3.15 Provisions, Contingent Liabilities and
Contingent Assets
Provisions and Contingent Liabilities
A Provision is recognised when the Company has present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation and in respect of which a reliable estimate can be made. Provisions are discounted to their present value, where the time value of money is material. An provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
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 recognised as a separate asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Contingent liability is a possible obligation arising from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events but is not recognised because it is not possible that an outflow of resources embodying economic benefit will be required to settle the obligations or reliable estimate of the amount of the obligations cannot be made.
in cases where the possible outflow of economic resources as a result of present obligation is considered improbable or remote, no Provision is recognised or disclosure is made.
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits. Contingent Assets are not recognised and are disclosed only where an inflow of economic benefits is probable.
3.16 Income Taxes
Tax expense recognised in Statement of Profit and Loss comprises the sum of deferred tax and current tax except to the extent that the tax relates to the items that are recognised directly in other Comprehensive Income (oCI) or in equity in which case the related tax is recognised either directly in oCI or equity accordingly.
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income-tax Act. The Company offsets current tax assets and current tax liabilities when the legally enforceable right to offset exists and they are intended to be settled net or realised simultaneously.
Deferred income taxes are calculated using the balance sheet liability method/approach. deferred tax liabilities are generally recognised in full for all taxable temporary differences. deferred tax assets are recognised to the extent that it is probable that the underlying tax loss, unused tax credits or deductible temporary difference will be utilised against future taxable income. the carrying amount of deferred tax assets is reviewed at each balance sheet 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 tax asset to be utilised.
deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
the Company offsets deferred income tax assets and liabilities when the legally enforceable right to offset current tax assets and liabilities exists and they are intended to be settled or realised simultaneously.
3.17 Financial Instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument and are measured at fair value on initial recognition. transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, except for those which are classified at Fair Value through Profit & Loss (FVtPL) at inception, are adjusted with the fair value on initial recognition.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expires, or has been transferred, and the Company has transferred all substantial risks and rewards of ownership. A financial liability (or a part of financial liability) is derecognised when the obligation specified in the contract is extinguished or discharged or cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:
• amortised cost
• financial assets at fair value through profit or loss (FVTPL)
• financial assets at fair value through other comprehensive income (FVoCI)
An financial assets except for those at FVTPL are subject to review for impairment at least at each reporting date.
Amortised cost
A financial asset is measured at amortised cost using effective interest rates if the following conditions are met:
a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
b) 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.
the Company's cash and cash equivalents, trade receivables and most of other receivables fall into this category of financial instruments.
Financial assets at FVTPL
Financial assets at FVTPL include financial assets that either do not meet the criteria for amortised cost classification or that are equity instruments held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. All derivative financial instruments also fall into this category. assets in this category are measured at fair value with gains or losses recognised in Statement of Profit and Loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.
financial assets at FVOCI
FVToCI financial assets are either debt instruments that are managed under hold to collect and sell business model or are non-trading equity instruments that are irrevocable designated to this category.
FVToCI financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income, except for interest and
dividend income, impairment losses and foreign exchange differences on monetary assets, which are recognized in Statement of Profit and Loss.
Classification and subsequent measurement of financial liabilities
Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at FVTPL, that are carried subsequently at fair value with gains or losses recognized in Statement of Profit and Loss. All derivative financial instruments are accounted for at FVTPL.
Embedded Derivatives
Some hybrid financial liability contracts contain both derivative and a non-derivative component. in such cases, the derivative component is termed as embedded derivative, with a non-derivative component representing the host financial liability contract. if the economic characteristics and risks of embedded derivatives are not closely related to those of the host contract and the contract itself is not measured at FVTPL, the embedded derivative is bifurcated and reported at fair value, with gains and losses recognised in net gains (losses) on financial assets/liabilities at fair value through profit or loss (FVTPL). the host financial liability is accounted for in accordance with the appropriate ind As.
Fair value measurement
the Company classifies the fair value of its financial instruments in the following hierarchy, based on the inputs used in their valuation:
i) Level 1: the fair value of financial instruments quoted in active markets is based on their quoted closing price at the Balance Sheet date.
ii) Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar instruments and use of comparable arm's length transactions.
iii) Level 3: the fair value of financial instruments that are measured on the basis of entity specific valuations using inputs that are not based on observable market data (unobservable inputs).
Impairment of financial Assets
in accordance with ind As 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss for financial assets measured at amortised cost or at fair value through other comprehensive income.
ECL is the weighted average difference between all contractual cash flows that are due to the Company
in accordance with the contract and all the cash flows that the Company expects to receive.
Trade Receivables
trade receivables are recognised initially at fair value based on amounts exchanged and subsequently at amortised cost less any impairment as per ind As 109.
Offsetting of financial instruments
Financial assets and liabilities are offset, with net amount reported in the balance sheet, only 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 both in the normal course of business and in the event of default, insolvency or bankruptcy of the counterparty.
3.18 Investments in subsidiaries, joint ventures, associates and equity Instruments
investment in subsidiaries, associate and joint ventures are carried at cost less accumulated impairment, if any in the Company's standalone financial statements in accordance with ind AS-27, 'Separate Financial Statements'.
investments in equity instruments, where the Company has opted to classify such instruments at fair value through other comprehensive income (FVTOCI) are measured at fair value through other comprehensive income. there is no recycling of the amounts from OCi to P&L, even on sale of investment. However, the Company may transfer the cumulative gain or loss within equity. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment.
