3.7 Provisions and contingencies:
3.7.1 Provisions:
Provisions are recognised when the Company has a present legal or constructive obligation arising from a past event, settlement is probable, and
a reliable estimate can be made.
They are measured at the best estimate of the expenditure required to settle the obligation, considering associated risks and uncertainties. If
material, provisions are discounted to present value using a pre-tax rate reflecting current market assessments. Unwinding of the discount is
recognised as finance cost.
Provisions are reviewed at each reporting date and adjusted to reflect current estimates.
Provisions for onerous contracts are recognised when unavoidable costs of fulfilling the contract exceed the expected economic benefits.
3.7.2 Restoration, rehabilitation, and decommissioning:
An obligation for restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or
ongoing production of a mine and other manufacturing facilities. Such obligations are recognised as per statutory mandate or explicit mention
about such activities in various permissions granted by authorities for operating the facilities.
Net present value of such costs is provided for and a corresponding amount is capitalised at the commencement of each project. These costs are
recognised in the statement of profit and loss over the life of the asset through depreciation and unwinding of the discounted liability as finance
cost. The cost estimates are reviewed periodically and are adjusted to reflect known developments which may have an impact on the cost estimates
or life of operations. The cost of the related asset is adjusted for changes in the provision due to factors such as updated cost estimates, changes in
lives of operations, new disturbances, and revisions of discount rates. The adjusted cost of the asset is depreciated prospectively over the lives of
the assets to which they relate.
Obligations for site restoration and decommissioning of structures at coal mines are estimated in accordance with the guidelines from Ministry
of Coal, Government of India and as per approved Mine Closure Plan. Estimated expenses are inflated and discounted to present value. The mine
closure obligation is initially recognised by creating corresponding site restoration asset and amortised over the remaining life of the mine on a
straight line basis. The unwinding of the discount is charged as finance cost.
A designated escrow deposit account is maintained for mine closure obligation of the coal mine as per the approved mine closure plan.
3.7.3 Environmental liabilities:
Environmental liabilities are recognised when the Company becomes obliged, legally, or constructively to rectify environmental damage or
perform remedial work.
The Company recognises provisions against such obligations at an undiscounted amount, unless the effect of time value of material.
3.7.4 Enterprise Social Commitments:
Enterprise Social Commitment is the amount to be spent on social and economic development of the surrounding area over a period of time
where any new project is set up. Such obligation arises out of conditions mentioned in the Environment Clearance Certificate given by the
Government for new projects and are generally defined as a percentage of total project cost.
Present value of such future cash flows discounted at appropriate and applicable discount rates are capitalised against the obligation created.
Actual cash flows that happen over the period are adjusted against the obligation. The obligation is increased over a period of time and the
differential is recognized in the statement of profit and loss as finance cost.
3.7.5 Legal Obligations:
Provision is recognised once it has been established that the Company has a present obligation based on consideration of the information which
becomes available up to the date of reporting. Provisions are recognised at an undiscounted amount, unless the effect of time value of money is
material.
3.7.6 Contingent Liabilities:
Contingent liabilities are possible obligations that arises from past events, the existence of which would be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation, but payment is not
probable, or the amount cannot be measured reliably. Contingent liabilities are disclosed in the financial statements unless the possibility of any
outflow in settlement is remote.
3.7.7 Contingent Assets:
Contingent assets are not recognised in the financial statement but are disclosed where inflow of economic benefits is probable.
3.8 Leases:
The Company determines whether an arrangement contains a lease by assessing whether the fulfilment of a transaction is dependent on the use
of a specific asset and whether the transaction conveys the right to control the use of that asset to the Company in return for payment.
Company as a lessee:
At the date of commencement of lease, the Company recognizes, “Right of Use” or ROU Asset at cost, and the lease liability is measured at the
present value of all lease payments that are not paid at that date, except leases with a lease term of 12 months or less that do not contain a purchase
option (Short term leases) and leases for which the underlying asset is of low value.
3.8.1 Initial Measurement:
The “Cost of ROU Asset” includes amount of:
i. Initial measurement of lease liability
ii. Prepaid lease payments less any lease incentives received
iii. Initial direct cost incurred by the company as lessee and
iv. Estimated costs to dismantle remove or, restore the underlying asset.
The lease liability is measured at the present value of lease payments that are not paid and discounted using interest rate implicit in the lease
if that rate can be readily determined. If that rate cannot be readily determined, the Company uses incremental borrowing rate.
The “lease payment” includes:
i. Fixed payments (including in-substance fixed payment);
ii. Variable lease payment that depends upon an index or a rate;
iii. Amount payable by the company as residual value guarantee;
iv. The exercise price of purchase option if the Company expects with reasonable certainty to exercise the same;
v. Payment of penalties for termination by the Company, if the term of lease contains such option for the Company.
