mineral exploration corporation limited · the company has registered 2,05,860 m of drilling which...

Mineral Exploration Corporation Limited

DIRECTORS’ REPORT

To The Members, Your Directors have pleasure in presenting the Thirty Sixth Annual Report together with the Audited Accounts of the company for the year ended March 31, 2008. 1. FINANCIAL PERFORMANCE:

a) The financial performance of the Company for the year 2007-08 with comparative figures for the previous financial year are summarized below:

(Rs. in lakhs)

Particulars 2007-08 2006-07Gross Revenue 9446.24 8528.72Gross Margin 1288.10 1125.67Depreciation 325.20 367.53Amortization and write off 2.81 148.74Prior Period Adjustments (3.65) (5.28)Profit before Extraordinary Item and Taxes 956.44 604.12Provision for Taxation 345.38 216.38Profit after Taxes and before Extraordinary Item 611.06 387.74Extra Ordinary Income - 5884.05Profit After Extra ordinary Item 611.06 6271.79Provision for Tax on Extraordinary Income - 314.32Profit for the Year after Tax 611.06 5957.47

During the year under review, the company has registered gross revenue of Rs.9446.24 lakhs (highest since inception) as against to Rs.8528.72 lakhs during previous year. The company has achieved gross margin & net profit of Rs. 1288.10 lakhs & Rs. 956.44 lakhs as compared to Rs. 1125.67 lakhs & Rs.604.12 lakhs (before extraordinary income & taxes) respectively during previous year.

2. PERFORMANCE HIGHLIGHTS:

MECL continued its core activities of exploratory drilling and exploratory / developmental mining along with associated geological activities. During the year 2007-08, a total of 4160 million tonnes of mineral reserves have been established. Since inception in 1972, a total of 130673 million tonnes of reserves for various minerals have been added to National Mineral Inventory. The mineral wise break up of reserves established during 2007-08 and since inception is given in the following table.

* Subject to adoption at the Annual General Meeting scheduled to be held on 15.09.2007.


Mineral Wise Details of Reserves established by MECL ( 1972 To March' 2008)

Mineral Reserves established

during 07-08 (m.t) Reserves

established since inception ( m.t.)

A) Energy Minerals Coal 3609.44 87325.38 Lignite 419.42 33939.63 Coal Bed Methane(B.Cum.) 471.40Sub-Total 4028.86 121736.41B) Ferrous Minerals Iron Ore 102.50 2547.90 Nickel 64.60 Chromite 0.01 Manganese 7.21Sub-Total 102.50 2619.72C) Non-Ferrous Minerals Bauxite 1277.34 Lead-Zinc 7.58 159.87 Lead-Copper 1.01 Copper 20.66 594.38 Poly Mettalic Ore Copper+Lead+Zinc 11.50Sub-Total 28.24 2044.10D) Strategic Minerals Tin Ore 5.11 Tungsten 4.00 (Cesium)/Rare metal 0.18Sub-Total 9.29E) Precious Minerals/Metals Gold 26.13 Molybdnum 1.50 Diamondiferrous Conglomerate 2.93Sub-Total 30.56F) Industrial Minerals Limestone Cement Grade 2188.46 Flux(Blast Furnace) Grade 39.00 SMS (Steel) Grade 62.00 Chemical Grade 168.00Sub-Total 2457.46G) Other Minerals Dolomite 53.70 Rock phosphorite 32.29 Magnesite 11.98 Silliminite/Fluorite 0.78 Graphite 1.32 Rock Salt 94.10 Fuller's Earth/Fire clay 1884.84 Stowing Sand 127.14 Ferrosilicon grade qtz. 6.52 Glass Sand 34.51 Shell limestone 0.22Sub-Total 2247.40G.Total 4159.60 130672.53 +CBM 471 Billion Cum.


Salient features of mineral reserves estimated during 2007-08 A total of 3609.44 million tonnes of non coking coal reserves have been

established in the states of Andhra Pradesh, Orissa, Chattisgarh, Madhya Pradesh, Meghalaya & Sikkim.

419.42 million tonnes of lignite reserves were established in the state of

Rajasthan . 3.84 million tonnes of lead-zinc reserves with 3.76% Pb + Zn at North

Sindeswar Ridge, Rajasthan and 1.20 million tonnes of zinc with 2.75% Zn were established at Bhanskhapa, Madhya Pradesh.

102.50 million tonnes of iron ore with 55% Fe cut off were established at Koira

iron ore deposit in the state of Orissa. 17.21 million tonnes of copper and 2.54 million tonnes of lead-zinc with 1% TMC

were established at Sanganer block, Rajasthan. 2.64 million tonnes of copper with average grade of 0.80% Cu and 0.81 million

tonnes with average grade of 0.97% Cu were also established at Dariba-Akola and Devtalai multi metal (Phase-II) respectively in the state of Rajasthan.

3. OPERATIONAL RESULTS: a) Exploration Services: The company has registered 2,05,860 m of drilling which includes 14129 m of slim hole drilling for CBM on behalf of M/s. ONGC & CMPDIL, 2738 m of drilling for evaporite on behalf of ONGC and 232 m of drilling for oil shale on behalf of M/s. DGH. During the year, geophysical logging was taken up for minerals namely coal, lignite and CBM and a total of 139528.30 m of geophysical logging was carried out. Surface geophysical survey was continued in Rajasthan state for lignite and a total of 218.60 sq.km of area was covered by gravity survey. During the year, a total of 154.65 sq. km of geological mapping was also carried out for various minerals in different parts of the country. The Company has carried out promotional works for Ministry of Coal and Ministry of Mines during the year 2007-08, which were as under:

• Ministry of Coal : The priority regional exploration for coal and lignite on behalf of Ministry of Coal constitute the major work. Coal drilling was continued in Madhya Pradesh, Chhattisgarh, Assam, Maharashtra & Andhra Pradesh and against the total allocation of 51400 m., the achievement has been 55716.95 m. (108%). In Lignite sector work was carried out in Rajasthan & Tamil Nadu state. A total of 37865.20 m. has been achieved.


• Ministry of Mines : Exploration under promotional work on behalf of Department of Mines was carried out for Gold, Copper & Lead Zinc in the state of Jharkhand & Rajasthan. A total of 14924.55 m. of drilling has been carried out along with associated geological work.

A total of 34 exploration reports for geological investigations, geophysical, environmental & remote sensing studies were submitted for various minerals namely coal, lignite, copper, gold, lead-zinc, iron ore, CBM & for geo-technical work. A total of 4160 million tonnes of reserves were added to the National Mineral Inventory.


In laboratories, a total of 36209 numbers of samples were analysed and 81439 radicals were determined during 2007-08. Developmental Mining

The mine development activity was spread over in the states of Jharkhand and Rajasthan. During the year 2007-2008, a total of 6640 m exploratory / developmental mining was carried out. The major part of work was carried out for uranium on behalf of M/s UCIL.

4. EXPANSION AND DIVERSIFICATION ACTIVITY: Under the diversification programme, MECL has continued exploration for CBM investigation, supply of ballast stone to South Eastern Railway, coal sampling & analysis work to increase its revenue. MECL has applied for mining lease for bauxite for Serengdag-I and Serengdag-II in the state of Chhattisgarh. IBM has approved the mining plan of both the areas. The work for clearance from Ministry of Environmental & Forest (MoEF) of Serengdag-I block is under progress. MECL was granted prospecting licence and now MECL has applied for mining lease of copper deposit at Singhana block, Jhunjujhnu dist. Rajasthan. The forest clearance of the block has been obtained and has been submitted to State Govt. The application is under process at Directorate, Department of Mines & Geology. In addition to above, MECL has also applied for the prospecting license of 10 Nos. of prospects for Gold, Lead Zinc and Copper in various blocks in the State of Rajashthan, Jharkhan and M.P.


5. INFORMATION TECHNOLOGY CENTRE:

1. Geological data processing of 26 exploration blocks explored by MECL consisting of base metal , Iron ore, Ligtnite, Coal, CBM and geotechnical studies carried out. The work includes online database creation, numerical & graphical modeling and Map database creation by scanning & digitizing surface features, contours, geological features & litho-contacts, administrative boundary, mine workings, section line etc. from geological and topographical plans.

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T.D- 29.00(m)

NBH-23 R.L. 856.00

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GEOLOGICAL CROSS SECTIONKoira Iron Ore Deposit

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2. Digital conversion of analog geophysical logs of pertaining to lignite & coal block have been done. This converted data and the digital data generated from geophysical logging units are brought into uniform format by using in-house developed utility interface. These geophysical logs are then plotted along with exploratory boreholes using indigenously developed software.

