4th annual report for the year 2012-13

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4th

ANNUAL REPORT

2012-13

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

Regd. Officer: Vidyut Bhawan, Shimla-171004. Phone No 0177-2801762 Fax No 2658908 email ID [email protected]

http://[email protected]/�

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Regd. Officer: Vidyut Bhawan, Shimla-171004

INDEX

Sr. No.

Subject Page

1. Notice of AGM 1-2

2. Proxy Form 3

3. Board of Directors 4

4. Directors Report 5-13

5. Accounts 14-60

6. Auditors’ Report 61-109

7. Replies to Auditors’ Report 110-197

8. Comments of CAG of India 198-200

9. Replies to CAG Comments 201-202

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Himachal Pradesh State Electricity Board Limited, Shimla-4 (A State Govt. Undertaking)

Regd. Office: Vidyut Bhawan, Shimla-4 CIN No U40109HP2009SGC031255

Phone No 0177-2801762 Fax No 2658908 email ID

[email protected]

Notice of 4th Adjourned Annual General Meeting of the HPSEB Ltd. “Notice is hereby given that the 4th Adjourned Annual General Meeting of the Members of the Himachal Pradesh State Electricity Board Limited, Shimla-4 will be held on Thursday, the 5th March, 2015 at 2.30 PM at Committee Room, Armsdale Building, H.P. Secretariat, Shimla-171002 to transact the following business:

ORDINARY BUSINESS:

1. To receive, consider and adopt the Annual Accounts of the Company for the year ended 31st March, 2013, Directors’ Report and Report of Auditors thereon along with the comments of the Comptroller and Auditors General of India as on that date.

2. Appointment of Statutory Auditors of the Company for the Financial Year 2014-15.

To consider and, if thought fit, to pass with or without modification(s), the following resolutions as Ordinary Resolutions:

“RESOLVED THAT the approval be and is hereby accorded for the appointment of M/s Rajeev Sharma & Associates, Old Bus Stand, Gandhi Chowk, and Hamirpur (H.P.) as Statutory Auditors of the Company for the financial year 2014-15 at a fee of Rs.1, 50,000/- (Rs. One Lakh Fifty Thousand only) apart from TA/DA.

1. Approval of Shareholders to borrow money in excess of the paid up capital & free reserves of the Company.

SPECIAL BUSINESS:

To consider and, if thought fit, to pass with or without modification(s), the following as Special Resolutions: “RESOLVED THAT pursuant to Section 180 (1)(c) and any other applicable provisions of the

Companies Act, 2013 and the rules made there under [including any statutory modification(s) or re-enactment thereof for the time being in force], consent of the Company be and is hereby accorded to the Board of Directors of the Company [‘the Board’] to borrow money/ either by borrowing/raising loans/CC Limits from PFC, REC, other Financial Institutions, Banks etc. or by issuing Bonds among other authorized Investors/public etc. in excess of the paid up capital & free reserves of the Company to the extent of Rs.5000 crore (Rs. Five thousand crore only) for generation, transmission and distribution of power in the State, notwithstanding that the money or moneys to be borrowed, together with the moneys already borrowed by the Company [apart from temporary loans obtained from the Company’s bankers in the ordinary course of business] will exceed, at any time, the aggregate of the paid-up capital of the Company and its free reserves, that is to say, reserves not set apart for any specific purposes.”

“FURTHER RESOLVED THAT necessary statutory form(s) and related documents to give effect to the above resolution be filed in this regard by any of the Director of the Company

http://[email protected]/�

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or Chief Accounts Officer, as and when required with the Registrar of the Companies (MCA) in physical or digital form and to do all acts and deeds in this regard.”

Place: Shimla Dated: 05.03.2015

By order of the Board of Directors Sd/-

Rajiv Sharma, 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- proxy form attached.

2. Memorandum for Shareholders is attached.

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PROXY FORM

I/We member (s) of the Himachal Pradesh State Electricity Board Limited, Shimla, 171004 do

hereby appoint__________________ of ________________________as my proxy to attend and

vote for me/us and on 05.03.2015 at 2.30 PM and at any adjournment thereof.

Signatures

Signed this on ………….

Affix Rs.5/- Revenue Stamp

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Regd. Officer: Vidyut Bhawan, Shimla-171004.

Board of Directors as on 28.02.2015.

1. Sh. Sushil Kumar Bhim Sen Negi, IAS Chairman 2. Er. P.C Negi Managing Director 3. Sh. Rajeev Sharma, IAS Director (F&A)/Personnel 4. Er. J.P. Kalta Director (Operation) 5. Er. Pawan Kumar Kohli Director (Civil) 6. Sh. Ravinder Kumar Sharma, Director (Tech.) 7. Dr. S.K. Baldi, IAS, Pr. Secretary (Finance) to the Govt. of H.P. Nominee Director

8. Sh. Akshay Sood, IAS Spl Secretary (Finance ) to the Govt., of H.P. Nominee Director

9. Dr. Ajay Sharma,IAS Director Energy to the Govt., of H.P. Nominee Director 10. Sh. Kameshwar Singh Dhulta, Spl Secretary (Power ) to the Govt.,

of H.P. Nominee 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, Shimla 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

24. Axis Bank, Shimla 25. Maharastra Bank, 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 Fourth Annual Report of the Company for the year ended March 31, 2013 along with the Annual Accounts, Report of Statutory 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 2012-13 2011-12

Income: Sale of Power 4221.67 3828.46 Revenue subsidies & Grants 0.00 0.00 Other Incomes 372.40 194.09 Total Income 4594.07 4022.55 Expenses: Purchase of Power 2629.38 2657.62 Other Expenses 2304.97 1877.69 Total Expenses 4934.35 4535.31 Profit/Loss (340.28) (512.76) Loss transferred from previous year (1398.35) (885.59) Accumulated Loss (1738.63) (1398.35)

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.

Targets

: During the year under review, 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.

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Objectives 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 centers, cables, wires, accumulators, plants motors, meters, apparatus, computers and materials connected with transmission, distribution, supply of electrical energy, communication and telemetering equipments.

(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

(i) Distribution of Electricity in the State of H.P.

(ii) Sale, Purchase and Trading of Electricity.

(iii) Operation and Maintenance of all existing Power Generation Plants & Electrical System infrastructure associated with evacuation & distribution of electricity.

(iv) Completion of ongoing HEPs and execution of HEPs so allotted by GoHP along with associated electrical networks.

(v) R&M of existing EHV, HV & LV Electrical System networks in the State of H.P. for distribution of electricity.

(vi) 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.

4. Works The Company has 477.450 MW installed capacity of Generating Stations and the execution of the following projects continue to progress satisfactorily during the period under review:-

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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 Commissioned on

01.01.2014. 2 Uhl-III in Distt Mandi 100 94084.00 Oct-2002 May, 2015 (1st Unit)

The following EHV lines/ EHV Sub Stations and HV distribution lines/ Sub Stations were completed/ commissioned during the year 2012-13:-

Sr. No

Name of work/ schemes

(a) EHV Lines & Sub Stations 1 SOP to HPSIDC Davni C/O 66KVline from 66KV S/Stn. Akanwali to Davni a/w

66/11KV,2x10MVAS/Stn. at Davni(Partial 50:50 deposits) 2 Aug. of 132/33kV, 8MVA Trf to 16MVA at Kunihar Sub-Station 3 Aug.of 66/22KV,2x6.3MVA tfr.to .2x10MVA at Hulli Sub-Station. 4 Aug. of 220/66KV, 2x80/100MVA transformer to 3x80 /100MVA at Baddi S/Stn. by providing addl.

T/F of capacity 220/66KV, 1x80/ 100MVA. 5 Aug. of 220/132kV, 2x80/100 MVA Trf bank at Kunihar S/Stn. by installing additional Trf of capacity

220/132kV,1x160/200MVA 6 Aug. of 220/132KV,2x63MVATrf. to 2x80/100MVA at Girinagar S/Stn. 7 Augmentation of one no. 132/11KV S/Stn.at Barotiwala with 1x25/31.5MVA T/F to replace

1x16/20MVA Transformer. 8 Aug. 132/133 KV from 1x16+20 MVA Power Transformer to 1x25/31.5 MVA capacity at 132/133

KVA Sub-Station Bajini. (b) HV Distribution lines & Sub Stations 1 C/O 33/11 KV 2x3.15 MVA Un-manned Sub Station at Totarani (Mcleodganj) along with associated

33 & 11 KV HT lines

2 C/O 33/11 KV 2x3.15 MVA un-manned Sub Station at Pattii (Pachchrukhi) along with associated 33 & 11 KV HT Lines.

3 CC/O 33KV/11 2x1.6 MVA Un-manned Sub Station at Gopalpur (Nagri) along with associated 33 & 11 KV HT lines.

4 C/O 33/11 KV 2x3.15 MVA un-manned Sub Station at Khaira along with associated 33 & 11 KV HT Lines.

5 Const. of 33/11 KV 2x1.6 MVA un-manned Sub Station at Thanakalan a/w 33 & 11 KV HT Lines. 6 Const. of additional 33kV HT Line from 132/ 33 KV Sub Station Rakkar (Una) to 33/11 KV Sub

Station Tahliwala 7 Aug. of 2x1.6 MVA to 2x3.15 MVA 33/11 KV, S/Stn. at Shillai.

8 Augmentation of 33/11 KV Sub Station Shahpur from 2x2.5 MVA to 2x6.3 MVA . 9 Augmentation of 33/11 KV Sub Station Bhaira (Baruhi) from 2x3.15 MVA to 2x6.3 MVA . 10 Augmentation of 33/11 KV Sub Station Haroli from 2x3.15 NVA to 2x6.3 MVA. 11 Augmentation of 33/11 KV Sub Station Bharwain from 2x1.6 MVA to 2x3.15 MVA. 12 Re-conductoring of 33 KV HT line Una to Mehatpur from ACSR 6/1/4.72 Dog Conductor to ACSR

30/7/2.59 150mm2 WOLF Conductor. 13 Augmentation of DOG Conductor with WOLF Conductor of 33 KV Bathri-Koti-Chamba line (1st

feeder) along with strengthening of bus bar system at 33/11 KV Sub Station Chamba. 14 Augmentation of DOG Conductor with WOLF Conductor of 33 KV Bathri-Koti-Chamba line (2nd

feeder) along with strengthening of bus bar system at 33/11 KV Sub Station Koti and Jarangla. 15 Aug. of 33/11 KV 2x1.6 MVA to 2x3.15 MVA S/Stn. at Khudla under ED- S/Ghat.

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Sr. No

Name of work/ schemes

16 Aug. of 33/11 KV 2x5 MVA to 2x10 MVA S/Stn. Prini under ED- Manali. 17 Aug. of 33 KV 2x2.5 MVA to 2x500 MVA Naggar. 18 Aug. of 33/11 KV, 2x2.5MVA to 2x6.30MVA Power Trans.at Jabli. 19 Augmentation of 1x1 MVA + 1x2.5 MVA to 2x3.15 MVA S/Stn at Jhandutta. 20 Aug. of 33/11KV Sub-station (1x1.0 into 2x1.6MVA Dhaneta. 21 Aug. of 33/11KV Sub-station (2x1.0 into 2x3.15MVA ) Galore.

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 24909 as on 31-3-2013 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 416 676 1,092 II 206 432 638 III 6,490 9,168 15,658 IV 3,000 4,521 7,521

G. Total 10,112 14,797 24,909 Personal Post:

i Work Charged 2018 ii Daily wages/ Part-time 722

Your Company gives utmost importance for the enrichment of skills and towards this in-house and external training programme 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, 2013: • That the 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.

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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, 2013 by the Comptroller & Auditor General of India. The Auditors have audited the accounts and submitted their report on 22nd October, 2014, which is annexed. 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 2012-13 with the approval of Ministry of Corporate Affairs.

9. BOARD OF DIRECTORS

Since the date of 3rd AGM of the Company, the following is the position of the Directors, who are the Sr. Officers of the State Govt. and HPSEBL: PARTICULARS OF THE PERSONS WHO WERE DIRECTORS/SECRETARY OF THE COMPANY SINCE THE DATE OF 4th AGM

S. No.

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 (Presently)

3. Dr. 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. Ajay Sharma Indian VPO.- Kharanal, Via Paprola, Tehsil- Baijnath, Kangra, 176115, Himachal Pradesh, INDIA

21/01/63 27/11/2014 In position as Nominee Director

5. 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 Nominee Director (Presently)

6. Sh. Kameshwar Singh Dhaulta

Indian House No.- A-62, Phase- 1, Sector-2,, New Shimla, Shimla, 171009, Himachal Pradesh, INDIA

29.08.59 28.02.2014 In position as Nominee Director

7.

Sh. Rajeev Sharma, IAS

Indian House No.-24, Type-V, Officers Colony, Kasumpti,, Shimla, 171009, H.P.

15/10/63 05/11/2014 In position as Whole- time- Director

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S. No.

Name NATIONA

LITY USUAL ADDRESS

DATE OF BIRTH

DATE OF APPOINTMENT

DATE OF CESSATION

(IF ANY)

8. Sh. Jai Parkash Kalta

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

10.05.60 01.06.2012 In position as Whole- time- Director

9. Sh. Pavan Kumar Kohli

Indian House No.-62, Housing Board Colony, Saproon, Solan, 173211, Himachal Pradesh, INDIA


10. Sh. Ravinder Kumar Sharma

Indian Type-IV, HPSEB Colony, Kelston, Shimla, 171001, Himachal Pradesh, INDIA


11. Sh. Rawther Dawood Nazeem, IAS

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

02.12.68 18.12.2012 Ceased as Nominee Director w.e.f. 18/09/2014

12. Sh. Hans Raj Sharma, HAS

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


13 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

14. Sh. Amandeep Garg, IAS

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


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. 5, 22, 03, 18,000/- 12. ACCOUNTS The Profit & Loss Account Statement for the period ended 31st March, 2013 and Balance Sheet as on that date have been prepared and are annexed along with the annual accounts of its subsidiary Company, Beas Valley Power Corporation Limited. 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, 2013 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 10 (Ten) Directors, consisting of 5 (five) Whole Time (Functional Directors) including Managing Director and 05 (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 Third financial year on 28.12.2013, 5 (Five

) meetings of Board of Directors have been held including this meeting on 05.03.2015. Majority of 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 adopted its Annual Accounts in Annual General Meetings for the financial year 2012-13 and 2013-14. However, the Annual Accounts for the financial year 2012-13 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 2012-13 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.

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

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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: 05.03.2015 Managing Director

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HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD. Balance Sheet as at 31st March, 2013. (₹ in Lacs)

Particulars Note No. As at 31st March,2013 As at 31st March,2012 I. EQUITY AND LIABILITIES 1 Shareholders’ Funds

(a) Share Capital 2.1 11.40

11.40

(b) Reserves and Surplus 2.2 23,903.07

34,267.45

(c) Money Received against Share Warrants 23,914.47

34,278.85

2 Share Application Money Pending Allotment 2.3

44,653.18

97,177.18

3 Non-Current Liabilities (a) Long-Term Borrowings 2.4 1,50,734.25

1,61,477.30

(b) Deferred Tax Liabilities (Net) -

-

(c) Other Long Term Liabilities 2.5 64,476.00

42,959.49

(d) Long-Term Provisions 2.6 - 2,15,210.25 - 2,04,436.79

4 Current Liabilities (a) Short-Term Borrowings 2.7 2,63,299.11

2,33,878.37

(b) Trade Payables 2.8 1,04,248.96

1,14,400.43

(c) Other Current Liabilities 2.9 1,61,736.92

1,54,571.62

(d) Short-Term Provisions 2.1 11,881.17 5,41,166.16 10,291.30 5,13,141.72

TOTAL 8,24,944.06

8,49,034.54

II. ASSETS Non-current assets 1 (a) Fixed Assets (i)Tangible Assets 2.11 4,99,423.12 - 4,42,608.16

(ii)Intangible Assets 2.12 958.69 - -

(iii)Capital Work-in-Progress 2.13 99,372.57

1,27,327.94

5,99,754.38

5,69,936.10

(b) Non-Current Investments 2.14 38,806.89

88,051.20

(c) Deferred Tax Assets (net) (d) Long-Term Loans and Advances 2.15 2,347.00

1,027.99

(e) Other Non-Current Assets 2.16 14,993.67 6,55,901.94 15,147.22 6,74,162.51

2 Current Assets (a) Current Investments 2.17 1,849.84

2,034.21

(b) Inventories 2.18 9,447.29

10,411.24

(c) Unbilled Revenue -

-

(c) Trade Receivables 2.19 42,697.96

50,106.72

(d) Cash and Cash equivalents 2.2 22,406.25

28,719.69

(e) Short-Term Loans and Advances 2.21 37,909.32

47,863.69

(f)Other Current Assets 2.22 54,731.46 1,69,042.12 35,736.48 1,74,872.03

TOTAL 8,24,944.06

8,49,034.54

The accompanying notes and significant accounting policies form an integral part of these financial statements. For and on behalf of Company

Sd/- Sd/- Sd/- (Gulshan Aggarwal) (Akshay Sood, IAS) (Er. P C Negi) ChiefAccountsOfficer Director (F&A) ManagingDirector

Auditors Report As per our report of even date

Sd/- For Anil Karol & Co. ( C.A. Umesh Walia) CharteredAccountants Partner FirmNo.04816N MNo.098287 Place: Shimla Date:22.10.2014

15

HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD.

Statement of Profit and Loss for the year ended 31st March, 2013

(₹ in Lacs)

Particulars Note No.

As at 31st March, 2013


I. Revenue from Operations 2.23 422166.66 382845.73 II. Other Income 2.24 37240.52 19409.44 III. Total Revenue (I + II) 459407.18 402255.17 IV. Expenses:

Purchase of Power 2.25 262938.30 265762.21

Employee Benefits Expense 2.26 114084.26 104026.96

Finance Costs 2.27 42946.27 26110.72

Depreciation and Amortization expense 2.28 20955.29 19975.65

Other expenses 2.29 52389.57 37971.58

Total Expenses 493313.69 453847.12

V. Profit / (Loss) before exceptional and extraordinary items and tax (III-IV)

(33906.52) (51591.95)

VI. Exceptional items

VII. Profit / (Loss) before extraordinary items and tax (V - VI)

(33906.52) (51591.95)

VIII. Extraordinary Items 2.30 121.69 (316.36)

IX. Profit / (Loss) before tax (VII- VIII) (34028.20) (51275.59) X Tax expense:

(1) Current Tax 0.00 0.00

(2) Deferred Tax 0.00 0.00

XI Profit / (Loss) for the period from operations (VII-VIII)

(34028.20) (51275.59)

The accompanying notes and significant accounting policies form an integral part of these financial statements. For and on behalf of Company

Sd/- Sd/- Sd/- (Gulshan Aggarwal) (Akshay Sood, IAS) (Er. P C Negi) Chief Accounts Officer Director (F&A) Managing Director

Auditors Report As per our report of even date

Sd/- For Anil Karol & Co. (C.A. Umesh Walia) Chartered Accountants Partner FirmNo. 04816N MNo.098287 Place: Shimla Date: 22.10.2014

16

ANNUAL REPORT 2012-13

1. Notes to Accounts

The Amounts in financial statements are presented in Lakhs Indian Rupees

The financial statements for the year ended 31st March, 2013 were prepared as per the provisions applicable under revised schedule VI to the Companies Act, 1956. The figures of previous year have also been reclassified/regrouped wherever necessary to confirm those year classification

2.1 Share Capital

As at 31st March, 2013 As at 31st March, 2012

No. of Shares (₹ in Lacs) No. of Shares (₹ in Lacs)

Authorised

Equity Shares at par value `100/- each

5,00,000 500.00 5,00,000 500.00

EQUITY SUBSCRIBED AND FULLY PAID UP

- - - -

Equity Shares at par value `100/- each fully paid up

11,400 11.40 11,400 11.40

Total

11.40

11.40

2.1.1 The reconciliation of the number of shares outstanding is set out low:

Name of Shareholder As at 31st March, 2013 As at 31st March, 2012

No. of Shares (₹ in Lacs) No. of Shares

(₹ in Lacs)

Number of shares at the beginning

11,400 11.40 1,400 1.40

Number of shares issued during the year.

0.00 0.00 10,000 10.00

Number of shares at the end. 11400 11.40 11,400 11.40

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

Name As at 31st March, 2013 As at 31st March, 2012

No. of Equity Shares

% of Shareholding

No. of Equity Shares

% of Shareholdin

g

1. Governor of HP - 10000 87.72% 10000.00 87.72%

2. Sh. R.D. Dhiman, IAS

3. Sh. Akshay Sood, IAS

4. Sh. Anil Kumar Dutta

5. Sh. P.C. Negi 6. Sh. J. P. Kalta

7. Dr. S. K. Baldi, IAS

8. Sh. S.K.B.S. Negi,IAS

17

2.2 Reserves & Surplus

(₹ in Lacs)

Particulars As at 31st March, 2013 As at 31st March,

2012

Capital Reserves / Capital Grants from Go HP & GOI

Opening Balance 91201.02 90171.52

Add: addition during the year 986.82 1029.50

Less : Utilized during the year 0.00 0.00

Closing balance 92187.84 91201.02

Capital Reserves / Other Grants and Subsidies

Opening Balance 81401.26 67157.96


less: Utilized during the year 0.00 0.00

Closing balance 103728.43 81401.26

General Reserves

Opening Balance ( Leave encashment fund) 1500.00 1555.08


less : Utilized during the year 0.00 55.08

Closing Balance 1849.83 1500.00

Deficit

Opening Balance -139834.83 -88559.24

Add: Loss during the year as per statement of P & L A/c

-34028.20 -51275.59

Closing Balance -173863.03 -139834.83

Total 23903.07 34267.45

2.3 Share Application Money Pending Allotment

(₹ in Lacs) Particulars As at 31st March, 2013 As at 31st March, 2012

Application money pending allotment 44653.18 97177.18

2.4 Long Term Borrowings (₹ in Lacs)

Particulars As at 31st March, 2013 As at 31st March, 2012 Term Loans A Secured

Banks 0.00 0.00 Financial Institutions 106563.14 94418.05 Others 0.00 0.00

Total A 106563.14 94418.05

B Unsecured

Banks 20600.00 32300.00

Financial Institutions 20819.87 30080.48

Others 2751.24 4678.77

Total B 44171.11 67059.25

Total Long Term Borrowings (A+B)

150734.25 161477.30

18

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.

(₹ in Lacs) Particulars

As at 31st March, 2013 As at 31st March,

2012 Secured REC 58,340.23 40,691.23 PFC 32,706.72 40,842.87 LIC 0.00 326.75 PFC ( APDRP Part-A) 5,347.80 2,891.80 PFC ( APDRP Part-B) 10,168.40 9,665.40

Total 1,06,563.15 94,418.05 Unsecured Banks H P State Coop. Bank, Shimla 20600.00 31436.00

Kangra Central Cooperative Bank 0.00 864.00 Total 20600.00 32300.00

Financial Institutions REC ( RGGVY ) 2,859.87 2,859.87 Non SLR Bonds 5,460.00 12,422.50 LIC 12,500.00 14,798.12

Total 20,819.87 30,080.49 Others ADB Loan through H P Government 840.46 767.99 APDRP Loan through H P Government incl. Interest accrued

1,410.78 3,410.78

RGGVY Loan H P Government 500.00 500.00 Total 2,751.24 4,678.77

2.5 Other Long Term Liabilities



2012 Security Deposits from Consumers 25,303.58 23,248.72 Deposits, Retention Money from Contractors and Others

8,012.81 7,918.63

Contributory Provident Fund 0.00 0.00 GPF 1,12,355.58 1,00,884.74 less : GPF Investments -94,670.88 -1,00,175.27 Other Funds-CPS 821.61 1471.80 Advance for Infrastructure development / Others 12653.30 9610.87

Total 64476.00

42959.49

2.6 Long Term Provisions


Provision for losses pending investigation

0.00 0.00

19

2.7 Short Term Borrowings (₹ in Lacs)

Particulars As at 31st March, 2013 As at 31st March, 2012 Secured Loans Overdraft / Cash Credit limit from banks 66597.28 70464.23 Cash Credit limit from banks 0.00 0.00 Unsecured Loans 0.00 0.00 Over Draft / Cash Credit limits from banks 56374.83 40083.14 Short Term Loans from banks 140327.00 123331.00

Total 263299.11 233878.37

2.71 Overdrafts from banks are secured against FDR's.


Over drafts State Bank of India 10,529.05 9,159.89 UCO Bank 1,676.35 3,492.25 Bank of India - 282.08 Bank of Baroda 3,338.85 3,287.47 Kangra Central Coop Bank 11,960.41 12,186.72 Union Bank of India - 98.68 H P Cooperative Bank 10,268.92 10,527.80 Indian Overseas bank 1,070.29 1,010.13 Punjab National Bank 5,048.30 3,102.11 Central bank of India 959.88 2,924.82 Punjab & Sind bank 4,301.64 4,194.87 Maharashtra Bank - 844.71 IDBI 2,133.66 2,763.70 State bank of Patiala 4,470.60 - Canara Bank - - Working Capital - - State Bank of India - 11,664.00 UCO Bank 8,609.00 3,675.00 Indian Overseas Bank 1,250.00 1,250.00 central bank of India 980.33 -

Total 66,597.28 70,464.23 Unsecured

Cash Credit limit against Escrow cover

State Bank of India 6,362.53 10,083.14 Kangra Central Co-op Bank 20,000.00 20,000.00 Punjab & Sind bank 9,999.97 10,000.00 Canara bank 20,012.33 - Total 56,374.83 40,083.14 Short Term Loans from Banks Kangra Central Coop Bank 55,000.00 35,000.00 Canara Bank - 10,000.00 State Bank of India 12,000.00 30,000.00 Vijaya bank 8,327.00 28,331.00 Central bank of India 10,000.00 10,000.00 Punjab National bank - 10,000.00

20


M/s REC Ltd 15,000.00 - M/S PFC Ltd. 20,000.00 - P& S bank 20,000.00 -

Total 1,40,327.00 1,23,331.00

2.8 Trade Payables.


Sundry Creditors Purchase of Power 1,04,248.96 1,14,400.43 Others - -

Total 1,04,248.96 1,14,400.43

2.9 Other Current Liabilities (₹ in Lacs)

Particulars As at 31st March, 2013 As at 31st March, 2012 Current Liabilities of Long Term debt Secured 13,643.90 13,311.25 Unsecured 17,607.99 11,047.70 - - Interest accrued but not due on : - - Term loans 6,753.55 3,495.32 Bonds 201.11 219.17 Other Payables: - - Liability for employees remuneration and benefits 3,769.32 3,833.26 Unclaimed Interest 86.50 32.00 Security deposits from employees (19.65) 0.96 Advances received from contractors / others 12.66 11.78 Amounts payable to GoHP / other departments 42,936.70 35,522.84 Other payable for expenses / employee deductions

72.71 4,786.69

Liability for Purchases -Capital / Others 19,734.83 16,819.44 TDS and other Statutory Taxes payable 339.12 196.53 Deposits, Retention Money from Contractors and Others

56,598.18 65,294.68

Total 1,61,736.92 1,54,571.62

2.10 Short Term Provisions (₹ in Lacs)

Particulars As at 31st March, 2013


Current Liabilities of Long Term debt Unfunded Employee Benefits Leave Salary 345.46 149.32 Others Bonus 14.53 9.07 Medical expenses 384.54 223.44 Interest Payable on Consumer deposits 5,280.69 1,150.47 Provision for expenses 5,855.95 8,759.00

Total 11,881.17 10,291.30

21

HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD. Note No. 2.11 FIXED ASSETS AND PROVISION FOR DEPRECIATION

(₹ in Lacs)

GROSS BLOCK PROVISION FOR DEPRECIATION NET BLOCK

Sl. No.

Asset Group BH OB as on 01.04.12

Additions during the

year

Adjust-ments

Deductions As at end of March, 2013

OB as on 01.04.2012

Depreciation from

01.04.2012 to 31.03.2013

Adjust./ deductions

2012-13

At the end of March 2013.



1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 Land & Land Rights 10.1 8,581.93 647.57 - 1.57 9,227.94 61.90 30.95 - 92.85 9,135.08 8,520.03

2 Buildings 10.2 21,387.24 (50.77)

- 12.30 21,324.17 7,531.83 523.53

- 8,055.36

13,268.80

13,855.41

3 Hydraulic Works 10.3 1,23,100.55 65.06

- 24.89 1,23,140.72 28,063.70 6,457.45 - 34,521.16 88,619.56 95,036.84

4 Other Civil Works 10.4

22,327.78

3,219.55

- 179.97

25,367.36

9,014.14 448.49

-

9,462.62

15,904.74

13,313.64

5 Plant & Machinery 10.5

1,87,906.64

31,241.30

- 259.26

2,18,888.68

30,127.73 7,201.45

-

37,329.18

1,81,559.50

1,57,778.92

6 Lines & Cable Net 10.6

1,75,449.66

42,947.04

- 118.15

2,18,278.55

31,132.31 5,519.04

-

36,651.34

1,81,627.21

1,44,317.35

7 Vehicles 10.7

1,639.75

119.30

- 103.19

1,655.87

1,099.27 132.18

-

1,231.44

424.43

540.49

8 Furniture & Fixtures 10.8

859.99

(6.36)

- 0.49

853.14

568.40 52.04

-

620.44

232.70

291.59

9 Office Equipments 10.9

2,048.93

268.48

- -

2,317.40

422.62 126.86

-

549.48

1,767.92

1,626.30

10(s)

1,447.81 -

- -

1,447.81 - -

- -

1,447.81 -

Sub-Total

5,44,750.28

78,451.18

- 699.82

6,22,501.64

1,08,021.89 20,491.99

-

1,28,513.88

4,93,987.75

4,35,280.57

10 Capital Assets (not belonging to the Company)

11.101

327.48 -

- -

327.48

506.89 450.95

-

957.85

(630.37)

(179.42)

11.102

6,710.59

0.00

- -

6,710.59

644.85 -

-

644.85

6,065.73

6,065.73

11 Assets Transfer Inward 13.4 -

0.00

- - - 6.54 (6.54)

- -

-

(6.54)

Total

7,038.06

0.00

- -

7,038.06

1,158.29 444.41

-

1,602.70

5,435.36

5,879.78

Grand Total 5,51,788.34 78,451.18

- 699.82 6,29,539.70 1,09,180.18 20,936.40 - 1,30,116.58 4,99,423.12 4,41,160.35

1. Gross Block does not includes 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 2012-13 Rs. Nil.

22

HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD. Note No. 2.12 INTANGIBLE ASSETS AND PROVISION FOR DEPRECIATION

(₹ in Lacs) GROSS BLOCK PROVISION FOR DEPRECIATION NET BLOCK

Sl.No. Asset Group BH OB as on 01.04.12

Additions during the

year Adjustments Deductions

As at March,

2013

OB as on 01.04.2012

Depreciation from

01.04.2012 to 31.03.2013

Adjust./ deductions

2012-13


At the end of March

2013.

At the end of March

2012.

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

Assets 18.30 - 958.69 - - 958.69 - - - 958.69 - Total - 958.69 - - 958.69 - - - - 958.69 -

23

HIMACHAL PRADESH STATE ELECTRICITY BOARD LTD. Note No. 2.13 TANGIBLE ASSETS AND PROVISION FOR DEPRECIATION

(₹ in Lacs)

Sr. No.

Particulars Accounts

Code As at 31st March,

20112

Additions during the year

2013

Transfers/ Adjustments

Total WIP as on 31st March, 2013

Capitalised during the year 2013

As at 31st March 2013

1 2 3 4 5 6 7 9 10

1 Land & Land Rights 14.1 1,514.84 157.96 (102.89) 1,775.70 206.79 1,568.91

2 Building& civil structure 14.2 1,315.71 2,514.00 53.81 3,775.90 1,000.98 2,774.92 3 Hydraulic Works 14.3 2,188.79 2,681.28 4,163.57 706.50 3,501.96 (2,795.46) 4 Other Civil Works 14.4 22,073.77 2,240.35 (4,066.02) 28,380.14 (4,565.43) 32,945.58 5 Plant & Machinery-T&D 14.5 30,453.99 35,611.31 (1,172.56) 67,237.86 47,727.54 19,510.32 6 Lines & Cable Network etc. 14.6 49,553.13 34,099.72 759.80 82,893.05 42,537.97 40,355.08 7 Vehicles 14.7 811.08 (6.23) 505.02 299.83 290.28 9.55 8 Furniture & Fixtures 14.8 96.82 164.10 (7.56) 268.48 254.70 13.78 9 Office Equipments 14.9 3,566.82 653.19 (133.17) 4,353.18 422.73 3,930.45 14s (9,090.67) - - (9,090.67) 526.67 (9,617.34)

Sub-Total 1,02,484.28 78,115.67 - 1,80,599.96 91,904.17 88,695.79

Other Assets at construction stage

1 Contract- in Progress 15.1 6,941.16 (1,683.76) - 5,257.40 5,068.36 189.04 15 182.93 - 182.93 - 182.93

2 Revenue Expense Reclassified Pending Allocation over capital works

15.2 17,719.56 7,290.68 25,010.24 14,705.43 10,304.81

Sub Total 24,843.66 5,606.92 - 30,450.58 19,773.79 10,676.79 Total:- 1,27,327.94 83,722.60 - 2,11,050.54 1,11,677.96 99,372.57

Previous Year 1,29,369.82 85,082.86 11,308.10 2,03,144.59 75,816.65 1,27,327.94

24

2.14 Non Current Investments (₹ in Lacs)



Benevolent fund investment with banks - 307.38 Investment in its own projects By HPSEBL - 57,524.00 Investments in Shares in : - - Subsidiary (BVPCL)-27500000 Equity Shares of `100/- each

27,500.00 20,000.00

Others ( HPPCL) 1130689 Shares of 1000/- each 11,306.89 10,219.82 Total 38,806.89 88,051.20

2.15 Long Term Loans & Advances



2012 Capital Advances Secured - - Unsecured - Considered Good 1,713.61 441.69 Loans & Advances to Employees - - Secured 392.12 490.03 Unsecured - Considered Good - - Loans & Advances Others - - Unsecured - Considered Good 145.00 - Interest Accrued but not due on - - Staff loans & advances - - Others 96.27 96.27

Total 2,347.00 1,027.99 2.16 Other Non Current Assets


Assets not in use 973.21 1,038.69 Deferred Miscellaneous expenses 12,098.26 12,505.23 Trade receivables-defaulters 535.36 590.83 Inventories-Scrap/other materials/excess/shortages

564.09 623.06

Interest Accrued & due on - - Staff loans & advances - - Others 0.47 0.39 Interest Accrued but not due on - - Staff loans & advances 734.94 267.76 Others 87.34 121.26

Total 14,993.67 15,147.22 2.17 Current Investments


Leave Encashment and CPS fund Investment

1,849.84

2,034.21

25

2.18 Inventories (₹ in Lacs)

Particulars As at 31st March, 2013 As at 31st March, 2012 Materials Stock

9447.29

10411.24

Less : Provision for Shortage and Obsolescence

0.00

0.00

Total 9447.29

10411.24

2.19 Trade Receivables



2012

Outstanding for sale of power 43,245.55 50,248.76 Others - - Less: Provision for doubtful debts (-)547.59 (-)142.04 Total 42,697.96 50,106.72 Out of above - - Trade receivables outstanding for period exceeding six months from the date they were due for payment

- -

Unsecured considered good 29,653.01 39,013.41 Other Trade Receivable - - Unsecured considered good 13,044.95 11,093.31 - -

Total 42,697.96 50,106.72 2.20 Cash and Bank Balances



2012

Cash and Cash equivalents 9.35 1.30

Postage stamps/DDs in Hand 205.12 21.31

Imprest with Staff 0.59 0.59

Balances with Banks 12,292.44 15,416.67

FDR's > 3M 9,897.75 13,279.82

Total 22406.25 28719.69

26

2.21 Short Term Loans & Advances (₹ in Lacs)

Particulars As at 31st March, 2013 As at 31st March,

2012

Advances to Contractors and Suppliers

Secured Considered Good 1,984.29 2,152.89

Less : Provision for doubtful advances - -

Others - -

Advance recoverable from employees 162.20 176.37

Prepaid expenses 100.75 61.17

Advance tax and tax deducted at source 2,018.80 1,127.34

Amount recoverable- Government departments 5,071.85 3,571.28

Amt recoverable- Related parties 4,931.61 10,291.33

Amount recoverable others 5,436.06 11,956.01

Deposits 6,482.57 7,608.99

Amount recoverable from employees 1,276.62 210.98

Interest accrued but not due from - -

Employees 1.15 1.18

Others 10,443.42 10,706.15

Total 37,909.32 47,863.69

2.22 Short Term Loans & Advances


Receivables from scrap sale / miscellaneous. 443.24 427.62

Unbilled revenue 19,055.03 15,450.66

Electricity Duty recoverable from Consumers 757.32 1,141.48

Grant /Subsidies receivable GoHP 16,228.00 11,174.89

Inter Unit Transactions 18,247.87 7,541.83

Total 54731.46 35736.48

27

2.23 Revenue from Operations (₹ in Lacs)

Particulars

Account Code Figures for the Current

Year ended 31.03.2013

Figures for the Previous


Total Inter State Sale of Power UPSEB 61.103 3,831.60 - Sangroli (NTPC) 61.110 - 0.10 Uttranchal Jal Vidyut Nigam Ltd. 61.113 - 459.36 Power Trading Corp. of India 61.114 - - Through Banking-BRPL/BYPL 61.119 15,904.25 10,050.00 Through Banking-Haryana Power Corp. Ltd. 61.120 5,055.56 30,918.90 Through Banking-P.S.E.B 61.121 23,086.63 25,887.67 Consumers Deviation of Malana. 61.123 531.70 21.51 Reactive Engergy from various CPU's/SEBs 61.124 138.29 232.37 UI Charges /Sale of Power NREB Through PGCIL. 61.130 6,074.38 13,144.07 M/S Indian Energy Exchange & Power,. India 61.148 4,428.97 6,378.92 Revnue from SOP-Others (By Gen. Wing) 61.460 10,653.47 -

Sub-Total(A) 69,704.84 87,092.89 REVENUE FROM SALE OF POWER Domestic 61.201 to 209 56,454.96 41,509.06 Commercial 61.211 to 219 22,555.70 22,808.17 Small Power 61.221 to 229 2,830.73 2,666.68 Medium Power 61.231 to 240 7,852.23 6,554.77 Large supply 61.241 to 250 &

378 &379 1,98,909.46 1,66,893.93

Agriculture/Irrigation 61.251 to 259 2,598.10 1,720.83 Public Lighting 61.261 to 269 884.39 622.49 Bulk and Grid supply 61.271 to 290 9,862.78 9,009.08 Common Pool 61.291 to 300 - - Revenue from Sale of Power ND/NC 61.301 to 309 6,637.40 5,554.82 Other (Water Works and sewerage) 61.350 to 353 &

357 25,612.25 23,026.59

Temporary Metered Supply 61.373 to 375 1,597.44 1,688.58 Total (B) 3,35,795.44 2,82,054.99

Total Revenue (A+B) 4,05,500.28 3,69,147.89 Electricity Duty Recovery 61.501 to 519 33,437.54 31,087.82 Meter Rent/Service Line Rentals 61.6 4,141.44 3,677.25 Recoveries for theft of power and Mal practice. 61.711 to 729 9.71 1.97 Peak Load Violation Charges 61.741 to 743 3,515.26 3,033.59

Sub- Total 41,103.94 37,800.63 Wheeling charges recoveries 61.8 8,474.66 6,442.26 Misc. Charges from consumers 61.9 525.31 542.77 ECT levied by MCs/NACS 61.941 to 953 336.38 178.60

Sub- Total 9,336.36 7,163.62 GROSS REVENUE FROM SALE OF POWER 4,55,940.58 4,14,112.14 Less: Electy. Duty Payable (Contra) 61.541 to 559 33,437.54 31,087.82 Electricity consumption tax (Contra) 61.961 to 973 336.38 178.60

Sub- Total 33,773.92 31,266.42 Total 4,22,166.66 3,82,845.73

28

2.24 Other Income

(₹ in Lacs)

Particulars





Interest on Staff Loans and Advances. 62.210 to 219 53.28 184.21 Income from Investments 62.220 to 239 1,824.40 2,795.96

Delayed Payment Charges from Consumers. 62.250 3,001.29 1,880.65 Interest on advances to suppliers / Contractors. 62.260 105.10 5.00 Income from Trading. 62.3 155.74 210.12 Income from staff Welfare activities. 62.6 8.59 8.66 Miscellaneous Receipts. 62.9 3,545.36 6,765.38

Total 8,693.76 11,849.98 Gain on sale of fixed Assets (excluding capital Gain Rs. Nil transferred to capital reserve)

62.4 - 26.13

Revenue grant and subsidies 63.121 - - Prior Period Income 65 28,546.76 7,533.34

Total 37,240.52 19,409.44 2.25 Purchase of Power

(₹ in Lacs)

Particulars





P.S.E.B. 70.101 75.69 89.17 U.P.P.C.L (through Banking ) 70.103 4,524.61 - B.B.M.B 70.106 428.67 355.85 NTPC 70.11O 41,563.24 43,248.69 NPCC NAP 70.112 2265.45 1596.70 POP from Rajasthan Atomic Power Project of NPCIL (RAP)

70.119 5,182.95 4,973.59

Malana HEP 70.120 63.46 92.04 Uttranchal Power Corp. Ltd. 70121 1,712.23 8.54

Uttranchal Jal Vidyut Nigam Ltd. 70.122 2,621.76 5,212.52 NHPC 70.123 9,293.23 7,160.36 Reactive Energy from various CPUs/SEB 70.124 441.41 328.79 Purchase of Power through banking-BRPL/BYPL 70.125 12,115.70 14,143.34 POP through Banking-Haryana Power Gen Co.Ltd. 70.126 14,563.68 15,206.12 Purchase of Power through banking-P.S.E.B. 70.127 26,537.27 19,597.36 Purchase of Power U.P.J.V.N.L. 70.129 - - NREB Through PGCIL. 70.130 5,001.41 8,185.98 POP- Aravali power Co. 70.132 1,709.11 597.82 Wheeling chares 70.4 62.66 - Wheeling charges -UPPCL Charges 70.401 - - Raskat HEP 70.816 92.55 89.56 Titang Mini HEP. 70.817 46.90 37.64 Baspa Power Ltd. 70.818 32,594.29 32,501.54 Satluj Jal Vidyut Nigam Ltd. 70.819 5,739.28 5,541.72 Manjhi HEP M/S Dharamshala Hydro Power Ltd. 70.820 260.61 251.85

29

(₹ in Lacs)

Particulars





Deher HEP M/S Astha Project India 70.821 667.88 639.04 Baragaon HEP M/S K.K.K. Hydro Power Ltd.Faridabad

70.822 745.75 847.05

Ching HEP M/S Hateshwari Om Power Enterprises Ltd.

