Ispat Bhawan, Lodi Road, New Delhi - 110 003www.sail.co.in

ANNUAL REPORT 2007-08

Strengthening India. Touching Lives.

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Highlights 2007-08 5

Awards & Accolades 6

Board of Directors 8

Directors' Report 10

Management Discussion and Analysis Report 20

Ten Years at a Glance 28

Annual Accounts 32

Cash Flow Statement 34

Schedules 36

Auditors' Report 68

Comments of C&AG 73

Corporate Governance 81

Corporate Governance Certificate 84

Consolidated Financial Statements 86

Maharashtra Elektrosmelt Limited (MEL) 111Subsidiary Company

Principal Executives 138

Notice 139

Scheme of Amalgamation 143

Proxy 151

Contents

Today, our country is on a high growth path and

needs more steel to build its infrastructure and strengthen

its manufacturing base. We, in SAIL, are in the process of

modernising & expanding all our steel plants & mines

and are well poised to play a vital role

in a growing economy of the country.

As a responsible corporate citizen, SAIL,

since its inception, is strengthening India. We at SAIL

are proud of touching the lives of millions of people and

making a meaningful difference in their lives.

ANNUAL REPORT 2007-08

Strengthening India. Touching Lives.

Plant on 4th February, 1959. Subsequently, the first including key sectors like defence, railways, oil & gas, blast furnace of Durgapur Steel Plant was dedicated construction, power and shipping. In addition to to the nation on 26th December, 1959. These events contributing significantly to India's economic growth, marked the beginning of steel plant operations in the

SAIL has also transformed remote and underdeveloped public sector in independent India, thus laying the

areas around its steel plants, mines and other units industrial base for the country.into vibrant mini-Indias.

HSL's reincarnation as Steel Authority of India Limited (SAIL) in 1973 symbolised a young nation's SAIL marches ahead in its quest to maintain market belief in its strengths and capabilities to propel India leadership in the Indian steel business. The into the future. The newly-formed Bokaro Steel

organisation is poised to make its mark globally in Limited came into the SAIL fold along with other

the years to come with the implementation of state-companies associated with the steel industry. Over

of-the-art clean and green technologies as part of its the years, the SAIL family has grown to a turnover of modernisation & expansion plans to increase its over Rs. 45,000 crore company with the addition of

three special steel plants; the country's one of the capacity to over 26 million tonnes by 2011 and 60 largest mining network, state-of-the-art R&D centre million tonnes by 2020.and a pan-Indian marketing network. The country's oldest iron making company, IISCO, is also now a

As we celebrate 50th year of production, we salute part of the expanding SAIL family.

the vision, grit and determination of the numerous

steel men who continue to add "a little bit of SAIL in SAIL steel has, over the last half a century, been the everybody's life".sinews of the nation's infrastructure development,

To realise Pandit Nehru's grand vision of an It is a moment of great happiness and pride for SAIL to celebrate its 50th year of production from February, industrially self-reliant India, the Government of 2008. It was on 3rd February, 1959 that the then India had set up Hindustan Steel Limited (HSL) to President of India, Dr. Rajendra Prasad had develop and manage steel plants in the public sector. dedicated the first blast furnace of erstwhile HSL's A modest beginning was made with commissioning Rourkela Steel Plant to the nation, followed by the

of three 1 million tonne steel plants each at Rourkela, dedication of the first blast furnace of Bhilai Steel

Bhilai and Durgapur in 1959.

1954: The sleepy pastoral village of Bhilai in Madhya Pradesh before its transformation into a pulsating giant

The Golden Era50th year of production

2008: Bhilai Steel Plant forms the backdrop of a modern township

> Best ever turnover at Rs. 45,555 crore, up by 16%

> Best ever EBIDTA at Rs. 12,955 crore, up by 15%

> Best ever Profit before Tax at Rs. 11,469 crore, up by 22%

> Best ever Profit after Tax at Rs. 7,537 crore, up by 22%

> Highest ever Dividend of 37%, up by 19%

> Highest ever Hot Metal, Crude Steel and Saleable Steel production crossing

15 million tonnes, 14 million tonnes and 13 million tonnes respectively

> Highest ever sales of 12.3 million tonnes, up by 4%

> Lowest ever energy consumption at 6.95 G.Cal / TCS achieved

> Continued improvement in debt-equity ratio from 0.24:1 as on 31st March,

2007 to 0.13:1 as on 31st March, 2008

> Marketing Dealers Network expanded to all districts of the country

2007-08Highlights

We build lasting relationships with customers based on trust and mutual benefit.

We uphold highest ethical standards in conduct of our business.

We create and nurture a culture that supports flexibility, learning and is proactive to change.

We chart a challenging career for employees with opportunities for advancement and rewards.

We value the opportunity and responsibility to make a meaningful difference in people’s lives.

To be a respected world-class corporation

and the leader in Indian steel business in

quality, productivity, profitability and

customer satisfaction.

Vision

Credo

54

Performance of SAIL has been widely recognized by all stakeholders including leading financial institutions / rating agencies and industry bodies, winning several awards/ accolades in various fields during the financial year 2007-08. Some of the major awards are:

/ FICCI Annual Award 2006-07 to SAIL for its outstanding achievement in the category of Rural & Community Development Initiatives.

/ The Gold Trophy of the prestigious SCOPE Award to SAIL for Excellence and Outstanding Contributions to the Public Sector Management for the year 2006-07.

/ Corporate Social Responsibility Award for its significant contributions in this field, by Ministry of Rural Development, Govt. of India during the National Conference of Youth Hostels Association (YHAI).

/ Employer Branding Award 2007-08 to SAIL under the category "Best HR strategy in line with business" at the Asia Pacific Human Resource Management Congress.

/ The prestigious CNBC-TV18 Employers of Choice Award 2007 to SAIL in PSU category.

/ Vishwakarma Rashtriya Puraskar-2006 to 51 SAIL employees. SAIL bagged 12 out of 28 for their innovative suggestions leading to cost reduction, higher productivity, import substitution and improved efficiency of the organisation. Out of the twelve groups 7 are from Bhilai Steel Plant, 4 from Rourkela Steel Plant and 1 from Bokaro Steel Plant.

/ SAIL has been selected as Business Superbrand 2008 and falls within the top 5% of all brands across all segments and all categories.

/ ICWAI National Award for Excellence in Cost Management-2007 to SAIL in the category "Public Sector Manufacturing (Organisation)" for the 3rd time for its cost management efforts since the inception of the award in 2003.

/ 1st rank to SAIL for Largest & Most Profitable Steel Company (Public Sector) at Construction World (NICMAR) Awards 2007.

/ Dun & Bradstreet's American Express Award 2007 to SAIL as the Top Indian Company in the Iron & Steel Sector.

/ The Good Green Governance (G-Cube) Award 2007 to SAIL at Peace with Earth in the large scale manufacturing category towards greening the environment .

/ Runner-up Trophy to SAIL in the Category of Most Innovative Industry Resource in the Corporate University Best in Class (CUBIC) Award 2007 presented in Florida, USA.

/ The Special Award (Top amongst all the categories) to SAIL pavilion at Udyog Mela in Ranchi from Jharkhand Govt. and Second Prize at Bhartiya Vigyan Sammelan & Expo-2007 from Govt. of MP, Vigyan Bharti, MP Council of Science & Technology.

/ Golden Peacock Award 2007 to BSP for Corporate Social Responsibility during the 3rd Global Conference of Social Responsibility at Vilamoura, Portugal.

/ Golden Peacock Innovation Award 2007 to RSP for the 3rd year in succession for its efforts in the innovative technologies adopted in the field of environment protection by Institute of Directors/ World Environment Council.

/ Golden Peacock Innovative Products/ Service Award 2007 from the Institute of Directors (IOD) to RDCIS for excellence in development of innovative value-added products.

/ State Govt. Exemplary Worker Award for 2005 to five employees of SSP for their valuable suggestions for the improvement in safety standards, working environment and productivity.

/ Nine National Safety Awards to BSP. Five Awards to three Mines of RMD - 2 awards to Kiriburu Iron Ore Mine for the Longest Accident Free Period (LAFP) consecutively for the year 2004 and 2005, 2 awards to Kalta Iron Mine for Lowest Injury Frequency Rate (LIFR) consecutively for the year 2005 and 2006, and in the same category 1 award to Kuteshwar Limestone Mine for the year 2005.

/ Ispat Suraksha Puraskar to SSP at Annual Safety Awards at Visakhapatnam for its efforts in instilling a sense of safety, health and cleaner work environment.

/ National Sustainability Award for the year 2007 to SSP from the Ferrous Division of Indian Institute of Metals for the 4th consecutive time and for the 11th time since inception of the award.

/ The second prize of National Sustainability Award in the Integrated Steel Plant category to RSP from Indian Institute of Metals.

/ National Gold Award to RSP for e-governance from Department of Administrative Reforms and Public Grievances along with the Department of IT, Govt. of India.

/ Greentech Environment Excellence Gold Award to RSP for 4th consecutive year for achieving excellence in Environment Management in the year 2006-07.

/ Certificate of Merit in the integrated steel plants sector for the National Energy Conservation Award 2007, instituted by the Ministry of Power, Government of India to RSP for achieving significant success in improving the performance of the steel plant on the energy conservation front.

/ Gold Medal to RSP's The Rising Sun Quality Circle from Plate Mill & Bronze Medal to ASP's Flip-Flop QC Team (EED, SMS & CCS) in the International Convention on Quality Control Circle 2007 held at Beijing, Federal Republic of China.

/ The prestigious Rajiv Gandhi National Quality Award 2007 to BSL. Plant received the coveted “Best of all awards for achieving excellence of the highest order among all participants”.

/ International Quality Summit Award 2007 in the Gold Category to ASP from Business Initiative Directions (BID) for Excellence & Business Prestige at the Quality Summit in New York, USA.

/ Quality Circles Awards - 8 Par Excellence awards, 13 Excellent awards and 3 Distinguished awards to BSP, 4 Par Excellence awards & 1 Excellent award to SSP, and RMD's BOM team adjudged at Par Excellence and Gua team at Par Distinguished in the 21st National Convention on Quality Circles at Kolkata.

/ Dr. M. Visvesvaraya Memorial Gold Medal to a six member team of engineers from RDCIS for their paper titled “New challenges in project management for Indian Steel Industry” during the 22nd Indian Engineering Congress.

/ First prize for promoting the usage of Hindi in the official work to SAIL from Town Official Language Implementation Committee (PSUs-Delhi) constituted by Govt. of India. 2 first prizes for best in-house hindi magazine to Ispat Bhasha Bharti - one at national level from GOI, Ministry of Home Affairs and second from TOLIC-Delhi.

/ Silver Award in the tabloid category & a Bronze for the Indian Language Category to Ispat Sambad, the fortnightly in-house journal of DSP at the 47th Annual Awards of Association of Business Communicators of India (ABCI).

/ The Champions Trophy in the Junior National Hockey Championship for the second year in succession to SAIL Hockey Academy Team of RSP. The Academy Team also bagged Second Prize in the Late S.S. Tomar Memorial All India Hockey Tournament.

Awards & Accolades

76

Shri B. S. Meena

Shri Shyamal Ghosh

Chairman

Functional Directors

Managing Directors

Government Directors

Independent Directors

Secretary

Shri S.K. Roongta

PersonnelShri G. Ojha

FinanceShri Soiles Bhattacharya

CommercialShri S.S. Ahmed

TechnicalShri V.K. Gulhati

Durgapur Steel PlantShri V. Shyamsundar

Rourkela Steel PlantShri B.N. Singh

Bokaro Steel PlantShri V.K. Srivastava

Bhilai Steel PlantShri R. Ramaraju

IISCO Steel PlantShri S.P. Rao

Shri B.S. MeenaAdditional Secretary & Financial AdviserMinistry of Steel, Government of India

Shri G. EliasJoint SecretaryMinistry of Steel, Government of India

Dr. S.C. Jain

Prof. R.P. Sengupta

Dr. Velu Annamalai

Shri Siddharth Kak

Shri Shyamal Ghosh

Shri Mohammad Yusuf Khan

Prof. Deepak Nayyar

Prof. Javaid Akhtar

Shri P.K. Sengupta

Dr. Vinayshil Gautam

Shri Devinder Kumar

Board of Directors

Bankers

Statutory Auditors

Registered Office

+ State Bank of India

+ Punjab National Bank

+ Canara Bank

+ Bank of Baroda

+ United Bank of India

+ Bank of India

+ Union Bank of India

+ Oriental Bank of Commerce

+ Allahabad Bank

+ Bank of Maharashtra

+ UCO Bank

+ Central Bank of India

+ State Bank of Patiala

+ Indian Overseas Bank

+ Syndicate Bank

+ Punjab & Sind Bank

+ Jammu & Kashmir Bank

+ State Bank of Hyderabad

+ State Bank of Saurashtra

+ State Bank of Bikaner & Jaipur

+ State Bank of Indore

+ State Bank of Mysore

+ IDBI Bank

+ HDFC Bank

+ Yes Bank

+ Corporation Bank

M/s. Ray & RayChartered Accountants

M/s. Dass Maulik Mahendra K. Agrawala & Co.Chartered Accountants

M/s. T.R. Chadha & Co.Chartered Accountants

Ispat Bhawan, Lodi Road, New Delhi-110003Phone: 24367481; Fax- 24367015Gram: STEELINDA

Internet: www.sail.co.in

E.Mail: secy.sail@sailex.com

Board of Directors

Shri V. K. GulhatiShri S. S. AhmedShri BhattacharyaSoiles

Shri G. OjhaShri V. K. Srivastava

Shri S.K. Roongta

Shri B. N. Singh

Shri S.P. RaoShri R. Ramaraju

Shri V. Shyamsundar

Prof. Deepak Nayyar

Dr. Velu Annamalai

Dr. Vinayshil Gautam

Shri G. Elias

Shri P. K. SenguptaProf. Javaid Akhtar

Prof. R. P. SenguptaDr. S. C. Jain Shri Siddharth Kak

Shri M. Y. Khan

98

To, 1959 that the then President of India, Dr. Rajendra Prasad had

dedicated the first blast furnace of erstwhile Hindustan Steel The Members,Limited at Rourkela Steel Plant to the nation, followed by the The Directors have pleasure in presenting the 36th Annual Report dedication of the first blast furnace of Bhilai Steel on 4th February, of your Company together with the audited accounts for the year 1959. These events marked the beginning of steel plant ended 31st March, 2008.operations in the public sector in independent India, thus laying The financial year 2007-08 has been a historical year for the the industrial foundation for the country as envisioned by our first Company, being an year for commemorating its Golden Jubilee

year of iron making from February, 2008. It was on 3rd February, Prime Minister, Pandit Jawaharlal Nehru.

FINANCIAL REVIEW

PRODUCTION REVIEW

The financial year 2007-08 has been another milestone year of achievement for your Company with an overall improvement in operational areas and financial performance. For the first time production of hot metal, crude steel and saleable steel crossed the 15 MT, 14 MT & 13 MT mark respectively during the year. The year saw further progress and strengthening in the areas of modernisation & expansion of SAIL plants, increase in the net worth of the Company and higher internal resource generation for funding the growth plan of SAIL. Your Company set a new record by achieving the turnover of Rs. 45,555 crore and profit before tax of Rs. 11,469 crore, registering a growth of 16% and 22% respectively over the previous year. Your Company recorded a net profit after tax (PAT) of Rs. 7,537 crore, an increase of 22% over previous year. There were improvements in all financial parameters as shown below:

considering borrowings of Rs. 3,045 crore maintained its virtual debt free status. The interest cost at Rs. 251 crore was lower by Rs. 81 crore over the previous year and the Company earned interest of Rs. 1,105 crore during the year on short term deposits. The entire capital expenditure of Rs. 2,181 crore during the year was funded through internal accruals.

During the previous year, your Company had constituted a Gratuity Trust under the name “Steel Authority of India Limited Gratuity Fund”. An amount of Rs. 1,250 crore has been contributed to this trust during the year 2007-08 making a cumulative contribution of Rs. 2,000 crore. This measure will secure gratuity payment to the employees.

The Company has paid an interim dividend of 19% on the paid-up equity share capital during the year. The Board of Directors have further recommended a final dividend of 18% on paid up equity share capital subject to the approval of the shareholders, thus making the total dividend to 37% of the paid up equity share capital for the year 2007-08 (previous year 31%). A sum of Rs.770 crore has been transferred to the general reserves during the year for this purpose (previous year Rs.635 crore).

The year 2007-08 turned out to be another eventful year for SAIL in production and operational efficiencies. SAIL plants achieved

While an improved demand for iron & steel helped in recording all time best production performance by better input and logistics better financial performance, significant improvements also came management, optimising operations and better value addition. by way of several internal initiatives viz., higher capacity utilisation

SAIL plants recorded the highest ever hot metal production of 15.2 at 118%, record production through continuous cast route, best million tonnes, achieving a capacity utilisation of 110% with a ever performance in key techno-economic parameters like overall growth in production by 4% over the previous year. The increase in energy consumption and coke rate, highest production and sales hot metal production of more than half a million tonne during the of value added products, continuous emphasis on cost reduction year, was achieved by implementing process improvements, like and prudent fund management.introduction of mobile equipment for cast house preparation job at

Impetus on cost reduction at all levels, productivity improvements BSP, installation of rocking runner in the cast house of BF#3 in through benchmarking, proper utilization of in-house R&D single track, increased oxygen enrichment at RSP and higher services and application of new technology resulted in cost furnace availability at BSL. Further, higher usage of auxiliary fuels savings of Rs.328 crore during the year. Thrust areas during the and optimum utilisation of resources helped SAIL plants to year included achieving higher yields and improved techno- produce more than capacity.economic/productivity parameters.

Highest ever crude steel production of about 14.0 million tonnes The strong financial performance continued in 2007-08 by SAIL plants was achieved with capacity utilisation of 109%. contributing to an enhanced cash generation to meet the strategic This was achieved through focused approach and maximisation growth objectives. Debt equity ratio has improved to 0.13: 1 (as on of production through concast route, increase in hot metal & crude 31st March, 2008) from 0.24: 1 (as on 31st March, 2007). The steel ratio with a reduction in pig iron production etc. Bloom Caster Company had liquid assets of Rs.13,136 crore as at 31st March, was also commissioned at DSP, which helped in increasing 2008 invested in short term deposits with scheduled banks and production through concast route.

Inaugural function for commencement of Golden jubilee celebrations by SAIL, as it enters its 50th Year of Production. Shri S.K. Roongta, Chairman, SAIL presenting a memento to Hon'ble Union Minister for Chemicals & Fertilizers and Steel, Shri Ram Vilas Paswan.

Shri B.S. Meena, Addl. Secretary & Financial Adviser, Shri George Elias, Jt. Secretary, Ministry of Steel and Shri G. Ojha,Director (Personnel), SAIL are also present on the dais.

(Rupees in crore)

2007-08 2006-07

Sales Turnover 45,555.34 39,188.66

Profit before interest, depreciation

and tax (EBIDTA) 12,955.15 10,966.66

Less: Interest and finance charges 250.94 332.13

Depreciation 1,235.48 1,211.48

Profit before Tax (PBT) 11,468.73 9,423.05

Less: Provision for taxation 3,931.95 3,220.76

Profit after Tax (PAT) 7,536.78 6,202.29

Key Ratios EBIDTA to Net Sales (%) 32.8 32.3

Return (PAT) on Net worth (%) 32.8 36.1

EBIDTA to Average Capital

Employed (%) 48.0 46.4

Earning Per Share (Rupee 10/- each) 18.25 15.02

Debt Equity Ratio 0.13:1 0.24:1

Shri S.K. Roongta, Chairman, SAIL handing over the interim dividend cheque of Rs. 673.49 crore for 2007-08, to

Shri Ram Vilas Paswan, Hon'ble Union Minister for Chemicals & Fertilizers and Steel, on 7th February, 2008.

ReportDirectors’

1110

SALES & MARKETING REVIEW

GROWTH PLAN

STRATEGIC INITIATIVES OF YOUR COMPANY

During the financial year 2007-08, your company achieved highest ever sales of steel of 12.3 million tonnes recording a growth of 3.7% over previous year. Sales of special steel recorded 69% growth over previous year comprising 109% in long products and 8.5% in flat products. Major categories which recorded significant growth over previous year were TMT 54%, Plates 8%, HR Coils 7% and Medium Structurals 27%.

Record sales of 2.4 million tonnes of steel was made to projects of national importance to meet the critical requirements of key sectors, like airports, railway, metro rail, highways, power projects, registering a growth of 32% over previous year. Record supply of rails, wheels & axles, sheets, plates and structurals were made to Indian Railways (including Rail Vikas Nigam Limited) at 9,79,152 tonnes. During the year record supply of long rails was made to Indian Railways at 101,104 tonnes registering a growth of 56% over previous year. Supply of TMT steel was augmented through conversion and decoiling arrangements which helped in stepping up supplies of TMT to 1.31 million tonnes during 2007-08, against 0.85 million tonnes in the previous year (up 54%).

Dealer network was extended to cover 602 districts (out of 603 ! Joint Venture in cement production : A joint venture for setting districts, in the country). With the addition of 1200 dealers during up a 2.2 million tonnes cement plant at Bokaro Steel Plant the year, dealers strength has gone up to 1897 as on 1st April, has been formed, which is scheduled to commence 2008. Sales through dealers at 3.3 lakh tonnes grew more than production in 2010. Also, process for setting up of slag fourfold. 8 new stockyards were also made operational during the cement plant at Rourkela Steel Plant has been initiated, for year. For better customer service, e-payment and e-receipt which identification of a strategic JV partner is under systems have been introduced at all branches of CMO. Towards

progress.improving customer satisfaction and greater logistics support,

! Joint Venture Agreement signed with Manganese Ore (India) door delivery to customers was also stepped up.Ltd. (MOIL) for setting up a Ferro Alloy Plant for production of Your company maintained its presence in neighbouring and ferro-alloys for SAIL. The plant is likely to be commissioned traditional markets and exported about 4.72 lakh tonnes during by 2011. the year. The products exported were primarily Billets, Wire Rods,

Plates, HR Coils and CRNO Coils. Exports were made to new ! MoU signed with Rashtriya Ispat Nigam Ltd. (RINL) to jointly markets viz., Argentina and Brazil. Diesel Loco Wheels from explore and develop low silica limestone mines in the Durgapur Steel Plant were exported to Malaysia for the first time. Sultanate of Oman. High Tensile and Ship Building Plates from Bhilai Steel Plant were

! Towards achieving the target of making PSUs self reliant in exported to the European Union. the area of coking coal, Union Cabinet has accorded approval for formation of a Special Purpose Vehicle (SPV)

Considering the fast growing demand for steel, your company is comprising five companies SAIL, Rashtriya Ispat Nigam implementing growth plan to enhance its Hot Metal production Limited (RINL), Coal India Limited (CIL), NTPC Limited and from the base level of 14.6 million tonnes to 26.2 million tonnes per annum by 2011. The growth plan, besides targeting higher production, also addresses the need for eliminating technological obsolescence, achieving energy savings, enriching product-mix, reducing pollution, developing mines and collieries, introducing customer centric processes and developing matching infrastructure facilities.

As per the study of International Iron and Steel Institute, steel demand in India is projected to grow to a level of around180 million tonnes by 2020. To maintain its current dominance in the domestic market and to meet the future challenges, your company is working on a long term directional plan 'Lakshaya 2020', which will steer the company towards meeting its strategic objectives of achieving profitability through growth and customer satisfaction.

During the year 2007-08, your company continued to give impetus towards new business initiatives including formation of new Joint Ventures, mergers & acquisitions, entering into Memorandum of Understandings for its long term strategic objectives etc. As part of such initiatives, during the year your company has successfully concluded 11 (eleven) MOUs as well as 4 (four) Joint Venture Arrangements with leading organisations in diverse areas. These include:

Shri S.K. Roongta, Chairman, SAIL and Shri B. Muthuraman, MD, TATA STEEL signing an agreement for setting up a joint venture for

Coal Mining in India on 3rd January, 2008.

SAIL plants recorded highest ever saleable steel production of was reduction in specific power consumption by 1% compared to 13.0 million tonnes, a growth of 4% over the previous year and the previous best of 457 kwh/tcs achieved earlier.best ever finished steel component in saleable steel at 83%. This helped in attaining the highest ever capacity utilisation of saleable steel production at 118 %, surpassing the previous best of 114% Your company has ensured full availability of iron ore for its steel achieved during 2006-07. The three special steel plants plants by stepping up production to about 26.37 million tonnes (ASP/SSP/VISL) together recorded a growth in saleable steel from its captive mines during 2007-08 (up by 7%). The production production of 13% during 2007-08 over the previous year. of limestone and dolomite from captive mines also increased

to 2.6 million tonnes. The production of coking and non-coking Special thrust was given to increase production of the value added coal crossed a million tonne during the year for the first time products and increasing the share of special steels. Highest ever (up by 47%).production of special steel/value added items of 3.7 million tonne

was recorded during the year, with a growth of 25% over the The requirement of iron ore is to go up to about 42 million tonnes previous year. This included an improvement in the production of

post modernization and expansion by 2011. In order to meet the special quality steel products - Electrode quality wire rods (22%), 7

higher level of iron ore requirement, linkages have been fold increase in TMT/500/550 HCRM grade, LPG-grade HR

formulated between plants and mines and plans have accordingly coils/sheets/plates (11%), SAILCOR HR/CR coils (44%), with

been made for development of the mines. The matter of delay in record production of Rails at 9,16,000 tonne. The long rail renewal of leases for Chiria has been taken up with the respective production exceeded one lakh tonne, up by 56% over the State Governments and Central Government including PMO. Your previous year.company is vigorously pursuing with Government for renewal of

SAIL developed a number of new products during the year which leases, forest & environmental clearances etc. On infrastructure includes Earthquake Resistant (EQR) TMT Wire Rods, with

front, an MOU has been signed on 12th December, 2007 amongst improved corrosion resistance. Vanadium Micro-alloyed Rail for

SAIL, Ministry of Railways, Government of Chhattisgarh and application in tracks for higher axle load at high speed (SAILMA

NMDC Ltd. for construction of railway line between Dalli-Rajhara- 550) and high yield strength rolled plates (SAILMA 550 HI) at the

Rowghat-Jagdalpur. Bhilai Steel Plant (BSP), Armour steel plates for the defense sector at Rourkela Steel Plant (RSP), low carbon EDD HR/CR Your Company has taken several steps to increase production of steel for auto bodies, Boron-treated Al-killed low carbon steel at both coking coal and thermal coal in captive mines at Chasnalla, the Bokaro Steel Plant (BSL), SUP-11 (DSP). Ramnagore and Jitpur. Process has been initiated for

development of new coking coal mines at Tasra and Sitanala. Your Company continued to achieve improvement in efficiency Grant of statutory clearances for production from these mines are parameters. Continuous cast production went up to a record high in progress. For attaining the raw material security in steel related of 8.93 million tonnes, a growth of 7% over the previous year. Coke raw materials, your company has applied for prospecting rate was the lowest ever at 533 kg/thm, a reduction of 8 kg over the license/mining lease in new areas for Iron ore, Manganese ore, previous year and energy consumption came down to lowest ever Nickel, Chromium ore in the states of Jharkhand and Orissa. 6.95 G.cal/tcs, a reduction of 3% over the previous year. There

SECURING RAW MATERIALS

MoU being singed amongst SAIL, Indian Railways, NMDC Ltd. and Govt. of Chhattisgarh for the construction of a railway line between Dalli-Rajhara-Rowghat-Jagdalpur, on 11th December, 2007, in the presence of (from left to right), Dr. Raman Singh, Hon'ble Chief Minister, Chhattisgarh, Shri Lalu Prasad Yadav, Hon'ble Minister of Railways, Shri Ram Vilas Paswan, Hon'ble Union Minister for Chemicals &

Fertilizers and Steel, Shri R. Velu, Hon'ble State Minister for Railways.

Shri Ram Vilas Paswan, Hon'ble Union Minister for Chemicals & Fertilizers and Steel, in the presence of Dr. Raman Singh, Hon'ble

Chief Minister, Chhattisgarh and other dignitaries on the occasion of foundation laying ceremony for modernisation & expansion of

Bhilai Steel Plant on 9th February, 2008. Also seen in the picture are Shri Ram Chandra Paswan, MP; Shri S.K. Roongta, Chairman,

SAIL and Dr. J.S. Sarma, Secretary, Fertilizer & Steel.

Directors' Report

1312

NMDC Limited with an initial equity capital base of upto 0 Merger of Bharat Refractories Limited (BRL) with SAILRs. 3,500 crore to facilitate acquisition of coking coal assets Government of India has approved merger of BRL with SAIL. Both abroad. the companies have been permitted to initiate the process of

merger under section 396 of the Companies Act, 1956. The ! Strategic decision taken to start the production facilities at Kulti in West Bengal for production of ferrous and non-ferrous necessary activities for merger of BRL with SAIL have been

initiated and a proposal for obtaining approval of shareholders to castings for its steel plants. Production of non - ferrous castings has already commenced and for ferrous castings it the Scheme of Amalgamation has been included in the business will start during 2008. to be transacted in this year's Annual General Meeting.

! MoU signed with the Korean steel giant, POSCO, to collaborate in the strategic areas of mutual interest. Your Company has undertaken a massive modernization and

expansion plan to expand capacity of hot metal to over 26.2 million ! Strategic decision taken for development of a Special Economic Zone (SEZ) at Salem, Tamil Nadu, which has also tonnes from the base level of 14.6 million tonnes. been approved by the Government of India. The implementation of growth plan is being done simultaneously

in all the plants including mines and requires matrix planning, ! Decision taken to install Steel Processing Units in different involvement / coordination with a large number of agencies, states where SAIL has no steel plant. This decision is in view

to make finished steel available to the end users. prudent fund management, selection of right technology etc. Your Company has already initiated actions in all areas including

Apart from this, following strategic initiatives are taken to augment preparing the organization accordingly. The SAIL Board gave 'in-

supplies of key input raw materials and associated infrastructure principle' approvals during the year for modernization and on a long term basis:expansions at BSP, RSP and DSP with an estimated outlay of

! Signed an agreement with Tata Steel for joint development of about Rs. 24,500 crore and final approval for modernization and coal blocks. expansion at ISP, SSP and BSL (New CRM).

! MOU with Mineral Exploration Corporation Limited (MECL) The modernization & expansion plans include installation of new for exploration by MECL at all SAIL mines for assessing the Coke Oven Batteries, three new Sinter Plants, three new Blast reserves and quality of ore available. MECL has already Furnaces of bigger capacity with upgradation of existing blast started exploratory work in Gua and Chiria mines. furnaces, three new Steel Melting Shops with addition of

Converters in old shops, installation of new Rail Mill, Plate Mill, ! MOU with M/s. Bisra Stone Lime Company Limited (BSLC) Compact Strip Mill, Bar and Rod Mills, Wire Rod Mills, Structural for Dolomite.Mill, Universal Beam Mill, etc. All this will increase share of finished

! MOU with M/s. Heavy Engineering Corporation (HEC) for steel in saleable steel from current level of about 83% to almost equipment/spares required for modernization/expansion. 100%. Along with the addition of new facilities, most of the existing

facilities are also being upgraded to enable production of value ! Agreement entered with Centre for Railway Information System (CRIS), Indian Railways for on-line tracking of rake added steels, reduce energy consumption and improvement in movements. productivity, etc.

MODERNISATION & EXPANSION PROJECTS

Number of capital projects have been commissioned during the Ø Your Company also awards merit-cum-means and merit scholarships and Jawaharlal Nehru Science and Technology year and several major projects (> Rs.100 crore) are under

implementation at various Plants which, inter-alia, include Scholarships to the wards of its employees. 20% of these Rebuilding of Coke Oven Battery No.5, Installation of Slab Caster, scholarships are reserved for the wards of SC/ST employees.Main Step Down Station-V, 700 tpd Air Separation Unit at BSP;

Ø Bhilai Steel Plant awards 18 scholarships for SC/ST students Rebuilding of Coke Oven Battery No.4, New Coke Oven Gas

from PM's Trophy Fund.Holder, Oxygen Plant, Simultaneous Blowing at SMS-II at RSP;

Ø Rourkela Steel Plant has instituted a scholarship of Coal Dust Injection in Blast Furnace-2 & 3, Augmentation of Rs.1,00,000/- each to six SC/ST students from peripheral Coking Coal Storage facilities, New Turbo Blower, Upgradation of villages for pursuing professional courses like medical, Blast Furnace No.2 Rebuilding of Coke Oven Batteries 1 & 2 at engineering etc.BSL, Coal Dust Injection in BF No.3 & 4 at DSP and Rebuilding of

Coke Oven Battery No.10 at ISP. Ø Salem Steel Plant provides 10 scholarships on yearly basis, besides providing free uniform and books to SC/ST students from peripheral schools.Your Company has always believed that human resource is its

most important asset and continues to work for its development Ø Your Company has adopted 95 SC/ST children of Chhattisgarh Region and 12 Birhor Tribe children from the and realisation of its potential. To achieve growth and to foster

motivational climate, several initiatives were undertaken in the HR Jharkhand Region. They are being provided free education, area during the year. The thrust on optimal utilisation of manpower boarding and lodging facilities.with focus on improvement in productivity continued. Manpower

Ø 51 tribal students are being provided education free of cost in strength of SAIL as on 31st March, 2008 was 1,28,804 comprising

Company sponsored DAV school at Chiria.15,895 executives and 1,12,909 non-executives. The manpower

Ø SAIL's Tribal Sports Festival 2007 was organised at DSP on was further rationalised with a reduction of 4,169 during the year. 31st December, 2007, in which 1458 villagers from 16 villages Labour productivity witnessed an increase of 7% over previous participated in different games.year to touch a new peak of 214 tonne/man/year.

Ø At each of the main integrated steel plant location, one school Presidential Directives on Scheduled Castes (SC) and Scheduled has been opened to provide free primary education to the Tribes (ST) continued to be implemented. As on1st January 2008,

out of the total manpower, 14.99% were SC and 12.26% were ST. children of economically weaker section living below poverty line. Students of these schools are also being provided free During the year, out of total recruitments of 1398 employees made

by the Company, 223 candidates (15.95%) and 191 candidates uniforms, books and other stationery items besides mid-day (13.66 %) belonged to SC and ST categories respectively. meals to encourage them to attend the schools.

Other initiatives undertaken for the welfare for SCs/STs: SAIL Ø SAIL plants organises free medical camps for the welfare of steel plants and units including mines are located in economically villagers living in the peripheral villages of steel townshipsbackward regions of the country with predominant SC/ST

Your Company has constructed roads in and around steel plant population. Therefore, SAIL has contributed to the overall

and mine locations for the benefit of the peripheral population. development of civic, medical, educational and other facilities in

These initiatives help in making a meaningful difference in the these regions. Besides, your Company has also undertaken

lives of the local SC/ST population.several welfare initiatives for the welfare of SC/ST and other

Your Company continued with the thrust on implementation of weaker sections of the society, such as:Official Languages Policy of Government of India. The Company Ø Your Company awards 14 scholarships to deserving SC/ST won the first prize in the area of promoting the usage of Hindi in undergraduate engineering students in various disciplines to official work from Town Official Language Committee (PSUs-encourage technological education among them.Delhi) constituted by G.O.I. The in-house-Hindi magazine “Ispat Bhasha Bharti” bagged 2, first prizes for best Hindi journal, one at the national level from Government of India, Ministry of Home Affairs and second from TOLIC-Delhi. The Company has also organised a two day National Seminar in Hindi on “Employees Motivation and Discipline”, in which faculty from top management institutes like IIM, FMS, MDI etc. participated.

Your Company's excellent performance got recognition from several quarters during the year 2007-08. 51 employees received Vishwakarma Rashtriya Puraskar-2006 Awards instituted by the Government of India in recognition of their extraordinary contribution. 10 employees won 2 Shram Vir Awards under the prestigious Prime Minister's Shram Awards Scheme. Major awards received by your Company include SCOPE Award for Excellence & Outstanding contribution to the Public Sector Management-“Institutional Category” for the year 2006-07; FICCI Annual Award 2006-07 for outstanding achievement; CNBC-TV 18 “Employers of Choice Award 2007”; and the “Employer Branding Award 2007-08”, under the award category ' Best HR strategy in line with business'.

HUMAN RESOURCES MANAGEMENT REVIEW

AWARDS AND ACCOLADES

Shri Ram Vilas Paswan, Hon'ble Union Minister for Chemicals & Fertilizers and Steel, addressing a gathering on the occasion of foundation laying ceremony for modernisation and expansion of Rourkela Steel Plant, on 4th January, 2008. Seen in the picture are (from right to left) :

Shri Jual Oram, MP; Shri Ram Chandra Paswan, MP; Shri Naveen Patnaik, Hon'ble CM, Orissa; Shri R.S. Pandey, Secretary, Steel, Shri S.K. Roongta, Chairman, SAIL and Shri B.N. Singh, MD, RSP.

Shri G. Ojha, Director (Personnel), SAIL receiving the first prize for best in-house Hindi Magazine awarded to "Ispat Bhasha Bharti" from Shri Shivraj Patil, Hon'ble Minister of Home Affairs on 14th

September, 2007.

Directors' Report

1514

To ensure clean environment in plants/units and in the surrounding habitat, your Company continued its efforts in the areas of resource conservation, pollution prevention, compliance to legislative & regulatory requirements, waste management and conservation of waste to wealth and has complied with the norms relating to water consumption, particulate emission in air etc. Areas of major achievements during 2007-08 are:

Ø Lowest ever Particulate emission in air at 2.2 kg/tcs, a reduction over 5% over the previous year.

Ø Solid waste utilisation touched 80%, an improvement of 3%.

Ø Water consumption brought below 4.0 m3/tcs, an improvement of 8%.

Ø Restored over 200 acres of degraded mining area at Purnapani, Barsua and Kalta under the MoU between Delhi University, Department of Biotechnology and SAIL.

Ø Pisciculture has been taken in the abandoned mining areas at Purnapani and over 2 lakh fishlings have flourished in 100 acres of quarry water voids.

Your Company has actively associated with fora like Asia Pacific In addition, RSP won the prestigious "Gold Icon National Award for Partnership for Clean Development and Climate (APPCDC), New e-Governance" in 2007-08; SSP won the "National Sustainability Energy and Industrial Technology Development Organisation Award" for the year 2007; RDCIS has won the “Golden Peacock (NEDO) and International Iron and Steel Institute (IISI), for Innovative Products / Service Award” for 2007. adoption of energy and environment friendly technologies.

Phasing out of Ozone Depleting Substances (ODS) has also been The Institute of Cost & Works Accountants of India (ICWAI) under its taken up in the SAIL plants under UNDP programme.National award for excellence in Cost Management, conferred upon

SAIL, the first prize in the category of Public Sector Undertaking, as Your Company has launched an ambitious programme for tapping a recognition of the Company's efforts in the areas of cost the carbon benefits under Clean Development Mechanism (CDM) management practices and attainment of cost consciousness in the of the Kyoto Protocol agreement on climate change. Over 71 organisation for the year 2007. This is the fourth time, when SAIL's potential projects have been identified across the Company's endeavour in the area of cost reduction has been recognised. plants located at Bhilai, Durgapur, Rourkela, Bokaro and Burnpur

for availing carbon credits. The CDM project entitled, “LD gas The Institute of Cost & Works Accountants of India (ICWAI) also recovery at Rourkela Steel Plant” has been registered at UNFCCC conferred upon Rourkela Steel Plant the second award in the for tapping the carbon benefits.category of Public Sector manufacturing unit having turnover of

more than Rs.1,000 crore for the year 2007.

Your Company is continuously moving ahead in innovative usage Contribution of your Company towards environmental protection has been duly recognized with getting awards, viz. CII of Information Technology (IT). Enterprise Resource Planning sustainability prize and Institute of Directors (IOD) Golden (ERP) and Manufacturing Execution System (MES) are being Peacock Environment Management award in Mining and Metal implemented in SAIL. At BSP, ERP will go-live soon. A Wide Area sector for BSP, Golden Peacock Innovation award and Greentech Network through VSATs has been installed in all the mines and Environment Excellence Gold award for RSP and National Raw Material Division, Kolkata, to establish a strong and stable Sustainability award for SSP. data-voice network and has been linked to SAIL's network making

communication faster. Other initiatives include:- SAIL has been a pioneer in introducing e-business and under this Employee Serviceseffort, RSP bagged the Golden Award for “Exemplary Usage of

Information & Communication Technology (ICT) by PSUs” under Intranet Web Portals have been developed by plants/units for the category of National Awards for e-governance conferred by providing on-line facilities like leave encashment, LTC/LLTC the Government of India. encashment, tour advance, festival advance etc. to employees.

Information like circulars, orders, forms, pay details, PF status are Your Company has received the FICCI Award on 'Rural and Community Development Initiatives' on 15th February, 2008 available on the web site for employees. To provide Employee Self which was presented by Hon'ble Prime Minister, Dr. Manmohan Services, Kiosks have been installed for accessing intranet web

sites by the employees of plants/units.Singh. BSP has been awarded Golden Peacock Award -2007 for its CSR jobs, at Portugal, on 15th February, 2008. An on-line Executive Performance Management System (EPMS)

has been developed with an objective to create a performance culture through continuous performance improvements of

Corporate Environmental Policy of your Company emphasises on individual employees, teams and the organisation.

“Conducting our operations in an environmentally responsible E-Commerce manner to comply with applicable regulations and striving to go

beyond” and the Company recognises its responsibility and its Electronic commerce has been continuously given top priority to commitment towards Corporate Responsibility of Environment ensure equity and fairness besides efficiency in commercial Protection (CREP). transactions. By giving continuous thrust, the e-Purchase

IT RELATED INITIATIVES

ENVIRONMENT MANAGEMENT

(through Reverse Auction of Rs.1,508 crore and e-Sale (through generation, sports facilities, etc. Out of the 79 villages, 13 villages Forward Auction of Rs.2,512 crore) totaling to Rs.4,020 crore in have been developed as Model Steel Villages, during the year 2007-08, indicated a growth of 48% over previous year. 2007-08.

Your Company is also working towards preserving culture and heritage. Some of the key activities include assistance to SAIL has been a pioneer in the area of Corporate Social maintenance of monuments in Lodhi Garden, New Delhi; Responsibility (CSR) since inception, substantially contributing contribution towards the development of infrastructural facilities towards betterment of social indices in and around the periphery and amenities etc. at Archeological Sites of Lauria Nanandangarh of steel plants. SAIL has been structuring and implementing CSR and Chankigarh in West Champaran District of Bihar and Light initiatives right from inception with the underlying philosophy and a and Sound Show organised on 10th May, 2007 on the occasion of credo to make a meaningful difference in people's lives. These 150th anniversary of First War of Independence at Dhyan Chand

efforts have seen the obscure villages of yesterday, where SAIL National Stadium, New Delhi.

plants are located, turn into leading industrial centres in the Besides, the Company extended support to a number of activities country today.for the benefit of physically challenged persons and destitute. 193

Since inception your company has established 40 primary health physically challenged and hearing impaired persons from

centres, 11 reproductive and child health centres 31 hospitals and peripheral villages were identified and crutches, artificial limbs

8 super-speciality hospitals. These have resulted in access to and hearing aids were provided with the help of Bharat Vikash

improved health infrastructure for 2.2 crore people from ailments Parishad, a reputed NGO; Besides 150 hearing aids, computer

from common cold to measles, diabetes, reproductive and child lab and furniture, 15 tricycle and 5 wheel chairs were also provided.

health care, open heart surgery, neuro surgery, kidney CSR is ingrained in all spheres of industrial life and social

transplantation etc. Your Company has opened about 138 schools responsibility for the Company and it is not only a virtue but a

in the steel townships to provide modern education to about business imperative.

81,000 children. Besides adopting and providing free education The objective of the Company is to focus on the following thematic and facilities to tribal children, company has provided assistance themes/causes as part of Corporate Social Initiatives and Women to over 1407 schools, with more than 1,64,000 students of around Upliftment :435 villages surrounding its units. In this endeavour, SAIL has

achieved a Girl:Boy ratio of 1:1 for all levels of education and a Ø Income Generating Schemes ( through Self Help Groups);survival rate (i.e. rate of retaining enrolled students) of 90% in all SAIL secondary schools and 95% in all SAIL primary schools. SAIL Ø Education; and has started 5 free schools exclusively for the poor, under privileged

Ø Health issues children - one each at its 5 Integrated Steel Plant locations. Students are being provided free meals, uniforms, tuition, books & stationery In line with the above themes, SAIL is working in tandem with State and transportation, etc. in these schools. Government of Chattisgarh for establishing a Technical University

at Bhilai, Chattisgarh. An ITI was inaugurated at Gua Mines in In addition to contributing in areas of education and health, your September'07 by Shri Madhu Koda, Hon'ble Chief Minister of Company provides access to potable water to about 1.1 lakh Jharkhand in which classes in two streams have started. persons every year and constructs/ repairs 33 km of (pucca) roads

per year, thereby providing access to more than 2 lakh persons Project 'Jaladhara' was taken up under the Corporate Social across 435 villages per year. During 2007-08, 61 kms of pucca Responsibility initiatives of SAIL / CMO in tribal villages in road was built, 423 new water resources were created and 402 Vishakapatnam District. The project aimed to provide drinking solar lights were provided. water to the hamlets of Dummaguda and Sarada Bonguda village

from the natural springs of the Ranajilledu water falls in the Your Company has adopted 79 villages as Model Steel Villages picturesque Araku Valley. Water from the perennial natural springs across eight states. The developmental activities planned for (at a height of 60m from the village) is brought down to the villages these villages include medical and health services, education, by taking advantage of the natural gradient (by the gravity) by roads and connectivity, sanitation, community centres, livelihood constructing a cistern at the tapping point, laying a main pipeline (1.6 kms long) through mountain terrain to convey the water from the cistern at the tapping point to three tiny hamlets housing a population of about 450 in the village premises where filtration tanks and distribution tanks with taps are provided and distributed. Earlier the village folk (especially ladies) had to trek nearly 2.5 kms to collect water from the Ranajilledu Falls. The entire facility was handed over to the Sarpanch of the village on15th December 2007.

In the field of health care, free medical health centres for poor have been set up at Bhilai, Bokaro, Rourkela, Burnpur (Gutgutpara) and Durgapur providing free medical consultation, medicines, etc. In addition, over 400 medical camps have been held in 2007-08 by all the plants and units in 12 states (Bihar, Jharkhand, Chattisgarh, Orissa, West Bengal, Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh, Haryana, Himachal Pradesh, Rajasthan) for providing free health check-up, path lab treatment, medicines, immunization, etc to to over 5 lakh of the needy persons. Surgical cases were referred to plant hospitals (free stay, to and fro

CORPORATE SOCIAL RESPONSIBILITY

Mahantabagan, one of the 79 villages adopted by SAIL for developing as Model Steel Villages.

Shri S.K. Roongta, Chairman, SAIL receiving the FICCI Award 2006-07 for Rural & Community Development initiatives from the

Hon'ble Prime Minister, Dr. Manmohan Singhon 15th February, 2008

Directors' Report

1716

SAIL continued its efforts to project the image of the company by taking up brand building measures that included advertising through the outdoor and print media, participation in exhibitions sponsorships of various sports and cultural events, etc.

Sustained efforts were made to build the SAIL brand image as a steel producer of international repute and to generate confidence amongst customers and all the stakeholders through internal and external communication. Our house journal “Sail News” played an important role as an effective medium of communication amongst the employees and it has also provided a platform for sharing views of employees and their family members.

To commemorate the Golden Jubilee Year of Production on 4th February, 2008, at Vigyan Bhawan, New Delhi, a SAIL Logo on 50th Year of Production, was released. Several events have been planned to celebrate the Golden Jubilee Year of Production in all the plant/unit locations till 3rd February, 2009.

The Company continued to disseminate vital information related to Performance, Expansion Plans, Safety, Vigilance activities and Growth Plan through its house magazines, hoardings, posters, booklets and other channels.

transport and food with 1 attendant each) with the facility for post operative check up etc. In one of these camps organized by SSP, a The Vigilance Department of your Company has received the 18 months old girl was detected with congenital cataract in both coveted ISO 9001:2000 Certification for all its Plants/Units in the eyes (nearly blind) and was restored vision after surgery at 2007-08. Vigilance Department is playing a proactive role for SSP hospital. Ten (10) numbers of Mobile Medicare units have continuous simplification of systems and procedures to facilitate also been provided to different organizations during 2007-08 faster and effective decision making, in a transparent manner. On

the initiative of Corporate Vigilance, Integrity Pact has been Thirty three (33) child labour rescued by an NGO operating in MSV implemented in the Company w.e.f. 16.8.07 for all procurements / Thirumalaiviri, Salem, are being supported by taking care of their contracts above Rs.100 crore. A procedure for procurement of education, livelihood, hygiene and health care. Massive flood quality medicines and consumables for its hospitals has been relief operation was organized by SAIL. Almost 100 employees made by Corporate Vigilance in December, 2007 and were pressed into service. Flood relief operation was undertaken implemented across the Company.in 46 districts in 3 states namely, Bihar, Uttar Pradesh and Assam More than 160 training workshops involving around 3400 (in North East).participants were held for enhancing Vigilance Awareness of

Your company is one of the first PSUs to get associated as an employees. SAIL Vigilance also organized two training programmes inter-sectoral collaborator of National AIDS Control Organisation at MTI, Ranchi for executives of other PSUs under the Ministry. The (NACO), Ministry of Health and Family Welfare, Government of programmes were related to Disciplinary Proceedings, Purchase India. SAIL has continued its efforts to contribute to the society in Procedures, CVC guidelines, RTI Act etc. As a step towards creating prevention and control of HIV/AIDS through Information, awareness of Vigilance matters, a half-yearly house publication Education and Communication (IEC) Programmes where more titled “INSPIRATION” was launched during the Vigilance Awareness than one lakh people were covered. In the schools, AIDS Week celebrated in November, 2007.Education Programme (for Class IX and above) has been taken up across the Company, in line with NACO guidelines.

In the field of Income generating schemes, vocational training has been provided to around 25,000 villagers in SMART Model for Vegetable Cultivation , WADI, Amrapali Drip Watering, Teak Plantation , Poultry Farming , Water Harvesting , Mobile Artificial Insemination, Vermiculture etc.

Your Company has well planned sports policy, with an accent on nurturing young talents through four specialized academies promoting Athletics, Hockey, Football and Cricket. SAIL sponsored several sporting tournaments at the national and the international levels to promote sports in the country. In order to provide impetus to sports, Archery Academy has been set up at Kiriburu Mines, Jharkhand. A host of tribal sports festivals have also been organized like SAIL Tribal Sports Festival-2007 at Durgapur, Gramin Khel Melas in Athletics, Football, Volleyball and Khokho for tribal students at Narayanpur, Chattisgarh.. Another prestigious programme under sports promotion was SAIL sponsoring ADPROS Asian Tour Golf Tournament (SAIL Open Golf Tournament) and Nehru Champion Colleges Hockey Tournament besides supporting UP Badminton Association for UPA Badminton Academy.

CORPORATE COMMUNICATION

VIGILANCE ACTIVITIES

To ensure compliance of laid-down system and procedures,

around 2900 surprise checks, including 500 joints checks, were In terms of listing agreement with the Stock Exchanges and the conducted during the year and based on their outcome, actions guidelines on Corporate Governance for Central Public Sector

Enterprises issued by the Government of India, Department of were initiated for system improvement. During the 2007-08, about Public Enterprises, a compliance report on Corporate 49 system improvement initiatives were taken across the Governance is given at Annexure-IV. A certificate from Auditors of company which will smoothen the decision making process and the company regarding compliance of conditions of Corporate

enhance transparency in day to day working. Governance is placed at Annexure-V. The Board has laid down a Code of Conduct for all Board Members and Senior Management Vigilance Department maintained the thrust on e-governance as a of the Company. The Code of Conduct has been posted on the result of which EPS system has been introduced in RSP and BSP website of the Company. All the Board Members and Senior and is being implemented in other Plants/Units also.Management Personnel have affirmed compliance with the code.

The Management Discussion & Analysis Report covering the In terms of listing agreement with the Stock Exchanges, the duly

performance and outlook of the company is enclosed. audited consolidated financial statements are placed at Annexure-VI.

The Statutory Auditors' Report on the Accounts of the company for

the financial year ended 31st March, 2008 along with The Maharashtra Elektrosmelt Limited (MEL) recorded a turnover Management's replies thereon is enclosed at Annexure-I. The of Rs.396.41 crore. The Net Profit after Tax (PAT) for the year was

Rs.36.32 crore after charging depreciation of Rs.1.91 crore, Comptroller & Auditor General of India (C&AG) vide its letter dated interest/finance charges of Rs.0.11 crore and tax of Rs. 19.55 20th June, 2008 has given 'nil' comments on the accounts of the crore. MEL produced 64584 tonne of High Carbon Ferro company on accounts for the year ended 31st March, 2008, under Manganese and 37640 tonne of Silico Manganese during the year.

Section 619 (4) of the Companies Act, 1956. A copy of the above Audited Accounts of Maharashtra Elektrosmelt Limited for the letter of C&AG is enclosed at Annexure II. year ended 31st March, 2008 are enclosed as Annexure-VII.

IISCO-Ujjain Pipe & Foundary Company Limited, a wholly owned subsidiary of the erstwhile Indian Iron & Steel Company Limited (IISCO), was ordered to be wound up by BIFR. The Official Information in accordance with the provisions of Section 217(1)(e) Liquidator is continuing its liquidation process. SAIL (including

of the Companies Act, 1956 read with the Companies (Disclosure IISCO) has received an amount of Rs. six crore from the liquidator of Particulars in the Report of Board of Directors) Rules, 1988 as partial settlement.regarding Conservation of Energy, Technology Absorption and

Foreign Exchange Earnings and Outgo is given at Annexure-III to Shri K.K. Khanna, Director (Technical) ceased to be Director w.e.f. this report.30.09.2007 on attaining the age of superannuation.

Shri A.K. Rath resigned from the Board w.e.f. 16.11.2007There was no employee of the company who received

Shri V.K. Gulhati has been appointed as Director (Technical) w.e.f. remuneration in excess of the limits prescribed under Section 01.10.2007.217(2A) of the Companies Act, 1956 read with the Companies

Shri B.S. Meena has been appointed as Director w.e.f. 20.12.2007(Particulars of Employees) Rules, 1975.

Shri Nilotpal Roy, MD, ISP ceased to be Director w.e.f. 31.01.2008 on attaining the age of superannuation.

Pursuant to Section 217(2AA) of the Companies Act, 1956, it is Shri S.P. Rao has been appointed as MD, ISP w.e.f. 15.02.2008.

hereby confirmed:

i) that in the preparation of the annual accounts, the applicable The Board of Directors wish to place on record their appreciation accounting standards had been followed along with proper for the support and cooperation extended by every member of the

explanation relating to material departures; SAIL family. The Directors are thankful to the State Governments, Electricity Boards, Railways, Banks, Suppliers, Customers and ii) that the directors had selected such accounting policies and Shareholders for their continued cooperation. The Directors also applied them consistently and made judgments and estimates wish to acknowledge the continued support and guidance that are reasonable and prudent so as to give a true and fair received from the different wings of the Government of India,

view of the state of affairs of the company at the end of the particularly from the Ministry of Steel.financial year and of the profit or loss of the company for that

period;For and on behalf of the Board of Directors

iii) that the directors had taken proper and sufficient care for the

maintenance of adequate accounting records in accordance

with the provisions of the Act for safeguarding the assets of the

company and for preventing and detecting fraud and other (S.K. Roongta)irregularities; Chairman

iv) that the directors had prepared the annual accounts on a going New Delhiconcern basis. Dated: 31st July, 2008

CORPORATE GOVERNANCE

MANAGEMENT DISCUSSION & ANALYSIS REPORTCONSOLIDATED FINANCIAL STATEMENTS

AUDITORS' REPORT

SUBSIDIARY

REPORT ON CONSERVATION OF ENERGY, TECHNOLOGY

ABSORPTION, ETC.

DIRECTORS

PARTICULARS OF EMPLOYEES

DIRECTORS' RESPONSIBILITY STATEMENT

ACKNOWLEDGEMENT

Shri S.K. Roongta, Chairman, SAIL releasing the new format Vigilance Bulletin "INSPIRATION" during the Vigilance Awareness Week Celebrations in November, 2007. Also seen in the picture,

Shri Venugopal K. Nair, IPS, ADGP & CVO, SAIL

Shri S.K. Roongta, Chairman, SAIL addressing the International Seminar on Iron Ore Beneficiation & Pelletisation, organised by the Ministry of Steel. Dr. U.P. Singh, Jt. Secretary, Ministry of Steel is

seen on the dais.

Directors' Report

1918

The Management of Steel Authority of India Limited presents its Analysis Report covering the performance and outlook of the Company.

