(i) Contractual obligations
Refer note 48.1 for disclosure of contractual commitments for the acquisition of property, plant and equipment.
(ii) Land:
(a) Includes 55854.89 acres (58131.07 acres as on 31st March, 2022) owned/possessed/taken on lease by the Company, in respect of which title/lease deeds are pending for registration.
(b) Includes 31397.15 acres (31397.15 acres as on 31st March, 2022) in respect of which title is under dispute.
(c) 8873.81 acres (8866.59 acres as on 31st March, 2022) transferred/agreed to be transferred or made available for settlement to various Joint Ventures/Central/ State/ Semi-Government authorities, in respect of which conveyance deeds remain to be executed/registered.
(d) 6114.59 acres (6105.79 acres as on 31st March, 2022) given on lease to various agencies/employees/ex-employees.
(e) Includes 4435.60 acres (4208.60 acres as on 31st March, 2022) under unauthorised occupation.
(f) 2371.10 acres (2381.16 acres as on 31st March, 2022) of land which is not in the actual possession, shown as deemed possession.
(g) ^56.72 crore is lying under deposits, in respect of land already acquired (^55.03 crores as on 31st March, 2022) with the District & Sessions Judge, Bokaro during the year 2007 towards compensation payable to land losers.
(h) Vide Notification of acquisition in the Gazette of India (Extraordinary) bearing No S.O. 1309(E) dated 08.06.2012 and No. S.O. 2484E dated 13.10.2012, National Highway Authority of India Ltd. (NHAI) had acquired 34.471 acres freehold land. Also notified for acquisition by Government of Jharkhand vide Gazette notification no. 42 & 43 dated 26th August, 2009. Matter is subjudice regarding valuation of the said land.
(i) 525.43 acres land includes 500 acres land granted by Government of Maharashtra under occupancy rights subject to restrictions agreed upon by the company towards payment of unearned increment on the property transfer as per agreed terms.
(j) Includes 5.51 acres freehold land out of 21.13 acres land notified for acquisition by Government of Jharkhand vide Gazette notification no. 42 & 43 dated 26th August, 2009, are under dispute for which no compensation was fixed in favour of RDCIS-SAIL. The compensation for the balance freehold land of 15.62 acres amounting to ^13.07 crore has been considered in the accounts for the Financial Year ended 31st March, 2020. Out of ^13.07, provision @50% amounting to ^6.53 crore has been created for the year ended 31st March, 2023.
(k) ^0.06 crore is lying under deposits (in respect of land already acquired) with the District & Sessions Judge, Salem during the year 2013 towards compensation payable to land losers.
(iii) Other Assets:
(a) Includes 7207 (5894 as on 31st March, 2022), residential quarters/houses under unauthorised occupation.
(iv) Refer note 48.1 (B) for title deeds not held in the name of parent Company.
(i) On floatation of tender for sale of items of Property, Plant and Equipment, it is considered highly likely that such assets will be sold within next 12 months and such assets are treated as 'Assets classified as held for sale'
(ii) Plant & Machinery classified as held for sale during the reporting period was measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification. The fair value of the plant & machinery was determined using the comparable value approach. This is a level 3 measurement as per the fair value hierarchy set out in fair value measurement disclosures. The key inputs under this approach is the metal price in the market.
Nature and purpose of other reserves Capital reserve
Capital reserve is created out of the capital profit, it is created out of the profit earned from some specific transactions of capital nature. Capital reserve is not available for the distribution to the shareholders.
Securities premium reserve
Securities premium reserve represents premium received on issue of shares. The reserve is utilised in accordance with the provisions of the Companies Act, 2013.
Bond redemption reserve
The Company is required to create bond redemption reserve as per the provisions of Companies Act, 2013 out of the profits which are available for distribution of dividends. The reserve is maintained till the redemption of bonds.
Other Comprehensive Income (OCI) reserve
The Company has opted to recognise changes in the fair value of certain investments in equity securities in other comprehensive income. These changes are accumulated within the FVOCI equity investments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised.
No loans have been guaranteed by the directors and others.