70.823 60.94 53.06

POP Aleo Hydro Project 70.824 328.88 381.80 POP Manal Hydro Project 70.825 452.54 486.65 POP from Power Trading Corp. of India Ltd. 70.826 29,535.92 41,797.92

POP Manjhal HEP M/S Virender Dogra Power Project.

70.827 102.67 136.86

POP- Salag HEP M/S Dhaluladar Hydro System Pvt. Ltd.

70.828 13.66 10.94

POP- Tehri Hydro Power Project. 70.829 5,103.37 5,683.15 POP- Jiwa Kothkhai HEP 70.830 189.25 145.98 POP- Marhi Mini hydro project 70.832 787.20 733.22 POP-Taraila HEP 70.833 63.54 - POP- Kothi HEP 70.834 38.15 36.11 POP-JHTHED HEP 70.835 3.23 7.32 POP-Patikari HEP 70.836 1,358.98 1,166.28 POP-Salag HEP ( M/S -A-Himalya Ltd.) 70.837 168.37 98.26 POP- Braham ganga M/S Harison Hydel Construction (P) Ltd.

70.838 637.23 690.27

POP- Gharola HEP( Him Urja) 70.839 11.30 12.87 POP-Sahu HEP M/S. Him kailash Hydro Power Ltd. 70.840 588.91 698.28 POP- Sarabai HEP ( M/S DSL Hydrowati Ltd.) 70.842 774.38 802.06 POP- Awa HEP ( M/s Astha Project India Ltd.) 70.843 875.45 917.94 POP-Lingti HEP ( Him Unja) 70.844 10.75 1.18 POP- Sural HEP 70.845 8.26 6.39 POP-Kotla HEP Ltd. 70.847 24.23 - POP_IKU-II HEP 70.848 643.95 746.32 POP- M/S Toss HEP 70.849 1,117.83 1,103.96 POP- M/S Shyang HEP 70.850 253.87 250.75 POP- M/S Tarailla-II HEP 70.851 887.52 797.14 POP-M/S Luni-111 70.852 637.75 688.97 POP-M/S-Andhra Stage-11 70.853 440.63 492.54 POP-M/S-Changer Vidyut Karanti PVTLtd. 70.854 85.95 149.93 POP-M/S-A.T.Hydro Pvt-Ltd.(Upper Tarila) 70.855 704.59 616.91 POP-M/S -Sri Sai Krishna Hydro Eng.Pvt.Ltd. 70.856 670.71 737.08 POP-M/S-Vamshi Hydro Eng.Pvt.Ltd against Baner 111 HEP

70.857 341.88 362.40

POP- Manglar HEP 70.858 756.12 789.13 POP-Dirni Dhar HEP 70.859 754.71 527.58 POP- Sainj HEP 75.860 391.36 225.36 POP-Purthi HEP 70.861 1.27 2.31 POP-DSL Hydro HEP 70.862 908.73 922.39 POP-Gurcharan HEP 70.864 138.52 119.26

30

(₹ in Lacs)

Particulars





POP-Dharamshalla HEP 70.865 433.24 397.56 POP-Sach HEP 70.866 72.46 84.04 POP-Tanging HEP 70.867 419.10 389.14 POP-Polar-Ist HEP 70.868 202.63 188.23 POP-Bharhi HEP 70.869 513.67 532.75 POP-Gaj-IIrd HEP 70.870 233.15 243.71 POP-Jirah HEP 70.871 408.57 349.25 POP-Upper Khauli HEP 70.872 659.63 545.04 POP-Rikchad HEP 70.873 910.15 1,004.20 POP-Chirchand HEP 70.874 892.73 703.26 POP Koteshwar HEP 70.875 1,681.56 871.77 POP-TimbiHEP 70.876 84.39 87.44 POP from Binwa parari HEP 70.877 683.38 647.09 POP from Dehar _II HEP 70.878 234.11 198.54 POP from Torela Power Ltd. 70.879 869.20 363.50 POP from Jaina HEP 70.880 914.00 543.25 POP from TATa Power Trading Company 70.881 - 2,916.28 POP from Knowledge Infrastructure system 70.882 - 6,570.67 POP from Rukti-II 70.883 660.74 99.42 POP from Sach HEP 70.884 435.67 34.92 POP from Sumer 70.885 828.98 40.81 POP from Chakshi HEP 70.886 246.04 7.41 POP from Beas Kund HEP 70.887 238.08 - POP from Bely HEP 70.888 332.49 - POP from Balso HEP 70.889 306.78 - POP from Suman Suwari HEP 70.890 175.32 - POP from NSL Power Genration (P) Ltd. Rohru. 70.894 52.56 - POP- Different Utilities on a Day Ahead Availability (IEX)

70.901 1,506.00 650.00

Sub-Total 2,32,176.99 2,40,572.14 O & M charges payable 70.5 1,423.90 891.99 Trans. Charges payable to PGCIL 70.6 24,693.53 20,957.22 Short term open Access - Payable 70.601 3,962.89 2,404.63 Expenses related to ULDC Scheme in the Northern Region under unified Scheme

70.731 504.88 760.85

System/ Marketing operation charges Power System (op) Ltd.

70.733 176.10 175.38

Sub-Total 30,761.30 25,190.07 Total 2,62,938.30 2,65,762.21

31

2.26 Employee Benefits Expenses

(₹ in Lacs)

Employee Benefits Expenses Account Code Figures for the Current




Dearness Pay 75.0 134.86 129.68 Grade Pay (Regular) 75.008 8,051.64 7,871.85 Grade Pay (work charged) 75.009 89.52 72.79 Salary 75.1 33,679.08 35,248.60 Overtime. 75.2 387.18 307.83 Dearness Allowance. 75.3 28,688.52 23,840.40 Other Allowances. 75.4 3,464.33 3,009.40 Bonus. 75.5 2.75 0.68

Sub-Total 74,497.88 70,481.23 Fee & Honorarium. 75.610 1.91 0.72 Medical Expenses reimbursement. 75.611 1,033.18 1,033.02 Leave Travel Assistance. 75.612 18.08 28.21 Salary/ wages of outsourced /contractor 75.613 166.50 19.95 Earned Leave Encashment. 75.617 5,274.72 3,850.93 Payment under WCT. 75.629 104.21 56.33 Leave Salary contributions.(Employee on Dep.) 75.633 - - Leave encashment Fund 75.635 - -

Sub-Total 6,598.60 4,989.16 Staff welfare expenses. 75.7 83.50 71.81 Terminal Benefits. 75.8 37,701.30 34,304.58

Sub-Total 37,784.80 34,376.39 Total 1,18,881.29 1,09,846.78

Less: Expenses Capitalized 75.9 4,797.03 5,819.82 Net Employees Cost 1,14,084.26 1,04,026.96

2.27 Finance Cost

(₹ in Lacs)

Particulars





Interest on State Government Loans. 78.1 154.23 161.51 Interest on Bonds 78.2. 0.00 44.48

Sub-Total 154.23 205.99 Interest on loans from LIC 78.501 1,371.86 1,598.30 Interest on loans from REC 78.502 8,381.04 5,464.76 Other loans etc. 78.504 to 509 - - Interest on stock other loan 78.510 8,062.02 5,004.99 Interest on PFC Loan 78.511 5,369.61 4,179.93 Interest on stock PNB loan 78.512 403.16 736.72 Interest on stock Canara Bank loan 78.513 468.92 939.45 Interest on stock Punjab & Sind Bank Loan 78.514 244.66 - Interest on SIDBI 78.515 - - Interest on Private Bonds 78.516 1,363.92 1,726.41 Interest on UCO Bank Loan 78.517 - 720.46 Interest on loans from Bank of Maharashtra 78.522 - 122.74 Interest on loans from State Bank of India. 78.524 2,829.31 2,223.88 Interest on loans from RAPDRP Part-B PFC 78.526 - 1,000.00 Interest on loan from Vijay Bank 78.527 2,185.95 3,446.78

32

(₹ in Lacs)

Particulars





Interest on loan from Central Bank of India 78.529 1,127.92 620.53 Sub-Total 78.5 31,808.36 27,784.95

Penal interest 0.00 0.00 Interest to consumers (securities) 78.601 1,601.50 1,339.14

Sub-Total 1,601.50 1,339.14 Total interest on capital liabilities 78.1 to 78.6 33,564.09 29,330.08 Interest on borrowing For working capital. 78.7 12,162.73 11,031.05

Sub-Total 12,162.73 11,031.05 Other interest and Finance charges. 78.8 - - Discount to consumers for timely payment of Bills.

78.821 to 78.830

0.58 0.00

- -

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

78.831 & 833 184.03 60.43

Sub-Total 78.82 & 78.831 184.61 60.43 INTEREST TO SUPPLIERS/CONTRACTORS. 0.00 0.00 Interest on Contributory Pension Fund. 78.854 148.04 24.12 Cost of raising finance. 78.861 to 869 11.81 1.27 Discount/Redemption premium on Bound 78.771 - - Other charges. 78.880 to 889 1,550.25 73.50 Interest on LC Charges 78.895 - 39.76

Sub-Total 1,710.09 138.66 Total 47,621.52 40,560.22

Less: Interest capitalized 4,675.25 14,449.50 Total 42,946.27 26,110.72

2.28 Depreciation and Amortization expenses

(₹ in Lacs)

Particulars Account Code Figures for the Current




Depreciation. 77.1&77.2 20,916.55 19,978.47 Sub-Total 20,916.55 19,978.47

WDV of assets scrapped- Land & Land rights 77.711 9.40 - WDV of assets scrapped- Buildings 77.712 3.25 - WDV of assets scrapped -Other Civil Works 77.714 16.94 - WDV of assets scrapped-Plant & Machinery 77.715 - - WDV of assets scrapped-Vehicles 77.717 1.89 0.61 WDV of deficits of fixed assets absorbed on physical verification –vehicles

77.727 - -

Loss on sale on fixed assets ie. Plant Machinery 77.736 - - Loss on sale on fixed assets ie. Vehicles 77.737 2.15 -

Sub-Total 33.63 0.61 Less: Amount capitalized 77.9 (5.11) 3.43

Sub-Total (5.11) 3.43 Total 20,955.29 19,975.65

33

2.29 Other Expenses

(₹ in Lacs)





Repair & Maintenance Plant & Machinery 74.1 1,516.35 1,200.09 Buildings. 74.2 401.11 386.23 Civil Works. 74.3 395.10 300.05 Hydraulic Works. 74.4 267.87 149.66 Lines cables, Net works etc. 74.5 5,263.65 4,972.18 Vehicles. 74.6 2,026.88 1,950.18 Furniture & Fixtures. 74.7 9.85 7.41 Office Equipments. 74.8 111.46 82.54 Others i.e. cost of vehicle other than vehicle/ 74.9 (258.46) (231.25) Re-allocated to capital works Total cost (including employee costs.) 9,733.82 8,817.09 Less:- Employee costs and Admn. & Gen. Exp. 2,196.96 463.50 Less:- Other costs reallocated such as Dep. 1,897.43 3,571.66 Recovery of cost of vehicle from O&M & Units. - -

Sub-Total 4,094.39 4,035.16 Total ( Net Repair and Maintenance ) 5,639.43 4,781.92

Administration and General expenses Rent 76.101 129.38 144.98 Rates & Taxes. 76.102 2.29 15.82

Total 131.67 160.80 Insurance 76.104 to 107 1.27 10.06 Telephone charges, Postage, Telegrams & Telex charges.

76.111 to 113 270.15 286.86

Legal charges. 76.121 74.34 79.12 Audit fee 76.122 5.43 242.16 Consultancy charges. 76.123 72.81 17.48 Technical fees. 76.124 2.79 0.25 Other professional Charges 76.125 26.60 63.86 Income Tax Uploading Charges. 76.126 4.01 6.31 Statutory Audit fee 76.127 1.69 1.69 Charges on a\c of service rendered by central board keeping agency under new pension scheme

76.128 1.02 -

Internal Audit Fee. 76.129 25.00 - Conveyance & Travel expenses 76.131 to 139

& 76.141. 1,611.23 1,516.73

Expenditure on foreign travel. 76.140 6.08 - TA/ DAs to Statutory Auditor 76.143 14.38 0.25

Sub-Total 2,102.43 2,224.78 Other expenses:- Fee & Subscription. 76.151 20.30 27.78 Books & Periodicals 76.152 9.64 8.30 Printing & Stationary. 76.153 173.93 173.90 Exp. Under Right to Information Act- Paper & Processing fee.

76.154 0.02 1.21

Advertisement expenses. 76.155 45.75 69.08

34

(₹ in Lacs)





Public Interaction Prog. Expenses 76.156 13.60 26.34 Contributions /Donations 76.157 - 4.47 Electricity charges. 76.158 308.98 265.24 Cold weather expenses/water charges. 76.159 & 160 32.38 24.50 Expenditure on Gift/Presentation. 76.161 - - Entertainment. 76.162 19.40 4.72 Incentives to informer regarding theft of energy 76.163 - - Expenditure on display of Models. 76.164 0.87 - Expenditure on training to staff within the state. 76.165 3.11 11.25 Expenditure on training to staff outside the state. 76.166 3.00 3.19 Petition fee payment to HPERC 76.167 92.71 73.18 & Consumer Grievances Redressal Forum 76.168 5.27 46.54 License fee for Distribution & Trans payable to HPERC

76.169 25.00 25.00

Fees for SAS Examination 76.170 1.85 1.47 Exp. On promotion of energy efficiency 76.171 - 14.18 Exp. On Geographically information system/Global Position System (GIS/GPS)

76.173 21.29 2.44

Transaction charges to SCAs for collection of energy bills

76.174 35.73 12.91

Welfare\protection of consumer utilized amount from rounding of security and other surplus receipts

76.182 0.01 -

Exp. On providing cost free CFL bulb to domestic Consumers

76.183 1,094.32 1,126.17

Exp. Incurred on capacity building for Poverty Reduction Projects CBPRS for sponsor HPSEB personnel to attend training programme.

76.185 4.47 -

Publicity expenses. 76.191 0.72 7.16 76.190 & 54.35 - Miscellaneous expenses. 192 to 198 - 85.66

Sub-Total 1,966.71 2,014.69 Freight. 76.210 to 220 10.80 - Other Purchase Related Expenses. 76.230 to 299 249.07 290.86

Sub-Total 259.87 290.86 Total 4,460.68 4,691.13

Less : Expenses Capitalized 76.9 294.98 377.01 Net Expenditure 4,165.70 4,314.12

Prior Period Expenses 83 40,501.29 28,852.95 Other Debits - - Bad & Doubtful debts written off / provided for. 79.4 405.79 0.38 Miscellaneous Losses & write offs. 79.5 1,677.36 22.21

Total 52,389.58 37,971.58

35

2.30 Exceptional and Extraordinary items

(₹ in Lacs)

Particulars Account Code

Figures for the Current




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

63.2 - 350.00

Total

- 350.00

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

79.8 121.69 33.64

Total

121.69 33.64

Extraordinary items (Net) 121.69 (316.36)

36

HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED

Cash Flow statement for year ended 31st March, 2013 (₹ in Lacs)

Sr. No. Description 2012-13) 2011-12

A: Cash Flow from Operating Activities

(indirect method)

1 Net profit/(Loss) Before Tax. (34,028.20) (51,275.59) 2 Add:- Non Cash transactions:

Depreciation including adjustment 20,955.29 19,975.65

Interest Income (105.10) (4.99)

Deferred Revenue Expenses write back (1,094.32) (1,126.17)

Interest & finance charges 42,946.27 26,110.72

Unbilled Revenue (19,055.03) (15,450.66)

Loss on a/c of flood, cyclone, fire etc. 121.69 (316.36)

3 Operating Profit/(Loss) Before Working Capital Changes (1+2) 9,740.60 (22,087.40)

4 Adjustment for

Decrease in trade & other Recoverable 38,852.37 (14,721.64)

Decrease in Store & spare 1,007.30 (1,969.21)

Decrease in Trade Payable 8,392.80 (48,122.04)

5 Cash Generated from Operations (3+4) 57,993.07 (86,900.29) 6 Borrowing for working Capital

7 Sub-Total (5-6) 57,993.07 (86,900.29) 8 Net prior Period (Expenses/Income (Net of Period period Dep.) (11,943.80) (21,319.61) 9 Fringe benefit Tax - -

10 Net cash Flow from Operating Activities ( 7+8+9)(A) 46,049.27 (1,08,219.90) 11 B: Cash Flow From Investing Activities.

i) Purchase of fixed assets & CWIP-increased/(decreased) 50,689.20 39,809.59

ii) Disposal of fixed assets. - -

iii) Service line contribution- increased. 20,987.13 12,887.85

iv) purchase of investments- increased/(decreased) (54,933.07) 9,943.48

v) Deferred revenue expenditure- increased (406.97) (8.89)

vi) Interest Income 105.10 4.99

Net Cash Used in Investing Activities. 16,441.39 62,637.02

12 C: Net Cash Used in Financing activities

i) Proceeds from long term & Other Borrowings 1,14,594.97 1,59,010.00

ii) Repayment of Long Term & Other Borrowings (95,917.28) (1,05,783.04)

iii) Interest & finance Charges (paid) (45,509.98) (26,558.52)

iv) Consumer security deposits-increased 2,054.86 2,351.27

v) Grant-increased 2,326.85 2,384.94

vi) Reserves funds 11,170.48 7,466.74

vii) Equity -HPSEB Ltd.. (57,524.00) -

Net Cash generated from Financing Activities ( I to vii) (C ) (68,804.10) 38,871.39

13 Net increase in Cash and cash equivalent ( A+B+C) (6,313.44) (6,711.49)

14 Opening balance of Cash and cash Equivalents 28,719.69 35,431.18 15 Closing Balance of Cash & Cash Equivalents. 22,406.25 28,719.69

Sd/- Sd/- Sd/-

(Gulshan Aggarwal) (Akshay Sood, IAS) (Er. P C Negi) Chief Accounts Officer Director (F&A) Managing Director

Sd/- For Anil Karol & Co. (C.A. Umesh Walia)

Chartered Accountants Partner FirmNo. 04816N MNo. 098287 Place: Shimla Date: 22.10.2014

37

Note 2.31 SIGNIFICANT ACCOUNTING POLICES AND NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2013.

(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.

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.

e) Fixed Assets value of Rs. 9.66 lacs in respective of following field Units have been created on land which does not belong to HPSEB Ltd.:- (Amount in Rs.) (i) Electrical Division, Bilaspur 117.49 (ii) Electrical Division, Ghumarwin 122.22 (iii) Electrical Division, Kangra 108.30 (iv) Electrical Division, Dharamshala 313.46 (v) Electrical Division, Palampur 9.98 (vi) Electrical Division, Baijnath 66.24 (vii) Electrical Division, Lambagaon 96.22 (viii) Electrical Division, Dehra 125.80 (ix) Electrical Division, Chopal

Total 6.74

966.45

f) Residential and Non-Residential Building valuing Rs. 712.26 lacs and Rs. 93.34 lacs built in Sainj Project have been transferred to HPPCL on 16.01.2010 and 29.01.2010 respectively.

g) Land measuring 113.06 Bighas situated in Sainj Project having value of Rs.358.49 lacs Project has been transferred to HPPCL on 29.01.2010. Out of above, Land measuring 14.04 Bigas valuing Rs. 11.63 lacs had already been transferred to NHPC, Parbati during 1998-99.

h) Land measuring 3-06.74 Hectares situated in Mahal Chirgoan bearing Khatoni No. 433 occupied by HPSEB Ltd. is in the name of State Govt.

3. Machinery Spares

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

38

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 @ 6% 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 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. The 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 at the close of year on the basis of average billing of a year of concerned group by remaining days of numbers of unbilled period.

b. Difference on account of adjustments of undercharged/ overcharged billing with actual billing is adjusted in the year of rectification.

c. Earning from sale of electricity does not include Electricity duty payable to State Govt. and Municipal Taxes (Octroi) payable to Municipal Committee/ Municipal Corporation.

d. Bill raised for theft of energy, whether on consumption or outsides are recognized in full as soon as assessment order is received from the competent authority. Payment made by the consumer under protest is treated as part payment against the bill raised.

39

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. Amount Recoverable and payable from/ to GoHP/Local Authorities

The above accounts are not being netted off, however, kept in separate recoverable and payable accounts, as per practice, in view of the nature of such accounts.

10. General Provident Funds (GPF) of employees

GPF of employees is being accounted for in books of accounts, as per government rules governing GPF. No separate Fund/ Trust is being maintained, however, liabilities with respect of GPF and interest accrued thereon is met by the Company out of own resources.

11. 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.

12. Borrowing Cost

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.

12 (a). Investments

Current investments are valued at lower of cost and fair market value. 12 (b) An amount of Rs. 19.11 crore on account of Govt. loans shown in Note No. 2.4 (unsecured

and Other loans of Rs. 27.51 crore) has been converted into Govt. Equity by the State Govt. under FRP vide letter dated 29.01.2014.

13. Government Grants

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

14. 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.

40

e) Cost of new meter used to replace the damaged meter is charged to revenue and the cost of damaged meter and its accumulated depreciation is not withdrawn.

f) Expenditure incurred on identification, survey & feasibility study of project, before project is considered for sanction or rejection, is accounted for under separate head and shown under deferred Cost. As and when the decision of competent authority is received, expenditure is adjusted accordingly by transferring expenditure to work concerned if accepted or written off to profit & Loss Accounts in case of rejection

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

16. The Cash Flow Statement has been prepared on indirect as prescribed in AS-3. 17. The cost of Computer software recognized as intangible is amortized on straight line method

over a period of five years. 18. The Company has only one integrated business i.e. Generation & Distribution of Power; it has

no reportable segment under AS-17. However, management has been identified five segments i.e Distribution, Transmission, Generation, Projects, SL&DC and Head office as separate unit. The Segments wise reports are explained in additional items of notes to Accounts.

(B) NOTES FORMING PART OF THE ACCOUNTS:-

1. HPSEBL was incorporated under Companies Act, 1956 on 03.12.2009 and is a Government

Company within the meaning of Section 617 of the Companies Act, 1956. The entire paid up Share Capital is held by the Government of Himachal Pradesh and its nominees.

2. The financial year of the working of the Company is from 1/4/2012 to 31/3/2013 (Previous year from 1/4/2011 to 31/3/2012.

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:-

(₹ in Lacs) Current Year

2012-13 Previous year

2011-12 Opening Capital work in Progress (excluding advances to supplier/ Contractor) (31.3.2012)

1,02,484.28 1,09,675.87

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

78,115.67 38,357.91

Interest capitalized during the year 4,675.25 14,449.50 Employee cost and other expenses capitalized during the year

5,086.90 6,196.82

Less: Transferred to fixed assets during the year 91,904.17 66,195.82 Closing capital work in progress at the end of the year (excluding advances to suppliers)

88,695.79 1,02,484.28

41

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. 973.21 Lac 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.

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 within 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 within 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 crore for the interest on loan up to 31st March, 2013 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. 8, 40, 45,967/-, 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 Lacs)

Balance end of year (₹ in Lacs))

Period of redemption

Guarantee

1 9.30% NSLR Bonds

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

2 10.46% NSLR bonds

10.46% 11420.00 4568.00 2011 to 2013 Guaranteed by Govt. of H.P

Total 19220.00 12368.00

11. Disclosure of Contingent Liabilities as on 31.3.2013

(i) Arbitrations cases (More than 100 Lacs each in value):

(a) M/s SAB, Chandigarh (R.E. Khauli P/H) Rs. 757.00 (b) M/s Anshul Prop., Delhi (R.E. Khauli P/H) Rs. 205.00 (c) M/s Ansal Properties Delhi(R.E. Khauli P/House) Rs. 347.00 (d) M/s Ansal Properties Delhi(R.E. Khauli P/House) Rs. 346.00 (e) M/s P&R Engineering, Chandigarh (R.E. Khauli P/House) Rs. 265.00 (f) M/s P&R Engineering, Chandigarh (R.E. Khauli P/House) Rs. 345.00 (g) M/s P&R Engineering, Chandigarh (R.E. Khauli P/House) Rs.405.00 (h) M/S SSJV Ltd. Banglore (Sr. Xen Arb. & Mtd. Divn. Thalout) Rs. 12345.00. (i) M/s SSJV Ltd. Banglore (Sr. Xen Arb. & Mtd. Divn. Thalout) Rs. 14806.00 (j) M/s Prem Laxmi (Sr. Xen Arb. & Mtd. Divn. Thalout) Rs. 557.00 (k) M/s SSJV Ltd. Banglore (Addl. S.E. Thirot Construction Divn. Pandoh) Rs. 7364.00 (l) M/S Prem Laxmi (Addl. S.E. Thirot Construction Divn. Pandoh) Rs.239.00.

42

(m) M/s Continantal Construction Ltd. (Addl. S.E. Thirot Const. Pandoh) Rs.1004.00 (n) M/s Continantal Construction Ltd. (Addl. S.E. Thirot Const. Pandoh) Rs.274.00. (o) M/s SSJV Ltd. Banglore (Addl. S.E. Thirot Const. Divn. Pandoh) Rs. 5228.00. (p) M/s On A/C of difference of rates of Shanan share sold to the Board by the PSEB

Rs. 1884.00. (A.O. SL&D). (q) M/s UPJVNL on A/C of energy bills Rs. 528.00 Crore. (A.O. SL&D). (r) Arb. Case between Uhl Power Company Ltd. Rs. 91027.00 (C.E. (PCA)). (s) Arb. Case between M/S SSJV Project (P) Ltd. Rs.30904.00 (C.E. (PCA). (t) M/s SSJV Ltd. Banglore (Addl. SE Ganvi Const. Divn. Ghanvi) Rs. 309.00 (C.E.

(PCA). (u) Arbitration case lodged with SE HPPWD , Solan by Sh Rajeev Kapoor , Contractor

Rs. 6774.00 (CE (OP) CZ. (v) Counter claim against Arbitration case lodged with SE HPPWD, Solan by Sh Rajeev

Kapoor , Contractor Rs. 2537.00 (CE (OP) CZ). (w) M/s Himalyan Intent Limited recovery suit for payment of energy bill of Rs. 1.98

crore (ED Ponta). (x) M/s Arsh Casting Limited recovery suit for payment of energy bill of Rs. 1.84 crore

(ED Ponta). (y) M/s Steel Strips Limited recovery suit for payment of energy bill of Rs. 19.00 crore

(ED Ponta). (z) M/s SAB Industries Limited recovery suit for payment of energy bill of Rs. 8.79

crore (ED Ponta). (aa) Non- provisioning of Rs. 7.81 crore on account of 1% Local Area Development

Fund (LADF) charges payable to GoHP upto 31st March, 2013 as per HP Govt. notification dated 30.11.2009 as some IPPs have filed a petition with HPERC/Hon,ble Court to withdraw this charge.

12. Generating Station:

Sl No. Location Capacity (MW) 1 Hydel Generating Plant, Bhaba 120.000 2 Hydel Generating Plant, Giri 60.000 3 Hydel Generating Plant, Bassi 66.000 4 Hydel Generating Plant, Binwa 6.000 5 Hydel Generating Plant, Nogli 2.500 6 Hydel Generating Plant, Chaba 1.750 7 Hydel Generating Plant, Rukti 1.500 8 Hydel Generating Plant, Chamba 0.450 9 Hydel Generating Plant, Rongtong 2.000

10 Hydel Generating Plant, Andhra 16.950 11 Hydel Generating Plant, Killar 0.300 12 Hydel Generating Plant, Thirot 4.500 13 Hydel Generating Plant, Gaj 10.500 14 Hydel Generating Plant, Baner 12.000 15 Hydel Generating Plant, Sal-II 2.000 16 Hydel Generating Plant, Ganvi 22.500 17 Hydel Generating Plant, Gumma 3.000 18 Hydel Generating Plant, Holi 3.000 19 Hydel Generating Plant, Larji 126.000 20 Hydel Generating Plant, Khauli 12.000

43

21 Hydel Generating Plant, Bhaba Aug. 4.500 Total 477.450

1 Diesal Generating Station, Keylong 0.133 Grand Total 477.317

Total installed capacity at the end of the year 2011-12 477.317 Plant commissioned during the year 2012-13 Nil Total installed capacity at the end of year 477.317

13. Details of Remuneration Paid to Auditors: (₹ in Lacs)

Particulars Current year Previous year Statutory Auditor Fee (including services tax) 1.69 1.69 For other services (T.A.) includes previous year TA also.

6.08

0

Total 9.48 1.69

14. during the financial year, Company has made transactions with the 'Related Parties' in terms of Accounting Standard-18 as under:-

Sr. No Name of Party Description (₹ in Lacs)

1 H.P. Power Corporation Ltd. 1Investment 2 Other

1087.07 (3829.95)

2 H.P. Power Trans. Corp. Ltd. 0.00 3 Beas Valley Power Corporation 1.Investment

2.Other 7500.00

(5478.10) 15. Remunerations paid to CMD & Directors.

(₹ in Lacs) Name Current year Previous year

Sh. R.D. Dhiman , IAS (CMD) 14.02 10.83

Sh. S.K.B.S. Negi, IAS, Director (F&A) 0.00 1.64 Sh. Akshay Sood, IAS, Director (F&A) 13.83 8.74

Sh. Such Dev Rattan, Director (Op) 0.00 6.05

Sh. P.C. Negi, Director (Op)/Tech 15.51 5.92

Sh. R.C. Khillian, Director (Tech) 0.00 1.44

Sh. S.P. Sharma Director (Tech.) 7.73 11.74 Sh. A.K. Dutta Director (Projects) 15.51 13.55

Sh. J.P. Kalta, Director (Op) 16.66 0.00

16. Other expenses like Medical / TA and Telephone paid to Directors.

(₹ in Lacs) Name Current year Previous year Sh. R.D. Dhiman , IAS (CMD) 0.46 0.24

Sh. S.K.B.S. Negi, IAS, Director (F&A) 0.00 0.02 Sh. Akshay Sood, IAS, Director (F&A) 0.69 0.09

Sh. Such Dev Rattan, Director (Op) 0.00 0.01

44

Sh. P.C. Negi, Director (Op)/ Tech 0.42 0.14

Sh. R.C. Khillian, Director (Tech) 0.00 0.02 Sh. S.P. Sharma, Director (Tech.) 0.02 0.16 Sh. A.K. Dutta, Director (Projects) 0.89 0.12 Sh. J.P. Kalta , Director (Op) 0.30 0.00

17. 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. 2012-13 (Previous year 2011-12) 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, 2013

(₹ in Lacs)



1 EQUITY AND LIABILITES

(a) Share Capital

(Paid up and Subscribed)

27,500.00 20,000.00

(b) Reserves and surplus - -

(c) Money Received against Share Warrants - -

2 Share Application Money Pending for Allotment 725.00 5,915.64

3 Non- Current Liabilities - -

Long-Term Borrowings 52,650.37 46,699.64

4 Current Liabilities - -

(a ) Other-Current Liabilities 10,073.54 4,011.42

(b) Short –Term Provisions 29.95 21.15

Total 90,978.86 766,47.85

ASSETS

1 Non- Current Assets

(a) Fixed Assets

(i) Tangible Assets 3,130.84 3,255.29

(ii) Intangible Assets

(iii) Capital Work-in-Progress 79,135.89 66,844.72

(iv) Intangible assets under Development

(v) Fixed assets held for sale 0.64 0.00

(b) Non- Current Investment

(c ) Deferred tax assets (net)

(d) Long term loans and advances 1,233.05 1,075.43

(e ) Other non-current assets Misc expenditure (to the extent not written off)

72.29 72.29

2 Current Assets

(a) Current Investments - -

(b) Inventories 632.90 840.79

45



(c ) Trade Receivables - -

(d) Cash and cash equivalents 564.06 925.64

(e) Short term loans and advances 118.25 223.42

(f) Other currents assets 6,090.93 3,410.28

Significant Accounting Policies forming part of Accounts Cash flow statement

Total 90,978.86 7,664.79

18. Statement of Capital Base and surplus under Section 185 of Electricity Act, 2003. (₹ in Lacs)

Sr. No. Particular At the beginning of Current year (1.4.2012)

At the beginning of Previous Year

(i.4.2011) 1 Original cost of Fixed assets 5,51,788.34 4,90,946.18

2 Less- Accumulated Depreciation 1,09,180.18 89,150.80

3 Net Block (1-2) 4,42,608.16 4,01,795.38

4 Consumer’s Contribution, Grant & Subsidies towards cost of Capital Assets.

142880.95 106490.81

5 Capital Base (3-4) 2,99,727.21 2,95,304.57

6 Surplus (Deficits) for the year (34,028.20) (51,275.59)

7 Surplus as a percentage of Capital Base U/s 185 of Electricity Act, 2003.

(11.35) (17.36)

19. 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.

20. The Internal Audit is being conducted by reputed firms of Chartered Accountants. During the

FY 2012-13, 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.

21. Estimated amount of contracts remaining unexecuted on Capital Account and not provided for

are as under: (₹ in Lacs)

Sr. No. Description Current year Previous year

1 Contract placed 12,297.13 22,158.97

2 Payment/ advance payment

made 9,547.26 3,824.86

3 Balance contracts as liability 2,749.87 18,334.11

46

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

(₹ in Lacs)

A. Opening Stock Account Code Current year Previous year

Capital 22.601 & 22.619 1,462.79 1,862.59

O&M 22.621 & 22.639 8,759.94 6,085.43

Total: 10,222.73 7,948.01

B. Purchases

Capital 22.201 & 22.219 14,855.66 13,048.68

O&M 22.221 & 22.239 3,317.38 5,324.73

Total: 18,173.04 18,373.41

C. Opening Stock

Plus Purchases 28,395.77 26,321.42

D. Issues for Consumption

Capital 22.301 & 22.319 14,900.55 13,808.91

O&M 22.321 & 22.339 5,605.76 4,691.97

Total: 20,506.31 18,500.88

E. Issued to Contractors

Issues 22.341 & 22.359 52.37 33.60

Returns 22.361 & 22.379

Net Issues 52.37 33.60

F. Total Issues (D+E) 20,558.68 18,534.48

G. Closing Stock

Capital 22.601 & 22.619 1,740.22 1,462.79

O&M 22.621 & 22.639 7,420.93 8,759.94

Total: 9,161.15 10,222.73

H. Transfer Inward 22.401 & 22.419 15,477.10 12,847.54

I . Transfer Outward 22.421 & 22.439 15,463.41 12,532.10

Total: 13.69 315.44

J. Material stock adjustment

Capital 22.501 & 22.519 268.62 213.21

O & M 22.521 & 22.539 1,041.74 1,907.14

Total: 1,310.37 2,120.35

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

47

22. AVERAGE REALISATION FROM SALE OF POWER:-

The figures shown in brackets relate to previous year and without brackets relate to current 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.

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

23. 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.

Sr. No.

Consumers Category

No. of Consumers

Units Sold in MKWH

Revenue (Rs. in Lacs)

% of the Total units

sold

Average realization in paisa per unit

1 Domestic 1767625

(1719673) 1618.449

(1407.293) 56454.96

(41509.06) 18.71

(16.32) 349

(295)

2 Commercial 232673

(226911) 410.977

(387.203) 22555.70

(22808.17) 4.75

(4.49) 549

(589)

3 NDNC 22046

(19312) 106.815 (98.550)

6637.40 (5554.82)

1.23 (1.14)

621 (564)

4 Industries

(i) Small & Medium

32886 (32715)

206.168 (198.069)

10682.96 (9221.45)

2.38 (2.30)

518 (466)

(ii) Large supply 1651

(1651) 4170.984

(4116.498) 198909.46

(166893.93) 48.21

(47.74) 476

(405)

5 Agriculture/Irrigation

19950 (18190)

46.624 (36.170)

2598.10 (1720.83)

0.53 (0.42)

557 (476)

6 Public Lighting 865

(756) 13.908

(12.894) 884.39

(622.49) 0.17

(0.15) 636

(483)

7 Bulk Supply 191

(244) 169.778

(192.877) 9862.70

(9009.08) 1.97

(2.24) 581

(467)

8 Water Pumping & Irrigation

5207 (4790)

453.976 (439.976)

25612.25 (23026.59)

5.25 (5.10)

564 (523)

9 Temporary 4315

(3728) 25.902

(28.640) 1597.44

(1688.58) 0.29

(0.33) 617

(590)

Total within State

2087409 (2027970)

7223.581 (6918.168)

335795.44 (282055.00)

83.49 (80.23)

465 (408)

10 Outside the State

1428.710

(1598.640) 69704.84

(87092.89) 16.51

(19.77) 488

(545)

Total 2087409

(2027970) 8652.291

(8516.800) 405500.28

(369147.89) 100

(100) 469

(433)

48

24. POSITION OF SECURED AND UNSECURED LOANS FOR THE YEAR as on 31st March, 2013. (₹ in Lacs)

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, 2013

1 REC Loan 45491.74 6295.07 22849.00 4800.51 63540.23

- 368.66 10000.00 2500.00 7500.00

- 1378.54 15000.00 7500.00 7500.00

2 RGGVY 2919.57 338.76 - 59.70 2859.87

3 LIC Loan 17816.40 1371.86 - 2691.53 15124.87

4 Market Bond - - - - -

5 H.P. Co-Op Bank 37400.00 3472.65 - 8600.00 28800.00

6 KCC Bank 35000.00 4589.37 20000.00 - 55000.00

KCC STL - 1659.45 20000.00 - 20000.00

7 PFC Loans 49162.08 3710.16 182.70 8319.04 41025.74

8 Non SLR Bonds 15810.50 15810.50 - 3442.50 12368.00

9 Punjab & Sind Bank

- 244.66 20000.00 - 20000.00

10 Bank of Maharashtra

- - - - -

11 Canara Bank 10000.00 468.92 - 10000.00 -

12 SBI 30000.00 2829.31 - 18000.00 12000.00

13 Vijaya Bank 28331.00 2185.95 - 20004.00 8327.00

14 CBI 10000.00 1127.92 - - 10000.00

15 PNB 10000.00 403.16 10000.00 10000.00 -

16 R-APDRP-PFC Loan (Part-A)

2891.80 -

2456.00 - 5347.80

17 R-APDRP-PFC (Part-B)

9665.40 - 503.00 - 10168.40

18 ADB. 767.99 - 72.47 - 840.46

19 H.P. Govt. 1910.78 - - - 1910.78

20 Over Draft 110547.37 - 12424.74 - 122972.11

G. Total 417714.62 31808.36 123487.91 95917.28 445285.25

49

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

NET PRIOR PERIOD CREDITS/(CHARGES) (₹ in Lacs)

Sr. No. Description Account Code Current year (A) Prior Period Income 1 Fuel releated gain on prior period transaction 65.1 0.00 2 Receipts from Consumers relating to prior periods. 65.2 (15,844.72) 3 Interest Income relating to prior periods 65.4 15,847.17 4 Excess provision of Income Tax in prior period 65.5 3.84 5 Excess provision for depriciation in prior periods 65.6 5.39 6 Excess provision interest & Finance charges 65.7 0.00 7 Other excess provision in prior period. 65.8 27,127.44 8 Other income relating to prior periods. 65.9 1,407.64 Sub-Total 28,546.76

(B) Prior period Expenses/Losses

1 Short provision for power purchased in previous years.

83.1 31,384.27

2 Operating expenses of previous years (excess provision)

83.3 (164.30)

3 Excise duty relating to Generation in previous years 83.4 0.00 4 Employee costs relating to previous years. 83.5 9,181.32 5 Depreciation under provided in previous years. 83.6 279.36

6 Interest & other Finance Charges relating to previous years.

83.7 252.98

7 Other charges relating to previous years( Excess provision )

83.8 (432.34)

Sub-Total 40,501.29 (A-B) Net prior period credits/{charges} (11,954.51)

26. Bank wise detail of amount proposed/ approved for Financial Restructuring Plan of HPSEB Ltd, in terms of Ministry of Power Scheme dated 05.10.2012 is as under :-

(₹ in Lacs) Sr. No

Name of Bank

STLs to be Restructured

Bonds to be issued Long Term Loans Total

Fresh Exposure by the Banks in shape (Long Term and investment i.e

Bonds)

50% STLs to

be restructured

Against outstandi

ng 50% STLs

Against 50%

power purchase liability

Against operating

losses

Against 50% power

purchase liability

1 2 3 4 5 6 7 8 A SBI 3000.00 3000.00 3528.00 15527.00 3528.00 28583.00 B KCC 26000.00 26000.00 0.00 0.00 0.00 52000.00 C CBI 5000.00 5000.00 0.00 0.00 0.00 10000.00 D Vijay 834.00 834.00 781.00 3437.00 781.00 6667.00 E P&S 14000.00 14000.00 2344.00 10312.00 2344.00 43000.00 F Canara 0.00 0.00 938.00 4124.00 938.00 6000.00 Total 48834.00 48834.00 7591.00 33400.00 7591.00 146250.00 Total 48834.00 56425.00 40991.00+7591.00 146250.00

50

27. (a) Additional information pursuant to clause 4 C of Part –II to Schedule VI of the Companies Act, 1956. (₹ in Lacs)

Particulars 2012-13 2011-12 Transmission Loss 270.619 MU 219.431MU Transmission & Distribution Loss 1138.88 MU 1277.57 MU Energy Sold 8652.23MU 8516.81 MU Revenue from operation / sale of energy 422166.66 382845.73 Revenue from energy traded/ interstate sales 69704.84 87092.89 Opening debtors for sale of energy w/o deducting provision for doubtful debt

67431.73 44880.56

Closing Debtors for sale of energy w/o deducting provision for doubtful debts or any amount written off

63593.26 67431.73

Total Expenditure 493435.37 453530.76 Non Tariff/ Other Income 8693.76 11876.11 Subsidy received 22000 .00 14574.00 Subsidy Booked / Built in the Revenue 27053.00 17710.00 Sundry debtor for energy traded & interstate sale of power 19694.35 19000 .28 Gross Energy Generated 1815.48MU 2019.96 MU Auxiliary Consumption 5.41 MU 6.03 MU Energy Purchased 10006.52 MU 7539.91 MU Energy Traded/ Inter State Sales (Net) 1428.71 MU 1598.64 MU

27(b) Detail of equity received from state Govt.:-

Sr. No Particulars Year (₹ in Lacs)

1

Equity capital of Govt Laon of Rs. 468 crore outstanding as on 31.3.93 by converting 50% in to equity of state Govt in HPSEB Ltd. as per following details:- (i) Distribution Rs. 189.00 cr. (ii) PH Gaj Rs. 15.00 cr. (iii) PH Baner Rs. 15.00 cr. (iv) PH Thirot Rs. 15.00 cr.

