annual report 2011-12 - hpseb sheet for the year ended 2011-12.pdf · annual report . 2011-12....

3rd ANNUAL REPORT

2011-12

HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD.

(A state Govt. Undertaking) Regd. Office: Vidyut Bhawan, Shimla-171004

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HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED (A State Govt. Undertaking)

Regd. Officer: Vidyut Bhawan, Shimla-171004

INDEX Sr. No.

Subject Page

1. Notice of AGM

2. Proxy Form

3. Board of Directors

4. Directors Report

5. Accounts

6. Auditors’ Report

7. Replies to Auditors’ Report

8. Comments of CAG of India

9. Replies to CAG Comments

HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED SHIMLA-171004

(A State Govt. Undertaking)

Notice of 3rd Adjourned Annual General Meeting of the HPSEB Ltd.

“Notice is hereby given that the 3rd Adjourned Annual General Meeting of the Members of the Himachal Pradesh State Electricity Board Limited, Shimla-4 will be held on 28th December, 2013 at 12.30 PM at Armsdale Building, H.P. Sectt., Shimla-171002 to transact the following business:

To receive, consider and adopt the Annual Accounts of the Company consisting of Profit & Loss Accounts and Balance Sheet for the year ended 31st March, 2012, Directors’ Report and Report of Auditors thereon alongwith the comments of the Comptroller and Auditors General of India as on that date

ORDINARY BUSINESS

Place: Shimla By order of the Board of Directors

Dated: 28.12.2013 Sd/- Akshay Sood, IAS

Director (Finance & Accounts)

Note: 1. A Member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend

and vote instead of himself and a proxy need not be a member.

2. The Memorandum for Shareholders is enclosed.

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PROXY FORM

I/We Member (s) of the Himachal Pradesh State Electricity Board Limited, Shimla-4 do

hereby appoint _______________________________ of _______________________ as my

proxy to attend and vote for me/us and on 28-12-2013 at 12:30 PM and at any adjournment

thereof.

Signatures

Signed on this ......................

Affix Rs. 5/-

Revenue Stamp

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HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED (A State Govt. Undertaking)

Board of Directors as on 31.3.2013

1. Sh. Sushil Kumar Bhim Sen Negi, IAS Chairman

2. Er. P.C Negi Managing Director

3. Sh. Akshay Sood, IAS Director (F&A)

4. Er. J.P. Kalta Director (Operation)

5. Er. Pawan Kumar Kohli Director (Civil)

6 Sh. S.K.Baldi, IAS (Pr. Secretary (Finance) to the Govt. of H.P. Director

7. Sh. Sushil Kumar Bhim Sen Negi, IAS

(Pr. Secretary (MPP & Power) to the Govt. of H.P.

Director

8. Sh. R.D Nazeem, IAS, Director Energy to the Govt. of H.P. Director

9. Sh. Hans Raj Sharam, Spl Secretary (Power ) to the Govt., of H.P. Director

Auditors:- M/s Anil Karol & Co. Chartered Accountants HO First Floor, 77 Lower Bazar, Shimla-1 Ph. No. 0177-2657882 Principal Bankers:- 1. State Bank of India, Shimla-3 2. Punjab National Bank, The Mall, Shimla-1 3. The H.P. State Co-Op. Bank Ltd., Shimla-4 4. The Kangra Central Co-Op. Bank Ltd., Dharamshala 5. UCO Bank, Vidhan Sabha, Shimla-3 6. State Bank of Patiala, Shimla 7. Punjab and Sind Bank, Shimla 8. Canara Bank, The Mall, Shimla 9. Bank of Maharshtra, Shimla 10. ICICI, The Mall Shimla 11. Vijaya Bank, The Mall, Shimla 12. United Bank of India, Shimla 13. Bank of India, Shimla 14. Bank of Baroda 15. Union Bank of India, Shimla 16. Oriental Bank of Commerce, Lower Bazar, Shimla 17. IDBI, Solan 18. Yes Bank, Shimla 19. Indian oversea Bank, The Mall, Shimla 20. Central Bank of India, Shimla 21. Syndicate Bank, The Mall, Shimla 22. Indian Bank, The Mall, Shimla 23. J&K Bank, The Mall, Shimla

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HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED (A State Government Undertaking)

Regd. Office: VIDYUT BHAWAN, SHIMLA-171004 DIRECTORS’ REPORT Dear Members,

Your Directors are pleased to present the Third Annual Report of the Company for the year ended March 31, 2012 along with the Annual Accounts, Report of Auditors and Comments of the Comptroller and Auditor General of India. 1. GENESIS

Himachal Pradesh State Electricity Board Limited (HPSEBL), an undertaking of Government of Himachal Pradesh, was incorporated on 03-12-2009 with the objective to maintain and operate generation, distribution and trading of electricity, electricity used in the State of Himachal Pradesh and to purchase of electrical energy and sale of energy to the other agencies and to co-ordinate, maintain and operate an integrated power distribution system in all aspects including; to acquire, establish, construct erect, lay, operate, run, manage, maintain, enlarge, alter, renovate, modernize, work in the State of Himachal Pradesh. The Financial Results of the Company for the period under report are as below:- FINANCIAL RESULTS:

(` in crore) PARTICULARS 2011-12 2010-11

(14.6.2010 to 31.3.2011)

Sale of Power Income

3828.46 2934.02 Revenue subsidies & Grants 00.00 0.05 Other Incomes 194.09 78.92 Total Income 4022.55 3012.99

Purchase of Power Expenses:-

2657.62 2271.33 Other Expenses 1877.69 1122.13 Total Expenses 4535.31 3393.46 Profit/Loss (512.76) (380.47) Loss transferred from previous year (885.59) (505.12) Accumulated Loss (1398.35) (885.59)

2. VISION, MISSION, AIMS AND TARGETS

• Vision:

-Availability of reliable and quality power at competitive rates on a sustainable basis to all.

• Mission: To provide environment friendly, qualitative and reliable power to all sections of the society by creating a value based, customer centric, employee oriented organization, with an aim to enhance the standard of life of the society in which the organization operates.

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• Targets

: During the year under report, the targets for achieving the goals set out under Power Sector Reforms, implementation of IT initiatives under R-APDRP, computerized billing and accounting, GIS/ GPS asset based valuation, ERP etc.

•

The objectives of Himachal Pradesh State Electricity Board Limited are:- (a) To plan, promote, organize, maintain and operate an integrated power distribution

system in all aspects including; to acquire, establish, construct erect, lay, operate, run, manage, maintain, enlarge, alter, renovate, modernize, work and use in the State of Himachal Pradesh and elsewhere, extra high voltage (EHV), high voltage (HV), medium voltage (MV) and low voltage (LV) lines and associated sub-stations, including distribution centres, cables, wires, accumulators, plants motors, meters, apparatus, computers and materials connected with transmission, distribution, supply of electrical energy, communication and telemetering equipment.

(b) To plan, promote, organize, maintain and execute Power Project within and

outside the State of Himachal Pradesh including execution of new projects. (c) To undertake, for and on behalf of others the erection, operation, maintenance,

management of extra high voltage, high voltage, medium voltage and low voltage lines and associated sub-stations, equipment apparatus, cables and wires.

(d) To carry on the business of purchasing, selling, trading electrical energy and co-

importing, exporting, wheeling, trading of electrical energy, including formulation of tariff, billing and collection thereof.

(e) Universal power access through various electrification schemes/ processes/

Programs. (f) To improves quality and reliability of power by system strengthening. (g) To avoid cost and time overruns on the schemes under execution through

effective TMR System. (h) Reduction of T&D and AT&C losses.

3. FUNCTIONS

Objectives

1. Distribution of Electricity in the State of H.P. 2. Sale, Purchase and Trading of Electricity. 3. Operation and Maintenance of all existing Power Generation Plants & Electrical System

infrastructure associated with evacuation & distribution of electricity. 4. Completion of ongoing HEPs and execution of HEPs so allotted by GoHP along with

associated electrical networks. 5. R&M of existing EHV, HV & LV Electrical System networks in the State of H.P. for

distribution of electricity. 6. Creation of New and Augmentation of EHV, HV & LV Electrical System Network

commensurate with load growth, rural electrification system extension, distribution loss reduction and quality improvement of power in the State of Himachal Pradesh.

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4. Works The Company has 471.58 MW installed capacity of Generating Stations and the execution of the following projects continue to progress satisfactorily during the period under review: Sr. No.

Name of Project Installed capacity (MW)

Estimated/ Revised cost (` in lakh)

Date of start of work

Targeted date of commissioning

1 Ghanvi HEP Stage-II in Distt Shimla

10 9980.00 Jan,2005 December, 2013

2 Uhl-III in Distt Mandi 100 94080.00 Oct-2002 June, 2014 (1st Unit)

The following EHV lines/ EHV Sub Stations and HV distribution lines/ Sub Stations were

completed/ commissioned during the year 2011-12. Sr. No

Name of work/ schemes

EHV Lines & Sub Stations 1 220KV S/C. from Khodri to Majri (Ckt-I) 2 220KV S/C. from Khodri to Majri (Ckt-II) 3 Replacement of 132/33 KV, 1x16 MVA to 1x25.31/5 MVA transformer at Kangra 4 SOP to HPSIDC Davni, C/o 66 KV line from 220/66 KV sub staion Baddi to Davni a/w 66/11

KV, 2x10 MVA S/ Stn at Davni. 5 Aug of 2x16 MVA 132/33 KV transformer to 2x25/31.5 MVA S/ Stn. at Paonta 6 Providing 220/ 33 KV, 25/31.5 MVA Power transformer at 220/ 132 KV S/ Stn. Baddi. 7 Addition of 220/33 KV, 25/31.5 MVA Power Transformer at 220/ 132 KV S/ Stn. 8 Aug. of 132/33 KV, 1x16/20 MVA transformer to 1x25/31.5 MVA at Girinagar S/ Stn. 9 Augmentation of 220/ 132 KV, 2x50/63 MVA transformer to 2x80/100 MVA at Girinagar S/

Stn. 10 Replacement of 132/33/11 KV, 25 MVA Transformer with 31.5 MVA at Annu , Hamirpur 11 Prov. 132/33/11 KV, 2x16 MVA S/ Stn at Gagret a/w 132 KV S/C line from Amb to Gagret 12 Augmentation of 16 MVA, 33/132 KV Power transformer to 25/31.5 MVA capacity at 33/ 132

KV S/ Stn. Malana HEP HV Distribution lines & Sub Stations 1 Construction of 33/11KV,2x1 6 MVA unmanned substation at Gopalpur Nagri associated 33 KV

& 11 KV HT lines 2 Construction of 33/11 KV 2x1.6MVA unmanned sub-station at Lahru- Dadu alongwith

associated 33 KV & 11 KV HT lines. 3 Aug of 33/11 KV KV S/ Station at Chadiar from 1x1MVA to 1x1+1x3.15 MVA 4 Const. of additional 33 KV HT line from 132/33 KV Sub Station Rakkar (Una) to 33/11 KV Sub

Station, Tahliwala 5 Aug. of 33/11 KV, Sub Station at Bhaira (Beruhi) from 2x1.6 MVA to 2x3.15 MVA 6 Aug. of 33/11 KV Sub Station at Bharwain from 2x1.6 MVA to 2x3.15 MVA 7 Replacement of old equipments (switchgear) at 33/11 KV Sub Stan Mheatpur , Bhangna to

Bhaira. 8 Construction of 33/ 11 KV, 1x1.6 MVA un-manned substation at Chaned (Bhanauta) alongwith

associated 33 KV & 11KV HT Line. 9 Aug of 33/11 KV, Sub Station at Galore from 2x1 MVA to MVA to 2x3.15 MVA

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5. ENVIROMENT

All the Environment Management Plans (EMP) of the State Government or the Company are proposed to be implemented diligently with a view to ensure safeguarding environment and improving the same, wherever possible. To this end, the HPSEBL may go beyond the provisions in EMP. 6. HUMAN RESOURCES

The total sanctioned posts of the Company are 25207 as on 31-3-2012 and 5 (five) Whole Time Directors are on the rolls. The class wise position of sanctioned posts as on 31.3.2013 is as under:-

Class Permanent Temporary Total I 417 672 1089 II 206 436 642 III 6538 9188 15726 IV 3019 4731 7750

G. Total 10180 15409 25207 Personal Post:

i Work Charged 2067 ii Daily wages/ Part-time 710

Your Company gives utmost importance for the enrichment of skills and towards this in-house and external training programmes are proposed to be organized in all disciplines and at all levels. 7. DIRECOTRS’ RESPONSIBILITIES STATEMENT

The Directors confirm that in the preparation of the annual accounts for the year ended March 31, 2012:

• That applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

• That the Directors had selected such accounting policies and applied them consistently except as disclosed in the Notes on Accounts and made judgment and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year;

• That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

• That the Directors had prepared the annual accounts on a going concern basis.

8. AUDITORS’ REPORT

M/s Anil Karol & Company, Chartered Accountants, First Floor, 77 Lower Bazar, Shimla-1 were appointed as the Statutory Auditors of the Company for the financial year ended 31st March, 2012 by the Comptroller & Auditor General of India. The Auditors have audited the accounts and submitted their report on 30th September, 2013, which is annexed.

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8.1 Cost Audit:

Pursuant to the Central Government directions to audit Cost Accounting Records as maintained by the Company, your Company appointed M/s Anirudh Joshi & Associates, Cost Accountants, 203 Railways Road , opposite Shastri Market, Hoshiarpur (Punjab) 146001 as Cost Auditors for the year 2011-12 with the approval of Ministry of Corporate Affairs.

9. BOARD OF DIRECTORS

Since the date of 2nd AGM of the Company, the following is the position of the Directors, who are the Sr. Officers of the State Govt. and HPSEBL:

S. No.

PARTICULARS OF THE PERSONS WHO WERE DIRECTORS/SECRETARY OF THE COMPANY SINCE THE DATE OF 3rd AGM

Name NATIONA-

LITY USUAL ADDRESS DATE OF

BIRTH DATE OF

APPOINTMENT DATE OF

CESSATION (IF ANY)

1. Sh. Sushil Kumar Bhim Sen Negi, IAS

Indian Abey File Cottage, Lakkar Bazar, Shimla, 171001, Himachal Pradesh, INDIA

11.09.56 28.12.2012 In position as Chairperson

2. Sh. Pratap Chand Negi

Indian V.P.O- Jeori, Tehsil- Rampur Distt.- Shimla, Himachal Pradesh, India 172101

21.04.57 12.10.2011 In position as Managing Director

3. Sh. Shrikant Baldi, IAS

Indian Old Brock Hourst No. 1, Chotta Shimla, Shimla, 171002, Himachal Pradesh,

12.12.59 25.07.2011 In position as Nominee Director

4. Sh. Rawther Dawood Nazeem, IAS

Indian Tea Board, Shelwood, Coonoor,Tamil Nadu, India 643101


5. Sh. Amandeep Garg, IAS

Indian Type VI, Set No 18,, Ias Colony, Kasumpti, Shimla, 171009, Himachal Pradesh, India


6. Sh. Hans Raj Sharma, HAS

Indian Type-VI,Bbnda Residential Colony, Judi Kalan, Baddi, 173205, Himachal Pradesh, INDIA


7. Sh. Akshay Sood, IAS

Indian B 227, Sector 3 Tehsil Shimla (Rural) Distt Shimla,171009, Himachal Pradesh

04.08.63 28.06.2011 In position as Whole- time- Director

8. Sh. Jai Parkash Kalta

Indian Kalta Villa, Below B.C.S., Phase-III, New Shimla, Shimla, H.P. India 171009.


9. Sh. Pawan Kumar Kohli

Indian House No. 62 H.P. Housing Board Colony Saproon, Solan (H.P.).


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S. No.

Name NATIONA-LITY

USUAL ADDRESS DATE OF BIRTH

DATE OF APPOINTMENT

DATE OF CESSATION

(IF ANY) 10. Sh. Ram Dass

Dhiman, IAS Indian House No. 23, Type-V,

Officers Colony, Kasumpti, Shimla, 171009, H.P.

05.12.62 07.05.2011 Ceased as Chairman-cum-MD w.e.f. 21/05/2013

11. Sh. Deepak Sanan, IAS

Indian House No 10 Type V, Kasumpti, Shimla, 171009, Himachal Pradesh, INDIA

02.01.57 05.05.2010 Ceased as Nominee Director w.e.f. 28/12/2012

12. Sh. Bhola Datt Suyal, IFS

Indian Set No.-64, Type-IV,Kasumpti Shimla, Himachal Pradesh India 171009


13. Sh. Subhasish Panda,IAS

Indian First Floor, Type 5, Talland, Shimla, Himachal Pradesh India 171001


14. Sh. Maneesh Garg,IAS

Indian Flat No 103, Dawlish Apartment, Dilshant Estate, Bharari, Shimla, H.P. India 171001


15. Sh. Rakesh Kanwar, HAS

Indian Cottage No.-90LD, Brock Hurst,Shimla, Himachal Pradesh, India 171002


16 Sh. Anil Kumar Dutta

Indian 19, Kotla Nala Lane, Rajgarh Road, Solan, Solan, 173212, Himachal Pradesh, INDIA

08.09.55 15.06.2010 Ceased as Whole- time- Director w.e.f. 30.09.2013

The Board noted the contributions made by the above Directors during their tenure and placed

on record its appreciation for their services. 10. AUDIT COMMITTEE

In accordance with the provisions of Section 292A of the Companies Act, 1956 an Audit Committee was constituted with the following Directors of the Board. i) Pr. Secretary/Secretary (MPP & Power)

ii) Pr. Secretary/Secretary (Finance)

iii) Director (Finance & Accounts)

The Chief Accounts Officer is the Secretary to the Audit Committee. The meetings of the Audit Committee are being held from time to time.

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11. SHARE CAPITAL

The Authorized Share Capital of the Company is Rs.1100,00,00,000/- (Rs. Eleven Hundred Crore only). The issued subscribed & paid up capital of the Company is Rs.446,53,18,000/-

12. ACCOUNTS

The Profit & Loss Account Statement for the period ended 31st March, 2012 and Balance Sheet as on that date have been prepared and are annexed. 13. PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS

IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988.

a) Conservation of Energy The Company consumes renewable energy in its projects or offices on regular basis except

for emergency operations. b) Foreign Exchange Earnings and Out-Go There is no import and export of foreign exchange during this year and as such this

information can be treated as Nil. c) Technology Absorption This information can be treated as Nil.

14. PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217(2a) OF THE COMPANIES

ACT, 1956.

The information under Section 217 (2a) of the Companies Act, 1956 for the year ending 31st March, 2012 is Nil. 15. CORPORATE GOVERNANCE

HPSEBL continuously strive to bring the best practices expected by all the stake holders in the conduct of our business. Though, the Company is a Public Limited and unlisted Company as on date, to the extent applicable, the information on the subject is furnished as under: Board of Directors 15.1 Size of the Board

HPSEB Ltd. is a Government Company within the meaning of Section 617 of the Companies Act, 1956. The present share-holding is 100% by the Government of Himachal Pradesh. As per Articles of Association, the power to appoint Directors vests in the Government of H.P. The Strength of the Board shall not be less than 3 and not more than 10. These numbers include all whole-time and part-time Directors. 15.2 Composition & Tenure of the Board

As on today, the Board is comprised of 9 (Nine) Directors, consisting of 4 (four) Whole Time (Functional Directors) including Managing Director and 5 (Five) part time Directors.

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15.3 Board Meetings

The meetings of Board of Directors are held at Shimla to facilitate full participation by the Directors. Since the adoption of accounts for the Second financial year on 26.03.2013, 3 (Three) meetings of Board of Directors have been held including this meeting on 28.12.2013. Almost all the Directors have attended these meetings. 15.4 Applicability of Section 274 (1) (g)

Since HPSEBL is a Govt. Company, clause (g) of sub section (i) of section 274 of the Companies Act 1956 is not applicable to the Company in terms of notification No. G.S.R. 829 (E) dated 21-10-2003. 16. INTERNAL CONTROL SYSTEMS

The Company has adequate internal control systems and the transactions/processes are guided by delegation of powers, documented policies, guidelines etc. of the Company as well as of the State Govt. The Organizational Structure is well defined in terms of the structured authority/ responsibility involved at a particular hierarchy level.

In order to ensure that all checks and balances are in place and internal control systems are in order, regular internal audit is conducted by the Firms of Chartered Accountants in close coordination with Company’s own internal Audit Department. 17. OTHERS

There is no decision to buy back its shares during the year under report under section-77 (A) of the Companies Act, 1956. Industrial relations remained peaceful and cordial during the period under review. 18. Subsidiary Company

The Himachal Pradesh State Electricity Board Limited has a subsidiary Company named Beas Valley Power Corporation Limited, which was earlier incorporated by the erstwhile Himachal Pradesh State Electricity Board. Beas Valley Power Corporation Limited is having its registered office at Shimla. Presently, the Authorized Share Capital of the Company is Rs.300 Crore and paid up capital is Rs.300 Crore. The Nominees of the State Govt. and Himachal Pradesh State Electricity Board Limited are on the Board of Directors of the Beas Valley Power Corporation Limited. The Beas Valley Power Corporation Limited has got its Annual Accounts adopted in its Annual General Meetings for the financial year 2011-12 and 2012-13. However, the Annual Accounts for the financial year 2011-12 of Beas Valley Power Corporation Limited shall only be taken into consideration for the purpose of filling with the Annual Accounts for the financial year 2011-12 of Himachal Pradesh State Electricity Board Limited (Holding Company). 19. ACKNOWLEDGEMENTS

Your Directors gratefully acknowledge the continuous support and assistance provided by the State Govt. and its Departments such as Deptt. of Power, Deptt. of Finance, Deptt. of Forests, Deptt. of I&PH, HPERC, Pollution Control Board etc. The Board of Directors also acknowledge with thanks the guidance and help extended by various Ministries/Departments of the Government of India, Central Electricity Authority, and Financial Institutions, such as ADB, PFC, REC and Banks etc.

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The Board conveys its gratitude to the outgoing Directors for their dedicated services rendered during their tenure. The Directors further place on record, their gratitude to the officers of HPPCL, HPPTCL, BVPCL and other agencies for their institutional support. The Directors would also like to thank the office of A.G. H.P., C.A.G. of India, Statutory Auditors, Internal Auditors who have made efforts in conducting and finalizing the audit report of the Company. Last but not least, the Board commends the hard work and dedicated efforts put in by the employees of the Company including the employees on deputation at all levels. Thanking you.

For and on behalf of Board of Directors Sd/- Place: Shimla (Er. P.C. Negi) Date: 28.12.2013 Managing Director

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HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD.

Balance Sheet as at 31st March, 2012 (Amount in `)

Particulars Note No.

As at 31st March, 2012 As at 31st March, 2011

I. EQUITY AND LIABILITIES

1 Shareholders’ Funds (a) Share Capital 2.1 1,140,000 140,000 (b) Reserves and Surplus 2.2 3,426,744,867 7,032,532,310 (c) Money Received against

Share Warrants - 3,427,884,867 - 7,032,672,310

2 Share Application Money Pending Allotment

2.3 9,717,718,000 9,717,718,000

3 Non-Current Liabilities (a) Long-Term Borrowings 2.4 16,147,730,340 16,958,024,099 (b) Deferred Tax Liabilities

(Net) - -

(c) Other Long Term Liabilities 2.5 4,295,949,213 3,338,079,024 (d) Long-Term Provisions 2.6 - 20,443,679,553 - 20,296,103,123

4 Current Liabilities (a) Short-Term Borrowings 2.7 23,387,836,707 17,132,056,786 (b) Trade Payables 2.8 11,440,042,795 8,869,012,714 (c) Other Current Liabilities 2.9 15,457,161,672 14,157,516,849 (d) Short-Term Provisions 2.10 1,029,130,161 51,314,171,335 704,918,225 40,863,504,574 TOTAL 84,903,453,755 77,909,998,007

II. ASSETS Non-current assets

1 (a) Fixed Assets (i) Tangible Assets 2.11 44,260,816,083 40,080,694,044 (ii) Intangible Assets 2.12 - - (iii) Capital Work-in-

Progress 2.13 12,732,793,968 12,936,981,947

56,993,610,051 53,017,675,991 (b) Non-Current Investments 2.14 8,805,120,024 8,354,187,477 (c) Deferred Tax Assets (net) (d) Long-Term Loans and

Advances 2.15 102,799,622 172,338,100

(e) Other Non-Current Assets 2.16 1,514,721,002 67,416,250,699 1,522,091,539 63,066,293,107 2 Current Assets

(a) Current Investments 2.17 203,420,878 183,970,008 (b) Inventories 2.18 1,041,123,768 833,185,923 (c) Trade Receivables 2.19 5,010,671,868 2,994,902,717 (d) Cash and Cash equivalents 2.20 2,871,969,103 3,543,118,136 (e) Short-Term Loans and

Advances 2.21 4,786,370,114 3,962,208,005

(f) Other Current Assets 2.22 3,573,647,325 17,487,203,056 3,326,320,111 14,843,704,900 TOTAL 84,903,453,755 77,909,998,007

The accompanying notes form an integral part of these financial statements

For and on behalf of Company Auditors Report As per our report of even date Sd/-

(Er. P C Negi) For Anil Karol & Co. Managing Director Chartered Accountants Firm No. 04816N Sd/-

(Akshay Sood, IAS) Sd/- Director( F&A) (Umesh Walia) Partner Sd/- M No. 098287

(Gulshan Aggarwal) Chief Accounts Officer

Place: Shimla Date 30.9.2013

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HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD. Statement of Profit and Loss for the year ended 31st March, 2012

( Amount in `)

Particulars Refer Note No.

Year ended 31st March, 2012


I. Revenue from Operations 2.23 38,284,572,581 29,340,241,263 II. Other Income 2.24 1,940,944,171 2,126,612,166 III. Total Revenue (I + II) 40,225,516,752 31,466,853,429 IV. Expenses:

Purchase of Power 2.25 26,576,220,639 22,713,304,457 Employee Benefits Expense 2.26 10,402,696,025 7,243,762,107 Finance Costs 2.27 2,611,071,833 1,415,874,803 Depreciation and Amortization expense 2.28 1,997,564,733 1,105,281,990 Other expenses 2.29 3,797,157,982 2,781,210,604

V. Total Expenses 45,384,711,212 35,259,433,961 VI. Profit / (Loss) before exceptional and extraordinary

items and tax (III-V) (5,159,194,460) (3,792,580,532)

VII. Exceptional items - - VIII. Profit / (Loss) before extraordinary items and tax

(VI - VII) (5,159,194,460) (3,792,580,532)

IX. Extraordinary Items 2.30 (31,635,576) 12,090,342 X. Profit / (Loss) before tax (VIII- IX) (5,127,558,884) (3,804,670,874)

XI. Tax Expense: - - (1) Current Tax - - (2) Deferred Tax - -

XII. Total - - XIII. Profit / (Loss) for the period from operations (X-XII) (5,127,558,884) (3,804,670,874)

The accompanying notes form an integral part of these financial statements For and on behalf of Company Auditors Report Sd/- As per our report of even date (Er. P C Negi) Managing Director For Anil Karol & Co. Chartered Accountants Sd/- Firm No. 04816N (Akshay Sood, IAS) Director( F&A) Sd/- (CA. Walia Umesh) Sd/- Partner (Gulshan Aggarwal) M No. 098287 Chief Accounts Officer Place: Shimla Date 30.9.2013

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ANNUAL REPORT 2011-12 2 Notes to Accounts

The Amounts in financial statements are presented in Indian Rupees.

The financial statements for the year ended 31st March,2011 were prepared as per the applicable schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended 31st March, 2012 are prepared as the per revised schedule VI accordingly the previous year figures have also been reclassified/ regrouped/ rearranged wherever necessary to conform to this year's classification. The adoption of revised schedule VI for previous year figures does not impact recognition and measurement principle followed for preparation of financial statements.

2.1 Share Capital (Amount in `) As at 31st March, 2012 As at 31st March, 2011 No. of Shares Amount No. of Shares Amount Authorised Equity Shares at par value ` 100/- each 500000 50,000,000 500000 50,000,000 EQUITY SUBSCRIBED AND FULLY PAID UP Equity Shares at Par Value ` 100/- each fully

Paid-up 11400 1,140,000 1400 140,000

Total 1,140,000 140,000 2.1.1

The reconciliation of the number of shares outstanding is set out below:

(Amount in `)

Name of Shareholder As at 31st March, 2012 As at 31st March, 2011 No. of Shares Amount No. of Shares Amount Number of shares at the beginning 1400 140,000 1000 100,000 Number of shares issued during the year. 10000 1,000,000 400 40,000 Number of shares at the end. 11400 1,140,000 1400 140,000

2.1.2

Details of Shareholding more than 5% shares in the company:

Name As at 31st March, 2012 As at 31st March, 2011 No. of Equity

Shares % of

Shareholding No. of Equity

Shares % of

Shareholding 1. Governor of HP - 10000 87.72% 2. Sh. R D Dhiman, IAS 200 14.28% 3. Sh. Akshay Sood,IAS 200 14.28% 4. Sh. Anil Kumar Dutta 200 14.28% 5. Sh. P C Negi 200 14.28% 6. Sh. J P Kalta 200 14.28% 7. Sh. S K Baldi, IAS 200 14.28% 8. Sh. Sushil Kumar Bhim Sen Negi, IAS 200 14.28%

2.2 Reserves & Surplus (Amount in `) As at 31st

March, 2012 As at 31st March,2011

Capital Reserves / Capital Grants from GoHP & GOI

Opening Balance 9,017,151,657 - Add: Addition during the year 102,950,000 9,017,151,657 Less : Utilised during the year - - Closing balance 9,120,101,657 9,017,151,657 Capital Reserves/Other Grants and Subsidies Opening Balance 6,715,795,892 - Add: addition during the year 1,424,329,796 6,715,795,892 less: Utilised during the year - - Closing balance 8,140,125,688 6,715,795,892 General Reserves Opening Balance ( Leave encashment fund) 155,508,355 - Add: addition during the year - 155,508,355 less : Utilised during the year 5,508,355 - Closing balance 150,000,000 155,508,355 Deficit Opening Balance -8,855,923,594 -5,051,252,720 Add: Loss during the year as per statement of

P & L A/c -5,127,558,884 -3,804,670,874

Closing balance -13,983,482,478 -8,855,923,594

16

Total 3,426,744,867 7,032,532,310 2.3 Share Application Money Pending Allotment (Amount in `)

As at 31st March, 2012


Application money pending allotment 9,717,718,000 9,717,718,000

2.4 Long-Term Borrowings (Amount in `) As at 31st

March,2012 As at 31st March,2011

Term Loans A Secured

Banks - - Financial Institutions 9,441,804,867 9,362,990,944 Others - - Total A 9,441,804,867 9,362,990,944

B Unsecured Banks 3,230,000,000 3,740,000,000 Financial Institutions 3,008,048,716 3,583,926,188 Others 467,876,757 271,106,967 Total B 6,705,925,473 7,595,033,155 Total Long Term Borrowings (A+B) 16,147,730,340 16,958,024,099

2.41 Loans from Financial Institutions PFC / REC / LIC were obtained under different schemes for creation of fixed assets. The assets created with the loans are hypothecated with the REC/PFC/LIC.

Secured REC 4,069,123,215 PFC 4,084,287,007 LIC 32,674,645 PFC ( APDRP Part-A) 289,180,000 PFC ( APDRP Part-B) 966,540,000 Total 9,441,804,867 Unsecured Banks H P State Coop. Bank, Shimla 3,143,600,000 Kangra Central Cooperative Bank 86,400,000 Total 3,230,000,000 Financial Institutions REC ( RGGVY ) 285,986,712 Non SLR Bonds 1,242,250,000 LIC 1,479,812,004 Total 3,008,048,716 Others ADB Loan through H P Government 76,799,000 APDRP Loan through H P Government incl.