The world output grew by 4.9% in 2007, only marginally below the peak growth of 5% attained in 2006. While the growth rate of emerging and developing economies reached a peak of 7.9% in 2007, there was evidence of a deceleration in the growth of advanced economies at 2.7% compared to a growth of 3% in 2006. The reduction in growth was sharper for US at 2.2%, lowest in past 5 years, as fallout of the sub-prime crisis which affected the housing and the financial sectors.

With the sudden and sharp drop in market valuations of U.S. mortgage-backed securities in mid-2007, global markets have entered a phase of uncertainty. This has been reflected in increased volatility in equity markets, commodity prices, and exchange rates. Notwithstanding the increased volatility, the impact on developing countries has been relatively minor to date. Aggregate growth in developing countries continues to be strong, reflecting improved fundamentals in many countries and sizable revenues from commodity exports. Their strong gross domestic product (GDP) growth is partially offsetting weaker U.S. domestic demand, which is now expected to remain subdued well into 2008.

The impact of the sub-prime crisis is expected to be more pervasive in 2008 as the US and European banks start de-leveraging, and repricing of risk takes place. The projections indicate a slowdown in the US economy which may come under minor recession during 2008. Despite weaker U.S. import growth, continued robust spending by oil-exporting countries and in China and India are projected to keep developing-countries growth strong. While high growth rate in the emerging and developing economies, will keep the world growth at a level of around 3.7% (IMF estimates), higher than the average growth of around 3% attained in 1990s, advanced economies are likely to experience a sluggish growth of less than 1.5% during 2008 and 2009.

The impact of sub-prime crisis is expected to be less on China and India where the growth, although milder, will continue to be fairly robust. In India containment of inflation and managing run away commodity price escalation is emerging as a bigger challenge. The GDP growth of 9.6% in 2006-07 has expected to be moderated to 9% in 2007-08. The growth in India in 2008-09 may come under further pressure due to a number of factors such as rupee depreciation, increase in the interest rates, containment of the overall liquidity as well as supply side factors such as unprecedented increase in oil prices. Increase in food and industrial raw materials prices have been a cause of concern and a number of fiscal measures have been taken to augment supplies by reducing customs duty and imposing levy on exports.

Projections for the GDP growth for India in fiscal 2008-09 indicate a softening of growth process. But the moderation is expected to be relatively mild, with GDP growing between 8 to 8.5% under the influence of robust investment, good corporate performance, and buoyancy in tax and savings rate.

thIndia's global competitiveness (48 ) compares well with those thof the three other large emerging economies like China (34 ),

th ndRussia (58 ) and Brazil (72 ) (Source : World Economic Forum Annual Meet 2008). India has been moving towards greater innovation capabilities. Once India expands its resource base further, it should be able to produce quality goods at low price being a low cost economy with the high quality resource base.

A. INDUSTRY STRUCTURE & DEVELOPMENTS

General Economic Environment :

Global crude steel output witnessed a growth of 7.5% in 2007(IISI), scaling a level of 1343 million tonne. Of this the Asian Region alone accounted for 56%. Ten years ago the Asian Region accounted for 38% Only. China still remains the main driver of world steel production. Without China world steel production would have grown by a mere 3.3%. US was the only major country with a negative growth in steel production in 2007. Total crude steel production of US was 97 million tonne, a 1.4% reduction from 2006.

2007 was another year of strong growth in steel demand, with global finished steel consumption reaching 1.2 billion tonne. The steel consumption was propped up by the BRIC nations (Brazil, Russia, India and China) which registered a growth of more than 13% for the year and accounted for more than 80% of the incremental steel consumption. Finished steel consumption in India and China grew by 11% and 13% respectively during 2007. China remains the largest single market and the strongest growth area. Apparent use of finished steel at 408 million tonne in China recorded an impressive 13% growth in 2007. A strong positive trend is foreseen for China, Africa, Asia and South America in 2008.

The forecast for global steel consumption continues to be buoyant with growth rates for 2008 and 2009 expected to exceed 6%. While sub-prime crisis will impact steel growth in US and EU regions, rest of the world is expected to remain unaffected. The prospect for steel over the medium term is bullish with finished steel consumption projected at a level of around 1.75 billion tonne by 2016 (IISI estimate), a growth of 4% CAGR over the consumption level of 2007.

The BRIC countries will again be leading the growth with an expected increase of 11.1% for 2008 and 10.3% for 2009 (source: IISI). However, as steel demand growth increases in other emerging countries, the large gap in growth rate - that we have come to expect in recent times - between BRIC countries and the rest of the world (ROW) will narrow.

With rapid expansion in emerging countries, world crude steel making capacity grew by 7.4% or 108.3 million tonne to 1564

World Steel Scenario :

Management Discussion and Analysis Report

million tonne in 2007. The capacity addition in 2007 was the second highest in history after 112.2 million tonne added in 2005. China's crude steel capacity increased by 14.4% or 70.1 million tonne to 558 million tonne in 2007 and accounted for 65% of total world addition.

The finished carbon steel consumption in India for fiscal 2007-08 has been estimated at around 49 million tonne, a growth of 10.6% over the previous year (provisional estimates of JPC). The strong demand pull resulted in record finished steel imports of 6.5 million tonne, a 46% jump over the previous year, even as domestic producers curtailed their exports and redirected it for domestic consumption. The Indian steel industry has major expansion plans to meet growing demand. However incremental demand could lead to rising import volumes till commissioning of fresh capacities.

India produced 53.9 million tonne of crude steel in fiscal 2007-08, a growth of 6% over previous year's production. India

thranks 5 largest steel producer globally, and is set to emerge as the second highest producer and consumer of steel in the world by 2015.

Steel consumption in India is growing at a rate of more than 10%, a trend that is likely to persist as the nation enters into a steel intensive phase of development. The 11th Five Year Plan has given a major thrust on the infrastructure sector with the total spending planned at around US $ 500 billion by 2012. Mega projects in the power, energy, ports, railways and surface transportation sectors, plans for rural infrastructure like Bharat Nirman, allocation for which was raised to Rs. 31,280 crore and building over 2 lakh kilometers of National Highways by 2010, present an unprecedented opportunity for SAIL which is implementing expansion cum modernization plan to cater to the emerging demand.

The size range and quality makes SAIL's long products a preferred choice for project customers. In case of flat products, SAIL remains a major supplier of HR Coils to the tube making sector and is slowly increasing its presence in cold reducing segment. Plates from SAIL are rated amongst the best and are in good demand from project customers.

The water supply and oil & gas sectors are the other segments where there is a large growth potential. The modernized ERW Pipe Mill at Rourkela Steel Plant is able to cater to the requirement of these sectors. Bokaro Steel Plant and Bhilai Steel Plant are also producing small quantities of API grade HR Coil and Plates for servicing these sectors.

The per capita consumption in India at around 46 kg remains very low compared to the world average of around 200 kg. One of the reasons for low steel consumption is low availability of steel in the rural area. SAIL in recent years has developed a dealers' network which covers all the districts in India. This will facilitate availability of quality steel in the interiors and promote market development and growth.

At a macro level, steel consuming segments such as construction, auto, capital goods etc. are growing rapidly registering a double digit growth in recent years and would continue to be the growth drivers given the structure of the economy. The auto sector in India has experienced rapid growth for a number of years. Improved road, growing middle class and globally competitive auto ancillary industry have been the facilitators of good growth for the sector. Technological break through and global competitiveness in two wheeler and small car segments are likely to make India a global hub for these products boosting demand for steel in the country.

Indian Steel Industry:

B. OPPORTUNITIES AND THREATS

Opportunities

Customs duty on steel imports has been made nil in India and products such as TMT are also exempt from CVD. Sluggish market conditions in developing economies may make India destination for large scale imports adversely affecting domestic players.

Government of India has imposed export levy on steel products. India is a net exporter of galvanized products as its total capacity is in excess of domestic demand. Adverse impact on exports of galvanized products will have a cascading impact on domestic market for cold rolled and hot rolled coils and sheets.

China's production of crude steel at 489 million tonne in 2007 was around 36% of the global production. As Chinese economy matures and its steel consumption stabilizes, a part of the capacity will be serving only the export markets. The proximity and growing domestic steel consumption will make India a preferred destination for Chinese steel, significantly intensifying the competition.

SAIL is the largest steel company in India with a 26% share in total crude steel production. Captive iron ore mines, skilled manpower base, and existing infrastructure for brown-field expansion provide it the strength to retain its leadership position in the Indian steel industry. Its Captive power plants provide it with more than 60% of its total power requirement, a proportion that is likely to increase after expansion in capacity of power plants in its Joint Venture Companies.

SAIL has the largest distribution network in India comprising 37 branches, 64 warehouses and 24 customer contact offices. It has a presence in all districts in India through a dealers' network. Its wide range of product-mix enables it to meet the entire range of a customers' requirement. The Company has a strong Research and Development Centre enabling it to develop superior products matching customized needs.

As a top profit earner in India SAIL has a healthy balance sheet and is virtually debt free as its short term deposits are much higher than its total loans.

The current weaknesses of the Company stem from dependence on purchased coal from domestic and overseas suppliers. Some technologically obsolete processes such as ingot casting and the twin hearth furnaces continue to operate and will be eliminated only after implementation of the modernization cum expansion plan.

As the integrated steel plants of SAIL are located primarily in the eastern states, it increases the transportation cost to the fast growing markets of the west and south. Due to historical legacy the manpower cost in the Company is higher than its competitors. Also, being a public sector company adherence to a number of rules and procedures slows down the business decisions in some cases.

The Indian economy has experienced inflationary pressure since beginning of March 2008. A variety of fiscal and monetary measures have been introduced to contain inflation. In case inflation rate does not subside Government may introduce stronger measures that could impact the growth rate of the economy and consequently domestic market for steel.

Pace of infrastructure development not keeping up with the pace of development of the industry is a key concern. Increase in oil prices will also have impact on production cost. The ocean freight continues to be high. Other infrastructure problems like availability of wagons, port congestion etc would

Threats

Strength and Weaknesses

C. RISKS AND CONCERN

2120

1118

also affect operations at SAIL Plants and will have direct impact on operating margins.

SAIL has had the advantage of low operating cost but with the impending proposal to shift royalty rates of iron ore from the present specific duty to ad valorem rates at 10% of the sale price, the production cost is likely to increase.

The current year has witnessed historical high prices for inputs for steel making. Prices of iron ore and coking coal have been contracted at levels unimaginable only some time back. High cost of industrial raw materials will increase the marginal cost of production of steel and, therefore, the price of the metal in the market. At these prices steel may come under threat of substitution as end users look for cheaper options.

Availability of key raw materials such as iron ore and fluxes etc. give India an advantage in steel production. However, inordinate delay in clearance of mines may lead to shortage of input materials for steel making and thereby impact the growth of the sector.

Rapid growth in domestic demand for steel has come about due to increasing project and construction activity in the country, coupled with growth in consumer durables. Increase in cost of capital and reduced liquidity in the economy may result in postponing the activities resulting in reversal of demand growth. Similarly, construction and project activities may not take off as the increasing cost of construction make marginal projects unviable.

SAIL has taken up expansion plan at all its plants with a target to complete the projects by 2010. However there are only a limited number of equipment suppliers for steel plants. Currently the order books of steel plant equipment suppliers is overbooked which has exposed SAIL to the risk of higher project cost due to lack of competition amongst suppliers. In addition, the overbooked order position could also result in delay in supply of equipment.

Steel consumption in India is expected to continue its strong run in immediate future. According to the short term forecast of IISI, steel consumption in India is expected to grow at 9% and 12% respectively during 2008 and 2009.

The medium term outlook for steel industry in India is extremely bullish. It is anticipated that the steel consumption in India over medium term will grow at an average of more than 10%.

SAIL has undertaken expansion cum modernization plan to increase its saleable steel production by 10 million tonnes by end of 2010. Enrichment of product-mix, induction of state of art technology and introduction of new processes will facilitate the company in reaping benefits from an expanding market.

2007-08 % increase over (Rs. in crore) Previous year

Sales Turnover 45555 + 16

PBDIT 12955 + 18

Profit Before Tax (PBT) 11469 + 22

Profit After Tax (PAT) 7537 + 22

During FY 2007-08 the company surpassed all previous records in production and saleable steel sales volume. Production of saleable steel at 13.0 million tonne compared to 12.6 million tonne in 2006-07 and sales volume of saleable steel at 12.3 million tonne against 11.9 million tonne in 2006-

D. OUTLOOK

E. REVIEW OF FINANCIAL PERFORMANCE

1. FINANCIAL OVERVIEW OF SAIL

1.1Record Financial Performance

07, resulted in a growth of 3.7% in each. Finished steel sales were higher by 7% at 10.3 million tonne.

During FY 2007-08, SAIL achieved the best ever turnover of Rs. 45555 crore and best ever profit before tax (PBT) of Rs. 11469 crore, surpassing the previous best PBT of Rs. 9423 crore achieved in FY 2006-07. Profit before tax was higher by Rs. 2046 crore over previous year. Higher production and sales volume; higher average price realization due to higher sales of value added products, better product mix and improvement in prices; improvement in techno-economic indices; cost control measures, increased interest income from investment of surplus funds and reduction in interest cost contributed to the record financial performance of SAIL. Interest costs were lower by Rs. 81 crore and interest earnings were up by Rs. 448 crore

• Emphasis on cost reduction and productivity improvement through systematic application of new technology, process improvement through R&D efforts and strong awareness to reduce cost at all levels of operation, has been maintained throughout the year.

• A saving of Rs. 328 crore has been achieved during the year through cost control and revenue maximization. Cost control savings have been achieved in major areas of operation, viz reduction in specific energy consumption, improvement on coke rate, higher CC production, low power consumption and improvement in other techno-economic parameters.

During the year, the company continued its thrust on debt reduction and better fund management. Overall debt of the company reduced by Rs 1135 crore during the year. This enabled the company to improve its debt/equity ratio to 0.13:1 as on 31.03.08 from 0.24:1 as on 31.03.07 and helped in reducing its total interest burden. Also, the company has

1.2 Initiatives taken by the SAIL management include:

Cost Control Measures

Fund Management

earned interest of Rs 1105 crore through short-term deposits with schedule banks. Thus, the company continued its virtual debt-free status with term deposits with Banks at Rs. 13136 crore against borrowings of Rs. 3045 crore at the year-end.

During the year, the company contributed Rs. 1250 crore in SAIL Gratuity Trust constituted in 2006-07. The total accumulation contributed by the company as on 31.03.2008 is Rs. 2000 crore. The fund size has grown to Rs. 2218 crore as on 31-03-2008, including returns on the investments made by the fund.

• The company has undertaken a massive modernization cum expansion plan to increase capacity of Hot Metal production to 26 million tonne by 2010 from the current level of 15.2 million tonne.

• Contracts for expansion plans of IISCO Steel Plant and Salem Steel Plant have already been awarded. The modernization & expansion plans of other integrated steel plants have been accorded in-principle approval and are at various stages of implementation. The contracts for about 30% of the total modernisation and expansion plan have so far been awarded.

• During FY 2007-08, capital expenditure of Rs.2181 crore was incurred (against Rs. 1150 crore in previous year) which has been funded through internal accruals.

Rs in crore

2007-08 2006-07 Change %

Sales of Saleable 43304.51 37014.06 17Steel Products

Sales of other products 2250.83 2180.48 3

Total Sales turnover 45555.34 39188.66 16

Less: Excise Duty 6046.89 5265.54 15

Net Sales turnover 39508.45 33923.12 17

Saleable steel sales constitute about 95% of total turnover and were higher by 17%. Sales of other products like coal chemicals, pig iron were also 3% higher over CPLY. The company's main business arena continues to be the domestic market, which provides about 97% of its total sales turnover. Saleable steel exports at 4.77 lakh tonne during 2007-08, were

Contribution to SAIL Gratuity Trust

Capital Investments

2. ANALYSIS OF THE FINANCIAL PERFORMANCE OF THE COMPANY

a) Sales turnover

lower by about 7%. Export incentives of Rs. 61 crore were earned during the year.

The company caters to almost the entire gamut of the mild steel business. Flat products in the form of Plates, HR coils/sheets, CR coils/sheets, Galvanised plain/corrugated Sheets and Long products comprising Rails, Structurals, Wire-rods and merchant products. In addition, Electric Resistance Welded Pipes, Spiral Welded Pipes, Electric Tin Plates and Silicon Steel Sheets form part of company's rich product-mix. The product category-wise sales turnover during 2007-08 is as follows:

Products Category % of sales value

Saleable Steel:

Flat Products 51.7

Long Products 36.2

PET (Pipes, Electrical sheets, Tin plates) Products 1.6

Integrated Steel Plants 89.5

Alloy & Special Steel Plants 5.7

Total Saleable Steel 95.2

Secondary products (ingots, pig iron, scrap, coal chemicals etc.) 4.8

Total 100.0

(Rs. in crore)

2007-08 2006-07 Change %

Other Revenues 646.27 779.66 -17

Reduction in other revenues by Rs. 133 crore i.e. by 17% over previous year mainly on account of higher revenues during 2006-07 due to reversal of 'Interest on SDF Loans' and 'penal/surcharge written back for CSEB liabilities'.

(Rs. in crore)

2007-08 2006-07 Change %

Raw Materials Consumed 13963.77 13272.37 5

Employee Remuneration & 7919.02 5084.18 56Benefits

Stores & Spares Consumed 3293.90 3002.23 10

Repairs & Maintenance 552.15 383.43 44

Power & Fuel 2825.56 2574.40 10

Freight Outwards 717.85 692.04 4

Other Expenses 1836.32 1619.15 13

The increase in expenditure of the Raw materials is on account of escalation in prices of ferro & silico manganese, nickel, ferro-alloys and also increase in ocean freight on imported coal, domestic freight rates on iron ore, fluxes etc. The increase in expenditure on account of stores & spares consumption and repair & maintenance is due to major repairs undertaken for blast furnaces, coke oven batteries and other mills at integrated steel plants. Increase in power & fuel, freight & other expenses is mainly due to increased level of operations.

The employees cost increased by 56% mainly due to provision of Rs. 2428.33 crore made during the year 2007-08 for wage revision effective from 1.01.2007, apart from normal increase in dearness allowance related to price index.

b) Other Revenues

c) Expenditure

2322

A broad break-up of element-wise expenditure has been prepared and is presented for your information:

During the year 2007-08, SAIL has contributed Rs. 13,623 crore to the national exchequer by way of payment of taxes and duties

to various government authorities, which is higher by Rs. 1,897 crore over 2006-07.

(Rs. in crore)

2007-08 2006-07 Change %

Secured Loans 925.31 1556.39 -41

Unsecured Loans 2119.93 2624.13 -19

Total Loans 3045.24 4180.52 -27

Secured loans decreased by 41% during the year on account of repayment of short term loan taken from banks and redemption of non-convertible bonds. Unsecured loans were lower by Rs. 504 crore on account of redemption of Non-Convertible Bonds.

(Rs. in crore)

FY2007-08 FY2006-07 Change %

Gross Block 30922.73 29912.71 3

Less: Depreciation 19351.42 18315.00 6

Net Block 11571.31 11597.71 -0.2

Capital Work-in-progress 2389.55 1198.52 99

Projects worth Rs. 1010 crore were commissioned/capitalized during the year. The on-going expansion/ moderanisation expenses are reflected in increased value of capital work-in-progress.

d) Contribution to Exchequer

e) Secured & Unsecured Loans

f) Fixed Assets

(Rs. in crore)

2007-08 2006-07Change %

InventoriesSemi-finished/FinishedProducts 3944.97 3508.69 12Stores & Spares 1499.93 1361.95 10Raw Materials 1412.33 1780.83 -21Total Inventories 6857.23 6651.47 3

Sundry DebtorsGross Debtors 3264.81 2517.03 30Less: Provision fordoubtful debts 216.69 202.28 7Net Debtors 3048.12 2314.75 32Loans & Advances 2379.75 1650.01 44Current Liabilities 6400.92 5397.77 19Provisions 6797.83 5513.69 23Total Current Liabilities &Provisions 13198.75 10911.46 21

The increase in inventory of finished/semi-finished products by 12% was on account of valuation at increased cost of production. However, in terms of number of days of turnover, the inventory of finished/semi-finished products reduced to 32 days as on 31.03.2008 against 33 days as on 31.03.2007.

Increase in stores & spares inventory by 10% was due to price escalations and procurement for major repairs to be carried out in various plants. In terms of number of days, stores & spares inventory was almost at the same level of 31.03.2007.

Raw materials inventory was at 37 days consumption as on 31.03.2008 as against 49 days consumption as on 31.03.2007.

The increase of Rs. 733 crore in net debtors was mainly on account of increase in turnover. In terms of number of days of turnover, the debtors increased from 22 days as on 31.03.2007 to 24 days as on 31.03.2008.

Loans & Advances increased by Rs 730 crore. The increase was mainly on account of loans to employees and advances for operational supplies.

Increase in current liabilities by Rs 1003 crore were mainly on account of increased level of operations and employees related year-end dues. While there were increase in provisions on account of mines afforestation / restoration / closure costs, wage revision, dividend and tax on dividend; overall increase was marginal due to reduction in provision for gratuity on account of transfer of Rs. 1250 crore to a separate Gratuity Fund constituted during the previous year.

(Rs. in crore)

Plant/Unit 2007-08 2006-07

Bhilai Steel Plant (BSP) 5366.37 4271.59Durgapur Steel Plant (DSP) 1008.61 623.76Rourkela Steel Plant (RSP) 1401.33 1336.40Bokaro Steel Plant (BSL) 2830.43 2736.96IISCO Steel Plant (ISP) -285.19 -249.53Alloy Steels Plant (ASP) 2.69 14.08Salem Steel Plant (SSP) 102.74 118.31Visvesvaraya Iron & Steel Plant (VISL) -58.79 -40.92Central Units 1100.54 612.40SAIL: Profit Before Tax (PBT) 11468.73 9423.05

SAIL: Profit After Tax(PAT) 7536.78 6202.29

g) Current Assets, Current Liabilities and Provisions

3. PLANT-WISE FINANCIAL PERFORMANCE (BEFORE TAXES)

Buoyant market, improvement in net sales realizations, increase in value added products, better product-mix, improved techno-economic parameters , h igher production/sales volume, reduction in interest cost and increase in interest earned on short term deposits of surplus fund were the main factors for improvements. Profit of central units was higher on account of interest earned on surplus funds.

The Company has further consolidated its position to leverage its balance sheet to meet the funding of its modernization and expansion plan. The Net worth of the company has reached a new peak of Rs. 23004 crore along with term deposits with Banks of Rs. 13136 crore. The Overall debt of the company reduced by Rs. 1135 crore during the year (Borrowing as on 31.03.2008 reduced to Rs. 3045 crore). This enabled the company to improve its debt/equity ratio to 0.13:1 as on 31.03.2008 from 0.24:1 as on 31.03.2007 and helped in reducing its total interest burden.

The Company endeavours to procure equipment, raw materials and other inputs from indigenous sources to the extent they become available to the company at the commercially acceptable prices/costs and meet the requirements of the technologies being used in the company. Further, the company also takes reasonable steps to ensure that all receivables in foreign exchange, which are due to the company, are realized within contractual period. As regards incurrence of expenditure in foreign currencies, besides exercising the requisite control, it is also ensured that it is in the commercial interest of the Company.

Eleven projects costing Rs. 890 crore have been commissioned during the year viz.

• Installation of Bloom Caster with associated facilities and Augmentation of Power Distribution System (Phase-I) at Durgapur Steel Plant;

• Rebuilding of Coke Oven Battery No.1 at Rourkela Steel Plant;

• Automation system of Tandem Mill-II of CRM, Installation of Cast House Slag Granulation Plant in BF-4, Rebuilding of Coke Oven Battery No.5, HCL regeneration plant for Pickling Line-II of CRM, Installation of EDT machine in RGBS at Bokaro Steel Plant;

• Replacement of 4 no. of Medium HP Locos by High HP WDS-6 Locos at Bhilai Steel Plant;

• Rebuilding of BF-2 and Replacement of Turbo Blower at IISCO Steel Plant.

Capital Projects valued at about Rs.5,600 crore (i.e. projects costing more than Rs.20 crore each) are under implementation at SAIL Plants. The objective/benefit envisaged for these projects is given below:

• New Slab Caster, along with RH Degasser & Ladle Furnace has been taken up for additional steel casting of 0.165 Mtpa, production of 0.3 Mtpa of API X65/X70 grade steel, processing of additional Rail Steel demanded by Indian Railway through new RH Degasser and creating a potential to produce special quality plates especially in high thickness range (40mm and above) and grades requiring vacuum treatment.

• Rebuilding of Coke Oven Battery No.5 has been taken up wherein state-of-art pollution control equipment will be

Foreign Exchange Conservation

F. PROJECT MANAGEMENT

Major Projects commissioned

Major Capital (AMR) Schemes presently in progress

Bhilai Steel Plant (BSP)

incorporated to achieve the latest statutory emission norms of Ministry of Environment & Forest.

• Hydraulic Automatic Gauge Control & Plan View Rolling in PM is aimed at achieving closer thickness tolerance as per requirement of customers, less crop end cutting & side trimming and improvement in the yield of plates.

• Hot Metal Desulphurisation Unit at SMS-II will help in production of low sulphur steel by desulphurisation of hot metal before steel making to meet the increasing demand for high quality steel, particularly for application in off-shore, transport and structural sectors

• Power supply facilities for 2x1250 tpd Oxygen Plant will help in evacuation of power at 220 KV from Power Plant3.

• Main Step Down Station (MSDS-V) has been taken up for evacuation of power at 220 KV from new Power Plant-3 (2 x 250 MW), which is under construction through NSPCL, a JV company of NTPC & SAIL, to meet the future power requirement of BSP.

• Under the Project of Thyristorisation of Plate Mill drives, replacement of old and unreliable MG sets by modern day thyristor converters with state-of-art digital control is being done as a technical necessity. This is required in order to achieve high quality of finished products and reliability in production.

• 4th Air Separation Unit of 700 tonne per day capacity is being installed in Oxygen Plant-II to meet the increasing requirement of oxygen, nitrogen & argon.

• Installation of Electro-magnetic Stirrer System in the existing Bloom Caster has been taken up on the request of Indian Railways to avoid concentration of non-metallic inclusions in the product.

• An End Forging Plant along with associated auxiliary units is being installed in the existing bay of Rail & Structural Mill for converting end profile thick web rails to profile of stock rails, needed by Indian Railways for manufacture of switches.

• Coal Dust Injection system in Blast Furnace 3&4 for reduction in coke rate and improvement of furnace productivity.

• Hot Metal Desulphurisation Unit at SMS-II will help in production of low sulphur steel by desulphurisation of hot metal before steel making to meet the increasing demand for high quality steel, particularly for application in off-shore, transport and structural sectors

• Pipe Coating Plant is being carried out in order to supply coated pipes, mainly to the hydrocarbon sector. Coating of 3-layers poly ethylene (3-LPE) to be applied on the external surfaces of the bare pipes (60,000 tpa capacity) would prevent corrosion of pipes.

• Coal Dust Injection system in Blast Furnace4 for reduction in coke rate and improvement of the blast furnace productivity.

• Rebuilding of Coke Oven Battery No.4 has been taken-up for incorporating state-of-the-art pollution control equipment to achieve the latest statutory emission norms of Ministry of Environment & Forests

• Turbo Blower No.5 of CPP-I is being up-rated by the Original Equipment Manufacturer M/s MAN Turbo,

3Germany with a discharge volume of 1,63,000 Nm /hr at a 2pressure of 2.3 Kg/cm for meeting the high top pressure

requirement of BF-4 and also meeting air requirement of other BFs in case of shutdown/non-availability of other Turbo Blowers.

Durgapur Steel Plant (DSP)

Rourkela Steel Plant (RSP)

Freight2% Interest & Depn

5%Other Exps

6%R & M

2%

Stores10%

Coal/Coke27%

Other RawMaterials

15%Power & Fuel9%

Salary & Wages24%

Dividend &Dividend Tax to

Govt.11%

Sales Tax11%

Royalty &Cess1%

Other Taxes2%

Excise Duty45%

Customs Duty2%

Corporate Tax& FBT28%

2524

Elements of Expenditure 2007-08

Contribution to Exchequer 2007-08

3• A new 100,000m capacity Coke Oven (CO) Gas Holder is being installed in Coal Chemicals Department as a replacement to the existing CO Gas holder in order to maintain adequate pressure in the gas grid, for storing surplus CO gas and utilizing it as & when required.

• A new Oxygen Plant of 700 tpd capacity is being installed to produce Oxygen mainly for enrichment in blast furnaces and production of other gases (Nitrogen & Argon) for steel making process.

• Installation of Online Ultrasonic Testing (UST) Machine at Plate Mill has been taken-up for producing quality plates to meet the substantial market demand.

• Simultaneous Blowing of BOF Converters of SMS-II has been taken-up for enhancing the production capacity of the shop from 1.68 Mtpa to 1.85 Mtpa. For this, major facilities envisaged are strengthening of secondary refining facility, piping network for oxygen, nitrogen, water and other utilities, material handling facilities like ladles, slag pots, cranes etc.

• Modification/Revamping of Mae West blocks in Hot Strip Mill has been taken up to ensure smooth functioning of Hot Strip Mill by avoiding repeated breakdowns in the finishing stands.

• Air Turbo Compressor and Oxygen Turbo Compressor is being taken up for maintaining health of equipment and output of Oxygen Plant on a sustainable basis in future. Besides, a 50 MW Power Tapping Arrangement is being done to meet the electrical power requirement of proposed 1250 TPD Oxygen Plant on BOO basis.

• 50 MW Power Tapping arrangement to meet the electrical power requirement of 1250 TPD Oxygen Plant to be set up on Built-Own-Operate (BOO) basis.

• Coal Dust Injection in BF-2&3 system is a technical necessity for reduction in coke rate and improvement of the blast furnace productivity.

• Computerised Process Control System of SMS-II shall help in improving the yield and production of quality steel as per customers' requirement.

• Augmentation of storage facilities of coking coal in Coal Handling Plant envisages increasing coking coal storage capacity from 115,000 T to 202,500 T, extension of railway tracks, upgradation of conveyor facility, installation of new conveyors, 2 nos. new wagon pushers and PLC based automation of conveyors and associated facilities.

• Ladle Furnace in SMS-II would facilitate production of value added steels, especially steel grades with low sulphur content, reduction in return heats, savings in oxygen consumption & ferro alloys, besides creating a buffer station for longer sequence at casters & flexibility in operation.

• The extension of existing covered slag yard is being carried out, with provision for new slag pit, new crane with grab and magnet to cope with the increased production level of 3.2 Mt/yr crude steel from SMS-II under Expansion of Bokaro Steel Plant.

• The replacement of 6 no. of Battery Cyclones of 720,000 m3/hr with 6 no. of Electrostatic Precipitators of capacity 900,000 m3/hr is being carried out in three machines of the Sinter Plant for cleaning of sinter process gas to meet the statutory requirement of emission level of outlet dust at 150 mg/Nm3 as prescribed by Central Pollution Control Board.

• One new Turbo-Blower along with associated facilities is being installed to meet the enhanced cold blast

Bokaro Steel Plant (BSL)

requirement of Blast Furnace-2 at blower discharge volume of 4000 Nm3/min and discharge pressure of 3.9

2kg/ cm at blower end.

• The Blast Furnace-2 is being upgraded to increase the working volume from 1758 m3 to 2250 m3 with higher productivity level (2 t/m3/day) by incorporating state-of-art technology in the blast furnace proper. Also installation of a top pressure recovery turbine has been envisaged.

• Rebuilding of Coke Oven Batteries 1 & 2 with pollution control facilities has been taken up for achieving the emission standards as per CPCB norms of Govt. of India.

• Rebuilding of Coke Oven Battery No.10 has been taken-up wherein state-of-art pollution control equipment shall be incorporated to achieve the latest statutory emission norms of Ministry of Environment & Forests (MOEF) along with the renewal of By-product Plant.

• Bloom Caster in SMS has been taken up for replacing the old ingot teeming technology by continuous casting technology for steel production which will improve yield. The capacity of bloom caster is 125,000 tpa.

General (BSP, RSP, BSL)

• Procurement of 23 nos. of locos has been taken up to replace old medium horse power locos by high horse power locos.

• Expansion Plans for IISCO Steel Plant (Rs.12743 crore) and Salem Steel Plant (Rs.1902 crore) have been accorded final approval by SAIL Board during the year. Work is in progress for all the major packages.

• Also final approval have been accorded for the New Cold Rolling Mill package (Rs.2524 crore) of Bokaro Steel Plant and two packages of Bhilai Steel Plant viz. Compressed Air Station-4 (Rs.135 crore) and Ore Handling Plant-A (Rs.184 crore) during the year.

Centre for Engineering & Technology (CET) is providing its services in the areas of modernization, technological upgradation and, addition, modifications and replacement scheme to plants and units with SAIL and clients outside SAIL - both in India and abroad.

• Rebuilding of Coke Oven Battery No.1, RSP

• Rebuilding of Coke Oven Battery No.5, BSL

• Installation of Bloom Caster, DSP

• Rebuilding of Blast Furnace No.2, ISP

• Installation of HCL Acid Regeneration Plant for Pickling Line-II, BSL

• Installation of Electro-Discharge Texturing Machine in CRM, BSL

• Revamping of Turbo Blower, ISP.

• Rebuilding of Coke Oven Battery No.5 with Pollution Control Facilities at BSP

• Installation of new Slab Caster, RH Degasser and Ladle Furnace in SMS-II, BSP

• Desulphurisation of Hot Metal before SMS-II

• Installation of End Forging Plant for thick web rails, BSP

• Rebuilding of Coke Oven Battery Nos. 1 & 2 with Pollution Control Facilities, BSL

IISCO Steel Plant (ISP)

VISL

Expansion Plans in progress

G. IN HOUSE DESIGN & ENGINEERING

Major projects implemented during 2007-08:

Major Ongoing projects:

• Upgradation of BF-2, BSL• Augmentation of storage facilities of coking coal in BSL• Installation of CDI unit in BF-2 & 3, BSL• Rebuilding of Coke Oven Battery No.4 with Pollution

Control Facilities at RSP• Installation of CDI in BF # 4, RSP• Installation of 3 LPE Casting Line, RSP• Installation of 700 tpd Oxygen Plant, RSP• Capacity expansion of SMS-II by simultaneous blowing, RSP• Installation of CDI in BF-3 & 4 at DSP

Research & Development Centre for Iron and Steel (RDCIS) have provided innovative technological inputs to different units of SAIL, with special emphasis on cost reduction, quality improvement, product development, energy conservation and automation. In the year 2007-08, RDCIS had pursued 123 nos. of research projects; out of these 70 projects were targeted for completion. Surpassing the target, RDCIS had completed 73 nos. of projects during the year. Several new products were developed viz., Armour Quality Steel Plates for T-90 MBT & Rail Wagons at RSP, Low Carbon EDD HR/CR Steels for Auto bodies at BSL, SAILMA 550 Hl Plate at BSP, Boron Treated Al Killed Low Carbon Steel at BSL and Vanadium Micro-alloyed Rail at BSP. The Centre strengthened its technology marketing efforts by providing consultancy services to M/s. Bhushan Power & Steel Ltd., Kolkata and M/s. KMMI, Bangalore. Specialised technology know-how was transferred to M/s. Refcom, Purulia, WB. The Centre also undertook contract research sponsored by Ministry of Information Technology, New Delhi, Petroleum Conservation Research Association, New Delhi and Coal India Ltd., Kolkata.

During the year, 179 nos. of technical papers were published/presented, besides filing of 36 patents (including 11 from SAIL plants) and 35 copyrights (including 10 from SAIL plants). The scientists at the Centre bagged ten national level awards.

Environment Management Division in SAIL ensures continual improvement in environmental protection, technological conservation and renewable energy development. Trees have significant role in protection of environment and ecological balance thus acting as carbon sink. Extensive afforestation programme has been followed in all the SAIL Plants and mines. During 2007-08, 2.6 lakh saplings have been planted covering an area of 116 hectares. Apart from plantation, the division has also associated in restoring over 200 acres of degraded mining area at Purnapani, Barsua and Kalta. Pisciculture has been taken in the abandoned mining areas at Purnapani and over 2 lakhs fishlings are flourishing in 100 acres of quarry water voids.

SAIL Board has accorded its approval to the approach of installing wind farms as a source of clean energy and directed for a phase wise implementation starting with Salem Steel Plant. Feasibility report for the wind farm has been prepared and C-WET engaged as technical consultants for the project. A 50 MW wind power plant project is being implemented in Tamilnadu for meeting the captive requirements of Salem Steel Plant.

During the year, a number of pollution control facilities such as Dry fog dust suppression system in the stock house of BF #4 of BSP, Fume extraction system with ladle de-skulling at RSP have been commissioned/revamped for which the

H. RESEARCH AND DEVELOPMENT

I. ENVIRONMENTAL PROTECTION AND CONSERVATION

Renewable Energy Developments

J. TECHNOLOGICAL CONSERVATION

Environment Management Division (EMD) has provided technical support . All the pollution control facilities were made to run effectively through regular maintenance and operation practices. The EMD has also provided consultancy service to Central Pollution Control Board for “Description of Clean Technology and Development of Environmental Standards for Iron Ore Mines in India.

SAIL has been a pioneer in the area of Corporate Social Responsibility (CSR) since inception, substantially contributing towards betterment of social indices in and around the periphery of steel plants. With the underlying philosophy and a credo to make a meaningful difference in people's lives, SAIL has been structuring and implementing CSR initiatives right from the inception. These efforts have seen the obscure villages of yesterday, where SAIL plants are located, turn into leading industrial centers in the country today.

The Company has an efficient system of internal controls for achieving the following business objectives of the company:

• Efficiency of operations

• Protection of resources

• Accuracy and promptness of financial reporting

• Compliance with the laid down policies and procedures

• Compliance with laws and regulations.

In SAIL, Internal Audit is a multi-disciplinary function which reviews, evaluates and appraises the various systems, procedures/policies of the Company and suggests meaningful and useful improvements. It helps management to accomplish its objectives by bringing a systematic and disciplined approach to improve the effectiveness of risk management towards good corporate governance.

The Company has taken a number of steps to make the audit function more effective. The Internal Audit is subjected to overall control environment supervised by Board Level Audit Committee, providing independence to the Internal Audit function, emphasizing transparency in the systems and internal controls with appropriate skill-mix of internal audit personnel etc. Annual Audit Plans are based on identification of key-risk areas with thrust on system/process audits and bench-marking of the best practices followed in the plants/units is being done so as to achieve cost reduction in overall operation of the company. Development of Internal Audit Executives, bringing awareness amongst auditees, converging on the pro-active role of internal audit remained other focused areas during the year.

The Internal Audit system is supplemented by well-documented policies, guidelines and procedures and regular reviews are being carried out by our Internal Audit Department. The reports containing significant audit findings are periodically submitted to the management and Audit Committee of the Company.

Statement in the Management Discussion and Analysis, describing the Company's objective, projections and estimates are forward looking statement and progressive within the meaning of applicable security laws and regulations. Actual results may vary from those expressed or implied, depending upon economic conditions, Government policies and other incidental factors.

K. CORPORATE SOCIAL RESPONSIBILITY

L. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

CAUTIONARY STATEMENT

2726

VALUE ADDED STATEMENT

SHAREHOLDING PATTERN (As on 31st March, 2008)

(Rs. in crore)

For the year 2007-08 2006-07

Value of own production 46385 39841

Other Revenues 1831 48216 1532 41373

Less: Cost of Raw Materials 12632 12262

Stores and Spares 2845 2602

Power and Fuel 2825 2574

Excise Duty 6047 5266

Freight Outward 718 692

Other Operating Cost 2275 27342 1927 25323

Total Value Added 20874 16051

Establishment Cost 7919 5084

Financing Cost 251 332

Dividend 1528 1280

Corporate Income Tax 3932 3221

Dividend Tax 259 198

Income Retained in Business

Depreciation 1235 1211

Retained in Business 5750 6985 4724 5935

Total Value Applied 20874 16050

CATEGORY Number of Number of Amount % ofEquity Shares Held Holders (Rs. in Crore) Equity

Government of India 3544690285 1 3544.69 85.82

Financial Institutions 191505961 30 191.51 4.64

Banks 8013743 48 8.01 0.19

Mutual Funds 58421505 116 58.42 1.42

Foreign Institutional Investors (FII's) 223582002 293 223.58 5.41

Global Depository Receipts (GDRs) 787050 2 0.79 0.02

Companies (including Trusts & Clearing Members) 24391740 3546 24.39 0.59

Individuals (Including Employees & NRIs) 79008259 284907 79.01 1.91

TOTAL 4130400545 288943 4130.40 100.00

FINANCIALS

PRODUCTION TREND

(Rupees in crore)

2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-2000 1998-99

Gross Sales 45555 39189 32280 31805 24178 19207 15502 16233 16250 14994

Net Sales 39508 33923 27860 28523 21297 16837 13519 14110 14311 13138

Earnings before depreciation, interest & tax(EBIDTA) 12955 10966 7381 11097 4652 2165 1011 2167 1202 1503

Depreciation 1235 1211 1207 1127 1123 1147 1156 1144 1133 1104

Interest & Finance charges 251 332 468 605 901 1334 1562 1752 1789 2017

Profit Before Tax ( PBT ) 11469 9423 5706 9365 2628 -316 -1707 -729 -1720 -1618

Provision for tax/Income Tax Refund (-) 3932 3221 1693 2548 116 -12 - - - -44

Profit After Tax ( PAT ) 7537 6202 4013 6817 2512 -304 -1707 -729 -1720 -1574

Dividends 1528 1280 826 1363 - - - - - -

Equity Capital 4130 4130 4130 4130 4130 4130 4130 4130 4130 4130

Reserves & Surplus (net of DRE) 18874 13054 8255 5881 529 -2141 -1878 33 635 2756

Net Worth 23004 17184 12386 10011 4659 1989 2252 4163 4765 6886

(Equity Capital and Reserves & Surplus)

Total Loans 3045 4181 4298 5770 8690 12928 14019 14251 15082 21017

Net Fixed Assets 11571 11598 12162 12485 13168 14036 14798 15177 15873 18307

Capital Work-in-progress 2390 1199 758 366 382 361 556 1221 1475 2589

Current Assets (including short term deposits) 26318 20379 17384 14187 8075 7282 7107 8362 8259 11399

Current Liabilities & Provisions 9439 6500 8108 6608 6025 4777 4849 5274 5027 4880

Working Capital 16879 13879 9276 7579 2050 2505 2258 3088 3232 6519

(Current Assets less Current Liabilities)

Capital Employed 28450 25476 21782 20064 15218 16541 17056 18265 19105 24826

(Net Fixed Assets + Working Capital)

Market price per share (In Rs.) 185 113 83 63 32 9 5 6 8 6(As at the end of the year)

Key Financial Ratios

EBDITA to average capital employed (%) 48.0 46.4 35.3 62.9 29.3 12.9 5.7 11.6 5.5 -

PBT to Net Sales (%) 29.03 27.78 20.48 32.83 12.34 - - - - -

PBT to average capital employed (%) 42.54 39.88 27.27 53.09 16.55 - - - - -

Return on average net worth (%) 37.51 41.95 35.84 92.94 75.57 - - - - -

Net worth per share of Rs. 10 (Rs.) 55.69 41.60 29.99 24.24 11.28 4.82 5.45 10.08 11.54 16.67

Earnings per share of Rs. 10 (Rs.) 18.25 15.02 9.72 16.50 6.08 - - - - -

Price - earning ratio (times) 10.12 7.53 8.56 3.81 5.31 - - - - -

Dividend per share of Rs. 10 (Rs.) 3.70 3.10 2.00 3.30 - - - - - -

Effective dividend rate (%) 2.00 2.74 2.41 5.24 - - - - - -

Debt - Equity (times) 0.13 0.24 0.35 0.58 1.87 6.50 6.23 3.42 3.17 3.05

Current ratio (times) 2.79 3.14 2.14 2.15 1.34 1.52 1.47 1.59 1.64 2.34

Capital employed to turnover ratio (times) 1.60 1.54 1.48 1.59 1.59 1.16 0.91 0.89 0.85 0.60

Working capital turnover ratio (times) 2.70 2.82 3.48 4.20 11.79 7.67 6.87 5.26 5.03 2.30

Interest coverage ratio (times) 46.39 29.29 13.07 16.43 3.88 0.76 -0.09 0.56 0.04 0.17

(Thousand tonnes)

Item 2007-08 2006-07 2005-06* 2004-05 2003-04 2002-03 2001-02 00-01 99-00 98-99

Main Integrated Steel Plants

(BSP, DSP, RSP, BSL, ISP)

Hot Metal 14981 14368 14398 12351 12749 12080 11327 11202 10939 11180

Crude Steel 13649 13194 13177 11827 11828 11087 10467 10306 9788 9858

Pig Iron 410 452 558 147 278 288 353 358 574 731

Saleable Steel

Semi Finished 2243 2278 2273 1751 2146 2057 2149 2141 2592 2293

Finished 10288 9849 9351 8900 8581 8029 7315 7269 6637 6034

Total: Integrated Steel Plants 12531 12127 11624 10651 10727 10086 9464 9410 9229 8327

Alloy & Special Plants 513 454 427 379 298 266 234 293 301 275

(ASP, SSP & VISL)

Total Saleable Steel 13044 12581 12051 11030 11026 10352 9697 9703 9530 8602

* Includes IISCO, merged with SAIL from 2005-06

Ten Years at a glance

Government of India85.82%

Companies (inculding Trusts & Clearing Members) 0.59%

Indviduals (Including Employees & NRIs)

1.91%

Global Depository Receipts (GDRs) 0.02%

Foreign Institutional Investors (FII's)

5.41%

Mutual Funds1.42%

Financial Institutions4.64%

Banks0.19%

SHAREHOLDING PATTERN (% of Equity)

2928

Net worth Per Share (In Rupees)

11

24

30

42

56

0

10

20

30

40

50

60

2003-04 2004-05 2005-06 2006-07 2007-08

4555539189

3228031800

24178

0

10000

20000

30000

40000

50000

2003-04 2004-05 2005-06 2006-07 2007-08

Turnover (Rs. in crore)

Financial Highlights

3130

8690

46595770

10011

4298

12386

41813045

23004

0

5000

10000

15000

20000

25000

2003-04 2004-05 2005-06 2006-07 2007-08

Debt and Equity (Rs. in crore)

Total loans

Shareholders' Funds17184

75736202

4013

6817

2512

2003-04 2004-05 2005-06 2006-07 2007-080

1000

2000

3000

4000

5000

6000

7000

8000

Profit after tax (Rs. in crore)

3332

Schedule As at As atNo. 31st March, 2008 31st March, 2007

(Rupees in crore)

Shareholders' FundShare Capital 1.1 4130.40 4130.40Reserves and Surplus 1.2 18933.17 23063.57 13182.75 17313.15

Loan FundsSecured Loans 1.3 925.31 1556.39Unsecured Loans 1.4 2119.93 3045.24 2624.13 4180.52

Deferred Tax Liability ( Net ) 1568.60 1412.66

27677.41 22906.33

Fixed Assets 1.5Gross Block 30922.73 29912.71Less: Depreciation 19351.42 18315.00

Net Block 11571.31 11597.71Capital Work-in-Progress 1.6 2389.55 13960.86 1198.52 12796.23

Investments 1.7 538.20 513.79

Current Assets, Loans & Advances

Inventories 1.8 6857.23 6651.47Sundry Debtors 1.9 3048.12 2314.75Cash & Bank Balances 1.10 13759.44 9609.83Other Current Assets 1.11 273.08 152.56Loans & Advances 1.12 2379.75 1650.01

26317.62 20378.62

Less: Current Liabilities & ProvisionsCurrent Liabilities 1.13 6400.92 5397.77Provisions 1.14 6797.83 5513.69

13198.75 10911.46

Net Current Assets 13118.87 9467.16Miscellaneous Expenditure 1.15 59.48 129.15

(to the extent not written off or adjusted)27677.41 22906.33

Significant Accounting Policies and Notes on Accounts 3Schedules 1 and 3 annexed hereto, form part of the Balance Sheet.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-( Devinder Kumar ) ( Soiles Bhattacharya) ( S.K.Roongta)

Secretary Director ( Finance ) Chairman

In terms of our report of even date

For Ray & Ray For Dass Maulik Mahendra K Agrawala & co. For T.R.Chadha & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-( B.K. Ghosh ) (Mahendra K Agrawala) ( Ajesh Tuli)

Partner Partner Partner

Place : New DelhiDated : May 16, 2008

SOURCES OF FUNDS

APPLICATION OF FUNDS

Schedule Year ended Year endedNo. 31st March, 2008 31st March, 2007

(Rupees in crore)

Sales 2.1 45555.34 39188.66Less : Excise duty 6046.89 39508.45 5265.54 33923.12 Finished products internally consumed 490.81 410.00Interest earned 2.2 1184.76 752.60Other revenues 2.3 646.27 779.66Provisions no longer required written back 2.4 60.62 58.65

41890.91 35924.03

Accretion( - ) to stocks 2.5 -339.30 -242.58Raw Materials Consumed 2.6 13960.14 13271.08Purchase of Finished / Semi-finished Goods 3.63 1.29Employees' Remuneration & Benefits 2.7 7919.02 5084.18Stores & Spares Consumed 3293.90 3002.23Power & Fuel 2.8 2825.56 2574.40Repairs & Maintenance 2.9 552.15 383.43Freight Outward 717.85 692.04Other Expenses 2.10 1836.32 1619.15Interest & Finance Charges 2.11 250.94 332.13Depreciation 1235.48 1211.48

Total 32255.69 27928.83Less : Inter Account Adjustments 2.12 1832.22 30423.47 1444.90 26483.93

11467.44 9440.10Adjustments pertaining to earlier years 2.13 1.29 -17.05

11468.73 9423.05

Profit before taxLess : Provision for taxation

Current tax (including provision for wealth tax Rs. 0.67 crore 3745.81 3299.55 -Previous year Rs. 0.43 crore) Deferred tax 155.94 -71.80 Fringe benefit tax 32.90 26.48 Earlier years -2.70 3931.95 -33.47 3220.76

Profit after tax 7536.78 6202.29Transferred from Bonds Redemption Reserve ( net ) 86.39 38.42Balance brought forward from last year 10811.65 6698.84Provision towards long term service awards to 0.00 -14.50employees upto 31st March 2006 (net of tax)Amount available for appropriation 18434.82 12925.05

Amount Transferred to General Reserve 770.00 635.00Interim dividend 784.78 660.86Proposed dividend ( Final ) 743.47 619.56Tax on Interim dividend 133.37 92.69Tax on Proposed dividend ( Final ) 125.54 105.29Balance carried to Balance Sheet 15877.66 10811.65

18434.82 12925.05

Earnings per Share ( Face value Rupees 10/- each )Profit after tax 7536.78 6202.29 Average Number of equity shares 4130400545 4130400545 Basic and Diluted Earnings per share ( Rupees ) 18.25 15.02Significant Accounting Policies and Notes on Accounts 3Schedules 2 and 3 annexed hereto, form part of the Profit & Loss Account.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(Devinder Kumar) (Soiles Bhattacharya) (S.K.Roongta)

Secretary Director ( Finance ) Chairman

In terms of our report of even date

For Ray & Ray For Dass Maulik Mahendra K Agrawala & Co. For T.R.Chadha & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-(B.K. Ghosh) (Mahendra K Agrawala) (Ajesh Tuli)

Partner Partner Partner

Place : New DelhiDated : May 16, 2008

INCOME

EXPENDITURE

APPROPRIATIONS

Profit & Loss Account For the year ended 31st March, 2008

Balance SheetAs at 31st March, 2008

Cash Flow Statement for the Year 2007-08 2006-07

(Rupees in crore)

Net Profit / Loss ( - ) before taxation 11468.73 9423.05

Add / ( Less ) Adjustments for :

Depreciation 1234.33 1236.75

Interest Expenses 250.94 215.25

Bad debts written-off 2.15 4.59

Unrealised Foreign Exchange Fluctuation (22.89) (5.61)

Provision for Long Term Service Awards 0.00 -1.38

Provision for diminution in value of investments 0.00 3.21

Provision for Others 1146.55 (182.35)

Deferred revenue expenditure (Charged during the year) 73.34 127.34

Profit on Sale of Fixed Assets (49.78) (13.93

Interest Income (1184.76) (752.60)

Dividend Income (14.45) (17.34)

Operating Cash Flow before working capital change 12904.16 10036.98

Adjustments for :-

Increase / Decrease in Inventories (205.76) (441.41)

Increase / Decrease in Sundry Debtors (735.52) (437.61)

Increase / Decrease in Loans and Advances (734.35) (394.54)

Increase / Decrease in Current liabilities 935.90 337.90

Deferred revenue expenditure (Additions) (3.67) (40.67)

Cash generated from Operations 12160.76 9060.65

Direct Taxes Paid (3782.58) (3427.74)

Net Cash from Operating Activities 8378.18 5632.91

Purchase of Fixed Assets (2293.18) (1137.66)

Proceeds from sale of Fixed Assets 94.40 46.82

Loans to Subsidiary & Other Companies 4.61 25.45

Purchase/Sale of investments (net) (24.41) (225.00)

Interest received 1064.24 685.52 Dividend received 14.45 17.34

Net Cash from / (used in) Investing Activities (1139.89) (587.53)

A. Cash Flow from Operating Activities

B. Cash Flow from Investing Activities

Cash Flow Statement

Cash Flow Statement for the Year 2007-08 2006-07

(Rupees in crore)

Increase in Reserve & Surplus 0.80 2.35

(Decrease) in Borrowings (net) (1112.39) (111.49)

Reversal of Interest on SDF Loans 0.00 116.88

Interest and Finance Charges Paid (334.09) (509.16)

Dividend Paid (1404.34) (970.64)

Tax on Dividend (238.66) (136.13)

Net Cash from / ( used in ) Financing Activities (3088.68) (1608.19)

Net Increase in Cash & Cash Equivalents (A+B+C) 4149.61 3437.19

Cash & Cash Equivalents (Opening) 9609.83 6172.64

Cash & Cash Equivalents (Closing) 13759.44 9609.83

(Represented by Cash & Bank balances)

Notes :

1. The above Cash Flow Statement has been prepared pursuant to Clause 32 of Listing Agreement with Stock Exchanges and under the indirect method set out in Accounting Standard-3 issued by The Institute of Chartered Accountants of India.

2. Figures in bracket indicate cash outflow.

3. Significant Accounting Policies and Notes to Accounts ( Schedule 3 ) form an integral part of the Cash Flow Statement.

4. Previous year figures have been rearranged / regrouped wherever necessary to conform to current year's classification.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(Devinder Kumar) (Soiles Bhattacharya) (S.K.Roongta)

Secretary Director ( Finance ) Chairman

In terms of our report of even date

For Ray & Ray For Dass Maulik Mahendra K Agrawala & Co. For T.R.Chadha & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-(B.K. Ghosh) (Mahendra K Agrawala) (Ajesh Tuli)

Partner Partner Partner

Place : New Delhi

Dated : May 16, 2008

C. Cash Flow from Financing Activities

3534

1.1: SHARE CAPITAL

1.2 : RESERVES AND SURPLUS

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)

Authorised

5,00,00,00,000 equity

shares of Rs. 10 each 5000.00 5000.00

Issued, Subscribed & Paid-up

4,13,04,00,545 equity sharesof Rs.10/- each fully paid. 4130.40 4130.40

Note : 1,24,43,82,900 equity shares ofRs.10 each (net of adjustments onreduction of capital) were allotted as fullypaid up for consideration other than cash.

