1. SIGNIFICANT ACCOUNTING POLICIES
1.1 BASIS OF PREPARATION
(a) Statement of compliance
The standalone financial statements has been prepared in accordance with Indian Accounting Standards ("Ind AS") notified under the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 and 2017 and other relevant provisions of the Act.
(b) Basis of measurement
The standalone financial statements have been prepared on a historical cost convention and on an accrual basis, except for the following material items that have been measured at fair value as required by relevant Ind AS:
i) Certain financial assets and liabilities measured at fair value (refer accounting policy on financial instruments);
ii) Defined benefit and other long-term employee benefits.
(c) Functional and presentation currency
The standalone financial statements are presented in Indian rupees, which is the functional currency of the Company and the currency of the primary economic environment in which the entity operates. All financial information presented in Indian rupees has been rounded to the nearest crore except share and per share data.
(d) Use of estimates and judgments
The preparation of standalone financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
1.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i. Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which these entities operate (i.e. the "functional currency").
The standalone financial statements are presented in Indian Rupee, the national currency of India, which is the functional currency of the Company.
ii. Foreign currency transactions and balances
Transactions in foreign currency are translated into the respective functional currencies using the exchange rates prevailing at the dates of the respective transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the exchange rates prevailing at reporting date of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of profit and loss and reported within foreign exchange gains/ (losses).
Non-monetary assets and liabilities
denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction
iii. Investment in subsidiaries and joint venture
Investment in subsidiaries is measured at cost. Dividend income from subsidiaries is recognized when its right to receive the dividend is established.
iv. Financial instruments
All financial instruments are recognized initially at fair value. Transaction costs that are attributable to the acquisition of the financial asset (other than financial assets recorded at fair value through profit or loss) are included in the fair value of the financial assets. Purchase or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trade) are recognized on trade date. While, loans and borrowings and payable are recognized net of directly attributable transactions costs.
For the purpose of subsequent measurement, financial instruments of the Company are classified in the following categories: non-derivative financial assets comprising amortized cost; non derivative financial liabilities at amortized cost.
The classification of financial instruments depends on the objective of the business model for which it is held. Management determines the classification of its financial instruments at initial recognition.
Financial instrument is derecognized only when the company has transferred its right to receive/extinguish its obligation to pay cash flow from such financial instruments.
a) Non-derivative financial assets
Financial assets at amortized cost
A financial asset shall be measured at amortized cost if both of the following conditions are met:
- the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding
They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets. Financial assets are measured initially at fair value plus transaction costs and subsequently carried at amortized cost using the effective
interest method, less any impairment loss.
Amortized cost is represented by security deposits, cash and cash equivalents, employee and other advances and eligible current and non-current assets.
Cash and cash equivalents comprise cash on hand and in banks and demand deposits with banks which can be withdrawn at any time without prior notice or penalty on the principal.
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand, in banks and demand deposits with banks, net of outstanding bank overdrafts that are repayable on demand and are considered part of the Company's cash management system.
b) Non-derivative financial liabilities
Financial liabilities at amortized cost
Financial liabilities at amortized cost represented by trade and other payables are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest method.
v. Property plant and equipment:
a) Recognition and measurement:
Normally Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditures directly attributable to the acquisition of the asset. The Company has elected to apply the optional exemption to use this previous GAAP value as deemed cost at 1 April 2015, the date of transition.
Depreciation: Normally the Company depreciates property, plant and equipment over the estimated useful life of the assets as prescribed
in Schedule II of the Companies Act 2013 on a straight-line basis. Depreciation is charged on pro-rata monthly basis on additions / disposals of assets during the year taking the first day of the month for acquisition / commissioning and the last day of the month for disposals. Wherever the useful life is determined by technical assessment for certain assets, such assets are depreciated as per their assessed life. Assets acquired under finance lease and leasehold improvements are amortized over the lower of estimated useful life and related term. Depreciation methods, useful lives and residual values are reviewed at each reporting date
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Subsequent expenditure relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
Repairs and maintenance costs are recognized in the statement of profit and loss when incurred.
The cost and related accumulated depreciation are eliminated from the standalone financial statements upon sale or disposition of the asset and the resultant gains or losses are recognized in the statement of profit and loss.
