Auditors red-flag SAIL accounting procedure for Rourkela plant

Updated: Aug 13 2014, 07:06am hrs
Auditors have red flagged SAIL's accounting procedure relating to its Rourkela 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 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 R104.92 crore and R28.74 crore, respectively, resulting in overstatement of profit by R133.66 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 R2,616.48 net profit in 2013-14, up from R2,170.35 crore recorded in previous fiscal. The rise, according to a senior steel ministry official, was mainly because of a R1,056-crore exceptional gain from Vale towards damages due to non-supply of full quantity of contracted hard coking coal.

SAIL had reported R3,542.72 crore 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.