The Company applies Ind AS 36 - Impairment of Assets to determine whether a ROU asset is impaired and accounts for any identified impairment
loss as per its accounting policy on Impairment of non-financial assets. ROU assets are depreciated over the lease term on a straight-line basis.
3.8.2 Subsequent Measurement:
During subsequent periods, lease liability is measured at amortised cost using effective interest rate method and the ROU asset is measured at cost
less accumulated depreciation and accumulated impairment, if any.
The lease payments are classified as cash flow from financing activities.
3.8.3 Short-term leases and leases of low-value assets:
The lease payments for leases with a lease term of 12 months or less that do not contain a purchase option and leases for which the underlying
asset is of low value, are recognized as expenses on a straight-line basis over the lease term.
Company as a lessor:
Leases for which the Company is a lessor are classified as either finance or operating leases. Whenever the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee, the contract is classified as finance lease. All other leases are classified as operating leases.
In case of operating leases, rental income is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same
basis as rental income. Contingent rents are recognised as income in the period in which they are earned.
In case of finance leases, amounts due from lessees under finance leases are recorded as receivables at the Company’s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in
respect of the lease.
3.9 Inventories:
Inventories of raw materials, stores and spares are valued at the lower of cost (net of tax credit) and net realisable value. Cost is determined on
moving weighted average price.
Stores and spares (excluding must keep items) held but not issued for more than 5 years are valued at 5% of the cost.
Materials and other supplies held for use in the production (other than considered as non-moving) are not written down below cost, if the
finished products in which they will be incorporated are expected to be sold at or above cost.
Inventories of finished goods, semi-finished goods, intermediary products, and work in process including scraps generated from aluminium
processing are valued at lower of cost and net realisable value.
Cost includes value of material consumed plus cost of conversion comprising of labour cost and attributable portion of manufacturing overhead.
Net realisable value is the estimated selling price in the ordinary course of business available on the reporting date less estimated cost necessary
to make the sale.
3.10 Trade receivables:
Trade receivables are measured at their transaction price unless it contains a significant financing component or pricing adjustments embedded
in the contract, in which case, it is recognised net of such adjustments. Trade receivables are held with the objective of collecting the contractual
cash flows and therefore are subsequently measured at amortised cost less loss allowance for expected credit losses.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If the receivable is
expected to be collected within a period of12 months or less from the reporting date, they are classified as current assets otherwise as non-current
assets.
3.11 Cash and Cash Equivalents:
Cash and cash equivalents comprise cash at bank and on hand and short-term bank deposits having maturity period of three months or less from
the date of acquisition, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above.
3.12 Financial Instruments:
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
3.12.1 Financial assets:
Initial recognition and measurement:
All Financial Assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss,
transaction cost that are attributable to the acquisition of the Financial Asset. However, trade receivables that do not contain a significant
financing component are measured at transaction price. Transaction costs directly attributable to the acquisition of financial assets measured at
fair value through profit or loss are recognized immediately in the Statement of Profit and Loss.
Subsequent measurement:
For the purpose of subsequent measurement, the Company classifies the Financial Assets in the following categories:
a. Financial assets at amortised cost:
Financial assets, including trade receivables where it contains significant financing component, are classified as subsequently measured
at amortised costs and are measured accordingly using effective interest method if the financial assets are held within a business model
whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial assets give rise
on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
b. Debt Instruments at fair value through Other Comprehensive Income (‘FVTOCI’):
Debt instruments are measured at fair value through other comprehensive income if these financial assets are held within a business model
whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial
assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
The changes in fair value recognised in other comprehensive income is accumulated in other equity and are reclassified to profit or loss
when such financial assets are disposed of / derecognised.
c. Equity Instruments:
Equity Shares in Subsidiaries, Joint Ventures and Associates at Cost:
Investments in Equity Shares of Subsidiaries, Joint Ventures and Associates are accounted for at cost in the financial statements and the
same are tested for impairment in case of any indication of impairment.
d. Financial assets and Derivatives at fair value through Profit or loss (‘FVTPL’):
Financial assets are classified as subsequently measured at fair value through profit or loss unless it is classified as subsequently measured at
amortised cost or at fair value through other comprehensive income. Transaction costs directly attributable to the acquisition of financial
assets and liabilities at fair value through profit or loss are immediately recognised in the statement of profit or loss.
