Annual Report 2012-13 Cover final - Bharat Sanchar Nigam...

Annual Report2012 - 2013

BHARAT SANCHAR NIGAM LIMITED(A Govt. of India Enterprise)

Regd. Office : Bharat Sanchar Bhawan, H.C. Mathur Lane, Janpath, New Delhi-110 001

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Annual Report 2012-13

13th ANNUAL REPORTFor the Financial Year ended 31.3.2013

BHARAT SANCHAR NIGAM LIMITED


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CONTENTS

DETAILS PAGE NO

CMD and the Board of Directors 05 – 07

Vision and Mission 09

Chairman and Managing Director’s Message 10 – 11

Directors Report 12 – 26

Management Discussion and Analysis Report 27 – 29

Report on Corporate Governance 30 – 50

Financial Statements [Balance Sheet, P & L Account, Cash Flow Statement, Notes forming part of the Financial Statements]

52 – 91

Auditor’s Report 92 – 127

Addendum to Directors Report 128 – 138

Comments of the Comptroller and Auditor General of India on the Accounts 139 – 141

Replies of the Management to the Comments of the Comptroller and Auditor General of India on the Accounts

142 –143


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Chairman and Managing Director

SHRI R.K. UPADHYAY


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Board of Directors

Shri A.N. Rai Director (Enterprise)

Shri Anupam Shrivastava Director (CM) (Wef 1.6.2013)

Shri K.C.G.K. PilaiDirector (Finance)

Shri N.K. GuptaDirector (CFA) [Wef 1.6.2012]

Shri Shahbaz AliGovernment Director

Ms. Rita A.Teaotia,Government Director

Shri Ajai Vikram SinghDirector Chairman, Remuneration Committee of the Board

Prof. N. BalakrishnanDirectorChairman, Audit Committee of the Board

Shri Rajesh Wadhwa Director (CFA) [Upto 31.5.2012]

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Shri R.K. Agarwal Director (CM)(upto 30.4.2013)

Shri Ashish Guha Director, (upto 20.5.2013)

Registered and Corporate Office:

Bharat Sanchar Bhawan, H.C.Mathur Lane, Janpath, New Delhi-110 001

Statutory Auditors:

Walker Chandiok & Co., L-41 Connaught Circus, New Delhi-110001

Company Secretary

Shri H.C.Pant, Company Secretary & Sr.GM(Legal)

Bankers

State Bank of India, Punjab National Bank, ICICI Bank, Indian Bank, HDFC Bank, Canara Bank, Union Bank of India, Corporation Bank, IDBI Bank, Oriental Bank of Commerce, Indus Ind Bank

OUR BUSINESS

Consumer Mobility

-GSM 2G, GSM 3G, WiMAX, CDMA Mobile, CDMA Fixed and CDMA Data Card Servic-es to individual and corporate customers

Consumer Fixed Access

-Telephone Lines, Intelligent Network Services, PCOs, PRI/BRI/Dial-up Internet and host of oth-er services to individual and corporate cus-tomers

Broadband Services

-Landline Broadband, 3G Mobile Broad-band, WiMAX Broadband, Dial up Internet, Fiber Broadband(FTTH) and CDMA Broad-band (EVDO) Services to individual and corporate customers

Enterprise Business

-Enterprise Voice and Mobility, Internet Data Centre Services, Enterprise Data Services, En-terprise Broadband, Managed Services and host of other Enterprise Business Solution Ser-vices to Enterprise customers


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Cost Auditors:

Name of the Cost Audit Firm Name of the Circle

S.K.Bhatt & Associates Central Auditor

Narasimha Murthy & Co AP

S.C.Mohanty & Associates Chattisgarh

K.Suryanayanan & Associates TN and Kerala

M.Krishnaswamy & Associates Chennai Phones and Karnataka

Rohit & Associates Gujarat, Haryana and Maharashtra

Jaso & Co Jharkhand

A.C.Dutta & Co Kolkatta Phones and Andaman and Nicobar [2nd Preference for A & N]

Bandyopadhyaya Bhaumik & Co NE II Circle

Niran & Co Orissa Circle

R.M.Bansal & Co J & K, Punjab and UP[E]

KG Goyal & Co Rajasthan

A.J.S. & Associates Bihar , Assam and NE-I

Aman Malviya & Associates Uttarakhand

Dhananjay V.Joshi & Associates Madhya Pradesh

Chatterji & Co West Bengal

K.B.Saxena & Associates UP(W)

Balwinder & Associates Himachal Pradesh

Mou Banerjee & Co A & N Circle [1st preference].

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VISION AND MISSION

VISION

Be the leading telecom service provider in India with global presenceCreate a customer focused organization with excellence in customer care, sales and marketingLeverage technology to provide affordable and innovative telecom services / products across customer segments

MISSION:

a) Be the leading telecom service provider in India with global presence• Generating value for all stakeholders – employees, shareholders, vendors & business

associates• Maximizing return on existing assets with sustained focus on profitability• Becoming the most trusted, preferred and admired telecom brand• To explore International markets for Global presence

b) Creating a customer focused organization with excellence in sales, marketing and customer care • Developing a marketing and sales culture that is responsive to customer needs• Excellence in customer service- friendly, reliable, time bound, convenient and courteous

servicec) Leveraging technology to provide affordable and innovative products/services across

customer segments• Offering differentiated products/services tailored to different service segments• Providing reliable telecom services that are value for money

d) Providing a conducive work environment with strong focus on performance• Attracting talent and keeping them motivated• Enhancing employees skills and utilizing them effectively• Encouraging and rewarding individual and team/group performance

e) Establishing efficient business processes enabled by IT• Changing policies and processes to enable transparent, quick and efficient decision

making• Building effective IT systems and tools

OBJECTIVES

• To be the Leading Telecom Services provider by achieving higher rate of growth so as to become a profitable enterprise.

• To provide quality and reliable fixed telecom service to our customer and thereby increase customers confidence.

• To provide customer friendly mobile telephone service, with focus on Value added service and data services, of high quality and play a leading role as GSM operator in its area of operation.

• Strategy for:I. Rightsizing the manpowerII. Providing greater customer satisfaction

• Contribute towards:I. Broadband customers base in India as envisaged in draft National Telecom Policy 2011.II. Providing broadband connectivity to 2.5 lakhs Village Panchayats as per Government

policy• To leverage the existing infrastructure of BSNL for facilitating implementation of other government

programmes and initiatives particularly in the rural areas.• To look for the opportunity of possible expansion of BSNL footprint globally by exploring international

telecom developing markets such as Africa.


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Dear Shareholders,

With great pleasure, I extend a warm and hearty welcome to all of you in the 13th Annual General Meeting of your Company. Financial statements alongwith the Auditors Report is already in your hands.

The impact of the global slowdown in the economy had its impact on Indian economy too. Although the growth of the telecom sector in the past decade has been phenomenal, but the slow growth witnessed globally in the past two years did affect the sector. Despite the GDP growth of 5% in 2012-13, no significant growth waves were felt in the domestic economic sector. Telecom, although in service segment, did show some resilience to the external economy factors; and thus, emerged as one of the key players showing better performance.

Depreciation of Rupee against US Dollar did effect the overall growth and expansion plans in the Indian Telecom sector - since most of the high-tech equipments, gears etc., are all imported – combined with increase in the Diesel prices – critical component of the operations at base stations/exchanges had shot up the operating costs.

PERFORMANCE DURING 2012-13

During the year 2012-13, the Company incurred a loss of 7884.44 Crore [Previous Year Rs.8850.70 Crore]. While the Income From Services is Rs.25654.81 Crore [Previous Year Rs.25982.13 Crore], Other Income was Rs.1473.08 Crore [Previous Year Rs.1951.37 Crore].

There was a reduction of 1.26% in Income from Services in comparison to previous

year, the Other Income reduced by 24.51%. There was a reduction of 2.88% in the Total Income in comparison with the previous year.

The Employee Remuneration and Office & Administration expense has shown an increase of 2.62% and 1.05%, respectively.

Your Company is operating in a very dynamic and highly competitive environment. Quest for higher market share and increased margins have propelled competitors to introduce new and innovative business models, thereby a business environment where the core competencies are becoming imitable and competitive advantages are short-lived. With its transparent and affordable tariff packages aiming for connecting the country and empowering the masses to bridge the digital divide, the ‘Brand BSNL’ touches the life-line of the bulk of the population of the country.

You will appreciate that the management tried relentlessly to arrest the fall in revenues by exploring innovative business approaches and models. To considerable extent, the BSNL Brand has regained the market confidence. Management is exploring various means to turn around the Company inter-alia, possibilities of monetizing of it’s land and building assets.

CORPORATE SOCIAL RESPONSIBILITY - BSNL IN NATION BUILDING

Being a pan-India service provider connecting the country, the Brand BSNL almost touches the life of every one in the country. BSNL always takes the lead in fulfilling its social obligations and nation

ChAIRMAN AND MANAGING DIRECTOR’S MESSAGE

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building during times of distraught. Wherever and whenever required, the communication networks are restored immediately. During the recent unprecedented natural calamity in Uttarakhand, your company ensured continued connectivity of the region with rest o the world by restoring communication networks in shortest possible time.

CORPORATE GOVERNANCE

Being the leading service provider closely associated with nation building, we always aspire to deliver the best and establish a long-term relationship with all our stakeholders. With the right workforce, strong ethical values and a well established systems and procedures, your company has a strong and well defined governance mechanism. Your Company has been implementing the Corporate Governance Norms for the Unlisted CPSEs issued by the Department of Public Enterprises wef 2008-09. Department of Public Enterprises have conferred “Excellent” grading for the year 2011-12 to your company for implementation of the Corporate Governance Norms.

OUR STRENGTh AND OUTLOOK

Since human resources are the core assets in any servie organization, your company is focused on enhancing the value of its human capital.

Your Company’s management aims to increase productivity of the employees and scalability of the business so that company can concentrate more in growth areas like Consumer Mobility and Data Businesses.

We believe that organic growth drives the greatest value creation for our stakeholders. We aim to lead in the sector, by being profitable and sustainable while also having a social purpose. We aim to be innovative and have initiated actions to adopt newer technologies. We already have planned to switch over to Next Generation Network System for our vast wire-line business.

Further, the communication services and products have become the catalyst in development activities of the nation. With focus of Government shifting to e-governance and e-delivery of services, Your Company sees a larger role to play in the coming days in nation building.

ACKNOWLEDGEMENT

On behalf of the Board of Directors and my colleagues at all levels of the organization, I would like to convey my sincere gratitude to Our Subscribers, Various Ministries and Departments of the Government of India – specially the DoT, the C & AG of India, Various State Governments and the employees for their continued cooperation and invaluable support.

We look forward to your continued support.

R.K. UPADhYAYChAIRMAN AND MANAGING DIRECTOR


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DIRECTOR’S REPORT

Dear Members,

Your Directors have great pleasure in presenting the 13th Annual Report of your company, alongwith the Audited Statement of Accounts, Auditors’ Report and Comments and Review of the Comptroller and Auditor General of India, on the Accounts for the financial year ended March 31, 2013.

FINANCIAL PERFORMANCE

The financial performance for fiscal 2012-13 is summarized as below:-

SNo Details 2012-13(Rs. In Lakhs]

1 Income from Services 2565481

2 Other Income 147308

3 Expenditure [excluding Interest and Depreciation] 2621253

4 Profit before Interest, Depreciation and Tax [EBIDTA] [1+2-3] 91536

5 Depreciation 833643

6 Interest 35147

7 Profit/(Loss) before prior period adjustment [4-(5+6) ] (777254)

8 Prior period adjustments (18282)

9 Profit / Loss before Tax [ 7 + 8] (795536)

10 Provision for Deferred Tax 7092

Tax Provision for the Year -

Tax Provision for the earlier years -

Wealth Tax*

11 Net Profit / Loss for the Year [9 – 10] (788444)

*Wealth Tax for the current year Rs.85 lacs which is included in the Admn., operating and Other Expenses.

During the year 2012-13, the Company incurred a loss of Rs.7884.44 Crore.

DIVIDENDS AND BORROWINGS

In view of the losses suffered by the Company, Your Directors do not recommend any dividend for the year.

During the year under review, your company borrowed Rs.1698.0903 crore from Union Bank of India and Rs.863.0500 crore from Corporation Bank. Loan amount of Rs.1320.4725 borrowed during the previous year was repaid to Union Bank of India. The loan balance as on 31.3.2013 stood at Rs.2561.1403 crore.

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INVESTMENTS

No new investments were made by your Company during the year 2012-13.

MEMORANDUM OF UNDERSTANDING [MoU] WITh ThE DEPARTMENT OF TELECOM

In compliance with the guidelines for “MoU Signing and Monitoring Mechanism” issued by the Department of Public Enterprises, Government of India, Your Company has been signing the MoU with the Department of Telecommunications since 2004-05.