Interest accrued 341,077,757

RGGVY Loan H P Government 50,000,000 Total 467,876,757

2.5 Other Long Term Liabilities (Amount in `) As at 31st


Security Deposits from Consumers 2,324,872,381 2,089,745,333 Deposits, Retention Money from Contractors

and Others 791,863,404 548,787,149

Contributory Provident Fund - - GPF 10,088,473,772 9,396,534,944 less : GPF Investments -10,017,527,194 -9,493,562,926 Other Funds-CPS 147,179,989 86,936,733 Advance for Infrastructure development /

Others 961,086,861 709,637,791

17

Total 4,295,949,213 3,338,079,024 2.6 Long-Term Provisions (Amount in `)


As at 31st March,2011

Provision for losses pending investigation 0.00 0.00

2.7 Short-Term Borrowings (Amount in `) As at 31st


Secured Loans Overdraft / Cash Credit limit from banks 7,046,423,468 6,882,056,787 Cash Credit limit from banks - - Unsecured Loans Overdraft / Cash Credit limits from banks 4,008,313,239 3,549,999,999 Short Term Loans from banks 12,333,100,000 6,700,000,000 Total 23,387,836,707 17,132,056,786

2.71 Overdraft from banks are secured against FDR's.

Overdrafts State Bank of India 915,989,148 UCO Bank 349,225,269 Bank of India 28,207,948 Bank of Baroda 328,747,468 Kangra Central Coop Bank 1,218,671,558 Union Bank of India 9,867,992 H P Cooperative Bank 1,052,780,125 Indian Overseas bank 101,012,518 Punjab National Bank 310,210,735 Central bank of India 292,482,350 Punjab & Sind bank 419,487,086 Maharashtra Bank 84,471,253 IDBI 276,370,018 Working Capital State Bank of India 1,166,400,000 UCO Bank 367,500,000 Indian Overseas Bank 125,000,000 Total 7,046,423,468 Unsecured Cash Credit limit against Escrow cover State Bank of India 1,008,313,239 Kangra Central Coop Bank 2,000,000,000 Punjab & Sind bank 1,000,000,000 Total 4,008,313,239 Short-Term Loans from Banks Kangra Central Coop Bank 1,500,000,000 Canara Bank 1,000,000,000 State Bank of India 3,000,000,000 Vijaya bank 2,833,100,000 Central bank of India 1,000,000,000 Kangra Central Coop Bank 2,000,000,000 Punjab National bank 1,000,000,000

18

Total 12,333,100,000 2.8 Trade Payables (Amount in `)



Sundry Creditors Purchase of Power 11,440,042,795 8,869,012,714 Others - - Total 11,440,042,795 8,869,012,714

2.9 Other Current Liabilities (Amount in `) As at 31st


Current Liabilities of Long Term debt Secured 1,331,124,966 1,313,336,966 Unsecured 1,104,770,162 1,398,019,373 Interest accrued but not due on : Term loans 349,532,078 175,294,517 Bonds 21,917,363 43,485,066 Other Payables: Liability for employees remuneration and

benefits 383,326,337 452,401,341

Unclaimed Interest 3,200,000 - Security deposits from employees 95,584 132,342 Advances received from contractors / others 1,178,011 2,107,295 Amounts payable to GoHP / other departments 3,552,284,122 2,275,062,317 Other payable for expenses / employee

deductions 478,669,145 533,474,784

Liability for Purchases -Capital / Others 1,681,943,858 1,848,418,618 TDS and other Statutory Taxes payable 19,651,913 15,411,614 Deposits, Retention Money from Contractors

and Others 6,529,468,133 6,100,372,615

Total 15,457,161,672 14,157,516,849

2.10 Short Term Provisions (Amount in `) As at 31st


Unfunded Employee Benefits Leave Salary 14,931,509 5,634,230 - Others - - Bonus 907,207 - 0 Medical expenses 22,344,213 14,383,083 Interest Payable on Consumer deposits 115,047,372 198,665,929 Provision for expenses 875,899,860 486,234,983

Total 1,029,130,161 704,918,225

Note No. 2.11 (Amount in `)

GROSS BLOCK PROVISION FOR DEPRECIATION NET BLOCK Sl.No.

Asset Group A/C Code

Opening balance as on 1.4.2011

Additions during the Period 1.4.2011 to 31.3.2012

Adjust-ments

Deductions At the end of March,12

Opening fund as on 1.4.2011

Deprecia-tionduring the year

Adjust-ments or deduc-tions 2011-12

At the end of March,12



1 2 3 4 5 6 7 8 9 10 11 12 13 14

1 Land & Land Rights 10.1 731259136 240655431 0 113721190 858193377 4,214,545 1975619 0 6190164 852003213 727044591

2 Buildings 10.2 2347133705 54501351 260264049 2647351 2138723656 683,109,404 84440423 0 753182894 1385540762 1664024301

3 Hydraulic Works 10.3 12206626441 425132481 321690036 14243 12310054643 2,164,133,827 650038534 0 2806370448 9503684195 10042492614

4 Other Civil Works 10.4 5108296665 443817166 3319336095 0 2232777736 755,222,403 148256271 0 901413561 1331364175 4353074262

5 Plant & Machinery 10.5 13073632596 5717171612 0 139913 18790664295 2,387,488,846 581797823 0 3012772739 15777891556 10686143750

6 Lines & Cable Net 10.6 14246585207 3302731060 0 4350343 17544965924 2,625,723,638 496137970 0 3113230927 14431734997 11620861569

7 Vehicles 10.7 247221956 40047460 51685578 71608521 163975317 145,796,054 101630063 0 109926559 54048758 101425902

8 Furniture & Fixtures 10.8 165321789 22604337 101927530 0 85998596 46,828,306 10047345 0 56839670 29158926 118493483

9 Office Equipments 10.9 165890377 64231576 25229070 0 204892883 31,124,794 11297548 0 42262403 162630480 134765583

S 0 144781386 0 144781386 144781386 0

Sub-Total 48291967872 10455673860 4080132358 192481561 54475027813 8843641817 2085621596 0 10802189365 43672838448 39448326055

0

10 Capital expenditure resulting in an assets not belonging to the Board.

11.101 703170898 0 0 32747600 70822196 44352238 0 50689238 -17941638 632348702

11.102 0 0 0 671058557 0 0 0 64485196 606573361 0 13.400 635259 0 615972 38116 654088 -654088 19287

Total 703806157 0 0 0 703806157 71438168 44390354 0 115828522 587977635 632367989 0 0 Grand Total 48995774029 10455673860 4080132358 192481561 55178833970 8915079985 2130011950 0 10918017887 44260816083 40080694044 2. Gross Block does not include value of small and low value assets each costing below Rs.500/-, charged to Revenue Account in the year in which they are first put to use.Value of such assets charged to Revenue Account during the year 2011-12 Rs Nil and during the year 2010-11 Rs. Nil. Total upto the Balance Sheets date (i.e. including previous year's write offs ) Rs. Nil.

Note No. 2.12

Intangible Assets

Nil.

20

Note No. 2.13

Sr. No.

Particulars Accounts Code

As at 2011 Additions during the year

Transfers/Adjustments

Total WIP 2012 Capitalised during the year

As at 2012

1 Land & Land Rights 14.1 164557044.00 227582743.00 0.00 392139787.00 240655431.00 151484356.00

2 Building& civil structure 14.2 134577170.00 66710306.00 15215344.00 186072132.00 54501351.00 131570781.00

3 Hydraulic Works 14.3 100704000.00 543307063.00 0.00 644011063.00 425132481.00 218878582.00

4 Other Civil Works 14.4 1980848956.00 1171777855.00 501432626.00 2651194185.00 443817166.00 2207377019.00

5 Plant & Machinery-T&D 14.5 3415932658.00 2137251687.00 458178631.00 5095005714.00 2049607046.00 3045398668.00

6 Lines & Cable Network etc. 14.6 5763848434.00 2562171694.00 91722039.00 8234298089.00 3278984774.00 4955313315.00

7 Vehicles 14.7 78119455.00 22054319.00 -20981934.00 121155708.00 40047460.00 81108248.00

8 Furniture & Fixtures 14.8 24179778.00 8106638.00 0.00 32286416.00 22604337.00 9682079.00

9 Office Equipments 14.9 213886065.00 207027669.00 0.00 420913734.00 64231576.00 356682158.00

s -909066806.00 0.00 -909066806.00 0.00 -909066806.00

Sub-Total 10967586754.00 6945989974.00 1045566706.00 16868010022.00 6619581622.00 10248428400.00

Other Assets at construction stage 1 Contract- in Progress 15.1 844253107.00 0.00 85242873.00 759010234.00 64894391.00 694115843.00

s 18293307.00 18293307.00 0.00 18293307.00

2 Revenue Expense Reclassified Pending Allocation over capital works

15.2 1106848779.00 1562296165.00 2669144944.00 897188526.00 1771956418.00

Sub Total 1969395193.00 1562296165.00 85242873.00 3446448485.00 962082917.00 2484365568.00

Total:- 12936981947.00 8508286139.00 1130809579.00 20314458507.00 7581664539.00 12732793968.00

Previous Year 10788306122.00 4711088440.00 571003043.00 14928391519.00 1991409572.00 12936981947.00

2.14 Non-Current Investments (Amount in `)



Benevolent Fund Investment with Banks 30,738,024 29,805,477 Investment in its own projects By HPSEBL 5,752,400,000 5,752,400,000 Investments in Shares in : Subsidiary (BVPCL)-20000000 Equity Shares

of `100/- each 2,000,000,000 1,550,000,000

Others ( HPPCL) 1021982 Equity Shares of ` 1000/- each

1,021,982,000 1,021,982,000

Total 8,805,120,024 8,354,187,477

2.15 Long-Term Loans & Advances (Amount in `) As at 31st


Capital Advances Secured - - Unsecured - Considered Good 44,168,773 31,801,315 Loans & Advances to Employees Secured 49,003,381 55,389,317 Unsecured - Considered Good - - Loans & Advances Others Unsecured - Considered Good - 75,520,000 Interest Accrued but not due on Staff loans & advances - - Others 9,627,468 9,627,468 Total 102,799,622 172,338,100

2.16 Other Non Current Assets (Amount in `) As at 31st

March, 2012 As at 31st March, 2011

Assets not in use 103,868,690 98,843,838 Deferred Miscellaneous expenses 1,250,522,973 1,251,411,569 Trade receivables-defaulters 59,082,846 53,543,032 Inventories-Scrap/other

materials/excess/shortages 62,305,713 73,289,752

Interest Accrued & due on

Staff Loans & Advances - - Others 38,748 9,727 Interest Accrued but not due on

Staff Loans & Advances 26,776,292 32,730,154 Others 12,125,740 12,263,467 Total 1,514,721,002 1,522,091,539

2.17 Current Investments (Amount in `) As at 31st


Leave Encashment and CPS fund Investment 203,420,878 183,970,008

2.18 Inventories (Amount in `)



Materials Stock 1,041,123,768 833,185,923

Less : Provision for Shortage and Obsolescence

0 0

Total 1,041,123,768 833,185,923

2.19 Trade Receivables (Amount in `) As at 31st


Outstandings for sale of power 5,024,876,176 3,009,005,169

22

Others - - Less: Provision for doubtful debts - 14,204,308 - 14,102,452 Total 5,010,671,868 2,994,902,717 Out of above Trade receivables outstanding for period exceeding six months from the date

they were due for payment

Unsecured considered good 3,901,340,868 1,944,652,717 Other Trade Receivable Unsecured considered good 1,109,331,000 1,050,250,000 Total 5,010,671,868 2,994,902,717

2.20 Cash and Bank Balances (Amount in `) As at 31st


Cash and Cash equivalents 130,164 7,793 Postage stamps in Hand 2,130,993 1,315,967 Imprest with Staff 58,638 167,184 Balances with Banks 1,541,667,423 2,377,743,245 FDR's > 3M 1,327,981,885 1,163,883,947 Total 2,871,969,103 3,543,118,136

2.21 Short-Term Loans & Advances (Amount in `) As at 31st

March 2012 As at 31st March,2011

Advances to Contractors and Suppliers Secured Considered Good 215,289,375 170,114,004 Less : Provision for doubtful advances 0 - 607,067 Others Advance recoverable from employees 17,636,955 15,246,023 Prepaid expenses 6,117,291 2,691,885 Advance tax and tax deducted at source 112,734,048 101,803 Amount recoverable- Government

departments 357,128,286 358,209,237

Amt recoverable- Related parties 1,029,133,090 964,345,354 Amount recoverable others 1,195,601,500 1,125,164,398 Deposits 760,899,093 768,051,924 Amount recoverable from employees 21,097,974 21,582,767 Interest accrued but not due from Employees 117,909 117,909 Others 1,070,614,593 537,189,769

Total 4,786,370,114 3,962,208,005

2.22 Other Current Assets (Amount in `) As at 31st

March, 2012 As at 31st March, 2011

Receivables from scrap sale / miscellenous. 42,761,943 42,794,328 Unbilled revenue 1,545,066,387 1,295,711,438 Electricity duty recoverable from consumers 114,147,636 129,796,621 Grant /Subsidies receivable GoHP 1,117,488,687 803,895,372 Inter unit transactions 754,182,672 1,054,122,352 Total 3,573,647,325 3,326,320,111

23

Note 2.23 Revenue from Operations

( Amount in `) Particulars Account Code Year ended

31st March, 2012 Year ended

31st March, 2011 Total Inter State Sale of Power UPSEB 61.103 - 1,171,800,000 Sangroli (NTPC) 61.110 10,000 337,660 Uttranchal Jal Vidyut Nigam Ltd. 61.113 45,935,811 3,103,941 Power Trading Corp. of India 61.114 - 321,497,075 Through Banking-BRPL/BYPL 61.119 1,005,000,000 750,729,000 Through Banking-Haryana Power Corp. Ltd. 61.120 3,091,890,000 1,939,725,000 Through Banking-P.S.E.B 61.121 2,588,766,500 2,087,437,500 Consumers Deviation of Malana. 61.123 2,150,522 10,863,130 Reactive Engergy from various CPU's/SEBs 61.124 23,236,688 19,568,191 UI Charges /Sale of Power NREB Through PGCIL. 61.130 1,314,407,236 373,175,314 M/S Indian Energy Exchange & Power exc. Of India 61.148 637,892,488 1,262,182,341 Sub-Total(A) 8,709,289,245 7,940,419,152 REVENUE FROM SALE OF POWER OTHER CONSUMERS Domestic 61.201 to 209 4,150,906,100 2,954,829,611 Commercial 61.211 to 219 2,280,816,950 1,511,253,833 Small Power 61.221 to 229 266,667,621 210,560,943 Medium Power 61.231 to 240 655,476,920 486,771,759 Large supply 61.241 to 250 &

378 &379 16,689,392,882 12,407,001,740

Agriculture/Irrigation 61.251 to 259 172,082,678 134,525,240 Public Lighting 61.261 to 269 62,248,693 48,642,916 Bulk and Grid supply 61.271 to 290 900,908,387 813,910,326 Common Pool 61.291 to 300 - 9,219,472 Revenue from Sale of Power Non Domestic/Non commercial

61.301 to 309 555,481,585

411,345,867

Other (Water Works and sewerage) 61.350 to 353 & 357

2,302,659,323 1,413,979,278

Temporary Metered Supply 61.373 to 375 168,858,135 92,573,421 Total (B) 28,205,499,274 20,494,614,406 Total Revenue (A+B) 36,914,788,519 28,435,033,558 Electricity Duty recovery 61.501 to 519 3,108,782,004 2,060,313,428 Meter Rent/Service Line Rentals 61.6 367,724,595 257,074,323 Recoveries for theft of power and Mal practice. 61.711 to 61.729 197,314 219,029 Peak Load vialotion charges 61.741 to 61.743 303,359,482 246,695,162 Sub- Total 3,780,063,395 2,564,301,942 Wheeling charges recoveries 61.8 644,226,133 330,506,736 Misc. Charges from consumers 61.9 54,276,538 70,712,455 Electricity Consumption Tax levied by MCs/NACS 61.941 to 953 17,859,782 13,547,872 Sub- Total 716,362,453 414,767,063 GROSS REVENUE FROM SALE OF POWER 41,411,214,367 31,414,102,563 Less: Electy. Duty Payable (Contra) 61.541 to 559 3,108,782,004 2,060,313,428 Electricity consumption tax (Contra) 61.961 to 973 17,859,782 13,547,872 Sub- Total 3,126,641,786 2,073,861,300 Total 38,284,572,581 29,340,241,263

24

Note 2.24 Other Income

( Amount in `) Particulars Account Code Year ended

31st March, 2012 Year ended

31st March,2011

Interest on staff loans and advances. 62.210 to 219 18,421,335 5,221,674 Income from investments 62.220 to 239 279,595,808 57,694,233 Delayed payment charges from consumers. 62.250 188,064,717 117,778,960 Interest on advances to suppliers / contractors. 62.260 499,780 4,577,547 Income from Trading. 62.3 21,011,859 11,640,133 Income from staff Welfare activities. 62.6 865,644 508,927 Miscellaneous receipts. 62.9 676,538,481 591,804,596 Total 1,184,997,624 789,226,070

Gain on sale of fixed Assets (excluding capital Gain Rs. nil transferred to capital reserve)

62.4 2,612,500 131,431

Revenue grant and subsidies 63.121 - 500,000 Prior Period income 65.5 753,334,047 1,336,754,665

Total 1,940,944,171 2,126,612,166

Note 2.25 Purchase of Power

( Amount in `) Particulars Account

Code Year ended

31st March,2012 Year ended

31st March,2011 P.S.E.B. 70.101 8,917,476 16,553,034 U.P.P.C.L (through Banking ) 70.103 - 1,171,800,000 B.B.M.B 70.106 35,585,281 24,005,600 NTPC 70.11O 4,324,868,870 3,031,629,332 NPCC 70.112 159,669,693 120,543,210 Purchase of Power Rajaystan atomic Power Project of NPCIL 70.119 497,359,080 286,866,371 Malana HEP 70.120 9,204,346 6,698,642 Uttranchal Power Corp. Ltd. 70121 853,763 2,392,000 Uttranchal Jal Vidyut Nigam Ltd. 70.122 521,252,004 260,090,555 NHPC 70.123 716,035,745 562,011,091 Reactive Energy from various CPUs/SEB 70.124 32,879,298 26,851,543 Purchase of Power through banking-BRPL/BYPL 70.125 1,414,334,420 11,172,000 Purchase of Power through banking-Haryana Power Gen Corporation Ltd.

70.126 1,520,611,650 2,747,550,000

Purchase of Power through banking-P.S.E.B. 70.127 1,959,736,130 2,162,687,500 Purchase of Power U.P.J.V.N.L. 70.129 - 20,745,900 NREB Through PGCIL. 70.130 818,598,455 367,158,840 POP- Aravali power Co. 70.132 59,782,272 4,537,324 Wheeling chares 70.4 - 200,000 Wheeling charges -UPPCL Charges 70.401 - 2,392,000 Raskat HEP 70.816 8,956,250 4,422,046 Titang Mini HEP. 70.817 3,763,824 2,198,509 Baspa II HEP Through Jai Parkash Hydro Power Ltd. 70.818 3,250,153,764 3,661,970,790 Satluj Jal Vidyut Nigam Ltd. 70.819 554,172,337 466,213,878 Manjhi HEP M/S Dharamshala Hydro Power Ltd. 70.820 25,185,375 18,637,462 Deher HEP M/S Astha Project India 70.821 63,903,500 48,023,416 Baragaon HEP M/S K.K.K. Hydro Power Ltd.Faridabad 70.822 84,705,356 68,065,498

25

Particulars Account Code

Year ended 31st March,2012


Ching HEP M/S Hateshwari Om Power Enterprises Ltd. 70.823 5,306,100 4,281,691 POP Aleo Hydro Project 70.824 38,180,250 46,094,991 POP Manal Hydro Project 70.825 48,665,148 35,948,108 POP from Power Trading Corp. of India Ltd. 70.826 4,179,791,500 4,237,743,566 POP Manjhal HEP M/S Virender Dogra Power Project. 70.827 13,685,622 8,562,210 POP- Salag HEP M/S Dhaluladar Hydro System Pvt. Ltd. 70.828 1,094,225 1,240,602 POP- Tehri Hydro Power Project. 70.829 568,314,609 416,653,245 POP- Jiwa Kothkhai HEP 70.830 14,598,000 12,963,187 POP- Marhi Mini hydro project 70.832 73,321,718 59,986,848 POP-Taraila HEP 70.833 - 30,944,508 POP- Kothi HEP 70.834 3,610,857 2,525,278 POP-JHTHED HEP 70.835 732,356 446,007 POP-Patikari HEP 70.836 116,628,336 129,053,232 POP-Salag HEP ( M/S -A-Himalya Ltd.) 70.837 9,826,046 8,131,355 POP- Braham ganga M/S Harison Hydel Construction (P) Ltd. 70.838 69,027,241 53,760,716 POP- Gharola HEP( Him Urja) 70.839 1,287,176 955,222 POP-Sahu HEP M/S. Him kailash Hydro Power Ltd. 70.840 69,828,250 48,541,241 POP- Sarabai HEP ( M/S DSL Hydrowati Ltd.) 70.842 80,205,795 62,348,335 POP- Awa HEP ( M/s Astha Project India Ltd.) 70.843 91,793,807 70,104,191 POP-Lingti HEP ( Him Unja) 70.844 118,450 501,044 POP- Sural HEP 70.845 639,298 1,952,706 POP_IKU-II HEP 70.848 74,631,509 43,168,031 POP- M/S Toss HEP 70.849 110,396,408 103,402,131 POP- M/S Shyang HEP 70.850 25,075,045 15,298,180 POP- M/S Tarailla-II HEP 70.851 79,714,465 55,487,203 POP-M/S Luni-111 70.852 68,897,122 52,079,527 POP-M/S-Andhra Stage-11 70.853 49,254,250 31,677,379 POP-M/S-Changer Vidyut Karanti PVTLtd. 70.854 14,992,900 11,337,601 POP-M/S-A.T.Hydro Pvt-Ltd.(Upper Tarila) 70.855 61,691,353 46,664,577 POP-M/S -Sri Sai Krishna Hydro Eng.Pvt.Ltd. 70.856 73,708,078 34,229,079 POP-M/S-Vamshi Hydro Eng.Pvt.Ltd against Baner 111 HEP 70.857 36,239,867 25,729,379 POP- Manglar HEP 70.858 78,913,090 53,339,798 POP-Dirni Dhar HEP 70.859 52,758,171 32,726,095 POP- Sainj HEP 75.860 22,535,640 42,537,725 POP-Purthi HEP 70.861 231,248 539,757 POP-DSL Hydro HEP 70.862 92,238,689 43,148,166 POP-Allian Duhgan HEP 70.863 - 71,746,950 POP-Gurcharan HEP 70.864 11,925,750 5,796,250 POP-Dharamshalla HEP 70.865 39,755,968 2,199,669 POP-Sach HEP 70.866 8,404,196 1,819,383 POP-Tanging HEP 70.867 38,913,635 4,883,651 POP-Polar-Ist HEP 70.868 18,822,500 3,369,000 POP-Bharhi HEP 70.869 53,274,935 11,473,435 POP-Gaj-IIrd HEP 70.870 24,370,540 3,788,095 POP-Jirah HEP 70.871 34,924,661 2,807,750 POP-Upper Khauli HEP 70.872 54,504,202 3,978,518 POP-Rikchad HEP 70.873 100,419,770 6,987,960 POP-Chirchand HEP 70.874 70,326,293 2,187,183

26




POP Koteshwar HEP 70.875 87,177,064 POP-TimbiHEP 70.876 8,744,408 152,343 POP from Binwa parari HEP 70.877 64,708,858 - POP from Dehar _II HEP 70.878 19,854,385 - POP from Torela Power Ltd. 70.879 36,349,677 - POP from Jaina HEP 70.880 54,325,150 - POP from TATa Power Trading Company 70.881 291,627,664 - POP from Knowledge Infrastructure system 70.882 657,067,106 - POP from Rukti-II 70.883 9,941,832 - POP from Sach HEP 70.884 3,491,500 - POP from Sumer 70.885 4,081,350 - POP from Chakshi HEP 70.886 740,745 - POP- Different utilities on a day ahead availibility 70.901 65,000,000 2,051,831 Sub-Total 24,057,213,697 21,042,761,470 O & M charges payable 70.5 89,199,000 37,453,967 Trans. charges payable to Power Grid Corp. of India 70.6 2,095,721,975 1,397,762,491 Short term open Access - Payable 70.601 240,462,691 180,020,672 Expenses related to ULDC Scheme in the Northern Region under unified Scheme

70.731 76,085,422 42,423,881

System/ Marketing operation charges Power System (op) Ltd. 70.733 17,537,854 12,881,976 Sub-Total 2,519,006,942 1,670,542,987 Total 26,576,220,639 22,713,304,457

Note 2.26 Employee Benefits Expense ( Amount in `)

Employee Benefits Expense Account Code



Dearness Pay 75.0 12,968,262 13,263,474 Grade Pay (Regular) 75.008 787,184,710 615,332,231 Grade Pay (work charged) 75.009 7,279,044 4,522,611 Salary 75.1 3,524,860,141 2,797,222,334 Overtime. 75.2 30,783,201 22,868,300 Dearness Allowance. 75.3 2,384,039,777 1,486,709,575 Other Allowances. 75.4 300,939,593 242,405,355 Bonus. 75.5 68,347 173,857

Sub-Total 7,048,123,075 5,182,497,737 Fee & Honorarium. 75.610 71,649 11,200 Medical Expenses reimbursement. 75.611 103,301,889 85,541,118 Leave Travel Assistenance. 75.612 2,821,383 3,946,522 Salary/ wages of outsourced /contractor 75.613 1,994,638 - Earned Leave Encashment. 75.617 385,093,272 211,945,350 Payment under Workmen's Compensation Act. 75.629 5,633,127 2,221,852 Leave Salary contributions.(Employees on deputation) 75.633 - - Leave Encashment Fund 75.635 - 150,000,000

- -

Sub-Total 498,915,958 453,666,042 Staff Welfare Expenses. 75.7 7,180,949 6,077,825 Terminal Benefits. 75.8 3,430,457,566 2,163,550,796

Sub-Total 3,437,638,515 2,169,628,621 Total 10,984,677,548 7,805,792,400 Less: Expenses capitalised 75.9 581,981,523 562,030,293

27

Employee Benefits Expense Account Code



Net Employees Cost 10,402,696,025 7,243,762,107

Note 2.27 Finance Cost


Code As at 31st March,

2012 As at 31st March,

2011 Interest on State Government Loans. 78.1 16,150,505 13,814,456 Interest on Bonds 78.2. 4,448,220 5,505,511 Sub-Total 20,598,725 19,319,967 Interest on loans from LIC 78.501 159,830,062 143,645,476 Interest on loans from REC 78.502 546,476,138 291,611,272 and other loans etc. 78.504

to 509 - 836,759,370

Interest on stock other loan 78.510 500,499,226 - Interest on PFC Loan 78.511 417,992,778 - Interest on stock PNB loan 78.512 73,671,690 - Interest on stock canara Bank loan 78.513 93,944,722 - Interest on stock Punjab & Sind Bank Loan 78.514 - - Interst on SIDBI 78.515 - - Interest on Private Bonds 78.516 172,641,224 - Interest on UCO Bank Loan 78.517 72,046,320 95,094,794 Interest on loans from Bank of Maharashtra 78.522 12,273,972 115,013,699 Interest on loans from State Bank of India. 78.524 222,387,854 122,396,324 Interest on loans from RAPDRP Part-B PFC 78.526 100,000,000 - Interst on loan from Vijay Bank 78.527 344,677,636 - Interst on loan from Central Bank of India 78.529 62,053,170 - Sub-Total 78.5 2,778,494,792 1,604,520,935 Penal interest Interest to consumers (securities) 78.601 133,914,441 78,495,963 Sub-Total 133,914,441 78,495,963 Total interest on capital liabilities 78.1 to

78.6 2,933,007,958 1,702,336,865

Interest on borrowing For working capital. 78.7 1,103,104,769 555,674,486 Sub-Total 1,103,104,769 555,674,486 Other interest and Finance charges. 78.8 Discount to consumers For timely payment of Bills.

78.821 to

78.830

- -

Rebate allowed for timely payment to inter-state SOP Bulk Supply under bilateral agreement

78.831 6,043,441 7,142,888

Sub-Total 78.820 & 78.831

6,043,441 7,142,888

INTEREST TO SUPPLIERS/CONTRACTORS. Interest on Contributory Pension Fund. 75.854 2,411,839 3,820,252 OTHER INTEREST Cost of raising finance. 78.861

to 869 126,823 86,534

Discount/ redumption premium on Bound 78.771 - - Other charges. 78.881

to 889 7,350,483 2,527,280

Interst on LC Charges 78.895 3,976,416 Sub-Total 13,865,561 6,434,066

28




Total 4,056,021,729 2,271,588,303 Less: Interest capitalised 1,444,949,896 855,713,500

Total 2,611,071,833 1,415,874,803

Note 2.28 Depreciation and Amortization expenses


Code Year ended 31st

March, 2012 Year ended 31st

March, 2011 Depreciation. 77.1&77.2 1,997,846,862 1,104,834,249 Sub-Total 1,997,846,862 1,104,834,249 Written down value of assets scrapped-Plant & Mechinery 77.715 - 464,283 Written down value of assets scrapped-Vechile 77.717 61,029 Loss on sale on fixed assets ie. Plant Machniery 77.736 - - Loss on sale on fixed assets ie. Vechile 77.737 - - Sub-Total 61,029 464,283

Less: Amount capitalised 77.9 343,158 16,542 Sub-Total 343,158 16,542 Total 1,997,564,733 1,105,281,990

Note 2.29 Other Expenses

( Amount in `) Account

Code Year ended 31st

March, 2012 Year ended 31st

March, 2011 Repair & Maintenance Plant & Machinery. 74.1 120,008,932 279,456,469 Buildings. 74.2 38,623,181 66,638,115 Civil Works. 74.3 30,004,894 43,869,803 Hydraulic Works. 74.4 14,966,260 30,477,537 Lines cables, Net works etc. 74.5 497,217,853 2,911,183,464 Vehicles. 74.6 195,017,798 174,130,821 Furniture & Fixtures. 74.7 740,808 920,001 Office Equipments. 74.8 8,253,698 7,174,709 Others i.e. cost of vehicle other than vehicle/ re-allocated to capital works

74.9 (23,124,592) (23,003,446)

Total cost ( including employee costs.) 881,708,832 3,490,847,473 Less:- Employee costs and Admn. & Gen. Expenses 46,350,235 2,918,866,954 Less:- Other costs reallocated such as Depreciation & 357,166,148 181,336,329 Recovery of cost of vehicle from O&M and other units. Sub-Total 403,516,383 3,100,203,283 Total (Net Repair and Maintenance ) 478,192,449 390,644,190 Administration and General expenses Rent 76.101 14,497,821 3,577,791 Rates & Taxes. 76.102 1,582,120 1,180,679 Total 16,079,941 4,758,470 Insurance 76.104

to 107 1,006,327 1,011,081

Telephone charges,postage,telegrams & telex charges. 76.111 to 113

28,686,069 20,910,766

Legal charges. 76.121 7,912,146 6,129,116 Audit fee 76.122 24,215,703 21,838,000

29

Account Code



Consultancy charges. 76.123 1,748,297 1,429,845 Technical fees. 76.124 24,550 81,571 Other professional Charges 76.125 6,386,409 2,812,151 Income Tax Uploading Charges. 76.126 631,128 165,041 Statutory Audit fee 76.127 168,540 168,540 Conveyance & Travel expenses 76.131

to 139 & 76.141.

151,673,430 140,161,247

Expenditure on foreign travel. 76.14O - 865 TA/ Das to Statutory Auditor 76.143 25,000 Sub-Total 222,477,599 194,708,223 Other expenses:- Fee & Subscription. 76.151 2,778,121 2,631,187 Books & Periodicals 76.152 829,701 622,711 Printing & Stationary. 76.153 17,390,435 17,811,511 Exp. Under Right to Information Act- Paper & Processing fee. 76.154 120,861 15,178 Advertisement expenses. 76.155 6,908,234 7,094,455 Public Interaction Programme Expenses 76.156 2,634,462 2,415,963 Contribution/Donations. 76.157

447,362

29,874 Electricity charges. 76.158 26,523,619 25,203,669 Cold weather expenses/water charges. 76.159 &

160 2,449,566 2,717,641

Expenditure on Gift/Presentation. 76.161 - 16,705 Entertainment. 76.162 471,790 1,833,349 Incentives to informer regarding theft of energy etc. 76.163 - - Expenditure on display of Models. 76.164 - - Expenditure on training to staff within the state. 76.165 1,125,270 838,601 Expenditure on training to staff outside the state. 76.166 319,250 681,331 Petition fee payment to HPERC 76.167 7,317,974 10,446,961 Exp. on assignments secretariat of Elect. Ombudman - & Consumer grievances redressal forum 76.168 4,654,085 9,991,095 Licence fee for Distribution & Trans payable to HPERC 76.169 2,500,000 2,500,000 Fees for SAS Examination 76.170 146,530 164,211 Exp. On promotion of energy efficiency 76.171 1,418,044 18,150 Exp. On Geographically information system/Global Position System (GIS/GPS)

76.173 243,696 116,556

Transaction charges to SCAs for collection of energy bills 76.174 1,291,438 - Expenses related to High level Committee for formulation of power Policy- Other charges.