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)

Capital Reserve 3.14 3.14

Prime Minister's Trophy Award Fund

As per last Balance Sheet 11.33 8.98

Additions 1.28 2.77

12.61 11.75

Less: Utilisation 0.48 12.13 0.42 11.33

Securities Premium 235.29 235.29

Bond Redemption Reserve

As per last Balance Sheet 348.83 387.25

Transferred from Profit & Loss Account 31.82 59.40

Transferred to Profit & Loss Account 118.21 262.44 97.82 348.83

General Reserve

As per last Balance Sheet 1772.51 1137.51

Transferred from Profit & Loss Account 770.00 2542.51 635.00 1772.51

Surplus in Profit & Loss Account 15877.66 10811.65

18933.17 13182.75

1.3 : SECURED LOANS

1.4 : UNSECURED LOANS

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)Working Capital Borrowings from Banks (a) 260.81 266.24

Loans from Banks against term deposits 0.00 525.00

Non Convertible Bonds (b)

Interest Rate Date of Redemption

12.95 % 1st December 2007 0.00 100.05

11.60 % 1st June 2008 33.95 33.95

7.80 % 1st September 2008 0.15 0.15

11.50% 1st December 2008 0.30 0.30

11.10% 20th July 2009 (c) 0.00 0.50

11.50% 20th July 2009 48.65 48.65

9.75% 1st February 2010 (c) 0.00 0.10

10.25% 1st February 2010 88.35 88.35

11.50% 15th April 2010 21.00 21.00

8% 1st September 2010 0.70 0.70

13.05 % 1st December 2010 59.80 59.80

12.10 % 1st June 2011 91.30 91.30

12% 1st December 2011 76.90 76.90

12% 20th July 2012 109.90 109.90

10.75% 1st February 2013 75.30 75.30

8.20% 1st September 2013 58.20 58.20

664.50 765.15

925.31 1556.39

(a) Secured by hypothecation of all current assets

(b) Secured by charges ranking pari-passu inter-se, on all the present and future immovable property at Mouje-Wadej of City taluka, District Ahmedabad, Gujarat and Company's Plant & Machinery, including the land on which it stands, pertaining to Durgapur Steel Plant.( DSP )

(c) Redeemed at par by exercising call option

Note : Amount repayable within one year as at 31.03.2008, Rs.34.40 crore (Previous Year : Rs. 625.05 crore)

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)Government of India 0.27 0.27

Interest accrued and due thereon 0.58 0.85 0.58 0.85

Steel Development Fund 204.16 204.16

Interest accrued and due thereon 907.37 1111.53 888.42 1092.58

Foreign Currency Loans

Long Term @ 515.65 512.59

Short Term 0.00 515.65 23.06 535.65

Non convertible Bonds @

Interest Rate Date of Redemption

( % )

10.25% 3rd June, 2007 0.00 450.00

11.60% 12th March, 2008 0.00 15.00

10.50% 1st August,2008 35.00 35.00

11.50% 30th March, 2010 # 43.50 43.50

12.45% 1st September, 2010 * 0.00 38.15

12.55% 1st September, 2010 39.40 39.40

12.10% 12th March, 2011 195.00 195.00

11% 1st August, 2011 115.00 115.00

6.4% 15th October, 2010 64.00 491.90 64.00 995.05

2119.93 2624.13

@ Guaranteed by Government of India /State Bank of India

# 11.50% Non-convertible Bonds earlier guaranteed by Government of India, have beenconverted into 11.85% Non-convertible secured bonds w.e.f. 01.04.2008

* Redeemed at par by exercising call option

Note : Amount repayable within one year as at 31.03.2008, Rs. 994.24 crore (Previous Year : Rs. 1422.07 crore)

Schedules(Forming part of the Balance Sheet)

Schedules(Forming part of the Balance Sheet)

36 37

1.5 : FIXED ASSETSGROSS BLOCK (AT COST)

Description As at Additional/ Deduction As at

31st Adjustments 31stMarch, March,

2007 2008

(Rupees in crore)

A. PLANTS, MINES, OTHERS

Land (including cost of development)

-Freehold Land 117.61 40.56 0.06 158.11

-Leasehold Land 27.07 15.16 0.00 42.23

Railway Lines & Sidings 225.86 0.14 0.33 225.67

Roads, Bridges & Culverts 153.94 1.56 -0.19 155.69

Buildings 1683.25 23.73 -0.13 1707.11

Plant & Machinery

-Steel Plant 23574.92 798.70 170.71 24202.91

-Others 1617.20 93.59 30.06 1680.73

Furniture & Fittings 77.02 4.75 0.14 81.63

Vehicles 489.63 98.67 10.34 577.96

Water Supply & Sewerage 298.35 -0.99 -0.02 297.38

EDP Equipment's 199.80 16.11 1.96 213.95

Software (Intangible) 18.51 2.98 0.16 21.33

Mining Rights (Intangible) 202.57 105.52 15.80 292.29

Miscellaneous Articles 234.40 12.24 2.76 243.88

Sub-total 'A' 28920.13 1212.72 231.98 29900.87

Figures for the previous year 28388.97 674.37 143.21 28920.13

B. SOCIAL FACILITIES

Land (including cost of development)

-Freehold Land 9.96 0.03 0.00 9.99

-Leasehold Land 7.09 0.00 0.00 7.09

Roads, Bridges & Culverts 50.40 0.00 0.00 50.40

Buildings 558.91 7.90 0.38 566.43

Plant & Machinery-Others 88.31 4.25 0.32 92.24

Furniture & Fittings 15.08 1.46 0.33 16.21

Vehicles 9.11 1.17 0.50 9.78

Water Supply & Sewerage 115.24 0.81 0.02 116.03

EDP Equipment's 9.55 3.31 0.36 12.50

Software (Intangible) 0.45 0.18 0.00 0.63

Miscellaneous Articles 104.52 14.18 3.66 115.04

Sub-total 'B' 968.62 33.29 5.57 996.34

Figures for the previous year 947.07 26.51 4.96 968.62

C. ASSETS RETIRED FROM ACTIVE USE

Unservicable / Obsolete Assets 23.96 6.94 5.38 25.52

Figures for the previous year 24.41 4.42 4.87 23.96

Total ('A'+'B'+'C') 29912.71 1252.95 242.93 30922.73

Figures for the previous year 29360.45 705.30 153.04 29912.71

1.5 : FIXED ASSETSDEPRECIATION NET BLOCK

Description Up to For Less : On sales / Up to As at As at31st the Adjustments 31st 31st 31st

March, year March, March, March,2007 2008 2008 2007

(Rupees in crore)

A. PLANTS, MINES, OTHERS

Land(including cost of development)

-Freehold Land 0.00 0.71 0.00 0.71 157.40 117.61

-Leasehold Land 9.78 8.25 0.00 18.03 24.20 17.29

Railway Lines & Sidings 162.43 6.04 0.27 168.20 57.47 63.43

Roads, Bridges & Culverts 45.07 2.60 -0.01 47.68 108.01 108.87

Buildings 904.30 46.40 0.11 950.59 756.52 778.95

Plant & Machinery

-Steel Plant 14519.27 1012.52 144.19 15387.60 8815.31 9055.65

-Others 1168.28 71.35 28.14 1211.49 469.24 448.92

Furniture & Fittings 63.27 4.06 0.13 67.20 14.43 13.75

Vehicles 365.81 15.35 9.79 371.37 206.59 123.82

Water Supply & Sewerage 222.42 7.97 0.01 230.38 67.00 75.93

EDP Equipment's 161.00 9.82 1.83 168.99 44.96 38.80

Software (Intangible) 15.87 1.55 0.16 17.26 4.07 2.64

Mining Rights (Intangible) 65.80 13.56 7.61 71.75 220.54 136.77

Miscellaneous Articles 155.17 9.85 2.06 162.96 80.92 79.23

Sub-total 'A' 17858.47 1210.03 194.29 18874.21 11026.66 11061.66

Figures for the previous year 16764.19 1210.96 116.68 17858.47 11061.66

B. SOCIAL FACILITIES

Land(including cost of development)

-Freehold Land - - - - 9.99 9.96

-Leasehold Land 4.73 0.13 0.00 4.86 2.23 2.36

Roads, Bridges & Culverts 17.11 1.74 0.00 18.85 31.55 33.29

Buildings 190.83 9.19 0.14 199.88 366.55 368.08

Plant & Machinery-Others 61.28 3.05 0.19 64.14 28.10 27.03

Furniture & Fittings 12.03 0.74 0.11 12.66 3.55 3.05

Vehicles 6.44 0.36 0.46 6.34 3.44 2.67

Water Supply & Sewerage 89.81 3.33 0.02 93.12 22.91 25.43

EDP Equipment's 3.81 1.58 0.12 5.27 7.23 5.74

Software (Intangible) 0.42 0.01 0.00 0.43 0.20 0.03

Miscellaneous Articles 70.07 4.57 2.98 71.66 43.38 34.45

Sub-total 'B' 456.53 24.70 4.02 477.21 519.13 512.09

Figures for the previous year 434.14 25.90 3.51 456.53 512.09

C. ASSETS RETIRED FROM ACTIVE USE

Unservicable / Obsolete Assets - - - - 25.52 23.96

Figures for the previous year - - - - 23.96

Total ('A'+'B'+'C') 18315.00 1234.73 198.31 19351.42 11571.31 11597.71

Figures for the previous year 17198.33 1236.86 120.19 18315.00 11597.71

Note : Allocation of Depreciation Current PreviousYear Year

(a) Charged to Profit & Loss Account 1235.48 1211.48

(b) Charged to expenditure during construction 0.40 0.11

(c) Adjustments pertaining to earlier years -1.15 25.27

Total 1234.73 1236.86

Schedules(Forming part of the Balance Sheet)

Schedules(Forming part of the Balance Sheet)

3938

1.6 : CAPITAL WORK-IN-PROGRESS

1.6.1: EXPENDITURE DURING CONSTRUCTION(pending allocation)

As at As at

31st March, 2008 31st March, 2007

(Rupees in crore)

Expenditure during construction 16.66 5.51

pending allocation (Schedule 1.6.1)

Capital Work-in-progress

Steel Plants & Units 1382.69 820.12

Township 23.42 10.52

Ore Mines and Quarries 3.72 0.00

1409.83 830.64

Less: Provisions 56.74 1353.09 58.89 771.75

Capital equipments pending erection, 267.20 194.88installation and commissioning

Construction Stores and Spares 33.17 23.15 Less: Provision for non-moving items 2.18 30.99 2.96 20.19

Advances 722.63 207.64

Less: Provision for doubtful advance 1.02 721.61 1.45 206.19

2389.55 1198.52

Particulars of advances

Unsecured, Considered Good 721.61 206.19

(including advances backed by

Bank Guarantees Rs. 59.11 crore)

(Previous year Rs. 0.26 crore)

Unsecured, Considered Doubtful 1.02 1.45

722.63 207.64

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)

Opening Balance (a) 5.51 4.46

Expenditure incurred during the yearEmployees' Remuneration & Benefits

Salaries & Wages 47.01 27.86

Company's contribution to Provident fund 3.68 2.64

Travel Concession 2.86 0.47

Welfare Expenses 0.35 0.14

Gratuity 4.76 58.66 2.02 33.13

Technical Consultants' fees & know-how 25.36 6.69

Repairs & Maintenance 1.48 0.11

Stores and Spares 1.43 1.69

Power & Fuel 10.19 5.76

Other expenses 8.09 6.38

Interest & Finance charges 1.68 0.88

Depreciation 0.40 0.11

107.29 54.75

Less: Recoveries

Interest Earned 1.11 0.00

Liquidated Damages 1.53 6.35

Hire Charges 1.25 0.37

Sundries 0.80 4.69 1.08 7.80

Net expenditure during the year (b) 102.60 46.95

Total (a)+(b) 108.11 51.41

Less : Amount allocated to Fixed Assets/Capital Work-in-progress 91.45 45.90

Balance carried forward 16.66 5.51

Total

1.7 : INVESTMENTS AT COST – LONG TERM

Number of Face As at As at Fully Paid-up Value per 31st March, 2008 31st March,2007

Equity Shares Share(Rs.)

(Rupees in crore)

(A) Unquoted

Trade Investments

Subsidiary Companies

Maharashtra Elektrosmelt Limited 2,37,87,935 10 23.79 23.79

IISCO Ujjain Pipe & 30,00,000 10 3.00 26.79 3.00 26.79Foundary Company Limited

(under liquidation)

Joint Venture Companies

UEC SAIL Information Technology Limited 1,80,000 10 0.18 0.18

North Bengal Dolomite Limited 97,900 100 0.98 0.98

NTPC- SAIL Power Company Pvt Limited 39,02,50,050 10 390.25 390.25

Bokaro Power Supply Company Pvt Limited 8,40,25,000 10 84.02 84.02

Bhilai Jaypee Cement Limited 2,44,07,500 10 24.41 0.00

SAIL- Bansal Service Centre Limited 32,00,000 10 3.20 3.20

Mjunction Services Limited 40,00,000 10 4.00 4.00

Romelt SAIL ( India ) Limited 63,000 10 0.06 507.10 0.06 482.69

Others

Tata Refractories Limited 22,03,150 10 11.35 11.35

Almora Magnesite Limited 40,000 100 0.40 0.40

Indian Potash Limited 3,60,000 10 0.18 0.18

Cement & Allied Products (Bihar) Limited 2 10 0.00 * 0.00 *

Chemical & Fertilizer Corporation(Bihar) Limited 1 10 0.00 * 0.00 *

Bhilai Power Supply Company Limited 5 10 0.00 * 0.00 *

MSTC Limited 20,000 10 0.01 0.01

Bihar State Finance Corporation 500 100 0.01 0.01

Shares in Co.-operative Societies (Schedule 1.7.1) 0.18 12.13 0.18 12.13

Total (A) 546.02 521.61

(B) Quoted

HDFC Limited 12,000 10 0.01 0.01

HDFC Bank Limited 500 10 0.00 * 0.00 *

ICICI Bank Limited 28600 10 0.05 0.06 0.05 0.06

0.06 @ 0.06 @

Total ( A+B ) 546.08 521.67

Less : Provision for diminution in value of investments 7.88 7.88

538.20 513.79

@ Market value of quoted investments 5.12 4.31

* Cost being less than Rs. 50,000/-, figures not given.

Schedules(Forming part of the Balance Sheet)

Schedules(Forming part of the Balance Sheet)

4140

1.7.1: SHARES IN CO-OPERATIVE SOCIETIES

Number of Face As at As at Fully Paid-up Value per 31st March, 2008 31st March, 2007

Shares Share (Rs.)

(In Rupees)

Bokaro Steel Employees' Co-operativeCredit Society Limited 116500 10 1165000 1165000

Bokaro Steel City Central Consumers'Co-operative Stores Limited 250 10 2500 2500

NMDC Meghahatuburu Employees'Consumers Co-operative Society Limited 25 100 2500 2500

DSP Employees' Co-operativeSociety Limited 1377 100 137700 137700

Bolani Ores Employees' ConsumerCo-operative Society Limited 200 25 5000 5000

IISCO Employees Primary Co-operativeStores Limited 23000 20 460000 460000

1772700 1772700

1.8: INVENTORIES*

1.9 : SUNDRY DEBTORS

1.10 : CASH & BANK BALANCES

As at As at 31st March, 2008 31st March, 2007

(Rupees in crore)

Stores & spares 1521.04 1391.80

Add: In-transit 137.05 130.93

1658.09 1522.73

Less: Provision for Non Moving/Obsolete items 158.16 1499.93 160.78 1361.95

Raw Materials 758.79 1201.81

Add: In-transit 656.25 580.87

1415.04 1782.68

Less: Provision for unusable materials 2.71 1412.33 1.85 1780.83

Finished / Semi-finished products (including scrap) 3944.97 3508.69

6857.23 6651.47

* As certified by the Management and valued as perAccounting Policy No. 1.7 of Schedule 3

As at As at 31st March, 2008 31st March, 2007

(Rupees in crore)

Debts over six months 284.37 274.91

Other Debts 2980.44 2242.12

3264.81 2517.03

Less: Provision for Doubtful Debts 216.69 202.28

3048.12 2314.75

Particulars

Unsecured, considered good 3048.12 2314.75

(Including debts backed by

bank guarantees Rs. 864.83 crore,

Previous year : Rs. 605.81 crore)

Unsecured, considered doubtful 216.69 202.28

3264.81 2517.03

As at As at 31st March, 2008 31st March, 2007

(Rupees in crore)

Cash and Stamps on hand 1.57 1.67

Cheques on hand 400.50 418.55

With Scheduled Banks

Current Account 62.22 12.84

Unpaid Dividend Account 5.88 4.30

Term Deposits 13289.27 13357.37 9172.47 * 9189.61

13759.44 9609.83

* Deposits of Rs. 566.50 crore under bank lien against loans

Schedules(Forming part of the Balance Sheet)

Schedules(Forming part of the Balance Sheet)

4342

1.11 : OTHER CURRENT ASSETS

1.12 : LOANS & ADVANCES

As at As at 31st March, 2008 31st March, 2007

(Rupees in crore)

Interest Receivable/Accrued

Loans to subsidiary company 0.58 0.58

Loans to other companies 0.00 0.63

Term Deposits 232.78 107.43

Employees 31.25 39.36

Others 12.88 9.68

277.49 157.68

Less: Provision for doubtful interest 4.41 5.12

273.08 152.56

Particulars

Unsecured, considered good 273.08 152.56

Unsecured, considered doubtful 4.41 5.12

277.49 157.68

As at As at 31st March, 2008 31st March, 2007

(Rupees in crore)

Loans

Employees 339.46 269.02Subsidiary Company 2.38 2.38 Others 30.83 372.67 35.43 306.83

Advances recoverable in cash or inkind or for value to be received

Claims 779.26 623.50

Contractors & Suppliers 158.99 116.56

Employees 26.99 19.47

Income tax paid in advance / recoverable 11.62 10.50

For purchase of shares * 18.93 0.00 Export Incentive 58.56 107.07

Subsidiary Company 14.04 14.04

Others 404.20 1472.59 317.44 1208.58

DepositsPort Trust, Excise Authorities, 220.67 108.30

Railways, etc.

Others 478.11 698.78 200.18 308.48

2544.04 1823.89 Less : Provision for Doubtful Loans & 164.29 173.88

Advances 2379.75 1650.01

Particulars of Loans & Advances

Secured, considered good 252.21 225.52

Unsecured, considered good 2127.54 1424.49

Unsecured, considered doubtful 164.29 173.88

2544.04 1823.89

Amount due from-Directors 0.01 0.01

Maximum amount due at any time during

the year from-Directors 0.01 0.01

* Includes Rs. 16.43 crore for Joint Venture Companies

1.13: CURRENT LIABILITIES

1.14 : PROVISIONS

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)

Sundry creditors

Micro and small enterprises 3.69 0.00

Sundry creditors other than micro and small enterprises

Capital works 512.16 361.76

Small Scale Industrial Undertakings 0.00 10.73

Subsidiary company 9.24 12.24

Others 2460.15 2981.55 2160.34 2545.07

Advances from

Customers 548.02 615.71

Others 95.47 643.49 15.97 631.68

Security Deposits 243.14 257.83

Less : Investments received as security deposit 0.05 243.09 0.07 257.76

Interest accrued but not due on Loans 115.64 198.79

Stores received on loan (Including 11.69 0.00

Rs. 11.60 crore from subsidiary companies,

Previous year: Rs. NIL)

Liability towards Investor Education and

Protection Fund, not due

Unpaid Dividends 5.88 4.30

Unclaimed Matured Deposits 1.80 2.19

Unclaimed Matured Bonds 0.55 0.20

Interest Accrued on unclaimed Deposits / Bonds 0.66 8.89 0.74 7.43

Other Liabilities * 2392.88 1757.04

6400.92 5397.77

* Includes an amount of Rs. 0.01 crore credited to Investor's Education & Protection Fund,(Previous year Rs. 0.02 crore)

As at As at 31st March, 2008 31st March, 2007

(Rupees in crore)

Gratuity 718.16 1718.20

Accrued Leave 1346.70 1371.43

Employee Defined Benefit Schemes 832.06 736.26

Taxation 38.18 44.75

Pollution Control & Peripheral Development 89.05 83.11

Proposed Dividend 743.47 619.56

Tax on Proposed Dividend 125.54 105.29

Voluntary Retirement Scheme 40.15 58.92

Wage Revision 2459.66 512.58

Mines Afforestation/ restoration / closure etc. 351.05 223.96

Others 53.81 39.63

6797.83 5513.69

Schedules(Forming part of the Balance Sheet)

Schedules(Forming part of the Balance Sheet)

4544

1.15 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

Balance Additions Total Amount Balanceas at during Charged as at31st the Off 31st

March, year during the March,2007 year 2008

(Rupees in crore)

Deferred Revenue Expenditure

Voluntary Retirement Compensation 129.15 3.67 132.82 73.34 59.48

Total 129.15 3.67 132.82 73.34 59.48

Previous year 215.82 40.67 256.49 127.34 129.15

Current Previousyear year

Charged to:

Raw Materials consumed 0.00 3.34

Other Expenses 73.34 124.00

73.34 127.34

2.1 : SALES

2.2 : INTEREST EARNED

2.3 : OTHER REVENUES

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Domestic 44260.14 37894.68

Exports 1234.41 1177.12

Export Incentives 60.79 116.86

45555.34 39188.66

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Customers 55.02 38.96

Employees 15.04 10.89

Term Deposits * 1105.33 657.60

Others 9.37 45.15

1184.76 752.60

* (Tax deducted at source Rs.3.41 crore –

Previous Year Rs. 0.00 crore)

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Social amenities-recoveries 133.81 133.35

Sale of empties etc. 64.19 58.15

Liquidated damages 26.26 20.67

Service charges ( Gross ) * 11.36 10.14

Subsidy, relief and concession 53.89 55.30

Dividend 14.45 17.34

Profit on sale of fixed assets (net) 49.78 13.93

Foreign Exchange Fluctuation (net) 112.12 39.78

Reversal of Interest on SDF Loans 0.00 116.88

Sundries * 180.41 314.12

* (Tax deducted at source Rs. 0.04 crore – 646.27 779.66

Previous Year : Rs. 0.03 crore)

Schedules(Forming part of the Profit & Loss Account)

Schedules(Forming part of the Balance Sheet)

4746

2.7 : EMPLOYEES' REMUNERATION & BENEFITS

2.8 : POWER & FUEL

Year ended Year ended31st March, 2008 31st March, 2007

(Rupees in crore)

Salaries & Wages 6048.57 3700.38

Company's contribution to Provident Fund 335.59 325.61

Travel Concession 700.87 408.75

Welfare Expenses 336.93 258.32

Gratuity 497.32 391.46

7919.28 5084.52

Less : Grants in Aid received from Government of Karnataka 0.26 0.34

7919.02 5084.18

Note :

Expenditure on Employees'

Remuneration and Benefits not

included above and charged to:

a) Expenditure During Construction 58.66 33.13

b) Deferred Revenue Expenditure 73.34 123.90

c) Net Expenditure on Social Amenities charged to various primary revenue heads 355.28 263.37

487.28 420.40

Year ended Year ended31st March, 2008 31st March, 2007

(Rupees in crore)

Purchased power 2097.00 1971.16

Duty on own generation 15.60 18.19

Boiler Coal/Middlings 176.42 156.46

Furnace Oil/Steam etc. 536.54 428.59

2825.56 2574.40

Note :

Expenditure on Power & Fuel notincluded above & charged to:

- Expenditure During Construction 10.19 5.76

2.4 : PROVISIONS NO LONGER REQUIRED WRITTEN BACK

2.5 : ACCRETION(-) TO STOCK OF FINISHED / SEMI-FINISHED PRODUCTS

2.6 : RAW MATERIALS CONSUMED

Year ended Year ended 31st March, 2008 31st March, 2007

(Rupees in crore)

Loans & Advances 15.45 11.10

Sundry Debtors 12.49 20.26

Stores & Spares 10.09 7.06

Others 22.59 20.23

60.62 58.65

Year ended Year ended 31st March, 2008 31st March, 2007

(Rupees in crore)

Opening stock 3508.69 3223.48

Less : Closing stock 3944.97 3508.69

Accretion(-) to stock ( a ) -436.28 -285.21

Less : Excise Duty on accretion(-) to stock ( b ) -96.98 -42.63

Net accretion ( - ) to stock ( a - b ) -339.30 -242.58

Year ended Year ended31st March, 2008 31st March, 2007

Quantity Value Quantity Value

Tonnes Rs./crore Tonnes Rs./crore

Iron Ore 25443849 1725.38 24653024 1488.31

Coal 13953945 8242.98 13536403 8479.23

Coke 638572 819.28 600670 699.44

Limestone 4048296 627.08 3926137 567.22

Dolomite 2637143 206.94 2560930 170.71

Ferro Manganese 67562 349.30 48872 188.61

Ferro Silicon 21329 96.67 19277 78.97

Silico Manganese 122174 510.15 109594 315.19

Hot Rolled Stainless Steel Coils 20061 96.06 3508 24.89

Intermediary Products 22543 293.19 47166 478.94

Zinc 7005 112.62 8965 156.39

Aluminum 17185 206.03 15899 202.05

Others 674.46 421.13

13960.14 13271.08

Schedules(Forming part of the Profit & Loss Account)

Schedules(Forming part of the Profit & Loss Account)

4948

2.10 : OTHER EXPENSES Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Handling expenses

- Raw Material 181.59 152.65

- Scrap recovery 79.69 261.28 67.36 220.01

Royalty and cess 59.01 51.21

Conversion charges 120.92 83.25

Excise Duty on inter-plant transfer / internal consumption 73.31 85.65

Demurrage & wharfage 53.54 41.59

Water charges & Cess on water pollution 35.19 35.10

Insurance 6.30 8.13

Postage, Telegram & Telephone 18.90 14.60

Printing & Stationery 11.02 10.45

Rates & Taxes 39.36 25.25

Rent 21.07 24.28

Security expenses 184.42 117.72

Travelling expenses 205.56 191.88

Training expenses 17.87 10.49

Directors' Fees 0.29 0.18

Remuneration to Auditors

- Audit fees 0.88 0.68

- Tax Audit fees 0.31 0.27

- Out of pocket expenses 0.90 0.88

- In other capacities 0.61 2.70 0.58 2.41

Cost Audit Fees 0.02 0.02

Provisions

- Doubtful Debts, Loans and Advances 30.07 21.38 - Investments 0.00 3.20 - Stores, Spares and Sundries 27.65 57.72 22.86 47.44

Write-offs

- Deferred Revenue Expenditure 73.34 124.00

- Miscellaneous 2.15 75.49 4.59 128.59

Handling expenses - Finished goods 71.64 71.88

Cash Discount (net) 74.03 49.87

Commission to selling agents 4.44 9.85

Export sales expenses 14.66 23.08

Miscellaneous 427.58 366.22

1836.32 1619.15

2.9 : REPAIRS & MAINTENANCEYear ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Buildings 101.86 65.93

Plant & Machinery 312.25 212.13

Others 138.04 105.37

552.15 383.43

Note :

Expenditure on Repairs & Maintenancenot included above and charged to:

a) Employees' Remuneration & BenefitsBuildings 69.07 52.36 Plant & Machinery 996.91 724.03 Others 119.59 79.10

1185.57 855.49

b) Stores & Spares

Buildings 30.56 27.64 Plant & Machinery 1244.71 1093.54 Others 59.98 58.86

1335.25 1180.04

c) Expenditure during Construction 1.48 0.11

Total ( a+b+c ) 2522.30 2035.64

Schedules(Forming part of the Profit & Loss Account)

Schedules(Forming part of the Profit & Loss Account)

5150

2.11 : INTEREST & FINANCE CHARGES

2.12 : INTER ACCOUNT ADJUSTMENTS

2.13 : ADJUSTMENTS PERTAINING TO EARLIER YEARS

Year ended Year ended 31st March, 2008 31st March, 2007

(Rupees in crore)

Foreign Currency Loans 48.33 44.21

Non Convertible Bonds 149.49 240.85

Bank Borrowings - working capital 16.14 3.06

Steel Development Fund Loans 22.95 22.88

Others 0.20 4.28

Finance Charges 13.83 16.85

250.94 332.13

Note :

Expenditure on interest & finance chargesnot included above & charged to:

Expenditure During Construction

Steel Development Fund Loans - Interest 1.36 0.88

Finance Charges 0.32 0.00

1.68 0.88

Year ended Year ended 31st March, 2008 31st March, 2007

(Rupees in crore)

Raw materials 1331.22 1010.26

Departmentally manufactured stores 449.12 400.68

Services transferred to capital works 45.50 28.43

Power and Fuel 3.31 3.03

Others (Net) 3.07 2.50

1832.22 1444.90

Year ended Year ended 31st March, 2008 31st March, 2007

(Rupees in crore)

Sales 2.37 0.16

Other Revenues 0.44 -6.76

Raw materials consumed 0.06 0.31

Stores & spares consumed -2.48 -1.04

Power & Fuel 0.26 -0.06

Employee Remuneration and Benefits 0.00 -0.80

Repair & Maintenance 0.25 -0.03

Excise Duty 0.16 0.00

Other expenses -1.24 0.00

Depreciation -1.15 25.27

Interest 0.04 0.00

Net Debit -1.29 17.05

(-) indicate credit

SCHEDULE 3 : SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

1. Significant Accounting Policies

1.1 Basis of AccountingThe financial statements are prepared under the historical cost convention on accrual basis of accounting, in accordance with the

generally accepted accounting principles, accounting standards issued by the Institute of Chartered Accountants of India, as

applicable, and the relevant provisions of the Companies Act, 1956.

1.2 Use of Estimates In preparing the financial statements in conformity with accounting principles generally accepted in India, management is required

to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent

liabilities as at the date of financial statements and the amounts of revenue and expenses during the reported period. Actual results

could differ from those estimates. Any revision to such estimates is recognised in the period the same is determined.

1.3 Fixed AssetsFixed assets are stated at cost of acquisition less depreciation, except land gifted by the State Governments, which is stated at

notional/nominal value with corresponding credit to capital reserve.

Expenditure on development of land, including leasehold land, is capitalised as part of cost of land. Expenditure on

construction/development of assets on land owned by Government/Semi-Government authorities is capitalised under appropriate

asset accounts.

Cost includes all identifiable expenditure including trial-run expenses, net of revenue.

Assets retired from active use are shown separately under fixed assets at lower of net book value and estimated realisable value.

Mining rights are treated as intangible assets and all the related costs thereof are amortised over the period (including deemed

renewal) of the lease.

Software which is not an integral part of related hardware, is treated as intangible asset and amortised over a period of five years or

its licence period, whichever is less.

1.4 Borrowing CostsBorrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset.

Other borrowing costs are recognised as expense in the period in which these are incurred.

1.5 DepreciationDepreciation is provided on straight-line method at the rates specified in Schedule XIV to the Companies Act, 1956.

However, where the historical cost of a depreciable asset undergoes a change, the depreciation on the revised unamortised

depreciable amount is provided over the residual useful life of the asset.

Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and

depreciation provided accordingly.

Depreciation on addition/deletion during the year is provided on pro-rata basis with reference to the month of addition/deletion.

1.6 InvestmentsLong-term investments (including investments in subsidiary companies and joint ventures) are carried at cost, after providing for

diminution in value, if it is of a permanent nature. Current investments are carried at lower of cost and market value.

1.7 InventoriesRaw materials, stores & spares and finished/semi-finished products are valued at lower of cost and net realisable value of the

respective plants. In case of identified obsolete/ surplus/ non-moving items, necessary provision is made and charged to revenue.

The net realisable value of semi-finished special products, which have realisable value at finished stage only, is estimated for the

purpose of comparison with cost.

Iron ore fines not readily useable/saleable, are recognised on disposal.

Residue products and scrap of various nature are valued at estimated net realisable value.

The basis of determining cost is:

Schedules(Forming part of the Profit & Loss Account)

Schedules

5352

Raw materials and Stores & Spares - weighted average costMaterials in-transit - at costFinished/Semi-finished products - material cost plus appropriate share of labour, related overheads and duties.

1.8 Grants Grants relating to the acquisition of a specific asset are adjusted against the cost of the concerned asset. Grants relating to the

revenue expenditure are adjusted against the related expenses.

1.9 Voluntary Retirement Compensation Voluntary retirement compensation is treated as deferred revenue expenditure. Such expenditure incurred upto 31st March, 2006

is written-off in five years and the expenditure incurred thereafter is written-off in equal yearly instalments upto 31st March, 2010.

1.10 Foreign Currency TransactionsMonetary assets and liabilities related to foreign currency transactions remaining unsettled are translated at year-end rates.

The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions other

than those relating to fixed assets acquired from outside India prior to 1st April, 2004, are recognised in the profit and loss account.

In respect of transactions covered by forward exchange contracts, the difference between the contract rate and spot rate on the

date of the transaction is recognised in the profit and loss account over the period of the contract.

Exchange differences (including arising out of forward exchange contracts) in respect of liabilities relating to fixed assets, arising

out of transactions entered prior to 1st April, 2004, are adjusted in the carrying amount of such assets.

1.11 Employees' BenefitsThe provisions/liabilities towards gratuity, accrued leave, leave travel concession facility, long term service awards, post-retirement

medical and settlement benefits, future payments to the disabled employees/legal heirs of deceased employees under the

Employees' Family Benefit Scheme, are made based on the actuarial valuation as at the end of the year and charged to the profit

and loss account alongwith actuarial gains/losses.

1.12 Adjustments pertaining to earlier years and prepaid expensesIncome / expenditure relating to prior period and prepaid expenses, which do not exceed Rs.5 lakhs in each case, are treated as

income/expenditure of current year.

1.13 Revenue recognitionSales include excise duty and are net of rebates and price concessions. Sales in the domestic market are recognised at the time of

despatch of materials to the buyers including the cases where delivery documents are endorsed in favour of the buyers. Export

sales are recognised on :i) the issue of bill of lading, orii) negotiation of export bills upon expiry of laycan period, in cases where `realisation of material value without shipment' is

provided in the letters of credit of respective contracts,whichever is earlier.

Export incentives under various schemes are recognised as income in the year of actual shipment at estimated realisable

value/actual credit earned.

1.14 Claims for Liquidated Damages/Price EscalationClaims for liquidated damages are accounted for as and when these are deducted and/or considered recoverable by the Company.

These are adjusted to the capital cost or recognised in profit and loss account, as the case may be, on final settlement.

Suppliers'/Contractors' claims for price escalation are accounted for, to the extent such claims are accepted by the Company.

1.15 Deferred TaxThe deferred tax on timing differences between book profit and taxable profit for the year is accounted for applying the tax rates and

laws that have been enacted or substantively enacted as on the balance sheet date. Deferred tax assets arising from timing

differences are recognised to the extent there is a reasonable certainty that the assets can be realised in future.

Schedules

NOTES ON ACCOUNTS

2. CONTINGENT LIABILITIES

3. FIXED ASSETS

4. INVESTMENTS, CURRENT ASSETS, LOANS & ADVANCES AND CURRENT LIABILITIES & PROVISIONS

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in crore)

i) Claims against the Company pending appellate/judicial decisions :

a) Excise Duty 1277.39 1313.74

b) Sales Tax on inter-state stock transfers from plants to stockyards*. 1155.87 1178.18

c) Other sales tax matters 100.12 113.70

d) Income Tax 0.75 0.71

e) Other duties, cess and levies 188.20 159.94

f) Civil matters ** 201.09 203.46

g) Miscellaneous ** 251.21 172.03

* No liability is expected to arise, as sales tax has been paid on eventual sales.

** includes claims of Rs. 19.01 crore (As at 31st March 2007 : Rs.19.01 crore), against which there are counter-claims of Rs.25.82 crore (As at 31st March 2007 :Rs.25.82 crore).

ii) Other claims against the Company not acknowledged as debt:

a) Sales Tax 9.32 8.06

b) Duties, cess and levies 8.26 4.91

c) Civil matters $ 35.86 34.05

d) Miscellaneous $ 285.69 317.29

$ includes claims of Rs. 11.80 crore (As at 31st March 2007 Rs.58.65 crore),against which there are counter-claims of Rs.8.98 crore (As at 31st March 2007Rs. 48.00 crore)

iii) Disputed income tax/service tax demand on joint venture company for which company 121.70 80.70may be contingently liable under the joint venture agreement

iv) Guarantees/counter-guarantees given to banks/excise authorities on behalf of a 31.40 31.40subsidiary company and a joint venture company.

v) Bills drawn on customers and discounted with banks. 72.96 17.01

vi) Price escalation claims by contractors/suppliers and claims by certain employees, - -extent whereof is not ascertainable

(Figures in brackets pertain to previous year)

3.1 Land includes:i) 62161.37 acres (62116.84 acres) owned / possessed / taken on lease by the Company, in respect of which title/lease deeds are

pending for registration.ii) 5999.73 acres (5958.95 acres) given on lease to various agencies/ employees/ex-employees.iii) 10082.99 acres (9832.99 acres) transferred/agreed to be transferred or made available for settlement to various

Central/State/Semi-Government authorities, in respect of which conveyance deeds remain to be executed/registered. iv) 1854.23 acres ( 1854.23 acres) in respect of which title is under dispute.

3.2 Buildings include net block of Rs. 24.67 crore (Rs. 30.83 crore) for which conveyance deed is yet to be registered in the name of the Company.

3.3 Foreign exchange variations aggregating to Rs. 22.89 crore (net debit) [Rs. 5.61 crore (net debit)] have been adjusted in the carrying amount of fixed assets during the year.

3.4 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs. 13525.42 crore ( Rs.1970.72 crore).

(Figures in brackets pertain to previous year)

4.1 The Central Board of Direct Taxes vide its Notification dated 25th September 2001 revised the rules for computation of certain perquisites. The Employees' Union/Association filed writ petitions with the Hon'ble High Court at Kolkata challenging the above Notification. In pursuance of Hon'ble Court's orders, the amount of tax deducted at source on house perquisite w.e.f. 1st April 2003

Schedules

5554

and other perquisites w.e.f. 1st October 2001, upto 31st March 2005 has been kept separately as term deposits with banks, pending final decision of the Hon'ble Court. Such deductions and deposits after 31st March 2005, have been made in accordance with amended law/judicial decisions. However, there is no impact on accounts of the company as the additional tax, if required, shall be recoverable from the employees.

4.2 The amount due to Micro and Small Enterprises as defined in the `The Micro, Small and Medium Enterprises Development Act, 2006', (as disclosed in Schedule 1.13 - Current Liabilities) has been determined to the extent such parties have been identified on the basis of information available with the Company. The disclosures relating to Micro and Small enterprises as at 31st March, 2008 are as under:

(Rs. in crore)

Sl. Description As at 31st No. March, 2008

1. The principal amount remaining unpaid to supplier as at the end of accounting year 3.69

2. The interest due thereon remaining unpaid to supplier as at the end of accounting year NIL

3. The amount of interest paid in terms of section 16, alongwith the amount of the payment made to the NILsupplier beyond the appointed day during the year 2007-08

4. The amount of interest due and payable for the period of delay in making payment (which have been paid NILbut beyond the appointed day during the year) but without adding the interest specified under this Act

5. The amount of interest accrued during the year and remaining unpaid at the end of the accounting year NIL

6. The amount of further interest remaining due and payable even in the succeeding years, until such date NILwhen the interest dues as above are actually paid to the small enterprises, for the purpose ofdisallowance as a deductible expenditure under section 23.

The previous year's figures are not given, as there were no reported Micro and Small enterprises upto 31st March, 2007.

4.3 Balances shown under creditors, debtors, claims recoverable and advances include balances subject to confirmation/reconciliation and consequential adjustment, if any. Reconciliations are carried out on on-going basis. Provisions, wherever considered necessary, have been made.

4.4 The Company has stock of iron ore fines of 43.62 million tonnes at various mines of the Company. Since the usage/sale of such iron ore fines, not being readily useable /saleable, involves elements of uncertainties, as a matter of prudence, no valuation of such fines has been made in the accounts. However, the revenue earned from actual disposal thereof during the year has been recognised in the books of accounts.

5.1 The long-term agreement for wage revision expired on 31st December, 2006. Pending finalisation of fresh agreement w.e.f. 1st January 2007, provision towards salaries and wages revision of Rs. 2598.12 crore (Rs. 2428.33 crore for the year) and Rs. 11.39 crore (Rs. 11.12 crore for the year) has been charged to Profit & Loss Account and Expenditure during construction respectively, on estimated basis. Against the provision made, ad-hoc adjustable advance of Rs. 492.37 crore, has been paid and adjusted during the year.

5.2 Power & Fuel does not include expenses for generation of power and consumption of certain fuel elements produced by the plants which have been included under the primary heads of account.

5.3 The Research and Development expenditure charged to Profit & Loss Account and allocated to Fixed Assets, during the year, amount to Rs. 99.62 crore (previous year - Rs. 71.30 crore) and Rs. 2.24 crore (previous year - Rs. 5.55 crore) respectively.

5.4 The Company had represented for withdrawal of Joint Plant Committee (JPC) cess on sale of certain steel products in view of decontrol of steel prices in earlier years, which was confirmed by JPC during the year. As a result, an amount of Rs. 17.39 crore provided in earlier years has been written back.

5.5 The Company reviews the carrying amount of its fixed assets on each balance sheet date for the purpose of ascertaining impairment, if any, by considering assets of entire one plant as Cash Generating Unit. On such review as at 31st March, 2008, wherever there was an indication of impairment, no provision is required to be made, as the net realisable value thereof, assessed by an independent agency as at 31st March, 2008, is more than the carrying amount.

5.6 The policy relating to accounting of exports sales, hitherto recognised on the basis of issue of bill of lading has been changed during the year, as disclosed in “Schedule 3.1.13: Accounting Policies”, resulting in increase in sales and profit for the year by Rs.139.02 crore and Rs.56.84 crore respectively.

5. PROFIT & LOSS ACCOUNT

6. GENERAL

6.1 Employee Benefits

6.1.1. General description of defined benefit schemes:

Gratuity - Payable on separation @15 days pay for each completed year of service to eligible employees who render continuous service of 5 years or more. Maximum amount in the case of executive employees is Rs. 3.50 lakhs as per the scheme. Maximum amount of Rs.10 lakhs has been considered for actuarial valuation based on the recommendations of 6th Pay Commission for Central Government employees.

Leave Encashment - Payable on separation to eligible employees who have accumulated earned and half pay leave. Encashment of accumulated earned leave is also allowed upto 30 days once in a financial year.

Provident Fund 12% of Basic Pay Plus Dearness Allowance, contributed to the Provident Fund Trusts by the Company.

Post Retirement Medical Benefits - Available to retired employees at company's hospitals and/or under the health insurance policy.

Post Retirement Settlement Benefits - Payable to retiring employees for settlement at their home town.

Employees' Family Benefit Scheme - Monthly payments to disabled separated employees/legal heirs of deceased employees in lieu of prescribed deposit till the notional date of superannuation.

Long Term Service Award - Payable in kind on rendering minimum 25 years of service and also on superannuation.

6.1.2 Other disclosures, as required under Accounting Standard (AS) - 15 (revised) on ̀ Employee Benefits', in respect of defined benefit obligations are :

(a) Reconciliation of present value of defined benefit obligations :

(Rs. in crore)

Sl. Particulars Gratuity Leave Post Post Long Term Employees'No. Encashment Retirement Retirement Service Family

Medical Settlement Award Benefit Benefits Benefit Scheme

i) Present value of projected 2468.21 1371.43 447.95 65.78 20.46 202.06benefit obligations, as at1st April, 2007

ii) Service Cost 97.85 123.42 6.69 3.22 0.68 0.00

iii) Interest Cost 187.40 100.99 35.21 5.00 1.51 14.57

iv) Actuarial gains(-) / losses(+) 434.75 -28.43 49.90 5.71 3.54 34.77

v) Past service cost 0.00 0.00 0.00 0.00 0.00 0.00

vi) Benefits paid 252.11 220.71 15.76 5.89 3.36 39.98

vii) Present value of projected benefit 2936.10 1346.70 523.99 73.82 22.83 211.42obligations as on 31st March,2008 (i+ii+iii+iv-v-vi)

(b) Reconciliation of fair value of assets and obligations :

The company has partly funded the gratuity liability through a separate Gratuity Fund. The fair value of the plan assets is mainly based on the information given by the insurance companies through whom the investments have been made by the Fund.The reconciliation of fair value of assets of the Gratuity Fund and defined benefit Gratuity obligations is as under:

Sl. Particulars AmountNo. (Rs. in crore)

i) Fair Value of plan assets as at 1st April, 2007 750.00ii) Acquisition adjustment 0.00iii) Expected return on plan assets 159.98iv) Actual Company's contribution 1502.05v) Actuarial gain/(loss) 57.95vi) Benefits payments 252.04vii) Fair value of plan assets as at 31st March, 2008 2217.94viii) Present value of defined benefit obligation [6.1.2 (a)(vii)] 2936.10ix) Net liability recognised in the Balance Sheet (viii)-(vii) * 718.16

* The company expects to contribute the amount to the Gratuity Fund during the year 2008-09 after considering the return on the investments.

The defined benefit obligations, other than gratuity, are unfunded.

Schedules Schedules

5756

ii) Geographical segments have been considered for Secondary Segment Reporting, by treating sales revenue in India and foreign countries as separate geographical segments.

The disclosure of segment-wise information is given at Annexure-I.

6.3 Related Party

As per Accounting Standard - 18 - ̀ Related Party Disclosures' issued by the Institute of Chartered Accountants of India, the names of the related parties are given below: -

Nature of Relationship Name of the related party

Joint Ventures SAIL Bansal Service Centre Limited

Mjunction Services Limited

UEC-SAIL Information Technology Limited

Romelt SAIL (India) Limited

N.E. Steel & Galvanising Pvt. Limited

Bhilai Jaypee Cement Limited

Bokaro Jaypee Cement Limited

Nature of Relationship Name of the related party

Key Management Personnel Shri S.K. RoongtaShri K.K. Khanna (upto 30th September 2007)Shri Nilotpal Roy (upto 31st January 2008)Shri V. ShyamsunderShri B.N. SinghShri V.K. SrivastavaShri G. OjhaShri R. RamarajuShri Soiles BhattacharyaShri S.S. Ahmed (w.e.f. 11th May 2007)Shri V.K. Gulhati (w.e.f. 1st October 2007)Shri S.P. Rao (w.e.f. 15th February 2008)Shri R.K. Sarangi (upto 30th April 2007)Shri P.M. Balasubramanian (upto 31st October 2007)Shri Sushim Banerjee (from 15th May 2007 to 30th Nov. 2007)Shri M.K. BhattacharyaShri S.P. Patnaik Shri Jagdish Singh Shri.M. Roy Shri R.K. AgarwalShri A.S. MathurShri N. Sudan (from 1st May 2007 to 30th June 2007)Shri B.B. Singh (w.e.f. 1st November 2007)Shri M. Singh (w.e.f. 1st November 2007)Shri A.J. Vijh (w.e.f. 13th November 2007)

The details of transactions between the Company and the related parties, as defined in the Accounting Standard, during the year, are given below:

(Rs. in crore)

Sl. Nature of Transaction Joint Ventures Key Management Schedule No. No. Personnel and Account Head

As at 31st As at 31st As at 31st As at 31st March, 2008 March, 2007 March, 2008 March, 2007

i) Investments 31.85 7.44 - - 1.7: Investments–Long Term

ii) Provision for Investment 3.44 3.44 - -

iii) Other Loans/ Advances 1.40 1.39 0.03 0.04 1.12: Loans &Advances–Others

iv) Advance for purchase of Shares 1.43 - - -

v) Provision for Loans and 1.39 1.39Advances

(c) Provident fund : Company's contribution paid/payable during the year to provident fund are recognised in the Profit & Loss Account. The Company does not anticipate any further obligations in the near foreseeable future having regard to the assets of the funds and return on investment, as confirmed by the actuary.

(d) Expenses recognised in the statement of Profit & Loss Account for the year ended 31st March, 2008 :

(Rs. in crore)

Sl. Particulars Gratuity Leave Post Post Long Term Employees'No. Encashment Retirement Retirement Service Family

Medical Settlement Award Benefit Benefits Benefit Scheme

i) Service Cost 97.85 123.42 6.70 3.22 0.68 0.00

ii) Interest Cost 187.40 100.99 35.21 5.01 1.51 14.57

iii) Actuarial gains(-)/losses 376.81 -28.45 49.87 5.70 3.54 34.77

iv) Past service cost 0.00 0.00 0.00 0.00 0.00 0.00

v) Expected return on plan assets 159.98 0.00 0.00 0.00 0.00 0.00

vi) Total (i+ii+iii+iv-v) 502.08 195.96 91.78 13.93 5.73 49.34

vii) Employees' Remuneration andBenefits

a) Charged to Profit & Loss 497.32 195.73 91.78 5.73 49.34Account (Schedule 2.7)

b) Charged to Expenditure during 4.76 0.23construction

Other Expenses- Charged to Profit & Loss

Account (schedule 2.10) 13.93

viii) Actual return on plan assets 217.95

(e) Effect of one percentage point change in the assumed inflation rate in case of valuation of benefits under post-retirementmedical benefits scheme.

(Rs. in crore)

Sl. Particulars One percentage point One percentageNo. increase in medical point decrease in

inflation rate medical inflation rate

i) Increase/(decrease) on aggregate service and interest 20.82 (17.93)cost of post retirement medical benefits

ii) Increase/(decrease) on present value of defined benefit 71.50 ( 59.73 )obligations as at 31st March, 2008

(f) Actuarial assumptions

Sl. No. Description As at 31st March, 2008 As at 1st April, 2007

i) Discount rate (per annum) 8% 8%

ii) Mortality rate Indian assured lives mortality Indian assured lives mortality(1994-96) (modified) Ultimate (1994-96) (modified) Ultimate

iii) Withdrawal rates (per annum) Executives & Non-Executives - 0.10% Executives-2% to 0.50% depending upon the age Non-Executives - 1% to 3%

depending on age

iv) Medical cost trend rates (per annum) 5% for hospital cost and Nil for 5% for hospital cost and NilMediclaim premium. for Mediclaim premium.

v) Estimated rate of return on plan assets 8% 8%

vi) The estimate of future salary increases considered in actuarial valuation, takes into account inflation rate, seniority,promotion and other relevant factors.

6.2 Segment Reporting

i) Business Segments: The five integrated steel plants and three alloy steel plants, being manufacturing units, have been considered as primary business segments for reporting under `Accounting Standard-17 - Segment Reporting' issued by the Institute of Chartered Accountants of India.

Schedules Schedules

5958

Mines closure costs - Estimated liability towards closure of mines, to be incurred at the time of cessation of miningactivities.

Overburden backlog - To be incurred towards removal of overburden backlog at mines over the future years.removal costs

(Rs. in crore)

Movement of Provisions Mines affore- Mines closure Overburden Totalstation costs costs removal costs

Balance as at 1st April, 2007 121.59 41.25 61.12 223.96

Additions during the year 104.98 10.85 30.58 146.41

Amounts utilised during the year 15.80 0.00 3.52 19.32

Balance as at 31st March, 2008 210.77 52.10 88.18 351.05

6.7 As per requirement of the listing agreements with the stock exchanges, the requisite details of loans and advances in the nature of loans, given by the Company are given below:

i) In respect of subsidiary company:

(Rs. in crore)

Name of the subsidiary Company Loans and advances in the nature Maximum amount of loans and of loans outstanding as on 31st advances in the nature of loans March 2008 outstanding during the year 2007-08

IISCO Ujjain Pipe and Foundry Co. Limited 16.42* 16.42

(under liquidation) (16.42)* (16.42)

* Out of outstanding amount, Rs. 10.42 crore (previous year -Rs. 16.42 crore), being doubtful of recovery, provided for.

ii) No loans have been given (other than loans to employees), wherein there is no repayment schedule or repayment is beyondseven years; and

iii) There are no loans and advances in the nature of loans, to firms/companies, in which directors are interested.

Own Products Installed ProductionCapacity

(Quantity : Tonnes)

Main Steel Plants

Pig Iron 1740000 410303

(1740000) (451636)

Crude Steel (i) 12987000 13648705

(12987000) (13194395)

Saleable Steel 10990000 12531293

(10990000) (12126799)

Alloy Steels Plants

Pig Iron 58000 29418 (58000) (47292)

Crude Steel 352000 314894

(352000) (308744)

Saleable Steel 457000 512891

(457000) (454387)

Notes:

i) Crude Steel installed capacity is in terms of solid steel as per International Iron & Steel Institute.

ii) "Licensed Capacity" Not Applicable(N.A.) in terms of Government of India Notification No.S.O.477(E) dated 25th July, 1991.

7.(a) Licensed Capacity, Installed Capacity, Production

For the year ended For the year ended

31st 31st 31st 31st March, 2008 March, 2007 March, 2008 March, 2007

vi) Dividends received 2.80 4.20 - - 2.3: Other Revenues

vii) Managerial Remuneration - - 2.57 1.56 2.7: Employees'Remuneration andBenefits

viii) Services received by 15.14 17.16 - - 2.10: Other Expenses the Company

ix) Provision for Investment - 3.20 - -

6.4 In accordance with AS-22 on `Accounting for taxes on income' by the Institute of Chartered Accountants of India, net deferred tax as on 31st March, 2008, has been accounted for, as detailed below:

(Rs. in crore)

As on As on31st March, 2008 31st March, 2007

Deferred Tax Liability

Difference between book and tax depreciation 2559.99 2707.79

Total 2559.99 2707.79

Deferred Tax Assets

Retirement Benefits 244.10 584.02

Others 747.29 711.11

Total 991.39 1295.13

Net Deferred Tax Liability 1568.60 1412.66

6.5 As per Accounting Standard - 27 - ̀ Financial reporting of interest in Joint Ventures' issued by the Institute of Chartered Accountants of India, the Company's share of ownership interest, assets, liabilities, income, expenses, contingent liabilities and capital commitments in the joint venture companies, all incorporated in India, are given below:

(Rs. in crore)

Sl. Name of the Joint Venture Company % of Assets Liabilities Income Expenditure Contingent Capital No. Company's Liabilities Commit-

ownership mentsinterest

1. NTPC SAIL Power Company Pvt. Limited (**) 50 1353.42 908.62 125.92 90.71 9.96 193.77

2. Bokaro Power Supply Co. Pvt. Ltd. ($) 50 263.92 113.27 175.60 143.68 - 140.56

3. Mjunction Services Limited (@) 50 38.62 24.25 34.91 22.61 0.28 -

4. SAIL Bansal Service Centre Limited ($) 40 8.60 7.78 15.62 16.12 - -

5. Romelt SAIL (India) Limited ($) 15 - 0.04 0.01 0.03 - -

6. UEC SAIL Information Technology Limited (@@) 40 0.41 2.26 - 0.16 0.41 -

7. North Bengal Dolomite Limited (*) 50 0.28 2.08 0.21 1.28 0.01 -

8. N.E. Steel & Galvanising Pvt. Limited (@@) 49 1.50 0.04 - - - -

9. Bhilai Jaypee Cement Limited (@) 26 26.86 2.47 - - 9.93 79.33

10. Bokaro Jaypee Cement Limited (&) 26 - - - - - -

** Based on Audited Accounts for the year 2007-08@ Based on Unaudited Accounts for the year 2007-08$ Based on Audited Accounts for the year 2006-07@@ Based on Unaudited Accounts for the year 2006-07* Operations under suspension and based on Unaudited Accounts for the year 2006-07& Operation not yet started

6.6 Disclosures of provisions required by Accounting Standard (AS) 29 'Provisions, Contingent Liabilities and Contingent Assets' :

Brief Description of Provisions :

Mines - Payable on renewal (including deemed renewal)/forest clearance of mining leases to Government afforestation costs authorities, towards afforestation cost at mines for use of forest land for mining purposes.

Schedules Schedules

6160

7(b). Opening Stock, Purchases, Turnover and Closing Stock

Class of Products Opening Stock Purchases Sales Closing Stock

Quantity Value Quantity Value Quantity Value Quantity Value

(Quantity : Tonnes)(Value : Rs./crore)

OWN PRODUCTS

Main Steel Plants

Pig Iron 71041 94.24 - - 307719 622.82 50529 72.72

(96590) (110.71) (-) (-) (379192) (618.34) (71041) (94.24)

Steel Ingots 143287 234.27 - - 2921 6.77 197961 377.65

(195807) (293.62) (-) (-) (2716) (5.64) (143287) (234.27)

Saleable Steel - Finished 685270 1457.36 - - 11871956 40770.19 605282 1472.56 (570230) (1094.83) (-) (-) (11444618) (34626.69) (685270) (1457.36)

Saleable Steel - Semi Finished 263540 504.29 - - - - 248950 510.85

(317019) (523.93) (-) (-) (-) (-) (263540) (504.29)

ALLOY STEELS PLANTS

Pig Iron 2628 4.47 - - 24292 49.95 5021 10.02 (4630) (6.62) (-) (-) (43978) (69.88) (2628) (4.47)

Steel Ingots 11992 49.78 - - 0 0.00 15605 52.12 (10253) (45.02) (-) (-) (0) (0.00) (11992) (49.78)

Saleable Steel - Finished 64190 401.08 - - 442575 2534.32 79297 544.58 (79730) (407.45) (-) (-) (425100) (2387.37) (64190) (401.08)

Saleable Steel - Semi Finished 24633 183.79 - - - - 34345 242.13

(36995) (230.73) (-) (-) (-) (-) (24633) (183.79)

SUNDRIES

Calcium Ammonium 1023 - - - - - 1023 -

Nitrate (In term as 25% N) (4993) - (-) (-) (3970) (0.16) (1023) -

Middlings / Rejects 175273 5.70 - - 131472 10.50 294503 6.12(91584) (2.38) (-) (-) (81173) (5.15) (175273) (5.70)

Others (By-products etc.) 573.70 - 1558.32 654.42

(507.90) (-) (1474.47) (573.70)

TRADING ACTIVITIES

Saleable Steel 0 0.01 1132 3.63 653 2.47 479 1.80

(0) (0.29) (90) (1.29) (90) (0.96) (0) (0.01)

3508.69 3.63 45555.34 3944.97(3223.48) (1.29) (39188.66) (3508.69)

Note:

i) The classification of the company's own products for the purpose of quantitative data is in accordance with the Company Law Board's OrderNo.3/19/80-CL VI dated 16th July 1980.