GRAPHIC LITHOLOG ALONG WITH GEOPHYSICAL LOG

BD

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SP

LIGNITE

ICAL OF LIGNITE/CARBCLAY

CARBONACEOUS CLAY

GEOLOGICAL CROSS-SECTION ,DEVTALAI BLOCK


3. Exploration data processing of Nagaur Salt Deposit on behalf of ONGC was also completed.

4. Lithological and Block Modeling of Hadla, Bitnok and Jayamkondam Blocks were completed for M/s NLC. Similarly Geological Modeling for Dulunga block, for M/s NTPC was also completed.

Photograph Taken in: TRANSMITTED LIGHT, Stratigraphic unit: HALITE

Borehole No.- SPR-3 From 448.60m to 452.40 m Top Bottom

3-D View of Coal seam, Dulunga Block


5. A database application has been developed for “Resource Estimation of Oil Shale Deposits and Syncrude Potential” Project in collaboration with BRGM, France. This application is being used for Report Preparation of the above project.

6. Work for Preparation of revenue plan of Talaipalli Coal Mining Project (Phase –

I) comprising of 8 villages, on behalf of M/s NTPC were taken up and completed during 2007-08. The work includes rectification of Revenue Maps with images, Geo-Referencing, Edge Matching and Mosaicing, Digital Conversion of revenue Maps and Attribute attachments. The Phase-II work of Creation of Land Record Database and Linking with the Revenue Maps were taken .

Mosaiced Composite Revenue Map of 8 Villages

Khasara where Land Area > 2 Ha Forest Land

Queried Result Queried Result


6. BUSINESS DEVELOPMENT: Rigorous efforts were continued to generate more and more contractual work through competitive bidding and bilateral negotiation. As a result during the year 2007-08, MECL has received a total of 49 work orders from various agencies such as M/s. ONGC, NTPC, UCIL,CMDCL,APMDCL-OMCL, HPGCL, SAIL, etc. valued at Rs. 98.87 crores.

7. SAFETY:

MECL continued its efforts to maintain safety at all work places and

establishments of the Company during the year 2007-2008 also. However, 5 (five) minor accidents involving injury to five workmen were reported, who were provided medical aid immediately.

8. SOCIAL WELFARE ACTIVITIES:

a) Every year merit Scholarships are granted to meritorious wards of MECL

employees under “MECL Employees Grant of Scholarship to Employees Children Scheme”, as an encouragement and as welfare measure. 18 fresh Scholarships were granted & 28 scholarships were renewed during the year 2007-08 to the wards of MECL employees. Thus, total number of 46 scholarships were awarded.

b) Subsidised canteen facility continued in the organisation.

c) Medical facilities were provided to MECL employees and their dependant

family members as per Medical Benefit Scheme.


9. INDUSTRIAL RELATIONS:

Industrial relations remained by and large peaceful and cordial in all the

establishments of the company during the year 2007-08. 10. EMPOWERMENT OF WOMEN: The Company gives equal status to its women employees and the Service Rules

etc., are uniformly made applicable. The women employees in the Company are provided maternity benefits as per rules.

In order to avoid sexual harassment of women at work place, a Grievance

Committee on “Sexual Harassment” of women at work place was constituted and is functioning in the Company. A meeting of the Committee is held periodically and steps have been taken to sensitise all employees of the Company on the issue.

“International Womens’ Day, 2008” was celebrated in MECL on 11th March, 2008 wherein all the women employees posted in various offices of Nagpur participated. Lectures on “Empowerment of Women” by eminent speakers were the highlight of the programme.

11. OFFICIAL LANGUAGE POLICY: In accordance with the Government’s policy for propagating the use of Hindi in

official work, number of steps were taken during the year 2007-2008. Hindi Divas/Fortnight were organised wherein various competitions were organised for employees to propagate Hindi amongst them. Competitions for school level children of employees were organised during 2007-08. Four Hindi Workshops were organised during this period. Four Quarterly meetings of Official Language Implementation Committee of MECL were held wherein steps to further propagate Hindi in official work were discussed and implementation position reviewed. In order to encourage employees to do official work in Hindi, 140 employees were given the Cash Awards during the year 2007-2008. Mineral Exploration Corporation Limited has been honoured on 12-12-2007 by Nagpur Rajbhasha Karyanwayan Samiti, Nagpur with two separate encouragement awards, one for its outstanding contribution made in propagation of Official Language for the year 2006-07 and the other for publication of its in-house Magazine “MEC SAMACHAR”.


12. PERSONNEL:

a) Manpower: The manpower position as on 31-03-2008 as compared to 31.03.02007 is given below:

Category 2007-2008 2006-2007 Officers (Group A & B) 294 328 Group C (Ministerial & Technical) 1633 1709 Group D 79 84 Contingent/Daily rated 29 29 Total 2035 2150

b) Manpower Reduction: The details of separation of manpower due to superannuation and other

reasons during the year is as follows:

Executives Non-Executives Total 36 81 117

c) Representation of Scheduled Castes, Scheduled Tribes & Other

Backward Classes as on 31-03-2008 :

Scheduled Caste Scheduled Tribe OBC Group Total No.of employees Total Percentage Total Percentage Total Percentage

A 224 40 17.86% 14 06.25% 09 04.01%

B 70 11 15.71% 05 07.14% 02 02.86% C 1633 226 13.84% 116 07.10% 87 05.33% D 74 13 17.57% 04 05.41% 05 06.32%

D(Safaiwala)

05 5 100% - - - -

Total 2006 295 14.71% 139 06.93% 103 05.13% Overall percentage: - 26.77%

13. TRAINING AND MANAGEMENT DEVELOPMENT:

In today’s globalised economy the concept of “People Power” has emerged

strongly and therefore training and management development activities in MECL were designed to equip employees with the necessary competencies to take all challenges and the same is reflected in the Organisation’s upward swing.

During the year 2007-08, 8 In-house Training Programmes were conducted

exposing 345 personnel and 64 executives were nominated to external Training Programs / Seminars/Conferences, etc. Thus, during the period under review, training was provided to 409 employees.


14. PARTICULARS OF EMPLOYEES:

There are no employees within the purview of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975 as amended from time to time.

15. MEMORANDUM OF UNDERSTANDING:

The Company’s performance has been provisionally rated “Excellent” in the evaluation of Memorandum of Understanding (MoU) signed with Government of India for the year 2007-08. Further, MOU for the year 2008-09 with Ministry of Mines was signed on 24-03-2008.

16. CORPORATE GOVERNANCE:

In Compliance with the guidelines on Corporate Governance for CPSEs 2007, the Board of Directors has laid down Code of Conduct for all Board Members and Senior Management Personnel of the company for affirming the compliance with the code of conduct. The Company believes that good Corporate Governance is essential to achieve long term corporate goals and to enhance stakeholders’ value. MECL believes in transparency, accountability and attaining maximum level of enrichment of the enterprises. For maintaining its transparencies in the system, Leveraging Technology was introduced while dealing with Tenders and also Introduces e-payment to Contractors/Suppliers.

Your company is committed to transparency in all its dealing with its

shareholders and others and to provide high quality products and services to its customers.

17. CORPORATE SOCIAL RESPONSIBILITY:

The Company believes in considering the interest of customers, employees, shareholders, stakeholders, communities as well as the ecological consideration in all respect of their operations and it extends beyond their statutory obligation to comply under various Acts & Rules. While working at the exploration sites located in the remote areas under the Company’s policy, it has been envisaged to pass on some monetary assistance, etc. to the local people by way of providing them engagement for a specific period to assist the drill crew in miscellaneous and unskilled nature of jobs related to the drilling operations being carried out at the site. Further, for establishment of drill sites at different locations of the project, we make motorable roads for our use which are being used by the local people.

18. DIRECTORS RESPONSIBILITY STATEMENT:

In pursuance of Section 217(2AA) of the Companies Act, 1956 which requires inclusion of a Directors’ Responsibility Statement, the Directors hereby confirm -


a) The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

b) Accounting policies have been selected and applied consistently and

reasonably, and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company and of the Profit & Loss of the Company for the financial year ended 31st March 2008.

c) Proper and sufficient care has been taken for the maintenance of accounting

records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) The Annual Accounts of the company have been prepared on a going concern

basis. 19. AUDITORS:

The Comptroller and Auditor General of India, New Delhi appointed following firms of Chartered Accountants as Statutory & Branch Auditors for the financial year 2007-08. Statutory Auditors M/s Aurangabadkar & Co., Indradhanush, 2, SBI Colony, Amravati Road, Nagpur-440033 (Maharashtra)

Branch Auditors M/s R. Bansal & Associates, 2nd Floor, Sri Gopal Complex, Kutchery Road, Ranchi – 834001 (Jharkhand)

M/s R. Kankaria & Uttam Singhi, Chartered Accountants, 6-3-1090/C-4 Rajbhawan Road, Opp. Kapadia Lane, Hyderabad – 500082 (Andhra Pradesh)

20. AUDIT COMMITTEE:

The Audit Committee constituted by the Board in terms of Section 292A of the Companies Act, 1956 is in operation. The Director (Finance) and the representative of Statutory Auditors and the Internal Auditors are included in the committee as invitees as a Transparent Corporate Governance Policy, though the representative(s) of the Statutory Auditors may be called as and when required by the committee, as stipulated in accordance with the provisions of Section 292A of the Companies Act, 1956. The role of Audit Committee is in accordance with the provisions of Section 292A of Companies Act, 1956.