Total Rs. 234.00 cr.

1994-95 23400.00

2 Equity Share for Larji 1998-99 to 2004-05 4811.18 3 Khauli HEP 2007-08 1516.00 4 Ganvi HEP 2008-09 1512.00

5 BVPCL 2007-08,2008-

09,2009-10 7426.00

6 PVPCL 2007-08 558.00 7 Equity for Trans & Distribution schemes 2009-10 1430.00 8 Equity share in the name of Director 2010-11&2011-12 11.40 9 T&D Schemes 2012-13 4000.00

Total 44664.58

Abstract- Generation- 20368.18 Distribution- 24296.40 Total 44664.58

Note:-Besides above, Hon’ble Regulator has allowed equity of Rs. 107.46 crore for Larji HEP to HPSEBL from the cash available (wef 1986-87 to 2006-07) considered by them internal accrual for the project.

51

29 (c) Detailed Technical Data:-

Sl. No. Particulars 2012-13 2011-12

1 Installed Generating Capacity (MW)

(a) Hydel 477.450 477.450

(b) Thermal

(c) Internal combustion (Diesel) 0.130 0.130

2 Normal Maximum Demand on the System (MW)

(a) Restricted 1360 1333

(b) Unrestricted 1383 1352

3 Plant Capacity available at the time of Max. Sys. met NA NA

4 Plant load factor (Hydel)%age 33.21 62.950

5 Generation in million KWH (Gross)

(a) Hydel 1815.48 2019.960

(b) Thermal 0.000 0.000

(c ) Internal combustion(Diesel) 0.000 0.000

Total:- 1815.48 2019.960

6 Auxiliary Consumption (MKWH) 5.413 6.030

7 Less Govt. of HP Share in HPSEB's projects

(a) Ghanvi 8.810 8.330

(b) Baner 5.184 5.530

(c) Gaj 4.690 4.950

(d) Larji 78.091 83.630

(e) Khauli 5.639 6.040

Total:- 102.414 108.480

8 Net Availability from own Projects (5-6-7) 1707.653 1905.450

9 Free Power (GoHP’s entitlement)

a PSEB (Shanab & Thein) 0 0

b Nathpa Jhakri 0 0

c Baspa-II (IPP) 0 0

d Malana (IPP) 0 0

e Malana-II 0 0

f Budhi 0 0

g ADHPL 0 0

h Karcham Wangtoo 0 0

i Larji 0 0

Sub-Total 0 0

10 HPSEB Ltd. Projects 0 0

a Giri 0 0

b Bassi 0 0

c Bhaba 0 0

d Larji 0 0

Sub-Total 0 0

52


11 Unscheduled Interchange (UI) 0 0

12 A. Energy Purchased (MKWH)(With Losses)

I BBMB

(a) Old HP(10) 43.800 43.920

(b) New HP 318.392 232.45

(c ) Dehar 180.902 81.790

(d) Pong 53.518 0

Sub Total 596.612 358.160

II PSEB

(a) Shanan Share (45 MU) 45.000 45.000

(b) Shanan share 1 MW (at Gen. Cost) 5.256 5.260

(c) Shanan share 0.5 MW (Free Power) 2.628 2.630

(d) Shanan share 600 MW (Free Power) 62.486 0.000

(e) Banking 0.000 312.320

(f) Purchase 0.000 0.060

(g) Thien share (Free Power) (h) Pong (Shared Generation)

0.000 0.000

23.780 85.130

Sub Total 115.370 474.180

III UJVNL(Yamuna Share)Stage I,II,3 & Kulhal 438.127 474.180

IV UUPJVNL(Yamuna Share) Khara 71.902 428.960

V Uttaranchal (UJVNL) 0.000 0.00

VI Bairasiul (Free Power) 0.000 34.99

VII NHPC Bairasiul Chamera I,II &III 0.000 0.00

VIII NTPC

(a) Rihand-I STPP 270.884 309.660

(b) Rihand-II STPP 315.207 297.050

(C ) Rihand-III 36.929 0

(d) Anta (Gas Fired) 124.065 88.370

(e) Anta (Liq. Fired) 56.289 4.630

(f) Anta(LNG) 0.000 0.000

(g) Auriya (Gas Fired) 107.082 108.000

(h) Auriya (Liq. Fired) 68.275 6.630

(i) Dadri (Gas Fired) 77.081 143.780

(j) Dadri(Liq. Fired) 0.000 5.980

(k) Dadri LNG 0.000 0.00

(l) Dadri –II TPS 70.195 0.00

(m) Unchahar- I TPP 111.603 55.930

(n) Unchahar- II TPP 134.337 106.200

(o) Unchahar- III TPP 32.905 72.080

(p) Singrauli 53.874 103.900

(q) kahalgoan 0.000 125.180

53


(r) Anta RF 0.000 0

(s) Auriya LNG 0.000 0

(t) Dudri RF (u) Jhajjar Dadri-II

0.000 0.000

0 67.710

Sub Total:- 1458.726

IX NPCIL

NAPP 91.491 67.720

RAPP-5 151.469 145.650

Sub Total:- 242.960

X NHPC

(a) Bairasuil 180MW (Free Power) 41.105 0.000

(b) Chamera-I

0.000

(i) 12% Free Power 114.371 91.890

(ii) At Cost 70.488 75.560

(c) Chamera-II

(i) 12% Free Power 144.549 71.260

(ii) At Cost 64.100 63.020

(d) Chamara-III

(i) 12% Free Power 25.078 0.000

(ii) At Cost 24.574

(e) Salal 32.447 32.020

(f Tanakpur 14.444 15.35

(g) Uri 80.288 72.860

(h) Dhauli Ganga 46.551 44.410

(i) Dulhasti 15.412 9.620

(j) Tehri 0.000 125.460

(k) Tehri interim Power 0.000 17.670

(l) Sewa-II 4.970 3.730

(m)Tehri stage-I 104.496 0.000

(n) Koteshwar 35.732 0.000

Sub Total 818.605 0.000

XI Nathpa Jhakri 1500 MW

(i) Free Power 386.461 144.390

(ii) Govt. HP against Equity Power 0.000 350.340

(iii) State of region share 2.47% 192.936 204.780

Sub Total:- 579.397 0.00

XII Private Sector

(a) Malana (free power) 49.401 55.870

(b) Baspa-II (300 MW) 0.000 0.000

(i) 12% Free Power 147.184 166.610

(ii) at Cost 1079.357 1221.830

54


(c ) Patikari (16 MW) 0 0

(i) At Cost 0.000 51.834

(ii) Free Power 8.236 7.070

(d) Sarabai 5.4 MW 0.000 0

(i) At cost 0.000 31.270

(ii) Free cost 12% 0.000 4.260

(e) TOSS (5.4MW) 0.000 0.000

(i) Free Power12% 0.000 44.160

(ii) At cost 0.000 7.790

(f) Allain Dhaauliganga (Free Power)

(i) Free Power 12% 15.922 16.760

(ii) Malana-II (100 MW) (15%) 3.147 0

(iii) Budhil (70 MW) 1.790 0.00

(g) Karcham Wangtoo (1000 MW) 77.352 79.000

(h) Upper Joiner(12 MW) 0 28.660

(i) Sumez(14MW) 0 1.830

Sub Total:- 1382.387 0.00

Purchase from IPPs (including GoHP Free Power) Mini Micro

244.439 0.000

0.000 0.000

Sub Total:- 1048.401 0.000

XIII H.P. Govt Share in HPSEB Ltd. Projects

a) Ghanvi 8.600 0.000

b) Baner 5.284 0.000

c) Gaj 4.691 0.000

d) Khauli 5.639 0.000

e) Larji 78.233 0.000

SubTotal:- 102.447 0.000

XIV (c ) Mini Micros (Private Sector)

(i) Titang (5.0 MW) 1.875 1.505

(ii) Rasket (0.08 MW) 3.702 2.861

(iii) Maujhi (4.5 MW) 10.424 10.174

(iv) Dehar (5 MW) 26.715 25.561

(v) Baragaon (4.9 MW) 29.829 30.961

(vi) Ching (1 MW) 2.437 2.122

(vii) Manal / Chandnit (3 MW) 18.101 19.466

(viii) Aleo (3 MW) 12.455 15.272

(ix) Manjhal (1 MW) 4.106 6.474

(x) Salag (0.15 MW) 0.546 00.437

(xi) Jiwa Kothari 6.365 5.839

(xii) Marhi (5.00 MW) 26.684 24.854

(xiii) Kothi (200 KW) 1.084 1.224

55


(xiv) Juthed (100 KW) 0.109 0.246

(xv) Taraila (5 MW) 2.547 12.194

(xvi) Gharola (.1 MW) 0.323 0.136

(xvii) Bramganga (5MW) 25.486 27.610

(xviii) Sahu (5MW) 23.556 27.931

(ixx) Sarbari ( 4.5MW) 30.975 32.082

(xx) Upper Awa (5MW) 29.676 31.116

(xxi) Purthi (.1MW) 0.110 0.069

(xxii) Sural (.1 MW) 0.254 0.159

(xxiii) Lingti (.4MW) 0.216 0.237

(xxiv) lku-II ( RE Baner) 20.559 19.378

(xxv) Toss 0.000 0.000

(xxvi) Shyang ( 3MW) 8.606 8.500

(xxvii) Tarella-II(5MW) 30.085 27.021

(xxviii) Luni-III(5MW) 21.618 23.354

(xxix) Andhra Stage-II(5MW) 17.625 19.701

(xxx) Lower Baijnath Kuhl (1MW) 3.437 5.339

(xxxi) Upper Tarella(5MW) 23.884 20.912

(xxxii) Luni-II(5MW) 22.735 24.985

(xxxiii) Baner-III(5MW) 11.589 12.284

(xxxiv) Manglad(4.5MW) 25.631 26.750

(xxxv) Dhiridhar(5MW) 25.583 17.884

(xxxvi) Sainj(5MW) 13.266 7.639

(xxxvii) Gurahan 5.540 4.770

(xxxviii) Maujhi-II 14.786 13.476

ixl) Polar-I 8.105 7.529

xl) Tangling 14.652 13.191

xli) Gaj-II 7.903 8.261

xlii) Brahal 17.412 15.498

xliii) Upper Khali 22.360 18.476

xliv) Jirah 18.671 15.511

xlv) IQU-I 1.497 6.985

xlvi) Rakchad 30.852 34.040

xlvii) Chirchand 30.262 23.839

xlviii) Timbi 3.260 3.498

lix) Sach 2.372 2.070

l) Binua Parai (5 MW) 23.165 26.935

li) Dehar-II (5 MW) 7.935 6.730

lii) Tarella-II (5 MW) 29.464 12.321

liii) Rukti –II (5 MW) 23.091 3.270

liv) Sechi (4.5 MW) 17.456 13.966

56


lv) Chakshi 8.340 0.251

lvi) Belij (5 MW) 11.270 0.000

lvii) Balsio (5 MW) 13.944 0.000

lviii) Suman Sarwari (2.5 MW) 7.305 0.000

lix) Masli (5 MW) 2.102 0.000

Total Mini Micro (Private Sector) 803.962 697.326

XV Banking

BYPL-Bkg (Seller Bus) 7.185 67.940

BYPL-Contra Bkg.(Seller Bus) 5.445 134.810

BRPL-Bkg (Seller Bus) 19.400 0

BRPL- Contra Bkg (Seller Bus) 195.659 0

PSEB-Contra Bkg (Seller Bus) 0.000 0

HPPC- Contra Bkg (Seller Bus) 0.000 224.360

UPPCL- Contra Bkg 86.183 0

HPPCL- Fwd Bkg. 240.300 0

HPPCL- Contra Bkg 123.792 0

PSPCL-Fwd Bkg. 259.543 0

PSPCL- Contra Bkg 232.950 0

Sub Total 1170.457 472.110

XVI Market Purchase through IEX 61.885 229.650

Under UI 211.571 230.710

XVII Unallocated 0 0

Total 9(A) 9791.080 7813.380

9 (B) Energy Wheeled for

a. HVPNL (Kulhal- Giri-Abdulapur) 0 0.130

b. BSL Project (BBMB) 0 14.940

c. J&K (for Sewa Const. Power) 0 0.170

d. Malana 0 316.610

e. Govt. of HP- NHPC Projects 0 389.310

f. SJVNL (Free Power +Equity) 0 2107.620

Total-9 (B) 0 2828.780

External Loss @3.5% 215.440 273.470

Net purchase 10006.520 7539.910

13 Power available for sale without wheeling 0 9445.360

Power available for sale with Grid loss wheeling 0 0.00

in million kwh (8+9 (A))

14 Power sold in million Kwh i/C wheeling

I) With in state 7223.517 6918.168

II) Outside the state 1428.710 1598.640

Sub Total 8652.227 8516.808

Total Energy Sold (w/o Wheeling) 8652.227 8516.808

57


15 Transmission and Distribution losses: *

-

a) In million Kwh (8-9) (with Grid Loss) 1138.883 1277.570

b) % age (with Grid Loss) 13.62 13.15

c) T&D Losses within state (w/o Grid Loss) 832.18 0

d) % age (w/o Grid Loss) 8.88 0

16 Fuel

a) Consumption in MTCoal/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 agencie are based on the data supplied by the Chief Engineer (SO&P), Shimla.4.

For and on behalf of Company

Sd/- Sd/- Sd/- (Gulshan Aggarwal) (Akshay Sood, IAS) (Er. P C Negi) Chief Accounts Officer Director (F&A) Managing Director Auditors Report As per our report of even date

Sd/- For Anil Karol & Co. (C.A. Umesh Walia) Chartered Accountants Partner FirmNo. 04816N MNo. 098287 Place: Shimla Date: 22.10.2014

59

SEGMENTS WISE BALANCE SHEET AS AT 31.03.2013 (₹ in Lacs)

Sl. No.

Segment Name/Particulars Note No. Head Office MTc. Shimla Genration Electrical system

operations SLDC Projects Others Total

I Equity and Liabilities

Share Holders' Funds Share Capital

2.01 11.40 - - - - - - - 11.40

Reserves & Surplus 2.02 (3,67,098.54) (769.00) 3,710.99 16,374.35 3,67,394.27 (685.67) 2,063.32 2,913.35 23,903.07

Share Application Money Pending Allotment

2.03 44,653.18 - - - - - - - 44,653.18

Non Current Liabilities Long Term Borrowings

2.04 1,50,472.17 - - 223.92 29.97 - - 8.19 1,50,734.25

Other Long Term Liabilities 2.05 20,350.10 4.44 1,249.47 787.44 41,860.76 - 220.73 3.07 64,476.00

Long Term Provisions 2.06 - - - - - - - - -

Current Liabilities Short Term Borrowings

2.07 2,63,299.11 - - - - - - - 2,63,299.11

Trade Payables 2.08 1,03,930.80 - - - 316.65 - - 1.52 1,04,248.96

Other Current Liabilities 2.09 88,266.83 27.59 1,113.86 14,423.84 45,638.21 39.91 85.55 12,141.13 1,61,736.92

Short Term Provisions 2.10 36,285.29 (162.71) (2,204.03) 921.57 (26,404.62) 48.98 (298.61) 3,695.31 11,881.16

Total 3,40,170.33 (899.69) 3,870.28 32,731.11 4,28,835.24 (596.78) 2,070.98 18,762.56 8,24,944.05

II Assets - - - - - - - - -

Fixed Assets/Tangible Assets 2.11 (1,28,326.18) 801.90 1,41,647.58 1,35,513.12 2,39,323.94 182.26 1,637.67 1,08,642.83 4,99,423.12

Capital Works in progress 2.12 23,255.92 9.00 65.72 18,501.62 45,072.75 62.97 9,211.51 3,193.09 99,372.57

Intangible Assets Work in Progress

2.13 958.69 - - - - - - - 958.69

Non Current Investments 2.14 38,806.89 - - - - - - - 38,806.89

Long Term Loans and Advances 2.15 18,696.37 (6.50) (341.48) 788.66 (12,289.31) (32.86) (4,894.55) 426.68 2,347.00

Other Non Current Assets 2.16 2,87,063.52 (1,708.03) (1,39,797.02) (1,28,155.74) 1,04,844.01 (881.68) (4,590.98) (1,01,780.40) 14,993.67

Current Assets/Current Investments

2.17 1,849.84 - - - - - - - 1,849.84

Inventories 2.18 - 0.73 392.30 572.10 8,312.51 71.01 58.23 40.41 9,447.29

Trade Receivables 2.19 17,865.68 - 24.20 630.94 21,427.61 - - 2,749.53 42,697.96

Cash & Cash equivalents 2.20 21,434.92 0.01 706.54 95.58 213.43 0.02 0.01 (44.25) 22,406.25

Short Term Loans and advances

2.21 24,088.81 3.21 988.88 4,784.85 2,262.98 1.52 244.40 5,534.67 37,909.32

Other Current Assets 2.22 34,475.88 - 183.57 - 19,667.32 - 404.68 0.00 54,731.46

Total 3,40,170.33 (899.69) 3,870.28 32,731.11 4,28,835.24 (596.78) 2,070.98 18,762.56 8,24,944.05

60

SEGMENTS WISE PROFIT & LOSS STATEMENTS FOR THE YEAR ENDED 31.03.2013

(₹ in Lacs) Sl.

No. Segment Name/Particulars

Note No.

Head Office MTc. Shimla Genration Electrical system

operations SLDC Projects Others Total

1 INCOME

a) Revenue From Operations 2.23 33,654.03 - 10,653.47 358.88 3,77,500.27 - - - 4,22,166.66

b) Other Income 2.24 30,001.35 54.86 522.67 781.23 5,721.31 8.51 150.58 - 37,240.52

2 Total Revenue (a+b) 63,655.38 54.86 11,176.15 1,140.11 3,83,221.59 8.51 150.58 - 4,59,407.17 3 EXPENDITURE

a) Cost of Materials Consumed - - - - - - - - -

b) Purchase of Stock- in -Trade 2.25 2,62,381.06 - - - 557.24 - - - 2,62,938.30

d) Employees benefits expenses 2.26 43,331.74 647.10 7,300.65 5,921.00 56,609.06 523.86 (249.14) - 1,14,084.26

e) Finance Costs 2.27 53,434.50 - (3,041.66) (2,728.16) (2,913.69) (1.84) (1,802.88) - 42,946.28

f) Depreciation and other amortizatization expenses

2.28 20,791.88 10.47 25.89 12.92 111.40 1.52 1.21 - 20,955.29

g) Other Expenses 2.29 33,939.18 163.14 3,943.27 1,507.05 12,512.83 170.18 133.71 20.20 52,389.57

4. Total Expenses 4,13,839.31 820.70 8,228.15 4,712.81 66,876.84 693.73 (1,917.09) 20.20 4,93,313.69

5. Profit (Loss) before exceptional and extraordinary items and

(3,50,183.93) (765.84) 2,948.00 (3,572.70) 3,16,344.75 (685.22) 2,067.67 (20.20) (33,906.52)

6. Exceptional items - - - - - - - - -

7. Profit (Loss) before extraordinary items and taxes(5+6)

(3,50,183.93) (765.84) 2,948.00 (3,572.70) 3,16,344.75 (685.22) 2,067.67 (20.20) (33,906.52)

8. Extra Ordinary Items 2.30 - - - - 120.34 - 1.34 - 121.69

9. Profit & Loss before Tax (7+8)

(3,50,183.93) (765.84) 2,948.00 (3,572.70) 3,16,224.41 (685.22) 2,066.33 (20.20) (34,028.21)

10. Tax Expenses - - - - - - - - -

11. Profit & Loss for the Year (9+10)

(3,50,183.93) (765.84) 2,948.00 (3,572.70) 3,16,224.41 (685.22) 2,066.33 (20.20) (34,028.21)

62

Independent Auditors’ Report

To The Members of Himachal Pradesh State Electricity Board Limited. Report on the Financial Statements We have audited the accompanying financial statements of Himachal Pradesh State Electricity Board Limited, Shimla (“ the Company”) as on 31st March, 2013 and the Statement of Profit and Loss account , Cash Flow Statement and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance in accordance with the accounting standards referred to in section 133 of the companies Act ,2013( Compliance with sub section (3C) of section 211 of the companies Act 1956 is sufficient compliance with section 133 of Companies Act, 2013 read with MCA circular no 16/2013 dt 18/09/2013). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit of disclaimer opinion.

63

Basis for Disclaimer Opinion 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. During the year accounts statements at division levels are prepared on the basis of old schedule VI but the divisions, wings and circles balance sheets has been re casted as per revised schedule VI for the year and also for the previous year . The previous year’s figures has been re casted and regrouped to comply with the requirements of revised schedule VI.

b) 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 Divisions and Circles do not reconcile with consolidated balances used for compilation of these financial statements. We further report that the erstwhile Board transferred it 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.

64

Amount in lacs

Current Year Previous Year Code Main Heads Debit( Credit) Debit( Credit)

Reserves and Surpluses

55Contributions, grants and Subsidies Towards Cost of Capital Assets (2,664.21) (2,676.84)

56 Reserves (266.70) (254.07) Profit & Loss account 16,345.30 16,345.30

13,414.40 13,414.40 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 43 Staff Related Liabilities & Provisions 14.70 (3,150.70) 44 Other Liabilities and Provisions (300.96) (4,227.78) 46 Deposits for Electrification, Service connection etc. (7,154.76) (7,154.76) 47 Security Deposits from Consumers (3,724.83) (3,724.83)

(11,165.85) (14,876.90) Tangible Asssets - -

10 Fixed Assets 592.74 592.74

11Capital Expenditure Resulting in An Asset Not Belonging Tothe Board 180.76 180.76

12 Depriciation (1.48) (1.48) 772.02 772.02

Capital work in progress - -

14 Capital Works in Progress Accounts. (9,617.34) (9,090.67) 15 Contracts – in-progress 182.93 182.93

(9,434.40) (8,907.73) Long term Loans and Advances - -

25 Advances to Suppliers/ Contractors-- (Capital) - (390.97) 28 Sundry Receivables 4,064.64 4,288.90

4,064.64 3,897.93 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 Recivables - - 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 (120.62) (100.44)

(44.31) (24.12) Short term Loans and Advances - -

26 Advances to Suppliers/ Contractors-- (O & M) - 266.71 27 Other Loans and Advances (7.33) 266.60

(7.33) 533.31 Other Current Assests - -

30-39 Inter Unit accounts (2,911.68) (121.41) Total (2,911.68) (121.41) Grand Total 0.00- -

(i) 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 extent of ₹ 439.18 lacs , Trade Payables are overstated to the extent of ₹ 1.52 lacs, Other Liabilities are overstated to the extent of ₹ 11,165.85 lacs, Tangible assets are overstated to the extent of ₹ 772.02 lacs Capital work in progress are understated to the extent of ₹ 9,434.40, Long term loans and advances are overstated to the extent of ₹ 4,064.64 , 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 ₹ 44.31 lacs ,Short term loans and advances are understated to the extent of ₹ 7.33 lacs and inter unit accounts are understated to the extent of ₹ 2,911.68 lacs.

65

(ii) The Company has adjusted during the year following heads during the year under review

with the opening differences . No sufficient information in respect of the same has been provided to us.

Debit/Credit Amount in Lacs

25.s 390.97 26.s (266.71) 28.S (124.26) - 42.s (3,381.17) 43.s 3,165.40 44.s 215.76

0.00

Adjustment with Head Offcie Accout27.s (273.92) 44. S 3,711.05

3,437.13

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 14,000 Equity shares of ₹. 100/- each for cash at par, the payment against allotment of 14,000 Equity Shares has been shown as recoverable from HP Govt and report that payment against above Equity shares amounting to ₹. 11.40 Lacs has not been received till date of audit and same has also been shown as recoverable from HP Govt. The Company has shown the same as short term loan and advances. In our opinion the same is in the nature of other noncurrent assets. Thus short term loans and advances are overstated to the extent of above.

3 Reserves and Surplus (Note 2.2)

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

(i) 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. In the absence of information we are unable to quantify the same as it may affect current year losses and previous year’s deficits.

(ii) Special and Means, advance on account of natural calamity relief fund Account Code

54.601 The Company has received ₹ 500.00 lacs during the year under review and ₹ 150.00 lacs was outstanding as on 31st March 2012. The company has not adjusted the expenditure incurred on account of natural calamity and relief during the year review and incurred in earlier years. In the absence of information we are unable to comment on the same.

(iii) Assets created from loans under Government Schemes.

66

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.

b) Deficit in Profit and Loss Statement

The company has transferred the accumulated profit and loss of the erstwhile Board amounting to ₹ 50,512 lacs 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

4 Share Application Money Pending Allotment ( Note 2.3)

(i) In terms of “Transfer Scheme” in respect of assets and liabilities of Board transferred from HP State Government to the Company the difference of ₹ 39,653 lacs has been recognized and recorded as share application money pending for allotment of equity shares to Himachal Pradesh Govt. We report that, due to errors and incorrect consideration of accumulated losses assets in aggregate amounting to ₹. 7,48,893 lacs and liabilities amounting to ₹. 7,59,752 lacs has been transferred and a sum of ₹. 10,859 lacs is recoverable from HP Govt. whereas share application money of ₹. 39,653 lacs pending for allotment to HP Govt. has been disclosed in financial statements. We further report that an accumulated loss also includes losses of ₹ 50,512 lacs pertaining to the tenure of Board. The same is summarized as under:

Amount ₹. In lacs

Balance as on

13/06/2010 Amount not to be considered

As per transfer scheme

Net Fixed assets 387,461 - 387,461 Capital expenditure in progress 107,927 - 107,927 Assets not in use 625 - 625 Deferred costs 12,706 - 12,706 Investment 196,567 57,524 139,043 Subsidy receivable from Govt. 4,970 - 4,970 Current Assets 96,161 - 96,161 Total Assests 806,417 57,524 748,893

Less LiablitiesSecurity from consumers 21,965 - 21,965 Other current liabilities 192,124 - 192,124 Borrowing for working capital 82,887 - 82,887 Payment due on capital liabilities 32 - 32 Capital Liabilities 225,629 - 225,629 Funds from state Govt. 7,749 - 7,749 Spl. ways and means advance on a/c of natural

49,808 - 49,808

Contributions, grants and subsides towards

95,014 - 95,014 Equity share of HPSEB in its own projects 57,524 57,524 - Reserves and reserves funds 84,543 - 84,543 Total Liabilities 817,276 57,524 759,752

Amount recoverable from Govt. of HP 10,859 - 10,859

In our opinion, the deficit in profit and loss statement, share application money pending for allotment is overstated to the extent of ₹. 50,512 lacs and ₹. 39,653 lacs, respectively and other non-current assets (amount recoverable from HP Govt.) is understated to the extent of ₹. 10,859 lacs.

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(ii) The Company has received ₹ 3,750 lacs and ₹ 1,250.00 lacs during the year under review

and share application money from the Government of Himachal Pradesh on 20/10/2012 and 20/11/2012. No resolution for receipt and allotment of shares in respect of share application money recived was placsed on record before the Board Meeting. The Company has not allotted corresponding shares in respect of the share application money received within the 60 days of the receipt as specified required by the companies act 1956 nor the same has been disclosed in the notes to accounts.

(iii) No disclosure of the time limit when the shares will be allotted has been disclosed in the

notes to accounts. 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 - status of defaults of repayment of interest and loan. b) Loans under APDRP Schemes Part A and B (i) The company has taken loans from APDRP(Part A) scheme amounting to ₹ 5,347.80

( previous year ₹ 2,891.80)) towards 100% financing of its approved projects which is subject to a condition requiring that projects to be completed within five years( extended up to 31st March 2015) 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.

(ii) The company has taken loans from APDRP(Part A) scheme amounting to ₹ 10,168.40 lacs

( previous year ₹ 9,665.40 lacs) towards 100% financing of its approved projects which is subject to a condition requiring that projects to be completed within five years( extended up to 31st July 2014) 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

(iii) The sanction letter stipulates the moratorium of principal and interest during moratorium

period. The Company has made provision for the interest on loan amounting to ₹ 2,000.00 lacs in the books of account on provisional basis up to 31st March 2012. (Refer Note 2.31 (B)(9) ). No Provision for interest payable during the year under review has been provided amounting to ₹1,550.00 lacs in the books of account. In our opinion the interest payable is understated to the extent of ₹ 1,550.00 lacs.

c) Loans under RGGVY Scheme The Company has taken loan under the scheme from the state Government under RGGVY

scheme amounting to ₹ 500.00 lacs (previous year ₹ 500.00 lacs). The government has not yet provided the terms and conditions of the loan and the payment of interest thereon. (Refer Note 2.31 (B)10 ).

d) Loans under ADB though GOHP Scheme

The Company has taken loan under the scheme from the state Government under ADB Loan amounting to ₹ 840.46 lacs (previous year ₹ 767.99 lacs). The government has not yet provided the terms and conditions of the loan and the payment of interest thereon. (Refer Note 2.31 (B)(10) ).

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e) Financial Restructuring Plan

(i) The Company has opted for Financial Restructuring Plan formulated by the Ministry of Power Government of India for State Owned Discoms for restructuring of debts (Refer Note No 2.31( 28)(i)). In this scheme the short term loans amounting to ₹ 97,667 lacs was converted into long term borrowings for 10 years with moratorium period of three years for repayment of principal loan. The short term loans is converted into 50 % Bonds of ₹48,834 lacs and 50 % Long term Loans amounting to ₹ 48,834 lacs.

(ii) The above Financial Restructuring Plan was approved and accepted by the company and

the banks on 31st July 2013. (iii) The above restructuring plan was not approved by the company in regular Board Meeting

and the same been approved in the whole time Directors Meeting. (iv) The financials for the year under review was approved by the Board of directors on 18th

October 2014 and the company has shown the loans as short term loans whereas the same has been converted into long term loans before the approval of accounts.

(v) In our opinion the Long term loans are understated to the extent of ₹ 97,667 lacs and

correspondingly the short term loans are overstated to that extent. 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 has 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.

b) Amount payable for Employees Provident Fund (GPF)

We report that, contribution towards Provident Fund collected from employees have 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.

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

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Current Year Previous YearAssestsInvestments in Fixed deposits of Banks 94,670.88 1,00,175.27 Interest Accured on Investments 10,443.42 10,706.15 Recoverable from HPSEB Limited 9,001.69 -

1,14,115.99 1,10,881.42

LiabilitiesMembers Account 1,12,355.58 1,00,884.74 Excess of Expenditure over Income 1,760.41 2,624.95 Payable to HPSEB Limited - 7,371.73

1,14,115.99 1,10,881.42 0.00

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 ₹ 1,14,115.99 lacs (previous year ₹. 1,00,884.74 lacs) and has deposits there against of ₹ 105,114.30 lacs (previous year ₹. 110,881.42 lacs )which has resulted in amount recoverable form company amounting to ₹ 9,001.69 lacs. In our opinion, the said assets and liabilities do not relate to Company and sum of ₹. 9,001.69 lacs is payable to General Provident Fund (GPF).

We further report that the Company has obtained Overdraft facility of ₹ 68,514.00 lacs. (Previous year ₹ 88,717.00 lacs) 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 ₹ 1,760.41 lacs (previous year ₹. 2,625.00 lacs) 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, We report that company has shown the amounts in the balance sheet as under different head:-

Amount in lacs ₹Amount payable to GPF Fund Other Long term Liablities 17,684.00 CreditIncome on investments Income 1,760.41 CreditInterest Accured on FDR Short Term Loans and advances 10,443.42 DebitNet Recoverable/Payable 9,000.99-

The overall impact of the above is that long term liabilities are overstated to the extent of ₹17,684

lacs,( Previous year₹ 709.00 lacs ) income is overstated to the extent of ₹ 17,60.41 lacs(Previous year₹ 2,625.00 lacs) and correspondingly the short term advances are overstated to the extent of ₹ 19,444.41 lacs.( Previous year₹ 3,334.00 lacs)

We further report that the above amount payable to the Trust is of current nature and should be shown under current liabilities. Thus Current liabilities are understated to the extent of ₹ 9,000.99 lacs.

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 2013. The company has received contributions amounting to ₹ 956.66 lacs( previous year ₹ 1,590.55 lacs) as on 31st March 2013 from the employees against which only ₹ Nil lacs (previous year ₹ 450.60 lacs) has been invested by the company. Thus the company has not made investments of contributory pension scheme amounting to ₹ 956.66 lacs (previous year ₹ 1,139.94 lacs) with the authorities and the same has been used in operations.

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

Amount in LacsCurrent Year Previous Year

Assests ₹ ₹Fixed Deposits with Bank - 339.70 - Interest Accured on FDR - 110.90 Amount Recoverbale from HPSEB Limited 956.66 1,139.95

956.66 1,590.55

LiablitiesCPS Employees Share 478.33 795.28 CPS Employer Share 478.33 795.28

956.66 1,590.55

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. 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 overstated to the extent of above of ₹ 956.66 lacs.

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 ₹ 135.05 lacs (previous year ₹ 118.75 lacs )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 to balance the fund account a contribution ₹ 135.05 lacs (previous year ₹ 426.13 lacs) is required from the company as on 31st March 2013. Thus the expenditure is understated to the extent of above and correspondingly the reserve fund is understated to the extent of above.

Amount in lacsCurrent Year Previous Year

Assests ₹ ₹Investments in Fixed deposits of Banks - 307.38 Interest Accured on Investments -

- 307.38

LiabilitiesFund Acccount 135.05- 118.75- Excess of Expenditure over Income - - Fund Contribution due/From to HPSEB Limite 135.05 426.13

- 307.38

We further report that the above liability does not belong to the company and the same is of the nature reserve fund in our opinion the other long term liabilities are understated to the extent of above and correspondingly the reserve funds are understated to the extent of above.

e) Non refundable advances from industrial consumers for infrastructure development charges

The erstwhile HPSEB and the company has received Non refundable advances from industrial consumers for infrastructure development charges from consumers. The

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company has received ₹ 10,748.11 lacs (previous year ₹ 7,838.48 lacs) under the above head up to 31st march 2013. 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.

f) Funds From ASIDE

The funds received from ASIDE are subject to confirmation and reconciliation. The assets created 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. The Head office is showing Debit balance in 47.501 amouting to ₹ 11.94 lacs for which no information has been provided. Thus long term liabilities are overstated to the extent of above.

7 Long Term Provisions (a) Leave Salary Payable The Company has not made provision of Leave salary payable to present employees as per

the requirements of AS15- Accounting for Employees Benefits issued by The Institute of Chartered Accountants of India. The estimated liability on account of leave salary at end of the year is ₹51,429.39 lacs against which the company has creat ed reserve fund of Rs ₹1,849.84 lacs only. Thus in our opinion the long term provisions are understated to the extent of ₹ 49,579.55 lacs

(b) Gratuity Payable to Employees The Company has not made provision of gratuity payable to present employees as per the

requirements of AS15- Accounting for Employees Benefits issued by The Institute of Chartered Accountants of India. The estimated liability on account of leave salary at end of the year is ₹69,938.14 lacs. Thus in our opinion the long term provisions are understated to the extent of ₹ 69,938.14 lacs.

8 Short Term Borrowings(Note 2.7) Overdraft and Cash Credit from Banks (i) We further report that the Company has obtained Overdraft facility/ Loans of ₹ 68,514.00

lacs (previous year ₹ 88,718.00 lacs) against GPF Fixed Deposits which has been utilized for operations and no sufficient disclosure has been made in financial statements and notes to accounts.

(ii) We further report that the Company has obtained Loans against fixed deposits of RGGVY

Fund R/ APRDP Funds of ₹ 7,600.00 lacs (previous year ₹ 11,600 lacs) which has been utilized for operations and no sufficient disclosure has been made in financial statements and notes to accounts.

9 Trade Payables (Note 2.8)

Liability for Purchase of Power

(i) 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.

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Amount in ₹ lacsCurrent Year Previous yearDebit Credit Debit Credit

41.123 NHPC - 256.01 - 711.21 41.129 UPJVNL - 185.00 - 184.58 41.401 Wheeling Charges UPPCS - 108.41 - 138.41

- 549.43 - 1,034.19

We are of the opinion that the Trade Payables are overstated to the extent of ₹ 549.43 lacs 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 liability neither provision has been made in the accounts.


₹ ₹NHPC 2,776.96 2,776.96 Nrora Atomic Power Station - 161.94 THDC - 11.90

- 2,776.96 2,950.80

(iii) Account Code 41.125

The Account code Shows ₹ 3,788.54 lacs as debit balance. In our opinion the Trade Payables are understated to that extant and correspondingly the trade receivables are also understated to that extant.

10 Other Current Liabilities (Note 2.9)

a) Interest accrued and due

(i) The above also includes the interest earned on surplus RGGVY and ARDRP Funds the details of the same is as under:

Amount In lacsCurrent Year Previous Year

₹ ₹Interest Accured and Due RGGVY Funds

46.127 958.48 711.7274Interrest Accured and Due APDRP Funds

46.128 2,057.31 1082.8753,015.79 1,794.60

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

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will be paid back to the agencies as and when they demand it. In our opinion the loans are for long term period and the interest due will be part of Long term loans. Thus in our opinion the interest due will be of the nature of other long term liabilities as a result the other current liabilities are overstated to the extent of ₹ 3,015.79 lacs.

(ii) Interest Payable APRDP Loans (Code 46.734)

The company has shown ₹2,000.00 lacs as interest accrued on APRDP part A and B loan up to 31st March 2012 and the same has been shown as current liabilities. In our opinion the interest payable is of long term nature as the same relates to the moratorium period of the loan. Thus other long term liabilities are overstated to the extent of ₹ 2,000.00 lacs.

b) Liability for Purchases Capital and Others

i) The above account code shows a sum of ₹ 23,247.95 lacs (previous year ₹ 16,819.78 lacs) payable as liability on account of capital materials 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 have to be charged to revenue. The following are the details of the above:-

Current Year Previous Year

₹ ₹

Liabilities for supply of Materials/Works – Capital 42.1 1,617.36

(2,005.03)

Liability for supply of Material / Works – O&M 43.1 9,090.65

10,767.03

Stale cheques 46.910 2,876.31

917.07

Unclaimed Credit Balances 46.929 24.71

22.47

46.930 33.22

33.22

Provision for Outstanding Cheques 46.940 9,602.68

7,082.02

Outstaning Cheques Renuka Dam Projects 46.942 2.96

2.96

Adjustment account pension payments 46.943 0.05

0.05

23,247.95

16,819.78

(ii) It has been observed that divisions charge full liability 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 is being made. All such deductions which are done by the Head Office and not accounted for by the divisions may affect the other current liabilities and income of the company. In the absence of information we are unable to comment on the same.

(iii) In certain cases the payment of bills of the suppliers are to be made in phases on some percentage basis and will be not be due at the end of the financial year. The Divisions has booked the bills with the full amount and no bifurcation has been made for current and noncurrent liability. In the absence of the information we are unable to comment on the same.

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(iv) It has been observed that the where the payments has been made by the CPC up to 31st March 2013 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.

(v) The Company has executed contract with HCL for computerization of the sub divisions and implementation of SAP in the year 2009 and advanced ₹ 1,155.65 lacs 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 ₹ 1,155.65 lacs and correspondingly the short term advances are overstated to that extant.

c) Earnest Money Deposits from Suppliers and Contractors.

The above account code shows a sum of ₹ 2,097.77 lacs (Previous Year ₹ 2,241.77 Lacs) payable as earnest money deposits from suppliers and contractors. The subsidiary records in respect of above are pending for reconciliations at division level.

₹ ₹

Current Year

Previous Year

Earnest money deposits – capital 46.103 1,635.02

1,559.83

Earnest money deposits – O&M 46.123 462.75

681.94

2,097.77

2,241.77

In the absence of reconciliations we are unable to comment on the authenticity of the amount payable.

d) Electricity Consumptions Tax levied payable to MCs/NACs

The above account code shows a sum of ₹ 751.68 lacs (previous year ₹ 627.96 lacs) payable to different Municipal corporations and NAC as at 31st March 2013. 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 18(A)5 of the report of this annexure.

e) Sundry Creditors for Expenses

The above account code shows a sum of ₹ 441.34 lacs (previous year ₹ 448.68 lacs) payable to different parties is subject to confirmation as at 31st March 2013.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.

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f) 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 by the parties to whom the same has been issued as at 31st March 2013 and are to be shown in bank reconciliations statements (Please refer para 19(b) .) The details of the same are as under:-


₹ ₹1 Details as per Bank Reconclilations Statements

Outstanding Cheques 7,348.19 5,948.81 Less amount debited by bank 78.77 86.86 Excess amount Debited by bank 2,175.93 1,046.55

9,602.88 7,082.22 2 Amount for which details are not available 0.20-

9,602.68 7,082.22

In our opinion the other current liabilities are overstated and bank balance is also overstated to that extant.

The old non-reconciled entries in above are subject to reconciliations which may affect profit and loss account and balance sheet.

g) Liability on account cheques outstanding others/ stale Cheques

The company is showing a sum of ₹ 2,876.30 lacs (previous year ₹ 917.06 lacs) under the 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.

h) Deposits for Electrification Services Connections Account

The above account code shows a sum of ₹ 47,390.22 lacs (previous year ₹ 55,739.06 lacs) on account of deposit amount received from consumer for Electrification Services Connections and other charges as at 31st March 2013. The company has not provided the details of the amount received under different sub heads under above head.

As per the practice of erstwhile board the amount kept under this 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 2013. We have not been provided with the following information’s by the Divisions.

1 The details of those works where the work has 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 2013. 3 The details of parties from whom full amount has been received but no work of deposit

work has been done till 31st March 2013.

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In the absence of information we are unable to comment on the amount kept under this head of account.

(i) It has been observed that in some divisions the consumers has deposited only the

departmental charges and deposit work has been done by the consumer by their own. The charging of the departmental charges to revenue and charging of the value of fixed assets created and creation of reserves is subject to confirmations and reconciliations.