3.19 Segment reporting
Segments are identified based on the manner in which the Chief Operating Decision Maker ('CODM') decides about resource allocation and reviews performance. Segment results that are reported to the CODM include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire property and equipment and intangible assets.
the Company has eight operating segments: five integrated steel plants and three alloy steel plants, being separate manufacturing units, have been considered reportable operating segments. in identifying these operating segments, management generally considers the Company's separately identifiable manufacturing operations representing its main operations.
Each of these operating segments is managed separately as each has different requirements in terms of technology, raw material and other resources. All inter-segment transfers are carried out at arm's
length prices based on prices charged to unrelated customers in standalone sales of identical goods or services.
in addition, corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment. This primarily applies to the Company's administrative head office and mining operations.
there have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.
3.20 Earnings per share
Basic earnings per share is computed by dividing profit or loss for the year attributable to equity holders by the weighted average number of shares outstanding during the year. Partly paid-up shares are included as fully paid equivalents according to the fraction paid-up.
Diluted earnings per share is computed using the weighted average number of shares and dilutive potential shares except where the result would be anti-dilutive
3.21 Significant Judgements, Assumptions and Estimations in applying accounting Policies
3.21.1 Leases
the Company evaluates if an arrangement qualifies to be a lease as per the requirements of ind AS 116. identification of a lease requires significant judgment. the Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.
3.21.2 Close-down and Restoration Obligations
Close-down and restoration costs are normal consequence of mining or production, and majority of close-down and restoration expenditure are incurred in the years following the closure of mine. Although the ultimate cost to be incurred is uncertain, the Company estimate their costs based on current interpretation of scientific and legal data and existing technology, in addition to assumptions about probability and future costs.
3.21.3 recognition of Deferred Tax assets
the extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company's future taxable income against which the deferred tax assets can be utilized. in addition, significant judgement is required in assessing the impact of any legal or economic limits.
3.21.4 Inventories
the Company estimates the cost of inventories taking into account the most reliable evidence, such as cost of materials and overheads considered attributable to the production of such inventories including actual
cost of production, etc. Management also estimates the net realisable values of inventories, taking into account the most reliable evidence available at each reporting date. Significant technical and commercial judgements are required to determine the Company's quality and quantity of inventories. the future realisation of these inventories may be affected by future technology or other market-driven changes that may reduce future selling prices.
3.21.5 Defined Benefit Obligation (DBO)
Employee benefit obligations are measured on the basis of actuarial assumptions which include mortality and withdrawal rates as well as assumptions concerning future developments in discount rates, medical cost trends, anticipation of future salary increases and the inflation rate. the Company considers that the assumptions used to measure its obligations are appropriate. However, any changes in these assumptions may have a material impact on the resulting calculations.
3.21.6 Fair Value Measurements
the Company applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. this involves developing estimates and assumptions consistent with the market participants to price the instrument. the Company's assumptions are based on observable data as far as possible, otherwise on the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.
3.21.7 Provisions and Contingencies
the assessments undertaken in recognising provisions and contingencies have been made in accordance with indian Accounting Standards (ind As) 37, 'Provisions, Contingent Liabilities and Contingent Assets' the evaluation of the likelihood of the contingent events is applied best judgement by management regarding the probability of exposure to potential loss.
3.21.8 Mine Closure and restoration Obligations
Environmental liabilities and Asset Retirement Obligation (ARO): Estimation of environmental liabilities and ARO require interpretation of scientific and legal data, in addition to assumptions about probability and future costs.
3.21.9 useful lives of depreciable/ amortisable assets (tangible and intangible)
Management reviews its estimate of the useful lives of depreciable/ amortisable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to actual normal wear and tear that may change the utility of plant and equipment.
ii) Risk Management
"The Company is exposed to various risks in relation to financial instruments. The Company's financial asset and liabilities by category, are summarised in note 43 (i). the main types of risks are market risk, credit risk and liquidity risk. the Company's risk management is co-ordinated at its headquarters, in close cooperation with the Board of Directors, and focuses on actively securing the Company's short to medium-term cash flows by minimising the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns. the Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. the most significant financial risks to which the Company is exposed are described below.
A) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Comapny. The Company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. the Company's maximum exposure to credit risk is limited to the carrying amount of following types financial assets.
- Cash and cash equivalents
- Derivative financial instruments
- trade receivables
- other financial assets measured at amortized cost
the Company continuously monitors defaults of customers and other counterparties, identified either individually or by the Company, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. the Company's policy is to deal only with creditworthy counterparties.
a) Credit risk management Cash and cash equivalent
Credit risk related to cash and cash equivalents is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.
Derivative financial instruments
Credit risk related to derivative financial instruments is also managed by only entering into such arrangement with highly rated banks or financial institutions as counterparties. the company diversifies its holdings with multiple counterparties.
Trade receivables
Credit risk related to trade receivables are mitigated by taking bank guarantees from customers where credit risk is high. the Company closely monitors the credit-worthiness of the debtors and only sells goods to credit-worthy parties. the Company's internal systems are configured to define credit limits of customers, thereby limiting the credit risk to pre-calculated amounts.
Other financial assets measured at amortized cost
other financial assets measured at amortized cost includes loans and advances to employees and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously, while at the same time internal control system in place ensure the amounts are within defined limits.
b) Expected credit losses
Company provides expected credit losses based on the following;
Trade receivables
the Company recognizes lifetime expected credit losses on trade receivables using a simplified approach and uses historical information to arrive at loss percentage relevant to each category of trade receivables.