Fixed Assets costing ' 5,000 or less are fully depreciated in the year of purchase
b) Treatment of Enabling Assets:
"Expenditure incurred on any facility, the ownership of which is not vested with the company, but the incurrence of which is essential in bringing an asset/projects of NMDC to the location and condition necessary to be capable of operating in the manner intended by the management, shall be capitalized as a part of the overall cost of the said asset/project. Else the same shall be charged to revenue."
vi. Intangible assets :
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized over their respective estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition and other economic factors (such as the stability of the industry and known technological advances) and the level of maintenance expenditures required to obtain the expected future cash flows from the asset
vii. Inventory
a) Raw materials, Stores and spares (including loose tools and implements), work in process and finished products are valued at lower of cost and net realizable value of the respective units.
b) The basis of determining the cost is Raw materials : Weighted average cost Stores and spares : Weighted average cost Stores in Transit : At cost Work in process and finished goods : Material cost plus appropriate share of labour, related overheads and levies.
c) In case of identified Obsolete/Surplus/ Non-moving items necessary provision is made and charged to revenue.
d) Stationery, Medical, Canteen, School Stores, Cotton Waste, Hospital Stores and Lab stores (excluding for R & D Lab) charged off to Revenue on procurement.
e) No credit is taken in respect of stock of run of mine ore, embedded ore, Iron ore slimes.
viii. Impairment
a) Financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss.
i) The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivable.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If in subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognizing impairment loss allowance based on 12 month ECL
Lifetime ECLs are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12 month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive(i.e. all shortfalls), discounted at the original
EIR. When estimating the cash flows, an entity is required to consider:
ii) All contractual terms of the financial instrument (including prepayment, extension etc.) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument.
iii) Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/expense in the statement of profit and loss. The balance sheet presentation for various financial instruments is described below:
Financial assets measured at amortized cost, contractual revenue receivable: ECL is presented as an allowance, i.e. as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Untill the asset meets write off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
b) Non-financial assets
The Company assesses at each reporting date whether there is any objective evidence that a non financial asset or a group of non financial assets is impaired. If any such indication exists, the Company estimates the amount of impairment loss.
An impairment loss is calculated as the difference between an asset's carrying amount and recoverable amount. Losses are recognized in profit or loss and reflected in an allowance account. When the Company considers that there are
no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through profit or loss.
The recoverable amount of an asset or cash-generating unit (as defined below) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").
ix. Employee benefits
a) Payments under Employees' Family Benefit Scheme:
Under the NMDC Employees' family benefit scheme, monthly payments are made till the normal date of retirement to the family members of those employees who are discharged from service due to medical reasons or death, on deposit of the amount envisaged in the scheme and liability for the payments are accounted for on the basis of actuarial valuation and the amount is administered by a separate Trust.
b) Gratuity & Provident fund:
Gratuity payable to eligible employees is administered by a separate Trust. Payments to the trust towards contributions and other demands are made on the basis of actuarial valuation.
c) The company's contribution to the provident fund is remitted to a separate trust based on a fixed percentage of the eligible employees' salary. Further, the company makes good the shortfall, if any, between the return from investments of trust and the notified rate of interest on actuarial valuation basis.
d) Pension Fund
Defined contributions to NMDC Employees' Contributory Pension Scheme are made on accrual basis at a rate as approved from time to time to a fund which is administered by a separate Trust.
e) Accrued Leave Salary:
Liability towards Accrued Leave Salary, as at the end of the year is recognized on the basis of actuarial valuation and the amount is administered by a separate trust.
f) Other Benefits :
Liability towards Long Service Award, Settlement Allowance and Post Retirement Medical Facilities to employees as at the end of the year is recognized on the basis of actuarial valuation. Such amounts towards Settlement Allowance and Post Retirement Medical Benefits are administered by a separate trust.
Actuarial gains or losses are recognized in other comprehensive income. Further, the profit or loss does not include an expected return on plan assets. Instead net interest recognized in profit or loss is calculated by applying the discount rate used to measure the defined benefit obligation to the net defined benefit liability or asset. The actual return on the plan assets above or below the discount rate is recognized as part of re-measurement of net defined liability or asset through other comprehensive income.
Re-measurements comprising actuarial gains or losses and return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are not reclassified to profit or loss in subsequent periods.
x) Provisions
All the provision are recognized as per Ind AS 37. Provisions (including mine closure) are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset, if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. Provisions for onerous contracts are measured at the present value of lower of the expected net cost of fulfilling the contract and the expected cost of terminating the contract.
xi) Revenue recognition:
Revenue from contracts with customers is recognized when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
All revenue from sale of goods is recognized at a point in time. Revenue from wind power and services is recognized over time.
The timing of transfer of control in case of sale of goods varies depending upon individual transfer terms of the contract.
Export sales: In Export sales control passes to the customer on the date of Bill of Lading.
