenses— Raw Material 129.68— Finished goods 72.04— Scrap recovery expenses 68.49 270.21

Insurance 7.46Postage, telegram & telephone 18.56Printing & stationery 8.03

Provisions— Doubtful debts, loans and

advances 77.04— Investments 0.05— Stores, Spares and Sundries 41.13 118.22

Rates & Taxes 23.45

Remuneration to Auditors— Audit fees 0.51— Tax Audit fees 0.13— Out of pocket expenses 0.64— In other capacities 0.20 1.48

Cost Audit Fees 0.01Rent 25.17Royalty and cess 44.70Security expenses 84.99Travelling expenses 104.72

Write Offs— Miscellaneous & Deferred

Revenue Expenditure 223.60— Doubtful debts, advances etc. 7.95 231.55

Cash Discount 52.96Training expenses 5.37Conversion charges 26.21Foreign Exchange Fluctuation (net) 45.81Water charges & Cess on water pollution 23.29Contribution to Joint Plant Committee Funds 2.27Miscellaneous (include Donation Rs. 0.51 lacs) 238.12

1369.38

Schedules (FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT)

2.11 : INTEREST & FINANCE CHARGES


(Rukpees in crores)

Public Deposits 167.61Foreign Currency Loans 136.42Non Convertible Bonds 576.73Bank Borrowings - working capital 462.93Steel Development Fund Loans 37.48Others 179.58Finance Charges 40.98

1601.73Less : Interest subsidy received from GOI 26.24

1575.49

Note :Expenditure on interest not includedabove & charged to:Expenditure during ConstructionForeign Currency Loans 1.69Non Convertible Bonds 24.56Steel Development Fund Loans 9.48Others 3.43Finance Charges 0.65

39.81

2.12 : INTER ACCOUNT ADJUSTMENTSYear ended

31st March, 2002

(Rupees in crores)

Raw materials 987.63Departmentally manufactured stores 211.68Services transferred to capital works 21.30Coke subsidy to Employees 1.94Inter plant transfer of stocks/stores 28.15Others (Net) 5.74

1256.44

2.13 : ADJUSTMENTS PERTAINING TO EARLIERYEARS


(Rupees in crores)Sales 1.81Other revenues 0.48Raw materials consumed -0.47Employees’ remuneration & benefits 1.42Stores & spares consumed -4.73Power & fuel -6.02Repairs & Maintenance -0.24Excise duty -1.56Other Expenses & Provisions 9.27Interest 3.46Depreciation 8.23

Net Debit 11.65* (-) indicate credit items


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SCHEDULE 3 : ACCOUNTING POLICIES & NOTES ON ACCOUNTS1.5 INVESTMENTS

Investments held/intended to be held for a period exceeding oneyear are classified as long term investments, while other investmentsare classified as current investments.Current quoted investments are valued at lower of cost or marketvalue on individual investment basis.Investments in long-term and unquoted investments are valued atcost. However, provision for diminution in the value of suchinvestments is made to recognise a decline, other than temporary,on individual investment basis.

1.6 INVENTORIESSemi/Finished products, are valued at lower of cost and net realisablevalue of the respective plants.Raw-materials are valued at lower of cost and net realisable value.Iron scrap and steel/skull scrap at the integrated plants, are valuedat 75% and 90% respectively of the previous year’s realisable valueof pig iron.The stocks of wear scrap lying unconsumed at the plant and mixed coke andmiddlings/rejects, are valued at the estimated net realisable value.In the case of special products, which have a realisable value at thefinished stage only, the realisable value of process materials is arrivedat by applying the ratio of finished product’s realisable value andits cost, to the cost upto the stage of process.Stores and spares are valued at cost. However, in the case of stores andspares declared obsolete/surplus and also those which have not movedfor five years or more, provision is made at 75% and 10% respectivelyof the book value and charged to revenue.In respect of inter-unit transfers: (i) the closing stock of semi/finished products is valued at lower of cost or realisable value of thetransferor plant. Materials out of inter-plant transfers, lying in stockafter further processing, are valued at transfer price plus processingcost of the transferee plant or realisable value, whichever is lower.Such inter-plant transferred materials used for capitalisation have,however, been considered at cost (ii) Stores and spares are valued atcost of the transferor plant (iii) Raw materials at plants are valued atlower of cost and net realisable value. Cost is determined based on theaverage of purchase cost and transfer price.Cost is arrived on weighted average basis exept for raw materials (other thancoke) at MEL, which is arrived on 'First In First Out' basis.

1.7 DEVELOPMENT/DEFERRED REVENUEEXPENDITUREExpenditure incurred on development of new projects, removal ofover-burden at mines, cost of feasibility studies for new projectsand payments for technical know-how/documentation is treated asdevelopment expenditure.Expenditure incurred on removal of over-burden in mines is writtenoff in five years except for IISCO wherein expenditure incurredduring the year for regular mining operation is charged to Profitand Loss account. Expenditure on feasibility studies, technicalknow-how/documentation and other development expenditure isadded to the capital cost of the project, if implemented. In case theproject is abandoned, such expenses are written off in five years.Voluntary retirement compensation liability ascertained on actuarialvaluation, is treated as deferred revenue expenditure and written-offin five years. Further, annual increase/decrease to the above liabilityactuarially ascertained, is taken to Profit & Loss Account, after

1. ACCOUNTING POLICIES1.1 BASIS OF ACCOUNTING

The Company prepares its accounts on accrual basis under historicalcost convention as per the generally accepted accounting principles.

1.2 FIXED ASSETSAll fixed assets are stated at historical cost less depreciation.Land gifted by the State Governments is valued notionally/nominallyand the corresponding amount is credited to ‘Capital Reserve’. Theexpenditure on development of land including lease-hold land, iscapitalised as a part of the cost of land.Interest on Loans for additions, modifications and replacementschemes is capitalised, based on the mean of the balances under‘Capital work-in-progress’ at the beginning and close of the yearunder each scheme.Fixed assets whose actual costs cannot be accurately ascertained, areinitially capitalised on the basis of estimated costs and finaladjustments for costs and depreciation, if any, are made retrospectivelyon ascertainment of actual costs.Expenditure incurred during the trial run period are capitalised tillthe concerned assets are ready for commercial production.The contribution/expenditure towards construction/developmentof assets on land owned by the Government/Semi-Governmentauthorities, is capitalised under appropriate assets account.Grants-in-aid related to specific fixed assets are shown as deductionfrom the gross value of the assets concerned in arriving at their bookvalue. Grants-in-aid related to revenue items are netted against therelated expenses.Machinery spares which can be used only in connection with anitem of fixed assets and whose use as per technical assessment isexpected to be irregular, are capitalised and depreciated over theresidual useful life of the respective assets.Items of fixed assets that have been retired from active use areexhibited under fixed assets at their book value till the acceptance ofdisposal proposals thereagainst, and due provisions are made totake care of the shortfall, if any, in their respective realisable value.However, fixed assets that have been retired from active use andwhose disposal proposals have been accepted, are de-capitalised andincluded under “Inventories” at lower of book value and estimatedrealisable value.

1.3 BORROWING COSTSBorrowing costs relating to the acquisition/construction of qualifyingassets are capitalised until the time all substantial activities necessaryto prepare the qualifying assets for their intended use are complete.A qualifying asset is one that necessarily takes substantial period oftime to get ready for its intended use.All other borrowing costs are charged to revenue.

1.4 DEPRECIATIONDepreciation is provided on straight line method at the rates specifiedin Schedule-XIV to the Companies Act, 1956. However, where thehistorical cost of a depreciable asset undergoes a change, thedepreciation on the revised unamortised depreciable amount isprovided prospectively over the residual useful life of the assetbased on the rates specified in Schedule XIV as stated above.Depreciation on assets installed/disposed off during the year isprovided with respect to the month of addition/disposal thereof.Cost of acquiring mining rights is amortised over the lease period.

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adjustment of payments thereof during the year. Incrementalpayments against Voluntary Retirement Schemes due to wage revisionis charged corresponding to the period for which deferred revenueexpenditure relating to such Voluntary Retirement Scheme isamortised, with the first charge being made for the entire lapsedperiod in the year in which such wage agreement is finalised. Incase of Voluntary Retirement Schemes which envisage monthlypayments, the payments are charged off as per contractual terms,while the future liability to the disabled employee/legal heirs ofdeceased employees under the Family Benefit Schemes is treated asdeferred revenue expenditure and written-off over a period of 5 years.Other deferred revenue expenditure including expenditure onconsultancy/ technological assistance for strategic cost reduction andquality improvements is written-off in five years.

1.8 FOREIGN CURRENCY TRANSACTIONSForeign currency assets and liabilities (other than those covered byforward contracts) as on the Balance Sheet date are converted at theyear end exchange rates and loss or gain arising thereon, is adjustedin the carrying amount of fixed assets or charged to Profit & LossAccount, as the case may be.Transactions in foreign currencies other than those covered by forwardcontracts are recorded at the rates prevailing on the date oftransactions.In case of foreign currency transactions covered by forward contracts,the difference between contract rate and exchange rate prevailing onthe date of transactions, is adjusted to the cost of fixed assets orcharged to the Profit & Loss Account, as the case may be,proportionately over the contract period.

1.9 RESEARCH & DEVELOPMENT EXPENDITUREResearch and Development Expenditure is charged to Profit andLoss Account in the year of incurrence. However, expenditure onfixed assets relating to research and development, is treated in thesame way as other fixed assets.

1.10 CLAIMS FOR LIQUIDATED DAMAGES/ESCALATIONClaims for liquidated damages are accounted for as and when theseare deducted and/or considered recoverable by the Company.These are treated as income on completion of the projects/finalsettlement.Suppliers’/Contractors’ claims for price escalation are accountedfor, to the extent such claims are accepted by the Company.

1.11 RETIREMENT BENEFITSThe provisions for gratuity and leave encashment liabilities aremade on the basis of year end actuarial valuation.

1.12 ADJUSTMENTS PERTAINING TO EARLIERYEARS AND PREPAID EXPENSESIncome/expenditure relating to prior period and prepaid expenseswhich do not exceed Rs.5 lakhs in each case are treated as income/expenditure of current year.

1.13 SALESSales include Excise Duty and are net of rebates/price concessions/sales tax.Materials sold in domestic market are treated as sales on delivery tocarriers including the cases where delivery documents are in thecompany’s name, pending collection of payments, since thesignificant risks and rewards in such cases are passed on to thebuyers on despatch of materials. Export sales are treated as sales onissue of Bills of lading.

Schedules1.14 EXPORT INCENTIVES

Export incentives in the form of Special/Advance Licences, credit earnedunder Duty Entitlement Pass Book Scheme and duty drawback, are treatedas income in the year of export, at estimated realisable value/actual creditearned on exports made during the year.

1.15 LEASES(a) Where the group is lessor

Assets given under finance lease are recognised as receivable atan amount equal to the net investment in the lease. Lease rentalsare apportioned between principal and interest on the basis ofinternal rate of return. The principal amount received is reducedfrom the net investment in the lease while interest recovery isrecognised as revenue. In those cases where the entire leasepremium/consideration is received up front, the differencebetween consideration money and net book value of the assets isrecognised as income in the Profit & Loss Account.Assets subject to operating lease are included in fixed assets andthe lease income is recognised in the Profit & Loss Account ona straight line basis over the lease term. Expenses includingdepreciation in relation thereto, are recognised as an expense inthe Profit & Loss Account.

(b)Where the group is lesseeFinance leases which effectively transfer to the Companysubstantially all the risks and rewards incidental to the ownershipof the leased items, are capitalised at the lower of the face valueand present value of the minimum lease payments at the inceptionof the lease term. Leased payments are apportioned between thefinance charges and reduction of the lease liability so as toachieve a constant rate of interest on the remaining liability.Capitalised leased assets are depreciated over the lease term orestimated useful life of the relevant assets, whichever is shorter.All leases except for those specified above, are classified as operatingleases. Lease payments, in such cases, are recognised as an expense inthe Profit & Loss Account on a straight line basis over the lease term.

1.16 TAXATIONProvision for income tax comprises of current tax and deferred taxcharged or realised. Deferred tax is recognised, subject toconsideration of prudence on timing differences, being the differencesbetween taxable and accounting income/expenditure that originatein one period and are capable of reversal in one or more subsequentperiod(s). Deferred tax assets are not recognised unless there isvirtual certainty that sufficient future taxable income will be available,against which such deferred tax assets will be realised.

1.17 SEGMENT REPORTING(a) Identification of Segments

The group has identified that its operating segments are primarysegments. The group’s operating business are organised andmanaged separately for all the manufacturing units, with eachbusiness unit representing a strategic segment. Accordingly,each manufacturing unit has been identified as an operatingsegment for reporting purposes.The analysis of geographical segments is based on the areas inwhich the customers of the Group are located.

(b) Allocation of Common costsCommon expenses are allocated to each segment on appropriatebasis. Revenue and expenses not allocated to segments, havebeen included under the head “unallocated – common expenses”.The Accounting Policies adopted for segment reporting are inline with those of the group.


96 97

NOTES ON ACCOUNTSs in MEL as on 31st March, 2001, has been adjusted against theaccumulated loss of the group as on 31st March, 2001. Similarly,provision of Rs.23.79 crores made in SAIL accounts for thediminution in the value of investments in MEL, has been creditedto the accumulated loss of the Group as on 31st March, 2001.

3.5 Goodwill (as stated in para 3.4 above) in relation to the shares inIISCO and MEL has been calculated on step-by-step basis, basedon the acquisition made during each year, subsequent to theformation of Steel Authority of India Ltd., presuming suchacquisitions to be on the last date of the respective years, irrespectiveof the actual date of such acquisition.

3.6 In terms of the guidelines issued by the Institute of CharteredAccountants of India in relation to Accounting Standard-21, previousyear’s figures have not been furnished in the consolidated accounts.

4. FIXED ASSETS4.1 Land includes:

i) 61473.20 acres owned/ leased/ possessed by the Company, inrespect of which title/lease deeds are pending for registration.

ii) 4442.30 acres gifted by State Governments, which are pendingfor registration and included in (i) above.

iii) 4991.43 acres given on lease to various agencies/ employees/ex-employees.

iv) 14459.72 acres transferred/agreed to be transferred or madeavailable for settlement to various Central/State/Semi-Government authorities, in respect of which conveyance deedsremain to be executed/registered. Out of the above, 10626.73acres have already been adjusted in the accounts.

v) 13117.70 acres in respect of which title is unascertained.4.2 Foreign exchange variations aggregating to Rs. 56.95 crores (net

debit) have been included in the carrying amount of fixed assetsduring the year.

4.3 Estimated amount of contracts remaining to be executed on capitalaccount and not provided for (net of advances) – Rs.288.51 crores.

5. INVESTMENTS, CURRENT ASSETS, LOANS &ADVANCES AND CURRENT LIABILITIES &PROVISIONS

5.1 The Indian Iron & Steel Co. Ltd. (IISCO), was declared a SickIndustrial Company by the Board for Industrial and FinancialReconstruction (BIFR) on 17th August, 1994. The IndustrialDevelopment Bank of India has been appointed as operating agencyand the proposal for revival of IISCO is pending with BIFR. Theaccounts of IISCO have been drawn up based on the assumptionthat it is a going concern.

5.2.1 IISCO-Ujjain Pipe & Foundry Co. Ltd.(IISCO-Ujjain), a whollyowned subsidiary company of IISCO, is under liquidation and anofficial liquidator has been appointed on 10th July 1997 by theHon’ble High Court of Kolkata, who has taken over the possessionof the assets. As IISCO-Ujjain is held exclusively with a view to itsdisposal in the near future, consolidation of the accounts of IISCO-Ujjain is not called for with the group in terms of AS-21.

5.2.2 Bhilai Oxygen Ltd, a wholly owned subsidiary of the Company isheld exclusively with a view to its disposal in the near future andtherefore, the consolidation of its accounts is not called for with thegroup in terms of AS-21.

5.2.3 Sundry debtors and Loans & Advances include Rs 18.70 crores(including Government of India loan and interest thereon amountingto Rs. 0.62 crores) due from IISCO Ujjain Pipe & Foundry Co.

2.1 CONTINGENT LIABILITIESAs at 31st

March, 2002

(Rs. in crores)i) Claims against the group pending

appellate/judicial decisions 1495.04ii) Other claims against the group not

acknowledged as debt 680.93iii) Bills drawn on customers and

discounted with banks 30.76iv) Guarantee given to banks 28.85 v) Claims by certain employees and escalation claims,

extent whereof is not ascertainable —

2.2 Sales Tax authorities have raised demands for Rs.1041.86 crores onaccount of sales tax on stock transfers made by the plants over theyears to stockyards situated in different States, under various marketingschemes. The demands of Sales Tax authorities at plants have beencontested by the Company which are pending at various stages ofappeal. As sales tax liability has been discharged by the respectivestockyards on sale of such stocks by depositing sales tax with therespective Sales Tax authorities in different States, no liability is expectedto arise, as sales tax is leviable only once.

3. PRINCIPLES OF CONSOLIDATION OFFINANCIAL STATEMENTS :The consolidated financial statements which relate to Steel Authorityof India Ltd. (SAIL) and its various subsidiary companies havebeen prepared on the following basis -

3.1 The subsidiary companies considered in the financial statementsare as follows :

Name Country of % of VotingIncorporation power as on

31st March,2002

Indian Iron & Steel Co. Ltd. (IISCO)India 100.00Maharashtra Elektrosmelt Ltd. (MEL)India 99.12

3.2 The financial statements of the Company and its subsidiaries arecombined on a line-by-line basis by adding together the bookvalues of like items of assets, liabilities, income and expenditure,after fully eliminating intra group balances, intra group transactionsand any unrealised profit/loss included therein. However, materialslying in stock against inter-group company transfers and profitmargins included therein; the quantum whereof is insignificant,have been accounted for based on the management certificates.

3.3 The consolidated financial statements have been prepared usinguniform accounting policies for like transactions and are presentedto the extent possible in the same manner as the Company’s separatefinancial statements. However, raw materials (other than coke)inventory of Rs.1.13 crores at MEL has been valued on the ‘First InFirst Out’ method as against the general policy of the group to valuesuch raw material on the weighted average cost basis. The resultantimpact of such deviation is not material.

3.4 Goodwill amounting to Rs.651.42 crores, being the excess of costof investment to SAIL over the proportionate net worth of thesubsidiary companies, and Rs.0.38 crore being minority interest

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Ltd. The land and buildings of IISCO Ujjain Pipe & FoundryCo. Ltd. as on 31st March, 2000, were re-valued by an independentagency and the re-valued amount of the above assets, along with thevalue of other assets like plant & machinery, etc. is quite adequate tocover the above loans and advances made by the company whichare, therefore, considered to be recoverable. However, provision fordiminution in the value of the investment in equity shares ofRs. 3.00 crores and for other dues amounting to Rs. 2.11 croreshave been made in the accounts.

5.3 At Durgapur Steel Plant, recoverable advances/dues of Rs 138.37 croresfrom Hindustan Steel Works Construction Limited (HSCL) include (i)Rs 133.40 crores paid over the years in excess of contractual obligationsincluded in Capital Work-in-Progress (ii) Rs. 2.54 crores paid againstfuture jobs to be awarded (iii) Estate dues of Rs. 2.43 crores. HSCL hasdisputed the above advances and has made further claims against theCompany and the Company, in turn, has also made counter claims.These matters have been referred to a conciliator. Pending conciliation andHSCL being a Government of India Undertaking, the advances and otherdues have been considered recoverable. Adjustment/provision, if any,required with regard to such advances/dues shall be carried out on finalisationof conciliation proceedings/settlement of claims/counter claims.Further, an amount of Rs. 42.75 crores (net) is due from HSCL atBokaro Steel Plant and Bhilai Steel Plant towards advances againstfuture jobs to be executed, estate dues etc. These are considered asrecoverable, since the Company has continuous dealings with HSCLand expects to recover these advances in due course.

5.4 At Bhilai Steel Plant, advances of Rs. 9.84 crores due from BharatRefractory Ltd., under BIFR, are considered as recoverable, sincethe Company has continuous dealings with these companies andexpects to recover these advances in due course.

5.5 Claims recoverable (Schedule-1.12) include Rs.44.76 crores duefrom M/s TPE, Russia towards claims for short weight of equipments(less than contractual estimates) and equipments getting shippedthrough shorter route resulting in freight refunds to Bhilai SteelPlant during the years 1976 to 1984. The above claims havealready been accepted by the party in Nov.’97 and recovery thereofis being followed up through Inter-Governmental meetings/protocol.

5.6 The Capital Work-in-Progress (Schedule 1.6) includes Rs.16.31crores towards expenditure incurred on Hot Dip Galvanising Lineproject in Assam. The company has initialled an MOU for enteringinto a joint venture with M/s N E Steel Private Limited to undertakethe above project. Based on the terms & conditions for such jointventure, a sum of Rs.15.90 crores is recoverable from the JointVenture company, and the balance amount of Rs.0.41 crores hasbeen provided for.

5.7 Unlike previous years, the future liability for benefits payable to the disabledemployees / legal heirs of deceased employees under the Employee FamilyBenefit Scheme have been provided and treated as deferred revenueexpenditure as referred to in Accounting Policy 1.7 above, resulting into anincrease in loss for the year by Rs. 20.31 crores.

5.8 Sundry creditors, other liabilities, sundry debtors, claimsrecoverable, deposits and advances to parties include some oldunlinked balances pending reconciliation/ confirmation/adjustments.Adequate provisions wherever considered necessary have been madefor such old balances. Further adjustments as necessary, will beaccounted for in the year of reconciliation/settlement/realisation ofthe respective balances.

5.9 The group has substantial carried forward losses and unabsorbeddepreciation under the Income Tax Act, 1961 and accordingly

Schedulesdeferred tax asset of about Rs.2513.06 crores has arisen as on31.3.2002 (including Rs.719.95 crores for the current period) asper Accounting Standard-22 on ‘Accounting for taxes on income’.However, in consideration of prudence, the above deferred tax assethas not been recognised in the financial statements and the samewould be considered at appropriate time keeping in view theavailability of sufficient taxable income against which such deferredtax asset can be realised.

5.10 On behalf of employees of the Company, an amount of Rs. 1 crore was paidduring the year to Orissa Chief Minister Relief Fund to provide relief to theaffected families caused by the devastating flood in Orissa during July2001 in anticipation of recoveries from the employees for this cause. Rs.44.62 lakhs were recovered from the employees during the year and effortsare on for the recovery of the balance amount.

6. PROFIT & LOSS ACCOUNT6.1 The Company has transferred and assigned for Rs. 670.50 crores,

its Captive Power Plants at Bokaro and Bhilai on 18th September,2001 and 19th March, 2002 to the then subsidiary companies,Bokaro Power Supply Company Limited and Bhilai Electric SupplyCo. Ltd. respectively, which later converted into joint venturecompanies with Damodar Valley Corporation and National ThermalPower Corporation Limited respectively for generation and sale ofpower to the company. The profit of Rs 490.58 crores on suchtransfer has been included under ‘Other Revenues’ as Profit on saleof Power Plants’.

6.2.1 The long term agreements for employees’ salaries & wages of SAIL& MEL had expired on 31.12.1996. The Companies haveimplemented the revised salaries & wages payment w.e.f. 1.1.2001with fitment on the basis of notional increment over the periodfrom 1.1.1997 to 31.12.2000 and appropriate adjustments thereofhave been carried out in the accounts. However, the issue of wagerevision (including other benefits) for the period from 1.1.1997 to31.12.2000 is to be discussed separately with the employees.Liability if any, in this regard is unascertainable. Further, followingthe past practice, adhoc adjustable advances/Interim Relief ofRs.422.90 crores for the above period (including Rs.128.34 croresduring the year) have been charged to “Employees’ Remunerationand Benefits” in the respective years.

6.2.2 In respect of Colliery employees and other units of IISCO, the longterm agreements for employees’ pay revision have expired on 30thJune, 1996 and on 31st December, 1996 respectively. No provisionhas been made for pay revision and arrears, if any, in view ofGovernment directives applicable to companies under BIFR.Liability, if any, in this regard is unascertainable. However, interimrelief @12% is being paid and the paid amount of Rs. 39.62 crores(including Rs.18.95 crores during the year) has been provided for,pending final decision, for the period from 01.07.1996 for collieriesand from 01.01.1997 to 31.03.1998 and thereafter from01.01.2001 for other units.

6.3 Power & Fuel does not include expenses for generation of powerand consumption of certain fuel elements produced by the plantswhich have been included under the primary heads of account.

6.4 Amount of foreign exchange differences in respect of forwardexchange contracts to be recognised in the Profit and Loss Accountfor subsequent periods is Rs. 15.43 crores (net debit).

6.5 The benefits relating to Leave Travel Concession (LTC)/Liberalised LeaveTravel Concession (LLTC) for the block calendar years of 1998-99, 2000-01and 2002-03 have been withdrawn and accordingly, there exists no liabilitytowards LTC/LLTC for the above periods.


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6.6 The Central Board of Direct Taxes vide its Notification dated 25thSeptember 2001 has revised the rules for computation of certainperquisites. The Employees’ Union/Association have filed writpetitions with the Hon’ble High Court at Kolkata challenging theabove Notification. The Hon’ble High Court, Vide it’s Orderdated 25.1.2002, has directed that the Income Tax calculated onthe perquisites shall be deducted and kept separately and not depositedwith the Income Tax Department and vide order dt. 30.1.2002 hasgranted an interim stay restraining the Company from deduction oftax on perquisite on accommodation provided to the employees bythe Company. Accordingly, no tax has been deducted on houseperquisite and tax on other perquisites has been deducted and keptin separate account for all employees. Necessary accountingadjustments in the above matter would be carried out on the disposalof appeals filed by the Employees’ Union/Association.

6.7 The Company has granted long term lease, in respect of certainresidential premises at its various units to the employees, ex-employees etc. and profit of Rs. 171.64 crores arising on leasing ofsuch assets has been included under ‘Other Revenues’ as Profit onsale/lease of houses’.

6.8 In order to comply with Accounting Standard-2, unlike previousyears, the stocks of iron ore, limestone, dolomite, etc. raised at theCompany’s Mines for captive consumption, have been valued atlower of cost or net realisable value, resulting into an increase in lossfor the year by Rs. 5.87 crores.

6.9 The amount of public deposits accepted by the Company, as per thecomputerised list, containing depositor-wise details is higher byRs.2.14 crores as compared to the overall balance as per financialrecords of the Company. The above difference has been adjusted inthe books through credit to deposits and charged as prior periodexpense. Adjustments, if any, in this regard would be carried outafter further verification/reconciliation.

6.10 The classification of plant and machinery into continuous and non-continuous has been made on the basis of technical opinion anddepreciation thereon is provided accordingly.

6.11 Interest aggregating to Rs.46.42 crores (including Rs.3.57 crores for the year)on SDF loans to IISCO has been deemed to have been waived.

7. GENERAL7.1. Segment Reporting

i) Business Segment: The four integrated steel plants and threealloy steel plants, being manufacturing units, have beenconsidered as primary business segments for reporting under‘Accounting Standard–17–Segment Reporting’ issued by theInstitute of Chartered Accountants of India.

ii) Geographical segments have been considered for Secondary SegmentReporting. The whole of India has been considered as a geographicalsegment and exports as other segments. The disclosures of segment-wise information is given at Annexure-I.