For descriptive note on trade receivables ageing, refer note 48.4 (B)
Other financial assets measured at amortized cost
Company provides for expected credit losses on "loan advances and other than trade receivables" by assessing individual financial instruments for expectation of any credit losses. Since, this category includes loans and receivables of varied natures and purpose, there is no trend that the Company can draw to apply consistently to entire population. For such financial assets, the Company's policy is to provide for 12 month expected credit losses upon initial recognition and provide for lifetime expected credit losses upon significant increase in credit risk. the Company does not have any expected loss based impairment recognised on such assets considering their low credit risk nature, though incurred loss allowances are disclosed under each sub-category of such financial assets.
B) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities. Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Company's liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.
Maturities of financial liabilities
The tables below analyse the company's financial liabilities into relevant maturity companying based on their contractual maturities for all nonderivative financial liabilities and the amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.
C) Market Risk a) Foreign currency risk
Most of the Company's transactions are carried out in INR. Exposures to currency exchange rates arise from the Company's overseas borrowing arrangements, which are primarily denominated in uS dollars (uSD).
To mitigate the Company's exposure to foreign currency risk, non-Wr cash flows are monitored and forward exchange contracts are entered into in accordance with the Company's risk management policies. Generally, the Company's risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows (due after 6 months). Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Forward exchange contracts are mainly entered into for significant long-term foreign currency exposures that are not expected to be offset by other same-currency transactions.
b) Interest rate risk
The Company's policy is to minimise interest rate cash flow risk exposures on long-term financing. Long term borrowings are therefore usually at fixed rates. At 31st March, 2024, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. other borrowings are at fixed interest rates. the Company's investments in bonds all pay fixed interest rates. the exposure to interest rates for the Company's money market funds is considered immaterial. The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of /- 1% (2023: /- 1%). these changes are considered to be reasonably possible based on observation of current market conditions. the calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.
47.2 a) (i) The Nine Judge Bench of the Hon'ble Supreme court, vide its order dated 11th November, 2016, upheld the Constitutional validity of the Entry tax legislations passed by the various States. However, the Bench directed that certain other matters raised by the Petitioner, such as matter relating to Entry tax on account of discriminatory rates resulting in entry tax liability amounting to ? 1092.28 crore wherein a rate of 6% was applied on iron Ore and Coking Coal in Bhilai-Durg area as compared to lower rate of 1% on Coking Coal and 3% on iron ore in rest of the areas of Chhattisgarh and matter relating to Entry tax amounting to ? 98.83 crore on goods entering into the local area of Jharkhand from other State etc. may be determined by regular benches hearing the matters. During the year, Chhattisgarh Government notified a settlement scheme (Chhattisgarh Settlement of Arrears of Tax, interest and Penalty Act, 2023) for settlement of old cases of VAT, Entry Tax & CST etc. under which applications were filed assessment year-wise for settlement of Entry Tax dispute pertaining to rate discrimination. Out of nine applications filed, four applications settled by the Commercial Tax Department. The disputed amount for balance five applications are ? 762.91 Crore. The settlement amount for balance five applications as per scheme works out to ? 137.72 crore for which firm liability has been provided as on 31st March, 2024. Balance amount of ? 625.19 crore has been treated as contingent liability. As on 31st March, 2024, the matters are pending before Regular Benches of Hon'ble Supreme Court/ Jurisdictional High Courts/ assigned authorities/ Commercial Tax Department in this regard. Pending decision by the other Courts, disputed
Entry Tax liabilities of ? 724.02 crore have been treated by the Company as Contingent Liability (As at 31st March, 2023 - ? 1184.81 crore) and included in Note No. 47.1 (i) (g) above.
(ii) in respect of levy of Entry Tax in industrial township of Rourkela Steel Plant, Hon'ble Supreme Court, vide its judgment dated 4th November, 2022 had decided that Entry Tax is leviable in areas covered under Rourkela Steel Plant industrial township. However, by virtue of a judgement dated 01.12.2021 pronounced by Orissa High Court and subsequently upheld by the Supreme Court vide its order dated 13.07.2022, the reassessed demands raised under Section10 of Orissa Entry Tax Act, 1999 in absence of original assessment are liable to be rejected. Pending such adjudication as on 31st March, 2024, these demands amounting to ?138.48 crores (31st March 2023 ? 213.00 crores) have been treated as Contingent Liability and included in Note No. 47.1 (i) (g) above.