(ii) The deposits received under this head is for capital works and in our opinion the

deposits are also of long term nature. Thus other current liabilities are overstated to the extent of ₹ 47,390.22 lacs.

i) Provision for Losses

The Company has shown the provision for losses under the head other Current Liabilities and the following heads are having debit balances

Amount in lacsCurrent YePrevious Year

₹ ₹Provision for Loss on obselance of Capital Assests 46.961 2.05 2.05 Provision for Loss on obselance of Capital Spares 46.962 11.97 11.97 Provision for losses pending investigation 46.939 0.35 0.35

14.37 14.37

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.

j) Unclaimed Credit Balance

The Company is showing ₹ 22.46 lacs (previous year₹ 22.46 lacs) as unclaimed credit balance as at 31st March 2013 which is outstanding since 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.

k) Outstanding Cheques Renuka Dam projects The Company is showing a sum of ₹ 2.95 lacs (previous year₹ 2.95 lacs) as outstanding

cheques of renuka dam projects. In our opinion the liability has become time barred and should be charged to revenue

l) Account Code 44.410 The above account code shows debit balance of Rs ₹3,728.33 lacs for which no information

and explanations has been provided to us. In our opinion the current liabilities are understated to the extent of above.

m) Account code 46.420 The above account code shows debit balance of Rs ₹739.74 lacs for which it has been explained to us that the same amount pertains to account code 46.430. In our opinion the current liabilities are understated to the extent of above and short term provisions are overstated to that extant.

11 Short Term Provisions (Note 2.10)

a) Interest accrued on Consumer Security Deposit The company has charged interest on security deposits of consumers amounting to ₹ 1,605.47(Previous Year ₹ 1,150.47 lacs) during the year under review. The provision made is subject to reconciliations and confirmations.

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b) 46.430 Provision for Liability of Expenses The provision made by the company on account of liability of expenses is subject to confirmations and reconciliations.

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 balance of the assets except on vehicles which is 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 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 view that 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 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 and assets created

from REC loans have not been fully insured. (iii) The company has transferred cost of transmission lines to the HPTCL( Himachal Pradesh

Power Transmission Corporation Limited) amounting to ₹ 2,639.91 lacs 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 the date of transfer and same has been transferred at original cost. The Account is subject to reconciliation with the HPTCL

The Company has not provided to 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) as per Government of Himachal Pradesh decision in 2008. The HPPCL has charged the depreciation on the assets of the Kasang project as per

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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 Apirl 2008 to 31st March 2011 on the assets of the project transferred to the Board.

The Company has not provided to us the amount of depreciation required to be adjusted on account of above. In the absence of information we are unable to comment same.

(v) The Company has not made provision against assets valuing ₹ 13.67 lacs 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..

(vi) The Company has created assets valuing ₹ 1,040.00 lacs on the land the ownership of

which does not belong either to the erstwhile HPSEB or the company . (vii) The Company has not made provision of assets valuing ₹ 20.40 lacs stolen from various

lines /sites in the books of accounts. In our opinion the assets are overstated to the extent of above.

(viii) Depreciation on assets acquired out of Grants / Subsidy / Customer Contribution. Please

refer Para 3 of this Annexure (ix) The Company is showing a sum of ₹ 7,038.06 lacs (previous year ₹ 7,038.06 lacs) as capital

expenditure resulting in assets not belonging to the board and assets transferred I/Ward as at 31st March 2013. The Company has charged depreciation to the tune of ₹ 444.41 lacs (previous year ₹ 443.90 lacs). 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 ₹ 1,158.28 lacs

(x) The accumulated depreciation as on 31st March 2013 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.

(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.

(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.

(xiii) Depreciation of vehicles during the year has been adjusted for the less/ excess depreciation charged up to 31st March 2013 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

13 Capital Work in Progress (Note 2.12)

(a) Capital Works in Progress

(i) The above account head shows a sum of ₹ 88,695.79 lacs (previous year ₹ 1, 02,484.28 lacs) on account of work in progress of various capital works as on 31st March 2013 which is subject to reconciliation and confirmations.

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No Information / explanations in respect of the same have been providing to us. In the absence of information we are unable to comment on the same

(ii) It has been observed that the works under capital work in progress has 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.

(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 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 work on the assets has been completely finished or not.

(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 @ 21.71 % ( previous year @11.71 %) on year to year basis without verifying whether the assets has 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.

b) IDC Calculations

The Company has charged the IDC during the year on following basis: Amount in lacs

IDC Charged by Head Office for the year 2012-13 -6,634.57 IDC Reveresed By Head Office for the year 2011-12 14,049.05 IDC Charged by the Division for the year 2011-12 -12,089.72

-4,675.25

The Divisions has less charged the IDC for the year 2011-12 during the year under review amounting to ₹ 1,959.32 lacs. Thus IDC is understated to the extent of above.

c) The Company has charged ₹ 436.17 lacs as IDC on survey and investigation charges

incurred by the Chamba division of CE Projects during the year under review. The above practice is not in lines with the AS 16 Accounting of Borrowing Costs issued by ICAI. This may affect the profits/ loss of the Company. Thus expenditure of the company is understated to the extent of above.

d) Contracts in Progress The Company is showing a sum of ₹ 675.37 lacs (previous year ₹ 7,427.48 lacs) as on 31st March 2013 as contract in progress at various divisions which is subject to reconciliation and confirmations.

e) Revenue Expenses pending allocation over Capital Works The company is showing ₹ 10,001.42 lacs (previous year ₹ 17,416.17 lacs ) 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 and amount added as per para b above. Thus above head is overstated to the extent of ₹11,960.74lacs.

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f) Intangible Assets

The above head includes expenditure incurred on implementation and installation of SAP and its related activities. The expenditure is subject to confirmations and reconciliations.

14 Long Term Loans and Advances (Note 2.15)

a) Advances to Supplies/ Contractors ( Capital)

The Company is showing a sum of ₹ 1,713.61 lacs (previous year ₹ 441.68 lacs) as advances to supplier and contractors as on 31st March 2013. The above amount is subject to confirmation and reconciliations in respect of works completed against advances sanctioned.

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 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.

(iii) The Company has supplied to us the list of employees for house building and car loan but the outstanding amounts as per list does not tally with the books of accounts

(iv) The Company is showing the following amounts under the above head for which does not reconciled with the details supplied to us. In the absence of complete reconciliation the same cannot be commented on:-

Amount in lacs


₹ ₹

27.101 Loans and advances to staff – House building 392.41 234.19

27.102 Loans and advances to staff – Scooter/Motor Cycle - 14.95 - 13.88

27.103 Loans and advances to staff – Car 14.66 - 4.21

27.s Opening Diffrence - 273.93

392.12 490.03

(v) No information regarding current and noncurrent portion of loans and advances to employees has been provided to us.

15 Other Non Current Assets ( Note 2.16)

a) Assets not in use The company is showing ₹ 973.21 lacs (previous year ₹ 1,038.68 lacs) as assets not in use as at 31st March 2013. In our opinion the above assets has completed their use full life and

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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 (B)6 )

b) Special Repair to Vehicles

The above account code shows a sum of ₹ 1.91 lacs (previous year ₹ 5.15 lacs) incurred on account of special repairs to vehicles as at 31st March 2013. The above cost does not qualify 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.

c) Expenditure on Survey/ Feasibility Studies Projects not yet sanctioned.

The above account code shows a sum of₹ 12,096.38 lacs (previous year ₹ 11,376.38 lacs) incurred on account of Expenditure on Survey/ Feasibility Studies Projects not yet sanctioned as at 31st March 2013.

It has been observed that expenditure on survey / feasibility studies on different Pojects has been incurred by the erstwhile board since many years. The expenditure has been done as the HPSEB was the only nodel 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 nos 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 ₹ 10,159.24 lacs (previous year ₹ 9,439.28 lacs )which was shown by the divisions for our verification.

d) Trade Receivables (Non Current)

The Company is showing a sum of ₹ 535.36 lacs (previous year ₹ 590.82 lacs) due from permanent defaulters as on 31st March 2013. The Company had made provision for the same but the same has been reduced from current trade receivables. In our opinion non current trade receivables are overstated to that extent.

e) 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 218.68 164.52 22.8 Materials short excess pending investigations 345.42 458.54

564.09 623.06

In our opinion other noncurrent assets are overstated to the extent of ₹ 564.09 lacs for which no provisions has been made in the books of accounts.

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f) Interest Accrued and Due on and Interest Accrued but not due on staff Loans and others (i) 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:- Income accrued and due on Loans/Advances to staff

Current Year Previous Y₹ ₹

Income accrued and due on loans and a 28.261 243.77 216.56- M.C./Scooter Advance 28.262 44.59 22.03- Car Advance 28.263 26.31- 25.54- Income accrued and due on Loans/Adv 28.260 11.56- 11.62- Income Accrued & due--- Others. 28.290 0.47 0.39 Income accrued but not due- Staff Loan 28.360 - 102.73

28.360 3.22 3.36 House Building Advance 28.361 475.44 392.12 Motor Cycle Advance 28.362 13.15 15.46 Car Advance 28.363 7.39- 29.86 Warm Clothing Advance 28.364 0.71 34.60 income accured but not due others 28.390 86.66 86.66

ii) The account code 28.364 is of the nature of short term nature and should be shown under the head other short term loans and advances. Thus other non current advances are overstated to the extent of ₹ 0.71 lacs.

16 Current Investments (Note 2.17) Leave Encashment Fund The Company is showing ₹1,849.84 lacs (Previous Year ₹ 1,694.50 lacs) 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.

17 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 relisaable value whichever is less. In the absence of sufficient information we are unable to comment on its affect to the Profit and Loss Account.

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 has been made in the books of accounts on account of obsolescence, shortages and reduction in the value.

Current Year Previous Year₹ ₹

22.6 Opening Diffrence 23.65 23.65 22.6 Stocks in hand more than five years Critical 801.67 904.81 22.6 Stocks in hand more than five years non Critic 124.79

950.12 928.46

In our opinion the inventories are overstated to the extent of ₹ 124.79 lacs for which no provisions has been made in the books of accounts.

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c) It has been found that there is no systematic accounting of stocks in this account heads and some divisions has 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.

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.

18 Trade Receivables (Note 2.19) The Company has shown trade receivables from consumers and others under this head

amounting to ₹ 43,245.54 lacs. No sufficient information with regard to that the trade receivables are of current nature ie 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.

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 2013.

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.

3 The Trade Receivables also includes ₹ 737.25 lacs (previous year ₹ 10,544.95 lacs) as

amount recoverable from different departments of Government of Himachal Pradesh. The Party-wise details of the same is as under:--

Amount in ₹ lacsCurrent Year Previous year

I&PH 10,905.32 6,976.41 MC/NAC 2,473.03 2,522.90

13,378.35 9,499.31

Others MiscMedical Department 499.55 662.5DC Office 44.28 135.06PWD 33.06 32.36Education Department 20.66 16.81Revenue Department 29.55 49.48Police 5.19 10.88Judiciary 0.03 3.6Cicute HouseOthers Misc 104.93 134.95 Total 737.25 1,045.64 Total 14,115.60 10,544.95

The company has filed an affidavit with the Honab’le High Court of Himachal Pradesh on 5th March 2013 that aprox ₹ 9,000 lacs are in arrears/ defaults from different government departments, corporations and municipalities etc. whose outstanding are more than ₹ 25 lacs.

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4 The company has made only provision for doubtful debts amounting to ₹ 12.23 lacs (previous year ₹ 141.02 lacs) and the provision has not been increased from many years. In our opinion the provision is less keeping in view the amount recoverable from Government departments and other 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 2013 to different Municipal committees and NAC is ₹ 751.68 (previous year ₹ 627.96 lacs) 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.

6 The Company has shown ₹ 709.00 lacs 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.

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

₹ 4,390.30 lacs (previous year ₹ 2,636.69 lacs) includes the accounts of following parties for which no sufficient information/ confirmations are available at Head Office.

Amount in LacsCurrent Year Previous YearDebit Credit Debit Credit

23.601 PSEB 1,263.30 - 1,263.30 - 23.603 UPSEB 949.69 - 266.40 - 23.610 NTPC 1.56 23.623 Malana Deve. Power 181.84 - 23.624 REC.CH. 749.54 - 23.630 PGCIL(UI) 1,244.36 -

Total 4,390.30 - 1,529.70 -

We are further of the opinion that the trade receivables are overstated to the extent of ₹ 4,390.30 lacs (previous year ₹ 4,275.22 lacs) on account of debit balance in the parties account for which no sufficient confirmations / information is available with the company.

2 The company is also showing a sum of ₹ 13,790 lacs (previous year ₹ 6,768.18) recoverable from different parties on account wheeling/ O&M Charges as on 31st March 2013. The following are the account balances of parties in which there are differences in closing balance.

Amount in LacsCurrent Year Privious YearDebit Credit Debit Credit

23.802 HVPNL 22.66 - 226.30 23.814 MALANA(W) - 2.07 23.82 Handling charges of Govt. Free power 3,138.04 -

23.82623.821 MALANA(H) 10.89 - 23.83 PTC System opt. ch. 10,252.19 -

Total 13,423.77 2.07 226.30 -

We are of the opinion that the wheeling and OM charges are understated to the extent of ₹ 2.07 lacs

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We are further of the opinion that the trade receivables are overstated to the extent of ₹ 13,423.77 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.

3 O& M Charge Recoverable from HPTCL

The Company has booked ₹ 630.94 lacs (previous Year ₹ 392.58 lacs) as O & M Charges Recoverable from HPTCL during the year under Review. The company has shown the same as current trade receivable but the payment of the same has not been received till the date of the audit. Thus current trade receivables are overstated to the extent of above.

C Court Cases by Consumers The erstwhile Board has billed ₹ 1,208.16 lacs (previous year ₹ 835.00 lacs) and ₹ 1,425.65 lacs

(previous year ₹ 1,271.00 lacs) 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

19 Cash and Cash Equivalents (Note 2.20)

a) Balance 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 2013 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.

(ii) Bank Reconciliations at Head Office Level

It has been observed that the head office have accounted for all the pending entries in the bank reconciliations statements of all banks in the financial statements which is not in line with the commercial accounting practice. The un reconciled entries on account of unrepresented cheques and cheques outstanding for clearing has to be shown in the reconciliations statements only and has not to be accounted for in the financial statements and to be settled in the bank reconciliations statements in succeeding months.

(iii) The Head office has adjusted the overdraft account of PNB The Mall Shimla having balance of ₹ 381.76 lacs( Previous Year ₹ 531.93 lacs ) Cr with the current account balance of the PNB The Mall Shimla in the bank balances shown as on 31st March 2013. 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 24.324 amounting to ₹ 69.82 lacs (previous year ₹ 69.82 lacs). Thus bank balances are overstated to that extent.

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b) Cash in Transit

The company is showing a sum of ₹ 6,366.65 lacs (Previous year ₹ 9,603.52 lacs) as cash in transit as on 31st March 2013. The details of the same as under:-


₹ ₹1 Details as per Bank Reconclilation Statements

Bank Charges Excess Charged by Bank - - Outstanding Remittance 4,042.16 8,328.75 Short credit given by Banks 1,111.07 678.87 Excess amount debited by Banks 1,181.35 595.92

6,334.58 9,603.53 2 Cheuqe in transit since 1996-97 32.07 32.07

Total 6,366.65 9,635.60

The above amounts pertains to cheques outstanding for clearing by banks which has 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 unreconciled entries in above are subject to reconciliations and it may affect the profit and loss account and balance sheet. In our opinion all old entries shown in the reconciliation statements should be reconciled and necessary adjustment entries may be passed in books of accounts.

20 Short Term Loans and Advances (Note 2.21)

A Advances to Contractors and Suppliers

(i) The company is showing ₹ 1,984.28 lacs (Previous year ₹ 2,152.89 lacs) as loans and advances for supplies / works. The above advances also include advances which are old and require adjustments as the works has 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 same has been provided. Non Information in respect of noncurrent portion of advances has been shown for our verification.

(ii) The Binwa division of Generation wing has advanced ₹ 58.67 lacs to M/s Garg Engineering Industries Private Limited. The Advance has become bad as the party is not traceable. In our opinion the short term loans and advances are overstated to the extent of above.

B Loans and Advances to Staff

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

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that the same is being reconciled and kept at head office level in the broad sheets of the employees.

It has also been observed that when an 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 2013 as such we are unable to comment on the authenticity of the amount recoverable on account of loans and advances from the employees.

The company has not provided us the details in respect of the following account heads during the year review.

Amount In lacs

Credit

₹

Loans and advances to staff – Warm clothing 27.104 17.94 Loans and advances to staff – T.A 27.201 1.24 Loans and advances to staff – pay 27.202 20.27 Loans and advances to staff – Festival 27.203 -0.04 LTC advance 27.207 1.89 Medical advance 27.208 13.92 warm clothing advance 28.264 -5.41 28.266 3.02

52.84

No information in respect of current and noncurrent portion of advances has been shown for our verification

C Prepaid Expenses

(a)The Company is showing prepaid expenses amounting to ₹ 100.74 lacs out of which a sum of ₹ 91.65 lacs 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.

(b) It has been observed that the company has no precise policy of charging the expenses to prepaid expenses head. Most of the divisions are charging petrol and diesel of vehicles in hand at the close of the year. Some Divisions have charged Insurance on vehicles in the prepaid expenses.

D Account code 28.831

The above account code shows credit balance of ₹ 389.60 lacs during the year under review. No information in respect of same has shown for our verification. In our opinion the short term loans and advances are understated to the extent of above.

E Advance Income Tax/ Tax Deductions at Source

(i) The Company has claimed ₹ 571.65 lacs as income tax refund in the income tax return filed for the financial year 2012-13 where as the company has accounted for ₹ 891.38 lacs under the head TDS recoverable. No sufficient information in respect of the same has been provided to us. In the absence of information we are unable to comment on the same.

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(ii) The above account head shows ₹ 2,018.80 lacs as short term loans and advances where as above amount includes ₹ 901.89 TDS which are of noncurrent nature. Thus short term loans and advances are overstated to the extent of above.

F) Amount Recoverable Government Departments (i) A sum of ₹ 11.40 lacs 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.

(ii) Amount Deposited with PWD Kullu

The Thalot division of Generation Wing(earlier Projects Wing) has deposited ₹ 100.00 lacs 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 .

(iii) Amount Recoverable from HIMURJA The Company has shown a sum of ₹ 26.99 lacs (previous Year ₹ 26.99 lacs) 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.

G) Amount recoverable Related Parties

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.

II. BVPCL ( Subsidiary Company)

The Company has incurred expenditure to the tune of ₹ 4,931.71 lacs (previous year ₹ 10,291.33 lacs) as on 31st March 2013 for which shares has to be issued by the BVPCL . The above balance is subject to reconciliation and confirmation. The Company has allotted only shares for ₹ 2,500.00 lacs during the year 2013-14. Thus a sum of ₹ 2,431.71 lacs amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

H) Amount Recoverable Others 1 Amount Recoverable from SJVNL

The Company is showing a sum of ₹ 176.75 lacs (previous year ₹ 176.75 lacs )recoverable from SJVNL as on 31st March 2013 as short term loans and advances Other . SJVNL has not accepted the liability as such the amount is not current assets and is of the nature of non current assets. Thus short term loans and advances are overstated to the extent of above.

2 Expenditure incurred on Resident of Parbati HEP

The Company is showing a sum of ₹ 21.68 lacs (previous year ₹ 21.68 lacs) as amount recoverable from NHPC. The amount has not been recovered till the approval of accounts.

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The amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets.

3 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

4 Amount Recoverable Himachal Pradesh Power Corporation Limited

The company has shown a sum of ₹ 1,770.51lacs (previous year ₹2,939.15 lacs) recoverable as on 31st March 2013 for which shares has to be issued by the HPPCL. The HPPCL has issued shares for above amount in the year 2014-15.The amount recoverable is of noncurrent nature and should be shown under the head other non current assets.

5 Amount Recoverable Himachal Pradesh Power Transmission Corporation Limited.

The company has transferred cost of transmission lines to the HPTCL ( Himachal Pradesh Power Transmission Corporation Limited) as per the scheme of the transfer . A sum of ₹ 2,675.12 lacs (previous Year ₹ 2,675.12 lacs) has been shown as recoverable as at 31st March 2013 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 Theft of Property Pending Investigation The above head shows a sum of ₹ 3,061.74 lacs (previous Year ₹ 3,214.18 lacs) as on 31st

March 2013. The above amount is to be shown under the head other noncurrent assets. Thus other current assets are overstated to the extent of above.

7 Expenses recoverable from Suppliers /Contractors.

The above head shows a sum of ₹ 794.79 lacs (previous year ₹ 490.84 lacs) as on 31st March 2013 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.

8 Inspection charges related to material \ equipment third party inspection

The above head shows a sum of ₹ 22.43 lacs (previous year ₹ 20.21 lacs) as on 31st March 2013 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. In our opinion short term loans and advances are overstated to the extent of above.

9 Amount Recoverable from PSEB

The above head shows a sum of ₹ 7.63 lacs (previous year ₹ 7.63 lacs) as on 31st March 2013 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.

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I) Deposits

(i) The Company is showing a sum of ₹ 7,587.84lacs under this head the details of which as under :

Current year Previous Year

₹ ₹Amount Recoverable from Government of H P 7,408.00 7,408.00 Other Deposit with High Court and Athorities 179.84 200.99

7,587.84 7,608.99

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 ₹ 7,408.00 lacs 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.

J) Amount Recoverable from Employees

(i) The above account includes a sum of ₹ 166.18 lacs (previous year ₹183.87 lacs) 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 has gone to courts and in some cases the monthly installments has been fixed and in some cases the amount has 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.

Current Year Previous YearAmount recoverable from ex-employees

28.401 162.20 178.33 Amount recoverable from employees on deputation from other organisations 28.402 3.18 4.74

28.411 0.80 0.80 166.18 183.87

(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

K) Interest Accrued but not due employees

The above account includes a sum of ₹ 1.14 lacs (previous year ₹ 1.17 lacs) for which no sufficient information has been provided to us. In the absence of the information we are unable to comment on the same

L) Interest Accrued but not due others.

The above account includes interest accrued and due on GPF Fixed deposits amounting to ₹ 10,443.41 lacs (previous year ₹10,706.14 lacs). 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.

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M) Leave and pensionary Benefits Recoverable from outside parties Account Code 28.880 The above account shows ₹ 1,110.28 lacs recoverable on account of leave and pensionary

contribution recoverable from outside parties. The above amount includes ₹ 872.20 lacs which is of non current nature. Thus short term loans and advances are overstated to the extent of above.

21 Other Current Assets (Note 2.22)

(i) Receivables from scrap Sales/ Misc Income

The above account includes a sum of ₹ 443.23(previous year ₹ 427.61 lacs) receivable from scrap and other incomes. Out of above a sum of ₹ 351.45 lacs is of noncurrent nature. Thus, other current assets are overstated to the extent of above.

(ii) Reimbursement of up front subsidy by GOHP

The above account shows a sum of ₹ 4,970.00 lacs (previous year ₹ 4,970.00 lacs) 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.

(iii) Revenue Subsidy Grant From Govt of HP (Account Code 28.623 and 28.264)

The amount recoverable from HP Government amounting to ₹ 11,258.00 lacs is of noncurrent nature. Thus the other current assets are overstated to the extent of above.

iv) Inter Unit Transactions

The company is showing ₹ 18,248.87 lacs (previous year ₹ 7,541.82 lacs) on account inter unit transfers and the same has 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 has to be adjusted at the close of the year and amount should be Nil under this head. Thus other current assets are overstated to the extent of above.

22 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 1,760.41 2,624.98 2 Interest on APRDP Fund - - 3 Interest on RGGVY Funds - - 4 Interest on Leave Encashment Fund - 139.43

1,760.41 2,764.41

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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.

(ii) Prior Period Items 2013-14 The Company has charged the following amounts under the Head Prior Period Items in the accounts for the year 2013-14. The account for the year 2012-13 was approved by the Board on 18th October 2014 and the prior period items are known to the company before the finalization of the accounts for the year 2012-13 but no effect of the same has been made in the financial statements for the year 2012-13.


Amount in₹ lakhsCurrent Year Previous Year

Prior Period Items Interest Income for Prior Period - (15,680.79) Other Income Relating to previous year - 373.49 Fuel Related Expenses - - Interest and other Finance Charges relaiting to Privious Ye - - Other Charges Relating to Privious year 0.92 - Other Excess provision in prior period (226.88) -

- (225.96) (15,307.30)

Short Provision for power Purchased in privious year 6,519.49 (13,871.12) Other Income Relating to Privious Year - - Employees costs relating to previous years 1,055.73 - Depreciation under provided in previous years (3,226.57) - Other Charges Relating to Privious year 18.97 - Opertaing Expenses Relating to Privious Year 43.38 (0.69)

4,410.99 (13,871.80) Net Prior Period Items (4,636.95) (1,435.50)

(iii) Contingencies and Events Occurring after Balance Sheets Dates The Company has not accounted for material events incurred after balance sheet date till

the approval of the accounts by the Board of Directors as the next year accounts are not complete till the finalization of the report. The material items which may affect the profit loss account and balance sheet cannot not be commented on in the absence of the information as per the requirements of AS 4 Contingencies and events Occurring after the Balance Sheet Date issued by the Institute of Chartered Accountants of India

(iv) Reallocation costs of Employees and Repair and Maintenance to Capital works

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.

(iv) Losses on account of flood cyclone fire etc. Account Code 79.8 The Company has incurred ₹ 121.68 lacs on losses on account of flood Cyclone fire and

natural Calamity Etc. The Company has received the grant for the same from the

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Government of Himachal Pradesh under special and means, advance on account of natural calamity. The amount has not been adjusted with account code 54.601. Thus Expenditure is overstated to that extent of above.

(v) Prior Period Employee Costs

The Company has charged arrears of the 6th Pay Commission on the order issued by HP Government and HPSEB Limited (Refer Note 2.31(B) 26). The Above accounting is in contravention of the AS 5 Net Profit or Loss for the year , Prior Period items and Changes in Accounting Policies which states that prior period items refers only income and expenses which arise in current period as a result of errors or omissions in one or more prior periods. Thus current year employee costs are understated to the extent of ₹ 6,052.31 lacs and similarly the prior period expenses are overstated to that extant.

vii) Penalty Imposed by the Income Tax Department. The Income Tax Department has levied penalty amounting to ₹ 666.52 lacs on 20/03/2013

under section 271 (c) of the Income Tax Act 1961. The Company has deposited the amount on 12/08/2013 and filed appeal against the same. No disclosure of the same has been made to the notes to accounts and in the financial statements. Thus, other current Liabilities are understated to the extent of above.

23 Other Observations (i) The BOD has 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 lacs 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.

(ii) Transfer of various HPSEB Limited Roads to HPPWD. a) The BOD 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.

b) The BOD vide resolution no dated 16.09 28/12/2013 has transferred Largi Barrage-Shilly

Larji HPSEBL roads to HPPWD along with the title of the land free of cost amounting to ₹ 90.17 lacs. In our opinion the tangible assets are overstated to that extant.

(iii) The BOD has sanctioned to write off the stolen AAC amounting to ₹ 0.92 lacs 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.

(iv) 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:-

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Amount in ₹ lacsCurrent 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 0.02 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 351.16 351.19

In our opinion the assets and liabilities are overstated to the extent of above.

(v) 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 record of the same has 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 had been provided to us as such we are unable to comment on the amount of depreciation charged on vehicles.

Amount in₹ lacs

Current Year Previous 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


(vi) Investigation Division Recongpeao

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We have been provided with the account of the investigation Division Recongpeo, by the Chief Engineer Projects, but sub head details and subsidiary record of the same has not been provided to us:-

Amount in₹ lacs


Debit(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 Contribution towards Cost of Capital Assets

Total

(250.66)

(250.66)

In our opinion the assets and liabilities are overstated to the extent of above (vii) Civil MTC Division Bawanagar

We have been provided with the account of the Civil MTC Division Bawanagar, by the Head Office, but sub head details and subsidiary record of the same has not been provided to us:-

Amount in₹ lacs


10 Fixed Assests 813.27 813.27 813.27 813.27

In our opinion the tangible assets are overstated to the extent of above.

(viii) Repair and Maintenance Line and cable Net Works It has been observed that 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.

(ix) 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:-

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Amount in ₹ lacsCurrent Year Previous Year

Short credit given by banks 1,111.07 678.87 Excess amount debited by banks 1,181.35 595.92

2,292.42 1,274.78

Less amount debited by banks 78.77 86.86 Excess Credit by banks 2,175.93 1,046.55

2,254.69 1,133.41

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.

(x) Distribution Losses

The distribution losses incurred by the company during the year 2012-13 is as under. In some of the circles the distribution losses is very high as compared to acceptable norms for electricity companies.

Distribution Losses for the year 2012-13

Units MKW/H(MU)Figures in bold Current Year

Energy Input Energy Sold T& D Losses PercentageShimla 428.54 349.25 79.29 18.50

426.81 342.44 84.37 19.77 Rampur 160.26 128.04 32.21 20.10

162.06 132.12 29.94 18.47 Rohroo 130.66 75.60 55.05 42.14

130.69 68.04 62.65 47.94 Solan 3,360.53 3,038.93 321.60 9.57

3,177.09 2,935.04 242.05 7.62 Nahan 1,146.26 1,030.04 116.22 10.14

1,133.99 1,008.40 125.59 11.08 Hamirpur 282.12 232.37 49.75 17.64

266.02 216.18 49.84 18.74 Bilaspur 719.00 637.15 81.85 11.38

717.60 619.48 98.12 13.67 Mandi 245.56 196.47 49.09 19.99

232.21 177.13 55.08 23.72 Kullu 257.03 200.07 56.96 22.16

245.40 206.33 39.07 15.92 Una 607.17 538.28 68.90 11.35

545.76 457.25 88.51 16.22 Kangra 515.49 402.07 113.42 22.00

508.90 388.79 120.11 23.60 Dalhousie 509.87 395.30 114.57 22.47

465.10 366.91 98.19 21.11 8,362.49 7,223.57 1,138.91 13.62 8,011.63 6,918.12 1,093.52 13.65

(xi) 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, epf contribution payable as on 31st March 2013 ( refer Note 2.31(A)8) 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.

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(xii) 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 2013. 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.

Amount in₹ lacs

Government of Himachal Pradesh Current Year Previous YearAmount RecoverableInvestment in HPTCL 7,408.00 7,408.00 Share Application Money 11.40 11.40 Handling Charges Free Power 3,726.00 3,138.00 Subisidy 11,258.00 6,205.00 Tarriff Subsidy 4,970.00 4,970.00 Sale of Power Vidhan Sabha ( Dsala) 193.00 193.00 Pension Contribution Bhutan Project 176.00

27,742.40 21,925.40

Amount PayableFree Power Charges 68,373.00 45,223.00 Elelctricity Duty 41,247.00 33,669.00

109,620.00 78,892.00

(xiii) 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 ) 28.

Amount in₹ lacsCurrent Year Previous Year

Prior Period Income 43,268.48 5,264.99 Prior Period Expenses 40,996.03 4,253.17 Net Prior Period Items 2,272.45 1,011.82

(xiv) Contingent Liabilities in notes to accounts

The Company has made disclosure of contingent liability where liability involved is more than ₹ 100 lacs and where the liability involved is less than₹100 lacs 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) 12)

(xv) 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, 2013. In the absence of the information we are unable to comment on the same.

(xvi) The Company has not provided any information in respect of the following comment of AG for the year ended on 13/06/2010.

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(i) ₹ 7,025.00 lacs 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 ₹ 121.00 lacs due to non -account of interest on Power Bonds of ₹7,025 lacs. This has resulted in understatement of above head as well as Deficit to that extent

(iii) ₹5075.00 lacs on account of Interest on Power Bonds of ₹ 7025.00 lacs (October 2001 to

2009-10). This has resulted in understatement of Accumulated Loss as well as Other Current Liabilities to the above extent.

(xvii) No details has been provided for Non Provision of ₹ 160.00 lacs 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 ₹ 153 lacs and current financial period ₹7.00 lakh) as reported by AG in their report for the year ended on 13/06/2010

(xviii) Non Provision of ₹ 1374.00 lacs 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.

(xix) Non Provision of ₹169.00 lacs 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

(xx) Non Provision of assets valuing ₹ 243.00 lacs washed away due to flash floods (between

2003 to March 2009) and which were not in existence. In Our Opinion the tangible assets are over stated to the extent of above.

(xxi) 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 ₹ 1,293.00 lacs transferred to M/s HPPCL/NHPC during 2009-10. In our Opinion the tangible assets are overstated to the extent of above.

(xxii) No provision of assets valuing ₹ 1,106 lacs 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.

(xxiii) The Company has shown an amount of ₹113.00 lacs 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

(xxiv) The Company and its divisions has not provided to us Court cases details which are

contingent in nature and in which contingent liability of the company is involved.

25 Non Compliance of Accounting Standards The Company has not complied with the following mandatory accounting standards issued

by the Institute of Chartered Accountants of India

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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 & 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.

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.

3 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 18th October 2014 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 2013 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 availability of information. 4 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

5 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.

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

6 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.

7 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.


8 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


9 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.


10 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.


11 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.

12 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

13 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.

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14 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.”

15 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

16 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 effect of the said qualifications where ascertainable the loss of current year ₹ 34,028.20 lacs will be increased to loss of ₹2,27,603.36 lacs . The reserves and surpluses will be ₹ (1,06,242.38) lacs instead of ₹ 23,903.07 lacs. The share application money pending allotment will be ₹ 5,000.18 lacs instead of ₹44,653.18 lacs. The Long Term Borrowings will be ₹ 2,48,401.25 lacs instead of ₹1,50,734.25 lacs. The Other long term liabilities will be ₹ 1,00,694.76 lacs instead of ₹ 64,476.00 lacs . The long term provisions wil be ₹ 1,19,517.69 lacs instead of ₹ Nil lacs. The short term borrowings will be ₹ 1,66,013.87 lacs instead of ₹2,63,299.11 lacs . The Trade payables will be ₹ 1,10,423.51 lacs instead of ₹ 1,04,248.96 lacs. The other current liabilities will be ₹99,496.47 instead of ₹ 1,61,736.92 lacs . The short term provisions will be ₹ 11,141.43 lacs instead of ₹ 11,881.17 lacs. The Tangible assets will be ₹4,87,089.58 lacs instead of ₹4,99,423.12 lacs. The capital work in progress will be ₹1,08, 806.97 lacs instead of ₹ 99,372.57 lacs. The non current Investments will be ₹ 40,656.73 lacs lacs instead of ₹ 38,806.89 lacs. The long term loan and advances will be ₹ 3,329.35 lacs instead of ₹ 2,347 lacs. The other noncurrent assets will be ₹ 46,323.69 lacs instead of ₹ 14,993.67 lacs . The current investments will be ₹ Nil lacs instead of ₹ 1849.34 lacs. The inventories will be ₹9,263.79 lacs instead of ₹9447.29 lacs. The Trade receivables will be ₹21,733.90 lacs instead of ₹42,697.96 lacs. The cash and cash equivalents will be ₹ 13,159.77 lacs instead of ₹22406.25 lacs. The short term loans and advances will be ₹ 6,970.91 lacs instead of ₹ 37,909.32 lacs . The other current assets will be ₹22,823.50 instead of ₹ 54,731.46 lacs.

Opinion

In our opinion, because of the significance of the matter discussed in the Basis for disclaimer of opinion paragraph,

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

(a) in the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2013.

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(b) in the case of the Statement of Profit and Loss ,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 Emphasis of the Matter

(i) 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.

(ii) We draw attention to Note 2.31 (A) 5 d where in the CWIP has been capitalized

irrespective of the date of commissioning of the assets. (iii) We draw attention to Note 2.31 (A) 6 the practice of the company is to value inventories

at cost only. (iv) We draw attention to Note 2.31 (B) 20 the practice of the company to keep both the

assets owned by own funds and from consumer contributions towards cost of capital assets in one account head and should be accounted for separately .

Report on Other Legal and Regulatory Requirements

A) As required by the Companies ( Auditors Report) Order, 2003, as amended , issued by the

Central Government of India in terms of sub section ( 4A) of section 227 of the Act , we give in the annexure I as statement on the matters specified in paragraphs 4 and 5 of the order.

B) As required by section 227 (3) of the Act ,we report that:-

i) We have obtained all the information and explanations which to the best of knowledge and belief were necessary for the purposes of our audit except the following:-.

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.

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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, 2013 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.

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 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 / unreconciled. The adjustment required if any may affect the profit & loss account and the balance sheet.

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.

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.

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.

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, investment section, SLND and Pension II. The subsidiary records / register of individual DDO has not been produced for our verification. No sufficient information has been provided in respect of the liability of expenses, other liabilities and provisions at Head Office Level

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 has been burnt. The above pendency has been observed in Solan Circle, Rampur Circle, Rohroo Circle and other circles/ divisions also. The adjustment required if any may affect the profit & loss account and the balance sheet.

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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 year’s records has 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.

11 No sufficient information and evidence in support of revenue expenses pending allocation

over Capital Works has been provided to us. The adjustment required if any may affect the profit & loss account and the balance sheet.

12 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 The adjustment required if any may affect the profit & loss account and the balance sheet.

13 The Company has not provided any information about those consumers who has gone to

the courts on account of disputes in the bills raised for energy charges. 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.

15 The Head office has not supplied to 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.

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.

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.

18 The Company has not able to provide reconciliation in respect of deposits and retentions

from suppliers and contractors with the subsidiary records maintained.

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.

20 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.

21 The divisions has not provided sufficient information in respect of those assets where the consumer has deposited the departmental charges and executed the work by their own. The adjustment required if any may affect the Value of assets created and the reserves on the other hand.

22 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

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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.

ii) In view of following in our opinion, proper books of accounts as required by Law have not been kept by the company so far as it appears from our examinations of those statement, 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.

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 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 / 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.

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.

iii) The Balance Sheet and Statement of Profit and Loss dealt with by this report are in agreement with the books of statements except our observations in para 1(b),22(iv),(v),(vi)and (vii);

iv) Except for the effects of the matter described in the Basis for Disclaimer of Opinion paragraph and non compliance of accounting standard specified therein , in our opinion, the Balance Sheet, Statement of Profit and Loss comply with the accounting standards referred to in section 133 of Companies Act, 2013 read with MCA circular no 16/2013 dt 18/09/2013.

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

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vi) The Company has not taken any reasonable steps to remove the qualifications reported in earlier year reports while adopting the accounts for the current year, therefore old qualifications has been considered in the current year report also. Other Matters

1 The Company is not complying with the latest provisions of the Service Tax Act in respect of service tax payable on taxable services specified in the Service Tax Act .

For Anil Karol & Company Chartered Accountants Firm Registration Number: 04816N Sd/- CA Walia Umesh Partner Membership No. 098287 Place: Shimla Date: 22.10.2014

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ANNEXURE-A

Forming part of auditors’ report on financial statements of Himachal Pradesh State Electricity Board Limited for the year ended on 31st March, 2013. (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 is 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 Rs 9,423.64 lacs ( Previous Year Rs 10,387.00 lacs) as at 31st March 2013, out of which stock amounting to Rs 926.47 lacs (Previous Year Rs 904.00 lacs) which are more than five years old and has not been utilized 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 .

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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 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 does 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 26,173.71 Lacs 31,448.00lacs Municipal Taxes 515.84 Lacs 382.00 lacs Labour Cess 0.00 Lacs 7.00 Lacs CPS Contribution 345.41 lacs 624.00 Lacs

Service Tax 8.36 lacs 13.51 lacs

We further report that company has not transferred the GPF fund contributions to a 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 31.03.2013 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.

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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. The Company has opted for Financial Restructure Plan Issued by the Govt. of India where the short term loans issued by the Banks have been converted into long term loans.

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. xvii) 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 Sd/- Place: Shimla CA Walia Umesh Dated: 22.10.2014 Partner) M No 098287

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Auditor’s Report REPLIES TO THE AUDITOR’S REPORT ON ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2013.

OBSERVATION REPLY

INDEPENDENT AUDITORS’ REPORT To

The Members of Himachal Pradesh State Electricity Board LTD, Report on the Financial Statements We have audited the accompanying financial statements of Himachal Pradesh State Electricity Board Limited, Shimla (“the Company”) as on 31st March, 2013 and the Statement of Profit and Loss account, Cash, Flow Statement and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance in accordance with the accounting standards referred to in section 133 of the companies Act ,2013 (Compliance with sub section (3C) of section 211of the companies Act 1956 is sufficient compliance with section 133 of Companies Act, 2013 read with MCA circular no 16/2013 dated 18.09.2013).This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates

Statement of facts, hence no comments are required.

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made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit of disclaimer opinion. Basis for Disclaimer Opinion 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. During the year accounts statements at division levels are prepared on the basis of old schedule VI but the divisions, wings and circles balance sheets has been re casted as per revised schedule VI for the year and also for the previous year. The previous year’s figures have been re casted and regrouped to comply with the requirements of revised schedule VI.

Needful shall be done in next financial year.

b) 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 Divisions and Circles do not reconcile with consolidated balances used for compilation of these financial statements.

We further report that the erstwhile Board transferred it

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.

The erstwhile H.P. State Electricity Board was unbundled through a transfer schemes notified by the Govt. of H.P. vide order dated 10.6.2010 under which the undertaking assets, properties, liabilities, proceeding and personnel of erstwhile HPSEB which stand vested in Govt. of H.P. have been transferred to the HPSEBL and the Company started its operations w.e.f. 14th June , 2010. The Accounts of erstwhile HPSEB were 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. books of accounts. The CAG of India had certified the final accounts of erstwhile HPSEB for FY 2010-11 (1.4.2010 to 13.6.2010) as true and fair. The subsidiary records maintained at Divisions / Sub-Divisions are being updated by the Units. Efforts have been made by the management to improve the accounts such as, reconciliation of differences, clearance of old advances and suspense balances by writing off petty and old accounts etc. Besides, the management has formed a Committee to reconcile the

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Amount in lacs

Current Year Previous Year Code Main Heads Debit( Credit) Debit( Credit)

Reserves and Surpluses

55Contributions, grants and Subsidies Tow ards Cost of Capital Assets (2,664.21) (2,676.84)

56 Reserves (266.70) (254.07) Profit & Loss account 16,345.30 16,345.30

13,414.40 13,414.40 Other Long term Liablilities - -

48 Deposits for electrif ication, 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 43 Staff Related Liabilities & Provisions 14.70 (3,150.70) 44 Other Liabilities and Provisions (300.96) (4,227.78) 46 Deposits for Electrif ication, Service connection etc. (7,154.76) (7,154.76) 47 Security Deposits from Consumers (3,724.83) (3,724.83)

(11,165.85) (14,876.90) Tangible Asssets - -

10 Fixed Assets 592.74 592.74

11Capital Expenditure Resulting in An Asset Not BelongingTo the Board 180.76 180.76

12 Depriciation (1.48) (1.48) 772.02 772.02

Capital work in progress - -

14 Capital Works in Progress Accounts. (9,617.34) (9,090.67) 15 Contracts – in-progress 182.93 182.93

(9,434.40) (8,907.73) Long term Loans and Advances - -

25 Advances to Suppliers/ Contractors-- (Capital) - (390.97) 28 Sundry Receivables 4,064.64 4,288.90

4,064.64 3,897.93 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 Recivables - - 23 Sundry debtors for sale of pow er 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 (120.62) (100.44)

(44.31) (24.12) Short term Loans and Advances - -

26 Advances to Suppliers/ Contractors-- (O & M) - 266.71 27 Other Loans and Advances (7.33) 266.60

(7.33) 533.31 Other Current Assests - -

30-39 Inter Unit accounts (2,911.68) (121.41) Total (2,911.68) (121.41) Grand Total 0.00- -

differences in balances of books of accounts of divisions, Circles and HO. The improvement in the accounts, as in any other sphere, is a continuing process and Company is making efforts for the same.