Members of the Audit Committee

1. Shri V.K. Thakral, Chairman 2. Shri B.K. Panda (upto 08/05/2007) 3. Shri P.R. Mandal (w.e.f. 08/05/2007 ) 4. Dr. S.K. Haldar

The Company Secretary acted as Secretary to the Audit Committee.

The terms of reference of the Audit Committee are as per the provisions of the Companies Act, 1956. During the year under report, the Audit Committee met five times. The details of attendance of the members are indicated below: -

Sl. No. Date of meeting Name of the members present Leave of absence

granted 1. 16.05.2007 1. Shri V.K. Thakral

2. Dr. S.K. Haldar -

2. 17.07.2007 1. Shri V.K. Thakral 2. Dr. S.K. Haldar

-

3. 27.08.2007 1. Shri V.K. Thakral 2. Shri P R Mandal 3. Dr. S.K. Haldar

-

4.

06.11.2007 1. Shri V.K. Thakral 2. Dr. S.K. Haldar

-

5.

26.02.2008 1. Shri V.K. Thakral 2. Shri P R Mandal 3. Dr. S.K. Haldar

-


21. BOARD OF DIRECTORS: The composition of the Board is as under:-

1. Dr. A.K. Lomas - Chairman-cum-Managing Director 2. Shri V.K. Thakral - Government Nominee 3. Shri P.R. Mandal - Government Nominee (w.e.f. 08/05/2007) 4. Shri C.P. Gupta - Director (Finance) 5. Dr. S.K. Haldar - Director (Technical) 7. Shri B.K. Panda - Government Nominee (upto 08/5/2007) Shri B.K. Panda ceases to be Director with effect from 08/5/2007 on being transferred from Ministry of Coal. Number of Board Meetings During the year 2007-08, five meeting were held. The details of which are given below :-

Sl. No. Date Total No. of Board of

Directors No. of Directors present

1 16.05.2007 5 5 2 17.07.2007 5 4 3 27.08.2007 5 5 4 06.11.2007 5 4 5 26.02.2008 5 5

Attendance of each Director at Board Meetings :

Sl. No. Name of the Director Period No. of Board

Meeting No. of Board

Meetings attended(A) Wholetime Functional Director 1 Dr. A. K. Lomas, CMD 01/04/07 to

31/03/08 5 5

2 Shri C.P. Gupta, D(F) 01/04/07 to 31/03/08

5 5

3 Dr. S.K. Haldar, D(T) 01/04/07 to 31/03/08

5 5

(B) Govt. of India Nominee Director 1 Shri V.K. Thakral 01/04/07 to

31/03/08 5 5

2 Shri P.R. Mandal 08/05/07 to 31/03/08

5 3

3 Shri B.K. Panda 01/04/07 to 08/05/07

- -


22. REMUNERATION OF THE DIRECTORS:

The remuneration of the Functional Directors are fixed by the Government of India in terms of Section 617 of the Companies Act, 1956. The Government Nominee are not eligible for sitting fee as per the provision of the Companies Act,1956 for the meeting attained by them.

23. ANNUAL GENERAL MEETING:

The 35th Annual General Meeting was held on 07.09.2007.

24. VIGILANCE:

The Vigilance Department of the company operates at Corporate Office, headed by the Chief Vigilance Officer reporting to the Chairman–cum–Managing Director of the Company. During the year, a Vigilance Manual and a booklet on Do’s & Don’ts were published for awareness of the employees of the organisation. Various activities like essay competition, poster campaign, seminars, etc. were organized during the Vigilance Awareness Week celebrated in the month of November 2007. Various systemic and procedural improvements were effected due to preventive Vigilance measures. The emphasis was given by ensuring strict adherence to the laid down rules and regulations of the organisation. CVC Guidelines as and when received are being strictly followed in the organisation.

25. ACKNOWLEDGEMENT:

Your Directors gratefully acknowledge and place on record for their support, co-operation and guidance received from Ministry of Mines, Ministry of Coal and other Departments of Government of India & Regulatory Agencies. Your Directors express their sincere thanks to the office of the C&AG, Statutory & Branch Auditors, Customers and Bankers who continued to repose their faith and trust in the working of the Company. The Board of Directors would like to assure that the Company would continue to strive for better achievements in the coming years. Your Directors express their appreciation to the untiring efforts put in by all the officers and employees at various levels and their support over the years which has enabled your company to achieve the present position. With such continued support, your company will grow from strength to strength and would be able to expand its area of activities, scale greater heights of success and contribute positively for better stakeholders’ delight.

For & on behalf of Board of Directors

Place : CAMP, NEW DELHI Date : 19.06.2008

(DR. A. K. LOMAS) CHAIRMAN-CUM-MANAGING DIRECTOR


Annexure to Directors’ Report as required under Companies (Disclosure of

particulars in the report of Board of Directors) Rules, 1988.

FORM-B (See Rule 2)

Form for disclosure of particulars with respect to absorption –

RESEARCH AND DEVELOPMENT (R&D) i) Specific area in which R&D activities

carried out during the year.

: During the year no R&D project under any specific S&T scheme was taken up. However, effectiveness of adopting different filtering techniques in Gravity Data Processing was exercised to demarcate Lignite bearing zones under vast sand covered areas of Rajasthan. Estimation of Geo-technical parameters from combination of different Geophysical log response was tried and established.

ii) Benefits derived as a result of R&D

: Application of different techniques such as 1st and 2nd order derivatives in combination with power spectrum analysis and reverse modelling through GEOSOFT software, disposition of low density sediments (lignite) under vast cover of desert sand in western Rajasthan could be revealed more effectively. Estimation of Geo-technical parameters such as Young’s Modulous, Rigidity Modulous, Poission’s Ratio etc. from combined geophysical log response by using WellCAD software could be established and has been implemented in contractual Lignite exploration program.

iii) Future Plan of Action

: Attempt to give a field worthy shape to the Geo-radar system procured during 2003-04 under the S&T scheme titled as “Development of Electromagnetic Tomography and Buried Electrode Method for geotechnical studies and base metal exploration” for Commercial use.

iv) Expenditure on R&D

: Nil


TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts in brief, made towards technology absorption, adaptation & innovation :

A. DRILLING TECHNOLOGY 1. High Performance Diamond Bit:

To achieve higher productivity and completion of work within time schedule in hard formation, high performance diamond bits were put in use and the following advantages were noticed: a) Total time consumption is less in hoisting and lowering of drill string for

changing of bit than the indigenous bit. b) Penetration rate of high performance bit is faster than indigenous bit.

2. Drilling fluid technology: Polymer has been used in hard rock formation and also in CBM projects. By the use of polymer, the in hole problems were reduced due to better bailing out of the cuttings, leading to efficient bore hole cleaning.

3. Indigenous Clay Coat developed from t he by-product of Glycerine has been used as additive to drilling fluid to increase the lubrisity and viscosity of the drilling fluid. This has been extensively used in Chintalpudi and Khapri Projects and has given good performance.

4. Salt exploration on behalf of M/s O.N.G.C. was commenced in March 2007.

Two boreholes SPR-1 and SPR-3 have been completed at the depth of 1031.70 metres and 880.70 metres respectively and the operation at third borehole SPR-2 is in progress. This is a milestone achieved by MECL by drilling in halite formation.

5. MECL has successfully completed CBM investigation in South Karanpura and

North Karanpura in difficult situations and varied complex geological formations. The strata consist of Barren Measures, Baraker formations and were negotiated using polymers and bentonite mud. Boreholes in the depth range of 1200 metres to 1300 metres were drilled during the year.

B. INFORMATION TECHNOLOGY

MECL is committed to improve in his performance of services for enhancement of customer satisfaction. During the year, MECL procured latest hardware and software to cater the various needs and requirements of its customer e.g. Ore Body Modeling, Geological Modeling and GIS Solutions. (a) SURPAC Four lignite block models involving multi seams are prepared by using Surpac software. Procedure for preparing block model is established from these models.