b) Hon'ble Supreme Court dismissed the SLP by the Company in respect of dispute with Damodar Valley Corporation(DVC) related to provisional tariff petition of electricity charges for 2009-2014 vide order dated 18th January, 2017, keeping the question of law open. The Order of Central Electricity Regulatory Commission (CERC) dt. 7-8-2013 related to Tariff of 2009-2014 against Petition No.275/GT/2012 has been challenged before Appellate Tribunal for Electricity (APTEL) (Appeal No.18 of 2014) in which the Company has also intervened and the order of APTEL is pending. Further, in respect of the civil appeal filed by Damodar Valley Corporation (DVC) pertaining to tariff of Financial Year 2004-05 to 2008-09
against the order of the Appellate Tribunal for Electricity (APTEL), the Hon'ble Supreme Court of india dismissed the appeal vide its order dated 3rd December, 2018, which could also have an effect on future tariff orders in view of consideration of certain parameters for fixation of tariff. accordingly, State electricity Regulatory Commission (SERC) will finalise the retail tariff as directed by APTEL, the financial implication of which can only be ascertained after the Tariff fixation by SERC. For the State of Jharkhand where the dispute of ? 587.72 crore arises, DVC has filed its Retail Tariff Application in November, 2020 along with application for Annual Revenue Requirement before the Jharkhand State Electricity Regulatory Commission (JSERC) for the period of 2006-07 to 2011-12 and also seeking adjustment of Revenue Gap/Surplus in the period of 2012-13 to 2014-15. The Company has also filed their objections on 28th December, 2020 to the aforesaid Application of DVC. JSERC finalised the Category-wise Retail Supply Tariff of DVC for the period from FY 200607 to FY 2011-12 vide order dated 31st October, 2023. However, DVC has preferred an appeal before Hon'ble APTEL against the order of the JSERC regarding the consideration of non-tariff income in totality in the tariff order. APTEL vide it's order dated 5th February, 2024 allowed the appeal of DVC with request to the commission to pass an order afresh at the earliest. Pending fixation of such Electricity Tariffs, disputed demands of DVC of ? 587.72 crore upto 31st March 2024, (upto 31st March, 2023, ? 587.72 crore) has been treated as Contingent Liability. Against the said claims, the entire amount has been paid to DVC and retained as advance. Further from 1st April, 2017 onwards full invoice value is being paid and charged to revenue.
47.3 Under the Jharkhand Mineral Area Development Authority (Amendment) Act, 2015, the State Government of Jharkhand has made a demand of ' 5387.70 crore upto 31st March, 2024 (upto 31st March, 2023 ' 5037.29 crore) towards "Market Fee” on transaction value of coal, iron and steel items. As the matter is sub-judice, the amount has been disclosed as Contingent Liability in Note No. 47.1(i)(e) above.
The Mineral (Mining by Government Company) Rules 2015 (the "MMGC Rules”) were notified by GOi on 03.12.2015. Although no provision was made for realization of any money for extension of the leases in the said Rules, demands for payment under the MMGC Rules 2015 in respect of Duargaiburu lease of Gua, Amalgamated leases of Kiriburu-Meghahatuburu and Dhobil lease of Chiria were raised by the District Mining Officer (DMO), Chaibasa, Jharkhand. The collective demand for payment against the notices was about ' 2980.00 Crore. SAiL challenged the demand notices through the filing of Writ Petitions in Hon'ble High Court of Jharkhand in March 2019. Hon'ble High Court vide order dated 18.12.2019/20.12.2019 stayed the operation of such demand notices. in the meantime, the Government of Jharkhand sought clarification in respect of right/claim to raising of demand under Rule 5 of Mineral (Mining by Government Company)
Rule, 2015 (MMGC) from the Ministry of Mines, Govt. of india. The Ministry of Mines, GOi vide letter dated 29.01.2021 clarified MMGC Rule, 2015 do not provide for payment of the additional amount for extension of mining leases granted to a Government Company. Pending disposal of the matter by the Hon'ble High Court of Jharkhand, an amount of ' 5959.14 crores (' 5241.88 crore as on 31st March, 2023) has been disclosed as contingent liability in Note No. 47.1(i)(h) above.
47.4 in its judgement, the Central Administrative Tribunal (CAT), Kolkata has directed that Ministry of Steel shall consider the aspect of payment of arrears of revised perks and allowances and take appropriate decision for payment of revised perks and allowances amounting to ' 309.34.crore (previous year: ' 309.34 crore) to the executives for the period from 26.11.2008 to 4.10.2009. Ministry of Steel intimated the matter to the Company on 7.12.2016. A petition in the matter was filed on 22.12.2016 before the Hon'ble Calcutta High Court and is disposed off during the year. Pending administrative decision on the matter, the amount has been disclosed as Contingent Liability in Note No. 47.1(ii)(d) above.
47.5 (i) The Ministry of Environment & Forest and Climate
Change (MoEF & CC) vide their letter No.-11-599/2014-FC dated 1st April 2015 issued revised Guidelines for diversion of Forest Land for nonforest purpose under the Forest (Conservation) Act, 1980 (FC Act). These revised Guidelines stipulated that in case of existing mining leases having Forest Land (partially or fully), where approval for only a part of forest land has been obtained under the FC Act, the Central Government accorded general approval under Section-2(iii) of the FC Act for the remaining area also to be Forest Land, subject to certain conditions, which includes realising Net Present Value (NPV) for the entire forest land falling in the mining lease, in case NPV of such forest land has not already been realised.
in this matter, as per legal opinion obtained by the Company, Section 2 (iii) of FC Act, 1980 will not apply to Government Corporation and NPV is required to be paid only for that limited area, which has been approved by MoEF & CC and in which mining activities are proposed to be done and not for the entire forest area. The matter of applicability of NPV for total forest land has been challenged by the Company in Hon'ble High Court of Jharkhand. The Hon'ble Court, in its order, has directed to place the matter before Division Bench of this Court.
A writ petition has also been filed in the Hon'ble high Court of Chhattisgarh against the demand of ' 96.28 crores received during 2017-18 from the Office of Principal Chief Conservator of Forest, Chhattisgarh, in which the Hon'ble High Court of Chhattisgarh awarded judgement in favour of Chhattisgarh Government.