PhYSICAL PERFORMANCE

Your Company has so far been emphasizing on organic growth. Each year brings new challenges and 2012-13 was no exception.

Physical performance during the financial year 2012-13 vis-à-vis the targets is as follows:-

SNo Item Unit MoU Target for

12-13

Status as on

31.3.2012

Status as on

31.3.2013

Net achievement

during 2012-13

%age of achievement

against annual target

1 Total Telephone connection

Lakh Conn

100.00 1,209.81 1,216.53 6.72 6.72

1(a) Wireline “ 0.00 224.68 204.46 -20.22 -

1(b) WLL “ 0.00 40.04 27.02 -13.02 -1(c) Mobile “ 100.00 945.09 985.05 39.96 39.96

2 Total switching capacity

Lakh Lines

75 1,251.58 1,248.97 -2.61 -

2(a) Wireline “ 0.00 424.36 398.58 -25.78 -

2(b) WLL “ 0.00 88.31 85.19 -3.12 -

2© Mobile “ 75 738.91 765.82 26.91 31.88

3 VPT Nos - 577,131 577,882 - -4 Broadband Lakh

Nos75 -

4(a) Wireline (ADSL)

Lakh conns

30 Lakhs 89.15 99.28 10.13 34.134

4(b) FTTH Nos 4,143 11,445 7,302

4(c) EVDO connection

Nos 45,00,000 108,388 101,538 -6,850 0.941

4(d) Wimax connection

Nos 36,110 85,329 49,219

5 Broadband capacity

Lakh Ports

3.2 93.05 100.18 7.14 -

6 OF Cable Route Kms

30,000 698,428 719,935 21,507 71.69


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SERVICES AND PLANS

Your Company is committed to its mission and objective to provide telecom services at affordable tariffs to the country, having 121.65 million customers connected across the country as on 31st March 2013. Apart from covering 1259 cities with 3G services, all the 2G customer services have been upgraded to 3G platform.

MOBILE SEGMENT

Your Company has covered all the District Headquarters of the country with GSM services; and, plans to cover the villages having population of 1000 in the coming year subject to techno-commercial viability. To meet the capacity requirement for augmentation of GSM services, Phase VII expansion project aims to add 15 Million Lines.

A glimpse of GSM coverage of your company, as on 30.4.2013 is as follows:-

SNo Parameter Total Covered % Coverage1 District Headquarters 632 632 100.00

2 Block Headquarters 6,210 6,165 99.283 Villages 5,93,601 4,06,811 68.534 National Highway(Km) 64,374 5,84,477 90.795 State Highway(Km) 1,39,865 97,527 69.736 Railway Route(Km) 55,414 46,105 83.207 Area(Sq.Km) 32,83,762 18,37,885 55.978 Population(In lakh) 12,261 7,320 59.70

WIMAX & CDMA SERVICES

Commencing from 2010, to take the first mover advantage and extend rural broadband coverage, your company has been rolling out WiMAX services apart from wireline broadband services. In Kerala and Pubjab Circles, urban WiMAX has also been deployed for providing coverage to all major cities.

FIBRE TO hOME(FTTh)

To cater to the demand for high bandwidth services, your company has started rolling out FTTH services (GPON & GE-PON) from the year 2010 onwards. Over 160 cities have already been covered by FTTH services.

FIXED ACCESS SEGMENT

WIRE-LINE CONNECTIONS

During the 12th Five Year Plan period, Your Company aims to ensure that the entire wireline customer base network is IP enabled. Your company has already replaced existing billing/commercial system for PSTN services by CDR based convergent billing system and customer care project.

Induction of IP TAXs in the BSNL network replacing old TDM(Time Division Multiplex) TAXs

As part of modernization and up gradation of the fixed line network, Your Company has inducted Softswitch based IP TAXs (NGN Class-4) in its network for handling long distance trunk calls (National and International calls). Installation and commissioning of IP TAX equipment (2212 Kilo circuits) has been completed in North, South and East Zones.

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Replacement of Circuit Switched equipments / Digital Telephone Exchanges by NGN

Next Generation Network equipment based on the latest architecture is planned to be deployed gradually to replace the entie TDM/Digital telephone Exchanges(OCB, EWSD, AXE and 5ESS TDM types).

Migration of C-DOT TDM Switches to NGN C-5(C-DOT MAX NG)

As part of encouraging indigenous development of technology which is being developed by C-DOT, the process of migrating C-DOT TDM technology exchanges with NGN solution has begun. This will result in reduction of operational cost alongwith ease of induction of new value added services to the landline customers.

Closure of Telegraph Services

Due to availability of better technological alternatives such as SMS in Wireless Mobile services and spread of internet, the telegraph service had become purely loss-making operations. Therefore, keeping in view the commercial interest of the company, your Board of Directors decided to close the telegraph services.

VALUE ADDED SERVICES

Your Company is focusing on providing latest and innovative value added services/features to its esteemed customers. At present, customers are being provided value added services like Games on Demand, Music & Video on Demand, Video tutoring, Voice & video over broadband(VVoB) etc. After shifting to NGN, enhanced Value added services like PRBT, Broadband Vas, Multi Media conferencing, Video Conferencing, IPTV & IP Centrex etc., may become realities in the networks of your company.

Shri Kapil Sibal Hon’ble Minister of Communications and Information Technology launching BSNL video telephony service in southern India at Bharat Sanchar Bhawan Janpath New Delhi on 11.02.2013.With him in picture are Shri R.K.Upadhayay CMD BSNL,Shri N.K.Gupta Director(CFA),A.K.Garg CMD MTNL and other

dignitaries.


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BROADBAND SERVICES

Advancement in technologies and demand and growth of on-line services in the travel, insurance and purchases have fuelled the demand for broadband services. Shift of consumer preference to data over voice – increased use of Mobile Broadband - has revolutionized the very nature of the network. Sensing the business opportunities, your company has increased minimum download speed to 512 Kbps. Your Company has covered over 1.69 lakh villages with Broadband services; and, the customer base as at 31.3.2013 stood at 10.13 Million. Your company plans to reach 17.50 Million customers by the year 2017. A glimpse of Broadband coverage of your company, as on 30.4.2013 is as follows:-

SNo Parameter Total Covered % Coverage1 District Headquarters 632 628 99.372 Block Headquarters 6,210 6,003 96.673 Cities 4,629 4,417 95.424 Villages 5,93,601 1,69,201 28.50

BSNL was awarded with Best Broadband Operator by Tele.Net for the year 2013.Shri R.K.Upadhyay CMD BSNL receiving award form Shri Alok Brara Publisher & smt. Shampa Bahadur (Editor) of Tele.Net.Image

ENTERPRISE BUSINESS

The Enterprise vertical formed in 2009 caters to the business needs of Enterprise customers segmented in three categories of Platinum, Gold and Silver. To provide focused attention, at eight major cities, the Platinum offices cater to the Platinum group, which are headed by GM level officer. To take care of the Gold, Silver and all other Enterprise customers, separate Enterprise Business Groups have been carved out in the Circles. This segment is growing at a rate of 20%.

ILD OPERATIONS

Your Company has been offering various ILD Services, with total monthly incoming and outgoing traffic for voice in terms of minutes are around 500 Million and 20 Million respectively. To cope with the ever increasing volume of traffic, your company also plans to have more interconnection, NNI and ITFS agreements in 2013-14.

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Europe India Gate-way(EIG) submarine cable system

Your Company has become a consortium member of Europe India Gateway(EIG) submarine cable system as a non-landing party. The EIG cable was partially RFS (Ready for Service) providing EIG end to end connectivity from 14.1.2012 onwards.

Indo-Sri Lanka submarine cable network

The already commissioned the Bharat-Lanka submarine cable, on 50:50 JV basis is being used for ILD services with Foreign Carriers.

DEVELOPMENT OF RURAL TELECOM NETWORK

Your Company, being a pan-India service provider involved in nation building has been providing affordable telephone services across the far flung and inaccessible areas of the country. A glimpse of the rural coverage of your company as on 30.4.2013 is as follows:-

SNo Parameter Total villages Covered % Coverage

1 Village Public Telephones 5,93,601 5,78,023 97.38

2 GSM 5,93,601 4,06,811 68.53

3 CDMA 5,93,601 4,82,456 81.28

4 Broadband 5,93,601 1,69,201 28.50

CUSTOMER SERVICE

A glimpse of the fault repair service achieved during the year 2012-13 is as follows:-

Operational Parameter UNIT Nature of Parameter

MoU Target 12-13 [Very Good]

Achievement during 2012-13 (upto 31.3.2013)

Quality - Call completion ratei)STD %age Positive 53.50 54.40ii)Junction 62.00 56.46iii)Local 66.10 70.70Customer SatisfactionFault Rate per 100 telephone/month

%age Negative 4.75 5.11

Clearance of Fault on TelephoneOn same day %age Positive 80.20 74.78By following day 90.00 75.90

Within 3 days 96.00 93.53


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Operational Parameter UNIT Nature of Parameter

MoU Target 12-13 [Very Good]

Achievement during 2012-13 (upto 31.3.2013)

Provision of Services in Area on DemandNew connections within 7 days % age Positive 98.00 94.69 Shift within 3 days 96.00 86.27Inter-Exchange Shift within 5 days

95.00 43.72

QoS in GSM NetworkCall set up success rate in GSM network

% age Positive 95.00 97.80

Call drop in GSM network % age Negative 2.00 1.55

COMPUTERISATION AND IT

With the twin aims of customer retention and increased business volumes in the land line business, your company by using its IT assets i.e. CDR System has launched a Loyalty Management Scheme for Landline and Broadband customers wherein, loyalty is rewarded.

Further, to serve the needs of the Government of India and others, your company has launched world-class cloud computing services from Managed Cloud Platform(MCP) hosted at IDC Ahmedabad.

Shri R.K.Upadhyay CMD BSNL launches enterprise cloud computing services.

For the benefit of corporate customers having company’s land line and broadband facility in multi cities, PAN India E-stapling of bills i.e., All India One Bill facility has been launched.

During the year 2012-13, 3 Internet Data Centres of the Company located at Hyderabad, Bangalore and Cherthala became operational.

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TELECOM FACTORIES

Your Company’s Telecom Factories located at Kolkatta, Gopalpur, Kharagpur, Jabalpur, Richhai, Bhilai and Mumbai are in-house manufacturing units engaged in production of various telecom products. As on April 1, 2013, the strength of employees stood at 2522. During 2012-13, the production output of factories was Rs.143 crores.

The huge telecom factory assets of the company remained underutilized due to dependence on imported equipment which is substantially used for mobile services. Therefore, your Directors have decided to explore the possibility of monetizing this idle infrastructure by entering into appropriate arrangement with any prospective OEMs through a RFP.

hUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Directors strive to ensure that our employment policies meet relevant social, statutory and regulatory conditions and practices across the whole organization. Creating a workplace that endorses diversity and recognizes the generational differences of our growing multigenerational workforce remains a key priority for us.

Government of India, M/o Communications and IT, D/o Telecommunications Vide their Notification No.61-01/2012-SU, dated 10.6.2013, in partial modification of OM No.61-01/2009 dated 27.2.2009, conveyed the benefit of merger of 50% DA effectively amounting to 78.2% as on 1.1.2007 for the purpose of fitment in respect of the Board level and below Board level executives and Non-unionised supervisors and non-executives of the Company, from the date of issue of the order; and, no arrears will be paid and the revised fitment on the basis of DPE OM dated 2.4.2009 will be paid with prospective effect only. Your Company has issued orders for implementing the same.

Industrial relations have remained by and large cordial during the year under review.

TRAINING OF EMPLOYEES

Your Company’s state of the art training centres located across various places of the country are engaged in imparting various training programmes to Telecom and Telecom Finance Professionals. Against the MoU target of 4,24,826 man days, a total of 4,36,026 man days was achieved in the training segment.

On-line Certificate Courses

On-line certificate courses on seven modules have been launched on 25th February 2013 from the 17 training centres.

Lead Organisation for IPv6 Training Programmes

As part of National IPv6 Development Roadmap of Department of Telecommunications, your company has been earmarked as the lead organization for imparting training and awareness programmes across the country. IPv6 lab has already been set up at ALTTC Ghaziabad.

MEMORANDUM OF UNDERSTANDING [MoU] WITh ThE A.I.C.T.E.

In addition, your company has signed an Memorandum of Understanding with the Government of India All India Council for Technical Education(AICTE), with a aim to improve employability of youths across the country by providing state of the art telecom equipment based operational skills to the engineering graduates. The programmes aims to enhance their qualification, competence and employability.


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IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY

The Government’s guidelines on the implementation of the official language policy is followed scrupulously. Your Company has a full fledged official language Wing.

RESERVATION POLICIES OF ThE CENTRAL GOVERNMENT

Government policies with regard to reservations for various categories of employees in the matters of recruitments and promotions are being followed.