(b) MINEX MINEX software has been first time used under R&D to prepare fault model of Dulunga coal block. Categorisation of reserves by interlinking various grid models, various plans and sections are generated from the seam model. (c) GIS APPLICATION

By using Arc / Info and AutoCAD Map softwares different themes are generated, as per the clients requirements, from the Revenue Plan of Talaipalli to get the approval of mine plan. (d) GEMCOM & GDM

The updated version of GEMCOM & GDM softwares have been adopted for providing 2D and 3D Plans and as per the clients requirement in oil shale project. (e) GEOMATICA Georeferencing and mosaicking of toposheets (8 Nos.) and satellite images LISS-III + PAN merged data using Geomatica 9.1.5 version was done on PC-E006 Ellipsoid Projection system and the same was further Georeferenced on Lat – Long WGS-84-E 012 ellipsoid system as per requirement of BRGM under Oil Shale Project. Plotted more than 250 sample locations pertaining to lithounits of the study area. Vectorisation of lithounits was done and overlaid on toposheets.

FOREIGN EXCHANGE EARNINGS AND OUTGO: Foreign Exchange Earning : Nil Foreign Exchange Outgo : Rs. 52.12 lakhs

For & on behalf of Board of Directors Place : CAMP, NEW DELHI Date : 19.06.2008 ( DR. A. K. LOMAS)

CHAIRMAN-CUM-MANAGING DIRECTOR


COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF MINERAL EXPLORATION CORPORATION LIMITED, NAGPUR FOR THE YEAR ENDED 31 MARCH 2008.

The preparation of financial statement of Mineral Exploration Corporation Limited, Nagpur, 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 22 May,2008.

I, on 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 Mineral Exploration Corporation Limited, Nagpur, 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 the Comptroller & Auditor General of India

(Nand Kishore) Principal Director of Commercial Audit &

Ex-Officio Member Audit Board –III. New Delhi.

Place: New Delhi Dated: 18th June, 2008.


ADDENDUM TO THE DIRECTORS’ REPORT Clarifications under Section 217 of the Companies Act, 1956. Reference to the Auditors Report and annexure thereto dated 22-05-2008 of M/s Aurangabadkar & Co. Chartered Accountants, Nagpur on the Accounts of M/s Mineral Exploration Corporation Limited, Nagpur for the year 2007-2008.

COMMENTS OF STATUTORY AUDITORS

REPLY/CLARIFICATION OF THE MANAGEMENT

AUDITORS REPORT :

1) Certain Assets sold, discarded, left or lost in boreholes have not been withdrawn from Gross Block. The management is unable to estimate its effect on profit for the year.

This has already been disclosed vide Note No.3 (iii) of Schedule “V” notes on Balance Sheet and Profit & Loss Accounts forming a part of accounts.

2) Non-Provision for payment of

Service Tax of Rs. 572.50 Lakhs.

This has already been disclosed vide Note No.4 of Schedule “V” Notes on Balance Sheet and Profit & Loss Accounts forming a part of accounts.

3) Non-withdrawal of certain Scrap Assets from Gross Block.

This has already been disclosed vide Note No.5 of Schedule “V” notes on Balance Sheet and Profit & Loss Accounts forming a part of accounts.

4) Non-confirmation of various balances.

This is informative in nature and the same has already been disclosed vide Note No.10 of Schedule “V” Notes on Balance Sheet and Profit & Loss Accounts forming a part of accounts.

Annexure to the auditors Report : No.i c (Para 2) :The Gross Block of Assets include certain Scrap Assets & the same have not been disclosed separately in the Balance Sheet at lower of net book value or net realisable value. The practice does not comply with the requirements of Para 24 of Accounting Standard-10’ Accounting for fixed Assets’.

This has already been disclosed vide Note No.5 of Schedule “V” notes on Balance Sheet and Profit & Loss Accounts forming a part of accounts.

No. ii to xxi of Annexure to the Auditor’s Report.

These are general disclosures and wherever necessary have already been covered in Schedule ‘V’ Notes on the Balance Sheet and Profit & Loss Accounts forming a part of accounts.

Place : Nagpur, (Dr. A.K. LOMAS) Dated : 19.08.2008 CHAIRMAN-CUM-MANAGING DIRECTOR


BALANCE SHEET AS AT 31ST MARCH,2008 (Rs In Lacs) Particulars Schedule As at 31.03.2008 As at 31.03.2007 SOURCES OF FUNDS Shareholders' Fund Share Capital A 11955.00 11955.00 Deferred Govt Grant B 141.88 158.36 Deferred Tax Liability C 112.99 234.72 12209.87 12348.08 APPLICATION OF FUNDS Fixed Assets D Gross Block 6,893.68 10,373.22 Less: Depreciation 4,827.21 8,369.99 Net Block 2,066.47 2,003.23 Scrap Fixed Asset (Net) 6.93 Capital work-in-progress including capital items in Stock/Transit 83.33 2156.73 172.01 2175.24 Current Assets,Loans & Advances Inventories E 542.21 496.03 Work-In-Progress/ Work Done- Not Due & Not Billed F 724.37 910.94 Sundry Debtors G 3,596.15 2,616.10 Cash & Bank Balances H 5,293.77 5,221.61 Loans & Advances I 750.38 482.38 10,906.88 9,727.06 Less : Current Liabilities & Provisions Current Liabilities J 1,603.71 1,087.05 Provisions 276.79 107.21 1,880.50 1,194.26 Net Current Assets 9026.38 8532.80 Miscellaneous Expenditure (to the extent not written off) Deferred Revenue Expenses K 17.79 20.01 Profit & Loss Account 1008.97 1620.03 12209.87 12348.08 Accounting Policies U Notes on Accounts V Schedules 'A' to 'V' form an integral part of accounts As per our report of even date for AURANGABADKAR & CO. CHARTERED ACCOUNTANTS [ASHISH M. JOSHI] [BISWAJIT DORA] Partner Company Secretary Mem no. 106298

CAMP, NEW DELHI [C.P. GUPTA] [DR. A. K. LOMAS] Date:22.05.2008 Director (Finance) Chairman-cum-Managing Director


PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31ST MARCH 2008 (Rs In Lacs) Particulars Schedule YEAR ENDING YEAR ENDING 31.03.2008 31.03.2007 EARNINGS Income from works L 9086.47 7629.41 Other Income M 518.79 432.10 Accretion (Decretion) to WIP / Work Done -not due & not billed and Stock. N (159.02) 467.21

9446.24 8528.72OUTGOINGS Operational O 1253.42 1284.56 Establishment P 509.06 534.12 Personnel Q 6303.28 5537.05 Provisions R 92.38 47.32 Depreciation 325.20 367.53 Amortisation and Write off: S 2.81 148.74 8486.15 7919.32 Profit before Prior Period Adjustment And Extraordinary Item 960.09 609.40 Prior Period Adjustment(Net) T (3.65) (5.28)Profit before extraordinary item and taxes 956.44 604.12 Provision for Taxation: Current tax 449.64 214.20 Deferred tax (121.76) (14.62)Fringe Benefit Tax 17.50 16.80 Profit AfterTaxes And Before Extraordinary Item 611.06 387.74 Extraordinary income-waiver of interest on Govt. loan 0.00 5884.05 Profit After Extraordinary Item 611.06 6271.79 Provision for tax on extraordinary income 0.00 314.32 Profit for the year after taxes 611.06 5957.47 Profit/(Loss) for the previous year brought down (1620.03) (7328.15)Deferred tax Liability/ Asset At The Beginning Of The Year 0.00 (249.35) Profit/(Loss) Carried Over to Balance Sheet (1008.97) (1620.03) Earning per Share (Rs.) - Basic & diluted (Face Value of Rs. 1000/= each (Refer Note 21 Of Schedule V) Before Extraordinary Item 51.11 32.43 After Extraordinary Item 0.00 498.32 Accounting Policies U Notes on Accounts V Schedules 'A' to 'V' form an integral part of accounts As per our report of even date for AURANGABADKAR & CO. CHARTERED ACCOUNTANTS [ASHISH M. JOSHI] [BISWAJIT DORA] Partner Company Secretary Mem no. 106298

CAMP, NEW DELHI [C.P. GUPTA] [DR. A. K. LOMAS] Date: 22.05.2008 Director (Finance) Chairman-cum-Managing Director


(Rs In Lacs)Particulars As at 31.03.2008 As at 31.03.2007

SCHEDULE 'A' SHARE CAPITAL

SHARE CAPITAL AUTHORISED 1250,000(1250,000)Equity Shares of 12500.00 12500.00 Rs.1000/- each ISSUED,SUBSCRIBED & PAID UP 1195500 (1195,500) Equity Shares of Rs.1000/- each fully paid up 11955.00 11955.00 11955.00 11955.00

SCHEDULE 'B' DEFERRED GOVT. GRANT

GRANT FROM GOVERNMENT Balance as per last Balance Sheet 158.36 174.85 Less:Transfer to Other Income/Adjustment 16.48 16.49 141.88 158.36 141.88 158.36