76.180 - -

Exp. On providing cost free CFL bulb to domestic Consumers 76.183 112,617,498 99,693,484

Exp. On Reserch and Development charges 76.184 - 2,780 Exp. Incurred on capacity building for Poverty Reduction Projects CBPRS for sponser HPSEB personnel to attend training programme.

76.185 - 800,000

Publicity expenses. 76.191 715,514 928,995 76.190 &

Miscellaneous expenses. 192 to 198

8,565,908 12,719,471

Sub-Total 201,469,358 199,293,878 Freight. 76.210

to 220 - 118,809

30

Account Code



Other purchase related expenses. 76.230 to 299

29,085,698 25,327,749

Sub-Total 29,085,698 25,446,558 Total 469,112,596 424,207,129

Less : Expenses Capitalised 76.9 37,700,714 32,083,173 Net Expenditure 431,411,882 392,123,956 Prior Period Expenses 83 2,885,294,713 1,981,989,639 Other Debits Bad & Doubtful debts written off / provided for. 79.4 37,537 12,916,189 Miscellaneous Losses & write offs. 79.5 2,221,401 3,536,630

Total 3,797,157,982 2,781,210,604 Note 2.30 Exceptional and Extraordinary items

( Amount in `) Particulars Head of

account Year ended 31st March,

2012

Year ended 31st March,

2011 Extra -Ordinary credits(including subsidies against loss on account of flood, fire, cyclone etc.)

63.2 35,000,000 250,000

Total 35,000,000 250,000 Extra-Ordinary debits (including subsidies against loss on account of flood, cyclone, fire etc.)

79.8 3,364,424 12,340,342

Total 3,364,424 12,340,342 Extraordinary items(Net) (31,635,576) 12,090,342

Note 2.31

SIGNIFICANT ACCOUNTING POLICES AND NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2012.

(A)

1. Basis of Accounting

Significant Accounting Policies

Accounts of the Company are being prepared on accrual basis based on historical cost convention and are in line with the fundamental accounting principles of prudence, consistency and materiality except otherwise stated. Financial statements are prepared in accordance with the provisions of the Companies Act, 1956 and the relevant provisions of Electricity Act, 2003 and Electricity (Supply) Annual Accounts Rules (ESAAR), 1985.

2. Fixed Assets

a) The Fixed Assets are carried forward at the original/ transfer cost including appropriate expenses capitalized less depreciation thereof.

b) The interest on the borrowed funds attributable to the acquisition/ construction of fixed assets till commissioning of such assets, is being capitalized.

c) Capital Expenditure on assets not owned by the company is reflected as a distinct item in the Fixed Assets.

d) Payments made towards compensation and other expenses relatable to land are treated as cost of land.

3. Machinery Spares

31

The cost of capital spares purchased at any time after commissioning are charged to O&M expenditure and not capitalized.

4. Capital Work-in-Progress (CWIP)

a) Administrative and other general overheads at the head office attributable to the construction of fixed assets are identified and allocated on systematic basis on major assets.

b) In respect of supply cum erection contracts, the value of supplies received and accepted is treated as capital work in progress.

c) Expenditure against ‘Deposit Work’ is accounted for on the basis of statement of accounts received from the concerned agency and accepted by the company. Provision is made wherever necessary.

5. Depreciation and Amortization

a) Depreciation is charged on straight line method to the extent of 90% of the cost of asset following the rates notified by the H.P. State Electricity Regulatory Commission for the purpose of fixation of tariff. In respect of asset, where rate has not been notified by regulation of HPERC, depreciation is provided on straight line method at the rates corresponding to the rates laid down under the Companies Act, except in case of Computers and Peripherals which are depreciated @ 15% on SLM.

b) Depreciation on vehicles is charged by the units to the extent of 90% of the cost of the asset. Life of vehicle is taken as 7 years, depreciation is charged on SLM basis.

c) No depreciation is charged on addition to fixed assets during the year and depreciation is charged for the whole year in respect of assets ceased/Sold during the year, as per accounting policy of the Company which is in conformity with the provisions of the Electricity (supply) Annual Accounts Rules, 1985 and other amendments made by the Government of India from time to time in this regard.

d) The expenditure on capital work in progress is transferred to appropriate asset at the end of the financial year irrespective of the date of commissioning of asset.

e) Capital expenditure on assets not owned by the Company are amortized as per normal rate of deprecation on similar assets owned by the Company as provided under HPERC.

6. Inventories / Stores and Spares

Inventories/ Stores and Spares are valued at cost or market value, whichever is less. The cost is determined on weighted average method. Storage cost @ 3% and freight is added to the cost. Cost of material at site, however is determined as per issue price.

7. Revenue Recognition

1. Sale of Power is being accounted for on accrual basis on the basis of bills raised by the Company except as under :—

a. Unbilled revenue is accounted for on the basis of estimates made by the management. b. Difference on account of adjustments of undercharged/ overcharged billing with actual

billing is adjusted in the year of rectification. 8. Retirement Benefits & Pension

Actual liabilities in respect of Earned Leave and Gratuity are accounted for at the time of actual encashment of leave/ payment of gratuity on death/ resignation/ superannuation. Pension is paid by the Company on cash basis.

9. Provisions, Contingent Liabilities, Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent liabilities are not recognized but are disclosed in the notes on accounts. Contingent assets are neither recognized nor disclosed in the financial statements.

10. Borrowing Cost

32

Borrowing costs that are attributable to the acquisition or construction of assets are capitalized as part of the cost of asset. All other borrowing costs are charged to profit and loss account.

11. Investments

Current investments are valued at lower of cost and fair market value.

12. Government Grants

Grants received from Central/ State government for the purpose of capital works are considered as capital receipts and other grants in the shape of incentives/ subsidies etc. as revenue receipt.

13. Miscellaneous

a) Expenses on training and recruitment, research and development, if any are charged to revenue.

b) Expenses on raising of finance and financial loan are charged to revenue. c) Income from surcharge levied on consumers for delayed payment of energy bills is

accounted for on actual realization basis. d) Interest on loans and advances paid to the staff is recovered after full recovery of principal

amount. However, interest is accounted for on accrual basis in the accounts.

14. Accounts are prepared as per Accounting Standards prescribed by the Institute of Chartered Accountants of India (ICAI) which are relevant to the Company.

15. The Cash Flow Statement has been prepared on indirect method as prescribed in AS-3.

(B) NOTES FORMING PART OF THE ACCOUNTS:

1. The financial year of the working of the Company is from 1/4/2011 to 31/3/2012 (Previous year from 1/4/2010 to 31/3/2011. The figures of FY 2010-11 are not comparable with current FY 2011-12 due to the reasons that previous year contained the data of the period 14.6.2010 to 31.3.2011).

2. Previous year’s figures have been regrouped/ re-casted wherever necessary in order to conform to current years presentations. The figures have been rounded off to nearest rupee.

3. Provisions have been made for all known expenses and incomes of the current financial year.

4. The expenditure on foreign tour and revenue during the trial stage during the current year is nil.

5. The details of Capital Work in Progress ( Except AG 15) and expenses capitalized are as under: Current Year (`)

2011-12 Previous year (`)

2010-11 Opening Capital work in Progress (excluding advances to supplier/ Contractor) (31.3.2011)

10967586754.00 8247907886.00

Addition during the year including interest capitalized on world bank loan funded project

3835791135.00 3741075313.00

Interest capitalized during the year 1444949896.00 855713500.00 Employee cost and other expenses capitalized during the year

619682237.00 594130008.00

Less: Transferred to fixed assets during the year 6619581622.00 2471239953.00 Closing capital work in progress at the end of the year (excluding advances to suppliers)

10248428400.00 10967586754.00

Capital Work in Progress also includes pre-operative expenses i.e. expenses capitalized in the previous years.

6. The Assets not in use amounting to Rs. 103868690/- as shown in note 2.16.1 are in the nature of discarded/ surveyed off assets and these have been taken at its written down value.

33

7. The Company has not insured the fixed assets (except Vehicles & hypothecated to LIC against Loan).

8. The company has taken loans from APDRP towards 100% financing of its approved projects, APDRP scheme is subject to a condition requiring projects to be completed with in three years and rewards with 100% conversion of loan along with interest into grant else no conversion of loan and interest to grant shall be made if projects are not completed with in 3 years. In the absence of the rate of interest applicable to the scheme, the Company has provided lump sum provision of Rs, 20.00 crores for the interest on loan upto 31st March, 2012 in its books of account.

9. In the absence of terms and conditions of the Loans taken under RGGVY scheme from GoHP

(Rs. 5, 00, 00,000/- and ADB through GoHP Rs. 76,79,9000/-, no provision for interest has been made.

10. The terms and conditions in respect of Bonds is as under:

Sr. No.

Series of Bonds Rate of interest (` in Lakh) Period of redemption

Guarantee

1 9.30% NSLR Bonds 9.30% 7800.00 5 Years Guaranteed by Govt. of H.P.

2 10.22% NSLR Bonds

10.22% 329.00 2008 to 2010 Guaranteed by Govt. of H.P

3 10.46% NSLR bonds 10.46% 11420.00 2011 to 2013 Guaranteed by Govt. of H.P

Total 19549.00 11. Disclosure of Contingent Liabilities as on 31.3.2012

(i) Arbitrations cases (More than 1 Crore each in value):

(a) M/s SAB, Chandigarh (R.E. Khauli P/H) Rs. 7.57 Crore (b) M/s Anshul Prop., Delhi (R.E. Khauli P/H) Rs. 2.05 Crore (c) M/s Ansal Properties Delhi(R.E. Khauli P/House) Rs. 3.47 Crore (d) M/s Ansal Properties Delhi(R.E. Khauli P/House) Rs. 3.46 Crore (e) M/s P&R Engineering, Chandigarh (R.E. Khauli P/House) Rs. 2.65 Crore (f) M/s P&R Engineering, Chandigarh (R.E. Khauli P/House) Rs. 3.45 Crore (g) M/s P&R Engineering, Chandigarh (R.E. Khauli P/House) Rs.4.05 Crore (h) M/S SSJV Ltd. Banglore (Sr. Xen Arb. & Mtd. Divn. Thalout) Rs. 123.45 Crore. (i) M/s Prem Laxmi (Sr. Xen Arb. & Mtd. Divn. Thalout) Rs. 5.57 Crore (j) M/s SSJV Ltd. Banglore (Addl. S.E. Thirot Construction Divn. Pandoh) Rs. 73.64

Crore (k) M/S Prem Laxmi (Addl. S.E. Thirot Construction Divn. Pandoh) Rs.2.39 Crore. (l) M/s Continantal Construction Ltd. (Addl. S.E. Thirot Const. Pandoh) Rs.10.04 Crore. (m) M/s Continantal Construction Ltd. (Addl. S.E. Thirot Const. Pandoh) Rs.2.74 Crore. (n) M/s SSJV Ltd. Banglore(Addl. S.E. Thirot Const. Divn. Pandoh) Rs. 52.28 Crore. (o) M/s SSJV Ltd. Banglore (Addl. SE Thirot Const. Divn. Pandoh) Rs. 73.64 Crore. (p) M/s On A/C of diffence of rates of Shanan share sold to the Board by the PSEB Rs.

18.84 Crore. (A.O. SL&D). (q) M/s UPJVNL on A/C of energy bills Rs. 5.28 Crore. (A.O. SL&D). (r) Arb. Case between Uhl Power Company Ltd. Rs. 910.27 Crore (C.E. (PCA)). (s) Arb. Case between M/S SSJV Project (P) Ltd. Rs.309.04 Crore (C.E. (PCA). (t) M/s SSJV Ltd. Banglore (Addl. SE Thirot Const. Divn. Ghanvi) Rs. 3.09 Crore.

12. Generating Station:

(A) Plant in operation:- (i) Hydel Generating Plant Location Capacity (MW)

1. Bhaba 120.000 2. Giri 60.000 3. Bassi 60.000 4. Binwa 6.000 5. Nogli 2.500

34

6. Chaba 1.750 7. Rukti 1.500 8. Chamba 0.450 9. Rongtong 2.000

10. Andhra 16.000 11. Killar 0.300 12. Thirot 4.500 13. Gaj 10.500 14. Baner 12.000 15. Sal-II 2.000 16. Ganvi 22.500 17. Gumma 3.000 18. Holi 3.000 19. Largi 126.000 20. Khauli 12.000 21. Bhaba Augmentations 4.500 Total 471.450

(ii) Diesel Generating Station 1. Keylong 0.133 G. Total

Particulars

471.583

Total installed capacity at the end of the year 2010-11 467.083 Plant commissioned during the year 2011-12 One (4.5 MW Bhaba Augmentation) Total installed capacity at the end of year 471.583 16. Details of remuneration to Auditors:

Current year (`) Previous year (`) Statutory Auditor Fee (including services tax) 1,68,540.00 1,68,540.00 For other services (T.A.) 25.000.00 0

Total 1,93,540.00 1,68,540.00

17. During the financial year, Company has made transactions with the 'Related Parties' in terms of Accounting Standard 18 as under

Remunerations paid to CMD & Directors:

Name Current year (`) Previous year (`)

Sh. R.D. Dhiman , IAS Chairman cum Managing Director

1082571 0

Sh. S.K.B.S. Negi, IAS 164125 1170087 Sh. Akshay Sood, IAS Director (F&A)

874109 0

Sh. Such Dev Rattan, Director (Op)

605011 289671

Sh. P.C. Negi Director (Op)

592011 0

Sh. R.C. Khillian Director (Tech)

144069 277771

Sh. S.P. Sharma 1173846 0 Sh. A.K. Dutta Director (Projects)

1355257 866163

Sh. Subhash Chander Negi, IAS Chairman cum Managing Director

0 827215

Er. R.K. Dhiman, Director (Tech)

0 919595

Er. N.S. Bal, Director (Op)

0 537478

Other expenses like Medical / TA and Telephone paid to Directors

Name Current year (`) Previous year (`)

35

Sh. R.D. Dhiman , IAS Chairman cum Managing Director

24489 0

Sh. S.K.B.S. Negi, IAS 2345 20784 Sh. Akshay Sood, IAS Director (F&A)

9217 0

Sh. Such Dev Rattan, Director (Op)

780 1008

Sh. P.C. Negi Director (Op)

14186 0

Sh. R.C. Khillian Director (Tech)

2310 4808

Sh. S.P. Sharma 16029 0 Sh. A.K. Dutta Director (Projects)

11547 7758

Sh. Subhash Chander Negi, IAS Chairman cum Managing Director

0 12574

Er. R.K. Dhiman, Director (Tech)

0 72640

Er. N.S. Bal, Director (Op)

0 11952

18. Beas Valley Power Corporation Ltd. (BVPCL) is a Subsidiary (Wholly Owned) of HPSEBL. As on the date of the Audit Report of HPSEBL, audited financial results of BVPCL for the F.Y 2011-12 (Previous year 2010-11) are as under (Information pursuant to Sec 212 of the Companies Act, 1956 relating to subsidiary company).

Beas Valley Power Corporation Ltd. Balance Sheet as at 31 March, 2012

Particulars As at 31st March, 2012 (`)

As at 31st March, 2011 (`)

1 EQUITY AND LIABILITES (a) Share Capital

(Paid up and Subscribed) 2,000,000,000.00 1,550,000,000.00

(b) Reserves and surplus (c) Money Received against Share

Warrants

2 Share Application Money Pending Allotment

591,564,364.00 595,354,782.00

3 Non- Current Liabilities Long-Term Borrowings 4,669,964,464.00 3,889,839,139.00 4 Current Liabilities

(a ) Other-Current Liabilities 401,141,958.00 350,489,022.00 (b) Short –Term Provisions 2,114,777.00 0.00 Total 7,664,785,563.00 6,385,682,934.00 ASSETS 1 Non- Current Assets (a) Fixed Assets (i) Tangible Assets 325,529,334.00 268,049,765.00 (ii) Intangible Assets (iii) Capital Work-in-Progress 6,684,472,386.00 5,446,019,831.00 (iv) Intangible assets under

Development

(v) Fixed assets held for sale (b) Non- Current Investment

36

(c ) Deferred tax assets (net) (d) Long term loans and advances 107,543,092.00 99,196,480.00 (e ) Other non-current assets

Misc expenditure (to the extent not written off)

7229000.00 7229000.00

2 Current Assets (a) Current Investments (b) Inventories 84,078,754.00 135,481,398.00 (c ) Trade Receivables (d) Cash and cash equivalents 92,562,820.00 147,171,924.00 (e) Short term loans and advances 22,342,440.00 25,612,455.00 (f) Other currents assets 341,027,737.00, 256,922,081.00 Significant Accounting Policies forming part

of Accounts Cash flow statement

Total 7,664,785,563.00 6,385,682,934.00 19. Statement of Capital Base and surplus under section 185 of Electricity Act, 2003.

Sr. No. Particular At the beginning of the year (1.4.2011)

(`)

At the beginning of previous year (13.6.2010)

(`) 1 Original cost of Fixed assets 49094617867 46524534076 2 Less- Accumulated Depreciation 8915079985 7778472699 3 Net Block (1-2) 40179537882 38746061377 4 Consumer’s Contribution, Grant &

Subsidies towards cost of Capital Assets.

10649081362 8454290245

5 Capital Base (3-4) 29530456520 30291771132 6 Surplus (Deficits) for the year (5127557655) (5051252720) 7 Surplus as a percentage of Capital

Base U/s 185 of Electricity Act, 2003. (17.36) (16.68)

20. The amount received from the Consumers on account of Grants and Contribution towards cost of Capital Assets is accumulated under BH 55 and expenditure is incurred in WIP. After completion the work/ asset(s) is put to use and the amount is debited to concerned fixed assets BH.10.

21. The Internal Audit is being conducted by reputed Firms of Chartered Accountants. During the F.Y 2011-12, Internal Auditors conducted the audit as per the scope of work, changes, if any suggested by the Internal auditors have also been incorporated in the books of account.

22. Estimated amount of contracts remaining unexecuted on Capital Account and not provided for are as under: Sr. No. Description Current year

(` in Lakh) Previous year

(` in Lakh) 1 Contract placed 22158.97 26989.56

2 Payment/ advance payment made 3824.86 2304.29

3 Balance contracts as liability 18334.11 24685.27

22. (a) Purchase, Issues & Stocks of Materials (Value recorded in Account Heads 22.2 to 22.6) should be disclosed here:

37

A. Account Code Opening Stock This year 2011-12

(`)

This year 2010-11

(14.6.10 to 31.3.11) (`)

Capital 22.601 & 22.619 186258686 163329212

O&M 22.621 & 22.639 608543164 400412645

Total: 794801850 563741857

B. Purchases

Capital 22.201 & 22.219 1304867958 899638656

O&M 22.221 & 22.239 532472581 519924539

Total: 1837340539 1419563195

C. Opening Stock Plus Purchases

2632142389 1983305052

D. Issues for Consumption

Capital 22.301 & 22.319 1380890803 862808873

O&M 22.321 & 22.339 469196842 414820102

Total: 1850087645 1277628975

E. Issued to Contractors

Issues 22.341 & 22.359 3359898 8352071

Returns 22.361 & 22.379 0

Net Issues 3359898 8352071

F. Total Issues (D+E) 1853447543 1285981046

G. Closing Stock

Capital 22.601 & 22.619 146279116 186258686

O&M 22.621 & 22.639 875994129 608543164

Total: 1022273245 794801850

H. 22.401 & 22.419 Transfer Inward 1284754071 729429126

22.421 & 22.439 I . Transfer Outward 1253209681 744645764

Total: 31544390 -15216638

J. 22.501 & 22.519 Material stock adjustment Capital

21319745 12148459

O & M 22.521 & 22.539 190714264 100546023

Total: 212034009 112694482

*Note:- The Closing Stock Balance shown as above is excluding material at site.

38

23. AVERAGE REALISATION FROM SALE OF POWER:-

• The figures in shown in brackets relate to previous year and without brackets relate currents

year *

• Revenue received from each category of Consumers on account of Sale of Power and other applicable Levies is divided by the number of units sold to that category.

24. The balances under O&M material in transit account and advances to Suppliers/ Contractors account are under the process of reconciliation.

25. The Cash flow statement as per requirement of AS-3 is enclosed as Appendix-A along with accounts.

Sr. No.

Consumers Category No. of Consumers

Units Sold in MKWH

Revenue (` in Lakh)

% of the Total units

sold

Average realization

in paisa per unit

1 Domestic 1719673 (1668261)

1407.293 (1087.060)

41509.06 (29548.30)

16.32 (15.54)

295 (272)

2 Commercial 226911 (222936)

387.203 (294.930)

22808.17 (15112.54)

4.49 (4.22)

589 (512)

3 NDNC 19312 (18278)

98.550 (71.640)

5554.82 (4113.46)

1.14 (1.02)

564 (574)

4 Industries (i) Small & Medium 32715

(32450) 198.069

(148.069) 9221.45

(6973.33) 2.30

(2.12) 466

(471) (ii) Large supply 1651

(1631) 4116.498

(3294.391) 166893.93

(124070.01) 47.74

(47.10) 405

(377) 5 Agriculture/Irrigation 18190

(16861) 36.170

(28.730) 1720.83

(1345.25) 0.42

(0.41) 476

(468) 6 Public Lighting 756

(702) 12.894 (9.780)

622.49 (486.43)

0.15 (0.14)

483 (497)

7 Bulk Supply 244 (325)

192.877 (192.390)

9009.08 (8231.30)

2.24 (2.75)

467 (428)

8 Water Pumping & Irrigation

4790 (4483)

439.976 (315.240)

23026.59 (14139.79)

5.10 (4.51)

523 (449)

9 Temporary 3728 (3380)

28.640 (19.040)

1688.58 (925.73)

0.33 (0.27)

590 (486)

Total within State 2027970 (1969397)

6918.168 (5461.270)

282055.00 (204946.14)

80.23 (78.08)

408 (375)

10 Outside the State 1598.640 (1533.390)

87092.89 (79404.419)

19.77 (21.92)

545 (518)

Total 2027970 (1969397)

8516.800 (6994.660)

369147.89 (284350.33)

100 (100)

433 (407)

39

26. The arrear of 6th pay commission has been prepared on the basis of order issued by the H.P. Govt./ HPSEB Ltd. and charged to prior period employee cost.

27. POSITION OF SECURED AND UNSECURED LOANS FOR THE YEAR As on 31st March, 2012.

(Amount in `)

28. The balances have been reconciled with subsidiary records and the difference have been accounted for under head of prior period adjustments as per details below:

Prior period Income Rs. (Credit) 5264.99 lakh

Prior period Expenses Rs. (Debit) 4253.17 lakh

(Net Prior period item) Rs. (Debit) 1011.82 lakh

Sr. No.

Particulars Outstanding at the end of

previous year

Interest for the year

Amount received during the year

Repayment due/ made during the

year

Outstanding at the end of 31st March, 2012

1 REC Loan 3658148404 513602426 1349852485 458827037 4549173852 2 RGGVY 270514188 32873712 21442686 0 291956874 3 LIC Loan 2061139974 159830062 0 279499996 1781639978 4 Market Bond 55000000 4448220 0 55000000 0 5 H.P. Co-Op

Bank 4160800000 378704555 0 593600000 3567200000

6 KCC Bank 259200000 344677936 3500000000 86400000 3672800000 7 PFC Loans 5710631532 417992778 57136412 851559937 4916208007 8 Non SLR

Bonds 1954900000 172641224 400000 374250000 1581050000

9 UCO Bank 2000000000 720463240 2000000000 0 10 B of

Maharashtra 2000000000 12273972 2000000000 0

11 Canara Bank 700000000 93944722 1000000000 700000000 1000000000 12 SBI 2000000000 22387854 3000000000 2000000000 3000000000 13 Vijaya Bank 0 0 4000000000 1166900000 2833100000 14 CBI 0 0 1000000000 0 1000000000 15 PNB 0 0 1000000000 0 1000000000 16 R-APDRP-

PFC Loan (Part-A)

289180000

200000000

0 0 289180000

17 R-APDRP-PFC (Part-B)

966540000 0 0 966540000

18 ADB. 76799000 0 0 0 76799000 19 APDRP 153297130 0 0 12219373 141077757 20 RGGVY 50000000 0 0 0 50000000 21 Over Draft 10432056786 - - - 11054736 G. Total 36798027014 2882943012 14928831583 10578256343 41771462175

40

29. Additional information.

Sl. No.

Particulars 2010-11 (14.6.10 to 31.3.11)

2011-12

1 Installed Generating Capacity (MW)

(a) Hydel 466.950 471.583 (b) Thermal (c) Internal combustion (Diesel) 0.130 0.130 2 Normal Maximum Demand on the System (MW) (a) Restricted 1043 1333 (b) Unrestricted 1083 1352 3 Plant Capacity available at the time of NA NA maximum system was met 4 Plant load factor (Hydel)%age 39.130 62.950 5 Generation in million KWH (Gross) (a) Hydel 1600.600 2019.960 (b) Thermal 0.000 0.000 (c ) Internal combustion(Diesel) 0.000 0.000 Total:- 1600.600 2019.960 6 Auxiliary Consumption (MKWH) 7.220 6.030 7 Less Govt. of HP Share in HPSEB's projects (a) Ghanvi 5.560 8.330 (b) Baner 4.230 5.530 (c) Gaj 3.590 4.950 (d) Larji 62.400 83.630 (e) Khauli 4.420 6.040 Total:- 80.200 108.480 8 Net Availability from own Projects (5-6-7) 1513.180 1905.450 9 A. Energy Purchased (MKWH)(With Losses)

I BBMB (a) Old HP(10) 35.120 43.920 (b) New HP 107.840 232.45 (c ) Dehar 63.010 81.790 II PSEB (a) Shanan Share (45 MU) 31.330 45.000 (b) Shanan share 1 MW (at Gen. Cost) 4.190 5.260 (c) Shanan share 0.5 MW (Free Power) 2.460 2.630 (d) Banking 202.000 312.320 (e) Purchase

0.070

0.060

(f) Thien share (Free Power)

(g) Pong (Shared Generation) 64.940

0 23.780 85.130

III UJVNL(Yamuna Share)Stage I,II,3 & Kulhal 345.900 474.180 IV UUPJVNL(Yamuna Share) Khara 56.320 428.960 V Bairasiul (Free Power) 33.400 34.99 VI NTPC

(a) Rihand-I STPP 195.950 309.660 (b) Rihand-II STPP 181.160 297.050 (c) Anta (Gas Fired) 56.080 88.370

41

Sl. No.

Particulars 2010-11 (14.6.10 to 31.3.11)

2011-12

(d) Anta (Liq. Fired) 0.080 4.630 (e) Auriya (Gas Fired) 89.420 108.000 (f) Auria (Liq. Fired) 0.180 6.630 g) Dadri (Gas Fired) 99.210 143.780 h) Dadri(Liq. Fired) 0.140 5.980 (i) Unchahar- I TPP 37.280 55.930 (j) Unchahar- II TPP 65.270 106.200 (k) Unchahar- III TPP 38.400 72.080 (l) Singrauli -16.590 103.900 (m) kahalgoan 112.070 125.180 (n) Anta RF -2.220 0 (o) Auriya RF -3.130 0 (p) Dudri RF

(q) Jhajjar/ Dadri-II -2.500

0 0

67.710

VII NAPP 45.260 67.720 RAPP-5 71.700 145.650

VIII NHPC (a) Chamera-I (i) 12% Free Power 108.250 91.890 (ii) At Cost 54.170 75.560 (b) Chamera-II (i) 12% Free Power 64.000 71.260 (ii) At Cost 35.130 63.020 (c) Salal 23.690 32.020 (d) Tanakpur 12.100 15.35 (e) Uri 59.310 72.860 (f) Dhauli Ganga 31.430 44.410

(g) Dulhasti -2.650 9.620 (h) Tehri firm power 75.120 125.460 (I) Tehri interim Power 0.000 17.670 (J) Sewa 0.000 3.730

IX Nathpa Jhakri (i) Free Power 250.660 144.390 (ii) Against Equity 458.600 350.340 (iii) State of region share 127.450 204.780

X Private Sector (a) Malana (Free Power) 40.560 55.870 (b) Baspa (i) 12% Free Power 139.450 166.610 (ii) at Cost 1103.990 1221.830 (c ) Patikari (16 MW) (i) At Cost 57.210 51.834 (ii) Free Power 8.000 7.070 (d) Sarabai 5.4 MW (i) At cost 15.000 31.270 (ii) Free cost 12% 2.000 4.260 (e) TOSS (5.4MW) (i) Free Power12% 41.020 44.160

42

Sl. No.

Particulars 2010-11 (14.6.10 to 31.3.11)

2011-12

(ii) At cost 10.000 7.790 (f) ADHPL (i) Free Power 12% 24.080 16.760 (ii) At cost 9.000 0 (g) Karcham Wangtoo 0 79.000 (h) Upper Joiner(12 MW) 0 28.660

(i) Sumez(14MW) 1.830 (c ) Mini Micros (Private Sector) (i) Titang (5.0 MW) 0.750 1.505 (ii) Rasket (0.08 MW) 1.770 2.861 (iii) Maujhi (4.5 MW) 7.450 10.174 (iv) Dehar (5 MW) 19.200 25.561 (v) Baragaon (4.9 MW) 21.790 30.961 (vi) Ching (1 MW) 1.710 2.122 (vii) Manal / Chandnit (3 MW) 14.380 19.466 (viii) Aleo (3 MW) 18.440 15.272 (ix) Manjhal (1 MW) 3.426 6.474 (x) Salag (0.15 MW) 0.500 00.437 (xi) Jiwa Kothari 5.190 5.839 (xii) Marhi (5.00 MW) 20.339 24.854 (xiii) Kothi (200 KW) 0.860 1.224 (xiv) Juthed (100 KW) 0.152 0.246 (xv) Taraila (5 MW) 16.064 12.194 (xvi) Gharola (.1 MW) 0.270 0.136 (xvii) Bramganga (5MW) 21.506 27.610 (xviii) Sahu (5MW) 19.420 27.931 (ixx) Sarbari ( 4.5MW) 24.940 32.082 (xx) Upper Awa (5MW) 19.580 31.116 (xxi) Purthi (.1MW) 0.080 0.069 (xxii) Sural (.1 MW) 0.270 0.159 (xxiii) Lingti (.4MW) 0.051 0.237 (xxiv) lku-II ( RE Baner) 13.730 19.378 (xxv) Toss 0.000 0.000 (xxvi) Shyang ( 3MW) 4.810 8.500 (xxvii) Tarella-II(5MW) 17.790 27.021 (xxviii) Luni-III(5MW) 16.740 23.354 (xxix) Andhra Stage-II(5MW) 12.670 19.701 (xxx) Lower Baijnath Kuhl (1MW) 4.540 5.339 (xxxi) Upper Tarella(5MW) 14.390 20.912 (xxxii) Luni-II(5MW) 11.046 24.985 (xxxiii) Baner-III(5MW) 8.460 12.284 (xxxiv) Manglad(4.5MW) 18.000 26.750 (xxxv) Dhiridhar(5MW) 9.390 17.884 (xxxvi) Sainj(5MW) 14.290 7.639 (xxxvii) Gurahan 2.319 4.770 (xxxviii) Maujhi-II 0.746 13.476 ixl) Polar-I 1.348 7.529 xl) Tangling 1.655 13.191

43

Sl. No.