A glimpse of representation of Scheduled Caste, Scheduled Tribe, OBC, Ex-Servicemen, Physically Disabled employees and their representation as on 31.3.2013:-

Group Total No. of Employees

Scheduled Caste

Scheduled Tribe OBC Ex-Servicemen

Executive 49922 8010 2413 5746 112Non-Executive

202570 37291 10636 15502 548

Total 252492 45931 13049 21248 660

Category Executive Non-Executive Total

Blindness of low vision 0 31 31Hearing Impairment 7 27 34

Locomotor Disability or Cerebral Palsy 144 368 512

STAFF GRIEVANCES REDRESSAL MAChINERY

Your Company has established a Staff Grievancs Redressal Cell at the Corporate Office for looking into the grievances of the staff members. Similar cells have also been established at Circle/SSA levels.

COMPLAINTS COMMITTEE FOR REDRESSAL OF SEXUAL hARASSMENT AT WORK PLACES

In compliance with the guidelines of the Government on the subject, your Company has established a Complaints Committee at the Corporate Office and a at Circle/SSA level for looking into the complaints of employees regarding sexual harassment at work place.

CORPORATE SOCIAL RESPONSIBILITIES

The philosophy of Corporate Social Responsibility is very strongly imbedded in the operations of your company. Being a forerunner in this segment, your company has already established a robust and sound mechanism of serving the society. Despite incurring losses, your company’s commitment in this segment is significant. The losses have not affected the Welfare Schemes and Programmes designed and implemented under the aegis of the Sports and Welfare activities, Scholarships and Book Awards for the meritorious wards of the employees etc.

Your Company has an essential role in country’s telecom sector, by providing seamless connectivity efficiently and responsibly in remote and difficult terrains and far flung areas in the country. Your Company contribute to sustainable economic growth.

Even at the time of natural calamity/disasters, your company has been successfully providing

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connectivity against all odds. Your Company’s sustainability as a business is closely inter-twined with the well being of the subscribers located all across the world.

Your Company is committed to its motto of ‘connecting India’ even during worst ever disaster which struck the Uttarakhand in June 2013. Your company provided connectivity to the effected areas and the public in general. It was a unique initiative, wherein, two dedicated numbers viz., 1503 – for Uttarakhand and 919412024365 – for Others were put in place for providing the affected person’s last known location to the caller. Apart from this, also provided free communication services at all major relief centres, which were operational at Badrinath, Joshimath, Gaurikund, Gochar, Badkot, Uttarkashi, New Tehri, Dharchulla and helipads of Jollygrant and Sahstradhara. Further, the employees of your company also contributed their one day’s basic salary towards Prime Minister’s National Relief Fund as a relief to victims of natural disaster of Uttarakhand.

Shri R.K.Upadhyay CMD BSNL addressing on occasion of BSNL enterprise cloud computing services launch.

CONSERVATION OF ENERGY & TEChNOLOGY ABSORPTION

Being a service providing Company, these rules are not applicable to your Company. Being a leading telecom service provider of the country, Your Company is fully concerned regarding its responsibility for Environmental Protection and Energy Conservation.

FOREIGN EXChANGE EARNINGS AND OUTGO

Earned: - 9043 lacs

Used: - 16412 lacs

AWARDS AND ACCOLADES

Your Company was conferred the following Telecom Operator Awards-2013 instituted by the tele.net.in in the previous year:-

Best National Fixed Line Operator;

Best Long Distance Operator; and,

Best Broadband Operator.


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RIGhT TO INFORMATION

In line with the directions contained in the Right to Information Act 2005, Your Company has nominated CPIOs at the Corporate Office as well as the field units of the Company for providing information to citizens.

CORPORATE GOVERNANCE

Good governance contributes to the long-term success of a company. The corporate governance philosophy of your company is aimed to institutionalize policies and procedures that embrace the efficiency of the Management and inculcate a culture of accountability, transparency and integrity across the organization.

The Government of India’s directives for implementation of Corporate Governance Norms for the Unlisted CPSEs are being implemented since the Financial Year 2008-09.

All the Members of the Board; and, the Senior Management Personnel of the Company have affirmed compliance with the Company’s Codes of Conduct for the Members of the Board and Senior Management Personnel, respectively.

Your Company, acknowledging its corporate responsibility, has voluntarily obtained a certificate from M/s NC Pandey & Associates, Company Secretaries, regarding compliance of conditions of corporate governance as stipulated in the Guidelines on Corporate Governance for Central Public Sector Enterprises 2007, issued by the Department of Public Enterprises.

Management Discussion and Analysis Report, Report on Corporate Governance, together with the Certificate on compliance of conditions of corporate governance as stipulated in the Guidelines on Corporate Governance for Central Public Sector Enterprises 2007, and revised further vide No.18(8)/2005-GM, dated 14.5.2010, issued by the Department of Public Enterprises forms part of this Report and the requisite quarterly progress reports are being sent regularly to the Administrative Ministry.

Department of Public Enterprises have conferred “Excellent” Grading for the year 2011-12 to your company for implementation of the Corporate Governance Norms.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company hereby confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) that the Directors had selected such accounting policies and applied them consistently and made judgments 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) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors had prepared the annual accounts on a going concern basis.

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STATUTORY DISCLOSURES

None of the Directors of your Company is disqualified as per provision of Section 274(1)(g) of the Act. Your Directors have made necessary disclosures, as required under various provisions of the Act.

None of the employees of your Company is drawing remuneration exceeding the limits laid down under provisions of section 217(2A) of the Act read with Companies (Particulars of Employees) Rules, 1975.

DIRECTORS

In terms of Government of India, Ministry of Communications and IT, Department of Telecommunications order No. 2-3/2011-PSA dated 5.12.2011, the additional charge of Director(HRD) was entrusted to Shri A.N.Rai, Director(E), with immediate effect for a period of 3 months.

In continuation to the above, Government of India, Ministry of Communications and IT, Department of Telecommunications order No.1-4/2012-PSA dated 19.4.2012, entrusted the charge of office of Director(HRD) to CMD from 5.3.2012, for a period of three months.

Thereafter, vide order No.1-4/2012-PSA dated 19.6.2012, Government of India, Ministry of Communications and IT, Department of Telecommunications have entrusted the additional charge of Director(HRD) to Shri A.N.Rai Director(Enterprise) with immediate effect for a period upto 4.9.2012 or till a regular incumbent is appointed or until further orders, whichever is the earliest.

Government of India, Ministry of Communications and IT, Department of Telecommunications vide their Notification No.1-4/2012-PSA dated 27.2.2013 conveyed the ex-post-facto approval of the ACC for extension of the entrustment of the Additional charge of Director(HR) to Shri A.N.Rai Director(E) for a further period of 3 months beyond 4.9.2012. Government of India, Ministry of Communications and IT, Department of Telecommunications vide their Notification No.1-4/2012-PSA dated 13.2.2013 conveyed the ex-post-facto approval of the ACC for entrustment of the Additional charge of Director(HR) to Shri A.N.Rai Director(E) for a further period of six months beyond 4.12.2012 or till a regular incumbent is appointed or until further orders, whichever is earliest.

Thereafter, wef 4.6.2013, till the receipt of further orders from Department of Telecom, CMD was looking after the additional charge of the Director(HR). Government of India, Ministry of Communications and IT, Department of Telecommunications vide Notification No1-4/2012-PSA, dated 8.8.2013 conveyed the approval of ACC for extension of additional charge of the post of Director(HR) in favour of Shri A.N.Rai Director(Enterprise) for a period of six months beyond 4.6.2013 or till a regular incumbent is appointed or until further orders, whichever is earliest.

Government of India, Ministry of Communications and IT, Department of Telecommunications vide their Notification No. 1-11/07-PSA, dated 14.3.2013 conveyed the amendment of their earlier communication of even number dated 11.3.2010, regarding terms and conditions of the appointment of Shri R.K.Agarwal Director(CM). Accordingly, the term of appointment of Shri Agarwal will be for a period till the date of his superannuation i.e. 30.4.2013 or until further orders, whichever occurs earliest.

Pursuant to Government of India, Ministry of Communications and IT, Department of Telecommunications Notification No. 1-11/2007-PSA dated 30.4.2013, on attaining the age of superannuation, Shri R.K.Agarwal Director(CM) retired from service wef A/N of 30.4.2013.

Pursuant to Government of India, Ministry of Communications and IT, Department of Telecommunications Notification No. 1-3/2013-PSA, dated 31.1.2013 appointing Shri Anupam Shrivastava as Director(CM) in scale of pay of Rs.75,000-1,00,000/-[IDA] scale for a period of five


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years from the date of assumption of charge of the post on or after 1.5.2013, Shri Shrivastava assumed the charge of office of Director(CM) wef 1.5.2013.

Consequent upon the completion of the three years tenure of the appointment on 20.5.2013, Shri Ashish Guha ceased to be Director wef 21.5.2013.

Your Directors place on record their deep appreciation of the valuable services rendered by Shri R.K.Agarwal Director(CM) and Shri Ashish Guha Director, during their association with the Company.

AUDIT COMMITTEE

The Audit Committee of the Board comprised of Shri Ashish Guha Director, as Chairman and Shri R.K.Agarwal Director(CM) and Shri Shahbaz Ali Government Director as Members. Subsequently, the Board in its 143rd meeting held on 28.8.2012 inducted Prof.N.Balakrishnan Director, as Member of the Audit Committee. The Committee in its 46th meeting elected Prof.Balakrishnan as Chairman of the Committee. Consequent upon the cessation of Directorships of Shri Ashish Guha Director and Shri R.K.Agarwal Director(CM), the Board, in its 148th meeting held on 14.6.2013 re-constituted the Committee.

At present, the Committee has Prof.N.Balakrishnan, Non official Part Time (Independent) Director as Chairman; and, Shri Ajai Vikram Singh Non official Part Time (Independent) Director, Shri Shahbaz Ali Government Director and Shri Anupam Shrivastava Director(CM) as Members. Shri K.C.G.K.Pillai Director(Finance) is the Regular Invitee and Shri H.C.Pant the Company Secretary & Sr.GM(L) is the Secretary of the Committee.

AUDITORS

M/s Walker Chandiok & Co., Chartered Accountants, New Delhi were appointed as Statutory Auditors of the Company by the Comptroller & Auditor General of India. In addition to the Statutory Auditors 46 Branch Auditors for 47 circles were also appointed for the year 2012-13. The Report of the Statutory Auditors and the comments of the Comptroller and Auditor General of India, alongwith replies of the Management thereto are attached as Addendum forming part of this Report.

COST AUDITORS

Pursuant to the directions of the Government of India, Ministry of Corporate Affairs, Cost Audit Branch for Cost Audit of the Telecommunication Companies by the Cost Accountants, Your Company has appointed the following Cost Auditors for carrying out the Cost Audit of the Company for the years 2011-12 and 2012-13.


S.K.Bhatt & Associates Central AuditorNarasimha Murthy & Co AP S.C.Mohanty & Associates Chattisgarh K.Suryanayanan & Associates TN and KeralaM.Krishnaswamy & Associates Chennai Phones and KarnatakaRohit & Associates Gujarat, Haryana and MaharashtraJaso & Co JharkhandA.C.Dutta & Co Kolkatta Phones and Andaman and Nicobar [2nd

Preference for A & N]

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Bandyopadhyaya Bhaumik & Co NE II CircleNiran & Co Orissa CircleR.M.Bansal & Co J & K, Punjab and UP[E]KG Goyal & Co RajasthanA.J.S. & Associates Bihar , Assam and NE-IAman Malviya & Associates UttarakhandDhananjay V.Joshi & Associates Madhya PradeshChatterji & Co West BengalK.B.Saxena & Associates UP(W)Balwinder & Associates Himachal PradeshMou Banerjee & Co A & N Circle [1st preference].

The Cost Audit Report for the Financial Year 2011-12 was filed with the MCA, Registrar of Companies on 12.7.2013.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their sincere appreciation and gratitude to the subscribers of Company’s telecom services, the stakeholders, and bankers and to all the State Governments and regulatory agencies for their continued cooperation and invaluable support. Your Directors express their deep appreciation for the hardwork and dedicated efforts put in by the employees and look forward to their continued contribution in achieving the mission and objective of the Company. Your Directors would like to place on record their hearty appreciation to all the employees of the Company for their performance.