7.2 Related partyAs per Accounting Standard - 18 - ‘Related party disclosures’issued by the Institute of Chartered Accountants of India, the nameof the related parties of the group are given below:Name of the related partiesJoint Venture

SAIL, Bansal Service Centre LimitedMetaljunction.Com Pvt. LimitedUEC SAIL Information Technology Limited

Key Management Personnel : Shri Arvind Pande

Shri V.S.Jain

Shri S.C.K.Patne

Shri B.K.Singh

Dr. S.K.Bhattacharyya

Shri A.K.Singh

Shri Suresh Pandey

Shri Barun Ghoshal

Dr. Sanak Mishra

Shri R.P.Singh

Shri Sudhakar Jha

Shri D.A.PikleShri S.Panigrahi

Shri S.N.P.Singh

Shri M.N.Thakur

Shri M.Roy

Shri A.K. Jaiswal

Shri R.K. Gupta

The details of transactions between the company and the relatedparties, as defined in the Accounting Standard, are given below :

Sl. Nature of transactions Amount Ref. Schedule & AccountNo. Rs./crores head of the Accounts

Joint Key Mgt.Venture Personnel

i) Advances for purchase 4.00 1.13 : Loans & Advancesof Shares Others

ii) Other Advances 0.10 0.08 1.13 : Loans & AdvancesOthers

iii) Investments 2.68 1.7 : Investments

iv) Payments madeagainst services renderedduring previous year. 0.05

v) Managerial Remuneration 1.32 2.7 : Employees' Remunerationand Benefits

7.3 Earning Per Share (EPS)

In terms of Accounting Standard-20 issued by the Institute ofChartered Accountants of India, the calculation of EPS is givenbelow :

2001-02

Loss (-) as per Profit & Loss Account (-) 1895.15(Rs. in crores)

Weighted average number of equity sharesoutstanding during the year 4,13,04,00,000

Basic and diluted EPS. (Rs.) (-) 4.59

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100

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF STEEL AUTHORITY OF INDIA LIMITEDON THE CONSOLIDATED FINANCIAL STATEMENTS OF

STEEL AUTHORITY OF INDIA LIMITED AND ITS SUBSIDIARIES

We have examined the attached Consolidated Balance Sheet of Steel Authority of India Limited (SAIL) and its subsidiaries as at 31st March2002 and the Consolidated Profit and Loss Account for the year then ended.

These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit in accordance with the generally accepted auditing standards in India. Thesestandards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in allmaterial respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes,examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statements. We believethat our audit provides a reasonable basis for our opinion.

We did not audit the financial statements of the Company’s subsidiaries, whose financial statements reflect total assets of Rs.699.65 croresas at 31st March 2002 and total revenues of Rs.1118.42 crores for the year then ended. These financial statements have been audited by otherauditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries,is based solely on the report of the other auditors.

We report that, subject to our observation vide paragraph (i) below, the consolidated financial statements have been prepared by the Companyin accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute ofChartered Accountants of India and on the basis of the separate financial statements of Steel Authority of India Limited and its subsidiariesincluded in the consolidated financial statements.

On the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual auditedfinancial statements of Steel Authority of India Limited and its aforesaid subsidiaries, we report that:

i) The Accounts of IISCO Ujjain Pipe & Foundry Co. Ltd, a subsidiary of Indian Iron and Steel Company Ltd. (the Company’s subsidiary) andBhilai Oxygen Ltd. have not been consolidated in these accounts for the reasons mentioned vide note nos. 5.2.1 and 5.2.2 in Schedule 3.

ii) Attention is drawn to the following notes in Schedule 3 whose impact on the Group’s Loss for the year as well as accumulated loss as onthe Balance Sheet date is indicated in the respective notes below:a. Advances, claims etc. to the extent of Rs. 252.31 crores as indicated in Note Nos. 5.2.3 to 5.5 in Schedule 3 are considered fully recoverable

by the management. However, since all the above items are outstanding since long, we are unable to offer our comments on the recoverabilitythereof.

b. Liability of Rs. 101.53 crores for future benefits payable under Family benefit Scheme as referred to in Note no. 5.7 in Schedule 3 has beendeferred over a period of 5 years instead of charging it off fully in the current year. Because of the above, the loss for the year is understated byRs. 81.22 crores.

c. Loans and advances include Rs. 0.55 crore being the balance amount of Rs. 1 crore given to the Orissa Chief Minister’s Relief Fund as statedin Note No. 5.10 of Schedule 3. The Management has stated that efforts are being made to recover the above amount from the employees and,any shortfall in this regard will be treated as ‘donation’, in due course.

d. Pending finalisation and ascertainment of the arrear salaries and wages of employees for the period from 1.1.1997 to 31.12.2000, as referredto in Note Nos. 6.2.1 and 6.2.2 in Schedule-3, we are unable to comment on the adequacy of the provision of Rs.462.52 crores (includingRs.147.29 crores provided during the year).

e. The group has withdrawn the benefits relating to Leave Travel Concession (LTC) / Liberalised Leave Travel Concession (LLTC) for variousblock periods from 1998-99 to 2002-03 as indicated in note No. 6.5 in Schedule 3. Because of the above withdrawal, no liability towardsLTC/LLTC has been provided in the accounts. However, in view of specific agreements with the unions and terms of employment for extensionof above benefits to the employees, we are unable to comment whether, such liabilities have accrued or not. (amount unascertained)

f. The amount of public deposits as per the detailed computerized list was higher by Rs. 2.14 crore as compared to the financial records of SAILas on the Balance Sheet date as indicated in Note No. 6.9 in Schedule 3. The deposits have been increased by this amount and debited to Profit& Loss Account as a ‘Prior Period Expense’. Internal control procedures in this regard are required to be strengthened. The above accounthaving not yet been reconciled/ verified and in the absence of adequate details / supportings justifying the above adjustment, we are unable tooffer comments in this matter.

g. IISCO, a subsidiary Company, has become sick and referred to BIFR as indicated in Note no. 5.1 in schedule 3. However, IISCO continuesto prepare its accounts on historical cost basis as a Going concern.

h. Goodwill of Rs. 651.42 crores arisen on consolidation has been debited to accumulated loss as on 31st March 2001, instead of charging itto the current year’s Profit & Loss Account, as indicated in Note no. 3.4 in Schedule 3.

Schedules


100 101

Without considering item Nos. (a), and (c) to (g) above, whose effect on the Group’s loss / Profit and Loss Account debit balance, is not presentlyascertainable, had the impact of items (b) & (h) above been considered, the loss for the year would have been Rs.2627.79 crores as against the reportedloss of Rs.1895.15 crores and Profit and Loss Account debit balance would have been Rs.3350.47 crores, as against the reported figures of Rs. 3269.25crores.

Subject to the above and read together with other ‘Notes’ appearing in Schedule 3, on the basis of the information and explanations givento us, and on the consideration of separate audit reports on individual audited financial statements of Steel Authority of India Limited andits subsidiaries, we are of the opinion that,

a) the Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of Steel Authority of India Limited andits subsidiaries as at 31st March 2002; and

b) the Consolidated Profit and Loss Account gives a true and fair view of the consolidated results of operations of Steel Authority ofIndia Limited and its subsidiaries for the year then ended.

S.R. Batliboi & Co. S.N.Nanda & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/-[R.K.Agrawal] [S.N.Nanda]

Partner Partner

Chaturvedi & CoChartered Accountants

Sd/-[S.C. Chaturvedi]

Partner

Place : New DelhiDated : 25th June, 2002

102


102

AS ON 23.8.2002

NEW DELHI

ChairmanArvind Pande

DirectorsFinanceV.S. JainProjectsS.C.K. PatneCommercialA.K. Singh

Chief Vigilance OfficerS.K. Panda

Executive DirectorsSAILCONT.TiwariRajinder NathInternal AuditB.K. VermaCorporate PlanningAshis DasProjectsK.K. KhannaChairman’s Sectt.R.B. MajumdarOperationsU.P. SinghCoal Import GroupA.P. SinghFinance & AccountsR.K. GuptaLawA.K. ShahiMaterials ManagementK. ChandraHRDS.C.L. DasEnvironment ManagementDr. M.N. Thakur

Chief Expert (Raw Materials-BlastFurnace & Sinter)B.R. Satpathi

Chief of Corporate AffairsShoeb Ahmed

Company SecretaryDevinder Kumar

CORPORATE OFFICE STEEL PLANTS ORGANISATIONS

Durgapur Steel PlantManaging DirectorDr. S.K. BhattacharyyaExecutive DirectorsWorksY. PrasadProjectsS.K. SinhaFinance & AccountsD. Mitra

Bokaro Steel PlantManaging DirectorS. PandeyExecutive DirectorsWorksH.M.P. SinghMaterials ManagementR.P. ChourasiaProjectsK.P. ChoudharyMedicalDr. C.R. DasPersonnel & AdministrationU.N. Jha

Bhilai Steel PlantManaging DirectorB.K. SinghExecutive DirectorsWorksB.M.K. BajpaiProjectsR.P. SinghFinance & AccountsP.K. Chakraborty

Rourkela Steel PlantManaging DirectorDr. Sanak MishraExecutive DirectorsPersonnel & AdministrationG. JagannathanWorksS.C. DasProjectsB.B. MohantyMaterials ManagementS. Padhi

Alloy Steels PlantExecutive DirectorN.P. Jayaswal

Salem Steel PlantExecutive DirectorS.N.P. Singh

Visvesvaraya Iron & Steel PlantExecutive DirectorR.P. Singh

Research & Development Centrefor Iron & SteelDirectorR.C. JhaExecutive DirectorSudhakar Jha

Raw Materials DivisionExecutive Director I/cS. PanigrahiExecutive DirectorU. Mishra

Centre for Engg. & TechnologyExecutive DirectorD.A. Pikle

Growth Division, KolkataExecutive DirectorM. Roy

Central Marketing Organisation

Executive DirectorCommercialP. Ganesan

Transport & ShippingB. Basu

Personnel & AdministrationA.K. Mukerji

Marketing - Long ProductDr. S. Dubey

Marketing - Flat ProductS.K. Roongta

SUBSIDIARIES

The Indian Iron & Steel Co. Ltd.Executive Director I/cA.K. Jayswal

Executive DirectorWorksA.K. Das

ProjectsR.K. Pujari

Central Growth Works, KultiGeneral ManagerV.C. Dimri

Maharashtra Elektrosmelt Ltd.Executive DirectorR.K. Gupta

Principal Executives

THE INDIAN IRON & STEEL COMPANY LIMITED

103


ToThe Members,

The Board of Directors have pleasure in presenting the 85th AnnualReport of the Company together with the Audited Accounts for the yearended 31st March, 2002.

FINANCIAL REVIEWDuring 2001-2002 the Company achieved a turnover of Rs. 911.94crores (previous year Rs 941.37 crores). The Net Loss for the year aftercharging depreciation (Rs. 23.94 crores) and interest (Rs. 11.63 crores)was Rs. 179.87 crores compared to the net loss of Rs. 187.31 croresduring 2000-2001. Net Loss for the year could be contained mainlydue to higher Net Sales Realisation, higher volume of Saleable Steelproduction/Sales and favourable techno-economic factors, which were,however, partly reduced by higher input cost.

PRODUCTION REVIEW

Burnpur WorksThe production of Hot Metal was 688 thousand tonnes, Pig Iron 288thousand tonnes, Crude Steel 346 thousand tonnes and Saleable Steel292 thousand tonnes. Production of Crude Steel and Saleable Steelsurpassed previous year’s production.

On the techno-economic front the plant achieved the lowest ever SpecificEnergy Consumption of 9.339 G.Cal/tcs and lowest ever RefractoryConsumption of 21.8 kg/tcs during the year.

Rapid water quenching system was introduced in M&R Mill forproduction of TMT Bars in sizes of 16 mm dia to 32 mm dia meetingquality specifications.

Kulti WorksSpun Pipe production was 15.7 thousand tonnes (previous year 17.6thousand tonnes). Total Casting output for the year was 17.02 thousandtonnes (previous year 11.5 thousand tonnes). Sale of Spun Pipe was16.7 thousand tonnes (previous year 16.1 thousand tonnes)

CollieriesTotal Coal raisings from three Captive Collieries was 1154.7 thousandtonnes. Clean Coal output from Chasnalla Washery was 567.51 thousandtonnes and despatch of Clean Coal to Burnpur was 501.58 thousandtonnes.

Ore MinesTotal Iron Ore Lump production was 1307 thousand tonnes.

Lump Ore despatch from two Captive Ore Mines was 1276 thousandtonnes.

SALES AND MARKETING REVIEW

Domestic SalesSale of Saleable Steel was 293.3 thousand tonnes. Sale of Pig Iron was245.1 thousand tonnes.

Export12.8 thousand tonnes of Steel Materials and 13.5 thousand tonnes ofPig Iron was exported.

CAPITAL SCHEMES REVIEWDuring the year 2001-2002, the Company incurred cash expenditureto the tune of Rs. 7.45 crores on various Capital Schemes includingAdditions/Modifications/Replacements. Financial constraints continuedto affect the progress of work against ongoing schemes.

Under the Scheme for Revamping and upgradation of Merchant andRod (M&R) Mill, Rapid Water Quenching System for production ofthermo-mechanical treated bars of size range 16 to 32 mm was introduced

and the Project was commissioned in May, 2001. Performance of thissystem was found satisfactory and Performance Guarantee Tests for thesame were successfully completed in October, 2001.

Another part of revamping and upgradation scheme for Merchant &Rod Mill comprising Installation of slit rolling facility for production of10 & 12mm dia thermomechanical treated bars was approved in May,2001 at a cost of Rs. 346.76 lakhs. Major orders covering Design &Engg., supply of major equipment and supervision of manufacture/installation/commissioning of the Project has already been awarded toMECON in June, 2001. It is likely to be commissioned by middle ofAugust, 2002. Tendering activities for the last phase of revamping andupgradation of Merchant & Rod Mill comprising upgradation of MillControl System has also been taken up. In addition, few more schemes,e.g. augmentation of 11 KV distribution net work for Steel Section etc. arealso being implemented.

Guarantee tests for 6t capacity medium frequency induction furnaceinstalled at SPP-2 of Kulti Works have been completed and the Furnacewas taken over for regular use from February, 2002. Also ThyristorControl System for the electric arc furnace of steel foundry at Kulti Workshas been installed and successfully commissioned.

ENVIRONMENT MANAGEMENTEnvironment Management and pollution control has been given priorityin all the activities of the company. Ambient air, stack emission and workenvironment quality are within specified limits of statutory authority.Industrial water consumption was limited per tonne of crude steel to7.66 Cu.M/tcs in 2001-2002.

Environment awareness campaign through observance of the worldEnvironment Day, SAIL Environment month and Workshop/Trainingon Environment Management were organised for different section ofEmployees at Burnpur, and Eco-club members and students of affiliatedschools. Pollution Control Laboratory, Burnpur have received recognitionfrom Central Pollution Control Board, New Delhi. About 1200 saplingsof different plants were planted in township and works area. Dust extractionsystem at A & B Boilers, Dolomite Plant & T.H.F. have been workingeffectively. Consent for air emission, effluent discharge and hazardouswaste handling/disposal have been received from State Pollution ControlBoard.

HUMAN RESOURCE MANAGEMENT REVIEWThe Company gives great importance to the development of its humanresource to improve efficiency and productivity.

Manpower UtilisationThe Manpower strength as on 31st March, 2002 was 22767 comprising1045 executives and 21722 non-executives. There was a reduction ofmanpower strength by 903 compared to the previous year.

During 2001-2002, 66 Employees were given Voluntary Retirement.

Industrial RelationsThe Industrial Relations remained cordial and peaceful during the year.However, in the Collieries and Ore Mines there were occasions of stoppagesof work and economic blockade for demands relating to wage revision.

Safety & Occupational HealthThe thrust towards Safety and Occupational Health continued. 26 bi-partite meetings of Safety were held. 2271 regular employees and 482contract labourers were trained on various safety aspects.

TrainingThe endeavour to make training more result and skill oriented continued.During the year 2051 employees were trained in various fields.

Scheduled Castes and Scheduled TribesScheduled Caste and Scheduled Tribe employees were 12.28 percentand 3.22 percent respectively of the total manpower as on 31.03.2002.

Directors' Report


104

Awards6 Executives and 12 Non-executives were given Jawahar and NehruAwards respectively for extra ordinary, innovative or exemplary jobs intheir fields of work. 4 employees were given Netaji Subhas Award forsignificant achievement in various fields of activities.

Official Language PolicyDuring the year the Company continued to pursue vigorously theimplementation of Official Language Policy of the Government. Employeeswere encouraged to carry out their official work in Hindi and liberalincentives for such work were given. Official Language FortnightCelebrations, Hindi Workshops and seminars on technical writing inHindi were organised. Hindi poem competition amongst theSchool students and Computer training programmes for doing work onHindi software were also organised during the year. Rajbhasha Shieldsand cash prizes were awarded in various competitions to encouragethe employees.

Employees’ WelfareThe Company undertook various welfare measures like maintenance ofhouses, education for children, medical facilities, socio-cultural activitiesand other facilities and spent Rs. 37.16 crores (Net) during the year.

SportsDuring the year, various sports activities were conducted for employeesand their dependants.

- IISCO Bridge Team became champion of Inter SteelChampionship.

- 7 Junior wards of IISCO employees were awarded SAIL Sportsscholarships 2001-2002 in Cricket, Basketball and Volleyballdisciplines.

STATUS ON REHABILITATIONIISCO was declared a Sick Industrial Company by the Board for Industrialand Financial Reconstruction (BIFR) on 17-08-1994. IndustrialDevelopment Bank of India has been appointed as Operating Agencyand the proposal for revival/modernisation is in process.

SUBSIDIARYIISCO Ujjain Pipe & Foundry Co. Ltd. (IISCO Ujjain) a wholly-owned Subsidiary of IISCO, was decided to be wound up by BIFR inJune, 1996. The Official Liquidator has initiated the liquidation process.

AUDITORS’ REPORTReplies of the Board of Directors to the observations made in the Reportof the Statutory Auditors on the Accounts are enclosed at Annexure-I.The comments and review of Accounts by the Comptroller and AuditorGeneral of India along with management’s replies are enclosed atAnnexure-II

REPORT ON CONSERVATION OF ENERGY,

TECHNOLOGY ABSORPTION ETC.Information in accordance with provisions of Section 217(1)(e) of theCompanies Act, 1956 read with Companies (Disclosure of Particularsin the Report of Board of Directors) Rules, 1988 regarding Conservationof Energy, Technology Absorption and Foreign Exchange Earnings andOutgo is given at Annexure-III to this report.

PARTICULARS OF EMPLOYEESThere was no employee of the Company who received remuneration inexcess of the limits prescribed in Section 217(2A) of the Companies Act,1956 read with the Companies (Particulars of Employees) Rules, 1975as amended up-to-date.

DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to Section 217(2AA) of the Companies Act, 1956 [As amendedby Companies (Amendment) Act, 2000], it is hereby confirmed :-

(i) that in the preparation of the annual accounts, the applicableaccounting standards had been followed along with properexplanation relating to material departures;

(ii) that the directors had selected such accounting policies and appliedthem consistently and made judgements and estimates that arereasonable and prudent so as to give a true and fair view of thestate of affairs of the company at the end of the financial year2001-2002 and of the Profit & Loss Account of the company forthe financial year ended 2001-2002;

(iii) that the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance withthe provisions of the Companies Act for safeguarding the assets ofthe Company and for preventing and detecting fraud and otherirregularities;

(iv) that the directors had prepared the annual accounts on a goingconcern basis.

COMPOSITION OF AUDIT COMMITTEEPursuant to Section 292A of the Companies Act, 1956 [As amended byCompanies (Amendment) Act, 2000] an Audit Committee consistingof the following Directors has been constituted by the Board of Directorsof the Company :-

(i) Shri D.V. Singh(ii) Shri V.S. Jain(iii) Shri S.C.K. Patne

Shri D.V. Singh is the Chairman of the Audit Committee.

DIRECTORSShri G. Upadhyaya was appointed as Additional Director on06-03-2002. Shri Upadhyaya resigned on 31-03-2002.

Shri D.P. Singh has been appointed as Additional Director w.e.f.05-03-2002.

Shri B. Ghoshal and Shri Ashis Das have been appointed as AdditionalDirectors w.e.f. 06-03-2002.

Shri T. Tiwari, Shri C.S.Rao, Shri M.K. Moitra and Shri B.K. Singhresigned w.e.f. 17-07-2001, 31-12-2001, 28-02-2002 and11-03-2002 respectively. The Board has placed on record its appreciationof the valuable services rendered by Shri T. Tiwari, Shri C.S. Rao, ShriM.K. Moitra and Shri B.K. Singh.

ACKNOWLEDGEMENTThe Directors place on record their sincere appreciation for the servicesrendered and co-operation extended by the employees at all levels andhope that they will continue to contribute their best to the continuousefforts of the Management for optimising the resources and improvingthe operations of the Company. The Directors whole-heartedly thank theState Government Agencies, Financial Institutions, Bankers, Suppliers,Customers and Auditors for their co-operation, assistance and patronage.The Directors also wish to acknowledge the continuous support andguidance received from Steel Authority of India Ltd., Government ofWest Bengal and the different Departments of the Government of Indiaand more particularly from the Ministry of Steel.


Sd/-(Arvind Pande)

ChairmanPlace : New DelhiDate : 23rd August, 2002

Directors' Report


105

Schedule As at As atNo. 31st March, 2002 31st March, 2001

(Rupees in crores)

SOURCES OF FUNDSShareholders’ Fund

Share Capital 1.1 387.66 387.66Reserves and Surplus 1.2 3.51 391.17 3.51 391.17

Loan FundsSecured Loans 1.3 131.71 125.61Unsecured Loans 1.4 47.68 179.39 47.52 173.13

570.56 564.30

APPLICATION OF FUNDSFixed Assets 1.5

Gross Block 793.74 785.68Less: Depreciation 487.57 466.33

Net Block 306.17 319.35Capital Work-in-Progress 1.6 11.93 318.10 17.56 336.91

Investments 1.7 0.07 0.10

Current Assets, Loans & AdvancesInventories 1.8 178.86 213.56Sundry Debtors 1.9 71.85 176.91Cash & Bank Balances 1.10 21.97 22.47Interest Receivable/Accrued 1.11 0.23 0.31Loans & AdvancesSubsidiary Companies 1.12 0.00 0.00Others 1.13 30.71 35.45

303.62 448.70

Less: Current Liabilities & ProvisionsCurrent Liabilities 1.14 649.51 661.59Provisions 1.15 210.69 178.72

860.20 840.31

Net Current Assets -556.58 -391.61Miscellaneous Expenditure 1.16 11.83 1.63(to the extent not written off or adjusted)Profit & Loss Account Debit Balance 797.14 617.27

570.56 564.30Accounting Policies and Notes on Accounts 3Schedules 1 to 3 annexed hereto,form part of the Balance Sheet

In terms of our report of even date

For and on behalf of For and on behalf of For and on behalf of Board of DirectorsM/s Guha Nandi & Co. M/s S. Ghose & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/- Sd/- Sd/- Sd/-(Dr. B.S. Kundu) (Chandan Chatterjee) (A.K. Mukherjee) (A.K. Jayswal) (V.S. Jain) (Arvind Pande)

Partner Partner Secretary Exe.Director. I/C Director Chairman




106


(Rupees in crores)

INCOMESales 2.1 911.94 941.37Finished products internally consumed 3.29 4.93Interest earned 2.2 0.10 0.98Other revenues 2.3 19.74 9.73Provision no longer required written back 2.4 26.27 5.56Stock transfer to other units 0.00 961.34 0.00 962.57

EXPENDITUREAccretion(-)/Depletion to stocks 2.5 31.26 25.57Raw materials consumed 2.6 486.32 478.07Purchase of semi/finished products 53.16 40.44Employees Remuneration & Benefits 2.7 338.56 349.06Stores & Spares consumed 107.44 110.50Power & Fuel 2.8 100.09 87.36Repairs & Maintenance 2.9 13.34 15.54Excise duty 102.15 98.87Freight outward 21.62 18.06Other expenses 2.10 128.96 132.92Interest & finance charges 2.11 11.63 11.74Depreciation 23.94 29.25

Total 1418.47 1397.38Less: Transferred to Inter

Account Adjustments 2.12 278.39 1140.08 249.68 1147.70

Profit/Loss(-) for the year -178.74 -185.13Adjustments pertaining to earlier years 2.13 -1.13 -2.18

Net Loss(-) -179.87 -187.31Balance brought Forward from previous year -617.27 -429.96

Balance carried over to Balance Sheet -797.14 -617.27

Accounting Policies and Notes on Accounts 3Schedules 2 to 3 annexed hereto,form part of the Profit & Loss Account

Schedules 2 to 3 and Accounting Policies annexed form part of the Accounts


In terms of our report of even date

For and on behalf of For and on behalf of For and on behalf of Board of DirectorsM/s Guha Nandi & Co. M/s S. Ghose & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/- Sd/- Sd/- Sd/-(Dr. B.S. Kundu) (Chandan Chatterjee) (A.K. Mukherjee) (A.K. Jayswal) (V.S. Jain) (Arvind Pande)

Partner Partner Secretary Exe.Director. I/C Director Chairman



107

1.1 SHARE CAPITAL As at As at31st March, 31st March,

2002 2001

(Rupees in crores)Authorised54,70,00,000 Equity Sharesof Rs.10/- each 547.00 547.003,00,000 5% Cumulativepreference shares ofRs.100/- each 3.00 3.00

Issued, Subscribed & Paid-up*36,94,84,257 Equity Shares of Rs.10/- eachfully paid-up in cash 369.48 369.48

1,81,81,500 Equity Sharesof Rs.10/-each fully paid-up forconsideration other than cash(including 1,24,40,899 and20,73,483 fully paid Bonus Sharesallotted by Capitalisation ofGeneral Reserves and fromShare premium respectively) 18.18 18.18

387.66 387.66

* (All the shares are held by Steel Authority of India Ltd.of which the company is a wholly owned subsidiary)

1.2 RESERVES & SURPLUS As at As at31st March, 31st March,

2002 2001

(Rupees in crores)Capital ReserveAs per last Balance Sheet 3.15 3.98Add: Grant-in-Aid from Government

of India 0.00 0.05Less: Adjustment during the year 0.00 3.15 0.88 3.15Share Premium Account

As per last Balance Sheet 0.36 0.36

Less : Adjustment towards Bond Issue 0.00 0.36 0.00 0.36

Expenses 3.51 3.51

1.3 SECURED LOANS As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Working Capital Borrowings from Banks* 59.34 56.58Term Loan from Banks/FinancialInstitutions# 30.95 30.95Interest accrued and due thereon 41.42 72.37 38.08 69.03

131.71 125.61

* Secured by hypothecation Company's inventories,book debts and other current assets.

# (Consortium Loan for plantrehabilitation Loan from Consortium(Consisting of Industrial DevelopmentBank of India, United Bank of India,Allahabad Bank, Central Bank of India,Grindlays Bank Ltd., Industrial FinanceCorporation of India Ltd., IndustrialCredit & Investment Corporation of IndiaLimited and Life Insurance Corporation ofIndia) secured by First Mortgage of theproperties and undertakings of theCompany together with a floating chargeon the whole of the undertakings andassets ranking pari-passu interse of theConsortium Members.