Particulars 2010-11 (14.6.10 to 31.3.11)

2011-12

xli) Gaj-II 1.284 8.261 xlii) Brahal 3.889 15.498 xliii) Upper Khali 1.349 18.476 xliv) Jirah 1.123 15.511 xlv) IQU-I 0.798 6.985 xlvi) Rakchad 2.369 34.040 xlvii) Chirchand 0.741 23.839 xlviii) Timbi 0.061 3.498 lix) Sach 0.779 2.070 l) Binua Parai (5 MW) 0 26.935 li) Dehar-II (5 MW) 0 6.730 lii) Tarella-II (5 MW) 0 12.321 liii) Rukti –II (5 MW) 0 3.270 liv) Sechi (4.5 MW) 0 13.966 lv) Chakshi 0 0.251 Total Mini Micro (Private Sector) 382.455 697.326

XI GO HP Share in HPSEB Projects (a) Ghanvi 5.553 8.330 (b) Baner 4.231 5.530 (c) Gaj 3.599 4.950 (d) Larji 41.309 83.630 (e) Khauli 4.425 6.040 Total Govt. of HP Purchase 59.117 108.480

XII BYPL-Bkg (Seller Bus) 0.000 67.940 XIII UPPCL-Bkg.(Seller Bus) 365.000 0 XIV BYPL-Contra Bkg.(Seller Bus) 0.000 134.810 XV BRPL Bkg. (Seller Bus) 1.520 0 XVI HPPC Contra Bkg.(Seller Bus) 0.000 224.360 XVII PSEB Contra Bkg (Seller Bus) 143.700 0

XVIII UPPCL- Contra Bkg. (Seller Bus) 160.000 0 XIX UI 338.300 230.710 XX Market Purchase 0.000 229.650 XXI Unallocated 377.000 0

Total 9(A) 6489.002 7813.380 9 (B) Energy Wheeled for

a. HVPNL (Kulhal- Giri-Abdulapur) 0.500 0.130 b. BSL Project (BBMB) 13.950 14.940 c. J&K (for Sewa Const. Power) 0.170 0.170 d. Malana 280.100 316.610 e. Govt. of HP- NHPC Projects 299.530 389.310 f. SJVNL (Free Power +Equity) 1549.010 2107.620 Total-9 (B) 2143.260 2828.780 External Loss @3.5% 268.000 273.470 Net purchase 7381.420 7539.910

10 Power available for sale without wheeling 7734.418 9445.360 in million kwh (8+9 (A))

11 Power sold in million Kwh i/C wheeling I) With in state 5461.591 6918.168

44

Sl. No.

Particulars 2010-11 (14.6.10 to 31.3.11)

2011-12

II) Outside the state 1533.589 1598.640 Sub Total 6995.180 8516.808 Total Energy Sold (w/o Wheeling) 6995.180 8516.808

12 Transmission and Distribution losses: * - a) In million Kwh (8-9) 739.237 1277.570 b) % age 12.73 13.15

13 Fuel a) Consumption in MT Coal/HFC/FO/LD/Oil/HSEL Nil b) Average calorific value per Rs. Fuel (Coal/HFC/FO/LD/Oil) Nil

c) Consumption per unit of (in Kg./Kwh)Coal/HFC/FO/ LD/Oil/HSL

Nil Nil

Note: The energy transmitted, through HPSEBL system on account of wheeling has not been taken into account to work out the overall transmission and distribution losses of the Company

The figures of Energy purchased and sold outside the state to other agencies are based on the data supplied by the Chief Engineer (SO&P), Shimla.4. As per our separate report of even date For and on behalf of Board of Directors

Sd/- (Er. P.C. Negi) For Anil Karol & Co. Managing Director Chartered Accountants Firm No. 04816N) Sd/- Sd/- (Sh. Akshay Sood) (CA Walia Umesh) Director (F&A) M. NO. 098287) Sd/- (Gulshan Aggarwal) Place: Shimla Chief Accounts Officer Date: 30.9.2013

SEGMENTS WISE BALANCE SHEET AS AT 31.3.2012 Particulars Distribution Genertion Projects MTC Div Transmission SLDC HO Other Total

Share Capital

- - - -

9,71,88,58,000 - 9,71,88,58,000

Reserve & surplus 1,12,83,81,760 (1,21,31,119) 50,39,56,303 25,76,388 2,61,41,673 45,19,778 13,74,55,33,875 10,62,02,725 15,50,51,81,383 Consumer contribution

and grants 3,93,46,86,905 60,76,896 1,53,25,940

97,36,31,499 - 6,94,30,32,295 26,79,46,189 12,14,06,99,724

Secured Loan 29,97,383.00

8,39,75,000

2,23,91,693 - 41,86,12,79,065 8,19,035 41,97,14,62,176

Unsecured Loan

-

- - - - - Conusmer security

deposit 2,48,38,37,656.03

-

- - - (4,39,17,903) 2,43,99,19,753

Inter Unit Accounts (1,24,88,78,28,746.73) 10,61,49,04,282.00 23,55,63,701 43,88,05,049 2,05,11,35,097 16,76,50,825 1,07,27,09,02,863 3,35,46,84,250 (75,41,82,680)

Loss trasfer to H.O 1,17,21,52,40,863 3,51,98,94,306 81,69,37,623 (26,20,10,580) 9,91,44,35,097 (8,35,68,865) (1,38,39,38,38,447) 7,27,29,10,004 0

Total (12,26,84,180) 14,12,87,44,365 1,65,57,58,567 17,93,70,857 12,98,77,35,059 8,86,01,738 41,14,57,67,650 10,95,86,44,300 81,02,19,38,356

Gross Block 19,64,23,61,619 12,11,05,41,648 17,28,06,369 8,38,81,810 12,23,57,30,937 1,33,17,666 3,81,61,631 10,88,20,32,290 55,17,88,33,970

Less:Depreciation (5,57,17,286) (97,09,209) (1,86,72,687) (1,21,78,900) (1,13,69,595) (7,61,305) (10,79,18,59,292) (1,77,49,613) (10,91,80,17,887)

Net Block 19,58,66,44,333 12,10,08,32,439 15,41,33,682 7,17,02,910 12,22,43,61,342 1,25,56,361 (10,75,36,97,661) 10,86,42,82,677 44,26,08,16,083

Assets not in use 2,98,57,381 1,69,48,449 1,60,73,063 2,79,880 2,26,50,435 - - 1,80,59,482 10,38,68,690 Capital works in

progress 6,02,62,59,001 1,44,45,77,772 75,03,77,864 89,21,939 1,97,13,27,410 8,67,923 2,22,74,32,575 34,71,98,257 12,77,69,62,741

Total fixed Assets 25,64,27,60,715 13,56,23,58,660 92,05,84,609 8,09,04,729 14,21,83,39,187 1,34,24,284 (8,52,62,65,086) 11,22,95,40,416 57,14,16,47,514

Investment

-

2,03,50,000 - 20,32,60,68,096 76,31,885 20,35,40,49,981 Curent Assets Loan &

Advances 97,54,94,674 4,20,51,009 70,91,652 10,57,231 6,63,23,168 55,40,771 - 58,70,976 1,10,34,29,481

Store & spares 3,75,67,45,488 - -

3,92,58,693 - 2,65,80,11,826 27,49,52,730 6,72,89,68,737

Sundry debtor 1,42,413 8,129 429 4,321 47,36,400 298 1,54,91,32,084 (1,00,36,857) 1,54,39,87,217 Cash and Bank

balances 18,70,10,145 2,23,78,575 1,88,482 18,35,036 (2,89,703) (2,76,948) 13,06,45,560 5,65,74,048 39,80,65,195

Other current assets 4,77,79,721 14,17,59,535 (21,74,29,510) 17,87,844 47,11,64,524 2,26,386 4,52,75,31,512 67,33,07,165 5,64,61,27,177

Total current assets 4,96,71,72,442 20,61,97,248 (21,01,48,947) 46,84,432 60,15,43,082 54,90,507 29,19,13,89,078 1,00,82,99,946 35,77,46,27,788 Less current Liabilitues

and Provsiion 3,91,95,65,187 25,35,33,851 2,68,08,848 (61,29,389) 2,03,30,26,384 47,47,371 19,26,87,49,596 1,62,80,40,550 27,12,83,42,398

1,04,76,07,255 (4,73,36,603) (23,69,57,795) 1,08,13,821 (1,43,14,83,302) 7,43,136 9,92,26,39,482 (61,97,40,604) 8,64,62,85,390

Misc expenditure to the extent not written off or

11,22,87,473 - 1,06,88,12,783

- - (28,14,96,135) 35,09,18,852 1,25,05,22,973

Profit & Loss account (Dr. balances) (26,92,53,39,623) 61,37,22,308 (9,66,81,030) 8,76,52,307 20,08,79,174 7,44,34,318 40,03,08,89,389 (20,74,364) 13,98,34,82,478

Total :- (12,26,84,180) 14,12,87,44,365 1,65,57,58,567 17,93,70,857 12,98,77,35,059 8,86,01,738 41,14,57,67,650 10,95,86,44,300 81,02,19,38,356

22

SEGMENTS WISE PROFIT & LOSS STATEMENTS FOR THE YEAR ENDED 31.3.2012

Head of Particulars Schedule

Account

No. Distribution Genertion Projects Transmission SLDC HO Total

INCOME

61 Revenue from sale of power

32,28,25,32,254 - - 97,23,783 - 5,99,23,16,544 38,28,45,72,581

62 Other Income

40,30,65,422 3,26,00,790 15,87,597 6,23,16,314 1,30,923 68,79,09,078 1,18,76,10,124

63 Revenue subsidies and grants

- - - - - - -

Prior period income

1,53,36,60,704 29,09,34,940 4,39,01,338 18,50,05,487 4,96,476 (1,30,06,64,898) 75,33,34,047

Sub Total

34,21,92,58,380 32,35,35,730 4,54,88,935 25,70,45,584 6,27,399 5,37,95,60,724 40,22,55,16,752

EXPENDITURE

70 Purchase of Power

1,00,64,056 - - - - 26,56,61,56,583 26,57,62,20,639

71 Generation of Power

- - - - - - -

74 Repair & Maintenance

25,04,22,109 17,70,22,187 (2,22,66,180) 5,84,84,461 1,40,99,028 4,30,824 47,81,92,429

75 Employee Cost

5,09,26,01,422 61,44,38,865 3,39,53,023 52,72,00,258 5,04,19,201 4,08,40,83,256 10,40,26,96,025

76 Adminstration &General Expenses

26,75,55,963 1,75,81,075 3,28,34,572 2,17,33,485 33,29,226 8,83,77,562 43,14,11,883

77 Depreciation & Related Debits

90,92,301 6,09,543 14,24,656 17,98,880 (3,033) 1,98,46,42,406 1,99,75,64,753

78 Interest and Finance Charges

(18,59,62,022) (17,29,81,049) (6,52,99,131) (21,00,47,751) (7,36,045) 3,24,60,97,831 2,61,10,71,833

Sub Total

5,44,37,73,829 63,66,70,621 (1,93,53,060) 39,91,69,333 6,71,08,377 35,96,97,88,462 42,49,71,57,562

79 Other Debits

22,21,400 - (64,319) 28,34,754 - (27,32,898) 22,58,937

63/79 Extraordinary items

33,64,424 - - - - (3,50,00,000) (3,16,35,576)

Sub Total

55,85,824 - (64,319) 28,34,754 - (3,77,32,898) (2,93,76,639)

Net Expenditure Total

5,44,93,59,653 63,66,70,621 (1,94,17,379) 40,20,04,087 6,71,08,377 35,93,20,55,564 42,46,77,80,923

Profit / (Loss) before tax

28,76,98,98,727 (31,31,34,891) 6,49,06,314 (14,49,58,503) (6,64,80,978) (30,55,24,94,840) (2,24,22,64,171)

Provision for Income Tax

- - - - - - -

Profit / (Loss) after Tax

28,76,98,98,727 (31,31,34,891) 6,49,06,314 (14,49,58,503) (6,64,80,978) (30,55,24,94,840) (2,24,22,64,171)

65/83 Net prior period credit / (chrages)

(1,77,89,79,298) (30,05,87,417) (5,58,89,343) (11,94,15,591) (79,53,340) (62,24,69,724) (2,88,52,94,713)

Profit / (Loss) available for appropriation

26,99,09,19,429 (61,37,22,308) 90,16,971 (26,43,74,094) (7,44,34,318) (31,17,49,64,564) (5,12,75,58,884)

Loss transferred from previous year

- - - - - (8,85,59,23,594) (8,85,59,23,594)

Balance carried to Balance Sheet

26,99,09,19,429 (61,37,22,308) 90,16,971 (26,43,74,094) (7,44,34,318) (40,03,08,88,158) (13,98,34,82,478)

Appendix-A

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2012

HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD

Description

2011-2012 ( Rs. In Crore)

2010-2011 (Rs In Crore)

A: Cash Flow from Operating Activities (indirect method)

Net profit/(Loss) Before Tax. (512.76) (380.47) Add:- Non Cash transactions:

Depreciation including adjustment 199.76 110.44 Interest Income (0.51) (0.43) Interest & finance charges 261.11 141.59 Loss on a/c of flood, cyclone, fire etc. (2.94) 1.21 Operating Profit/(Loss) Before Working Capital Changes (1+2) (55.34) (127.66) Adjustment for

Decrease in trade & other Recoverable (306.42) (315.02) Decrease in Store & spare (19.69) (23.68) Decrease in Trade Payable (504.85) (324.04) Cash Generated from Operations (3+4) (886.30) (790.40) Borrowing for working Capital 0.00 0.00 Sub-Total (5-6) (886.30) (790.40) Net prior Period (Expenses/Income) (213.20) (64.52) Fringe benefit Tax 0.00 0.00 Net cash Flow from Operating Activities

(1099.50) (854.92) B: Cash Flow From Investing Activities.

i) Purchase of fixed assets & CWIP-increased/(decreased) 579.82 250.07 ii) Disposal of fixed assets. 0.51 0.69 iii) Service line contribution- increased. 149.16 41.30 iv) purchase of investments- increased/(decreased) 91.89 282.82 v) Deferred revenue expenditure- increased (2.84) 1.15 vi) Interest Income 0.51 0.43 Net Cash Used in Investing Activities. 819.05 576.46 C: Net Cash Used in Financing activities

i) Proceeds from long term & Other Borrowings 1492.88 1184.88 ii) Repayment of Long Term & Other Borrowings (1057.83) (667.72) iii) Interest & finance Charges (expenditure) (261.11) (141.59) iv) Consumer security deposits-increased 15.15 8.85 v) Grant-increased 7.84 57.33 Net Cash generated from Financing Activities ( I to vii) (C ) 196.93

Net increase in Cash and cash equivalent

(83.52) 163.29 Opening balance of Cash and cash Equivalents 237.92 74.63 Closing Balance of Cash & Cash Equivalents. 154.40 237.92

As per our separate report of even date For and on behalf of Board of Directors

(Er. P.C. Negi) For Anil Karol & Co. Managing Director Chartered Accountants Firm No. 04816N) (Sh. Akshay Sood) (CA Walia Umesh) Director ( F&A) M. NO. 098287) (Gulshan Aggarwal) Place: Shimla Chief Accounts Officer Date:

23

AUDITORS’ REPORT To The Shareholders of Himachal Pradesh State Electricity Board Limited We have audited the attached Balance Sheet of Himachal Pradesh State Electricity Board Limited as on 31st March, 2012 and the annexed Profit and Loss account and Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these statements based on our audit.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements .An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. I. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India

in terms of section 227(4A) of the Companies Act 1956, and on the basis of such checks of books and records of the company as we considered appropriate and according to the information and explanation given to us during the course of audit, we annex hereto a statement on the matters specified in paragraph 4 & 5 of the said order, to the extent applicable to the company.

II.

The Company has failed to enhance its minimum paid-up capital in the manner specified in section 3 of Companies Act, 1956 as on the reporting date (refer para 2 of annexure of our audit report)

III. We further report that the Company’s net worth as at the end of the financial year is completely eroded by its accumulated losses. However, the management has prepared the financial statements assuming that the Company will continue as a going concern. No sufficient information with regard to adequacy of resources in the operating cash flows to meet its future obligations has been provided by the management.

IV. Further to our comments in the annexure referred to in paragraph 1 above, and subject to:-

(a) We have obtained all the information and explanation, which to the best of our knowledge and

belief were necessary for the purpose of our audit except as listed in Annexure I forming part of this report,

(b) In view of following, in our opinion, no proper books of accounts, as required by law,

have been kept by the Company so far as its appears from our examination of statements, registers and related records produced for our verification,

i. The Divisions of the Company has maintained cash & bank book and no corresponding

transactions are recorded in ledger accounts. The adjustment entries were passed in the memorandum statement maintained to compile these financial statements, which is in contrary to the double entry system of recording of transactions as required by the Companies Act 1956.

The Divisions extract monthly Trial Balance (known as “TICHA”) for the purpose of

consolidation of financial transactions at Circle and Wings and Head Office on the basis of memorandum statements submitted by Circles and Wings for compiling these financial statements. The adequacy and correctness of memorandum statements and transmission of financial data do not ensure the correctness and sufficiency of accounting and recording of transactions and compilation of Balance Sheet and Profit & Loss account of the Company.

ii. The Divisions do not compile the trial balance with balances of the previous accounting

month. The Circles consolidate the Trial Balance provided by the Divisions on monthly

24

basis and Head Office merges the monthly Trial Balance and at the end of year consolidated balances are drawn on the basis of memorandum record for the purpose of preparation of financial statements. The Company does not record balances provided by Divisions at Circle or at Head Office in proper financial books of accounts. These financial statements have been compiled on the basis of statements prepared on the basis of merged Trail Balances provided by Circles and not on the basis of books of accounts.

iii. The consolidated statements / records compiled at Head Office and Circles do not provide

complete details of Main Accounting Code and or Sub-Account Code’. The memorandum consolidated record does not provide Circle or Division wise detail of transactions disclosed in these financial statements.

iv. The cash book maintained at Division is not balanced on daily basis, therefore, the cash

book do not reflect the cash in hand on daily basis. (c) In view of our observations in sub-para (i) to (iv) of para (b) above, we comment that Balance

Sheet and Profit & Loss account and Cash Flow Statement do not tally with financial books of accounts.

(d) Subject to our comments in “Annexure II” regarding non compliance in relation to Accounting

Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956, in our opinion, the Balance Sheet and Profit & Loss account dealt with by this report comply with Accounting Standards.

(e) We were informed, in terms of Notification No. GSR 829(E) dated 21st October, 2003 issued by

Government of India, Ministry of Finance, Department of Company Affairs, Government companies are exempt from the applicability of provisions of 274(1)(g) of the Companies Act, 1956, therefore, no written representation from Board of Directors has been obtained.

(f) Subject to our comments in “Annexure III” and the effect of the said qualifications where

ascertainable the loss of current year ` 5,12,75,58,884 will be converted into loss of ` 10,79,83,78,986. The reserves and surpluses will be ` 4,16,28,39,791 instead of ` 3,42,67,44,866. The share capital will be ` 1,40,000 instead of ` 11,40,000 . The share money pending allotment will be ` Nil instead of ` 9,71,77,18,000. The Long Term Borrowings will be ` 16,14,61,30,340 instead of

` 16,14,77,30,340. The Other long term liabilities will be ` 4,59,21,67,116 instead of ` 4,29,59,49,213. The short term borrowings will be ` 23,44,10,30,298 instead of ` 23,38,78,36,707 . The Trade payables will be ` 8,52,62,46,477 instead of ` 11,44,00,42,795.The other current liabilities will be ` 13,08,07,24,828 instead of ` 15,45,71,61,671. The short term provisions will be ` 3,92,88,48,759 instead of `1,02,91,30,160. The Tangible assets will be ` 44,05,68,35,826 instead of ` 44,26,08,16,083. The capital work in progress will be ` 11,88,19,50,265 instead of ` 12,73,27,93,967. The non current Investments will be`3,22,21,70,894 instead of `8,80,51,20,024. The long term loan and advances will be ` 95,97,49,219 instead of ` 10,27,99,621.The other noncurrent assets will be ` 4,67,76,31,352 instead of ` 1,51,47,21,001. The current investments will be ` 3,39,70,008 instead of `20,34,20,878. The inventories will be ` 94,46,78,980 instead of ` 1,04,11,23,768. The Trade receivables will be ` 2,98,55,54,145 instead of `5,01,06,71,868. The cash and cash equivalents will be `2,21,02,84,151 instead of ` 2,87,19,69,103. The short term loans and advances will be ` 10,18,96,238 instead of ` 4,78,63,70,113. The other current assets will be ` 2,80,34,05,528 instead of ` 3,57,36,47,324.

(g) We further report that the said accounts do not give the information as required by the Companies Act, 1956, in the manner so required and in conformity with accounting principles generally accepted in India and because of the significance of the matters described in para above and in Annexure I & II, forming part of our audit report, and for those qualifications where the effects are unascertainable and are of material nature, and considering the qualifications in this report and audit reports of earlier years of erstwhile HP State Electricity Board we have not been able to obtain sufficient

25

appropriate audit evidence to provide a basis for an audit opinion therefore we disclaim our opinion:

a) in the case of Balance Sheet of the affairs of the company as at 31st March, 2012 and b) in the case of Profit & Loss Account of the Loss for the year ended on that date. c) in the case of the cash flow statement of the cash flows for the year ended on that date.

For Anil Karol & Company Chartered Accountants Firm Registration Number: 04816N Sd/- CA Walia Umesh Partner Membership No. 098287 Place: Shimla Date: 30.09.2013

26

ANNEXURE-A

Forming part of auditors’ report on financial statements of Himachal Pradesh State Electricity Board Limited for the year ended on 31st March, 2012.

i) a) The Fixed assets Register maintained is not as per Companies Act showing the complete details of cost, location, identification code, transfer write off, accumulated depreciation etc in respect of each individual items. The Fixed Assets register maintained at division level does not tallied with the sub head wise accounts of Fixed assets maintained in the account statements.

b) The assets have not been physically verified by the company . Since the detailed records of Fixed assets at different locations are not maintained as prescribed, the question of comparison of Fixed Assets with book records and ascertaining the discrepancies out of physical verification does not arise and its impact upon accounts is not ascertainable.

c) During the year, the Company has not disposed off any substantial part of its assets.

ii) a) As explained to us, stores and spare, at all locations, has been physically verified. In our opinion, the frequency of physical verification is reasonable and adequate.

b) The procedure for physical verification of inventories followed by the management are not reasonable and adequate in relation to the size of the Company and nature of its business.

c) The Company is maintaining proper records of inventory, ie, Stores and spares .However we were not provided with any report of physical verification , hence we are unable to comment on the same.

iii) The Company has not granted/taken any loans secured or unsecured from companies, firms or other parties listed in the register required to be maintained under section 301 of the Companies Act, 1956.

iv) In our opinion and according to the information and explanations given to us, internal control procedures followed by the Company do not commensurate with the size of the Company and the nature of its business with regard to purchase of stores, Fixed Assets machinery or spare parts. The Company has piled up stocks of Rs103.87 Crores( Previous Year Rs 79.48 Crores) as at 31st March 2012, out of which stock amounting to Rs9.04 Crores(Previous Year Rs 9.09 Crores) which are more than five years old and has not been utilised till the close of the year

v) As regards our comments for the sale of goods and services the internal control over sale of power is lacking as reflected by high distribution losses in some operation circles , poor collection efficiency seen from rising level of debtors, non-classification of debtors into good, doubtful and bad, amount and not acting timely for recovery from permanently disconnected consumers and non-compliance of procedure for disconnection in case of default and non recovery of dues from government departments .

vi) a) According to the information and explanations given to us, there are no transactions of purchase of goods and material and sale of goods and materials which were required to be

27

entered in the register(s) as required to be maintained under Section 301 of the Companies Act, 1956.

b) In view of above point, paragraph (vi) (b) is not applicable to the company.

vii) The company has not accepted any deposit from the public under section 58-A and 58-AA of the Companies Act, 1956.

viii) The Internal Audit of the Company is being conducted by independent firm of Chartered Accountants. In our opinion and according to the information and explanations given to us, the internal audit system do not commensurate with the size and the nature of the business of the Company. The scope of the internal audit needs to be redefined and periodicity of internal audit reports needs to be improved.

xi) With pursuant to Rule made by the Central Government of India, the maintenance of cost records have been prescribed under clause (d) of sub-section (1) of Section 209 of the Companies Act,1956 in respect of Electricity Supply. The Company has not prepared cost records as prescribed. x) a) The Company is generally regular in depositing with appropriate authorities statutory dues including provident fund, investor education protection fund, employees State Insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess and other statutory dues applicable to it, except the following dues which is in arrears for more than six months .

Current Year Previous Year

- Electricity Duty 314.48 Crores 59.80 Crores

-Municipal Taxes 3.82 Crores 3.82 Crores

- Labour Cess 0.07 Crores 0 .07Crores

-CPS Contribution 6.24 Crores 8.29 Crores

We further report that company has not transferred the GPF fund contributions to separate trust or to epf authorities as required by EPF Act 1956.( Refer para 3 of the Annexure III of main report of even date)

b) According to the information and explanation given to us, no undisputed amounts payable in respect of income tax, wealth tax, sales tax, custom duty, excise duty and other cess were in arrears, as at 31.03.2012 for a period of more than six months from the date they become payable.

c) According to the information & explanation given to us, details of dues of sales tax, income tax, custom duty, wealth tax, excise duty and cess which have not been deposited as on March 31, 2012 is Nil:

xi) The accumulated losses of the company cannot be quantified due to quantum of qualifications involved and non availability of information and disclaimer of our opinion.

xii) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

28

xiii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, dentures and other securities.

xiv) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund/society. Therefore, the provisions of clause of 4 (xiii) of the Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.

xv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditors’ Report) Order ,2003 are not applicable to the Company.

xvi) The Company has not given guarantees for loans taken by others from Banks or Financial institutions.

xvi) The term loans have been applied for the purpose for which they were raised.

xviii) According to the information and explanation given to us and on an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long term investment. No Long term funds have been used to finance short term assets except permanent working capital.

xix) The Company, during the year, has not made any preferential allotment of shares to any party.

xx) The Company has not issued any debentures during the period under audit.

xxi) The Company has not raised any money by public issues during the year under audit.

xxii) According to the information and explanation given to us no cases of fraud has been noticed or reported during the course of our audit.

For Anil Karol & Company,

Chartered Accountants

Firm No NR 04816N

Place: Shimla CA Walia Umesh

Dated: ( Partner)

M No 098287

29

HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED (A state Govt. Undertaking)

Auditor’s Report

REPLIES TO THE AUDITOR’S REPORT ON ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2012

OBSERVATION REPLY

We have audited the attached Balance Sheet of Himachal Pradesh State Electricity Board Limited as on 31st March, 2012 and the annexed Profit and Loss account and Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these statements based on our audit.

We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements .An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

Statement of facts, hence no comments are required.

V. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of section 227(4A) of the Companies Act 1956, and on the basis of such checks of books and records of the company as we considered appropriate and according to the information and explanation given to us during the course of audit, we annex hereto a statement on the matters specified in paragraph 4 & 5 of the said order, to the extent applicable to the company.

Statement of facts, hence no comments are required.

VI. The HPSEB Ltd. has enhanced paid up capital from Rs. 1.40 lacs to Rs. 44653 .18 Lac in July 2013 after getting authorized Share Capital of the Company increased from Rs. 5.00 crore to Rs. 1100.00 crore. Hence para stands settled.

The Company has failed to enhance its minimum paid-up capital in the manner specified in section 3 of Companies Act, 1956 as on the reporting date (refer para 2 of annexure of our audit report)

VII. We further report that the Company’s net worth as at the end of the financial year is completely eroded by its accumulated losses. However, the management has prepared the financial statements assuming that the Company will continue as a going concern. No sufficient information with regard to adequacy of resources in the operating cash flows to meet its future

The Financial statement of the Company has been drawn up on the premise that its business will continue as a going concern. The Company is State Govt. undertaking registered under Companies Act. The annual plan of the company is being prepared every year by assessing revenue income, revenue expenditure, capital receipt and Capital Exp. on the basis of its resources and the Capex plan is being

30

OBSERVATION REPLY

obligations has been provided by the management.

prepared from HPERC. Hence para stands settled.

VIII. Further to our comments in the annexure referred to in paragraph 1 above, and subject to:- a) We have obtained all the information and

explanation, which to the best of our knowledge and belief were necessary for the purpose of our audit except as listed in Annexure I forming part of this report,

(b) In view of following, in our opinion, no

proper books of accounts, as required by law, have been kept by the Company so far as its appears from our examination of statements, registers and related records produced for our verification,

i. The Divisions of the Company has

maintained cash & bank book and no corresponding transactions are recorded in ledger accounts. The adjustment entries were passed in the memorandum statement maintained to compile these financial statements, which is in contrary to the double entry system of recording of transactions as required by the Companies Act 1956.

The Divisions extracts monthly Trial

Balance (known as “TICHA”) for the purpose of consolidation of financials by Circle and Wings and Head Office on the basis of memorandum statements submitted by Circles and Wings compile these financial statements. The adequacy and correctness of memorandum statements and transmission of financial data do not ensure the correctness and sufficiency of accounting and recording of transactions and compilation of Balance Sheet and Profit & Loss account of the Company.

As already stated at S. No. 1 of significant accounting policies of the Company, accounts of the Company are being prepared on accrual basis based on historical cost convention and are in line with the fundamental accounting principles of prudence, consistency and materiality except otherwise stated. Financial statements are prepared in accordance with the provisions of the Companies Act, 1956 and the relevant provisions of Electricity Act, 2003 and Electricity (Supply) Annual Accounts Rules (ESAAR), 1985.The improvement in accounts, as in any other sphere, is a continuing process and there is always scope of minimizing the infirmities, more so in the case of a Company carved out from the predecessor entity operating for over four decades.

As this is the 2st operational year of the Company and the Company has complied 11 Nos Accounting Standards out of total mandatory 29 Accounting Standards in force. Most of them are partly complied. The reason for non compliance of these standards is primarily due to the fact that the accounts of the Company are based on the provisions of Electricity Supply Annual Accounts Rules (ESAAR), 1985.

2. Caution has been taken to make appropriate disclosures either in the Accounting Policies or by way of Notes of Accounts, so that the transparency aspect is duly taken care of.

ii. The Divisions do not compile the trial balance with balances of the previous accounting month. The Circles consolidates the Trial Balance

provided by the Divisions on monthly basis and Head Office merges the monthly Trial Balance and at the end of year consolidated balances are drawn on the basis of memorandum record for the purpose of preparation of financial statements. The Company

As already stated above, the accounts of the company have been prepared as per Electricity Supply Annual Accounts Rules (ESAAR), 1985, the balances of previous years are also taken in the trial balances so prepared. Reconciliation of the same is under process. Fact has adequately been disclosed at point No.13 of the notes to accounts. Efforts would be made to reduce the difference during the current financial

31

OBSERVATION REPLY

does not record balances provided by Divisions at Circle or at Head Office in proper financial books of accounts. These financial statements have been compiled on the basis of statements prepared on the basis of merged Trail Balances provided by Circles and not on the basis of books of accounts.

year.

iii The consolidated statements / record compiled at Head Office and Circle do not provide complete details of Main Accounting Code and or Sub-Account Code’. The memorandum consolidated record does not provide Circle or Division wise detail of transactions disclosed in these financial statements.

As above.

iv The cash book maintained at Division is not balanced on daily basis, therefore, the cash book do not reflect the cash in hand on daily basis.

As above.

(c) In view of our observations in sub-para (i) to (iv) of para (b) above, we comment that Balance Sheet and Profit & Loss account and Cash Flow Statement do not tally with financial books of accounts.

The Balance sheet and profit & loss account tally with the financial statement. However, there are differences in some of head of a/c and efforts are being made for the reconciliation of the same please. Regarding cash flow statement, the same shall be complied during current financial year.

(d) Subject to our comments in “Annexure II” regarding non compliance in relation to Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956, in our opinion, the Balance Sheet and Profit & Loss account dealt with by this report comply with Accounting Standards.

The Account of the erstwhile Board was prepared as per Electricity Supply Annual Accounts Rules, 1985 and this is 2st operational Balance Sheet of the Company. The most of the Accounting Standards have been compiled by the Company and point wise replies of observation have been given in the Annexure-II. The compliance of remaining Accounting Standards shall be ensured in subsequent year (s).

(e) We were informed, in terms of Notification No. GSR 829(E) dated 21st October, 2003 issued by Government of India, Ministry of Finance, Department of Company Affairs, Government companies are exempt from the applicability of provisions of 274(1)(g) of the Companies Act, 1956, therefore, no written representation from Board of Directors has been obtained.