For and on behalf of the Board of Directors,

Sd/- [R.K.UPADHYAY]

CHAIRMAN AND MANAGING DIRECTORPlace : NEW DELHIDated : 30.09.2013


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DECLARATION BY THE CHAIRMAN AND MANAGING DIRECTOR REGARDING COMPLIANCE WITH THE CODE OF CONDUCT BY THE BOARD MEMBERS AND THE SENIOR MANAGEMENT PERSONNEL OF THE COMPANY DURING THE FINANCIAL YEAR 2012-13

I, R.K.Upadhyay, Chairman and Managing Director Bharat Sanchar Nigam Limited, do hereby declare that all the Members of the Board and the Senior Management Personnel of the Company have affirmed their compliance of the Code of “Conduct for Board Members and the Senior Management Personnel” during 2012-13

Sd/--[R.K.UPADHYAY]

CHAIRMAN AND MANAGING DIRECTORPlace : NEW DELHIDated : 16.9.2013

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MANAGEMENT DISCUSSION AND ANALYSIS REPORT

&REPORT ON CORPORATE

GOVERNANCE


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MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENTS

In the last decade, the Telecom Sector significantly contributed to social economic development of the country and also attained the stature of a dynamic parameter in measuring growth in Indian economic scenario. Being the Second largest telecom network of the world, impact of the telecom sector, its growth and significance in nation’s economy play a pivotal role. Gradual shifting of service delivery in e-mode by the Government and other players had turned the sector as key player in most of the sectors.

Emergence of the telecom sector as key development catalyst, the services assuming importance as the last mile in e-service delivery programmes demand active leverage of the sector to derive maximum mileage.

In the above scenario, Low rural teledensity and low penetration of internet in the country pose a strong business case for the ICT Sector to chase growth.

MAJOR REGULATORY DEVELOPMENTS/ChALLENGES

The Telecom Regulatory Authority of India (TRAI), keeping in view the healthy growth of the sector, has issued various regulations in the previous year.

Entry of more advanced technologies and shifting of consumer’s focus from wired-line to wireless technology have already resulted in a huge user base. Further technological advancements and offerings in the ICT Sector foresee greater degree of convergence.

For taking maximum mileage of the advancement of technologies for nation’s growth, optimum utilization of the available spectrum will be required. Therefore, coming days foresee complete re-farming of the spectrum and new policies for optimum pricing and utilization of the spectrum including sharing of spectrum.

STRENGThS / OPPORTUNITIES/WEAKNESS/ThREATS

BSNL being the incumbent operator with strong network operations and core telecom professionals is ideally placed in the crowded ICT market. With abundant backhaul capacity and Copper and OFC linkages across the country, the Company has all the potentials of emerging as a key player in nation’s economic matrix.

Government’s thrust on e-delivery of services has opened a new vista of opportunity to the ICT Sector, for Broadband, M-VAS and other services.

But drastically falling call rates, cut-throat competition and huge investment in spectrum have upset the operating margins of the ICT sector.

OUTLOOK

Urge of the consumer for accessing various services such as Stock market data, Health, Education related and Entertainment has gradually shifted the focus to wireless segment; thus, the demand for M-VAS applications and service will grow manifold. Country is already witnessing a steady growth of on-line business transactions. Technological advancements will further push the demand and growth of internet/broadband segment in the coming years.

With broadband penetration, the market is expected to grow further, specially in rural areas, where teledensity and broadband penetration is low. Thus, a strong growth story is waiting to happen in the telecom sector, which will benefit the BSNL also.

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RISKS AND CONCERNS

INTERNAL CONTROL SYSTEMS AND ThEIR ADEQUACY

Being the successor of erstwhile Central Government Departments of Telecom Services and Telecom Operations, your company has a well defined and planned internal control systems and procedures commensurate with its size and operations. Internal checks are routinely carried out by the internal audit teams all over the country.

Apart from its own Internal Audit machinery, Your Company, being the Central Public Sector Enterprise, is subject to the Resident Audit Office scheme of the Director General of P & T Audit under the aegis of C & AG of India, CVC Mechanism and the Guidelines of the Department of Public Enterprises.

In accordance with the Guidelines on Corporate Governance Norms issued by the Department of Public Enterprises, the Audit Committee of the Board had discussions with the Statutory Auditors and the Internal Audit Teams and reviewed the Internal Audit Paras.

Further, pursuant to the directions of the Government of India, Ministry of Corporate Affairs, Cost Audit Branch for Cost Audit of the Telecommunication Companies by the Cost Accountants, Company has appointed 19 Cost Audit Firms – One Central Auditor and 18 Auditors for various circles spread across the country.

DISCUSSION ON FINANCIAL PERFORMANCE WITh RESPECT TO OPERATIONAL PERFORMANCE

During the year 2012-13, the Company incurred a loss of 7884.44 Crore [Previous Year Rs.8850.70 Crore]. While the Income From Services is Rs.25654.81 Crore [Previous Year Rs.25982.13 Crore], Other Income was Rs.1473.08 Crore [Previous Year Rs.1951.37 Crore].

There was a reduction of 1.26% in Income from Services in comparison to previous year, the Other Income reduced by 24.51%. There was a reduction of 2.88% in the Total Income in comparison with the previous year.

The Employee Remuneration and Office & Administration expense has shown an increase of 2.62% and 1.05%, respectively.

ENVORONMENTAL PROTECTION AND CONSERVATION, TEChNOLOGICAL CONSERVATION, RENEW-ABLE ENERGY DEVELOPMENTS, FOREIGN EXChANGE CONSERVATIONS

Although the rules are not applicable to your Company, which is a service provider, but, as a responsible corporate citizen, Your Company is fully concerned and committed as regards its responsibility for Environmental Protection. Therefore, all required measures for Energy Conservation and Use of Alternate / Renewable Energy Resources are being taken at all levels.

CORPORATE SOCIAL RESPONSIBILITYDue to losses, there was no separate budgetary allocation for CSR Programmes in 2012-13. The Company continued with its Employee / Family related Welfare Schemes throughout the year.

In addition, your company has signed an Memorandum of Understanding with the Government of India All India Council for Technical Education(AICTE), with a aim to improve employability of youths across the country by providing state of the art telecom equipment based operational skills to the engineering graduates. The programmes aims to enhance their qualification, competence and employability.

CAUTIONERY STATEMENT

These discussions are forward looking within the meaning of the applicable laws and regulations. Actual performance may deviate or vary from the explicit or implicit expectations.


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REPORT ON CORPORATE GOVERNANCE

The institution of Corporate Governance aims to align and integrate the stakeholders interest through a mechanism of controlled monitoring system. Cardinal principles of the Corporate Governance are imbedded in the core functioning of the BSNL.

With an highly institutionalized system aiming for transparency, disclosures, internal control, BSNL has already been complying with most of the codified norms, viz.-

Composition of the Board;

Complete following of Board procedure, specially, the Secretarial Standards laid down by the Institute of Company Secretaries of India;

Constitution of the Audit Committee of the Board with 2/3rd of the Members comprising of other than Whole-time Directors;

Clear cut demarcation of powers with Delegation of Financial and Administrative Powers to the Management Committee of the Board, CMD and the Functional Directors, and below Board-level executives;

Conduct, Discipline and Appeal Rules for the Employees and reporting systems;

Appointment of Statutory and Branch Auditors by the C & AG of India;

Audit jurisdiction of the DG P & T’s Resident Audit Office scheme,

Dedicated Internal Audit Set up;

Amenability with the Guidelines of Central Vigilance Commission;

Outside independent personnel as CVO;

Dedicated and full-fledged Vigilance set up across the units of the country;

Compliance of the Orders and Guidelines of the Government of India - Department of Public Enterprises, Administrative Ministry and host of other compliances.

With the introduction of Corporate Governance Norms for the Unlisted CPSEs by the Department of Public Enterprises, for achieving complete compliance, required changes/modifications have been put in place.

BOARD OF DIRECTORS

Size of the Board

Being a Government Company, the power to appoint or remove a Director vest with the President of India. The Article of Association provides that the minimum strength of the Board shall not be less than three (03) and the maximum at fifteen (15).

Composition of the Board

The Board comprise of 12 Directors, of which 6 [including the CMD] are whole time Directors; 2 Government Nominee Directors and 4 Non-official Part Time Directors. Thus, the Board has the optimum mix of 50% Whole-time and 50% part-time Directors. The composition is as per the Corporate Governance Norms for the unlisted CPSEs, laid down by the Department of Public Enterprises.

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The details of the composition of the Board of Directors is as follows:-

Whole-Time Directors [ 06 including CMD] [Position of Director(hRD) is vacant]

1. Shri R.K.Upadhyay, CMD [Wef 30.4.2012] [Additional charge of Director(HRD) vested with CMD between 5.3.2012 to 18.6.2012; and, thereafter charge vested with the Director(E) till 3.6.2013. Thereafter, till the receipt of further orders from the GoI, CMD looked after the charge of Director(HR). GoI DoT vide their letter dated 8.8.2013, conveyed the approval of ACC for extension of additional charge of Dir(HR) to Shri A.N.Rai Director(E) wef 4.6.2013 for a period of six months or till a regular incumbent is appointed or until further orders whichever is the earliest].

2. Shri R.K.Agarwal, Director [Consumer Mobility] [Upto 30.4.2013]

3. Shri Rajesh Wadhwa, Director[Consumer Fixed Access] [Upto 31.5.2012]

4. Shri A.N.Rai, Director [Enterprise] & * [HRD]

[* Additional charge vested with Shri Rai wef 5.12.2011 to 4.3.2012. Wef 5.3.2012 to 18.6.2012 additional charge vested with the CMD. Thereafter, Government of India, M/o Communications and IT vide order dated 19.6.2012 conveyed the approval of the competent authority for entrustment/extension of the additional charge of Dir(HR) to Shri A.N.Rai for a period upto 4.9.2012. Thereafter, GoI DoT vide order dated 27.2.2013 conveyed the ex-post-facto approval of the ACC for extension of the Additional charge of Dir(HR) to Director(E) for a further period of 3 months beyond 4.9.2012; which was followed by another ex-post-facto approval for a further period of six months beyond 4.12.2012.

Thereafter, w.e.f. 4.6.2013, till the receipt of further orders, from GoI, CMD looked after the additional charge of Dir(HR). GoI, MoC & IT, DoT, vide their order dated 8.8.2013 conveyed the approval of ACC for extension of the additional charge of Director(HR) to Shri A.N.Rai Dir(E) wef 4.6.2013 for a period of six months or till a regular incumbent is appointed or further orders, whichever is the earliest].

5. Shri K.C.G.K.Pillai, Director[Finance] [Wef 25.4.2012 – Before that charge vested with the CMD]

6. Shri N.K.Gupta, Director(CFA) [ Wef 1.6.2012]

7. Shri Anupam Shrivastava, Director(CM) [ Wef 1.5.2013]

Government Nominee Directors [ 02 ]

1. Shri Shahbaz Ali, DDG[TPF & A/cs ] in DoT [ Wef 14.2.2012]

2. Ms.Rita A.Teoatia, Additional Secretary(T) in DoT [Wef 04.09.2012]

Non-official Part-Time Directors [ 04] [ Two Positions are vacant]

1. Shri Ashish Guha, Director [Upto 20.5.2013]

2. Shri Ajai Vikram Singh, Director [ Wef 17.7.2012]

3. Prof.N.Balakrishnan, Director [ Wef 17.7.2012]

Shri R.K.Upadhyay, Chairman and Managing Director. [Director(Finance) Upto 24.4.12] & Director(hRD)* [*Wef 5.3.2012 to 18.6.2012, after which charge vested with Shri A.N.Rai Director(hR) till 3.6.13. Thereafter, wef 4.6.2013 till the receipt of further order dated 8.8.2013 conveying the approval of ACC for extension of the Additional Charge of Dir(hR) to Shri Rai


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Dir(E) wef 4.6.2013, CMD looked after the charge of Dir(hR) ]:- Shri Rakesh Kumar Upadhyay, joined BSNL as Chairman & Managing Director on 30 th April 2011. Shri Upadhyay is a B. Tech in Electronics Engineering from IT, Banaras Hindu University (BHU). He is also a graduate of Defence Services Staff College , Wellington and was awarded M.Sc.(DS) degree by Madras University . He has done MBA in Marketing Management from Indira Gandhi Open University. His career began in Department of Telecommunications in 1975 after his selection by UPSC for Indian Telecom Service. In DoT, he gained experience in areas of Planning, Installation and Commissioning, Commercial Administration and Operations. In October 1996, he proceeded on Deputation to TCIL, where he remained till August 1999. During his deputation, he successfully worked as Project Director in the Foreign Projects at Sana and as General Manager in Yemen. On return from TCIL, he worked in BSNL as General Manager in J&K Circle from January 2000 to June 2003. He was again selected for Deputation in TCIL in June 2003 where he was entrusted the job of Chief Project Director, Algeria, Group General Manager (New Technology) and Executive Director (Project Monitoring) and other important assignments. He took over the charge of Director (Projects), TCIL on 01.11.2005 and was subsequently selected as Chairman & Managing Director of TCIL.

Prior to assumption of the charge of CMD BSNL, he remained at the helms of TCIL from 1st March 2007 to 29th April 2011. During his tenure in TCIL he gained rich experience in the fields of Planning, Project Management, Operations and Business Development. In TCIL, he guided the successful implementation of many complex projects. Some of the notable projects are: Pan African e-Network Project – Providing Tele-Education and Tele-Medicine Services to 34 African Nations from seven Universities and 12 Super Specialty Hospitals of India; National Internet Backbone Project; SAARC e-Network Project; Optical Ground Wire Project over 3000 Kilometer Electrical Transmission Lines in live line conditions in Algeria. He has to his credit the turning around of TCIL as its CMD.