There is no default as on the balance sheet date in repayment of borrowings and interest thereon.
All bonds are repayable on the maturity date unless otherwise stated.
Borrowings are secured, in respect of respective facilities by way of :
a) Secured by charges ranking pari-passu inter-se, on all the present and future immovable property at Mouje-Wadej of City taluka, District Ahmedabad, Gujarat and Company's Plant & Machinery, including the land on which it stands, pertaining to IISCO Steel Plant (ISP).
b) Redeemable in 12 equal yearly instalments of ?14 crore each starting w.e.f 26th October, 2014. Instalment payable on 26th Oct, 2023 has been shown in current borrowings under the head 'current maturities'.
c) The soft basis of the loan was drawn in 3 tranches stated as 1(a), 1(b) and 1( c) at an interest rate of 8.75% p.a. The Interest on 1(a) is 0.75% p.a and balance 8% is towards meeting exchange fluctuation (4%) and pollution control schemes (4%). In case of 1 (b) the Interest 0.75% p.a and balance 8.0% p.a is towards periphery development. Tranche 1(c) has been fully repaid. The principal and interest amount is repayable half yearly. The loan is guaranteed by Government of India.
d) The loan is repayable by 2030. The principal and interest is paid half yearly, guaranteed by Government of India.
e) Terms of repayment is to be decided by SDF management Committee.
f) Secured by charges ranking pari-pasu on the present and future movable plant and machinery of RSP to the extent of loan.
42. FINANCIAL INSTRUMENTS
i) Fair values hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are categorized into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: Quoted prices (unadjusted) in active markets for financial instruments.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entity specific estimates.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
(iv) Valuation process and technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
(a) Fair value of interest swap is determined based on dealer or counterparty quotes for similar instruments.
(b) Fair value of forward foreign exchange contract and principal swap is determined using forward rate at balance sheet date.
(c) The carrying value of borrowings bearing variable interest rate are considered to be representative of their fair value.
(d) The carrying value of financial assets and liabilities with maturities less than 12 months are considered to be representative of their fair value.
(e) Fair value of fixed interest rate financial assets and liabilities carried at amortised cost (including lease obligations) is determined by discounting the cash flows using a discount rate equivalent to market interest rate applicable to similar assets and liabilities as at the balance sheet date.
(v) Unquoted investments:
Fair value estimates of unquoted equity investments are included in level-3 and are based on information relating to value of investee Group's net assets. For investments in co-operative societies, the Group has determined that cost is appropriate estimate of fair value, therefore, there have been no changes on account of fair values.
ii) Risk Management
The Group, its Joint Ventures & Associate is exposed to various risks in relation to financial instruments. The Group, its Joint Ventures & Associate'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 Group's, its Joint Venture's & Associate's risk management is co-ordinated at its headquarters, in close co-operation with the Board of Directors, and focuses on actively securing the Group's, its Joint Venture's & Associate'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 Group, its Joint Ventures & Associate 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 Group, its Joint Ventures & Associate is exposed are described below.