Investments in equity instrument of entities other than subsidiaries, associates and joint ventures are measured at fair value and changes
in fair values are recognised in profit or loss, unless the Company has irrevocably elected to record the changes in fair values in the other
comprehensive income. The option to record the changes in fair value of equity instruments is exercised on an instrument by instrument
basis. Changes in fair value of equity instruments recoginsed in OCI is accumulated within equity and never reclassified to profit or loss.
3.12.1.1 De-recognition of financial assets:
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expires, or when substantially all the risks
and rewards of ownership of the assets are transferred to another entity. The gain or loss on de-recognition of financial assets that is measured at
amortised cost or fair value through profit or loss is recognised in the statement of profit and loss.
The changes in fair value financial assets (other than equity instruments) recognised in other comprehensive income is accumulated in other
equity and are reclassified to profit or loss when such financial assets are disposed of / derecognised.
3.12.1.2 Impairment of financial assets:
The Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss on the financial Assets that are
measured at amortised cost e.g., loans, debt securities, deposits, trade receivables and bank balance.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as expense /income/ in the Statement of Profit and
Loss. In the Balance Sheet, 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. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the
gross carrying amount.
Simplified Approach:
The Company follows ‘simplified approach’ for recognition of impairment loss allowance on Trade Receivables. 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.
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The
provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward¬
looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are
analysed. On that basis, the Company estimates provision on trade receivables at the reporting date.
General Approach:
For recognition of impairment loss on other financial assets, 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-months ECL is used to provide for impairment loss. However,
if credit risk has increased significantly, lifetime ECL is used. If, in a 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-months ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The
12-months ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
3.12.2 Financial liabilities:
Initial recognition and measurement:
All Financial Liabilities are recognized initially at fair value and, in the case of liabilities subsequently measured at amortised cost, they are
measured net of directly attributable transaction cost. In case of Financial Liabilities measured at fair value through profit or loss, transaction
costs directly attributable to the acquisition of financial liabilities are recognized immediately in the Statement of Profit and Loss.
The Company’s Financial Liabilities include trade and other payables, loans and borrowings and derivative financial instruments.
Subsequent measurement:
The measurement of financial liabilities depends on their classification, as described below:
(i) Financial Liabilities at fair value through profit or loss:
Financial Liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon
initial recognition as at fair value through the Statement of Profit and Loss. This category also includes derivative financial instruments
entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit and Loss.
(ii) Financial Liabilities at amortised cost:
Financial Liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of
subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are
determined based on the effective interest method. Gains and losses are recognized in the Statement of Profit and Loss when the liabilities
are derecognized as well as through the Effective Interest Rate (EIR) amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or cost that are an integral part of the
EIR. The EIR amortisation is included as finance costs in the Statement of Profit and Loss.
(iii) Financial Guarantee Contracts:
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder
for a loss it incurs because the specified debtor fails to make the payment when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction cost that are directly attributable
to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per
impairment requirements of Ind AS 109 and the amount initially recognized less cumulative income recognized in accordance with
principles of Ind AS 115.
3.12.2.1 De-recognition of financial liability:
Financial liabilities are derecognised when, and only when, the obligations are discharged, cancelled or expired.
In the case of retention for liquidated damages, if on finalization/closure of contract, liquidated damage is leviable, the amount retained is written
back and recognized as income except capital contracts where liquidated damage is directly attributable to escalation/increase in the cost of the
asset. In such case, the retention amount is adjusted against cost of the asset.
3.12.3 Off-setting financial instruments:
Financial assets and liabilities are offset and the net amount reported in the balance sheet, when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal course of business.
3.13 Borrowing cost:
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until
such time as the assets are substantially ready for their intended use.
Qualifying assets are assets that necessarily take a substantial period of time, considered as more than twelve months, to get ready for their
intended use or sale. Transaction costs in respect of long-term borrowings are amortised over the tenure of respective loans using effective interest
method.
All other borrowing cost is recognised in statement of profit and loss in the period in which they are incurred.
3.14 Accounting for government grants:
Government grants are recognised when there is reasonable assurance that the conditions attached to them will be complied and that the grants
will be received.
Government grants related to assets whose primary condition is that the Company should purchase, construct, or otherwise acquire non-current
assets are recognised in the balance sheet by setting up the grant as deferred income and are transferred to profit or loss on a systematic basis over
the useful life of the related assets.
Government grants related to income are recognised as income on a systematic basis over the periods necessary to match them with the costs for
which they are intended to compensate.
The Company receives Government grant as export incentive under Foreign Trade Policy (FTP) of the Government of India. The same is
recognised/presented as other operating income when there is a reasonable assurance that the conditions attached to them will be complied and
that the grants will be received.