1.4 UNSECURED LOANS As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Steel Development Fund 44.68 44.68

Interest accrued and due thereon* 0.00 44.68 0.00 44.68

Term Loans From UTI 1.00 1.00

Interest accrued and due thereon 2.00 3.00 1.84 2.84

47.68 47.52

1.5 FIXED ASSETS


Description As at 31st Additions Less : Sales / As at 31stMarch, Adjustments Adjustments March,

2001 during the during the 2002year year

(Rupees in crores)

A. PLANTS, MINES, OTHERS

Land (including cost ofdevelopment)

— Freehold Land 58.04 0.00 0.00 58.04— Leasehold Land 0.79 0.05 0.00 0.84

Railway Lines & Sidings 4.75 0.00 0.00 4.75

Roads, Bridges & Culverts 2.94 0.00 0.00 2.94

Buildings 28.52 0.00 0.00 28.52

Plant & Machinery

— Steel Plant 465.96 3.40 0.14 469.22

— Others 82.88 6.21 0.79 88.30

Furniture & Fittings 2.44 0.03 0.00 2.47

Vehicles 41.93 0.03 0.93 41.03

Water Supply & Sewerage 4.98 0.00 0.00 4.98

EDP Equipments 3.54 0.02 0.00 3.56

Miscellaneous Articles 5.24 0.05 0.00 5.29

Sub-total 'A' 702.01 9.79 1.86 709.94

Figures for the previous year 615.13 88.37 1.55 701.95

B. SOCIAL FACILITIES

Land (including cost ofdevelopment)

— Freehold Land 0.20 0.00 0.00 0.20

Roads, Bridges & Culverts 2.63 0.00 0.00 2.63

Buildings 45.51 0.08 0.00 45.59

Plant & Machinery-Others 8.53 0.00 0.00 8.53

Furniture & Fittings 1.28 0.00 0.00 1.28

Vehicles 1.54 0.00 0.05 1.49

Water Supply & Sewerage 19.59 0.00 0.00 19.59

EDP Equipments 0.01 0.00 0.00 0.01

Miscellaneous Articles 4.44 0.04 0.00 4.48

Sub-total 'B' 83.73 0.12 0.05 83.80


Total (A+B) 785.74 9.91 1.91 793.74


Schedules


108

Schedules1.5 FIXED ASSETS (Contd.)

DEPRECIATION NET BLOCK

Description Up to 31st For the Less : On Sales / Upto 31st As at 31st As at 31stMarch, 2001 year Adjustments March, 2002 March, 2002 March, 2001

during the year

(Rupees in crores)A. PLANTS, MINES, OTHERS

Land (including cost of development)— Freehold Land - - - - 58.04 58.05— Leasehold Land 0.20 0.00 0.00 0.20 0.64 0.59Railway Lines & Sidings 3.26 0.10 0.00 3.36 1.39 1.48Roads, Bridges & Culverts 1.52 0.06 0.00 1.58 1.36 1.40Buildings 17.06 0.54 0.02 17.58 10.94 11.44Plant & Machinery— Steel Plant 314.39 16.16 1.16 329.39 139.83 151.56— Others 62.73 2.97 0.88 64.82 23.48 20.13Furniture & Fittings 1.80 0.09 0.00 1.89 0.58 0.63Vehicles 30.29 1.30 0.55 31.04 9.99 11.64Water Supply & Sewerage 2.61 0.11 0.00 2.72 2.26 2.38EDP Equipment's 2.95 0.15 0.00 3.10 0.46 0.57Miscellaneous Articles 2.67 0.22 0.00 2.89 2.40 2.60

Sub-total 'A' 439.48 21.70 2.61 458.57 251.37 262.47

Figures for the previous year 411.98 26.93 -0.57 439.48 262.47

B. SOCIAL FACILITIESLand (including cost of development)— Freehold Land - - - - 0.20 0.20Roads, Bridges & Culverts 0.44 0.04 0.00 0.48 2.15 2.18Buildings 11.05 0.79 0.00 11.84 33.75 34.46Plant & Machinery – Others 4.02 0.37 0.00 4.39 4.14 4.51Furniture & Fittings 0.77 0.06 0.00 0.83 0.45 0.49Vehicles 1.45 0.02 0.10 1.37 0.12 0.08Water Supply & Sewerage 6.47 0.80 0.00 7.27 12.32 13.12EDP Equipments 0.01 0.00 0.00 0.01 0.00 0.00Miscellaneous Articles 2.60 0.21 0.00 2.81 1.67 1.84

Sub-total 'B' 26.81 2.29 0.10 29.00 54.80 56.88


Total ('A'+'B') 466.29 23.99 2.71 487.57 306.17 319.35


NOTE: ALLOCATION OF DEPRECIATION Current Year Previous Year

(a) Charged to Profit & Loss Account 23.94 29.25(b) Charged to expenditure during construction 0.05 0.05(c) Debited to adjustments pertaining to earlier years 0.00 0.09

TOTAL 23.99 29.39

1.6 CAPITAL WORK-IN-PROGRESS As at As at31st March, 31st March,

2002 2001

(Rupees in crores)Expenditure during constructionawaiting allocation (Schedule 1.6.1) 0.00 1.88

Capital Work-in-progress

Steel Plants & Units 11.75 12.71Township 0.03 2.71Ore Mines and Quarries 0.00 11.78 0.00 15.42Advances * 4.44 5.42Less: Provisions 4.29 0.15 5.16 0.26

11.93 17.56

Particulars of advances

Unsecured, Considered Good 0.15 0.26Unsecured, Considered Doubtful 4.29 5.16

4.44 5.42* Include Rs.2.34 crores earmarked

for low cost housing scheme(Against Capital Reserve)

1.6.1 EXPENDITURE DURING As at As atCONSTRUCTION 31st March, 31st March,

2002 2001

(Rupees in crores)

Opening balance (a) 1.88 0.39Expenditure incurred during the yearEmployees Remuneration & Benefits

Salaries & Wages 0.62 1.80Company’s contribution toProvident Fund and other Funds 0.06 0.16Travel Concession 0.01 0.02Gratuity 0.04 0.73 0.11 2.09Depreciation 0.05 0.05

0.78 2.14Less: Income

Liquidated Damages 0.04 0.22Hire Charges 0.00 0.01Sundries 0.00 0.04 0.00 0.23

Net expenditure during the year (b) 0.74 1.91Total (a)+(b) 2.62 2.30

Amount allocated to Fixed Assets/Capital Work-in-Progress 2.62 0.42Balance carried forward 0.00 1.88

Total 2.62 2.30

* Net Block as on 31.03.2002 includes Rs.0.08 crores being assets retired from active use (Provision thereagainst Rs.0.05 crores held under 'Other Provisions')


109

1.7 INVESTMENT (AT COST) Number Face As at As at – Long Term of Fully value per 31st March, 31st March,

Paid-up Share (Rs.) 2002 2001Equity Shares

(Rupees in crores)Quoted InvestmentsIndustrial Credit & InvestmentCorporation of India Ltd. 57200 10 0.05 0.05

(Market Value Rs. : PreviousYear Rs.)

Unquoted Investments

Trade InvestmentsSouth India Export Co. (P) Ltd. 7500 10 0.01 0.01

India Standard WagonCompany Ltd. 130 100 0.00 0.00

Hoogly Docking and Engg.Company Limited 1433 100 0.02 0.02

Satna Stone LimeCompany Limited 33804 10 0.03 0.06 0.03 0.06

Other InvestmentsSubsidiary CompaniesIISCO Ujjain Pipe &FoundaryCompany Limited 30,00,000 10 3.00 3.00

Other CompaniesBihar State Financial Corporation 500 100 0.01 0.01

Government Securities 0.06 0.06

Shares in Co-operative Societies (1.7.1) 0.05 0.05

3.23 3.23Less : Provision for diminution invalue of investments 3.16 3.13

0.07 0.10

* Cost being less than Rs.50,000/- figures not given.

1.7.1: SHARES IN CO-OPERATIVE SOCIETIES

Barajamda Iron Ore Mines CentralCo-operative Stores Limited 400 25 10000 10000

IISCO Employees PrimaryCo-operative Stores Limited 23000 20 460000 460000

470000 470000

1.8 INVENTORIES As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Stores & spares* 55.76 59.68Add: In-transit 2.31 1.63

58.07 61.31Less: Provision 9.16 48.91 12.26 49.05

Raw materials * 18.05 22.62Add: In-transit 3.61 1.89

21.66 24.51Less: Provision 0.48 21.18 0.88 23.63Semi/finished products* 100.07 132.51(including scrap)Add: In–transit 4.33 104.40 3.94 136.45At book or assessed or realisable valuewhichever is lower:Salvaged/Scrapped fixed assets 15.22 14.90Less : Provision 11.55 3.67 11.26 3.64Others (at cost) 0.70 0.79

178.86 213.56* Valued as per Accounting Policy No.1.6

1.9 SUNDRY DEBTORS As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Debts over six months 40.92 111.62

Other debts 51.74 83.74

92.66 195.36

Less: Provision for doubtful debts 20.81 18.45

71.85 176.91

Particulars

Unsecured, considered good 71.85 176.91


92.66 195.36

1.11 INTEREST RECEIVABLE/ACCRUED As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Deposits 0.03 0.04Employees 0.22 0.29

0.25 0.33Less: Provision for doubtful interest 0.02 0.02

0.23 0.31ParticularsUnsecured, considered good 0.23 0.31Unsecured, considered doubtful 0.02 0.02

0.25 0.33

1.12 LOANS AND ADVANCES TO As at As atSUBSIDIARY COMPANIES 31st March, 31st March,

2002 2001

(Rupees in crores)

Loans 2.11 2.11Other Advances 0.00 2.11 0.00 2.11Less: Provisons 2.11 2.11

0.00 0.00ParticularsUnsecured, considered good 0.00 0.00Unsecured, considered doubtful 2.11 2.11

2.11 2.11

1.10 CASH & BANK BALANCES As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Cash and Stamps on hand 0.27 0.50

With Scheduled Banks

Current account* 17.26 12.03

Margin money 0.95 1.18

Term deposits 0.03 18.24 7.06 20.27

Remittances-in-transit 3.46 1.70

21.97 22.47

* {Includes balance with Lloyds Bank Ltd. (Rs.0.05 lakhs) & Midland Bank Ltd. (Rs.0.07 Lakhs) London} (Maxium balance same)


110

1.13 LOANS & ADVANCES — OTHERS As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Loans

Employees 0.16 0.22

Stores issued 0.10 0.10

Others 0.00 0.26 0.00 0.32

Advances recoverablein cash or in kind or forvalue to be received

Claims recoverable 20.71 19.30

Contractors & suppliers 10.65 14.55

Employees 2.85 4.05

Advance Income Tax * 0.23 0.18

and Tax deducted at source

Bills Receivable 0.10 0.10

Others 1.83 36.37 2.42 40.60

DepositsPort trust, excise department, 5.74 5.71Railways, etc.

Others 1.96 7.70 1.57 7.28

44.33 48.20Less: Provision for doubtful

Loans & Advances 13.62 12.75

30.71 35.45

Particulars of Loans &Advances—Others

Unsecured, considered good 30.71 35.45


44.33 48.20

1.14 CURRENT LIABILITIES As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Sundry creditors

Capital works 5.73 6.36

Others 354.02 359.75 393.63 399.99

Advances from

Customers 48.69 45.64

Others 0.61 49.30 0.61 46.25

Security deposits 14.56 13.21

Less: Investment received assecurity deposit 0.05 14.51 0.05 13.16

Interest accrued but not due onLoans 0.43 0.43

Stores received on loan 0.10 0.10

Others Liablities 225.42 201.66

649.51 661.59

1.15 PROVISIONS FOR As at As at31st March, 31st March,

2002 2001

(Rupees in crores)

Gratuity 163.91 148.43

Acc rued Leave Liability 31.55 28.75

Middlings stocks 0.91 0.36

Others 14.32 1.18

210.69 178.72

1.16 MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

Balance Additions Total Amount Balanceas at during Charged Off/ as at 31st the Transferred 31st

March, 2001 year during the year March, 2002(Rupees in crores)

(i) Development Expenditure(a) On Mines 0.72 0.26 0.98 0.79 0.19(a) On New Projects 0.00 0.20 0.20 0.04 0.16

Total (i) 0.72 0.46 1.18 0.83 0.35

(ii) Deferred Revenue Expenditure(a) Voluntary Retirement Compensation 0.91 -0.01 0.90 0.32 0.58(b) Employee's Family Benefit Scheme 0.00 13.63 13.63 2.73 10.90

Total (ii) 0.91 13.62 14.53 3.05 11.48

Total (i+ii) 1.63 14.08 15.71 3.88 11.83

Previous year 2.00 0.04 2.04 0.41 1.63

Charged Off to:

Current Year Previous YearOther Expenses & Provisions 3.29 0.32Adjustments pertaining to earlier years 0.59 0.00

3.88 0.32

Schedules


111

2.1 SALES Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in crores)

Direct 605.43 681.96From Stockyards 283.15 243.32Exports 23.36 16.09

911.94 941.37

2.5 ACCRETION(-)/DEPLETION TO STOCKOF SEMI/FINISHED PRODUCTS Year ended Year ended

31st March, 31st March,2002 2001

(Rupees in crores)

Opening stock 136.81 162.38

Less: Closing stock 105.55 136.81

31.26 25.57

2.2 INTEREST EARNED Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in crores)

Customers 0.04 0.23Employees 0.01 0.04Term Deposits 0.01 0.71Others 0.04 0.00

0.10 0.98

2.3 OTHER REVENUES Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in crores)

Social amenities–recoveries 9.19 5.04Sale of empties etc. 0.07 0.14Liquidated damages 0.24 0.27Service charges 0.13 0.30

Grant-in-aid 0.03 0.01Subsidy 1.75 1.65Hire charges etc. 0.09 0.23Claims for finished products 0.43 0.00(Shortages & missing wagons)Dividend from Other investments 0.06 0.03

Duty drawback 0.43 0.13Foreign Exchange Fluctuation (Net) -0.01 0.03Sundries 7.33 1.90

19.74 9.73

2.4 PROVISIONS NO LONGER REQUIREDWRITTEN BACK Year ended Year ended


(Rupees in crores)

Loans & advances 1.23 0.01

Sundry debtors 0.71 0.69

Stores & spares 3.52 1.01

Others 20.81 3.85

26.27 5.56

2.6 RAW MATERIALS CONSUMED Year ended Year ended31st March, 2002 31st March, 2001

Quantity Value Quantity Value

Tonnes Rs./lakhs Tonnes Rs./lakhs

Iron ore 1254416 77.65 1265088 76.09Indigeneous Coal 1261485 284.11 1466990 273.57Imported Coal 50020 17.40 83393 25.23Coke 7797 3.30 111 4.45Limestone 140966 16.32 129780 13.82Dolomite 149572 7.80 156452 7.90Pig Iron 29382 18.48 23723 15.13Scrap 56104 27.98 51301 23.25Nickel 6 0.25 - 0.29Ferro Manganese 5941 11.48 5880 11.43Ferro Silicon 1030 3.25 814 3.94Silico Magenese - 0.04 - 0.17Other Ferrous Metals 2 0.20 - 0.20Intermediary Products - 10.37 - 16.74Tin 6 0.20 - 0.15Copper - 3.04 - 2.20Aluminimum - 0.50 - 0.55Others 3.95 2.96

486.32 478.07

NOTE: 1) Consumption of raw materials includes shortagesRs.1.63 crores (Previous year Rs.2.49 crores)to the extent not covered by normal handlinglosses and excess to the extent of Rs.11.47 crores.(previous year Rs.10.01 crores)

2) Value of raw materials consumed is afteradjustments relating to Inter Plant Transfers.

2.7 EMPLOYEES’ REMUNERATION & BENEFITS

Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in crores)

Salaries & wages 262.24 277.13

Company’s contribution toprovident fund & other funds 27.46 25.97

Travel concession 1.37 2.13

Welfare expenses 14.93 14.04

Gratuity 32.56 29.79

338.56 349.06

Note :Expenditure on Employees’Remuneration and Benefitsnot included above andcharged to:

a) Expenditure during Construction 0.73 2.09

b) Deferred Revenue Expenditure 0.32 0.32

c) Net expenditure on Social Amenities charged 7.33 0.00to various primary revenue heads

8.38 2.41

2.8 POWER & FUEL Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in crores)

Purchased power 77.86 69.76Duty on own generation 0.58 0.55Boiler Coal/Middlings 19.60 14.54Others 2.05 2.51

100.09 87.36


112

Schedules2.9 REPAIRS & MAINTENANCE Year ended Year ended


(Rupees in crores)

Buildings 2.75 2.94Plant & Machinery 6.68 9.20Others 3.91 3.40

13.34 15.54

Note :Expenditure on repairs & maintenancenot included above and charged to:

a) Employees Remuneration & BenefitsBuildings 7.75 7.53Plant & Machinery 42.25 42.27Others 7.09 6.92

57.09 56.72

b) Stores & SparesBuildings 2.53 3.14Plant & Machinery 28.80 35.73Others 0.32 0.45

31.65 39.32

Total (a)+(b) 88.74 96.04

2.10 OTHER EXPENSESYear ended Year ended


(Rupees in crores)

Commission to selling agents 0.94 1.07Demurrage & wharfage 0.09 0.06Expenses connected with Imports 0.01 0.01Export sales expenses 0.05 0.01Handling expenses

— Handling expenses - Raw Material 51.34 57.63— Handling expenses - Finished goods 11.57 10.58— Scrap recovery expenses 5.61 68.52 5.91 74.12

Insurance 0.33 0.47Law charges 0.45 0.49Postage, telegram & telephone 1.05 1.22Printing & stationery 0.61 0.65

Provisions— Doubtful debts & loans and 4.39 4.35 advances— Investments 0.03 0.00— Sundries 4.84 9.26 5.64 9.99

Rates & Taxes 1.22 1.29Remuneration to Auditors

— Audit Fees 0.03 0.03— Tax Audit Fees 0.01 0.01— Out of pocket expenses 0.01 0.02— In other capacities 0.00 0.05 0.00 0.06

Rent 0.54 0.45Royalty and cess 8.91 8.23Security expenses 11.66 11.77Travelling expenses 7.20 5.73Write Offs

— Miscellaneous & Deferred Revenue 3.29 0.32 Expenditure— Advances 0.38 0.00— Others 0.49 4.16 0.00 0.32

Training expenses 0.02 0.01Conversion charges 0.00 0.64Water charges & Cess on water pollution 0.05 0.10Miscellaneous (include Donation Rs.0.01 13.84 16.23lakhs (Previous year Rs.0.01 lakhs)

128.96 132.92

2.11 INTEREST & FINANCE CHARGES Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in crores)

Bank borrowings - working capital 7.34 7.12

Others 4.04 4.13

Finance Charges 0.25 0.49

11.63 11.74

2.13 ADJUSTMENTS PERTAININGTO EARLIER YEARS Year ended Year ended


(Rupees in crores)

Sales 1.08 0.63(semi/finished products)

Other revenues -0.18 -0.15

Raw materials consumed 1.41 1.27

Employees’ remuneration & benefits 0.00 -0.83

Stores & spares consumed 0.28 0.00

Power & fuel -0.72 0.18

Other Expenses & Provisions -0.74 0.99

Net Debit (Credit) 1.13 2.18

* (-) indicate credit items.

2.12 INTER ACCOUNT ADJUSTMENTSYear ended Year ended


(Rupees in crores)

Raw materials 247.84 224.39

Coke subsidy to Employees 1.41 1.77

Inter plant transfer of stocks/stores 28.15 22.52

Others (Net) 0.99 1.00

278.39 249.68


113

SCHEDULES 3 : ACCOUNTING POLICIES & NOTES ON ACCOUNTS


1.1 BASIS OF ACCOUNTINGThe Company prepares its accounts on accrual basis under historical cost conven-tion as per the generally accepted accounting principles.

1.2 FIXED ASSETSAll fixed assets are stated at historical cost less depreciation.The expenditure on development of land including lease-hold land, is capitalisedas a part of the cost of land.Interest on Loans for additions, modifications and replacement schemes is capit-alised, based on the mean of the balances under ‘Capital work-in-progress’ at thebeginning and close of the year under each scheme.Fixed assets whose actual costs cannot be accurately ascertained, are initially capi-talised on the basis of estimated costs and final adjustments for costs and deprecia-tion, if any, are made retrospectively on ascertainment of actual costs.Expenditure incurred during the trial run period are capitalised till the concernedassets are ready for commercial production.The Company’s contribution/ expenditure towards construction/ development ofassets on land owned by the Government/Semi-Government authorities, is capi-talised under appropriate assets account.Grants-in-aid related to specific fixed assets are shown as deduction from the grossvalue of the assets concerned in arriving at their book value. Grants-in-aid relatedto revenue items are netted against the related expense.Machinery spares which can be used only in connection with an item of fixed assetsand whose use as per technical assessment is expected to be irregular, are capit-alised and depreciated over the residual useful life of the respective assets.Items of fixed assets that have been retired from active use are exhibited underfixed assets at their book value till the acceptance of disposal proposals there against,and due provisions are made to take care of the shortfall, if any, in their respectiverealisable value. However, fixed assets that have been retired from active use andwhose disposal proposals have been accepted, are de-capitalised and includedunder “Inventories” at lower of book value and estimated realisable value.

1.3 BORROWING COSTBorrowing costs relating to the acquisition/construction of qualifying assets are capi-talised until the time all substantial activities necessary to prepare the qualifyingassets for their intended use are complete.A qualifying asset is one that necessarily takes substantial period of time to get readyfor its intended use. All other borrowing costs are charged to revenue.

1.4 DEPRECIATIONDepreciation is provided on straight line method at the rates specified in Schedule-XIV to the Companies Act, 1956. However, where the historical cost of a depre-ciable asset undergoes a change, the depreciation on the revised unamortised de-preciable amount is provided prospectively over the residual useful life of the assetcomputed on the basis of rates specified in schedule XIV as stated above.Depreciation on assets installed/ disposed off during the year is provided withrespect to the month of addition/disposal thereof.Cost of acquiring mining rights is amortised over the lease period.

1.5 INVESTMENTSInvestments held/intended to be held for a period exceeding one year are classifiedas long term investments, while other investments are classified as current invest-ments.Current quoted investments are valued at lower of cost or market value on indi-vidual investment basis.Investments in subsidiary Companies and other long-term and unquoted invest-ments are valued at cost. However, provision for diminution in the value of suchinvestments is made to recognise a decline, other than temporary, on individualinvestment basis.

1.6 INVENTORIESSemi/Finished products, are valued at lower of cost or net realisable value ofthe respective plants.Raw materials are valued at lower of cost and net realisable value.Iron scrap and steel/skull scrap at the integrated plants, are valued at 75% and90% respectively of the previous year’s realisable value of pig iron.The stocks of wear scrap lying unconsumed at the plant and mixed coke andmiddlings /rejects, are valued at the estimated net realisable value.In the case of special products, which have a realisable value at the finished stageonly, the realisable value of process materials is arrived at by applying the ratio offinished product’s realisable value and its cost, to the cost upto the stage of process.Stores and spares are valued at cost. However, in the case of stores and sparesdeclared obsolete/surplus and also those which have not moved for five years ormore, provision is made at 75% and 10% respectively of the book value andcharged to revenue.In respect of inter-unit transfers: (i) the closing stock of semi/finished products

is valued at lower of cost or realisable value of the transferor plant. Materials outof inter–plant transfers , lying in stock after further processing, are valued attransfer price plus processing cost of the transferee plant or realisable value , which-ever is lower. Such inter-plant transfer materials used for capitalisation have, how-ever, been considered at cost (ii) Stores and spares are valued at cost of thetransferor plant (iii) Raw materials at plants are valued at lower of cost and netrealisable value.Cost is arrived on weighted average basis.

1.7 DEVELOPMENT/DEFERRED REVENUE EXPENDITUREExpenditure incurred on development of new projects, removal of over-burden atmines, cost of feasibility studies for new projects and payments for technical know-how/documentation is treated as development expenditure.Expenditure incurred on removal of over-burden in mines is written off in five years.Expenditure on feasibility studies, technical know-how/documentation and otherdevelopment expenditure is added to the capital cost of the project, if implemented.In case the project is abandoned, such expenses are written off in five years.Voluntary retirement compensation incurred by the company is treated as deferredrevenue expenditure and written-off in five years. Future liability to the disabledemployees / legal heirs of deceased employees under the Family Benefit Scheme istreated as deferred revenue expenditure and written-off over a period of five years.Other deferred revenue expenditure including expenditure on consultancy/ tech-nological assistance for strategic cost reduction and quality improvements is writ-ten-off in five years.

1.8 FOREIGN CURRENCY TRANSACTIONSForeign currency assets and liabilities (other than those covered by forward con-tracts) as on the Balance Sheet date are converted at the year end exchange ratesand loss or gain arising thereon, is adjusted in the carrying amount of fixed assetsor charged to Profit & Loss Account, as the case may be.Transactions in foreign currencies other than those covered by forward contractsare recorded at the rate prevailing on the date of transaction.In case of foreign currency transactions covered by forward contracts, the differ-ence between contract rate and exchange rate prevailing on the date of transac-tions, is adjusted to the cost of fixed assets or charged to the Profit & Loss Account,as the case may be, proportionately over the contract period.

1.9 RESEARCH AND DEVELOPMET EXPENDITUREResearch and Development Expenditure is charged to Profit and Loss Account inthe year of incurrence. However, expenditure on fixed assets relating to researchand development, is treated in the same way as other fixed assets.

1.10 CLAIMS FOR LIQUIDATED DAMAGES/ESCALATIONClaims for liquidated damages are accounted for as and when these are deductedand/or considered recoverable by the Company. These are treated as income oncompletion of the projects/final settlements.Suppliers’/Contractors’ claims for price escalation are accounted for, to the extentsuch claims are accepted by the Company.

1.11 RETIREMENT BENEFITSThe provision for gratuity and Leave encashment liabilities is made on the basisof year end actuarial valuation.

1.12 ADJUSTMENTS PERTAINING TO EARLIER YEARS AND PREPAIDEXPENSESIncome/expenditure relating to prior period and prepaid expenses which do notexceed Rs.5.00 lakhs in each case, are treated as income/expenditure of current year.

1.13 SALESSales include Excise Duty and are net of rebates/price concessions/sales tax.Materials sold in domestic market are treated as sales on delivery to carriersincluding the cases where delivery documents are in the company’s name, pendingcollection of payments. Export sales are treated as sales on issue of Bills of lading.

1.14 EXPORT INCENTIVESExport incentives in the form of Special/Advance Licences, credit earned underDuty Entitlement Pass Book Scheme (DEPB) and duty drawback, are treated asincome in the year of export, at estimated realisable value/actual credit earned onexports made during the year.

1.15 TAXATIONProvision for income tax comprises of current tax and deferred tax charged orrealised. Deferred tax is recognised, subject to consideration of prudence of timingdifferences, being the differences between taxable and accounting income/ex-penditure that originate in one period and are capable of reversal in one or moresubsequent period(s). Deferred tax assets are not recognised unless there is “virtualcertainty” that sufficient future taxable income will be available, against whichsuch deferred tax assets will be realised.

1.16 SEGMENT REPORTINGThe Company has identified that its operating segments are primary segments.The analysis of geographical segments is based on the areas in which the customersof the Company are located. Common expenses are allocated to each segment onappropriate basis.


114

NOTES ON ACCOUNTS – 2001-02

2.1 CONTINGENT LIABILITIES NOT PROVIDED FOR(Rupees in crores)

As at As at31.03.2002 31.03.2001

A. Claims against the Companynot acknowledged as debts:

i) Pending Judicial decisions 48.16 69.88

ii) Sales Tax 7.69 13.76

iii) Income Tax 1.04 1.04

iv) Interest on Consortium Loan 28.78 28.16

v) Central Excise Duty 54.52 37.98

B. Asansol Municipal CorporationHolding Tax 9.19 7.35

C. Estimated amount of contractsremaining to be Executed on Capitalaccount and not provided For. 16.81 17.46

2.2 In view of the principles laid down by the Hon’ble Supreme Court and the judge-ment passed by the Kolkata High Court on 25th November, 1992, the Companyhas ceased to provide cess on coal arising out of the provisions of the West BengalPrimary Education Act, 1973 and West Bengal Rural Employment and Produc-tion Act, 1976 from the year 2000-01. However, in view of special leave petitionpreferred by the Government of West Bengal against such judgment of the KolkataHigh Court, the liability upto 31st March 2000 amounting to Rs. 83.69 crores hasnot been written back pending disposal of the petition. The liability for the year2000-01 and 2001-2002 amounting to Rs.30.68 crores has been disclosed asa contingent liability.

3. FIXED ASSETSi) Physical verification of fixed assets and corresponding linking of the same with

Assets Register is being carried out on continuous basis.ii) Land includes also those awaiting execution of conveyance deed in favour of

the company.iii) In the case of lease hold property the cost of acquiring the lease right is written

off over the lease period.