SCHEDULE `C' DEFERRED TAX (ASSET)/ LIABILITY

DEFERRED TAX LIABILITY On account of Depreciation 310.23 315.35 DEFERRED TAX ASSET On account of Provision for bonus 13.56 0.00 Provision for doubtful debts 85.57 54.01 Provision for doubtful advances 21.58 21.26 Provision for employees benefits 76.53 197.24 5.36 80.63 NET DEFERRED TAX (ASSET)/ LIABILITY 112.99 234.72


SCHEDULE ' D ' FIXED ASSETS (Rs in Lacs) GROSS BLOCK DEPRECIATION RESERVE NET BLOCK DESCRIPTION BALANCE ADDITION DELETION BALANCE BALANCE ADDITION DELETION PRIOR BALANCE NET BLOCK NET BLOCK AS AT DURING DURING AS AT AS AT DURING DURING PERIOD AS AT AS AT AS AT 01-Apr-07 THE YEAR THE YEAR 31-Mar-08 01-Apr-07 THE YEAR THE YEAR ADJUSTMENT 31-Mar-08 31-Mar-08 31-Mar-07 FREE HOLD LAND 25.27 0.00 0.00 25.27 0.00 0.00 0.00 0.00 0.00 25.27 25.27 LEASE HOLD LAND 260.23 0.00 0.00 260.23 15.99 2.63 0.00 0.00 18.62 241.61 244.24 BUILDINGS,STRUCTURES AND TENTAGES 703.05 0.05 3.82 699.28 211.69 12.55 3.83 0.00 220.41 478.87 491.36 ROADS 3.20 0.00 0.00 3.20 1.22 0.05 0.00 0.00 1.27 1.93 1.98 PLANT AND MACHINARY 2,842.33 282.24 150.92 2,973.65 2,413.71 72.66 143.39 (0.69) 2,342.29 631.36 428.62 ACCESSORIES 4,186.93 102.51 3,703.86 585.58 4,097.52 154.56 3,703.85 0.03 548.26 37.32 89.41 ELECTRICAL INSTALLATIONS 33.64 0.00 0.04 33.60 26.53 0.90 0.04 (0.01) 27.38 6.22 7.11 INSTRUMENTS & EQUIPMENTS 1,148.87 0.50 0.00 1,149.37 676.36 40.49 0.00 0.05 716.90 432.47 472.51 FURNITURE & OFFICE APPLIANCES 221.85 2.13 8.78 215.20 177.60 4.54 8.32 (0.29) 173.53 41.67 44.25 SYSTEMS - TANGIBLE 222.10 8.91 0.00 231.01 179.79 8.93 (6.74) 0.39 195.85 35.16 42.31 - INTANGIBLE 196.73 0.00 0.00 196.73 188.83 4.98 6.74 0.00 187.07 9.66 7.90 VEHICLES 529.02 0.00 8.46 520.56 380.75 22.91 8.03 0.00 395.63 124.93 148.27 TOTAL 10,373.22 396.34 3,875.88 6,893.68 8,369.99 325.20 3,867.46 (0.52) 4,827.21 2,066.47 2,003.23 Figures of Previous Year 10,086.93 501.19 214.90 10,373.22 8,191.59 367.53 191.92 2.79 8,369.99 2,003.23 1,895.34 Scrap Assets as on 31.03.2008 3,807.92 3,800.99 6.93



SCHEDULE `E' INVENTORIES

(As taken ,valued and certified by the Management) Stores and Spares 476.48 453.83 Loose Tools 26.39 25.83 Stores and Spares in Transit 4.55 9.13 Less:Provision for Losses in Transit 0.28 0.28 4.27 8.85 Finished Stock (Stone Ballast) 35.07 7.52 542.21 496.03

SCHEDULE `F' WORK-IN-PROGRESS/ WORK DONE - NOT DUE & NOT BILLED

(As assessed and certified by the Management) Work done not yet due for payment 649.88 347.35 Work done not billed 71.65 563.08 Workshop work in progress 2.84 0.51 724.37 910.94

SCHEDULE `G' SUNDRY DEBTORS

SUNDRY DEBTORS (Unsecured) Debts outstanding for a period exceeding six months Considered good 853.32 877.21 Considered Doubtful 251.77 160.45 1,105.09 1,037.66 Other Debts Considered good 2,742.83 1,738.89 3847.92 2,776.55 Less :Provision for doubtful debts 251.77 160.45 3596.15 2616.10



SCHEDULE `H' CASH AND BANK BALANCES

Cash In Hand 8.32 6.50 Remittances In Transit 27.00 78.15 Balances With Scheduled Banks: On Current Accounts 173.46 414.45 Cash Credit Account 160.99 61.37 On Short Term Deposit Accounts 4,924.00 5258.45 4,661.14 5136.96 (including FDR of Rs.500.00 (Rs.27.49) against margin money) 5293.77 5221.61

SCHEDULE `I' LOANS AND ADVANCES

Loans & Advances Recoverable in cash or in kind or for value to be received Considered good: Secured 12.83 20.56 Unsecured 710.22 414.72 Considered doubtful(Unsecured) 63.50 786.55 63.13 498.41 (Incl. Rs.4.58 for capital expenditure Previous year Rs.4.58) Balances with customs 1.42 7.26 Cenvat Credits Receivable 25.91 39.84 813.88 545.51 Less:Provision for doubtful advances 63.50 63.13 750.38 482.38


(Rs In Lacs)

Particulars As at 31.03.2008 As at 31.03.2007

SCHEDULE `J'

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES

Sundry Creditors 333.04 366.80

Advances against works 297.49 29.33

Security and other deposits 68.68 68.12

Liabilities for expenses 265.67 348.74

Other Liabilities 638.83 274.06

1603.71 1087.05

PROVISIONS:

For Gratuity 17.33 15.94

For Taxation

Income Tax Liability 449.64 528.52

Less: Advance tax paid 190.18 259.46 437.25 91.27

276.79 107.21

SCHEDULE'K'

DEFERRED REVENUE EXPENSES

Stamp duty and Filing fees:

Opening Balance 20.01 2.14

Add:Expenditure incurred during the Yr. 0.00 22.23

20.01 24.37

Less: Expenditure Amortised 2.22 17.79 4.36 20.01

Expenditure On VRS:


Add: Additions During the Year 0.00 0.00

0.00 142.43

Less : Expenditure amortised 0.00 142.43

0.00 0.00

17.79 20.01


(Rs In Lacs)

Particulars YEAR ENDING YEAR ENDING 31.03.2008 31.03.2007

SCHEDULE `L'

INCOME FROM WORKS

Contractual Promotional Total

Drilling 5,036.31 924.65 5960.96 4910.93

Mining 1,002.91 1.42 1004.33 928.11

Geology 1,432.80 217.73 1650.53 1329.72

Laboratory 145.67 42.64 188.31 124.74

Coal Sampling 200.46 - 200.46 209.41

Sale of Stone Ballast 81.88 - 81.88 126.50

7,900.03 1,186.44 9086.47 7629.41

SCHEDULE `M'

OTHER INCOME

Interest on Advances to Staff 0.08 0.05

Interest on Short Term Deposit (Gross) 372.18 294.20

Tax deducted at source Rs.38.99( Rs.6.41)

Sale of Scrap 31.38 22.76

Profit on Sale of Assets 24.97 40.01

Grant Written Back 16.48 16.49

Liabilities/Provisions no longer

required Written Back 1.00 8.76

Income From Rent 47.46 29.36

Miscellaneous Income 25.24 20.47

518.79 432.10


(Rs In Lacs)

Particulars YEAR ENDING YEAR ENDING

31.03.2008 31.03.2007

SCHEDULE `N'

ACCRETION/(DECRETION) TO

WORK-IN-PROGRESS/ WORK DONE- NOT DUE & NOT BILLED

AND STOCK OF STONE BALLAST

WORK DONE NOT YET DUE FOR PAYMENT

Closing Balance 649.88 347.35


302.53 99.24

WORK DONE NOT BILLED



(491.43) 409.46

STOCK OF STONE BALLAST



27.55 (40.44)

WORKSHOP WORK IN PROGRESS



2.33 (1.05)

(159.02) 467.21


(Rs In Lacs)


31.03.2008 31.03.2007

SCHEDULE `O'

OPERATIONAL EXPENSES

Stores & Spares 462.61 488.16

Petrol,Oil & Lubricants 508.32 515.48

Other Material consumed 46.42 46.86

Joint VentureExpenses 0.00 52.06

Sub- Contract 9.98 0.00

Site Maintenance Expenses 105.44 79.17

Other Site Expenses 8.78 17.85

Stone Ballast Expenses :

Purchase of Stone Ballast (Finished) 39.61 39.00

Other Stone Ballast Expenes 56.07 46.60

95.68 85.60

Repairs to:

Machinery 87.24 76.35

Vehicles 15.29 19.64

Others 23.66 126.19 20.58 116.57

Miscellaneous 2.88 4.00

1366.30 1405.75

Less:- Workshop Expenses Transferred to 112.88 121.19

Capital and Other Accounts

1253.42 1284.56


(Rs In Lacs)Particulars YEAR ENDING YEAR ENDING 31.03.2008 31.03.2007

SCHEDULE `P' ESTABLISHMENT EXPENSES

Electricity 44.46 50.70 Repairs to: Building 15.99 13.60 Machinery 16.46 14.76 Vehicles 1.22 0.60 Others 21.74 55.41 21.32 50.28 Freight& Handling Charges 44.45 56.54 Petrol,Oil & Lubricants 15.83 10.34 Insurance 18.36 16.65 Travelling & Conveyance 145.50 156.97 Postage, Telegram & Telephones 27.21 33.11 Stationery & Printing 22.34 24.35 Rates & Taxes 45.50 43.50 Rent 21.43 19.67 Publicity & Advertisement 4.72 6.35 Legal Expenses 4.79 8.25 Recruitment 0.40 1.08 Entertainment 0.47 0.53 Books,Journals & Technical Literature 1.65 1.47 Management Development & Training 1.79 0.94 Auditor's Remuneration 1.13 1.13 Other Audit Expenses 0.09 0.21 Miscellaneous 53.35 52.00 Stamp Duty & Registration Charges 0.18 0.05

509.06 534.12


(Rs In Lacs)


31.03.2008 31.03.2007

SCHEDULE `Q'

PERSONNEL EXPENSES

Salaries,Wages, Bonus and Allowances 4778.93 4296.54

Contribution to provident Fund and

Other Funds 1311.68 1052.70

Medical and Welfare 252.24 228.63

Workmen Compensation & Accident Benefits - 0.20

6342.85 5578.07

Less:- Workshop Expenses Transferred to

Capital and Other Accounts 39.57 41.02

6303.28 5537.05

SCHEDULE `R'

PROVISIONS

PROVISIONS FOR :-

Doubtful Advance 0.37 0.00

Doubtful Debts 92.01 47.32

92.38 47.32


(Rs In Lacs)

Particulars YEAR ENDING YEAR ENDING 31.03.2008 31.03.2007

SCHEDULE 'S'

AMORTISATION AND WRITE OFF

AMORTISATION

Stamp duty and Filing fees 2.22 4.36

Deferred Revenue Expenses for VRS 0.00 142.43

WRITE - OFF

Bad Debts 1.28 42.07 Less: Adjusted against opening Provision for Doubtful Debts 0.69 40.12

0.59 1.95

2.81 148.74

SCHEDULE `T'

PRIOR PERIOD ADJUSTMENTS

INCOME

Income from works (10.90) 2.12

Other Income (0.21) 5.02

(11.11) 7.14

EXPENSES

Operational Expenses (7.48) 4.77

Establishment Expenses 0.32 4.73

Personnel Expenses 0.22 0.13

Depreciation (0.52) 2.79

(7.46) 12.42

NET INCOME/(EXPENDITURE) (3.65) (5.28)


SCHEDULE U

ACCOUNTING POLICIES 1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the generally accepted accounting principles in India and provisions of Companies Act, 1956.

2. REVENUE RECOGNITION a. Amount due for payment in respect of bills submitted for work done is considered

as income from works. Not due portion of bills submitted and value of work done not billed is considered as Work Done- Not Due & Not Billed.

b. Sale of scrap and reject stone chips are accounted for as income when delivered. 3. FIXED ASSETS a. Fixed Assets are maintained at the original cost. b. Temporary structures are capitalized either at the lower of the completion

certificate value and amount spent as per books of account or where the completion certificate does not specify the value, at the amount spent as per books of account.

c. Temporary structures at closed projects, steel structures issued for use ten years

earlier and tentages and accessories issued for use three years earlier are withdrawn from Gross Block.

d. Unidentifiable assets such as Drilling Accessories, GI Pipes, Rails, etc., when sold

or lost in borehole, are withdrawn from Gross Block on the basis of “ first in first out “.

e. Impairment of Assets: Carrying amount of fixed Assets, if exceeds recoverable

amount on reporting date, the carrying amount of fixed Assets is reduced to recoverable amount. The recoverable amount is measured as the higher of the net selling price and the value in use determined by the present value of estimated future cash inflows.

4. DEPRECIATION

Depreciation is charged on straight line method in accordance with schedule XIV of the Companies Act, 1956 at the rates in existence as at the end of the accounting year (applied uniformly for the year to all assets) except in the following cases :


a. 9.5% on steel structures based on assessed life of 10 years. b. Leasehold land is depreciated over the lease period. c. Intangible Assets (Software) are depreciated over a period of 3 years

without retaining any residual value. d. The calculation of depreciation is done from the beginning of the quarter

in which the asset is issued for use including items on which rate of depreciation is 100%.

5. GOVERNMENT GRANTS

Government Grant for specific Fixed Assets is recognized proportionately in Profit & Loss Account over the useful life of the assets.

6. INVENTORIES

Inventories are valued as under:

a. Stores, Spares and Loose Tools – at cost on weighted average basis.

b. Unserviceable diamond bits – at 5% of cost on weighted average basis, other unserviceable stores and spares at 3% of cost on weighted average basis.

c. Surplus stores, stores & spares and loose tools issued for use but still

Serviceable – at 50% of cost on weighted average basis.

d. Salvaged Diamonds – at Re. 1/- carat.

e. Boulders (Stone), Finished stock and stock in process of stone ballast are valued at lower of cost or net realizable value.

7. WORK-IN-PROGRESS / WORK DONE NOT DUE & NOT BILLED

a. Drilling, Mining and Laboratory work done not billed/work done not due for payment for which contract have been executed/approved is assessed at contract/estimated rates less estimated expenditure to be incurred.

b. Workshop work in progress and workshop finished goods is valued at

direct cost. c. Drilling, Mining and Laboratory work done pending formal approval is

valued at direct cost or net realizable value whichever is less.


8. EMPLOYEE BENEFITS

a. Defined Contribution Plan: Contribution made to employees Provident Fund is considered as defined contribution plan and contributions are charged to profit & loss account of the year as and when due.

b. Defined Benefit Plan: Retirement Benefits in the form of Gratuity &

leave encashment are considered as defined benefit obligations and are provided for on the basis of an actuarial valuation, using the projected unit credit method, as at the date of the balance Sheet. The company has taken insurance cover for payment of gratuity and leave encashment to its regular employees and payments made to LIC are treated as part of plan Assets.

c. As regards contingent workers, accrued liability of gratuity and leave

encashment at the year-end is provided for. 9. AMORTISATION OF EXPENSES

a. Stamp duty and filing fees payable consequent upon increase in authorized share capital is treated as deferred revenue expenditure and is charged off in 10 years.

b. Payment of ex-gratia made to employees separated under VRS not

reimbursed by the Government and payments made by the Company from its own fund is amortised over the period of 5 years.

10. BORROWING COST

Borrowing cost attributable to the acquisition/construction/development of qualifying assets is capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial time to get ready for intended use.


SCHEDULE ‘V' NOTES ON ACCOUNTS (Figures are given in lacs of Rupees) 1. Contingent Liabilities: i. Letter of Credit and Bank Guarantees outstanding Rs. 864.91 (Rs.389.40).

ii. Claims not acknowledged as debts by the Company :

a) From employees and others Rs. 57.70 (Rs.33.05) b) From contractors and suppliers Rs.32.65 (Rs.44.73) c) Additional compensation claimed by the previous owner of the land & building at 8/5 Alipore Park Road , Kolkata acquired by the company under the provision of Land Acquisition Act, 1894 . Rs.189.00 (Rs.189.00)

Interest from the date of claim has not been considered in case of matters under litigation on the ground that it may prejudice the interest of the company

d) Entry tax alongwith interest and penalty claimed by Rajasthan State Authority and disputed by MECL in appeal to Dy. Commissioner Commercial Tax (Appeal) Udaipur Rs.5.37 (Rs.0.00) e) Some of the ex- employees of the company have filed the cases for payment

of wage revision arrears of 1992 and 1997. Amount of the same is not ascertainable.

f) Government of India vide O.M. No. 2(7)/2005-DPE(WC) GL-III dated 26.2.2008 has advised all profit making CPSEs following IDA pattern scales of pay to consider merger of 50% DA with basic pay for Executives and Workmen from their own resources without any budgetary support from the Government subject to approval of the Board and concerned Administrative Ministry. The proposal is under consideration of the Management and financial implication on this account works out to Rs. 500.00 (0.00) for the period from 1.1.2007 to 31.3.2008. The amount shall be payable subject to the approval from Ministry of Mines.