3.15 Employee Benefits:
3.15.1 Short-term employee benefits:
A liability is recognised for benefits accruing to employees in respect of wages and salaries, short term compensated absences etc. in the period
the related service is rendered at the undiscounted amount of the benefits expected to be paid.
3.15.2 Post-employment and long-term employee benefits:
3.15.2.1 Defined contribution plans:
A defined contribution plan is plan under which fixed contributions are paid to a separate entity and the Company has no legal or
constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay. Contributions to defined contribution
retirement benefit plans are recognised as an expense when employees have rendered service entitling them for such contributions.
3.15.2.2 Defined benefit plans:
For defined benefit plans, the cost of providing benefits is determined through actuarial valuation using the Projected Unit Credit Method,
carried out at each balance sheet date.
The service cost, net of interest on the net defined benefit liability, is treated as an expense. Past service cost is recognised as an expense when the
plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognised.
Re-measurement gains and losses of the net defined benefit liability are recognised immediately in other comprehensive income and are not
reclassified to statement of profit and loss.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined-benefit obligation as reduced by the
fair value of plan assets.
3.15.3 Other long-term employee benefits:
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash
outflows in respect of services provided by employees up to the reporting date. The expected costs of these benefits are accrued over the
period of employment using the same accounting methodology as used for defined benefit retirement plans. Actuarial gains and losses
arising from experience adjustments and changes in actuarial assumptions are recognised in the statement of profit and loss in the period
in which they arise. These obligations are valued annually by independent actuaries.
3.16 Revenue:
3.16.1 Revenue from sale of goods or services:
The Company’s revenue is generated mainly from the sale of products like Alumina, Aluminium and Power. Revenue from contracts with
customers is recognised upon satisfaction of the performance obligation for an amount that the Company is entitled to under the contract
(net of variable consideration, if any), allocated to that performance obligation.
The transaction price of a promised goods or services is the amount net of discounts, excluding the taxes and duties collected on behalf of the
government that reflects the consideration to which the Company expects to be entitled in exchange for that goods or services. Revenue from
sale of goods include revenue from related ancillary services, if any.
Performance obligation is satisfied when customer obtains control of the goods or services promised as per the contract. The control of the
goods or services are transferred to the customer when legal title, physical possession, significant risk and rewards of ownership passes to
the customer, customer has accepted the goods in accordance with the sales contract or there is an objective evidence that all criteria for
acceptance have been satisfied, and the Company has the present right to payment, all of which generally occurs upon shipment or delivery of
the goods or services.
Revenue from sale of wind power is recognised based on energy transmitted to DISCOMs / consumer at the price notified by respective
authorities subject to Power Purchase Agreement (PPA) with them.
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs part of
its obligation by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset
is recognised for the earned consideration when that right is conditional on the Company’s future performance.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration 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 received.
3.16.2 Interest income:
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of
income can be measured reliably. Interest income is recognised using effective interest rate method.
3.16.3 Dividend:
Dividend income from investments is recognised when the right to receive the dividend is established, it is probable that the economic benefits
associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
3.16.4 Income from Incentives:
Incentives and subsidies are recognized as other operating revenue when there is reasonable assurance that the Company will comply with the
conditions as provided in the relevant statute.
3.16.5 Liquidated Damages:
Claims for liquidated damages are accounted for as and when these are considered recoverable by the Company. These are adjusted to the capital
cost or recognised in statement of profit and loss, as the case may be.
3.17 Taxes on Income:
3.17.1 Current taxes:
Provision for current tax is made as per the provisions of the Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income
or in equity). Management periodically evaluates positions taken in the tax returns with respect to applicable tax regulations which are subject to
interpretation and establishes provisions where appropriate
Current tax assets and tax liabilities are offset where the Company has a legally enforceable right to offset and intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously.
3.17.2 Deferred taxes:
Deferred tax is provided using the Balance Sheet method on temporary differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the reporting date. Deferred tax assets and liabilities are measured based on tax
rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in
equity).
The carrying amount of deferred tax asset is reviewed at the end of each reporting period and adjusted to the extent it has become probable that
sufficient taxable profits will be available to allow the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off when they relate to income taxes levied by the same
taxation authority.
3.18 Exceptional items:
Exceptional items are items of income and expenses within profit or loss from ordinary activities but of such size, nature, or incidence whose
disclosure is necessary for better explanation of the financial performance achieved by the Company.
Note No. 4. Critical accounting judgments and key sources of estimation uncertainty:
The preparation of the financial statements requires the management to make complex and/or subjective judgements, estimates and assumptions about
matters that are inherently uncertain. These estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent
liabilities and assets at the date of the financial statements and also revenues and expenses during the reported period.