4. INVESTMENTS, CURRENT ASSETS, LOANS & ADVANCES ANDCURRENT LIABILITIES & PROVISIONS

4.1 The Company has equity investment aggregating to (at cost) Rs. 3.00 crores.(Previous year Rs. 3.00 crores) in its subsidiary company IISCO Ujjain Pipe &Foundry Co. Ltd. as at 31st March 2002. The Company has other dues of Rs. 2.11crores (previous year Rs. 2.11 crores) from it. Board for Industrial and FinancialReconstruction (BIFR) has directed winding up of the company which has beensubsequently upheld by the Appellate Authority for Industrial and FinancialReconstruction. An official liquidator has been appointed on 10th July 1997 bythe Hon’ble High Court of Kolkata. Provision for diminution in the value of theinvestment in equity share of Rs. 3.00 crores and for other dues amounting to Rs.2.11 crores have been made in the accounts.

4.2 Sundry creditors, other liabilities, sundry debtors, claims recoverable, depositsand advances to parties include some old unlinked balances pending reconciliation/confirmation/adjustments. Adequate provisions wherever considered necessaryhave been made for such old balances. Further adjustments as necessary, will beaccounted for in the year of reconciliation/settlement/realisation of the respectivebalances.

4.3 The company has substantial carried forward losses and unabsorbed depreciationunder the Income Tax Act, 1961 and accordingly, deferred tax assets of about Rs.378.77 crores has arisen as on 31.3.2002 (including Rs. 42.74 crores for thecurrent period) as per Accounting Standard – 22 on “Accounting for Taxes onIncome” . However, in consideration of prudence, the above deferred tax assethas not been recognized in the financial statements and the same would beconsidered at appropriate time keeping in view the availability of sufficient taxableincome against which the deferred tax can be realised.

4.4 In terms of Employees Provident Fund and Miscellaneous provisions (Amendment)Ordinance, 1995 for employees covered under Employees Family Pension Scheme,a new pension scheme had been made effective from 16th November, 1995 inrespect of which Rs. 3.52 crores had been deposited with RPFC covering the

period up to January, 1996 and from October, 1996 to December, 1996. In termsof the injunction issued by the Hon’ble Kolkata High Court deposit is being madeunder EFP-1971, the old scheme, and the remaining amount i.e. the amountpayable under 1995 scheme over the amount payable under 1971 scheme isbeing kept deposited with the P.F. Trusts. Accordingly, a sum of Rs.5.39 crores hadbeen deposited under old scheme i.e. EFP-1971 covering period from 16.11.95to 31.3.2000. Further, with effect from April, 2000 deposit is being made underEFP-1971 and the remaining amount is being deposited with the P.F. Trusts. Theamount lying deposited with the P.F. Trusts on account of pension fund stands atRs. 46.34 crores (previous year Rs. 44.03 crores).

4.5 Unlike previous years, the future liability for benefits payable to the disabledemployees / legal heirs of deceased employees under the Employee Family BenefitScheme have been provided and treated as deferred revenue expenditure asreferred to in Accounting Policy 1.7 above, resulting into an increase in loss for theyear by Rs. 2.73 crores.

5. PROFIT & LOSS ACCOUNT5.1 Interest of Rs.3.57 crores for the year (previous year Rs.3.57 crores) aggregating

to Rs.46.42 crores (previous year Rs.42.85 crores) on SDF loan has been deemedto have been waived.

5.2 The long term agreements for employees’ pay revision have expired on 30th June,1996 in respect of colliery employees and on 31st December, 1996 for employeesof other units of the Company. No provision has been made for pay revision andarrears, if any, in view of Government directives applicable to companies underBIFR. Liability, if any, in this regard is unascertainable. However, interim relief@12% has been and is being paid and provided for, pending final decision, from01.07.1996 for collieries and from 01.01.1997 to 31.03.1998 and thereafterfrom 01.01.2001 for other units.

5.3 Expenditure on over burden removal incurred during the year for regular miningoperation has been charged to Profit & Loss Account.

5.4 Sundry Creditors include Rs.0.44 crores due to small scale and ancillaryundertakings to the extent such parties have been identified . As the companygenerally makes payments to SSI units in due time and there being no interestclaims from the creditors, interest on overdue payments, if any, is not ascertainableand thus not provided for. There are no SSI units to whom amounts in excess ofRs. 1 lakh are due for more than 30 days.

6. GENERAL6.1 Segment Reporting

The steel plant, foundry, collieries and mines have been considered as primarybusiness segments for reporting under Accounting Standard-17 issued by theInstitute of Chartered Accountants of India. Geographical segments have beenconsidered for secondary segment reporting. The whole of India has beenconsidered as a geographical segment and exports as other segments. The disclosuresof segment-wise information is given in Annexure-I.

6.2 Related PartyAs per Accounting Standard –18 –“Related Party Disclosures’ issued by theInstitute of Chartered Accountants of India, the name of the related party andnature of related party relationship where control exists, are given below :

Name of related parties :Shri A. K. Jaiswal, Executive Director I/C – Key management personnel

Description of transactions with related parties:There has been no transaction between the company and the related parties, asdefined in the Accounting Standard.

6.3 Consolidated Financial StatementSince IISCO Ujjain Pipe & Foundry Co. Ltd., the only subsidiary of IISCO, isunder liquidation, no consolidated financial statement is required to be madeunder AS-21.

6.4 The Company was declared a Sick Industrial Company by the Board for Industrialand Financial Reconstruction (BIFR) on 17th August, 1994. The IndustrialDevelopment Bank of India has been appointed as operating agency and theproposal for revival/modernization is in process. The company is, however,continuing the assumption of going concern in the preparation of its financialstatements.

6.5 Figures have been rounded off to the nearest rupee in crores as approved by theCompany Law Board.

6.6 Previous year’s figures have been re-arranged/re-grouped wherever necessary.

Schedules


115

7. (a) Licensed Capacity, Installed Capacity, Production

Own Products Licensed Installed ProductionCapacity (i) Capacity

(Tonnes) (Tonnes) (Tonnes)

Steel Ingots 1300000 1000000 345729*(1300000) (1000000) (329564)**

Saleable Steel 1048000 800000 291986***(1048000) (800000) (276880)

Cast Iron Spun Pipes (I & II) 156960 156960 15354(156960) (156960) (15891)

Cast Iron Spun Pipes (III) — 9000 392(—) (9000) (1761)

Steel Castings 5484 5300 2302(5484) (5300) (1714)

Non Ferrous Castings 564 530 189(564) (530) (103)

Other Castings 82716 77916 14528(82716) (77916) (9641)

Note : * Including Steel Casting 1205 M.T.** Including Steel Casting 1135 M.T.*** Excluding converted Steel 10459 M.T.

7. (b) Opening Stock, Purchases, Turnover and Closing Stock

Opening Stock Purchases Turnover Closing Stock

Quantity Value Quantity Value Quantity Value Quantity Value(Tonnes) (Rs/crores) (Tonnes) (Rs/crores) (Tonnes) (Rs/crores) (Tonnes) (Rs/crores)

Saleable Steel 15990 21.72 — — 293283 411.57 7977 10.97(23369) (32.12) (—) (—) (278819) (386.84) (15990) (21.72)

Pig Iron 14375 10.36 — — 245099 192.61 9727 7.00(10976) (7.48) (—) (—) (282426) (217.24) (14375) (10.36)

Cast Iron Spun Pipes 10427 14.53 — — 16687 27.96 8739 11.77(8497) (13.10) (—) (—) (16114) (27.70) (10428) 14.53

Steel Castings 2105 8.17 — — 1863 5.21 2607 10.88(2001) (8.78) (—) — (1742) (4.15) (2105) (8.17)

Non Ferrous Castings 134 3.69 — — 167 3.06 157 2.68(141) (4.18) (—) (—) (112) (1.61) (135) (3.69)

Other Castings 7575 13.03 — — 15194 12.52 6488 11.52(9855) (18.90) (—) (—) (11456) (10.47) (7576) (13.03)

Others 65.24 — — 0 203.85 0 50.67(77.30) (—) (—) (0) (249.40) (0) (65.24)

TRADING ACTIVITIESIndigenous Steel 7 0.01 31888 53.16 31888 55.16 0 0.00

(500) (0.46) (25187) (40.44) (25187) (43.96) (7) (0.01)Purchased Pipe & Castings 98 0.06 0 0.00 0 0.00 98 0.06

(98) (0.06) (0) (0.00) (0) (0.00) (98) (0.06)

136.81 53.16 911.94 105.55(162.38) (40.44) (941.37) (136.81)

Notes:i) The classification of the company's own products for the purpose of quantitative data is in accordance with the Company Law Board's Order No.3/19/80-CL VI dated 16th July 1980. However, in respect

of item (Sundries), particulars of installed capacity and production have not been given, as this being an omnibus head, clubbing of various products and by-products under one head would not givemeaningful information.

ii) Sales are net of rebates/price concessions allowed on certain Iron and Steel products.iii) Figures of closing stock are after adjustment for inter-plant transfers, internal consumption, transfer to capital works, shortages/excess etc.

7. (c) Pig Iron and Saleable Steel Quantitative Reconciliation

Pig Iron Saleable SteelOpening Stock 14375 15990

(10976) (23369)Production 287743 291986

(330911) (276880)Total 302118 307976

(341887) (300249)Sales 245099 293283

(282426) (278819)Inter Plant Transfer 32299 1454

(27814) (1476)Internal Consumption (including for capital works) 10250 1216

(11160) (1961)Assorted Length/Cuttings etc. 0 3996

(0) (2336)Depletion/Acrcretion(-) in In-process stock (including out of inter plant transfers) — —

(—) (—)Shortages/Excesses(-) due to Sectional Weight variation transportation, handling etc. 4743 50

(6112) (-333)Closing Stock 9727 7977

(14375) (15990)Total 302118 307976

(341887) (300249)

Note to 7(a), 7(b) & 7(c) Figures in brackets pertain to previous year and have been rearanged/regrouped inter-se. A total quantity of 10,459 tonnes, rolled on conversion account for CMO, is notincluding figures of saleable steel during the year 2001-02.


116

Schedules8. Expenditure incurred in foreign

currency on account of Current PreviousYear Year

(Rupees in crores)Know-how 0.00 0.00Interest 0.00 0.00Training expenses & payments to Foreign Technicians 0.00 0.00Others 0.00 0.00Total 0.00 0.00

9. Earnings in foreign exchangeon account of Current Previous

Year Year

(Rupees in crores)

Export of goods (Calculated on FOB basis) 16.86 12.72

16.86 12.72

13. Particulars of Directors’ RemunerationCurrent Previous

Year Year

(Rupees in crores)

Salaries 0.00 0.00Company’s contribution to provident

fund & other funds 0.00 0.00Leave travel concession 0.00 0.00Medical benefits 0.00 0.00Provision for gratuity 0.00 0.00Estimated value of perquisites 0.00 0.00(Excluding facilities provided in Company'shospitals the value of which is not readilyascertainable).

Total 0.00 0.00

SCHEDULE 4EXPENDITURE ON PUBLIC RELATIONS DEPARTMENTS


(Rupees in crores)

Employees remuneration & benefits 0.27 0.25Expenditure on institutional publicity 0.04 0.06Other items of expenditure under publicity 0.05 0.07

Total 0.36 0.38

Turnover 911.94 941.37Percentage 0.04 0.04

SCHEDULE 5

SOCIAL AMENITIES

Expenses Township Education Medical Social & Co-operative Transport Total PreviousCultural Societies & Dairy yearactivities

(Rupes in crores)Employees’Remuneration & Benefits

Salaries & wages 8.02 2.02 9.73 0.55 0.00 1.76 22.08 21.15Annual Bonus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.53Co. contribution to PF & other funds 0.68 0.21 0.86 0.06 0.00 0.19 2.00 1.94Travel concession 0.27 0.08 0.13 0.01 0.00 0.02 0.51 0.43Welfare expenses 0.08 0.04 0.15 0.02 0.00 0.03 0.32 0.30Consumption of medicines 0.02 0.01 1.80 0.19 0.00 0.01 2.03 2.04Coke subsidy 1.64 0.00 0.00 0.00 0.00 0.00 1.64 1.64Gratuity 0.51 0.25 0.36 0.04 0.00 0.09 1.25 0.97

Total 11.22 2.61 13.03 0.87 0.00 2.10 29.83 29.00Stores & Spares 0.77 0.00 0.14 0.00 0.00 0.12 1.03 0.93Repair & maintenance 1.20 0.00 0.03 0.00 0.00 0.12 1.35 1.14Power & fuel 7.88 0.18 0.60 0.18 0.00 0.00 8.84 8.39Miscellaneous expenses 1.14 1.00 0.75 0.31 0.00 0.01 3.21 2.79Depreciation 1.70 0.06 0.21 0.01 0.00 0.22 2.20 2.23

Total 23.91 3.85 14.76 1.37 0.00 2.57 46.46 44.48Less: Income 7.48 0.06 1.55 0.00 0.00 0.21 9.30 5.32

Net Deficit 16.43 3.79 13.21 1.37 0.00 2.36 37.16 39.16

10. Value of importsduring the period(Calculated on CIF basis)


(Rupees in crores)

Raw materials 14.45 13.87Stores, Spares and

Components 4.63 4.34

Total 19.08 18.21

11. Value of raw materials consumed during the year

Rs./crores % Rs./crores %


486.32 100.00 478.07 100.00

12. Value of stores/spares & components consumed during the year

Rs./crores % Rs./crores %


107.44 100.00 110.50 100.00


117

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details


Balance-Sheet Dated

II. Capital raised during the year (Amount in Rs. Thousands)



III. Position of Mobilisation and Redeployment of Funds (Amount in Rs. Thousands)

Total Liabilities Total Assets

Sources of Funds

Paid-up Capital Reserves & Surplus


Application of Funds


Net Current Assets Misc. Expenditure

Accumulated Losses

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover Total Expenditure

Profit Before Tax Profit After Tax

Earnings per Share Dividend Rate %

V. Generic Names of Three Principal Products/Services of Company (as per Monetary Terms)

Item Code No.(ITC Code)

Product Description


Product Description


Product Description

2 9 3 7

3 1 0 3 2 0 0 2

N I L N I L

N I L N I L

6 2 1 7 9 0 0

— V E N I L

7 2 0 1 1 0 0 0 / 1 2 0

2 1

6 2 1 7 9 0 0

3 8 7 6 6 0 0

1 3 1 7 1 0 0

3 1 8 1 0 0

— 5 5 6 5 8 0 0

3 5 1 0 0

4 7 6 8 0 0

7 0 0

1 1 8 3 0 0

9 1 1 9 4 0 0

— 1 7 9 8 7 0 0

1 0 9 1 8 1 0 0

— 1 7 9 8 7 0 0

7 9 7 1 4 0 0

P I G I R O N

7 2 1 6 6 6 0 0 2

S A L E A B L E S T E E L

7 3 2 5

C A S T I N G S

(Annualised) (Rs.)


118

ToThe Members of THE INDIAN IRON & STEEL CO. LTD.

1.0 We have audited the attached Balance Sheet of The Indian Iron & Steel Co. Ltd. as at 31st March,2002 and the Profit & Loss Account for the year ended on that date annexed thereto, in which theaccounts of plants, collieries, iron ore mines and stockyards-cum- sales offices are incorporated.These financial statements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audit.

2.0 We have conducted our audit in accordance with auditing standards generally accepted in India.Those Standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that ouraudit provides a reasonable basis for our opinion.

3.0 We report as follows:

3.1 Liability of Rs.13.63 crore for future benefits payable under Family Benefit Scheme as referred toin note no. 4.5 in schedule 3 has been deferred over a period of 5 years instead of charging it off fullyin the current year. Because of the above, the loss for the year is understated by Rs.10.91 crore.

3.2 We are unable to comment on the pay revision liability, if any, in view of Government directivesapplicable to companies under BIFR (note no. 5.2 in schedule 3).

3.3 Attention is drawn to note no. 6.4 in schedule 3 regarding underlying assumption of going concernin the preparation of financial statements of the Company.

4.0 As required by the Manufacturing & Other Companies (Auditor’s Report) Order, 1988 issuedby the Company Law Board in terms of section 227(4A) of the Companies Act, 1956, we enclosein the Annexure a statement on the matters specified in the said Order.

5.0 Further to our comments in paragraphs 3.0 and 4.0 above, we report that:

5.1 We have obtained all the information and explanations, which to the best of our knowledge andbelief were necessary for the purposes of our Audit.

5.2 In our opinion, proper books of account as required by law have been kept by the Companyso far as appears from our examination of those books and proper returns adequate for thepurposes of our audit have been received from stockyards-cum-sales offices not visited by us.

5.3 The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with thebooks of account.

5.4 In our opinion, read with our comments in paragraph 3.1 above regarding deferment of futureliability payable under Employees’ Family Benefit Scheme which is not in terms of AccountingStandard – 15 issued by the Institute of Chartered Accountants of India, the Balance Sheet andthe Profit & Loss Account dealt with by this report comply with the Accounting Standardsreferred to in sub-section (3C) of section 211 of the Companies Act, 1956.

5.5 On the basis of written representations received from the directors, and taken on record by theBoard of Directors, we report that none of the directors is disqualified as on 31st March, 2002from being appointed as director in terms of clause (g) of sub section (1) of section 274 of theCompanies Act, 1956. However, in terms of letter dated 22nd March, 2002 from the Departmentof Company Affairs, the provisions of section 274(1)(g) are not applicable to the directorsnominated by the Government of India.

6.0 In our opinion and to the best of our information and according to the explanations givento us, subject to our comments in paragraph 3.1 and 3.2 above, the impact of paragraph3.2 being not ascertainable, the said Accounts read together with the Accounting Policies andNotes on Accounts appearing in Schedule 3, give the information required by the Companies Act,1956, in the manner so required and also give a true and fair view in conformity with theaccounting principles generally accepted in India :

i) in the case of the Balance Sheet, of the state of affairs of the Company as on 31st March, 2002;and

ii) in the case of the Profit & Loss Account, of the Loss for the year ended on that date.

COMMENTS MANAGEMENT'S REPLY

The expenditure incurred upto 31st March 2002 has been fully charged to Profit & Loss Account andthe future liability has been treated as deferred revenue expenditure to be written-off in five years as inthe case of compensation payable under the Voluntary Retirement Scheme.

The long term agreements for employees' pay revision have expired on 30.06.96 for collieries & on31.12.96 for other Units. Pending finalisation of wage agreements and in view of the Company beingunder BIFR, no provision towards the pay revision has been made. Liability, if any, in this regard isunascertainable. The position has been appropriately disclosed in Notes on Accounts at para 5.2 ofSchedule 3 forming part of the accounts.

IISCO is having continuous operation and is thus, being properly accounted for as a going concern.

Reply as at 3.1


Sd/-(Arvind Pande)


For and on behalf of

Guha Nandi & Co. S. Ghose & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/-(Dr. B.S. Kundu) (Chandan Chatterjee)

Partner PartnerPlace : New Delhi.Date : 30th May, 2002.

Auditors' ReportANNEXURE-I TO THE DIRECTORS T


119

1. The Company has maintained proper records showing in most cases, full particulars including quantitative details and situationof its fixed assets.

2. The fixed Assets of the Company, except in some cases, have been physically verified by the management and the discrepanciesnoticed on such verification have been ascertained which are not material and necessary provisions have been made in the accounts.We are informed by the management that the physical verification is conducted in a phased manner by the physical verification teamsof the Company. Having regard to the size of the Company and the nature of its assets, the programme of physical verification,in our opinion, is reasonable.

3. The Fixed assets of the Company have not been revalued during the year.4. Except in few cases, stock of semi-finished/finished products and raw materials have been physically verified by the management

at its various locations at the year end. Stores and spare parts are verified in accordance with a regular programme of verificationwhich, in our opinion, is reasonable. Year end stock of scraps, middlings and boiler-ash have been estimated on the basis of visualsurvey/estimates.

5. In our opinion and according to the information and explanations given to us, the procedures for physical verification of stocks,followed by the Management are generally reasonable and adequate in relation to the size of the Company and the nature of its business.

6. The discrepancies between the physical stocks and book records arising out of physical verification, as stated in foregoingparagraph, which were material in some cases, have been properly dealt with in the books of account.

7. In our opinion and on the basis of our examination, the valuation of stocks is fair and proper in accordance with the normallyaccepted accounting principles and is on the same basis as in the preceding year.

8. The Company has not taken any loan secured or unsecured from companies, firms or other parties listed in the register maintainedu/s 301 of the Companies Act, 1956 or from the companies under the same management as defined under section 370(1B) of theCompanies Act, 1956. Nothing contained in section 370(1B) is, however, applicable with effect from 31.10.1998.

9. The Company has not granted any loan, secured or unsecured, to companies, firms or other parties listed in the register maintainedunder section 301 of the Companies Act, 1956 or to companies under the same management within the meaning of section 370(1B)of the Companies Act, 1956. However, in respect of dues of Rs. 211.28 lakhs (previous year Rs. 211.28 lakhs) from IISCO UjjainPipe & Foundry Co. Ltd. (in liquidation), a wholly owned subsidiary of the Company, the terms and conditions of the advancewhich is in the nature of loan are not specified and no interest is charged during the year on the same.

10. Employees and other parties to whom loans and advances in the nature of loans have been given, are generally repaying the principalamount as stipulated and are also regular in payment of interest wherever applicable except where such loans and advances are treatedas doubtful. Reasonable steps have been and are being taken for recovery in the defaulting cases.

11. In our opinion and according to the information and explanations given to us, there are adequate internal control procedurescommensurate with the size of the Company and the nature of its business for the purchase of stores, raw materials includingcomponents, plant & machinery, equipment and other assets and for the sale of goods.

12. On the basis of our test checks and having regard to the explanations that some of the items purchased are of special nature andcomparable prices are not available, the transactions for the purchase of goods, materials and services, made in pursuance of contractsand arrangements listed in the register maintained under section 301 of the Companies Act, 1956 and aggregating during the yearto Rs.50,000/- or more in respect of each party, have been made at prices which are reasonable having regard to prevailing marketprices for such goods, materials or services or the prices at which transactions for similar goods, materials and services have beenmade with other parties.

13. As explained to us, the Company has in general a regular procedure for the determination of unserviceable or damaged stores, rawmaterials and finished goods. Reasonable provisions have been made in the accounts for the same.

14. The Company has not accepted any public deposits during the year. With regard to the balance deposit of Rs.0.25 lakhs acceptedearlier, the Company has during the year deposited the same in Investor Education and Protection Fund as required u/s 205Cof the Companies Act, 1956

15. Reasonable records are maintained by the Company for sale, disposal or usage of realisable scraps and by-products.16. The Internal Audit System of the Company is generally commensurate with its size and nature of business.17. Maintenance of cost records has not been prescribed by the Central Government under section 209(1)(d) of the Companies Act,

1956 excepting for chemicals. On broad review of the relevant records relating to the said product, we are of the opinion that, primefacie, the prescribed accounts and records have been maintained.

18. Although the Company is not regular in depositing Provident Fund dues with appropriate authorities, namely the P.F. Trusts,as explained to us the Company has more or less deposited the entire amount payable by it within the year. However, attentionis drawn to pending reconciliation of its various provident fund related accounts scattered over the different units which as a wholeis to be taken into consideration.

19. As explained to us no undisputed amounts payable in respect of Wealth Tax, Excise Duty and Customs Duty were outstandingas on 31st March, 2002 for a period exceeding six months from the date they became payable. However, in respect of Income Taxdeducted at source and Sales Tax collected, undisputed amounts payable for more than six months as at the year end stand at Rs. 93.13lakhs and Rs. 527.46 lakhs respectively.

20. According to the information and explanations given to us no personal expenses have been charged to revenue other than that payableunder contractual obligation or in accordance with the generally accepted business practice.

21. The Company is a sick industrial company within the meaning of Section 3(1)(o) of Sick Industrial Companies (special Provisions)Act, 1985 and a reference was made on 22.06.1994 under section 15 of the said Act to BIFR, decision of which is pending.

22. In respect of the Company’s trading activities, we are informed that damaged goods have been ascertained and adequately dealt within the accounts.

IISCO Ujjain Pipe & Foundry Co.Ltd.(in liquidation) is under OfficialLiquidator of Hon’ble High Court of Kolkata. In view of above, no interesthas been charged on the amount of advance.

Reconciliation is in progress

Due to adverse liquidity problem, dues on account of Sales Tax & IncomeTax could not be paid within 31.03.2002. However, Income Tax dues havesince been deposited with the Income Tax Authorities. Sales Tax dues wouldbe cleared with expected improvement in realization arising out of IISCO'srevival package which is under consideration of various agencies.

ANNEXURE TO AUDITORS’ REPORT

(Referred to in paragraph 4.0 of our Report of even date)



Sd/-(Arvind Pande)


For and on behalf of

Guha Nandi & Co. S. Ghose & Co.Chartered Accountants Chartered Accountants

Sd/- Sd/-(Dr. B.S. Kundu) (Chandan Chatterjee)

Partner PartnerPlace : New Delhi.Date : 30th May, 2002.

Auditors' Report


120

Comments of C&AG ANNEXURE-II TO THE DIRECTORS’ REPORT

COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT,1956ON THE ANNUAL ACCOUNTS OF THE INDIAN IRON & STEEL COMPANY LIMITED

FOR THE YEAR ENDED 31ST MARCH, 2002.

COMMENTS MANAGEMENT'S REPLIES

Accepted for appropriate adjustments in the accounts for 2002-03.

The stock of Cast Iron Spun Pipes is saleable, satisfying the test of quality. Pipe marketis cyclic in nature and its demand varies linked with various urban/rural projects.There is pick up in the market for Cast Iron Pipes in the current year. As the stocks areusable, valuation of Cast Iron Pipes has been made at appropriate rates.

As per consistent practice followed, the stock of castings is valued at lower of cost ornet realisable value. Net realisable value is considered based on weighted averageprice applicable for the captive consumption and outside customers. Thus, valuationof castings has been made at appropriate rates.

Despatches have recently started. As the stocks are usable, the valuation of RefractoriesBrick Bats has been made at appropriate rates.

Accounting Standard (AS)-15 applies to retirement benefits in the nature of eithera defined contribution scheme or defined benefit scheme. The medical facilities andsettlement expenses as provided by the company to retired employees do not fallwithin the definition of defined contribution scheme or defined benefit scheme.

Sd/-(Arvind Pande)

ChairmanPlace : New DelhiDate : August 23, 2002

A. Profit & Loss Account

Loss of Rs.179.87 crore for the year would increase further in view of thefollowing:-

1. Schedule -2.8 – Power & Fuel Rs.100.09 crore :

Non-provision of liability for the amount payable to DVC towards delayedpayment surcharge on Electricity Bill as per agreement - Rs.1.62 crore

2. Schedule 2.5 – Accretion/Depletion to Stock of Semi/Finished Products –Rs.31.26 crore

(a) Overvaluation of stock of old Cast Iron Spun Pipes having no market andaccumulated over the years - Rs.1.80 crore

(b) Overvaluation of stock of cast iron general/special castings, steel castings andnon-ferrous castings due to adoption of higher rates - Rs.0.75 crore

(c) Overvaluation of stock of unmoved Refractory Brick Bats - Rs.0.90 crore

B. Notes on Accounts

Liabilities on account of post retirement medical facilities and settlementexpenses are not being recognised as per actuary estimate in accordance withAS-15.