The Company has deposited ' 96.28 crores with Principal Chief Conservator of Forest, Chhattisgarh and a Special Leave Petition has been filed in Hon'ble Supreme Court of india against the order of Hon'ble High Court of Chhattisgarh. The disputed amount of ' 96.28 crore (previous year: ' 96.28 crore) crore has been disclosed under contingent liability in Note no.47.1.(i)(e).
(ii) Chhattisgarh State enacted Chhattisgarh (Adhosanrachna Vikas ewam Paryaawaran) upkar Adhiniyam, 2005 and levied Cess on the mineral extracted in the State of Chhattisgarh. BSP has filed a writ petition in the high Court of Chhattisgarh challenging the enactment as ultra vires. however, BSP has deposited ' 235.71 crore under protest till March, 2024 and shown as deposit with Government Department. total disputed amount of ' 235.71 crore (previous year ' 212.96 crore) is disclosed under contingent liability in note no. 47. 1.(i) (e).
47.6 Pursuant to the hon'ble Supreme Court Judgment dated 2nd august, 2017 in the Common Cause matter regarding illegal mining, demand/Show cause notices have been issued for recovery of the price of minerals produced without and beyond the environmental clearances under Section 21(5) of Mines and Mineral development Regulation act, 1957, forest clearance under the Forest Conservation act 1980, and towards excess production beyond consent to operate. The Company has challenged the purported demand before the high Court of Jharkhand and odisha and obtained stay on demand.
(a) As the matter is pending for final determination and considering the implication of existing litigation, the Company:
(i) in respect of iron ore, by the Government of odisha and Government of Jharkhand amounting to '419.68 crore and '3122.00 crore ('386.33 crore and '2847.52 crore as on 31st March, 2023) respectively (including interest). Based on internal assessment, the Company has provided an amount of ' 329.67 crore (' 329.67 crore as on 31st March, 2023) on estimated basis. Balance amount of ' 3212.01 crore (' 2904.18 crore as on 31st March, 2023) (including interest) has been treated as contingent liability in note No. 47.1(i)(h).
(ii) in respect of Flux, by the Government of Jharkhand & odisha amounting to '66.15 crore ('59.03 crore as on 31st March 2023) (including interest). Based on internal assessment, the Company has provided an amount of '6.86 crore ('6.86 crore as on 31st March 2023) on estimated basis. Balance amount of '59.29 crore ('52.17 crore as on 31st March 2023) (including interest) has been treated as contingent liability in note No. 47.1(i)(h) above.
(iii) in respect of Coal, by the Government of Jharkhand amounting to 'nil crore ('755.90 crore as on 31st March 2023) (including interest), revision application has been filed under rule 55 (5) of Mineral Concessions rule, 1960 read with Section 30 of Mines and Minerals (development and regulation) act, 1957 (MMDR). the revisional authority, Ministry of Coal, has granted Stay to the Company. accordingly pending disposal, the amount of 'nil crore ('755.90 crore as on 31st March 2023) (including interest) has been treated as Contingent Liability in note No. 47.1(i)(h) above.
47.7 M/s JSC Cryogenmash have filed a case before arbitral tribunal in international Chamber of Commerce against SaiL/Bhilai Steel Plant for resolution of dispute arising out of contract. arbitral tribunal has awarded a sum of '106.92 crores on 20.07.2018 against SAI L/ Bhilai Steel plant.
against the award, the management has filed an appeal before hon'ble high Court at Delhi which has been admitted. Pending disposal of appeal, the sum of '171.22 crore (previous year: '160.37 crore) (including interest) has been disclosed under contingent liability in note no 47.1(ii) (d) above.
47.8 Land measuring 5.545 acres was allotted to DVC for 30 year w.e.f. 12.07.1966 on long term lease basis. the Land was given to DVC for setting up of Electrical sub-station for ensuring supply of power for the benefit of Asp. there was no lease agreement for the subsequent period, i.e., w.e.f. 13/07/1996. in absence of any agreement, the dues receivables for the said period, could not be ascertained with reasonable certainty. the same will be accounted for in the year of settlement.
47.9 Consequent to the order of hon'ble odisha high Court, Company's claim towards renewal of lease [total area of 2599.54 acre disclosed under note No. 4.(ii) (b)], of land at horomoto stands rejected, except surface area of 222.54 acre for which State Govt has been directed to consider as per provisions of Law.
47.10 An award arising out of the Arbitration between M/S. Goyal Mg Gases Pvt. Ltd. (Claimant) and SAIL/Alloy Steels Plant, Durgapur (respondent) seeking claim of '116.86 crore, has been received on 22.05.2020, vide SCoPE, New Delhi letter dated 18.05.2020.
By the aforesaid award, tribunal allowed claim no. 1 and 2 of the Claimant w.r.t. differential amount pertaining to transportation charges of Argon from DSP Boo Plant to ASP based upon market rate claimed by the Claimant and refund of withheld/ deducted amount by ASP from the bills of the Claimant on account of merchant market sale of oxygen, Nitrogen and Argon respectively along with applicable interest thereon, out of the total claimed amount.