The estimates and associated assumptions are based on past experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised.
4.1 Critical accounting judgments:
4.1.1 Financial assets at amortised cost:
Apart from those involving estimations that the management have made in the process of applying the Company’s accounting policies that have
the most significant effect on the amounts recognised in the financial statements, management has decided that reporting of Company’s financial
assets at amortised cost would be appropriate in the light of its business model and have confirmed the Company’s positive intention and ability
to hold these financial assets to collect contractual cash flows.
4.1.2 Materiality:
The Company assesses materiality threshold considering financial parameters such as total assets, revenue, total expense and profit before tax for
preparation and presentation of financial statements and follows on a consistent basis. This threshold is reviewed periodically.
4.2 Key sources of estimation uncertainty:
The following are the key assumptions concerning the future, and other key sources of estimation of uncertainty at the end of the reporting period
that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
4.2.1 Impairment:
Investments in Associates and other investments, loans and advances, property, plant and equipment and intangible assets are reviewed for
impairment whenever events and changes in circumstances indicate that the carrying value may not be fully recoverable or atleast annually.
Future cash flow estimates of Cash Generating Units which are used to calculate the asset’s fair value are based on expectations about future
operations primarily comprising estimates about production and sales volumes, commodity prices, reserves and resources, operating
rehabilitations and restoration costs and capital expenditure.
4.2.2 Useful lives of property, plant and equipment:
The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This reassessment may result in change
in depreciation expense in the future periods.
4.2.3 Assessment of Mining Reserve:
Changes in the estimation of mineral reserves where useful lives of assets are limited to the life of the project, which in turn is limited to the life of
the probable and economic feasibility of reserve, could impact the useful lives of the assets for charging depreciation. Bauxite and coal reserves at
Mines is estimated by experts in extraction, geology and reserve determination and based on approved mining plan submitted to Indian Bureau
of Mines (IBM) or the Coal Controller as the case may be.
4.2.4 Obligation for post-employment benefit liability:
Liability for post-employment benefit and other long term employee benefit is based on valuation by the actuary which is in turn based on
realistic actuarial assumptions.
4.2.5 Provisions and Contingent Liabilities:
The amount recognised as a provision, including tax, legal, restoration and rehabilitation, contractual and other exposures or obligations
is the best estimate of the consideration required to settle the related liability, including any interest charge, taking into account the risks
and uncertainties surrounding the obligation. The Company assess its liabilities and contingent liabilities based upon the best information
available, relevant tax and other laws, contingencies involved and other appropriate requirements.
4.2.6 Fair value measurement and valuation process:
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which
are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the
measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly
or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.
6.1. Amount of capital work in progress includes directly attributable expenses of ' 207.17 crore (previous year ' 191.44 crore) for 5th Stream
Alumina Refinery expansion.
6.2 The Company on 27.09.2017, had awarded a contract favouring M/s Regen Powertech. Pvt. Ltd (the Agency). for supply, erection and
commissioning of 25.5MW Wind Power Project (WPP) at Kayathar, Tamilnadu for a value of ' 163.13 crore. Agency had executed t 119.63 crore
worth of work till FY 2018-19. Thereafter, there was no progress in execution due to financial crisis and liquidity issue of the agency.
Insolvency resolution process was initiated against the said company under Insolvency and Bankruptcy Code, 2016. The Hon’ble National
Company Law Tribunal (NCLT), Chennai passed the Resolution Plan on 01.02.2022 which was not acceptable to the Company. Aggrieved
with the order, the Company filed an appeal to the Hon’ble National Company Law Appellate Tribunal (NCLAT). The NCLAT vide its order
dated 31.08.2023 allowed the consolidation of CIRP (Corporate Insolvency Resolution Process) setting aside the resolution plan already
approved by NCLT. The Company appealed petition was disposed off by NCLAT vide its order dated 10.11.2023 in view of setting aside of
earlier resolution plan.
As there is inordinate delay in the resolution process to take the project forward, the Company has considered these as indication for
impairment assessment of the project and provided for ' 79.25 crore as on 31.03.2025 (as on 31.03.2024 t 79.25 crore).
32.A. Employee benefit Plans
32.A.1 Defined contribution plans
a) Pension fund: The Company pays fixed contribution to the trustee bank of Pension Fund Regulatory and Development Authority (PFRDA), which
in turn invests the money with the insurers as specified by the employee concerned. The company’s liability is limited only to the extent of fixed
contribution.
32.A.2 Defined benefit plans
a) Provident fund: The provident fund of the Company is managed by an exempted trust under Section 17 of the Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952. Both the employees and the Company make monthly contributions to the provident fund at a specified percentage
of employees salary. The Company contributes major part of the fund to the Trust, which invests the funds in permitted securities as per the statute.