Statement of facts, hence no comments are required

(f) (F & G) With respect to the observations of Statutory Auditor the position is as follow:-

Subject to our comments in “Annexure III” and the effect of the said qualifications where ascertainable the loss of current year ` 5,12,75,58,884 will be converted into loss of ` 10,79,83,78,986. The reserves and surpluses will be ` 4,16,28,39,791 instead of ` 3,42,67,44,866. The share capital will

1. The erstwhile H.P. State Electricity Board (HPSEB) was unbundled through a transfer scheme notified by the Govt. Of Himachal Pradesh vide Order dated 10.6.2010 under which the undertaking assets,

32

OBSERVATION REPLY

be ` 1,40,000 instead of ` 11,40,000 . The share money pending allotment will be ` Nil instead of ` 9,71,77,18,000. The Long Term Borrowings will be `16,14,61,30,340 instead of

` 16,14,77,30,340. The Other long term liabilities will be ` 4,59,21,67,116 instead of ` 4 29,59,49,213 . The short term borrowings will be ` 23,44,10,30,298 instead of ` 23,38,78,36,707. The Trade payables will be ` 8,52,62,46,477 instead of `11,44,00,42,795. The other current liabilities will be ` 13,08,07,24,828 instead of ` 15,45,71,61,671. The short term provisions will be `3,92,88,48,759 instead of `1,02,91,30,160. The Tangible assets will be `44,05,68,35,826 instead of `44,26,08,16,083. The capital work in progress will be ` 11,88,19,50,265 instead of ` 12,73,27,93,967. The non current Investments will be `3,22,21,70,894 instead of `8,80,51,20,024. The long term loan and advances will be ` 95,97,49,219 instead of `10,27,99,621.The other noncurrent assets will be `4,67,76,31,352 instead of `1,51,47,21,001.The current investments will be ` 3,39,70,008 instead of `20,34,20,878. The inventories will be `94,46,78,980 instead of ` 1,04,11,23,768. The Trade receivables will be `2,98,55,54,145 instead of `5,01,06,71,868. The cash and cash equivalents will be `2,21,02,84,151 instead of `2,87,19,69,103. The short term loans and advances will be `10,18,96,238 instead of `4,78,63,70,113. The other current assets will be ` 2,80,34,05,528 instead of ` 3,57,36,47,324.

properties, liabilities, proceeding and personnel of erstwhile HPSEB which stand vested in Govt. of HP have been transferred to the HPSEBL and the Company started its Operations w.e.f. 14th June 2010. All the Accounts of erstwhile HPSEB have been audited by the CAG of India and audited figures of FY 2010-11 (1.4.2010 to 13.6.2010) of erstwhile Board have been transferred to HPSEB Ltd. book of accounts.

2. The CAG of India had certified the final accounts of the erstwhile HPSEB for FY 2010-11 (1.4.2010 to 13.6.2010) by giving a true and fair view of the state of affairs with certain qualifications. The Accounts of the Company are being maintained as per old practice as such this is 2nd Balance Sheet of the Company and thus status of the accounts of the Company has not changed during the period under audit.

3. Efforts have been made by the management to improve the accounts such as, in respect of reconciliation of debit and credit advice and inter Company transactions, clearance of old advances and suspense balances, clearing of balance sheet etc. by way of write off of petty and old accounts etc.

4. As may be read from the accounts, 11 Nos as out of the 29 Accounting Standards in force have been complied. Most of the others are also partly complied. The reason for non compliance of these standards is primarily the fact that the accounts of the Company have been based on the provision of Electricity Supply Annual Accounts Rules (ESAAR), 1985. The improvement in accounts, as in any other sphere, is a continuing process and the Company is making full efforts for the same.

5. Caution has been taken to make appropriate disclosures either in the Accounting Policies or by way of Notes of Accounts, so that the transparency aspect is duly taken care of .

6) Neither mis-appropriation/ embezzlements have been come to the notice of the Management nor pointed out by the auditors.

(h)

We further report that the said accounts do not give the information as required by the Companies Act, 1956, in the manner so required and in conformity with accounting principles generally accepted in India and because of the significance of the matters described in para above and in Annexure I & II, forming part of our audit report, and for those qualifications where the effects are unascertainable and are of material nature, and considering the

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qualifications in this report and audit reports of earlier years of erstwhile HP State Electricity Board we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion therefore we disclaim our opinion:

(a) in the case of Balance Sheet of the affairs of the company as at 31st March, 2012 and

(b) in the case of Profit & Loss Account of the Loss for the year ended on that date.

(c) in the case of the cash flow statement of the cash flows for the year ended on that date.

Annexure I

(Forming part of auditors’ report on financial statements of Himachal Pradesh State Electricity

Board Limited for the year ended on 31st March, 2012)

1. Provision of Liabilities and Expenditure Year end provisions for liabilities / expenses booked at the close of the year are reversed in the subsequent accounting year by the Company.

We further report, that during the year under review Company has made provision for expenses on the basis of budgets approved for particular works irrespective of the fact that actual expense accrued/ incurred and same is reversed in the subsequent period on receipt of actual bill / invoice of the vendor / contractor. The same results in overstatement of other current liabilities and revenue expenses / capital work in progress. The sufficient information with regard to quantum of such liabilities provided in financial statements has not been made available to us.

It is submitted that as per transfer scheme notified by the Govt ,of H.P. all assets and liabilities of erstwhile Board have been transferred to the Company and year end liabilities are reversed in the subsequent accounting year. Necessary instructions have been issued to the field Units for booking of the expenditure based on actual expenses rather on budgeted expenses. However, system of providing liabilities on accrual basis at year and appropriate system of accounting of the same shall be deliberated upon for the necessary action.

2. It has been observed that expenses approved by Head Office till the year end are only provided in the financial statements. The work completed / services rendered / goods supplied till 31st March, 2012 and not approved by Head Office, has not been provided in the financial statements, however, the same have been recorded in the subsequent period on receipt of approval from Head Office. The information with regard to assets / expenses and liabilities has not been made available to us, therefore, impact of same on noncurrent assets / current assets/ noncurrent liabilities/ current liabilities / losses cannot be quantified.

All the information relating to the transactions made by the Head Office of the Company has been made available to the Auditors by the Company. As pointed out by Auditor in para, the work wise details of these expenses are available in our field units and shall be provided, if required by the auditors.

However, system in this regard shall be reviewed & appropriately implemented.

3. Neither the Company has disclosed the facts in notes nor given any information as to settlement for those cases which were disclosed in earlier years balance sheet as notes to account / audit

The company shall disclose all the facts, as pointed out in para during the FY 2012-13 audit.

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report / CAG comments / comments of works audit party/ comments of RA audit /pending court case / settlement where the Company had deposited deposits with various authorities amounts some of them may have been settled / awarded by the Court / Govt. / Arbitrator but the status not disclosed by the Company. This may affect the profit & loss account and the balance sheet

4. Old assets (recoverable) and old liabilities (Payables) in all the divisions being time barred mostly remained unconfirmed / un-reconciled. The adjustment required if any may affect the profit & loss account and the balance sheet.

Most of the time-barred old assets (recoverable) and old liabilities (payable) in all the Divisions have been got adjusted. Necessary action on remaining amounts shall be taken after completion of reconciliation process.

5. The Company has not provided sufficient physical verification records in respect of Tangible Assets, Capital Work in progress and Contracts in progress at the Division level. The adjustment required if any may affect the profit & loss account and the balance sheet.

The Company has provided all the records relating to fixed assets to the Statutory Auditors. However, where the records were not provided, the same shall be provided to the auditors in future. Noted for future compliance regarding physical verification of assets.

6. The Company has not taken any reasonable steps to remove the qualifications reported in previous year report and earlier year reports of HPSEB by CAG while adopting the accounts for the current year, therefore old material qualifications has been considered in the current year report where the same is quantifiable as no information for the same has been provided by the company.

It is submitted that most of para/ qualifications of CAG on the earlier report of erstwhile HPSEB have been settled and compliance has been shown to Auditors Hence para stands settled.

7. The Company has not shown to us the account statements / records of the following accounting Divisions:-

- Khauli Construction Division. - Largi Construction Division - Civil MTC Bawanagar . - Investigation Division Recong Peo. - P&D( Generation Wing) -

In this regards, it is submitted that all these Units are defunct and closing balances of these units have been included in the consolidated Balance Sheet of the Company, which have already been shown to the Auditors.

8. The Head Office has not provided complete details/ information of the closing balance of sub heads operated by them in respect of respective DDO’s except , banks section, loan section and investment section. The subsidiary records / register of individual DDO has not been produced for our verification.

The instructions have been issued to all the DDOs to produce the record to the Statutory Auditors as per their requirement.

9. The reconciliation of the Fixed Assets Register and the Fixed Assets account in the account statement is pending since many years. The pendency is due to non availability of records/ information of earlier years or in some Divisions the earlier years records have been burnt. The above pendency has been observed in Solan Circle, Rampur Circle, Rohroo Circle and other Circles/ Divisions also. The adjustment required if

The Company is making efforts to get the Fixed Assets Registers at Divisional level ready and complete in all respect and necessary instructions in this regards stands issued/imparted to all the concerned to ensure compliance at the earliest please.

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any may affect the Profit & Loss account and the Balance Sheet.

10. The reconciliation of the Works register and the Capital Work-in-Progress account in the account statements is pending since many years. The pendency is due to non availability of records/ information of earlier years or in some divisions the earlier years records have been burnt. The above pendency has been observed in Solan Circle, Rampur Circle, Rohroo Circle and other Circle also. The adjustment required if any may affect the Profit & Loss account and the Balance sheet.

Instructions have been issued/imparted to all the concerned to reconcile the subsidiary record as per accounts.

11. No sufficient information and evidence in support of revenue expenses pending allocation over Capital Works have been provided to us. The adjustment required if any may affect the profit & loss account and the balance sheet.

The complete record of the same had been shown to Auditors. Hence the version of the auditor is not correct. Hence para stands settled.

All allocable direct expenses are booked in CWIP.

12. The subsidiary records in relation to consumer ledgers at the end of the year are pending for reconciliation at all Divisions of the Operation Circles The adjustment required if any may affect the profit & loss account and the balance sheet.

Efforts are being made to reconcile the same at the earliest.

13. The Company has not provided any information about those consumers who have gone to the courts on account of disputes in the bills raised for energy charges.

The information with regards to those consumers who have gone to the courts on account of disputes in the bills raised for energy charges is available with concerned Divisions. Instructions have been issued to all to provide the information to the auditors.

14. The Company has not settled the old un reconciled entries in the bank reconciliations statements. The adjustment required if any may affect the profit & loss account and the balance sheet.

Needful has been done during FY 2012-13. Hence para stands settled.

15. The Head office has not supplied us the employees wise details of loans and advances to staff and interest accrued thereon The adjustment required if any may affect the profit & loss account and the balance sheet.

Needful has been done and compliance of the same shall be shown by Head office during the audit of FY 2012-13. Detail will be supplied during 2012-13

16. The Company has not provided complete details of amount recoverable on account of theft of property pending investigation (Account Code 28.885). The adjustment required, if any, may affect the profit & loss account and the balance sheet.

The complete details of amount recoverable on account of theft of property pending investigation are available in all Units of the Company. However, where the detail of such amount not provided, the same shall be provided during FY 2012-13. Hence para stands settled.

17. The Company has not able to provide sufficient information/ confirmation from the Parties in respect amount payable for purchase of power. The adjustment required if any may affect the profit & loss account and the balance sheet.

Efforts are being made to reconcile the amount of payable/receivable on a/c of purchase /sale of power. After reconciliation, the action shall be taken accordingly for adjustment of un-reconciled amount if any.

18. The Company has not able to provide reconciliation in respect of Deposits and Retentions from suppliers and contractors with the subsidiary records maintained.

The concerned DDOs are maintaining the subsidiary record of all the deposit/retention money received from suppliers and contractors. However, instructions

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have been issued to all the DDOs to complete the records in case the same had not maintained and shown to auditors previously.

19. The Company has not been able to provide reconciliation in respect of Deposits for Electrification Services Connections Account Code 47.1 with the subsidiary records maintained.

The concerned DDOs are maintaining the subsidiary record of all the deposit. However, instructions have been issued to all the DDOs to complete the records in respect of Deposits for Electrification Services Connections Account Code 47.1 with the subsidiary.

20. The Company has not provided to us the liabilities on account of leave salary payable of present employees and gratuity payable of present employees as on 31st March 2012. The adjustment required if any may affect the profit & loss account and the balance sheet.

The point has been noted and compliance of these will be done FY 2012-13 accounts..

21. No sufficient Information has been provided in respect of the Contingent Liabilities provided in the notes to accounts and further no information for contingent assets has been provided.

The contingent’s liabilities above Rs.1 crore have been shown in the notes to accounts. Hence para stands settled.

22. No sufficient information has been provided in respect of the liability of expenses, other liabilities and provisions.

All the information of the liability of expense has been provided & shown to audit. Hence para stands settled.

23. During the year under review the financial statements are prepared on the revised schedule VI of the Companies Act 1956 .The basis for grouping of noncurrent liabilities/ assets and current liabilities and assets as per the requirements of revised Schedule VI for the current and previous year has not been produced for our verification.

The point has been noted for future compliance.

Annexure II

(Forming part of auditors’ report on financial statements of Himachal Pradesh State Electricity Board Limited for the year ended on 31st March, 2012)

1. Accounting Standard I- regarding disclosure of Accounting Policies:

i) Non disclosure of policy of conveyance for accounting of losses of stock due to theft, fire, floods etc.

ii) Non disclosure of any policy on write off & recovery of shortage from contractors and suppliers

iii) Non disclosure of any policy on write off &

As already stated at S. No. 1 of significant accounting policies of the Company, accounts of the Company are being prepared on accrual basis based on historical cost convention and are in line with the fundamental accounting principles of prudence, consistency and materiality except otherwise stated. Financial statements are prepared in accordance with the provisions of the Companies Act, 1956 and the relevant provisions of Electricity Act, 2003 and Electricity (Supply) Annual Accounts Rules (ESAAR), 1985.The improvement in accounts, as in any other sphere, is a continuing process and there is always scope of minimizing the infirmities, more so in the case of a Company carved out from the predecessor entity operating for over four decades.

2. Caution has been taken to make appropriate

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recovery of shortage from employees

iv) Accounting treatment of capital and revenue items

v) No disclosure about the company whether its going concern or not.

disclosures either in the Accounting Policies or by way of Notes of Accounts, so that the transparency aspect is duly taken care of.

Noted for compliance in future.

2. Accounting Standard 2: Valuation of Inventories

Accounting policy on inventory valuation, where the cost is determined on weighted average method and storage cost @ 3% and freight is added to the cost is not in line with the Accounting standard issued by ICAI . (Refer Note 2.31(A)6)

The effect of noncompliance with accounting standard 2 on inventories stores and spares and Profit & Loss account is un-ascertainable due to non availability of information).

As replied above.

3 Accounting Standard 3: Cash Flow Statements

The Company has prepared the cash flow statement but its has not been prepared in the manner prescribed by the Institute of Chartered Accountants of India .

Needful shall be done in next financial year.

4 Accounting Standard 4: Contingencies and Events Occurring after the Balance Sheet Date

The Company has not provided to us with the information on contingencies and events occurring after balance sheet date, neither the same has been incorporated in the accounts statements nor the same has been disclosed by the management in the notes to accounts .

This may be noted that although this year Balance Sheet is approved u/s 215(3) on 28th September 2013 and submitted to us for audit. The Material Contingencies and events occurring after balance sheet date which may affect the balance sheet at 31st March 2012 has not been disclosed in the notes to accounts

The effect of noncompliance with accounting standard 4 on profit & loss account is un-ascertainable due to non

The requisite information has already been given against Sr. No. 14 of significant accounting policies of Company disclosed in Notes of Accounts.

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availability of information.

5 Accounting Standard 5:Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies

The Company has not complied with the requirements of Accounting standard 5 which deals with Prior period and extraordinary items, as the Company has no accounting policy for prior period items and changes in accounting policies and there is no disclosure of the same in the notes to accounts.

The effect of noncompliance with accounting standard 5 on profit & loss account is un-ascertainable due to non availability of information

There exists a proper policy for the accounting of prior period Income/Expenditure. On the date of balance sheet all the expenses/income relating to the year are being charged to the concerned head of account, when the accounts of the year have been closed, all the receipt/expenses relating to previous years are being charged to prior period expenses/income. However, point of audit is noted for future compliance

6 Accounting Standard 6: Depreciation Accounting

The Company has not complied with the requirements of Accounting standard 6 which deals with accounting of Depreciation. The company has changed the method of providing the depreciation rates which was previously adopted by the Board and the depreciation has not been recalculated retrospectively in accordance with the new rates.

The effect of noncompliance with accounting standard 6 on profit & loss account is un-ascertainable due to non availability of information.

As replied above Annexure-II (1).

7 Accounting Standard 9: Revenue recognition

The Company has not followed the accounting standard 9 as required for revenue recognition, . The company has not disclosed any accounting policy in respect of violation charges, O & M Charges, Charges for interlinking facility, other O & M Charges and other charges recoverable.

The policy of the company in respect to Revenue recognition has been disclosed at S.No. 7 of significant accounting policies.

8 Accounting Standard 10: Accounting for Fixed Assets

The Company has not complied with the requirements of the accounting standard 10 accounting for fixed assets while preparing the financial statements.


The policy of the company in respect to Accounting Standards for fixed assets has been disclosed at S. No. 2 of significant accounting policies.

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9 Accounting Standard 12: Accounting for Government Grant

The Company has not complied with the requirements of accounting standard 12 on accounting of Government Grants in relation to charging of the depreciation on the assets acquired from the grants


The policy of the company in respect to Government grants has been disclosed at S.No. 12 of significant accounting policies.

10 Accounting Standard 15: Accounting for Employee Benefits

The Company has not complied with the requirements of AS15 regarding accounting for employee Benefits while preparing the financial statements in respect of leave salary , gratuity and provident fund contributions payable to present employees.


11. Accounting Standard 16 Accounting of Borrowing Costs

The company has not complied with the requirements of AS 16 issued by the ICAI which states that only interest paid on loan which has been used for construction of Assets during construction period has to be capitalized as part of the cost and after that the interest has to be charged to revenue.


The policy of the company in respect to accounting of terminal benefits has been disclosed at S.No. 8 of significant accounting policies.

The policy of the company in respect to accounting of Borrowing cost has been disclosed at S.No.10 of significant accounting policies.

12 Accounting Standard 17: Segment Reporting

The Company has not complied with requirement of Accounting Standard 17 regarding segment reporting, although well defined segments of Distribution, Electrical Systems, Generation, Projects etc are there.

The segment reporting shall be complied as per requirement during FY 2012-13.

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13 Accounting Standard 18 Related Party Disclosures

The Company has not complied with requirement of Accounting Standard 18 and not disclosed the transactions done with the related parties in the notes to accounts.

Noted for future compliance.

14 Accounting Standard 20: Earnings Per Share

The Company has not complied with the accounting standard issued on the Earnings per Share issued by ICAI while preparing the financial statements

NA, as the Company is currently in losses.

15 Accounting Standard 22: Accounting for Taxes on Income

The Company has not recognized the tax effect of timing differences arising on account of carry forward losses as per Accounting Standard 22 "Accounting for Taxes on Income" issued by ICAI on accounting of prudence.

Needful shall be done during current financial year..

16 Accounting Standard 26: Intangible Assets

The Company has not complied with the accounting standard 26 issued on the Intangible assets which states that “an intangible asset should be recognized if, it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and the cost of the asset can be measured reliably.”

Needful shall be done as per requirement.

17 Accounting Standard 28 : Impairment of Assets

The Company has not complied with the accounting standard issued on the Impairment of Assets issued by ICAI while preparing the financial statements

Needful shall be done as per requirement.

18 Accounting Standard 29:Provisions, Contingent Liabilities and Contingent assets

The Company has not complied with the accounting standard issued on the Provisions, Contingent Liabilities and Contingent Assets issued by ICAI while preparing the financial statements.

The same has been complied partly, wherever not complied shall be complied in future.

Annexure III

(Forming part of auditors’ report on financial statements of Himachal Pradesh State Electricity Board Limited for the year ended on 31st March,

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OBSERVATION REPLY

2012)

1. Preparation of Financial Statements for the year under review:-

a) The financial statements are prepared as per revised schedule VI of the companies act 1956 during the year under review. However it has been observed that the company has re casted and regrouped the balance sheet prepared as per the old schedule VI of the companies act for the current year and previous year to comply with requirements of the revised Schedule VI. The accounts statements at the Division level are made on the basis of the old schedule of the Companies Act. The recasting of individual balance sheets of the Divisions, Wings and Circles at the end of the year and of the previous year are not being done as per the requirements of the revised schedule VI. In the absence of the information we are unable to comment on the same.


b) The Companies turnover is in excess of ₹ 100 crores and there is explicit requirement as per revised schedule VI to present the figures in lacs while preparing the financial statements. The company has rounded off the figures in rupees only. Further the company has not used same unit of measurement in the financial statements and notes thereon.


c) Sub Head Reconciliations

The company has during the year under review made reconciliations of its sub head account codes of all its Divisions and Head office of the balances transferred from the erstwhile Board as at 31st March 2011. In some cases the negative balances as on 1st April 2011 has been arrived at by the Divisions and Head Office and same has been re casted and regrouped within the main group head No sufficient information for recasting and regrouping has been provided to us. In the absence of information we are unable to comment on the same.

In reply to this para it is submitted that negative balances as on 1st April 2011 arrived at by the Divisions and Head Office have been set right after obtaining the factual position from subsidry record during FY 2011-12 and apprised the Auditor accordingly. Hence, the para stands settled.

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d) Consolidation of Financial Statements at Head Office Level and Circle Level

The consolidated statements of assets and liabilities compiled on the basis of information provided by the Divisions and Circles do not reconcile with consolidated balances used for compilation of these financial statements.


We further report that the erstwhile Board transferred its assets and liabilities to Company in accordance with “Transfer Scheme”. The following balances have not been reconciled / traced in subsidiary records maintained at Divisions / Sub-Divisions and accounting treatment and impact thereof in financial statements of the Company is subject to confirmation.

As replied against “ g” above page______..

Amount in ` lakh

Current Year

Previous Year

Account Code

Main Heads Debit (Credit)

Debit (Credit)

Reserves and Surpluses

55 Contributions, Grants and Subsidies Towards Cost of Capital Assets

(2,676.84)

(2,676.84)

56 Reserves (254.07) (254.07) Profit & Loss account 16,345.30 16,366.04 13,414.40 13,435.14 Other Long term

Liablilities

48 Deposits for electrification, service connection, etc.

439.18 439.18

439.18 439.18 Trade Payables

41 Liability for Capital Supplies/Capital Works

(1.52) (1.52)

(1.52) (1.52) Other Current

Liabilities

42 Liability for O&M Supplies/Works

3,381.17 3,381.17

43 Staff Related Liabilities & Provisions

(3,150.70)

(3,150.70)

44 Other Liabilities and Provisions

(4,227.78)

(4,227.46)

46 Deposits for Electrification, Service connection etc.

(7,154.76) (7,155.07)

47 Security Deposits (3,724.83) (3,724.83)

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from Consumers (14,876.90) (14,876.90) Tangible Asssets

10 Fixed Assets 592.74 591.26 11 Capital Expenditure

Resulting in An Asset Not Belonging To the Board

180.76 180.76

12 Depriciation (1.48) - 772.02 772.02 Capital Work in

Progress

14 Capital Works in Progress Accounts.

(9,090.67) (9,090.67)

15 Contracts– in-progress

182.93 182.93

(8,907.73) (8,907.73) Long Term Loans

and Advances

25 Advances to Suppliers/ Contractors-- (Capital)

(390.97) (391.85)

28 Sundry Receivables 4,288.90 4,167.49 3,897.93 3,775.63 Other Non Current

Assests

16 Assets not in use 164.57 164.57 17 Deferred Revenue

expenditure 1,937.10 1,937.10

2,101.67 2,101.67 Inventories

22 Stock and Related Accounts.

23.65 23.65

23.65 23.65 Trade Receivables

23 Sundry Debtors for sale of power

2,749.53 2,749.53

2,749.53 2,749.53 Cash and Cash

Equivalents

20 Investments Against Funds

76.32 76.32

24 Cash and Bank (100.44) (121.19) (24.12) (44.87) Short term Loans

and Advances

26 Advances to Suppliers/ Contractors-- (O & M)

266.71 267.59

27 Other Loans and Advances

266.60 266.60

533.31 534.19 Other Current

Assests

30-39 Inter-Units accounts (121.41) - Total (121.41) - Grand Total - -

We are of the opinion that Reserves and Surpluses are understated to the extent of ` 13,414.40 lacs, Other Current Liabilities are understated to the

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OBSERVATION REPLY

extent of ` 439.18 lacs, Trade Payables are overstated to the extent of ` 1.52 lacs, Other Liabilities are overstated to the extent of ` 14,876.90 lacs, Tangible assets are overstated to the extent of ` 772.02 lacs Capital work in progress are understated to the extent of ` 8,907.73, Long term loans and advances are overstated to the extent of ` 3,897.93, lacs, Other noncurrent assets are overstated to the extent of ` 2,101.67 lacs, inventories are overstated to the extent of ` 23.65 lacs, Trade Receivables are overstated to the extent of ` 2,749.53, Cash and Cash equivalents are under stated to the extent of ` 24.12 lacs ,Short term loans and advances are overstated to the extent of ` 533.31 lacs and inter unit accounts are understated to the extent of ` 121.41 lacs.

d) Cash Flow Statement

The company has prepared cash flow statement during the year under review however the same is not according to the manner prescribed in the Accounting Standard issued by the Institute of Chartered Accountants of India.

(i) The company has prepared the cash flow statement for the previous year for the period 14/06/2010 to 31/03/2011, whereas the same has to be made from 1/04/2010 to 31/03/2011. The cash and cash equivalents as on 1/4/2010 was Rs Nil whereas the same has been shown as ` 74.63 crores

(ii) The company has not included the Fixed Deposits in the closing and Opening Balances of cash and cash equivalents.

(iii) The Cash Flow statement has been rounded off in crores where as the balance sheet and profit and loss account has been rounded off in Rupees.

(iv) The cash flow statement does not tally with the balance sheet annexed and the working for the preparation of cash flow statement has not been produced for our verification.

(v) Deferred revenue expenditure written off and unbilled revenue has not been included in non cash transactions.

In the absence of complete information we are unable to comment on the cash flow statement.

In reply to this para it is sub mitted that point has been noted and Cash Flow Statement for the FY 2012-13 shall be prepared as per Accounting Standard issued by the Institute of Chartered Accountants of India. Hence para stands settled.

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2 Share Capital ( Note 2.1)

In terms of provisions of sec. 227(1A) of the Companies Act, 1956, we report that the Company has allotted 10,000 Equity shares of ` 100/- each (previous year 1,400 Equity Shares of ` 100 each) during the year for cash at par, the payment against allotment of 10,000 Equity Shares has been shown as recoverable from HP Govt and report that payment against above Equity Shares amounting to ` 10,00,000.00 (previous year ` 1,40,000.00) has not been received till date of audit and same has also been shown as recoverable from HP Govt. We also report that the above shares has in fact been allotted on 5/12/2012 after the balance sheet reporting date. Thus Share Capital and Short term loans and advances are overstated to the extent of above .

In reply to this para it is submitted that the share amounting to Rs. 40,000/- has been allotted on 5.12.2012 duly filed with RCA after obtaining the approval of BODs. The books of accounts for 2011-12 were not close till filing of e-return for 2010-11 and it could be uploaded only with share capital of Rs. 1.40 lacs. Therefore Rs. 40.00 lac shown as recoverable.

3 Reserves and Surplus ( Note 2.2)

a) Capital Reserves (Grants/ subsidy from Govt, Consumers Contribution)

The depreciation on assets acquired out of subsidies / grants / consumer contribution is charged to Profit and Loss account. In terms of Accounting Standards 12 issued by Institute of Chartered Accountants of India, the depreciation on such assets either should be charged to Capital Contribution / Grant / Subsidy / Assistance or the cost of assets should be reduced to the extent of subsidy / grant / customer contribution received while computing the depreciation. The company has not provided sufficient information with regard to excess amount of depreciation charged to revenue account, in our opinion the depreciation charged and Reserves and surpluses (Capital Grant from Government / consumer contribution) are overstated to the extent of excess depreciation charged to revenue account, which is subject to confirmation.

Efforts to do the needful shall be done during the current financial year.

b) Leave Encashment Fund

Current Year Previous YearLiablilties Rs. Rs.Fund Account 150,000,000.00 150,000,000.00 Interest Earned 19,450,870.00 5,508,355.00

169,450,870.00 155,508,355.00

AssestsSBI Fund 112,882,121.00 100,000,000.00 Canara Bank Fund 56,568,749.00 50,000,000.00 Interest Accured - 5,508,355.00

169,450,870.00 155,508,355.00 Diffrence - -

In reply to this para , it is submitted that interest earned on Leave encashment fund amounting to Rs. 1,94,50,870/- from SBI and Canara Bank Fund has been shown as Reserve Fund ( Leave Encashment Fund) by debited to prior period Income vide JV No 372 during FY 2012-13 accounts. Hence, para stands settled.

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The company has taken leave encashment policy from State Bank of India and Canara Bank for its employees. The Company has charged the interest earned on the fund to the revenue account of the company where as in our opinion the same has to be charged to the Leave encashment fund. Thus Leave encashment fund under General Reserves are understated to the extent of ` 1,39,42,515/- for this year and ` 55,08,355/- for previous year and correspondingly interest earned is overstated to the extent of above.

c) Deficit in Profit and Loss Statement

The companyhas transferred the accumulated profit and loss of the erstwhile Board amounting to ` 5,05,12,52,720 as on 13th June 2010 as accumulated profit and loss of the company( also refer para 4 of this annexure). In our opinion the Deficit account is overstated to the extent of above

In reply to this para, it is submitted that matter in this regards is under consideration with Govt . of H.P. As and when the decision is communicated necessary adjustment shall be done accordingly.

4 Share Application Money Pending Allotment (Note 2.3)

In terms of “Transfer Scheme” in respect of assets and liabilities of Board transferred from HP State Government to the Company the difference of ₹971.77 Crore has been recognized and recorded as Share Application Money pending for allotment of equity shares to HP Govt.

We report that, due to errors and incorrect consideration of accumulated losses assets in aggregate amounting to ` 7,488.93 Crore and liabilities amounting to ` 7,597.52 Crore has been transferred and a sum of ` 108.59 Crore is recoverable from HP Govt. whereas share application money of ` 971.77 Crore pending for allotment to HP Govt. has been disclosed in financial statements. We further report that investments of `1,810.72 Crore also includes self generated fictitious investments of ` 575.24 Crore in own projects and accumulated losses also includes losses of ` 505.12 Crore pertaining to the tenure of Board.

The same is summarized as under:

The matter regarding investment Rs. 575.24 crore shown by the Company as equity in its own projects is under consideration for rectification of the same in the books of accounts. As regards accumulated losses of Rs. 505.12 Crore pertaining to the tenure of Board also is under consideration with State Government and HPSEBL. As and when the same is decided the action shall be taken accordingly.

Regarding the same recoverability of Rs. 109.00 crore, the same shall be deliberated in detail and appropriate action will be taken in due course.

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Amount Rs. In Crore Balance as on

13/06/2010 Amount not to be considered

As per transfer scheme

Net Fixed assets 3,875 - 3,875 Capital expenditure in progress 1,079 - 1,079 Assets not in use 6 - 6 Deferred costs 127 - 127 Investment 1,966 575 1,390 Subsidy receivable from Govt. 50 - 50 Current Assets 962 - 962 Total Assests 8,064 575 7,489

Less LiablitiesSecurity from consumers 220 - 220 Other current liabilities 1,921 - 1,921 Borrowing for working capital 829 - 829 Payment due on capital li biliti

0 - 0 Capital Liabilities 2,256 - 2,256 Funds from state Govt. 77 - 77 Spl. ways and means advance

/ f t l l it li f498 - 498

Contributions, grants and b id t d t f

950 - 950 Equity share of HPSEB in its

j t575 575 -

Reserves and reserves funds 845 - 845 Total Liabilities 8,173 575 7,598

Amount recoverable from Govt. of HP 109 - 109

In our opinion, the investments, deficit in profit and loss statement, share application money pending for allotment is overstated to the extent of ` 575.24 Crore, ` 505.13 Crore and ` 971.77 Crore, respectively and Other non current assets (amount recoverable from HP Govt.) is understated to the extent of ` 108.59 Crore.