Shri R.K.Agarwal Director(CM)[Upto 30.4.2013]:- Shri Rakesh Kumar Agarwal has done his B.E. from Indian Institute of Science, Bangalore in 1973 and then M.Tech in Communications from IIT Delhi in 1975. Thereafter he joined Department of Telecommunications and worked in various fields of telecommunications. He did installation of C-400 Cross Bar Exchanges till 1983. He was sent to France for training for the installation of Digital Electronic Exchange of E-10B make in 1983 and thereafter worked as Deputy General Manager (Installation) for E-10B Exchanges in MTNL, Mumbai from 1983 till 1991. He was DoT representative for the System Selection Committee set up to finalise gateway switches for VSNL. During 1990 he represented India for APT Conference in Indonesia. He was also deputed as Project Director, TCIL to Sultanate-of-Oman from 1991 to 1996 where he handled all the projects related to setting up the external plant network for copper cable and Optical Fibre Network in Sultanate-of-Oman. From 1996-98 he worked as Chief General Manager, Andaman & Nicobar Telecom Circle and thereafter handled the charge of Jaipur Telecom District, Rajasthan from 1998-99. He was posted as General Manager (Development) in Pune in 1999 and was incharge of complete planning and installation of all switching and transmission network in Pune District. He was also in-charge of computerization as well as introduction of new services in the network in Pune. He was closely involved with planning, evaluation of tender as well as implementation and maintenance of GSM Mobile Services in Maharashtra since 2002. As Chairman of the Validation Committee he successfully carried out the validation of mobile switch for West Zone installed at Pune. He was in-charge of all the Central Platforms for GSM Mobile Services for West Zone installed at Pune namely pre-paid platform, billing system and value added services for mobile. Later on he finalized expansion of mobile network in West Zone for 4 million lines and was involved in the commissioning and maintenance of GSM Mobile Network. He was also closely involved with the setting up of Call Centre at Pune for handling Customer Care and Marketing of Mobile Services till May, 2006.In June, 2006, he was posted as Chief General Manager, BSNL Bihar Telecom Circle. He has taken over the charge of Director (Planning & New Services) in BSNL Board w.e.f. 11th April, 2008.

Shri A.N.Rai, Director[Enterprise] & (*hRD) [* Additional charge vested with Shri Rai wef 5.12.2011

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to 4.3.2012. Wef 5.3.2012 to 18.6.2012 additional charge vested with the CMD. Thereafter, Government of India, M/o Communications and IT vide order dated 19.6.2012 conveyed the approval of the competent authority for entrustment/extension of the additional charge of Dir(HR) to Shri A.N.Rai for a period upto 4.9.2012. Thereafter, GoI DoT vide order dated 27.2.2013 conveyed the ex-post-facto approval of the ACC for extension of the Additional charge of Dir(HR) to Director(E) for a further period of 3 months beyond 4.9.2012; which was followed by another ex-post-facto approval for a further period of six months beyond 4.12.2012. Thereafter, w.e.f. 4.6.2013, till the receipt of further orders, from GoI, CMD looked after the additional charge of Dir(hR). GoI, MoC & IT, DoT, vide their order dated 8.8.2013 conveyed the approval of ACC for extension of the additional charge of Director(hR) to Shri A.N.Rai Dir(E) wef 4.6.2013 for a period of six months or till a regular incumbent is appointed or further orders, whichever is the earliest]:- Shri A.N.Rai assumed the charge of office of Director(Enterprise) on 19.9.2011. Shri Rai, officer of Indian Telecommunications Service 1977 batch holds B.Tech Degree in electronics and communications Engineering from BHU Varanasi. Shri Rai, was actively associated with Installation, Commission and Maintenance of Switching equipments at various places in the country. He was also trained in Digital Telephone systems in various countries like UK, Germany and USA. As senior telecom management professional, he was involved with Development, Operation and Maintenance of Telecom Services at various places like Allahabad, Kanpur etc. As Deputy Director General at the Corporate Office, he handled Rural Networking and CMTS areas. Prior to the joining as Director(Enterprise), he was the Chief General Manager of Orissa Circle of the BSNL, which bagged the prestigious “Telecom Circle of the Year 2010-11 Award”.

Shri K.C.G.K.Pillai, Director(Finance) [ Wef 25.4.2012]:- Shri K.C.G.K.Pillai took over the charge of Director(Finance) on 25th April 2012. An MBA in Finance and Post Graduate in Political Science, Shri Pillai, an Officer of the Indian P & T Accounts and Finance Service-1981 batch, entered Government Service in 1982. Spanning over a career of 30 years in the P & T Accounts and Finance Service, he served in the Uttar Pradesh, Gujarat and Maharashtra Telecom Circles of the Department of Telecommunications; apart from a stint of over 7 Years in the MTNL ‘s Finance Wing. Possess vast experience of Budget, Banking, Treasury Management, Human Resources and Personnel Management and Procurement Finance. Before being appointed as Director(Finance), he was the Principal General Manager heading the Procurement Finance and Finance-Personnel units.

Shri N.K.Gupta Director(CFA) [ Wef 1.6.2012]:- Shri Naresh Kumar Gupta took over as Director CFA in BSNL on 1st June 20012. Shri Gupta is B.E. from Delhi College of Engineering (DCE), in Electronics and Communications. He joined the Department of Telecommunications, Government of India through Indian Telecommunications Services (ITS) Group A 1978 batch. Since then he has worked in various capacities in different units of DoT/TEC/BSNL/MTNL and has versatile experience covering almost all the fields in telecommunications including installation, operations, development and management of telecom networks, sales and marketing and financial management etc. Before joining as Director (CFA) on the BSNL Board, N K Gupta was working as Chief General Manager Punjab Telecom Circle in BSNL and prior to that he was heading the Information Technology division for CFA business unit of BSNL”. He in the capacity of DDG (I) TEC was instrumental in framing specifications and Network architecture against which BSNL and MTNL have implemented their broadband Networks. He has represented DoT in many committees of TRAI, DIT, and also in various Inter-Ministerial Committees like committee on preparing encryption policy, E-Commerce and Information Security working Group. He has widely travelled abroad and represented India in number of UN & ITU meetings including World Summit on Information Society in Geneva and other important assignments. He was an active member of Apex Committee involved in the planning and execution of NIB-II of BSNL and also framing the specification for ERP implementation in BSNL which is currently in progress. He was deeply involved in Pan-India Roll out of zonal OSS and BSS for Wire-line and Broadband segment which helped BSNL to changeover from decentralized 334 SSA level systems to 4 zonal data centres with implementation of world class COTS applications. N K Gupta is also


34

instrumental in conceptualizing BSNL entry in to the Data Center (IDC) Services business for opening up a new revenue stream by leveraging BSNL’s existing infrastructure with an innovative revenue share model. Presently BSNL is in the process of acquiring IDC business. As Director (CFA) BSNL, he is mainly responsible for improving the Systems and Methods to achieve optimal performance and maximum utilization of BSNL’s extensive country-wide Infrastructure and network. He is also responsible for achieving business interests of the Company by way of high customer satisfaction and timely provision of quality services in BSNL CFA segment. He is also responsible for induction & adoption of new technologies and committed to provide state-of-the-art modern and world class telecom services in the highly competitive environment.

Shri Anupam Shrivastava Director[CM] [Wef 1.5.2013]:- Shri Anupam Shrivastava is a 1981 batch of Indian Telecom Service (ITS) Officer who has around three decades of experience in the field of telecommunications. He is BE (Electronics & Communications) and is also MBA (Mktg.). He has taken telecommunication trainings in India & Japan. Shri Shrivastava joined BSNL Corporate Office as Director (CM) on 1st May, 2013 and is responsible for the growth of mobile business of GSM / CDMA / WIMAX in BSNL, including all activities related to Sales & Marketing, VAS, Tariff finalization & revenue. As Zonal Director for North Zone he is responsible for monitoring growth and maintenance of Telecom Network in 8 Circles. Prior to this assignment, Shri Shrivastava had held the post of Sr. GM, Ajmer TD where he gave special attention to Sales & Marketing of telecom products in the SSA which resulted in physical growth of connections in all segments and increased revenue for the SSA. Ajmer SSA was chosen for the pilot project for NOFN which was successfully completed ahead of target. His contributions in providing quality service to BSNL customers have been widely acknowledged and he strived to achieve benchmarks prescribed by TRAI / BSNL C.O. for various service parameters. Shri Shrivastava also worked as GM Jodhpur SSA and during his stint there he gave record number of mobile and landline connections with special emphasis on data and broadband business. He also has experience of working as GM (BB) in Rajasthan Telecom Circle with additional charge of Marketing and Enterprise Business. Shri Shrivastava also has overseas working experience in Zimbabwe where he was posted in Harare while representing TCIL as Task Force Leader to upgrade their telecom services. Due to his hard work and coordination skills the fault rate was drastically curtailed which was well appreciated by PTC Zimbabwe and TCIL management. He was associated with 6th G-15 Summit in Harare in 1996. Shri Shrivastava has delivered lectures extensively in different institutions both in India and abroad including many universities and management colleges. He also organized many seminars and skill up-gradation courses at many places. A firm believer in team work, Shri Shrivastava always sets examples by himself and uses latest technological applications to promote and inculcate team work amongst his subordinates and maintain synergy with superiors in BSNL management.

Shri Shahbaz Ali, Government Director[Wef 14.2.2012]:- Shri Shahbaz Ali, having Master Degree from Patna University, is an officer of Indian P&T Accounts & Finance Service of 1989 Batch. He is presently working as DDG(TPF & Accounts) in GOI, Ministry of Communication & IT, Deptt. of Telecom. Shri Ali has wide and varied experience in the field of Telecom Sector as he has worked in various capacities in Deptt. of Telecom and its Public Sectors, Mahanagar Telephone Nigam Ltd and Bharat Sanchar Nigam Ltd .

In his present assignment, Shri Shahbaz Ali is responsible for:-

• Formulation of Budget of DoT.

• Rendering Finance advice for DoT’s PSEs (including disinvested PSEs).

• Nodal Officer for Indian Telegraph Act for billing related disputes.

• Overall accounting functions of Department of Telecom.

35


Shri Ali has also rendered his services as Government Nominee Director on the Board of Directors of Tata Communications Ltd.

Ms.Rita A. Teoatia Government Director[Wef 04.09.2012]:- Rita Teaotia joined the Indian Administrative Service in the year 1981 and served in the districts of Panchmahal and Gandhinagar in Gujarat. Subsequently, she worked in the energy sector as MD, Gujarat Industries Power Company Ltd., and Secretary (Energy). She has worked extensively at policy making and strategic levels in the fields of Education, Health, Women’s Development and rural Development. From 2003-2007, she worked in the Government of India as Joint Secretary in the Ministry of Health and Family Welfare. Prior to the present assignment, she also served as Additional Secretary, in the Department of Electronics and Information Technology (DeitY),from 19th March, 2012. In this capacity, she headed the National eGovernane Plan, which entailed working closely with all Statement Governments and arms of DeitY, including National Informatics Centre(NIC), Standardisation Testing and Quality Certification (STQC) Directorate, Centre for Development of Advance Computing (C-DAC) and National Institute of Smart Governance(NISG).At present, she is serving as Additional Secretary in the Department of Telecommunications and ex officio Secretary of the Telecom Commission. Rita Teaotia has received four National eGovernance awards for applications developed during her various assignments. She holds a Masters in Medieval and Modern Indian History from the University of Lucknow.

Shri Ashish Guha Director[Upto 20.5.2013]:- Shri Ashish Guha entered upon the office of Director of the Company wef 21st May 2010. Shri Ashish Guha joined HeidelbergCement Group in August 2006 as the Managing Director of Heidelberg Cement India Limited. Mr.Guha consolidated Heidelberg Cement’s entry into India and has been instrumental in transforming the businesses of the acquired companies. Prior to joining Heidelberg Cement, Mr.Guha was an investment banker, a career spanning over two decades. He was the CEO of Lazard India and subsequently a senior partner with Ambit Corproate Finance. Mr. Guha has had the distinction of varied experience in investment banking ranging from Treasury, Research, Capital Markets and Merger and Acquisitions. He has advised large multinational corporate on their entry into India as well as acquisitions. Some of the prominent clients handled by Mr.Guha include BAT, Baxter, France Telecom, General Motors, Lafarge. Mr.Guha has been involved with various industry forums like Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) and has represented India as a delegate in many nations. He was also an active participant in the World Economic Forum at Davos in the late90’s. He has been part of many Government bodies including the one on Privatisation. Mr.Guha is an Honours Graduate in Economics and an alumnus of London Business School.