The remaining part is contributed to the Government administered Pension Fund.
The Company has an obligation to pay minimum rate of return to the members as specified by Government of India. As per the condition of exemption,
the Company shall make good for the deficiency, if any, between the return from the investments of the Trust and the notified interest rate by the
Government. The contributions made by the Company and the shortfall of interest, if any, are recognised as an expense in profit and loss under
employee benefits expense.
Accordingly the Company has obtained actuarial valuation in accordance with Ind AS 19 and there is no shortfall in the funds managed by the trust
as at 31 March 2025 and 31 March 2024. The present value of obligation, the fair value of the plan assets and other key assumptions are summarized
below.
b) Gratuity: Gratuity payable to employees as per The Payment of Gratuity Act subject to a maximum of ^ 20,00,000/-. The gratuity scheme is funded by
the Company and is managed by a separate trust. The liability for gratuity under the scheme is recognised on the basis of actuarial valuation.
c) Post retirement medical benefit: The benefit is available to retired employees and their spouses who have opted for the benefit. Medical treatment as
an in-patient can be availed from the Company’s hospital/Govt. Hospital/ hospitals as per company’s rule. They can also avail treatment as out patient
subject to maximum ceiling of expenses fixed by the Company. The scheme is funded by the Company and is managed by a separate trust. The liability
under the scheme is recognised on the basis of actuarial valuation and funded to the Trust.
d) Settling-in-benefit: On superannuation/retirement/termination of service, if opted for the scheme, the transfer TA is admissible to the employees
and / or family from the last head quarters to the hometown or any other place of settlement limited to distance of home town. Transport of personal
conveyance shall also be admissible. The liability for the same is recognised on the basis of actuarial valuation.
e) NALCO Benevolent Fund Scheme : The objective of the scheme is to provide financial assistance to families of the members of the scheme who die
while in employment of the Company. As per the scheme there will be contribution by members @ ^ 30/- per member per death, in the event of death
of a member while in the service of the company and matching contribution is made by the Company. The liability for the same is recognised on the
basis of actuarial valuation.
f) NALCO Retirement Welfare Scheme : The objective of the scheme is to provide financial assistance as a gesture of goodwill as post retirement support
to employees retiring from the services of the company. As per the scheme the recovery from each employee member would be ^ 10/- per retiring
member. The Company would provide equivalent sum as matching contribution. The liability for the same is recognised on the basis of actuarial
valuation.
g) Superannuation gift scheme: The objective of the scheme is to recognise the employees superannuating or retiring on medical ground from the
services of the Company. The scheme includes a gift item worth of ^ 25000/- per retiring employees to be presented on superannuation/ retirement.
The liability for the same is recognised on the basis of actuarial valuation.
h) Post retirement honour scheme: The scheme has been introduced during current financial year 2024-25 to honour the superannuated employees
who have attained the age of 70/75/80/85/90/95/100 years. The scheme provides honour amount ranging from ^ 45,000/- to ^ 1,90,000/- for each
eligible employees based on attaining the corresponding age. The liability for the same is recognised on the basis of actuarial valuation.
32.A.3 Other long term employees benefits
a) Compensated absences : The accumulated earned leave, half pay leave & sick leave is payable on separation, subject to maximum permissible
limit as prescribed in the leave rules of the Company. During the service period encashment of accumulated leave is also allowed as per the
Company’s rule. The obligation is funded by the Company and is managed by a separate trust. The liability for the same is recognised on the basis of
actuarial valuation and is funded to the Trust.
b) Long Service Reward : The employee who completes 25 years of service are entitled for a long service reward which is equal to one month basic pay
and DA. The liability for the same is recognised on the basis of actuarial valuation.
c) NEFFARS : NEFFARS stands for ”Nalco Employees’ Family Financial Assistance Rehabilitation Scheme”. In the event of disablement/death, on
deposit of prescribed amount as stipulated under the scheme, the Company pays monthly benefit to the employee/ nominee at their option up to the
date of notional superannuation. The liability for the same is recognised on the basis of actuarial valuation.