Domestic sales: Control passes to the customer on the date of delivery which is generally the forwarding note (rail dispatches)/ lorry receipt/ delivery challan. However, in case of spot auction under electronic mode, control passes to the customer on conclusion of the auction and receipt of money.
Obsolete stores & scrap: Control passes to the customer on the date of realization.
Contract asset
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional.
Trade receivables
A receivable represents the Company's right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Contract liability
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the Company performs under the contract.
xii) Finance income and expense
Finance income consists of interest income on funds invested, dividend income and gains on the disposal of Fair value through profit and loss account financial assets. Interest income is recognized as it accrues in the statement of profit and loss, using the effective interest method.
Dividend income is recognized in the statement of profit and loss on the date that the Company's right to receive payment is established.
Finance expenses consist of interest expense on loans and borrowings. Borrowing costs are recognized in the statement of profit and loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis. This includes changes in the fair value of foreign exchange derivative instruments, which are accounted at fair value through profit or loss.
xiii) Income tax
Tax comprises current and deferred tax. Income tax expense is recognized in the statement of profit and loss except to the extent it relates to items directly recognized in equity or in other comprehensive income.
Current income tax
Current income tax for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the taxable income for the period. The tax rates and tax laws used to compute the current tax amount are those that are enacted or substantively enacted by the reporting date and applicable for the period. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis or to realize the asset and liability simultaneously.
a) Deferred income tax
Deferred income tax is recognized using the balance sheet approach. Deferred income tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount in financial statements, except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profits or loss at the time of the transaction. Deferred income tax asset are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. Deferred income tax liabilities are recognized for all taxable temporary differences. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
xiv) Earnings per share
Basic earnings per share is computed using the weighted average number of equity shares outstanding during the year.
Diluted EPS is computed by dividing the net profit after tax by the weighted average number of equity shares considered for deriving basic EPS and also weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the year, unless issued at a later date. Dilutive potential equity shares are determined independently for each year presented. The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares, as appropriate.
xv) Borrowing costs
Borrowings costs directly attributable to acquisition or construction of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which it occur. Borrowing costs consists of interest and other costs that an entity incurs in connection with the borrowing of funds.
xvi) Government grants
Grants from the government are recognized when there is reasonable assurance that:(i) the Company will comply with the conditions attached to them; and (ii) the grant will be received. Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate. Such grants are deducted in reporting the related expense. When the grant relates to an asset, it is recognized as income over the expected useful life of the asset. Where the Company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost it is recognized at a fair value. When loan or similar assistance are provided by government or related institutions, with an interest rate below the current applicable market rate, the effect of this favorable interest is recognized as government rate. The loan or assistance is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying value of the loan and the proceeds received.
Grant related to income are presented as part of profit or loss, as a deduction to the related expenses.
xvii) Exploration and Evaluation:
Exploration and evaluation expenditure comprises costs that are directly attributable to:
- researching and analyzing existing exploration data;
- conducting geological studies, exploratory drilling and sampling;
- examining and testing extraction and treatment methods; and/or
- compiling pre-feasibility and feasibility studies.
Exploration expenditure relates to the initial search for deposits with economic potential.
Evaluation expenditure relates to a detailed assessment of deposits or other projects that have been identified as having economic potential. . All evaluation and exploration expenses till high degree of confidence is achieved are expensed.
Evaluation expenditure are capitalized as Intangible assets when there is a high degree of confidence that the Company will determine that a project is commercially viable, that is the project will provide a satisfactory return relative to its perceived risks, and therefore it is considered probable that future economic benefits will flow to the Company.
The carrying values of capitalized evaluation expenditure are reviewed for impairment every year by management.
xviii) Stripping cost:
Development stripping cost:
Overburden and other mine waste material removed during the initial development of a mine in order to access mineral deposit are capitalized as Intangible Asset. Amortization of the same is done based on the life estimated by the management.
Production stripping cost:
Overburden and other mine waste materials which are removed throughout the production phase of mine are charged entirely to profit and loss account as production cost.
xix) Prepaid Expenses:
Expenses are accounted under prepaid expenses only when the amount relating to the unexpired period exceeds rupees Two crore in each case.
xx) Restatement of earliest prior period financials on material error/omissions
The value of error and omissions is construed to be material for restating the opening balances of assets and liabilities and equity for the earliest prior period presented if the amount in each case of earlier period income/expenses exceeds 1.0% of the previous year turnover of the company.