SAIL ASP had challenged the award for claims no. 1 & 2 before ld. Commercial Court in Misc. Arb. Case No.8( re-registered under new rules as Misc. Arb. Comm. Case no 12 of 2024. oral arguments of both parties were heard and Written notes of Arguments were also filed by both parties whereafter order was reserved by ld. Commercial Court on 06.03.2024 fixing the case for pronouncement 16.04.2024. however due to filing of additional written notes on Limitation by M/s. Goyal MG Gases, judgement was not pronounced and is now fixed for pronouncement on 07.05.2024. the Ld. Court on the said date set aside the award by arbitration tribunal on the above claims.
in view of above and based on the amount quantified by the tribunal, the net disputed liability of '7.54 crore as on 31st March, 2024 (previous year: '6.56 crore) including interest, has been shown under Contingent Liability in Note No. 47.1(i)(b) above.
49.3 As per the Department of Public Enterprises (DPE) guideline, the Company is required to contribute up to 30% of Salary (Basic Pay plus dearness allowance) in respect of executive employees as superannuation benefits, which may include Contributory Provident Fund, Gratuity, Pension and Post-Superannuation Benefits. accordingly the Company has made provision for pension benefit for executive employees @ 9% of Salary w.e.f. 1st January, 2007 and @3% of Salary w.e.f. 1st April, 2015. Further, pension benefit for non-executive employees has been provided @ 6% of Salary w.e.f. 1st January, 2012 and @2% of Salary w.e.f. 1st April, 2015. Subsequent to wage revision, the pension benefit for non-executive employees has been provided @ 9% of Salary w.e.f. 1st November, 2021.
Pension Scheme was approved in the Meeting of the Board of directors held on 9th February, 2017 with modification that from the Financial Year 2015-16 and onwards, the contribution towards Pension shall be measured, as a percentage of Profit Before Tax (PBT) to average net-worth. if the percentage of PBT to average net-worth is 8% or above, amount of Pension contribution shall be limited to 9% of Basic Pay plus Da for executives and 6% of Basic Pay plus Da for non-executive (@9% w.e.f. 1st november, 2021), else the amount of contribution towards Pension will be reduced proportionately. However, a minimum Pension contribution shall be kept at the rate of 3% and 2% (@3% w.e.f. 1st november, 2021) of Basic Pay plus Da for executive and non-executive employees respectively even in case of loss during a Financial Year. During the Year ended 31st March, 2024 provision for pension has been made @ 9% for all employees.
The cumulative liability towards pension for Executive and non-executive employees, amounting to ?714.00 crore (?597.12 crore during the Year) and ?61.03 crore (?3.50 crore during the Year) has been charged to 'Employee Benefits Expense' and 'Expenditure during Construction' respectively. An amount of ?630.99 crore has been transferred to Pension Fund during the Year. Further, an amount of ?77.82 crore has been paid to retired employees during the Year and an amount of ^il crore deposited by the employees for being eligible for pension.
49.4 The research and development expenditure charged to Statement of Profit and Loss and allocated to Fixed Assets/Capital work-in-progress (net), during the Year, amount to ?239.47 crore (?397.60 crore during the previous Year) and ?67.61 crore (?32.88 crore during the previous Year) respectively. The aggregate amount of revenue expenditure incurred on research and development is shown in the respective head of accounts. The break-up of the amount is as under:
49.5 The Company considers the assets of one entire plant as Cash Generating Unit (CGU). The Company internally reviews whether there are any indicators that the carrying amount of assets of CGUs may be impaired on each balance sheet date. if any such indicators exist, the asset recoverable amount is estimated as higher of the net selling price and the value in use. Value in use is based on present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. An impairment loss is recognised whenever the carrying amounts of assets of a CGU exceed the asset recoverable amount. Further to the internal assessment, the Company also determines net selling price of the assets of CGU, in which any such indication exists, by an independent expert.
As on the reporting date, based on the internal assessment done by the Company at its different CGUs, no impairment loss is required to be provided.
49.8 information on leases as per indian Accounting Standards (ind AS) 116 on Leases':
(I) The Company has leases for Land, office building, Plant & Equipment, warehouses & related facilities and vehicles. With the exception of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate are excluded from the initial measurement of the lease liability and right of use assets. the Company classifies its right-of-use assets in a consistent manner to its Property, plant and equipment.
each lease generally imposes a restriction that, unless there is a contractual right for the Company to sublease the asset to another party, the right-of-use asset can only be used by the Company. Some leases contain an option to extend the lease for a further term. the Company is prohibited from selling or pledging the underlying leased assets as security. For leases over office buildings and other premises the Company must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Company is required to pay maintenance fees in accordance with the lease contracts.
Right of Use assets
Set out below are the carrying amounts of right-of-use assets (Refer note 4a) recognised and the movements during the period:
(II) Description of major leasing arrangements Power Plant
The Company has accounted for certain power plants as finance lease under Appendix-C of Ind AS 17 by virtue of the power purchase agreement with the supplier. under the terms of the power purchase agreement, the Company shall continue to purchase power until the parties decide to terminate the agreement, which has been determined to be an un-economic proposition considering the specialised nature and location of the asset. For any new lease treatment treatement has been done in accordance with Ind AS 116 - Leases.
Oxygen Plant
The Company has accounted for certain oxygen plants as finance lease (or operating lease) under Appendix-C of Ind AS 17 by virtue of the oxygen purchase agreement with the supplier. The agreement to purchase oxygen is a 15 year fixed term agreement. There is no change in treatment under Ind AS 116 - Leases.
Mining land
The Company has accounted for leasehold lands for mining as finance leases by virtue of its rights under the lease agreement after considering the right/economic compulsion for renewal. There is no change in treatment under Ind AS 116 - Leases.