The employee benefit plans typically expose the Company to risks such as actuarial risk, investment risk, interest risk, longevity risk and salary risk:-
i. Actuarial risk: It is the risk that employee benefits will cost to the Company more than expected. This can arise due to one of the following reasons:
a. Adverse Salary Growth Experience: Salary hikes that are higher than the assumed salary escalation will result into an increase in obligation at a
rate that is higher than expected.
b. Variability in mortality rates: If actual mortality rates are higher than assumed mortality rate assumption then the gratuity benefits will be
paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cash flow will lead to an actuarial loss
or gain depending on the relative values of the assumed salary growth and discount rate.
c. Variability in withdrawal rates: If actual withdrawal rates are higher than assumed withdrawal rate assumption then the gratuity benefits will
be paid earlier than expected. The impact of this will depend on whether the benefits are vested as at the resignation date.
ii. Investment risk: For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may not be the fair value
of instruments backing the liability. In such cases, the present value of the assets is independent of the future discount rate. This can result in wide
fluctuations in the net liability or the funded status if there are significant changes in the discount rate during the inter-valuation period.
iii. Interest risk: The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the defined benefit
obligation will tend to increase.
iv. Longevity risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants
both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
v. Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an
increase in the salary of the plan participants beyond assumed plan will increase the plan’s liability.
Note:
35.1 Consequent upon amendment of Mines and Minerals (Development and Regulation) Amendment Act, 2021 with effect from 28th March, 2021,
Section 8A(8) provides that the period of mining leases, other than the mining leases granted through auction, shall be extended on payment of such
additional amount as specified in the Fifth Schedule. Based on demand raised by IBM through I3MS portal for royalty, the Company had paid DMF
and NMET along with additional royalty for Both North & Central Block and South Block of Panchapatmali Bauxite Mines till November 2022.
Ministry of Mines, Govt of India Vide Letter Dated 31.01.2023 clarified that additional royalty payment in respect of government companies
are applicable in case of extension of lease under 8A(8) of the Act or grant of fresh lease to Govt. Companies where area are reserved after
2015 as per Section 17A(2C)of Mines and Mineral (Development and Regulation) Act, 2015. Panchpatmali (South Block) and Panchpatmali
(Central and North block) mining leases of the Company have been deemed to be granted for 50 years i.e. up to 19.07.2029 and 16.11.2032
respectively in accordance with the rule 3(1) of Mineral (Mining by Government Company) Rules, 2015 now Rules 72(1) of Mineral (Other
than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 [M(OAHCEM)CR, 2016]. Thus these leases of the Company have
not been extended under Section 8A(8) read with Rule 72(2) & (3) of M (OAHCEM)CR, 2016.
Ministry of Mines, Govt. of India had also requested to Govt. of Odisha that no additional royalty may be charged from the Company till the
completion of lease period of 50 years for both the Mines and the additional Royalty already paid by the Company so far in respect of these two
mining leases may be adjusted in lieu of future Royalty payments.
Mines and Steel Department, Govt. of Odisha vide its letter no. 2012/S&M, Bhubaneswar dated 06.03.2024 clarified that payment of additional
amount by the CPSU/SPSU in respect of their mining leases granted prior to introduction of MMDR Amendment Act, 2015 will be made applicable
on completion of 50 years of the validity of the said leases in absence of any such explicit mention under the provisions of Mineral (OAHCEM)
Concession Rules 2016. It also clarifies that the Govt. of Odisha will discontinue receipt of additional amount and adjust the amount paid so far
against the royalty payments in 2024-25.
Considering the above clarification, the Company does not recognise any additional royalty and related expenses during the current financial year
and amount charged till 31.03.2023 has been reversed recognising ^ 426.81 crore as the exceptional income during FY 2023-24. The amount of
additional royalty and related expenses of ^ 352.29 crore paid by the Company till Nov-22 which would be adjusted against the royalty payment of
2024-25 has been recognised as claim from Govt. Authority.
37 - Segment information
37.1 Products from which reportable segments derive their revenues
Information reported to the chief operating decision maker (CODM) for the purpose of resource allocation and assessment of segment performance
focuses on the types of goods delivered. The directors of the company have chosen to organise the Company around differences in products. No
reporting segment have been aggregated in arriving at the reportable segments in the Company. Specifically, the Company’s reportable segment
under Ind AS 108- Operating Segments are as follows:
i) Chemical segment
ii) Aluminium segment
The Company has considered Chemicals and Aluminium as the two primary operating business segments. Chemicals include Calcined Alumina,
Alumina Hydrate and other related products. Aluminium includes Aluminium ingots, wire rods, billets, strips, rolled and other related products.
Bauxite produced for captive consumption for production of alumina is included under chemicals and power generated for captive consumption for
production of Aluminium is included under Aluminium segment. Wind Power Plant commissioned primarily to harness the potential renewable
energy sources is included in the unallocated Common segment.
39.2 Financial risk management objectives
In the course of its business, the Company is exposed primarily to fluctuations in foreign currency exchange rates, interest rates, equity prices,
liquidity and credit risk, which may adversely impact the fair value of its financial instruments. The Company has a risk management policy which
not only covers the foreign exchange risks but also other risks associated with the financial assets and liabilities such as interest rate risks and credit
risks.