ADDITIONAL NOTES TO 2.1 & 2.3 : PPE (PROPERTY PLANT AND EQUIPMENT) AND INTANGIBLE ASSETS
1. Lease hold land measuring 3021.35 sq.mtrs. (previous year 3021.35 sq.mtrs.) has been taken from Vizag Port Trust Authorities for construction of Regional Office building has been granted for the period of 30 years i.e. up to 01.01.2044. Action is on hand to renew the lease periods of the above lands. However, the rents have been accounted till 31.03.2019.
Lease hold land measuring 1431.32sq.mtrs. (Previous year 1431.32sq. mtrs.) has been taken from Vizag Port Trust Authorities for construction of screening plant at port area and the lease deed will be expired on 17.06.2020 and applied for extension.
2. The value of land of 155.55 hectares taken over from District Industries Centre, Jagdalpur for construction of Steel Plant near Nagarnar has not been brought into the books as the amount payable is not ascertainable in the absence of any demand from the concerned authorities.
3. Formal agreements / Transfer deeds remain to be executed in respect of the following:
(a) Renewal of Mining Leases at Deposit 10 (Float Ore) & Donimalai.
(b) Lease deeds in respect of parts of land for township at Bacheli Complex, Kirandul Complex and Panna Project.
(c) Mining lease to the extent of 33.58 hectares (Mining area) and 19.42 hectares (Plant area) of Silica Sand Plant near Lalapur (Allahabad).
(d) Lease in respect of a portion of the total land at R&D Center measuring 9.12 acres has expired during Feb 07 (6.66 acres) and the balance in Feb 2010 (2.46 acres). The process of renewal of the lease is under progress.
(e) Only Provisional allotment letters issued for the land to the extent of 13.43 acres purchased from M/s APIIC at Industrial park, Paloncha. However, on physical survey found only 11.35 acres
of land. No effect is given in books, pending confirmation from M/s APIIC.
(f) Land to the extent of 26.39 acres purchased at Patancheru, Hyderabad from the Official Liquidator of Allwyn Watches Ltd. However, on physical survey found only 24.23 acres of land. No effect is given in books, pending confirmation from the Official Liquidator of Allwyn Watches Ltd.
(g) Land at Raipur to the extent of 57,432.99 Sq. Ft. has been acquired from Chhattisgarh Housing Board, however as per the actual land measurement taken by surveyor the total land comes to 62,205.96 Sq. Ft. The registration formalities are in the process for the total land.
5. Mining Lease of Donimalai:
The Government of Karnataka, while renewing the lease of NMDC's Donimalai Iron Ore Mine, has imposed a new condition asking for a premium of 80% on the average sale value. As the demand of the State Govt. is against the spirit of the MMDR Act, the company requested the State Govt. to reconsider its decision. Since there was no response from the State Govt. the company had to suspend its operations from 4th November 2018 and move the Hon'ble High Court of Karnataka praying for a suitable direction in this matter. Subsequent to a series of hearings, the Company is eagerly awaiting the decision of the Hon'ble High Court.
6. During the year 2018-19 a review of residual and useful life of PPE was done and as per the review there is no change recommended. The Useful life of all the PPE is as per schedule II except for the following PPE whose life as given under is determined as per technical assessment.
Addl. Notes :
1) No new shares were issued, during the current year.
2) Board of Directors of the company in its meeting held on 8th January 2019 approved buyback of 10,20,40,815 equity shares @ Rs,98/- for an aggregate consideration of '1,000.00 crore. The process of buyback was completed by 8th March 2019. The buyback offer was fully subscribed.
The Company has issued letter of comfort in favour of International Coal Venture (P) Limited (ICVL) in furtherance for providing Corporate Guarantee of US$ 30 Mn by them to EXIM Bank on behalf of Minas De Benga Limitada, Mozambique (Borrower), a downstream operating subsidiary of ICVL, New Delhi in respect of short term working capital loan. The said letter of comfort does not in any way constitute the guarantee or security by the Company of the duties of the borrower to meet its obligation under the said facility.
1.3 Disputed Claims under Income Tax Act.
The Hon'ble ITAT has delivered the orders in favour of the company on the subject matter of alleged under invoicing pertaining to the Financial Years 2006-07 to 2009-10. The Department has filed appeals before the Hon'ble High Court and pending its decision, the amount of demandsRs,1,207.14 Crore(Previous year Rs,1,207.14 Crore including interest) is included under contingent liability.