Sd/-(R.B.Sinha)

Principal Director of Commercial Audit &Place : Ranchi Ex-Officio Member, Audit Board, Ranchi.Dated : 22nd August, 2002


121

Review of AccountsREVIEW OF ACCOUNTS OF THE INDIAN IRON & STEEL COMPANY LIMITED

FOR THE YEAR ENDED 31ST MARCH, 2002 BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

6. SUNDRY DEBTORSThe following table indicates the Sundry Debtors and Sales in the last three years :

As on 31st Sundry Debtors Sundry Debtors Total Sundry Sales Percentage of SundryMarch considered good considered doubtful Debtors Debtors to Sales

(Rs. in crore)2000 238.53 16.18 254.71 918.06 282001 176.90 18.46 195.36 941.37 212002 71.85 20.81 92.66 911.94 10

Sd/-(R.B. Sinha)

Place : Ranchi Principal Director of Commercial AuditDate : 22.08.2002 & Ex-Offcio Member of Audit Board, Ranchi

B. Debt Equity Ratio -ve -ve -ve(Long term debt to equity) [c(i to v butexcluding short term loans)/o]

C. Profitability Ratios

a) Profit before tax toi) Capital Employed -ve -ve -veii) Net Worth -ve -ve -veiii) Sales -ve -ve -ve

b) Profit after tax to Equity -ve -ve -ve

c) Earning per share -ve -ve -ve(in Rs.)

3. Sources and uses of Funds

Funds amounting to Rs. 155.70 crore from internal and external sources were realised andutilised during this year as given below :-

(Rs. in crore)

Source of Funds

1. Decrease in working capital 152.942. Increase in Borrowing 2.76

Total 155.70

Utilisation of Funds

1) Loss for the year 179.87Less: Depreciation 29.39Less: Gratuity 15.48 39.47 140.40Less: Miscellaneous Expenditure 10.20 150.60

2) Addition to Fixed Assets 9.91Add: Adjustment of Assets 0.80Less : Depreciation WIP 5.63 5.08

3) Decrease in Investments 0.02

Total 155.70

4. WORKING RESULTS

The table below indicates sales, net loss, etc. during the last three years :

1999-2000 2000-01 2001-02

(Rs. in crore)

a) Sales 918.06 941.37 911.94b) Net loss during the year *210.37 187.31 179.87c) Percentage of net loss to sales 22.91 19.89 19.72

* Due to waiver of loan/interest by Government of India as a part of Financial structuringof SAIL, net loss was decreased by Rs. 238.38 crore.

5. INVENTORY LEVELS

The following table indicates the inventory levels (Net of Provisions) during the last threeyears :

1999-2000 2000-01 2001-02

(Rs. in crore)

Stores & Spares 55.15 47.41 46.60(excluding in transit)

Raw Materials 25.93 24.19 17.57(excluding in transit)

Semi/Finished goods 151.31 129.69 100.07(excluding in transit)

Scrap & Others 7.69 3.69 4.37

1999-2000 2000-01 2001-02

(in percentages)

Note : Review of Accounts has been prepared without taking into account the Comments UnderSection 619(4) of the Companies Act, 1956 and qualification contained in the StatutoryAuditors’ Report.

1. Financial Position :The table below summarises the financial position of the Company under broad headings forthe last three years:

1999-2000 2000-01 2001-02

(Rs. in crores)LIABILITIESa) Paid-up capital

i) Government 387.67 387.67 387.67ii) Others — — —

b) Reserve & Surplusi) Free Reserves — — —ii) Share Premium Account 0.36 0.36 0.36iii) Capital Reserve 3.97 3.14 3.14

c) Borrowingsi) From Govt.of India — — —ii) From Financial Institutions/Banks 31.95 31.95 31.95iii) Foreign Currency Loans — — —iv) Cash Credit 56.68 56.68 59.34v) Others 44.68 44.68 44.68Total Borrowing (i to v) 133.31* 133.21* 135.97vi) Interest accrued and due 36.41* 39.92 43.42

d) i) Current Liabilities and Provisions 597.13 691.45 696.29ii) Provision for Gratuity 137.87 148.41 163.91

Total 1296.72 1404.16 1430.76

*The Government of India has waived Rs. 1946.17 crore as a part of Financial & Business restructuring during 1999-2000.

ASSETSe) Gross Block 698.67 785.71 793.74f) Less : Depreciation 436.34 466.31 487.57

g) Net Block 262.33 319.40 306.17h) Capital Work-in-Progress 85.60* 18.27 11.93I) Investments 0.09 0.09 0.07j) Current Assets, Loans and Advances 517.46 448.22 303.62k) Misc. expenditure not written off 1.28 0.91 11.83l) Accumulated loss **429.96 617.27 797.14

Total 1296.72 1404.16 1430.76

m) Working Capital [j-d(i)-c(vi)] -116.08 -283.15 -436.09n) Capital Employed (g+m) 146.25 36.25 -129.92o) Net Worth [a+b(i)+b(ii)-k-l] -43.21 -230.15 -420.94p) Net Worth per Rupee -ve -ve -ve

of Paid-up capital (in Rs.)

* The waiver of loan of Rs. 252.30 crore has been adjusted against the accumulated loss.

** The waiver of loan by Government of India of Rs. 1693.87 crore has been adjusted against theaccumulated loss.

(i) The cumulative loss of Rs. 797.14 crore as on 31st March 2002 represents 205.63% of thepaid-up capital. The Net Worth having become negative, the Company has been declared sickand referred to Board for Industrial & Financial Reconstruction (BIFR) on 22 June 1994.

2. Ratio AnalysisSome important financial ratios on the financial health & work of the Company at the end of

last 3 years are as under :

1999-2000 2000-01 2001-02

(in percentages)A. Liquidity Ratio

Current Ratio (Current assets to 82 61 41Current Liabilities & Provisionsand interest accrued and duebut excluding provision for Gratuity)[j/(d(i)+c(vi)]

ANNEXURE-II TO THE DIRECTORS’ REPORT


122

ANNEXURE-III TO THE DIRECTORS’ REPORT

INFORMATION AS PER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (DISCLOSURE OF PARTICULARSIN THE REPORT OF THE BOARD OF DIRECTORS)RULES, 1988

A. Conservation of Energy:

Specific energy consumption during 2001-2002 was 9.339 G.cal/tcs against 9.629 G.cal/tcs achieved in 2000-2001. The specific energy consumption was 3.0% lower than2000-2001 and was lowest ever achieved in IISCO, Burnpur Works.

a) Energy conservation measures taken in 2001-2002 are as follows :

i) Phased out steel making through Open Hearth Furnace route after April, 2001.

ii) Arresting steam leakages by on-line techniques and conventional methods and by installation/replacement of steam traps and valves.

iii) Thermal insulation of bare heating surfaces of boiler & H.P.Steam Lines (Phase-III).

iv) Reduction of boiler coal consumption by (i) minimising process requirements (ii) reconditioning of de-aerators in boiler house No. 3A (iii) sustaining steam quality.

v) Replacement of 51 metres of H.P. Coke Oven Gas pipeline from Burnpur to Kulti Works.

vi) On line sealing of leakages on B.F. Gas and C.O. Gas Mains

vii) Improvement in operational & maintenance practices in Coke Oven to increase C.O. Gas recovery.

viii) Patch repair of detected damages in deck of B.F. Gas holder in a short shutdown

b) Additional investments and proposals being implemented for reduction of consumption of energy during 2002-2003:

i) Arresting steam leakages using on-line conventional methods and by installation/replacement of steam traps and valves.

ii) Replacement of 75 metres of H.P. Coke Oven Gas pipeline from Burnpur to Kulti Works.

iii) On line sealing of leakages on B.F. Gas and C.O. Gas Mains

iv) Overhauling of Blast Furnace Gas Holder

v) Optimisation of performance of R.H. Furnace in M&R Mill

vi) Optimisation of performance of Soaking Pits Nos. 5 & 6

vii) Recommissioning of Gas Mixing Stations at Rolling Mills Complex

viii) Recommissioning of ratio controller in stoves of B.Fce.3 for automatic control of combustion air volume

c) Impact of measures at (a) and (b) above for reduction of energy and cost are as follows :

Measures taken during 2001-2002

i) 13,877 G. cal worth Rs. 36 lakhs (of energy equivalent) was saved

ii) Eliminated leakage @ 1 tph of steam

iii) Heat savings @ 0.44 G cal/hr due to reduction of losses

iv) Boiler coal consumption of Rs. 2 crores was reduced over budget

v) Provision for supplying additional C.O. Gas to Kulti Works was created following partial elimination of choked pipeline.

vi) Gas losses worth Rs. 13 lakhs were arrested by on-line leak sealing of C.O. Gas and B.F. Gas Mains and Gas hazards were eliminated.

vii) C.O. Gas yield improved by 1% over budget. C.O. Gas yield achieved was 298 m³/tdc against APP of 295 m³/tdc

viii) B.F. Gas leakage in B.F. Gas holder was reduced by 300 m³/hr.

Measures planned to be taken up during 2002-2003 :

i) Steam leakage elimination is expected to reduce steam leakage @ 1 tonne/hr.

ii) Further pipeline replacement during 2002-2003 is expected to improve C.O. Gas supply and thereby help in Oil Conservation.

iii) Online sealing of Gas Pipeline leakages will minimise gas losses and will help to ensure industrial safety.

iv) Overhauling of B.F. Gas holder will help in arresting leakage from the gas holder. Expected financial savings Rs. 35 lakhs per year.

v) Optimisation of operation of the existing reheating furnace at M&R Mill is expected to improve productivity, specific heat consumption and scale loss.

vi) Recommissioning of Gas Mixing station in Rolling Mills will help in the improvement of thermal regime in reheating furnaces, which will lead to better quality of steeland improve byproduct gas management.

vii) Recommissioning of air gas ratio controller in stoves of B.Fcs.3 is expected to optimise combustion air flow in stoves and thereby improve overall stove efficiency.


123

FORM - A

FORM FOR DISCLOSURE OF PARTICULARS WITHRESPECT TO CONSERVATION OF ENERGY

Pariticulars Unit Current year Previous year2001-2002 2000-2001

BURNPUR WORKS :

A. Power & Fuel Consumption :

1. Electricitya) Purchase Unit 10

6 KWH 112.70 101.28

Total Amount Rs./Lakhs 3606.87 3157.69Rate/Unit Rs./KWH 3.20 3.12

b) Own Generation:Through dieselgenerator Set Nil Nil NilThrough SteamTurbine/Generator Unit 10

6 KWH 121.48 124.69

Units per litreof Fuel Oil/Gas KWH/G.Cal 179.01 176.10Cost/Unit Rs./KWH 3.34 3.07

2. Coala) Coking Coal

(indigenous)Used inCoke Ovens:Quantity (wet) Tonne 963820 975492Total Cost Rs./Lakhs 24582.54 21984.56Avg.Rate Rs./Tonne 2550.53 2253.69

b) Coking Coal(imported)Used in coke Ovens:Quantity(wet) Tonne 50020 83993Total cost Rs./Lakhs 1740.04 2523.47Avg.Rate Rs./Tonne 3478.69 3004.38

c) Non-Coking CoalUsed in Boilers:Quantity(wet) Tonne 183533 184341Total cost Rs./Lakhs 1905.54 1405.22Avg.Rate Rs./Tonne 1038.25 762.29

3. Furnace Oil Quantity KL 3.0 5.0Total Amount Rs./Lakhs 0.12 0.21Avg.Rate Rs./KL 4140 4140Other/InternalGeneration - - -

B. Consumption Per Unitof ProductionElectricity KWH/TCS 553.4 580.0Furnace Oil KL/TCS - -Coking Coal T/TCS 2.932 3.216Non-Coking Coal T/TCS 0.531 0.559

FORM - A

FORM FOR DISCLOSURE OF PARTICULARSWITH RESPECT TO CONSERVATION OF ENERGY

Pariticulars Unit Current year Previous year2001-2002 2000-2001

KULTI WORKS:

A. Power & Fuel Consumption:

1. Electricity

a) Purchase Unit 106 KWH 31.68 32.75

Total Amount Rs./Lakhs 1051.50 1093.50

Rate/Unit Rs./KWH 3.32 3.34

b) Own Generation _ _ _

2. Coal ‘000T 0.3 _

Rs./Lakh 3.78 –

3. Furnace Oil Rs./T 1216.41

Quantity KL 274.818 179.651

Total Amount Rs./Lakhs 24.43 15.68

Average Rate Rs./KL. 8889.52 8728.03

4. Others/InternalGeneration _ _ _

5. CONSUMPTION PER UNIT OF PRODUCTION

Electricity _ _ _

Spun Pipes KWH/MT 212 270

Castings KWH/MT 449 662

(This excludes electricity Consumption for Services and Non-worksDepartments which is 626 KWH/MT in 2001-2002 and 700KWH/MT in 2000-2001)


124

FORM - B

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

Research & Development

1. Following projects were carried out in the year 2001-2002 in continuation from the year 2000-2001 :

a) Statutory monitoring of particulate PAH in Coke Oven work zone

b) Development of technology for protection of hearth in BF Nos. 3 & 4 by charging ilmenite sand through tuyeres of Blast Furnace.

c) Improvement in the productivity and quality of structurals at Light Structural Mill resulting reduction in operational delay and reduction ofcobble generation.

2. Future Plan of Action

a) Improvement in productivity and reduction in operational delay in LS Mill (Ongoing)

b) Improvement of clean coal quality at Chasnalla

c) Study to improve the operation of Re-heating Furnace in M&R Mill

d) Statutory monitoring of particulate PAH in Coke Oven work zone

3. Expenditure on R&D

a) Capital : Nil

b) Revenue : Rs. 25 lakhs

c) Total of R&D expenditure as a percentage of total turnover : 0.03%

Technology Absorption, Adaptation and Innovation

1) Rapid water quenching system was successfully introduced in M&R Mill for production of TMT bars in sizes of 16mm dia to 32mm dia.Corrosion resistant steel was manufactured and rolled successfully into TMT bars, in Fe 500 grade.

2) Injection of ilmenite sand through tuyere at Blast Furnaces was introduced for protection of furnace hearth.

3) Use of unscreened sinter brought from DSP (upto 50% sinter in the burden), was successfully tried out in Blast Furnaces achieving beneficialresults.

4) Roller guides were successfully introduced in finishing stand of LS Mill for 50 mm dia to 80 mm dia Round, for increasing productivity,reduction of relegation and reduction of cobbles.

5) Slag separator system introduced in Twin Hearth Furnace at Steel Melting Shop to minimise non metallic inclusions content in steel and toincrease recovery of Fe alloys thereby its savings.

6) On line purging facilities was introduced in Twin Hearth furnace at Steel Melting Shop for better homogeneity of steel and to minimisetemperature loss of steel of the order of 30ºc to 40ºc.

7) Manufacturing of intricate castings like Coke Oven door frame, door body was started in Foundry of Burnpur Works directly from Hot Metalof Blast Furnace.

8) Use of LD Slag in Blast Furnace was intensified upto 60 Kg/MT.

ANNEXURE-III TO THE DIRECTORS’ REPORT


125

Primary Business Segment-Wise information for the year ended 31.03.2002(Rs. in crores)

Particulars Burnpur Kulti Collieries Ore Total Eliminations TotalMines Segment Enterprise

REVENUEExternal Sales 795.33 47.14 58.23 11.24 911.94 911.94Inter segment sales 31.84 23.51 173.62 25.77 254.74 -254.74 0.00

TOTAL REVENUE 827.17 70.65 231.85 37.01 1166.68 -254.74 911.94

Total revenue of each segmentas a % of total revenue of all segment 70.90 6.06 19.87 3.17

RESULTOperating profit(+)/loss(–) -144.64 -41.39 18.81 -1.12 -168.34Interest expenses 9.29 0.99 0.60 0.75 11.63Interest income 0.09 0.01 0.00 0.00 0.10Income Taxes 0.00 0.00 0.00 0.00 0.00

Net Profit (+)/Loss(–) -153.84 -42.37 18.21 -1.87 -179.87

OTHER INFORMATIONSegment assets (excl.capital WIP & int Rec./Acc.)456.95 63.27 68.78 20.58 609.58 609.58Unallocated Corporated Assets 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS 456.95 63.27 68.78 20.58 609.58 609.58

Segment liabilities (excl. interest Acct. But not due)541.41 82.42 208.30 28.07 860.20 860.20Unallocated Corporate Liabilities 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL LIABILITIES 541.41 82.42 208.30 28.07 860.20 860.20

Capital Expenditure 8.59 0.07 6.75 0.13 15.54Depreciation 15.78 1.21 5.56 1.39 23.94

Non–cash expenditure other than depreciation 12.57 0.57 4.26 0.90 18.30(based on Actuarial valuation)

Secondary Business segment-wise (Geographical) information for the year ended 31.03.2002(Rs. in crores)

Particulars Amount %

Sales RevenueIndia 888.58 97.44Foreign Countries 23.36 2.56

TOTAL 911.94 100.00

Assets Carrying amount Additionof segment to fixed

assets assets

India 609.58 13.63

TOTAL 609.58 13.63

MAHARASHTRA ELEKTROSMELT LIMITED

126

MAHARASHTRA ELEKTROSMELT LIMITEDDirectors’ ReportTo

The Members,

The Directors have pleasure in presenting the 29th Annual Report of the Companytogether with the Audited Accounts for the year ended 31st March, 2002.

FINANCIAL REVIEWDuring the year the Company has recorded a turnover of Rs. 155.64 crores (includingconversion income of Rs. 133.92 crores) as compared to Rs. 186.97 crores (includingconversion income of Rs.76.94 crores) in the previous year. Due to increase in powertariff, raw material cost and sluggish market conditions, the Company has incurred a lossof Rs.8.38 crores. (previous year Rs.17.84 crores). The financial results are summarisedbelow:

Rs. in crores

2001-2002 2000-2001

Turnover 155.64 186.97

Operating Profit/Loss(-) (-) 4.78 (-) 8.32

Interest 2.34 8.39

Depreciation 1.26 1.13

Net Loss (-) 8.38 (-) 17.84

In view of the loss, the Directors do not recommend any dividend for the year.

PRODUCTION REVIEWThe Company’s production of different grades of ferro alloys was as under:

(M.T.)

2001-2002 2000-2001

High Carbon Ferro Manganese 47,299 53,356

Silico Manganese 32,147 37,011

Medium Carbon Ferro Manganese:

At plant 1,048 563

Through Conversion Agent — 158

Medium Carbon FeMn (Thermit) 2 —

Low Carbon FeMn 2 —

SALES & MARKETING REVIEWDuring the year, the Company continued conversion arrangements with SAIL SteelPlants to maximise revenue generation. Vigorous efforts were made by the Company tofind markets outside SAIL, but due to sluggish market conditions, higher sales did notmaterialise. Sales volume of different grades of Ferro Alloys were as under:

(M.T.)

2001-2002 2000-2001

SAIL STEEL PLANTS


Silico Manganese 30,155 29,037

Medium Carbon Ferro Manganese 683 615

OTHER CUSTOMERS


Silico Manganese 851 7,777

Medium Carbon Ferro Manganese 230 —

RESEARCH & DEVELOPMENTStudies were carried out for production of Medium Carbon Ferro Manganese throughthermit process towards reduction in the cost of production and utilisation of FerroManganese and Silico Manganese fines.

HUMAN RESOURCES MANAGEMENT REVIEWManpower and its development has been the prime concern for MEL. The employeeshave been trained with a view to gain multi skills and enable them to perform all criticaljobs. The employees participation and involvement in the overall improvement was themain thrust during the year. In the area of shop improvement, quality circles wereformed in the works as well as non-works areas. Suggestion scheme was activated.

A Company-wide mass communication exercise has been started involving all theexecutives and a major cross section of non-executives with a view to appraise theemployees about financial status of the Company and the plans for the next financialyear. In the communication workshops the employees are made aware of Company’sstrength, weakness, opportunities and threats. During the workshops various workinggroups are formed to interact among themselves to make action plans for furtherimprovements and to meet future challenges.

Regular training programmes were organised during the year wherein 120 executivesand 346 non-executives were covered in various thrust areas viz. Enhancing managerialeffectiveness, skill development, etc.

The manpower strength as on 31st March, 2002 was 885 comprising of 135 Executives& 750 Non-Executives, out of which 121 were Scheduled Castes & 42 were ScheduledTribes. A total of 15 executives and 28 non-executives were separated under VoluntaryRetirement Scheme during 2001-2002.

During the year conducive and congenial Industrial Relations were maintained throughthe support and co-operation of the Trade Union and Officers’ Association.

ENVIRONMENTEnvironment Management and pollution control continued to get top priority incompany’s activities during the year. To keep environment clean for ecologicalprotection, thrust was given in the areas of green belt development in and around theplant premises, solid waste management, monitoring of liquid and air effluent forvarious environmental parameters. In addition to the regular maintenance of existing16,000 teak trees, further 4500 tree saplings were planted during the year.

To comply with the environmental standards set up by Maharashtra Pollution ControlBoard (MPCB), the capacity of one of the neutralization pits has been enlarged insecondary treatment of trade effluents. Gas Cleaning Plant for SAF-I & II would alsoenhance the availability of clean gas for gainful utilization as a fuel to Sintering Plant,Lime Kiln and Gas based 4.2 MW Captive Power Plant.

Continuous steps were taken towards gainful utilization of High MnO Slag in SiMnProduction, Lumpy SiMn Slag as rail ballast and Sale of SiMn Slag for road construction.

TOTAL QUALITY & INDUSTRIAL SAFETYQuality Assurance System (QAS) addressed to ISO-9002 (1994) InternationalStandard was successfully maintained in the orgnisation during the year 2001-2002and was verified by the Certifying Body M/s. LRQA, Mumbai, by conductingsurveillance audit. In addition to the above, the transition activities from ISO-9002(1994) QAS to ISO-9001-2000 (QMS) has also been carried out on account ofrevision in ISO-9000 standards. Accordingly, revised standards ISO-9001-2000 hasrecently been implemented.

During the year under review in Industrial Safety, the Company has been awarded theSAIL Chairman’s Silver Plaque for No Fatal Accident during 2000 and SpecialCommendation Certificate from Ministry of Labour, Govt. of India, for meritoriousperformance in Industrial Safety for the year 1999.

SICK COMPANYThough the Company has taken various steps to improve its performance, the Companyhas continuously incurred loss due to increase in raw material cost, sluggish marketconditions and enhanced power tariff, which have eroded its networth as on 31/3/2001. Thus the Company became a sick company under Section 3(o) of the Sick IndustrialCompanies (Special Provisions) Act, 1985. Reference under Section 15 of the said Acthas been registered by the BIFR.


127

FUTURE PLANTo achieve the objectives of the Corporate Plan 2005, studies were carried out forproduction of Medium Carbon Ferro Manganese through thermit process towardsreduction in the cost of production and utilisation of Ferro Manganese and SilicoManganese fines.

Installation of 30 MW Power Plant on Build, Operate, Lease and Transfer (BOLT)basis is under consideration.

Production of special Ferro Alloys like Ferro Titanium, Ferro Molybdenum is underexamination.

REPORT ON CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION,ETC.Information in accordance with the provisions of Section 217(1)(e) of the CompaniesAct, 1956 read with the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988 regarding Conservation of Energy, Technology Absorption andForeign Exchange Earnings and Outgo, is given at Annexure —I, II & III to this report.

PARTICULARS OF EMPLOYEESThere was no employee of the Company who received remuneration in excess of thelimits prescribed under Section 217 (2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Rules, 1975.

DIRECTORS

Shri A.K. Jayswal, Director, has resigned w.e.f. 15th January, 2002.

Shri G. Upadhayaya, Director, has resigned w.e.f. 31st March, 2002.

Shri B.K. Singh has been appointed as Director w.e.f. 20th March, 2002.

DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to Section 217 (2AA) of the Companies Act, 1956 it is hereby confimred that:

i) in the preparation of the annual accounts, the applicable accounting standardshad been followed along with proper explanation relating to material departures;

ii) the directors had selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to givea true and fair view of the state of affairs of the Company at the end of the financial

year and of the profit or loss of the Company for that period;

iii) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with provisions of the Companies Act forsafeguarding the assets of the Company and for preventing and detecting fraudand other irregularities ;

iv) the directors had prepared annual accounts on a going concern basis.

CORPORATE GOVERNANCEIn terms of listing agreement with the Stock Exchanges a report on Corporate Governanceis given at Annexure-IV to this report. The Management Discussion & Analysis Reportis given at Annexure-V. A certificate from Auditors of the company regarding complianceof conditions of Corporate Governance is placed at Annexure-VI to this report.

AUDITORS' REPORTThe Statutory Auditors’ Report on Accounts of the Company for the financial yearended 31st March, 2002 alongwith Management’s replies are enclosed. The commentsof Comptroller and Auditor General of India under Section 619(4) of the CompaniesAct, 1956 alongwith review on accounts of the Company for the year ended 31st March,2002 are also enclosed at Annexure-VII.

ACKNOWLEDGEMENTThe Board of Directors wish to place on record their appreciation for the support, Co-operation and loyalty extended by every employee of the Company. They wish toacknowledge the continued support extended by Steel Authority of India Limited. TheDirectors also greatly appreciate the excellent support the Company received fromShareholders, Auditors, Bankers, Financial Institutions, Central & State Governments,Local Authorities, Maharshtra Electricity Regulatory Commission (MERC), ElectricityBoard and the Suppliers and Customers.