7(c). Pig Iron and Saleable Steel Quantitative Reconciliation

Pig Iron Saleable Steel

(Main Steel (Alloy Steels (Main Steel (Alloy SteelsPlants) Plants) Plants) Plants)

(Quantity : Tonnes)

Opening Stock 71041 2628 685270 64190 (96590) (4630) (570230) (79730)

Production 410303 29418 12531293 512891 (451636) (47292) (12126799) (454387)

Total 481344 32046 13216563 577081 (548226) (51922) (12697029) (534117)

Sales 307719 24292 11871956 442575 (379192) (43978) (11444618) (425100)

Inter Plant Transfers 20544 0 535836 52554 (47550) (0) (419080) (39640)

Internal Consumption (incl. 86159 2418 79177 385for capital works) (58488) (5960) (79518) (673)

Assorted length/Cuttings/Ingot etc. 1171 0 69799 4957(0) (0) (95226) (3422)

Depletion/Accretion (-) in 13081 0 29119 -4152

In-process stock (including (-11639) (0) (-33821) (27)of inter plant transfers)

Shortages/excesses(-) due to 2141 315 25394 1465 sectional weight variation (3594) (-644) (7138) (1065)

transportation, handling etc.

Closing Stock 50529 5021 605282 79297 (71041) (2628) (685270) (64190)

Total 481344 32046 13216563 577081 (548226) (51922) (12697029) (534117)

Opening and closing stock of Saleable Steel pertain to finished products

Note : Figures in brackets pertain to previous year and have been rearranged/regrouped inter-se wherever necessary.

Schedules Schedules

6362

Current PreviousYear Year

(Rupees in crore)

Know - how 35.41 42.21

Interest 40.32 44.44

Training expenses & payments to Foreign Technicians 11.98 9.41

Others 1.53 1.97

Total 89.24 98.03

Export of goods(Calculated on FOB basis) 1233.99 1169.48

Royalty, Know - how, professional and consultation fees 0.00 0.07

1233.99 1169.55

Raw materials 6192.93 6782.50

Capital goods 350.47 111.70

Stores, Spares and Components 279.97 386.97

Total 6823.37 7281.17

Rs/crore % Rs/crore %

Imported 7110.26 50.93 7237.99 54.54

Indigenous 6849.88 49.07 6033.09 45.46

13960.14 100.00 13271.08 100.00

Imported 300.43 9.12 276.01 9.19

Indigenous 2994.90 90.88 2727.91 90.81

3295.33 100.00 3003.92 100.00

The Company has not remitted any amount in foreign currencies on accountof interim / final dividend during the year and does not have information as to theextent to which remittances, if any, in foreign currencies on account of interim/final dividends have been made by / on behalf of non-resident shareholders.The particulars of final dividend for the year 2006-07 and interim dividend for the year2007-08 on account of non-resident shareholders are as under :-

Current PreviousYear Year

Final Dividend (2006-07)

a) Number of non-resident shareholders 1315 1501 b) Number of ordinary shares held by them 277967646 219860619 c) Amount of Dividend (Rs.'crore) 41.70 16.49

Interim Dividend (2007-08)

a) Number of non-resident shareholders 1879 1141 b) Number of ordinary shares held by them 227336520 258779724 c) Amount of Dividend (Rs.'crore) 43.19 41.40

Salaries 0.76 0.62Company's contribution to provident 0.08 0.08 fund & other fundsLeave Travel Concession 0.03 0.00 Medical benefits 0.06 0.05 Provision for gratuity / accrued Leave 0.47 0.15 Estimated value of perquisites 0.10 0.05

(Excluding facilities provided in Company'shospitals the value of which is not readilyascertainable).

Total 1.50 0.95

* Excluding sitting fee to independent directors and provision for wage revision

8. Expenditure incurred in foreigncurrency on account of

9. Earnings in foreign exchange on account of

10. Value of imports (Calculated on CIF basis)

11. Value of raw materials consumed

12. Value of stores/spares & components consumed

13. Remittance in foreign currencies for dividends :

14. Particulars of Directors' Remuneration*

15. Previous years' figures have been re–arranged / re–grouped / re–cast, wherever necessary.

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS

Registration No. 6 4 5 4 State Code 5 5

Balance Sheet Dated 3 1 0 3 0 8

II. CAPITAL RAISED DURING THE YEAR(Amount in Rs. Lakh)

Public Issue N I L Rights Issue N I L

Bonus Issue N I L Private Placement N I L

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS(Amount in Rs. Lakh)

Total Liabilities 4 0 8 7 6 1 6 Total Assets 4 0 8 7 6 1 6

Source of Funds

Paid-up Capital 4 1 3 0 4 0 Reserves & Surplus 1 8 9 3 3 1 7

Secured Loans 9 2 5 3 1 Unsecured Loans 2 1 1 9 9 3

Application of Funds

Net Fixed Assets 1 1 5 7 1 3 1 Investments 5 3 8 2 0

Net Current Assets 1 3 1 1 8 8 7 Misc. Expenditure 5 9 4 8

Accumulated Losses N I L

IV. PERFORMANCE OF THE COMPANY(Amount in Rs. Lakh)

Turnover/Other Income 4 1 8 9 0 9 1 Total Expenditure 3 0 4 2 2 1 8

Profit Before Tax 1 1 4 6 8 7 3 Profit After Tax 7 5 3 6 7 8

Earnings per share (Rs.) 1 8 2 5 Dividend Rate (%) 3 7

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF THE COMPANY(As per Monetary Terms)

Item Code No. (ITC Code) 7 2 0 8 3 7 9 0 / 7 2 0 8 3 8 9 0

7 2 0 8 3 9 9 0

Product Description HOT ROLLED COILS

Item Code No. (ITC Code) 7 2 0 8 . 5 1 1 0 / 7 2 0 8 . 5 2 1 0

Product Description PLATES

Item Code No. (ITC Code) 7 3 0 2 1 0 1 0 / 7 3 0 2 1 0 9 0

Product Description RAILS

Schedules

6564

Segment Information for the year ended 31st March, 2008 Annexure - I

A. BUSINESS SEGMENT

(Rs. in crore)

PARTICULARS BSP DSP RSP BSL ISP ASP SSP VISL Others Inter SAILSegment

Sales

REVENUE

- External Sales

Current year 16517.81 5274.73 7321.66 12037.57 1715.82 551.14 1374.27 732.61 29.73 45555.34

Previous year (13526.31) (4287.68) (6335.90) (11004.69) (1482.37) (531.90) (1299.27) (711.75) (8.79) (39188.66)

- Internal Segment Sales

Current year 191.43 368.10 63.19 719.47 124.44 500.31 22.86 53.53 677.42 -2720.75 0.00

Previous year (341.56) (200.39) (59.11) (514.52) (108.19) (240.10) (5.97) (36.74) (554.86) (-2061.44) (0.00)

- Total Revenue

Current year 16709.24 5642.83 7384.85 12757.04 1840.26 1051.45 1397.13 786.14 707.15 -2720.75 45555.34

Previous year (13867.87) (4488.07) (6395.01) (11519.21) (1590.56) (772.00) (1305.24) (748.49) (563.65) (-2061.44) (39188.66)

RESULT

- Operating Profit / (-) Loss (Before Interest Expenses)

Current year 5425.28 1036.34 1480.98 2870.84 -280.06 8.35 107.69 -52.05 1122.30 11719.67

Previous year (4286.24) (639.23) (1369.20) (2771.13) (-245.37) (22.73) (123.55) (-29.80) (818.27) (9755.18)

- Interest expenses

Current year 250.94

Previous year (332.13)

- Income Tax

Current year 3931.95

Previous year (3220.76)

- Net Profit / Loss ( - )

Current year 7536.78

Previous year (6202.29)

OTHER INFORMATION

- Segment Assets

Current year 5289.51 3587.01 4335.81 4509.56 1602.14 868.88 861.17 697.32 19124.76 40876.16

Previous year (4650.83) (3662.67) (4318.70) (4367.50) (941.08) (707.13) (742.81) (628.70) (13835.89) (33855.31)

- Segment Liabilities

Current year 3078.15 1177.00 1612.00 2895.37 1519.90 325.69 172.42 250.28 2167.94 13198.75

Previous year (2208.71) (918.80) (1193.01) (2207.05) (1178.46) (249.78) (137.52) (183.80) (2671.85) (10948.98)

- Capital Expenditure

Current year 566.09 134.95 332.16 471.76 665.28 25.88 72.86 8.33 166.67 2443.98

Previous year (459.40) (126.40) (126.21) (213.32) (147.51) (39.46) (14.66) (8.84) (47.60) (1183.40)

- Depreciation

Current year 216.68 301.26 304.37 246.70 29.42 10.66 43.65 11.21 71.53 1235.48

Previous year (223.43) (299.90) (291.92) (241.09) (23.18) (9.43) (43.36) (11.01) (68.16) (1211.48)

B. GEOGRAPHICAL SEGMENT

Particulars Current year Previous year

Sales Revenue (Rupees in crore)

India 44320.93 38011.54

Foreign Countries 1234.41 1177.12

Total 45555.34 39188.66

Note :

(1) Segment assets / liabilities exclude inter-unit balances.

(2) Total carrying amount of segment assets by geographical location of assets, for the Company's overseas operations are below 10% of the total assets of all segments, and hence not disclosed.

SOCIAL AMENITIES

(Rupees in crore)

Expenses Township Education Medical Social & Co-operative Transport Total PreviousCultural Societies & Year

Activities Dairy

– Salaries & Wages 163.52 102.07 188.69 5.86 3.25 18.41 481.80 334.78

– Company contribution 11.19 7.44 13.16 0.46 0.04 1.33 33.62 32.06to Provident Fund

– Travel concessions 20.90 9.54 19.92 0.57 0.00 1.65 52.58 37.11

– Welfare expenses 9.93 5.83 26.98 2.81 0.00 1.11 46.66 39.51

– Consumption of medicines 0.00 0.00 51.89 0.67 0.00 0.00 52.56 48.16

– Gratuity 11.20 9.21 9.40 0.34 0.21 1.56 31.92 26.32

Total 216.74 134.09 310.04 10.71 3.50 24.06 699.14 517.94

Stores & Spares 23.12 0.19 2.61 0.34 0.00 1.78 28.04 25.16

Repair & Maintenance 87.91 0.21 5.16 0.19 0.00 0.11 93.58 69.19

Power & Fuel 252.81 1.86 5.42 1.77 0.33 0.30 262.49 231.36

Miscellaneous expenses 43.84 9.30 17.89 1.70 0.00 7.55 80.28 45.11

Depreciation 19.89 0.92 3.29 0.16 0.01 0.43 24.70 25.90

Total 644.31 146.57 344.41 14.87 3.84 34.23 1188.23 914.66

Less: Income 94.80 5.69 32.36 0.09 0.00 0.87 133.81 133.35

Net Deficit 549.51 140.88 312.05 14.78 3.84 33.36 1054.42 781.31

6766

To

The Members of Steel Authority of India Limited

We have audited the attached Balance Sheet of STEEL AUTHORITY OF INDIA LIMITED, as on 31st March 2008, the Profit & Loss Account and the Cash Flow Statement of the company for the year ended on that date annexed thereto, in which are incorporated the accounts of Plants, Units, Branches and other Offices audited by the Branch Auditors in accordance with the letter of appointment of Comptroller & Auditor General of India. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

As required by the Companies (Auditors' Report) Order, 2003 as amended by the Companies (Auditors' Report) (Amendment) Order, 2004 (hereinafter referred to as “the Order”) issued by the Government of India in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

1. We have obtained all the information and explanations, which to the best of our knowledge and belief, were necessary for the purpose of our audit;

2. In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of the books and proper returns adequate for the purpose of our audit have been received from the branches not visited by us. The branch auditors' reports have been forwarded to us and have been appropriately dealt with.

3. The Balance Sheet, the Profit & Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and the audited returns from the branches.

4. In our opinion, the Balance Sheet, the Profit & Loss Account and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

5. In terms of Government of India, Department of Company Affairs Notification No. GSR 829(E) dated 21st October, 2003 Government companies are exempt from the applicability of provisions of section 274(1)(g) of the Companies Act, 1956.

In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with significant accounting policies and notes on accounts appearing in Schedule 3, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in case of Balance Sheet, of the state of affairs of the Company as on 31st March 2008;

ii) in case of Profit & Loss Account, of the Profit of the Company for the year ended on that date; and

iii) in case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For Ray & Ray For Dass Maulik Mahendra For and on behalf ofK Agrawala & Co. the Board of Directors

Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-[B.K. Ghosh] [Mahendra K. Agrawala] (S.K. Roongta)

Partner Partner Chairman(M.No. 51028) (M.No.51764)

T.R. Chadha & Co.Chartered Accountants

Sd/-(Ajesh Tuli)

Partner(M. No.86424)

Place : New Delhi Place : New DelhiDated : 16th May, 2008 Dated : 21st July, 2008

COMMENTS MANAGEMENT'S REPLIES COMMENTS MANAGEMENT'S REPLIES

Auditors' ReportAnnexure-I to the Directors' Report

6968

COMMENTS MANAGEMENT'S REPLIES

1. a) The Company has maintained proper records showing in most cases, full particulars including quantitative details and situation of its fixed assets.

b) The fixed assets of the company have been physically verified by the management at reasonable intervals in a phased manner so as to cover each asset at least once in three years. As informed to us, no material discrepancies have been noticed on such verification wherever reconciliation has been carried out and the same have been adjusted in the books. In few cases of fixed assets, verified but not reconciled, the discrepancies are yet to be ascertained.

c) In our opinion and according to the information and explanations given to us, there is no substantial disposal of fixed assets during the year.

2. a) The inventories have been physically verified by the management with reasonable frequency during the year. In certain cases, the stocks of scraps, middlings and rejects have been verified on the basis of visual survey/estimates.

b) In our opinion and according to the information and explanations given to us, the procedures for physical verification of inventories followed by the management are generally reasonable and adequate in relation to the size of the company and the nature of its business.

c) In our opinion and according to the information and explanations given to us, the company has maintained proper records of its inventory. The discrepancies between physical stocks and book records arising out of physical verification, which were not material for the Company as a whole, have been dealt with in the books of account.

3. According to information and explanations given to us:

a) The Company has not granted any loans, secured or unsecured, to companies, firms, or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

4. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major failures in the internal control system.

5. a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section.

b) According to the information and explanations given to us, the transactions of purchase of goods and materials and sale of goods, materials and services made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act 1956, and aggregating during the year to Rs.5,00,000 or more in respect of each party, have been made at prices which are reasonable having regard to the prevailing market prices for such goods, materials or services or the prices at which such transactions for similar goods or services have been made with other parties.

6. The Company has not accepted any public deposits during the year. In respect of public deposits accepted in earlier years, there are no unmatured outstanding deposits.

7. In our opinion, the company's internal audit system, generally commensurate with the size and nature of its business, is required to be strengthened with regard to enlarging the scope and frequency of coverage.

8. We have broadly reviewed the records maintained by the Plants for production of Fertilisers (Ammonium Sulphate), Chemicals (Benzene & Toluene), Industrial gases and Steel products pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Companies Act 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether these are accurate and complete.

9. According to the information and explanations given to us in respect of statutory and other dues:

a) The company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Service tax, Customs duty, Excise duty, Cess and other statutory dues, with appropriate authorities.

b) According to the information and explanations given to us, there are no undisputed statutory dues outstanding for a period of more than six months from the date they became payable, as per books of accounts as at 31st March, 2008.

c) According to the information and explanations given to us, there are disputed statutory dues which have not been deposited as given herein below:

Statutes Nature of Dues Amount Forum where (Rs. In crore) disputes are pending

Sales Tax Demand by 4.73 Supreme CourtAppellate 107.99 High CourtsAuthorities 260.35 Sales Tax Tribunals

755.06 Sales Tax Departments

1128.13

Central Excise Excise duty 641.14 Supreme CourtAct, 1944 20.05 High Courts

448.49 CESTAT130.81 Department of Excise

0.32 Settlement Commission

1240.81

Income Tax Act, 1961 TDS on perks 122.51 High Courts

Customs Act Custom duty 0.12 Department of Customs

Other Statutes Other statutory dues 4.38 Supreme Court(including cess) 272.26 High Courts

27.69 Lower Courts7.09 State Government8.93 Concerned Department

320.35

TOTAL 2811.92

10. There are no accumulated losses of the company as at the end of the year. The company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

12. According to the information and explanations given to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13. The company is not a chit fund or a Nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order, are not applicable to the company.

14 The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order, are not applicable to the company.

15 According to the information and explanations given to us, the terms and conditions of the guarantees given by the company for loans taken by others from banks or financial institutions are not prima-facie prejudicial to the interest of the company.

16 To the best of our knowledge and belief, and according to the information and explanations given to us, the Company has not raised any term-loans during the year under audit. Hence, paragraph 4 (xvi) of the Order is not applicable.

17. According to the information and explanations 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 of the company.

18. According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956.

19. According to the information and explanations given to us and records examined by us, securities have been created in respect of secured bonds issued.

20. The company has not raised any money by public issue during the year.

21. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud by the company has been noticed or reported during the year. As regards fraud on the company, the following cases have been noticed or reported during the year, according to the information and explanations given to us.

COMMENTS MANAGEMENT'S REPLIES

Physical verification of fixed assets and its reconciliation with the books is a continuous process.

Internal Audit Plan for the year 2008-09, approved by Audit Committee, takes care of the observation.

Annexure to the Auditors' ReportReferred to in our Report of even date

7170

Sl. No. Brief Description of the case Amount involved(Rs. in crore)

1. Misuse of township facilities by employees 0.01 These cases relate to under recoveries and2. Misuse of township facilities by others 0.03 are being followed up for recoveries.

0.04

For Ray & Ray For Dass Maulik Mahendra For and on behalf ofChartered Accountants K Agrawala & Co. the Board of Directors

Chartered Accountants

Sd/- Sd/- Sd/-[B.K. Ghosh] [Mahendra K. Agrawala] (S.K. Roongta)

Partner Partner Chairman(M.No. 51028) (M.No.51764)

T.R. Chadha & Co.Chartered Accountants

Sd/-(Ajesh Tuli)

Partner(M. No.86424)

Place : New Delhi Place : New DelhiDated : 16th May, 2008 Dated : 21st July, 2008

COMMENTS MANAGEMENT'S REPLIES

The preparation of financial statements of STEEL AUTHORITY OF INDIA LIMITED for the year ended 31st March 2008 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 16th May, 2008.

I on the behalf of the Controller 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 STEEL AUTHORITY OF INDIA LIMITED for the year ended 31st March, 2008. 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. On the basis of my audit nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors' Report under Section 619(4) of the Companies Act,1956.

For and on the behalf of theComptroller & Auditor General of India

Sd/-

(Rakesh Mohan)Principal Director of Commercial Audit

Place: RanchiDate: 20th June, 2008

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDlA UNDER SECTION 619(4)OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF STEEL AUTHORITY OF INDIA LIMITED FOR THE YEAR ENDED 31 MARCH, 2008

Comments of C&AGAnnexure-II to the Directors' Report

7372

FORM 'A'

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TOCONSERVATION OF ENERGY

A. POWER & FUEL CONSUMPTION

B. CONSUMPTION PER TONNE OF SALEABLE STEEL PRODUCTION

Particulars 2007-08 2006-07

1. ELECTRICITY

a) Total Power Purchased (including JV Power)

Units (Million KWH) 6483 6291

Total Amount (Rs. crore) 2032 1899

Average Rate per Unit (Rs./KWH) 3.13 3.02

b) Own Generation

Through Steam Turbine/Generator

Units (Million KWH) 895 948

Units per Gega Calories of energy input 229 228

Average Rate per Unit (Rs./KWH) 3.67 3.12

2. COAL

i) Coking Coal

Quantity (Million Tonne) 13.95 13.55

Total Cost (Rs. crore) 8243 8483

Average Rate (Rs. per tonne) 5907 6259

ii) Non-Coking Coal

Quantity (Million Tonne) 0.976 0.956

Total Cost (Rs. crore) 176 156

Average Rate (Rs. per tonne) 1807 1637

3. FUEL OILS

Quantity ('000 Kilo Litres) 65 51

Total Cost (Rs. Crore) 154 108

Average Rate (Rs./Kilo Litres) 23801 21285

4. OTHERS

i) Coke

Quantity ('000 Tonnes) 639 601

Total Cost (Rs. Crore) 819 699

Average Rate (Rs. Per tonne) 12830 11644

ii) Misc. (LPG, Gases, Process Steam etc.) 377 316

Total Cost (Rs. Crore)

2007-08 2006-07

Purchased Electricity (KWH) 498 483

Fuel oils (litres) 5 4

Coking Coal (kgs) 1087 1056

Coke (kgs.) 50 47

Non-coking Coal (kgs) 76 74

Note: 1. Purchased Electricity quantity includes power from Joint Venture also.

2. Proportionate pig iron production is added to saleable steel production for above calculation.

A. Energy Conservation

B. Technology Absorption

C. Foreign Exchange Earnings and Outgo

(iii) Rourkela Steel Plant (RSP)

(a) Measures taken (a) Phase II computerization of Energy Centre to facilitate more signals to enable better monitoring and control of The overall specific energy consumption in SAIL (5 integrated fuel gases & utilitiessteel plants) during 2007-08 has been 6.95 G.cal/ tcs, which is less

3than previous year figure of 7.16 G.cal/ tcs. Few important energy (b) Maintaining LD Gas recovery above 100 Nm /TCS after conservation schemes implemented during the year 2007 - 08 are commissioning of the LD gas holderlisted below: (c) Avoidance of continuous bleeding of 'CO' gas for

(i) Bhilai Steel Plant (BSP) maintaining grid safety after re-commissioning of 'CO' gas holder(a) VVVF drive installed in Sinter cooler & Drum feeder of

machine # 4 of SP-II (d) Provision of high emissivity coating in W.B. furnace of Plate Mill(b) Multi-slit burners commissioned in machine #1 and #2 of

SP- II (e) Commissioning of new coke oven battery # I with zero leak doors, on-main charging and computerized (c) Coal dust injection rates at BF #I, BF#V and BF-VII combustion control.enhanced

(iv) Bokaro Steel Plant (BSL)(d) VVF Drives for ID Fans I & II and booster Fans I, II & III of converter shop commissioned (a) Running of 2 hammer crushers in place of 3 in Coal

Handling Plant of Coke Oven by-product(e) Oxygen line from SMS-I to OP-I commissioned to utilize low purity oxygen for cold blast enrichment in Blast (b) Commissioning of CDI in BF # II & IIIFurnace. (c) Capital repair of Stove # 3 of BF # III

(ii) Durgapur Steel Plant (DSP) (d) Commissioning of new BF gas line to CPP to use surplus (a) Thyristorization of intermediate stand drives at Section CO gas

mill (v) IISCO Steel Plant (ISP)(b) On-line sealing of steam, blast and gas leakages (a) Capital repair of Blast Furnace # IV(c) Insulation of steam line and other hot surfaces (b) Battery # 10 under rebuilding(iii) Rourkela Steel Plant (RSP) (c) Impact of measures on energy consumption(a) Recuperator of Plate mill repaired The overall energy consumption for the year decreased by (b) Thyristorization of PM main drive about 3.0 % as compared to previous year.

(c) Damaged skid pipe of RH Furnace-VI of HSM repaired (d) Total Energy Consumption & Energy Consumption per and insulated unit of production.

(d) Battery-I mixing station stabilized

(iv) Bokaro Steel Plant (BSL) Form 'A' enclosed.

(a) Commissioning of Coke Oven battery # 5 after rebuilding

(b) Changeover of battery # V from CO gas to Mixed gas

(c) Supply of Mixed gas in stoves of 3 blast furnaces

(d) Minimization of operation of old pusher type furnace in HS Efforts made in Technology Absorption are given in Form 'B'Mill

(v) IISCO Steel Plant (ISP)

(a) Commissioning of Blast Furnace # II after rebuilding

(b) Capital repair of Blast Furnace # III (Rs. in crore)

(c) Relining of Stoves of BF No. IV i) Foreign exchange earned from exports 1233.99and other activities(b) Additional investment and proposal, if any

ii) Foreign exchange used:(i) Bhilai Steel Plant (BSP)a) CIF Value of import 6823.37(a) Waste heat recovery from sinter cooler for hot water

generation at SP # III b) Other expenditure in foreign currency 89.24

(b) Multi-slit burners in Machines # 3 & 4 of SP- II

(c) 10000 meter steam pipe line insulation

(d) Use of electronic blasts in place of conventional blasts For and on behalf of Board of Directors

(ii) Durgapur Steel Plant (DSP)

(a) Introduction of Multi Slit burner in SP # II Sd/-

(b) Use of solar power for illumination of few major office (S.K.Roongta)building & power distribution of sub-station and for battery Chairmancharging at telephone exchange

2(c) Insulation of steam line and other hot surfaces (5000 m )Place: New Delhi

(d) On-line sealing of steam and blast leakages (2000 bolts)Dated: 31st July, 2008

Annexure-III to the Directors' Report

7574

FORM 'B'

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

1. Specific areas in which R & D activities were carried out by the Company

2. Benefits Derived as a result of R & D efforts (2007-2008)

! Cost Reduction

! Quality Improvement

! Energy Conservation

! Product Development and Application

! Automation

Cost Reduction

! Improvement in Coke Quality with respect to Moisture and M40 at ISP

Electrical control systems have been installed in COB # 8 at ISP for better control of the quenching time and also providing compulsory drainage time and thereby achieve uniform coke moisture (5-6%). Pilot oven campaigns with 7 blends for ISP were conducted which has helped in assessing the quality parameters of the incoming coals and finally determining the desired coal blend composition. Satisfactory performance of washery circuit has been ensured by implementing the recommended operating parameters. Trials with new coal crushing hammers, made of new steel (50MoCr4), showed ~10% life improvement of the hammers.

! Improvement in Plant Productivity and Product Quality at Old Sinter Plants at BSP

Completion of sintering process on strand was ensured with the introduction of steam injection into sinter bed at Sinter Plant # 1 and the strength index of sinter was improved from 69.5 to 70.7%. At Sinter Plant # 2, a number of technological measures were

0introduced viz. changing angle of loading chute from 54 to 60 (to the horizontal), incorporation of single gate system of the intermediate bunker for uniform sinter mix feeding to sinter machine width wise, mapping of air infiltration to suction system for development of preventive measures for reduction of air leakages and installation of polymer liners with lifters for intensive mixing of sinter mix in primary mixing drum. These measures have resulted in improvement of productivity from a level of 1.11 to 1.21

2t/m /hr.

! Investigation into reasons for high CO/CO ratio in BF #2 at RSP2

With the burden distribution adjustments made through Bell Less Top (BLT), central gas flow has been enhanced by charging the coke centrally which has led to improvement in gas utilization from 37 to 43.5 % and reduction in coke rate by 22 kg/thm. CO/CO 2

ratio has been lowered from 1.7 to 1.25.

! Improvement in Performance of BF # 4 at BSP

The presence of scaffold, which was the reason for poor performance, was dislodged and furnace wind acceptability was improved with a number of process modification measures, e.g. sector charging of coke in the affected areas; charging of heavy coke bunch of 50 t once and 100 t two times along with required amount of LD slag, quartzite and Mn-ore; periodic practice of lean-slag to flush-out accumulated alkalis in the furnace; and enhancement of screening efficiency through regular cleaning of screen mats of sinter and coke. All these measures helped in improving the furnace productivity by about 4% and coke rate could be decreased by about 10 kg/thm.

! Improvement in Productivity and Quality at SMS I through Introduction of On-line Purging System at RSP

On-Line Purging (OLP) system was designed and commissioned in both the converters for purging of liquid steel during tapping, and before transfer for secondary refining, with a view to assist shop in achieving increased production target of 0.40 mt of crude steel per annum. A ferro-alloy addition system was also installed in converter # 5. The modified practice resulted in improved deoxidation, desulphurisation and better alloy recovery at LHF and thereby a significant reduction in overall consumption of ferro-alloys was achieved. The overall treatment time could be reduced to about 35 minutes for both low and high-grade heats as against more than 100 minutes.

! Optimisation of VAD Process Parameters for Enhanced Production of Special Quality Slabs in SMS II at BSP

Formation of high sulphide capacity refining slag, through addition of fused calcium aluminate synthetic flux, resulted in considerable reduction in VAD treatment time by 40-90 minutes with final sulphur content in the range of 0.004 to 0.01%. The developed practice also resulted in improvement of product quality through reduction in NDT failure from 13.2 to 7.6%, and reduction in rejection due to NMI from 1.13 to 0.36%. The modified practice has been implemented for regular production of slabs through BOF-ARU-VAD route.

! Modification of Gas Purging System in Steel Ladle in SMS II at BSL

Hood jamming in Ladle Furnace (LF) was sorted out by implementing a number of process modifications, which were based on computational fluid dynamic simulations. The purging gas pressure and flow rate suiting to BSL conditions were optimised. The porous plug locations were also modified from adjacent quadrant to diagonal quadrant. These modifications resulted in: reduction

in aluminium consumption by 8.2% in LF and 7.2% in LRS; reduction in stirring gas consumption by 10.36% in LF and 14.7% in LRS; significant reduction of metal splashing and slag roof formation; uniform ladle lining erosion; a record well block and mid-repair life of 56 heats; and improvement in avg. ladle life from 78 to 96 heats.

Quality Improvement

! Revamping of Slime Beneficiation System to Decrease Silica Control in Iron Ores Fines at CSW Plant at Dalli Mines, BSP

The slime beneficiation unit was revamped by installing a newly designed system consisting 'Fluidised Bed Classifier (FBC)' coupled with 'hydro-cyclone' for removal of silica and aluminous gangue respectively. The product concentrate was de-watered by 'Slow Speed Spiral Classifier (SSSC)' unit and mixed with sinter fines. Three entry points in SSSC and teeter bed classifying in FBC were novel in the system. This new system has resulted in: enrichment of the slime from 49% Fe, 15% SiO & 9% Al O to 2 2 3

63.2-65% Fe, 3.2-4.6% SiO and 1.9-2.4% Al O and nearly at the rate of 30 t/hr, this concentrate was recovered through this 2 2 3

system and mixed with sinter fines. The chemical composition of the composite ore fines improved from 62.59% Fe, 4.93% SiO , 2

and 2.87% Al O to 63.11% Fe, 4.47% SiO and 2.65% Al O . The thickener operation was also made smoother by reduction of the 2 3 2 2 3

faster settling iron ore particles from its feed.

! Enhancement of Cast Billet Quality and Caster Productivity for 125 mm Square Billet at DSP

Acute problem of macro quality in terms of off-corner crack, rhombodity and centreline pipe, faced by DSP while casting 125 mm square billet at 2.2 m/min speed, was solved by introducing a number of modifications in the operating parameters. Mn/S ratio: 25 (min); Mould cooling: 1400 lpm; EMS current: 350 A at 8 Hz; and Superheat: 45 C (max) were followed. Modification of oscillator stroke from 12 to 11 mm, installation of foot rolls and spray ring were also carried out. The acceptability of special quality billet had increased to > 90% with almost complete elimination of off-corner crack. In addition, breakout frequency reduced significantly from the earlier level of 1% to about 0.5% / strand.

! Improvement in Productivity and Quality of CR Coils through PL1-CR1 Route at RSP

Pickling bath parameters were optimised to increase the pickling rate and a new inhibitor was identified. Line speed could be increased from 25.0 to 35.0 m/min, leading to increased production of CR coils by 25.5% (from 9100 to 12,200 t/ month). Improvement in the quality of CR coils were achieved through the implementation of measures like: installation and commissioning of hot water rinsing system leading to improvement in the brightness of coils (% reflectance enhanced from 70 to 83); introduction of an in-house designed strip guide system for preventing side tracking of coils; introduction of a new wiper system to eliminate acid and water carry-over from the line. Furthermore, modified roll cooling system installed in CR1, along with roll crown modification, resulted in improvement in strip shape (wedge reduced from 60 to 30µ).

! Improvement of Coating Adherence of Galvanized Products at BSL

Quality deficiency like bare spots in the galvanized sheets from BSL (~1% diversion) was related to the presence of an undesired level of carbon residue on the surface and incomplete burn off of rolling emulsion at DFF. As a remedial measure, the gas supply

3was raised from 3100 to 3700 m /hr in DFF and the furnace insulation was also improved. It led to improved strip heating and prevention of bare spots, especially in thicker coils (0.75 1.5 mm).

Energy Conservation

! Introduction of Curtain Flame Ignition System in one of the Machines of Sinter Plant II at BSP

A new ignition system, using the mixed gas available at the shop for main burner modules fixed on rooftop for sinter mix ignition purposes and for two numbers of pilot burners mounted on sidewalls, was installed by modifying Zone-1 of the ignition hearth in machine # 1 of SP-2. Low moisture castable (LMC) was used as hood-roof and for charging side-door. The new system is in regular operation and benefits, accrued are: specific gas consumption reduced by ~ 30%; reduction in furnace start up time from 90 to 15 minutes; auto ignition when the machine starts with the help of pilot burners; minimisation of overheating of pallet side plates.

! Modified Duplex Burner for Rotary Kiln of RMP-II at BSP

Duplex burner was introduced long back by RDCIS in the rotary kiln of Refractory Material PlantII to fire coke oven (CO) gas as well as Pitch Creosote Mixture (PCM) in any proportion depending upon the fuel availability to maximise use of cheaper CO gas. To further improve the performance of this duplex burner, the burner was again commissioned with a modified design. The flame characteristics have improved, resulting in better quality of lime and complete elimination of localized heating of refractory lining.

3CO gas firing rate has increased from 3000 to 5000 Nm /hr. Production target of the shop could also be met with only CO gas firing in place of costlier PCM.

Product Development and Application

! Armour Quality Steel Plates for T-90 MBT & Rail Wagons at RSP

Armour quality thicker plates (130 mm) with guaranteed NDT properties have been processed from 250mm CC slabs by adhering to specially designed reheating cycle for slab as well as a new roll pass schedule. Based on successful ballistic test performance at PXE, Chandipur using Fin Stabilized Armour Piercing Discard Sabot (FSAPDS) ammunition, Defence has accepted the product for regular use and accordingly has given necessary clearance for regular production of these plates at RSP.

! Ti bearing LPG and Medium Carbon Steels at RSP

With small addition of Ti (0.02-0.03 wt %) along with suitable modifications of C & N contents in the steel, formability of conventional plain C-Mn LPG steel was improved. Optimisation of hot rolling parameters has resulted in the desired mechanical

7776

properties with consistent gauge control in HR coils. Attainment of strain aging index value at 10% max. has completely eliminated cracking problem of cold formed halved cylinders and thereby increased the average yield (no of cylinders per tonne of HR coil) by 3% at the customers end. During the year, more than 7500 tonnes of materials have been marketed through various customers.

The chemistry of steel of medium carbon HR coils (MC 11 and SAE 1040) grades, used for manufacturing chain link, rolling shutter etc., was optimised to restrict UTS value at 680 MPa max, which in turn ensured adequate cold reducibility of HR coils at the customers' end. During the year, more than 6000 tonnes of material have been marketed for a varietiy of applications.

! Low Carbon EDD HR / CR Steels for Auto bodies at BSL

Technological measures like addition of ~0.01 % Ti and optimization of load during skin pass rolling were introduced in order to meet the demands for EDD hot rolled as well as cold rolled steels with improved elongation. Strain aging, as measured by Strain Aging Index (SAI) substantially decreased from ~8 % (in case of conventional cold rolled and annealed EDD coils) to ~ 2% in the Ti micro-alloyed coils, which has contributed to > 2% (from 39 to 41.4%) improvement in elongation level. The HR coils were cold reduced and annealed for manufacture of various auto components and the CR coils have been successfully used to manufacture critical automotive components such as fuel tank, bottom shell etc.

! Development of SAILMA 550 HI Plate at BSP

A new process technology for production of high strength steel plates of yield strength 550 MPa min. in asrolled condition was developed for the first time in India and marketed under the brand name of SAILMA 550 HI which are used for fabricating penstocks, earthmovers, sluice gate for dams, impellers, bridges etc. Stipulated properties were achieved by adhering to a specially designed steel chemistry and hot rolling of concast slabs through Thermo Mechanical Controlled Processing (TMCP), maintaining finish rolling temperature at 800 C. BSP has produced more than 1800 tonnes of SAILMA 550 HI plates and supplied to M/s. PES Engineers Ltd. Chandigarh, for fabrication of penstocks. The success of SAILMA 550 HI plates has triggered demand of this product from other customers as well, such as M/s. Tratec Engineers, Faridabad and M/s. Texmaco, Kolkata.

! Boron Treated Al Killed Low Carbon Steel at BSL

For the first time, boron treated low carbon steel has been developed with improved cold reducibility and formability properties. A good combination of low work hardening exponent 'n' with higher % elongation (43-45 %) was achieved in steel with base chemistry of C:0.06 max, Mn:0.25 max, treated with B (~20 ppm). Further, this developmental work has been utilised to replace Ti by B in LPG grade steel, which led to reduction in cost of production (Rs. 125/tonne). The mechanical properties of B-treated LPG steel are found to be comparable to those of Ti-bearing LPG steel. More than 18000 tonnes of B-treated Al-killed low carbon steel (including LPG steel) has been supplied to major customers in all regions.

! Vanadium Micro-alloyed Rail at BSP

In view of Indian Railways introducing heavier axle loads, larger traffic volume and higher vehicle speeds for goods traffic movement, a new rail steel chemistry was developed by micro alloying with vanadium and experimental heats were made through BOF-LF-RH-CC route. Requisite property requirements against YS/UTS ratio, YS, UTS, % EL, fracture toughness, fatigue strength, impact strength and hardness of these new rails have been attained. As against a trial order of 500t from Indian Railways, rails were manufactured and supplied to SER for field trial.

Automation

! Development of Performance Monitoring System for Critical Stand Motors of Rail & Structural Mill at BSP

A high speed on-line performance monitoring system was installed & commissioned at Rail Mill. The system acquires critical performance parameters such as armature current, voltage, motor speed, field current etc. for motors of Roughing, Intermediate & Finishing stands. A programme was developed to plot frequency spectrum & power spectral density charts for analysis of the data. Abnormalities in motor drive parameters, stands and rolling practices through time and frequency domain spectrum are now being analysed by the system.

! Development of Modified Hydraulic Scheme for Improvement In Productivity of DCR Mill, CRM at BSL

Frequent failures of the Edge Guide System (EGS) at uncoiler side at Double Cold Reduction Mill at CRM led to frequent stoppages of the mill, causing loss of production. Existing centralized hydraulic system was modified and a dedicated hydraulic system was installed to ensure the consistent supply of clean hydraulic oil at an optimum pressure and flow rate to the EGS. Smooth operation of EGS has virtually eliminated the mill delay due to its failure; 300 tons/day (avg) of sheet gauge coils are now being rolled with good profile.

R&D programmes identified for the next five years are as follows:

Technology Areas Objectives

Coal, Coke & Chemicals Improvement in coal carbonization practice and introduction of process automation for improvement in coke quality and reduction in energy consumption; Improvement in coal charge preparation for optimization of cost of coal blends.

Iron & Sinter Development of intensive beneficiation schemes through lab/pilot studies and technological upgradation of beneficiation plants; Improvement in sintering technology; introduction of pelletisation technologies; maximizing of BF productivity through in-furnace investigation with probes and use of simulation models; Reduction in coke rate; Introduction and stabilization of alternate fuel injection technologies.

3. Future Plan of Action

Steel Making & Casting Improve productivity and reduce level of metallic inputs in BOF and secondary refining units through use of process model; Application of process simulation for enhancement of caster productivity including improved sequence length and tundish life and reduction in level of non-metallic residuals; Process automation through model development for improved turndown control.

Refractories Improvement in lining life of ladles and BOF through zonal lining and use of better refractory material; Development and application of low / ultra low cement and self flow castables; Development of shotcrete monolithic lining for steel ladles.

Rolling Technology Productivity improvement in Rolling Mills; Improvement in quality of rails and introduction of round ingot technology in wheel production; Production of banitic / micro-alloyed rails and wheels; Control of surface defects and gauge variation in HR and CR coils; Micro-structural modelling of HR coils.

Product Development Development of new coated products using simulators; Development and promotion of special steel grades for cold reducing, automobile, oil and construction sectors; Corrosion resistant rail steel; Earthquake resistant steel; High strength LPG steels; High strength steels for construction segment.

Energy Conservation Development and introduction of fuel-efficient burners; Optimization of heating, rolling and heat treatment regime for reduction in energy consumption; Energy conservation using computerized process and combustion control system.

Automation & Computerization Introduction of automation and control systems and development of softwares for productivity, yield and quality improvement in Reheating Furnaces, Heat Treatment Furnaces and Finishing Lines of Rolling Mills; PLC based mill monitoring system; Development of integrated communication and instrumentation system; Intelligent mill set up model development for control of variation in plate thickness; Development of on-line surface inspection system for hot rolled flat products.

Environment & Pollution Control Assessment of PAH in coke oven work zone; Environmental Life cycle Assessment of Iron & Steel making; Development of process for recycling/reuse of BF/BOF mill sludge/slag and improvement in water quality and recycling; Control of coke oven effluent discharge.

(Rs. in crore)

Capital 2.24

Revenue 99.62

Total 101.86

% of Turnover 0.25

Technology development, absorption, adaptation and further improvement are continuously taking place in SAIL in different areas of steel plant operation through a definitive technology strategy and intensive R&D efforts. A number of new technologies are installed/being installed as a part of modernization/continuous improvement. These area-wise include:

Area: Coke Making

! A new 7 m tall environment friendly Coke Oven Batter No.6 of RSP

! Rebuilding of environment friendly Coke Oven Battery No.1 & 4 of RSP

! Rebuilding of environment friendly Coke Oven Battery No.5, 1 & 2 of BSL

! Rebuilding of environment friendly Coke Oven Battery No. 5 & 6 of BSP

! Rebuilding of environment friendly Coke Oven Battery No. 2 of DSP

! Selective crushing of Coal (for improved coke quality) at DSP

! Partial Briquetting of Coal Charge for improving coke strength at BSP & RSP

! Coke Dry Quenching in new 7 m tall Batteries at ISP, BSP & RSP

Area: Sinter Making

! Base Blending for Sinter mix (for improved sinter quality)

! System for recovery of sensible heat from sinter for increased energy efficiency in ignition furnace at the new Sinter plants of BSP, DSP & RSP

4. Expenditure on R&D

TECHNOLOGY ABSORPTION, ADAPTATION & INNOVATION

7978

(a) Company's Philosophy

(b) Board of Directors

(c) Audit Committee:

The philosophy of the company in relation to corporate governance is to ensure transparency, disclosures and reporting that conforms fully with laws, regulations and guidelines, and to promote ethical conduct throughout the organization, with the primary objective of enhancing shareholders value, while being a responsible corporate citizen. The Company is committed to conforming to the highest standards of corporate governance in the country. It recognizes that the Board is accountable to all shareholders and that each member of the Board owes his/her first duty for protecting and furthering the interest of the Company.

stAs on 31 March, 2008, the Board of Directors comprised a full time Chairman, 9 whole–time Directors (WTD) and 12 non-executive Directors (Non-ED) (including 10 independent Directors). During the year, 15 Board meetings were held on 03.04.2007, 21.05.2007, 26.05.2007, 06.07.2007, 25.07.2007, 07.08.2007, 28.08.2007, 05.09.2007, 20.09.2007, 30.10.2007, 11.12.2007, 29.01.2008, 31.01.2008, 22.02.2008 and 14.03.2008.

The composition of directors and their attendance at the Board meetings during the year and at the last Annual General meeting as also number of other directorships, as disclosed, are as follows:

Name of the Director Category of No. of Board Attendance No. of otherDirectorship meetings at last directorship

attended AGM held as onduring 31.3.2008 *2007-08

Shri S.K. Roongta WTD 15 Yes Nil

Shri K.K. Khanna (upto 30.09.2007) WTD 9 Yes -

Shri Arun Kumar Rath. (upto 16.11.2007) Non-ED 10 -- -Dr. S.C. Jain Non-ED 14 -- Nil

Prof. R.P. Sengupta Non-ED 6 -- NilDr. Velu Annamalai Non-ED 14 Yes Nil

Shri Siddharth Kak Non-ED 14 -- 1

Shri Nilotpal Roy (upto 31.01.2008) WTD 13 Yes -

Shri G. Elias Non-ED 14 -- 1

Shri V. Shyamsundar WTD 14 Yes Nil

Shri B.N. Singh WTD 12 Yes 1

Shri V.K. Srivastava WTD 14 Yes 3

Shri G. Ojha WTD 14 Yes 1

Shri Shyamal Ghosh Non-ED 14 Yes 7Shri S.N. P.N. Sinha (upto 27.06.2007) Non-ED 2 N.A. -

Shri Mohammad Yusuf Khan Non-ED 7 Yes 3

Prof. Deepak Nayyar Non-ED 10 - 1

Shri R. Ramaraju WTD 15 Yes 3

Prof. Javaid Akhtar Non-ED 11 Yes Nil

Shri P.K. Sengupta Non-ED 14 Yes Nil

Dr. Vinayshil Gautam Non-ED 14 Yes 3

Shri Soiles Bhattacharya WTD 15 Yes Nil

Shri S.S. Ahmed (w.e.f. 11.05.2007) WTD 13 Yes NilShri V.K. Gulhati (w.e.f. 01.10.2007) WTD 5 N.A. 2

Shri B.S. Meena (w.e.f. 20.12.2007) Non-ED 4 N.A. 6

Shri S.P. Rao (w.e.f. 15.02.2008) WTD 2 N.A. Nil

* Includes Directorship in Private companies.

1. Terms of reference:

The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial reports; the Company's systems of internal controls

Corporate GovernanceAnnexure 'IV' to the Directors' Report

regarding finance, accounting and legal compliance that management and the Board have established; and the Company's auditing, accounting and financial reporting process generally.

The Audit Committee reviews reports of the Internal Auditors, meets Statutory Auditors and discusses their findings, suggestions and other related matters and reviews major accounting policies followed by the Company. The Audit Committee reviews with management, the quarterly and annual financial statements before their submission to the Board.

The minutes of the Audit Committee meetings are circulated to the Board, discussed and taken note of.

2. Composition:

The Audit Committee of the Board was formed in 1998. However, in pursuance to SEBI's requirements, the Audit Committee was

streconstituted on 21 March, 2001 with only Non-Executive Directors as members. The present Audit Committee was reconstituted on 11.06.2007 and consists of Shri Mohd. Yusuf Khan, Shri Siddharth Kak, Shri P.K. Sengupta and Dr. Vinayshil Gautam as members.

During the last year, the committee met 7 times and attendance of the members at the meetings was as follows:

Name of the Director Status No. of meetings attended

Shri Mohammad Yusuf Khan Chairman 4(w.e.f. 11.6.07)

Shri Siddharth Kak Member 7

Shri P.K. Sengupta Member 5(w.e.f. 11.6.2007)

Dr. Vinayshil Gautam Member 5(w.e.f. 11.6.2007)

Prof. R.P. Sengupta Chairman 2(upto 10.6.2007)

Shri Shyamal Ghosh Member 2(upto 10.6.2007)

i) Being a Government company, the nomination and fixation of terms and conditions for appointment as Director is made by Government of India. As such, the Nomination and Compensation Committee has not been constituted.

ii) The details of remuneration to whole time directors are given below:

(Rupees)

Name of the Director Salary Retirement & Totalother Benefits

Shri S.K. Roongta 723354 884940 1608294

Shri K.K. Khanna 340517 443113 783630(upto 30.09.07)

Shri Nilotpal Roy 513782 205202 718984(upto 31.01.08)

Shri V. Shyamsundar 939401 817876 1757277

Shri B.N. Singh 771363 811576 1582939

Shri V.K. Srivastava 729029 619166 1348195

Shri G. Ojha 768577 831804 1600381

Shri R. Ramaraju 831228 773442 1604670

Shri Soiles Bhattacharya 859342 772089 1631431

Shri S.S. Ahmed 622746 676308 1299054

Shri V.K. Gulhati 481523 436685 918208

Shri S.P. Rao 57657 91695 149352

Total 7638519 7363896 15002415

iii) The Non-Executive Directors (other then Government nominee Directors) are paid only sitting fee of Rs.10,000/- for each Board/Board Sub-Committee Meetings attended by them.

iv) The salary of the whole time directors is governed by pay scales and rules of the Government.

v) Terms & Conditions

The Whole Time Directors are nominated by Government of India for appointment as Director for a period of 5 years or till the age of

(d) Nomination & Compensation Committee

! Modern automation & control for improved and consistent quality of sinter by optimization of sintering process.

Area: Iron Making

! Coal Dust Injection (CDI) in four Blast Furnace at BSP, two Blast Furnaces at DSP, four Blast Furnaces at BSL and one Blast Furnace at RSP for reducing Coke rate and cost of production of hot metal. This technology is further being extended to other Blast Furnaces.

! Two stage Gas Cleaning Plant in three Blast Furnaces at BSP, two Blast Furnace each at RSP & ISP and one Blast Furnace at BSL (for improvement in quality of BF gas)

! Introduction of INBA Cast House Slag Granulation technology in three Blast Furnaces each of BSP & RSP, two Blast Furnace of DSP and four Blast Furnaces of BSL for improving productivity, reduce environmental pollution and gainful utilization of BF Slag.

! Introduction of High Hot Blast technology in Blast Furnace stoves

! Closed Loop Cooling System with DM water in three Blast Furnaces of BSP and one Blast Furnace each of BSL, RSP and ISP for enhancement of campaign life of furnaces.

! Cast House Fume Extraction Process in three Blast Furnaces at BSP, two Blast Furnaces at BSL and one Blast Furnace each at RSP & ISP as a pollution control measure

! Flat Cast House design in three Blast Furnaces of BSP and one Blast Furnace each of BSL, RSP & ISP for use of mobile equipment in Cast House and easy maintainability.

! Top Recovery Turbine in one Blast Furnace each of BSL, BSP, RSP & ISP for generation of power.

! Under burden probe in two Blast Furnaces each of BSL & BSP and one Blast Furnaces each of RSP & ISP3

! 4000 m Blast Furnaces at BSP, ISP & RSP

Area: Steel Making

! Hot Metal Desulphurisation system after mixer for charging low sulphur hot metal in the BOF converters for improved steel quality at RSP & BSP.

! Three new state of the art steel melting facilities at ISP, BSL & BSP

! Introduction of combined blowing technology (for improved product quality) in SMS-II, BSL

! Introduction of RH Degassing of improved rail steel product quality in SMS-II of BSP

! Introduction of Electro-magnetic stirring (for improved product quality) in the continuous casting machines at VISL, DSP, ASP and BSP

! Introduction of thin slab casting & direct rolling at BSL

Area: Rolling & Finishing (Long Products)

! Ultrasonic testing of plates in Plate Mill (for quality assurance of plates) at BSP

! Ultrasonic testing and Eddy current testing facilities (for quality assurance of rails) at BSP

! Long rail finishing technology at Rail & Structural Mill, BSP

! Slit rolling in Merchant Mill (for increased productivity and broad product range) in Merchant Mill of DSP

! Hydraulic Automatic Gauge Control in Plate Mill (for achieving close thickness tolerances) at BSP

! State of the art Bar & Rod Mill and Universal Rail & Beam Mills at DSP, ISP & BSP

! Installation of Walking Beam Reheating Furnace (for improved product quality, yielding and reductions in energy consumption) in Blooming Mill of DSP.

Area: Rolling & Finishing (Flat Products)

! Laminar Strip Cooling, Hydraulic Automatic Gauge Control, Work Roll Bending (all for improved product quality) in the Hot Stril Mill of BSL & RSP

! Installation of Walking Beam Reheating Furnaces (for improved product quality yield and reductions in energy consumption) in the Hot Strip Mills fo BSL & RSP and Plate Mills of RSP & BSP

! State of the art Cold Rolling Mill complex at BSL

These technologies have been adopted/being adopted and are being gradually absorbed by the plants. No other major technologies were imported by the Company during the last five years.

8180

Superannuation or until further order, whichever is the earliest. They are initially appointed by the Board of Directors as Additional Directors and thereafter by the Shareholders in the Annual General Meeting in terms of the provisions of the Companies Act, 1956.

The appointment may, however, be terminated by either side on three months notice or on payment of three months salary in lieu thereof.

(i) A Shareholders/Investors Grievance Committee under the Chairmanship of an Independent Director namely Prof. Deepak Nayyar and comprising another independent director, namely Prof. Javaid Akhtar, and two Whole Time Directors, i.e. Director (Personnel) and Director (Finance), as members is functioning to look into the redressal of shareholders and investors complaints like non-transfer of shares, non-receipt of balance sheet, non-receipt of declared dividend etc.

(ii) Name of compliance officer: Shri Devinder Kumar, Company Secretary.

(iii) There was one complaint pending redressal as on 31.03.2007. Number of shareholders complaints received during the period from 01.04.2007 to 31.03.2008 were 50. During the year, 50 complaint were resolved and only one complaint was pending for redressal as on 31.03.2008, which has also been resolved subsequently.

Location and time where last three AGMs held:

Financial Year Date Time Location

2006-2007 20.09.2007 10.30 a.m. Air Force AuditoriumSubroto Park, New Delhi.

2005-2006 22.09.2006 10.30 a.m. NDMC Indoor Stadium,Talkatora Garden, New Delhi.

2004-2005 23.09.2005 10.30 a.m. NDMC Indoor Stadium,Talkatora Garden, New Delhi.

i) In the last 3 years, only one Special Resolution has been passed in the AGMs and none through Postal Ballot.

ii) No special resolution is proposed to be conducted through postal ballot upto the ensuing AGM.

There were no transactions by the Company of material nature with Promoters, Directors or the Management, their Subsidiaries or relatives etc. that may have potential conflict with the interests of company at large. The Non-Executive Directors had no pecuniary relationships or transactions vis-à-vis the company during the year except receipt of sitting fee for attending the meetings of the Board/Board Sub-Committee. None of the Non-Executive Directors held any share/convertible instrument of the company.

There were no instances of non-compliance by the Company, penalties, strictures imposed on the company by Stock Exchanges or SEBI or any statutory authority, on any matter related to capital markets, during the last three years.

The Central Vigilance Commission (CVC) has informed that as per the Hon'ble Supreme Court orders and Government of India Resolution on

(e) Shareholders/Investors Grievance Committee

(f) General Body Meetings:

(g) Disclosures:

“Public Interest Disclosure & Protection of Informer” only CVC can act as the designated agency to receive Whistle Blower Complaint. No other agency is empowered/can be nominated to deal with the matter. As such, CVC has not permitted SAIL to formulate the Whistle Blower Policy at this stage. Accordingly, the Company has not adopted Whistle Blower Policy. However, the Company has not denied access to any personnel to approach the Management on any issues.

The Company has complied with the mandatory requirements of Clause 49 of the Listing Agreement of the Stock Exchange and the guidelines on Corporate Governance for Central Public Sector Enterprises issued by the Department of Public Enterprises, Government of India. Further, the company has not adopted non-mandatory requirement of the said clause 49.

Quarterly results have been published in prominent daily newspapers as per requirements on the following dates:

Quarter ending 30.06.2007 30.09.2007 31.12.2007

Date of publication 26.07.2007 31.10.2007 30.01.2008

The Quarterly/Annual results are also made available at the website of the Company (www.sail.co.in). The company displays official news releases also on its website.