1.4: Disputed claims under ' Karnataka Forest Act:
Government of Karnataka had introduced Forest Development Tax (FDT), to pay @ 12% on the sale value of iron ore with effect from 27.08.2008. NMDC preferred an appeal before Hon'ble High Court of Karnataka and the court passed an interim order directing the Company to pay 50% of FDT, consisting of 25% in cash and balance 25% in the form of Bank Guarantee. As against the total FDT demand of Rs,487.27 Crore( from August 2008 to Sep-2011), the Company has deposited an amount of Rs,121.84 Crore (25%) in cash which has been shown as amount recoverable and submitted a bank guarantee for similar amount. An amount of Rs,365.43 Crore (balance 50% amount of Rs,243.69 Crore plus 121.84 Crore paid and accounted as amount recoverable)is included under disputed claims at 1.1.A. The amount of Rs,121.84 Crore for which BG was given is included under contingent liability on BGs' at 1.2.
Hon'ble High Court of Karnataka vide order dated 03.12.2015 has quashed the orders of Government of Karnataka levying the FDT and ordered refund of the tax collected within three months and accordingly the Company has lodged refund claims. However, Government of Karnataka has filed a Special Leave Petition with Hon'ble Supreme Court of India, challenging the orders of Hon'ble High Court of Karnataka. Hon'ble Supreme Court of India has accepted the same and imposed stay on refund of the FDT amount.
Meanwhile Karnataka State Govt. had enacted Karnataka Forest (Amendment) Act 2016 vide Gazette notification dated 27.07.2016. The amendment substituted the word 'Tax' in the principal act to 'Fee' w.e.f 16th day of Aug 2008. Based on this the Monitoring Committee had started billing the Forest Development Fee in its invoices. Meanwhile consumers in Karnataka had filed separate Writ Petitions in Hon'ble High Court of Karnataka on the above. Karnataka High Court vide its order dated 20th Sept. 2016, had ordered that State Govt may restrain from collecting FDF during the pendency of the writ petition, subject to the condition of furnishing bank guarantee in respect of 25% of the demand in relation to future transactions. Karnataka State Govt. had approached Hon'ble Supreme Court on this. Hon'ble Supreme Court vide its order dated 13.02.2017 modified the order of High Court of Karnataka and ordered for payment of 50% of the demanded amount and furnish Bond for balance amount.
The amount billed by the monitoring committee amounting to Rs,93.85 crore towards FDF has been accounted under sales revenue during previous year. As, the Karnataka High Court vide its judgments dated 4th October 2017 has declared the Karnataka Forests (Amendment) Act, 2016 which was introduced for collection of Forest Development Fee (FDF) as unconstitutional, No FDF was collected nor paid with effect from 5th October 2017.
2.32.2. Segment Reporting as per Ind - AS-108 A. Basis for segmentation
An operating segment is a component of the company that engages in business activities from which it may earn revenues and incur expenses and for which discrete financial information is available. All operating segments' operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segments and assess their performance.
The company has two reportable segments, as described below, which are the company's strategic business units. These business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the business units, the company's Board reviews internal management reports on a periodic basis.
The following summary describes the operations in each of the company's reportable segments:
B. Information about reportable segments
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit (before tax), segment revenue and segment capital employed as included in the internal management reports that are reviewed by the board of directors. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm's length basis.
From 1 July 2017 onwards the excise duty and most indirect taxes in India have been replaced by Goods and Service Tax (GST). The group collects GST on behalf of the Government. Hence, GST is not included in Revenue from operations.
In view of the aforesaid change in indirect taxes, Revenue from operations year ended 31 March 2019 is not comparable 31 March 2018.
Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days. In March 2019, Rs,1,958.15 crore (March 2018: Rs,1,708.97 crore) was recognized as provision for expected credit losses on trade receivables.
Contract assets are generally recognized in case of supply of services only when the receipt of money is conditional on milestone even after satisfaction of performance obligation. In case of sale of goods, directly receivable is recognized as company has unconditional right to payment from the moment performance obligation is satisfied.
Contract liabilities includes advance received from customer which will be adjusted towards supply of goods or services.
2.32.4: Accounting policies, change in Accounting Estimates and Errors ( As per Ind-AS 8): I. Review of Accounting Policies
a. Revenue Recognition: (Accounting policy No. 1(1.2)(xi)):.
Ind AS 115 recognizes revenue on transfer of the control of goods or services, either over a period of time or at a point in time, at an amount that the entity expects to be entitled in exchange for those goods or services. In order to align with Ind AS 115, the Accounting policy on revenue recognition was reviewed and revised.
The said revision has nil impact on the financials of the company as the company was recognizing and accounting revenue in line with the Ind AS 115.
b. Property Plant and Equipment: Depreciation (Accounting Policy No. 1(1.2)(v)(a))
Depreciation is charged on pro-rata monthly basis on additions / disposals of assets during the year taking the first day of the month for acquisition / commissioning and the last day of the month for disposals. To reflect the existing practice of the Company, policy was revised.