For & on behalf of the Board

Sd/- Place : New Delhi. (V. S. JAIN)Date : 29th June, 2002 Chairman


128

Schedule As at 31st As at 31stNO. March, 2002 March, 2001

(Rupees in lakhs)

SOURCES OF FUNDS :SHAREHOLDERS’ FUNDS:Share Capital 1.1 2400.00 2400.00Reserves & Surplus 1.2 15.00 15.00

2415.00 2415.00LOAN FUNDS:Secured Loans 1.3 1712.93 1536.05Unsecured Loans 1.4 1497.34 591.78

3210.27 2127.83

TOTAL 5625.27 4542.83APPLICATION OF FUNDS:FIXED ASSETS :Gross Block 1.5 5471.22 3943.63Less: Depreciation 2835.40 2709.76

Net Block 2635.82 1233.87Capital Work-in-progress 1.6 11.86 1444.69

2647.68 2678.56CURRENT ASSETS, LOANS AND ADVANCESInventories 1.7 3276.06 2831.12Sundry Debtors 1.8 204.46 305.19Cash and Bank Balances 1.9 299.22 464.03Interest Receivable 1.10 74.03 80.74Loans and Advances 1.11 1285.55 1378.05

5139.32 5059.13Less: CURRENT LIABILITIES & PROVISIONS 1.12 7220.90 7343.97

Net Current Assets –2081.58 –2284.84Miscellaneous Expenditure 1.13 215.54 143.58(To the Extent not written off or adjusted)Profit & Loss Account 4843.63 4005.53

TOTAL 5625.27 4542.83

Notes on Accounts 3Schedules 1 to 3 form part of Accounts

As per our report of even date attached For and on behalf of Board of DirectorsFOR A.K. JHUNJHUNWALA & CO. Sd/- Sd/-Chartered Accountants (R. ASHOKKUMARR) (R.K. GUPTA)

Company Secretary Executive Director

Sd/- Sd/- Sd/-(M.A. GOHEL) (T.K. GUPTA) (V.S. JAIN)

Partner General Manager (F&A) Chairman

Place : New DelhiDate : 29th May, 2002



129


(Rupees in lakhs)

INCOME

Sales 2.1 15564.22 18697.16Accretion/Depletion in Stock of Finished Goods 2.2 447.53 –792.26Interest Earned 2.3 60.30 113.93Other Revenues 2.4 83.67 113.20Provision no longer required written back 0.14 7.28

TOTAL 16155.86 18139.31

EXPENDITURE

Raw Materials Consumed 2.5 1556.03 3300.23Employees’ Remuneration and Benefits 2.6 2061.72 1614.23Stores and Spares Consumed — 303.59 330.80Power and Fuel — 9139.59 10079.78Repairs and Maintenance 2.7 26.43 34.24Excise Duty — 2790.43 2796.73Other Expenses and Provisions 2.8 756.53 815.25Interest 2.9 233.85 838.97Depreciation 125.89 113.36

TOTAL 16993.96 19923.62

Net Loss for the year -838.10 -1784.31

Profit/Loss brought forward from previous year –4005.53 –2221.22

Balance of Loss carried forward to Balance Sheet –4843.63 –4005.53

Notes on Accounts 3Schedules 1 to 3 form part of Accounts

As per our report of even date attached For and on behalf of Board of DirectorsFOR A.K. JHUNJHUNWALA & CO. Sd/- Sd/-Chartered Accountants (R. ASHOKKUMARR) (R.K. GUPTA)







130

1.1 SHARE CAPITAL As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)

Authorised :30,000,000 Equity Shares ofRs.10/- each 3000.00 3000.00

3000.00 3000.00

Issued :24,000,000 Equity Shares ofRs.10/- each 2400.00 2400.00

Subscribed and Paid-up :24,000,000 Equity Shares ofRs.10 /- each fully paid-up [*] 2400.00 2400.00

TOTAL 2400.00 2400.00

[*] Of the above, 237,87,935(237,87,935)Equity Shares are held bySteel Authority of India Limited -Holding Company

1.2 RESERVES & SURPLUS As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)

CAPITAL RESERVE 15.00 15.00(Represents amount receivedfrom Central Government byway of Capital subsidy)

GENERAL RESERVEAs per last Balance Sheet 0.00 77.13

Less : Transferred to Profit & Loss A/c. 0.00 77.13

0.00 0.00

TOTAL 15.00 15.00

1.3 SECURED LOANS As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)TERM LOANS FROM :

Housing Development FinanceCorporation Ltd. 145.43 178.56[Due for repayment withinone year Rs.42.73 lakhs(Rs.36.11 lakhs)]

Interest accrued and due 3.88 4.54149.31 183.10

CASH CREDIT FROM BANKS : 1563.62 1352.95

[Secured by hypothecation of 'stocks, stores and book debtsand are guaranteed by theSteel Authority of India Limited(Holding Company)]

TOTAL 1712.93 1536.05

1.4 UNSECURED LOANS As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)

FROM SICOM LIMITED

Interest free loan :For sales tax 591.78 591.78[Due for repayment withinone year Rs.113.84 lakhs(Rs.90.88 lakhs)]

From Steel Authority of India Limited(Holding Company)Interest Bearing Loans 905.56 0.00(Due for repayment within one year Rs. Nil lakhs(Rs. Nil lakhs)

TOTAL 1497.34 591.78

1.5 FIXED ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As at Additions Sales/ As at Up to During On Sales/ Up to As at As at31st During Adjust- 31st 31st the Adjust- 31st 31st 31st

March, the ments March, March, year ments March, March, March,2001 year (Net) 2002 2001 (Net) 2002 2002 2001

(Rupees in lakhs)Land - Freehold 29.79 0.00 0.00 29.79 0.00 0.00 0.00 0.00 29.79 29.79Building and Roads

- Factory Buildings 387.81 240.44 0.00 628.25 184.01 14.96 0.00 198.97 429.28 203.80- Other than Factory Buildings 300.10 0.00 0.00 300.10 62.85 4.89 0.00 67.74 232.36 237.25

Railway Sidings 108.58 0.00 0.00 108.58 103.15 0.00 0.00 103.15 5.43 5.43Plant and Machinery 2920.65 1202.61 0.00 4203.26 2215.29 97.47 0.00 2312.76 1890.50 705.36Tubewells 24.31 0.00 0.00 24.31 17.01 0.46 0.00 17.47 6.84 7.30Furniture and Fixtures 95.97 2.26 -0.20 98.03 65.12 4.26 -0.08 69.30 28.73 30.85Computers 41.60 2.82 -0.34 44.08 34.15 1.58 -0.17 35.56 8.52 7.45Vehicles 34.82 0.00 0.00 34.82 28.18 2.27 0.00 30.45 4.37 6.64

Total 3943.63 1528.13 –0.54 5471.22 2709.76 125.89 -0.25 2,835.40 2635.82 1233.87

Previous Year Total 3933.90 26.65 –16.92 3943.63 2611.21 113.36 -14.81 2709.76 1233.87 1322.69

Schedules


131

1.6 CAPITAL WORK-IN-PROGRESS As at As at31st March, 31st March,

2002 2001(Rupees in lakhs)

Expenditure during construction 0.00 194.07pending allocation (Schedule 1.6.1)Capital work-in-progressFerro alloy plant 57.42 77.63Plant & Machinery 20.35 18.02

77.77 95.65Less : Provision 75.44 18.02

2.33 77.63Power Plant 9.53 1,172.99

TOTAL 11.86 1,444.69

1.6.1 EXPENDITURE DURING CONSTRUCTION(pending allocation) As at As at


(Rupees in lakhs)Opening Balance 194.07 159.51Expenditure incurred during the yearEmployees’ Remuneration & BenefitsSalaries & Wages 39.49 29.00Technical Consultants’ fees & know-how 1.89 0.79Stores & Spares 0.46 0.30Other Expenses 0.47 4.47Interest 0.00 0.00

TOTAL 236.38 194.07

Amount allocated to Fixed Assets/CWIP 236.38 0.00Balance carried forward 0.00 194.07

1.7 INVENTORIES(As taken, valued and As at As atcertified by Management) 31st March, 31st March,


Stores and Spares 392.45 385.76Add : In transit 0.00 13.54

392.45 399.30Less : Provision 146.09 144.08

246.36 255.22Raw Materials : 474.10 456.80Add : In transit 1.69 12.72

475.79 469.52Less : Provision 2.34 2.34

473.45 467.18Finished products, by-productsand scrap 1933.05 1485.52Less : Provision 1.05 1.05

1932.00 1484.47Salvaged / Scrapped Fixed Assets 775.08 775.08(At book or assessed or realisablevalue whichever is lower)Less : Provision 150.83 150.83

624.25 624.25

TOTAL 3,276.06 2,831.12

1.8 SUNDRY DEBTORS As at As at(Unsecured) 31st March, 31st March,


Debts due for more than six months 33.66 39.29Others 189.19 284.29

222.85 323.58Less : Provision for doubtful debts 18.39 18.39

204.46 305.19204.46 305.19

PARTICULARSConsidered Good 204.46 305.19Considered Doubtful 18.39 18.39TOTAL 222.85 323.58Note :(i) Due from Steel Authority of India 153.72 241.14

Limited (Holding Company)

1.9 CASH AND BANK BALANCES As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)

Cash on hand 1.17 0.97

Cheques/Drafts on hand 12.87 0.00

Remittance in Transit 140.00 389.34

With Scheduled Banks in :

— Current Account 125.48 45.79

— Term Deposit 19.70 27.93

TOTAL 299.22 464.03

1.10 INTEREST RECEIVABLE As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)

Employees 52.36 48.43Others 24.70 35.34

77.06 83.77Less : Provision for doubtful interest 3.03 3.03

74.03 80.74

TOTAL 74.03 80.74

1.11 LOANS AND ADVANCES(Unsecured, considered good unless otherwise stated)

As at As at31st March, 31st March,

2002 2001

(Rupees in lakhs)

Loans to employees[Secured Rs.283.60 lakhs 289.46 323.97(Rs.318.69 lakhs)]

Advances recoverable in cash orkind or for value to be received :

Claims recoverable 43.43 86.46

Contractors and Suppliers 93.39 38.97

Employees 2.91 8.69

Income tax deducted at source 42.16 43.83

Accrued Export Incentinve 0.00 45.15

Others 162.25 207.08

344.14 430.18Less : Provision for doubtful

advances 91.35 89.90

252.79 340.28

Deposits :

With Excise Authorities 7.43 2.62

With MSEB and Others 735.87 711.18

743.30 713.80

TOTAL 1285.55 1378.05

1. Amount due fromSteel Authority of India Limtied 3.81 12.35(Holding Company)

Maximum amount due atany time during the year 9.51 655.64


132

1.12 CURRENT LIABILITIES ANDPROVISIONS As at As at


(Rupees in lakhs)

CURRENT LIABILITIES :Sundry Creditors :SSI Units 94.51 60.46Others 4,507.49 4602.00 5,077.52 5,137.98Advances From Customers 51.29 81.81Security Deposits 206.68 195.80Interest accrued but not due on loans 31.87 0.00Unclaimed Dividend 0.24 0.24Other Liabilities 1385.41 1,286.51

6,277.49 6,702.34PROVISIONS :Gratuity 419.80 327.20Accrued Leave 188.11 113.43Income Tax 4.36 12.16Voluntary Retirement Compensation 198.69 188.84Employees Family Benefit Scheme 132.45 0.00

TOTAL 7220.90 7343.97

1.13 MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

Balance Additions Total Amount Balanceas at during Charged off as at

31.03.2001 the year during 31.03.2002the year

(Rupees in lakhs)DEFERREDREVENUE EXPENDITURE :Voluntary RetirementCompensation 143.58 32.87 176.45 66.87 109.58Employees FamilyBenefit Scheme 0.00 132.45 132.45 26.49 105.96

143.58 165.32 308.90 93.36 215.54Previous year 191.44 0.00 191.44 47.86 143.58

2.1 SALES Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in lakhs)

Ferro Alloys 2134.16 10554.41Conversion 13391.78 7694.17Exports 0.00 347.85Export Incentive 0.00 45.15Others 38.28 55.58

TOTAL 15564.22 18697.16

2.2 ACCRETION/DEPLETION INSTOCK OF FINISHED GOODS Year ended Year ended


(Rupees in lakhs)Closing Stock 1933.05 1485.52Less : Opening Stock 1485.52 2277.78INCREASE/DECREASE TOTAL 447.53 -792.26

2.3 INTEREST EARNED (GROSS) Year ended Year ended31st March, 31st March,


Employees 18.46 22.59Others * 41.84 91.34TOTAL 60.30 113.93

* Tax deducted at source Rs.5.65 lakhs (Rs.9.21 lakhs).

2.4 OTHER REVENUES Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in lakhs)

Social amenities-recoveries 6.98 5.09

Sundry Sales 5.06 15.90

Liquidated damages 0.73 0.10

Profit on sale of surplus stores 0.00 0.09

Profit on sale of Fixed Assets 0.00 0.00

Sundries 70.90 92.02

TOTAL 83.67 113.20

2.5 RAW MATERIAL CONSUMED Year ended Year ended31st March, 31st March,

2002 2001

Quantity Rs./lakhs Quantity Rs./lakhs[MT] [MT]

Manganese Ore 46269 909.17 114443 2245.98

Coke 2113 120.62 21455 721.89

Miscellaneous 526.24 332.36

TOTAL 1556.03 3300.23

NOTE : Consumption is net ofSale proceeds ofRs.599.86 lakhs(Rs.684.73 lakhs).

2.6 EMPLOYEES' REMUNERATIONAND BENEFITS Year ended Year ended


(Rupees in lakhs)

Salaries and wages 1605.63 1335.58

Co’s contribution to providentand other funds 156.92 114.87

Travel concession 11.15 0.96

Welfare expenses 104.64 102.93

Gratuity 183.38 59.89

TOTAL 2061.72 1614.23

2.7 REPAIRS AND MAINTENANCE Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in lakhs)

Buildings and roads 10.16 14.52

Plant and machinery 6.92 6.20

Others 9.35 13.52

TOTAL 26.43 34.24

Schedules


133

2.8 OTHER EXPENSES AND PROVISIONSYear ended Year ended


(Rupees in lakhs)

Export Sales Expenses 0.00 5.49

Bank charges 14.17 26.71

Demurrage and wharfage -0.16 1.96

Handling and scrap recovery- Contractors 340.66 340.15

Insurance 16.74 23.01

Legal charges 2.56 1.99

Postage, telegram & telephone 19.15 14.56

Printing and stationery 2.70 3.98

Rates and taxes 64.04 30.65

Rent 8.40 8.60

Travelling expenses 60.76 57.03

Sundries 72.87 82.05

Remuneration to auditors:

Audit fees 1.09 0.98

Tax audit fees 0.33 0.32

Out of pocket expenses 0.43 0.19

In Other Capacities 0.00 0.60

1.85 2.09

Provisions :

Doubtful debts 0.00 0.01

Doubtful advances 0.00 0.00

Doubtful interest 0.00 0.00

Diminuation in the value offixed asset & materials 59.43 169.14

Deferred Revenue Expenditure 93.36 47.86

152.79 217.01

TOTAL 756.53 815.28

2.9 INTEREST Year ended Year ended31st March, 31st March,

2002 2001

(Rupees in lakhs)

Cash credit &other financing charges 239.48 281.80

Other -5.63 557.71

TOTAL 233.85 838.97

ACCOUNTING POLICY :

1. BASIS OF ACCOUNTING:The company prepares its accounts on accrual basis under historical cost convention as perthe generally accepted accounting principles.

1.1 FIXED ASSETS:All fixed assets are stated at historical cost less depreciation.Fixed assets whose actual costs can not be accurately ascertained are initially capitalised onthe basis of estimated cost and final adjustments for cost and depreciation, if any, are maderetrospectively on ascertainment of actual cost.Expenditure incurred during trial run period are capitalised till the concerned assets areready for commercial production.

Machinery spares which can be used only in connection with an item of fixed assets andwhose use as per technical assessment is expected to be irregular are capitalised.

1.2 DEPRECIATION:Depreciation is provided on straight line method at the rates and in the manner specified inSchedule XIV of the Companies Act,1956.Low value items costing Rs.5000 or below are depreciated fully in the year of its acquisition.Depreciation on assets installed/disposed off during the year is provided with respect to themonth of addition/disposal thereof.Extra shift depreciation is provided treating a particular plant as one unit.Machinery spares capitalised and adjustment to fixed assets on account of fluctuations inforeign exchange rates are depreciated over residual usefull life of the respective assets.

1.3 GOVERNMENT GRANTSGrants-in-aid related to specific fixed assets are shown as deduction from the gross value ofthe assets concerned in arriving at their book value.Grants-in-aid related to revenue items are netted against the related expenses.

1.4 BORROWING COSTBorrowing costs relating to the acqulsition/construction of qualifying assets are capitaliseduntil the time all substantial activities necessary to prepare the qualifying assets for theirintended use are complete.A qualifying asset is one that necessarily takes substantial period of time to get ready for itsintended use.All other borrowing costs are charged to revenue.

1.5 INVENTORY:Inventory is valued on the following basis:Finished products : Cost

OrNet realisable value whichever is lower.

Raw Materials : CostOrNet realisable value whichever is lower.

Cost is arrived for :Coke – Weighted average cost.Others – First in First outStores & Spares : Weighted average cost. However, in the case of

stores & spares declared obsolete/surplus andstores & spares not moved for five years or more,provision is made at 75% and 10% respectively ofthe book value and charged to revenue.

By products and processScrap/ Mn Ore Fines/Cokerejects/Steel process material : Net realisable valueSinters : Replacement cost of Mn Ore.

1.6 DEFERRED REVENUE EXPENDITURE:Expenses incurred on development of new projects, cost of feasibility studies for new projects,payment of technical knowhow/documentation, is treated as development expenditure.Expenditure incurred on feasibility studies, technical know-how/documentation and otherdevelopment expenditure is added to the capital cost of the project, if implemented. In casethe project is abanoned, such expenses are written off in five years.Voluntary retirement compensation liability ascertained on actuarial valuation, is treated asdeferred revenue expenditure and written off in five years. Further, annual increase/decreaseto the above liability actuarially ascertained, is taken to Profit and Loss account, after adjustmentof payments thereof during the year. Incremental liability against Voluntary RetirementSchemes due to wage revision is charged corresponding to the period for which deferredrevenue expenditure relating to such Voluntary Retirement Scheme is amortised, with thefirst charge been made for the entire lapsed period in the year in which such wage agreementis finalised. The future liability to the disabled employees/legal heirs of deceased employeesunder the Employees' Family Benefit Schemes is treated as deferred revenue expenditure andwritten off over period of 5 years.Other deferred revenue expenditure including expenditure on consultancy/technologicalassistance for strategic cost reduction and quality improvements is written off in five years.

1.7 FOREIGN CURRENCY TRANSACTIONS:Foreign currency assets and liabilities (other than those covered by forward contracts) as onthe Balance Sheet date are converted at the year end exchange rates and loss or gain arisingthereon, is adjusted in the carrying amount of fixed assets or charged to Profit & LossAccount, as the case may be.Transactions in foreign currencies other than those covered by forward contracts are recordedat the rated prevailing on the date of transactions.In case of foreign currency transactions covered by forward contracts, the difference betweencontract rate and exchange rate prevailing on the date of transactions, is adjusted to the costof fixed assets or charged to the Profit & Loss Account, as the case may be, proportionatelyover the contract period.

1.8 CLAIMS FOR LIQUIDATED DAMAGES/ESCALATIONSClaims for liquidated damages are accounted for as and when these are deducted from theSuppliers’ bill. These are treated as income on completion of the projects/final settlement.Suppliers’/Contractors’ claims for price escalation are accounted for, to the extent suchclaims are accepted by the company.

1.9 RETIREMENT BENIFITS:The provisions for gratuity and leave encashment liabilities are made on the basis of year-endactuarial valuation.


134

4.1(a) LICENSED, INSTALLED CAPACITY AND PRODUCTION :

*LICENSED CAPACITY **INSTALLED CAPACITY #PRODUCTION[TONNES] [TONNES] [TONNES]

High Carbon Ferro Manganese 47,299(53,356)

Silico Manganese 100,000 100,000 32,147(100,000) (100,000) (37,011)

Medium Carbon Ferro Manganese 1,048(563)

Low Carbon Ferro Manganese 2(Nil)

Medium Carbon Ferro Manganese (Thermit) 2(Nil)

NOTE : * Re-endorsed capacity.** As Certified by Management and not verified by auditors, being a technical matter.# Including jigged Ferro/Silico Manganese and Metal dust & adjustment relating to excess/shortage on account of physical verification.

1.10 ADJUSTMENTS PERTAINING TO EARLIER YEARS AND PREPAID EXPENSES:Income/expenditure relating to prior periods and prepaid expenses, which do not exceedRs.5.00 lakh in each case, are treated as income/expenditure of the current year.

1.11 SALES:Materials sold in domestic market are treated as sales on delivery to carriers. Export sales aretreated as Sales on issue of Bill of Lading.“Sales and conversion charges” include packing charges, excise duty but exclude sales tax.

1.12 EXPORT INCENTIVE:Export incentives in the form of Special/Advance Licenses and credit earned under Duty EntitlementPass Book Scheme (DEPB) and Duty Drawback, are treated as income in the year of export,at estimated realisable value/actual credit earned on exports made during the year.

1.13 TAXATIONProvision for income tax comprises of current tax and deferred tax charged or realised. Deferredtax is recognised subject to consideration of prudence on timing differences, being the differencesbetween taxable and accounting income/ expenditure that originate in one period and are capableof reversal in one or more subsequent period(s). Deferred tax assets are not recognised unlessthere is “virtual certainty “ that sufficient future taxable income will be available, against whichsuch deferred tax assets will be realised.

2. NOTES ON ACCOUNTS:2.1 Sales and raw materials consumed are not comparable with that of previous year as the

conversion activities were carried out during part of the previous year.Out of total production of 47299 MT (53356 MT) of High Carbon Ferro Manganese and32147 MT (37011 MT) of Silico Manganese, 42162 MT (28641 MT) of High CarbonFerro Manganese and 26638 MT (16425 MT) of Silico Manganese are under conversionarrangement.

2.2 In accordance with past practice, quantities of inventories of bulk raw materials and finishedgoods have been taken as per weight-volume-ratio as determined by the Production/TechnicalDepartment.

2.3 Out of Rs. 300 lakhs received by the company in the previous year from the National RenewalFund as a Grant –in-Aid for disbursement under voluntary retirement scheme, a sum ofRs.218.79 lakhs (Rs. 81.21 lakhs) has been accounted for during the year. The amountremaining to be disbursed to the employees to the extent of Rs. 119.36 lakhs has been retainedin a no-lien account.

2.4 Inventory of finished goods at the year-end was physically verified and the surplus quantity of381MT (Previous year shortage of 688 MT) valued at Rs.84.37 lakhs (Previous year shortageof Rs.135.66 lakhs) has been accounted for.

2.5 On account of loss for the year and accumulated losses of previous years, no provision forIncome tax has been made in the accounts.

2.6 The company has substantial carried forward losses and unabsorbed depreciation under theIncome Tax Act, 1961 and accordingly deferred tax asset of about Rs.1728.66 lakhs has arisenas on 31-03-2002 (including Rs.221.42 lakhs (approx.) for the current year) as per AccountingStandard-22 on ‘Accounting for taxes on income’. However, in consideration of prudence, theabove deferred tax asset has not been recognised in the financial statements and the same wouldbe considered at appropriate time keeping in view the availability of sufficient taxable incomeagainst which such deferred tax asset can be realised.

2.7 The long term agreements for employees’ salaries and wages had expired on 31.12.1996. Thecompany has implemented the revised salaries and wages w.e.f. 1.1.2001 with fitment on thebasis of notional increment over the period from 1.1.1997 to 31.12.2000 and appropriateadjustments thereof have been carried out in the accounts. However, the issue of wage revision(including other benefits) for the period from 1.1.1997 to 31.12.2000 is to be discussedseparately with the employees. Liability if any, in this regard is unascertainable. Further, followingthe past practice, adhoc adjustable advances/ interim relief of Rs.255.39 lakhs for the aboveperiod (including Rs.72.39 lakhs paid during the year) have been charged to “Employees’Remuneration & Benefits” in the respective years.

2.8 The company has normally made payments to SSI units in due time and also there being noclaims from the parties, interest, if any, on overdue payments is unascertainable and thus notprovided for. There are no SSI units to whom amounts in excess of Rs.1 lakh are due for morethan 30 days.

2.9 In terms of the understanding reached, pending final settlement of related claims between thecompany and MSEB a net sum of Rs. 154.19 lakhs (Dr) in respect of interest and power charges

earlier accounted for has been adjusted during the year. Arising out of this, no further interesthas been provided for as the existing liability for the same is adequate.

2.10 The Company has retained Rs.54.83 lakhs (Rs.54.86 lakhs) under Employees’ Family BenefitScheme which is exempt under section 58 A of the Companies Act, 1956.

2.11 Unlike previous years, the future liability for benefits payable to the disabled employees/legalheirs of deceased employees under the Employees’ Family Benefit Scheme have been providedand treated as deferred revenue expenditure as referred to in Accounting Policy 1.6 above,resulting into an increase in loss for the year by Rs.26.49 lakhs.

2.12 The Central Board of Direct Taxes vide its Notification dated 25th September,2001 has revisedthe rules for computation of certain perquisites. The Employees’ Union/Association of SAIL(our holding company) have filed writ petitions with the Hon’ble High Court at Kolkatachallenging the above notification. The Hon’ble High Court, vide it’s order dated 30-1-2002,has granted an interim stay restraining from deduction of tax on perquisite on accommodationprovided to the employees. Accordingly, the company has not deducted tax on house perqui-sites. Necessary accounting adjustments in the above matter would be carried out on the disposalof appeals filed.

2.13 The Board of Directors has withdrawn the benefits relating to Leave Travel Concession (LTC)/Liberalised Leave Travel Concession (LLTC) for the block calendar years of 1998-99, 2000-01 and 2002-03. Accordingly, there exists no liability towards LTC/LLTC for the above peri-ods.

2.14 Power & Fuel does not include expenses for generation of power which have been includedunder the primary heads of account.

2.15 The classification of plant and machinery into continuous and non-continuous has been madeon the basis of technical opinion and depreciation thereon is provided accordingly.

2.16 Sundry Creditors, other liabilities, Sundry Debtors, claims recoverable and advances to partiesare subject to confirmation. The response to letters requesting confirmation of balances has beeninsignificant except that of units of Steel Authority of India Ltd.

2.17 Estimated amount of contracts remaining to be executed on capital account and not provided forRs.4.63 lakhs (Rs.2.18 lakhs).

2.18 Stock of Slag and Khad has been considered in accounts based on pending orders on hand.2.19 There is no related party transaction as defined in the Accounting Standard –18 on ‘ Related

Party Disclosures’.2.20 The requirement under Accounting Standard – 17 on Segment Reporting is not applicable

since the company is having line of products subject to same risks and returns and operatingin economic environment subject to same risk & returns.Further, since the whole of India has been considered as a geographical segment and exportsas other segment, even geographical segment is also one in the absence of any export duringthe year.

2.21 In terms of Accounting Standard-20 issued by the Institute of Chartered Accountants ofIndia, the calculation of EPS is given below:

2001-02 2000-01

i. Loss as per Profit & Loss Account (Rs.in lakhs) -838.10 -1784.31

ii. Weighted average number of equity shares 24,000,000 24,000,000outstanding during the year

iii. Basic and diluted EPS. -3.49 -7.43

2.22 Previous year figures have been rearranged / regrouped wherever necessary.Previous year’s figures have been given in brackets.

3. CONTINGENT LIABILITIES:Contingent Liabilities not provided for -

3.1 Claims against the Company pending judicial decision Rs. 176.03 lakhs (Rs.279.84 lakhs)3.2 Other claims against the Company not acknowledged as debts Rs. 688.08 lakhs

(Rs. 1035.23 lakhs)3.3 Probable levy of penal interest by Sales Tax Authority which may amount to Rs.11.80 lakhs

(Rs. 12.81 lakhs)3.4 Bills drawn on customers and discounted with Bank Rs. 46.11 lakhs (Rs. 484.38 lakhs).3.5 Guarantee provided to supplier on behalf of holding company in the form of Post Dated cheques

Rs.1210.46 lakhs (Rs. 587.04 lakhs).3.6 Claims by certain employees and selling agents/ contractors, extent of the same is unascertainable.

Schedules


135

4.1(b)OPENING STOCK, SALES AND CLOSING STOCK :[Qty. in MT, Value in Rs. in lakhs]

OPENING STOCK SALES CLOSING STOCKQTY. VALUE QTY. VALUE QTY. VALUE

High Carbon Ferro Manganese 2,634 504.09 45,491 7,730.54 4,096 917.40(5,446) (1,155.40) (56,013) (10211.60) (2,634) (504.09)

Silico Manganese 3,082 698.50 31,006 7,391.05 3,236 703.89(3,618) (831.21) (36,814) (8,147.85) (3,082) (698.50)

Medium Carbon 112 39.65 913 404.35 238 91.00Ferro Manganese (6) (1.05) (615) (282.13) (112) (39.65)Low Carbon Ferro 0 0.00 0 0.00 2 1.00Mangenese (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)Medium Carbon Ferro 0 0.00 0 0.00 2 1.44Manganese (Thermit) (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)SUB TOTAL 5,828 1,242.24 77,410 15,525.94 7,574 1,714.73

(9,070) (1,987.66) (93,442) (18,641.58) (5,828) (1,242.24)Steel 52 1.06 0 0.00 52 1.06

(52) (1.06) (Nil) (Nil) (52) (1.06)Others 46,985 242.22 6,767 38.28 40,218 217.26

(57,417) (289.06) (10,432) (55.58) (46,985) (242.22)TOTAL 52,865 1,485.52 84,177 15,564.22 47,844 1,933.05

(66,539) (2,277.78) (103,874) (18,697.16) (52,865) (1,485.52)NOTE : * Sales of High Carbon Ferro Manganese and Silico Manganese include conversion.

4.1(c) FERRO ALLOYS QUANTITATIVE RECONCILIATION :

FERRO SILICO MEDIUM CARBON LOW CARBON MEDIUM CARBONMANGANESE MANGANESE FERRO MANGANESE FERRO MANGANESE FERRO MANGANESE

[MT] [MT] [MT] [MT] (THERMIT) [MT]

Opening Stock 2,634 3,082 112 0 0(5,446) (3,618) (6) (Nil) (Nil)

Production 47,299 32,147 1,048 2 2(53,356) (37,011) (721) (Nil) (Nil)

TOTAL 49933 35,229 1160 2 2(58,802) (40,629) (727) (Nil) (Nil)

Sales/ 45,491 31,006 913 0 0Adjustments (56,013) (36,814) (615) (Nil) (Nil)Internal 346 987 9 0 0Consumption (155) (733) (Nil) (Nil)Closing Stock 4,096 3,236 238 2 2

(2,634) (3,082) (112) (Nil) (Nil)TOTAL 49,933 35,229 1,160 2 2

(58,802) (40,629) (727) (Nil) (Nil)I) Sales of High Carbon Ferro Manganese and Silico Manganese include conversion.2) Production of Medium Carbon Ferro Manganese includes NIL MT (157.285 MT) produced through conversion agent.