49.9 Contributions made in cash and kind for the period from the Financial Year 2006-07 to 2021-22 to Railway authorities for laying out railway line from Rajhara to Rowghat would be recovered in cash at the rate of 7% per annum for 37 year on total contribution towards redemption of SAIL's contribution after commencement and fulfilment of assured traffic from Rowghat mines. Management is of view that the criteria laid out in Memorandum of Understanding will be met and interest accrues from the date of investment. The refund amount comprises principal and interest elements. Accordingly, the interest element has been computed and recognised as income during the Year amounting to ' 61.90 crore (till date ' 311.82 crore). As per the opinion of Expert Advisory Committee of The Institute of Chartered Accountants of India, such treatment of recognition on time proportion basis is in order as in view of the Management, no significant uncertainty exists regarding collectability and measurability of revenue.
49.10 The inventory of sub-grade iron ore fines generated at the captive mines of the Company were not assigned any value in the books of accounts of the Company till the financial year ended 31st March 2019, since, the Government of India Notification dated 19th September 2012 prohibited all captive miners from selling such sub-grade fines.
Following the Government of India Order no.F.No.16/30/2019-M.VI dated 16th September 2019 allowing sale of subgrade iron ore fines, the inventories of sub-grade fines held by the Company gained economic value. in this regard, the Company also obtained opinions from the Additional Solicitor General of india as well as the Expert Advisory Committee (EAC) of institute of Chartered accountants of india (ICAI). Based on the aforesaid opinions, the Company recognized these inventories as by-product inventory as at 31st March 2020. Since, these inventories were generated over many year, making it impracticable to ascertain the actual valuation, the Company assigned a valuation to such inventories basis average selling price of similar sub-grade fines over the last 36 months as declared by indian Bureau of Mines (iBM), a Government of india organisation and as adjusted for royalty and other selling costs.
The Company has obtained all clearances including environmental clearance and clearance from Director General of Mines Safety, Government of india. Further, procedural clearances have been obtained from the State Government of odisha. With respect to the State of Jharkhand, evacuation of dumped fines from Duarguiburu lease have started in FY 2023-24 for captive use. With respect sale, the delay is procedural and the management expects to receive the clearances in due course.
the management has been able to sell off such inventories in certain locations. While, on an overall basis during the current and the previous year, there has been movement of 2.10 million tonnes in the volume of such inventories, there is significant market demand for sub-grade fines and the recent sales price trends are indicative of considerable margins over and above the carrying value of such inventories. the management also has plans to set up beneficiation plant and pellet making facilities in future that will consume significant volume of sub-grade fines annually. accordingly, in view of the management, there is no adjustment required in the carrying value of these inventories at this stage.
Considering the substantial volume of inventories, the quantity estimated to be sold/consumed within the next one year has been recognized as current and the balance has been classified as non-current inventory.
As at 31st March 2024, the Company is carrying sub-grade iron-ore fines inventory of 40.88 MT (as at 31st March 2023: 41.55 MT) valuing ?3932.35 crores (as at 31st March 2023 valuing ?3995.75 crores) which includes 38.73 Mt valued at ?3749.00 crores classified as non-current inventory at its various mines.
Likewise, the Company
- at its Barsua and Dalli Mines is carrying inventory of tailings of 10.84 MT valuing ?513.57 crores (as at 31st March 2023: 10.27 MT valuing ?491.98 crores) which includes 9.34 Mt valued at ?434.21 crores classified as non-current inventory.
- at its Bhilai, and Rourkela Steel Plants is carrying inventory of extractable iron and steel scrap embedded in BF Slag and LD Slag of 0.45 MT valuing ? 449.84 crores (as at 31st March 2023: 0.47 MT valuing ?460.35 crores) which includes 0.41 Mt valued at ?406.42 crores classified as non-current inventory.
- at its Chandrapur Ferro Alloys Plant is carrying inventory of Granulated high manganese ore (HMnO) slag and slag fines of 0.59 MT valuing ?42.35 crores (as at 31st March 2023: 0.52 valuing ?41.56 crores) which includes 0.53 Mt valued at ?35.66 crores classified as non-current inventory.
The Company is formulating a detailed plan for disposal/consumption of these inventories.
Considering the market volatility, steel market dynamics, possibility of future additions to steel and pellet making capacity in the country which may augment the demand of these materials, the carrying value of the non-current inventories need not be adjusted for any unforeseeable changes in the future prices. Accordingly, in view of the management, the carrying values of the aforementioned inventories are the best estimates basis the information available at this stage.
19.11 The Cabinet Committee on Economic Affairs (CCEA) in its meeting held on 27th October, 2016 had accorded 'in-principle' approval for Strategic Disinvestment of three units of Steel Authority of india Limited (SAiL) viz. Visvesvaraya iron & Steel Plant (ViSP), Bhadravati, Karnataka, Salem Steel Plant (SSP), Tamil Nadu and Alloy Steel Plant (ASP), West Bengal. Subsequently, in line with the "in-principle" approval of Government of india, SAiL Board in its meeting held on 9th February, 2017, approved the Strategic Disinvestment of ASP, ViSP and SSP. The Company appointed various Advisors to carry out the process. The entire process of Strategic Disinvestment is being overseen by an inter-Ministerial Group (iMG). The iMG is chaired by Secretary, Department of Public Assets Management (DiPAM) and co-chaired by Secretary (Steel).