The said revision has nil impact on the financials of the company.
c. Stripping Cost: (Accounting Policy No.1(1.2)( xviii))
Overburden and other mine waste materials which are removed throughout the production phase of mine are charged entirely to profit and loss account as production cost. To reflect the existing practice of the Company, policy was revised.
The said revision has nil impact on the financials of the company.
II. Ind AS issued and not yet effective:
Ind AS 116 Leases :
Ministry of Corporate Affairs has notified 'The Companies (Indian Accounting Standards) Amendment Rules, 2019 dated March 30, 2019 which inter alia includes the new standard on Leases Ind AS 116 replacing the existing standard Ind AS 17, to be effective from the 1st April 2019. The impact of the same is yet to be assessed. The Company is proposing to use the Modified Retrospective Approach for transitioning to Ind AS 116.
D. Key Management Personnel: (Directors) as on 31/03/2019 Directors :
1. Shri N.Baijendra Kumar CMD
2. Dr. Narendra K Nanda Director(Technical)
3. Dr T R K Rao Director(Commercial)
4. Shri P K Satpathy Director(Production)
5. Shri D S Ahluwalia Director(Finance) up to 30th April 2018
6. Shri Sandeep Tula Director(Personnel)
7. Shri Amitava Mukherjee Director(Finance) from 20th Nov. 2018
Company Secretary :
Sri A.S Pardha Saradhi
The Company has so far deposited an amount of '639.61 Crore (previous year 639.61 crore) with Karnataka Industrial Area Development Board (KIADB) for acquisition of land for setting up of Steel plant at Karnataka and an amount of Rs,2.17 Cr was spent for fencing the land during the current year. The amount of Rs,641.78 Crore is included under Advances to Subsidiaries under the note 2.4.2.
Board in its meeting held on 28/11/2014 deliberated that the land purchased in respect of Karnataka Steel plant shall be purchased in the name of new subsidiary company to be floated for the purpose of setting up of Steel Plant. Subsequent to the incorporation of wholly owned subsidiary Karnataka Vijayanagar Steel Limited, (KVSL) based on request, the Government of Karnataka vide its order no. CI 264 SPI 2009, Bengaluru dated 10/07/2015 has approved the proposal of the Company to transfer the Project in favour of Karnataka Vijayanagar Steel Limited (KVSL) a wholly owned subsidiary of the Company.
KIADB has vide its letter dated KIADB/BALLARI/DO/PC/714/2017-18 dated 11.01.2018 handed over the possession of land measuring 2,857.54 acres to KVSL. Earlier KIADB had not considered the extent of land utilized for the widening work of existing NH-63 by concerned authority which is passing through few survey numbers of our acquired private land. However, during the year the same is rectified and the revised possession certificate dated 01.08.2018 for land admeasuring 2,843.985 acres is obtained from KIADB. The execution of agreement and registration of private land is pending. Pending execution, the land is capitalized in the books of KVSL.
Note:*The earnings per share (EPS) have been adjusted on account of buyback.
2.32.7 Accounting for Deferred Taxes on income (Ind-As-12) : Necessary details have been disclosed in note no: 2.5.
2.32.8 Discontinuing Operations (IndAS-105) :
On 25/02/2008 the Board of directors had announced a plan to dispose-off the plant and machinery of Silica Sand Project, Lalapur which is included in the segment of "Other minerals and services." Pending disposal, the unit is kept under care & maintenance.
2.32.9 Intangible Assets (IndAS-38) : R&D
The Research & Development expenditure, charged to Statement of Profit & Loss during the year is Rs,23.81 crore (previous year Rs,22.03 crore), including expenditure of Rs,0.35 crore (previous year Rs,0.83 crore) on feasibility studies.
During the year, at R&D unit, the additions to tangible assets (except land and buildings) are Rs,7.50 crore. (Previous year Rs,3.10 crore).
2.32.11 Impairment of Assets (IndAS - 36):
The impairment of assets has been reviewed during the year in respect of the following cash generating units, included under the segment 'Other Minerals and Services' and decided to maintain same status:
1. The Recoverable amount of the assets of SSP, Lalapur unit has been arrived at considering the 'value in use'
Since the value in use has resulted in negative cash flows, the recoverable amount has been taken as nil without applying any discount rate.
2. In the case of SAF plant at the Sponge Iron Unit, the impairment is based on net selling price as assessed by the approved Valuer.