5. EXPENDITURE IN FOREIGN CURRENCIES(Rs. in lakhs)

CURRENT PREVIOUS YEAR YEAR

i) Bank charges Nil 0.30ii) Others 0.30 0.20

TOTAL 0.30 0.50

6. EARNING IN FOREIGN CURRENCIES (Rs. in lakhs)


Export of goods on FOB basis Nil 347.85

7. VALUE OF IMPORTS CALCULATED ON CIF BASIS(Rs. in lakhs)


Stores & Spares 8.26 6.04

9. REMUNERATION TO DIRECTORS : (Rs. in lakhs)


Remuneration 4.23 3.30Contribution 0.44 0.31TOTAL 4.67 3.61

SIGNATURE TO SCHEDULES 1 TO 3 For and on behalf of Board of DirectorsAs per our report of even date attachedFOR A.K. JHUNJHUNWALA & CO. Sd/- Sd/-Chartered Accountants (R. ASHOKKUMARR) (R.K. GUPTA)

Company Secretary Executive DirectorSd/- Sd/- Sd/-

(M.A. GOHEL) (T.K. GUPTA) (V.S. JAIN)Partner General Manager (F&A) Chairman


8. VALUE OF IMPORTED & INDIGENOUS RAW MATERIALS, STORES & SPARES CONSUMED :

RAW MATERIALS CONSUMED STORES & SPARES CONSUMEDCurrent Year Prev. Year Current Year Prev. Year

Value % Value % Value % Value %(Rs. in lakhs) (Rs. in lakhs) (Rs. in lakhs) (Rs. in lakhs)

Imported 0.00 0.00 0.00 0.00 10.48 3.45 5.27 1.60Indigenous 1,556.03 100.00 3,300.23 100.00 293.11 96.55 325.53 98.40TOTAL 1,556.03 100.00 3,300.23 100.00 303.59 100.00 330.80 100.00


136




Balance Sheet Date

II. Capital raised during the year (Amount in Rs. Thousands)



III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)


Sources of Funds

Paid-up Capital Reserve & Surplus




Net Current Assets Misc.Expenditure

Accumulated Losses

IV. Performance of the Company (Amount in Rs. Thousands)

Turnover Total Expenditure


Earning per share in Rs. Dividend Rate %



Product Description

1 7 4 0 2 of 1974-75

3 1 0 3 2 0 0 2

N I L N I L

N I L N I L

5 6 2 5 2 7 5 6 2 5 2 7

2 4 0 0 0 0 1 5 0 0

1 7 1 2 9 3 1 4 9 7 3 4

2 6 4 7 6 8 N I L

– 2 0 8 1 5 8

1 5 5 6 4 2 2 1 6 9 9 3 9 6

– 8 3 8 1 0 – 8 3 8 1 0

N I L N I L

1 1

4 8 4 3 6 3

2 1 5 5 4

F E R R O A L L O Y S

Date Month Year

—

For and on behalf of Board of DirectorsFOR A.K. JHUNJHUNWALA & CO. Sd/- Sd/-Chartered Accountants (R. ASHOKKUMARR) (R.K. GUPTA)





Schedules


137

ANNEXURE - IIFORM ‘A’

CONSERVATION OF ENERGY

2001-2002 2000-2001

POWER & FUEL CONSUMPTION

ELECTRICITY

1. PURCHASEDUnit Million kwh 251.09 294.00Total Amount Rs/Lakhs 8812.25 10334.53Rate Rs../kwh 3.51 3.51

2. OWN GENERATION Million kwh 10.24 Nil

3. COAL Nil Nil

4. FURNACE OILUnit KL 612.49 NilTotal Amount Rs./Lakhs 62.54 NilRate Rs./Kl 10211 Nil

CONSUMPTION PER UNIT OF PRODUCTION

ELECTRICITY FURNACE OIL COAL(Kwh/Tonne) (Tonne) (Tonne)

2001-02 2000-01 2001-02 2000-01 2001-02 2000-01

Ferro Manganese 2662 2600 — — — —

Silico Manganese 4167 4184 — — — —

Medium Carbon 1388 1396 — — — —

ANNEXURE - IIIFORM ‘B’

RESEARCH & DEVELOPMENT (R&D)

1. SPECIFIC AREA IN WHICH R&D CARRIED OUT BY THE COMPANY— Production of Medium Carbon Ferro Manganese through Thermit Process.

2. BENEFITS DERIVED AS A RESULT OF ABOVE R & D— In-house utilisation of FeMn & SiMn fines.— Utilisation of wastes

3. FUTURE PLAN OF ACTION :— Production of Low Carbon Ferro Manganese and Special Ferro Alloys like Ferro Titanium, Ferro Molybdenum.— Use of sludge in Sinter Production.

4. EXPENDITURE ON R & DResearch work is undertaken jointly with RDCIS, SAIL and as such no specific expenses on R&D are apportionable.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION1. As an effective cost reduction measure and also as a strategy to conserve high grade manganese ores, use of low grade high silica are in Silico Manganese has been increased.2. Use of reject material like Khad in Silico Manganese production.

FORM ‘C’FOREIGN EXCHANGE EARNINGS & OUTGO

Rs./LakhsEARNINGS : NilOUTGO : 0.30

ANNEXURE - IPARTICULARS REQUIRED UNDER THE COMPANIES

(DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988.

CONSERVATION OF ENERGYMajor areas of energy conservation include:

— Gainful utilisation of waste gas of Submerged Arc Furnace for generation of Power in 4.2 MW Gas Based Power Plant.— Stoppage of Air Compressors in Sinter Plant-II and use of Blower for supply of air for Sintering for 30% reduction in specific power consumption.— Use of low reactivity coke & charcoal to reduce specific power consumption for Silico Manganese production.— Conservation of water by Recirculation of effluent water after filtration.— Improvement in quality of inputs with respect to both physical & chemical composition.— Use of alternative reductant and manganese bearing wastes in ferro alloy production.— Change in the slag regime to improve productivity.— Statistical Process Control for control of major elements in ferro alloys.


138

(a) COMPANY’S PHILOSOPHYThe Company is committed to attain the highest standard of Corporate Governance. It recognisesthat the Board is accountable to all stakeholders for good governance. The philosophy of thecompany in relation to corporate governance is to ensure transparency in all its operations, makeappropriate disclosures and enhance shareholders value without compromising in any way incompliance with laws and regulations.

(b) BOARD OF DIRECTORSThe Board of Directors at present comprises of non-executive Chairman, whole time ExecutiveDirector (WTD) and 4 Non-Executive Directors (Non-ED). During the year, seven BoardMeetings were held on 29/5/2001, 6/7/2001, 31/7/2001, 28/8/2001,31/10/2001, 30/1/2002 and 20/3/2002.

The composition of directors and their attendance at board meetings during the yearand at the last Annual General Meeting as also number of other directorships are as follows:

Name of the Category of Board Attendance No. of otherDirector Directorship Meetings at last AGM Directorship

Attended held as on(Nos.) 31/3/2002

Shri V. S. Jain Chairman 7 Yes 4

Shri S. C. K. Patne Non-ED 6 Yes 4

Shri T. Tiwari Non-ED 1 — —(upto 6th July, 2001)

Shri Ashis Das Non-ED 5 — 3(effective from6th July, 2001)

Shri G. Upadhayaya Non-ED 6 — —(upto 31/3/2002)

Shri B. K. Singh Non-ED 1 — 5(Effective from20th March, 2002)

Shri Sunil Porwal Non-ED — — —

Shri A. K. Jayswal WTD 4 Yes —(upto 15th Jan. 2002)

Shri R. K. Gupta WTD 2 — —(effective from30th Jan. 2002)

(c) AUDIT COMMITTEE

(1) Terms of ReferenceThe primary function of the Audit Committee is to assist the Board of Directors infulfilling its oversight responsibilities by reviewing the financial reports; the Company’ssystems of internal controls regarding finance, accounting and legal compliance thatmanagement and the Board have established; and the Company’s auditing, accounting andfinancial reporting process generally.

The Audit Committee review reports of the Internal Auditors, meet Statutory Auditors anddiscuss their findings, suggestions and other related matters and reviews major accountingpolicies followed by the Company. The Audit Committee reviews with management, thequarterly and annual financial statements before their submission to the Board.

The minutes of the audit committee meetings are circulated to the Board, discussed andtaken note of.

(2) CompositionThe Audit Committee of the Board was formed in January, 2001. However, the reconstitutedAudit Committee consists of three non-executive Directors. At present Shri V.S. Jain,Shri S.C.K. Patne, Shri Ashis Das are members of the Audit Committee. Duing the lastyear, the committee met 6 times and attendance at the Meetings are as follows:

Name of the Director Status No. of meetings attended

Shri S.C.K. Patne Chairman 6

Shri V.S. Jain Member 2(Upto 6/7/2001 andagain w.e.f . 29/5/2002

Shri Ashis Das Member 5(Since 6/7/2001)

Shri G. Upadhyaya Member 4(Upto 31/7/2001

Shri T. Tiwari Chairman 1(Upto 29/5/2001

(d) Nomination & Compensation Committee(i) Being a Government Company, the nomination and fixation of terms and conditions for

appointment as Director is made by Government of India. As such, the Nomination andCompensation Committee has not been constituted.

(ii) The details of remuneration to whole time director during the year is given below:

(Rs. In Lakhs)

Name of the Salary Other Retirement TotalDirector Benefits Benefits

Shri A.K. Jayswal 2.23 0.17 0.27 2.67(salary upto 31/8/2001)

Shri R.K. Gupta 1.57 0.26 0.17 2.00(salary w.e.f. 16/11/2001)

(iii) No sitting fees is paid to the Non-Executive Directors for attending Board/Board Sub-Committee Meetings.

(iv) The salary of the whole time director is fixed and does not include performance linkedincentive except amount payable as per the Productivity Linked Incentive Scheme of theCompany.

(v) Terms & ConditionsThe Executive Director is an employee of Company on transfer from Steel Authority ofIndia Limited. He has been inducted on the Board of the Company as a Director. Theappointment may be terminated by either side on three months notice or on payment ofthree months salary in lieu thereof.

(e) Shareholders/Investors Grievance Committee(i) A Shareholders/Investors Grievance Committee is constituted under the Chairmanship

of a non-executive director. The committee consists of Shri Ashis Das and Shri R.K. Guptato look into the redressal of shareholders and investors complaints like non-transfer ofshares, non-receipt of balance sheet, non-receipt of declared dividend etc.

(ii) Name of compliance officer : Shri R. Ashokkumarr, Company Secretary.

(iii) Number of shareholder complaints received during the period from 01/04/2001 to31/03/2002.

Source from which complaint was received

Number of the Complaint Direct SEBI Exchange Total

A Non-receipt of sharesafter transfer — — — —

B Delay in issuing Duplicateshare certificates — — — —

C Non-receipt ofDividend Warrants — — — —

D Complaint-reg Transmissionof Shares — — — —

Total * — — — —

* Complaints not solved to the satisfaction of shareholders : N I L

(f) GENERAL BODY MEETINGS

Financial year Date Time Location

2000-2001 20/08/2001 12.00 Noon “Nirmal” 10th floor, Nariman Point,Mumbai-400 021.

1999-2000 30/08/2000 12.00 Noon —do—

1998-1999 28/08/1999 11.30 A.M. —do—

(g) DisclosuresThere were no transactions of material nature with its promoters, the directors or the management,their subsidiaries or relatives etc. that may have potential conflict with the interests of companyat large. The non-executive Directors had no pecuniary relationships or transactions viz-a-viz thecompany during the year.

There were no instances of non-compliance by the company, penalties, strictures imposed on thecompany by Stock Exchange or SEBI or any statutory authority, on any matter related to capitalmarkets, during the last three years.

(h) Means of CommunicationQuarterly results are published in the Newspapers as per the requirements. There is no websiteof the Company.

Report on Corporate Governance ANNEXURE - IV


139

Management Discussion and Analysis Report (MDAR) ANNEXURE - V

The Management of Maharashtra Elektrosmelt Limited presents its analysis report covering performance and outlook of the Company.

OPPORTUNITIES & THREATS FOR MEL

Opportunities

MEL being the largest ferro alloy producer in India having total capacity of One lakhtonnes for ferro alloys. MEL has the advantage of producing High Carbon FerroManaganese, Medium Carbon Ferro Managanese and Silico Manganese to requisitequality for steel plants.

MEL has achicved capacity utilisation of 98% during the year. Being ISO-9002 com-pany, it has got good potential with highly motivated workforce and professionals notonly to maintain the level of production, but also to improve productivity, techno-economic parameters etc.

Abundant and rich reserves of Manganese Ore are available in Maharashtra for con-tinuous supply of raw material. This is an added advantage for MEL to get quality rawmaterials.

The 4.2 MW Power Plant is being operated using furnace waste gas as a fuel. This hasprovided good scope for savings on account of power and fuel expenses.

Installation of 30 MW Captive Power Plant on Build, Operate, Lease and Transfer(BOLT) basis is being pursued. This shall help in drastic reduction in the expenses onpower.

MEL is gearing up for production of special Ferro Alloys like Ferro Titanium, FerroMolybdenum. MEL has also taken up cost reduction steps particularly through wasteutilisation, improvement in productivity, reduction in purchase price and right sizingof manpower.

Threats

High power tariff in Maharashtra has made the ferro alloy industry unviableas power is a major element of cost. High powr tariff is eroding its marginsconsiderably.

Report on Corporate Governance(i) General Shareholders Information

(i) Annual General Meeting is proposed to be held on 27th July, 2002 at 12.00 noon at theRegistered Office at “Nirmal” 10th floor, Nariman Point, Mumbai-400 021.

(ii) Date of Book Closure : 18th July, 2002 to 23rd July, 2002.

(iii) The shares of the Company are listed at the following stock exchanges:

1) The Stock Exchange MumbaiPhiroze Jeejeebhoy Towers, Dalal Street, MUMBAI-400 001

2) The Stock Exchange AhmedabadKamdhenu Complex, Opp. Sahajanand College, Panjarapole,AHMEDABAD-380 015.

It is confirmed that Annual Listing Fee has been paid to each of the stock exchanges.

(iv) Stock code : 4824

(v) Market price data : High/Low : No floor trading in the last financial year.during each month in lastfinancial year

vi) Registrar and Transfer Agent : M/s. IIT Corporate Services Limited, IITHouse, Off. M. Vasanji Road, Opp. Vazir Glass,Near J.B. Nagar, Andheri (East), Mumbai –400 059.

(vii) Share transfer system : The Board has delegated powers to the ExecutiveDirector for transfer of shares. The shares lodgedfor transfer are despatched back well within thetime limit prescribed in this respect under thelisting agreements.

(viii) Distribution of shareholding as on 31st March, 2002 :

Categoary Shares held % age of(Nos.) Holding

A. Promoter’s holding : Holding Company- SAIL 2,37,87,935 99.12

Sub-Total 2,37,87,935 99.12

B. Non-Promoters Holding :

Banks 300 —

Sub-Total 300 —

C. Others

Private Corporate Bodies 10,050 0.04

Indian Public 2,00,665 0.84

NRIs 1,050 —

OCBs Nil Nil

Any other - (Please specify) Nil Nil

Sub-Total 2,11,765 0.88

Grand Total 2,40,00,000 100

(ix) Dematerialization of shares : Shares are not dematerialised. Tradeableand liquidity as on 31/3/2002. stock is 0.88% only. Thus liquidity is negligible.

(x) Address for correspondence from shareholders for queries/complaints, if any:

M/s Maharashtra Elektrosmelt LimitedChanda-Mul Road, Chandrapur-442 401Fax. No. 07172-55812, 07172-55437 Phone No.07172-55789

INDUSTRY STRUCTURE & DEVELOPMENTGeneral Economic EnvironmentDuring the year 2000-01 and 2001-02, GDP growth is estimated to have been 4.0%and 5.4% respectively. The manufacturing sector, which grew by 6.7% in 2000-01,grew by only 3.3% in 2001-02. The growth in finished Steel consumption was 5.7%in 2000-01 but dropped to 2.6% in 2001-02. Since Ferro alloys are exclusivelyutilised as raw materials in steel making, the growth in ferro alloy consumption isdirectly related to the growth in steel consumption. The financial year 2001-02witnessed yet another difficult period in steel industry world-wide.Demand for ferro alloys in IndiaThe demand for ferro alloys in India is almost constant for the last 3-4 years due tooverall industrial recession and demand for steel is lower. The finished steel consump-tion in the country in 2001-02 is 27 million tonnes against the steel production of30.6 million tonnes. The demand of Manganese based ferro alloys is in the range of3.25 to 3.35 lakh tonnes which includes about 1.5 lakh tonnes of Silico Manganeseand 1.75 lakh tonnes of High Carbon Ferro Manganese. In line with the growthpotential in terms of steel consumption, growth potential for ferro alloys also exists.Capacity for ferro alloys productionOver capacity in the area of Manganese based ferro alloys exists due to existence ofsmall units especially in the eastern part of the country. Growth has taken place toavail the advantage of cheap power offered by those states exclusively for ferro alloysindustry. Due to over capacity, most of the bigger units had to close down/curtail theiroperations, bringing down capacity utilisation to mere 48%.ExportsDue to anti-dumping duty levied by United States, the export of ferro alloys havepractically stopped & this has led to stress on margins in the domestic market.Position of MELMEL is the largest producer of manganese based ferro alloys in the country with 30%market share in the production.


140

ANNEXURE - VI

CERTIFICATE

To,

The Members ofMaharashtra Elektrosmelt Limited

We have examined the compliance of the conditions of corporate governance by Maharashtra Elektrosmelt Limited for the year ended 31st March, 2002 as stipulated in clause 49 ofthe Listing Agreement of the said company with the Mumbai and Ahmedabad Stock Exchange.

The compliance of the conditions of corporate governance is the responsibility of the management. Our examination was limited to the procedures and implementation thereof, adoptedby the company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company.

We certify that in our opinion, and to the best of our information and according to explanations given to us, the company has complied with conditions of Corporate Governance asstipulated in the above mentioned Listing Agreements.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with which the management has conductedthe affairs of the company.

For A. K. JHUNJHUNWALA & CO.Chartered Accountants

Sd/-Place : New Delhi (M.A. GOHEL)Date : 29th May, 2002 Partner

Management Discussion and Analysis Report (MDAR)The State Government of West Bengal and Chhattisgarh have offered cheap power alongwith severalother concessions to ferro alloys units situated there. Due to the above concessions by such StateGovetnments within the country and denial of such benefit by Government of Maharashtra, theCompany's survival has become a matter of great concern.

Due to increase in raw material cost, power rate and sluggish market condition MEL has incurredlosses and has become a sick company under Section 3(o) of the Sick Industrial Companies (SpecialProvisions) Act, 1985. Reference under Section 15 of the said Act, has been registered by the BIFR.

SEGMENTWISE OR PRODUCTWISE PERFORMANCEDue to recession and also poor health of the furnaces, there was a decline in the production volurneduring the year. The technoeconornic parameters were also adversely affected during the year dueto lower capacity utilisation of the furnaces.

OUT LOOKIndian demand, which had suffered from sluggish conditions for long period, has also begun toshow some signs of improvement. There are signs of firming up to global prices and expectation ofirse in global demand. With the sign of recent recovery, the sentiment in the steel industry is upbeatas is evident from the pick up in sales. This trend in steel industry will improve the performance ofthe ferro alloy industry.

The Company has a good potential with mativated and dedicated work force. It has produced in thepast more than the rated capacity and has maintained its quality standard. It has the capacity to caterto the SAIL plants in addition to supply to non-SAIL customers including exports. However, itneeds help from State Government in the form of power tariff in line with that provided by the StateGovt. of West Bengal/Chhattisgarh.

In order to internalise the cost of power in addition to 4.2 MW Power Plant installed, installationof 30 MW Plant on BOLT basis is being pursued.

RISK AND CONCERNSThe Ferro Alloy industry is hard hit due to over supply, cheap imports and recession in the steelindustry. Expenditure on electrical power attributes to 54-60% of the cost of production. This hasbeen further aggravated by continuous increase in power tariff by MSEB. The ferro alloy producersin other States like West Bengal and Chhattisgarh are getting cheaper power and therefore, canproduce their products at lower cost, thus affecting the viability of the ferro alloy industry inMaharashtra.

INTERNAL CONTROL SYSTEMSThe Company has an adequate system of internal controls implemented by the management towardsachieving the following objectives.

— Efficiency of operations.

— Protection of resources.

— Accuracy and promptness of financial reporting.

— Compliance with the laid down policies and procedures.

— Compliance with laws and regulations.

In MEL, Internal Audit Department reviews, evaluates and appraises the various systems, proce-

dures/policies laid down by the Company and suggests meaningful and useful improvements. It

helps management to accomplish its objectives by bringing a systematic and disciplined approach

to improve the effectiveness of management towards good corporate governance.

Internal Audit prepares audit programs to cover vital areas and ensures its compliance. Audit reports

giving details of control factors, identification/management of risk factors and preventive sugges-

tions, are submitted to Management.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONALPERFORMANCEDuring the year the company has achieved a turnover of Rs.155.64 crores as against Rs.186.97

crores in the previous year. However, the turnover is not comparable as the conversion activities were

carried out during part of the previous year. Value of earning through conversion arrangement was

Rs.133.92 crores as against Rs.76.94 crores during the previous year. On the operational front,

company has achieved a capacity utilisation of 98%. Sales of ferro alloys during the year was 77410

tonnes as against 93442 tonnes during the previous year.

In spite of lower production, high cost of power in Maharashtra, increase in cost of raw materials

and other inputs including salary & wages due to pay revision, the company has ended with a loss

of Rs.8.38 Crores as against Rs.17.84 Crores in the previous year thereby reducing loss by 53%

in the current year which is primarily due to improvement in conversion price & reduction in

interest obligation to MSEB towards arrears.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES / INDUSTRIAL RELATIONSHuman resource is one of the most important resources for MEL. MEL focuses greatly on proper

utili

across the company got reoriented for maximum capacity utilisation, better operational control,

quality products, enlarge the market coverage and cost reduction measures.

The manpower employed by MEL as on 31st March, 2002 was 885 comprising of 135 executives

and 750 non-executives. With a view to optimise the manpower and reduce the labour cost a

Voluntary Retirement Scheme based on Department of Public Enterprises (DPE) guidelines with

lumpsum payment was introduced resulting in separation of 43 employees during the year.


141

ANNEXURE - VIIAuditor's ReportCOMMENTS MANAGEMENT'S REPLY

To the Members of Maharashtra Elektrosmelt LimitedWe have audited the attached Balance Sheet of MAHARASHTRA ELEKTROSMELT LIMITED asat 31st March, 2002 and also the Profit and Loss Account for the year ended on that date annexed thereto.These financial statements are the responsibility of the Company’s management. Our responsibility isto express an opinion on these financial statements based on our audit.We conducted our audit in accordance with auditing standards generally accepted in India. ThoseStandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by the management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.As required by the Manufacturing and Other Companies (Auditors’ Report) Order, 1988 issued bythe Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act,1956, we annex hereto a statement on the matters specified in the paragraphs 4 and 5 of the said order;Further to our comments in the annexure referred to in paragraph ‘3’ above, we report that:-1. We have obtained all the information and explanations, which to the best of our knowledge and

belief were necessary for the purpose of our audit.2. In our opinion, proper books of accounts as required by law have been kept by the Company

so far as appears from our examination of the books of the Company.3. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the

Books of Account of the Company.4. In our opinion, the said Balance Sheet and Profit and Loss Account dealt with by this report

comply with the accounting standards referred to in sub-section (3C) of Section 211 of theCompanies Act, 1956, to the extent applicable.

5. Based on the representations made by the Directors of the Company and information and explana-tions as made available to us, none of the Director of the Company is disqualified from beingappointed as Director under clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

6. (i)Scheme as referred to in Note No. 2.11 in Schedule : 3.0 has been deferred over a period of 5years instead of charging it off fully in the current year. Consequently, the Loss for the year isunderstated by Rs. 105.96 Lacs.

(ii) Pending finalisation and ascertainment of the arrear salaries and wages of employees for theperiod from 01.01.1997 to 31.12.2000, we are unable to comment on the adequacy of theprovision of Rs. 255.39 Lacs ( including Rs. 72.39 lacs provided during the year) as referredto in Note No. 2.7 in Schedule : 3.0.

(iii) The Company has withdrawn the benefits relating to Leave Travel Concession (LTC) /Liberalised Leave Travel Concession ( LLTC) for various block periods from 1998-99 to2002-03 as indicated in Note No.2.13 in Schedule : 3.0. Consequently, no liability towardsLTC / LLTC has been provided in the accounts. However, in view of specific agreements withthe unions and terms of employment for extension of above benefits to the employees, we areunable to comment whether, such liabilities have accrued or not ( amount unascertained ).

Without considering Items No. (ii) and (iii) of Paragraph 6 above, whose effect on the Company’s Lossfor the year and Profit and Loss Account debit balance, is not presently ascertainable, had the impactof Item No. (i) of paragraph 6 above, been considered, the Loss for the year would have been Rs. 944.06lacs as against reported Loss of Rs. 838.10 lacs and the Debit balance of the Profit and Loss Accountwould have been Rs. 4,949.59 lacs as against the reported figure of Rs. 4,843.63 lacs.Subject to the foregoing, in our opinion and to the best of our information and according to theexplanations given to us, the said Accounts, read together with significant Accounting Policies andother relevant notes thereon in Schedule ‘3.0’, give the information required by the Companies Act,1956, in the manner so required and present a true and fair view in conformity with the accountingprinciples generally accepted in India:-a. In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2002

andb. In the case of the Profit and Loss Account, of the Loss for the year ended on that date.

The expenditure incurred upto 31st March 2002 has been fully charged to Profit and Loss Account andthe future liability has been treated as deferred revenue expenditure to be written-off in five years as inthe case of compensation payable under the Voluntary Retirement Scheme.

Wage agreements have been finalised with employees, notionally from 1.1.97 to 31.12.2000 andimplemented from 1.1.2001. The liability has been provided accordingly including towards adhocadvances paid for the period 1.1.97 to 31.12.2000. Arrears for this period are to be discussed separately,keeping in view the financial health of the company. Liability if any will be provided only on settlement.

As the Company has withdrawn the benefits relating to Leave Travel Concession (LTC)/LiberalisedLeave Travel Concession (LLTC) for the block calendar years of 1998-99, 2000-01 and 2002-03 thereexists no liability towards LTC/LLTC for these periods.

For A.K. JHUNJHUNWALA & COChartered Accountants

Sd/-(M.A. Gohel) Partner



ANNEXURE TO THE AUDITORS’ REPORT ANNEXURE REFERRED TO IN PARAGRAPH ‘1’ OF THE AUDITORS’ REPORT OF EVEN DATE TO THE MEMBERS OF MAHARASHTRA ELEKTROSMELT LIMITED ON THE

ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2002

On the basis of such checks as we considered appropriate and in terms of the information and explanations given to us, we state that :-FIXED ASSETS:1. The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. The fixed assets of the Company

have been physically verified by the management in accordance with regular programme of verification, which in our opinion is reasonable, having regard to thesize of the Company and the nature of its assets. We are informed that the reconciliation of physical verification with book records has been completed anddiscrepancies noticed on such verification have been properly dealt with in the books of account.