The Management's Discussion & Analysis Report forms part of the Annual Report.

thi) Annual General Meeting is proposed to be held on 10 September, 2008 at Air Force Auditorium, Subroto Park, New Delhi-110010.

st stii) Financial year : 1 April, 2007 to 31 March, 2008nd thiii) Date of Book Closure: 2 August, 2008 to 20 August, 2008 (Both

days inclusive).

iv) The Board of Directors of the Company has recommended payment of final Dividend of 18% for the Financial Year ended

stMarch 31 , 2008 in addition to the Interim Dividend of 19% paid on th5 February, 2008. The Final Dividend, if declared at the ensuing

AGM, will be paid to those Shareholders whose names appear in stthe Company's Register on the record date i.e. 1 August, 2008

(end of business hours).

v) The shares of the Company are listed at the following stock exchanges:

Bombay Stock Exchange Ltd.,Phiroze Jeejeebhoy Towers, Dalal Street, Fort Mumbai-400001(Stock Code No.500113)

The National Stock Exchange of India Limited,Plot No. C/1, G Block, Bandra Kurla Complex, Bandra (E).Mumbai- 400051 (ISIN No. INE 114A01011)

The London Stock Exchange,10 Paternoster Square, London EC4M 7LS, UK

The Annual Listing Fee for 2007-08 has been paid to each of the stock exchanges.

vi) The monthly high and low quotation of the Company's shares during each month in the last financial year at the Bombay Stock Exchange Ltd.(BSE) and National Stock Exchange (NSE) during the year 2007-08 are indicated below:

(h) Means of Communication:

(i) General Shareholders Information:

MONTH & SENSEX SAIL at BSE NIFTY SAIL at NSE

YEAR HIGH LOW HIGH LOW HIGH LOW HIGH LOW

APR '07 14383.72 12425.52 137.70 106.10 4217.90 3617.00 137.90 106.05

MAY'07 14576.37 13554.34 149.95 131.90 4306.75 3981.15 149.95 124.10

JUN '07 14683.36 13946.99 141.90 123.75 4300.70 4161.80 141.70 123.00

JUL '07 15868.85 14638.88 167.10 128.15 4647.95 4304.00 167.20 128.10

AUG '07 15542.40 13779.88 172.75 136.00 4528.85 4165.70 172.80 135.10

SEP '07 17361.47 15323.05 209.35 163.10 5055.80 4445.55 209.75 162.10

OCT '07 20238.16 17144.58 280.90 184.00 5976.00 5000.95 280.00 185.00

NOV '07 20204.21 18182.83 273.15 218.65 6011.95 5394.35 273.00 225.25

DEC '07 20498.11 18886.40 292.50 250.10 6185.40 5676.70 293.00 250.00

JAN '08 21206.77 15332.42 288.70 165.00 6357.10 4448.50 290.40 165.00

FEB '08 18895.34 16457.74 262.00 180.70 5545.20 4803.60 263.00 180.10

MAR '08 17227.56 14677.24 250.00 181.50 5222.80 4468.55 250.00 181.15

vii) Registrar and Share Transfer AgentM/s. MCS Limited,Sri Venkatesh Bhawan, W-40, Okhla Industrial AreaPhase-II, New Delhi-110020Phone No.011-41406149

viii) Share Transfer System:

The equity shares of the Company is mandatory traded in the dematerialized form. The Share Transfer Committee of the Board meets at regular intervals, to expedite the process of transfer of shares well within the time limit prescribed in this respect under the listing agreements.

stix) Distribution of Shareholdings as on 31 March, 2008

Shareholding Shareholders Amount

Number % to Total In Rupees % of Total

(1) (2) (3) (4) (5)

Upto 500 266133 92.11 326758810 0.79

501-1000 12343 4.27 103967250 0.25

1001-2000 5187 1.80 81253860 0.20

2001-3000 1666 0.58 43436390 0.10

3001-4000 778 0.27 28453140 0.07

4001-5000 764 0.26 36707330 0.09

5001-10000 937 0.32 69985340 0.17

10001-50000 692 0.24 149974240 0.36

50001-100000 114 0.04 80847670 0.20

Above 100000 329 0.11 40382621420 97.77

Total 288943 100.00 41304005450 100.00

stx) Shareholding pattern as on 31 March, 2008

Category No. of %age ofShares held Shareholding

A. Promoters' Holding

1. Promoters - Indian Promoters viz, the

Govt. of India 3,544,690,285 85.82

- Foreign Promoters -

2. Persons acting in Concert -

Sub-Total 3,544,690,285 85.82

B. Non-Promoters Holding

3 Institutional Investors

a. Mutual Funds and UTI 5,84,21,505 1.42

b. Banks, Financial Institutions, Insurance Companies (Central/State Govt. Institutions/

Non-Govt. Institutions) 19,95,19,704 4.83

c.Foreign Institutional Investors (FIIs) 223582002 5.41

Sub-Total 48,15,23,211 11.66

4 Others

a Private Corporate Bodies 2,43,91,190 0.59

b Indian Public 7,70,24,899 1.86

c NRIs/OCBs 19,83,910 0.05

d Any other (Please specify) - GDR 7,87,050 0.02

Sub-Total 10,41,87,049 2.52

GRAND TOTAL 4,130,400,545 100.00

xi) Status of dematerialization as on 31.03.2008

Particulars No. of Shares % of No. of capital Accounts

NSDL 56,39,34,570 13.65 180672

CDSL 1,35,82,505 0.33 57732

Total Dematerialised 57,75,17,075 13.98 238404

Physical - Government of India 3,54,46,90,285 85.82 4

Physical - Other Shareholders 81,93,185 0.20 50535

Total 4,13,04,00,545 100.00 288943

The Government of India holds shares in physical form. Out of the balance equity capital of the company, 98.60% have already been dematerialised by 31.03.2008.

xii) CODE OF CONDUCT

The Company has in place a Code of Conduct applicable to the Board Members as well as the Senior Management and that the same has been hosted on the Company's website. All the Board Members and the Senior Management Personnel have affirmed

stcompliance with the Code of Conduct, as on 31 March, 2008.

xiii) The Company's plants/units/subsidiaries are located at:

STEEL PLANTS

• Bhilai Steel Plant, Bhilai-490001, Chhattisgarh

• Durgapur Steel Plant, Durgapur-713203, West Bengal

• Rourkela Steel Plant, Rourkela-769011, Orissa

• Bokaro Steel Plant, Bokaro Steel City-827001, Jharkhand

• IISCO Steel Plant, Burnpur-713325, West Bengal

• Alloy Steels Plant, Durgapur-713208, West Bengal

• Salem Steel Plant, Salem-636013, Tamil Nadu

• Visvesvaraya Iron & Steel Plant, Bhadravati-577031, Karnataka

UNITS

• Central Coal Supply Organisation, Dhanbad-828127, Jharkhand.

• Central Marketing Organisation, Ispat Bhawan, 40, Jawahar Lal Nehru Road, Kolkata-700071, West Bengal.

• Centre for Engineering & Technology, Ranchi-834002, Jharkhand.

• Environment Management Division, 6, Ganesh Chandra Avenue, (5th Floor), Kolkata-700013, West Bengal.

• Growth Division, 97, Park Street, Calcutta-700016, West Bengal.

• Management Training Institute, Ranchi-834002, Jharkhand.

• Raw Materials Division, 10, Camac Street, Industry House, Kolkata-700017, West Bengal.

• Research & Development Centre for Iron & Steel, Ranchi-834002, Jharkhand.

• SAIL Consultancy Division, 16-20 Floor, SCOPE Minar North Tower, Laxmi Nagar Distt. Centre, Delhi-110092.

• SAIL Safety Organisation, Ranchi-834002, Jharkhand.

SUBSIDIARIES

• Maharashtra Elektrosmelt Limited, Chandamul Road, Chandrapur-442401, Maharashtra.

• IISCO-Ujjain Pipe & Foundry Company Limited (under liquidation).

xiii) Address for correspondence from shareholders for queries/ complaints, if any:

M/s. MCS Limited,Sri Venkatesh Bhawan, W-40, Okhla Industrial AreaPhase-II, New Delhi-110020Phone No.011-41406149Fax No. 011-41709881E-mail mcsdel@vsnl.com

8382

To

The Members of

Steel Authority of India Limited

We have examined the compliance of the conditions of corporate governance by Steel Authority of India Limited for the year ended 31st March, 2008, as stipulated in clause 49 of the Listing Agreements of the said company with the various stock exchanges and the Guidelines on Corporate Governance for Central Public Sector Enterprises, issued by the Government of India, Department of Public Enterprises (DPE).

The compliance of the conditions of Corporate Governance is the responsibility of the management. Our examination was limited to the procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the company.

We certify that, in our opinion, and to the best of our information and according to explanations given to us, the company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements and DPE's guidelines. However, there were 10 independent directors on the Board of Directors of the company as against the requirement of 12 independent directors. As regards compliance with DPE's Guidelines, besides the position relating to the requirements of independent directors as stated above, the Company is submitting the details of related party transactions for review by the Audit Committee on half yearly basis, instead of pre-approval by the Audit Committee required by the above Guidelines.

We state that no investor grievance is pending for a period exceeding one month against the company, as per the records maintained by the Shareholders/Investors Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency or effectiveness with which the management has conducted the affairs of the company.

For Ray & Ray For Dass Maulik Mahendra For T.R. Chadha & Co. Chartered Accountants K Agrawala & Co. Chartered Accountants

Chartered Accountants

Sd/- Sd/- Sd/-

(B.K. Ghosh) (Mahendra K. Agrawala) (Ajesh Tuli)

Partner Partner Partner

(M. No. 51028) (M. No.51764) (M. No.86424)

Place : New Delhi

Dated : 15th July, 2008

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956, RELATING TO SUBSIDIARY COMPANY

NAME OF THE SUBSIDIARY MAHARASHTRACOMPANY ELEKTROSMELT

LIMITED

1. Financial year of the subsidiary ended 31st March, 2008

2. Date from which they became subsidiary 18th October, 1986

3. Share of the subsidiary held by the Company as on 31st March, 2008

a) Number & face value 2,37,87,935 equityshares of Rs.10/-each fully paid up

b) Extent of holding 99.12%

4. The Net aggregate amount of the subsidiary (Rupees in Crore)Company profit/(loss) so far as it concernsthe member of the holding company:

a) Not dealt with in the holdingCompany's accounts.

i) For the financial year ended31st March, 2008 36.00

ii) Upto the previous financial yearsof the subsidiary company 39.99

b) Dealt with in the holdingCompany's accounts.

i) For the financial year ended31st March, 2008. Nil

ii) For the previous financial yearsof the subsidiary companysince they became the holdingcompany's subsidiaries. Nil

Note:

The Company holds 30,00,000 equity shares of Rs.10 each in IISCO Ujjain Pipe & Foundry Co. Ltd. The Hon'ble High Court of Calcutta had directed winding-up of the Company with effect from 10th July, 1997 and the official liquidator has taken over the possession of the assets of the Company. The liquidator, after disposing the assets of the Company, is in the process of settling the outstanding dues. The cumulative loss of IISCO Ujjain Pipe & Foundry Co. Ltd. upto 10th July'97 was Rs.17.05 crores.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(Devinder Kumar) (Soiles Bhattacharya) (S.K. Roongta)

Secretary Director (Finance) Chairman

Place : New Delhi

Date : 21st July, 2008

Corporate Governance CertificateAnnexure-V to the Directors' Report

8584

Schedule As at As atNo. 31st March, 2008 31st March, 2007

(Rupees in crore)

Shareholders' Fund

Share Capital 1.1 4130.40 4130.40

Reserves and Surplus 1.2 19156.87 23287.27 13348.61 17479.01

Share Application Money pending allotment 1.50 10.40

Loan Funds

Secured Loans 1.3 1767.28 2013.75

Unsecured Loans 1.4 2120.36 3887.64 2625.15 4638.90

Deferred Tax Liability ( Net ) 1564.35 1416.88

Minority Interest 1.16 0.43 0.18

28741.19 23545.37

Fixed Assets 1.5

Gross Block 31679.85 30622.81

Less: Depreciation 19739.02 18651.77

Net Block 11940.83 11971.04

Capital Work-in-Progress 1.6 3486.65 15427.48 1791.51 13762.55

Investments 1.7 35.79 36.99

Current Assets, Loans & Advances

Inventories 1.8 6954.08 6756.37

Sundry Debtors 1.9 3110.27 2353.60

Cash & Bank Balances 1.10 13933.08 9810.75

Other Current Assets 1.11 276.37 154.80

Loans & Advances 1.12 2488.96 1742.47

26762.76 20817.99

Less: Current Liabilities & Provisions

Current Liabilities 1.13 6644.96 5631.87Provisions 1.14 6899.54 5569.97

13544.50 11201.84

Net Current Assets 13218.26 9616.15

Miscellaneous Expenditure 1.15 59.66 129.68(to the extent not written off or adjusted)

28741.19 23545.37

Accounting Policies and Notes on Accounts 3

Schedules 1 and 3 annexed hereto, form part of the Consolidated Balance Sheet.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-( Devinder Kumar ) ( Soiles Bhattacharya) ( S.K.Roongta)

Secretary Director ( Finance ) Chairman

In terms of our report of even date

For Ray & Ray For Dass Maulik Mahendra K Agrawala & co. For T.R.Chadha & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-( B.K. Ghosh ) (Mahendra K Agrawala) ( Ajesh Tuli)

Partner Partner Partner

Place : New DelhiDated : July 14, 2008

SOURCES OF FUNDS

APPLICATION OF FUNDS

Schedule Year ended Year endedNo. 31st March, 2008 31st March, 2007

(Rupees in crore)

Sales 2.1 45654.44 39236.78Less : Excise Duty 6087.16 39567.28 5286.31 33950.47 Finished products internally consumed 490.81 410.00 Interest earned 2.2 1191.25 757.51 Other revenues 2.3 661.85 792.22 Provisions no longer required written back 2.4 61.27 59.46

41972.46 35969.66

Accretion ( - ) in stocks 2.5 -330.53 -216.06Raw Materials Consumed 2.6 14031.88 13312.84Purchase of finished / semi-finished products 3.63 1.29Employees' Remuneration & Benefits 2.7 8014.32 5141.03Stores & Spares Consumed 3316.70 3030.29Power & Fuel 2.8 2702.72 2466.48Repairs & Maintenance 2.9 595.31 419.79Freight outward 717.85 692.12 Other expenses 2.10 1881.24 1651.70 Interest & finance charges 2.11 259.39 344.37 Depreciation 1283.52 1261.53

Total 32476.03 28105.38Less : Inter Account Adjustments 2.12 2089.63 30386.40 1670.55 26434.83

11586.06 9534.83 Adjustments pertaining to earlier years 2.13 -1.48 -16.01

Profit before tax 11584.58 9518.82 Less : Provision for taxation :

– Current tax 3809.39 3341.44 – Deferred tax 147.42 -80.44 – Fringe benefit tax 33.69 27.07 – Earlier years adjustments -2.70 3987.80 -33.04 3255.03

Profit after tax 7596.78 6263.79 Share of profit of associate 0.09 0.00

Minority Interest 0.25 0.12 7596.62 6263.67

Balance brought forward 10966.80 6798.54 Amount transferred from Bonds Redemption Reserve ( net ) 86.39 38.42 Provision towards long term service awards to 0.00 -14.59 employees upto 31st March 2006 (net of tax)Amount Available for Appropriation 18649.81 13086.04

Transferred to General Reserve 773.65 638.50Interim dividend 784.78 660.86 Proposed dividend 743.54 619.60 Tax on Interim Dividend 133.62 93.22 Tax on Proposed Dividend 127.31 107.06 Balance carried to Balance Sheet 16086.91 10966.80

18649.81 13086.04Earnings per Share ( Face value Rupees 10/- each )Profit after tax 7596.62 6263.67 Average Number of equity shares 4130400545 4130400545 Basic and Diluted Earnings per share ( Rupees ) 18.39 15.16 Accounting Policies and Notes on Accounts 3Schedules 2 and 3 annexed hereto, form part of the Consolidated Profit & Loss Account.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(Devinder Kumar) (Soiles Bhattacharya) (S.K.Roongta)

Secretary Director (Finance) Chairman

In terms of our report of even date

For Ray & Ray For Dass Maulik Mahendra K Agrawala & Co. For T.R.Chadha & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-(B.K. Ghosh) (Mahendra K Agrawala) (Ajesh Tuli)

Partner Partner Partner

Place : New DelhiDated : July 14, 2008

INCOME

EXPENDITURE

APPROPRIATIONS

Consolidated Profit & Loss Account For the year ended 31st March, 2008

Consolidated Balance SheetAs at 31st March, 2008 Annexure-VI to the Directors' Report

8786

Consolidated Cash Flow Statement for the Year 2007 - 08 2006 - 07(Rupees in crore)

Net Profit before taxation 11584.58 9518.82Add / ( Less ) Adjustments for :Minority Interest (0.25) (0.12)Opening balance of Long Term Service Award 0.00 (21.94)Depreciation 1282.37 1286.80 Interest Expenses 259.39 227.49 Bad debts written-off 2.30 4.61 Unrealised Foreign Exchange Fluctuation (22.89) (5.61)Provision for Others 1178.05 (158.45)Deferred revenue expenditure (Charged during the year) 73.70 127.84 Profit on sale of Fixed Assets (48.72) (14.00)Interest Income (1191.25) (757.51)Dividend Income (3.48) (12.77)Operating cash flow before working capital change 13113.80 10195.16 Adjustments for :-( Increase ) / Decrease in Inventories (197.71) (434.54)( Increase ) / Decrease in Sundry Debtors (758.97) (446.35)( Increase ) / Decrease in Loans and Advances (728.14) (425.45)Increase / ( Decrease ) in Minority Interest 0.25 0.12 Increase / ( Decrease ) in Current liabilities 955.23 371.04 Deferred revenue expenditure (Additions) (3.68) (40.67)Cash generated from Operations 12380.78 9219.31 Direct Taxes Paid (3831.92) (3445.27)

Net Cash from Operating Activities 8548.86 5774.04

Purchase of Fixed Assets (2842.49) (1485.51)Fixed Assets sold /discarded 82.46 45.86 Loans to Other Companies 4.54 26.38 Purchase/Sale of investments (net) 1.69 (16.86)Interest received 1069.68 689.99 Dividend received 3.48 12.77 Net Cash used in Investing Activities (1680.64) (727.37)

Share Application Money (8.90) 9.00 Increase / ( decrease ) in Reserve & Surplus 0.80 2.27 Increase / ( Decrease ) in Borrowings (net) (751.26) 31.84 Reversal of Interest on SDF Loans 0.00 116.88 Interest and Finance Charges paid (340.08) (521.28)Dividend Paid (1405.50) (980.59)Tax on Dividend (240.95) (137.71)Net Cash used in Financing Activities (2745.89) (1479.59)Net Increase / (Decrease) in Cash & Cash Equivalents (A+B+C) 4122.33 3567.08 Cash & Cash Equivalents (Opening) 9810.75 6243.67 Cash & Cash Equivalents (Closing) 13933.08 9810.75 (Represented by Cash & Bank Balances)

Notes :1. The above Cash Flow Statement has been prepared pursuant to Clause 32 of Listing Agreement with Stock Exchanges and under the indirect method

set out in Accounting Standard-3 issued by The Institute of Chartered Accountants of India.2. Figures in bracket indicate cash outflow.3. Significant Accounting Policies and Notes to Accounts ( Schedule 3 ) form an integral part of the Cash Flow Statement.4. Previous year figures have been rearranged / regrouped / recast whereever necessary to conform to current years classification.

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(Devinder Kumar) (Soiles Bhattacharya) (S.K.Roongta)

Secretary Director (Finance) Chairman

In terms of our report of even date

For Ray & Ray For Dass Maulik Mahendra K Agrawala & Co. For T.R.Chadha & Co.Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-(B.K. Ghosh) (Mahendra K Agrawala) (Ajesh Tuli)

Partner Partner Partner

Place : New DelhiDated : July 14, 2008

A. Cash flow from Operating Activities

B. Cash flow from Investing Activities

C. Cash flow from Financing Activities

1.1. : SHARE CAPITAL

1.2 : RESERVES AND SURPLUS

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)Authorised

5,00,00,00,000 equity shares of Rs. 10 each 5000.00 5000.00

Issued, Subscribed & Paid-up4,13,04,00,545 equity sharesof Rs. 10/- each fully paid. 4130.40 4130.40

Note : 1,24,43,82,900 equity shares ofRs.10 each (net of adjustments onreduction of capital) were allotted as fullypaid up for consideration other than cash.

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)

Capital Reserve 3.29 3.29 Prime Minister's Trophy Award Fund

As per last Balance Sheet 11.33 8.98 Additions 1.28 2.77

12.61 11.75 Utilisations 0.48 12.13 0.42 11.33

Securities Premium 235.29 235.29

Bond Redemption ReserveAs per last Balance Sheet 348.83 387.25 Transferred from Profit & Loss Account 31.82 59.40 Transferred to Profit & Loss Account 118.21 262.44 97.82 348.83

General ReserveAs per last Balance Sheet 1783.07 1144.65 Add: Transferred from Profit & Loss Account 773.65 638.50 Add: Adjustment during the year 0.09 2556.81 -0.08 1783.07

Surplus as per Profit & Loss Account 16086.91 10966.80

19156.87 13348.61

Consolidated Cash Flow Statement Schedules(Forming part of the Consolidated Balance Sheet)

8988

1.4 : UNSECURED LOANSAs at As at

31st March, 2008 31st March, 2007

(Rupees in crore)Government of India 0.27 0.27

Interest accrued and due thereon 0.58 0.85 0.58 0.85

Steel Development Fund 204.16 204.16

Interest accrued and due thereon 907.37 1111.53 888.42 1092.58

Foreign Currency Loans

Long Term (@) 515.65 512.59

Short Term 0.00 515.65 23.06 535.65

Term Loans From Government of Maharashtra (Interest free) 0.39 0.98

Non Convertible Bonds (@)

Interest Rate Date of Redemption

10.25 % 3rd June 2007 0.00 450.00

11.60 % 12th March 2008 0.00 15.00

10.50 % 1st August,2008 35.00 35.00

11.50 % 30th March 2010 # 43.50 43.50

12.45 % 1st September 2010 * 0.00 38.15

12.55 % 1st September 2010 39.40 39.40

6.4% 15th October 2010 64.00 64.00

12.10 % 12th March 2011 195.00 195.00

11.00 % 1st August, 2011 115.00 115.00

491.90 995.05

Others

Inter Corporate Loans - Short term 0.04 0.04

2120.36 2625.15

(@) Guaranteed by Government of India /State Bank of India

# 11.50% Non Convertible bonds earlier guaranteed by Government of India, have been converted into 11.85% Non convertible secured bonds w.e.f. 01.04.2008

* Redeemed at par by exercising call option

Note : Unsecured Loans repayable within one year as at 31.03.2008, Rs. 994.41 crore ( 31.03.2007 : Rs. 1422.66 crore)

1.3 : SECURED LOANSAs at As at

31st March, 2008 31st March, 2007

(Rupees in crore)

Working Capital Borrowings from Banks 267.98 271.10

( Including Foreign currency demand loans ( a )

of Rs. 0.00 crores ; Previous year Rs. 28.02 crores )

Term Loan from Banks 834.62 977.50

Interest accrued and due thereon 0.18 834.80 0.00 977.50

Non Convertible Bonds ( b )

Interest Rate Date of Redemption

12.95 % 1st December 2007 0.00 100.05

11.60 % 1st June 2008 33.95 33.95

7.80 % 1st September 2008 0.15 0.15

11.10 % 1st December 2008 0.30 0.30

11.10 % 20th July 2009 (c) 0.00 0.50

11.50 % 20th July 2009 48.65 48.65

9.75 % 1st February 2010 (c) 0.00 0.10

10.25 % 1st February 2010 88.35 88.35

11.50% 15th April 2010 21.00 21.00

8.00% 1st September 2010 0.70 0.70

13.05 % 1st December 2010 59.80 59.80

12.10 % 1st June 2011 91.30 91.30

12.00 % 1st December 2011 76.90 76.90

12.00 % 20th July 2012 109.90 109.90

10.75 % 1st February 2013 75.30 75.30

8.20% 1st September 2013 58.20 664.50 58.20 765.15

1767.28 2013.75

(a) Secured by hypothecation of all current assets

(b) Secured by charges ranking pari-passu inter-se, on all the present and future immovable property at Mouje-Wadej of City taluka, District Ahmedabad, Gujarat and Company's Plant & Machinery, including the land on which it stands, pertaining to Durgapur Steel Plant.( DSP )

(c) Redeemed at par by exercising call option

Note : Secured Loans repayable within one year as at 31.03.2008, Rs.90.96 crore ( 31.03.2007 : Rs. 625.05 crore)

Schedules(Forming part of the Consolidated Balance Sheet)

Schedules(Forming part of the Consolidated Balance Sheet)

9190

1.5 : FIXED ASSETSGROSS BLOCK (AT COST)

Description As at Additional/ Deduction As at31st Adjustments 31st

March, March,2007 2008

(Rupees in crore)

A. PLANTS, MINES, OTHERS

Goodwill * 27.11 0.00 0.00 27.11

Land(including cost of development)

-Freehold 128.05 41.04 10.20 158.89

-Leasehold 61.74 16.73 -19.33 97.80

Railway Lines &Sidings 227.53 0.14 0.33 227.34

Roads, Bridges & Culverts 155.15 3.49 -0.19 158.83

Buildings 1783.68 25.07 -0.20 1808.95

Plant & Machinery

-Steel Plant 24085.99 825.88 168.64 24743.23

-Others 1621.92 94.52 27.07 1689.37

Furniture & Fittings 81.76 5.67 0.18 87.25

Vehicles 491.24 99.05 10.42 579.87

Water Supply & Sewerage 299.07 -0.96 -0.08 298.19

EDP Equipment's 203.41 16.85 2.09 218.17

Software (Intangible) 18.88 3.03 0.14 21.77

Mining Rights (Intangible) 202.57 105.52 15.80 292.29

Miscellaneous Articles 235.60 12.62 2.75 245.47

Sub-total 'A' 29623.70 1248.65 217.82 30654.53

Figures for the previous year 29082.56 684.96 143.82 29623.70

B. SOCIAL FACILITIES

Land(including cost of development)

-Freehold 9.96 0.03 0.00 9.99

-Leasehold 7.09 0.00 0.00 7.09

Roads, Bridges & Culverts 50.49 0.00 0.00 50.49 Buildings 561.40 7.90 0.39 568.91

Plant & Machinery-Others 90.70 4.25 2.71 92.24

Furniture & Fittings 15.10 1.47 0.32 16.25

Vehicles 9.11 1.17 0.50 9.78

Water Supply & Sewerage 115.31 0.90 0.02 116.19

EDP Equipment's 9.58 3.33 0.36 12.55

Software (Intangible) 0.45 0.18 0.00 0.63

Miscellaneous Articles 105.94 14.19 4.47 115.66

Sub-total 'B' 975.13 33.42 8.77 999.78

Figures for the previous year 953.39 26.71 4.97 975.13

C. ASSETS RETIRED FROM ACTIVE USE

Unserviceable / Obsolete Assets 23.98 6.93 5.37 25.54

Figures for the previous year 24.44 4.44 4.90 23.98

Total ('A'+'B'+'C') 30622.81 1289.00 231.96 31679.85

Total - Previous year 30060.39 716.11 153.69 30622.81

* Arising out of consolidation of Subsidiary Accounts.

1.5 : FIXED ASSETSDEPRECIATION NET BLOCK

Description Up to For Less : On Sales / Up to As at As at 31st the Adjustments 31st 31st 31st

March, year March, March, March,2007 2008 2008 2007

(Rupees in crore)

A. PLANTS, MINES, OTHERS

Goodwill * 27.11 0.00 0.00 27.11 0.00 0.00

Land(including cost of development)

-Freehold 0.00 0.71 0.00 0.71 158.18 128.05

-Leasehold 11.11 9.68 -0.29 21.08 76.72 50.63

Railway Lines &Sidings 163.96 6.10 0.27 169.79 57.55 63.57

Roads, Bridges & Culverts 45.35 2.63 -0.01 47.99 110.84 109.80

Buildings 939.39 52.38 0.13 991.64 817.31 844.29

Plant & Machinery

-Steel Plant 14779.70 1053.52 144.18 15689.04 9054.19 9306.29

-Others 1171.85 71.74 27.56 1216.03 473.34 450.07

Furniture & Fittings 65.02 4.53 0.14 69.41 17.84 16.74

Vehicles 366.62 15.50 9.85 372.27 207.60 124.62

Water Supply & Sewerage 222.89 8.02 0.01 230.90 67.29 76.18

EDP Equipment's 163.14 10.51 1.96 171.69 46.48 40.27

Software (Intangible) 16.04 1.67 0.16 17.55 4.22 2.84

Mining Rights (Intangible) 65.80 13.56 7.61 71.75 220.54 136.77

Miscellaneous Articles 155.70 10.04 2.06 163.68 81.79 79.90

Sub-total 'A' 18193.68 1260.59 193.63 19260.64 11393.89 11430.02

Figures for the previous year 17050.81 1262.33 119.46 18193.68 11430.02

B. SOCIAL FACILITIES

Land(including cost of development)-Freehold - - - - 9.99 9.96 -Leasehold 4.73 0.13 0.00 4.86 2.23 2.36 Roads, Bridges & Culverts 17.14 1.74 0.00 18.88 31.61 33.35 Buildings 191.48 9.23 0.14 200.57 368.34 369.92 Plant & Machinery-Others 61.51 3.05 0.42 64.14 28.10 29.19 Furniture & Fittings 12.03 0.74 0.10 12.67 3.58 3.07 Vehicles 6.44 0.36 0.46 6.34 3.44 2.67 Water Supply & Sewerage 89.83 3.33 0.02 93.14 23.05 25.48 EDP Equipment's 3.82 1.59 0.12 5.29 7.26 5.76 Software (Intangible) 0.42 0.01 0.00 0.43 0.20 0.03 Miscellaneous Articles 70.69 4.70 3.33 72.06 43.60 35.25

Sub-total 'B' 458.09 24.88 4.59 478.38 521.40 517.04

Figures for the previous year 435.66 25.95 3.52 458.09 517.04

C. ASSETS RETIRED FROM ACTIVE USE

Unserviceable / Obsolete Assets

- - - - 25.54 23.98

Figures for the previous year - - - - 23.98

Total ('A'+'B'+'C') 18651.77 1285.47 198.22 19739.02 11940.83 11971.04

Total - Previous year 17486.47 1288.28 122.98 18651.77 11971.04

* Arising out of consolidation of subsidiary accountsNote : Allocation of Depreciation Current Previous

Year Year

(a) Charged to Profit & Loss Account 1283.52 1261.53 (b) Charged to expenditure during construction 3.10 1.48 (c) Debited to adjustments pertaining to earlier years -1.15 25.27

Total 1285.47 1288.28

Schedules(Forming part of the Consolidated Balance Sheet)

Schedules(Forming part of the Consolidated Balance Sheet)

9392

1.6 : CAPITAL WORK-IN-PROGRESS

1.6.1: EXPENDITURE DURING CONSTRUCTION (pending allocation)

As at As at

31st March, 2008 31st March, 2007

(Rupees in crore)

Expenditure during construction 35.51 18.67

pending allocation (Schedule 1.6.1)

Capital Work-in-progress

Steel Plants & Units 2208.95 1201.96

Township 23.42 10.52

Ore Mines and Quarries 3.72 0.00

2236.09 1212.48 Less: Provisions 57.50 2178.59 59.65 1152.83

Capital equipments pending erection, 280.18 194.93

installation, commissioning and adjustments

Construction Stores and Spares 86.73 111.38

Less: Provisions 2.18 84.55 2.96 108.42

Advances 908.84 318.11

Less: Provisions 1.02 907.82 1.45 316.66

3486.65 1791.51

Particulars of advances

Secured, Considered Good 1.41 1.82

Unsecured, Considered Good 906.41 314.84

(including advances backed by

Bank Guarantees Rs. 77.46 crores)

(Previous year: Rs. 0.26 crores)

Unsecured, Considered Doubtful 1.02 1.45

908.84 318.11

As at As at31st March, 2008 31st March, 2007

(Rupees in crore)

Opening Balance (a) 18.67 14.71

Expenditure incurred during the year

Employees' Remuneration & Benefits

Salaries & Wages 47.16 27.88

Company's contribution to Provident 3.68 2.64

and other Funds

Travel Concession 2.88 0.47

Welfare Expenses 0.39 0.14

Gratuity 4.76 58.87 2.02 33.15

Technical Consultants' fees & know-how 25.36 7.79

Repairs & Maintenance 1.50 0.12

Stores and Spares 1.43 1.69

Power & Fuel 10.23 5.76

Rent 0.02 0.00

Rates & Taxes 0.30 0.00

Other expenses 58.35 35.28

Interest & Finance charges 1.82 0.88

Depreciation 3.10 1.48

160.98 86.15

Less: Income

Interest Earned 1.17 0.01

Liquidated Damages 1.53 6.35

Hire Charges 1.25 0.37

Sundries 0.80 4.75 1.08 7.81

Net expenditure during the year (b) 156.23 78.34

Total (a)+(b) 174.90 93.05

Amount allocated to Fixed Assets/

Capital Work-in-progress 139.39 74.38

Balance carried forward 35.51 18.67

1.7: INVESTMENTS AT COST - Long Term

Number of Face As at As at

Fully paid-up Value per 31st March, 2008 31st March, 2007Equity Shares Share

(Rs.)

(Rupees in crore)

(A) Unquoted

Trade Investments

Subsidiary Companies

IISCO Ujjain Pipe & FoundaryCompany Limited (Refer Note No. 3.6) 30,00,000 10 3.00 3.00 3.00 3.00

Others

Almora Magnesite Limited 40,000 100 0.40 0.40

Add : Share of post acquisition profit 0.09 0.49 0.00 0.40

North Bengal Dolomite Limited 97,900 100 0.98 0.98

Tata Refractories Limited 22,03,150 10 11.35 11.35

Indian Potash Limited 360000 10 0.18 12.51 0.18 12.51

Cement & Allied Products (Bihar) Limited 2 10 0.00 * 0.00 *

Chemical & Fertilizer Corporation(Bihar) Limited 1 10 0.00 * 0.00 *

Bhilai Power Supply Company Limited 5 10 0.00 * 0.00 *

MSTC Limited 20,000 10 0.01 0.01

Bihar State Financial Corporation 500 100 0.01 0.01

Shares in Co-operative Societies (1.7.1) 0.18 0.20 0.18 0.20

Unquoted Current Investments

Units of Mutual Fund 23.57 25.26

Total (A) 39.77 41.37

(B) Quoted

HDFC Limited 12000 10 0.01 0.01

HDFC Bank Limited 500 10 0.00 0.00 *

ICICI Bank Ltd 28600 10 0.05 0.06 0.05 0.06

Total (B) 0.06 @ 0.06 @

Total (A+B) 39.83 41.43

Less : Provision for diminution in value of investments 4.04 4.44

35.79 36.99

@ Market value of quoted investments 5.12 4.31

* Cost being less than Rs. 50,000/-, figures not given.

Schedules(Forming part of the Consolidated Balance Sheet)

Schedules(Forming part of the Consolidated Balance Sheet)

9594

1.7.1: SHARES IN CO-OPERATIVE SOCIETIES Number of Face As at As at

Fully Paid Value per 31st March, 2008 31st March, 2007Shares Share

(Rs.)

(In Rupees)

Bokaro Steel Employees'Co-operative Credit Society Limited 116500 10 1165000 1165000

Bokaro Steel City Central Consumers'

Co-operative Stores Limited 250 10 2500 2500

NMDC Meghahatuburu Employees'Consumers Co-operative Society Limited 25 100 2500 2500

DSP Employees' Co-operative

Society Limited 1377 100 137700 137700

Bolani Ores Employees' Consumer

Co-operative Society Limited 200 25 5000 5000

IISCO Employees PrimaryCo-operative Stores Limited 23000 20 460000 460000

1772700 1772700

1.8 : INVENTORIES*

1.9 : SUNDRY DEBTORS

As at As at31st March, 31st March,

2008 2007

(Rupees in crore)

Stores & Spares 1579.85 1434.16

Add: In-transit 138.67 131.66

1718.52 1565.82

Less: Provision for Non moving/Obsolete items 158.48 1560.04 161.10 1404.72

Raw Materials 744.52 1201.29

Add: In-transit 656.10 581.09

1400.62 1782.38

Less: Provision forUnusable materials 2.71 1397.91 1.85 1780.53

Finished / Semi-finishedProducts (including scrap) 3996.13 3571.12

6954.08 6756.37

* As certified by the Management and Valued as per Accounting Policy No. 1.7 in Schedule No. 3

As at As at31st March, 31st March,

2008 2007

(Rupees in crore)

Debts over six months 285.44 275.65

Other Debts 3041.62 2280.47

3327.06 2556.12

Less: Provision fordoubtful Debts 216.79 202.52

3110.27 2353.60

Particulars

Unsecured, considered good 3110.27 2353.60

(Including debts backed by

bank guarantees Rs. 864.83 crores)

Previous year Rs. 605.81 crores)

Unsecured, considered doubtful 216.79 202.52

3327.06 2556.12

1.10 : CASH & BANK BALANCES

1.11 : OTHER CURRENT ASSETS

As at As at31st March, 31st March,

2008 2007

(Rupees in crore)

Cash and Stamps on hand 1.61 1.71

Cheques on hand 400.81 418.56

With Scheduled Banks

Current Account 71.07 19.09

Unpaid Dividend Account 5.91 4.31

Margin Money Account 0.02 0.01

Term Deposits 13449.95 13526.95 9366.85 * 9390.26

Remittances-in-transit 3.71 0.22

13933.08 9810.75

* Deposits of Rs. 566.50 crores under Bank lien against loans

As at As at31st March, 31st March,

2008 2007

(Rupees in crore)

Interest Receivable / AccruedLoans to subsidiary company 0.58 0.58

(Refer Note No.3.6 of Schedule 3)

Loans to other companies 0.00 0.63

Deposits 234.13 108.78

Employees 31.59 39.78

Others 14.48 10.15

280.78 159.92

Less : Provision for Doubtful Interest 4.41 5.12

276.37 154.80

Particulars

Unsecured, considered good 276.37 154.80

Unsecured, considered doubtful 4.41 5.12

280.78 159.92

Schedules(Forming Part of the Consolidated Balance Sheet)

Schedules(Forming Part of the Consolidated Balance Sheet)

9796

1.15 : MISCELLANEOUS EXPENDITURE (TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED)

1.16 : MINORITY INTEREST

Balance Additions Total Amount Balanceas at during Charged as at31st the Off 31st

March, year during the March,2007 year 2008

(Rupees in crore)

(i) Development Expenditure(a) On New Projects 0.00 0.01 0.01 0.00 0.01

Total (i) 0.00 0.01 0.01 0.00 0.01

(ii) Deferred Revenue Expenditure(a) Voluntary Retirement Compensation 129.64 3.67 133.31 73.70 59.61 (b) Others 0.04 0.00 0.04 0.00 0.04

Total (ii) 129.68 3.67 133.35 73.70 59.65

Total (i+ii) 129.68 3.68 133.36 73.70 59.66

Previous year 216.85 40.67 257.52 127.84 129.68

Current PreviousYear Year

Charged Off to:

Raw Materials 0.00 3.34 Other Expenses & Provisions 73.70 124.50

73.70 127.84

Current PreviousYear Year

Balance of Equity as on the date of Investment -0.43 -0.43

Add : Movement in Equity and proportionate share of Profit /losses from the date of investment 0.86 0.61 up to 31.03.2008

0.43 0.18

1.12: LOANS & ADVANCES

As at As at31st March, 31st March,

2008 2007

(Rupees in crore)

Loans

Employees 346.47 274.66

Subsidiary company 2.38 2.38 Others 29.41 378.26 33.95 310.99

Advances recoverable incash or in kind or forvalue to be received

Claims recoverable 784.50 624.66

Contractors & suppliers 161.46 117.78

Employees 30.73 20.56

Income tax paid in advance/recoverable 102.32 74.73

For purchase of shares 3.93 0.00

Export Incentive 58.56 107.07

Subsidiary company 14.04 14.04

Others 421.21 1576.75 326.93 1285.77

Deposits

Port Trust, Excise 220.78 108.35 Authorities, Railways, etc.

Others 482.22 703.00 211.47 319.82

2658.01 1916.58

Less : Provision for doubtful

Loans & Advances 169.05 174.11

2488.96 1742.47

Particulars of Loans &Advances - Others

Secured, considered good 255.46 228.02

Unsecured, considered good 2233.50 1514.45

Unsecured, considered doubtful 169.05 174.11

2658.01 1916.58

Amount due from

-Directors 0.01 0.01

-Officers 0.20 0.10

Maximum amountdue at any timeduring the year from

-Directors 0.01 0.01

-Officers 0.23 0.12

1.13: CURRENT LIABILITIES

As at As at31st March, 31st March,

2008 2007

(Rupees in crore)

Sundry creditors

Micro and small enterprises 3.69 0.00

Sundry creditors other thanmicro and small enterprises

Capital works 596.33 457.78

Small Scale IndustrialUndertaking 0.00 11.32 Others 2477.63 3073.96 2196.72 2665.82

Advances from

Customers 551.93 616.75

Others 96.87 648.80 16.64 633.39

Security Deposits 270.09 275.68

Less : Investments received as

Security Deposit 0.05 270.04 0.07 275.61

Interest accrued but notdue on Loans 118.40 199.09

Stores received on loan 0.09 0.00

Liability towards InvestorEducation and

Protection Fund, not due

Unpaid Dividends 5.91 4.31

Unclaimed Matured Deposits 1.80 2.19

Unclaimed Matured Bonds 0.55 0.20

Interest Accrued onunclaimed Deposits / Bonds 0.66 0.74

Other Liabilities* 2521.06 1850.52

6644.96 5631.87

* Includes an amount of Rs 0.01 crores credited to Investor's Education & Protection Fund (Previous year Rs. 0.02 crores)

1.14: PROVISIONSAs at As at

31st March, 2008 31st March, 2007

(Rupees in crore)

Gratuity 744.44 1734.63

Accrued Leave 1355.60 1380.18

Employee Defined Benefit Schemes 851.70 743.63

Taxation 72.11 63.65

Pollution Control & Peripheral Development 89.05 83.11

Proposed Dividend 743.47 620.72

Tax on Proposed Dividend 127.31 107.33

Voluntary Retirement Scheme 40.57 59.48

Wage Revision 2469.14 513.19

Mines afforestation / restoration / closure etc. 351.05 223.96

Others 55.03 40.09

Total 6899.47 5569.97

Schedules(Forming Part of the Consolidated Balance Sheet)

Schedules(Forming Part of the Consolidated Balance Sheet)

9998

2.7 : EMPLOYEES' REMUNERATION &BENEFITS

2.8 : POWER & FUEL

Year ended Year ended31st March, 2008 31st March, 2007

(Rupees in crore)

Salaries & Wages 6111.60 3743.28

Company's contribution toprovident fund & other funds 340.82 329.28

Travel concession 703.88 411.26

Welfare expenses 350.23 264.25

Gratuity 508.05 393.30

8014.58 5141.37

Less : Grants in Aid received from Government of Karnataka 0.26 0.34

8014.32 5141.03

Note :

Expenditure on Employees'Remuneration and Benefits notincluded above and charged to:

a) Expenditure During Construction 58.87 33.15

b) Deferred Revenue Expenditure 73.70 124.40

132.57 157.55

Year ended Year ended31st March, 2008 31st March, 2007

(Rupees in crore)

Purchased power 1819.72 1804.65

Duty on own generation 15.60 18.19

Boiler Coal/Middlings 320.30 208.77

Furnace Oil/Steam etc. 547.10 434.87

2702.72 2466.48

Note :

Expenditure on Power & Fuel notincluded above & charged off to:

- Expenditure During Construction 10.23 5.76

Schedules(Forming part of the Consolidated Profit & Loss Account)

2.1 : SALES

2.2: INTEREST EARNED

2.3: OTHER REVENUES

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Domestic - Iron & Steel,By-products, others 44359.15 37942.60

Exports - Iron & Steel 1234.41 1177.12

Export Incentives 60.79 116.86

Conversion charges 0.09 0.20

45654.44 39236.78

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Customers 55.03 38.96

Employees 15.38 11.18

Term Deposits 1110.83 660.71

Others * 10.01 46.66

1191.25 757.51

* (Tax deducted at source Rs. 3.64 crores)

(previous year : Rs. 0.85 crores)

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Social amenities-recoveries 133.88 133.42

Sale of empties etc. 65.82 58.61

Liquidated damages 26.30 20.80

Service charges ( Gross ) * 36.68 26.56

Subsidy 15.40 55.30

Dividend (gross) from investments 3.48 12.77

Profit on sale of fixed assets (net) 48.72 14.00

Profit on sale of current Investment 0.55 0.59

Foreign Exchange Fluctuation ( Net ) 112.12 39.78

Reversal of Interest on SDF Loans 0.00 116.88

Waivers of Dues 38.62 0.00

Sundries * 180.28 313.51

661.85 792.22

* (Tax deducted at source Rs. 0.04 crores,

Previous year : Rs. 0.03 crores)

2.4 : PROVISIONS NO LONGER REQUIRED WRITTEN BACK

2.5 : ACCRETION(-) TO STOCK OF FINISHED/ SEMI - FINISHED PRODUCTS

2.6 : RAW MATERIALS CONSUMED

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Loans & Advances 15.45 11.10

Sundry Debtors 12.49 20.26

Stores & Spares 10.09 7.08

Investments 0.40 0.00

Others 22.84 21.02

61.27 59.46

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Opening Stock 3571.12 3314.62

Less : Closing Stock 3996.12 3571.12

Accretion ( - ) to Stock -425.00 -256.50

Less : Excise Duty on accretion(-) to Stock -94.47 -40.44

Net accretion ( - ) to Stock -330.53 -216.06

Year ended Year ended

31st March, 2008 31st March, 2007

Quantity Value Quantity Value

Tonnes Rs./crore Tonnes Rs./crore

Iron ore 25443849 1725.38 24653024 1488.31

Coal 13953945 8242.98 13536403 8479.23

Coke 638572 819.28 600670 699.44

Limestone 4048296 627.08 3926137 567.22

Dolomite 2637143 206.94 2560930 170.71

Ferro Manganese 67562 349.30 48872 188.61

Ferro Silicon 21329 96.67 19277 78.97

Silico Magenese 122174 510.15 109594 315.19

Hot Rolled StainlessSteel Coils 20061 96.06 3508 24.89

Intermediary Products 22543 293.19 47166 478.94

Zinc 7005 112.62 8965 156.39

Aluminium 17185 206.03 15899 202.05

Others 746.20 462.89

14031.88 13312.84

2.9 : REPAIRS & MAINTENANCE

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Buildings 102.93 66.89

Plant & Machinery 353.00 246.19

Others 139.38 106.71

595.31 419.79

Note :

Expenditure on repairs & maintenance

not included above and charged to:

a) Employees' Remuneration & Benefits

Buildings 69.07 52.36 Plant & Machinery 996.91 724.03 Others 119.59 79.10

1185.57 855.49

b) Stores & Spares

Buildings 30.56 27.64

Plant & Machinery 1244.71 1093.54

Others 59.98 58.86

1335.25 1180.04

c) Expenditure during Construction 1.50 0.12

1.50 0.12

Total ( a+b+c ) 2522.32 2035.65

Schedules(Forming part of the Consolidated Profit & Loss Account)

101100

1. Significant Accounting Policies

1.1 Basis of Accounting

The financial statements are prepared under the historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles, accounting standards issued by the Institute of Chartered Accountants of India, as applicable, and the relevant provisions of the Companies Act, 1956.

1.2 Use of Estimates

In preparing the financial statements in conformity with accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and the amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. Any revision to such estimates is recognised in the period the same is determined.

1.3 Fixed Assets

Fixed assets are stated at cost of acquisition less depreciation, except land gifted by the State Governments, which is stated at notional/nominal value with corresponding credit to capital reserve.

Expenditure on development of land, including leasehold land, is capitalised as part of cost of land. Expenditure on construction/development of assets on land owned by Government/Semi-Government authorities is capitalised under appropriate asset accounts.

Cost includes all identifiable expenditure including trial-run expenses, net of revenue.

Assets retired from active use are shown separately under fixed assets at lower of net book value and estimated realisable value.

Mining rights are treated as intangible assets and all the related costs thereof are amortised over the period (including deemed renewal) of the lease.

Software which is not an integral part of related hardware, is treated as intangible asset and amortised over a period of five years or its licence period, whichever is less.

In case of Mjunction Services Limited, software development expenditure is charged to revenue in the year of incurrence. In case of NTPC-SAIL Power Company Private Limited, software is amortised over licence period or 3 years, whichever is less.

1.4 Borrowing Costs

Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as expense in the period in which these are incurred.

1.5 Depreciation

Depreciation is provided on straight-line method at the rates specified in Schedule XIV to the Companies Act, 1956.

However, where the historical cost of a depreciable asset undergoes a change, the depreciation on the revised unamortised depreciable amount is provided over the residual useful life of the asset.

SCHEDULE 3 : SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and depreciation provided accordingly.

Depreciation on addition/deletion during the year is provided on pro-rata basis with reference to the month of addition/deletion.

In case of Bokaro Power Supply Company Private Limited, depreciation is charged on straight-line method as per the rates prescribed under The Electricity Act, 2003.

1.6 Investments

Long-term investments (including investments in subsidiary companies and joint ventures) are carried at cost, after providing for diminution in value, if it is of a permanent nature. Current investments are carried at lower of cost and market value.

1.7 Inventories

Raw materials, stores & spares and finished/semi-finished products are valued at lower of cost and net realisable value of the respective plants. In case of identified obsolete/ surplus/ non-moving items, necessary provision is made and charged to revenue. The net realisable value of semi-finished special products, which have realisable value at finished stage only, is estimated for the purpose of comparison with cost.

Iron ore fines not readily useable/saleable, are recognised on disposal.

Residue products and scrap of various nature are valued at estimated net realisable value.

The basis of determining cost is:

Raw materials and Stores & spares – weighted average cost

Materials in-transit – at cost

Finished/Semi-finished products – material cost plus appropriate share of l a b o u r , r e l a t e d o v e r h e a d s a n d duties.

In case of Bokaro Power Supply Company Private Limited, inventories, other than scrap are valued at cost.

Cost is arrived on weighted average basis, except in case of SAIL Bansal Service Centre Limited, in which cost is arrived on First in First out basis.

1.8 Grants

Grants relating to the acquisition of a specific asset are adjusted against the cost of the concerned asset. Grants relating to the revenue expenditure are adjusted against the related expenses.

1.9 Voluntary Retirement Compensation

Voluntary retirement compensation is treated as deferred revenue expenditure. Such expenditure incurred upto 31st March, 2006 is written-off in five years and the expenditure incurred thereafter is written-off in equal yearly instalments upto 31st March 2010.

1.10 Foreign Currency Transactions

Monetary assets and liabilities related to foreign currency transactions remaining unsettled are translated at year-end rates.

2.10 : OTHER EXPENSES

Year ended Year ended31st March, 31st March,

2008 2007

(Rupees in crore)

Commission to selling agents 4.46 9.87

Directors' Fees 0.30 0.20

Export sales expenses 14.66 23.08

Excise Duty on IPT / InternalConsumption 73.33 85.68

Handling expenses

- Raw Material 183.04 153.82

- Finished goods 75.33 75.35

- Scrap recovery expenses 79.69 338.06 67.37 296.54

Insurance 7.22 9.52

Postage, Telegram & Telephone 20.21 15.45

Printing & Stationery 11.56 10.87

Provisions

- Doubtful debts, loans and advances 30.07 21.40

- Stores, Spares and Sundries 32.24 62.31 23.67 45.07

Rates & Taxes 40.43 26.06

Remuneration to Auditors

- Audit fees 0.91 0.71

- Tax Audit fees 0.32 0.29

- Out of pocket expenses 0.91 0.89

- In other capacities 0.62 2.76 0.59 2.48

Cost Audit Fees 0.02 0.02

Rent 22.03 25.18

Royalty and cess 59.01 51.21

Security expenses 186.73 119.43

Travelling expenses 209.71 195.33

Write Offs

- Miscellaneous & Deferred Revenue

Expenditure 73.70 124.50

- Doubtful debts, advances etc. 2.30 76.00 4.60 129.10

Cash Discount 74.03 49.87

Training expenses 18.77 11.03

Conversion charges 120.29 82.70

Water Charges & Cess onwater pollution 53.57 51.12

Miscellaneous 485.78 411.89

1881.24 1651.70

2.11 : INTEREST & FINANCE CHARGES

2.12 : INTER ACCOUNT ADJUSTMENTS

2.13 : ADJUSTMENTS PERTAINING TO EARLIER YEARS

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Foreign Currency Loans 48.33 44.21

Non Convertible Bonds 149.49 240.85

Bank borrowings - working capital 16.15 3.09

Steel Development Fund (SDF) Loans 22.95 22.88

Others 8.49 16.17

Finance Charges 13.98 17.17

259.39 344.37

Note :

Expenditure on interest notincluded above & charged to:

Expenditure During Construction

Steel Development Fund Loans 1.36 0.88

Finance Charges 0.32 0.00

1.68 0.88

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Raw Materials 1588.63 1235.91

Departmentally manufactured stores 449.12 400.68

Services transferred to capital works 45.50 28.43

Power and Fuel 3.31 3.03

Others (Net) 3.07 2.50

2089.63 1670.55

Year ended Year ended

31st March, 2008 31st March, 2007

(Rupees in crore)

Sales 2.37 0.16

Other revenues 0.36 -6.98

Raw materials consumed 0.06 0.37

Employees' remuneration & benefits 0.00 -0.80

Stores & Spares consumed -2.48 -0.93

Power & Fuel 0.26 -0.06

Repairs & Maintenance 0.23 -0.03

Excise Duty 0.16 0.00

Other Expenses & Provisions 1.63 -0.99

Interest 0.04 0.00

Depreciation -1.15 25.27

Net Debit 1.48 16.01

(-) indicate credit items

Schedules(Forming part of the Consolidated Profit & Loss Account)

Schedules

103102

there is a reasonable certainty that the assets can be realised in future.

2. The Subsidiary Company, Joint Venture Companies and Associate Company, all incorporated in India, considered in the consolidated financial statements, are as follows:

Sl. Name of the Company Proportion (%) of No. Company's ownership

interest (As on31st March, 2008)

A. Subsidiary Company

Maharashtra Elektrosmelt Ltd. (MEL) 99.12

B. Joint Venture Companies

NTPC SAIL Power CompanyPrivate Limited (NSPCL) 50

Bokaro Power Supply CompanyPrivate Limited (BPSCL) 50

Mjunction Services Limited (MSL) 50

SAIL Bansal Service CentreLimited (SBSCL) 40

UEC SAIL Information TechnologyLimited (USIT) 40

N.E Steel & Galvanising Private Limited 49

Romelt SAIL (India) Limited 15

Bhilai Jaypee Cement Limited 26

C. Associate Company

Almora Magnesite Limited (AML) 20

3.1 The consolidated financial statements of Steel Authority of India Ltd. (SAIL) and its Subsidiary, Joint Ventures and Associate Companies are prepared in accordance with Accounting Standard (AS) - 21 on “Consolidated financial statements”, AS-23 on “Accounting for Investments in Associates in Consolidated Financial Statements” and AS-27 on “Financial reporting of interest in Joint Ventures” issued by the Institute of Chartered Accountants of India and are presented to the extent possible in the same manner as the Company's separate financial statement.

3.2 The financial statements of SAIL and MEL are consolidated as per AS-21 on line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenditure, after fully eliminating intra group balances/transactions and any unrealised profit/loss included therein. However, materials lying in stock against intra-group transfers and profit margins included therein, the quantum whereof is insignificant, have been accounted for based on the management certificates.

3.3 The interest in the Joint Venture Companies has been accounted by using the proportionate consolidation method as per AS-27, after eliminating intra group transactions. However, intra group receivables/payables as on Balance Sheet date, relating to joint ventures have not been eliminated, as the details of the same were not available. The impact of such items on the financial statements is not likely to be material.

3.4 Investment in Associate Company has been accounted for using “equity method” as prescribed by AS 23 whereby investment is initially recorded at cost and the carrying amount is adjusted thereafter for post-acquisition change in

NOTES ON ACCOUNTS

3. Principles of consolidation of Financial Statements

The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions other than those relating to fixed assets acquired from outside India prior to 1st April, 2004, are recognised in the Profit and Loss Account. In respect of transactions covered by forward exchange contracts, the difference between the contract rate and spot rate on the date of the transaction is recognised in the Profit and Loss Account over the period of the contract.

Exchange differences (including arising out of forward exchange contracts) in respect of liabilities relating to fixed assets, arising out of transactions entered prior to 1st April, 2004, are adjusted in the carrying amount of such assets.

1.11 Employees' Benefits

The provisions/liabilities towards gratuity, accrued leave, leave travel concession facility, long term service awards, post-retirement medical and settlement benefits, future payments to the disabled employees/legal heirs of deceased employees under the Employees' Family Benefit Scheme, are made based on the actuarial valuation as at the end of the year and charged to the Profit and Loss Account alongwith actuarial gains/losses.

1.12 Adjustments pertaining to earlier years and prepaid expenses

In case of SAIL and MEL, income/expenditure relating to prior period and prepaid expenses, which do not exceed Rs.5 lakhs (Rs.1 lakh in case of NTPC-SAIL Power Company Private Limited) in each case, are treated as income/expenditure of current year.

1.13 Revenue recognition

Sales include excise duty and are net of rebates and price concessions. Sales in the domestic market are recognised at the time of despatch of materials to the buyers including the cases where delivery documents are endorsed in favour of the buyers. Export sales are recognised on :

i) the issue of bill of lading, or

ii) negotiation of export bills upon expiry of laycan period , in cases where `realisation of material value without shipment' is provided in the letters of credit of respective contracts,

whichever is earlier.

Export incentives under various schemes are recognised as income in the year of actual shipment at estimated realisable value/actual credit earned.

1.14 Claims for Liquidated Damages/Price Escalation

Claims for liquidated damages are accounted for as and when these are deducted and/or considered recoverable by the Company. These are adjusted to the capital cost or recognised in profit and loss account, as the case may be, on final settlement.

Suppliers'/Contractors' claims for price escalation are accounted for, to the extent such claims are accepted by the Company.

1.15 Deferred Tax

The deferred tax on timing differences between book profit and taxable profit for the year is accounted for applying the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. Deferred tax assets arising from timing differences are recognised to the extent

the Company's share of net assets of the Associate. The provision for investment in Associate company of Rs.0.40 crore by SAIL has been written back in the preparation of consolidated financial statements.