5 Long Term Borrowings (Note 2.4)

a) The Company has not complied with the requirements of revised schedule VI in respect of disclosure requirement Long term Borrowings in:-

- repayment period and rate of interest charged - Security given for the loans

- Status of defaults of repayment of interest and

In reply to this para it is submitted that the scheme wise detail of repayment, period of repayment, rate of interest charged is being prepared from the FY 2012-13 and same shall be disclosed as per the requirement of revised schedule VI of disclosure requirement in respect of long term borrowings.

-The security given in respect of long term borrowing

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loan.

b) The Bank-wise and Institution-wise details of secured and unsecured loans of the previous year are not disclosed in note 2.41

c) Non SLR Bonds ( Unsecured Loans)

The Company has redeemed 30% of the 10.46 % Non SLR Bonds amounting to ` 34.26 crore.The company has paid only Rs 34.09 crore to the Bond holders and rest of the amount of ` 0.16 crore has not been paid at the end of the financial year. In our opinion the long term borrowing are overstated to that extent and current liabilities under stated to that extent

d) Loans under APDRP Schemes

The company has taken loans from APDRP(Part A) scheme amounting to ` 28,91,80,000 ( previous year ` 28,91,80,000)) towards 100% financing of its approved Projects which is subject to a condition requiring that Projects to be completed within three years of the awards with 100% conversion of loan along with interest into grant else otherwise the same will be treated as loans and interest will be paid on them.

The scheme has to be completed before 31st March 2012 but the same has not been completed in the scheduled time and the company has applied for the extension but the same has not been sanctioned till the date of the audit.

In the absence of the rate of interest applicable to the scheme, the company has provided for the interest on loan amounting to ` 20.00 crore in its books of account on provisional basis. (Refer Note 2.3 (B)(8) ).

e) Loans under RGGVY Scheme

The Company has taken loan under the scheme from the state Government under RGGVY scheme amounting to ` 5,00,00,000 (previous year ` 5,00,00,000). The government has not yet provided the terms and conditions of the loan and the payment of interest thereon. (Refer Note 2.3 (B)(9) ).

f) Loans under ADB though GOHP Scheme

The Company has taken loan under the scheme

has been disclosed in the note 2.41, which may be perused from the balance sheet for the FY 2011-12..

-As regards the status of default of repayment of interest and loan , it is submitted that as on 31.3.2012, there was no default of repayment of interest as well as loan. In view of above, para stands settled.

From the FY 2012-13, the same shall be disclosed as per requirement of schedule VI of the Companies Act.

The amount is meager however the same has been paid during FY 2012-13 from the long term liability.

As per memorandum No 14.4.2008 – APDRP MOP, GOI, vide para 5.1, it has been clearly mentioned that initial 100% funds for the approved Projects shall be provided in the form of loan from the GOI and applicable rate of interest and other terms and conditions will be notify by the GOI in time to time. The loan along with interest thereon shall be converted into grants once the establishment of the required system is achieved.

However, as pointed out by the auditor, interest for the entire period has been provided in the books of accounts during FY 2011-12 on average basis for APDRP schemes. The para stands settled.

The Company has requested the State Govt. time and again to finalize the terms and conditions of the loan under RGGVY schemes so that payment of interest thereon, could be made. But till date, terms and conditions have not been conveyed by State Govt. in this regard.

The State Govt. has not yet provided the term and conditions of the Loans and Payments of interest thereon.

The utilization of the funds is being given by the

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from the state Government under ADB Loan amounting to ` 7,67,99,000 (previous year ` 7,67,99,000). The government has not yet provided the terms and conditions of the loan and the payment of interest thereon. (Refer Note 2.3 (B)(9) ).

g) Assets created from loans under Government Schemes.

The Company and erstwhile Board has created assets under various Central Government and State Government schemes financed by government agencies. The assets created from such schemes are subject to reconciliations and confirmations.

Company in respect of funds received from Central Government and State Govt. in respect of schemes financed by Government agencies.

6 Other Long Term Liabilities(Note 2.5)

a) Security Deposits from Consumers

The Divisions of Operation Circles have not reconciled and balanced customer-wise Security Deposit received and interest payable thereon. No sufficient records and reconciliation of subsidiary records confirming the balance outstanding have been made available to us, therefore, we are unable to comment on the amount outstanding as Security Deposits to customers and accordingly interest accrued thereon.

The sufficient subsidiary records of customer-wise Security Deposit received and interest payable thereon is available in our Operation Circles/Sub Divisions. As regards confirmation of balance outstanding, the Units have been directed to reconcile the outstanding balances of security deposit of the consumers.

b) Amount payable for Employees Provident Fund (GPF)

We report that, contribution towards Provident Fund collected from employees has been retained and invested in Fixed Deposits with Banks by the Company. The Company has neither obtained registration with `Employer’s Provident Fund Authorities’ nor exemption for creation of Trust as specified in Employer’s Provident Fund Act, 1952 and scheme framed there under. The Company has shown the same under other long term liabilities after netting off the investment made in the banks on account of GPF investments.

The amount payable/ recoverable to employees GPF are subject to reconciliation and confirmations

During the year under review, the Company has neither made own contribution nor has made provision for same in these financial statements. The amount of

contribution of employer’s share is subject to confirmation by Company.

It is submitted that the HPSEBL has not been registered with “Employer Provident Fund Authorities as yet. The General Provident Fund of the employees has been maintained by the Company at own level. The GPF corpus of employee’s has been invested in FDRs to safeguard the interest of employees as per direction of Hon’ble HPERC. The detail of amount of GPF shown payable/ recoverable to employee is reconciled and shown to the auditor during the audit.

There is no requirement of providing/charging employees contribution under CPF Scheme. In our opinion, para stands settled. The company is also in process of establishment of GPF interest.

The following is the position of Assets and Liabilities of the employees GPF at the close of the year and

In reply to this para it is submitted that the HPSEBL has not been registered with “Employer Provident

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should be transferred to a Trust and separate accounts of the same should be prepared as the same is not part of the accounts of the Company.

Amount in Rs. LacsCurrent Year Previous Year

AssestsInvestments in Fixed deposits of 100,175.27 94,935.63 Interest Accured on Investments 10,706.15 4,219.97 Recoverable from HPSEB Limite - -

110,881.42 99,155.60

LiabilitiesMembers Account 100,884.74 89,017.32 Excess of Expenditure over Inco 2,624.95 441.56 Payable to HPSEB Limited 7,371.73 9,696.72

110,881.42 99,155.60

We further report that liabilities and corresponding assets transferred from Board to Company have not been deposited with EPF or Trust. In terms of information and explanations given to us, the Company has accumulated total contribution of ` 1,008.84 Crores (previous year ` 890.17 Crore) and has deposits there against of ` 1,108.81 (previous year ` 991.55 Crore )which has resulted in excess investment in Provident Fund of ` 73.71 crores (previous year ` 96.97 Crore), In our opinion, the said assets and liabilities do not relate to Company and sum of ` 73.71 Crores is recoverable from General Provident Fund (GPF).

We further report that the Company has obtained Overdraft facility of ` 887.17 crores. (Previous year `667.07) Crore against GPF Fixed Deposits which has been utilized for operations and no sufficient disclosure has been made in financial statements.

We further report that during the year under review a sum of ` 26.25 crores (previous year ` 4.41 Crore) has been credited to interest received on investments i.e. excess of interest received on deposits and interest paid to members on GPF, in our opinion, the said excess interest accrued do not relate to the operations of company,

Fund Authorities as yet. The General Provident Fund of the employees has been maintained by the Company at own level. The GPF corpus of employee’s amounting to Rs. 11.29 cr. has been invested in FDRs to safeguard the interest of employees as per direction of Hon’ble HPERC. The excess invest of GPF shall be set right in next financial year.

As regards disclosure of overdraft obtained against investment of GPF, the same is noted for future compliance.

The Company is paying interest to GPF subscribers as per the rate fixed by the Govt. and excess interest earned on investment is Company income. We do not concur with the version of the auditor that excess interest accrued do not relate to the operations of company.

We report that company has shown the amounts in the balance sheet as under different head:-

The needful in this regards shall be done in next financial year.

Noted for future compliance.

Amount payable to GPF Fund

Other Long term Liablities

70,946,579.00 Credit

Income on investments

Income 262,494,895.00 Credit

Interest Accured Short Term 1,070,614,592.00 Debit

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on FDR Loans and advances

Net Recoverable 737,173,118.00

The overall impact of the above is that long term liabilities are overstated to the extent of ` 7.09 crore, income is overstated to the extent of ` 26.25 crore and correspondingly the short term advances are overstated to the extent of ` 33.34 crore.

We further report that the above amount is not expected to be realized in next twelve months and should not be treated as short term advance and should be treated as long term advance. Thus short term advances are overstated to the extent of `73.71 crore.

c) Contributory Pension Scheme The company has received contributions under

contributory pension scheme from employees and the same has not been deposited with the authorities as at 31st March 2012. The company has received contributions amounting to `15,90,55,080.00 (previous year ` 10,30,54,486) as on 31st March 2012 from the employees against which only ` 4,50,60,575 (previous year ` 3,59,50,289) has been invested by the company. Thus the company has not made investments of contributory pension scheme amounting to ` 11,39,94,505.00 (previous year ` 6,71,04,197.00) with the authorities and the same has been used in operations.

The following is the assets and liabilities of CPS Fund:-

Current Year Previous YearAssests Rs. Rs.Fixed Deposits with Bank 33,970,080.00 33,970,080.00 Interest Accured on FDR 11,090,495.00 1,980,209.00 Amount Recoverbale 113,994,505.00 67,104,197.00 HPSEB Limited 159,055,080.00 103,054,486.00 LiablitiesCPS Employees Share 79,527,540.00 51,527,243.00 CPS Employer Share 79,527,540.00 51,527,243.00

159,055,080.00 103,054,486.00

We further report that the above liability does not belong to the Company and the amount has to be paid to the CPS Authorities as and when demanded by them trust. In our opinion the liability is of current nature and should be shown under the head other current liabilities. Thus the long term liabilities are

Needful has been done during FY 2012-13. Hence para stands settled.

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overstated to the extent of above of `15,90,55,080

e) Non Refundable Advances from Industrial Consumers for Infrastructure Development Charges

f) The erstwhile HPSEB and the Company has received Non refundable advances from industrial consumers for infrastructure development charges from consumers. The company has received `78,38,48,126 (previous year ` 63,45,84,284) under the above head up to 31st march 2012. In our opinion the other long term liabilities are overstated to the extent of above as they are not payable to the consumers and is part of the revenue of the company and income of the company is understated to that extant.

In reply to this para it is submitted that the amount of NRA from industrial consumers for infrastructure development charges are collected as per the notification of HPERC and credited to this account. These amount are initially credited to this account as capital receipt for specific work. On completion of the work , the expenditure be transferred from CWIP to fixed assets after adjusting the NRA (Non refunded advances) from the consumers as per guidelines in this regards. Hence para stands settled.

d) Staff Benevolent Fund

The company has received contributions from employees on account of staff benevolent fund and the company is making payments to employees from this fund to the employees on superannuation.

We report that the company is showing ` 1,18,75,091/- (previous year ` 1,61,17,752) as recoverable from staff benevolent fund on account of excess payments done from the fund under the head other long term liabilities by netting off with other long term liabilities. In our opinion the balance of fund account a contribution ` 4,26,13,115 ( previous year ` 4,75,88,534) is required from the company as on 31st March 2012. Thus the expenditure is understated to the extent of above and correspondingly the Reserve Fund is understated to the extent of above.

Current Year Previous Year Assests Rs. Rs.Investments in Fixed deposits of Banks 30,738,024.00 29,805,477.00 Interest Accured on Investments 1,665,305.00

30,738,024.00 31,470,782.00

LiabilitiesFund Acccount 11,875,091.00- 16,117,752.00- Excess of Expenditure over Income - Fund Contribution due from HPSEB Limited 42,613,115.00 47,588,534.00

30,738,024.00 31,470,782.00

We further report that the above liability does not belong to the Company and the same is of the nature Reserve Fund In our the other long term liabilities are understated to the extent of above and correspondingly the Reserve Funds are understated to the extent of above.

It is submitted that due to information gap the investment has been made in excess of the subscription. The investment against Staff Benevolent Funds has now been withdrawn during FY 2012-13 and account shall be adjusted by granting matching amount from the Company. Hence para stands settled.

g) Funds From ASIDE The funds received from ASIDE are subject to confirmation and reconciliation. The assets created

The concerned Units have been directed to reconcile the funds received against ASIDE and confirmation in

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from the ASIDE funds have been fully completed and the amount has not been transferred to the reserves for want of completion certificates from the Divisions concerned.

this regards shall be shown to the audit in next year.

7 Short Term Borrowings (Note 2.7) a) Overdraft and Cash Credit from Banks

(i) The Company has not complied with the requirements of revised schedule VI in respect of disclosure requirements of short term borrowings from banks:

-in respect of the nature and value securities offered .

The previous year figures have not been shown in respect of each cash credit and loan against Fixed Deposits along with securities offered .

7 a) (i) The security offered for availing Cash Credit Limit from banks has been shown in the note 2.71 of the balance sheet, which may be perused. For the previous year figures, the point noted for future. In view of above, the point may be dropped.

(ii) We further report that the Company has obtained Overdraft facilities/ Loans of `887.18 crore (previous year `667.07 crore) against GPF Fixed Deposits which has been utilized for operations and no sufficient disclosure has been made in financial statements and notes to accounts.

The relevant notes in this regards will be mentioned in next year.

(iii) We further report that the Company has obtained Loans against Fixed Deposits of RGGVY Fund R/ APRDP Funds of ` 116.00 crore which has been utilized for operations and no sufficient disclosure has been made in financial statements and notes to accounts.

The relevant notes in this regards will be mentioned in next year

8 Trade Payables( Note 2.8) Liability for Purchase of Power

(i) The Company is showing a sum of ` 11,44,00,42,795 (previous year ` 8,86,90,12,713) as payable on account of purchase of power to various Parties as on 31st March 2012. While verifying the records we observed that the Company is not able to provide sufficient information/ confirmation from the Parties in respect of the following amount payable to Parties.

In reply to this para, it is submitted that Party-wise accounts were under reconciliation at the time of finalization of accounts for FY 2011-12 and sufficient information was not available at that time. The corrective measures have been taken in FY 2012-13 and proper Party-wise recompilation shall be shown to the Auditor during next year audit. Hence para stands settled.

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Amount in Rs. LacsCurrent Year Previous yearDebit Credit Debit Credit

41.101 PSEB - 4,263.81 - 4,372.02 41.102 HVPN - 4,306.46 - 4,306.46 41.106 BBMB - 344.89 - 188.18 41.107 DELHI - 41.00 - 41.00 41.110 NTPC - 482.77 190.04 - 41.114 PGCIL - - - 602.04 41.116 CHEMERA I - 201.07 - - 41.118 J&K - 8.49 - 8.49 41.119 RAPS - - - - 41.120 Malana - 45.12 - 6.67 41.121 UPPCL - 282.02 - 283.01 41.122 UJVN - 2,448.90 - 2,230.00 41.123 NHPC - 507.42 - 711.21 41.124 REC.CH. - 2.16 17.07 - 41.125 BRPL/BYPL Bkg. 323.64 - 323.64 - 41.126 HPGCL Bkg. - 12,930.00 - 12,930.00 41.127 PSEB Bkg. - 6,082.02 - 6,082.02 41.128 NDPL Bkg. - 0.11 - 0.11 41.129 UPJVNL - 185.00 - 184.58 41.130 PGCIL UI - 2.07 - 2.07 41.403 Wheeling Charges - - - 2.00 41.401 Wheeling Charges - 108.41 - 138.41 41.731 - - 0.39 - 41.732 - 2.03 - 2.03

Misc IPP 3,441.84 - - 1,731.63 41.901 - 818.18 818.18 -

3,765.48 33,061.92 1,349.32 33,821.94

We are of the opinion that the purchase of power is understated to the extent of ` 3,765.48 lakh (previous year ` 1349,32/- lakh) on account of debit balance in the account of Parties as payment has been made and the purchase has not been booked.

We are further of the opinion that the Trade Payables are overstated to the extent of ` 33,061.92 lacs (previous year ` 33,821.94 lakh) on account of credit balance in the Parties account for which no sufficient confirmations / information is available with the company. (ii) While going through the records of the suppliers we observed that the following amounts are in dispute with the Suppliers of power for which no disclosure has been made in the notes to accounts as contingent liabilities neither provision has been made in the accounts.

The point has been noted for future compliance and the disclosure in this regards shall be incorporated during FY 2012-13 accounts.

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Current Year Previous YearRs. Rs.

NHPC 277,695,658.00 277,695,658.00 Nrora Atomic 16,321,291.00 16,193,876.00 Power Station

THDC 1,189,969.00 1,189,969.00 295,206,918.00 295,079,503.00

9 Other Current Liabilities (Note 2.9) a) Interest accrued but not due

The above also includes the interest earned on surplus RGGVY and ARDRP Funds the details of the same is as under:

Interest Accured and Due RGGVY Funds 46.127 71,172,738.00

Interrest Accured and Due APDRP Funds 46.128 108,287,502.00

179,460,240.00

The Company has shown the interest accrued on surplus funds from the RGGVY fund and APRDP funds as Current Liabilities as it has been explained to us that the interest earned will be paid back to the agencies as and when they demand it

The statement of facts, hence no comments.

b) Liability for Purchases Capital and Others i) The above account code shows a sum of `

1,68,18,43,858/- (previous year ` 103,62,83,224) payable as liability on account of capital materials and O&M Supplies/ Works. The above liabilities are subject confirmations from the Parties .In the absence of information we are unable to comment on the old liabilities which are not payable and has to be charged to revenue. The following are the details of the above:-

Current YearRs.

Liabilities for supply of Materials/Works – Capital 42.1 (200,503,221.00)

Liability for supply of Material / Works – O&M 43.1 1,076,702,511.61 Stale cheques 46.910 91,706,722.00 Unclaimed Credit Balances 46.929 2,246,714.00

46.930 3,322,360.00 Provision for Outstanding Cheques 46.940 708,202,114.00 Outstaning Cheques Renuka Dam Projects 46.942 295,879.00 Adjustment account pension payments 46.943 5,316.99

1,681,943,857.78

The outstanding liabilities shown on account of Capital Material / O&M Suppliers/ Works are current in nature and sufficient information are available in our Divisions. However, the same shall be scrutinized for appropriate action.

In reply to this para, it is submitted that division book full liability of the bills of suppliers when the material is

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(ii) It has been observed that Divisions charge full liabilities of the bills of the Suppliers when the materials are received. However in some case the bills are not fully passed by the Head Office and certain deductions on account of Liquidity Damages and Price Differences from the final bills are being made. All such deductions which are done by the Head Office and not accounted for by the Divisions which may affect the other Current Liabilities and income of the company. In the absence of information we are unable to comment on the same.

received as per accounting procedure adopted by the Company. The deduction made by the Head Office on account of LD is revenue income of the Company and charged to concerned head of accounts.. The Auditor has not specifically mentioned. The unit has not accounted for such type of differences.

The point has been noted for future compliance in FY 2012-13.

(iv) It has been observed that the where the payments have been made by the CPC up to 31st March 2012 and the ATD for the same has been raised by the them to the Divisions the same has not been reconciled by the CPC Department with the Divisions on year to year basis. In the absence of the reconciliations we are unable to comment the amount of liabilities shown by the Divisions.

All the Units/ Divisions have been directed to reconcile the ATD with CPC Section on yearly basis.

(v) The Company has executed contract with HCL for computerization of the Sub Divisions and implementation of SAP in the year 2009 and advanced ` 14.01 crore at various intervals to the Company. The said payment was made by the CPC and was accounted for by the Shimla Division No. II as advance to the company under the account Head 26.5. The material has been supplied by the company and the same has been accounted for by the respective Divisions and created the liability under the Head 43. The Shimla Division II has not raised the ATD for the amount advanced to the HCL to respective Divisions. In our opinion the other current liabilities are overstated to the extent of ` 14.01 crore and correspondingly the short term advances are overstated to that extant.

The matter is being examined and compliance shall be shown to the audit after receipt of reply from concerned Divisions.

c) Staff Related Liabilities

The account code 44.211 is showing debit balance of ` 63,981/- as at 31st March 2012.The company has not provided any details regarding above. In the absence of information we are unable to comment on the same.

The adjustment of debit balance has been made during FY 2012-13 accounts by the concerned Unit.

d) Deposits and Retentions from Suppliers and Contractors.

The above account code shows a sum of ` 6,52,94,68,133 payable as deposits and retentions

The instructions to maintained subsidiary record in respect of Deposit and Retention from suppliers has been issued to concerned. Most of the Units have reconciled the balance of above and the same shall

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from suppliers and contractors. The subsidiary records in respect of above are pending for reconciliations at Division level. In the absence of reconciliations we are unable to comment on the authenticity of the amount payable .

be shown to auditor in FY 2012-13.

e) Electricity Consumptions Tax levied payable to MCs/NACs

The above account code shows a sum of ` 6,27,96,981 (previous year ` 4,90,73,975/-) payable to different Municipal corporations and NAC as at 31st March 2012. It has been observed that certain amounts are also recoverable from them on account of energy dues and the above account has not been netted off with amount recoverable from them. Thus other current liabilities are overstated to the extent of above. Please refer para 19(A)5 of the report of this annexure.

In reply to this para , it is submitted that amount of Rs. 6,27,96,981 are payable to MAC & NAC as on 31.3.2012 which are being paid regularly as per realization to MC/NAC by the Field Units. The amount of energy charges can not be netted off with the amount payable to MC/NAC because adjustment are relating to different MCS/NAC pertaining to various Divisions/Sub-Divisions of the Company.

f) Electricity duty and other levies payable to GoHP.

The above account code shows a sum of ` 3,47,30,11,479(previous year ` 2,20,79,41,623/-) payable to Government of Himachal Pradesh on account of Electricity duty as at 31st March 2012 is subject to confirmation.

The figures shown under this account head are payble to State Govt. on account of ED which have been reconciled with AG (HP) and Chief Electrical Inspector every quarter and confirmed, the same has been shown to the Auditor. The version of the auditor is denied.

g) Sundry Creditors for Expenses The above account code shows a sum of ` 4,48,68,759/- payable to different parties is subject to confirmation as at 31st March 2012.In the absence of information we are unable to comment on old liabilities which are to be charged to the revenue and may affect profit and loss account and the balance sheet .

The details of this expense are available with all DDOs of the Company and these liabilities are recurring in nature and discharged regularly. Therefore, these are not old liabilities. However the same shall be securitized in detail appropriate action will be taken in future.

h) Liabilities on account of cheques outstanding

The above account includes amounts pertaining to amount outstanding on account of cheques not presented for payments to banks as at 31st March 2012 and are to be shown in bank reconciliations statements by the Parties to whom the same has been issued (Please refer para 20 (e) (ii) of our report of this annexure.) The details of the same are as under:-


1 Details as per Bank Reconclilations StatementsOutstanding Cheques 594,880,897.00 662,892,272.00 Less amount debited by bank 8,686,325.75 5,286,500.00 Excess amount Debited by bank 104,654,586.00 128,214,935.00

708,221,808.75 796,393,707.00 2 Amount for which details are not available - 19,694.00

708,221,808.75 796,413,401.00

The needful is being done during current financial year.

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In our opinion, the other current liabilities are overstated and bank balance are also overstated to that extant.

The old un reconciled entries in above are subject to reconciliations

i) Liability on account of Cheques Outstanding Others/ Stale Cheques

The company is showing a sum of ₹ 9,17,06,722/- (previous year ₹ 62,57,961) under the Account Head Stale Cheques. No information in respect of the same has been provided by the company. In our opinion the other current liabilities are overstated to the extent of above.

The necessary rectification has been done in FY 2012-13 accounts.

j) Deposits for Electrification Services Connections

The above account code shows a sum of ` 5,57,39,06,128 ( previous year ` 5,90,88,30,443/-) on account of deposit amount received from consumer for Electrification Services Connections and other charges as at 31st March 2012. The company has not provided the details of the amount received under different sub heads under the above head. As per the practice of erstwhile Board the amount kept under this account head is transferred to Grants and Subsidies Head when the work of the assets to be created from deposit work is completed.

The subsidiary records at the Divisions level is pending for reconciliation as at 31st March 2012. We have not been provided with the following information’s by the Divisions.

1 The details of those works where the work have been completed and the amount from deposit has not been transferred to the consumer contribution towards the cost of the capital assets.

2 The details of the Parties from whom full amount

has not been received for the deposit work completed till 31st March 2012.

3 The details of Parties from whom full amount

have been received but no work of deposit work has been done till 31st March 2012.

In the absence of information we are unable to comment on the amount kept under this head of account.

The complete Sub Head wise detail of amount deposit for Electricifucation services connection are available in all Electrical Divisions of the Company and the amount received under sub head 47.320 NRA from industrial consumers for infrastructure development charges are being regulated as per HPERC direction and shall be rectified/ adjusted in next year accounts accordingly.

k) Provisions for Losses

The Company has shown the provisions for

The details of provision for losses are being examined and compliance shall be reported to the auditor

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losses under the head other Current Liabilities and the following heads are having debit balances

Debit Rs.

Provision for Loss on obselance of Capital Assests46.961 204,742.00

Provision for Loss on obselance of Capital Spares 46.962 1,197,390.00 Provision for losses pending investigation 46.939 34,538.82

1,436,670.82

No information in respect of above has been provided by the company. In our opinion the other current liabilities are understated to the extent of above.

accordingly.

l) Unclaimed Credit Balances

The Company is showing ` 22, 46,714 as unclaimed credit balance as at 31st March 2012. The Company has not provided information in respect of the same. In our opinion the time barred credit balance should be charged to revenue.

The investor-wise information is available with Company and shown to the Auditor during the course of audit. These amount are in respect of three investors and have been asked to submit original Bond Certificate for release of the amount.

m) 47.313 Repair as well as Expenditure of Himurja Deposit works

The company is showing ` 26,21,411 as debit balance in the above account code. No information in respect of the same has been provided to us

In the absence of the information we are unable to comment on the same.

The debit balance against this head has been rectified during 2012-13 accounts and compliance shall be shown to auditor.

n) Outstanding Cheques Renuka Dam projects

The Company is showing a sum of ` 2,95,879 as outstanding cheques of Renuka Dam Projects. In our opinion, the liability has become time barred and should be charged to revenue.

The amount of outstanding cheques of Renuka Dam Project has been cleared during 2012-13 accounts and compliance shall be shown to auditor . Hence para stands settled.

11 Short Term Provisions (Note 2.10)

a) Interest Accrued on Consumer Security Deposits

The company has charged interest on security deposits of consumers amounting to ` 11,50,47,372 during the year under review. The provision made is subject to reconciliations and confirmations.

The Company has charged the interest on security deposits as per instruction issued by the HPERC and pass on / adjusted these amount to Consumers during the July and August, 2013 bills which has been accepted by the consumers. .

b) Provision for Expenses of Employees

The Company is showing following amounts under the following heads in respect of provision for expenses of employees:-

In reply to this para , it is submitted that provision of expense of Gratuity, Pension, Ex-gratia has been set right during the FY 2012-13 accounts.

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Debit CreditRs. Rs.

Provision for Gratuity 44.11 (739,541,118.00) Provision for pension 44.12 399,994,817.00 Provision for Ex-gratia 44.13 (31,558,782.00)

(771,099,900.00) 399,994,817.00

The Company has not provided any information in respect of the above balances in account codes. It has been informed to us that normally the balance in these accounts are Nil at the end of the year In our opinion, the expenditures are understated to the extent of ` 77,10,99,900 in respect provision of Gratuity and Ex-gratia and the liability are overstated to the extent of ` 3,99,94,817 in respect of provision for pension.

12 Tangible Assets( Note 2.11)

(i) Depreciation on Fixed Assets owned by Board and transferred to Company is in accordance with “Transfer Scheme”. The Board charged depreciation at the rate of 2.50 percent on the Opening Balances of the assets except on vehicles which are being charged at the rate of 90% of cost of vehicles having 7 years life expectancy at Division levels which is not in accordance with Schedule XIV of Companies Act. We further report that during the year under review and in previous year the Company has charged depreciation in accordance with rates notified by Himachal Pradesh Electricity Regulatory Commission on all assets, whereas the said depreciation rates should have only to be applied to assets acquired after 14th June, 2010 and depreciation on assets transferred from Board on the basis of rates computed on the basis of life expectancy of each assets or class of assets. In our view, the Company has not proved us the sufficient information with regard to historical cost, date of purchase and expected life, we cannot comment on the adequacy of depreciation charged to revenue account.

We further report that during the previous year Company has changed the rates of depreciation as applied by Board, in terms of AS-6 Depreciation Accounting issued by Institute of Chartered Accountants of India, the method of depreciation is to be applied consistently and wherever the method is changed, the depreciation is to be recalculated from the date of asset coming into use and provision for depreciation has to be reinstated at close of the year. In view that sufficient information in this regard has not provided by the Company. Therefore, we are unable to comment of adequacy or sufficiency of

We concur with the view of the auditor. However, the system of changing depreciation has been changed in order to apply rate as per HPERC and arbitrarily @ 2.5% not on allotments as were keep applied before t incorporation of the Company.

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accumulated depreciation charged. We further report that the Company has not charged depreciation on addition made to any asset or where any asset has been sold, discarded, demolished or destroyed on pro rata basis during the year from the date of such addition or as the case may be up to the date on which such asset has been sold , discarded, demolished or destroyed and also the Company has not charged depreciation at the rate of 100 percent on assets whose actual cost does not exceed ` 5,000 as specified in Schedule XIV of Companies Act, 1956.

(ii) We also report that the assets of the Company except vehicles in use have not been fully insured.

Appropriate action shall be taken in due course.

(iii) The company has transferred the cost of transmission lines to the HPTCL( Himachal Pradesh Power Transmission Corporation Limited

The accounts with HPPTCL are under reconciliation and appropiate action shall be taken in future.

) amounting to ` 35,21,287 (previous year ` 26,41,47,904) as per the scheme of the transfer. However the same has not been reduced by the provision of depreciation booked on those lines up to 31st March 2012 and same has been transferred at original cost. The Account is subject to reconciliation with the HPTCL The company has not provided us the provision of depreciation on these lines booked under the head provision for depreciation. In the absence of information we are unable to comment on the excess provision of depreciation in the books of accounts.

(iv) The Board has received the assets and liabilities of Kasang Project from HPPCL (Himachal Pradesh Power Corporation Limited

The Company has not provided us the amount of depreciation required to be adjusted on account of above. In the absence of information we

) as per Government of Himachal Pradesh decision in 2008. The HPPCL has charged the depreciation on the assets of the Kasang Project as per the policy of the HPPCL. The Board has taken the provision of depreciation as provided by the HPPCL which is not in lines with depreciation policy of the Board. No depreciation has been provided by the Board and company from 1st April 2008 to 31st March 2011 on the assets of the project transferred to the Board.

(iv) The accounts with HPPCL are under reconciliation and action shall be taken after the process of reconciliation.

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are unable to comment same.

(v) The Company has not made provision against assets valuing ₹ 13.67 Lakhs washed away due to flash floods and heavy rain in Chamba, Nurpur, and Jubbal Divisions in earlier years. In our opinion the assets are overstated to extent of above..

The assets value Rs. 13.67 Lakh washed away due to flood and heavy rain in Chamba , Nurpur an Jubbal Division have been written off by the competent authroty and charged to revenue accounts during 2012-13 .The compliance shall be shown to auditors during the course of audit of concerned Divisions.

(vi) The Company has created assets valuing `10.40 crores on the land the ownership of which does not belong either to the erstwhile HPSEB or the company .

The ownership of the assets valuing Rs. 10.40 crores has been transferred to the name of Company, compliance shall be shown to auditors. Hence para stands settled.