2. None of the Fixed Assets have been revalued during the year.INVENTORIES:3. The Stock of finished goods, stores, spare parts and raw materials of the Company has been physically verified by the management at reasonable intervals. Stock-

in-transit as at 31st March, 2002 has been verified by the management with reference to subsequent receipt of goods. The shortage / surplus as compared withbook records have been properly dealt with in the books of account. The stock of Slag and Khad has been taken on the basis of orders on hand.


Sd/-Place : New Delhi (V.S. Jain)Date : 29th June, 2002 Chairman


142

COMMENTS OF THE COMPTROLLER & AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THECOMPANIES ACT, 1956 ON THE ACCOUNTS OF MAHARASHTRA ELEKTROSMELT LIMITED

FOR THE YEAR ENDED 31ST MARCH 2002.

I have to state that the Comptroller & Auditor General of India has no comments upon or supplement to the Auditors’ Report under Section 619(4) of the CompaniesAct, 1956, on the accounts of Maharashtra Elektrosmelt Limited for the year ended 31 March, 2002.

Sd/-(BALVINDER SINGH)

Principal Director of Commercial Audit &Mumbai Ex-Officio Member, Audit Board-1, Mumbai.21.06.2002

4. In our opinion and according to the information and explanations given to us, the procedures of physical verification of stocks followed by themanagement are reasonable and adequate in relation to the size of the Company and the nature of its business.

5. The discrepancies noticed on physical verification of stocks referred to in (3) above, as compared to book records i. e. the shortage / surplus, havebeen properly dealt with in the books of account of the Company.

6. In our opinion and on the basis of examination of the valuation of stocks referred to in (3) above, the valuation of stocks is fair and proper in accordancewith the normally accepted accounting principles and is on the same basis as in the immediately preceding year.

7. As explained to us, the Company has a regular procedure for determination of unserviceable or damaged stores, raw materials and finished goods.According to the information and explanations given to us, adequate provision has been made in the accounts for the loss arising on the items so determined.

8. In our opinion and according to the information and explanations given to us, the Company has maintained reasonable records for the sale and disposalof realisable scrap and by-products.

9. In respect of service activities carried out by the Company, in our opinion there is a reasonable system of recording receipts, issues and consumptionof materials and stores and allocation of materials and man-hours to the relative jobs. There is also reasonable system of authorisation at proper leveland adequate system of internal controls, commensurate with size of the Company and nature of its business, on the issue of stores and allocation ofstores and man-hours to the relative jobs.

LOANS AND ADVANCES :10. The rate of interest and other terms and conditions on which the Company has taken an Unsecured Loan from its Holding Company, are, in our

opinion, prima facie, not prejudicial to the interest of the Company. According to the information and explanations given to us, the Company has nottaken any loans, secured or unsecured, from firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956or a company under the same management within the meaning of Section 370(1B) (non-operative) of the Companies Act, 1956.

11. According to the information and explanations given to us, the Company has not granted any loans, secured or unsecured, to firms or other partieslisted in the register maintained under Section 301 of the Companies Act, 1956 or a company under the same management within the meaning of Section370(1B) (non-operative) of the Companies Act, 1956.

12. The employees to whom Loans or advances in the nature of loans have been given by the Company are generally repaying the principal amount asstipulated and are also generally regular in payment of interest, wherever applicable.

INTERNAL CONTROLS:13. In our opinion, the Company’s internal audit system is commensurate with the size and nature of its business. However, the same needs to be

strengthened further and its scope needs to be enlarged.14. In our opinion and according to the information and explanations given to us, having regard to the explanation that some of the items purchased and

sold are of special nature and suitable alternative source does not exist for obtaining comparable quotations, there are generally adequate internal controlprocedures commensurate with the size of the Company and nature of its business for the purchase of stores, raw materials, plant and machinery,equipment and other assets and for the sale of goods.

RELATED PARTIES:15. According to the information and explanations given to us and on the basis of test checks carried out by us, there were no transactions of purchase

of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the register maintainedunder Section 301 of the Companies Act, 1956 aggregating during the year to Rs.50,000 or more in respect of each party.

FIXED DEPOSITS:16. The Company has not accepted any deposits from the public other than the amount retained under Employees’ Family Benefit Scheme for which

exemption under Section 58A of the Companies Act, 1956 has been obtained.STATUTORY LIABILITIES:17 (i) According to the records of the Company, the Provident Fund dues have been generally regularly deposited during the year with the appropriate authorities.

(ii) As explained to us, the provisions of Employees’ State Insurance Act, are not applicable to the Company.18. According to the information and explanations given to us, no undisputed amount payable in respect of Income tax, Wealth tax, Sales tax, Customs

duty and Excise duty were outstanding as at 31st March, 2002 for a period of more than six months from the date they became payable.OTHERS :19. The Central Government has not prescribed maintenance of the Cost records under Section 209 (1)(d) of the Companies Act, 1956.20. On the basis of (i) the examination of the Books of Accounts, (ii) vouchers produced to us for our verification, (iii) explanations given and

representations made to us on our inquiries, (iv) the check and control relating to authorising expenditure on the basis of contractual obligations tothe employees and (v) accepted business practices, having regard to the Company’s needs and exigencies, we have not come across any expenses chargedto revenue which, in our opinion and judgment and to the best of our knowledge and belief, could be regarded as personal expenses.

21. The Company is a sick industrial Company within the meaning of Clause (O) of Section 3(1) of the Sick Industrial Companies (Special Provisions)Act, 1985. According to the information and explanations given to us, a reference has been made to the Board for Industrial and Financial Reconstructionunder Section 15 of that Act.

Further strengthening and enhancement in the scopeof Internal Audit is being reviewed.


Comments of C&AG ANNEXURE - VII

Auditor's Report

For A.K. JHUNJHUNWALA & COChartered Accountants

Sd/-(M.A. Gohel) Partner



Sd/-Place : New Delhi (V.S. Jain)Date : 29th June, 2002 Chairman


143

REVIEW ON THE ACCOUNTS OF MAHARASHTRA ELEKTROSMELT LIMITED FOR THE YEAR ENDED 31ST MARCH, 2002BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

(Review of Accounts has been prepared without taking into account the comments under Section 619(4) ofthe Companies Act,1956 and qualification contained in Statutory Auditor’s Report)

Review of Accounts

1. FINANCIAL POSITION:The table below summarise the financial position of the company under the broad headingsfor the last 3 years:

LIABILITIES : 1999-2000 2000-2001 2001-2002

(Rs.in lakhs)a) Paid-up Capital:

i) Government 2378.79 2378.79 2378.79ii) Others 21.21 21.21 21.21

b) Reserve and Surplus:i) Free Reserve & Surplus 77.13 — —ii) Share premium Accounts — — —iii) Capital Reserves 15.00 15.00 15.00iv) Committed Reserves — — —

c) Borrowings:i) From Govt.of India — — —ii) From Financial Institutions 795.17 770.34 737.21iii) Foreign currency loan — — —iv) Cash Credit 1362.18 1352.95 1563.62v) Others — — 905.56vi) Interest accrued and due — 4.54 3.88

d) i) Current Liabilities & Provisions 9758.23 7016.77 6801.10ii) Provision for Gratuity 304.26 327.20 419.80

TOTAL 14711.91 11886.80 12846.17

ASSETS:

e) Gross Block 3933.90 3943.63 5471.22f) (Less) Depreciation 2611.21 2709.76 2835.82g) Net Block 1322.69 1233.87 2635.82h) Capital work-in-progress 1143.40 1444.69 11.86i) Investments — — —j) Current Assets, Loans and

Advances 9756.09 5059.13 5139.32k) Misc.expenditure to the

extent not written off 191.44 143.58 215.54l) Accumulated Loss 2298.35 4005.53 4843.63

TOTAL 14711.97 11886.80 12846.17

m) Working Capital [j-d(i)-c(vi)] –2.14 –1962.18 –1665.66n) Capital employed [g+m] 1320.55 –728.31 970.16o) Net Worth [a+b(i)+b(ii)-k-l) –12.66 –1749.11 –2659.17p) Net Worth per rupee of paid-

up capital in Rs. — — —

2. WORKING RESULTS:Working results of the Company for the last three years are given under :

Particulars 1999-2000 2000-2001 2001-2002

(Rs.in lakhs)

I) Sales 19614.28 18697.16 15564.22ii) Less : Excise Duty 2688.52 2796.73 2790.43iii) Net Sales 16925.76 15900.43 12773.79iv) Other or Misc.Income 638.12 234.41 144.11v) Profit/Loss before tax and prior

period adjustment (1615.56) (1784.31) (838.10)vi) Prior period adjustment 5.75 — —vii) Profit/Loss before tax (1609.81) (1784.31) (838.10)viii) Tax Provision - earlier years 0.24 — —ix) Profit/Loss after tax (1610.05) (1784.31) (838.10)x) Proposed Dividend — — —

Company has been declared as Sick Company and referred to BIFR.

3. RATIO ANALYSIS:Some important financial ratios on the financial health and working of the company at theend of last three years are as under:

Particulars 1999-2000 2000-2001 2001-2002

(In Percentage)A. Liqudity Ratio

Current assets to current liabilities 0.97:1 0.69:1 0.71:1B. Debt Equity Ratio — — —C. Profitability Ratio:

a) Profit before taxi) Capital Employed — — —ii) Net Worth — — —iii) Sales

b) Profit after tax to equity — — —c) Earning per share (in rupees) — — —

4. SOURCES AND UTILISATION OF FUNDS:Funds amounting to Rs.369.98 lakh were generated and utilised during the year as below:

SOURCES OF FUNDS: (Rs.in lakhs)Loss for the year –838.10Depreciation 125.89Less : Adjustment 0.25

125.641082.44

Increase in borrowings 369.98APPLICATION OF FUNDS:Additions to fixed assets 1527.59Less: Decrease in CWIP 1432.83

94.76Increase in deferred revenue expenses 71.96Increase in working capital 203.26

Total 369.98

5. WORKING CAPITAL:The working capital (i.e., Current Assets, Loans and Advances less Current Liabilitiesand Provisions including Interest Accrued and Due) of the company at the close of threeyears ending 31 March 2002 amounted Rs.(–) 2.14 lakhs, Rs.(–) 1962.18 lakhs andRs.(-)1665.66 lakhs respectively. The sales during three years were Rs.16925.76 lakhs,Rs.15900.43 lakhs and Rs.12773.79 lakhs respectively.

6. INVENTORY LEVEL:The inventory level at the end of the three years upto 2001-2002 are given below:

(Rs.in lakhs)

1999-2000 2000-2001 2001-2002

i) Raw Materials 1343.53 467.18 473.45ii) General Spare Parts 283.21 255.22 246.36iii) Stock Under Process — — —iv) Finished Products 2276.73 1484.47 1932.00

7(a). SUNDRY DEBTORS:The position of Sundry Debtors vis-à-vis sales for the last three years ending 31 March2002 were as follows:

(Rs.in lakhs)

As on Considered good Sundry Total Sales % of31st Debtors (excluding SundryMarch Conside- subsidiary Debtors to

red & including SalesDoubful/ Excise

Bad Duty)

2000 2838.51 25.49 2864.00 19614.28 14.602001 305.19 18.39 323.58 18697.16 1.732002 204.46 18.39 222.85 15564.22 1.43

7(b). ANALYSIS OF SUNDRY DEBTORS:

i) Age-wise analysis of Sundry Debtorsbe given as below: (Rs.in lakhs)

Debtors less than 6 months 189.19Debtors more than 6 months but less than 1 year 0.38Debtors more than 1 year but less than 2 years 12.01Debtors more than 2 years but less than 3 years 2.88Debtors more than 3 years 18.39

Total 222.85

ii) Debts outstanding from:Government (Central & State)/Government Department —Public Sector Undertakings/Companies 200.92Private Companies & Others 21.93

222.85

Sd/-(BALVINDER SINGH)

Mumbai Principal Director of Commercial Audit &21.06.2002 Ex-Officio Member Audit Board-1, Mumbai.


144

2001-2002

(Rs.in lakhs)

Cash Flow Statement FOR THE YEAR ENDED 31ST MARCH, 2002.

To,The Board of Directors,Maharashtra Elektrosmelt Limited

We have examined the attached Cash Flow Statement of Maharashtra Elektrosmelt Limited for the year ended 31st March, 2002. The Statement has been prepared by thecompany in accordance with the requirements of Listing Agreement clause 32 with Mumbai & Ahemadabad Stock Exchange and is based on and in agreement with thecorresponding Profit and Loss Account and Balance Sheet of the company covered by our report of 29.05.2002 to the members of the company.

FOR A.K. JHUNJHUNWALA & CO.Chartered Accountants

Sd/-Place : New Delhi (M.A. Gohel)Date : 29th May, 2002 Partner

2001-2002

(Rs.in lakhs)A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before tax and dividend –838.10Adjustment for :Depreciation 125.93Investments Income 0.00Interest and Finance Charges 233.85Provision for fixed assest discarded 57.42Misc.Expenditure (Deferred) charged during the year 93.36

Operating Profit before working capital changes –327.54

Adjustment for :Inventories –444.94Sundry Debtors 100.73Interest Receivable 6.71Loans and Advances 92.50Current Liabilities and Provisions –123.07Misc. Expenditure (Deferred) created during the year –165.32

Cash Generated from Operations –860.93Income tax provision during the year 0.00

Net Cash from Operating Activities –860.93

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets –152.71Sale of Fixed Assets 0.24Sale of Investments 0.00Interest received from investments 0.00

Net Cash from Investing Activities –152.47

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from Issue of Share Capital 0.00Proceeds from Borrowings 1082.44Interest and finance charges –233.85Dividend Paid during the year 0.00Net Cash from Financing Activities 848.59

Net Increase /(Decrease) in Cash & Cash Equivalents –164.81Cash & Cash Equivalents as on 31st March, 2001 464.03

Cash & Cash Equivalents as on 31st March, 2002 299.22

For and on behalf of Board of DirectorsFor A.K. Jhunjhunwala & Co.Chartered Accountants Sd/- Sd/-

(R. ASHOKKUMARR) (R.K. GUPTA)Sd/- Company Secretary Executive Director

(M.A. GOHEL)Partner

Sd/- Sd/-Place : New Delhi (T.K. GUPTA) (V.S. JAIN)Date : 29th May, 2002 General Manager (F&A) Chairman

B. Adjustments for Inventories

Inventory as on 31st March, 2001 2206.87

(Net of value of discarded assets)

Inventory as on 31st March, 2002 2651.81(Net of value of discarded assets) –444.94

C. Adjustments for Sundry Debtors

Sundry Debtors as on 31st March, 2001 305.19

Sundry Debtors as on 31st March, 2002 204.46 100.73

D. Adjustment for Interest Receivable

Interest Receivable as on 31st March, 2001 80.74

Interest Receivable as on 31st March, 2002 74.03 6.71

E. Adjustment for Loans and Advances

Loans and Advances as on 31st March, 2001 1378.05Loans and Advances as on 31st March, 2002 1285.55 92.50

F. Adjustment for Current Liabilities and Provisions

Current Liabilities as on 31st March, 2002 6277.49Current Liabilities as on 31st March, 2001 6702.34 –424.85

Provision as on 31st March, 2002 943.41Provision as on 31st March, 2001 641.63 301.78

G. Purchase / Addition of Fixed Assets

Purchase (including insurance spares) 1528.13

Less : Value of assets written back 0.00

–1528.13

Capital WIP as on 31st March, 2001 1462.71

Capital WIP as on 31st March, 2002 87.29

1375.42

TOTAL –152.71

H. Sale of Fixed Assets

Cost of Assets sold during the year 0.54

Add Profit on sale of Fixed Assets 0.00

Less Depreciation on Assets sold 0.30 0.24

I. Interest and Finance Charges

Cash Credit 239.48

MSEB 0.00

OTHERS –5.63 233.85

J. Proceeds from Borrowings

Total Borrowings as on 31st March, 2002 3210.27

Total Borrowings as on 31st March, 2001 2127.83 1082.44

SCHEDULES 2001-2002

(Rs.in lakhs)A. Depreciation

Charged to P&L Accounts 125.89Depreciation to adjustments 0.04Pertaining to earlier years — 125.93

BHILAI OXYGEN LIMITED

145

AS AT 31ST MARCH, 2002

Schedule As at 31st As at 31stNo. March, 2002 March, 2001

(Rupees) (Rupees)

SOURCES OF FUNDSShare holders’ Fund

Share Capital 1.1 1000 1000

1000 1000

APPLICATION OF FUNDSCurrent Assets, Loans and Advances

Cash and Bank Balances 0 680Less : Current Liabilities and Provisions

Current liabilities 1.2 31150 20750

Net Current Assets -31150 -20070Profit & Loss Account 32150 21070

1000 1000

Accounting Policies andNotes on Accounts 3

Schedules 1 & 3 annexed, hereto form part of Balance Sheet.

In terms of our report of even date. For and on behalf of Board of Directorsfor Rohtas & Hans

Chartered Accountants

Sd/- Sd/- Sd/-(Hans Jain) (R. K. Gupta) (A.K. Das)

Partner Director Director

Place : New Delhi.Dated : May 31, 2002

Schedule Year ended 31st Year ended 31stNo. March, 2002 March, 2001

(Rupees) (Rupees)

INCOME

Sales — —

EXPENDITURE

Other Expenses 2.1 11080 9260

Loss for the year -11080 -9260

Loss brought forward from previous year -21070 -11810

Loss carried over to Balance Sheet -32150 -21070

Accounting Policies and Noteson Accounts 3

Schedules 2 & 3 annexed, hereto form part of Profit & Loss Account.

Balance Sheet

FOR THE YEAR ENDED 31ST MARCH, 2002Profit and Loss Account




Partner Director DirectorPlace : New Delhi.Dated : May 31, 2002

ToThe MembersThe Directors have pleasure in presenting the 3rd Annual Report of the Company together withaudited accounts for the year ended 31st March, 2002.

Financial & Operational ReviewAs the members are aware that the company was incorporated with an objective to acquire, promote,develop, establish, own, operate and maintain Oxygen plants of all types and capacities and manu-facture, purchase and supply Oxygen, Nitrogen, Acetylene, Hydrogen and other industrial gasesto the Steel Plants, other agencies and consumer etc. The company was to take over assets coveredunder the Business Restructuring of SAIL relating to Oxygen Plant -II of Bhilai Steel Plant. Dueto delay in the restructuring process, no asset has been transferred to the Company so far. As such,no commercial activity has been carried out by the company during the period. The company has,however, spent Rs.11,080/- on various miscellaneous matters. There being no income, loss for theperiod was also Rs.11,080/-.

SAIL invited the bids from the interested parties to become Strategic Alliance Partner (SAP) in theCompany along with SAIL. Detailed discussions were held with the short listed party, which finallyfailed. However, SAIL has started the efforts afresh for identification and selection of SAP for theCompany.

Auditor's ReportThe Statutory Auditor's Report on the Accounts of the Company for the financial year ended 31stMarch, 2002 is enclosed at Annexure-I. The Comptroller & Auditor General of India has decidednot to review the report of the auditors for the year 31st March, 2002 on the accounts of BhilaiOxygen Ltd. and as such he has no comments to make under Section 619(4) of the Companies Act,1956. A copy of the Non-Review Certificate is placed at Annexure-II.

Report on Conservation of Energy, Technology Absorption, etc.Since, no commercial activity was carried out by the Company, the disclosure of information inaccordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with theCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regardingConservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is notapplicable.

Particulars of EmployeesSince, the company has no employees, the particulars prescribed under Section 217(2A) of theCompanies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are notrequired to be given.

Directors’ Responsibility StatementPursuant to Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed that :

(i) in the preparation of the annual accounts, the applicable accounting standards had been fol-lowed alongwith proper explanation relating to material departures;

(ii) the directors had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair view ofthe state of affairs of the company at the end of the financial year and of the profit or loss ofthe company for that period;

(iii) the directors had taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of the com-pany and for preventing and detecting fraud and other irregularities;

(iv) the directors had prepared the annual accounts on a going concern basis.

DirectorsShri Suresh Pandey resigned from the Board on 16th July, 2001.

Shri M.K. Moitra, Director, SAIL was appointed as Director on the Board on 30th July, 2001 andresigned on 28th February, 2002.

Shri B. Ghoshal , Executive Director, SAIL was appointed as Director on the Board on30th July, 2001 and resigned on 24th December, 2001.

Shri B.K. Singh, Director, SAIL was appointed as Director w.e.f. 26th December, 2001.

Shri S.C.K. Patne resigned from the Board on 22nd March, 2002.

Shri P.K. Chakraborty resigned from the Board on 22nd March, 2002.

Shri Ashis Kumar Das, Executive Director, SAIL was appointed as Director on the Boardon 21st March, 2002.

Shri R.K. Gupta, Executive Director, SAIL was appointed as Director on the Boardon 21st March, 2002.

AcknowledgmentThe Board of Directors wish to place on record their appreciation for the support and cooperationextended by Steel Authority of India Limited. The Directors also wish to acknowledge the continuedsupport and guidance received from the different wings of the Government of India and moreparticularly from the Ministry of Steel.


Sd/-New Delhi (A.K. DAS)Dated : 24th July, 2002 Director

Directors' Report BHILAI OXYGEN LIMITED


146

2.1 OTHER EXPENSES Year ended 31st Year ended 31stMarch, 2002 March, 2001

(Rupees)Bank Charges 680 60Remuneration to Auditors 6300 6300Miscellaneous Expenses 4100 11080 2900 9260

11080 9260

1.1 SHARE CAPITAL As at 31st As at 31stMarch, 2002 March, 2001

(Rupees)

Authorised10,000 Equity shares of Rs. 10/- each 1,00,000 1,00,000

Issued,Subscribed and Paid-up *100 Equity shares of Rs. 10/- each fully paid-up 1,000 1,000

*(Out of 100 shares, 98 shares are held bySteel Authority of India Limited)(Holding Company)

1.2 CURRENT LIABILITIES As at 31st As at 31stMarch, 2002 March, 2001

(Rupees)

Sundry Creditors 31150 20750

SCHEDULE 3 - ACCOUNTING POLICIES AND NOTES ON ACCOUNTS


1.1 The Company prepares its Annual Accounts on accrual basis under historical cost convention as per the generally accepted accounting principles.

1.2 The accounts are drawn up following the Merchantile System of Accounting.

2. NOTES ON ACCOUNTS

2.1 The Company was incorporated on 9th February, 1999 as a Private Limited Company and was later converted into a deemed Public Limited Company u/s 43A of the Companies Act, 1956 on 24thFebruary, 1999. This is the third accounting year of the company.

2.2 There are no contingent liabilities.

2.3 There are no contracts remaining to be executed on capital account.

2.4 In view of the fact that no commercial activity has been carried out during the period under report, the quantitative details and information on licensed/installed capacities etc. are not being given.

2.5 No expenses have been incurred in foreign currency.

2.6 No managerial remuneration has been paid during the period under report.




Partner Director Director

Place : New Delhi.Dated : May 31, 2002

Schedules


147




Balance Sheet Date

II. Capital raised during the year (Amount in Rs.)



III. Position of Mobilisation and Deployment of Funds (Amount in Rs.)


Sources of Funds

Paid-up Capital Reserve & Surplus




Net Current Assets Misc.Expenditure

Accumulated Losses

IV. Performance of the Company (Amount in Rs.)

Turnover/Other Income Total Expenditure


Earning per share (Rs.) Dividend Rate %



Product Description


Product Description


Product Description

9 8 3 0 3

3 1 0 3 0 2

N I L N I L

N I L

1 0 0 0 1 0 0 0

1 0 0 0 N I L

N I L N I L

N I L N I L

- 3 1 1 5 0

N I L 1 1 0 8 0

– 1 1 0 8 0 - 1 1 0 8 0

N I L N I L

5 5

3 2 1 5 0

N I L

O X Y G E N

N I L


148

To

The Members of Bhilai Oxygen Limited

We have audited the attached Balance Sheet of BHILAI OXYGEN LIMITED, as at 31st March, 2002 and the annexed Profit & Loss Account of theCompany for the period ended on that date in accordance with the letter of appointment of Department of Company Affairs, Government of India.

We report as follows :

1. The provisions of MAOCARO, 1988 are not applicable as the company has not carried out any commercial activity.

2.1 We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit.

2.2 In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of the books.

2.3 The Balance Sheet and the Profit & Loss Account dealt with by this report, are in agreement with the books of account.

2.4 In our opinion, the Profit & Loss Account and the Balance Sheet have been drawn up in accordance with the accounting standards referred to insub-section (3C) of Section 211 of the Companies Act, 1956.

2.5 The said accounts, in our opinion and to the best of our information and according to the explanations given to us, and read with the accountingpolicies and notes appearing on Schedule 3, give the information required by the Companies Act, 1956 in the manner so required and give a trueand fair view :-a) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March 2002.

a n db) in the case of Profit & Loss Account, of the Loss of the Company for the period ended on that date.

For ROHTAS & HANSChartered Accountants

Sd/-Place : New Delhi (Hans Jain)Dated : 31st May, 2002 Partner

Auditor s Report'

Comments of C&AGComments of the Comptroller and Auditor General of India under section 619(4) of the Companies Act, 1956 on the accounts of

Bhilai Oxygen Limited for the year ended 31st March, 2002.

The Comptroller & Auditor General of India has decided not to review the report of the auditors for the year ended 31st March, 2002 on the accountsof Bhilai Oxygen Limited and as such he has no comments to make under section 619(4) of the Companies Act, 1956.

Sd/-(R.B. Sinha)

Place : Ranchi Principal Director ofDated : 10th July, 2002 Commercial Audit

ANNEXURE - I

ANNEXURE - II

STEEL AUTHORITY OF INDIA LIMITEDRegistered Office: Ispat Bhawan, Lodi Road

New Delhi - 110 003

ATTENDANCE SLIP

Folio No:

Name and Address ...............................................................................................................................................................................................

............................................................................................................................................................................................................................

I certify that I am a registered shareholder/proxy for the registered shareholder of the Company.

I hereby record my presence at the 30th ANNUAL GENERAL MEETING of the Company at 1030 hours on 24th September, 2002 at NDMCIndoor Stadium, Talkatora Garden, New Delhi.

Member’s/Proxy’s Name (In Block Letters) ..........................................................................................................................................................

Member’s/Proxy’s Signature .................................................................................................................................................................................

Note:

1. Please sign this attendance slip and hand over at the Attendance Verification Counter at the Entrance of the Meeting Hall.

2. This attendance slip is valid only in case shares are held on the date of meeting.

3. The members holding shares in Dematerialised (D Mat) Form are advised to bring with them their DP ID and Client ID Numbers.

4. REGRET NO GIFTS.

STEEL AUTHORITY OF INDIA LIMITEDRegistered Office: Ispat Bhawan, Lodi Road

New Delhi - 110 003

PROXY FORM

I/We ..................................................................................................... of ..........................................................................................................

in the district of ...................................................................................................................................................................................................

............................................................................................................................................................................................................................(Write full address)

hereby appoint ...................................................................................... of ..........................................................................................................(Write full address)

or failing him ........................................................................................ of ..........................................................................................................(Write full address)

as my/our proxy and to vote for me/us or my/our behalf at the 30th Annual General Meeting of the Company to be held on 24th September, 2002at 1030 hours and at any adjournment thereof.

Signed this ................................................ day of .................................... 2002

Signature(s) ......................................................................................................

Ledger Folio/DP ID & Client ID No ..............................................................

No. of Shares held ...........................................................................................

NOTE: 1) The Proxy need NOT be a member.

2) The Proxy Form signed across 30 paise revenue stamp should reach the Company’s Registered Office atleast 48 hours before thescheduled time of meeting.

3) Please fill in full particulars.

✄

Pleaseaffix

30 paiseRevenueStamp

BOOK POST (U.P.C)

TO,

Con

tad

/ D

elhi

Pre

ss

Ispat Bhawan, Lodi Road, New Delhi - 110 003

If undelivered please return to:

Annual Report

Documents

singh shri

place of shri

reddy shri

office of director

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directors report

additional director