The carrying amount of investment in Associate Company includes capital reserve of Rs. 0.56 crores, arising out of acquisition.

3.5 The excess of cost to SAIL, of its investment in its Subsidiary, Joint Ventures and Associate Companies, over its portion of equity is recognised in the financial statements as Goodwill. The excess of SAIL portion of equity of the Subsidiary, Joint Ventures and Associate Companies over cost of its investment is treated as Capital Reserve. This has been calculated, presuming such acquisitions to be on the last date of the respective years, irrespective of the actual date of such acquisition.

3.6 The accounts of IISCO-Ujjain Pipe & Foundry Company Limited, a wholly owned subsidiary company of SAIL have not been consolidated, being under liquidation.

3.7 The accounts of North Bengal Dolomite Limited, a joint venture company of SAIL have not been consolidated, as the operations of the said company are under suspension.

(Rs. in crore)

As at 31st As at 31stMarch, March,

2008 2007

i) Claims against the Group 3179.20 * 3146.60*pending appellate/judicialdecisions against which theGroup has counter claims ofRs.25.82 crores (Rs.25.82 crores)

* includes sales tax on inter-statestock transfers from SAIL plantsto stockyards - Rs. 1155.87 crores(Rs.1178.18 crores) for which noliability is expected to arise, assales tax has been paid oneventual sales.

ii) Other claims against the 356.56 376.46Group not acknowledgedas debts against which theGroup has counter-claims ofRs.8.98 crores(Rs.48.00 crores)

iii) Disputed income tax/service 121.70 80.70tax demand for which Groupmay be contingently liable

iv) Guarantees/Counter-guarantees 28.85 28.85given to banks

iv) Guarantees given to third parties 0.25 0.00

v) Bills drawn on customers and 72.96 17.01discounted with banks

vi) Price escalation claims byContractors/Suppliers andclaims by certain employees,extent whereof is not ascertainable

Figures in brackets pertain to previous year.

4. CONTINGENT LIABILITIES

5. FIXED ASSETS

6. INVESTMENTS, CURRENT ASSETS, LOANS & ADVANCES AND CURRENT LIABILIT IES & PROVISIONS.

5.1 In case of SAIL, land includes:

i) 62161.37 acres (62116.84 acres) owned / possessed / taken on lease by the Company, in respect of which title/lease deeds are pending for registration.

ii) 5999.73 acres (5958.95 acres) given on lease to various agencies/ employees/ex-employees.

iii) 10082.99 acres (9832.99 acres) transferred/agreed to be transferred or made available for settlement to various Central/State/Semi-Government authorities, in respect of which conveyance deeds remain to be executed/registered.

iv) 1854.23 acres ( 1854.23 acres) in respect of which title is under dispute.

5.2 Buildings include net block of Rs.24.67 crore (Rs. 30.83 crore) for which conveyance deed is yet to be registered in the name of the SAIL.

5.3 In respect of SAIL, Foreign exchange variations aggregating to Rs. 22.89 crore (net debit) [Rs. 5.61 crore (net debit)] have been adjusted in the carrying amount of fixed assets during the year.

5.4 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs.13869.76 crore ( Rs.2622.33 crore).

Figures in brackets pertain to previous year.

6.1 The Central Board of Direct Taxes vide its Notification dated 25th September 2001 revised the rules for computation of certain perquisites. The Employees' Union/Association filed writ petitions with the Hon'ble High Court at Kolkata challenging the above Notification. In pursuance of Hon'ble Court's orders, the amount of tax deducted at source by SAIL and MEL on house perquisite w.e.f. 1st April 2003 and other perquisites w.e.f. 1st October 2001, upto 31st March 2005 has been kept separately as term deposits with banks, pending final decision of the Hon'ble Court. Such deductions and deposits after 31st March 2005, have been made in accordance with amended law/judicial decisions. However, there is no impact on accounts of the company as the additional tax, if required, shall be recoverable from the employees.

6.2 The amount due to Micro and Small Enterprises as defined in the `The Micro, Small and Medium Enterprises Development Act, 2006', (as disclosed in Schedule 1.13 Current liabilities) has been determined to the extent such parties have been identified on the basis of information available with the Company. The disclosures relating to Micro and Small Enterprises as at 31st March, 2008 are as under:

(Rs. in crore)

Sl. Description As at 31stNo. March, 2008

1. The principal amount remaining 3.69unpaid to supplier as at the end of accounting year

2. The interest due thereon remaining NILunpaid to supplier as at the end ofaccounting year

Schedules Schedules

105104

Shri S.P. Rao (w.e.f. 15th February 2008)

Shri R.K. Sarangi (upto 30th April 2007)

Shri P.M. Balasubramanian (upto 31st October 2007)

Shri Sushim Banerjee(from 15th May 2007 to 30th Nov. 2007)

Shri M.K. Bhattacharya

Shri S.P. Patnaik

Shri Jagdish Singh

Shri.M. Roy

Shri R.K. Agarwal

Shri A.S. Mathur

Shri N. Sudan (from 1st May 2007 to30th June 2007)

Shri B.B. Singh (w.e.f. 1st November 2007)

Shri M. Singh (w.e.f. 1st November 2007)

Shri A.J. Vijh (w.e.f. 13th November 2007)

Shri Nawaz Ahmad

Shri Viresh Oberoi

Shri Harsh Bansal

Shri Manoj Gaur

Shri B.K. Prasad

The details of transactions with the related parties during the year in respect of the Group, as defined in the Accounting Standard, are given below:

(Rs. in crores)

Nature of transaction Key Management Schedule No.and Personnel for Account headthe year

Managerial 2.99 2.7: Employee Remuneration (1.97) Remuneration and

Benefits

Figures in brackets pertain to previous year

8.4 In accordance with AS-22 on `Accounting for taxes on income' by the Institute of Chartered Accountants of India, net deferred tax as on 31st March 2008, has been accounted for, as detailed below:

(Rs. in crore)

Particulars As on 31st As on 31stMarch, 2008 March, 2007

SAIL

Deferred Tax Liability

Difference between bookand Tax Depreciation 2559.99 2707.79

Total 2559.99 2707.79

Deferred Tax Assets

Retirement Benefits 244.10 584.02

Others 747.29 711.11

Total 991.39 1295.13

Net Deferred Tax Liability 1568.60 1412.66

3. The amount of interest paid in NILterms of section 16, along with theamount of the payment made to thesupplier beyond the appointed dayduring the year 2007-08.

4. The amount of interest due and NILpayable for the period of delay inmaking payment (which have beenpaid but beyond the appointed dayduring the year) but without addingthe interest specified under this Act.

5. The amount of interest accrued NILduring the year and remainingunpaid at the end of theaccounting year

6. The amount of further interest NILremaining due and payableeven in the succeeding years,until such date when the interestdues as above are actually paidto the small enterprises, for thepurpose of disallowance as adeductible expenditureunder section 23.

The previous year's figures are not given, as there were no reported Micro and Small Enterprises upto 31st March, 2007.

6.3 Balances shown under creditors, debtors, claims recoverable and advances include balances subject to confirmation/reconciliation and consequential adjustment, if any. Reconciliations are carried out on on-going basis. Provisions, wherever considered necessary, have been made.

6.4 In respect of SAIL, the Company has stock of iron ore fines of 43.62 million tonnes at various mines of the Company. Since the usage/sale of such iron ore fines, not being readily useable /saleable, involves elements of uncertainties, as a matter of prudence, no valuation of such fines has been made in the accounts. However, the revenue earned from actual disposal thereof during the year has been recognised in the books of accounts.

7.1 In respect of SAIL, MEL and NTPC-SAIL Power Company Private Limited, the long-term agreement for wage revision expired on 31st December, 2006. Pending finalisation of fresh agreement w.e.f 1st January 2007, provision towards salaries and wages revision of Rs. 2616.31 crore (Rs. 2444.76 crore for the year) and Rs. 11.39 crore (Rs. 11.12 crore for the year) has been charged to Profit & Loss Account and Expenditure during construction respectively, on estimated basis. Against the provision made, ad-hoc adjustable advance of Rs. 495.42 crore, has been paid and adjusted during the year.

7.2 Power & Fuel does not include expenses for generation of power and consumption of certain fuel elements produced by the plants which have been included under the primary heads of account.

7.3 In case of SAIL, the Research and Development expenditure charged to Profit & Loss Account and allocated to Fixed Assets, during the year, amount to Rs. 99.62 crore (previous year - Rs. 71.30 crore) and Rs. 2.24 crore (previous year - Rs. 5.55 crore) respectively.

7. PROFIT & LOSS ACCOUNT

7.4 SAIL had represented for withdrawal of Joint Plant Committee (JPC) cess on sale of certain steel products in view of decontrol of steel prices in earlier years, which was confirmed by JPC during the year. As a result, an amount of Rs.17.39 crore provided in earlier years has been written back.

7.5 SAIL reviews the carrying amount of its fixed assets on each balance sheet date for the purpose of ascertaining impairment, if any, by considering assets of entire one plant as Cash Generating Unit. On such review as at 31st March, 2008, wherever there was an indication of impairment, no provision is required to be made, as the net realisable value thereof, assessed by an independent agency as at 31st March, 2008, is more than the carrying amount.

7.6 In case of SAIL, the policy relating to accounting of exports sales, hitherto recognised on the basis of issue of bill of lading has been changed during the year, as disclosed in “Schedule 3.1.13: Accounting Policies”, resulting in increase in sales and profit for the year by Rs.139.02 crore and Rs.56.84 crore respectively.

8.1 Disclosures as required under Accounting Standard (AS) 15 (revised) on 'Employee Benefits' and AS 29 on 'Provisions, Contingent Liabilities and Contingent Assets' in respect of SAIL are given in paragraphs 6.1 and 6.6 respectively of Schedule 3 : 'Significant Accounting Policies and Notes on Accounts' forming part of the independent financial statements of SAIL.

8.2 Segment Reporting

i) Business Segments: The five integrated steel plants and three alloy steel plants of SAIL, MEL, two power Joint Venture Companies have been considered as primary business segments for reporting under AS -17 on 'Segment Reporting' issued by the Institute of Chartered Accountants of India.

ii) Geographical segments have been considered for Secondary Segment Reporting, by treating sales revenue in India and foreign countries as separate geographical segments.

The disclosure of segment-wise information is given at Annexure-I.

8.3 Related Party

As per AS - 18 - `Related Party Disclosures' issued by the Institute of Chartered Accountants of India, the names of the related parties are given below: -

Nature of Name of the related partyRelationship

Key Management Shri S.K.Roongta

Personnel Shri K.K.Khanna (upto 30th September 2007)

Shri Nilotpal Roy (upto 31st January 2008)

Shri V.Shyamsunder

Shri B.N.Singh

Shri V.K.Srivastava

Shri G.Ojha

Shri R.Ramaraju

Shri Soiles Bhattacharya

Shri S.S.Ahmed (w.e.f. 11th May 2007)

Shri V.K.Gulhati (w.e.f. 1st October 2007)

8. GENERAL

(Rs. in crore)

Particulars As on 31st As on 31stMarch, 2008 March, 2007

MEL

Deferred Tax Liability

Difference between bookand Tax Depreciation 3.55 3.38

Total 3.55 3.38

Deferred Tax Assets

Others 17.18 9.98

Total 17.18 9.98

Net Deferred Tax Assets 13.63 6.60

(Rs. in crore)

Particulars As on 31st As on 31stMarch, 2008 March, 2007

NSPCL

Deferred Tax Liability

Difference between bookand Tax Depreciation 22.33 27.77

Deferred Tax Assets

Retirement Benefit 1.94 0.77

20.39 27.00

Less : Recoverablefrom Customer 20.39 27.00

Net Deferred Tax Liability NIL NIL

mjunction services limited

(Rs. in crore)

Particulars Deferred Current Amount Deferredtax assets Period (charge)/ tax assets

as at (charge)/ Credited to as at 01.04.2007 Credit Reserves 31.03.2008

Deferred tax liability

Difference between bookand tax depreciation 0.18 (0.05) - 0.13

Provision for Leave Salary 0.09 (0.01) (0.05) 0.03

Provision for doubtful debts 0.01 0.00 - 0.01

Provision for doubtfulclaims receivable - 1.55 - 1.55

Provision for Gratuity 0.00 - - 0.00

Total 0.28 1.49 (0.05) 1.72

In respect of other Joint Venture Companies, the details of deferred Tax Assets/Liabilities have not been disclosed in the accounts of respective companies.

8.5 Previous year's figures have been rearranged/ regrouped/ recast, wherever necessary.

Schedules Schedules

107106

AUDITORS' REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS OFSTEEL AUTHORITY OF INDIA LIMITED AND ITS SUBSIDIARY, JOINT VENTURES AND ASSOCIATE COMPANIES

Name of the Company

Name of the Company

We have examined the attached Consolidated Balance Sheet of STEEL AUTHORITY OF INDIA LIMITED, and its subsidiary company, Joint Ventures and Associate Company (SAIL Group) as on 31st March 2008 and the annexed Consolidated Profit & Loss Account for the year ended on that date and the consolidated Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

We report that :

1. The audit of the following entities in the SAIL group has been carried out by the other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the assets and revenues of these entities, is based solely on the reports of the other auditors.

(Rupees in crore)

Assets Revenues

A. Subsidiary

Maharashtra Elektrosmelt Limited 219.56 321.60

B. Joint Ventures

NTPC SAIL Power Company Private Limited 1353.42 125.92

Bhilai Jaypee Cement Limited 26.87 -

2. In respect of the following Joint Ventures, we did not carry out the audit. Our opinion, insofar as it relates to the assets and revenues included in respect of these Joint Ventures, is based solely on the provisional financial statements as furnished to us by the management. Since the financial statements of these joint ventures for the financial year ended 31st March 2008, were not audited, any subsequent adjustment to the balances could have consequential effects on the attached consolidated financial statements. However, the size of the Joint Ventures in the consolidated position is not significant in relative terms.

(Rupees in crore)

Assets Revenues

SAIL Bansal Service Centre Limited 9.56 10.25

Mjunction Services Limited 38.62 34.90

UEC SAIL Information Technology Limited 0.21 -

Bokaro Power Supply Company Private Limited 362.64 271.74

N.E. Steel & Galvanising Private Limited 1.51 -

Romelt-SAIL (India) Limited - 0.01

3. The Accounts of IISCO-Ujjain Pipe & Foundry Company Limited, a subsidiary company of SAIL have not been consolidated as the said company is under liquidation.

4. The accounts of North Bengal Dolomite Limited, a joint venture company of SAIL, have not been consolidated, as the operations of the said company are under suspension.

5. The consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21, “Consolidated Financial Statements”, AS-23, “Accounting for Investments in Associates in Consolidated financial statements” and AS-27, “Financial reporting of interest in Joint Ventures” issued by the Institute of Chartered Accountants of India and on the basis of the separate financial statements of Steel Authority of India Limited and its subsidiary, Joint Ventures and Associates included in the consolidated financial statements.

6. Bokaro Power Supply Company Private Limited, a Joint Venture Company is governed by the Electricity Act, 2003. The provisions of the said Act read with rules thereunder have prevailed wherever the same have been inconsistent with the provisions of the Companies Act, 1956.

Segment Information for the year ended 31st March, 2008 Annexure - I

A. BUSINESS SEGMENT

B. GEOGRAPHICAL SEGMENT

(Rs. in crore)

PARTICULARS BSP DSP RSP BSL ISP ASP SSP VISL MEL Power Others Inter SAILCompanies Segment Group

Adjustment

REVENUE

- External Sales

Current year 16517.81 5274.73 7321.66 12037.57 1715.82 551.14 1374.27 732.61 88.18 390.12 41.28 46045.19

Previous year (13526.31) (4287.68) (6335.90) (11004.69) (1482.37) (531.90)(1299.27) (711.75) (30.74) (286.96) (26.72) (39524.29)

- Internal Segment Sales

Current year 191.43 368.10 63.19 719.47 124.44 500.31 22.86 53.53 308.23 677.42 3028.98 0.00

Previous year (341.56) (200.39) (59.11) (514.52) (108.19) (240.10) (5.97) (36.74) (260.80) (554.86) (-2322.24) (0.00)

- Total Revenue

Current year 16709.24 5642.83 7384.85 12757.04 1840.26 1051.45 1397.13 786.14 396.41 390.12 718.70 -3028.98 46045.19

Previous year (13868.87) (4488.07) (6395.01) (11519.21) (1590.56) (772.00)(1305.24) (748.49) (291.54) (286.96) (581.58) (-2322.24)(39524.29)

RESULT

- Operating Profit / (-) Loss (Before Interest Expenses)

Current year 5425.28 1036.34 1480.98 2870.84 -280.06 8.35 107.69 -52.05 56.00 72.91 1117.69 11843.97

Previous year (4286.24) (639.23) (1369.20) (2771.13) (-245.37) (22.73) (123.55) (-29.80) (28.37) (74.22) (828.54) (9868.04)

- Interest expenses

Current year 259.39

Previous year (344.37)

- Net Profit / Loss ( - )

Current year 11584.58

Previous year (9523.67)

OTHER INFORMATION

- Segment Assets

Current year 5289.51 3587.01 4335.81 4509.56 1602.14 868.88 861.17 697.32 206.06 1716.06 18625.22 42298.74

Previous year (4650.83) (3662.67) (4318.70) (4367.50) (941.08) (707.13) (742.81) (628.70) (138.71) (1262.36)(13364.24) (34784.73)

12892.59

- Segment Liabilities

Current year 3078.15 1177.00 1612.00 2895.37 1519.90 325.69 172.42 250.28 123.92 239.87 2162.95 13557.55

Previous year (459.40) (918.80) (1193.01) (2207.05) (1178.46) (249.78) (137.52) (183.80) (76.59) (206.68) (2689.75) (11250.15)

- Capital Expenditure

Current year 566.09 134.95 332.16 471.76 665.28 25.88 72.86 8.33 4.03 517.86 184.94 2984.14

Previous year (2208.71) (126.40) (126.21) (213.32) (147.51) (39.46) (14.66) (8.84) (2.78) (408.51) (49.00) (1596.09)

- Depreciation

Current year 216.68 301.26 304.37 246.70 29.42 10.66 43.65 11.21 1.90 45.22 72.45 1283.52

Previous year (223.43) (299.90) (291.92) (241.09) (23.18) (9.43) (43.36) (11.01) (1.70) (47.51) (69.00) (1261.53)

Particulars Current year Previous year

Sales Revenue (Rs. in crore)

India 44810.78 38347.17

Foreign Countries 1234.41 1177.12

Total 46045.19 39524.29

Note :

(1) Others include Raw Material Division and Central Units of SAIL, Mjunction Services Ltd., UEC-SAIL Information Technology Limited, SAIL-Bansal Service Centre Limited, N.E. Steel & Gal. (P) Ltd. and Romelt SAIL (India) Limited.

(2) Total carrying amount of segment assets by geographical location of assets , for the Company's overseas operations are below 10% of the total assets of all segments, and hence not disclosed.

109108

MEL

7. Subject to paras 3 & 4 above, we report that on the basis of the information and explanations given to us and on the consideration of the individual audited financial statements as stated in para1 above, and provisional financial statements as stated in para 2 above, of the SAIL group, we are of the opinion that the said consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in case of consolidated Balance Sheet, of the state of affairs of the SAIL Group as at 31st March 2008;

ii) in case of consolidated Profit & Loss Account, of the Profit of the SAIL Group for the year ended on that date; and

iii) in case of the consolidated Cash Flow Statement, of the cash flows of the SAIL Group for the year ended on that date.

For Dass Maulik Mahendra For Ray & Ray K Agrawala & Co. T.R. Chadha & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

Sd/- Sd/- Sd/-(B.K. Ghosh) (Mahendra K. Agrawala) (Ajesh Tuli )

Partner Partner Partner(M.No. 51028) (M.No.51764) (M. No.86424)

Place : New Delhi Dated : 14th July, 2008

Directors’ Report

To The Members,

thThe Directors have pleasure in presenting the 35 Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2008.

During the year the Company has achieved a turnover of Rs. 396.41 crores (including conversion income of Rs. 290.79 crores) as compared to Rs. 291.54 crores (including conversion income of Rs.241.80 crores) in the previous year. The Company has achieved an improved performance in terms of financial results and earned a net profit (before tax) of Rs. 55.87 crores despite the increase in power tariff and employees remuneration and benefits. The financial results are as summarized below:

(Rs.in crores)2007-2008 2006-2007

Turnover (Gross) 396.41 291.54Operating Profit/Loss (-) 57.89 30.07Interest 0.11 0.16Depreciation 1.91 1.70Net Profit/Loss(-) before Tax 55.87 28.21Income Tax Provision 19.55 9.71Net Profit/Loss(-) after Tax 36.32 18.50Proposed Dividend 7.44 4.80Tax on proposed Dividend 1.26 0.82

Considering the consistency in performance of the Company, the Directors have recommended dividend @ 31% of net profit subject to approval of the Shareholders. A sum of Rs.3.65 crores has been transferred to the General Reserve during the year.

The Company's production of different grades of ferro alloys was as under:

Material 2007-08 2006-07(MT) (MT)

High Carbon Ferro Manganese 64584 56319Silico Manganese 37640 50371Medium/Low Carbon Ferro Manganese 1941 373

Company had to operate Furnace-II for ten months for Silico Manganese production. In order to meet enhanced demand for SAIL Plants. Furnace-I was operated for producing Ferro Manganese for twelve months and Furnace-II for two months for producing Ferro Manganese.

SAIL STEEL PLANTSDuring the year the Company continued conversion arrangements with SAIL Steel Plants in order to have secured market. Vigorous efforts were made by the Company to find market outside SAIL. Despatches of ferro alloys to SAIL Steel Plants under conversion arrangements and direct sales during the year were as under:

Material 2007-08 2006-07(MT) (MT)

High Carbon Ferro Manganese 59129 55444Silico Manganese 32197 44848Medium/Low Carbon Ferro Manganese 1554 613

The Company continued to achieve a growth in terms of sales realisation through sale of ferro alloys to customers other than SAIL Plants. The details of sales performance in 2007-08 vis-à-vis 2006-07 are as under:

Material 2007-08 2006-07Quantity Value Quantity Value

(MT) (Rs.in (MT) (Rs. inLakh) Lakh)

High Carbon Ferro Manganese 8504 4918.45 5298 1508.02Silico Manganese 7525 3795.68 5327 1543.90Medium Carbon Ferro Manganese 237 218.62 124 56.03Others (Slag & others) -- 185.15 -- 222.00Total 16266 9117.90 10749 3329.95

a)Major in-house development projects undertaken in the area of technical improvement were:! Installation & commissioning of additional unit of Gas Cleaning Plant (GCP)

for SAF-II which helped in augmenting gas availability to Power Plant and resulted in higher power generation from the captive power plant.! Commissioning of Mud Gun & Tap Hole Drill Machine for SAF-I to prolong

taphole lining life.! Installation of Maximum Demand controller for better energy

management.

FINANCIAL REVIEW

PRODUCTION REVIEW

SALES & MARKETING REVIEW

OTHER CUSTOMERS

RESEARCH & DEVELOPMENT

! Layer casting of Ferro Alloys:In Phase-I construction of RCC compartments at SAF-II are completed and 100% Layer casting at SAF-II has been implemented in June'07 with the help of new front end wheel loader.! Plant-wide communication network of computers.! Public Announcement system installed at Bunker House No.1 & 2,

Screen House and Ground Hopper for communication among the operators, operating the raw material charging system, for flawless charging of the raw material.! Ultrasonic level switches installed at 12 locations of raw material bins at

SAF-II. This helps in monitoring bin level.! Saving in demurrage & unloading time by constructing BG siding for 60M with

the existing BG siding to accommodate 40 BCX/BCN Wagons at a time.

Human Resource has been MEL's greatest strength. Considering the increased activities the focus and thrust has been on optimum manpower utilization and improvement in production and productivity. Redeployment of employees has been carried out during the year considering the cross sectional requirement in the Company.The Human Resource Development (HRD) activities has been focusing on enhancement of Technical and Managerial skills with thrust on multi-skill training and exposure to modern management techniques. During the year 446 employees were trained in various areas. The Company continuous to recognize excellence in performance and innovation and has awarded 3 Executives and 33 Non-Executives, for their individual contribution with 6 groups awards on Republic Day, 2008. The Company's Scholarship for Meritorious wards have been awarded to 4 children during the year. The Company has also motivated 64 Bright Pupils by honoring them with an award for their Best Performance in academics.Long Service Awards for their 25 years of service to the company has been awarded to 13 employees.The Company in association with the National AIDS Control Organisation (NACO) has actively participated and promoted the Information, Education and Communication (IEC) under the campaign for HIV/Aids awareness programme.

stThe manpower strength as on 31 March, 2008 was 781 comprising 651 Non-executives and 130 Executives. The Presidential directives for Scheduled Caste and Scheduled Tribe continued to be implemented and monitored on regular basis. Out of the total manpower, 13.44% were Scheduled Caste, 7.17% Scheduled Tribes and 53% Other Backward Castes.The Company has been continuing thrust on the implementation of Official Language Policy of Government of India. The Company has been continuously focusing on improving safety standards in the company by conducting safety workshop/programme to inculcate safety awareness amongst the employee and workers in the factory premises. Several safety measures have been introduced with intensive safety awareness drives to make the work place safe and hazard free. Hormonious Industrial Relations has been the support behind the high production and high productivity. During the year the Industrial Relation remained harmonious and peaceful with full support and co-operation of the Trade Union and Officers' Association.

ENVIRONMENT Environment Management & Pollution Control is always accorded top priority in company's activities. To keep environment clean for ecological protection, focussed attention was given in the areas of green belt development in and around the plant premises, solid waste management, monitoring of liquid effluent and air ambient for various environmental parameters. Following special efforts were taken during the financial year for enhancing the effective environment management at MEL were:a) Completed plantation of 2000 saplings.b) Installation of Gas Cleaning Plant in SAF-II leading to reduction in

emission of dust laden & green house gases to the atmosphere by 13.8 million NM3 and by utilizing the gases in boiler for power generation, generating 6.35 million KWH of additional power over previous year.

c) Reduction in noise from Boiler Vent pipe by carrying out modification i.e. putting it in steam expander in Power Plant.

d) Field trials for stowing of SiMn granulated slag in underground mines of WCL, for first time in country is being conducted in consultation with CMRI, Dhanbad. Successful acceptance of the same by Coal India will be as landmark for ferro alloy industry's effort in solid waste management.

e) Weather Monitoring Station has been installed.f) Various pollution control schemes have been identified to improve

environment condition in raw material yard, sinter plants, 1 MVA Arc Furnace, etc. and preparation TS and estimate is assigned to CET, Ranchi.

HUMAN RESOURCES MANAGEMENT REVIEW

For the year ended 31st March, 2008

MAHARASHTRA ELEKTROSMELT LIMITED

111110

MEL

Schedule As at As atNo. 31st March 2008 31st March 2007

(Rupees in lakh)

Shareholders' Fund

Share Capital 1.1 2400.00 2400.00

Reserves and Surplus 1.2 7136.20 4374.26

9536.20 6774.26

Loan Funds

Unsecured Loans 1.3 38.68 98.14

9574.88 6872.40

Fixed Assets 1.4

Gross Block 6363.84 6107.30

Less: Depreciation 3777.21 3610.86

Net Block 2586.63 2496.44

Capital Work-in-Progress 1.5 288.40 2875.03 221.17 2717.61

Deferred Tax Assets ( Net ) 1362.91 659.95

Current Assets, Loans & Advances

Inventories 1.6 4219.39 6502.74

Sundry Debtors 1.7 3389.08 1720.74

Cash and Bank Balances 1.8 8610.23 719.43

Interest Receivable/Accrued 1.9 194.47 88.48

Loans and Advances 1.10 1303.30 2072.9817716.47 11104.37

Less: Current Liabilities & Provisions

Current Liabilities 1.11 6792.42 4722.80

Provisions 1.12 5600.37 2936.10

12392.79 7658.90

Net Current Assets 5323.68 3445.47

Miscellaneous Expenditure 1.13 13.26 49.37

(to the extent not written off or adjusted)

9574.88 6872.40

Accounting Policies and Notes on Accounts 3

Schedules 1 and 3 annexed hereto, form part of the Balance Sheet.

For and on behalf of Board of DirectorsSd/- Sd/- Sd/-

(R. Ashokkumarr) (Mahesh Chandra) Debidas PalCompany Secretary General Manager(F&A) (Executive Director)

In terms of our report of even dateFor Chandabhoy & Jassoobhoy

Chartered Accountants

Sd/- Sd/- Sd/-(Ambesh A. Dave) (S. K. Jain) (R. Ramaraju)

Partner Director Chairman

Place : Bhilai

Date : May 24th, 2008

SOURCES OF FUNDS

APPLICATION OF FUNDS

Balance SheetAs at 31st March, 2008

g) Improvement in working conditions at PH Yard by dust suppression and concreting at various locations.

With the underlying philosophy and a credo to make a 'Meaningful difference in people's lives', MEL has been fulfilling its obligations to the Society since inception. As a part of Corporate Social Responsibility activities, the following initiatives have been taken by the Company during the year.i) Distributed school bags, books and stationery to the students of Zilla

Parishad Sr. Primary School at Lohara village (162 nos.)ii) Co-sponsored a plastic surgery camp under the expertise of World

Renowned Surgeon Dr. Sharad Kumar Dicksheet (USA), in November, 2007, at Chandrapur. The camp was organized for surgery upon Cleft Lip. scar on face and squint cases benefiting 238 patients.

iii) Sponsored the world disabled day programme organized by the National Federation of Blind providing material for self employment, braille books for students white folding sticks and sarees (200 Nos.)

iv) Provided 10 street light fittings to the Lohara village which is situated near the vicinity of the Company.

Quality Management System (QMS) addressed to ISO-9001-2000 International Standard was successfully maintained in the Organization during 2007-08. Fifth Surveillance Audit of MEL's ISO-9001-2000 QMS by certifying agency M/s.LRQA, Mumbai, completed successfully without any non-conformity. The Vigilance Department of MEL has been accredited with Certificate of DIN EN ISO-9001-2000 certified Body M/s. TUV on

th25 February, 2008. In Industrial Safety, the Company has been awarded 'Ispat Surkhsa Purskar' for no fatality during 2005 & 2006 received in December, 2007.

! Out of 23 departments, 18 departments maintained “Zero reportable accident” level.

! Six months were celebrated as 'Zero Accident Months' these are February, March, April, August, September and December, 2007.

! Use of 100% crash helmets by two wheeler riders implemented.! Longest reportable accident free period achieved from 6/1/2007 to

16/6/2007 i.e. 162 days for regular employees and from 1/1/2007 to 14/6/2007 i.e. 165 days for contractual workers.

! Without any major/minor accident 30 Mtrs. height new Chimney was fabricated, erected and commissioned at sinter Plant-II.

! A lecture on Yoga and safety has been made mandatory in all the training programmes organized by HRD which has resulted in improving health, moral and attitude and safety consciousness of employees.

! MEL is playing a leadership role in promoting the 'Safety & Health' in nearby industries by coordinating various activities like safety meets, training programmes and safety competitions through 'Industrial Safety Forum for Chandrapur District' (ISFCD). It is an unique forum of its kind in the country.

The Expert Group, constituted by the Ministry of Steel, Govt. of India, to evaluate the Feasibility of proposals for merger of PSUs, has recommended for merger of MEL with SAIL. MEL Board approved in principle for merger of MEL with SAIL subject to the provisions of Companies Act, 1956.

To achieve the objectives of the Corporate Plan 2012, studies were carried out for developing infrastructural facilities and equipment for implementing layer casting of ferro alloys and mechanization in order to improve the labour productivity and yield. ! Installation of one number 33 MVA Submerged Arc Furnace for production

of Silico Manganese by December, 2010.! Construction of compound wall along Plant & Township premises by June, 2008.! Installation of SRF by June, 2008.! Construction of additional Bunkers for SAF-I and SAF-II by September, 2008.

nd nd! Layer casting of ferro alloys 2 phase including procurement of 1 No. (2 )

Front End Loader by December, 2008.! Mechanisation system for processing of layer casting of ferro alloys by

December, 2008.! Computerisation at MEL Phase-II by December, 2008.! Dust Collection System for SAF-II (South side) by March, 2009.! Thickner & Hotwell for SAF-II by March, 2009.

Application for 'Prospecting Licence' for Iron Ore has been submitted to the Office of District Mining Officer, Chandrapur.

CORPORATE SOCIAL RESPONSIBILITY

TOTAL QUALITY & INDUSTRIAL SAFETY

HIGHLIGHTS OF SAFETY PERFORMANCE

MERGER OF MEL WITH SAIL

FUTURE PLAN

Special Projects at MEL:Iron Ore Mines

Manganese Ore Mines

Installation of 2 x 67.5 MW Power Plant

REPORT ON CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

PARTICULARS OF EMPLOYEES

DIRECTOR

DIRECTORS' RESPONSIBILITY STATEMENT

CORPORATE GOVERNANCE

AUDITORS REPORT

ACKNOWLEDGEMENT

Application for 'Prospecting Licence' for Manganese Ore has been submitted to the Office of District Mining Officer, Chandrapur. MEL is pursuing the matter with District Mining Officers and Director, Geology & Mining, Nagpur, for both the cases.

Techno-economic/ pre-feasibility report for 2 x 67.5 MW Captive Power Plant at MEL, Chandrapur, prepared by MECON, Ranchi, has been received from NSPCL, New Delhi. The same is under study.

Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, is given at Annexure - I, II & III to this report.

There was no employee of the Company who received remuneration in excess of the limits prescribed under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

ndShri S.K. Jain has been appointed as Director w.e.f. 22 October, 2007. Shri V.K. Gulhati, Director, resigned from the Directorship w.e.f.

th6 November, 2007.stShri Vipin Puri, Director, superannuated w.e.f. 31 March, 2008.

thShri R. Ramaraju has been appointed as Director w.e.f. 15 May, 2008.thShri S. K. Jain Director superannuated w.e.f. 30 June, 2008.

thShri A. K. Nigote Director superannuated w.e.f. 30 June, 2008.

Pursuant to Section 217 (2AA) of the Companies Act, 1956 it is hereby confirmed that:i) in the preparation of the annual accounts, the applicable accounting

standards had been followed along with proper explanation relating to material departures;

ii) the directors had selected such accounting policies and applied them consistently and made judgements 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 and of the profit or loss of the Company for that period;

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

iv) the directors had prepared annual accounts on a going concern basis.

In terms of listing agreement with the Stock Exchange a report on Corporate Governance is given at Annexure-IV to this report. The Management Discussion & Analysis Report is given at Annexure-V. A certificate from Auditors of the company regarding compliance of conditions of Corporate Governance is placed at Annexure-VI to this report.

The Statutory Auditors' Report on Accounts of the Company for the financial year ended 31st March, 2008 along with Management's replies are enclosed. The comments of Comptroller and Auditor General of India under the Section 619(4) of the Companies Act, 1956 on accounts of the

stCompany for the year ended 31 March, 2008 are enclosed at Annexure-VII.

The Board of Directors take this opportunity to express their appreciation for the support, Co-operation and loyalty extended by every employee of the Company. They wish to acknowledge the continued support extended by Steel Authority of India Limited. The Directors also greatly appreciate the excellent support the Company received from Shareholders, Auditors, Bankers, Financial Institutions, Central & State Governments, Local Authorities, Maharashtra Electricity Regulatory Commission (MERC), Maharashtra State Electricity Distribution Company Limited (Maha Vitran) and the Suppliers and Customers.

For & on behalf of the Board

Sd/-Place: Bhilai (R. Ramaraju)

thDate : 30 June, 2008 Chairman

113112

MEL

Schedule Year ended Year endedNo. 31st March, 2008 31st March, 2007

(Rupees in lakh)

Sales 2.1 39641.12 29153.60 Less : Excise duty 7989.07 5966.08

31652.05 23187.52 Interest earned 2.2 268.28 121.09 Other revenues 2.3 223.34 152.31 Provisions no longer required written back 2.4 15.70 60.86

507.32 334.2632159.37 23521.78

Accretion to (-)/Depletion in stocks 2.5 1242.11 1377.64 Raw Materials Consumed 2.6 6342.66 2746.62 Employees Remuneration & Benefits 2.7 5503.82 2764.07 Stores & Spares Consumed 706.33 489.54 Power & Fuel 2.8 11391.29 12094.95 Repairs & Maintenance 2.9 139.45 69.29 Other expenses 2.10 1044.49 969.51 Interest & Finance Charges 2.11 11.25 15.54 Depreciation 190.63 169.63

26571.95 20696.79

Profit for the year 5587.42 2824.99 Adjustments pertaining to earlier years 2.12 0.00 (3.60) Profit before Tax 5587.42 2821.39 Less : Provision for Taxation - Current Tax 2640.00 1050.00 - Fringe Benefit Tax 18.00 15.38 - Deferred Tax (702.96) (119.92) - Earlier years adjustments - 1955.04 25.98 971.44

Profit after Tax 3632.38 1849.95 Surplus brought Forward from previous year 4034.26 2904.93 Less : Provision towards Long Service Award to - (9.04) employee's upto 31st March' 2006 Amount available for appropriation 7666.64 4745.84

Transferred to General Reserve 365.00 150.00Proposed Dividend 744.00 480.00Tax on Dividend 126.44 81.58Balance carried to Balance Sheet 6431.20 4034.26

7666.64 4745.84

Earnings per ShareProfit after Tax (Rs. in lakh) 3632.38 1849.95Average number of equity shares 24000000 24000000(Face value Rupees 10/- each)Basic & Diluted Earnings Per share (Rupees) 15.13 7.71

Accounting Policies and Notes on Accounts 3Schedules 2 and 3 annexed hereto, form part of the Profit & Loss Account

For and on behalf of Board of DirectorsSd/- Sd/- Sd/-

(R. Ashokkumarr) (Mahesh Chandra) Debidas PalCompany Secretary General Manager(F&A) (Executive Director)

In terms of our report of even dateFor Chandabhoy & Jassoobhoy

Chartered Accountants

Sd/- Sd/- Sd/-(Ambesh A. Dave) (S. K. Jain) (R. Ramaraju)

Partner Director Chairman

Place : Bhilai

Date : May 24th, 2008

INCOME

EXPENDITURE

APPROPRIATIONS

For the year For the year2007-08 2006-07

(Rs. in lakh)

Net profit before tax and dividend and prior period adjustment 5,587.42 2,824.99

Adjustment for :

Depreciation 190.63 169.63

Interest and Finance Charges 11.25 15.54

Interest Income -268.28 -121.09

Misc. Expenditure (Deferred) charged during the year 36.11 49.41

Provisions for Retirement Benefits (net of payment) 2,355.41 160.23

Provisions for Loans & Advances (Others) 1.31 75.67

Provision no longer required written back -15.70 -60.86

Credit balance written back -3.17 0.00

Loss on Sale of discharged Fixed Assets 0.14 0.01

Profit on Sale of discharged Fixed Assets -0.63 -30.48

Amount written off 14.61 1.23

Depreciation on sale of fixed assets written back -24.28 0.00

Adjustment for prior period item 0.00 -16.45

Prior period Adjustment written back 0.00 12.85

Operating Cash flow before payment of Tax 7,884.82 3,080.68

Payment of Advance Tax -2,115.00 -915.00

Tax deducted at source -696.12 -580.05

Payment of fringe benefit tax during the year -20.00 -15.75

Payment of Income Tax for Previous year 0.00 -226.08

Refund of Income Tax 0.00 70.70

Operating profit before working capital changes 5,053.70 1,414.50

Adjustment for :

Inventories 2,282.10 237.85

Sundry Debtors -1,668.34 -1,589.80

Loans and Advances 943.83 -134.96

Current Liabilities & Provisions 2,148.65 -674.13

Net Cash from Operating Activities 8,759.94 -656.45

Purchase of Fixed Assets -402.81 -296.71

Sale of Salvage/Scrapped Fixed Assets & Idle Spares 0.88 34.44

Interest Receivable -105.99 8.83

Interest Income 268.28 121.09

Net Cash from Investing Activities -239.64 -132.35

Payment of Dividend -477.21 -478.69

Payment of Dividend Tax -81.58 -67.32

Increase/Decrease in utilisation of Working Capital Borrowings 0.00 -1.11

Other Borrowings -59.46 -108.26

Interest and Finance Charges -11.25 -15.54

Net Cash from Financing Activities -629.50 -670.92

Net Increase/(Decrease) in Cash & Cash Equivalents 7,890.80 -1,459.81

Cash & Cash Equivalents (Opening) 719.43 2,179.24

Cash & Cash Equivalents (Closing) 8,610.23 719.43

For and on behalf of Board of DirectorsSd/- Sd/- Sd/-

(R. Ashokkumarr) (Mahesh Chandra) Debidas PalCompany Secretary General Manager(F&A) (Executive Director)

In terms of our report of even dateFor Chandabhoy & Jassoobhoy

Chartered Accountants

Sd/- Sd/- Sd/-(Ambesh A. Dave) (S. K. Jain) (R. Ramaraju)

Partner Director Chairman

Place : Bhilai

A. CASH FLOW FROM OPERATING ACTIVITIES :

B. CASH FLOW FROM INVESTING ACTIVITIES :

C. CASH FLOW FROM FINANCING ACTIVITIES :

Cash Flow Statement(For the year ended 31st March, 2008)

Profit & Loss Account (For the year ended 31st March, 2008)

115114

MEL

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)Authorised30,000,000 Equity Shares of Rs.10 each 3000.00 3000.00

3000.00 3000.00

Issued, Subscribed & Paid-up24,000,000 Equity Shares of Rs.10 each fully paid-up 2400.00 2400.00

2400.00 2400.00

Note : Of the above 237,87,935 (237,87,935) equity sharesare held by Steel Authority of India Limited- Holding Company

Capital Reserve As per last Balance Sheet 15.00 15.00(Represents amount received from Central Government by way of Capital subsidy)General ReserveAs per last Balance Sheet 325.00 175.00Add : Transferred from Profit & Loss Account 365.00 150.00

590.00 325.00Surplus as per Profit & Loss Account 6431.20 4034.26

7136.20 4374.26

Term Loan from Government of Maharashtra (Interest free) 38.68 98.14

(Transferred from SICOM to Govt. of Maharashtra) 38.68 98.14

Note: Unsecured Loans repayable within one year. 16.56 59.46

1.1: SHARE CAPITAL

1.2 : RESERVES AND SURPLUS

1.3 : UNSECURED LOANS

1.4 : FIXED ASSETS

A. PLANTS, MINES, OTHERS

B. SOCIAL FACILITIES

C. UNSERVICEABLE / OBSOLETE ASSETS

DESCRIPTION GROSS BLOCK (AT COST) DEPRECIATION NET BLOCK

As at Additions/ Less : Sales/ As at Up to For Less : On sales As at As at As at

31st Adjustments Adjustments 31st 31st the / Adjustments 31st 31st 31st

March, during during March, March, Year during March, March, March,

2007 the Year the Year 2008 2007 the Year 2008 2008 2007

Land (including cost of development)

-Freehold Land * 29.79 0.00 0.00 29.79 - - - - 29.79 29.79

Railway Lines & Sidings 108.58 0.00 0.00 108.58 103.15 0.00 0.00 103.15 5.43 5.43

Roads, Bridges & Culverts 18.89 28.52 0.00 47.41 4.27 0.55 0.00 4.82 42.59 14.62

Buildings 713.85 18.67 0.00 732.52 303.84 20.45 0.00 324.29 408.23 410.01

Plant & Machinery

-Ferro Alloys Plant 4179.84 155.68 78.77 4256.75 2551.07 117.30 24.28 2644.09 1612.66 1628.77

-Others 471.55 76.65 0.00 548.20 356.94 24.54 0.00 381.48 166.72 114.61

Furniture & Fittings 57.44 7.35 0.00 64.79 54.12 3.04 0.00 57.16 7.63 3.32

Vehicles 102.59 4.96 0.00 107.55 55.13 7.12 - 62.25 45.3 47.46

Water Supply & Sewerage 41.96 0.00 0.00 41.96 34.85 0.79 0.00 35.64 6.32 7.11

EDP Equipment's 57.57 14.80 0.00 72.37 44.87 5.92 0.00 50.79 21.58 12.70

Miscellaneous Articles 50.22 16.34 0.00 66.56 31.34 5.53 0.00 36.87 29.69 18.88

Sub-total 'A' 5832.28 322.97 78.77 6076.48 3539.58 185.24 24.28 3700.54 2375.94 2292.70

Figures for the Previous Year 5761.34 122.33 51.39 5832.28 3423.29 164.85 48.56 3539.58 2292.70 2338.05

Roads, Bridges & Culverts 9.15 0.00 0.00 9.15 3.13 0.15 0.00 3.28 5.87 6.02

Buildings 243.37 0.20 0.00 243.57 64.21 3.97 0.00 68.18 175.39 179.16

Furniture & Fittings 2.58 0.50 0.00 3.08 0.51 0.25 0.00 0.76 2.32 2.07

Water Supply & Sewerage 6.60 9.71 0.00 16.31 2.31 0.19 0.00 2.50 13.81 4.29

EDP Equipment's 2.72 1.28 0.00 4.00 0.53 0.53 0.00 1.06 2.94 2.19

Miscellaneous Articles 8.49 0.92 0.00 9.41 0.59 0.30 0.00 0.89 8.52 7.90

Sub-total 'B' 272.91 12.61 0.00 285.52 71.28 5.39 0.00 76.67 208.85 201.63

Figures for the Previous Year 253.60 19.85 0.54 272.91 66.66 4.78 0.16 71.28 201.63 186.94

Net book value or net realisable value

whichever is less 2.11 0.12 0.39 1.84 0.00 - 0.00 - 1.84 2.11

Figures for the Previous Year 3.38 2.11 3.38 2.11 0.00 0.00 0.00 2.11 3.38 Total ('A'+'B'+'C') 6107.30 335.70 79.16 6363.84 3610.86 190.63 24.28 3777.21 2586.63 2496.44

Figures for the Previous Year 6018.32 144.29 55.31 6107.30 3489.95 169.63 48.72 3610.86 2496.44 2528.37

* Land granted by Govt, of Maharashtra under occupancy rights subject to restrictions agreed upon by the company towards payment of unearned increment on the property transfer as per agreed terms.

(Rupees in lakh)

1.5.1: EXPENDITURE DURING CONSTRUCTION (Pending allocation)

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh) Opening Balance 21.07 21.07Balance carried forward 21.07 21.07

1.6 : INVENTORIES (As taken, valued and certified by the Management)

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)Stores & Spares 553.81 493.57Add: In-transit 14.33 7.21

568.14 500.78 Less: Provision 29.79 28.54

538.35 472.24 Raw materials 1032.15 1937.89 Add: In-transit 71.24 21.83

1103.48 1959.72

Finished products 2577.56 4070.78 4219.39 6502.74

1.7 : SUNDRY DEBTORS (Unsecured)

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Debts over six months 0.00 14.32Other Debts 3389.08 1720.74

3389.08 1735.06 Less: Provision for doubtful debts 0.00 14.32

3389.08 1720.74 ParticularsConsidered good 3389.08 1720.74 Considered doubtful 0.00 14.32

3389.08 1735.06 Note :Due from Steel Authority of India Limited 3389.02 1687.62( Holding Company )

1.8 : CASH & BANK BALANCES As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Cash and Stamps on hand 0.97 1.40 Cheques on hand 28.83 0.50 With Scheduled Banks in :

Current Account 343.47 271.98 Unpaid Dividend Account 2.79 1.31 Term Deposits 7863.50 8209.76 421.75 695.04

Remittances-in-transit 370.67 22.49 8610.23 719.43

1.9 : INTEREST RECEIVABLE/ACCRUED As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Employees 34.40 40.61 Others 160.07 47.87

194.47 88.48

1.5 : CAPITAL WORK-IN-PROGRESS As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Expenditure during construction 21.07 21.07pending allocation (Schedule 1.5.1)

Capital Work-in-progressFerro Alloys Units 244.36 275.77

265.43 296.84Less: Provisions 75.67 75.67

189.76Advances 98.64

288.40 221.17

1.10 : LOANS & ADVANCES As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)LoansEmployees 337.73 252.84[ Secured Rs. 324.73 lakhs (Rs. 249.96 lakhs) ]Advances recoverable in cash or inkind or for value to be received :

Claims recoverable 64.38 104.07 Contractors and Suppliers 43.40 34.85Employees 42.81 3.49 Advance Income Tax and 628.67 455.55 Tax deducted at sourceOthers 195.35 205.39

974.61 803.35 Deposits :Excise Department, Railways, etc. 7.78 4.71 Others 4.54 1034.76

12.32 1039.47

1324.66 2095.66 Less : Provision for Doubtful Loans & 21.36 22.68

Advances 1303.30 2072.98

Particulars of Loans & AdvancesSecured, considered good 324.73 249.96 Unsecured, considered good 978.57 1823.02 Unsecured, considered doubtful 21.36 22.68

1324.66 2095.66

1.11 : CURRENT LIABILITIES As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)Sundry Creditors :

Capital works - 23.56 Small Scale Industrial Undertakings - 58.95Others 1538.70 1538.70 2471.63 2554.14

Advance from Customers 250.26 80.84 Security Deposits 344.04 273.86Unclaimed Dividend 2.79 1.31

Other Liabilities 4656.63 1812.65

6792.42 4722.80

Schedules(Forming part of Balance Sheet)

Schedules(Forming part of Balance Sheet)

117116

MEL

1.12 : PROVISIONS FOR As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)Gratuity

Opening Balance 1296.29 1184.70

Add : Provision during the year 1033.78 125.92

Less: Amount utilised/adjusted during the year 48.59 2281.48 14.33 1296.29

Accrued Leave Liability

Opening Balance 612.38 563.03

Add : Provision during the year 94.37 131.74

Less: Amount utilised/adjusted during the year 88.44 618.31 82.39 612.38

Taxation

Opening Balance 0.00 127.03

Add : Provision during the year 2658.00 1091.36

Less: Amount paid / adjusted during the year 2658.00 0.00 1218.39 0.00

Proposed Dividend

Opening Balance 480.00 480.00

Add : Provision during the year 744.00 480.00

Less: Amount utilised during the year 480.00 744.00 480.00 480.00

Tax on Dividend

Opening Balance 81.58 67.32

Add : Provision during the year 126.44 81.58

Less: Amount utilised during the year 81.58 126.44 67.32 81.58

Voluntary Retirement Scheme

Opening Balance 56.41 78.33

Add : Provision during the year 10.18 9.27

Less: Amount utilised during the year 23.83 42.76 31.19 56.41

Employee Family Benefit Scheme

Opening Balance 245.81 276.70

Add : Provision during the year 74.87 17.08

Less: Amount utilised during the year 52.06 268.62 47.97 245.81

Post Retirement Medical and Settlement Benefits

Opening Balance 96.95 102.49

Add : Provision during the year 551.32 0.72

Less: Amount utilised/adjusted during the year 0.48 6.26

Less: Provision written back during the year 82.08 565.71 0.00 96.95

Wage Revision

Opening Balance 61.45 0.00

Add : Provision during the year 1190.88 61.45

Less: Amount utilised during the year 304.63 0.00

947.70 61.45

Long Service Awards to Employees

Opening Balance 5.23 0.00

Add : Provision during the year 0.49 9.04

Less: Amount utilised/adjusted during the year 0.37 3.81

5.35 5.23

5600.37 2936.10

2.1 : SALES As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Ferro Alloys - Sales 10561.87 4973.42 Ferro Alloys - Conversion 29079.25 24180.18

39641.12 29153.60

2.2 : INTEREST EARNED As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Customers 0.93 0.30 Employees 13.45 10.74 Term Deposits* 247.28 49.38Others 6.62 60.67

268.28 121.09 * Tax deducted at source Rs. 48.35 lakh (Rs. 23.41 lakhs)

2.3 : OTHER REVENUES As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Social amenities-recoveries 7.67 7.00Sale of empties etc. 162.96 45.56 Liquidated damages 4.17 13.05Profit on sale/discard of fixed assets 0.63 30.48Sundries 47.91 56.22

223.34 152.31

2.4 : PROVISIONS NO LONGER REQUIRED WRITTEN BACK

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Stores & Spares 0.00 1.84 Capital work–in progress 0.00 57.42 Others 15.70 1.60

15.70 60.86

2.5 : ACCRETION TO (-) /DEPLETION IN STOCK OF FINISHED PRODUCTS

As at 31st As at 31stMarch, 2008 March, 2007

(Rupees in lakh)

Opening stock 4070.78 5667.66Less : Closing Stock 2577 4070.78

Less : Excise Duty on Accretion/ 1493.22 1596.88Depletion Stock 251.11 219.24

1242.11 1377.64

1.13 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted)

Balance Additions Total Amount Balanceas at during Charged as at31st the off during 31st

March, year the year March,2007 2008

(Rupees in lakh)

Deferred RevenueExpenditure- Voluntary Retirement Compensation 49.37 0.00 49.37 36.11 13.26

Total 49.37 0.00 49.37 36.11 13.26

Previous year 98.78 0.00 98.78 49.41 49.37

2.6 : RAW MATERIAL CONSUMED

Year Ended Year Ended31st March, 31st March,

2008 2007

Quantity Value Quantity ValueTonnes Rs./Lakh Tonnes Rs./Lakh

Manganese Ore 53848 5016.37 47708 1743.07Others 1326.19 1003.55

6342.56 2746.62

2.7 : EMPLOYEES' REMUNERATION &BENEFITS

2.8 : POWER & FUEL

2.9 : REPAIRS AND MAINTENANCE

Year Ended Year Ended31st March, 31st March,

2008 2007

(Rupees in lakh)Salaries & Wages 3263.41 2068.14 Company's contribution to provident fundand other funds 213.97 198.53 Travel concession 301.87 251.13 Welfare expenses 690.79 120.35 Gratuity 1033.78 125.92

5503.82 2764.07

Note :Expenditure on Employees' Remuneration andBenefits not included above and charged to:Deferred Revenue Expenditure 36.11 49.41

36.11 49.41

Year Ended Year Ended31st March, 31st March,

2008 2007(Rupees in lakh)

Purchased Power 11277.93 12045.13 Furnace Oil 113.36 49.82

11391.29 12094.95

Year Ended Year Ended31st March, 31st March,

2008 2007(Rupees in lakh)

Buildings 51.24 25.78 Plant & Machinery 52.83 17.93 Others 35.38 25.58

139.45 69.29

Schedules(Forming part of Profit & Loss Account)

Schedules(Forming part of Balance Sheet)

119118

MEL

2.10 : OTHER EXPENSES Year Ended Year Ended31st March, 31st March,

2008 2007

(Rupees in lakh)Demurrage and Wharfage 0.89 4.16 Directors' Fees 1.30 0.45 Handling expenses- Raw Material 144.61 116.82 - Finished Goods 368.99 347.48 - Scrap recovery expenses 0.00 0.76

513.60 465.06 Insurance 8.57 9.39 Law charges 1.45 1.02 Loss on sale/scrapping of Fixed Assets 0.14 0.01 Postage, Telegram & Telephone 15.63 8.83 Printing & Stationery 9.03 5.82

Provisions - Doubtful Debts & Loans and 0.06 0.00 Advances - Work–in–progress 0.00 75.67 - Others 1.25 0.00

1.31 75.67 Rates & Taxes 92.43 66.22 Remuneration to Auditors - Audit Fees 1.93 1.63 - Tax Audit Fees 0.64 0.50 - Out of pocket expenses 0.42 0.70 - In other capacities 1.46 1.72

4.45 4.55Rent 22.95 20.37Security expenses 27.88 25.01 Travelling expenses 157.31 120.72 Write Offs - Miscellaneous & Deferred Revenue Expenditure 36.11 49.41 - Others 14.61 50.72 1.23 50.64 Miscellaneous 136.85 111.59

1044.51 969.51

2.11 : INTEREST & FINANCE CHARGES

2.12 : ADJUSTMENTS PERTAININGTO EARLIER YEARS

Year Ended Year Ended31st March, 31st March,

2008 2007

(Rupees in lakh)

Bank borrowings - working capital 0.18 1.43

Others 0.93 0.00

Finance Charges 10.14 14.11

11.25 15.54

Year Ended Year Ended31st March, 31st March,

2008 2007

(Rupees in lakh) Raw Materials Consumed 0.00 5.73

Stores & Spares Consumed 0.00 10.72

Other Expenses & Provisions 0.00 (12.85)

0.00 3.60

1.7 GRANTS:

Grants relating to the acquisition of a specific asset are adjusted against the cost of the concerned asset. Grants relating to the revenue expenditure are adjusted against the related expenses.

1.8 VOLUNTARY RETIREMENT COMPENSATION:

Voluntary retirement compensation is treated as deferred revenue expenditure. Such expenditure incurred upto 31st March, 2006 is written-off in five years and the expenditure incurred thereafter is written-off in equal yearly instalments upto 31st March, 2010.

1.9 FOREIGN CURRENCY TRANSACTIONS:

Monetary assets and liabilities related to foreign currency transactions remaining unsettled are translated at year- end rates.