(vii) The Company has not made provision of assets valuing ` 20.40 lakh stolen from various lines /sites in the books of accounts. In our opinion the assets are overstated to the extent of above.

Needful has been done during FY 2012-13. Hence the para stands settled.

(viii) Depreciation on assets acquired out of Grants / Subsidy / Customer Contribution. Please refer Para 3 of this Annexure

Needful will be done during current financial year.

(ix) The Company is showing a sum of ` 70,38,06,157 (previous year `70,38,06,157) as capital expenditure resulting in assets not belonging to the board and assets transferred as on 31st March 2012. The Company has charged depreciation to the ` 4,43,90,354 (previous year `2,01,32,958). Thus current year depreciation and Reserves and Surpluses are overstated to that extent Similarly the accumulated depreciation charged in earlier years are also overstated to the extent of ` 7,14,38,168.

As per accounting policies of the Company, the assets created from the consumer contribution, subsidies, grants had not been reduced proportionally and whole of the amount of depreciation is being charged to revenue. Now, as pointed out by the auditors, the consumer contribution, subsidies, grants shall be proportionately reduced w.e.f. FY 2012-13.

(x) The accumulated depreciation as on 31st March 2012 is not adjusted on account of assets washed away in floods, assets not in use , assets stolen and impaired assets. In the absence of information. We are unable to comment on the authenticity of the accumulated balance of depreciation at the end of the year.

In the cases where assets have been washed away in floods, stolen and impaired, the Company is regularly withdrawing the value of such assets and accumulated depreciation from the concerned head of accounts and the depreciated value of these assets have been placed in assets not in use accounts till, these are not finally written off. The same shall be

shown to auditors during FY 2012-13.

(xi) The Company had charged the cost of New Energy Meters installed in repair and maintenance account in earlier years , without writing off the cost of old meters and the corresponding depreciation from the Fixed Assets Register which is contrary to the AS10 – Accounting of Fixed Assets issued by the ICAI. In the absence of information we are unable to comment on the cost of written down of Meters which are in the Fixed assets schedule which are of nonexistent nature.

As per Manual of Instruction No.31 ,the New Energy Meters installed have been charged to repair and maintenance account without writing off the cost of old meters as these are the replacements and we do not concur with version of the audit in this regard.

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(xii) The Company is not showing Freehold Land and Leasehold Land separately in the Fixed Assets Schedule as per the requirement of Schedule VI of the Companies Act, 1956.

The compliance in this regards shall be shown during the FY 2012-13.

(xiii) Depreciation of vehicles during the year has been adjusted for the less/ excess depreciation charged up to 31st March 2012 and the effect of the same has been adjusted to prior period items. No Disclosure for the same has been made in the notes to the accounts

The point has been noted and the same shall be disclosed during FY 2012-13.

(xiv) The following heads in the provision for depreciation is showing debit Balance in head office:-

Account Code Rs.

12.221 7,926.0012.244 9,081,578.0012.252 17,630.0012.254 3,641.0012.255 1,032,128.0012.265 173,902.0012.599 745,012.00

11,860,222.00 In the absence of Information we are unable to comment on the same.

The full details of provision of deprecation are being examined and compliance shall be reported to the audit accordingly.

(xv) The Divisions only charge depreciation on vehicles and on rest of assets the depreciation is being charged at Head Office level. However, some of the Divisions have also charged the depreciation amounting to ` 1, 62, 32,036 under head of provision for depreciation for which no explanation was provided by the Divisions.

The matter is under consideration for appropriate adjustment, if any.

13 Capital Work in Progress ( Note2.12) A Capital Works in Progress

(i) The above account head shows a sum of ` 10,24,84,28,399 (previous year ` 10,96,75,86,754) on account of work in progress of various capital works as on 31st March 2012 which is subject to reconciliation and confirmations.

Statement of facts, hence no comments.

(ii) It has been observed that the works under Capital-Work-In-Progress have not been closed for want of completion certificates where as actually the work has been completed and the assets has been put to use by the company. No sufficient information in respect of completed capital work in progress has been provided to us. In the absence of information we are unable to comment on the same.

The Company is making efforts to transfer the completed work to fixed assets account after complying with the necessary codal formalities.

(iii) It has also been observed that in some cases the expenditure on capital work in progress has been incurred in excess of the sanctioned amounts

The efforts are being made to get the same regularized in futur.

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and the work is still going on.

(iv) It has also been observed that in some cases the work in progress has been partly transferred to the fixed assets on yearly basis without verifying that whether the works on the assets have been completely finished or not.

In absence of specific instances, we are unable to comments on the same. However, completed works are transferred to Fixed Assets after obtaining the Completion Certificates form the concerned Executive Engineers.

(v) Interest During Construction Period (IDC)

(a) It has been observed that Divisions are charging IDC(Interest during Construction Period) on the works under capital-work-in-progress on formula based @ 11.71 % ( previous year @11 %) on year to year basis without verifying whether the assets have been funded from the loan or not. In some cases the IDC charged on the assets is equivalent to the cost of the assets or even more than that.

The Head office has made calculations for IDC for the company as whole as per the Commercial Accounting Principles and Policies of the Board in which all interests paid on loans are covered and a sum of ` 1,44,49,49,896 (previous year ` 85,57,13,500/-) has been charged to Capital-Work-In Progress.

We have observed that the interest on following loans has also been covered for the purpose of calculating the IDC where the assets has been commissioned and put to use by the Company. The following is the details of such loans :-

Amount in Rs. Lakh

Current Year Previous YearLIC of India Larji 66.67 236.80 PFC Larji / Kauli 49,162.08 56,816.22 H P Coperative Bank Larji 2,272.00 3,408.00 Kangra Central Co-op Bank Larji / Kauli 1,728.00 2,592.00

53,228.75 63,053.02

We have further observed that the interest of following loans has also been covered for the purpose of calculating the IDC during the year under review.

Current Year Previous year(Rs. In crore) (Rs.in crore)

HP Cooperative Bank Equity Particpation 300 300NSLR Bonds Equity Particpation 78 78

378 378

Interest During Construction Period (IDC)

v a to c) The capitalization of interest on funds utilized during construction stage is calculated as per the procedure prescribed in “Commercial Accounting Manual” Vol-I adopted by the Company in Annerxure-V-1.42. However, as pointed out by Auditors the IDC shall be worked out as per AS-16 during the FY 2012-13.

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The above practice followed by the company to calculate interest during construction period is in contravention to the AS 16 Accounting of Borrowing Costs issued by ICAI, which states that only that interest paid on loan which has been used for construction of assets during construction period have to be capitalized as part of the cost and after that the interest has to be charged to revenue.

In the absence of information we are unable to comment on the excess IDC Charged in the Capital –Work-In Progress till 31st March 2012.

(b) The total IDC calculated by the company for the year ` 1,44,49,49,896 (previous year ` 85, 57,13,500/-) is not identifiable to eligible assets as defined as per AS 16 Accounting of Borrowing Costs issued by ICAI. In the absence of information we are unable to comment on the amount of IDC charged as it may affect profit and loss account.

As above.

B) Contracts in Progress

The Company is showing a sum of ` 74,27,48,367(previous year ` 88,37,98,875/-) as on 31st March 2012 as contract in progress at various Divisions which is subject to reconciliation and confirmations.

The balances are under reconciliation, the action to transfer the completed work shall be taken thereafter.

C) Revenue Expenses Pending Allocation Over Capital Works

The company is showing ` 1,74,16,17,201 (previous year ` 1,08,55,96,318) as revenue expenses pending allocation over capital works .No sufficient evidence for charging the amount to this head has been shown for our verification. We are of the opinion that capital work in progress is overstated to the extent of above.

As per the Accounting system adopted by the Company all the revenue expenses including the expenses which are chargeable to capital works shall be first booked under relevant expense heads. Periodically, the amount of expenses chargeable to works shall be first transferred to this account through credit account provided for each expense account group. The amount of revenue expenses transferred to this account would later be transferred to capital work-in-progress accounts and factual position has been appraised to auditors.

14 Non Current Investments( Note 2.14) Investment in HPSEB in its own Projects The company has carried forward a sum of ` 5,75,24,00,000 from the erstwhile Board for which no sufficient details have been provided to us. Please refer to para 4 of this annexure also. In our opinion the non current investments are overstated to extent of above.

The matter is under consideration for reversal of Rs. 575.24 crore from equity component the same has been taken up with Chief Engineer (Comm.). Appropriate action shall be taken accordingly during 2012-13.

15 Long Term Loans and Advances( Note 2.15) a) Advances to Supplies/ Contractors ( Capital) The Company is showing a sum of `

The balances are under reconciliation during the time of audit now the same has been reconciled with subsidiary records and information in this regards is

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4,41,68,773 (previous year ` 3,18,01,315) as advances to supplier and contractors as on 31st March 2012. The above amount is subject to confirmation and reconciliations in respect of works completed against advances sanctioned.

completely available with field Units.

b) Loans and Advances to staff (Interest Bearing)

(i) It has been observed that the individual Divisions does not have the complete record of the loan sanctioned and amount recovered from the employees and it has been explained to us that the same is being reconciled and kept at Head Office level in the Broad Sheets of the employees.

(ii) It has further observed that when a employee is transferred from one division to other Divisions his account is not transferred to the other Divisions though ATD and as such partial accounts are being kept at different divisions on account of loan sanctioned and recovery made at different Divisions.

(iii) The Head office has not able to supply us the employees- wise details of the amount outstanding in different account heads as on 31st March 2012 as such we are unable to comment on the authenticity of the amount recoverable on account of loans and advances from the employees.

(iv) The Company is showing the following amounts under the above head for which no sufficient details have been provided as such the same cannot be commented on:-

Debit Credit

Rs. Rs.

23,419,231.00

1,388,059.00

421,038.00

27,393,246.00

50,812,477.00 1,809,097.00

The head office has prepared complete records of loan and advance to staff i.e. House Building Advance, Scooter / Car Advance in the Broad Sheet Section of this office. The employee-wise details of above advances are available which are tailed with the accounts of FY 2012-13. The same shall be shown to the auditor during the next audit.

(v) No information regarding current and noncurrent portion of loans and advances to employees has been provided to us.

Point has been noted. the compliance shall be shown to auditor during FY 2012-13 audit.

16 Other Non Current Assets ( Note 2.16) a) Assets not in use

The company is showing ` 10,38,68,950 (previous year ` 9,88,43,838) as assets not in use as at 31st March 2012. In our opinion the above assets has completed their usefull life and will not help in generating any further revenue and should be charged to revenue. Thus other noncurrent assets are overstated to the extent of above. .(Refer Note 2.31

In reply to this para it is submitted that amount shown under this head is written down value of obsolete/ scrapped assets. The accounts shall be closed in respect of particulars assets after write offi/ sale. This is continuous process and amounts in this head are regularly written off/ sale after obtaining the approval of competent authority as per procedure prescribed by the Company. We do not concur with the version of auditor.

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(B)6 )

b) Special Repair to Vehicles

The above account code shows a sum of ` 5,15,469 (previous year ` 59,39,268) incurred on account of special repairs to vehicles as at 31st March 2012. The above cost does not qualifies the definition of intangible assets as defined under AS 26 Accounting standard for Accounting of Intangible Assets issued by the ICAI. Thus other noncurrent assets are overstated to the extent of above and should be charged to revenue.

The expenditure on special repairs of vehicles and Residential Building shall be charged to this account and shall be charged /write off by debiting to revenue account with corresponding credit to this account as per the accounting procedure adopted by the Company.

c) Special Repair to Residential Buildings

The above account code shows a sum of ` 12,76,601 (previous year ` 12,76,601 )incurred on account of special repairs to Residential Buildings as at 31st March 2012. The above cost does not qualifies for the definition of Intangible assets as defined under AS 26 Accounting standard for Accounting of Intangible Assets issued by the ICAI. Thus other noncurrent assets are overstated to the extent of above and should be charged to revenue.

As replied above.

d) Deferred Revenue Expenditure for providing cost free CFL Bulb to Domestic Consumers.

The above account code shows a sum of ` 11,10,92,625 (previous year ` 22,68,76,098) incurred on account of Deferred Revenue Expenditure for providing free of cost CFL Bulbs to Domestic Consumers of as at 31st March 2012.

The erstwhile Board and the Company has not provided to us the Economic Benefits derived by them up to 31st March 2012 and future benefit expected as stipulated by AS 26 issued by the ICAI by providing free of CFL Bulbs to Domestic Consumers.

The free CLF Bulbs issued to Domestic Consumers have completed their economic life of 6000 hours in the year 2010 and no more economic benefit will be derived from them hence they should be charged to revenue.

In our opinion the other noncurrent assets is overstated to the extent of above.

The Board procured the CFL bulbs through the Loan amounting to Rs. 70.00 crore provided by the State Govt. without interest to distribute CFL bulbs to Domestic consumers and decided to write off/ the same deferred revenue in five years equally. The bulbs provided for Domestic Consumers have saved the energy which has been sold to Industrial consumers and out of State on higher rates.

.

e) Expenditure on Survey/ Feasibility Studies Projects Not Yet Sanctioned.

The above account code shows a sum of ` 113,76,38,278 (previous year ` 1,01,73,19,602) incurred on account of Expenditure on Survey/ Feasibility Studies Projects not yet sanctioned as at 31st March 2012.

It has been observed that expenditure on

As per the accounting policy in vogue, the expenditure on preliminary survey and investigation of new project not yet sanctioned is charged to this account and when the project is sanctioned/ allotted these expenses are recovered from IPPs/ capitalized as the case may be. The projects mentioned by the audit have not yet been allotted to any Agency by the Govt. However, the amount shall be scrutinized in detail for

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survey/ feasibility studies on different projects has been incurred by the erstwhile board since many years. The expenditure has been incurred as the HPSEB was the only Nodal Agency to do such kind of survey and feasibility studies on behalf of the Government. The expenditure has to be recovered from the party to whom the project will be allotted. The above cost pertains to 62 projects and the same has not been allotted to any Agency by the GoHP.

In our opinion as no future economic benefit is available to the company as per AS 26 Accounting standard for Accounting of Intangible Assets issued by the ICAI the same should be charged to revenue. Thus other noncurrent assets are overstated to the extent of above of ` 94,39,28,068 (previous year ` 82,36,09,392/-) which was shown by the Divisions for our verification.

appropriate action, if any.

f) Trade Receivables

The Company is showing a sum of ` 5,90,82,845 (previous year ` 7,15,63,879) due from permanent defaulters as on 31st March 2012 but no provision of Doubtful Debtors has been made in the books of accounts. In our opinion noncurrent trade receivables are overstated to that extent.

The point has been noted and necessary compliance in this regards has been done in FY 2012-13.

g) Inventories-Scrap/Other Material/ Excess/ Shortages

The Company is showing amounts under the following account codes under other noncurrent assets:-


22.7 Obsolete materials stock account 16,452,095.00 38,698,602.00 22.8 Materials short excess pending investigations 45,853,617.00 51,184,460.00

62,305,712.00 89,883,062.00

In our opinion other noncurrent assets are overstated to the extent of ` 6,23,05,712/- for which no provisions has been made in the books of accounts.

In reply to this para, it is submitted that amount shown under this head is pending for investigation in various Units of the Company andfinal approval of competent authority is still awaited. The same will be regulated as per accounting policies of the Company and the cost incurred on retirement, scrapping and sales of assets are charged to revenue accounts in the year in which cost is incurred.

h) Interest Accrued and Due on and Interest Accrued but not due on staff Loans and others

The Company is showing the following amounts under the above head for which no sufficient details has been provided as such the same cannot be commented on:-

The figures of interest accrued and due on and interest accrued but not due on staff loans & other were under reconciliation while finalized the accounts for 2011-12 which have now been reconciled with subsidiary record by all the DDOs and Head Office (Broad Sheet Section) . The same shall be shown to auditor.

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Income accrued and due on Loans/Advances to staff Debit Credit

A/c Code Rs. Rs.Income accrued and due on loans and advances to staff— 28.261 21,656,217.00

House Building advance

M.C./Scooter Advance 28.262 2,203,473.00

Car Advance 28.263 2,554,311.00

Income accrued and due on Loans/Advances to staff 28.26 1,161,955.00

Income Accrued & due--- Others. 28.290 38,748.00

Income accrued but not due- Staff Loans & Advances 28.36 10,272,621.00

28.360 335,616.00

House Building Advance 28.361 39,211,673.00

Motor Cycle Advance 28.362 1,546,286.00

17 Current Investments ( Note 2.17)

(i) Leave Encashment Fund

The Company is showing ` 16,94,50,870/- under the head Leave Encashment fund which are of noncurrent nature. In our opinion the Current Investments are overstated to the extent of above and noncurrent Investments are understated to that extent.

In reply to this para it is submitted Company has taken a policy for leave encashment for SBI & Canara Bank of Rs. 15,00 crore. The said amount shall be utilized for payment of leave encashment to employees on these superannuation/retirement. This amount shall be utilized / reimbursed by raising the bill of retired employees at any time. Hence, the amount shown under current investment is in order. We do not concur with the version of audit.

18 Inventories ( Note 2.18)

a) The Divisions are adding 3 % as storage charges and freight charges in the cost of the material purchased which is contrary to the Accounting Standard AS 2 Accounting of Inventories issued by ICAI. The Accounting standard states that stock has to be accounted for at cost or Net Realisation Value (NRV) whichever is less. In the absence of sufficient information we are unable to comment on its affect to the Profit and Loss Account.

In this regards, it is submitted that 3% storage charges and freight charges in the cost of material are being charged as per instruction circulated by the Company on the handling of inventories. However, efforts shall are being made to comply with AS-2 in future.

b) The company has been transferred with stocks of the erstwhile Board which have been purchased in earlier years and the same has not been used till the close of the year and the same has resulted in over stocking of the stocks and pilling up of the stocks at Divisions level. The following is the details of stocks for which no provisions have been made in the books of accounts on account of obsolescence, shortages and reduction in the value.


22.6 Opening Diffrence 2,365,154.00 2,365,154.00 22.6 Stocks in hand more than five years 90,480,830.00 90,983,019.00

92,845,984.00 93,348,173.00

In our opinion the inventories are overstated to the extent of ` 9,28,45,984/- for which no provisions has been made in the books of accounts.

The Management is taking steps for the settlement of these balances and most of the balances have been settled during 2012-13 accounts. It is further submitted that stock lying in various Division shown under this head purchased more than five years including critical and non critical items which are useful and can be use at any time in the Company . Hence, para stands settled.

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c) It has been found that there is no systematic accounting of stocks in this account heads and some Divisions have not made distinctions between the stocks of stores and other materials and it has been observed that in some cases the office equipment stocks and other office equipment has also been included in the above head which should have been part of the fixed assets. In the absence of sufficient information we are unable to comment on the overstatement of inventories.

There is systematic accounting of stock. However, if specific instruction are mentioned. Appropriate action shall be initiated.

d) The Company has not provided details in respect of inventories which are of current and noncurrent nature. In the absence of information we are unable to comment on the current and noncurrent portion of inventories.

D) The details of current and noncurrent inventories are available with Division of the Company and instructions to provide the same have been communicated to all concerned.

19 Trade Receivables ( Note 2.19)

The Company has shown Trade Receivables from Consumers and others under this head amounting to ` 501,06,71,868. No sufficient information with regard to that the trade receivables are of current nature i.e. they are likely to be realized in next 12 months. Thus we are unable to comment on the non current nature of the trade receivables included in above amount.

The amount shown recoverable from Consumers are against Supply of Power which will be realized within credit period and sufficient information are available with the Operation Divisions /Sub Divisions of the Company and these amount shown current is in order.

A Sundry Debtors for Energy Bill (Other than Interstate Consumers)

1. The subsidiary records in relation to consumer ledgers at the end of the year is pending for reconciliation at all Divisions of the Operation Circles. In the absence of the proper reconciliation we are unable to comment on the authenticity of the amount recoverable from the consumers as at 31stMarch 2012.

The instruction for reconciliation of consumer Ledgers at the end of the year has been communicated to all the concerned.

2. The Consumers having credit balances in accounts on account of energy dues, municipal taxes, electricity duty and other dues or who has made advance payments has not been shown separately as other current liabilities.

The consumers who made advance payment on account of energy charges, M/Tax, ED are shown as credit balances separately in consumer ledgers and receivable against supply of power are shown less by reducing these liabilities. However, as point out by auditors efforts shall be made to show such advances in liabilities in future.

3. The Trade Receivables also includes ` 10,544.95 lakhs (previous year ` 10,142.59 lakh) as amount recoverable from different Departments of Government of Himachal Pradesh. The party wise details of the same is as under :-

Statement of facts, Hence no comments are required.

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Amount in Rs. lacsCurrent Year Previous year

I&PH 6,976.41 6,562.90 MC/NAC 2,522.90 2,457.13

9,499.31 9,020.03

Others MiscMedical Department 662.5 579.56 DC Office 135.06 114.07 PWD 32.36 54.58 Education Department 16.81 23.15 Revenue Department 49.48 41.23 Police 10.88 28.63 Judiciary 3.6 34.70 Cicute House 15.03 Others Misc 134.95 231.61 Total 1,045.64 1,122.56 Total 10,544.95 10,142.59

The company has filed an affidavit with the Honab’le High Court of Himachal Pradesh on 5th March 2013 that aprox ` 90 crore are in arrears/ defaults from different Government Departments, Corporations and Municipalities etc. whose outstanding are more than ` 25 lakh . In our opinion the above defaults / arrears are pending from many years and the above trades receivables are not expected to be realized with 12 months from the close of the financial year. Thus current trade receivables are overstated to the extent of amount recoverable from the defaulting Government departments.

4 The company has made only provision for doubtful debts amounting to ` 1,41,02,452 (previous year ` 1,41,02,452) and the provision has not been increased from many years. In our opinion the provision is less keeping in view the amount recoverable from permanent defaulters and amount recoverable from government departments.

The provision amounting to Rs. 1,41,02,452/- had been made by the company for doubtful debt is justified amount against the amount of Rs. 7,15,63,879/- dues from permanent disconnected consumers.

5. The sundry debtors includes Municipal committees and NACs from which amount is recoverable since many years correspondingly the amount is also payable to them on account of electricity consumption tax. The amount payable as on 31st March 2012 to different Municipal Committees and NACs is ` 6,27,96,981.60 (previous year ` 4,95,20,279) which has not been adjusted from the amount recoverable from them. Thus Trade receivables are overstated to that extent and correspondingly the other current liabilities are overstated to that extent.

The matter regarding reconciliation of receivable/ payables with MCs/NACs is under process and after settlement the same shall be adjusted with the MCs/NACs in due course of time.

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6. The Company has shown ` 7.09 crore receivables from the consumers on account of sale of power. The bills so raised were not accepted by the respective Consumers and were sub-judice. In Our Opinion the trade receivables are overstated to the extent of above.

The concerned Accounting Units has been directed to examine the matter and compliance be shown to audit in FY 2012-13 .

B Sundry Debtors for Interstate Sale of Power and for Wheeling / O & M Charges

1. The amount recoverable for interstate sale of power at Head Office amounting to ` 26,36,69,978 (previous year ` 26,36,69,978) includes the accounts of following Parties for which no sufficient information/ confirmations are available at Head Office.

Amount in lacsAmount in Rs. lacs

Current Year Previous YearDebit Credit Debit Credit

23.601 PSEB 1,263.30 - 1,263.30 - 23.602 HVPN - 804.59 - 804.59 23.603 UPSEB 266.40 - 266.40 - 23.604 RSEB 913.56 - 913.56 - 23.607 DTL - 823.78 - 823.78 23.609 UT. CHD - 0.56 - 0.56 23.610 NTPC 1.46 1.46 23.613 UJVNL 58.66 - 58.66 - 23.621 PSEB Bkg 307.20 - 307.20 - 23.623 Malana Deve. Power 91.59 - 91.59 23.624 REC.CH. 452.58 - 452.58 23.630 PGCIL(UI) 142.21 - 142.21 23.643 TATA Power - 9.60 - 9.60 23.631 UI 600.13 - 600.13 - 23.648 IEX 178.13 - 178.13 -

Total 4,275.22 1,638.53 4,275.22 1,638.53

We are of the opinion that the sale of power is understated to the extent of ` 16,38,52,579/- (previous year ` 16,38,52,579/-) on account of credit balance in the account of parties as payment has been received and the sale of power has not been booked.

We are further of the opinion that the trade receivables are overstated to the extent of ` 42,75,22,070 (previous year ` 42,75,22,070) on account of debit balance in the Parties account for which no sufficient confirmations / information is available with the company.

The accounts were not reconciled at the time of audit. Now the re-conciliation has been completed with concern Parties and accounts balances have been rectified/ adjusted accordingly which shall be shown to auditor during the course of audit FY 2012-13.

2 The company is also showing a sum of ` 67,68,18,621( previous year ` 35,26,19,717.00)

The accounts were not reconciled at the time of audit. Now the re-conciliation has been completed with

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recoverable from different Parties on account wheeling/ O&M Charges as on 31st March 2012.

The following are the account balances of parties in which there are differences in closing balance.

Amount in ₹lacsDebit Credit Debit Credit

23.802 HVPNL 22.63 - 226.30 23.814 MALANA(W) - 8.78 23.82 Handling charges of Govt. Free power 2,387.83 - 23.821 MALANA(H) - 33.86 23.83 PTC System opt. ch. - 1,168.37

Total 2,410.46 1,211.01 226.30 -

We are of the opinion that the wheeling and OM charges are understated to the extent of ` 1211.01 lacs on account of difference in the accounts of the Parties and correspondingly trade receivable are also understated.

We are further of the opinion that the trade receivables are overstated to the extent of ` 2410.46 lacs (previous year ` 226.30 lacs) on account of debit balance in the parties account for which no sufficient confirmations / information is available with the company.

concern Parties and accounts balances have been rectified/ adjusted accordingly which shall be shown to auditors during the course of audit FY 2012-13. Hence para stands settled.

3 O& M Charges Recoverable from HPTCL

The Company has booked ` 3,92,58,693/- as O&M Charges recoverable from HPTCL during the year under review. The company has shown the same as current trade receivables but the payment of the same have not been received till the date of the audit. Thus current trade receivables are overstated to the extent of above.

The amount had shown recoverable from HPTCL on account of Transmission charges as approved by the HPERC in its MYT order of HPTCL for the period 12-14. The HPTCL has not made the payment due to non reconciliation of receivables/ payables with HPSEBL. These have now been settled / adjusted during the current year.

C Court Cases by Consumers

1. The erstwhile Board has billed ` 8.35 crore (previous year ` 13.17 crore) and ` 12.71 crore (previous year ` 13.50 crore) to Industrial Consumers of Operation Circle, Solan and Nahan. The consumer had filed suits against the same and recovery had been stopped by the Courts. No disclosure of the same has been made in notes to accounts. The Company has shown the above amounts as current trade receivable. Thus the current Trade Receivables are overstated to that extant.

The point has been noted and relevant disclosure in this regards shall be incorporated in future.

20 Cash and Cash Equivalents ( Note 2.20)

a) Cash in Hand

The Company is showing ` 1,30,164/- as cash in hand as at 31st March 2012. In respect of cash in

The difference is being reconciled and the outcome shall be reported to auditor accordingly during the

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hand amounting to ` 61,702/- no sufficient record has been shown for verification. Thus cash in hand is overstated to the extent of ` 61,702/-.

audit of FY 2012-13.

b) Postage Stamps in Hand

The Company is showing ` 21,30,993/- as postage in hand as at 31st March 2012. In respect of postage in hand amounting to ` 19,58,737/- no sufficient record has been shown for verification. Thus postage in hand is overstated to the extent of ` 19,58,737/-

The difference is being reconciled and the outcome shall be reported to auditors accordingly during the audit of FY 2012-13.

c) Imprest with Staff The Company is showing ` 58,638/- as imprest

with staff as at 31st March 2012. In respect of above no sufficient record has been shown for verification. Thus imprest with staff is overstated to the extent of above.

The difference is being reconciled and the outcome shall be reported to auditors accordingly during the audit of FY 2012-13.

(d) Balances with Banks

(i) The company has done the bank reconciliations of all the banks accounts at Head Office level and no reconciliation is being done at the Division level. We have been provided with the bank reconciliations of the accounts maintained at Head Office level Bank wise consolidated and not by Bank-wise and branch wise individually. We have been explained that all collections received in the collection accounts maintained at Divisions level are being transferred to the Head Office account . We have not been provided with the bank reconciliation and balance confirmations certificates from the bank as on 31st March 2012 for all the collections accounts maintained at Divisions and Sub Divisions levels in the fields. In the absence of the information we are unable to comment on the amount of collections not accounted for in the books of accounts during the period under review.

It is submitted that presently the bank reconciliation is being done as per existing procedure laid down in HPSEB Banking Manual and no reconciliation is being done at Sub Division/ Division level and all Banks are reconciled at Head office level. The matter regarding modification of all the manuals is under process as and when finalized the reconciliation shall be done accordingly. As regards sub para (iii) it is submitted during the point is noted and necessary rectification will be done in the accounts FY 2012-13 and it has been decided to obtain balance confirmation certificate from all collectors accounts in future.

(ii) Bank Reconciliations at Head Office Leve

It has been observed that the Head Office has accounted for all the pending entries in the Bank reconciliations statements of all Banks in the financial statements which are not in line with the commercial accounting practice. The unreconciled entries in accounts of unrepresented cheques and cheques outstanding for clearing have to be shown in the reconciliations statements only and have not to be accounted for in the financial statements and to be settled in the bank reconciliations statements in succeeding months.

As per above (d) (i).

(iii) The Head Office has adjusted the overdraft As per above (d) (i).

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account of PNB The Mall Shimla having balance of ` 5,31,93,591.00( Previous Year ` 6,39,83,799.00) Cr with the current account balance of the PNB The Mall Shimla in the bank balances shown as on 31st March 2012. Thus bank balances and short term borrowings are understated to the extent of above.

(iv) The Head office has not shown to us the bank statement in respect of account code 24.362 amounting to ` 69,82,630/-. Thus bank balances are overstated to that extent.

The bank reconciliation statement of the account code 24.362 is prepared by the ES Division, Bhabanagar regularly and instructions have been issued to concerned Units provide the same during the course of audit.

c) Cash-in-Transit

The Company is showing a sum of ` 96,03,52,925 (Previous year ` 88,47,65,613) as cash-in-transit as on 31st March 2012. The details of the same as under:-

Current Year Previous Year

Rs. Rs.1 Details as per Bank Reconclilation Statements

Bank Charges Excess Charged by Bank - 106,110.34 Outstanding Remittance 832,874,558.00 787,154,536.66 Short credit given by Banks 67,886,606.17 74,329,425.00 Excess amount debited by Banks 59,591,761.66 26,371,695.00

960,352,925.83 887,961,767.00 2 Cheuqe in transit since 1996-97 3,196,154.00-

Total 960,352,925.83 884,765,613.00 The above amounts pertains to cheques outstanding for clearing by the Banks which have been included in this head and it should have been shown in the bank reconciliations statements instead of accounting for the same in the financial statements.

The Company has shown the cash in transit in bank balances . Thus Bank balances are overstated to that extent.

The old un reconciled entries in above are subject to reconciliations.

Presently the bank reconciliation has been done as per existing procedure laid down in HPSEB Accounts / Chart of Accounts banking Manual and the matter regarding modification of the manuals is under process , as and when the same is finalized the necessary rectification shall be made accordingly.

21 Short Term Loans and Advances( Note 2.21) A Advances to Contractors and Suppliers

The Company is showing ` 21,52,89,375 (Previous year `17,01,14,004/-) as loans and advances for supplies / works. The above advances also includes advances which are old and require adjustments as the works have been completed at the close of the year and expenditure has not been booked. The Company has not provided us any confirmations from the Parties for the amount due as such we are unable to comment on the above advances. The above advances have been shown as secured but no sufficient information in respect of the

Efforts are being made to scrutinized & reconcile the same at the earliest for appropriate action.

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same has been provided. Non Information in respect of non-current portion of advances has been shown for our verification.

B Loans and Advances to Staff

The above account head includes advances to employees amounting to ` 1,76,36,955 as on 31st March 2012.

It has been observed that the individual Division does not have the complete record of the loan sanctioned and amount recovered from the employees and it has been explained to us that the same is being reconciled and kept at Head Office level in the Broad Sheets Section of the employees.