(i) 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 extent of ₹ 439.18 lacs , Trade Payables are overstated to the extent of ₹ 1.52 lacs, Other Liabilities are overstated to the extent of ₹ 11,165.85 lacs, Tangible assets are overstated to the extent of ₹ 772.02 lacs Capital work in progress are understated to the extent of ₹ 9,434.40, Long term loans and advances are overstated to the extent of ₹ 4,064.64 , 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 ₹ 44.31 lacs ,Short term loans

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and advances are understated to the extent of ₹ 7.33 lacs and inter unit accounts are understated to the extent of ₹ 2,911.68 lacs. (ii) The Company has adjusted during the year following heads during the year under review with the opening differences. No sufficient information in respect of the same has been provided to us.

Debit/Credit Amount in Lacs

25.s 390.97 26.s (266.71) 28.S (124.26) - 42.s (3,381.17) 43.s 3,165.40 44.s 215.76

0.00

Adjustment with Head Offcie Accout27.s (273.92) 44. S 3,711.05

3,437.13

In reply to this Para, it is submitted that the Company has adjusted the negative balances of differences which were due to misclassification, however, There is no overall impact of these adjustments. Besides, all the adjustment entries have been made with the consent of Statutory Auditor. Hence, Para may be settled.

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 14,000 Equity shares of ₹. 100/- each for cash at par, the payment against allotment of 14,000 Equity Shares has been shown as recoverable from HP Govt. and report that payment against above Equity shares amounting to ₹. 11.40 Lacs have not been received till date of audit and same has also been shown as recoverable from HP Govt. The Company has shown the same as short term loan and advances. In our opinion the same is in the nature of other noncurrent assets. Thus short term loans and advances are overstated to the extent of above.

In reply to this Para it is submitted that efforts are being made to recover/adjust the recoverable amount with state Govt. and point has been noted for future compliance. Hence, Para may be settled.

3 Reserves and Surplus ( Note 2.2)

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

(i) 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

Needful has been done during the current financial year. Hence, Para may be settled.

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extent of excess depreciation charged to revenue account, which is subject to confirmation. In the absence of information we are unable to quantify the same as it may affect current year losses and previous year’s deficits.

(ii) Special and Means, advance on account of natural calamity relief fund Account Code 54.601

The Company has received ₹ 500.00 lacs during the year under review and Rs. 150.00 lacs were outstanding as on 31st March 2012. The company has not adjusted the expenditure incurred on account of natural calamity and relief during the year review and incurred in earlier years. In the absence of information we are unable to comment on the same.

Point noted. The expenditure incurred on natural calamity and relief during the years shall be net off with the receipt in above accounts in current financial year. Hence, Para may be settled.

(iii) 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.

Efforts are being made to reconcile the assets created from various Central Government and State Government schemes financed by government agencies.

b) Deficit in Profit and Loss Statement The company has transferred the accumulated profit and loss of the erstwhile Board amounting to ₹ 50,512 lacs 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 a decision is communicated by Govt. necessary adjustment shall be made accordingly.

4 Share Application Money Pending Allotment( Note 2.3)

(i)In terms of “Transfer Scheme” in respect of assets and liabilities of Board transferred from HP State Government to the Company the difference of Rs. 39,653 lacs has been recognized and recorded as share application money pending for allotment of equity shares to Himachal Pradesh Govt.

We report that, due to errors and incorrect consideration of accumulated losses assets in aggregate amounting to ₹. 7,48,893 lacs and liabilities amounting to Rs.7,59,752 lacs has been transferred and a sum of Rs.. 10,859 lacs is recoverable from HP Govt. whereas share application money of ₹. 39,653 lacs pending for allotment to HP Govt. has been disclosed in financial statements. We further report that accumulated losses also include losses of Rs. 50,512 lacs pertaining to the tenure of Board. The same is summarized as under:-

The matter regarding settlement of opening balance of the Company is under active consideration with State Govt. and Deloitte team a consulting firm, who has been assigned the job under NLTA, is taking steps to resolve the issue. On receipt of reports, necessary action shall be taken accordingly.

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Amount ₹. In lacs

Balance as on

13/06/2010

Amount not to be

considered

As per transfer scheme

Net Fixed assets 387,461 - 387,461 Capital expenditure in progress 107,927 - 107,927 Assets not in use 625 - 625 Deferred costs 12,706 - 12,706 Investment 196,567 57,524 139,043 Subsidy receivable from Govt. 4,970 - 4,970 Current Assets 96,161 - 96,161 Total Assests 806,417 57,524 748,893

Less LiablitiesSecurity from consumers 21,965 - 21,965 Other current liabilities 192,124 - 192,124 Borrowing for working capital 82,887 - 82,887 Payment due on capital liabilities 32 - 32 Capital Liabilities 225,629 - 225,629 Funds from state Govt. 7,749 - 7,749 Spl. ways and means advance on a/c of

49,808 - 49,808

Contributions, grants and subsides towards

95,014 - 95,014 Equity share of HPSEB in its own projects 57,524 57,524 - Reserves and reserves funds 84,543 - 84,543 Total Liabilities 817,276 57,524 759,752

Amount recoverable from Govt. of HP 10,859 - 10,859 In our opinion, the deficit in profit and loss statement, share application money pending for allotment is overstated to the extent of ₹. 50,512 lacs and ₹. 39,653 lacs, respectively and other non current assets (amount recoverable from HP Govt.) is understated to the extent of ₹. 10,859 lacs. (ii) The Company has received ₹ 3,750 lacs and ₹ 1,250.00 lacs during the year under review and share application money from the Government of Himachal Pradesh on 20/10/2012 and 20/11/2012. No resolution for receipt and allotment of shares in respect of share application money received was placed on record before the Board Meeting. The Company has not allotted corresponding shares in respect of the share application money received within the 60 days of the receipt as specified required by the companies act 1956 nor the same has been disclosed in the notes to accounts.

Shown for the amount received from Govt. on accounts of share application money has now been allotted during the financial year. Hence, Para stands settled.

(iii) No disclosure of the time limit when the shares will be allotted has been disclosed in the notes to accounts.

Necessary disclosure shall be made in current financial year.

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:-

Point has been noted and needful shall be done in current financial years.

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- repayment period and rate of interest charged - Status of defaults of repayment of interest and loan. b) Loans under APDRP Schemes Part A and B (I) The company has taken loans from APDRP (Part A) scheme amounting to ₹ 5,347.80 ( previous year ₹ 2,891.80)) towards 100% financing of its approved projects which is subject to a condition requiring that projects to be completed within five years( extended up to 31st March 2015) 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.

In reply to this Para it is submitted that the company has taken loans from APDRP (Part A) scheme amounting to ₹ 5,347.80 (previous year ₹ 2,) and projects to be completed within five years( extended up to 31st March 2015) of the awards with 100% conversion of loan along with interest into grant else otherwise the same will be treated as loans and interest. The repayment of loan and interest are being maid regularly and on receipt of final decision from Govt. settlement the APDRP schemes Part A & B loan shall be adjusted accordingly.

(ii) The company has taken loans from APDRP(Part A) scheme amounting to ₹ 10,168.40 lacs ( previous year ₹ 9,665.40 lacs) towards 100% financing of its approved projects which is subject to a condition requiring that projects to be completed within five years( extended up to 31st July 2014) 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 Company has requested 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.

(iii) The sanction letter stipulates the moratorium of principal and interest during moratorium period. The Company has made provision for the interest on loan amounting to ₹ 2,000.00 lacs in the books of account on provisional basis up to 31st March 2012. (Refer Note 2.31 (B)(9) ). No Provision for interest payable during the year under review has been provided amounting to ₹1,550.00 lacs in the books of account. In our opinion the interest payable is understated to the extent of ₹ 1,550.00 lacs.

The provision of interest shall be made during current financial year. The Company has requested 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.

c) Loans under RGGVY Scheme The Company has taken loan under the scheme from the state Government under RGGVY scheme amounting to ₹ 500.00 lacs( previous year ₹ 500.00 lacs) . The government has not yet provided the terms and conditions of the loan and the payment of interest thereon. (Refer Note 2.31 (B)10 ).

The utilization of the funds is being given by the Company in respect of funds received from central Government and State Govt. in respect of schemes financed by government agencies. The Company has requested 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

d) Loans under ADB though GOHP Scheme The Company has taken loan under the scheme from the state Government under ADB Loan amounting to ₹ 840.46 lacs (previous year ₹ 767.99 lacs). The government has not yet provided the terms and conditions of the loan and the payment

The State Govt. has not provided the terms and condition of the Loan and payment of interest thereon.

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of interest thereon. ( Refer Note 2.31 (B)(10) ). e) Financial Restructuring Plan (i) The Company has opted for Financial Restructuring Plan formulated by the Ministry of Power Government of India for State Owned Discoms for restructuring of debts( Refer Note No 2.31( 28)(i)) . In this scheme the short term loans amounting to ₹ 97,667 lacs was converted into long term borrowings for 10 years with moratorium period of three years for repayment of principal loan. The short term loans is converted into 50 % Bonds of ₹48,834 lacs and 50 % Long term Loans amounting to ₹ 48,834 lacs .

It is submitted that, the Financial Restructuringt Plan (FRP) of HPSEB Ltd. was earlier approved by WTDs of HPSEB Ltd. by circulation and later on placed in the Board meeting for perusal on 26-12-2013 and approved by the Board in its regular meeting held on 26-12-2013. However, as far as the classification of Loans restructured under the FRP of HPSEB Ltd. is concerned into Long Terms, Short terms as well as Current liabilities, the same has been made inthe accounts during FY14. In view of above the para may be dropped.

(ii) The above Financial Restructuring Plan was approved and accepted by the company and the banks on 31st July 2013. (iii) The above restructuring plan was not approved by the company in regular Board Meeting and the same been approved in the whole time Directors Meeting. (iii)The financials for the year under review was approved by the Board of directors on 18th October 2014 and the company has shown the loans as short term loans whereas the same has been converted into long term loans before the approval of accounts. (iv)In our opinion the Long term loans are understated to the extent of ₹ 97,667 lacs and correspondingly the short term loans are overstated to that extent. 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 has 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 relevant record of customer-wise Security Deposit and interest payable thereon is available in Operation Circle/ Sub Divisions of the Company. As regards confirmation of balances 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 have 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

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 its 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.

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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.

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

Current Year Previous YearAssestsInvestments in Fixed deposits of Banks 94,670.88 1,00,175.27 Interest Accured on Investments 10,443.42 10,706.15 Recoverable from HPSEB Limited 9,001.69 -

1,14,115.99 1,10,881.42

LiabilitiesMembers Account 1,12,355.58 1,00,884.74 Excess of Expenditure over Income 1,760.41 2,624.95 Payable to HPSEB Limited - 7,371.73

1,14,115.99 1,10,881.42 0.00

There is no requirement of providing/charging employee’s Contribution under GPF Scheme. In our opinion, Para may be settled.

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 ₹ 1,14,115.99 lacs (previous year ₹. 1,00,884.74 lacs) and has deposits there against of ₹ 105,114.30 lacs (previous year ₹. 110,881.42 lacs )which has resulted in amount recoverable form company amounting to ₹ 9,001.69 lacs. In our opinion, the said assets and liabilities do not relate to Company and sum of ₹. 9,001.69 lacs is payable to General Provident Fund (GPF).

We further report that the Company has obtained Overdraft facility of ₹ 68,514.00 lacs. (Previous year ₹ 88,717.00 lacs) 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 ₹ 1,760.41 lacs (previous year ₹. 2,625.00 lacs) 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, We report that company has shown the amounts in the balance sheet as under different head:-

In reply to this Para, it is submitted that the HPSEBL has not been registered with “Employees Provident Fund Authorities as yet. The General Provident Fund of the employees has been maintained by the Company at its own level. The GPF corpus of employee’s amounting to Rs. 946.71 cr. has been invested in FDRs to safeguard the interest of employees as per direction of Hon’ble HPERC. 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.

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Amount in lacs ₹Amount payable to GPF Fund Other Long term Liablities 17,684.00 CreditIncome on investments Income 1,760.41 CreditInterest Accured on FDR Short Term Loans and advances 10,443.42 DebitNet Recoverable/Payable 9,000.99-

The overall impact of the above is that long term liabilities are overstated to the extent of ₹17,684 lacs,( Previous year₹ 709.00 lacs) income is overstated to the extent of ₹ 17,60.41 lacs(Previous year₹ 2,625.00 lacs) and correspondingly the short term advances are overstated to the extent of ₹ 19,444.41 lacs. ( Previous year₹ 3,334.00 lacs) We further report that the above amount payable to the Trust is of current nature and should be shown under current liabilities. Thus Current liabilities are understated to the extent of ₹ 9,000.99 lacs.

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

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 2013. The company has received contributions amounting to ₹ 956.66 lacs( previous year ₹ 1,590.55 lacs) as on 31st March 2013 from the employees against which only ₹ Nil lacs (previous year ₹ 450.60 lacs) has been invested by the company. Thus the company has not made investments of contributory pension scheme amounting to ₹ 956.66 lacs (previous year ₹ 1,139.94 lacs ) with the authorities and the same has been used in operations.

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

Needful has been done during FY 2013-14. Hence, Para may be settled.

Amount in LacsCurrent Year Previous Year

Assests ₹ ₹Fixed Deposits with Bank - 339.70 Interest Accured on FDR - 110.90 Amount Recoverbale from HPSEB Limited 956.66 1,139.95

956.66 1,590.55

LiablitiesCPS Employees Share 478.33 795.28 CPS Employer Share 478.33 795.28

956.66 1,590.55

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. In our opinion the liability is of current nature and should be shown under the head

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other current liabilities. Thus the long term liabilities are overstated to the extent of above of ₹ 956.66 lacs.

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 ₹ 135.05 lacs ( previous year ₹ 118.75 lacs )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 to balance the fund account a contribution ₹ 135.05 lacs ( previous year ₹ 426.13 lacs) is required from the company as on 31st March 2013. Thus the expenditure is understated to the extent of above and correspondingly the reserve fund is understated to the extent of above.


Assests ₹ ₹Investments in Fixed deposits of Banks - 307.38 Interest Accured on Investments -

- 307.38

LiabilitiesFund Acccount 135.05- 118.75- Excess of Expenditure over Income - - Fund Contribution due/From to HPSEB Limit 135.05 426.13

- 307.38

We further report that the above liability does not belong to the company and the same is of the nature reserve fund In our opinion 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 the matter for grant of matching fund on account of staff Benevolent Fund has now been settled in FY 2014-15. The account shall be adjusted by granting matching amount from the Company. Hence, Para may be settled.

e) Non refundable advances from industrial consumers for infrastructure development charges

The erstwhile HPSEB and the company have received Non refundable advances from industrial consumers for infrastructure development charges from consumers. The company has received ₹ 10,748.11 lacs (previous year ₹ 7,838.48 lacs) under the above head up to 31st march 2013. In our opinion the other long term liabilities are overstated to the extent of

In reply to this Para, it is submitted that the amount of NRA from industrial consumers for infrastructure development charges is collected as per the notification of HPERC and credited to this account. This amount

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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.

is initially credited to this account as capital receipt for specific work. On completion of the work, the expenditure is transferred from CWIP to fixed assets after adjusting the NRA (Non- refunded advances) from the consumers as per guidelines in this regards. Hence, Para may be settled.

g) Funds From ASIDE

The funds received from ASIDE are subject to confirmation and reconciliation. The assets created 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. The Head office is showing Debit balance in 47.501 amounting to ₹ 11.94 lacs for which no information has been provided. Thus long term liabilities are overstated to the extent of above

The concerned units have been directed to reconcile the funds received against ASIDE and confirmation in this regard shall be shown to the audit in the next year.

7 Long Term Provisions a) Leave Salary Payable The Company has not made provision of Leave salary payable to present employees as per the requirements of AS15- Accounting for Employees Benefits issued by The Institute of Chartered Accountants of India. The estimated liability on account of leave salary at end of the year is ₹51,429.39 lacs against which the company has created reserve fund of Rs ₹1,849.84 lacs only. Thus in our opinion the long term provisions are understated to the extent of ₹ 49,579.55 lacs

The company has decided to make provision of 2% from FY 2013-14 on ward to meet the requirement of AS15.

b) Gratuity Payable to Employees The Company has not made provision of gratuity payable to present employees as per the requirements of AS15- Accounting for Employees Benefits issued by The Institute of Chartered Accountants of India. The estimated liability on account of leave salary at end of the year is ₹69,938.14 lacs. Thus in our opinion the long term provisions are understated to the extent of ₹ 69,938.14 lacs.

The company has decided to make provision of 2% from FY 2013-14 on ward to meet the requirement of AS15.

10 Short Term Borrowings(Note 2.7)

Overdraft and Cash Credit from Banks

(i) We further report that the Company has obtained Overdraft facility/ Loans of ₹ 68,514.00 lacs (previous year ₹ 88,718.00 lacs) 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 disclosure in notes to accounts in this regard will be made from next year.

(ii) We further report that the Company has obtained Loans against fixed deposits of RGGVY Fund R/ APRDP Funds of ₹ 7,600.00 lacs (previous year ₹ 11,600 lacs )which has been

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

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utilized for operations and no sufficient disclosure has been made in financial statements and notes to accounts. 9 Trade Payables( Note 2.8)

Liability for Purchase of Power

(i) 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.

Amount in ₹ lacsCurrent Year Previous yearDebit Credit Debit Credit

41.123 NHPC - 256.01 - 711.21 41.129 UPJVNL - 185.00 - 184.58 41.401 Wheeling Charges UPPCS - 108.41 - 138.41

- 549.43 - 1,034.19

We are of the opinion that the Trade Payables are overstated to the extent of ₹ 549.43 lacs on account of credit balance in the parties account for which no sufficient confirmations / information is available with the company.

In reply to this Para, it is submitted that party wise accounts were under reconciliation at the time of finalization of accounts for FY 2012-13 and sufficient information was not available at that time. The corrective measure has been taken in FY 2013-14 and proper party wise recompilation shall be shown to the Auditor during next audit. Hence, Para may be settled.

(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 liability neither provision has been made in the accounts.


₹ ₹NHPC 2,776.96 2,776.96 Nrora Atomic Power Station - 161.94 THDC - 11.90

- 2,776.96 2,950.80

The point has been noted for future compliance and the disclosure in this regard shall be incorporated in FY 2013-14 accounts.

(iii) Account Code 41.125

The Account code Shows ₹ 3,788.54 lacs as debit balance. In our opinion the Trade Payables are understated to that extant and correspondingly the trade receivables are also understated to that extant.

The reconciliation with BRPYL is under process and shall be adjusted in FY 2013-14 accounts

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10 Other Current Liabilities( Note 2.9)

b) Interest accrued and due

(i)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

46.127 958.48 711.7274Interrest Accured and Due APDRP Funds

46.128 2,057.31 1082.8753,015.79 1,794.60

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. In our opinion the loans are for long term period and the interest due will be part of Long term loans. Thus in our opinion the interest due will be of the nature of other long term liabilities as a result the other current liabilities are overstated to the extent of ₹ 3,015.79 lacs.

The point has been noted for future compliance in FY 2013-14.

(ii) Interest Payable APRDP Loans (Code 46.734)

The company has shown ₹2,000.00 lacs as interest accrued on APRDP part A and B loan up to 31st March 2012 and the same has been shown as current liabilities. In our opinion the interest payable is of long term nature as the same relates to the moratorium period of the loan. Thus other long term liabilities are overstated to the extent of ₹ 2,000.00 lacs.

The point has been noted for future compliance in FY 2013-14

b) Liability for Purchases Capital and Others

i) The above account code shows a sum of ₹ 23,247.95 lacs (previous year ₹ 16,819.78 lacs) payable as liability on account of capital materials 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:-

The outstanding liability shown on accounts of capital material / O&M suppliers/ works are current in nature ,sufficient information are available in our division and in our view does not include outstanding not payable to be charged to revenue. However, same shall be scrutinized for appropriate action.

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₹ ₹Liabilities for supply of Materials/Works – Capital

42.1 1,617.36 (2,005.03) Liability for supply of Material / Works – O&M

43.1 9,090.65 10,767.03 Stale cheques

46.910 2,876.31 917.07 Unclaimed Credit Balances

46.929 24.71 22.47

46.930 33.22 33.22 Provision for Outstanding Cheques

46.940 9,602.68 7,082.02 Outstaning Cheques Renuka Dam Projects

46.942 2.96 2.96 Adjustment account pension payments

46.943 0.05 0.05

23,247.95 16,819.78

(ii) It has been observed that divisions charge full liability 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 is being made. All such deductions which are done by the Head Office and not accounted for by the Divisions may affect the other current liabilities and income of the company. In the absence of information we are unable to comment on the same.

In reply to this Para, it is submitted that divisions book full liability of the bills of suppliers when the material is 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 name of unit which has not accounted for such type of differences. Hence Para may be dropped.

(iii) In certain cases the payment of bills of the suppliers are to be made in phases on some percentage basis and will be not be due at the end of the financial year. The Divisions has booked the bills with the full amount and no bifurcation has been made for current and noncurrent liability . In the absence of the information we are unable to comment on the same.

The point has been noted for future compliance in FY 2013-14.

(iv) It has been observed that the where the payments has been made by the CPC up to 31st March 2013 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. Hence, Para may be settled.

(v) The Company has executed contract with HCL for computerization of the sub divisions and implementation of SAP in the year 2009 and advanced ₹ 1,155.65 lacs 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 ₹ 1,155.65 lacs and correspondingly the short term advances are overstated to that extant.

The Shimla Division No-II has accepted the ATD during FY 2013-14 accounts. Hence, Para may be settled.

c) Earnest Money Deposits from Suppliers and The Company is making efforts to reconcile the amount of EMD from

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Contractors.

The above account code shows a sum of ₹ 2,097.77 lacs( Previous Year ₹ 2,241.77 Lacs) payable as earnest money deposits from suppliers and contractors. The subsidiary records in respect of above are pending for reconciliations at division level.

₹ ₹Current Year Previous Year

Earnest money deposits – capital46.103 1,635.02 1,559.83

Earnest money deposits – O&M 46.123 462.75 681.94 2,097.77 2,241.77

In the absence of reconciliations we are unable to comment on the authenticity of the amount payable.

subsidiary books of accounts and the reconciliation shall be shown in current financial year.

d) Electricity Consumptions Tax levied payable to MCs/NACs

The above account code shows a sum of ₹ 751.68 lacs (previous year ₹ 627.96 lacs ) payable to different Municipal corporations and NAC as at 31st March 2013. 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 18(A)5 of the report of this annexure.

In reply to this Para, it is submitted that amount of Rs. 751.68 Lac is payable to MOC & NAC as on 31.3.2013 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 adjustments are relating to different MCs/NACs pertaining to various Divisions/sub-divisions of the Company. Hence, the version of auditor is not acceptable and Para may be dropped.

e) Sundry Creditors for Expenses

The above account code shows a sum of ₹ 441.34 lacs (previous year ₹ 448.68 lacs) payable to different parties is subject to confirmation as at 31st March 2013.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 detail of this expense is available with all DDOs of the Company and these liabilities are recurring in nature and discharged regularly. Therefore, these are no old liabilities. However, the same shall be securitized in detail and appropriate action shall be shown during the audit in current financial year.

f) Liabilities on account of cheques outstanding

The above account includes amounts pertaining to amount outstanding on account of cheques not presented for payments

The needful has been done during the financial year 2013-14. Hence, Para

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to banks by the parties to whom the same has been issued as at 31st March 2013 and are to be shown in bank reconciliations statements (Please refer para 19(b) .) The details of the same are as under:-

Amount in lacsCurrent Year Previous Yea

₹ ₹1 Details as per Bank Reconclilations Statements

Outstanding Cheques 7,348.19 5,948.81 Less amount debited by bank 78.77 86.86 Excess amount Debited by bank 2,175.93 1,046.55

9,602.88 7,082.22 2 Amount for which details are not available 0.20-

9,602.68 7,082.22

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 which may affect profit and loss account and balance sheet.

may be settled.

g) Liability on account cheques outstanding others/ stale Cheques

The company is showing a sum of ₹ 2,876.30 lacs (previous year ₹ 917.06 lacs) under the 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 2013-14 accounts. Hence, Para may be settled.

h) Deposits for Electrification Services Connections Account

(i) The above account code shows a sum of ₹ 47,390.22 lacs (previous year ₹ 55,739.06 lacs ) on account of deposit amount received from consumer for Electrification Services Connections and other charges as at 31st March 2013. The company has not provided the details of the amount received under different sub heads under above head.

As per the practice of erstwhile board the amount kept

under this 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 2013. We have not been provided with the following information’s by the divisions.

1. The details of those works where the work has been completed and the amount from deposit has not been

The complete Sub Head wise detail of amount deposited for Electrification 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 is being regulated as per HPERC directions and shall be rectified/ adjusted in next year accounts accordingly.

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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 2013.

3. The details of parties from whom full amount has been

received but no work of deposit work has been done till 31st March 2013.

In the absence of information we are unable to comment on the amount kept under this head of account.

(ii) It has been observed that in some divisions the consumers has deposited only the departmental charges and deposit work has been done by the consumer by their own. The charging of the departmental charges to revenue and charging of the value of fixed assets created and creation of reserves is subject to confirmations and reconciliations.

The instruction for accounting of departmental charges and deposit works has been issued to all concerned and reconciliation shall be done in next financial year.

(iii) The deposits received under this head is for capital works and in our opinion the deposits are also of long term nature. Thus other current liabilities are overstated to the extent of ₹ 47,390.22 lacs.

Point has been noted for compliance and such type of liability shall be treated as Non current liability in the next year.

i) Provision for Losses The Company has shown the provision for losses under the head other Current Liabilities and the following heads are having debit balances

Amount in lacsCurrent Y Previous Year

₹ ₹Provision for Loss on obselance of Capital Assests 46.961 2.05 2.05 Provision for Loss on obselance of Capital Spares 46.962 11.97 11.97 Provision for losses pending investigation 46.939 0.35 0.35

14.37 14.37

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.

The balance appearing in this account is on account of obsolescence for assets, capital spares and stock represents losses pending investigation. On final outcome/ settlement the provision from these accounts shall be re-allocated to relevant heads. As regards version of auditor for no information in this regards is not considerable, as sufficient information are available with concerned Units. Hence, Para may be dropped.

j) Unclaimed Credit Balance The Company is showing ₹ 22.46 lacs ( previous year₹ 22.46 lacs) as unclaimed credit balance as at 31st March 2013 which is outstanding since 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. This amount is in respect of three investors and investors have been asked to submit original bond certificate for release of the amount.

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Hence, the version of auditor to charge it to revenue is not acceptable. Para may be dropped.

k) Outstanding Cheques Renuka Dam projects The Company is showing a sum of ₹ 2.95 lacs( previous year₹ 2.95 lacs ) 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 2013-14 accounts and compliance shall be shown to auditors. Hence, Para may be settled.

l) Account Code 44.410 The above account code shows debit balance of Rs ₹3,728.33 lacs for which no information and explanations has been provided to us. In our opinion the current liabilities are understated to the extent of above.

The necessary correction has been made during FY 2013-14 accounts. Hence, Para may be settled.

m) Account code 46.420 The above account code shows debit balance of Rs

₹739.74 lacs for which it has been explained to us that the same amount pertains to account code 46.430. In our opinion the current liabilities are understated to the extent of above and short term provisions are overstated to that extant.

The above amount was misclassified and correction has been made in FY 2013-14 accounts. Hence, Para may be settled.

11 Short Term Provisions (Note 2.10)

a) Interest accrued on Consumer Security Deposit The company has charged interest on security deposits of consumers amounting to ₹ 1,605.47(Previous Year ₹ 1,150.47 lacs) during the year under review. The provision made is subject to reconciliations and confirmations.

The Company has charged interest on security deposit as per instructions issued by the HPERC and passed on / adjusted this amount to consumers during in July and August, 2014 bills which has been accepted by the consumers. Hence, Para may be dropped.

b) 46.430 Provision for Liability of Expenses

The provision made by the company on account of liability of expenses is subject to confirmations and reconciliations.

The detail of provision for liability of expenses is available with all DDOs but auditor has not specified the unit concerned in absence of which specified reply can not be given. Hence, Para may be dropped.

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 balance of the assets except on vehicles which is 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

We concur with the view of the auditor. However, the system for calculating depreciation has been changed in order to apply rate as per HPERC and not arbitrarily @ 2.5% as applied before the incorporation of the company.GIS/GPS schemes are in process and final report is still awaited. Thereafter, proper procedure for deprecation, discarded, sold assets and life of assets, shall be adopted for

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Regulatory Commission on all assets, whereas the said depreciation 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 view that 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 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.

Tangible assets as specified in Schedule XIV of Companies Act, 1956.

(ii) We also report that the assets of the company except vehicles in use and assets created from REC loans have not been fully insured.

Appropriate action shall be taken in due course.

(iii) The company has transferred cost of transmission lines to the HPTCL( Himachal Pradesh Power Transmission Corporation Limited) amounting to ₹ 2,639.91 lacs 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 the date of transfer and same has been transferred at original cost. The Account is subject to reconciliation with the HPTCL The company has not provided to 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.

The accounts with HPPTCL were under reconciliation and reconciliation which have not been done in current year. Factual position of assets/ lines transferred to HPPTCL shall be shown to audit during current year.

(iv) The Board has received the assets and liabilities of Kasang Project from HPPCL (Himachal Pradesh Power Corporation Limited) as per Government of Himachal Pradesh

The accounts with HPPCL were under reconciliation during the period under report. Now, the same has been done

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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 Apirl 2008 to 31st March 2011 on the assets of the project transferred to the Board. The Company has not provided to us the amount of depreciation required to be adjusted on account of above. In the absence of information we are unable to comment same.

and depreciation on the assets of the Kashang Pproject has been recalculated as per HPSEBL procedure from 1st April 2008 to 31st March 2011 during FY 2013-14 accounts. Hence, Para may be dropped.

(v) The Company has not made provision against assets valuing ₹ 13.67 lacs 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 and Jubbal Division has been written off by all the division during FY 2013-14 accounts. Hence, Para may be settled.

(vi) The Company has created assets valuing ₹ 1,040.00 lacs 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 crore has been transferred in the name of company, compliance shall be shown to auditors. Hence, Para may be settled.

(vii) The Company has not made provision of assets valuing ₹ 20.40 lacs 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 2013-14. Hence Para may be dropped.

(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 ₹ 7,038.06 lacs (previous year ₹ 7,038.06 lacs) as capital expenditure resulting in assets not belonging to the board and assets transferred I/Ward as at 31st March 2013. The Company has charged depreciation to the tune of ₹ 444.41 lacs (previous year ₹ 443.90 lacs). 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 ₹ 1,158.28 lacs

The expenditure incurred by the erstwhile Board which creates an assets for which ownership of assets does not remain with the Board, viz roads on Municipal land , Board contribution to Public health Deptt., & I&PH and different type of expenditure at remote area/ project shall be included in this account head. The proposal to write off entire amount is being submitted to the management and final adjustment shall be done in current year accounts.

(x) The accumulated depreciation as on 31st March 2013 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 has been placed in assets not in use accounts till these are not finally

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written off. The same shall be shown to auditors during FY 2013-14.

(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 Instruction No.31 of Manual of Instruction, 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.

(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 2013-14.

(xiii) Depreciation of vehicles during the year has been adjusted for the less/ excess depreciation charged up to 31st March 2013 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 2013-14.

13 Capital Work in Progress ( Note2.12)

A Capital Works in Progress

(i) The above account head shows a sum of ₹ 88,695.79 lacs (previous year ₹ 1, 02,484.28 lacs) on account of work in progress of various capital works as on 31st March 2013 which is subject to reconciliation and confirmations.

No Information / explanations in respect of the same has been provide to us. In the absence of information we are unable to comment on the same

Statement of facts, hence no comments.

(ii) It has been observed that the works under capital work in progress has 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. All the Units have been directed to capitalize assets on put to use bases. Hence, Para may be settled.

(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 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 work on the assets has been completely finished or not.

Efforts are being made to get the same regularized in future. In the absence of specific instance, we are unable to comment on the same. However, completed works are transferred to fixed assets a/c after obtaining the completion certificate from concerned Engineer. Hence, Para denied and may be settled.

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(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 @ 21.71 % ( previous year @11.71 %) on year to year basis without verifying whether the assets has 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.

Interest During Construction Period (IDC) The capitalization of interest on funds utilized during construction stage is calculated as per the procedure prescribed in Annerxure-V-1.42 in “Commercial Accounting Manual” Vol-I adopted by the Company. However, as pointed out by Auditors the IDC shall be worked out as per AS-16 during the FY 2012-13 and from FY 2013-14 it shall be charged to concerned assets/ schemes funded on loan. Hence, Para may be dropped..

b) IDC Calculations The company has charged the IDC during the year on following basis:

Amount in lacs

IDC Charged by Head Office for the year 2012-13 -6,634.57 IDC Reveresed By Head Office for the year 2011-12 14,049.05 IDC Charged by the Division for the year 2011-12 -12,089.72

-4,675.25

The Divisions have less charged the IDC for the year 2011-12 during the year under review amounting to ₹ 1,959.32 lacs. Thus IDC is understated to the extent of above.

Statement of fact, the same shall be adjusted in FY 2013-14 accounts. Hence, Para may be dropped.

A) The Company has charged ₹ 436.17 lacs as IDC on survey and investigation charges incurred by the Chamba division of CE Projects during the year under review. The above practice is not in lines with the AS 16 Accounting of Borrowing Costs issued by ICAI. This may affect the profits/ loss of the Company. Thus expenditure of the company is understated to the extent of above.

The practice to charge IDC on Survey and investigation expense has been withdrawn from current year. Hence, Para may be settled.

B) Contracts in Progress The Company is showing a sum of ₹ 675.37 lacs (previous year ₹ 7,427.48 lacs) as on 31st March 2013 as contract in progress at various divisions which is subject to reconciliation and confirmations.

The balances are under reconciliation and action to transfer the completed work shall be taken thereafter.

C) Revenue Expenses pending allocation over Capital Works

The company is showing ₹ 10,001.42 lacs (previous year ₹ 17,416.17 lacs) 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 and amount added as per para b above. Thus above head is overstated to the extent of ₹11,960.74lacs.

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 head. Periodically, the amount of expenses chargeable to works shall be first transferred to this

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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 procedure for the same has been appraised to audit. Hence, Para may be settled.

D) Intangible Assets

The above head includes expenditure incurred on implementation and installation of SAP and its related activities. The expenditure is subject to confirmations and reconciliations..

The entire detail of Intangible Assets has been shown to Auditor. Hence, Para may be settled.

14 Long Term Loans and Advances( Note 2.15)

a) Advances to Supplies/ Contractors ( Capital)

The Company is showing a sum of ₹ 1,713.61 lacs (previous year ₹ 441.68 lacs) as advances to supplier and contractors as on 31st March 2013. The above amount is subject to confirmation and reconciliations in respect of works completed against advances sanctioned.

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 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.

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 advance are available which are tallied with the accounts of FY 2012-13 accounts. Hence, Para may be dropped.

(ii) It has further 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.

Statement of facts, hence no comments.

(iii) The Company has supplied to us the list of employees for house building and car loan but the outstanding amounts as per list does not tally with the books of accounts.

The Outstanding balance of employee HBA and Car loan are available with HO and shown to auditor during the course of audit. Hence, Para may be dropped.

(iv) The Company is showing the following amounts under the above head for which does not reconciled with the details supplied to us. In the absence of complete reconciliation the

The balance of staff loan has been reconciled and shall be shown to audit.

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same cannot be commented on:-

Amount in lacs


₹ ₹

27.101 Loans and advances to staff – House building 392.41 234.19

27.102 Loans and advances to staff – Scooter/Motor Cycle 14.95- 13.88-

27.103 Loans and advances to staff – Car 14.66 4.21-

27.s Opening Diffrence - 273.93

392.12 490.03

(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 audit in FY 2013-14 audit.

15 Other Non Current Assets ( Note 2.16)

a) Assets not in use The company is showing ₹ 973.21 lacs (previous year ₹ 1,038.68 lacs) as assets not in use as at 31st March 2013. In our opinion the above assets has completed their use full 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 (B)6 )

In reply to this papa, 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 off/ sale. This is a continuous process and amount in this head are regularly written off after obtaining the approval of competent authority as per procedure prescribed by the Company. We do not concur with the version of auditor.

b) Special Repair to Vehicles

The above account code shows a sum of ₹ 1.91 lacs (previous year ₹ 5.15 lacs) incurred on account of special repairs to vehicles as at 31st March 2013. The above cost does not qualify 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 has now been cleared and practice to defer the same has been withdrawn from the current year.

c) Expenditure on Survey/ Feasibility Studies Projects not yet sanctioned.

The above account code shows a sum of₹ 12,096.38 lacs (previous year ₹ 11,376.38 lacs) incurred on account of Expenditure on Survey/ Feasibility Studies Projects not yet sanctioned as at 31st March 2013.

It has been observed that expenditure on survey / feasibility studies on different projects has been incurred by the erstwhile board since many years. The expenditure has been done as the HPSEB was the only nodel agency to do such kind of

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

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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 Nos. 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 ₹ 10,159.24 lacs (previous year ₹ 9,439.28 lacs ) which was shown by the divisions for our verification.

been allotted to any agency by the Govt. however; the amount shall be scrutinized in detail for appropriate action, if any.

d) Trade Receivables ( Non Current)

The Company is showing a sum of ₹ 535.36 lacs (previous year ₹ 590.82 lacs) due from permanent defaulters as on 31st March 2013. The Company had made provision for the same but the same has been reduced from current trade receivables. In our opinion non current trade receivables are overstated to that extent.

The point has been noted and necessary compliance in this regards has been done in FY 2013-14 accounts.

e) 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 218.68 164.52 22.8 Materials short excess pending investigations 345.42 458.54

564.09 623.06

In our opinion other noncurrent assets are overstated to the extent of ₹ 564.09 lacs 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 pending for investigation in various Units of the Company and reports of competent authority are awaited. The same has been regulated as per accounting policies of the Company and cost incurred on retirement, scrapping and sales of assets is charged to revenue account in the year in which cost is incurred.

f) Interest Accrued and Due on and Interest Accrued but not due on staff Loans and others

(i)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 and interest accrued but not due on staff loans & other were under reconciliation while finalizing the accounts for 2012-13 which has 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 staffCurrent Year Previous

₹ ₹Income accrued and due on loans a 28.261 243.77 216.56- M.C./Scooter Advance 28.262 44.59 22.03- Car Advance 28.263 26.31- 25.54- Income accrued and due on Loans/A 28.260 11.56- 11.62- Income Accrued & due--- Others. 28.290 0.47 0.39 Income accrued but not due- Staff L 28.360 - 102.73

28.360 3.22 3.36 House Building Advance 28.361 475.44 392.12 Motor Cycle Advance 28.362 13.15 15.46 Car Advance 28.363 7.39- 29.86 Warm Clothing Advance 28.364 0.71 34.60 income accured but not due others 28.390 86.66 86.66

ii)The account code 28.364 is of the nature of short term nature and should be shown under the head other short term loans and advances. Thus other non current advances are overstated to the extent of ₹ 0.71 lacs.

The point has been noted. The compliance in this regards shall be done in current year

16 Current Investments ( Note 2.17) Leave Encashment Fund The Company is showing ₹1,849.84 lacs (Previous Year ₹ 1,694.50 lacs) 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 that Company has taken a policy for leave encashment from SBI & Canara bank for Rs. 15.00 crore. The said amount shall be utilized for payment of leave encashment to employees on this superannuation/retirement. During the current years these funds have been partly utilized. Hence, Para may be dropped.

17 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 releasable value 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 instructions to withdraw 3% storage charges and freight charges in the cost of material have been issued during FY 2012-13. Hence, Para may be settled.

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.

The Management is taking steps for the settlement of these balances and most of the balances have been settled during 2013-14 accounts. It is further submitted that stock lying in various Divisions shown under this head purchased not been 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 may be settled.

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Current Year Previous Year₹ ₹

22.6 Opening Diffrence 23.65 23.65 22.6 Stocks in hand more than five years Critical 801.67 904.81 22.6 Stocks in hand more than five years non Cri 124.79

950.12 928.46

In our opinion the inventories are overstated to the extent of ₹ 124.79 lacs for which no provisions has been made in the books of accounts c) It has been found that there is no systematic accounting of stocks in this account heads and some divisions has 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 instructions 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.

The details of current and noncurrent inventories are available with Divisions of the Company and instructions to provide the same have been issued to all concerned. Hence, para may be settled.

18 Trade Receivables ( Note 2.19)

The Company has shown trade receivables from consumers and others under this head amounting to ₹ 43,245.54 lacs. No sufficient information with regard to that the trade receivables are of current nature ie 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 is against supply of Power which will be realized within credit period and sufficient information is available with the operation Divisions /Sub Divisions of the Company and this amount shown current is in order. Hence, Para may be settled.

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 2013.

The instructions for reconciliation of consumer Ledgers/ subsidiary books at the end of the year have been issued 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 pointed out by audit, efforts shall be made to

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show such advances in liabilities in future.

3 The Trade Receivables also includes ₹ 737.25 lacs (previous year ₹ 10,544.95 lacs) as amount recoverable from different departments of Government of Himachal Pradesh. The party wise details of the same is as under :-

Amount in ₹ lacsCurrent Year Previous year

I&PH 10,905.32 6,976.41 MC/NAC 2,473.03 2,522.90

13,378.35 9,499.31

Others MiscMedical Department 499.55 662.5DC Office 44.28 135.06PWD 33.06 32.36Education Department 20.66 16.81Revenue Department 29.55 49.48Police 5.19 10.88Judiciary 0.03 3.6Cicute HouseOthers Misc 104.93 134.95 Total 737.25 1,045.64 Total 14,115.60 10,544.95

The company has filed an affidavit with the Honab’le High Court of Himachal Pradesh on 5th March 2013 that aprox ₹ 9,000 lacs are in arrears/ defaults from different government departments, corporations and municipalities etc whose outstanding are more than ₹ 25 lacs .