Shri Ajai Vikram Singh, Director [ Wef 17.7.2012 ]:- Ajai Vikram Singh was born at Ajmer and had his education at Mayo College (Senior Cambridge) and Government College (Graduation), Ajmer. After a short spell in the Private Sector, he joined the Indian Administrative Service(IAS) in 1967 and, after the initial training, was allotted to the Uttar Pradesh Cadre. He has served in various capacities in the State and Central Governments, both, in the field and in the Secretariats. He was District Magistrate in Ghazipur, Sultanpur, Moradabad, and Aligarh districts, as also Commissioner, Lucknow Division. He has served as Managing Director of two State enterprises (Rajasthan State Warehousing Corp-on deputation, & UP Export Corp.) In the Uttar Pradesh Secretariat, he has been Secretary, Small Industries; Secretary, Heavy Industries; Industrial Development Commissioner & Principal Secretary.In the Government of India, the postings have been with the Cabinet Secretariat, Ministry of Defence, Ministry of External Affairs, and the Ministry of Industries. He did the National Defence College(NDC) Course in 1984 during the first of his four tenures with the Ministry of Defence. He was posted as Minister (Supply) in the High Commission of India at London for two years. In November 2000, the State of Uttar Pradesh was bifurcated into Uttar Pradesh and Uttaranchal, and Ajai Vikram Singh was appointed as the first Chief Secretary of the new State of Uttaranchal (Now Uttarakhand). In 2001, consequent to the re-organisation of the Ministry of Defence, he was


36

appointed to the newly created post of Special Secretary (Acquisition). This involved setting up a new organization and evolving procedures for all capital acquisitions for the Armed Forces. Subsequently, he has been Revenue Secretary (Now the Ministry of Finance), Secretary, Ministry of Non-Conventional Energy Sources (now the Ministry of New & Renewable Energy), Secretary, Ministry of Road Transport & Highways, and Defence Secretary. During his various postings in the Central and State Governments, he has been Chairman of the following Companies:- Indo-Gulf Fertilisers Ltd., India Polyfibres Ltd., Pashupati Acrylon Ltd., U.P.Textile Corporation and U.P.Finance Corporation. In addition, he has served as Director on the Boards of, inter-alia, the following Companies:- IFCI Ltd., BHEL Ltd., Maruti Udyog Ltd., HMT Ltd., Heavy Engineering Corp. Ltd., Andrew Yule Ltd., Bharat Bhari Udyog Nigam Ltd., Bharat Yantra Nigam Ltd., Hindustan Aeronautics Ltd., Mazagon Docks Ltd., Goa Shipyard Ltd., and PICUP. Ajai Vikram Singh superannuated from service on 31st July 2005, and is now living in his home-town, Ajmer, with his wife, son, daughter-in-law, and two grand-children. He is involved with issues connected with ecology, the environment, and local development. He is currently Chairman of the Pune based World Institute of Sustainable Energy(WISE), a society devoted to the spread of clean and renewable energy. He is also on the Board of Directors of Pipavav Defence & Offshore Engg.Co.Ltd., and Overseas Infrastructure Alliance Infrastructure Alliance(India) Pvt. Ltd. He has taken up the cultivation of Jojoba ( a non-edible oil bearing plant) and Aloe Vera on a trial basis in his village near Ajmer.

Prof. N.Balakrishnan, Director [ Wef 17.7.2012 ]:- Prof. N. Balakrishnan received his B.E. (Hons.) in Electronics and Communication from the University of Madras in 1972 and Ph.D. from the Indian Institute of Science in 1979. He then joined the Department of Aerospace Engineering as an Assistant Professor. He is currently the Associate Director of the Indian Institute of Science and a Professor at the Department of Aerospace Engineering and at the Supercomputer Education and Research Centre. His areas of research where he has more than 200 publications in the international journals and international conferences include Numerical Electromagnetics, High Performance Computing and Networks, Polarimetric Radars, Aerospace Electronic Systems, Information Security, Complex Social Networks and Digital Library. He has received many awards including the Padmashree by the President of India, 2002, homi J. Bhabha Award for Applied Sciences, 2004, JC Bose National Fellowship in 2007, the Alumni Award for Excellence in Research for Science & Engineering by IISc, 2001, Millennium Medal of the Indian National Science Congress in 2000, Ph D (honoris Causa) from Punjab Technical University in 2003, the CDAC-ACS Foundation Lecture Award in 2008 and the Academy Excellence Award, Defence Research and Development Organization in 2009. He was the NRC Senior Resident Research Associate at the National Severe Storms Laboratory, Norman, Oklahoma, U.S.A. from 1987-1989. He was a visiting research scientist at the University of Oklahoma in 1990, Colorado State University in 1991 and is a Visiting Professor at Carnegie Mellon University from 2000 till 2006. He is an Honorary Professor in Jawaharlal Nehru Centre for Advanced Scientific Research (JNCASR). He is a Fellow of the Academy of Sciences for the Developing World (TWAS), Indian National Science Academy, Indian Academy of Sciences, Indian National Academy of Engineering, National Academy of Sciences and Institution of Electronics & Telecommunication Engineers. He is one of the Directors of Data Security Council of India (Currently its Chairman), Central Bank of India, Bharat Sanchar Nigam Limited (BSNL) and of CDOT-Alcatel Research Centre at Chennai, a member of the Council of CDAC, Member of the Joint Advisory Board of Carnegie Mellon University at Qatar and Member of the Governing Council of IIT Kharagpur, He was one of the editors of the International Journal on Distributed Sensor Networks, and Editor-in-Chief, International Journal of World Digital Libraries. Till recently he was a member of the National Security Advisory Board and the Board of Governors of IIT Delhi and of IIT Madras. He was also one of the Directors of the Bharat Electronics Limited (BEL), a Part-Time Member of the Telecom Regulatory Authority of India. He is the National Coordinator of Indo-US Million Books to the Web Digital Library Projects (www.ulib.org and www.new.dli.ernet.in ). He, along with his colleagues from India, China and the US created the world’s largest Digital Library which proudly hosts more than a million books that are freely accessible by any one anywhere and anytime. More details can be found at http://swati.dli.ernet.in/balki

37


Appointment and Tenure of the Directors

In terms of Article No.111 of the Articles of Association, the Directors are appointed by the President of India.

Functional Directors are appointed for a period/tenure of five years from the date of assumption of charge, or till the date of superannuation or until further orders of the President of India, whichever is the earliest. The salary and allowances are determined by the President of India.

The Government Nominee Directors are appointed by the President of India from amongst the officials of the Government of India. Such nominee Director ceases to be a Director on his superannuation from Government Service or transfer from the respective Ministry/Department.

Non-official Part-Time Directors are appointed by the President of India for a period of three years from the date of assumption of charge. The appointment of the Non-official Part-Time Directors shall be at the pleasure of the President of India and other terms and conditions as may be deemed fit by the President of India from time to time in accordance with the Memorandum and Articles of Association of the Company.

BOARD COMMITTEE MEETINGS AND PROCEDURES

Institutionalised Decision Making Process

With the aim of completely institutionalising the process of corporate governance and decision making by the Board of Directors, the Company has, well defined process of placing vital and sufficient information before the Board and/or committee(s) thereof.

The Board of Directors have constituted a standing committee named as “Management Committee of the Board, comprising of the CMD and all the Functional Directors as Members and the Company Secretary as the Secretary, and have delegated powers of general management of company’s business affairs to it. The Board of Directors have also delegated some of their powers to the CMD, Functional Directors and Senior Management Personnel of the Company.

The other standing Committees, viz., (a) the Audit Committee of the Board in accordance with the provisions of Section 292A of the Companies Act 1956; and, (b) the Remuneration Committee of the Board in terms of the Corporate Governance Norms for the CPSEs have been constituted.

In addition, as and when need arises, Board constitutes Committee of Directors.

Role of the Company Secretary in overall Governance Process

The Company Secretary ensures that the Board procedures are followed and regularly reviewed. The Company Secretary endeavors that all the relevant information and documents are made available to the Directors by the different nodal units to facilitate an effective decision making in their meetings. Being the interface between the Board / Executive Management, all the Senior Management Personnel of the Company take advice and services of the Company Secretary.

The Company Secretary is also the interface between the management and the regulatory authorities for governance matters.

Guidelines for the Board/Committee Meetings

Details guidelines have been laid down by the Company, especially with reference to preparation and submission of Agenda Notes, Circulation of decisions thereto etc.


38

Observance of the Secretarial Standards issued by the Institute of the Company Secretaries of India

The Institute of Company Secretaries of India(ICSI) has, evolved and laid down the best practices for corporate practice in the form of Secretarial Standards. Although recommendatory, the Company has been adhering to the Standards relating to Board Meetings, General Meetings, Payment of Dividend, Maintenance of Records and Registers, Minutes of the Meetings, Passing of Resolution by Circulation, affixing of Common Seal, Board’s Report etc.

Code of Conduct for the Members of the Board and the Senior Management Personnel

In addition to the Company’s Conduct, Disciplinary and Appeal Rules, in line with the corporate governance norms, the Board of Directors of the Company have laid down a “Code of Conduct for the Members of the Board”. All the Members have affirmed compliance with the said code.

Similarly, In addition to the Company’s Conduct, Disciplinary and Appeal Rules, in line with the corporate governance norms, the Board of Directors of the Company have laid down a “Code of Conduct for the Senior Management Personnel of the Company”. All the Senior Management Personnel have affirmed compliance with the said code.

Scheduling of Board/Committee Meetings and Submission of Agenda Items for the Board/Committee meetings.

The meetings of the Board/Committee thereof are convened, keeping in view the statutory provisions and the convenience of the Members, with sufficient advance planning. The Agenda Notes are, generally sent in advance to facilitate meaningful and informed discussions;

Wherever required, voluminous documents/documents of confidential nature are tabled at the meeting, with the approval of the Chairman;

The Board also discusses sensitive and urgent business proposals, without formal agenda note, depending on urgency and case to case basis;

The Agenda papers are prepared by the heads of respective line functions, viz., Principal General Managers/Sr.General Managers/General Managers of the Corporate Office, and approved by the concerned Functional Director/CMD as per the Delegation of Financial Administrative Powers to the Senior Management Personnel of the Company. Accordingly, compliance of the applicable laws are ensured by them. Prior approval of the Chairman is also obtained by the respective line heads for submission of agenda notes to the Board. Duly approved agenda papers are circulated by the Company Secretary amongst the Members of the Board/Committee.

Wherever required, the Senior Management Personnel of the Company are called to make presentations before the Board/Committee on specific agenda notes.

The Meetings of the Board/Committee are generally held at the Registered office of the Company at Delhi. Whenever required, meetings are also held outside the headquarters.

Recording of Minutes of the Board/Committee meetings

Minutes of the proceedings of the Board of Directors and the Management Committee of the Board are recorded. The minutes are circulated amongst the Members of the Board/Committee(s) for their comments in a given time frame. The comments if any, received are discussed in the next meeting of the Board/Committee, while confirming the minutes. All the minutes duly signed/initialed by the Chairman are entered into the Minutes Book.

39


The mechanism of follow up actions

Senior Management Personnel submit Action Taken Report on the decisions of the previous meetings, after obtaining the approval of the respective Functional Directors. These are circulated alongwith the Agenda for information and further directives of the Board.

Compliances

While submitting the Agenda Notes, every Senior Management Personnel/Functional Director(s) concerned, being the head of respective line function/business unit who have been delegated with administrative and financial powers thereto, ensure adherence to all the applicable laws, rules, guidelines etc. The Company Secretary ensures the compliance of all the applicable provisions of the Companies Act, 1956 and other corporate laws.

Accordingly, head of the business unit/line head handling the respective subject also ensures and undertakes the compliance of the enterprise risk management policy of the company as a routine, while submitting the Agenda papers. Being the successor and assigns of the erstwhile Departments of Telecom Services and Telecom Operations, the BSNL has an inbuilt systems, accordingly, all the court cases and litigation issues are handled by the respective heads of the Circles/Units.

All the returns/reports under Companies Act 1956 were filed in time with the designated authorities.

INFORMATION PLACED BEFORE ThE BOARD OF DIRECTORS

Subject to the provisions of the Companies Act 1956, Memorandum and Articles of Association of the Company, and the directives, guidelines of the Government on the subject, the Board of Directors have delegated all general powers of managing the company’s affairs to the Management Committee of the Board comprising of CMD and Functional Directors and to the CMD and the Functional Directors; and the Senior Management Personnel of the Company. The Minutes of the Meetings of the Management Committee of the Board are placed before the Board in its meetings. In addition, information on following items is invariably placed before the Board of Directors:-

(1) BUDGET a. Annual Budget Estimates and revised budget estimates for capital expenditure; b. Annual Budget Estimates and revised budget estimates for revenue account for operational expenditure; and c Budget requirements for five year plans.