3. The validity of the forest clearance of Panna Supplementary mining lease is up to 30-06-2015. As per the provisions of Mines and Mineral (Development and Regulation) Amendment Act 2015 and circular dated 01-042015 issued by MoEFCC the above mining lease shall be deemed to have been extended up to 30-06-2020 and accordingly the operations of the project are continued beyond 30-06-2015.
2.32.12 Provisions, Contingent Liabilities and Contingent Assets (IndAS-37) :
Necessary details in regard to provisions have been disclosed in notes 2.14,2.17& 2.31.
2.33: Disclosure as required under Regulation 34(3) and 53(f) of SEBI (LODR) Regulations, 2015
2.33.1 Loans and advances in the nature of loans to Subsidiaries/Jvs' where there is no repayment schedule or no interest :
2.33.2 There are no Investments by the loanees as mentioned in 2.36.1 in the shares of NMDC Ltd.
2.33.3 No Loans and Advances were given to the Associate Companies.
2.33.4 There are no loans and advances in the nature of loans to firms/companies in which directors are interested except as stated above
2.34. Others: 2.34.1 Service tax on Royalty:
The Central Govt vide circular dated 13th April 2016 (Sl no 9) clarified the applicability of service tax payable on Royalty wef 1.4.2016. The company has contended before the Hon'ble High Courts of Karnataka ,Chhattisgarh& Madhya Pradesh. The Chhattisgarh High Court has permitted NMDC to withdraw the case with liberty to pursue the matter before the concerned authority by filing a reply. The Madhya Pradesh High court has granted stay. The Karnataka High Court, initially granted stay but subsequently vacated the stay and dismissed the petition.
Considering the stay given by Supreme court in one of the cases on similar matter, the company has filed fresh 'Writs' in the High Courts of Chhattisgarh & Karnataka. The company has also filed transfer petitions before Hon' Supreme Court seeking transfer of the cases with Chhattisgarh High Court & Madhya Pradesh High Court. Hon'ble Supreme Court has not admitted the transfer petition with respect to the case with Chhattisgarh High Court. However with regard to case with Madhya Pradesh High Court, Hon'ble Supreme Court has granted permission to withdraw the transfer petition with liberty to draw the attention of the High Court to the pendency of similar matter(s) before the Hon'ble Supreme Court.
Pending the outcome of above actions, the company has provided for the liability on service tax and interest thereon. The amount as on 31.3.2019 towards liability is Rs,211.85 cr and interest is Rs,69.62 cr. (previous year '211.85 and Rs,37.97 cr respectively).
2.34.2 Enabling Facilities:
The Company is funding the schemes 'Doubling of Railway line between Kirandul and Jagdalpur' and between ' Jagdalpur and Ambagaon' both owned by Indian Railways which helps the company in augmenting of evacuation facility of Bailadila Sector. During the year an amount of Rs,75 Crore has been paid for the work 'Doubling of Line between Kirandul and Jagdalpur'. An amount of Rs,167.74 Crore utilized for the above purpose during the year 201819 (Previous year Rs,172.80 Crore) has been inter-alia included in 'Other expenses'
2.34.3 Disinvestment of NISP:
The Govt of India has accorded 'in principle' approval for strategic disinvestment of Nagarnar Steel Plant of NMDC Limited on 27.10.2016. Transaction Advisor (TA), Legal Advisor (LA) and Asset Valuer (AV) are appointed. However, the process of disinvestment has been deferred.
2.34.4 Property, Plant & Equipment (PPE)
As per Ind AS 16 items such as spare parts, stand by equipment and service equipment are to be capitalized when they meet the definition of PPE and are expected to be used for more than one accounting year. After review of the inventory values and its consumption patterns in the major production Units, Company based on materiality has fixed a threshold limit of Rs,20 Lakhs for such spare parts, stand by equipment and service equipment meeting the definition of PPE. On issue of said PPE, the WDV is allowed to be depreciated over the life of the main asset or the life of the equipment whichever is less.
2.34.5 NMET:
As per the Gazette Notification dated 27th March 2015 enacting the Mines and Minerals (Development and Regulation) (Amendment) Act, 2015 and subsequent notifications dated 14th Aug 2015 for contribution of National Mineral Exploration Trust (NMET), the Company was required to pay 2% of royalty towards NMET with effect from 12th Jan 2015 respectively.
The Hon'ble High Court of Bilaspur in its judgments dated 24.11.2017 clarified that contribution towards NMET shall be payable w.e.f. 14.8.2015, the date of promulgation of NMET Rules plus constitution of NMET Trust.