Statement of facts, Hence no comments are required.

4 The company has made only provision for doubtful debts amounting to ₹ 12.23 lacs (previous year ₹ 141.02 lacs) and the provision has not been increased from many years. In our opinion the provision is less keeping in view the amount recoverable from Government departments and other consumers.

The company had made provision amounting to Rs. 547.59 Lac (not Rs.12.23 Lacs) during the year under review for doubtful debts which is justified amount against the amount of Rs. 5,35,36,401/- due from permanent disconnected consumers. Hence, Para may be settled.

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 2013 to different Municipal committees and NAC is ₹ 751.68 (previous year ₹ 627.96 lacs) 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 MC/NAC is under process and after settlement the same shall be adjusted with the MC/NAC in due course of time.

6 The Company has shown ₹ 709.00 lacs 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

The concerned accounting units have been directed to examine the matter and compliance be shown to audit in FY 2013-14.

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extent of above.

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 ₹ 4,390.30 lacs (previous year ₹ 2,636.69 lacs) includes the accounts of following parties for which no sufficient information/ confirmations are available at Head Office.

Amount in LacsCurrent Year Previous YearDebit Credit Debit Credit

23.601 PSEB 1,263.30 - 1,263.30 - 23.603 UPSEB 949.69 - 266.40 - 23.610 NTPC 1.56 23.623 Malana Deve. Power 181.84 - 23.624 REC.CH. 749.54 - 23.630 PGCIL(UI) 1,244.36 -

Total 4,390.30 - 1,529.70 - We are further of the opinion that the trade receivables are overstated to the extent of ₹ 4,390.30 lacs (previous year ₹ 4,275.22 lacs) 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 concerned parties and account balances have been rectified/ adjusted accordingly which shall be shown to auditor during the course of audit for FY 2013-14.

2 The company is also showing a sum of ₹ 13,790 lacs ( previous year ₹ 6,768.18) recoverable from different parties on account wheeling/ O&M Charges as on 31st March 2013.

The following are the account balances of parties in which there are differences in closing balance.

Amount in LacsCurrent Year Privious YearDebit Credit Debit Credit

23.802 HVPNL 22.66 - 226.30 23.814 MALANA(W) - 2.07 23.82 Handling charges of Govt. Free power 3,138.04 -

23.82623.821 MALANA(H) 10.89 - 23.83 PTC System opt. ch. 10,252.19 -

Total 13,423.77 2.07 226.30 - We are of the opinion that the wheeling and OM charges are understated to the extent of ₹ 2.07 lacs .

The accounts were not reconciled at the time of audit. Now the re-conciliation has been completed with concerned parties and accounts balances have been rectified/ adjusted accordingly which shall be shown to audit during the course of audit for FY 2013-14. Hence, Para may be settled.

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We are further of the opinion that the trade receivables are overstated to the extent of ₹ 13,423.77 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. 3 O& M Charge Recoverable from HPTCL

The Company has booked ₹ 630.94 lacs (previous Year ₹ 392.58 lacs) as O & M Charges Recoverable from HPTCL during the year under Review. The company has shown the same as current trade receivable but the payment of the same has not been received till the date of the audit. Thus current trade receivables are overstated to the extent of above.

The amount had been shown as recoverable from HPPTCL on account of Transmission charges as approved by the HPERC in its MYT order of HPPTCL for the period 12-14. The HPPTCL has not made the payment due to non reconciliation of receivable/ payable with HPSEBL. This has now been settled / adjusted during the current year.

C Court Cases by Consumers The erstwhile Board has billed ₹ 1,208.16 lacs (previous year ₹835.00 lacs ) and ₹ 1,425.65 lacs (previous year ₹ 1,271.00 lacs ) 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.

19 Cash and Cash Equivalents ( Note 2.20)

a) Balance 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 2013 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 are being done as per existing procedure laid down in HPSEB Banking Manual and no reconciliations are being done at Sub Division/ Division level and all Bank are reconciled at Head office level. The matter regarding modification of all the manuals is under process as and when the same is finalized the reconciliation shall be done accordingly.

(ii) Bank Reconciliations at Head Office Level

It has been observed that the head office have accounted for all the pending entries in the bank reconciliations statements of all banks in the financial statements which is not in line with the

Presently the bank reconciliations are being done as per existing procedure laid down in HPSEB Banking Manual

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commercial accounting practice. The un reconciled entries on account of unrepresented cheques and cheques outstanding for clearing has to be shown in the reconciliations statements only and has not to be accounted for in the financial statements and to be settled in the bank reconciliations statements in succeeding months.

.The point is noted and all the pending entries shall be shown in Bank reconciliation statement from current years

(iii) The Head office has adjusted the overdraft account of PNB The Mall Shimla having balance of ₹ 381.76 lacs ( Previous Year ₹ 531.93 lacs ) Cr with the current account balance of the PNB The Mall Shimla in the bank balances shown as on 31st March 2013. Thus Bank balances and short term borrowings are understated to the extent of above.

Reply as per above above19 a (ii)

(iv) The Head office has not shown to us the bank statement in respect of account code 24.324 amounting to ₹ 69.82 lacs (previous year ₹ 69.82 lacs). 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 to provide the same during the course of audit. Hence, Para may be settled.

b) Cash in Transit

The company is showing a sum of ₹ 6,366.65 lacs ( Previous year ₹ 9,603.52 lacs) as cash in transit as on 31st March 2013. The details of the same as under:-


₹ ₹1 Details as per Bank Reconclilation Statements

Bank Charges Excess Charged by Bank - - Outstanding Remittance 4,042.16 8,328.75 Short credit given by Banks 1,111.07 678.87 Excess amount debited by Banks 1,181.35 595.92

6,334.58 9,603.53 2 Cheuqe in transit since 1996-97 32.07 32.07

Total 6,366.65 9,635.60

The above amounts pertains to cheques outstanding for clearing by banks which has 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 and it may affect the profit and loss account and balance sheet. In our opinion all old entries shown in the

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.

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reconciliation statements should be reconciled and necessary adjustment entries may be passed in books of accounts.

20 Short Term Loans and Advances( Note 2.21)

A Advances to Contractors and Suppliers

(i)The company is showing ₹ 1,984.28 lacs (Previous year ₹ 2,152.89 lacs ) as loans and advances for supplies / works. The above advance also includes advances which are old and require adjustments as the works has 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 advance has been shown as secured but no sufficient information in respect of the same has been provided. Non Information in respect of noncurrent portion of advances has been shown for our verification.

Efforts are being made to scrutinize & reconcile the same at the earliest for appropriate action.

(ii) The Binwa division of Generation wing has advanced ₹ 58.67 lacs to M/s Garg Engineering Industries Private Limited. The Advance has become bad as the party is not traceable. In our opinion the short term loans and advances are overstated to the extent of above.

The amount has been recovered from M/s Garg Engineer Industries Private Ltd. Hence, Para may be settled.

B Loans and Advances to Staff

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.

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 2013 as such we are unable to comment on the authenticity of the amount recoverable on account of loans and advances from the employees.

The company has not provided us the details in respect of the following account heads during the year review.

There is a complete record of loan and advances at H.O. level, the same shall be shown to auditors. There was some difference in some accounts, the same has now been rectified which shall be shown to auditor in FY 2013-14.

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Amount In lacsCredit

₹Loans and advances to staff – Warm clothing 27.104 17.94Loans and advances to staff – T.A 27.201 1.24Loans and advances to staff – pay 27.202 20.27Loans and advances to staff – Festival 27.203 -0.04 LTC advance 27.207 1.89Medical advance 27.208 13.92warm clothing advance 28.264 -5.41

28.266 3.0252.84

No information in respect of current and noncurrent portion of advances has been shown for our verification C Prepaid Expenses

(a)The Company is showing prepaid expenses amounting to ₹ 100.74 lacs out of which a sum of ₹ 91.65 lacs 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.

Sufficient details of prepaid expense are available with all DDOs/ accounting Units. A sum of Rs. 91.65 Lac towards purchase of stationery articles purchased by CE (MM) is shown in HO accounts which have now been issued from store to all field Units and accounts has been adjusted. Hence, Para may be dropped.

(b) It has been observed that the company has no precise policy of charging the expenses to prepaid expenses head. Most of the divisions are charging petrol and diesel of vehicles in hand at the close of the year. Some divisions have charged Insurance on vehicles in the prepaid expenses.

In reply to this Para, it is submitted that Company has clear policy for prepaid expense, expenses not due but paid in advance such as insurance premium, annual taxes on building, Rent of Telephone charges & vehicles etc while are considered as prepaid expense. The prepaid expenses are reversed in the next year so that expense bills can be accounted for in the usual manner. Hence, the version of auditor is denied and Para may be settled.

D) Account code 28.831

The above account code shows credit balance of ₹ 389.60 lacs during the year under review. No information in respect of same has shown for our verification. In our opinion the short term loans and advances are understated to the extent of above.

The credit balance of Rs. 389.60 Lac shown in BH 28.831 is payable to UPSEBL and accounts are under reconciliation.

E) Advance Income Tax/ Tax Deductions at Source

(i) The Company has claimed ₹ 571.65 lacs as income tax refund in the income tax return filed for the financial year 2012-13 where as the company has accounted for ₹ 891.38 lacs under the head TDS recoverable. No sufficient information in respect of the same 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 the Company has claimed ₹ 571.65 lacs and accounted for ₹ 891.38 lacs under the head TDS recoverable. Some amounts were credited to erstwhile Board PAN by the dedicator at the time of filing quarterly return. Now, we have requested all

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dedicators to revise the return and mention HPSEBL PAN. However, we have also filed the revised Income Tax return of HPSEB after finalization of annual accounts. Hence, Para may be settled.

(ii) The above account head shows ₹ 2,018.80 lacs as short term loans and advances where as above amount includes ₹ 901.89 TDS which are of noncurrent nature. Thus short term loans and advances are overstated to the extent of above.

The point has been noted and recoverable amount of TDS shall be considered noncurrent in future.

F) Amount Recoverable Government Departments (i) A sum of ₹ 11.40 lacs 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.

The point has been noted and recoverable amount of Rs. 11.40 a/c of Share capital from state Govt. shall be considered noncurrent/ long terms loan and advance in future.

(ii) Amount Deposited with PWD Kullu

The Thalot division of Generation Wing (earlier Projects Wing) has deposited ₹ 100.00 lacs 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 ₹ 26.99 lacs (previous Year ₹ 26.99 lacs) 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 is in active consideration with concerned agency/department. As and when any decision is read the adjustment of above amount shall be made accordingly.

G) Amount recoverable Related Parties (i) The Company has shown under these 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.

The point has been noted and compliance should be shown in FY 2013-14 accounts.

(ii) BVPCL ( Subsidiary Company) The company has incurred expenditure to the tune of ₹ 4,931.71 lacs (previous year ₹ 10,291.33 lacs) as on 31st March 2013 for which shares has to be issued by the BVPCL .The above balance is

The point noted & appropriate necessary action shall be taken in future.

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subject to reconciliation and confirmation. The Company has allotted only shares for ₹ 2,500.00 lacs during the year 2013-14. Thus a sum of ₹ 2,431.71 lacs amount recoverable is of noncurrent nature and should be shown under the head other noncurrent assets. H) Amount Recoverable Others 1 Amount Recoverable from SJVNL The Company is showing a sum of ₹ 176.75 lacs (previous year ₹ 176.75 lacs) recoverable from SJVNL as on 31st March 2013 as short term loans and advances Other. SJVNL has not accepted the liability as such the amount is not current assets and is of the nature of non current assets. Thus short term loans and advances are overstated to the extent of above.

The matter to recover said amount is under active consideration of SJVNL and HPSEBL and has not been 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 ₹ 21.68 lacs (previous year ₹ 21.68 lacs) 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 Audit accordingly.

3 The amount recoverable from other departments on account of leave and other pensioner benefits on account of deputation of employees in other departments is subject to confirmation and reconciliation

The detail of amount recoverable from other departments on account of leave and other pensioner benefits on account of deputation of employees has been reconciled and shall be shown to auditor. Hence, Para may be settled.

4 Amount Recoverable Himachal Pradesh Power Corporation Limited The company has shown a sum of ₹ 1,770.51lacs (previous year ₹2,939.15 lacs) recoverable as on 31st March 2013 for which shares has to be issued by the HPPCL. The HPPCL has issued shares for above amount in the year 2014-15.The amount recoverable is of noncurrent nature and should be shown under the head other non current assets

The point noted for necessary action for appropriate classification in future.

5 Amount Recoverable Himachal Pradesh Power Transmission Corporation Limited. The company has transferred cost of transmission lines to the HPTCL( Himachal Pradesh Power Transmission Corporation Limited) as per the scheme of the transfer . A sum of ₹ 2,675.12 lacs (previous Year ₹ 2,675.12 lacs ) has been shown as recoverable as at 31st March 2013 which is subject to reconciliation and confirmation. In the absence of confirmations

The Govt. of H.P. and HPPTCL has agreed to release/adjust the amount of transferred lines from receivable/ payable with GOHP. Hence, Para may be settled.

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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 Theft of Property Pending Investigation The above head shows a sum of ₹ 3,061.74 lacs (previous Year ₹ 3,214.18 lacs ) as on 31st March 2013. The above amount is to be shown under the head other noncurrent assets. Thus other current assets are overstated to the extent of above.


7 Expenses recoverable from Suppliers /Contractors.

The above head shows a sum of ₹ 794.79 lacs (previous year ₹ 490.84 lacs) as on 31st March 2013 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 complete details 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.

8 Inspection charges related to material \ equipment third party inspection

The above head shows a sum of ₹ 22.43 lacs (previous year ₹ 20.21 lacs) as on 31st March 2013 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. In our opinion short term loans and advances are overstated to the extent of above.

The instructions to reconcile the inspection charges have been communicated to concern and factual position shall be apprised to auditor.

9 Amount Recoverable from PSEB The above head shows a sum of ₹ 7.63 lacs (previous year ₹ 7.63 lacs) as on 31st March 2013 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 PSPCL and compliance shall be shown thereafter. We do not concur with the version of the audit regarding the noncurrent nature of the amount.

I) Deposits (i)The Company is showing a sum of ₹ 7,587.84lacs under this head the details of which as under :

Current year Previous Year₹ ₹

Amount Recoverable from Government of H P 7,408.00 7,408.00 Other Deposit w ith High Court and Athorities 179.84 200.99

7,587.84 7,608.99 The amount is in the nature of long term loans and advances and should not be treated as current assets. Thus short term loans


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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 ₹ 7,408.00 lacs 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 shall be incorporated in FY 2013-14. Hence, Para may be dropped.

J) Amount Recoverable from Employees

(i) The above account includes a sum of ₹ 166.18 lacs (previous year ₹183.87 lacs) 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 has gone to courts and in some cases the monthly installments has been fixed and in some cases the amount has 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.

Current Year Previous YearAmount recoverable from ex-employees

28.401 162.20 178.33 Amount recoverable from employees on deputation from other organisations 28.402 3.18 4.74

28.411 0.80 0.80 166.18 183.87

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 clarification 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 2012-13. However, payment of this amount has been made under the prior period expenses. Hence, Para may be settled.

K) Interest Accrued but not due employees The above account includes a sum of ₹ 1.14 lacs(previous year ₹1.17 lacs) for which no sufficient information has been provided to us. In the absence of the information we are unable to comment on the same

The details of interest accrued but not due to employees are available with all DDO/ broad sheet section of this office. Hence, Para may be dropped.

L) Interest Accrued but not due Others. The above account includes interest accrued and due on GPF Fixed deposits amounting to ₹ 10,443.41 lacs (previous year ₹10,706.14 lacs). The FDR wise interest accrued as at opening of

The point noted for necessary action and FDR interest accrued at the opening of the years shall be shown to

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the year has not been shown for our verification. In the absence of information we are unable to comment on the same.

auditor in future. Hence, Para may be dropped.

M) Leave and pensioner Benefits Recoverable from outside parties Account Code 28.880 The above account shows ₹ 1,110.28 lacs recoverable on account of leave and pensioner contribution recoverable from outside parties. The above amount includes ₹ 872.20 lacs which is of non-current nature. Thus short term loans and advances are overstated to the extent of above.

The point noted for necessary action for appropriate clarification in future

21 Other Current Assets ( Note 2.22)

(i) Receivables from scrap Sales/ Misc Income

The above account includes a sum of ₹ 443.23(previous year ₹ 427.61 lacs) receivable from scrap and other incomes. Out of above a sum of ₹ 351.45 lacs is of non-current nature. Thus Other current assets are overstated to the extent of above


(ii) Reimbursement of up front subsidy by GOHP

The above account shows a sum of ₹ 4,970.00 lacs (previous year ₹ 4,970.00 lacs) 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 amount of Rs. 4970.00 Lac is recoverable from GO HP on a/c of upfront subsidy determined by the Hon’ble HPERC in tariff orders and have been taken up with State Govt. regularly in the meeting of receivable/ payable and Govt. of HP never rejected the same. The version of auditor is not acceptable. Hence, Para be dropped.

(iii) Revenue Subsidy Grant From Govt of HP( Account Code 28.623 and 28.264)

The amount recoverable from HP Government amounting to ₹ 11,258.00 lacs is of noncurrent nature. Thus the other current assets are overstated to the extent of above.

Point has been noted for future compliance.

iv) Inter Unit Transactions

The company is showing ₹ 18,248.87 lacs (previous year ₹ 7,541.82 lacs ) on account inter unit transfers and the same has 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 has to be adjusted at the close of the year and amount should be Nil under this head. Thus other current assets are overstated to the extent of above.

Inter Unit Transfer is a regular process and all accounting Units under HPSEB Ltd have been directed to reconcile the IUT accounts at earliest and to ensure the balance under IUT should be NIL at the end of financial year.

22 Statement of Profit and Loss Account

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(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 1,760.41 2,624.98 2 Interest on APRDP Fund - - 3 Interest on RGGVY Funds - - 4 Interest on Leave Encashment Fund - 139.43

1,760.41 2,764.41

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.

The interest earned by the Company on investment of GPF is netted off with the interest provided to subscribers and difference amount charged to Revenue Expenditure/Income as per accounting policy of the Company. Besides, the HPSEBL has not created separate fund for the GPF. Hence, Para may be dropped.

(ii) Prior Period Items 2013-14 The Company has charged the following amounts under the Head Prior Period Items in the accounts for the year 2013-14. The account for the year 2012-13 was approved by the Board on 18th October 2014 and the prior period items are known to the company before the finalization of the accounts for the year 2012-13 but no effect of the same has been made in the financial statements for the year 2012-13.


Amount in₹ lakhsCurrent Year Previous Year

Prior Period Items Interest Income for Prior Period - (15,680.79) Other Income Relating to previous year - 373.49 Fuel Related Expenses - - Interest and other Finance Charges relaiting to Privious - - Other Charges Relating to Privious year 0.92 - Other Excess provision in prior period (226.88) -

- (225.96) (15,307.30)

Short Provision for power Purchased in privious year 6,519.49 (13,871.12) Other Income Relating to Privious Year - - Employees costs relating to previous years 1,055.73 - Depreciation under provided in previous years (3,226.57) - Other Charges Relating to Privious year 18.97 - Opertaing Expenses Relating to Privious Year 43.38 (0.69)

4,410.99 (13,871.80) Net Prior Period Items (4,636.95) (1,435.50)

All the expense/ incomes are accounted for up to cut-off dates which are included in supplementary trail balance to be forwarded to H.O. There exists proper policy for the accounting of prior period Income/Expenditure. On the date of balance sheet all the expenses/income relating to the year of field units are not 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. Hence, Para may be dropped.

(iii) Contingencies and Events Occurring after Balance Point noted for future compliance.

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Sheets Dates The Company has not accounted for material events incurred after balance sheet date till the approval of the accounts by the Board of Directors as the next year accounts are not complete till the finalization of the report. The material items which may affect the profit loss account and balance sheet cannot not be commented on in the absence of the information as per the requirements of AS 4 Contingencies and events Occurring after the Balance Sheet Date issued by the Institute of Chartered Accountants of India (iv) Reallocation costs of Employees and Repair and Maintenance to Capital works 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 a proper procedure has been prescribed in commercial Accounting system of HPSEB for reallocation of Employees & R&M to capital works which is done on the following basis: 1. The entire cost of employees at

purely construction units should be capitalized. This should include even the annual benefits like bonus, LTA etc.

2. The other units, the employee cost to be capitalized should includes (s) cost of employees, retained/ engaged specifically for one or more capital jobs (b) an estimated proportion of cost of employees (who are working on both capital and O&M) should be fixed on the proportion of time the employees are estimated to be spending on capital works

3. The employee who works only on the O&M works, no part of this employee’s cost be capitalized.

4. The entire expenditure transferred to capital works (i.e A/c group 15.2) should be allocated to the specific works at the year end no balance should be left unallocated.

In view of above, the version

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of auditor is denied. Hence, Para may be settled.

(v) Losses on account of flood cyclone fire etc. Account Code 79.8 The Company has incurred ₹ 121.68 lacs on losses on account of flood Cyclone fire and natural Calamity Etc. The Company has received the grant for the same from the Government of Himachal Pradesh under special and means, advance on account of natural calamity. The amount has not been adjusted with account code 54.601. Thus Expenditure is overstated to that extent of above.

Point noted for future compliance.

(vi) Prior Period Employee Costs The Company has charged arrears of the 6th Pay Commission on the order issued by HP Government and HPSEB Limited( Refer Note 2.31(B) 26). The Above accounting is in contravention of the AS 5 Net Profit or Loss for the year , Prior Period items and Changes in Accounting Policies which states that prior period items refers only income and expenses which arise in current period as a result of errors or omissions in one or more prior periods. Thus current year employee costs are understated to the extent of ₹ 6,052.31 lacs and similarly the prior period expenses are overstated to that extant.

The amount of 6th pay commission was revised during FY 2012-13. Hence, Para may be settled.

vii) Penalty Imposed by the Income Tax Department. The Income Tax Department has levied penalty amounting to ₹ 666.52 lacs on 20/03/2013 under section 271 (c) of the Income Tax Act 1961. The Company has deposited the amount on 12/08/2013 and filed appeal against the same. No disclosure of the same has been made to the notes to accounts and in the financial statements. Thus other current Liabilities are understated to the extent of above.

The disclosure shall be made in FY 2013-14 accounts. Hence, Para may be dropped.

23 Other Observations (i) The BOD has 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 lacs 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 necessary accounting has been made by the units during FY 2013-14 accounts Hence, Para may be settled.

(ii) Transfer of various HPSEB Limited Roads to HPPWD. a)The BOD 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 necessary accounting adjustment has been made by the units. Hence Para may be settled.

b)The BOD vide resolution no dated 16.09 28/12/2013 has transferred Largi Barrage-Shilly Larji HPSEBL roads to HPPWD along with the title of the land free of cost amounting to ₹ 90.17 lacs. In our opinion the tangible assets are overstated to that

The necessary accounting adjustment has been made in FY 2013-14 accounts by the units. Hence, Para may be settled.

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extant. (iii) The BOD has sanctioned to write off the stolen AAC amounting to ₹ 0.92 lacs 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 necessary accounting adjustment has been made by the units. Hence, Para be settled..

(iv) 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:-

Amount in ₹ lacsCurrent 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 0.02 0.05 26 Advances to Suppliers 26.79 26.79 28 Sundry Recivables 954.99 954.99 42 Liablity for Capital Supplies/work (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 351.16 351.19

In our opinion the assets and liabilities are overstated to

the extent of above.

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 and the subsidiary record is available with field Unit.

(v) 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 record of the same has 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 had been provided to us as such we are unable to comment on the amount of depreciation charged on vehicles.

The Larji Construcitin Division has been closed during September, 2008 and closing balance of these Units are appearing in the consolidated Balance sheet of the Company and subsidiary record of the same is available with CE (Gen).

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Amount in₹ lacs


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


(vi) Investigation Division Recongpeao We have been provided with the account of the investigation Division Recongpeo, by the Chief Engineer Projects, but sub head details and subsidiary record of the same has not been provided to us:-

Amount in₹ lacs


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)


The entire subsidiary record of Investigation Division, Reckong Peo is now available in Ganvi Const. Division, Jeori and shall be shown during the course of next audit.

(vii) Civil MTC Division Bawanagar We have been provided with the account of the Civil MTC

The detail of Civil Mtc. Division,

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Division Bawanagar, by the Head Office, but sub head details and subsidiary record of the same has not been provided to us:-

Amount in₹ lacsCurrent Year Previous YearDebit(Credit) Debit(Credit)

10 Fixed Assests 813.27 813.27 813.27 813.27

opinion the tangible assets are overstated to the extent of above.

Bhabanagar has been accepted by the Generation wing / RE, Bhaba Power House Division, Bhabanagar and shall be shown to the audit during next audit. Hence, Para may be settled.

(viii) Repair and Maintenance Line and cable Net Works It has been observed that 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.

We do not agree with the remarks of Statutory Auditor. In this context, it is submitted that cost being charged on repair and maintenance of line and cable network is purely R&M cost of these lines and ultimately it is a revenue expense being charged to P&L accounts of the Company. Hence, Para may be dropped.

(ix) Old un reconciled 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 ₹ lacsCurrent Year Previous Year

Short credit given by banks 1,111.07 678.87 Excess amount debited by banks 1,181.35 595.92

2,292.42 1,274.78

Less amount debited by banks 78.77 86.86 Excess Credit by banks 2,175.93 1,046.55

2,254.69 1,133.41

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.

(x) Distribution Losses

ribution losses incurred by the company during the year 2012-13 is er . In some of the circles the distribution losses is very high as

ed to acceptable norms for electricity companies.

The distribution losses of the Company are within the limit fixed by the HPERC under the acceptable norms for electricity companies. Hence, Para may be settled.

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Distribution Losses for the year 2012-13

Units MKW/H(MU)Figures in bold Current Year

Energy Input Energy Sold T& D LossesPercentageShimla 428.54 349.25 79.29 18.50

426.81 342.44 84.37 19.77 Rampur 160.26 128.04 32.21 20.10

162.06 132.12 29.94 18.47 Rohroo 130.66 75.60 55.05 42.14

130.69 68.04 62.65 47.94 Solan 3,360.53 3,038.93 321.60 9.57

3,177.09 2,935.04 242.05 7.62 Nahan 1,146.26 1,030.04 116.22 10.14

1,133.99 1,008.40 125.59 11.08 Hamirpur 282.12 232.37 49.75 17.64

266.02 216.18 49.84 18.74 Bilaspur 719.00 637.15 81.85 11.38

717.60 619.48 98.12 13.67 Mandi 245.56 196.47 49.09 19.99

232.21 177.13 55.08 23.72 Kullu 257.03 200.07 56.96 22.16

245.40 206.33 39.07 15.92 Una 607.17 538.28 68.90 11.35

545.76 457.25 88.51 16.22 Kangra 515.49 402.07 113.42 22.00

508.90 388.79 120.11 23.60 Dalhousie 509.87 395.30 114.57 22.47

465.10 366.91 98.19 21.11 8,362.49 7,223.57 1,138.91 13.62 8,011.63 6,918.12 1,093.52 13.65

(xi) 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, epf contribution payable as on 31st March 2013 ( refer Note 2.31(A)8) 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 accounting 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 2013-14 accounts as per AS-15 accordingly.

(xii) 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 2013. 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 2013-14.

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Amount in₹ lacs

Government of Himachal Pradesh Current Year Previous YearAmount RecoverableInvestment in HPTCL 7,408.00 7,408.00 Share Application Money 11.40 11.40 Handling Charges Free Power 3,726.00 3,138.00 Subisidy 11,258.00 6,205.00 Tarriff Subsidy 4,970.00 4,970.00 Sale of Power Vidhan Sabha ( Dsala) 193.00 193.00 Pension Contribution Bhutan Project 176.00

27,742.40 21,925.40

Amount PayableFree Power Charges 68,373.00 45,223.00 Elelctricity Duty 41,247.00 33,669.00

109,620.00 78,892.00

(xiii) 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 ) 28.

Amount in₹ lacsCurrent Year Previous Year

Prior Period Income 43,268.48 5,264.99 Prior Period Expenses 40,996.03 4,253.17 Net Prior Period Items 2,272.45 1,011.82

Needful is being done during current FY2013-14

(xiv) Contingent Liabilities in notes to accounts

The Company has made disclosure of contingent liability where liability involved is more than ₹ 100 lacs and where the liability involved is less than₹100 lacs 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) 12)

The full detail of amount shown as contingent liability is available with the unit concerned. However, most of the information has been provided by the Head Office to the Statutory Auditor during the course of audit.

(xv) 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, 2013. In the absence of the information we are unable to comment on the same.

Point has been noted for future compliance.

(xvi) The Company has not provided any information in respect of the following comment of AG for the year ended on 13/06/2010.

The Management has constituted a Committee for settlement of old Para/ comments of CAG on annual accounts of the erstwhile Board and detailed

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reply of each comment is as per Annexure “A”.

(i) ₹ 7,025.00 lacs 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.

In reply to this Para, it is submitted that the Power bond worth Rs. 70.25 crore issued by the State Govt. in 2003 to enable HPSEB dues to discharge the outstanding liability of on accounts of purchase of power from CPSUs up to 30.9.2001 as per the provision of tripartite agreement between the Central Govt., RBI, and Govt. of H.P. as per clause -4 & 8.1 of the Tripartite Agreement executed by the State Govt. for settlement of SEB dues / securitization of past dues of CPSUs that the liability of Power Bonds is to be borne by the State Govt..The clause of TPA is reproduced as under:- Clause 4:- It is difficult to believe that SEBs can undertake reforms and simultaneously clear the overhang of past dues unless very large tariff increases are mandated, beyond levels justified by current costs to cover phase dues. In the circumstances, it is appropriate that a onetime settlement of outstanding dues should be attempted by shifting the burden of clearing these dues to state Govt. while providing a package of relief in this context and also a set of penalties and incentive favouring discipline and future reform. Clause 8.1:- All amount payable in accordance with the above shall be converted into long term loans to be repaid by the State Governments over a period of 15 years in 20 equal 6 monthly installments commencing from 1.10.2006 i.e. after a moratorium of 5 years. The State Govt. would issue bonds to the respective CPSUs who will be free to trade them in the market in a phased manner i.e. 10 percent of the bonds will be eligible for trading in the secondary market every year on a cumulative basis, thus releasing all the bonds for trading in a period of 10 years. Further, as per Sr. 18 & 19 of Ahluwalia Committee Report, the liability of Power Bonds is to be discharged by the State Govt. and extract of which is

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reproduced hereunder: “The Group felt that it was appropriate for the State Govt. to take on the liability of the SEBs and to discharge it in future from general revenues. Even if it is felt that future consumers of electricity should bears the burden of clearing past dues, it would be better for the State Govt. to achieve the outcome by levying a duty on electricity”. The above bonds were issued by the State Govt. in order to clear the HPSEB outstanding dues towards CPSU dues up to 30.9.2001 in terms of tripartite Agreement executed by Principal Secretary (Finance) to the Govt. of H.P on behalf of State Govt. The state Govt. is making repayment and interest of above amount regularly through RBI and Rs. 14.05 crore is outstanding up to September, 2014. Copy of statement enclosed against above is as per Annexure “D”. The agreement was to shift the burden of liabilities of HPSEB (PSU) to state Govt. as a onetime measures to facilitate initiation of reforms in Power Sector as the tariff fixing/ determination mechanism being followed was arbitrary as Govt. would not allow the SEBs to fix the tariff in accordance with the input cost incurred for generation/ purchase of the power being supplied to the consumers. This had left a huge gap between the revenue receipt and expenditure. In view of the position, stated above, the Board is not liable to discharge the servicing of Power Bond. This liability is to be borne by the state Govt. out of Electricity duty imposed on electricity consumers and out of its general revenue. Thus withdrawing/ debiting the liabilities from accounts code 41.110, 41.112, 41.114 and 41.123 (Sundry creditor CPSUs) and crediting to Prior period income 65.2 is in order and version of the audit is not acceptable.

(ii)The above has been understated by ₹ 121.00 lacs due to non-

As above

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account of interest on Power Bonds of ₹7,025 lacs. This has resulted in understatement of above head as well as Deficit to that extent

(iii) ₹5075.00 lacs on account of Interest on Power Bonds of ₹ 7025.00 lacs (October 2001 to 2009-10). This has resulted in understatement of Accumulated Loss as well as Other Current Liabilities to the above extent .

As above

(xvii) No details has been provided for Non Provision of ₹ 160.00 lacs 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 ₹ 153 lacs and current financial period ₹7.00 lakh) as reported by AG in their report for the year ended on 13/06/2010

The matter has now been resolved and payment of power purchased from UPCL from 1989 to 2010-11 has been made from prior period expense. Hence, Para may be settled.

(xviii) Non Provision of ₹ 1374.00 lacs 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 are understated to the extent of above.

Entire payment of royalty has been booked and paid to State Govt. on a/c of royalty payable to Govt. of H.P. at the rate of Rs. 12 per cent in project executed by the Board after 1990. Hence, Para may be settled.

(xix) Non Provision of ₹ 169.00 lacs 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 expenditure incurred on abandoned HEP (Baspa-I) has been writes off during the FY 2013-14 accounts after approval from competent authority. Hence, Para may be settled.

(xx) Non Provision of assets valuing ₹ 243.00 lacs washed away due to flash floods (between 2003 to March 2009) and which were not in existence. In Our Opinion the tangible assets are over stated to the extent of above .

The assets value 243.00Lac washed away due to flash flood has been withdrawn from books of accounts in FY 2011-12 and matter was under investigation with police authority. The version of auditor to overstatement of tangible asset is denied. Hence, Para may be settled.

(xxi) 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 ₹ 1,293.00 lacs transferred to M/s HPPCL/NHPC during 2009-10. In our Opinion the tangible assets are overstated to the extent of above.

The matter is under reconciliation and compliance shall be shown to auditor accordingly in due course.

(xxii) No provision of assets valuing ₹ 1,106 lacs 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.

The instruction for accounting of material provided by the consumers for capital works has been issued in FY 2013-14 and necessary accounting has been made by the all units. Hence, Para may be settled.

(xxiii) The Company has shown an amount of ₹113.00 lacs 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 excess amount has been recovered from of M/s J.P. Associates to provide power supply to cement plant during FY 2013-14 by the ES

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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

Division, Solan. Hence, Para may be settled.

(xxiv) The Company and its divisions has not provided to us court cases details which are contingent in nature and in which contingent liability of the company is involved.

Instruction to provide the detail of all court cases and contingent liability issued to all Units of the Company and compliance shall be shown to audit accordingly.

24. Non Compliance of Accounting Standards

The Company has not complied with the following mandatory accounting standards issued by the Institute of Chartered Accountants of India

As already stated in Note No 2.31 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 others wise stated. Financial statements are prepared in accordance with the provision of the Companies Act, 1956 and relevant provision of Electricity Act, 2003. The improvement in accounts, as in any other sphere, is continuing process and there is always enterprises scope of minimizing the infirmities, more so in the case of a Company carved out from the predecessor entity operating for over four decades. Caution has been taken to make appropriate disclosure 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.

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 & 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.

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 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

The requisite information has already been mentioned in Sr. No 11 of Notes to accounts. Hence point may be dropped.

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statements nor has the same 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 18th October 2014 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 2013 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 availability of information.

4 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 exist proper policies for the accounting prior period income/ expenditure. On the date of balance sheet all the expense / income relating to year are being charged to the concerned head of account. When the accounts of the year have been closed, all the receipt/ expense relating to previous years are being charged to prior period expense/ income. However, the requisite information has already been given against Sr. No. 15 of significant accounting Policy of Company disclosed in Notes to Accounts.

5. Accounting Standard 6: Depreciation Accounting

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.

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

The policy of Company in respect of deprecation has been disclosed at Sr. No Sr. No 5 of significant accounting policies.

6. 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 Company in respect of deprecation has been disclosed at Sr. No Sr. No 7 of significant accounting policies

7. 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 effect of noncompliance with accounting standard 10 on

The Policy of the Company in respect of Accounting Standard for fixed assets has been disclosed at Sr. No 2 of significant accounting policies.

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profit & loss account is un-ascertainable due to non availability of information. 8. 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 of Government grants has been disclosed at Sr. No. 12 of significant accounting policies.

9. 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. The effect of noncompliance with accounting standard 15

on profit & loss account is un-ascertainable due to non availability of information.

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

10. 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 effect of noncompliance with accounting standard 16 on profit & loss account is un-ascertainable due to non availability of information.

The policy of Company in respect of borrowing cost has been disclosed at Sr. No Sr. No 12 of significant accounting policies

11 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.

Company has only one integrated business i.e Generation & Distribution of Power and it has no reportable segment under AS17. The necessary disclosure at Sr. No 18 of significant Accounting policies has already been mentioned,

12 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

13 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 year.

14 Accounting Standard 26: Intangible Assets The Company has fully complied the

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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.”

AS 26 and cost of intangible assets has been measured/ recognized. The amortization of these assets is five years. Hence, Para may be dropped.

15 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.

16 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 effect of the said qualifications where ascertainable the loss of current year ₹ 34,028.20 lacs will be increased to loss of ₹2,27,603.36 lacs . The reserves and surpluses will be ₹ (1,06,242.38) lacs instead of ₹ 23,903.07 lacs. The share application money pending allotment will be ₹ 5,000.18 lacs instead of ₹44,653.18 lacs. The Long Term Borrowings will be ₹ 2,48,401.25 lacs instead of ₹1,50,734.25 lacs. The Other long term liabilities will be ₹ 1,00,694.76 lacs instead of ₹ 64,476.00 lacs . The long term provisions wil be ₹ 1,19,517.69 lacs instead of ₹ Nil lacs. The short term borrowings will be ₹ 1,66,013.87 lacs instead of ₹2,63,299.11 lacs . The Trade payables will be₹ 1,10,423.51 lacs instead of ₹ 1,04,248.96 lacs. The other current liabilities will be ₹99,496.4 7 instead of ₹ 1,61,736.92 lacs . The short term provisions will be ₹ 11,141.43 lacs instead of ₹ 11,881.17 lacs. The Tangible assets will be ₹4,87,089.58 lacs instead of ₹4,99,423.12 lacs. The capital work in progress will be ₹1,08,806.97 lacs instead of ₹ 99,372.57 lacs. The non current Investments will be ₹ 40,656.73 lacs lacs instead of ₹ 38,806.89 lacs. The long term loan and advances will be ₹ 3,329.35 lacs instead of ₹ 2,347 lacs. The other noncurrent assets will be ₹ 46,323.69 lacs instead of ₹ 14,993.67 lacs . The current investments will be ₹ Nil lacs instead of ₹ 1849.34 lacs. The inventories will be ₹9,263.79 lacs instead of ₹9447.29 lacs. The Trade receivables will be ₹21,733.90 lacs instead of ₹42,697.96 lacs. The cash and cash equivalents will be ₹ 13,159.77 lacs instead of ₹2 2406.25 lacs. The short term loans and advances will be ₹ 6,970.91 lacs instead of ₹ 37,909.32 lacs . The other current assets will be ₹22,823.50 instead of ₹ 54,731.46 lacs.

The same has been complied partly, remaining part shall be complied in future. The CAG of India had certified the final accounts of the erstwhile HPSEB for FY 2010-11 by giving a true and fair view of the states of affairs with certain qualifications. The Accounts of the Company are being maintained as per old practice as such this is the 3rd Balance sheet of the Company and most of changes in accounts have been done by the Management as per requirement of the Companies Act thus complete changes/ status of the accounts of the HPSBL has not changed during the period under audit. 11 Nos Accounting Standards have been complied out of 29 AS in force and most of 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 provisions of Electricity Supply Accounts Rules, 1985. Caution has been taken to make appropriate disclosure either in the Accounting Policies or by the way of Notes of Accounts, so that the transparency aspect is duly taken care of. Neither misappropriation nor embezzlements have come to the notice of the Management nor pointed out by the auditors.

Opinion In our opinion , because of the significance of the matter

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discussed in the Basis for disclaimer of opinion paragraph, We 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 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 appropriate audit evidence to provide a basis for an audit opinion therefore we disclaim our opinion

(a) in the case of the Balance Sheet, of the state of affairs of

the company as at March 31, 2013. (b) in the case of the Statement of Profit and Loss ,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 Emphasis of the Matter (i) 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.

The Company has increased the authorized Share capital from 500 lac to 11000 lac and share capital of the Company is now Rs. 44664.58 Lac. The HPSEBL is State Govt. undertaking Company and Govt. is paying equity/ grants for the purpose of capital works every years.

(ii) We draw attention to Note 2.31 (A) 5 d where in the CWIP have been capitalized irrespective of the date of commissioning of the assets.

The expenditure on capital works in progress shall be transferred to appropriate assets at time of put to use in future and necessary instructions have been imparted to all concerned.

(iii) We draw attention to Note 2.31 (A) 6 the practice of the company is to value inventories at cost only.

Point noted necessary compliance shall be made in current year.

(iv) We draw attention to Note 2.31 (B) 20 the practice of the company to keep both the assets owned by own funds and from consumer contributions towards cost of capital assets in one account head and should be accounted for separately.

Point noted necessary compliance shall be made in current year

Report on Other Legal and Regulatory Requirements

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(a) As required by the Companies ( Auditors Report) Order, 2003, as amended , issued by the Central Government of India in terms of sub section ( 4A) of section 227 of the Act , we give in the annexure I as statement on the matters specified in paragraphs 4 and 5 of the order.

(b) As required by section 227 (3) of the Act ,we report

that:- (i) We have obtained all the information and explanations

which to the best of knowledge and belief were necessary for the purposes of our audit except the following:-.

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 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, 2013 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 is 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 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

The company shall disclose all the facts, as pointed out in Para during the FY 2013-14 audits.

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balance sheet

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

Most of the old assets (recoverable) and old liabilities (payable) in all the Divisions being time barred have been got adjusted. Necessary action on remaining amount 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. Point regarding physical verification of assets noted for future compliance.

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 shown to Audit. Hence, Para may be settled.

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.

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 has already been shown to the Auditors.

7. 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 , investment section , SLND and Pension II. The subsidiary records / register of individual DDO has not been produced for our verification. No sufficient information has been provided in respect of the liability of expenses, other liabilities and provisions at Head Office Level

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

8. 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 has been burnt. The above pendency has been observed in Solan Circle, Rampur Circle, Rohroo Circle and other circles/ divisions also. The adjustment required if any may affect the profit & loss account and the balance sheet.

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.