2. Estimated amount of contracts remaining to be executed on capital account and

not provided for Rs.260.79 (Rs. 351.86) net of advance 3. i. Central Government has not so far transferred the workshop and adjoining

office buildings including Nagpur Utility Complex at Seminary Hills, Nagpur in the name of the Company. As a result, the value of the plot and building and depreciation on Building have not been considered in the Accounts.

ii. Confirmation of title in respect of Free hold land of 2.30 acres at Hazaripahad,

Nagpur, Free hold land of 2.39 acres at Seminary Hills (adjacent to Administrative Building) Nagpur, Lease hold land of 7 acres at GSI Complex Bandlaguda, Hyderabad, and 110.56 sq. meters area in the Scope Minar Project of SCOPE at District Center, Laxshminagar, Delhi is awaited.


iii. Certain assets sold, discarded, left or lost in bore-holes have not been withdrawn from the Gross Block due to difficulties in identifications / pending documentation and as such profit / loss on such assets could not be ascertained.

4. Ministry of Mines vide their Letter No.37/7/95-MI dated 31.10.2002 indicated that

Service Tax is not applicable on promotional work being done on behalf of Ministry of Mines as the same is in the nature of Grant and discontinued the payment thereof. Accordingly, MECL discontinued charging and payment of Service Tax on promotional work and informed the same to the Central Excise Department. The Central Excise Department vide their Letter No. IV(16)30-364 /STS/ST/02/1544 dated 29.5.2003 has clarified that Service Tax is payable on promotional work also. The company has taken up the matter with the Ministry of Mines with the request to provide a specific notification from Ministry of Finance exempting promotional work being carried out by MECL from the applicability of the Service Tax or to allow the company to claim Service Tax on promotional work. The Govt. of India, Ministry of Mines vide their letter no. 37(11)/2002-MI(Pt) dated 27/30 August 2007 again reiterated that services tax is not applicable in the instant case of promotional work done by MECL. However in case , the Final Report of the Project happens to be sold , then MECL would charge and realise the service tax from the buyer of the report and remit it to Tax Agency and cost of the Report shall be deposited to the Govt. of India’s Exchequer. Accordingly MECL started collecting the service tax at the time of sale of the report from the buyer and depositing it with the service tax department. In the meanwhile, the company has also received a show cause notice no. IV(16)/30-50/07/ST/Adj dated 19/22/10/2007 from Office of the Commissioner of Customs and Central Excise, Nagpur. The company has replied to the show cause notice as per the letter received from Ministry of Mines. The amount payable on this account works out to Rs. 572.50 ( Rs. 427.51) approximately, and has not been provided in the Books of Account, as the Service Tax, if any payable, it is to be received from Ministry of Mines and to be paid to the Central Excise Department.

5. As per Accounting Standard 10 Assets retired from active use and held for

disposal should be stated at the lower of their net book value or net realisable value and shown separately. During the year company has identified major assets as unserviceable/surplus and shown separately in accounts at net book value as net book value being lower than net reliasable value.

6. Advances due from Officers: As on 31.3.2008 Maximum amount due at any time during the year Directors Rs.0.10 (Rs.3.53) Rs.4.59 (Rs.3.53) Other Officers Rs. 0.00( Rs.0.00) Rs. 0.08 (Rs.0.18) 7. Travelling and Conveyance Expenses include travelling expenses of: Chairman-cum-Managing Director Rs. 8.61 (Rs. 7.12) Directors Rs. 5.04 (Rs.7.16)


8. Remuneration to Chairman-cum- Managing Director and Functional Directors:

i Salaries & Allowances Rs. 17.34 (Rs 15.26) ii Perquisites Rs. 1.67 (Rs 1.52)

iii. Contribution to Provident Fund Rs. 2.07 (Rs. 1.79) iv. Medical reimbursement Rs. 0.37 (Rs.0.26) The Chairman-cum-Managing Director and full time directors have the option to

use the staff car for purposes other than official duty up to a ceiling of 750 KM per month, on payment at concessional rate, in accordance with the provisions of Govt. of India, vide DPE O.M. No. 2(53 / 90-DPE(WC)-GIV dated 26th March, 1999 as amended from time to time.

9. Expenditure on Public Relations and Publicity: i. Salary, Allowances, etc. Rs. 6.80 (Rs. 3.74) ii. Other Expenses Rs. 2.77 (Rs. 1.76) 10. Balances under Sundry Debtors, Loans & Advances and Current Liabilities are

subject to Confirmation. 11. Sundry Creditors include Rs.6.94 (Rs 6.94 ) payable to Amko Mining & Drilling ,

a SSI unit is outstanding for more than 30 days. No interest on the same has been provided as the matter is under litigation.

12. Payment to Auditors: (a) As a Auditor (i) Statutory Audit fees Rs. 0.75 (Rs 0.75)

(ii) Tax Audit fees Rs. 0.26 (Rs 0.26) (iii) Service tax on Audit fees Rs. 0.12 (Rs 0.12)

(b) Others (i) T.A. & other Expenses Rs.0.09 (Rs 0.21) 13. i) Expenditure incurred on account of Social Amenities: - a) Canteen expenditure Rs.6.40 (Rs.6.15) b) Residential Accommodations Rs. 2.70 (Rs.2.08)

------------- ------------- TOTAL Rs. 9.10 (Rs 8.23) Less: Recovery for

Residential Quarters Rs. 1.44 (Rs 1.70) -------------- -----------

Net expenditure Rs. 7.66 (Rs. 6.53) -------------- ------------


ii) Fixed assets include cost of residential accommodation for employees Rs.245.76 (Rs.245.76). The cumulative depreciation provision includes provision for Residential accommodation Rs.79.38 (Rs. 75.37).

14. There are no employees in receipt of remuneration exceeding Rs. 24.00 per

annum, if employed through out the year or Rs. 2.00 per month if employed for part of the year.

15. Value of imports on CIF Basis: i. Capital Goods Rs. 0.00 (Rs.132.16) ii. Components & Spare Parts Rs. 48.72 (Rs.50.13) 16. Value of Raw Materials, Spare Parts & Components Consumed. Value % of Total Consumption

------------------------------ ----------------------------- i. Imported Rs 35.29 (Rs. 33.34) 3 (3) ii. Indigenous (Consumption) Rs. 997.90 (Rs. 1027.50) 97 (97) 17. Expenditure in Foreign Currency: i. Consultancy Rs. 0.00 (13.80) ii. Others Rs. 3.40 (Rs.2.30) 18. Quantitative information in respect of stone ballast activity is as under:

Qty in Cums Value in Rs. Curr.Year Prev.Year Curr.Year Prev.YearBoulders Opening Stock 631.18 (301.41) 0.90 (0.30)Purchases 19511.21 (17514.53) 33.12 (25.02)Consumption / Crushed 19951.85 17184.76) 33.70 (24.42)Closing Stock 190.54 (631.18) 0.32 (0.90)Excess/Shortage - (-) - (-)Production 12094.62 (9921.68) - (-)Wastage/Rejects 7857.23 (7263.08) - (-)STONE BALLAST (Finished)

Opening Stock 2208.64 (13578.66) 6.63 (47.67) Purchase 9459.61 (10936.56) 39.61 (39.00)Production 12094.62 (9921.68) - (-)Sales 16661.28 (32798.83) 82.09 (125.20)Closing Stock 7101.59 (2208.64) 34.75 (6.63)Excess/Shortage 0.00 (570.57) - (-)


19. Defined Benefit Plans: As per the Actuarial Valuation as on 31.3.2008 and recognized in the financial

statements in respect of Employee Benefit Scheme:

Particulars Gratuity Leave Encashment

I- Expenses recognised in the statement of Profit & Loss a/c for the year ended 31st,March 2008

1 Current service cost 86.62 45.142 Interest cost 241.27 79.943 Employee contributions - -4 Expected return on plan assets 118.80 64.195 Actuarial (gains)/losses - 6 Past Service cost - 7 Settlement cost - 8 Losses/(gains) on acquisition/divesture - 9 Total Expenses 209.09 60.89II Net Asset/(liability) recognised in the Balance sheet as at March 31st, 2008.

