Auditors red flag SAIL accounting procedure for Rourkela plant

In their report they have said that depreciation and interest has been short provided by Rs 104.92 crore and Rs 28.74 crore respectively

Auditors have red flagged SAIL's accounting procedure relating to its Rourkela Steel Plant alleging that this has led to the state-run steel maker overstating profits by Rs 133.66 crore last fiscal, a charge strongly refuted by the firm.

In a note with first quarter (April-June) results, SAIL said auditors in their report for the year ended March 31, 2014 have brought out that "in respect of Rourkela Steel Plant, depreciation and interest has been short provided by Rs 104.92 crore and Rs 28.74 crore respectively, resulting in overstatement of profit by Rs 133.66 crore and fixed assets by similar amount."

SAIL, however, said as part of its modernisation and expansion plan/other capital schemes in RSP, the assets have been capitalised after installation, trial run, removal of all defects, issue of acceptance certificate and having become ready for commercial production during 2013-14.

"The capitalisation has been done in accordance with applicable accounting standards and generally accepted accounting principles. Therefore, there is no under-statement of deprecation and interest and overstatement of profit and fixed assets," it said.

SAIL had reported Rs 2,616.48 net profit in 2013-14, up from Rs 2,170.35 crore recorded in previous fiscal. The rise, according to a senior Steel Ministry official, was mainly because of a Rs 1,056 crore exceptional gain from Vale towards damages due to non-supply of full quantity of contracted hard coking coal.

SAIL had reported Rs 3,542.72 net profit in 2011-12.

The Steel Ministry would soon appoint a globally-renowned consultancy agency to carry out a "diagnostic study" for enhancing the performance and profitability of SAIL.

The auditors also said the company did not provide for entry tax worth Rs 91.55 crore for Uttar Pradesh, Rs 1,071.28 crore for Chhattisgarh and Rs 214.81 crore in Odisha last fiscal.

The company has also not provided for claims worth Rs 291.76 crore by Damodar Valley Corporation (DVC) for supply of power.

"... The company's views are that these cases are sub-judice and pending for adjudication before the Supreme Court. The disputed demands, contested on valid and bona-fide grounds, have been disclosed as contingent liabilities as it is not probable that present obligations exist as on March 31, 2014," SAIL said.

"Therefore, there is no adverse impact on profit. These cases were sub-judice as on March 31, 2012 and 2013 also and there is no change in the status of these cases till date," it added.