9. 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

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

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records has 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. 10. No sufficient information and evidence in support of revenue expenses pending allocation over Capital Works has been provided to us. The adjustment required if any may affect the profit & loss account and the balance sheet.

All direct expenses allocable are booked in CWIP. The complete record of the same had been shown to auditors. Hence the version of the auditor is not correct. Hence, Para may be settled.

11. 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 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.

12. The Company has not provided any information about those consumers who has 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.

13. The Company has not settled the old unreconciled 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 2013-14. Hence, Para may be settled.

14. The Head office has not supplied to us the employee’s 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 2013-14. Detail will be supplied during 2013-14

15. 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 2013-14. Hence, Para may be dropped.

16. 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.

17. 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 have been

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issued to all the DDOs to complete the records in case the same were not maintained and shown to auditors previously

18. 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.

19. 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. one crore have been shown in the notes to accounts. Hence, Para may be settled.

20. The divisions has not provided sufficient information in respect of those assets where the consumer has deposited the departmental charges and executed the work by their own. The adjustment required if any may affect the Value of assets created and the reserves on the other hand.

The company has clear policy for those assets where the consumer has deposited the department of charges and executed the work on their own and latest instructions have been issued in FY 2013-14 to all concerned. Hence, Para may be settled.

21. 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.

In view of following in our opinion, proper books of accounts as required by Law have not been kept by the company so far as it appears from our examinations of those statement, registers and related records produced for our verification.

The books of accounts are being maintained as per Commercial Accounting system and all the DDO have been directed to prepare proper books of accounts as per requirement of law and Companies Act.

(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.

All the units has been directed to maintain cash & bank book and record transaction in Ledger from April, 2015.

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(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 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.

All the units has been directed to maintain / prepare trial balance with balances of the previous years accounting month. The proper books of accounts and Ledger as per Companies Act shall be prepared from April, 2015

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.

The point noted. Necessary action shall be taken in current year.

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.

The cash book maintained at Divisions are now balanced on daily basis from FY 2013-14, Hence point may be settled.

v The Balance Sheet and Statement of Profit and Loss dealt with by this report are in agreement with the books of statements except our observations in Para 1(b),22(iv),(v),(vi)and (vii);

Statement of facts, hence no comments

vi Except for the effects of the matter described in the Basis for Disclaimer of Opinion paragraph and non compliance of accounting standard specified therein , in our opinion, the Balance Sheet, Statement of Profit and Loss comply with the accounting standards referred to in section 133 of Companies Act, 2013 read with MCA circular no 16/2013 dt 18/09/2013.

Efforts are being made & point noted. Necessary action shall be taken in current years

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

Statement of facts, hence no comments

viii) The Company has not taken any reasonable steps to remove the qualifications reported in earlier year reports while adopting the accounts for the current year, therefore old qualifications has been considered in the current year report also.

The management has formed Committee for settlement of old qualification reported by CAG and Auditor in report and action taken report shall be shown to audit in next year.

Other Matters 1 The Company is not complying with the latest provisions of the Service Tax Act in respect of service tax payable on taxable services specified in the Service Tax Act .

All the DDO’s have been directed to obtain services tax number from concerned department and comply the provision of Services Tax Act.

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ANNEXURE-A forming part of auditors’ report on financial statements of Himachal Pradesh State Electricity Board Limited for the year ended on 31st March, 2013.

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.

Efforts are being made to maintain the fixed assets register and GIS & GPS in process. Fixed assets register shall be updated on receipt of final report from firm.

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.

All the DDO’s have been directed to physically verify the fixed assets every year.

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

c) Statement of facts. Hence no comments

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.

ii) Complete procedure to verify the store and spares have been prescribed by the Company.

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

b) Procedure for physical verification of inventories followed by the management is reasonable and adequate in relation to the size of the Company as Stock Verifier verifies the same periodically.

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.

C) Verification reports are with concerned DDO and shall be shown to audit.

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.

iii) Statement of facts, hence no comments

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 Rs 9,423.64 lacs ( Previous Year Rs 10,387.00 lacs) as at 31st March 2013, out of which stock amounting to Rs 926.47 lacs (Previous Year Rs 904.00 lacs) which are more than five years old and has not been utilized till the close of the year

Company has proper system of internal audit as per the size of the Company. Internal Audit party for commercial Audit and CA firms are engaged for internal audit. As regards piled up stocks these are critical items and used frequently for restoration of supply.

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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

v) The distribution losses of the Company are with in the limit fixed by the HPERC and poor collection efficiency of the Company is due to non settlement of Govt. dues.

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

All the transactions of purchase of goods and material and sale of goods and materials are entered in stock sale / issue register (s).

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

b) Statement of facts, hence no comments.

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

vii) Statement of facts, hence no comments

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 does 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.

viii) The Internal Audit of the Company is being conducted by independent firms of Chartered Accountants which is commensurate with the size and nature of the business of the Company.

ix) 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.

ix) M/s Anirudh Joshi & Associate are the Cost Auditor of the Company and cost records are being prepared through outsourced Cost Audit firm M/s Anil Sharma & Company. Hence, observations of audit are denied and Para may be settled.

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 Dut 26,173.71 lacs 31,448.00lacs -Municipal Taxes 515.84 lacs 382.00 lacs - Labour Cess 0 lacs 7.00lacs -CPS Contribution 345.41 lacs 624.00 lacs -Service Tax 8.36 lacs 13.51 lacs 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)

X) Statement of facts, hence no comments.

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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 31.03.2013 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. The Company has opted for Financial Restructure Plan Issued by the Govt. of India where the short term loans issued by the banks have been converted into long term loans. 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. xvii) The term loans have been applied for the purpose for which they were raised.

b) Statement of facts, hence no comments.

c) Statement of facts, hence no

comments. xi) Statement of facts, hence no

comments. xii) Statement of facts, hence no

comments. xii) Statement of facts, hence no

comments. xiv) Statement of facts, hence no

comments. xv) Statement of facts, hence no

comments. xvi) Statement of facts, hence no

comments. xvii) Statement of facts, hence no

comments.

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.

xviii) Statement of facts, hence no comments

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

xix) Statement of facts, hence no comments.

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

xx) Statement of facts, hence no comments.

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

xxi) Statement of facts, hence no comments.

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.

xxii) Statement of facts, hence no comments.

Sd/- Chief Accounts Officer, Place: Shimla F&A Wing, HPSEBL, Shimla-4 Dated: 25.03.2015

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ANNEXURE ‘A”

Replies to the CAG's old Para on erstwhils Himachal Pradesh State Electricity Board

DRAFT SEPARATE AUDIT REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA ON THE ACCOUNTS OF HIMACHAL PRADESH STATE ELECTRICITY BOARD FOR THE PERIOD 1ST APRIL 2010 TO 13th JUNE 2010.

Status of the Draft Separate Audit Report upto 31.12.2014

A .BALANCE SHEET FIXED ASSETS AND PROVISION FOR DEPRECIATION (SCEHEDULE-19)- ` 3874.61 CRORE.

(a) The above includes: (i) assets valuing ` 13.67 lakh ( 8.20 Lakh in Chamba between January 2008 to February 2010, Rs. 1.41 lakh in Nurpur between April 2010 to June 2010 and Rs. 4.06 lakh in Jubbal in September 2009) washed away due to flash flood or heavy rain fall and were not in existence at the close of financial accounts. Non provision there against resulted in overstatement of assets and understatement of deficit (current financial period Rs. 1.41 lakh and prior period Rs. 12.26 lakh) to that extent.

(AM No. 8 for the year 2010-11) The Sr. Executive Engineer, ED Jubbal vide JV No 2 (3/14)S-II accounts amount of Rs. 406033/- and ED, Nurpur amounting to Rs. 1,40,000/- during 2011-12 accounts had transferred wash away amount to BH 16 i.e assets not in use account . Hence, the Para may be settled please.

(ii) assets valuing Rs. 9.66 crore were created on the land which does not belong to the Board. This fact was neither disclosed by way of foot note under ibid schedule nor in Statement-5 “Notes to Accounts/Balance Sheet.”

(AM No. 5 for the year 2010-11) The necessary disclosure of the same are being recorded from FY 2012-13 annual accounts of HPSEBL against Sr. No 30 Notes forming parts of the Account . Hence para may be settled.

(iii) assets valuing Rs. 20.40 lakh stolen from the various sites/service lines in nine units of the Board. The amount had not been adjusted in the accounts resulting in overstatement of assets and understatement of deficit to the above extent.

(AM No. 12 for the year 2010-11) These amount are relating to Electrical Divisions, Ghumarwain/ Sundernagar/ Kangra/ Palampur/ Lambagaon/ Dehra/ Dharamshala/ Bilaspur/ Rampur and all Division has settled these para during FY 2011-12 & 2012-13.

(iv) Rs. 10.95 crore being expenditure of completed works transferred without obtaining assets commissioning certificate. This resulted in overstatement of assets and understatement of Capital expenditure-in-progress.

(AM No. 3 for the year 2010-11) The commission certificates of Rs. 10.95 crore expenditure of completed works transferred without obtaining assets commissioning had been obtained from Engineer concern by these units (Electrical Divisions, Dalhousie, Jawali, Rampur ReckongPeo, Anni, Kaza, Rohru Chopal, Ghumarwain, Sundernagar, Karsog, Kangra, shahpur & Lambagaon.). Hence para may be settled.

2. CAPITAL EXPENDITURE IN PROGRESS (SCHEDULE-21)- Rs. 1079.27 CRORE. The above includes Rs. 3.39 crore being interim payments released to contractors against turnkey contracts by Operation Circle- Bilaspur. The said

AM No. 4 for the year 2010-11) The payment of Rs. 338.67 Lac released to various contractors has to be shown under contract in progress a/c not in advance to

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payments were required to be debited to advance to suppliers/contractors. Thus, Capital expenditure-in- progress was overstated and Contracts in progress understated by Rs. 3.39 crore.

suppliers/contractors as stated by audit and the payments released are covers under the head of WIP so there in no understatement of WIP. Now the schemes have been reconciled and final closer has been submitted to REC. Hence, Para may be dropped/ settled.

3. DEFERRED COSTS (SCHEDULE-23)- Rs. 127.06 CRORE. The above includes an amount of Rs. 32.19 crore being the cost of CFL bulbs which have completed their life of 6000 hours and the cost of these bulbs has also been covered through earnings by saving in power and from the consumers through tariff. As such the expenditure incurred on purchase of these bulbs should have been charged to the revenue instead of treating it as Deferred cost. This resulted in overstatement of above head and understatement of deficit to the extent of Rs. 32.19 crore.

AM No. 17 for the year 2010-11) The total expenditure incurred on purchase of CFL bulbs to domestic consumers in the state are being charged to revenue account in five years. The CFL bulbs are being issued in span and the version of the audit to complete the life of 6000 hours is not correct as such CFL bulb of Rs. 1,57,31,843 has been issued to domestic consumers in FY 2009-10 and Rs. 882198 in the period of (1.4.2010 to 13.6.2010). Besides above, the amount of Rs. 70.00 Crore has been fully repaid to Govt. at the end of March, 2011 and at the end of FY 2012-13, there is no deferred expenditure on accounts of CFL are in balance. The pare may be settled.

4. INVESTMENTS (SCHEDULE-25)- Rs. 1965.67 CRORE. The above includes an amount of Rs. 424.70 crore shown as investment in shares of three companies. Against this, equity shares of the value of Rs. 257.20 crore have only been received. This fact has not been disclosed in Statement-5 “Notes to Accounts”.

AM No. 38 for the year 2010-11) Against the investment of 424.70 Crore , equity shares of value of Rs. 257.20 Crore has been received up to 31.3.2010 .The necessary disclosure of the same has been recorded in the annual account of the Company/ HPSEB Ltd. during 2010-11. Hence para may be dropped please.

5. STOCKS {(SCHEDULE-26(a)}- Rs. 63.39 CRORE The above includes :- (i) un-reconciled difference of Rs. 28.62 lakh between the value of stock on ground and book balances of stocks.

Para 6 (i) Old comment AM No. 3 for the year (2009-10) The reconciliation of un-reconciled difference of Rs. 28.62 lakh has been carried out by the all Divisions during FY 2011-12 and FY 2012-13. Hence para may be dropped

(ii) Obsolete and unserviceable material of Rs. 2.34 lakh lying in Operation Circle- Rohroo which should be written off. This resulted in overstatement of Stocks and understatement of deficit to that extent.

(AM No. 10 for the year 2010-11) The value of obsolete material amounting to Rs. 2,33,711/- has been transferred to BH 22.790 by Sr. Executive Engineer , Electrical Division, under Operation Circle, Rohru vide TEO No during 2nd S-2014 ) . Hence para may be settled

6. SUNDRY RECEIVABLE (SCHEDULE-26 (e)- Rs. 309.21 CRORE. The above includes:- (i) Rs. 10.42 lakh (Rs. 1.03 lakh pertains to ex-employees whose whereabouts are not known, Rs.

AM No. 25 for the year 2010-11) The amount Rs. 10.42 lakh (Rs. 1.03 lakh pertains to ex-employees whose whereabouts are not known, has now been write off after obtaining

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3.16 lakh excess over expenditure of sanctioned estimates under deposit work and Rs. 6.23 lakh in respect of two employees who got injured during performing their duties). This resulted in overstatement of above head understatement of deficit to that extent.

approval of competent authority during FY 2011-12 & 2012-13 by the division ie. Electrical Diviion, Bilaspur, Ghumarwain, Kangra, Palampur , Dharamshala and Chamba. Hence para may be settled.

(ii) Rs. 9.47 lakh on account of outturn charges of vehicle shown recoverable from various Government departments which were not recoverable as per instructions of the Government of Himachal Pradesh. This has resulted in overstatement of above head and understatement of deficit to that extent.

AM No. 26 for the year 2010-11) The para was relating to Electrical division, Ghumarwain, Sundernagar, Karsog, Kangra,Dharamshala & Chopal and all units has been recovered outturn charges of vehicle deployed for election duty and adjusted in FY 2011-12 & 2012-13 accounts. Hence para may be settled.

7. OTHER CURRENT LIABILITIES (SCHEDULE-28)- Rs. 1921.24 CRORE. (a) The above is understated by:- (i) Rs. 47.72 lakh on account of ADA @ 8 percent due for the period 1-4-2010 to 13-6-2010 to the employees of the Board in respect of five units. Since it was known liabilities as such provision should have been made. This has also resulted in understatement of deficit to that extent.

(AM No. 19 for the year 2010-11) The provision of ADA @ 8% was not made by the Operation Circle, Dalhousie, ED, Dalhousie, Jawali, Rampur and kumarsain and now the payment of ADA has been made from prior period expense as per accounting policy of the Company during 2010-11. Hence, para may be settled.

(ii) Rs. 0.66 crore due to non provision of liabilities of contribution to the EPF fund for 377 daily wagers/contract employees. This also resulted in understatement of deficit to the extent of Rs. 0.66 crore (during the year Rs. 8.04 lakh and prior period Rs. 0.58 crore).

(AM No. 11 for the year 2010-11) AO (Funds)/ ED (Pers.) The HPSEB Ltd. vide letter 2.7.2055 had already been adopted the schemes towards the EPF in respect daily wages and Contract employee and all Drawing and Disbursing Officer has been directed to enrolled as PF members with Regional Provident Funds Commissioner, Shimla and follow the instructions of Act. It is further informed that as per the Act minimum 20 daily paid employee/ workman are required and where more than 20 workmen are on daily/ Contract in a Division on roll, the PF contribution/ enrolment are being made. ED, Dalhousie had made entire contributions of EPF and deposited to concerned workman accounts with PF Regional Commissioner.

(iii) Rs. 1.31 crore due to non provision of labour cess payment payable on various construction works executed during 2009-10 in eight Circles. This has also resulted in understatement of deficit to that extent (prior period Rs. 1.31 crore).

(AM No. 39 for the year 2010-11) The provision Rs. 1.31 crore of labour cess was not made by Opertion Circle, Bilaspur and Kangra, Elect. Division, Ghumarwain, Kangra, Shahpur, Palampur, Dharamshala Baijnath, Dehra, Sundernagar, Karsog, Chopal, Jubbal, Dalhousie Nurpur, Jawali, Rampur, R/Peo, Kumarsain, Kaza and Rohru and all the above units have now been paid labour cess to Govt and no pending for the same . Hence, para may be settled.

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(iv) Rs. 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 has to be borne by the Board.

(AM No. 310 (a) (ii) OC 9 (ii) for the year 2007-08) The liability of Power bond worth Rs. 70.25 crore issued by the state Govt. in 2003 to clear HPSEB dues was withdrawn strictly as per provision of Tripartite agreement between the state Govt. , RBI and Govt. of India no doubt the additional Chief Secretary (Fin) to the Govt. of HP instated that Board should clear this liability. The matter was deliberated at higher level and draft cabinet memorandum regarding receiving of liability of Power Bonds worth Rs. 70.25 Crore issued by the state Govt. as per provision of tripartite agreement was sent to HP Govt. on 4.8.2005. Since no further objection received from HP Govt. in this behalf and repayment of Bonds with interest being made regularly by the Govt. of H.P. through RBI and Rs. 14.05 Crore is outstanding upto September, 2014. Copy of statement enclosed. The agreement was to shift the burden of liabilities of HPSEB (PSU) to state Govt as a onetime measures to facilitate initiation of reforms in Power Sector as the tariff fixing/ determination mechanism being followed was arbitrary as Govt, would not allow the SEBs to fix the tariff in accordance with the input cost incurred for generation/ purchase of the power being supplied to the consumers. This had left a huge gap between the revenue receipt and expenditure. In view of the position, stated above, the Board is not liable to discharge the servicing of Power Bond. This liability is to be borne by the state Govt. out of Electricity duty imposed on electricity consumers and out of its general revenue. Thus withdrawing/ debiting the liabilities from accounts code 41.110, 41.112, 41.114 and 41.123 (Sundry creditor CPSUs) and crediting to Prior period income 65.2 is in order and version of the audit is not acceptable. Hence, para may be withdrawn.

8. SUNDRY RECEIVABLE FROM GOVERNMENT (SCHEDULE-29)-Rs. 49.70 CRORE. The above includes Rs. 49.70 crore being upfront subsidy shown receivable from the Government of Himachal Pradesh. The Govt. of HP did not approve the same and therefore the same should have been withdrawn/written back. This has resulted in overstatement of above head and understatement of deficit by Rs. 49.70 crore (current financial period Rs. 9.36 crore and prior period Rs. 40.34 crore.

(AM No.36 for 2010-11 updated Prior period amount 44.34 current financial year 9.36 crore) HPERC in its tariff order for the year 2006-07 has

approved Rs. 2.35 P/ Unit for free power and Rs.

2.84 P/ unit for equity power whereas rates

charged by Govt of (H.P) are Rs. 3.04P/ unit for

free power and Rs. 3.70 p/unit for equity power

respectively. The tariff for consumers for the year

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2006-07 has been approved by the HPERC on the

basis of the lower rate of Rs. 2.35 P/unit for 12%

free power and Rs. 2.84 P/unit for equity power

than actually charged by GOHP. Therefore, GoHP

vide decision dated 20th October, 2005 it has

been decided that HPSEB need to be

compensated for difference by the Govt.

Accordingly, following claims of up front subsidy

amounting to Rs. 74.53 crore during FY 2006-07

has been lodged.

Sr. No Period Amount (in cro 1 April & May, 2006 16.22 2 November,2006 10.24 3 December, 2006 15.16 4 January, 2007 10.61 5 Fenruary,2007 9.26 6 March, 2007 13.04 Total 74.53

While analyzing the Board’s claim of Rs. 74.53

crore receivable from GoHP, The Commission has

observed that the Board has also claimed upfront

subsidy on accounts of NJHP equity power

purchased from GOHP. In the truing up petition

for FY 2007 (Annexure-B) , the Board has

mentioned that a total sum Rs. 74.53 crore from

Govt. of H.P on a/c of difference between the

power purchase rate of free power approved by

the commission and that charged by the PTC to

the Board for FY 07, is pending with state Govt

which has been shown as receivable in FY 07 in

the annual accounts. The Board has termed this

amount as upfront subsidy in its accounts

statement. The Board has not considered

receivables from GOHP on accounts of free power

on its true up petition. While analysing the

Board’s claim of Rs. 74.53 Crore from GOHP, the

Commission has noticed that the Board has also

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claimed upfront subsidy on accounts of Nathap

Jhakri equity power purchase from the GOHP on

account of difference between the power

purchase rate of equity power approved by the

Commission and that charged by the PTC to the

Board for FY 07. The Commission clarified that

the power purchase const of equity power has to

be passed through in the ARR at actual cost and is

not recoverable from GO HP and amount claimed

by HPSEB Rs. 34.19 Crore is not justified. The

Commission has considered equity power at

actual cost while truing up for FY 07 and not

included any upfront subsidy from GOHP on

account of equity power.

Further, the Commission has noticed that the

Board has purchased some quantum of free

power (56.62 MU) from GOHP in the month of

August, 2006 at a rate of Rs. 3.92/ unit

aggregating to Rs. 23.93 Crore. In the tariff order

for FY07, the Commission had fixed the rate of

free power to be purchased by the Board at 2.35/

unit. Therefore, the difference in purchase price

higher than Rs. 2.35/ unit has to be refunded by

GOHP. Thus, the Commission has considered Rs.

9.36 Crore as additional upfront subsidy to be

claimed from GOHP on accounts of higher

purchase price of above mentioned free power.

Therefore, the Commission in true up order FY07

approved amount Rs. 49.70 crore (74.53-

34.19+936) towards receivable from GOHP

against free power under the provision Electricity

(Removal of Difficulty) (Third) order, 2005, and

the state Commission is mandate as per the Act

to regulate the price at which such free power is

procured by the distribution licensee. According,

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Chief Engineer (Comm) vide DO letter No. HPSEB

/ CE (Comm)/SERC-upfront subsidy/ 2009- 17919

dated 13.1.2010 claimed the lodge of above

amount with state Govt and these amount are

shown as receivable by debiting under BH 28.626

and credited to 63.130 and 65.2 in FY 3/ 2007 2nd

(s), 3/2008 2nd (S) and FY 2010-11 (13.6.2010 (S)

accounts. The issues are being discussed with

State Govt. time to time and they have never

refused for the same . Hence, para may be

dropped.

B. REVENUE ACCOUNT (Statement -1) EXPENDITURE

9. OTHER INCOME (SCHEDULE-5)- Rs. 12.15 CRORE. The above includes:- (i) Rs. 1.54 crore interests on FDR’s invested out of RGGVY and R-APDRP funds, instead crediting interest to the respective scheme, the same was shown as Board’s income. This resulted in overstatement of above head and understatement of deficit by Rs. 1.54 crore (current financial period Rs. 29.30 lakh and prior period Rs. 1.25 crore.)

(AM No. 29 for the year 2010-11) The amount out of RGGVY and R-APDRP schemes is both central sponsored have 90% grant and 10 % Loan. The funds are projects specific and therefore in order to ensure proper utilization of grants plus loan, these funds are temporality invested in banks till the expenditure incurred at sites against these schemes. General Manager, REC vide letter dated 26.12.2012 had conveyed that MOP Govt of India has decided that amount of interest earned by M/s REC and implementing agency (HPSEBL) against RGGVY funds shall be remitted to Govt. accounts immediately . HPSEBL had deposited the full amount of interest earned on investment against RGGVY schemes in the accounts of MoP GOI on dated 8.3.2013. As regards the interest earned against funds received under R-APDRP schemes, the amount of interest has now been kept in liability head 46.127 and shall be deposited in Govt. accounts or credited to respective schemes after the direction received from concerned agency. Hence, the para may be dropped.

(ii) Rs. 0.67 Crore on account of infrastructure development charges received form the industrial consumers as advance cost share. Thus, this resulted in overstatement of above head and understatement of liabilities by the above amount.

(AM No. 35 for the year 2010-11) Sr. XEN, Electrical Division, parwanoo has informed that the IDC received from the industrial consumers charged to concerned works during FY 2011-12 and considered these amount as Consumer contribution/grants for capital works. Hence para may be dropped.

10. PURCHASE OF POWER (SCHEDULE-6)- Rs. 350.62 CRORE. The above does not include:-

(AM No. 16 for the year 2010-11) As the amount related to prior period charges of purchase of power and the same has been

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(i) Rs. 49.50 crore on account of power purchased from various sources (PTC, PGCIL, NTPL ect.). This resulted in short provision of purchase of power and understatement of deficit by Rs. 49.50 crore (prior period Rs. 47.90 crore and current financial period Rs. 1.60 crore).

accounted for in prior period cost on a/c of purchase of power during the same FY 2010-11. In view if this para may be dropped please.

(ii) Rs. 1.60 crore being the charges of power purchased from UPCL during December 1989 to 13 June 2010. This resulted in understatement of above head of account and deficit to that extent (prior period Rs. 1.53 crore and current financial period Rs. 7.00 lakh).

AM No. 13 for the year 2010-11) The issue has been settled between both utilities and adjustment has been through banking arrangement vide TEO during 1/2014 accounts . Hence par be settled.

(iii) Rs. 36.07 lakh being the difference of rate of purchase of power from six IPP of Himurja, allowed by HPERC on 9 February 2010. This resulted in understatement of above head as well as deficit to the extent of Rs. 36.07 lakh (prior period Rs. 32.70 lakh and current financial period Rs. 3.37 lakh).

(AM No. 31 for the year 2010-11) The amount of Rs. 36.07 lakh being the difference of rate of purchase of power from six IPP of Himurja, allowed by HPERC on 9 February 2010 has been released to IPPs during 2011-12. Hence, para is settled.

(iv) Rs. 37.34 crore being cost of captive power purchased during 9 September 2009 to 14 February 2010 from five industrial customers to mitigate the problem of power shutdown. Only sales proceeds amounting to Rs. 18.13 crore were credited to the Board’s account. This resulted in understatement of Purchase of power by Rs. 37.34 crore and Sundry receivable being cost shared by the industrial consumers by Rs. 9.603 crore as well as deficit by Rs. 9.607 crore cost shared by the Board.

(AM No. 37 for the year 2010-11) The reply to this para , it is submitted that Operation circle, solan, and its Electrical Division (s) Nalagarh, and Baddi Rs. 37.34 crore being cost of captive power purchased during 9 September 2009 to 14 February 2010 from five industrial customers to mitigate the problem of power shutdown. It is fact that POP cost has not booked by the above divisions and adjusted these amounts with concerned consumers bills during 2011-12 with sale of Power. POP and SOP are revenue expense and revenue income for the Company and both revenue expense/ income has been set up amount each other with concerned consumers. During FY 200-11 & 2011-12. Hence para may be settled.

11. REPAIRS AND MAINTENANCE (SCHEDULE-8)- Rs. 4.94 CRORE. The above does not include an amount of Rs. 0.80 crore being expenditure incurred on shifting works whereas as per paragraph-2.32, Annexure-III of Basic Accounting Principles and Policies of Commercial Accounting Manual (Vol-I, Part-I) such expenditure was required to be charged to the revenue. Thus, this has resulted in overstatement of Capital expenditure-in –progress and understatement of deficit by Rs. 0.80 crore (Rs. 43.00 lakh current financial period and Rs. 37.00 lakh prior period).

(AM No. 20 for the year 2010-11) The compliance para has been received from Electrical division, Baijnath, Dharamshal, palampur, sundernagar, Dehra, lambagaon, Kangra, Shahpur, Dalhousie, Chamba, Rampur, Reckong Peo, Anni, Rohru and Jubbal and all the units has been informed that expenditure incurred on shifting works was also resulted in strengthening the existing infrastructure and no normal shifting works has been carried out from capital expenditure. Hence , para be dropped.

12. EMPLOYEES COST (SCHEDULE-9)- Rs. 179.61 CRORE. The above does not include an amount of Rs. 20.53 crore being arrear of 6th pay commission for the period 1 January 2006 to 30 November 2009 in respect of nine units of the Board. This resulted in understatement of above head as well as deficit to the

(AM No. 32 for the year 2010-11) The order to revision of pay scale under the 6th pay commission has been adopted by the HPSEB Ltd. on dated 31.12.2009. The releases of the amount of the arrears to various categories of employees are being ordered as per H.P. Govt. directive and the amount of arrear is being paid

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above extent. to the employees as per Govt. order. The provisions of the same are being kept by the field units as well as H.O. from time to time when the liability has arisen. Moreover, 6th pay commission liability has now been released to concerned employee from FY 2009-10 to FY 2012-13. Hence the para may be dropped.

13. ADMINISTRATION AND GENERAL EXPENSES-(SCHEDULE-10)- Rs. 11.21 CRORE. (a) The above does not include: (i) Rs. 1.95 crore on account of lease rent (prior period Rs. 1.81 crore and current financial period Rs. 14.00 lakh) which had been demanded by Municipal Corporation, Shimla for using of their land by the Board. This resulted in understatement of above head as well as deficit to that extent.

AM No. 14 for the year 2010-11) The entire amount has been settled with MC against energy dues Sr.XEN, Electrical Division No-II, Shimla and the same has been accounted for in 9/2012 accounts. Hence para may be dropped.

(ii) electricity charges to the tune of Rs. 7.88 lakh in respect of three units of the Board. This resulted in understatement of above head as well as deficit to that extent.

AM No. 24 for the year 2010-11) All the the ATDs have been accepted by the all units in next accounts i.e after 14.6.10 to 31.3.11. Regarding ATDs amounting to Rs. 4,85,872/- (for the month of 5/10 & 6/10) on account of electricity expenses Kumar House complex were raised by the city Electrical Division, Shimla (not by the HID Section ) of the Board on 18.6.10 & 15.7.10 which were accepted by the Mtc. Division, Shimla during 5.7.10 & 4.8.10 respectively. Hence the paras may be dropped.

(b) The above includes an amount of Rs. 1.03 crore being the lease rent paid by the Board (prior period Rs. 44.00 lakh, current financial period Rs. 10.00 lakh and prepaid Rs. 49.00 lakh). This resulted in overstatement of above head as well as deficit to the tune of Rs. 49.00 lakh.

AM No. 15 & revised 30 for the year 2010-11) In reply to this para it is submitted that XEN, Electrical Division, Nalagarh paid lease rent amounting to Rs. 1.03 crore and charge to AG-76. The amount has not been accounted for prior period Rs. 44.00 lakh, current financial period Rs. 10.00 lakh and prepaid Rs. 49.00 lakh due to known the fact. The lease rent is paid in advance for five years. The five years period has now been over and prepaid / advance amount paid for lease rent has been settled/ adjusted, Hence para may be settled.

14. INTEREST AND FINANCE CHARGES (SCHEDULE-12)- Rs. 53.27 CRORE. The above does not include Rs. 1.21 crore on account of interest on power Bonds of Rs. 70.25 crore for the current financial period. This resulted in understatement of above head as well as deficit to that extent.

AM No for the year 2010-11 In reply to this para it is submitted that the Power Bond are not liability of the Board as per the Tri-partite agreement and interest on power Bond were no question. Detailed reply has been given as against para NO. 7 ( iv) above. In view of reply para may be settle please.

15. NET PRIOR PERIOD CREDITS/(CHARGES) (SCHEDULE-18) Rs. 67.55 CRORE. The net prior period credits/charges were understated by Rs. 334.53 crore and overstated by Rs. 28.68 crore due to non provision/excess provision of liabilities resulting in understatement of liabilities as well as accumulated loss to the extent of Rs. 306.85 crore due

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to non-provision of the following:- i) Rs. 35.93 lakh (OT of vehicles: Rs. 7.57 lakh, Misc. recoveries from other organizations: Rs. 3.59 lakh, recoveries from officials: Rs. 14.07 lakh and contractors/suppliers: Rs. 10.70 lakh) shown as recoverable without any intimation to the concerned parties and is lying outstanding for the last seven to thirteen years, as such, provision for this amount should have been made in the accounts. This resulted in overstatement of Revenue expenditure/accumulated loss by Rs. 35.93 lakh {SCHEDULE-26 (e)}.

Para No 15 (i) Old comment 15 (ii) for 2009-10 The field Units had been recovered/ write off Rs. 35.93 Lakh after obtaining the approval of competent authority during 2010-11 & 2011-12, (OT of vehicles: Rs. 7.57 lakh, Misc. recoveries from other organizations: Rs. 3.59 lakh, recoveries from officials: Rs. 14.07 lakh and contractors/suppliers: Rs. 10.70 lakh) . Hence, para may be dropped.

(ii) Rs. 1.50 crore paid to I&PH Department for providing water supply scheme to the affected villages at Thalaut (Mandi) due to construction of Larji HEP. The amount so paid was utilized by the concerned Department (utilization certificate furnished in January 2007) for the purpose it was given. Therefore, depiction of the same as receivable was not correct. Thus, sundry receivable is overstated and accumulated loss understated by Rs. 1.50 crore {SCHEDULE-26 (e)}.

Para No 15 (ii) Old comment 15 (iii) for 2009-10 The reply is still awaited from thriot Const. Division, Pandoh.

(iii) Rs. 7.09 crore shown receivables from the consumers on account of sale of power. The bills so raised were not accepted by the respective consumers and are sub judice. As there was no certainty for realization of above amount the provision for the same should have been made in the accounts. Thus, non-provision for the same has resulted in overstatement of accumulated loss by Rs. 7.09 crore. {SCHEDULE-26()d)}.

Para No 15 (iii) Old comment 15 (iv) for 2009-10 The reply to this para , it is submitted that matter was sub judices and during FY 2011-12 Hon’ble Court had decided the same. The consumers accounts has been adjusted as per direction of court. Hence, para may be settled.

(iv) Rs. 4.28 crore being excess of revenue (Rs. 7.72 crore) over expenditure (Rs. 3.44 crore) during trial stage of Larji HEP. This should be reduced fro the cost of the project in terms of paragraph 2.56 (Annexure-III) of Basic Accounting Principles and Policies of Commercial Accounting Manual Vol-I, Part-I. This has resulted in overstatement of CWIP and understatement of accumulated loss by Rs. 4.28 crore (Schedule-21).

Para No 15 (iv) Old comment 15 (v) for 2009-10 The reply is still awaited from Larji Const. division, Thalout

(v) Rs. 25.85 lakh being expenditure incurred on restoration of damaged/washed away works charged to CWIP in December 2006 instead of revenue expenses. This resulted in overstatement of CWIP and understatement of revenue expenses/accumulated loss by above amount {Schedule-16}.

Para No 15 (v) Old comment 15 (vi) for 2009-10 Under paragraph 2.125 “other Accounting Areas” of Basic Accounting principles & Policies, it has been laid down that all losses on account of flood; cyclone, fire etc. shall be treated as the loss for the year in which the loss was incurred. Such a charges against revenue shall be reduced by the subsidy, if any received from Govt. specifically for meeting the loss. In this case Rs. 30.00 lacs were received from DC Kinnaur against calamity relief fund for the restoration of works damaged/ washed away in the River Satluj during June, 2008 and the above expenditure 25.85 has

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beenwithdrawn from CWIP and charged to Revenue during 2010-11 accounts. Hence, para may be settled.

(vi) Rs. 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 which resulted in understatement of revenue expenditure as well as accumulated loss to that extent {Schedule-6}.

Para No 15 (vii) Old comment 15 (viii) for 2008-09 In terms of the decision of HP Govt. the liability for the payment of free power royalty against the projects of HPSEB was provided earlier. Later the matter was taken up with the Board authorities and case was sent to Chief Engineer (Comm), HPSEB, Shimla-4 for comments . It has been informed by the Director Tariff that the HPERC has not made any provision for the power in the ARR filed by the Board, as such Board has filed review petition with HPERC/ Appellate Tribunal and no liability on this account is required to be provided. Since the decision of the HP Govt. belongs to the Projects executed by HPSEB after 1991 wherein no provision of 12% royalty payable to the HP Govt. exists in the Projects concerned, as such this amount cannot be paid to the HP Govt. without any relief in this behalf from HPERC. As such the payment of free power royalty will be made on actual basis as per the approval of HPERC and no liability is to be provided. Thus there is no overstatement of profit and para may kindly be dropped.

(vii) Rs. 17.35 lakh being the value of stolen irrecoverable/shortages of material which resulted in understatement of accumulated loss and overstatement of stocks to the extent {Schedule-26 (a)}.

Para No 15 (viii) Old comment 15 (ix) for 2008-09 The value of Rs. 17.35 Lakh stolen material & shortage detected in store has been adjusted in FY 2011-12 & 2012-13 accounts of the Company on completion of required procedures & formalities. Hence para may be settled.

(viii) Rs. 11.73 crore on account of deduction of T&D losses from the free power royalty, as the rate for free power royalty was calculated after adjusting T&D losses. This resulted in understatement of accumulated loss as well as other current liabilities by Rs. 11.73 crore {Schedule-28} and {Schedule-6).

Para No 15 (ix) Old comment 15 (X) for 2009-10 In reply to this para it is submitted that there is there is no dispute on this account with the H.P. Govt. and the amount of Rs. 11.73 crore on a./c of losses shown by the audit were correctly deducted by the Board as such the para may kindly be dropped .

(ix) Rs. 1.04 crore on account of prepaid expenses which in fact were not paid as per unit’s record. This resulted in understatement of accumulated loss and overstatement of Sundry receivables to the above extent {Schedule-26 (e)}.

Para No 15 (x) Old comment 15 (xi) for 2009-10 The reply is still awaited from Larji Const. Division No-I (Defunct)

(x) Rs. 1.00 crore being the amount deposited with HPPWD (NH) which has already been adjusted towards restoration of road construction and Rs. 1.23 crore on account of penalty payable to the forest Department for dumping of muck and debris at undesignated site. This resulted in understatement of

Para No 15 (xi) Old comment 15 (xii) for 2009-10 The reply is still awaited from Larji Const. Division No-I (Defunct

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accumulated loss and overstatement of Sundry receivables to the extent of Rs. 2.23 crore {Schedule-26(e)}. (xi) Rs. 50.75 crore on account of interest on Power Bonds of Rs. 70.25 crore (October 2001 to 2009-10). This resulted in understatement of accumulated loss as well as other current liabilities to the above extent {Schedule-28}.

Para No 15 (xii) Old comment 15 (xiii) for 2009-10 The power Bond was not liability of HPSEB as per Tri-partite agreement and question of interest on above bond does not arise. The detailed reply has been given against Para No. 7 ( iv) as above and in view of reply para may be settle please.

(xii) an amount of Rs. 2.51 crore incurred on erection of Loop in Loop Out on 2nd circuit of Bhaba-Panchkula line at Baddi. Being interstate line, the permission to energize the same was not accorded by the Haryana Vidyut Prasaran Nigam Limited (HVPNL) rendering the entire expenditure unfruitful, which should have been provided for. Thus, by not making provision fixed assets were overstated and accumulated loss understated by Rs. 2.51 crore {Schedule-19}.

Para No 15 (xiii) Old comment 15 (xiv) for 2009-10 The reply is still awaited from Transmission Division, Solan

(xiii) Rs. 1.21 crore incurred on shifting of existing infrastructure. This expenditure was to be charged to revenue as per the provisions of Commercial Accounting Manual of the Board. This resulted in overstatement of Capital expenditure-in-progress and understatement of accumulated loss by Rs. 1.21 crore {Schedule-21}.

Para No 15 (xiv) Old comment 15 (xv) for 2009-10 The reply to this para , it is submitted that SE Operation Circle , kangra had shifted existing infrastructure /works as per working program approved by the higher authorities and budget allotment. The other shifting works related to individual concerned have been executed under the deposit head and shifted expenditure charged to/ net up with deposit head. Keeping in view the facts para may be dropped.

(xiv) Rs. 2.12 crore shown recoverable (March 2005) from various suppliers/contractors for which, neither any intimation was ever sent to suppliers/contractors nor confirmed by them. In the absence thereof, the provision for the same should have been made in the accounts. Non provision has resulted in overstatement of Sundry receivables and understatement of accumulated loss by Rs. 2.12 crore {Schedule-26(e)}.

Para No 15 (xv) Old comment 15 (xviii) for 2009-10 The amounts of Rs 2.12 crore was shown recoverable (March 2005) from various suppliers/contractors has now been adjusted by the field Unit during FY 2011-12 & 2012-13 accounts . Hence, para may be settled.

(xv) an expenditure of Rs. 1.69 crore incurred on abandoned Hydro Electric Project (Baspa-I). Non provision for the same had resulted in overstatement of Sundry receivables and understatement of accumulated loss by Rs. 1.69 crore {Schedule-26(e)}.

Para No 15 (xvi) Old comment 15 (xvii) for 2009-10 The amount had withdrawn from AG 28.712 and debited to 17.3 (expenditure on survey and investigation). As regards expenditure of Rs. 1, 69, 35,229/- incurred against Baspa-I HEP has been write off and charged to revenue accounts after obtaining the approval of competent authority during 2012-13. Hence, para settled.

(xvi) Rs. 11.05 crore incurred on Survey and Investigation of two abandoned Hydel Projects

Para No 15 (xvii) Old comment 15 (xviii) for 2009-10

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required to be written off. Non writing off has resulted in overstatement of expenditure on Survey/Feasibility studies of projects not yet sanctioned and understatement of accumulated loss to the above extent {Schedule-15}.

The expenditure incurred on survey & investigation of these HEPs had been written off during FY 2011-12 after obtaining the approval of competent authority. Hence, the audit para may be dropped.

(xvii) Rs. 20.60 lakh being book value of damaged power transformer (April 2003) and two transmission line towers washed away during flood in August 2000 and August 2007. Thus, CWIP (Rs. 5.39 lakh) and fixed assets (Rs. 15.21 lakh) were overstated and revenue expenditure/accumulated loss understated by Rs. 20.60 lakh {Schedule-15).

Para No 15 (xviii) Old comment 15 (xxii) for 2009-10 In reply to his para it is submitted that book value of damaged power transformer and transmission line tower washed away has been withdrawn from CWIP and fixed assets during 2010-11 accounts and charged to revenue accounts by the 220 KV Trans. Division, Kunihar as the replacement of above has been made CWIP and above value charged to revenue. Hence, para may be dropped.

(xviii) Rs. 33.61 lakh being difference between the book value of condemned power transformer and the highest bid received there against. Thus, the Stock is overstated and accumulated loss understated by Rs. 33.61 lakh {Schedule-15}.

Para No 15 (xix) Old comment 15 (xxiii) for 2009-10 The reply to this para , it is submitted that Rs. 33.61 lakh being difference between the book value of condemned power transformer and the highest bid received has been adjusted in 3/2013 accounts by Trans. Division, Totu. Hence, para may be settled.