It has also been observed that when a employee is transferred from one Division to other Division his account is not transferred to the other division though ATD and as such partial accounts are being kept at different Divisions on account of loan sanctioned and recovery made at different Divisions.

The Head office has not able to supply us the employees wise details of the amount outstanding in different account heads as on 31st March 2012 as such we are unable to comment on the authenticity of the amount recoverable on account of loans and advances from the employees.

Debit CreditRs. Rs.

Loans and advances to staff – Warm clothing 27.104 908,617.0027.105 21,432.0027.106 11,324.0027.107 32,175.00

Loans and advances to staff – T.A 27.201 2,246,736.00Loans and advances to staff – pay 27.202 14,293,136.00Loans and advances to staff – Festival 27.203 447,386.00Loans and advances to staff – Wheat 27.204 5,453.00Loans and advances to staff – Flood Relief 27.205 26,413.00Loans and advances to staff – Sundry/ others 27.206 37,909.00LTC advance 27.207 279,710.00Medical advance 27.208 5,065,602.00

27.209 460,884.00warm clothing advance 28.264 3,700,252.00

28.265 3,633.0028.266 302,486.0028.269 37.00

22,740,070.00 5,103,115.00

No information in respect of current and noncurrent portion of advances has been shown for our verification

There is a complete record of loan and advances at H.O. level, the same shall be shown to auditors. There were some difference in some accounts, the same has now been rectified which shall be shown to auditor in FY 2012-13.

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C Prepaid Expenses

The Company is showing prepaid expenses amounting to ` 61,17,291/- out of which a sum of ` 53,13,916 has been accounted by the Head Office for which no sufficient information has been provided to us. In the absence of information we are unable to comment on the same.

The efforts are being made to reconcile the prepaid expense and Head Office has prepared sufficient information of prepaid expenses which shall be shown to auditor.

D Advance Income Tax/ Tax Deductions at Source

The Company has claimed ` 21,89,53,247 as income tax refund in the income tax return filed for the financial year 2011-12 where as the company has only accounted for ` 8,17,80,816 under the head TDS recoverable. No disclosure of the same has been made in the notes to accounts.

In reply to this para , it is submitted that while filing the Income Tax return of the Company we had no sufficient information at that time as the complete TDS was not available. UCO Bank had wrong deposited excess amount of Rs. 8,17,80,816/- in our PAN and IT department has given credit to the Company which has been return to IT Department during FY 2013-14 and the detail has been shown to audit.

E) Amount Recoverable Government Departments

(i) A sum of ` 10,00,000 share application money recoverable from HP Government for the share allotted to the government has been shown under the head short term loan and advances. Refer para 2 of this annexure in which we have stated that short term loans and advances are overstated to the extent of above.

In reply to para 2 of Annexure-III above.

(ii) Amount Deposited with PWD Kullu The Thalot Division of Generation Wing (earlier Projects Wing) has deposited ` 10,00,00,000 with PWD Kullu for construction of roads which is of non recoverable nature . In our opinion the amount short term loans and advances are overstated to the extent of above .

The matter is being examined and compliance shall be shown to audit accordingly.

(iii) Amount Recoverable from HIMURJA The Company has shown a sum of ` 26,21,411 ( previous Year ` 26,21,411) as amount recoverable from Himurja on account of DPR Charges of the projects of the Himurja. The amount has not been paid by the Himurja hence provision for the same should be made in the books of accounts. In our opinion the short-term loans and advances are overstated to the extent of above.

In reply to this para, it is submitted that the expenditure to the tune of Rs. 26,21,411/- was incurred for carrying out S&I works for preparation of DPRs of the six Projects of HIMURJA as per the decision of the Board conveyed by the CE (P&M). The matter regarding recovery of this expenditure in active consideration with concerned Agency/Department. As and when any decision is taken the adjustment of above amount shall be made accordingly.

(iv) Account Code 28.880 The Head Office is showing ` 7,82,41,193.65 credit under this head for on account pension and charges of employees from other departments for which no sufficient information has been provided to us. In our opinion the short term loans and advances and income is understated to the extent of above.

The adjustment/rectification as per requirement of audit has been made during 2012-13.

E) Amount recoverable Related Parties The point has been noted and compliance should be

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(i) The Company has shown under this head only transactions from the BVPCL (Beas Valley Power Corporation Limited) its subsidiary company and transactions with other related parties like Himachal Pradesh Power Transmission limited Corporation limited and Himachal Pradesh Power Corporation Limited is not shown under this head.

shown in FY 2012-13 accounts.

(ii) BVPCL (Subsidiary Company)

The company has incurred expenditure to the tune of ` 1,02,91,33,090 ( previous year ` 1,04,37,64,677) as on 31st March 2012 for which shares has to be issued by the BVPCL, whereas the BVPCL is showing ` 59,15,64,364 (previous year ` 59,53,54,782.00) as share money pending allotment in their balance sheet as on 31st March 2012 The above balance is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. The amount recoverable is of non-current nature and should be shown under the head other non-current assets.

The point noted for appropriate classifications necessary action in future.

F) Amount Recoverable Others

1 Amount Recoverable from SJVNL

The Company is showing a sum of ` 176,75,194 recoverable from SJVNL as on 31st March 2012 as Other Current Assets. SJVNL has not accepted the liability as such the amount is not current assets and is of the nature of noncurrent assets. Thus other current assets are overstated to the extent of above.

The matter to recover said amount is under active consideration of SJVNL and HPSEBL and has not rejected by the SJVNL till date. Appropriate action will be taken after settlement of the above matter.

2 Expenditure incurred on Resident of Parbati HEP

The Company is showing a sum of ` 21,67,922/- as amount recoverable from NHPC. The amount has not been recovered till the approval of accounts. The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

The matter is being examined and outcome shall be reported to Auditors accordingly.

3 Amount Recoverable from BVPCL (Subsidiary Company)

The Company is also showing a sum of ` 47,63,75,623 as recoverable from Beas Valley Power Corporation as at 31st March 2012. The above amount has to be shown under the head amount recoverable from related Parties. Thus amount recoverable others are overstated to the extent of above. The above balance is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

The point noted for necessary action for appropriate classification in future.

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4 Amount Recoverable Himachal Pradesh Power Corporation Limited

(i) The company has shown a sum of ` 29,39,15,341 (previous year ` 47,81,27,791) recoverable as on 31st March 2012 for which shares has to be issued by the HPPCL , whereas the HPPCL is showing ` 6,91,36,000 (previous year ` 6,91,36,000) as share money pending allotment in their balance sheet as on 31st March 2012 which is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.


(ii) The HPPCL in their financial statement for the year 2011-12 is showing ` 777.35 lacs as payable to HPSEB Limited on account of allotment of five HEP during the year 2009-10 and 2010-11 which is subject to confirmation and reconciliations. However the company is claiming ` 24,303 lacs from them . No Disclosure for the same has been made in the notes to accounts.


5 Amount Recoverable from Himachal Pradesh Power Transmission Corporation Limited.

The company has transferred cost of transmission lines to the HPTCL (Himachal Pradesh Power Transmission Corporation Limited

The point noted for appropriate classification in future.

) amounting to ` 35,21,287 (previous year ` 26,41,47,904) as per the scheme of the transfer . A sum of ` 26,75,12,665 has been shown as recoverable as at 31st March 2012 which is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

6 Amount Recoverable from H P Government

The Company is showing a sum of ` 1,40,000 and ` 2,94,428 as recoverable from Government on account of share application money and incorporation charges which is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

The State Govt. has been requested to release the share capital paid in the name of seven Directors of the Company who are appointed by the State Govt. and the decision in this regards are still awaited. The amount recoverable is current in nature and shown is in order.

7 Theft of Property Pending Investigation

The above head shows a sum of ` 32,14,184.44


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as on 31st March 2012. The above amount is to be shown under the head other noncurrent assets. Thus other current assets are overstated to the extent of above.

8 Expenses Recoverable from Suppliers/ Contractors.

The above head shows a sum of ` 4,90,84,387.00 as on 31st March 2012 which is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. No sufficient information for showing the same under current assets has been made available for our verification.

The complete detail of these expenses are available with all the DDOs of the Company and these amounts are regular in nature and are recovered regularly from concerned. The version of the audit is denied . Hence, para may be dropped. We do not concur with the version of the audit.

9 Inspection Charges Related to Material\ Equipment Third Party Inspection

The above head shows a sum of ` 20,20,749.00 as on 31st March 2012 which is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. No sufficient information for showing the same as current assets has been shown for our verification.

The instructions to reconcile the inspection charges has been communicated to concern and factual position shall be apprised to auditor thereafter.

10 Amount Recoverable from PSEB

The above head shows a sum of ` 7,63,000.00 as on 31st March 2012 which is subject to reconciliation and confirmation. In the absence of confirmations we are unable to comment on the same. The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

The matter is under reconciliation with PSEB and compliance shall be shown thereafter. We do not concur with the version of the audit regarding noncurrent in nature.

11 Advance to M/s Tantiya Limited Andhra Mega Power

A sum of ` 45,00,000.00 was advanced to M/s Tantiya Limited Andhra Mega Power on account of development charges of wind energy. No sufficient information for showing the same as current assets has been shown for our verification.

The information/ detail of advance paid M/s Tantiya Limited Andhar Mega Power has been shown to the auditor during the course of audit.

12 The amount recoverable from other departments on account of Leave and Other Pensionary Benefits on account of deputation of employees in other departments is subject to confirmation and reconciliation

The records are being updated and rectified. The compliance shall be shown to audit during the next audit of FY 2012-13.

G) Deposits

(i) The Company is showing a sum of ` 76,08,99,093 under this head the details of which as under :

`


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Amount Recoverable from Government of H P 740,800,000.00 Other Deposit with High Court and Athorities 20,099,093.00

760,899,093.00

The amount is in the nature of long term loans and advances and should not be treated as current assets. Thus short term loans and advances are overstated to the extent of above

(ii) The company has incurred expenditure on behalf of the Government of Himachal Pradesh amounting to ` 74,08,00,000 shown above which has been invested in the HPTCL on behalf of the Government . No Disclosure for the same has been made in the notes to accounts.

The point noted for future and necessary disclosure shal be incorporated in FY 2012-13 . Hence para may be dropped

H) Amount Recoverable from Employees

(i) The above account includes a sum of ` 2,10,97,974 Rs (previous year ` 2,15,49,411/-) recoverable from employees / ex employees. The account is subject to reconciliation and confirmation. In the absence of reconciliations we are unable to comment on the recoverability of the amount due from employees/ ex employees. It has been observed that the above account includes amount recoverable from employees on account of shortages and other recoveries. In some cases the amount has been disputed and employees have gone to courts and in some cases the monthly installments has been fixed and in some cases the amount have been paid by the employees and in some cases the employees are not paying shortages . The current and noncurrent portion of the amount recoverable has not been disclosed by the Company.

The employee wise detail of Interest accrued and due on Loan and advances from staff are available in Broadsheet Section of this office as well as with all DDOs. Necessary classification as appropriate shall be made available in future.

(ii) Non Provision of ` 10.42 lakhs recoverable from employees who have been injured while performing their duties .In our opinion non provision of the same has resulted in overstatement of the short term loans and advances.

The provision could not be made in the account for FY 2010-11 .However, payment of this amount has been made under the prior period expenses.

(iii) The above head also includes amount recoverable from other organizations amounting to ` 26,94,414 on account of Leave and pensioner contribution from outside Parties. Thus amount recoverable from employees are overstated to the extent of above and correspondingly the amount recoverable from others are understated to the extent of above.


I) Interest Accrued but not Due Employees

The above account includes a sum of ` 1,17,909 for which no sufficient information has been provided to us. In the absence of the information we are unable


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to comment on the same

J) Interest Accrued but not Due Others.

The above account includes interest accrued and due on GPF Fixed deposits amounting to ` 107,06,14,592.00. The FDR wise interest accrued as at opening of the year has not been shown for our verification. In the absence of information we are unable to comment on the same.


22 Other Assets ( Note 2.22)

(i) Receivables from Scrap Sales/ Misc Income

The above account includes a sum of ` 4,04,68,141 which are of noncurrent nature and should have shown under the head other noncurrent assets.


(ii) Unbilled Revenue

The company has made provision of unbilled revenue amounting to Rs 1,54,50,66,387 (previous year Rs 1,35,75,90,869) at the end of the financial year on account of energy bills from the last billed assessments made and till the close of the year. The basis of making assessment is not systematic and all Divisions are adopting different methods of making provisions for unbilled revenue. In the absence of systematic method of making provision for unbilled revenue at all Divisions we are unable to comment on the authenticity of the provision of unbilled revenue made at the close of the year.

As per Commercial Accounting System adopted by the Company, there exist proper system for the calculation of provision of un-billed revenue and provision of un-billed revenue is being made accordingly by all the Units. The auditor has not specially mentioned the name of Units who are not making assessment of unbilled revenue accordingly.

(iii) Reimbursement of up-front Subsidy by GoHP

The above account shows a sum of ` 49.70 crores (previous year ` 49.70 crores ) recoverable as upfront subsidy from the Government of Himachal Pradesh which has not been approved by the Government hence the amount is not recoverable. In our opinion the other current assets are overstated to the extent of above.

The matter has already taken up with the H.P. Govt for the recovery of amount, but the same has not accepted by the H.P. Govt. The matter will be again referred to HPERC for final decision, till that time the no further action can be taken for providing provision/ withdrawn the amount.

iv) Inter-Unit Transactions

The company is showing ` 75,41,82,672 ( previous year ` 105,41,22,358/-) on account inter unit transfers and the same have not been reconciled at the end of the year. It has been observed that the above practice of non reconciliation in inter unit accounts is pending since many years and same was not reconciled by the erstwhile Board and even by the company . In our opinion the amount is not of recoverable nature as the inter units accounts have to be adjusted at the close of the year and amount should be Nil under this head. Thus other current

Inter-Unit Transfer is regular process and all Accounting Units under HPSEB Ltd have been directed to reconcile the IUTs accounts at earliest and to ensure the balance under IUTs should be NIL at the end of financial year.

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assets are overstated to the extent of above.

23 Statement of Profit and Loss Account (i) Income from Investments

The company has shown the following as interest earned on investments The details of the same is as under:-


1 Net Interest recived from GPF Fund 262,498,495.00 44,156,444.00 2 Interest on APRDP Fund 0 9,922,521.00 3 Interest on RGGVY Funds 0 3,615,268.00 4 Interest on Leave Encashment Fund 13,942,515.00 -

276,441,010.00 57,694,233.00

In our opinion the income is overstated to the extent of above as the interest has not been earned by the Company in its own investments.

Noted for future compliance that amount in excess of the interest paid to ________________ the company has been paying interest as para enabled by the Govt.

(ii) Prior Period Items 2012-13

The Company has charged the following amounts under the Head Prior Period Items in the accounts for the year 2012-13 . The account for the year 2011-12 was approved by the Board on 28th September 2013 and the prior period items are known to the company before the finalization of the accounts for the year 2011-12 but no effect of the same has been made in the financial statements for the year 2011-12.

Amount in lakh Amount in lakhPrior Period Items Current Year Previous YearInterest Income for Prior Period (15,680.79) 15.11 Other Income Relating to previous year 373.49 100.35 Fuel Related Expenses - 769.99 Interest and other Finance Charges relaiting to Privious Ye - 21.76 Other Charges Relating to Privious year - 120.77 Other Excess provision in prior period 1.25 -

- (15,306.05) 1,027.99

Short Provision for power Purchased in privious year (13,871.12) 19,107.40 Other Income Relating to Privious Year - 4,416.55 Employees costs relating to previous years 5,206.58 - Depreciation under provided in previous years 239.42 - Other Charges Relating to Privious year 570.68 - Opertaing Expenses Relating to Privious Year (0.69) 41.95

(7,855.13) 23,565.90 Net Prior Period Items (7,450.92) (22,537.91)

There exists proper policy for the accountal of prior period Income/Expenditure. On the date of balance sheet all the expenses/income relating to the year are being charged to the concerned head of account, when the accounts of the year have been closed, all the receipts/expenses relating to previous years are being charged to prior period expenses/income. However, point of audit is noted for future compliance.

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(iii) Reallocation Costs of Employees and Repair and Maintenance

The method and calculation of reallocation of employee costs and repair and maintenance costs is subject to reconciliation as the basis for the same and the actual expenditure incurred has not been provided to us.

In this context, it is intimated that as per the procedure, initial cost on account of employee deputed for the repair and maintenance of assets is charges to revenue accounts and simultancely this cost is reallocated from Repair & Mtc. to Employee cost i.e Accounts Code. 75. From the FY 2013-14 the employee cost is being charged to AG 75 and only materials cost required for maintenance of assets is being charged R&M -AG-74.

24 Other Observations

(i) The BODs have sanctioned to write off the material washed away damaged due to flash flood in Andhra Khad and Pabbar River on 11 and 12.8.1997 amounting to ` 34,60,913 vide resolution no 4.5 dated 16/12/2010, the same has not been adjusted in accounts. In our opinion the Tangible assets are overstated to that extent.

The matter is being examined and compliance shall be shown to auditor accordingly.

(ii) Transfer of various HPSEB Limited Roads to HPPWD.

The BODs vide resolution no 3.03 dated 17/09/2010 decided to transfer the ownership of lands free of cost to HPPWD and write off the cost in the books of HPSEB Limited. No sufficient information in respect of same has been provided. In the absence of information we are unable to comment on the same.

The matter is being examined and compliance shall be shown to auditors accordingly in due course.

(iii) The BODs have sanctioned to write off the stolen AAC amounting to ` 91,975/- stolen from Katolu store ,Jeaori on 28/12/1999. vide resolution number 5.05 dated 14.3.2011, the same has not been adjusted in accounts.

In our opinion the inventories are overstated to that extent.

The matter is being examined and compliance shall be shown to auditors accordingly.

(iv) The Company has made no provision of the arrears of Revised Pay Scale for the year 2006 amounting to ` 2,52,86,13,516.00 ( Previous year

` 3,59,75,00,000 ) payable as on 31st March 2012 for its employees for the year under review. Thus other short term provisons and losses are understated to that extent.

The payment of revised pay scale has accordingly been made on the basis of orders issued by the Govt. of HP and Company and charged to prior period expense.

(v) Khauli Construction Division (PCC Dharamsala)

We have been provided with the account statements of the Khauli Construction Division, at Head Office ,which was closed in the year June 2008, but sub head details and subsidiary record of the same has not been provided to us:-

The Khauli Construction Division has been closed during June, 2008 and closing balance of this unit is already appearing in the consolidated Balance Sheet of the Company, but the subsidiary record is available with field unit.

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Amount in Rs. lakhsCurrent Year Previous YearDebit(Credit) Debit(Credit)

12 Provision for depriciation (6.22) (6.22) 22 Stores and spares 16.79 16.79 24 Cash In Hand 0.05 0.05 26 Advances to Suppliers 26.79 26.79 28 Sundry Recivables 954.99 954.99 42 Liablity for Capital Supplies/works (1.93) (1.93) 44 Staff Related Liabilities (20.44) (20.44) 46 Other Liablities and Provisions (416.26) (416.26) 47 Deposits (202.57) (202.57) 57

Total 351.19 351.19

In our opinion the assets and liabilities are overstated to the extent of above.

(vi) Larji Construction Division

We have been provided with the account of the Larji Construction Division, at Head Office which was closed in the year September 2008 but sub head details and subsidiary records of the same have not been provided to us:-

It has been observed that the division has charged depreciation on all assets of the board where as they have to charge the depreciation on vehicles only. No details regarding vehicles have been provided to us as such we are unable to comment on the amount of depreciation charged on vehicles.

Amount inRs.LakhsCurrent Year Current YearDebit(Credit) Debit(Credit)

12 Provision for depriciation (40.85) (40.85) 22 Stores and spares 18.27 18.27 25 Advances to Suppliers 143.19 143.19 26 Advances to Suppliers - - 28 Sundry Recivables 1,462.58 1,462.58 42 Liablity for Capital Supplies/works (164.09) (164.09) 44 Staff Related Liabilities (59.84) (59.84) 46 Other Liablities and Provisions (806.15) (806.15) 47 Deposits (5.50) (5.50) 55 (2.63) (2.63)

Total 544.99 544.99


The Larji Construcitin Division has been closed during September, 2008 and closing balance of this Unit are appearing in the consolidated Balance sheet of the Company and subsidiary record of the same is available with CE (Gen).

(vii) Investigation Division Recongpeao

We have been provided with the account of the

The entire subsidiary record of Investigation Division,

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Investigation Division Recongpeo, by the Chief Engineer Projects, but sub head details and subsidiary records of the same have not been provided to us:-

Amount in₹ lakhs

Current Year Current YearDebit(Credit) Debit(Credit)

10 Fixed Assests 41.81 41.81 12 Provision for depriciation (4.83) (4.83) 22 Stores and spares 0.00 0.00 24 Cash in hand 0.03 0.03 28 Sundry Recivables (73.95) (73.95) 42 Liablity for Capital Supplies/works (0.13) (0.13) 43 Liablity for Expenses (14.70) (14.70) 46 Other Liablities and Provisions (158.63) (158.63) 47 Deposits (40.25) (40.25) 55

Total (250.66) (250.66)


Reckongpeo is now available in Ganvi Const. Division, Jeori and shall be shown to the audit during the course of next audit.

(viii) Civil MTC Division Bhabanagar

We have been provided with the account of the Civil MTC Division Bhabanagar, by the Head Office, but sub head details and subsidiary record of the same has not been provided to us:-

Amount inRs lacsCurrent Year Previous YearDebit(Credit) Debit(Credit)

10 Fixed Assests 813.27 813.27 813.27 813.27

In our opinion the tangible assets are overstated to the extent of above.

The Sub Head-wise details of Civil Mtc. Division, Bhabanagar have been accepted by the Generation wing / RE, Bhaba Power House Division, Bhabanagar and shall be shown to the auditors during next audit.

(ix) P& D Division ( Gen Wing)

We have been provided with the account of the P&D Division Generation Wing by the Generation Wing, but sub head details and subsidiary records of the same have not been provided to us:-

The matter is being examined and compliance shall be shown to auditors during next audit FY 2012-13

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Amount inRs. Lakhs

Current Year Current YearDebit(Credit) Debit(Credit)

27 Loans and advances (0.52) 28 Sundry Recivables (0.30) - 42 Liablity for Capital Supplies/works - - 44 Staff Related Liabilities 50.56 - 46 Other Liablities and Provisions 5.75 -

- - Total 55.49


(x) Old unreconciled Entries in the Bank Reconciliation Statements

The Company is carrying over the old un reconciled entries of Bank Reconciliations statements and the same has not been adjusted at the close of the year the details of the same is as under:-

Amount in Rs. lacsCurrent Year Previous Year

Short credit given by banks 678.87 743.29 Excess amount debited by banks 595.92 263.72

1,274.78 1,007.01 Less amount debited by banks 86.86 52.87 Excess Credit by banks 1,046.55 1,282.15

1,133.41 1,335.01

In our opinion in the absence of complete information we are unable to comment on its effect on the Profit & Loss account and balance sheet.

It is intimated that the necessary correspondence regarding reconciliation of old entries has been done with all the Banks and necessary adjustments entries will be made after reconciliation/ reply from the Banks concerned.

(xi) Distribution Losses

The distribution losses incurred by the company during the year 2011-12 is as under . In some of the Circles the distribution losses are very high as compared to acceptable norms for the Electricity Companies.

The distribution losses of the Company are within the limit fixed by the HPERC.

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Distribution Losses for the year 2011-12

Units MKW/H(MU)Figures in bold Current Year

Energy Input Energy Sold T& D Losses PercentageShimla 426.81 342.44 84.37 19.77

403.49 322.27 81.22 20.13 Rampur 162.06 132.12 29.94 18.47

184.36 156.76 27.60 14.97 Rohroo 130.69 68.04 62.65 47.94

124.75 66.06 58.69 47.05 Solan 3,177.09 2,935.04 242.05 7.62

3,005.55 2,768.30 237.25 7.89 Nahan 1,133.99 1,008.40 125.59 11.08

1,065.60 952.97 112.63 10.57 Hamirpur 266.02 216.18 49.84 18.74

242.33 194.64 47.69 19.68 Bilaspur 717.60 619.48 98.12 13.67

745.71 657.72 88.00 11.80 Mandi 232.21 177.13 55.08 23.72

218.27 168.92 49.35 22.61 Kullu 245.40 206.33 39.07 15.92

244.51 204.40 40.11 16.40 Una 545.76 457.25 88.51 16.22

547.27 463.79 83.48 15.25 Kangra 508.90 388.79 120.11 23.60

452.65 344.90 107.75 23.80 Dalhousie 465.10 366.91 98.19 21.11

444.06 341.40 102.66 23.12 8,011.63 6,918.12 1,093.52 13.65 7,678.54 6,642.12 1,036.42

(xii) Leave Salary, Gratuity and PF Contributions

The Company has not made any provisions in the books of accounts in respect of leave salary payable, gratuity payable, PF contribution payable as on 31st March 2012 in respect of present employees as per AS 15 Accounting for Employees Benefits issued by the ICAI. In the absence of information we are unable to comment on its effect on the profit and loss account and balance sheet.

The policy of the Company with regards to accountal of Leave Salary, Gratuity and PF contribution has been disclosed at Sr. No. of 8 of significant accounting policies. However action shall be taken in FY 2012-13 accounts as per AS 15 accordingly.

(xiii) Account Payable and Recoverable from the Government of Himachal Pradesh

The company has accounted for the following amounts as recoverable and payable to the Government of Himachal Pradesh as on 31st March 2012. No disclosure for the same has been made in the notes to accounts and neither the same has been netted off in the books of accounts.

The disclosure of the same shall be made in the books of accounts during FY 2012-13.

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Amount inRs. lacs

Government of Himachal Pradesh Current Year Previous YearAmount RecoverableInvestment in HPTCL 7,408.00 7,408.00 Share Application Money 11.40 1.40 Handling Charges Free Power 3,138.00 2,388.00 Subisidy 6,205.00 3,725.00 Tarriff Subsidy 4,970.00 4,970.00 Sale of Power Vidhan Sabha ( Dsala) 193.00

21,925.40 18,492.40

Amount PayableFree Power Charges 45,223.00 33,312.58

45,223.00 33,312.58

(xiv) Cost Audit of the Company

The company has not appointed cost auditor under section 233 B(1) of the companies act 1956 to audit the accounts for the year under review.

M/s Anil Sharma & Company, Cost Accountant, 232/ 37 A Chandigarh has been appointed Cost Auditor of the Company for the FY 2011-12 to 2013-14 under section 233 (B) (1) of the Companies Act, 1956.

(xv) Write of Old Recoverable and Liabilities of erstwhile Board.

The Company during the year under review has written off certain old liabilities and old recoverable of the erstwhile Board for which no details are available with the Company. Please refer Note No 2.31 (B )29.

Amount inRs.lacsCurrent Year Previous Year

Prior Period Income 5,264.99 12,545.58 Prior Period Expenses 4,253.17 13,851.94 Net Prior Period Items 1,011.82 (1,306.36)

Needful is being done during current FY2012-13

(xvi) Repair and Maintenance Line and cable Net Works

It has been observed that the Company is charging the costs from above head to Revenue expenses pending allocation to capital works and Capital Work in progress at the close of the year. In the absence of sufficient information we are unable to comment on its effect to the profit and loss account and balance sheet.

Not agreed with the remarks of Statutory Auditor. In this context, it is submitted that the cost being charged on repair and maintenance of line and cable network is purely as R&M cost of these lines and ultimately it is a revenue expense being charged to P&L accounts of the Company. However, sufficient information in this regards is available with concerned Units and all Units have been directed to produce the detailed information to auditors during next year audit.

(xvii) Contingent Liabilities in Notes to Accounts The Company has made disclosure of

contingent liabilities where liability involved is more than ` 1 crore and where the liability involved is less

The full detail of amount shown as contingent liabilities are available with the Unit concerned. However, most of the information has been provided

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than` 1 crore no disclosure has been made and no information has been provided by the company.

No sufficient information has been provided in respect of the Contingent Liabilities provided in the notes to accounts. ( refer Note no 2.31 (B) 11)

by the Head Office to the Statutory Auditor during the course of audit.

(xvii) The Company has not provided any information in respect of the following comment of AG for the year ended on 13/06/2010.

(i) ` 70.25 crore being the principal amount of power bond issued to clear HPSEB’s dues towards Central Public Sector Undertakings (CPSU’s) up to 30 September 2001. The liability for this amount was cleared by crediting income in contravention of the orders (2005) of the Himachal Pradesh Government wherein it was stated that the liability on account of interest as well as repayment of Power Bonds had to be borne by the Board.

(ii) The above has been understated by ` 1.21 crore due to non-account of interest on Power Bonds of ` ₹70.25 crore. This has resulted in understatement of above head as well as Deficit to that extent

(iii) ` 50.75 crore on account of Interest on Power Bonds of ` 70.25 crore (October 2001 to 2009-10). This has resulted in understatement of Accumulated Loss as well as Other Current Liabilities to the above extent.

The matter is under active consideration, as and when the books of accounts are reconciled and updated, the corrective action, as deemed fit, shall be taken accordingly.

(xix) No details have been provided for Non Provision of ` 1.60 crore being the charges of power purchased from UPCL during December 1989 to 13 June 2010. This has resulted in understatement of above head of account and deficit to that extent (prior period ` 1.53 crore and current financial period ` 7.00 lakh) as reported by AG in their report for the year ended on 13/06/2010.

The matter is being examined and factual position shall be appraised to the auditor during FY 2012-13.

(xx) Non Provision of ` 13.74 crore on account of royalty payable to the Government of H.P. at the rate of 12 per cent in respect of Projects executed by the Board after 1990 as per the decision taken by the Government of H.P. in January 2006. The other current liabilities is understated to the extent of above.

The matter is under consideration between HPSEBL and Govt, of Himachal Pradesh which has not yet been resolved. As and when the final decision is reached, the required action shall be taken in the books of accounts.

(xxi) Non Provision of ` 1.69 crore incurred on abandoned Hydro Electric Project (Baspa I) and shown as recoverable. In our Opinion the tangible assets are overstated to the extent of above.

The matter is still under consideration with IPPs and Govt. of HP. On the receipt of final decision, the necessary action shall be taken accordingly.

(xxii) Non Provision of assets valuing ` 2.43 crore washed away due to flash floods (between

The matter is being examined and compliance shall be shown to the auditor accordingly.

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2003 to March 2009) and which were not in existence.

In Our Opinion the tangible assets are over stated to the extent of above .

(xxiii) The erstwhile Board has transferred cost of Land measuring (113.06 & 149.04 Bighas) and Buildings (residential/non-residential) at Sainj Hydro Electrical Project amounting to ` 12.93 crore transferred to M/s HPPCL/NHPC during 2009-10. In our opinion, the tangible assets are overstated to the extent of above.

The matter under reconciliation and compliance shall be shown to the auditor accordingly in due course.

(xxiv) No provision of assets valuing ` 11.06 crore created (2009-10) out of material provided by the consumers and being maintained by the Board in three Circles. The tangible assets and reserves and surpluses are understated to the extent of above.


(xxv) The Company have shown an amount of ` 1.13 crore incurred on behalf of M/s J.P. Associates to provide power supply to cement plant over and above the deposited amount. The consumer had refused to deposit the amount. In accordance with the provisions of Expenditure Regulations 2005, the excess expenditure was not recoverable from the consumer and had to be borne by the Board. In Our Opinion the current assets are overstated to the extent of above


(xxvi) The Company and its Divisions have not provided to us Court Cases details which are contingent in nature and in which contingent liability of the company is involved.

The instruction to provide the detail of all Court Case and contingent liabilities to all Units of the Company and compliance shall be shown to the auditors accordingly.

(xxvii) The Company has not provided any information of the suppliers / service providers who are registered as Micro, Small and Medium undertakings under "The Micro, Small and Medium Enterprises Development Act 2006" as on 31st March, 2012. In the absence of the information we are unable to comment on the same.

Efforts are being made to ascertain the information of the suppliers / service providers who are registered as Micro, Small and Medium undertakings under "The Micro, Small and Medium Enterprises Development Act 2006" and the same shall be shown to the auditor accordingly.

Place:- Shimla Sd/- Dated:- 21.12.2013 Chief Accounts Officer,

F&A Wing, HPSEB Ltd., Shimla-171004.

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