1. Opening Net Liability 2244.73 483.222. Unrecognised Transitional Liability 1795.78 386.573. Expenditure during the year 209.09 61.944. Contribution paid 450.19 158.595. Closing Net (Asset/Liability) (207.85) -III - Change in obligation during the year ended March 31st, 2008

1. Present value of defined benefit obligation at the beginning of the year

3216.94 1065.86

2. Current Service cost 86.61 45.143. Interest cost 241.27 79.944. Settlement cost - -5. Past service cost - -6. Employee contributions - -7. Liabilities assumed on acquisition/(settled on divesture)

- -

8. Actuarial (gains)/losses (220.02) (111.31)9. Benefits payments 281.86 107.8710.Present value of defined benefit obligation at the end of the year

3042.94 971.75

IV- Change in assets during the year ended March 31st, 2008

1. Plan assets at the beginning of the year 1085.44 627.522. Assets acquired on Amalgamation in previous year 3. Settlements - -4. Expected return on plan assets 118.80 64.195. Contributions by Employer 450.19 1158.586. Actual Benefit paid 281.86 107.877. Actuarial gains/(losses) 8. Plan assets at the end of the year 1372.57 742.42


V-The major categories of plan assets as a % of total plan Qualifying insurance policy: 100% VI-Actuarial Assumptions:

1. Discount rate 7.50% 2. Expected rate of return on plan assets 9.35%

3. Salary escalation 5.00%

20. During the year, the company has made provision for the employee benefits in accordance with the Accounting Standard – 15 (Revised) regarding employees benefits with effect from 1-4-2007. Consequent upon the change the transitional liability on adoption of AS-15 (Revised) has been recognised as an expenses on straight-line basis over the period of Five years. Total transitional liability as on 1.4.2007 works out to Rs. 2727.95. Amount recognised as expenditure and amount remained unrecognised as liability works out to Rs. 545.59 and Rs. 2182.36 respectively. Due to above change profit for the year has been deflated by Rs. 207.84 lacs.

21. Earning per Share has been computed as under (AS-20): Net Profit 597.51 (387.74) Weighted average no. of Equity Share 1195500 (1195500) Outstanding (1195500) Earning per Share (Rs.) Basic & diluted Face value of Rs.1000/- per Share 51.11 (32.43)


22. Cashflow statement- Particulars 31.03.08 31.03.07 Rs.in Lacs Rs. In Lacs Cash flow from operating activities Net profit/(Loss) Before Tax and prior period adjustments 960.09 609.40 Adjustment for : Depreciation 324.68 370.32 Interest Income (372.26) (294.25) Profit on sale of assets (24.97) (40.01) Govt. Grant written back (16.48) (16.49) Deferred Revenue Expenses Written off 2.22 124.56 Operating profit before working capital changes 873.28 753.53 (Increase)/ Drecrease in Sundry Debtors (980.05) (177.00) (Increase)/ Decrease in inventories / Work in Progress 140.39 (486.57) Increase /( decrease )in Current Liabilities & Provisions 686.24 427.23 (Increase)/Decrease in Current Loans & Advances (268.00) (69.07) Cash inflow / (Outflow) from operating activities before Tax and prior period adjustment 451.86 448.12 Prior period adjustment (3.65) (5.28) Income Tax (449.64) (528.52) Fringe Benefit Tax (17.50) (16.80) Net Cash inflow / (Outflow) from operating activities (A) (18.93) (102.48) Cash Flow from Investing Activities Purchase of Capital assets (307.66) (458.44) Proceeds from sale of Assets 26.49 62.99 Interest Received 372.26 294.25 Net Cash inflow / (Outflow) from Investing Activities (B) 91.09 (101.20) Cash Flow from Financing Activities Increase in Share Capital* Borrowing from Bank (Cash Credit ) Loan received from Govt. Repayment of Loan (Govt.) Repayment of Loan (Cash Credit) Interest paid Repayment of Loan(others) Net Cash inflow / (Outflow) from Financing Activities (C ) Net Increase /(Decrease) in Cash / Bank Balance [ A+B+C] 72.16 (203.68) Cash & Cash equivalent at the beginning of the year (Refer Sch. "H") 5221.61 5425.29 Cash & Cash equivalent at the closing of the year (Refer Sch. "H") 5293.77 5221.61 NOTES : 1. Cash Flow Statement has been prepared under the indirect method as set out in the AS-3 (Revised) issued by the Institute of Chartered Accountants of India.


23. Segmentwise information as prescribed by AS - 17 is given below: Particulars Exploration Mining Other Unallocable Total

Activities Enterprise Income From Works 7742.91 872.32 312.22 - 8927.45 [including Accretion/(Decretion) to WIP] (6751.10) (1051.09) (294.43) (8096.62)Other Income - - - 518.79 518.79 - - - (432.10) (432.10)Total Income 7742.91 872.32 312.22 518.79 9446.24 (6751.10) (1051.09) (294.43) (432.10) (8528.72) Identifiable Operating Expenses 5136.44 610.15 336.11 - 6082.70 (4808.24) (628.41) (332.38) - (5769.03) Other Expenses - - - 1983.06 1983.06 (1586.70) (1586.70) Depreciation 272.03 7.52 4.49 41.16 325.20 (310.95) (9.09) (4.61) (42.88) (367.53)

Write off - - - 2.81 2.81 - - - (148.74) (148.74)

Interest - - - - - - - - - - Provisions - - - 92.38 92.38 - - - (47.32) (47.32)Total Cost 5408.47 617.67 340.60 2119.41 8486.15 (5119.19) (637.50) (336.99) (1825.64) (7919.32)Profit/(loss) for the year 2334.44 254.65 (28.38) -1600.61 960.09 (1631.91) (413.59) (42.56) (-1393.54) (609.40) Prior Period Adjustment -3.65 -3.65 (-5.28) (-5.28) Extra Ordinary Item 0.00 0.00( Waiver of interest on Govt. loan) (5884.05) (5884.05) Income Taxes 345.38 (530.70) Profit/(loss) 611.06 (5957.47)Other Information Segment Assets 1. Fixed Assets 1140.10 1.96 38.11 976.56 2156.73 (1127.28) (8.87) (42.12) (996.97) (2175.24) 2. Other Assets 4318.90 295.55 103.04 6189.39 10906.88 (3545.48) (382.15) (229.39) (5570.04) (9727.06)Total Assets 5459.00 297.51 141.15 7165.95 13063.61 (4672.76) (391.02) (271.51) (6567.01) (11902.30) Segment Liabilities 245.80 23.40 15.75 1595.55 1880.50 (264.20) (27.02) (12.56) (890.48) (1194.26)Notes: The Company has considered Business Segment as the segment for disclosure. The activities included in each of the reported segment are as under: * Exploration activity includes Drilling, Geology and Geo-physical logging and Laboratory. * Mining activity includes Exploratory / Developmental Mining . * Other Activities includes Coal Sampling & Stone Ballast.


24 Balance Sheet Abstract and Company’s Business Profile. Registration Details

Registration No. 16078 State Code 11 Balance Sheet Date 31-03-2008 Date-Month-Year

Capital raised during the year (Amount in Rs. lacs) Public issue Rights issue Nil Nil Bonus issue Private placement Nil Nil

Position of Mobilisation & Deployment of Funds (Amount in Rs. lacs)

Total Liabilities Total Assets 14090.37 14090.37 Paid up Capital Reserves & Surplus (Deferred Govt. Grant)

Source of Funds 11955.00 141.88 Secured Loans Unsecured Loans Nil Nil Deferred Tax Liability 112.99

Application of Funds Net fixed Assets Investments 2156.73 Nil Net Current Assets Accumulated Losses 9026.38 1008.97 Misc. Expenditure 17.79

IV. Performance of Company(Amount in Rs. lacs) Turnover* Total Expenditure 9446.24 8486.15 Profit/(Loss) Profit/(Loss) Before tax after tax 956.44 611.06 Earning per Dividend rate % Share . Nil 51.11 *Includes other income

V. Generic Names of Principal Products/Services of Company(As per monetary terms)

Item Code No.(ITC Code) 980 100 04 Product Description Mining Project Item Code No.(ITC Code) 980 100 05 Product Description Project for Exploration Item Code No.(ITC Code) 980 100 09 Product Description Other Projects.


25. Government of India while conveying approval of financial restructuring and wage

revision of MECL employees vide letter no. 40(1)/2004-MI(Vol III) dt. 8.8.2006 stipulated certain physico-financial targets for the year 2006-07 for payment of wage revision arrears of 2003-04 & 2004-05. The company has achieved physico-financial target of 2006-07 and accordingly, arrears of wage revision for two years amounting to Rs. 1043.34 has been paid during this year with the approval of the Government.

26. The company has Fund based limit for Demand Cash Credit and Non fund based

limit for Bank Guarantee and Letter of Credit from SBI, Nagpur against hypothecation of inventories, work in progress and book debts and equitable mortgage of Land & Building situated at Seminary Hills. Nagpur.

27. The impact of significant events occurring after the Balance Sheet date and the

approval thereof is given effect to either by modification to the Balance Sheet and Profit & Loss Account or by specific mention in the Directors Report.

28. Previous year figures have been regrouped, rearranged and shown in brackets

wherever necessary. As per our report of even date for Aurangabadkar & Co. Chartered Accountants [ASHISH M. JOSHI] [BISWAJIT DORA] Partner Company Secretary Mem No.106298

[C.P. GUPTA] [DR. A.K.LOMAS] Director (Finance) Chairman-cum-Managing Director

Place: Camp, New Delhi Date: 22.5.2008

mineral exploration corporation limited · the company has registered 2,05,860 m of drilling which...

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