(xix) generator step up transformer of the book value of Rs. 33.65 lakh burnt in January 1996. Non provision resulted in overstatement of Fixed assets and understatement of revenue expenditure/accumulated loss by Rs. 33.65 lakh. {Schedule-16}.

Para No 15 (xx) Old comment 15 (xxiv) for 2009-10 Generator step up transformer of the book value of Rs. 33.65 lakh burnt in January 1996 has now been write off by the RE Banner Power House Division, Jia has during 2010-11 accounts after obtain the sanction of competent authority. Hence para may be dropped.

(xx) an expenditure of Rs. 1.99 crore incurred on acquiring accommodation on lease (January 2004) owing to non-acceptance of inter unit advice by the responding unit. This resulted in understatement of fixed assets and overstatement of suspense head by Rs. 1.99 crore besides understatement of depreciation as well as accumulated loss by Rs. 15.95 lakh {Schedule-19}.

Para No 15 (xxii) Old comment 15 (xxvii) for 2009-10 The expenditure incurred on acquiring accommodation on lease (january2004) and inter Unit advice has been accepted by the City Electrical division, Shimla and accounting adjustment has been made vide TEO No 84/3/2011 (S). Hence, the para may be dropped.

(xxi) assets valuing Rs. 2.43 crore washed away due to flash floods (between 2003 to March 2009) and which were not in existence. Non provision therein resulted in overstatement of the assets not in use as well as understatement of accumulated loss {Schedule-21}.

Para No 15 (xxiii) Old comment 15 (xxviii) for 2009-10 The assets washed away / damaged has been withdrawn from fixed assets and transferred to AG 16 (assets not in use). The AG is cleared on receipt of sanction of write off the loss from the competent authority. Almost in every year assets

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are damaged due to flood / cyclone etc. and cost of such assets transferred to AG -16 and thereafter crediting this AG on receipt of write of sanction is continues process and this AG cannot be brought nil balance. Hence para may be dropped.

(xxii) an amount of Rs. 2.89 crore receivable from the BVPCL adjusted during the year. Since all the projects against which this expenditure has been incurred stand allotted to private parties/CPSU and no claims are outstanding there against as per the agreement, necessary provisions there against should have been made in the accounts. Non provision for the same has resulted in overstatement of the deferred cost as well as understatement of accumulated loss by Rs. 2.89 crore {Schedule-26 (e)}.

Para No 15 (xxiv) Old comment 15 (xxix) for 2009-10 The amount has been withdrawn from the account of M/s BVPC Ltd. vide JV No 11 for 9 /2008. In view of the above the para may be withdrawn.

(xxiii) Rs. 1.74 crore on account of establishment & contingencies (October, 2007 to May, 2008) of Design offices shown as investment against kasang HEP was not accepted by the HPPCL on the ground that these claims pertained to period prior to the transfer of Project to the Company. Thus, the investment is overstated and accumulated loss understated to that extent {Schedule-25}.

Para No 15 (xxvi) Old comment 15 (xxxi) for 2009-10 The reconciliation has been finalized with HPPCL and Rs. 1.74 crore on account of establishment & contingencies (October, 2007 to May, 2008) of Design offices shown as investment against kasang HEP has been accepted by the HPPCL and share certificate has been issued in fvaour of HPSEBL against these amount during FY 2011-12. Hence, para may be settled.

(xxiv) Rs. 25.87 lakh shown recoverable for more than 4 to 20 years from employees/ex-employees whose whereabouts were either not known or were not alive, besides inadmissible out-turn charges of Board’s vehicles deputed for election duty. This resulted in overstatement of sundry receivable and understatement of revenue expenditure by Rs. 25.87 lakh {Schedule-26 (c)}.

Para No 15 (xxvii) Old comment 15 (xxiii) for 2009-10 The reply to this para , it is submitted that Rs. 25.87 lakh shown recoverable for more than 4 to 20 years from employees/ex-employees has been written off during FY 2011-12 accounts and out-turn charges of Board’s vehicles deputed for election duty has been recover from concerned department. Hence, para may be dropped.

(xxv) an amount of Rs. 3.08 crore incurred on Patikari HEP after handing over the project which was not admissible as per agreement. Thus, sundry receivables as well as survey/feasibility studies of projects not yet sanctioned have been overstated by Rs. 1.39 crore and Rs. 1.69 crore respectively besides understatement of accumulated loss by Rs. 3.08 crore {Schedule-15}.

Para No 15 (xxviii) 15( xxxv ) for 2009-10 The amount incurred on Patikari HEP after handing over the project has been accepted by the concerned party and recovery amounting to Rs. 0.82 Lac & 0.51 lakh has been made from M/s Patikari Power Private Ltd. during 10/10, 11/2010 & FY 2011-12. Hence, the para may be dropped.

(xxvi) Rs. 18.84 lakh incurred against three half completed/dilapidated residential accommodation/rest camp/shed abandoned between 1999 to 2004. Non-provision there against resulted in understatement of other debits and accumulated loss to the above extent {Schedule-15).

Para No 15 (xxix) Old comment 15( xxxvi ) for 2009-10 The reply to this para it is submitted that ED, Chopal & M&T Sundernagar has regularized these expenditure and charged to R&M of Building during FY 2011-12. Hence, para may be dropped.

(xxvii) Rs. 0.52 crore less incurred on construction of Pot Head Yard of Larji HEP which was commissioned in January 2007. This has resulted in overstatement of

Para No 15 (xxx) Old comment 15 (xxxvii) for 2009-10

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CWIP and understatement of fixed assets by Rs. 0.52 crore besides understatement of depreciation and accumulated loss by Rs. 3.90 lakh {Schedule-21}.

The reply is still awaited from Trans. Division, Mandi

(xxviii) Stock of Rs. 45.55 lakh found short should have been charged to the revenue account as per the provision of Commercial Accounting Manual. This resulted in understatement of assets and accumulated loss to that extent {Schedule-26 (a)}.

Para No 15 (xxxi) Old comment 15 (xxxviii) for 2009-10 All the filed Units have set right the stock accounts and there is not difference in book balance and physical balance in stock accounts of these units in this regards. Hence, para may be settled.

(xxix) Rs. 11.45 lakh liability created out of deposits received against burnt meters and other miscellaneous deposits after providing the required services. This resulted un-understatement of prior period income as well as overstatement of accumulated loss by Rs. 11.45 Lakh {Schedule-28}.

Para No 15 (xxxii) Old comment 15 (xxxviii) (b) for 2009-10 The 11.45 Lakh received as receipts against burnet meters and other misc. deposits has been considered as prior period receipt during FY 2010-11 and the amount under liabilities head ( A.G. 47.6) brought to nil as on 31.3.2011. In view of above the para may be dropped please.

(xxx) assets valuing Rs. 17.32 crore capitalized twice by Transmission Division, Bhabanagar in the accounts for the year 2006-07 and 2008-09. This resulted in overstatement of fixed assets and accumulated loss by Rs. 43.30 lakh due to levy of depreciation {Schedule-19}.

Para No 15 (xxxiii) Old comment 15 (iii) for 2009-10 The necessary adjustment has been carried out by the ED, Division, Bhababagar during Fy 2011-12 accounts . Hence para may be dropped please.

(xxxi) cost of 9 number power transformers valuing Rs. 5.21 crore installed at various EHV sub-stations damaged during 2007-09 and were beyond repair. This resulted into understatement of accumulated loss by Rs. 5.08 crore and overstatement of depreciation Rs. 13.03 lakh {Schedule-19}.

Para No 15 (xxxiv) Old comment 15 (iii) for 2009-10 The reply is still awaited from thriot Const. Division, Pandoh

(xxxii) assets valuing Rs. 0.57 crore washed away (Rs. 50.10 lakh) damaged in Chirgaon in July 2005 and Rs. 7.16 lakh damaged in 2009-10 in Thalout and Katgaon) due to flash flood and were not in existence. Non provision there against resulted in overstatement of fixed assets and understatement of accumulated loss by Rs. 0.57 crore {Schedule-19}.

Para No 15 (xxxv) Old comment 15 (iii) for 2009-10 The reply is still awaited from thriot Const. Division, Pandoh

(xxxiii) cost of land measuring (113.06 & 149.04 Bighas) and buildings (residential/non-residential) at Sainj Hydro Electrical Project amounting to Rs. 12.93 crore transferred to M/s HPPCL/NHPC during 2009-10 as such these should have been shown recoverable from the undertakings. This resulted in overstatement of fixed assets by Rs. 12.93 crore and overstatement of accumulated loss by Rs. 46.02 lakh on account of levy of depreciation on Rs. 9.24 crore cost of building and understatement of receivables {Schedule-19}.

Para No 15 (xxxvi) Old comment 15 (iii) for 2009-10 The reply is still awaited from thriot Const. Division, Pandoh

(xxxiv) depreciated value of machine amounting to Rs. 21.28 lakh replaced at Andhra Power House. The replaced machine is unserviceable and required to be written off. This resulted in overstatement of assets

Para No 15 (xxxvii) Old comment 15 (iii) for 2009-10 The reply to this para it is submitted that value of

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and understatement of accumulated loss to the above extent {Schedule-19}.

unserviceable machine has been written off during FY 2010-11 by the RE, APHD, Chirgaon. Hence, para may be settled.

(xxxv) Rs. 0.55 crore being the cost of assets stolen from the various sites in seven units of the Board. The cost had not been adjusted in accounts resulted in overstatement of assets and understatement of accumulated loss to the above extent {Schedule-19}.

Para No 15 (xxxiii) Old comment 15 (iii) for 2009-10 The cost of assets stolen amounting to Rs.0.55 crore from the various sites in seven units of the Board has been write off after obtaining the approval of compentent authority. Hence, para may be dropped

(xxxvi) assets valuing Rs. 9.74 crore were created on the land which does not belong to the Board. This fact was neither disclosed by way of foot note under ibid schedule nor in Statement-5 Notes to Accounts/Balance Sheet {Schedule-19}.

Para No 15 (xxxix) Old comment 15 (iii) for 2009-10 The facts has been disclosed in HPSEBL FY 2012-13 accounts. Hence, para may be settled.

(xxxvii) expenditure of Rs. 0.56 crore incurred to released general service connection during 2008-10. This resulted in understatement of fixed assets and overstatement of capital work in progress to the above extent {Scehedule-19}.

Para No 15 (xl) Old comment 15 (iii) for 2009-10 Normally , the expenditure incurred to release the general service connection has been capitalized at the end of year. Some units has not closed the estimated at that time and the work remained unclosed. Now the same was closed in FY 2011-11 HPSEBL accounts and to fixed assets . Hence, para may be dropped.

(xxxviii) assets valuing Rs. 11.06 crore created (2009-10) out of material provident by the consumers and being maintained by the Board in three Circles. This resulted in understatement of fixed assets and consumer contribution by Rs. 11.06 {Schedule-19}.

Para No 15 (xli) Old comment 15 (iii) for 2009-10 The instruction to accounts for the material provided by the consumers has been issued in FY 2012-13 and all units of the HPSEBL has capitalized these amount as per estimate submitted for execution of works at that time. Hence, para may be dropped.

(xxxix) Rs. 2.01 crore being the cost of two 33 KV sub-stations and 33 KV line constructed at Radiana (June 2007) and Gaura (September 2007). This resulted in understatement of fixed assets and accumulated loss to the extent of Rs. 10.04 lakh {Schedule-19).

Para No 15 (xlii) Old comment 15 (iii) for 2009-10 The cost of two 33 KV sub-stations and 33 KV line constructed at Radiana (June 2007) and Gaura (September 2007 has now been capitalized . Henc, para may be settled.

(xl) Rs. 55.50 crore being the value of works completed and put to use during 2005-06 to 2008-09. This has resulted in understatement of fixed assets and overstatement of capital expenditure-in-progress to the above extent and understatement of depreciation and accumulated loss by Rs. 2.67 Crore {Schedule-21}.

Para No 15 (xliii) Old comment 15 (iii) for 2009-10 The scheme has been closed upto 2010-11 and value of works completed and put to use during 2005-06 to 2008-09 has been capitalized in FY 2011-12 after obtaining commissioning certificate. Hence, para may be settled.

(xli) Rs. 19.32 crore being interim payments released to contractors against turnkey contracts in three Circles. The said payments were required to be debited to contracts-in-progress. Thus, capital expenditure-in-progress was overstated and contracts in progress understated by Rs. 19.32 crore. The accumulated loss was also understated by Rs. 1.15 crore owing to levy of Departmental Charges on these works which in fact were to be levied on completion

Para No 15 (xliv) Old comment 15 (iii) for 2009-10 The reply to this para, it is submitted that Operation Circle, Bilaspur released interim payments of Rs. 3.39 crore to contractors against turnkey contracts under RGGVY. The said payments were required to be debited to contracts-in-progress and charged to work in

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of entire works {Schedule-21}. progress . Now the RGGVY schemes has been closed and final closer already submitted to authority. Hence, para may be settled

(xlii) Rs. 19.73 lakh spent on purchase of land measuring 74.30 bigha during the year 2002. Since the purchase deed in favour of the Board has not been executed so far as such this amount should have been shown as advance. Thus, fixed assets overstated and loans and advances understated by Rs. 19.73 lakh {Schedule-21).

Para No 15 (xlv) Old comment 15 (iii) for 2009-10 The purchase deed are now in the name of HPSEB. Hence, para may be settled.

(xliii) Rs. 0.76 crore being value of unserviceable vehicles, machinery and power transformers lying in five units. This resulted in overstatement of fixed assets and understatement of assets not in use to the above extent {Schedule-22}.

Para No 15 (xlvi) Old comment 15 (iii) for 2009-10 The value of 0.76 Lakh unserviceable vehicles, machinery and power transformer has not been written off during FY 2010-11 accounts . Hence, para may be settled.

(xliv) Rs. 27.10 crore incurred on “Survey/Feasibility studies of Projects” which have been finally awarded to private parties. The expenditure incurred thereon should have been shown as sundry receivables. This resulted in overstatement of Deferred cost and understatement of Sundry receivables by Rs. 27.10 crore {Schedule-23}.

Para No 15 (xlvii) Old comment 15 (iii) for 2009-10 The expenditure of survey/ feasibly of Projects” awarded to private parties have been withdrawn from deferred expenditure and shown Sundry receivable. Hence para may be settled.

(xlv) stock does not include scrap value of Rs. 45.30 lakh lying in operation Circle, Nahan (2009-10). This resulted in understatement of stock and overstatement of accumulated loss to that extent {Schedule-26(a)}.

Para No 15 (xlviii) Old comment 15 (iii) for 2009-10 The scrap value of Rs. 45.30 Lakh lying in operation Circle, Nahan has now been sale after making the codel formalities and adjustment have been made FY 2011-12 accounts. Hence, para may be settled.

(xlvi) Rs. 0.54 crore shown as receivable from three consumers on account f sale of power which was not recoverable as per the decision of the Hon’ble High Court but the amount had not been withdrawn. This resulted in overstatement of sundry receivable and understatement of accumulated loss to the above extent {Schedule-26(b)}.

Para No 15 (xlx) Old comment 15 (iii) for 2009-10 The amount has now been withdrawn by the Opertion Circle, Solan in FY 2012-13 accounts. Hence, para may be settled.

(xlvii) Rs. 11.81 lakh placed in the PLA of two JE’s by Executive Engineer Parwanoo on account of un-sanctioned works which resulted in overstatement of sundry receivable and understatement of accumulated loss to that extent {Schedule-26 (e)}.

Para No 15 (L) Old comment 15 (iii) for 2009-10 The amount of PLA of two JEs under ED, Parwanoo is still pending for wants of sanction of competent authority.

(xlvii) Rs. 21.70 lakh shown as advance to the suppliers between June 2005 and January 2008 for the purchase of vehicles. The vehicles were received between July 2005 and February 2008 but the amount had not been settled in the accounts {Schedule-26 (e)}.

Para No 15 (Li) Old comment 15 (iii) for 2009-10 The amount has been withdrawn form advance to supplier and debite fixed assets accounts of vehicles during 2011-12 . Hence, para may be settled.

(xlix) Rs. 15.74 lakh shown receivable from BMO, Sandhasu (Chirgaon) and Police Chowki (Bhabanagar) as rent of residential buildings for which non rent deed was executed. Both departments had also not confirmed the recovery. Thus, the sundry receivables

Para No 15 (lii) Old comment 15 (iii) for 2009-10 The reply to this para it is submitted that a sum of Rs. 7,53,752/- against BH 28.870 recoverable from BMO sandhsu wef 1.4.94 to 3/12 has been

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were overstated and accumulated loss was understated to the above extent {Schedule-26 (e)}.

withdrawn from the accounts and charged to revenue vide TEO No 5/2012 (iiird supplementary ) by the RE, ANPH, Chirgaon, As regards, recovery of Rs. 8,20,214/- has also been withdrawn by the RE, BPHD during 2nd supplemtary 3/2011 accounts,. Hence, para may be settled.

(L) Rs. 5.15 crore due to short provision on account of wheeling and other charges payable to power Grid Corporation of India Ltd. for wheeling of power during 2009-10. Against bill amount of Rs. 8.15 crore liability of only Rs. 3.00 crore had been provided in the accounts. This has resulted in understatement of other current liabilities and accumulated loss to the extent of Rs. 5.15 crore {Schedule-28}.

Para No 15 (liii) Old comment 15 (iii) for 2009-10 The reply to this para it is submitted that wheeling and other charges payable to power Grid Corporation of India Ltd. for wheeling of power during 2009-10 has been released during FY 2010-11 against prior period expense as per accounting policy of HPSEBL. Hence para be settled.

(Li) an amount of Rs. 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 is not recoverable from the consumer and had to be borne by the Board. This resulted in understatement of sundry receivables above and accumulated loss to that extent {Schedule-28}.

Para No 15 (liv) Old comment 15 (iii) for 2009-10 In this context, it is submitted that final revision of the estimates was under process for sanction in the office of Chief Engineer (ES) during the time of audit and later on it was sanctioned for Rs. 1066.01 Lacs . The issue was under consideration with high level and meeting was held with representative of M/s J.P. Associate on 29.12.2012 and they agreed to deposit the same. Now the complete payment has been made by the firm and amount of Rs. 112.51 Lac has also been disbursed to concerned contraoctor who had executed the said works and amount has capitalized during 2/2013 vide TEO No 3. Hence, para settled.

(Lii) Rs. 31.37 lakh payable to BHEL during November 2009 and March 2010 for major repair of unit I and II of Giri Hydro Electrical Project. Thus liability as well as fixed assets understated to that extent {Schedule-28}.

Para No 15 (lv) Old comment 15 (iii) for 2009-10 The provision of Rs. 31.37 lakh payable to BHEL during November 2009 and March 2010 for major repair of unit I and II of Giri Hydro Electrical Project has not been made in said accounts. The liability of this amount has neem the FY 2010-11 accounts and said liability had discharged in Company accounts during FY 2011-12. Hence, para may be settled.

(Liii) an amount of Rs. 87.25 crore on account of bills for revised fixed charges of Baspa Hydro Electrical Project raised by M/s Jai Prakesh Hydro Power Ltd. as per the directions of M/s HPERC (June 2010) which was also agreed by HPSEB and Ist installment of Rs. 40.00 crore was released in August 2010. The Board instead of keeping it as firm liability has kept it as contingent liability. This has resulted in understatement of Purchase of power as well as accumulated loss to that extent {Schedule-6}.

Para No 15( lvi) Old comment 15 (iii) for 2009-10 The payment of balance amount has been made during 2010-11 as per the direction of HPERC and entire payment has been made in prior period charges. Hence, the paras may be dropped.

(Liv) Rs. 3.33 crore being expenditure incurred on shifting works whereas as per paragraph-2.32, Annexure-III of Basic Accounting Principles and

Para No 15 (Lvii) Old comment 15 (iii) for 2009-10

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Policies of Commercial Accounting Manual Vol-I Part-I such expenditure was required to be charged to the revenue. Thus, this had resulted in overstatement of Capital expenditure-in-progress by Rs. 2.97 crore and fixed assets by Rs. 35.88 lakh as well as accumulated loss by Rs. 3.33 crore {Schedule-8}.

The this context, it is submitted that the said expenditure was incurred under deposit works of the various units for shifting of line but the lines routes/ type of lines and other inventory items have been changed during shifting works. It is further informed that while executed the above works the credit of dismantle materials have been given to CWIP and it increase the existing capacity of lines an networks. Hence, para may be dropped.

16. IMPACT OF THE COMMENTS If the net impact of comments on the accounts for the year is taken into account the deficit of Rs. 121.94 crore will increase to the extent of Rs. 226.62 crore. Accumulated deficit of Rs. 505.13 crore as on 13 June 2010 will increase to Rs. 803.87crore.

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C. GENERAL NOTES TO ACCOUNTS/BALANCE SHEET-STATEMENT-5

17. CONTINGENT LIABILITES 1. The following contingent liabilities have either been shown incorrectly or not disclosed in the notes to accounts: (i) disputed amount of Rs. 12.61 crore on account of Annual fixed charges for the energy supplied (2006-07 & 2007-08) by M/s Tehri Hydro Development Corporation Ltd.

Para No 25 (i) Audit memo No. 75 for 2008-09 Old comment 15 (iii) for 2009-10 The same was disclosed in Notes to accounts against Sr No.14 (w) in Company FY 2010-11 accounts. Hence para be settled

(ii) disputed amount of Rs. 35.08 crore payable to Uttaranchal Power Corporation Limited regarding difference of pooled generation cost of Yamuna share.

Para No25 (iii) Old comment 21(1)(i) for 2009-10 The liability of the amount related to Yamuna share bill is being worked out at provisional cost payable to UPCL taking into the consideration of facts. The plea of audit to provide liability at billed rates of UPCL is direct favour of the UPCL, which is not acceptable to HPSEB. However, the provisions at rate of 0.37 paisa/ KWH has already been made in the account on the basis of the order HPERC. Hence para settled.

(iii) Rs. 18.84 crore being the difference of rates of Shanan share sold to the Board by PSEB (April 2001 to March 2009).

Para No 25 (iv) Old comment 21 (1) (ii) for 20o7-08 for 18.84 crore It is intimated that HPSEB has 45 MU per annum fixed share in shaman extension project at generation cost as per agreement dated 28.8.1975. Similarly as per mandi Darbar agreement dated 3.3.1925 HP is getting 100 KW bulk supply share in Shanan Project at cost PSEB during the year 2005-06 has been raising the bills for 45 MU per annum share at the rate 57.81 per unit, but HPSEB has accepted these bills @ 20.63 paisa per unit at an earlier agreed provisional rate during discussion between PSEB vid this office let No. HPSEB/CE (Comm)/IS-2003/98-Vol II/12828

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dated 28-102002 (Copy enclosed). The generation cost of Shanan extension Project has not so far been finalized as such tentative liability of Rs. 0.77 crore has been worked out for the year 2005-06 and provided in the accounts considering the estimated generation cost as 40/ paisa / units, being very old project. Similarly, the bill for 1000 KW share in shaman Project raised by PSEB @ 382/U as per their bulk supply tariff and against the spirit of agreement and hence not being accepted by HPSEB, as the generation cost of Shanan Project has so far not been supplied by PSEB and finalized mutually, the tentative liability of Rs. 0.21 crore for the year 2005-06 has been provided by considering the estimated generation cost as 40/- paisa per Units. However, the same has now been cleared. Hence para may be settled.

(iv) loss due to demolition of power house and switch-yard costing Rs. 5.44 crore at Bhaba Augmentation Project, Katgaon in May 2002 has not been accounted for, for want of sanction of the competent authority.

Para No 25 (v) Old comment 2 (v) for 2009-10 The Bhaba Augmentation Projets, has now been commissioned in 2013 and cost has been charged to schemes. Hence, para be settled.

(v) Rs. 3.09 crore was paid to SSJJV Project Pvt. Ltd. during current financial period but still shown under contingent liability.

The same has been withdrawn in Company accounts. Hence para settled.

20. OUTSTANDING PERSISTENT IRREGULARITIES (i) assets registers have not been maintained and brought upto date in the field offices since 1985-86. This has been qualified in Statement-4 (Note-2) Reasons for non-maintenance/updating of fixed assets registers by the field units for such a long period were not mentioned. The audit could not vouch safe the particulars of fixed assets showing their life, original cost, date of acquisition, depreciation provided, their written down value and adequacy of provision of depreciation as shown in the Balance Sheet (Schedule-19) in the absence of fixed assets register. This is being pointed out since 1994-95.

Para No 26(a) for 2008-09 The necessary instructions vide this office letter No. 2070-2220 dated 5.9.2011 to complete the fixed assets registers has been issued to all the office. The contract of GPS/GIS based mapping valuating was awarded to various companies and report of the GIS/GPS are being evaluated at higher level. However, all out efforts are being made to update utility wise assets register of the HPSEBL.

(ii) physical verification of assets has not been carried out. This is being pointed out since 2003-04.

Para No 26 (b) for 2008-09 Maximum efforts are being made to get the physical verification carried out from the remaining units. All the field units have been directed by this office to get the physical verification of fixed assets in every year.

(iii) Consolidated statement showing year wise break-up of sundry debtors was not being maintained in the circle offices of the Board. Segregation of the amount as good, bad and doubtful debts was also not done. This is being pointed out since 2004-05.

Para No 26 (c) for 2008-09 Necessary directions have been imparted by this office to all the operation Circle to segregate the amount of sundry debtors as good, bad and doubtful as the case may be and submit the statement to the comp. section of this office.

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(iv) An amount of Rs. 5.57 lakh in respect of Electrical Maintenance Division, Bhabanagar is recoverable from various firms since 1989-90. This is being pointed out since 1994-95.

The amount of Rs. 5.57 Lakh has been settled/ adjusted in FY 2011-12 accounts. Hence para may be dropped.

(v) In respect of obsolete and unserviceable stocks where write off sanction/survey off action is awaited, no provision is being made for expected reduction in prices on actual sales. This is being commented since 2004-05.

Efforts are being made to early sanction / write off the obsolete and unserviceable stocks.

(vi) Closing balances (sub account code wise) from the previous years are not being carried over (Schedule 19 to 35) since long. This fact is being pointed out since 2008-09.

Now, as on 31.3.2010 on ward, the closing balance of previous year are being carried forward and are being updated as such computerized ledger are being maintained by the field Unit and H.O. In view of above the para may be settle please

(vii) There is no reliable method of providing for doubtful dues from the consumers. This has been provided at the rate of 1 per cent on the amount of permanent defaulters. The head office should provide for bad and doubtful debts based on age analysis sheets, which are not being called for in March accounts of each year from the field units. All outstanding dues which are more than three years old (except large and bulk supply consumers) and dues from large and Bulk supply consumers should be provided after taking in to account the status of court cases and time elapsed after disconnection etc. This is being pointed out since 2008-09.

The doubtful dues from the consumer are being kept every year 1% of total outstanding Bad & doubtful debtor. The full detail regarding outstanding sundry debtors are being collected from the operation circle to segregate the amount of sundry debtors as good, bad and doubtful as the case may be and submit the statement, therefore the proper provision can be provided during the CY please.

(viii) As per accepted Commercial Accounting Principles, acceptance of the amount shown recoverable from companies/corporation/Govt. Departments is required to be obtained at the end of each year from the concerned parties. However, such acceptance has not been obtained. In the absence of this, authenticity of amount shown recoverable could not be verified. This is being pointed out since 2005-06.

All the units has been directed to reconcile the recoverable amount from concerned parties. The reply/ compliance is still awaited from all field units.

(ix) Freehold land and leasehold land have not been shown separately in Schedule-19 of the Balance Sheet. This was also pointed out since 2008-09.

The land and lease hold land have not been shown separately in schedule -19 of the Balance sheet. However, the separate amount shall be provided after receipt of report of GIS/ GPS.

(x) Subsidiary ledgers were either not maintained in field units or where maintained the figures depicted therein do not tally with the figures shown in the accounts of those units. This is being pointed out since 2007-08.

The instructions in the regards have been issued to all the field Units vide this office letter No. 793-912 dated 6.6.2011 and the same has being maintained by all the field units.

Annexure-I 1. Adequacy of Internal Audit System Internal Audit is conducted by the Internal Audit wing of the Board under the control of Member (Finance). Against the sanctioned four audit works parties only tow work parties were deputed due to which 45 to 50 per cent units were covered under audit. The internal

There is effective control of internal audit in the Board which is being exercised accordingly.

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audit coverage is not adequate and needs to be strengthened, considering the size and nature of business of the Board. 2. Adequacy of Internal Control System: The Internal control system of the Board is not adequate and commensurate with the size and nature of business of the Board in respect of the following items of works: i) The service Tax of Rs. 9.81 lakh (2009-10) and Rs. 1.22 lakh (April 2010 to 13 June 2010) realized from the prospective consumers but neither deposited with the concerned authority nor shown under proper head (liability on account of service tax received/receivable

Para No 2 (i) Audit Memo No 12 for 2008-09 for Rs. 9.81 Lakh The entire service Tax amount has been deposited by the all the concerned field units during FY 2011-12 . Hence para may be settled

(ii) The credit balance of General Provident Fund as shown in the books of accounts was not reconciled as per records maintained at head office by the concerned wing at the end of current financial period.

Para No 2 (ii) Audit Memo No 31 (b) for 2008-09 The credit balance of General Provident Fund is being reconciled with the concerned field unit at the end of every financial year regularly.

(iii) In respect of four units the figures shown in subsidiary ledgers in some account heads do not tally with the figures depicted in the respective accounts in 2009-10.

Para No 2(iii) Audit Memo No 34 for 2008-09 Now all the four units have rectified the error in the figures shown in subsidiary ledger & figure depicted in the respective accounts during 9/2009. Hence the point may be dropped.

(iv) Other current liabilities include an amount of Rs. 32.56 lakh on account of security deposits and earnest/retention money recovered from the suppliers/contractors. The balances under these heads have not been reconciled and lying for clearance/adjustments for more than 3 years to 16 years upto 2009-10.

Para No 2 (iv) Audit Memo No 50 for 2008-09 for 32.56 Lakh All the accounting units have been directed vide letter No.793-912 dated 6.6.2011to reconcile the Balances under head security deposits and earnest/ retention money received by them. Instructions have already been issued to all that if there is any balance after a period of five years in the above head of a/c the same may be credited to the revenue accounts please.

(v) There were huge balances of Rs. 238.18 crore during 2009-10 and 3.18 crore due to stock transfer during current financial period in inter unit accounts. The same were on account of casual approach towards its clearance, non-fixation of specific time limits within which the IUT advices should be raised/responded and non convening of joint meetings at circle/head office levels at least twice in a year, thus vitiating the results shown in the annual accounts.

Para No 2 (v) Audit Memo No 58 for 2008-09 for Rs. 79.70 Crore At the end of 13.6.2010 maximum of amount under IUT has been adjusted and got cleared and an amount of Rs. Outstanding for want of clearance. All out efforts are being made to clear the Balances under head IUT. In view of above para may be dropped please.

(vi) There was no lease hold land under one unit. However, Rs. 19.86 lakh was shown incurred on development of lease hold land in one unit in 2009-10.

Para No 2 (vi) Audit Memo No 29 (d) for 2008-09 for Rs. 19.86 Lakh The necessary correction has been made and this amount has been charged to revenue accounts during Fy 2011-12. Hence para settled.

(vii) Land measuring 4837.86 Sq. yard was acquired on 99 years lease for Rs. 0.90 lakh from the Bhakra Beas Management Board by one unit. However, in accounts

Para No 2 (vii) Audit Memo No 12 for 2008-09 for Rs. 0.90 Lakh

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it was shown under free hold (full title). Thus, land owned under full title was overstated and land held under lease understated by Rs. 0.90 lakh in 2009-10.

The necessary adjustment has been made by XEN Elect. Division, Gohar in FY 2010-11 Company accounts. Hence para settled.

(viii) Un-reconciled difference of Rs. 0.60 crore exists under “Amount invested in the Banks under Short term fixed deposit out of funds received against ASIDE-Rs. 28.00 lakh” and “Interest accrued and due on Government loans-Rs. 32 lakh” between the figure shown in the balance sheet and as per ledgers in 2009-10.

Para No 2 (viii) Ann-I2 (III) 2007-08 for Rs. O.60 crore The figure has now been reconciled with the XEN T&C Division, Bhabanagar. Hence the point may be dropped.

(ix) Un-reconciled difference of Rs. 2.66 crore on account of sale of power to Uttar Pradesh Power Corporation Ltd. between ledger account and account maintained by the State Load Dispatch and Communication Centre of the Board in 2009-10.

Para No 2 (ixAnnex-I 2 (vii) for 2008-09 for 2.66 crore The necessary reconciliation has now been done by the SL&D Section of this office during FY 2011-12. Hence para be settled.

(x) Capital expenditure in progress includes Rs. 10.35 crore in 2009-10 being credit balances advances to suppliers/contractors which have not reconciled.

Para No 2 (x) Ann-I 2(vv) for 2007-08 for Rs. 1.35 crore The offices to which para pertains have been closed and transferred to M/s HPPCL. However, replies to the audit observation are being collected from the XEN, Arb & Mtc. Division, Thallout to whom records have been handed over by the transfer units (CE (Gen), Sundernagar).

(xi) Rs. 82.93 crore being the amount of expenses pending for allocation carried forward from previous years under account code 15.2. This code is a transitory head and is meant for revenue expenses incurred on capital works to be transferred to CWIP in the same year. It appears that balances being carried forward under this head might pertain to closed schemes/works which should have been charged to the profit and loss account. In absence of details, such balances could not be ascertained.

Para No 2 (xi) Ann-I 2(xi) for 2007-08 for Rs. 72.96 crore It is intimated that Rs. 82.93 crore has been calculated as interest to be capitalized by the field units during 2009-10 as per our accounting policy. The amount of expenses pending for allocation pertains to the year 2008-09 as worked by Head Office and this amount has been charged to various Capital works by the field units during the Fy 2009-10 . Hence para may be dropped please.

(xii) An amount of Rs. 2.93 crore on account of supply of material received and payments released between July 1990 to February 2007. However, the same was lying unadjusted due to non-reconciliation.

Para No 2 (xii) Ann-I Audit memo57 for 2007-08 The same has now been reconciled and settled.

(xiii) Equity from the State Govt. {Schedule-33(a)} includes an amount of Rs. 301.26 crore invested by the H.P. Govt. in five Hydel Projects of the Board. However, share certificates to this effect were not issued by the Board.

Para No 2 (xii) Ann-I No 2 for 2007-08 for Rs. 2.93crore The same has been settled.

(xiv) Land valuing Rs. 9.78 lakh purchased (April 1989) for construction of a 33 KV sub-station includes IDC of Rs. 7.77 lakh capitalized to delay in capitalization for the period form 1989 to 2000.

The excess IDC has been withdrawn by Sr XEN Electrical Division, Kullu during FY 2011-12. Hence, para settled.

(xv) Rs. 14.46 crore depicted as investment in shares of Shongtong HEP, however, HPPCL accepted only Rs. 8.81 crore. The difference of Rs. 5.65 crore was not reconciled.

The reconciliation has been finalized with HPPCL and the same has been settled . Hence para dropped.

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(xvi) Material valuing Rs. 3.50 crore issued (June 2008) for use on installation of computers, allied equipments including billing software etc. Thus , the stock was overstated and CWIP understated to that extent.

The final settled has been done by the units. Hence the para may be dropped.

(xvii) Unserviceable/obsolete stock items of Rs. 9.13 lakh in two units condemned by the committee but awaiting auction have not been shown in the schedule under proper head of account in 2009-10.

The Unserviceable/ obsolete stock item of Rs. 9.19 of both Units i.e Electrical Division, Mandi & ED, Jogindenagar condemned by the committee have been auctioned. Hence the point may be dropped.

(xviii) Excess value of land in accounts as compared to value in fixed assets register amounting to Rs. 9.22 lakh.

The books of accounts have been rectified by the unit. Hence para settled.

(xix) land measuring 3.06.74 hectares at Mahal (Chirgaon) was in the name of the HP Govt. but was in the possession of HPSEB.

The necessary disclosure of the same will be recorded under or statement No. 5 in the next Annual Account of the Board/ Company.

(xx) un-reconciled amount of Rs. 13.73 lakh in the books of Elect. Division, Rajgarh outstanding in Account Head 43.1 for supply of Material.

The balance has been reconciled during 2011-12 by Electrical Division, Rajgarh.

(xxi) Liability amount of Rs. 50.01 lakh outstanding in the books of RE, Gaj since 1994 to 1999.

The reconciliation has been done by the Units. Hence para may be settled

(xxii) Rs. 31.56 crore billed to four industrial consumers by Operation Circle, Solan. The consumer had filed suits and recovery had been stopped.

The consumer petition has been disposed off and consumers accounts has been settled.

(xxiii) Rs. 11.31 lakh cost of buildings at Chari constructed at land of Defense authorities. Board had decided to hand over the land and buildings in September 2009.

The value of land has been withdrawn from books of accouts in FY 2011-12 Hence para be settled.

(xxiv) Expenditure of Rs. 5.40 crore incurred by R.E. Bhaba and R.E. Khauli on the investigation of Kasang and Uhl-III Hydro Electrical Project handed over to M/s HPPSCL and BVPCL, respectively.

The reconciliation with both parties has been done & accounts settled.

(xxv) An amount of Rs. 1.64 crore shown as receivable from other departments/contractors since 1989 to 2007, but no correspondence has been made during the last three years.

The recover the amount from Govt. Departments/ contractors has been settled. Hence para dropped.

(xxvi) Cost of land valuing Rs. 18.12 lakh purchased from the HP Govt. and the title of land had not been transferred in the name of the Board.

The efforts are being made to make full title of land in the name of HPSEBL by the concerned field units.

(xxvii) Rs. 0.81 crore being excess withdrawal from staff benevolent fund which has been met from the Board’s fund.

The excess withdrawn of Rs. 0.81 crore from staff Benevolent fund had been regularized during FY 2010-11 by meeting matching grants after obtaining the approval of competent authority. Hence para may be settled.

If Internal Audit System and Internal Control/check System were adequate, such irregularities could have been avoided.

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REPLIES TO COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF HIMACHAL PRADESH STATE ELECTRICITY BOARD LIMITED FOR THE YEAR 31ST MARCH, 2013

Audit para /CAG Comments Management Reply The preparation of financial statements of Himachal Pradesh State Electricity Board Limited for the year ended 31st March, 2013 in accordance with the financial reporting framework prescribed under the Companies Act, 1956 is the responsibility of the management of the Company. The Statutory Auditors appointed by the Comptroller and Auditor General of India under Section 619 (2) of the Companies Act, 1956 are responsible for expressing opinion on these financial statements under Section 227 of the Companies Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed by their professional body, the institute of Chartered Accountants of India. This is stated to have been done by them vide their Audit Report dated 22 October, 2014. I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under Section 619 (3) (b) of the Companies Act, 1956 of the financial statements of Himachal Pradesh State Electricity Board Limited for the year ended 31 March 2013. This supplementary audit has been carried out independently without access to the working papers of the Statutory Auditors and is limited primarily to inquiries of the Statutory Auditors and company personnel and a selective examination of some of the accounting records Based on my supplementary audit, I would like to highlight the following significant matters under Section 619 (4) of the Companies Act, 1956 which have come to my attention and which in my view are necessary for enabling a better understanding of the financial statements and the related Audit Report. 1. Balance Sheet Current Liabilities Other Current Liabilities (Note-2.9) Rs. 1617.37 crore. The Government of Himachal Pradesh vide Notification No. MPP-F(1)-2/2005-V Dated 30-11-

The payments to the GoHP on account of Free Power have been released through M/S PTC India Ltd. and Local Area Development Fund (LADF) additional charges are neither mentioned in the bill by the M/S PTC nor claimed by the State Govt. Therefore, the LADF charges have not been release to PTC by the Company. The issue has been taken up with Director (Energy), Govt. of H.P. and he informed that some

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2009 prescribed one percent power generated from Hydel Power Projects in the State towards Local Area Development Fund (LADF), payable to the State. The Company did not make provision of one percent power generated by its five Hydel Projects amounting to Rs. 8.14 crore from December, 2009 to March 2013. This has resulted in understatement of other current Liabilities as well as Loss by Rs. 8.14 crore. The qualification made by the Statutory Auditors did not contain the amount.

IPPs have filed petition with HPERC/ Hon’ble court to withdraw the LADF charges. The matter is still subjdices and they are not charging the same in bills. The Company is liable to make a provision equivalent to the 1% of free power generated from Hydel Power Projects in the State towards Local Area Development Fund (LADF) as per Notification No. MPP-F(1)-2/2005-V Dated 30-11-2009 but the matter is subjudices and provisioning of above cannot be made in accounts till date. Therefore, we had shown Rs. 7.81 crore contingent liability on accounts of LADF charges payable to GoHP upto March, 2013 in notes to Accounts. Hence, Para may be dropped.

2. Other Current Liabilities (Note No. 2.9) Amount payable to GoHP/ Other Departments Rs. 429.37 crore. The above is understated by Rs. 33.71 crore due to non provision for the liability towards delayed payment surcharge on account of power purchase from Power Trading Corporation. This has also resulted in understatement of loss by Rs. 33.71 crore.

In reply to this Para, it is submitted that due to the unfavorable financial position, HPSEBL not position to release the payments of power purchase on scheduled dates. The issue is under consideration with State Govt. and requested to adjust the same with receivable/ payable to Govt. So as per the provision in the PPA the surcharge are payable to the parties, the surcharge on late payment for FY 2012-13 has been worked out which become Rs. 36,26,78,755/- and provision of Rs. 2,55,41,453/- had made in FY 2012-13 accounts. The provision of remaining amount Rs. 33, 71, 37,302/- has been made in FY 2013-14 annual accounts. Hence, Para stands settled.

3. Long Term Borrowing (Note No. 2.4) Unsecured-Others Rs. 27.51 crore. The above includes Rs. 19.11 crore being loan from Government converted into equity in term of State Government’s approval conveyed by the Principal Secretary (Power) to the Government of Himachal Pradesh and to the Company vide letter dated 29-01-2014. This should have been disclosed by way of Notes to the Accounts attached to the Balance Sheet.

The suggested discloser i.e conversion of Rs. 19.11 crore of Loan into equity will be incorporated in “Notes to Accounts” at the time of printing of Balance Sheet of the Company. Hence, Para stands settled.

4. Impact of Comments As a result of audit comments current year loss of Rs. 340.28 crore has been understated by Rs. 41.85 crore. In case these adjustments are carried out accumulated loss would amount to Rs. 1780.48 crore against depicted figure of Rs. 1738.63 crore.

No comments

Sd/- Chief Accounts Officer, Place: Shimla F&A Wing, HPSEBL, Shimla-4 Date:

4th annual report for the year 2012-13

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