The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions other than those relating to fixed assets acquired from outside India prior to 1st April 2004, are recognised in the Profit and Loss Account. In respect of transactions covered by forward exchange contracts, the difference between the contract rate and spot rate on the date of the transaction is recognised in the Profit and Loss Account over the period of contract.

Exchange differences (including arising out of forward exchange contracts) in respect of liabilities relating to fixed assets arising out of transactions entered prior to 1st April, 2004, are adjusted in the carrying amount of such assets.

1.10 EMPLOYEES’ BENEFITS:

The provisions/liabilities towards gratuity, accrued leave, leave travel concession facility, long term service awards, post-retirement medical and settlement benefits, future payments to the disabled employees / legal heirs of deceased employees under the Employees’ Family Benefit Scheme, are made based on the actuarial valuation as at the end of the year and charged to the profit and loss account alongwith actuarial gains/losses.

1.11 ADJUSTMENTS PERTAINING TO EARLIER YEARS AND PREPAID EXPENSES:

Income / expenditure relating to prior period and prepaid expenses, which do not exceed Rs.5 lakhs in each case, are treated as income / expenditure of current year.

1.12 REVENUE RECOGNITION:

Sales* include excise duty, packing charges and are net of rebates. Sales in the domestic market are recognised at the time of despatch of materials to the buyers including the cases where delivery documents are endorsed in favour of the buyers. Export sales are recognized:

i) on the issue of bill of lading, or

ii) negotiation of export bills upon expiry of laycan period, in cases where ‘realisation of material value without shipment’ is provided in the letters of credit of respective contracts, whichever is earlier.

Export incentives under various schemes are recognised as income in the year of actual shipment at estimated realisable value / actual credit earned.

*Sales include conversion income.

1.13 CLAIMS FOR LIQUIDATED DAMAGES/ PRICE ESCALATION:

Claims for liquidated damages are accounted for as and when these are deducted and / or considered recoverable by the company. These are adjusted to the capital cost or recognised in Profit and Loss Account, as the case may be, on final settlement.

Suppliers’/Contractors’ claims for price escalation are accounted for, to the extent such claims are accepted by the company.

1.14 DEFERRED TAX

The deferred tax on timing differences between book profit and taxable profit for the year is accounted for applying the tax rates and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred tax assets arising from timing differences are recognised to the extent there is a reasonable certainty that the assets can be realised in future.

SCHEDULE 3 : SIGNIFICANT ACCOUNTING POLICIES & NOTES ON ACCOUNTS

Part-A : SIGNIFICANT ACCOUNTING POLICIES:

1.1 BASIS OF ACCOUNTING:

The financial statements are prepared under the historical cost convention on accrual basis of accounting, in accordance with the generally accepted accounting principles, Accounting Standards issued by the Institute of Chartered Accountants of India, as applicable and relevant provisions of the Companies Act, 1956.

1.2 USE OF ESTIMATES :

In preparing the financial statements in conformity with accounting principles generally accepted in India, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and the amount of revenue and expenses during the reported period. Actual results could differ from those estimates. Any revision to such estimates is recognised in the period the same is determined.

1.3 FIXED ASSETS:

Fixed Assets are stated at cost of acquisition less depreciation.

Expenditure on development of land, including lease hold land, is capitalised as part of cost of land.

Cost includes all identifiable expenditure including trial run expenses, net of revenue.

Assets retired from active use are shown separately under fixed assets at lower of net book value and estimated realisable value.

Software which is not an integral part of related hardware, is treated as intangible asset and amortised over a period of five years or its licence period, whichever is less.

1.4 BORROWING COSTS:

Borrowing costs attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as expense in the period in which these are incurred.

1.5 DEPRECIATION:

Depreciation is provided on straight-line method at the rates specified in Schedule XIV to the Companies Act, 1956.

However, where the historical cost of a depreciable asset undergoes a change, the depreciation on the revised unamortized depreciable amount is provided over the residual useful life of the asset.

Classification of plant and machinery into continuous and non-continuous is made on the basis of technical opinion and depreciation provided accordingly.

Depreciation on addition / deletion during the year is provided on pro-rata basis with reference to the month of addition / deletion.

1.6 INVENTORY :

Raw Materials, Stores & spares and finished/semi-finished products are valued at lower of cost and net realisable value. In case of identified obsolete / surplus/ non–moving items, necessary provision is made and charged to revenue.

Residue products in the nature of coke rejects valued at estimated net realisable value. Other residue products and scrap of various nature which are not readily usable/saleable are recognised on disposal.

The basis of determining cost is:

Raw Materials and Stores & Spares - Weighted average costMaterials in-transit - At Cost

Fnished/ Semi-finished Products - Material cost plusappropriate share of labour,related overheads and duties.

SchedulesSchedules(Forming part of Profit & Loss Account)

121120

MEL

Part-B : NOTES ON ACCOUNTS

2. CONTINGENT LIABILITIES

Contingent Liabilities not provided for –

(Rs. in Lakhs)

As at 31st As at 31st March, 2008 March, 2007

i) Claims against the Company 454.39 451.66pending appellate/judicial decision

ii) Other claims against the Company 746.93 800.31not acknowledged as debts

iii) Post dated cheques issued in 8025.30 1332.20favour of supplier on behalf of SAIL (Holding Company)

3. PROFIT & LOSS ACCOUNT

3.1 The long-term agreement for wage revision expired on 31st December, 2006 Pending finalisation of fresh agreement w.e.f. 1st January 2007, provision towards wages revision of Rs. 1252.33 Lakhs has been charged to Profit and Loss Account (including Rs. 1190.88 Lakhs during the year) on estimated basis. Further, an ad-hoc adjustable advance amount of Rs. 304.63 Lakhs paid to employees during the year, has been adjusted against the provision towards salaries and wages revision.

3.2 MEL is under conversion arrangement with SAIL, its holding company, in which major raw materials i.e. Manganese Ore and Coke are provided by SAIL for conversion of the same into Ferro Alloys for which conversion charges are paid by SAIL to MEL on negotiated rate.

3.3 The total quantity of Ferro Manganese and Silico Manganese produced during the period as well as total quantity despatched under conversion arrangement are as under:

(In MT)

2007-08 2006-07

Production for the Year Ferro Manganese 64584 56319

Silico Manganese 37640 50371

Despatch under conversion Ferro Manganese 59129 55027

Silico Manganese 32197 42092

3.4 The Stock of Manganese ore as on 31.03.2008 under conversion account is 28481 MT (18429 MT). Out of the above quantity, the company has consumed 17775 MT (4183 MT) of Manganese ore for its own production for which liabilities of Rs. 3004.23 Lakhs(Rs. 104.30 Lakhs) has been provided for.

3.5 Profit and / or loss on sale of coke rejects is not ascertained separately. The sale proceeds thereof have been adjusted to the raw material accounts.

3.6 Power & Fuel includes expenditure on purchased power and furnace oil. The other expenditure for generation of power is included under respective primary heads of account.

4. INVENTORY, SUNDRY DEBTORS, LOANS & ADVANCES AND CURRENT LIABILITIES

4.1 In accordance with past practice, quantities of inventories of bulk raw materials and finished goods have been taken as per weight-volume-ratio as determined by the Production/Technical Department.

4.2 Inventory of finished goods at the period end was physically verified and the net excess quantity of 356 MT (surplus Qty of 420 MT) valuing Rs. 146.30 Lakhs (Rs.68.69 Lakhs) has been accounted for.

4.3 The amount due to Micro and Small Enterprises as defined in the “ The Micro, Small and Medium Enterprises Development Act, 2006” has been determined to the extent such parties have been identified on the basis of information available with the Company. The disclosures relating to Micro and Small enterprises as at 31st March, 2008 are as under.

Sl. No. Description As at 31stMarch, 2008

1. The principal amount remaining unpaid to Nilsupplier as at the end of accounting year

2. The interest due thereon remaining unpaid Nilto supplier as at the end of accounting year

3. The amount of interest paid in terms of Nilsection 16, alongwith the amount of thepayment made to the supplier beyond theappointed day during the year 2007-08

4. The amount of interest due and payable Nilfor the period of delay in making payment(which have been paid but beyond theappointed day during the year) but withoutadding the interest specified under this Act

5. The amount of interest accrued during the Nilyear and remaining unpaid at the end ofthe accounting year

6. The amount of further interest remaining Nildue and payable even in the succeedingyears, until such date when the interestdues as above are actually paid to the smallenterprises, for the purpose of disallowanceas a deductible expenditure under section 23.

The previous year’s figures are not given, as there were no reported Micro and Small enterprises as at 31st March, 2007.

4.4 The Company has retained Rs. 190.19 Lakhs (Rs. 154.82 Lakhs) as on 31st March, 2008 under Employees’ Family Benefit Scheme which is exempted under section 58 A of the Companies Act, 1956.

4.5 The Central Board of Direct Taxes vide its Notification dated 25th September 2001 has revised the rules for computation of certain perquisites. The Employees’ Union / Association of SAIL (our holding company) have filed writ petitions with the Hon’ble High Court at Kolkata challenging the above notification. In pursuance of Hon’ble court’s orders, Rs. 9.12 Lakhs on account of tax deducted on house perquisites for Financial year 2003-04 and 2004-05 has not been deposited with the Income Tax Department. The amount so deducted has been kept in term deposit. Such deductions and deposits after 31st March, 2005 have been made in accordance with amended law/judicial decisions. However, there is no impact on accounts of the Company as the additional tax, if required, shall be recoverable from the employees.

4.6 Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 623.39 Lakhs (Rs. 221.17 Lakhs) as at 31.03.2008.

5. GENERAL

5.1 Employees Benefits

5.1.1 General description of defined benefits schemes :

Gratuity - Payable on separation @ 15 days pay for each completed year of service to eligible employees who render continuous service of 5 years or more. Maximum amount is Rs. 3.50 lakhs as per Gratuity Act. Maximum amount of Rs. 10 lakhs has been considered for Actuarial valuation based on the recommendations of 6th pay commission for Central Government employees.

Leave Encashment- Payable on separation to eligible employees who have accumulated earned and half pay leave. Encashment of accumulated earned leave is also allowed upto 30 days once in a financial year.

Provident Fund - 12% of Basic Pay Plus Dearness Allowance, contributed to the Regional Provident Fund Scheme of Government by the Company.

Post Retirement Medical Benefits - Available to retired employees at Company’s hospitals and/or under the health insurance policy.

Post Retirement Settlement Benefits - Payable to retiring employees for settlement at their home town.

Employees’ Family Benefit Scheme - Monthly payments to disabled separated employees/legal heirs of deceased employees in lieuof prescribed deposit till the notional date of superannuation.

Long Term ServiceAward - Payable in kind on rendering minimum 25 years of service and also on superannuation.

5.1.2 Other disclosures, as required under Accounting Standard (AS) – 15 (revised) on ‘Employee Benefits’, in respect of defined benefit obligations are :

(a) Reconciliation of present value of defined benefit obligations :

(Rs. in lakhs)

Sl. Particulars Gratuity Leave Post Post Long Term Employees’ LTC /No. Encash- Retirement Retirement Service Family LLTC

ment Medical Settlement Award Benefit Benefits Benefits Scheme

i) Present value of 1296.29 612.38 90.34 6.61 5.23 245.81 0projected benefit obligations,as at 1st April, 2007

ii) Service Cost 54.78 14.15 0 5.12 0 0 0

iii) Interest Cost 101.43 47.50 0.64 0.50 0.40 17.76 0

iv) Actuarial gains(-) / losses(+) 877.57 32.72 0.17 (0.25) 0.09 57.11 0

v) Past Service Cost 0 0 (82.08)* 0 0 0 0

vi) Benefits paid 48.59 88.44 0.17 0.31 0.37 52.06 0

vii) Present value of projected benefit 2281.48 618.31 554.04** 11.67 5.35 268.62 180.56obligations as on 31st March, 2008(i+ii+iii+iv-v-vi)

* Represent earlier provision no longer required on account of Mediclaim Policy introduced during 2007-08.

** Includes amount of Rs. 545.14 lakhs towards accrued liability on account of Mediclaim Actuarial Valuation as on 31.03.2008

(b) Provident fund : Company’s contribution paid/payable during the year to provident fund are recognised in the Profit & Loss Account.The Company does not anticipate any further obligations in the near foreseeable future.

(c) Expenses recognised in the statement of Profit & Loss Account for the year ended 31st March, 2008 :

(Rs. in lakhs)

Sl. Particulars Gratuity Leave Post Post Long Term Employees’ LTC /No. Encash- Retirement Retirement Service Family LLTC

ment Medical Settlement Award Benefit Benefits Benefits Scheme

i) Service Cost 54.78 14.15 0 5.12 0 0 0

ii) Interest Cost 101.43 47.50 0.64 0.50 0.40 17.76 0

iii) Actuarial gains(-)/losses 877.57 32.72 0.17 (0.25) 0.09 57.11 0

iv) Past service cost 0 0 0 0 0 0 0

v) 0 0 *545.14 0 0 0 0

vi) Total (i+ii+iii+iv-v) 1033.78 94.37 545.95 5.37 0.49 74.87 180.56

- Amount charged to Employees Remuneration and Benefits

a) Charged to P & L Account 1033.78 94.37 545.95 5.37 0.49 74.87 180.56(Schedule 2.7)

b) Charged to Expenditure during 0 0 0 0 0 0 0construction

- Charged to Other expenses 0 0 0 0 0 0 0(Schedule 2.10)

* Disclosed as above (a) of 5.1.2

(d) Actuarial Assumptions

Sl. No. Description As at 31st March, 2008 As at 1st April, 2007

i) Discount Rate (per annum) 8% 8%

ii) Mortality Rate Indian assured lives mortality Indian assured lives mortality(1994-96) (1994-96)(modified) Ultimate (modified) Ultimate

iii) Withdrawal Rates (per annum) Executives & Non-executives- 0.50% Executives & Non-executives- 0.50%for all age for all age

iv) Medical cost trend rates (per annum) Nil for Medi-claim premium. Not Applicable

v) The estimate of future salary increases considered in actuarial valuation, takes into account inflation rate, seniority, promotion and other relevant factors.

Schedules Schedules

123122

MEL

6.1(c) FERRO ALLOYS QUANTITATIVE RECONCILIATION :

Ferro Silico Medium / Manganese Manganese Low Carbon

(MT) (MT) Ferro Manganese(MT)

Opening Stock 6,003 6,462 273

(10,495) (6,779) (672)

Production 64,584 37,640 1,941

(56,319) (50,371) (373)

TOTAL 70587 44102 2214

(66,814) (57,150) (1,045)

Sales/ Adjustments 67,633 39,723 1,791

(60,742) (50,175) (737)

Internal Consumption 538 1,604 234

(69) (513) (35)

Closing Stock 2,416 2,775 187

(6,003) (6,462) (273)

TOTAL 70,587 44,102 2,212

(66,814) (57,150) (1,045)

1) Sales of High Carbon Ferro Manganese and Silico Manganese includedespatches under conversion.

7. EXPENDITURE IN FOREIGN CURRENCIES:

Current Year Previous Year(Rs. in lakh) (Rs. in lakh)

i) Sundries 0.88 2.48

0.88 2.48

8. EARNING IN FOREIGN CURRENCIES:

Current Year Previous Year(Rs. in lakh) (Rs. in lakh)

Export of goods on FOB basis Nil Nil

9. VALUE OF IMPORTS CALCULATED ON CIF BASIS:

Current Year Previous Year(Rs. in lakh) (Rs. in lakh)

Stores & Spares 0.00 27.87

10. VALUE OF RAW MATERIAL CONSUMED:

Current Year % Previous Year %Value Value

(Rs. in lakh) (Rs. in lakh)

Imported 0.00 0.00 0.00 0.00

Indegenous 6,342.56 100.00 2,746.62 100.00

TOTAL 6,342.56 100.00 2,746.62 100.00

11. VALUE OF STORES & SPARES CONSUMED:

Current Year % Previous Year %Value Value

(Rs. in lakh) (Rs. in lakh)

Imported 12.03 1.70 32.34 6.61

Indegenous 694.30 98.30 457.20 93.39

TOTAL 706.33 100.00 489.54 100.00

Signature to Schedule 1 to 3 For and on behalf of Board of Directors

Sd/- Sd/- Sd/-(R. Ashokkumarr) (Mahesh Chandra) (Debidas Pal)Company Secretary General Manager (F&A) Executive Director

In terms of our report of even date Sd/- Sd/-

For Chandabhoy & Jassobhoy (S.K. Jain) (R. Ramaraju)Chartered Accountants Director Chairman

Sd/-(Ambesh A. Dave)

Partner

Place : Bhilai

5.5 In compliance with AS-28 relating to “Impairment of Assets”, the company reviews the carrying amount of its fixed assets by grouping assets of entire plant as Cash Generating Unit (CGU). There was no indication of impairment during the period.

5.6 The company has not remitted any amount in foreign currency on account of interim/final dividend during the year.

5.7 Previous years’ figures have been re-arranged / regrouped wherever necessary.

5.2 The requirement under Accounting Standard – 17 relating to “Segment Reporting” is not applicable since the company is having line of products which are subject to same risks and returns and operating in economic environment subject to same risk & returns.

Further, since the whole of India has been considered as one geographical segment and exports as other segment, the requirement on segment reporting does not exist, in the absence of any export during the year.

5.3 As per Accounting Standard 18 relating to “Related party disclosures”, the names of the related parties are given below:

Nature of Name Nature of Amountrelationship Transaction (Rs. in Lakhs)

Key Management Shri Nawaz Managerial 10.22Personnel Ahmad Remuneration

5.4 In accordance with AS-22 on “Accounting for taxes on income” issued by the Institute of Chartered Accountants of India, net deferred tax assets as on 31st March, 2008, has been accounted for, as detailed below:

(Rs in Lakhs)

As on 31st As on 31st March, 2008 March, 2007

Deferred tax liabilitiesDifference between book andtax depreciation 354.78 338.41

Sub-Total 354.78 338.41

Deferred tax assetsOthers 1717.69 998.36

Sub-Total 1717.69 998.36

Net Deferred tax assets 1362.91 659.95

6.1(a) LICENSED, INSTALLED CAPACITY AND PRODUCTION:

*Licensed **Installed #ProductionCapacity Capacity (Tonnes)

(Tonnes) (Tonnes)

(Annual Capacity)

High Carbon Ferro Manganese 64,584

100,000 100,00 (56,319)

Silico Manganese (100,000) (100,000) 37,640

(50,371)

Medium / Low Carbon Ferro Manganese 1,941

(373)

Note : * Re-endorsed capacity

** As certified by Management and not verified by auditors, being a technical matter.

# Including jigged Ferro/Silico Manganese & adjustment relating to excess/shortage on account of physical verification.

6.1(b) OPENING STOCK, SALES AND CLOSING STOCK

(Qty. in MT, Value in Rs. in lakhs)

Opening Stock Sales/Adjustment Closing Stock

Qty. Value Qty. Value Qty. Value

High Carbon Ferro Manganese 6,003 1,786.23 67,633 21,343.45 2,416 1,177.61

(10,495) (3,192.65) (60,742) (13,146.80) (6,003) (1,786.23)

Silico Manganese 6,462 2,169.55 39,723 16,449.93 2,775 1,255.43

(6,779) (2,131.65) (50,175) (15,239.95) (6,462) (2,169.55)

Medeum / Low Carbon Ferro Manganese 273 115.00 1,791 1,662.59 187 144.52

(672) (343.36) (737) (544.85) (273) (115.00)

SUB-TOTAL 12,738 4,070.78 109,147 39,455.97 5,378 2,577.56

(17,946) (5,667.66) (111,654) (28,931.60) (12,738) (4,070.78)

Others 185.15

(222.00)

TOTAL 12,738 4,070.78 109,147 39,641.12 5,378 2,577.56

(17,946) (5,667.66) (111,654) (29,153.60) (12,738) (4,070.78)

Schedules Schedules

125124

MEL

ANNEXURE - IPARTICULARS REQUIRED UNDER THE COMPANIES

(DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988.

ANNEXURE - II

FORM 'A'CONSERVATION OF ENERGY

ANNEXURE - IIIFORM 'B'

RESEARCH & DEVELOPMENT (R&D)

FORM 'C'FOREIGN EXCHANGE EARNINGS & OUTGO

CONSERVATION OF ENERGYMajor areas of energy conservation include: ! Optimization of electric power cost: On representation before Regulatory Authority on additional parameters, load factor incentive was augmented,

resulting in saving Rs.383 lakhs during the year.nd rd

! Trial wheeling of Inter-State power from DSP, Durgapur, completed on 22 & 23 March, 2008 to establish an alternate route for cheaper power sources other than State Electricity Board, in the near future.

! Gainful utilisation of waste gas of submerged arc furnace for generation of power through 4.2 MW gas based Power Plant.! Use of alternate reductant to coke i.e. charcoal to reduce specific power consumption for Silico-manganese production.! Conservation of water by re-circulation after effluent treatment. ! Improvement in furnace performance and reduction in power consumption. ! Maintain unity power factor for improving utilisation of electrical energy.! Statistical Process Control for control of critical elements in Ferro alloys.! Gainful utilization of waste water for mechanized jigging.

POWER & FUEL CONSUMPTION 2007-2008 2006-2007

ELECTRICITY1. PURCHASED

Unit Million/kwh 313.74 337.75Total Amount Rs./Lakhs 11252.42 11944.53Rate Rs./kwh 3.58 3.54

2. OWN GENERATION Million/kwh 14.50 8.923. COAL NIL NIL4. FURNACE OIL

Unit KL 492.20 249.74Total Amount Rs./Lakhs 113.36 49.82Rate Rs./KL 23031.28 19950.13

CONSUMPTION PER UNIT OF PRODUCTION

Product Electricity Furnace Oil Coal(Kwh/Tonne) (KL) (Tonne)

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07Ferro Manganese 2585 2578 -- -- -- -Silico Manganese 3946 3948 -- -- -- -Medium Carbon 1194 1087 -- -- -- -

1. SPECIFIC AREA IN WHICH R&D CARRIED OUT BY THE COMPANY.• Development of use of Si MnO Slag in Coal Mines to replace sand in sand stoving.

2 BENEFITS DERIVED AS A RESULT OF ABOVE R & D.• Use of Si MnO Slag in Coal Mines paves way for disposal of Si MnO Slag and conserves sand which is costly and rare material.

3 FUTURE PLAN OF ACTION To achieve the objectives of the Corporate Plan 2012, studies were carried out for developing infrastructure facilities & equipment for implementing layer casting of Ferro Alloys, mechanization of product handling/breaking in order to improve the labour productivity and yield.• Installation of one number 33 MVA Submerged Arc Furnace for production of Silico Manganese by December, 2010.• Construction of compound wall along Plant & Township premises by June, 2008.• Installation of SRF by June, 2008.• Construction of additional Bunkers for SAF-I and SAF-II by September, 2008.

nd nd• Layer casting of ferro alloys 2 phase including procurement of 1 No. (2 ) Front End Loader by December, 2008.• Mechanisation system for processing of layer casting of ferro alloys by December, 2008.• Computerisation at MEL Phase-II by December, 2008.• Dust Collection System for SAF-II (South side) by March, 2009.• Thickner & Hotwell for SAF-II by March, 2009.

4 EXPENDITURE ON R&DResearch work is undertaken indigenously as such no specific expenses on R&D are apportionable.TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

! Utilisation of iron ore fines for production of iron ore sinter and subsequent usage in SAF-II for SiMn production.! Maintain unity power factor and load factor above 80% by optimising utilisation of power.

Rs./Lakhs EARNINGS : NILOUTGO : 0.88

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. 1 7 4 0 2 of 1974-75 State Code 1 1

Balance Sheet Date 3 1 0 3 2 0 0 8 Date Month Year

II. Capital raised during the year (Amount in Rs. Thousands)

Public Issue N I L Right Issue N I L

Bonus Issue N I L Private Placement N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities 9 5 7 4 8 8 Total Assets 9 5 7 4 8 8

Source of Funds

Paid-up Capital 2 4 0 0 0 0 Reserves & Surplus 7 1 3 6 2 0

Secured Loans N I L Unsecured Loans 3 8 6 8

Application of Funds

Net Fixed Assets 2 8 7 5 0 3 Investments N I L

Net Current Assets 5 3 2 3 6 8 Misc. Expenditure 1 3 2 6

Accumulated Losses N I L

IV. Performance of Company (Amount in Rs. Thousands)

Turnover/Other Income 3 2 1 5 9 3 7 Total Expenditure 2 6 5 7 1 9 5

Profit Before Tax 5 5 8 7 4 2 Profit After Tax 3 6 3 2 3 8

Earning per share in Rs. 1 5 . 1 3 Dividend Rate % 3 1

V. Generic Name of Three Principal Products / Services of Company (as per Monetary Terms)

Item Code No. (ITC Code) 7 2 0 0 2

Product Description F E R R O A L L O Y S

For and on behalf of Board of Directors

Sd/- Sd/- Sd/-

(R. Ashokkumarr) (Mahesh Chandra) (Debidas Pal)Company Secretary General Manager (F&A) Executive Director

In terms of our Report of even date

For Chandabhoy & JassobhoyChartered Accountants

Sd/- Sd/- Sd/-

(Ambesh A. Dave) (S.K. Jain) (R. Ramaraju)Partner Director Chairman

Place : Bhilai

Date : May 24th, 2008

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MEL

(a) COMPANY'S PHILOSOPHY

(b) BOARD OF DIRECTORS

(c) AUDIT COMMITTEE

(d) NOMINATION & COMPENSATION COMMITTEE

The philosophy of the Company in relation to corporate governance is to ensure transparency, disclosures and reporting that conforms fully with laws, regulations and guidelines, and to promote ethical conduct throughout the organization, with the primary objective of enhancing shareholders value while being a responsible corporate citizen. The company is committed to conforming to the highest standards of corporate governance in the country. It recognizes that the Board is accountable to all shareholders and that each member of the Board owes his first duty to protecting and furthering the interest of the Company.

The Board of Directors at present comprises of Non-Executive Chairman and three Non-Executive Directors (Non-ED). During the year, nine Board Meetings were held on 18/5/2007, 27/6/2007, 23/7/2007, 24/8/2007, 22/10/2007, 30/11/2007, 28/12/2007, 22/1/2008 and 22/2/2008.

The composition of directors and their attendance at Board Meetings during the year and at the last Annual General Meeting as also number of other directorships are as follows.

Name of Category of Board Attendance No. of otherthe Director Directorship Meetings at last AGM Directorship

Attended held as on (Nos.) 31/3/2008

Shri V.K. Gulhati Chairman 5 Yes --(upto 6/11/07)

Shri Vipin Puri Chairman 8 Yes --(from 31/11/07 to 31/03/08)

Shri S.D.M. Nagpal Non-ED 9 Yes --

Shri S.K. Jain Non-ED 5 -- --(22/10/07 to 30/06/08)

Shri A. K. Nigote Non-ED 1 -- --(upto 30/06/08)

(1) Terms of Reference

The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its overseeing responsibilities by reviewing the financial reports; the Company's systems of internal controls regarding finance, accounting and legal compliance that management and the Board have established; and the Company's auditing, accounting and financial reporting process generally.

The Audit Committee reviews reports of the Internal Auditors, meets Statutory Auditors and discusses their findings, suggestions and other related matters and reviews major accounting policies followed by the Company. The Audit Committee reviews with management, the quarterly and annual financial statements before their submission to the Board.

The minutes of the audit committee meetings are circulated to the Board, discussed and taken note of.

(2) COMPOSITION

The Audit Committee of the Board was formed in January, 2001. The reconstituted Audit Committee consists of four Non-Executive Directors viz. Shri S.D.M. Nagpal, Shri Vipin Puri, Shri S.K. Jain and Shri A.K. Nigote. During the last year, the committee met four times and attendances at the Meetings are as follows:

Name of the Director Status No. of Meetingsattended

Shri S.D.M. Nagpal Chairman 4

Shri Vipin Puri Member 3

Shri S.K. Jain Member 1

Shri A.K.Nigote Member 1

(i) Being a Government Company, the nomination and fixation of terms and conditions for appointment as Director is made by Government of India. As such, the Nomination and Compensation Committee has not been constituted.

(ii) The Non-executive (Independent) Director is paid only sitting fee of Rs.10,000/- for each Board/Board Sub-Committee Meetings attended by him.

(iii) The details of sitting fee paid to Non-Executive (Independent) Director during the year is given below:

Name of the No. of Sitting Fee No. of Audit Sitting Fee for TotalDirector Board for each Committee each (Rs.)

Meeting meeting Meeting meetingattended (Rs.) attended (Rs.)

Shri S.D.M.Nagpal 9 10,000/- 4 10,000/-

Total 90,000/- 40,000/- 1,30,000/-

(i) A Shareholders/Investors Grievance Committee is constituted under the Chairmanship of a non-executive director. The committee consists of Shri S.K. Jain and Shri A.K. Nigote to look into the redressal of shareholders and investors complaints like non-transfer of shares, non-receipt of balance sheet, non-receipt of declared dividend etc.

(ii) Name of compliance officer : Shri R. Ashokkumarr,

Secretary.

(iii) Number of shareholder complaints received during the period from 1st April, 2007 to 31st March, 2008.

Number of the Source from which complaint was received

Complaint Director SEBI Exchange Total

A)Non-receipt of shares after transfer -- -- -- --

B)Delay in issuing Duplicateshare certificates -- -- -- --

C)Non-receipt of Dividend Warrants -- -- -- --

D)Complaint-reg Transmission of Shares -- -- -- --

Total -- -- -- --

* Complaints not solved to the satisfaction of shareholders: Nil

Financial year Date Time Location

2006-2007 24/08/2007 12.00 noon “Nirmal” 10th floor, Nariman Point,Mumbai-400021.

2005-2006 25/08/2006 12.00 noon “Nirmal” 10th floor, Nariman Point, Mumbai-400021.

2004-2005 31/08/2005 12.00 noon “Nirmal” 10th floor, Nariman Point,Mumbai-400 021.

There were no transactions of material nature with its promoters, the directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of company at large. The non-executive Directors had no pecuniary relationships or transactions viz-a-viz the company during the year.

There were no instances of non-compliance by the company, penalties, strictures imposed on the company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years.

Quarterly results are published in the Newspapers as per the requirements. There is no website of the Company.

(i) Annual General Meeting is proposed to be held on 22nd August, 2008 at 12.00 noon at the Registered Office at “Nirmal” 10th Floor, Nariman Point, Mumbai-400 021.

(ii) Date of Book Closure: 11th July, 2008 to 15th July, 2008.

(iii) The shares of the Company is listed at the following stock exchange:

M/s. Bombay Stock Exchange Limited

Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001.

It is confirmed that Annual Listing Fee has been paid to the stock exchange.

(iv) Stock code : 4824

(v) Market price data: High/Low during each month in last financial year with the Bombay Stock Exchange Limited.

(e) SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE

(f) GENERAL BODY MEETINGS

(g) DISCLOSURES

(h) MEANS OF COMMUNICATION

(i) GENERAL SHAREHOLDERS INFORMATION

HIGH LOW

April, 2007 -- --

May, 2007 180.00 157.30

June, 2007 180.00 180.00

July, 2007 198.45 158.70

August, 2007 171.10 143.00

September, 2007 375.65 157.25

October, 2007 1045.70 394.40

November, 2007 1971.30 1097.95

December, 2007 1183.45 656.00

January, 2008 1014.40 674.35

February, 2008 760.00 480.00

March, 2008 506.25 351.85

Month & Year MEL at BSE vi) Registrar and M/s. MCS Limited, Transfer Agent Office No. 21/22, Ground Floor,

Kashi Ram Jamna Das Building, 5, D. Mello Road (GHADIYAL GODI) Masjid, Mumbai-400 009

(vii) Share transfer system

The Board has delegated powers to the Executive Director for transfer of shares. The shares lodged for transfer are despatched back well within the time limit prescribed in this respect under the listing agreement.

(viii)Distribution of shareholding as on 31st March, 2008:

Scrip Code:

Category Category of Number of Total number Number of shares Total shareholding as a percentage of

Code Shareholder Shareholders of shares held in demate- total number of shares

rialised form As a percentage As a percentageof (A+B) of (A+B+C)

(1) (2) (3) (4) (5) (6) (7)

(A) Shareholding of Promotor and Promoter Group Holding Company

(1) Indian

(a) Individuals/ HinduUndivided Family

(b) Central Government/ State Government(s)

(c) Bodies Corporate 9 23787935 - 99.12

(d) Financial Institutions/Banks

(e) Any Other (specify)

Directors & their RelativesSocieties

Partnership Firms

Reserve Bank of India

Employees Welfare FundESOP / ESOS

Trusts

Sub-Total (A)(1) 9 23787935 - 99.12

(2) Foreign

(a) Individuals (Non-Resident Individuals/ Foreign Individuals)

(b) Bodies Corporate

(c) Institutions

(d) Any Other (specify)

Directors & their RelativesSocieties

Partnership Firms

Employees Welfare FundTrusts

ESOP / ESOS

Total Shareholding of 9 23787935 - 99.12Promoter and Promoter Group(A)=(A)(1)+(A)(2)

(B) Public shareholding

(1) Institutions

(a) Mutual Funds/UTI

Report on Corporate Governance

ANNEXURE - IV

129128

MEL

(b) Financial Institutions/ 2 300 - -

Banks

(c) Central Govt./

State Govt.(s)

(d) Venture Capital Funds

(e) Insurance Companies

(f) Foreign InstitutionalInvestors

(g) Foreign Venture Capital Investors

(h) Any Other (specify)

Foreign Financial Institutions

Foreign Mutual Fund

Foreign Financial Institutions/Banks

Stressed Assets Stabilization Fund

State Finance Corporation

Sub-Total (B)(1) 2 300 - -

(2) Non-Institutions

(a) Bodies Corporate 41 16301 6251 0.07

(b) Individuals i) Individual 2140 192714 56107 0.81shareholders holding nominal share capital up to Rs.1 lakh.

ii) Individual shareholders holding nominal share capital in excess of Rs.1 lakh.

(c) Any Other (specify)

Trusts

Directors & their Relatives

Foreign Nationals

Escrow Account

Market Maker

Non Resident Indians 50 500 - -

Overseas Corporate Bodies

Societies

Clearing Members

Share in transit

Hindu Undivided 14 2250 - -Families

NRIs / OCBs

Foreign Corporate Bodies

Partnership Firm

Custodian of Enemy Property

Foreign Collaborators

ESOP / ESOS / ESPS

Sub-Total (B)(2) 2245 211765 62358 0.88

Total Public Shareholding (B)=(B)(1)+(B)(2) 2247 212065 62358 0.88

TOTAL (A)+(B) 2247 24000000 62358 100 100

(C) Shares held by Custodians and against which Depository Receipts have been issued

GRAND TOTAL 2256 24000000 62358 100 100

(A)+(B)(C)

(I)(d) Statement showing details of locked in shares.

Sl. Name of the Shareholder Number of Locked in Share Locked in Shares as a percentage of total number of No. shares {i.e., Grand Total (A)+(B)+(C) indicated

in Statement at para (I)(a) above}

1. Holding Company-SAIL 23787935 99.12

2.

TOTAL 23787935 99.12

(II)(a) Statement showing details of Depository Receipts (DRs)

Sl. Type of outstanding Number of Number of shares Shares underlying outstanding DRsNo. DR (ADRs, GDRs, outstanding DRs underlying as a percentage of total number of shares

SDRs, etc.) outstanding DRs {i.e., Grand Total (A)+(B)+(C) indicated in Statement at para (I)(a) above}

1.

2.

TOTAL NIL NIL NIL

(II)(b) Statement showing Holding of Depository Receipts (DRs), where underlying shares are in excess of 1% of the total number of shares.

Sl. Name of the DR Holder Type of outstanding Number of shares Shares underlying outstandingNo. DR (ADRs, GDRs, shares underlying DRs as a percentage of total

SDRs, etc.) outstanding DRs number of shares {i.e., Grand Total (A)+(B)+(C) indicated in Statement

at para (I)(a) above}

1.

2.

TOTAL NIL NIL NIL NIL

(ix) Dematerialization of shares : Shares are dematerialised. Tradeable stockand liquidity as on 31/3/2008. is 0.88% only. Thus liquidity is negligible.

(x) Address for correspondence from shareholders for queries/complaints, if any:

M/s. Maharashtra Elektrosmelt Limited

Chanda-Mul Road, Chandrapur-442 401.

Fax No. 07172-255812, 255437 Phone No. 07172-253693

(xi)E-mail ID of the grievance redressl division/Compliance Officer, MEL, for registering complaints by the investors.

E-MAIL ID “mcspanvel@yahoo.co.in”.

(I)(b) Statement showing Shareholding of persons belonging to the category “Promoter and Promoter Group”

Sl. Name of the Shareholder Number of shares Shares as a percentage of total number of No. shares {i.e., Grand Total (A)+(B)+(C) indicated

in Statement at para (I)(a) above}

1. Holding Company-SAIL 23787935 99.12

2.

TOTAL 23787935 99.12

(I)(c) Statement showing Shareholding of persons belonging to the category “Public” and holding more than 1% of the total number of shares.

Sl. Name of the Shareholder Number of shares Shares as a percentage of total number of No. shares {i.e., Grand Total (A)+(B)+(C) indicated

in Statement at para (I)(a) above}

1.

2.

TOTAL NIL NIL

131130

MEL

The Management of Maharashtra Elektrosmelt Limited presents its analysis report covering performance and outlook of the Company.

General Economic Environment

The upward trend in demand for Iron and Steel products maintained its momentum in financial year 2007-08. This resulted in further improvement in domestic and international prices. Global crude steel output witnessed a growth of 7.5% in 2007 (IISI), scaling a level of 1343 million tonnes. Of this the Asian Region alone accounted for 56%. Ten years ago the Asian Region accounted for 38% only. 2007 was another year of strong growth in steel demand, with global finished steel consumption reaching 1.2 billon tonnes. The forecast for global steel consumption continues to be buoyant with growth rates for 2008 and 2009 expected to exceed 6%.

The finished carbon steel consumption in India for fiscal 2007-08 has been estimated at around 49 million tonnes, a growth of 10.6% over the previous year (provisional estimates of JPC). The strong demand pull resulted record finished steel imports of 6.5 million tonnes, a 46% jump over the previous year. The Indian Steel industry has major expansion plans to meet growing demand.

India produced 53.9 million tonnes of crude steel in fiscal 2007-08, a growth thof 6% over previous year's production. India ranks 5 largest steel producer

globally, and is set to emerge as the second highest producer and consumer of steel in the world by 2015.

Projection for the GDP growth for India in fiscal 2008-09 indicates a softening of growth process. But the moderation is expected to be relatively mild, with GDP growing between 8 to 8.5% under the influence of robust investment, improved corporate performance, and buoyancy in tax and saving rate. Since ferro alloys are exclusively utilized as raw materials in steel making, the growth in ferro alloy consumption is directly related to the growth in steel consumption. The spurt in the steel industry gave way for good performance of ferro alloys industry.

Demand for ferro alloys in India The demand for ferro alloys largely depends on the production of steel in the country and export potential. With the present production level of 54 million tonnes of crude steel in the country, the production of manganese based ferro alloys hovers around 5,00,000 tonnes. The steel industry in Asian region is poised for growth in immediate future and the trend may continue for some more years. In line with the growth potential, India's apparent steel use is expected to grow at 7% upto 2010 and 7.7% upto 2015. (Source : IISI). Thus, the growth potential for manganese based ferro alloys apart from exports, lies in the range of 70-80% by 2011-12 over the present level.

Capacity for ferro alloys production

As on date, there exists over capacity in the ferro alloys production. With the growing demand of ferro alloys in the domestic as well as export market, new facilities are also likely to be added up. Thus, the industry is likely to operate at its rated capacity utilisation level only if the exports continue to be remunerative and no raw material constraints are faced.

Exports

There was no export of ferro alloys during 2007-08 as export market was not remunerative.

Position of MEL

MEL continues to be the largest producer of manganese based ferro alloys in the country with 30% share in the domestic market. It caters mainly to the requirement of its Holding Company viz. SAIL.

Opportunities

MEL has integrated large-scale facilities for the production of manganese based Ferro-alloys. It has, therefore, competitive edge in terms of specific consumption of inputs and operational efficiency.

MEL has a track record of achieving furnace capacity utilisation of more than 100% of its rated capacity and achieved capacity utilization of 122% in 2007-08.

INDUSTRY STRUCTURE & DEVELOPMENT

OPPORTUNITIES & THREATS FOR MEL

ANNEXURE - V

Management Discussion & Analysis Report (MDAR)

In order to meet the growing requirement of Ferro alloys at SAIL, MEL has taken up an ambitious project of installation of another 33 MVA capacity Submerged Arc Furnace to cater the requirement of SAIL Plants.

The 4.2 MW Power Plant is being operated using furnace waste gas as a fuel. This has provided good scope for savings on account of power and fuel expenses.

MEL has also taken up cost reduction steps particularly through waste utilisation, improvement in productivity, reduction in purchase price and right sizing of manpower & electrical power management through load management.

Threats

There has been steep hike in prices of Manganese Ore. The availability of Mn Ore has also decreased substantially. The company may face adversity due to scarcity and high prices of Mn Ore.

The production has been increased during the year and the capacity utilization was 122%.

With the increase in production of steel in the country, the domestic demand of Ferro alloys is expected to increase.

The company has a good potential with motivated and dedicated workforce. It has maintained its quality standard. It has the capacity to cater to the SAIL Plants in addition to supply to non-SAIL customers including exports. However, it needs help from State Government by allocating prospecting licenses for Iron Ore & Manganese Ore, which are the major raw materials for the Company's operations. It also needs help from State Govt. in the form of reduction in power tariff in line with that provided by other States and allow purchase of power from sources other than Maharashtra State Electricity Distribution Company Limited at cheaper rates.

Availability and quality of raw materials specially Manganese Ore is the major concern for MEL. The Company's operation may get adversely affected due to scarcity of Manganese Ore and deterioration in its quality.

The Company has an adequate system of internal controls for achieving the following business objectives of the Company.

! Efficiency of operations.! Protection of resources.! Accuracy and promptness of financial reporting.! Compliance with laid down policies and procedures.! Compliance with laws and regulations.

In MEL, Internal Audit Department reviews, evaluates and appraises the various systems, procedures/policies laid down by the Company and suggests meaningful and useful improvements. It helps management to accomplish its objectives by bringing a systematic and disciplined approach to improve the effectiveness of management towards good corporate governance.

The Internal Audit is subjected to overall control environment supervised by Board Level Audit Committee, providing independence to the Internal Audit function, emphasizing transparency in the systems and internal controls. Annual Audit Plans are based on identification of key-risk areas with thrust on system/process so as to achieve cost reduction in overall operation of the Company.

The Internal Audit system is supplemented by well-documented policies, guidelines and procedures and regular reviews are being carried out by our Internal Audit Department. The reports containing major IA observations are periodically submitted to the management and Audit Committee of the MEL Board.

SEGMENTWISE OR PRODUCTWISE PERFORMANCE

OUTLOOK

RISK AND CONCERNS

INTERNAL CONTROL SYSTEMS

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATIONS

MEL is under a conversion contract with SAIL in which major raw materials i.e. Manganese Ore and Coke are provided by SAIL for conversion of the same into Ferro Alloys, for which charges are paid by SAIL to MEL based on negotiated rate on yearly basis.

During the year the company has achieved a turnover of Rs. 396.41 crores as against Rs. 291.54 crores in the previous year. Value of earning through conversion arrangement was Rs. 290.79 crores as against Rs. 241.80 crores during the previous year.

On the operational front, company has achieved a capacity utilisation of 122%. Sales of ferro alloys (all sizes) during the year was 109146 tonnes as against 111654 tonnes during the previous year.

Despite this and in addition to increase in cost of raw materials, power tariff and other inputs, the company has achieved improved performance and earned a post tax net profit of Rs. 36.32 crores as against the profit of Rs. 18.50 crores in the previous year. This is due to increase in power tariff and employees remuneration and benefits.

Human resource was considered as a major factor in the overall working of the Company. The Company has motivated and involved the workforce in the areas of cost reduction for achieving better techno-economic, system improvement, production and other activities, which has resulted into improved performance of the Company. Training programmes were organised for the executives and non-executives employees for improvement and development in the skill, knowledge and working of the

employees. Personnel activities across the company got reoriented for maximum capacity utilisation, better operational control, quality of products, enlarge the market coverage and cost reduction measures.

MEL continued its contribution to the society as a socially responsive organisation through various initiatives. MEL in association with National AIDS Control Organisation (NACO) has actively participated and promoted the Information, Education and Communication (IEC) under the campaign for HIV/Aids awareness programmes.

stThe manpower employed by MEL as on 31 March, 2008 was 781 comprising of 130 Executives and 651Non-Executives, out of which 13.44 percent were Scheduled Castes, 7.17 percent were Scheduled Tribes and 53 percent were Other Backward Castes.

As a part of Corporate Social Responsibility, the following social obligation have been carried out by the Company during the year.

(i) Distributed school bags, books and stationery to the students of Zilla Parishad Sr. Primary School at Lohara village (162 nos.)

(ii) Co-sponsored a plastic surgery camp under the expertise of World Renowned Surgeon Dr. Sharad Kumar Dicksheet (USA), in November, 2007, at Chandrapur. The camp was organized for surgery upon Cleft Lip. scar on face and squint cases benefiting 238 patients.

(iii) Sponsored the world disabled day programme organized by the National Federation of Blind providing material for self employment, braille books for students white folding sticks and sarees (200 Nos.).

(iv) Provided 10 street light fittings to the Lohara village which is situated near the vicinity of the Company.

CORPORATE SOCIAL RESPONSIBILITY

AUDITOR'S CERTIFICATE ON CORPORATE GOVERNANCEThe MembersMaharashtra Elektrosmelt LimitedMumbai.

We have examined the compliance of conditions of Corporate Governance by Maharashtra Elektrosmelt Limited for the year ended March 31,2008 as stipulated in clause 49 of the Listing Agreement of the said Company with the stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we state that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements.

We state that no investor grievance is pending for a period exceeding one month against the Company as per the records maintained by the Shareholders / Investors Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For and on behalf of Chandabhoy & Jassoobhoy

Chartered Accountants

Sd/-Ambesh A. Dave

PartnerMembership No.:F 49289

thBhilai : 24 May, 2008

ANNEXURE - VI

133132

MEL

8. According to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 209 (1)(d) of the Companies Act,1956.

9. a. According to the information and explanations given to us and the records of the Company examined by us, the statutory dues applicable to the Company are Provident Fund, Income Tax, Sales tax, Excise Duty, Service Tax, Profession Tax and Cess. The Company is generally regular in depositing the statutory dues with the appropriate authorities.

b. According to the information and explanations given to us, no undisputed dues payable in respect of Provident Fund, Income Tax, Sales Tax, Excise Duty, Service Tax, Profession Tax and Cess were outstanding as at March 31, 2008 for a period of more than six months from the date they became payable.

c. According to the information and explanation given to us, above referred statutory dues which have not been deposited on account of any dispute and the forum where dispute is pending are as under :

Sl. PERIOD Amount FORUM WHERE DISPUTE IS PENDINGNo. (Rs.)

Financial Year:

1995-96 9, 81.200 Custom. Excise & Service Tax Appellate Tribunal-Mumbai

1996-97 2,91,410 Commissioner Central Excise (Appeals) - Nagpur

1997-98 74,89,466 Commissioner Central Excise (Appeals) - Nagpur

For the period:

July 2000 to Dec 2001 14,92,357 Asstt Commissioner, Central Excise - Nagpur

July 2000 to Mar 2001 1,62,49,905 Custom, Excise & Service Tax Appellate Tribunal - Mumbai #

July 2000 to Mar 2001 55,48,000 Custom, Excise & Service Tax Appellate Tribunal- Mumbai #

Apr 2001 to Mar 2002 6,20,452 Asstt Commissioner. Central Excise - Nagpur

Apr 2001 to Feb 2004 1,55,79,066 Asstt. Commissioner, Central Excise - Chandrapur

Jan 2002 to Oct 2002 9,06,650 Asstt. Commissioner, Central Excise - Nagpur

Nov 2002 to Mar 2003 4,80,983 Asstt. Commissioner, Central Excise - Chandrapur

Apr 2003 to Feb 2004 4,20,426 Asstt. Commissioner, Central Excise - Chandrapur

Mar 2004 to Nov 2004 6,38,611 Asstt. Commissioner, Central Excise - Chandrapur

2000 to December 2004 3,47,65,389 Commissioner, Central Excise - Chandrapur

July 2000 to Sep 2001 68,92,496 Commissioner, Central Excise - Chandrapur

Dec 2004 to Mar 2005 4,22,859 Asstt. Commissioner, Central Excise - Chandrapur

Jan 2005 to Sep 2005 2,38,510 Asstt. Commissioner, Central Excise - Chandrapur

Apr 2005 to July 2005 4,15,950 Asstt. Commissioner, Central Excise - Chandrapur

Aug 2005 to June 2006 4,44,680 Assrt. Commissioner. Central Excise - Chandrapur

Feb 2006 to May 2006 4,31,270 Asstt. Commissioner, Central Excise - Chandrapur

June 2006 to Sept 2006 4,40,541 Asstt. Commissioner, Central Excise - Chandrapur

Oct 2006 to Jan 2007 4,64,519 Asstt. Commissioner, Central Excise - Chandrapur

Feb 2007 to July 2007 4,13,335 Asstt. Commissioner, Central Excise - Chandra pur

# Subject to reconsideration ofapplication by Committee onDispute, Govt. of India.

TOTAL 9,56,28,075

Financial Year1983-84 to 2002-03 1,29,98,650 High Court- Nagpur

TOTAL 1,29,98,650

1973 74 to 1982-83 5,32,000 Government of Maharashtra

TOTAL 5,32,000

10,91,58,725

10. The Company does not have accumulated losses and has not incurred any cash losses during the financial year covered by our audit and in the immediately preceding financial year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to Banks and financial institutions. It has not issued any debentures.

12. The Company has not granted any loans or advances against security by was of pledge of shares, debentures and other securities.

13. The Company is not a chit fund, nidhi, mutual benefit fund or a society. Clause 4(XXII) of the Order is, therefore, not applicable to the Company.

14. In our opinion, the Company is not an investment company dealing or trading in shares, securities, debentures and other investments. Clause 4(XIV) of the Order is, in our opinion, not applicable to the Company for the year under report.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

A] EXCISE DUTY

B] MUNICIPAL TAX

C] GRAM PANCHAYAT/ZILA PARISHAD CESS

GRAND TOTAL [A+B+C]

To the Members of MAHARASHTRA ELEKTROSMELT LIMITED

ANNEXURE TO THE AUDITOR'S REPORT

ANNEXURE REFERRED IN OUR REPORT OF EVEN DATE

We have audited the attached Balance Sheet of Maharashtra Elektrosmelt Limited as at 31st March, 2008, the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date annexed thereto.

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

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

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account of the Company.

iv. In our Opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

v. The provisions of Section 274(1)(g) of the Companies Act, 1956 are not applicable to Government Company in terms of Notification No. GSR 829(E) dated 21st October, 2003 issued by the Department of Company Affairs, Ministry of Finance, Government of India.

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a. in the case of Balance Sheet, of the state of affairs of the Company as at 31st March 2008;

b. in the case of Profit and Loss Account, of the profit for the year ended on that date; and

c. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For and on behalf of

Chandabhoy & Jassoobhoy

Chartered Accountants

Sd/-

Ambesh A. DavePartner

Membership No.: F - 49289

Bhilai : 24th May, 2008

1. a. The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets.

b. We are informed that the fixed assets except those help by the employees under Furniture Hire Scheme have been physically verified by the management at reasonable intervals and no material discrepancies have been noticed in respect of verification is reasonable having regard to the size of the Company and the nature of its assets.

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

2. a. The inventories have been physically verified by the management at reasonable intervals during the year. The inventories in transit as at 31st March 2008 have been verified by the management with reference to subsequent receipt of materials.

b. The Producers of physical verification of inventories followed by the management are, in our opinion, reasonable and adequate in relation to the size of the Company and nature of its business.

c. The Company has maintained proper records of its inventories. No material discrepancies were noticed on physical verification of inventories.

3. a. The Company has not granted any loans, secured or unsecured, to companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly clause 4 (iii) (b) to (d) of the Order is not applicable to the Company.

b. The Company has not taken any loans, secured or unsecured, from companies, firms and other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly clause 4 (iii) (f) to (g) of the Order is not applicable to the Company.

4. In our opinion and according to the information and explanation given to us there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for sale of goods & services. During the course of our audit, no major weakness has been noticed in the internal controls.

5. In our opinion and according to the information and explanations given to us, there are no contracts and arrangements referred to in Section 301 of the Companies Act, 1956, particulars of which need to be entered into a register maintained under Section 301 of the Act. Accordingly clause 4 (v) (b) of the Order is not applicable to the Company.

6. The Company has not accepted any deposits during the year from the public other than the amount retained under Employees' Family Benefit Scheme for which exemption under section 58A of the Companies Act, 1956 has been obtained.

7. In our opinion, the Company has an internal audit system commensurate with the size of the Company and the nature of its business.

Auditor's Report

135134

MEL

16. According to the information and explanations given to us the records of the Company examined by us, the Company has not taken any term loan during the year.

17. On the basis of the records of the Company examined by us and according to the information and explanations given to us, in our opinion, the Company has not raised short term funds for long term investment.

18. During the year under Audit, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Companies Act, 1956.

19. The Company has not issued any debentures. Accordingly Clause 4(xix) of the Order is not applicable to the Company.

20. The Company has not raised any money by way of public issues during the year. Accordingly Clause 4 (xx) of the Order is not applicable to the Company.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year.

For and on behalf of

Chandabhoy & Jassoobhoy

Chartered Accountants

Sd/-

Ambesh A. Dave

Partner

Membership No.: F - 49289

Bhilai : 24th May, 2008

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF MAHARASHTRA ELEKTROSMELT LIMITED FOR THE YEAR ENDED 31 MARCH, 2008.

The preparation of financial statements of Maharashtra Elecktrosmelt Limited for the year ended 31 March, 2008 in accordance withe the financial reporting framework prescribed under the Companies Act, 1956 is the responsibility of the management of the company. The statutory auditor appointed by the Comptroller and Auditor General of India under Section 619(2) of the Companies Act, 1956 is 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 Charter Accountants of India. This is stated to have been done by them vide their Audit Report dated 24 May, 2008.

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 Maharashtra Elekrosmelt Limited for the year ended 31 March, 2008. This supplementary audit has been carried out independently without access to the working papers of the statutory auditors and/company personnel and a selective examination of some of the accounting records. On the basis of my audit nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditor's Report under Section 619(4) of the Commmpanies Act, 1956.

For and on the behalf of the

Comptroller and Auditor General of India

Sd/-

(K. P. Sasidharan)Place : Mumbai Principal Director of Commercial Audit and Date : 30 June, 2008 Ex-Officio Member, Audit Board-I, Mumbai

Comments of C&AG ANNEXURE - VII

137136

NEW DELHI

ChairmanS. K. Roongta

DirectorsPersonnelG. OjhaFinanceSoiles BhattacharyaCommercialShoeb S. AhmedTechnical V. K. Gulhati

Executive DirectorsInternal AuditV. K. MisraOperations & SSP. K. BajajProjectsS. C. DangayachPersonnel & AdministrationGautam MukherjiCoal Import GroupR. P. RawatSAILCONN. K. SudanVigilanceAnil KumarCorporate PlanningA. K. JainMaterials ManagementC. S. SharmaLawP. K. Basu Majumdar

HRDS. P. PatnaikSafetyV. K. Dhawan

Environment Management DivisionDr. R. K. AgrawalGrowth Division & KultiM. Singh

CCSOHyder Ali

Company SecretaryDevinder Kumar

DGM (Corporate Affairs)R. K. Singhal

Bhilai Steel PlantManaging DirectorR. Ramaraju

Executive DirectorWorksAshok KumarFinance & AccountsT. K. GuptaMinesM. K. BinduMaterials ManagementS. N. P. SinghProjectsV. K. AroraPersonnel & AdministrationP. K. Aggarwal

Durgapur Steel PlantManaging DirectorV. Shyamsundar

Executive DirectorsWorksS. N. SinghProjectsG. C. MishraFinance & AccountsT.C.A.S. PrasadMaterials Management Asok Kumar Ray

Rourkela Steel PlantManaging DirectorB. N. Singh

Executive DirectorsMedical & Health ServicesDr. O. P. AgrawalWorksN. P. SinghMaterials ManagementS. S. MohantyProjectsS. S. VermaFinance & AccountsV. NandgopalPersonnel & AdministrationBalbir Singh

Bokaro Steel PlantManaging DirectorV. K. Srivastava

Executive DirectorMaterials ManagementK. Sriram MurthyWorksS. RanadeFinance & Accounts D. P. BajajProjectsN. K. JhaPersonnel & AdministrationJeevesh MishraMedical & Health ServicesDr. D. N. Mohapatra

IISCO Steel PlantManaging DirectorS. P. Rao

Executive DirectorsMaterials Management & Mktg.P. K. DuttaCollieriesU. P. SinghWorksA. K. VirmaniPersonnel & AdministrationR. TiwariProjectsH. Suryaprakash

Alloy Steels PlantExecutive DirectorA. J. VijhSalem Steel PlantExecutive DirectorB. B. SinghVisvesvaraya Iron & Steel PlantExecutive DirectorM. K. Bhattacharya

UNITS

Research & Development Centre for Iron & SteelExecutive Director I/cJ. SinghExecutive DirectorN. Neogi

Raw Materials DivisionExecutive DirectorK. Kapoor

Centre for Engineering & Technology Executive DirectorA. S. MathurExecutive DirectorR. N. Pandey

Central Marketing OrganisationExecutive DirectorsTransport & ShippingRanen NagMarketing-Flat ProductD. KobiMarketing - Long ProductV. K. MehtaFinance & AccountsA. K. GhoshCommercialS. Banerjee

SUBSIDIARY

Mahrashtra Elektrosmelt Ltd.Executive DirectorD. Pal

CORPORATE OFFICE STEEL PLANTS/UNITS

Principal Executives

thNOTICE IS HEREBY GIVEN THAT the 36 Annual General Meeting of the Members of Steel Authority of India Limited will be held at 1030 hours on Wednesday, the 10th September, 2008 at Air Force Auditorium, Subroto Park, New Delhi-110010 to transact the following business:

1. To receive, consider and adopt the audited Profit & Loss Account for the year ended 31st March, 2008, the Balance Sheet as at that date and Directors' and Auditors' Reports thereon.