Preliminary information Memorandum (PiM)/Expression of interest (Eoi), Requests of ASP, SSP and ViSP were issued on 4th July 2019 and EOi bids were opened on 10th September 2019. EOis were received only for Salem Steel Plant (SSP) and Visveswaraya iron & Steel Plant (ViSP), Bhadravati. The existing Expression of interest of ViSP and SSP has been annulled due to lack of interest of the shortlisted bidders in proceeding further with the transaction and Alternative Mechanism has approved.
In view of the current status and the various disinvestment processes which are underway, no adjustment in these financial statements is considered necessary at this stage.
49.12 The net of unreconciled balances in iuCA (inter-unit current accounts) at the end of the year are transferred to iuCA Reserve under head other Equity (Note. No. 23). the sum of IuCA Reserve for all units of Sail is Nil.
49.13 other income includes profit on sale of obsolete Plant and Machinery (SMS-1) at one of the plant location amounting to ? 278.82 crore in the quarter ended 30th June, 2023.
49.14 Exceptional Items includes :
(I) For the Year ended 31st March 2024:
a. Provision for settlement of contractual disputes amounting to ? 394.39 crore under Vivad se Vishwas Scheme II.
b. Provision towards Settlement of Entry Tax dispute amounting to ? 446.45 Crore under Chhattisgarh Settlement of Arrears of Tax, Interest and Penalty Act 2023.
(II) For the year ended 31st March, 2023:
(i) Profit on sale of fixed assets amounting to ? 301.34 crore on account of sale of a portion of land to Dedicated Freight Corridor Corporation of India Limited (DFCCIL).
(ii) An amount of ? 38.91 crore towards settlement of a long pending demand of electricity duty on Transmission & Transformation loss under One Time Settlement Scheme and an amount of ? 4.44 crore towards a dispute arising out of a contract finalized during 2000-01.
49.15 Ministry of Steel, Government of India, vide its letters dated 19th January 2024 in exercise of the powers conferred by sub-rule (1) of Rule 20 of the Conduct, Discipline and Appeal Rules, 1977 of the Company has placed certain employees and two directors of the Company on suspension with immediate effect, on the basis of a preliminary enquiry done by the Central Vigilance Officer on allegations received with respect to certain policy/pricing decisions of the Company. While the matter is currently under investigation by external investigative agencies as per directions of the Lokpal of India vide its order dated 10th January 2024, in view of the management, on the basis of their internal assessment, the matter is not likely to have a material impact on the operations of the Company and/or these financial results.
49.16 The Company declared interim dividends @ 10% of the paid-up equity share capital (i.e. ? 1.00 per equity share of ? 10/-each) during the Financial Year 2023-24. The Board of Directors has recommended final dividend @ ? 1/- per equity share of ? 10 each i.e.10% on the paid up share capital of the Company for the Financial Year 2023-24, subject to approval of shareholders in the ensuing Annual General Meeting of the Company.
49.17 Pursuant to SEBI Circular No. SEBI/HO/DDHS-RACPODI/P/CIR/2023/172 dated October 19, 2023, and pursuant to email communication received from NSE and BSE, details of Outstanding Qualified Borrowings and Incremental Qualified Borrowings for the financial year ended March 31,2024 are provided below:
51.7 (a) No funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any
other sources or kind of funds) by the Company to or in any person(s) or entity(ies), including foreign entities ('the intermediaries'), with the understanding, whether recorded in writing or otherwise, that the intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ('the Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf the Ultimate Beneficiaries.
(b) No funds have been received by the Company from any person(s) or entity(ies), including foreign entities ('the Funding Parties'), with the understanding, whether recorded in writing or otherwise, that the Company shall, whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ('Ultimate Beneficiaries') or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries. Ratios as per Amended Schedule iii.
51.8 During the Financial Year:
(a) The company does not hold any Benami property under the Benami Transactions (Prohibitions) Act, 1988 (45 of 1988) and the rules made thereunder.
(b) The company has not been declared wilful defaulter by any bank or financial institution or other lender.
(c) The company does not have any charges or satisfaction yet to be registered with ROC beyond the statutory period.
(d) The company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with the Companies (Restriction on number of layers) Rules, 2017.
(e) The company has not entered into any Scheme of Arrangement under section 230 to 237 of the Companies Act, 2013.
(f) The company does not have any undisclosed income in the tax assessments under the income tax Act, 1961.
(g) The company has not traded in crypto currency or virtual currency.
53. The figures of previous periods have been re-grouped, wherever necessary, so as to conform to the current periods classification.
the impact of any re-grouping/reclassification on the financial statements is immaterial.
For and on behalf of the Board of Directors
[M.B. Balakrishnan] [Amarendu Prakash]
Company Secretary Chairman
M. No. A17770 Din: 08896653
In terms of our report of even date
For Walker Chandiok & Co LLP For J N Gupta & Co LLP For S P A R K & Associates Chartered For Vinod Singhal & Co LLP
Chartered Accountants Chartered Accountants accountants LLP Chartered Accountants
Firm Registration No.001076N/N500013 Firm Registration No.006569C/W100892 Chartered Accountants Firm Registration No.
Firm registration No.005313C/C400311 005826C/C400276
[Nalin Jain] [Devendra Upadhyay] [Nilesh Gupta] [Vinod Kumar Singhal]
Partner Partner Partner Partner
M. No.503498 M. No.076727 M. No.406020 M. No.074391
Place : New Delhi Dated : May 20, 2024
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