A) Credit risk
Credit risk is the risk that a counterparty fails to discharge an obligation to the Company. 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 Group, its Joint Ventures & Associate maintain flexibility in funding by maintaining availability under committed facilities. Management monitors rolling forecasts of the Group's, its Joint Venture's & Associate's liquidity position and cash and cash equivalents on the basis of expected cash flows. The Group, its Joint Ventures & Associate takes into account the liquidity of the market in which the entity operates. In addition, the Group's, its Joint Venture's & Associate'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 Group's, its Joint Venture's & Associate's financial liabilities into relevant maturity Grouping based on their contractual maturities for all non-derivative 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-INR 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 Group's, its Joint Venture's & Associate'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, 2023, the Group, its Joint Ventures & Associate is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The Group's, its Joint Venture's & Associate's investments in bonds all pay fixed interest rates. The exposure to interest rates for the Group's, its Joint Venture's & Associate'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% (2022: /- 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 Judges Constitutional Bench of Hon'ble Supreme Court, vide its judgment dated 11th November, 2016, upheld the Constitutional validity of Entry Tax Act enacted by various States and laid down principles/tests for consideration for deciding the specific issues related to levy of Entry Tax. As on 31st March, 2023, the matters are pending before Regular Benches of Hon'ble Supreme Court/Jurisdictional High Courts/ assigned authorities in this regard. Pending decision by the other Courts, disputed Entry Tax liabilities of ?1184.81 crores have been treated by the Company as Contingent Liability (As at 31st March, 2022 - ?1178.51 crores) 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, 2023, these demands amounting to ?213 crores (31st March 2022 ?241 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 (pertaining to Bokaro Steel Plant) in respect of dispute with Damodar Valley Corporation (DVC) related to provisional tariff petition of electricity charges for 200914 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 2009-14 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 can also have 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 filed its Retail Tariff Application in November, 2020 along with application for Annual Revenue Requirement before the Jharkhand State Electricity Regulatory Commission for the period 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 28.12.2020 to the aforesaid Application of DVC. Pending fixation of such Electricity Tariffs, disputed claims of DVC of ?587.72 crore upto 31st March, 2023 (upto 31st March, 2022, ?587.72 crore) has been treated as Contingent Liability and included in Note No. 47.1(i)(f ) above. 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 ?5037.29 crore upto 31st March, 2023 (upto 31st March, 2022 ?4690.37 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 Crore. SAIL challenged the demand notices through the filing of Writ Petitions in Hon'ble High Court of Jharkhand in December 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 ?5241.88 crores (?4526.00 crore as on 31st March, 2022) 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 stay petition in the matter has been filed on 22.12.2016 and is pending before the Hon'ble Calcutta High Court. As the matter is sub-judice, the amount has been disclosed as Contingent Liability in Note No. 47.1(v) 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 (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 ?212.96 crore under protest till March, 2023 and shown as deposit with Government Department. Total disputed amount of ?212.96 crore (previous year ?190.80 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 has provided:
(i) In respect of Iron Ore, by the Government of Odisha and Government of Jharkhand amounting to ?386.33 crore and ?2847.52 crore (?345.03 crore and ?2573.03 crore as on 31st March, 2022) respectively (including interest). Based on internal assessment, the Company has provided an amount of ?329.67 crore (?329.67 crore as on 31st March, 2022) on estimated basis. Balance amount of ?2904.18 crore (?2588.39 crore as on 31st March, 2022) (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 ?59.03 crore (?52.35 crore as on 31st March 2022) (including interest). Based on internal assessment, the Company has provided an amount of ?6.86 crore (?6.86 crore as on 31st March 2022) on estimated basis. Balance amount of ?52.17 crore (?45.49 crore as on 31st March 2022) (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 ?755.90 crore (?675.62 crore as on 31st March 2022) (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 ?755.90 crore (?675.62 crore as on 31st March 2022) (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 SAIL / 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 ?160.37 crore (previous year: ?133.65 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 years 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 is in the process of 2nd stage of litigation and filed a petition before the Commercial Court, Asansol, for setting aside the award under Section 34 of the Arbitration and Conciliation Act 1996 (the Act), as the issues pertain to patent illegality committed by the Tribunal while giving the award.
In view of above and based on the amount quantified by the tribunal, the net disputed liability of ?6.56 crore as on 31st March, 2023 (previous year: ?10.92 crore) including interest, has been shown under Contingent Liability in Note No. 47.1(i)(b) above.
48.5 Balances of some of the Trade Receivables, Other Assets, Trade and Other Payables are subject to confirmations/ reconciliations and consequential adjustment, if any. Reconciliations are carried out on on-going basis. Provisions, wherever considered necessary, have been made. However, Management does not expect to have any material financial impact of such pending confirmations/reconciliations.
49.1 In accordance with Ind AS 115- Revenue from Contracts with Customers', GST amount of ? 18071.67 crore (Previous Year: ? 16589.94 crore ) is not included in Revenue from Operations * Includes ? 489.32 Crore in respect of sales for the Financial Year ended 31st March, 2022 on account of revision of Provisional rail prices made with effect from 1st April 2021.