The objectives of the Company’s risk management policy are, inter-alia, to ensure the following:
i) Sustainable business growth with financial stability;
ii) Provide a strategic framework for Company’s risk management process in alignment with the strategic objectives including the risk
management organisation structure;
iii) That all the material risk exposures of Company, both on and off-balance sheet are identified, assessed, quantified, appropriately mitigated and
managed and
iv) Company’s compliance with appropriate regulations, wherever applicable, through the voluntary adoption of international best practices, as
far as may be appropriate to the nature, size and complexity of the operations.
The risk management policy is approved by the board of directors. The Internal Control Team would be responsible to evaluate the efficacy and
implementation of the risk management system. It would present its findings to the Audit Committee every quarter. The Board is responsible
for the Company’s overall process of risk management. The Board shall, therefore, approve the compliance and risk management policy and any
amendments thereto, and ensure its smooth implementation.
39.3 Market risk
Market risk is the risk of any loss in future earnings (spreads), in realizable fair values (economic value) or in future cash flows that may result from
a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign
currency exchange rates, liquidity and other market changes. The Company may also be subjected to liquidity risk arising out of mismatches in the
cash flows arising out of sales proceeds and funds raised and loan repayments/prepayments. Future specific market movements cannot be normally
predicted with reasonable accuracy.
39.4 Foreign currency risk management
Foreign currency risk emanates from the effect of exchange rate fluctuations on foreign currency transactions. The overall objective of the currency
risk management is to protect the Company’s income arising from changes in foreign exchange rates. The policy of the Company is to avoid any
form of currency speculation. Hedging of currency exposures shall be effected either naturally through offsetting or matching assets and liabilities
of similar currency, or in the absence of thereof, through the use of approved derivative instruments transacted with reputable institutions. The
Currency risk is measured in terms of the open positions in respective currencies vis-a-vis the Company’s operating currency viz. INR. A currency
gap statement shall be prepared to find the gap due to currency mismatch.
The fluctuation in foreign currency exchange rates may have impact on the income statement and equity, where any transaction references more than
one currency or where assets/liabilities are denominated in a currency other than the functional currency of the respective consolidated entities.
The Company undertakes transactions denominated in foreign currency; consequently, exposures to exchange rate fluctuations arise. Exchange rate
are managed within approved policy parameters utilising forward foreign exchange contracts.
The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period
are as follows:-
39.4.1 Foreign currency sensitivity analysis
The Company evaluates the impact of foreign exchange rate fluctuations by assessing its exposure to exchange rate risks. It hedges a part of these risks
by using derivative financial instruments in accordance with its risk management policies.
The foreign exchange rate sensitivity is calculated for each currency by aggregation of the net foreign exchange rate exposure of a currency and a
simultaneous parallel foreign exchange rates shift in the foreign exchange rates of each currency by 10%.
The following analysis is based on the gross exposure as of the relevant balance sheet dates, which could affect the income statement. There is no
exposure to the income statement on account of translation of financial statements of consolidated foreign entities.
The following table sets forth information relating to foreign currency exposure at year end.
39.5 Other price risks
39.5.1 Equity price sensitivity analysis
The Company is not exposed to equity price risk arising from equity instruments as all the equity investments are held for strategic rather than
trading purposes.
39.6 Credit risk management
Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations.
Credit risk encompasses both the direct risk of default and the risk of deterioration of creditworthiness as well as concentration risks. There is no
significant credit exposure as advance collection from customer is made.
1. The Company does not have any borrowings/debt except bill discounting (refer Note 20).
2. The variation in ratios over the previous year is attributable to higher net profit resulting from higher realisation and decrease in major raw
material prices.
3. The trade receivable turnover ratio has been computed considering the sale and rececivable of the Wind Power only.
43 - Regrouping of previous year’s figures
Previous year’s figures have been regrouped/rearranged wherever considered necessary to make them comparable.
For and on behalf of Board of Directors
(CS B. K. Sahu) (Sadashiv Samantaray) (Brijendra Pratap Singh)
Company Secretary Director (Commercial) Chairman-cum-Managing Director
DIN:08130130 Director (Finance) Addl. Charge
DIN:08665585
For B M Chatrath & Co LLP. For SRB & Associates.
Chartered Accountants Chartered Accountants
FRN: 301011E/E300025 FRN-310009E
(CA Sanjay Sarkar) (CA Sarat Chandra Bhadra)
Place: Bhubaneswar Partner Partner
Date: 21st May, 2025 M.No.: 064305 M.No.: 017054
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