(2) PLANS a Annual Plans; b Five Year Plans; c Manpower Plans; d Corporate Plans; and e Resource Mobilisation Plans.

(3) ACQUISITIONS Acquiring shares, stocks, securities etc., of other Companies or Undertakings other than in Government guaranteed securities for short term and in duly registered employees consumer co-operative societies.

(4) STRATEGIC DECISIONS a. Agreement involving foreign collaboration proposed to be entered into by the Company irrespective of the consideration involved; b Strategic Investments/decision and acquisition of shares/controlling stake/debentures/bonds of other companies; and Decision with regard to formation of joint ventures, subsidiary companies and restructuring of organization.

(5) PERSONNEL a. Creation of posts of the level of Executive Director; b.Formulation of any changes in wage structure and scales of pay of employees of the company; c. P o l i c y matters relating to allowances of the employees such as HRA, Performance Related Pay, Bonus etc.

(6) ACCOUNTS Acceptance of periodical profit and loss accounts; and Declaration of Dividend.


40

(7) Investment of the surplus funds of the company in acquisition of controlling stake/shares/debentures/bonds in other companies.

(8). All issues that are reserved for exclusive consideration by the Board of Directors by the Companies Act 1956; and, the Memorandum and Articles of Association of the Company.

(9) COMPLIANCE REPORTINGS UNDER ThE CORPORATE GOVERNANCE NORMS

NUMBER OF BOARD MEETINGS hELD DURING 2012-13; ATTENDANCE OF DIRECTORS IN ThE BOARD MEETINGS & 12Th ANNUAL GENERAL MEETING hELD ON 28.9.2012

TOTAL BOARD MEETINGS hELD IN 2012-13: 06

Name and Designation No. of Board Meetings

Attended out of 6 Meetings

Attended the last AGM held on 28.9.2012

Directorships in other Companies

Remarks

Shri R.K.Upadhyay, CMD 6 Present - -

Shri R.K.Agarwal Director(CM) [Upto 30.4.2013]

6 Present - Retired on 30.4.2013.

Shri Rajesh Wadhwa Director(CFA) [Upto 31.5.2012]

1 - - Retired on 31.5.2012.

Shri A.N.Rai, Director(Ent.) 6 Present - -

Shri K.C.G.K.Pillai Director(F)[Wef 25.4.2012]

6 Present NIL -

Shri N.K.Gupta Director(CFA) [Wef 1.6.2012]

5 Present NIL Assumed charge on 1.6.2012.

Shri S.R.Rao, Govt. Director[Wef 13.4.2011 to 29.5.2012]

1 - - Apptd. In place of Shri R.N.Jha wef 13.4.2011. Resigned Directorship on 29.5.2012.

Ms.Rita A.Teaotia Govt. Director [wef 4.9.2012]

3 Present - Appointed in place of Shri S.R.Rao wef 4.9.2012

Shri Shahbaz Ali Govt. Director [Wef 14.2.2012]

6 Present 1 ))) Appointed in place of Shri Tangirala wef 14.2.2012

Shri Ashish Guha Director Chairman, Audit Committee of the Board.[Upto 20.5.2013]

4 Present 3^ Tenure of appointment ended on 20.5.2013

Shri Ajai Vikram Singh Director [Wef 17.7.2012]

3 - 2& Appointed wef 17.7.2012

Prof.N.Balakrishnan Director [Wef 17.7.2012]

3 - 3&& Appointed wef 17.7.2012.

Note:-The disclosure of the Directorships are based on the disclosures received from the Directors. Details are updated to include the latest position of 2013-14 also.

41


))) Government Nominee Director in TCIL

^ CEO & MD Heidelberg Cement India Limited, Chairman-Cochin Cements Limited, Director-Ballarpur Industries Limited.

& Director in Pipavav Defence and Offshore Engineering Company Limited and Director in Overseas Infrastructure Alliance(India) Private Limited.

&& Director in CDOT Alcatel Research Centre Pvt. Ltd., Data Security Council of India and Central Bank of India.

DETAILS OF NUMBER OF COMMITTEE MEMBERShIPS AND ChAIRMANShIPS OF DIRECTORS DURING ThE YEAR 2012-13

Name and Designation Details of Board / Committee Membership Details of Board / Committee Chairmanship

Name of Company

Name of Committee Name of Company

Name of Committee

Shri R.K.Upadhyay, CMD BSNL ~ Finance Committee of the Board - -

BSNL@ Remuneration Committee of the Board

Shri R.K.Agarwal Director(CM) [Upto 30.4.2013]

BSNL Audit Committee of the Board - -

BSNL Finance Committee of the Board - -

- -

Shri Rajesh Wadhwa Director(CFA) [Upto 31.5.2012]

- - - -

+Shri A.N.Rai, Director(Ent.)

- - - -

++Shri K.C.G.K.Pillai Director (Finance)[Wef 25.4.2012]

BSNL Finance Committee NIL NIL

\ BSNL Remuneration Committee - -

+++Shri N.K.Gupta Director(CFA) [Wef 1.6.2012]

NIL NIL NIL NIL

Shri Anupam Shrivastava Director(CM)[Wef 1.5.2013]

BSNL \\\ Audit Committee of the Board

Shri S.R.Rao, Govt. Director[Wef 13.4.2011 to 29.5.2012]

BSNL Remuneration Committee of the Board

- -

Ms.Rita A.Teaotia Govt. Director [Wef 4.9.2012]

- - - -

Shri Shahbaz Ali, Govt. Director

TCIL Audit Committee - -

TCIL Remuneration Committee - -

BSNL Audit Committee - -

BSNL Committee on Appellate & Review matters under BSNL CDA Rules 2006.

- -

BSNL Remuneration Committee of the Board

- -


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Name and Designation Details of Board / Committee Membership Details of Board / Committee Chairmanship

Name of Company

Name of Committee Name of Company

Name of Committee

Shri Ashish Guha Director[Upto 20.5.2013]

Heidelberg Cement India Ltd

Audit Committee BSNL Finance Committee of the Board


Shareholders/Investors Grievances Committee

BSNL Audit Committee


Finance & Risk Management Committee

Cochin Cements Ltd

Chairman

Cochin Cements Ltd

Audit Committee - -

Ballarpur Industries Ltd

Risk Management Committee - -

Ballarpur Industries Ltd

Remuneration Committee - -

BSNL \ Remuneration Committee of the Board

- -

Shri Ajai Vikram Singh Director[Wef 17.7.2012]

Pipavav Defence and Offshore Engineering Company Ltd

Audit Committee BSNL \ Remuneration Committee of the Board

BSNL \\\ Audit Committee of the Board

Prof.N.Balakrishnan Director [Wef 17.7.2012]

Central Bank of India

Management Committee BSNL\\\ Audit Committee of the Board

Supervisory Committee of the Board for monitoring of IT Projects in Banks

Shareholders/investors Grievances Committee

Internal Training Policy Advisory Committee

Note:-

The disclosure of the Memberships/Chairmanships are based on the disclosures received from the Directors. Details are updated to include the latest position of 2013-14 also.

~ Charge of the Director(F) vested with the CMD till joining of Dir(F) on 25.4.2012. By virtue of having the charge of Dir(F) he was Member of the Finance Committee of the Board during relevant period.

@ Additional charge of Director(HRD) vested with CMD wef 5.3.2012 to 18.6.2012 and thereafter vested with Director(E). Thereafter wef 4.6.2013, CMD looked after the charge of Director(HR) till the GoI order

43


dated 8.8.2013, vide which the approval of ACC for extension of the additional charge of Director(HR) to Shri A.N.Rai Director(E), for a further period of six months wef 4.6.2013 was conveyed. By virtue of Dir(HR) being Member of the Committee, he was Member of the Remuneration Committee during the relevant period.

+ Shri A.N.Rai assumed the charge of Director(Enterprise) wef 19.9.2011. He is not a Member of any committee. Additional charge of Director(HRD) vested with Shri Rai wef 5.12.2011 to 4.3.2012. Thereafter, wef 19.6.2012, additional charge of Director(HRD) entrusted again to Shri A.N.Rai for a period upto 4.9.2012 till appointment of regular incumbent or further orders, whichever is the earliest, followed by extension upto 3.12.2012. Thereafter, the arrangement of entrustment of additional charge of Director(HR) to Shri Rai was extended for six months beyond 4.12.2012 or till a regular incumbent is appointed or until further orders, whichever is earliest. Thereafter, w.e.f. 4.6.13, till the receipt of further communication from the GoI, CMD looked after the charge of Director(HR).

Thereafter, GoI, MoC & IT, DoT, vide its order dated 8.8.2013 conveyed the approval of the ACC for extension of additional charge of the post of Director(HR) in favour of Shri Rai Director(E) for a period of six months or till a regular incumbent is appointed or until further orders, whichever is earliest. By virtue of Dir(HR) being Member of the Remuneration Committee of the Board and Committee on Appellate & Review Matters under BSNL CDA Rules 2006, he was Member of these Committees during the relevant period.

++ Shri K.C.G.G.K.Pillai assumed the charge of Director(F) wef 25.4.2011. Director(F) is Member of the Finance Committee and Remuneration Committee.

+++Shri Gupta assumed the charge of Director(CFA) on 1.6.2012. He is not a Member of any committee.

\ The Board, in its 143rd meeting held on 28.8.2012, re-constituted the Remuneration Committee with the following composition:- Shri Ajai Vikram Singh Director as Chairman; and, Shri Shahbaz Ali Govt. Director, Shri Ashish Guha Director, Director(HR), Director(Finance) as Members and the Company Secretary as the Secretary of the Committee.

\\ The Board, in its 143rd meeting held on 28.8.2012, re-constituted the Audit Committee of the Board by inducting Prof.N.Balakrishnan Director, also as one of the Members of the Committee. The Committee in its 46th meeting held on 7.12.2012 elected him as Chairman of the Committee

\\\ Consequent upon the cessation of Directorships of Shri R.K.Agarwal Director(CM) and Shri Ashish Guha Director, Members of the Audit Committee of the Board, the Board in its 148th meeting held on 14.6.2013 re-constituted the Audit Committee by inducting Shri Ajai Vikram Singh Director and Shri Anupam Shrivastava Director(CM) as Members of the Committee.

BOARD COMMITTEES

The Company has the following Committees of the Board.

The Management Committee of the Board (MC of the Board)

The Board of Directors of the Company, in their 118th meeting held on Thursday, the 26th day of February 2009, in supercession of all the extant instructions on the aforesaid subject, have constituted a Standing Committee of the Board, named, “Management Committee of the Board [MC of the Board], comprising of the Chairman and Managing Director [CMD] as the Chairman, and the Functional Directors as Members, with the Company Secretary as the Secretary of the Committee.

Further, the Board of Directors of the Company have also delegated to the aforesaid standing committee the powers for the management and administration of the business of the Company. The powers of the Board, in respect of the matters for which approval of the Board of Directors is statutorily required; or , the powers, which cannot be delegated; or, the matters, where, prior approval of the Government is necessary, have not been delegated.


44

Remuneration Committee

To ensure complete compliance of the Corporate Governance Norms, the Board of Directors of the Company has re-constituted the Remuneration Committee. The Committee comprised of Shri Sanjiv Gupta Non official Part Time [Independent] Director as Chairman, Shri S.R.Rao Government Director, Shri A.K.Garg Director(HR) and Shri Ashish Guha Non official Part Time [Independent] Director as Members and the Company Secretary as Secretary.

The Board, in its 143rd meeting held on 28.8.2012, re-constituted the Remuneration Committee with the following composition:- Shri Ajai Vikram Singh Director as Chairman; Shri Shahbaz Ali Govt. Director, Shri Ashish Guha Director[upto 20.5.2013], Director(HR), and Director(Finance) as Members and the Company Secretary as the Secretary of the Committee.

Finance Committee of the Board

Board of Directors in their 132nd Meeting held on 6.12.2010, have constituted a ad-hoc Committee of Directors named as Finance Committee of the Board. The Terms of Reference of the Committee for the present shall be to consider various ways and means to finance the company’s working capital and CAPEX requirements. The Committee shall also examine and recommend to the Board various methodologies to finance all CAPEX requirements of the Company. This being an ad-hoc committee, had met once under the chairmanship of Shri Ashish Guha.

Committee on Appellate & Review matters under BSNL CDA Rules 2006

To consider and decide all the appeal / review cases for and on behalf of the Board of Directors, wherever the Board is indicated as Appellate and Reviewing Authority in the CDA Rules 2006 of the Company, the Board of Directors, in their 135th meeting held on 26.8.2011, constituted a Standing Committee of the Board known as Committee on Appellate & Review matters under BSNL CDA Rules 2006, comprising of Director(HR) and One Government Director and the Company Secretary as Secretary of the Committee. The minutes of each of the meetings of the Committee shall be submitted to the Board in the immediately following meeting of the Board.