With regard to NMET, Company has made the payment w.e.f 12.01.2015. As per the Hight Court judgments the units in state of Chattisgarh the payments made from 12.01.2015 till 13.08.2015 are recognized under Amount Recoverable to be adjusted from future payments to State Government.
2.34.6 Mining issues at Donimalai complex in Karnataka:
The monitoring Committee has retained 10% of sale proceeds for the period from 04/10/2011 to 31/03/2019 amounting to '1,934.39 crore (previous year Rs,1,685.22 Crore) pending finalization of R&R plan. The amount is included under "Trade Receivables"
The Rehabilitation and Reclamation (R&R) plan prepared by ICFRE and submitted to Central Empowered Committee appointed by the Hon'ble Supreme Court of India was considered and approved. However the Monitoring Committee has not yet released the balance payment as the issue is still pending with the Hon'ble supreme court of India.
Based on the subsequent events, Company has reviewed the reasonability of realization of the 10% of the sales proceeds considered under the trade receivables from Monitoring Committee and under Ind AS 109, has provided for 100% of the said amount.
2.34.7 GST issue on Sales through Monitoring Committee
Post GST 1st July 2017, for sales through Monitoring Committee (MC), GST invoices were raised by Donimalai unit on MC as per the requirement of the GST Act. It was expected that MC shall raise GST invoices on the customers and utilize the input tax credit of the GST billed by NMDC and payback the GST to NMDC. However, for the period from 1st July 2017 to 30th Sept 2017 MC has not acknowledged the invoices raised by NMDC and has paid the GST of Rs,45.73 Crore collected from customers to the Exchequer without utilizing the input tax credit of GST billed by NMDC. Thereafter, from 1st October 2017 Donimalai has been raising GST invoice directly on the customers as per the Hon'ble Supreme Court's direction.
As efforts for recovery were being made, no provision was made in the accounts for FY 2017-18. With persistent efforts made by the company, the amount has been recovered during the current FY 2018-19.
2.34.8 Show cause notice of Dantewada:
The Company has been legally advised that there is no impact of the Hon'ble Supreme Court of India judgement with reference to the writ petition (Civil) no. 114 of 2014 dated 2nd August 2017 on NMDC. However, in case it is found applicable to NMDC at a later date, it may impact the profits of the company.
Subsequently, the Bailadila Projects of NMDC have received Show Cause Notices dated 31.7.2018 from District Collector, South Bastar, Dantewada as to why NMDC should not be asked to deposit an amount of Rs,7241.35 cr as compensation as calculated by the Collector based on the above judgement. The Company has contested the Show Cause Notices with District Collector, South Bastar Dantewada.
2.34.9 Mining Lease of Donimalai:
The Government of Karnataka, while renewing the lease of NMDC's Donimalai Iron Ore Mine, has imposed a new condition asking for a premium of 80% on the average sale value. As the demand of the State Govt. is against the spirit of the MMDR Act, the company requested the State Govt. to reconsider its decision. Since there was no response from the State Govt. the company had to suspended its operations from 4th November 2018 and move the Hon'ble High Court of Karnataka praying for a suitable direction in this matter. Subsequent to a series of hearings, the Company is eagerly awaiting the decision of the Hon'ble High Court.
2.34.10 Closure of SPV's:
Ministry of Steel vide its record note of discussion dated 23.4.2018 has taken the decision 'not to pursue the SPV's - NMDC Power Limited and NMDC-SAIL Limited. NMDC Board has approved for closure of the companies. Accordingly an amount of Rs,2.50 Lakhs investment in NMDC_SAIL Limited has been derated as application for striking off the name has been filed with ROC on 3rd April 2019. Status quo is maintained with regard to Investment in NMDC- Power Limited as action for closure is yet to be initiated.
.2.34.11 CSR Expenditure :
a) Gross amount required to be spent by the company during the year is Rs,97.09 crore (2% of the last three years average PBT Rs,4,854.64 crore).(Previous Year Rs,121.02 crore (2% of the last three years average PBT Rs,6,050.93 crore).
b) Amount spent during the year on account of CSR activities is Rs,167.24 crore.( Previous Year '169.37 crore)
2.34.12 General:
i. The company owns certain office space at New Delhi. It is not the company's intention to hold the property for a long term for capital appreciation nor for rental purpose. Hence the same is not treated as Investment Property and included under PPE.
ii. Some of the balances appearing under Trade receivables, Trade payables, advances, Security deposits and other payables are subject to confirmations.
iii. Figures for the previous year have been regrouped/ rearranged wherever considered necessary so as to confirm to the classification of the current year.
|