2. To appoint a Director in place of Shri V. Shyamsundar, who retires by rotation and is eligible for re-appointment.

3. To appoint a Director in place of Shri B.N. Singh, who retires by rotation and is eligible for re-appointment.

4. To appoint a Director in place of Shri V.K. Srivastava, who retires by rotation and is eligible for re-appointment.

5. To appoint a Director in place of Shri G. Ojha, who retires by rotation and is eligible for re-appointment.

6. To appoint a Director in place of Shri Shyamal Ghosh, who retires by rotation and is eligible for re-appointment

7. To appoint a Director in place of Shri Mohammad Yusuf Khan, who retires by rotation and is eligible for re-appointment

8. To fix the remuneration of the Auditors of the company appointed by the Comptroller & Auditor General of India for the year 2008-2009.

9. To declare dividend for the financial year 2007-2008.

10.To consider and, if thought fit, to pass with or without modification the following resolution as an ORDINARY RESOLUTION:

“RESOLVED THAT Shri V.K. Gulhati, who was appointed as an Additional Director of the Company by the Board of Directors under Section 260 of the Companies Act, 1956, and who holds office upto the date of this Annual General Meeting and in respect of whom the Company has received a notice in writing proposing his candidature for the office of Director under Section 257 of the Companies Act, 1956, be and is hereby appointed as a Director of the Company, liable to retire by rotation.”

11. To consider and, if thought fit, to pass with or without modification the following resolution as an ORDINARY RESOLUTION:

“RESOLVED THAT Shri S.P. Rao, who was appointed as an Additional Director of the Company by the Board of Directors under Section 260 of the Companies Act, 1956, and who holds office upto the date of this Annual General Meeting and in respect of whom the Company has received a notice in writing proposing his candidature for the office of Director under Section 257 of the Companies Act, 1956, be and is hereby appointed as a Director of the Company, liable to retire by rotation.”

12.To consider and, if thought fit, to pass with or without modification the following resolution as SPECIAL RESOLUTION:

SPECIAL BUSINESS

STEEL AUTHORITY OF INDIA LIMITEDREGISTERED OFFICE: ISPAT BHAWAN, LODI ROAD

NEW DELHI-110003

Notice

"RESOLVED THAT in accordance with the provisions of Section 396 of the Companies Act, 1956 and other applicable provisions of law, consent and approval of the shareholders be and is hereby accorded to the amalgamation of Bharat Refractories Limited with Steel Authority of India Limited, with effect from April 01, 2007, subject to the sanction of the same by the Ministry of Corporate Affairs, Government of India and such other authorities, if any, as may be required.

RESOLVED FURTHER THAT the draft Scheme of Amalgamation placed before the shareholders be and is hereby approved and the Board of Directors/Chairman of the Company be and is hereby authorized to make alterations and changes therein as may be expedient or necessary for satisfying the requirement or condition imposed, if any, by the Ministry of Corporate Affairs or such other authorities, if any, as may be required.

RESOLVED FURTHER THAT the Chairman of the Company be and is hereby authorised to do all such acts, deeds, matters and things, as may be necessary and expedient, to give effect to this resolution.”

By order of the Board of Directors

(Devinder Kumar)Secretary

New Delhi

Dated: 2nd August, 2008

Registered Office:Ispat Bhawan, Lodi Road, New Delhi-110003.

1. The relevant Explanatory Statements, pursuant to Section 173(2) of the Companies Act, 1956, in respect of the business Item Nos.10 to 12 above are annexed hereto.

2. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF. SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING. THE PROXY FORM IS ENCLOSED AT THE END OF ANNUAL REPORT.

3. Only members carrying the attendance slips or holders of valid proxies registered with the Company will be permitted to attend the meeting. In case of shares held in joint names or shares held under different registered folios wherein the name of the sole holder/first joint-holder is same, only the first joint-holder/sole holder or any proxy appointed by such holder, as the case may be, will be permitted to attend the meeting.

4. Members attending the meeting are requested to bring their copy of the Annual Report as extra copies will not be supplied.

5. The Register of Members of the Company will remain closed from 2nd August, 2008 to 20th August, 2008 (both days inclusive).

Notes:

139138

6. M/s. MCS Limited are acting as the Registrar and Transfer Agent (R&TA) for carrying out the company's entire share related activities viz. Transfer/ transmission/ transposition/ dematerialisation/ rematerialisation/ split/ consolidation of shares, change of address, bank mandate, filing of nomination, dividend payment and allied activities. Shareholders are requested to make all future correspondence related to share transfer and allied activities with this agency only at the following address:

M/s. MCS Limited,Sri Venkatesh Bhawan, W-40, Okhla Industrial Area, Phase-II,New Delhi-110020Phone No.011-41406149e-mail: mcsdel@vsnl.com

7.(i) Dematerialisation

Securities and Exchange Board of India (SEBI) Regulation provide that equity shares of SAIL are to be compulsorily delivered in the dematerialized form, for the purpose of trading. Though most of the shareholders have converted their holdings into demat form, it is seen that some shareholders still hold their shares in paper form (Physical). In this connection it is advised in their interest, to open a demat account with any depository participant authorized by either National Securities Depository Ltd. or Central Depository Services Ltd and dematerialize their shares.

ii) Members holding shares in the physical form should notify change in their addresses, if any, to the R&TA specifying full address in block letters with PIN CODE of their post offices, which is mandatory. Members holding shares in the Electronic Form (Demat), should inform the change of address to their Depository Participant.

iii) ECS MANDATE

Shareholders holding shares, whether in Physical or Demat form are advised to opt for Electronic Clearing Services (ECS) for any future payouts from the company. Under the ECS, the payment instruction is issued by the banker (Payer's banker) electronically to the clearing authority (RBI or SBI). The clearing authority provides credit reports to the

payee's Bank, who credits the amount to their respective accounts. It becomes inevitable that the shareholders opting for ECS should provide details of their Bank Name, A/c No., A/c Type, Branch name, 9 digit MICR No. along with their Name and Folio Number (DP-ID/Client ID) to the company if their holding is in Physical form and to the Depository participant, if their holding is in demat form.

8. Members holding shares in identical order of names in more than one folio are requested to write to the Company's Shares Department/R&TA enclosing their Share Certificates to enable the Company to consolidate their holdings in one folio.

9. The Company has transferred to Investor Education and Protection Fund, unclaimed dividends till financial year 1997-1998. The Company did not declare any dividend for the financial years during 1998-1999 to 2003-2004. The Company has thereafter paid/declared the following dividends:

Year Interim Dividend Final Dividend (%) (%)

2004-2005 15.00 18.00

2005-2006 12.50 7.50

2006-2007 16.00 15.00

2007-2008 19.00 -

Shareholders who have not encashed their dividend warrants as above are requested to make their claims to the company.

10. Members seeking further information on the Accounts or any other matter contained in the Notice, are requested to write to the Company at least 7 days before the meeting so that relevant information can be kept ready at the meeting.

11. Entry to the Auditorium will be strictly against Entry Slip available at the counters at the venue and against exchange of Attendance Slip.

12. No Brief case or Bag or mobile phone will be allowed to be taken inside the auditorium.

Notice

ANNEXURE TO THE NOTICEEXPLANATORY STATEMENT PURSUANT TO SECTION

173(2) OF THE COMPANIES ACT, 1956.

Item No.10

Item No.11

Item No. 12

On nomination by the President of India vide Government's Notification No.6(11)/2005-SAIL(PC). Vol.II dated 8th June, 2007, Shri V.K. Gulhati was appointed as an Additional Director of the Company with effect from 1st October, 2007 and vacates his office of Directorship at this Annual General Meeting, pursuant to section 260 of the Companies Act, 1956 and Articles of Association of the Company. The notice under Section 257 of the said Act has been received from a member proposing the name of Shri V.K. Gulhati as a candidate for the office of Director of the Company.

Shri V.K. Gulhati is a B.Sc.Engg. (Mechanical) and has rich work experience in a variety of areas in the steel industry. His fields of specialization include management of maintenance and operations of steel plants, projects, and corporate planning.

Board considers it desirable that the Company should continue to avail itself of his services as a Director and recommend this Resolution for approval of the shareholders.

None of the Directors other than Shri V.K. Gulhati, to the extent of his appointment as Director, is concerned or interested in the above resolution.

On nomination by the President of India vide Government's Notification No.6(7)/2006-SAIL(PC)-Vol.II dated 14th February, 2008, Shri S.P. Rao was appointed as an Additional Director of the Company with effect from 15th February, 2008 and vacates his office of Directorship at this Annual General Meeting, pursuant to section 260 of the Companies Act, 1956 and Articles of Association of the Company. The notice under Section 257 of the said Act has been received from a member proposing the name of Shri S.P. Rao as a candidate for the office of Director of the Company.

Shri S.P.Rao is a BE/B.Tech/ME/M.Tech and has rich work experience in a variety of areas in the steel industry. His fields of specialization include management of maintenance, operations, projects, planning and process control in steel plants.

Board considers it desirable that the Company should continue to avail itself of his services as a Director and recommend this Resolution for approval of the shareholders.

None of the Directors other than Shri S.P. Rao, to the extent of his appointment as Director, is concerned or interested in the above resolution.

The Ministry of Steel, Government of India, vide its Letter Ref. No. F. No. 4 (52)/2005 HSM dated May 2, 2008 has approved the merger of the Bharat Refractories Limited (“BRL”, the Transferor Company) with Steel Authority of India Limited (“SAIL”, the Transferee Company) in public interest. The amalgamation of BRL with SAIL will be effected by an arrangement embodied in the Scheme of Amalgamation (hereinafter referred to as "the Scheme") under Section 396 of the Companies Act, 1956 (hereinafter referred to as "the said Act"), which has been framed pursuant to the proposals and the conditionalities issued for the same by the Ministry of Steel, Government of India vide its letter mentioned above. A copy of the proposed Scheme is annexed herewith.

A. Background of the two institutions

(a) BRL was incorporated on July 22, 1974 under the Companies Act, 1956 and has its Registered Office at Indira Gandhi Marg, Sector IV, Bokaro Steel City 827 004. The primary objects of BRL have been set out in the Memorandum and Articles of Association of the Transferor Company. Briefly, the BRL is presently engaged in the business of manufacturing, trading and otherwise dealing in refractories. BRL was referred to Board for Industrial and Financial Reconstruction (“BIFR”) in August 1992 on the erosion of its net worth due to losses over the years mainly due to technological obsolescence, ageing of plant and equipments, low capacity utilization, lower price realization of finished products and lack of necessary capital investments.

(b) SAIL was incorporated on January 24, 1973 under the Companies Act, 1956 and has its Registered Office at Ispat Bhawan, Lodhi Road, New Delhi 110 003. The primary objects of SAIL have been set out in the Memorandum and Articles of Association. Briefly, SAIL is presently engaged in the business of manufacturing, trading and otherwise dealing in iron and steel.

B. Objectives/Benefits of the Amalgamation

The Board of SAIL sees the following prominent benefits of the proposed amalgamation to the company, as more particularly described in the Scheme:

Strategic Advantage: SAIL being the single most prominent customer of the Transferor Company, purchases approximately 85% of the total production of BRL and upon amalgamation, shall be in a strategic position to meet its enhanced requirement of refractories, in order to meet the huge demand of the steel both in the domestic market as well as in the international market.

Delivery Channels: The manufacturing plants of BRL are located in close proximity of the plants of SAIL which produces locational synergy between SAIL and BRL.

Cost Reduction: The consolidated entity shall provide strategic and competitive advantage especially at the time when many large steel manufacturing companies are integrating vertically by setting up their own capacities for the production of the raw material. The proposed amalgamation of BRL with SAIL is in line with current global trends to achieve size, scale, integration and greater financial strength and flexibility. The consolidated entity is likely to achieve higher long term financial returns than could be achieved individually by SAIL.

C. Salient Features of the Scheme and Valuation

The terms and conditions on which the amalgamation is to be effected are contained in the Scheme of Amalgamation. In brief, some of the important features of the Scheme are:

(1) With effect from 1st day of April, 2007 (hereinafter referred to as "the Appointed Date") all the assets, liabilities and contracts of BRL shall be transferred to the Transferee Company, as more particularly provided in the Scheme.

(2) The said amalgamation will be regulated by the provisions of the Section 396 of the said Act and would require the sanction of the Ministry of Corporate Affairs, Government of India, under the said Act.

(3) All employees of BRL shall become the employees of SAIL on the terms and conditions as provided in the Scheme.

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(4) The compensation payable to the shareholders of BRL other than the Government of India shall be paid in cash only and no shares of SAIL shall be issued to the shareholders of BRL as a part of the Scheme of Amalgamation. The details of the payment of compensation are more particularly provided in the Scheme of Amalgamation.

The Shareholders are requested to read in detail the entire text of the Scheme. As stated above, the aforesaid are only some of the important highlights thereof.

D. Miscellaneous

1. In accordance with the provisions of the Listing Agreements, SAIL has filed the Scheme of Amalgamation to the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited for the approval of the said Scheme of Amalgamation.

2. The Scheme of Amalgamation is also being filed with the Board for Industrial & Financial Reconstruction (BIFR) for approval.

3. The Scheme is conditional and subject to necessary sanctions and approvals as set out in the Scheme.

4. The following documents will be open for inspection at the Registered Office of SAIL on any working day, except on 2nd and 4th Saturdays and Sundays, till the date of the meeting between 9.30 am to 11.30 a.m.:

(a) Memorandum and Articles of Association of the Transferor Company.

(b) Memorandum and Articles of Association of the Transferee Company.

(c) Audited Accounts of the BRL and SAIL for the year ended 31-3-2007.

(d) Scheme of Amalgamation of BRL with SAIL.

(e) Valuation Report received from M/s Axis Bank.

(f) The Letter Ref. No. F. No. 4 (52)/2005 HSM dated May 2, 2008 issued by Ministry of Steel, Government of India to SAIL approving the merger of Bharat Refractories Limited with Steel Authority of India Limited.

5. The Scheme of amalgamation duly approved by Board of Directors and shareholders of SAIL and BRL is required to be submitted to the Ministry of Corporate Affairs for approving the Scheme and issue necessary order to this effect under Section 396 of the Companies Act, 1956. The Scheme has already been approved by Board of Directors of SAIL and BRL.

6. Your directors, therefore, place before you this Scheme of amalgamation of BRL with your Company for approval of shareholders and authorizing Board of Directors/Chairman of the Company for making such alterations as may be required and also to take all necessary steps in connection with filling of application and other such acts as may be necessary for amalgamation of BRL with this Company.

7. All the Directors are deemed to be interested to the extent of their holdings of Equity Shares in SAIL/BRL. Further, Shri B.N. Singh and Shri V.K. Srivastava, being Government nominee directors on the Board of BRL, are interested or concerned in this Resolution.

By order of the Board of Directors

(Devinder Kumar)

Secretary

New Delhi

Dated: 2nd August, 2008

Registered Office: Ispat Bhawan, Lodi Road,New Delhi-110003

Details of Directors seeking re-appointment in forthcoming Annual General Meeting furnished in terms of clause 49 of Listing Agreements.

Name of the Shri V. Shri B.N. Singh Shri V.K. Shri G. Ojha Shri Shyamal Shri Mohd.Director Shyamsundar Srivastava Ghosh Yusuf Khan

Date of Birth 20.10.1949 18.11.1948 20.07.1950 26.01.1950 03.05.1942 24.06.1944

Date of Appointment 05.06.2006 13.06.2006 13.06.2006 07.07.2006 10.07.2006 10.07.2006

Expertise in Specific Management of Management of Management of Personnel Administration Banking/functional areas steel plants steel plants steel plants Finance

Qualifications B.E. B.E. B.E. M.A., PGD Post Graduate (Economics), Ph. D (Business (Mechanical) (Metallurgy) (Mechanical) (Sociology) Parvin Fellow(Princeton Management)

Univ., USA)

List of Companies Nil • Bharat • Bokaro Jaypee • Tata • Burn Standard Co. Ltd. (BSCL) • Unitech in which outside Refractories Cement Ltd. Refractories • Lagan Engineering CorporateDirectorship is held. Ltd.(BRL) • Bharat Limited Company Ltd. Parks Ltd.

• Mjunction Refractories Ltd. • Spentex Industries Ltd. • Bharat Hotels Ltd.Services Limited • Hindustan • Span Diagnostics Ltd. (SDL) • ETA Star

Steelworks • Quippo Telecom Insurance Ltd.Construction Ltd. Infrastructure Co. Ltd. • Zee• Heavy • IDBI Intech Ltd. Entertainment Ltd,Engineering • West Bengal State Electricity • Dhir Assets Ltd.Corporation Distribution Co. • TanejaLtd. (HEC) Ltd. (WBSEDCL) Developers Ltd.

Chairman/Member - BRL HEC SAIL BSCL SAILof the Committees Audit Committee- Audit Shareholders/ Audit Committee-Member Audit Committee - of the Board of the Chairman Committee- Investors SDL ChairmanCompanies on which Chairman Grievance Audit Committee-Chairmanhe is a Director. Committee WBSEDCL

- Member Audit Committee-Member

BHARAT REFRACTORIES LIMITED …TRANSFEROR COMPANY

WITH

STEEL AUTHORITY OF INDIA LIMITED …TRANSFEREE COMPANY

AND THEIR RESPECTIVE SHAREHOLDERS

This Scheme of Amalgamation (hereinafter referred to as the “Scheme” provides for the amalgamation of Bharat Refractories Limited, a Government company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Indira Gandhi Marg, Sector IV, Bokaro Steel City 827 004 (hereinafter referred to as the “Transferor Company”) with Steel Authority of India Limited, a Government company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Ispat Bhawan, Lodhi Road, New Delhi - 110 003 (hereinafter referred to as the “Transferee Company”), pursuant to Section 396 and the relevant provisions of the Companies Act, 1956 and the dissolution of the Transferor Company without winding up.

1.1 The Transferee Company, a Government company incorporated under the provisions of the Companies Act, 1956 is one of the largest steel manufacturing companies in India. The Transferee Company is presently engaged in the business of manufacture, processing and sale of steel through 5 (five) main integrated steel plants at Bhilai, Durgapur, Bokaro, Rourkela and Burnpur and three special steel plants at Salem, Durgapur and Bhadravati. All the plants are equipped with modernized facilities available to meet diverse customized requirements in terms of quality, size, grade and delivery for domestic industries and for sale in export markets outside India.

1.2 The Transferor Company, a Government company incorporated under the provisions of the Companies Act, 1956 essentially produces assorted types of refractories used primarily in the manufacture of iron and steel. The Transferor Company has four plants in the districts of Jharkhand and Chattisgarh:

(i) Bhandaridah Refractories Plant, Bhandaridah, Jharkhand

(ii) Ranchi Road Refractories Plant, P.O. Marar, Jharkhand

(iii) IFICO Refractories Plant, P.O. Marar, Jharkhand

(iv) Bhilai Refractories Plant, P.O. Maroda, Bhilai, Chattisgarh

1.3 The Transferor Company was referred to Board for Industrial and Financial Reconstruction (BIFR) in August 1992 on the erosion of its net worth due to losses over the years mainly due to technological obsolescence, ageing of plant and equipments, low capacity utilization, lower price realization of finished products and lack of necessary capital investments.

1.4 The Board for Industrial and Financial Reconstruction had earlier appointed IDBI as the operating agency for the Transferor Company. Subsequently vide orders dated September 16, 2004, the Board for Industrial and Financial Reconstruction has appointed SBI as the operating agency for the Transferor Company. Three revival packages for the Transferor Company were implemented in the years 1996, 1999 and 2002. However, the Transferor Company could not

1. BACKGROUND

be revived and continues to incur losses and has a negative net worth.

1.5 The Ministry of Steel, Government of India vide Letter Ref. No. F. No. 4 (52)/2005 HSM dated May 2, 2008 has approved the amalgamation of the Transferor Company with the Transferee Company and has permitted the Transferor Company and the Transferee Company to initiate the process of amalgamation under Section 396 of the Companies Act, 1956 and as per the terms and conditions specified therein.

1.6 The Scheme of Amalgamation is being sent to the Ministry of Steel, Government of India for its approval.

1.7 The Transferee Company has pursuant to the provisions of the Listing Agreement applied to the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited for the approval of the draft Scheme of Amalgamation.

1.8 An application is being filed by Transferor Company with the Board for Industrial and Financial Reconstruction (BIFR) for approval of the Scheme of Amalgamation of BRL with SAIL.

1.9 The amalgamation of the Transferor Company with the Transferee Company has been proposed on the basis of the “Rationale for the Scheme” as per Clause 4 herein below.

In this Scheme unless repugnant to the meaning or context thereof, the following expressions shall have the meaning as given to them below:

(a) “Act” means The Companies Act, 1956 and any amendments and/or re-enactment thereof for the time being in force.

(b) “Appointed Date” means April 1, 2007.

(c) “Effective Date” means the date on which the last of the approvals and events specified in Clause 14 of this Scheme are obtained or have occurred.

(d) “Transferee Company” means Steel Authority of India Limited, a Government company incorporated under the provisions of the Act and having its registered office at Ispat Bhawan, Lodhi Road, New Delhi -110 003.

(e) “Transferor Company” means Bharat Refractories Limited, a Government company incorporated under the provisions of the Act and having its registered office at Indira Gandhi Marg, Sector IV, Bokaro Steel City - 827 004.

(f) “Scheme” or “The Scheme” means the Scheme of Amalgamation in the present form or with any modification(s) made under Clause 13 of this Scheme.

3.1 The capital structure of the Transferor Company as on March 31, 2007 is as under:

2. DEFINITIONS

3. SHARE CAPITAL

Scheme of Amalgamation

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Authorised:

Equity Shares Amount in Rs.

23,30,00,000 Equity Shares of Rs. 10/- each : 233,00,00,000

Preference Shares

1,29,00,000 7% Non - Cumulative RedeemablePreference Shares of Rs. 10/- each : 12,90,00,000

50,000 7.5% Cumulative Redeemable Preference Shares of Rs. 10/- each : 5,00,000

50,000 9.5% Cumulative Redeemable Preference Shares of Rs. 10/- each : 5,00,000

Issued, Subscribed and Paid-up :

Equity Shares

21,76,90,800 Equity Shares of Rs. 10/- each : 217,69,08,000

Preference Shares

1,20,50,000 7% Non - Cumulative Redeemable Preference Shares of Rs. 10/- each (Due for redemption on March 31, 2005) : 12,05,00,000

13,450 7.5% Cumulative Redeemable Preference Shares of Rs. 10/- each (Due for Redemption on March 31, 2015) : 1,34,500

40,000 9.5% Cumulative Redeemable Preference Shares of Rs. 10/- each(Due for Redemption on March 31, 2015) : 4,00,000

3.2 The capital structure of the Transferee Company as on March 31, 2007, is as under:

Authorised: Amount in Rs.

500,00,00,000 Equity Shares of Rs.10/- each : 5000,00,00,000

Issued, Subscribed and Paid-up:

413,04,00,545 Equity Shares of Rs.10/- each : 4130,40,05,450

The amalgamation of the Transferor Company with the Transferee Company is in the interests of the public and shall result in the following benefits:

4.1 The interest of the existing employees of the Transferor Company shall be protected with continuity of employment, better utilization of manpower and an opportunity for enhancement of technical knowledge and expertise being provided.

4.2 The Transferee Company, being the single most prominent customer of the Transferor Company, purchases approximately 85% of the total production of the Transferor Company and upon amalgamation, shall be in a strategic position to meet its enhanced requirement of refractories, in order to meet the huge demand of the steel both in the domestic market as well as in the international market.

4.3 The plant and machinery and other assets of the Transferor Company which were under utilized, shall be properly, gainfully and efficiently utilized and may be upgraded with new technology. The upgradation of the plant and machinery and induction of new technology of the units of the Transferor Company would augment the asset base and thereby resulting in the optimal utilization of the resources and greater revenue inflow.

4. THE RATIONALE OF THE SCHEME

4.4 The manufacturing plants of the Transferor Company are located in close proximity of the plants of the transferee company which produces locational synergy between the Transferee Company and the Transferor Company.

4.5 The consolidated entity shall provide strategic and competitive advantage especially at the time when many large steel manufacturing companies are integrating vertically by setting up their own capacities for the production of the raw material. The proposed amalgamation of the Transferor Company with the Transferee Company is in line with current global trends to achieve size, scale, integration and greater financial strength and flexibility. The consolidated entity is likely to achieve higher long term financial returns than could be achieved individually by the Transferor Company.

4.6 The Transferor Company has about 430.5 acres of land (102.30 acres on lease and 328.20 acres on free hold basis) which would become available to the Transferee Company.

4.7 The proposed amalgamation of both the companies will bring administrative and operational rationalization, organizational efficiencies and rationalization in economies of scale and more optimal utilisation of various resources. The managerial expertise of Transferor Company would be combined giving additional thrust to the Transferee Company. Consequently, the Transferee Company will offer a strong financial structure to all creditors including the creditors of the Transferor Company, facilitate resource mobilization and achieve better cash flows. The synergies created by the merger may lower the cost of borrowing, increase operational efficiency and integrate marketing functions. This would contribute towards enhancement of shareholders value of the Transferee Company.

4.8 The proposed amalgamation will enable streamlining the activities of the respective companies and will also reduce managerial overlaps, which are necessarily involved in running multiple entities.

4.9 The banks and creditors are not affected by the proposed amalgamation as their security is maintained at the existing levels.

4.10The integration of the manufacturing and other facilities of the Transferor Company and the Transferee Company will contribute to the enhanced global competitiveness for the consolidated entity, thereby increasing the ability of Indian steel to compete with aggressive international market conditions.

4.11Consolidation would also enable the Transferee Company to improve its infrastructural backbone, which would be to the benefit of the public at large.

IN CONSIDERATION OF THE RECIPROCAL PROMISES AND THE ARRANGEMENT, THE SCHEME OF AMALGAMATION AS SET OUT HEREIN HAS BEEN PROPOSED.

5.1 Upon the coming into effect of this Scheme and with effect from the Appointed Date and subject to the provisions of this Scheme including in relation to the mode of transfer and vesting, and subject to any corrections and adjustments as may, in the opinion of the board of directors of the Transferee Company be required, the Transferor Company shall dissolve without winding up and whole undertaking including the plants specified in Clause 1.2, all assets and properties of the Transferor Company as on the Appointed Date, and all the debts, liabilities, advances, duties and obligations of the

5. TERMS OF AMALGAMATION OF COMPANIES

Transferor Company as on the Appointed Date shall stand transferred to and vested in and/or deemed to be transferred to and vested as a going concern, in the Transferee Company without any further acts of any parties and without the consent of third parties.

5.2 Without prejudice to the generality of the aforesaid, the transfer as aforesaid shall include all the reserves, capital works in progress, tax entitlements and liabilities, movable and immovable assets and properties including land whether leased or otherwise, all other assets (whether tangible or intangible) of whatsoever nature, investments and loans and advances including interest thereon, lease and hire purchase contracts, powers, authorities, allotments, approvals, consents, letters of intent, industrial and other government or statutory licensees, registrations, rights, leases, leave and license agreements, titles, interests, benefits and advantages of any nature whatsoever and where so ever situated, belonging to or in the ownership, power or possession and in the control of or vested in or granted in favour of or enjoyed by them, including but without being limited to all patents, patent rights applications, trademarks, service marks, trade names, patents, copyrights and/or any pending applications thereto and other industrial properties and rights of any nature whatsoever and licenses assignments, grants in respect thereof, privileges, liberties, tenancies, easements, advantages, benefits, leases, ownership flats, goodwill, quota rights, permits, approvals, authorizations, right to use and avail telephones, telexes, facsimile and other communication facilities, connections, equipments and installations, utilities, electricity and electronic and all other services of every kind, nature and descriptions whatsoever, earnest monies and/or security deposits, reserves, provisions, funds, benefit of all agreements, arrangements, subsidies, grants, tax credits, sales tax, turnover tax, service tax, customs and all other interests arising to the Transferor Company, the entire business and benefits and advantages of whatsoever nature and where so ever situated belonging to or in the ownership, power or possession and in the control of or vested in or granted in favour of or enjoyed by the Transferor Company, stand transferred to and vested in and/or be deemed to be and stand transferred to and vested as a going concern, in the Transferee Company pursuant to the provisions of Section 396 of the Act so as to become as and from the Appointed Date, the estate, assets, rights, title and interests of the Transferee Company. The mode of vesting of the movable property shall be in accordance with Clause 5.3.

5.3 The mode of vesting of the properties referred in 5.1 and 5.2 shall be as under:

5.3.1 In respect of such of the said properties as are movable in nature or are otherwise capable of transfer by manual delivery or by endorsement and delivery, the same may be so transferred by the Transferor Company and shall become the property of the Transferee Company without requiring any deed or instrument of conveyance for the same.

5.3.2 In respect of such of the said properties other than those referred to in Clause 5.3.1 above the same shall, without any further act, instrument or deed, be and stand transferred to and vested in and/or deemed to be transferred to and vested in the Transferee Company as on the Appointed Date.

5.3.3 In respect of the movable properties other than those specified in Clause 5.3.1 above, including sundry debtors, outstanding loans, advances recoverable in cash or in kind or for value to be received, bank balances and deposits with

Government, Semi Government, Local and other authorities, bodies etc. the same shall be so transferred by the Transferor Company and shall become the property of the Transferee Company without requiring any deed or instrument of conveyance for the same and the same shall become the property of the Transferee Company and further that it shall not be necessary to obtain the consent of any third party or other person, who is a party to any contract or arrangement by virtue of which such debts, loans or advances have arisen in order to give effect to the provisions of this Clause. The Transferee Company may, if required, give notice in such form as it may deem fit and proper to such person or debtor that pursuant to this Scheme, the said person or debtor should pay the debt, loan or advance or make good the same or hold the same to its account and that the right of the Transferee Company to recover and realize the same is in substitution of the rights of Transferor Company.

5.4 Upon coming into effect of the Scheme and with effect from the Appointed Date:

5.4.1 All debts, liabilities, duties and obligations of the Transferor Company other than liabilities being extinguished pursuant to the terms of the Scheme, (hereinafter referred to as the “Said Liabilities”) shall also be and stand transferred or be deemed to be and stand transferred to the Transferee Company, without any further act, instrument or deed of the Transferee Company, so as to become as and from the Appointed Date, the debts, liabilities, duties and obligations of the Transferee Company and further it shall not be necessary to obtain the consent of any third party or other person who is a party to any contract or arrangement by virtue of which such debts, liabilities, duties and obligations have arisen in order to give effect to the provisions of this Clause. Provided always that nothing in this clause shall or is intended to enlarge the security for any loan, deposit or other indebtedness created by the Transferor Company prior to the Appointed Date which shall be transferred to and be vested in the Transferee Company by virtue of the amalgamation and the Transferee Company shall not be required or obliged in any manner to create any further or additional security therefor after the Appointed Date or otherwise.

5.4.2 Any loans or other obligations due between the Transferor Company and the Transferee Company shall stand discharged and there shall be no liability in that behalf from the Appointed Date.

IT IS CLARIFIED THAT all debts, liabilities, duties and obligations of the Transferor Company as on the start of the business on the Appointed Date provided for in the Books of Accounts and all other liabilities which may accrue or arise on or after the Appointed Date shall be the debts, liabilities, duties and obligations of the Transferee Company.

IT IS CLARIFIED THAT all assets and receivables whether contingent or otherwise of the Transferor Company as on start of business on the Appointed Date provided for in the Books of Accounts and all other assets or receivables which may accrue or arise on or after the Appointed Date shall be the assets and receivables or otherwise as the case may be of Transferee Company.

5.4.3 Upon the coming into effect of this Scheme in accordance with the provisions hereof, the borrowings of the Transferee Company, in terms of Section 293(1) of the Act without any further act or deed on the part of the Transferee Company shall stand enhanced equivalent to the authorised borrowing

145144

limits of the Transferor Company, such limits being incremental to the existing limits of the Transferee Company, and if so required, those limits may be increased from time to time by the Transferee Company, by obtaining shareholders approval in accordance with the provisions of Section 293(1) of the Act.

5.4.4The Transferee Company may at any time after the coming into effect of this Scheme in accordance with the provisions hereof, if so required, under any law or otherwise, execute Deeds of Confirmation in favour of any other party to any contract or arrangement to which secured creditors or Transferor Company are party or any writings as may be necessary to be executed in order to give formal effect to the above provisions. Transferee Company shall under the provisions of the Scheme be deemed to be authorised to execute any such writings on behalf of Transferor Company and to implement or carry out all such formalities or compliance referred to above on their part to be carried out or performed.

5.5 Upon the coming into effect of this Scheme, and subject to the provisions of this Scheme, all contracts, deeds, bonds, agreements, arrangements including but not limited to all sales tax exemptions and or deferral benefits and/or any other direct or indirect tax benefits and all other instruments of whatsoever nature to which the Transferor Company is a party or to the benefit of which the Transferor Company may be eligible, and which are subsisting or having effect immediately before the Effective Date, shall be in full force and effect against or in favour of the Transferee Company, as the case may be and may be enforced as fully and effectually as if, instead of Transferor Company, the Transferee Company had been party or beneficiary or obligee thereto. The Transferee Company shall, wherever necessary, enter into and/or issue and/or execute deeds, writings or confirmations, enter into any tripartite arrangements, confirmations or novations to which the Transferor Company will, if necessary, also be a party in order to give formal effect to the provisions of this Clause.

5.6 The Transferee Company shall draw up and finalise a consolidated Balance Sheet post-merger as on the Appointed Date (hereinafter the “Consolidated Balance Sheet”) which shall be the opening Balance Sheet of the Transferee Company as on the Appointed Date.

The accounts of the Transferee Company as on the Appointed Date, as amalgamated in accordance with the terms of the Scheme shall be finalized on the basis of the Consolidated Balance Sheet as on the Appointed Date pursuant to this Scheme.

5.7 All taxes in respect of the profits and gains, including accumulated losses and unabsorbed depreciation and investment allowance of the business carried on by the Transferor Company before the Appointed Date shall be payable by the Transferee Company subject to such concessions and reliefs as may be allowed under the Income Tax Act, 1961 (43 of 1961) as a consequence of the amalgamation.

Without prejudice to the generality of the aforesaid, the Transferee Company is expressly permitted to revise its Income Tax & loss returns and related TDS certificates and to claim refunds, advance tax credits etc., on the basis of the combined accounts of both the companies as reflected in the Consolidated Balance Sheet as on the Appointed Date pursuant to the terms of this Scheme and the right to claim refunds, adjustments, credits, set-offs, advance tax credits

pursuant to the sanction of this Scheme and the Scheme becoming effective is expressly reserved.

5.8 With effect from the Appointed Date in accordance with the CENVAT Credit Rules, 2004 framed under the Central Excise Act, 1944 as are prevalent at the Effective Date, the CENVAT credit lying unutilized in the Transferor Company, shall stand transferred to the Transferee Company as if the same were the CENVAT credit unutilized in the Transferee Company's accounts. It is declared that the transfer of the CENVAT credit stands allowed as stock of inputs as such or in process, including capital goods are also transferred by the Transferor Company to the Transferee Company. The inputs or capital goods on which the credit has been availed of have been duly accounted for.

Subject to other provisions contained in the Scheme, all contracts, deeds, bonds, debentures, agreements and other instruments of whatever nature, to which the Transferor Company is a party, subsisting or having effect immediately before the Effective Date, shall remain in full force and effect, against or in favour of the Transferee Company, as the case may be, and may be enforced as fully and as effectually as if, instead of the Transferor Company, the Transferee Company had been a party thereto.

Any inter se contracts between the Transferor Company and the Transferee Company shall stand merged and vest in the Transferee Company upon the sanction of the Scheme and upon the Scheme becoming effective.

If any suit, writ petition, appeal, revision or other proceedings of whatsoever nature (hereinafter called “The Proceedings”) by or against the Transferor Company be pending, the same shall not abate, be discontinued or be in any way prejudicially affected by reason of the amalgamation of the Transferor Company or of anything contained in the Scheme, but the Proceedings may be continued, prosecuted and enforced by or against the Transferee Company in the same manner and to the same extent as it would be or might have been continued, prosecuted or enforced by or against the Transferor Company as if the Scheme had not been made. On and from the Effective Date, the Transferee Company shall and may initiate any legal proceedings for and on behalf of the Transferor Company.

This Scheme, although operative from the Appointed Date, shall become effective from the Effective Date.

All the staff, workmen or employees, in the service of the Transferor Company, on the date immediately preceding the Effective Date of the merger shall become the employees of the Transferee Company on the basis that :

(i) their service shall have been continuous and shall not have been interrupted by reason of the amalgamation of the Transferor Company;

(ii) every whole time officer, including whole time Director or other employees employed immediately before the Effective Date of merger shall become an officer, employee, as the case may be, of the Transferee

6. CONTRACTS, DEEDS, BONDS AND OTHER INSTRUMENTS

7. LEGAL PROCEEDINGS

8. OPERATIVE DATE OF THE SCHEME

9. TRANSFEROR COMPANY'S STAFF, WORKMEN AND EMPLOYEES

Company and upon the Scheme becoming effective, all the conditions of service and employment of the Transferee Company would be applicable to the employees of the Transferor Company. In order to bring in uniformity, the employees of the Transferor Company shall be absorbed on equivalent scales of pay, taking scales prior to salary/wage revision effective from January 1, 1997 in the Transferee Company with protection of pay (Basic + Dearness Allowance). While doing so, care would be taken not to disturb both the Transferee Company's and the Transferor Company's internal seniority and to ensure that employees are not lowered by more than one grade and under no circumstances, E-0 scale would become non-executive scale. Except for the benefits stated above in this Scheme, the employees and workman of the Transferor Company shall not be entitled to any other benefits whether under any subsisting or expired settlement agreements with any union, association or body of employees or otherwise.

(iii) As far as provident fund, gratuity fund, superannuation fund or any other special fund created or existing for the benefit of the staff, workmen and other employees of the Transferor Company are concerned, upon the Scheme becoming effective, the Transferee Company shall stand substituted for the Transferor Company for all purposes whatsoever related to the administration or operation of such funds or in relation to the obligation to make contributions to the said funds in accordance with the provisions of such funds as per the terms provided in the respective trust deeds. It is the aim and intent that all the rights, duties, powers and obligations of the Transferor Company in relation to such funds shall become those of the Transferee Company and all the rights, duties and benefits of the employees employed in the Transferor Company under such funds and trusts stand protected.

(iv)Without prejudice to the generality of the aforesaid, the Transferee Company shall have the right to transfer the employees of the Transferor Company to any unit, division, profit/cost centre or department of the Transferee Company situated anywhere in India or overseas if warranted and as may be deemed necessary from time to time.

10.1 With effect from the Appointed Date and up to and including the Effective Date:

(i) The Transferor Company shall be deemed to have been carrying on and shall carry on all their businesses and activities and shall be deemed to have held and stood possessed of and shall hold and stand possessed of all of the assets of Transferor Company for and on account of and in trust for Transferee Company. The Transferor Company hereby undertakes to hold the said assets with utmost prudence until the Effective Date.

(ii) Save and except in the ordinary course of business, Transferor Company shall carry on their business and activities with reasonable diligence, business prudence and shall not (without the prior written consent of Transferee Company) alienate, charge, mortgage, encumber or otherwise deal with or dispose off any of their units/undertakings or any part thereof except pursuant to any pre-existing obligation undertaken by Transferor Company prior to the Appointed Date.

10. TRANSACTIONS BETWEEN APPOINTED DATE AND EFFECTIVE DATE

(iii) All the profits or income accruing to Transferor Company or expenditure or losses arising or incurred or suffered by Transferor Company shall for all purposes be treated and be deemed to be and accrue as the income or profits or losses or expenditure , as the case may be, of Transferee Company.

(iv) Other than as provided under this Scheme, the Transferor Company shall not make any change in its capital structure either by any increase, (by fresh issue of equity shares whether by way of public issue, private placement, on a rights basis, or issuance of bonus shares, convertible debentures or otherwise) decrease, reduction, reclassification, sub-division or consolidation, re-organisation, or in any other manner which may, in any way, affect the consideration under this scheme, except by mutual consent of the respective Boards of Directors of both the Transferor Company and Transferee Company.

(v) The Transferor Company shall not without the prior approval of the Board of Directors of Transferee Company utilize the profits, if any, for any purpose including of declaring or paying any dividend in respect of the period falling on and after the Appointed Date.

(vi) The Transferor Company shall not vary the terms and conditions of the employment of its employees except in the ordinary course of business; and

(vii)The Transferor Company shall not, without the written consent of the Transferee Company, undertake any new business.

10.2 The transfer and vesting of the whole undertaking including the plants specified in Clause 1.2, all assets and properties of the Transferor Company to the Transferee Company and the continuance of any proceedings by or against the Transferee Company hereof shall not affect any transaction or proceedings already completed by the Transferor Company on and from the Appointed Date to the end and intent that the Transferee Company accepts all acts, deeds and things done and executed by and/or behalf of the Transferor Company as acts, deeds and things done and executed by and on behalf of the Transferee Company.

11.1 The financial statements of the Transferor Company shall be restructured in terms of Letter Ref. No. F. No. 4 (52)/2005 HSM dated May 2, 2008 issued by the Ministry of Steel, Government of India:

(a)Out of the total loan of Rs. 161.49 crores outstanding and due and payable by the Transferor Company to the Government of India on March 31, 2006:

(i) The non-plan loan of Rs. 145 crores sanctioned in the year 2002-2003, shall stand waived by the Government of India; and

(ii) The Government of India be issued fully paid up equity shares in the Transferor Company at par value for the balance amount of Rs. 16.50 crores approximately.

(b)7% Non-cumulative Preference Shares worth Rs. 12.05 crores due for redemption on April 1, 2005 shall stand redeemed by fresh issue of fully paid equity shares at par value of Transferor Company.

(c)The balance share capital of the Transferor Company after all the waiver/adjustments/set off, held by the Government of India, shall stand transferred to the Transferee Company at a token value of Rupee 1 only.

11. SPECIFIC TERMS OF THE SCHEME

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(d)The following accumulated losses of the Transferor Company shall stand set off against the paid up equity share capital of Rs.227.19 crores of the Transferor Company (including loans to be converted into equity):

(i) Rs. 22.31 crores outstanding in the books due to merger of IFICO with the Transferor Company; and

(ii)Rs. 30.00 crores being the additional loss on account of restructuring of the current assets based on assessment of the Transferee Company.; and

(iii)Rs. 173.73 crores outstanding as the remaining accumulated loss as on March 31, 2006.

(e)The interest of Rs. 40.91 crores accrued till March 31, 2006 on the Government of India loans shall stand waived by the Government of India.

(f) The non-plan loan of Rs. 30.46 crores along with the interest thereon, which was provided to the Transferor Company by the Government of India in December, 2006, shall stand waived by the Government of India.

11.2 The 13,450, 7.5% Cumulative Redeemable Preference Shares of Rs. 10 each which are due for redemption on March 31, 2015, have been valued, as on March 31, 2007, at Rs.10 per share pursuant to the valuation report received from M/s Axis Bank Ltd. Each shareholder who owns and holds 7.5% Cumulative Redeemable Preference Shares of Rs. 10 each shall be entitled to a compensation of Rs. 10 per share in cash. In addition to this, each such preference shareholder shall be paid in cash the arrears of preference dividend. The total compensation shall be payable within 60 (sixty) days of the Effective Date.

The 40,000, 9.5% Cumulative Redeemable Preference Shares of Rs. 10 each which are due for redemption on March 31, 2015, have been valued, as on March 31, 2007 at Rs. 10 per share pursuant to the valuation report received from M/s Axis Bank Ltd. Each shareholder who owns and holds 9.5% Cumulative Redeemable Preference Shares of Rs. 10 each , shall be entitled to a compensation of Rs. 10 per share in cash. In addition to this, each such preference shareholder shall be paid in cash the arrears of preference dividend. The total compensation shall be payable within 60 (sixty) days of the Effective Date.

Every equity shareholder (other than the Government of India) who owns and holds a fully paid equity share of Rs. 10 each in the Transferor Company shall be entitled to a compensation of Rs. 10 per equity share of Rs. 10 each in cash, which value has been arrived pursuant to the decision of the Transferee Company as against the valuation of Rs. 3.31 per equity share arrived by the valuation report received from M/s Axis Bank Ltd. The compensation shall be payable within 60 (sixty) days of the Effective Date.

11.3 The Board for Industrial and Financial Reconstruction vide orders dated April 20, 2006 provided as follows:

(A) Assistance from State Government (Jharkhand and Chhatisgarh)

(i) To consider to defer sales tax and entry tax dues/arrears over a period of 5 years during the period of rehabilitation.

(ii) To consider to waive surcharge on delayed payment of electricity dues accrued up to December 31, 2002 in respect of all the four units;

(B) Assistance from the Central Government (Income Tax Act, 1961)

(i) To consider to exempt the Company from the applicability of provision under Section 41(1) of the said Act;

(ii) To consider the Company to be eligible to carry forward the accumulated losses, unabsorbed investment allowance for setting off against the profit of the future years without limiting the period of carry forward and set off as mentioned in Section 72 of the said Act;

(iii) To consider to exempt the Company from the applicability of Section 115J of the said Act including previous assessment made.

(C) Assistance from Central Government (Companies Act, 1956)

(i) To consider to exempt the Company from the applicability of Section 81 (1) of the said Act from issue of further capital in accordance with the rehabilitation scheme

(ii) To consider to exempt the Company from payment of relevant fee as per Schedule X of the said Act for enhancement of Authorised Share Capital of the Company from Rs. 113 crores to Rs. 300 crores.

(iii) The Company would comply with the relevant provisions of the said Act and other requirements while augmenting the authorized capital.

D. Assistance from Central Government (Central Provident Fund Commissioner)

To consider to waive penal and liquidated damages on delayed payment of PF and Pension Funds.

The Transferor Company has pursuant to the orders dated April 20, 2006 of the Board for Industrial and Financial Reconstruction, made the following applications:

(i) Application to the Joint Secretary to the Government of India, Ministry of Corporate Affairs, New Delhi vide Letter No. Coy-1 (7)/ 2006/68 dated July 18, 2006 for seeking exemption of fees payable to the Registrar of Companies for increase in the authorised share capital from Rs. 113 Crore to Rs. 300 crore, in accordance with Schedule X of the Act, in exercise of the power vested with the Central Government under Section 620 or under Section 613 of the Act.

(ii) Application to the Chief Minister of Jharkhand vide Letter No. CMD/BRL/23/2006/927 dated July 24, 2006 for the deferment of the sales tax for a period of 5 years and the refund/adjustment of surcharge on delayed payments of electricity dues.

(iii) Application to the Chief Minister of Chhatisgarh vide Letter No. CMD/BRL/23/2006/927 dated July 24, 2006 for the deferment of the sales tax for a period of 5 years and the refund/adjustment of surcharge on delayed payments of electricity dues.

(iv) Application to The Chairman, Central Board of Trustee, Central Provident Fund Organisation, Employees Provident Fund, New Delhi vide Letter No. BRL/ND/24 (Pt. File)/2007-58 dated February 19, 2007 for the complete waiver of penal and the liquidated damages on the delayed payment of the Provident Fund and Pension Funds by the plants of the Transferor Company as per the order of BIFR.

(v) Application to The Assistant Director of Income Tax (R), Government of India (Department of Revenue), Directorate of Income Tax (Recovery), New Delhi vide Letter Reference Number BRL/F&A/2007-313 on December 04, 2007, for getting the relief and

concessions incorporated in the BIFR sanctioned scheme and the order as stated above.

Upon the Scheme becoming effective, the said waivers applied for by the Transferor Company shall be deemed to have been granted by the respective authorities and the application of the Transferor Company shall be deemed to have been allowed, in terms of the order of the Board for Industrial and Financial Reconstruction and the liability of the Transferor Company in this regard, shall stand extinguished.

11.4 The employees of the Transferor Company shall not be entitled to any rights, entitlements or benefits in pursuance of the Memorandum of Understanding entered into between the Unions and the Management of the Transferor Company on March 22, 2007 or any such arrangements/agreements entered into by the Transferor Company with any trade union, association or a body of employees including retrospective or prospective wage revision(s).

The Transferor Company and the Transferee Company hereto shall, within all reasonable time dispatch, make applications under Section 396 of the Act to the Ministry of Corporate Affairs, Government of India at New Delhi for sanctioning the Scheme and for dissolution of the Transferor Company without winding up.

13.1 The Transferor Company (by its Board of Directors or Chairman thereof) and the Transferee Company (by its Board of Directors or Chairman thereof) may assent to any modification or amendment to the Scheme or agree to any terms and/or conditions which the Ministry of Corporate Affairs, Government of India, Courts and/or any other authorities under law may deem fit to direct or impose or which may otherwise be considered necessary or desirable for settling any question or doubt or difficulty that may arise for implementing and/or carrying out the Scheme and do all acts, deeds and things as may be necessary, desirable or expedient for putting the Scheme into effect.

13.2 For the purpose of giving effect to the Scheme or to any modification thereof, the Board of Directors/Chairman of the Transferor Company and the Transferee Company are hereby authorised to give such directions and/or to take such steps as may be necessary or desirable including any directions for settling any question or doubt or difficulty whatsoever that may arise.

14.1The Scheme though comes into operation from the Appointed Date, shall be conditional upon and subject to the following:

(a) The Scheme being approved by the respective requisite majority of the shareholders of the Transferor Company and the Transferee Company.

(b) The approvals of the Public Financial Institutions and Banks, if applicable, under any contracts/agreements entered into with them by the Transferor Company and/or the Transferee Company.

12. APPLICATIONS TO MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA

13. MODIFICATIONS/AMENDMENTS TO THE SCHEME

14. SCHEME CONDITIONAL ON APPROVALS/SANCTIONS

(c) Such other sanctions, permissions, consents and approvals as may be required by the provisions of Section 396 of the Act and any other Law in respect of this Scheme being obtained including those of the relevant Government authorities.; and

(d) Notification of the Final Order of Merger in the Official Gazette of Government of India;

(e) The certified copies of the Order of the Ministry of Corporate Affairs being filed with the Registrar of Companies, National Capital Territory of Delhi and Haryana by the Transferee Company and the Registrar of Companies, Patna, Bihar by the Transferor Company.

Upon the Scheme being sanctioned the Transferor Company shall stand dissolved without being wound up as on the Appointed Date and no person shall make, assert or take, any claims, demands or proceedings against the Transferor Company, except in so far as may be necessary for enforcing the provisions of this Scheme.

In the event any of the sanctions or approvals referred to in Clause 14 of this Scheme are not obtained on or before September 30, 2009 or within such further period or periods as may be agreed upon between the Transferor Company by its Board of Directors, and the Transferee Company by its Board of Directors, this Scheme shall become null and void and in such an event no rights or liabilities whatsoever shall accrue to or be incurred inter se between the Transferor Company and the Transferee Company.

All costs, charges and expenses of the Transferor Company and the Transferee Company respectively in relation to or in connection with the Scheme and of carrying out and implementing/completing the terms and provisions of the Scheme and/or incidental to the completion of amalgamation of the Transferor Company in pursuance of the Scheme shall be borne and paid solely by the Transferee Company.

No stamp duty is payable on the amalgamation of the Transferor Company with the Transferee Company as contemplated herein, as no stamp duty is payable on an order of the Ministry of Corporate Affairs, Government of India, sanctioning a scheme of amalgamation.

Other than as expressly provided under the Act, all disputes and differences arising out of this Scheme shall be referred to the arbitration of the Chairman of the Transferee Company under the Arbitration and Conciliation Act, 1996 whose decision shall be binding on all concerned.

Place : New Delhi

Date : 2nd August, 2008

15. DISSOLUTION OF TRANSFEROR COMPANY

16. EFFECT OF NON-RECEIPT OF APPROVALS/ SANCTIONS

17. EXPENSES CONNECTED WITH THE SCHEME

18. STAMP DUTY

19. DISPUTES

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STEEL AUTHORITY OF INDIA LIMITED

ATTENDANCE SLIP

STEEL AUTHORITY OF INDIA LIMITED

PROXY FORM

Registered Office: Ispat Bhawan, Lodi RoadNew Delhi - 110 003

Folio No:

Name and Address ____________________________________________________________________________________________________________________________________________________________________________

I certify that I am a registered shareholder/proxy for the registered shareholder of the Company.

I hereby record my presence at the 36th ANNUAL GENERAL MEETING of the Company to be held on 10th September, 2008 at Air Force Auditorium, Subroto Park, New Delhi-110010.

Member's/Proxy's Name (In Block Letters) _____________________________________________________________Member's/Proxy's Signature _______________________________________________________________________

Note:1. Please sign this attendance slip and hand over at the Attendance Verification Counter at the Entrance of the Meeting

Hall.2. This attendance slip is valid only in case shares are held on the date of meeting.3. The members holding shares in Dematerialised (D Mat) form are advised to bring with them their DP ID and Client ID

Numbers.4. REGRET NO GIFTS.

-------------------------------------------------------------------------------------------------------------------------------------------------------------

Registered Office: Ispat Bhawan, Lodi RoadNew Delhi - 110 003

I/We ..........................................................................................of .......................................................................................in the district of .....................................................................................................................................................................

(Write full address)hereby appoint ..........................................................................of .......................................................................................

(Write full address)or failing him ..............................................................................of ......................................................................................

(Write full address)as my/our proxy and to vote for me/us or my/our behalf at the 36th Annual General Meeting of the Company to be held on 10th September, 2008 at 1030 hours and at any adjournment thereof.

Signed this ...................................................day of ...........................2008 Signature(s) .............................................................................................. Ledger Folio/DP ID & Client ID No. ............................................................No. of Shares held .....................................................................................

NOTE: 1. The Proxy need NOT be a member.2. The Proxy Form signed across Re.1 revenue stamp should reach the Company's Registered Office atleast 48 hours

before the scheduled time of meeting.3. Please fill in full particulars.

PleaseaffixRe.1

Revenue Stamp

KUTESHWARKUTESHWAR

RANCHIRANCHI

BOKAROBOKARO BURNPURBURNPURDURGAPURDURGAPUR

ROURKELAROURKELA

BHILAIBHILAI

PURNAPANIPURNAPANI

CHASNALLACHASNALLAJITPURJITPUR

RAMNAGORERAMNAGORE

NANDININANDINI

HIRRIHIRRI BARADUARBARADUAR

TULSIDAMARTULSIDAMAR

BHAWANATHPURBHAWANATHPUR

DALLIDALLIRAJHARARAJHARA

SATNASATNA

Captive Mines of SAILCaptive Mines of SAIL

IRON ORE.......................................IRON ORE.......................................

LIMESTONE ..................................LIMESTONE ..................................

DOLOMITE .....................................DOLOMITE .....................................

COAL ..............................................COAL ..............................................

KOLKATAKOLKATA

BARSUABARSUAKALTAKALTATALDIHTALDIH

BOLANI BOLANITHAKURANITHAKURANI

CHIRIACHIRIAGUAGUAKIRIBURUKIRIBURUMEGHAHATUBURUMEGHAHATUBURU

4. SOUTHERN REGION..............................

DEPARTMENTAL WAREHOUSE................

CONSIGNMENT AGENCY YARD...................

SHIPPING OFFICE ................................... .................CUSTOMER CONTACT OFFICE

3. WESTERN REGION................................

1. NORTHERN REGION..............................

2. EASTERN REGION................................REGIONAL OFFICES ..............................