(b) Sales for the year ended 31st March, 2023 include ?198.63 crore towards rail price revision for the Financial Year 2020-21, as per the recommendation of the Office of the Chief Adviser (Cost), Ministry of Finance. However, the same is pending for approval of the Railway Board. As per the assessment of the Company, it is highly probable that significant reversal in the amount of cumulative revenue recognised will not occur. Further, an amount of ?108.17 Crore has been provided towards revision of rail prices for the Financial Year 2019-20.
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 Financial Year ended 31st March, 2023 provision for pension has been made @ 6.84% for all employees.
The cumulative liability towards pension for Executive and Non-executive employees, amounting to ?825.71 crore (?462.62 crore during the Year) and ?57.53 crore (?2.06 crore during the Year) has been charged to 'Employee Benefits Expense' and 'Expenditure during Construction' respectively. An amount of ?569.35 crore has been transferred to Pension Fund during the Year. Further, an amount of ?58.77 crore has been paid to retired employees during the Year and an amount of ?0.19 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 ?397.60 crore (?742.90 crore during the previous Year) and ?32.88 crore (?71.91 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 Group considers the assets of one entire plant as Cash Generating Unit (CGU). The Group 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 Group also determines net selling price of the assets of CGU, in which any such indication exists, once every three years by an independent expert.
As on the reporting date, based on the internal assessment done by the group at its different CGUs, Property, Plant and Equipment (except leasehold land) of one of the units (Bokaro Steel Plant) is impaired during F/Y 2022-23. The amount of impairment losses recognised in profit & loss during the year is ? 9.10 Crs. ( ? NIL crore as on 31.03.2022) and the same is included under the item other expenses (Note no.41).
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.
(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 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 years 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 ?51.60 crore (till date ?249.92 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.
During the year, the company has recognised a loss of ?170.81 crore arising out of modification of financial assets on account of revision of estimated period of completion of Rowghat railway line.
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 years, hence, 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, the delay in the clearances is procedural and the management expects to receive the clearances soon. This is also supported by the legal opinion taken by the Company in this regard.
As a result, 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 1.43 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 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 2023, the Company is carrying sub-grade iron-ore fines inventory of 41.55 MT (as at 31st March 2022: 41.94 MT) valuing ?3995.75 crores (as at 31st March 2022 valuing ?4034.95 crores) at its various mines.
Likewise, the Company
• at its Barsua and Dalli Mines is carrying inventory of tailings of 10.27 MT (as at 31st March 2022: 7.44 MT) valuing ?491.98 crores (as at 31st March 2022 valuing ?382.66 crores).
• at its Bhilai, Bokaro and Rourkela Steel Plants is carrying inventory of extractable iron and steel scrap embedded in BF Slag and LD Slag of 0.47 MT (as at 31st March 2022 : 0.49 Mt) valuing ? 460.35 crores (as at 31st March 2022 valuing ?507.10 crores).
• at its Chandrapur Ferro Alloys Plant is carrying inventory of Granulated high manganese ore (HMnO) slag and slag fines of 0.52 MT (as at 31st March 2022 : 0.52 MT) valuing ?41.56 crores (as at 31st March 2022 valuing ?39.29 crores).
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.
49.11 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 for Salem Steel Plant(SSP) and Visveswaraya Iron & Steel Plant (VISP), Bhadravati. The existing Expression of Interest of VISP 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 (a) During the current year, Exceptional items includes:
(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.
(b) During previous year, In relation to a case pending before the Hon'ble Delhi High Court in respect of an award by Arbitral Tribunal, the company went for out of court settlement and accordingly an amount of ?353.41 crore has been disclosed as exceptional item
49.13 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
49.14 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 2022-23. Further, final dividend @ 5% of the paid-up equity share capital (i.e. ? 0.50 per equity share of ?10/- each) is proposed be declared for the Financial Year 2022-23 subject to approval of the Shareholders in the ensuing Annual General Meeting of the Company. Accordingly, the cumulative dividend for the Financial Year 2022-23 will be 15% of paid-up equity share capital.
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.
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