At present, the committee comprise Shri Shahbaz Ali Government Director and Director(HR) [at present additional charge of Director(HR) vest with Director(Enterprise)].

Audit Committee of the Board

The terms of reference the Audit Committee are in accordance with the provisions of the Section 292A of the Companies Act 1956 and the Corporate Governance norms issued by the Department of Public Enterprises for the unlisted CPSEs. The Board of Directors have constituted the Audit Committee of the Board, comprising of 4 Directors, of which Three are Official/Non-official Part-Time Directors [other than Functional Directors] and the other Member is a Functional Director:-

• Shri R.K.Agarwal Director(CM) Member upto 30.4.2013. – On attaining the age of superannuation, he retired from service and as such ceased to be Member.

• Shri Ashish Guha Non-Official Part-Time Director, Chairman [Inducted as Member Wef 6.6.2011] The Audit Committee, in its 40th meeting held on 29.9.2011 elected Shri Ashish Guha as Chairman of the Committee. Thereafter, the Committee, in its 46th meeting held on 7.12.2012 elected Prof. N.Balakrishnan as Chairman of the Committee. On completion of the three years tenure of appointment, Shri Guha ceased to be Director wef 21.5.2013.

• Shri Shahbaz Ali Government Director Member[ Wef 12.3.12]

• Prof N.Balakrishnan Non-official Part-Time Director Chairman [Wef 28.8.2012] The Board of Directors, in their 143rd meeting held on 28.8.2012, reconstituted the Audit Committee of the Board by inducting Prof.N.Balakrishnan Director also as one of the Members of the Committee.

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The Committee, in its 46th meeting held on 7.12.2012 elected Prof. N.Balakrishnan as Chairman of the Committee.

• Shri Anupam Shrivastava Director(CM) Member [ Wef 14.6.2013] The Board of Directors, in their 148th meeting held on 14.6.2013 inducted Shri Shrivastava Director(CM) as Member in place of Shri R.K.Agarwal former Director(CM).

• Shri Ajai Vikram Singh Non-official Part-Time Director Member [Wef 14.6.2013] The Board of Directors, in their 148th meeting held on 14.6.2013 inducted Shri Ajai Vikram Singh as Member in place of Shri Ashish Guha former Director.

Director (Finance) is a regular invitee to the Meetings of the Committee. Company Secretary acts as the Secretary of the Committee.

The Chairman of the Audit Committee was present in the last Annual General Meeting of the Company.

NUMBER OF MEETINGS hELD DURING 2012-13 AND ATTENDANCE

NO. OF MEETINGS hELD: 4

Name and Designation No. of meetings attended Remarks

Shri Ashish Guha Director, Chairman

3 Elected Chairman in the 40th meeting held on 29.9.2011. Tenure of appointment ended on 20.5.2013.

Shri Shahbaz Ali, Govt. Director Member

4 -

Shri R.K.Agarwal Director(CM) Member

4 On attaining the age of superannuation retired from service on 30.4.2013.

Prof.N.Balakrishnan Director Chairman

1 Board, in its 143rd meeting held on 28.8.12 inducted him as Member. The Committee in its 46th meeting held on 7.12.12 elected him as Chairman.

DISCLOSURES

DIRECTORS REMUNERATION

FUNCTIONAL DIRECTORS

BSNL being a Government Company, and in terms of Article No.111 of the Articles of Association of the Company, the remuneration payable to the Directors is determined by the President of India.The salary and other perks paid to the Functional Directors during the year under review is as follows:-

Name Desgn. Salary incl. DA

Other Benefits & Perks

Contribution in CPF & Other Funds

Total

Shri R.K.Upadhyay CMD 1957600 139172 199502 2296274

Shri R.K.Agarwal [Upto 30.4.2013] Dir(CM) 1784741 146751 219994 2151486

Shri Rajesh Wadhwa [Upto 31.5.2012]

Dir(CFA) 277140 53395 30824 361359

Shri N.K.Gupta [Wef 1.6.2013] Dir(CFA) 1465668 87450 163706 1716824

Shri A.N.Rai Dir(Ent.) 1804564 154780 201853 2161197

Shri K.C.G.K.Pillai [Wef 25.4.2012] Dir(Fin.) 1609612 95410 181982 1887004

TOTAL 8899325 676958 997861 10574144


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GOVERNMENT NOMINEE DIRECTORS

The Government Nominee Directors are not paid any remuneration.

NON-OFFICIAL PART-TIME DIRECTORS

Non-official Part-Time Directors are paid a sitting fee at the rate of Rs.10,000/-[Rupees Ten Thousand only] for attending each meeting of the Board and Committee thereof in addition to TA/DA to outstation Directors.

There were no other pecuniary relationships or transactions of the Non-official Part-Time Directors vis-à-vis the Company.

ShAREhOLDINGS BY ThE DIRECTORS AND STOCK OPTIONS

Being a hundred percent Government Owned Company, the shares are held by the President of India through Ministry of Communications and IT, Department of Telecommunications. The Directors are not required to hold any qualification shares.

The company has not issued any stock options to its Directors/Employees.

MATERIAL CONTRACTS/RELATED PARTY TRANSACTIONS

The company has not entered into any material financial or commercial transactions with the Directors or the Management or their relatives or the companies and firms etc., in which they are either directly or through their relatives interested as Directors and/or Partners except with the certain PSUs, where the Directors are Directors without the required shareholdings. The Company has obtained disclosures from all the Directors in this regard, which were noted by the Board.

Transactions with related parties are disclosed in Note No.36 to the Accounts in the Annual Report.

LIST OF PRESIDENTIAL DIRECTIVES ISSUED IN ThE PAST ThREE YEARS

SNo Year of Issue Subject Status of Implementation

1 2010-11 - -

2 2011-12 10-24/2011-SU.1, dated the 22nd December 2011 – Directing BSNL to become initial subscriber as well as acquire shares in the proposed SPV/Company being promoted by the Government for creating National Optical Fibre Network.

Implemented. BSNL has become a Member of the Bharat Broadband Networks Limited; and, as directed by the Government, invested a sum of Rs.10/- [Rupees Ten only] in this financial year [Vide Cheque No.502828, dated 19.4.2012], towards One Equity Share of Rs.10/- [Rupees Ten only] being fully paid up for cash at par.

3 2012-13 - -

4 2013-14 No.61-01/2012-SU, dated 10.6.2013. In partial modification of OM No.61-01/2009 dated 27.2.2009, the benefit of merger of 50% DA effectively amounting to 78.2% as on 1.1.2007 for the purpose of fitment in respect of the Board level and below Board level executives and Non-unionised supervisors and non-executives of BSNL was allowed from the date of issue of the order. No arrears will be paid and the revised fitment on the basis of DPE OM dated 2.4.2009 will be paid with prospective effect only.

Implemented. Vide Order No.1-16/2010-PAT(BSNL) dated 10.6.2013, orders issued for allowing benefit of merger of 50% DA effectively amounting to 78.2% as on 1.1.2007, with prospective date i.e. date of issue of Presidential Directive.

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ANNUAL GENERAL MEETINGS

Venue, Date and Time, where the previous three Annual General Meetings of the Company were held, including the details of the 13th Annual General Meeting are as follows:-

Meeting and Date Time Venue Details of Special Resolutions passed in the three AGMs

10th AGM, 28.9.2010 04.30 P.M. Regd & Corp. Office, Board Room, 3rd Floor Bharat Sanchar Bhawan, H.C.Mathur Lane, Janpath, New Delhi-110 001.

-

11th AGM, 29.9.2011 12.30 P.M. Regd & Corp. Office, Board Room, 3rd Floor Bharat Sanchar Bhawan, H.C.Mathur Lane, Janpath, New Delhi-110 001.

-

12th AGM, 28.9.2012 12.45 P.M., Regd & Corp. Office, Board Room, 3rd Floor Bharat Sanchar Bhawan, H.C.Mathur Lane, Janpath, New Delhi-110 001.

-

13th AGM, 30.09.2013 05.00 P.M. Regd & Corp. office, Board Room, 3rd floor, Bharat Sanchar Bhawan, H.C.Mathur Lane, Janpath, New Delhi-110 001.

-

MEANS OF COMMUNICATIONS

Annual financial statements, New releases, etc., are put in the company’s website as well as in the intranet portal of the company.

Website:- The company’s website www.bsnl.co.in is a user friendly site, containing all the latest developments.

Annual Report

Annual Report of the Company containing inter-alia, Audited Accounts, Directors Report, Auditors Report and replies of management thereto, Comments and Review of the C & AG of India are circulated amongst all the Members and other entitled thereto. As enunciated in the Companies Act, 1956, and also laid before the Houses of the Parliament.

TRAINING OF DIRECTORS

The Company is managed by the Sectoral Experts/Specialists having domain knowledge and expertise of the core sector, which is “Telecom Services Management”. Being a Telecom Service Provider, BSNL is also Member of various National and International level Telecom / Technology related forums.

In order to update the knowledge and skill of BSNL officers and to have first hand information on latest developments taking place in telecommunications, 33 officers including Board level officers were deputed abroad for various events.

Non-official Part-Time Directors, being men of public eminence and proven expertise, bring their own value addition to the management of the company. Still, they are also nominated for various national level seminars, workshops, training programmes as per their convenience.


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RISK MANAGEMENT

BSNL, by virtue of being the successor of erstwhile Central Government Departments of the Telecom Services (DTO) and Telecom Operations (DTO) already had a codified set up with inbuilt mechanism to foresee the potential risks and methods to arrest, control, ignore and/or respond to the risks.

Laying down Enterprise Risk Management Policy

However, as mandated by the Department of Public Enterprises through Guidelines on Corporate Governance Norms for the Un-Listed CPSEs - further revised and made mandatory for the CPSEs vide No.18(8)/2005-GM, dated the 14th May 2010 – Company has laid down a Enterprise Risk Management Policy.

For managing the affairs of the Company, the Board of Directors of the Company has delegated its powers to the Management Committee of the Board (MCB), the CMD and the Functional Directors and Below Board Functionaries, viz., the Executive Directors/CGMs/PGMs/GMs/TDMs/DGMs etc., as the case be. Considering the size and geographical spread of the organization vis-à-vis the delegation of powers made to the business heads and unit heads – who carry out the task of undertaking the risk management as a part of the normal business practice by integrating and aligning the same with corporate and operational objectives - the Business Heads in the Corporate Office; CGMs/PGMs/GMs and Other Unit Heads of the field units were designated as the Risk Management Administrators [RMAs].

Enterprise Risk Management Committee

Consequent upon the mandate of the DPE’s MoU Task Force for inclusion of Compliance of CG Norms, inter-alia, the “Establishing Risk Monitoring Centres”, as one of the Dynamic Parameters, for “Overseeing the mechanism of Enterprise Risk Management Mechanism”, inter-alia, the periodical review of risk assessment and minimization procedures, submission of recommendations / reports to the Executive Management and the Audit Committee of the Board, a ERM Committee comprising of all the Executive Directors has been constituted.

WhISTLE BLOWER POLICY

In view of BSNL being a wholly owned Govt. Company already having full fledged Vigilance Mechanism, headed by an independent CVO in compliance of DPE /CVC Guidelines on the subject, no separate Whistle Blower Mechanism was in place. Further, BSNL has also entered into an agreement with the Transparency International to ensure transparency in tendering process. Further, apart from the Audit by the C&AG of India, Statutory and Branch Audits, Amenability to the Writ Jurisdiction of the Court, GoI’s Rules and Regulations, BSNL has its own Conduct, Disciplinary and Appeal Rules covering all the classes of employees including the Functional Directors. The Members of the Board and Sr.Management Personnel are also governed by the Code of Conduct laid down in accordance with the CG Norms. Accordingly, no separate Whistle Blower Mechanism was in place.

However, consequent upon the mandate of the DPE’s MoU Task Force for inclusion of Compliance of CG Norms, inter-alia, the establisihing a whistle blower mechanism also as one of the Dynamic Parameters, the Company has put in place in place a Board approved Whistle Blower Policy.

Implementation of National Litigation Policy-2010

In addition to already existing Risk Management Policy which mandates the Risk Management

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Administrators for ensuring efficient litigation management and compliance of all applicable provisions of the laws, as directed by the Administrative Ministry, detailed instructions have been issued to all concerned to ensure and comply with the provisions of the NLP-2010. Accordingly, the Unit Heads of the Corporate Office and GM/DGM in-charge of Administration in the field units are the Nodal Officers for respective unit for overall policy implementation, who will be assisted by the “Officer-in-charge of litigation”, who shall be responsible for litigation administration and management of respective unit.

COMPLIANCE CERTIFICATE OF ThE AUDITORS AND SECRETARIAL COMPLIANCE REPORT

In general, the company has complied with the Corporate Governance Norms as laid down by the Department of Public Enterprises. A certificate to the effect has been obtained from M/s NC Pandey & Associates, Company Secretaries which forms part of the Report.

FEE TO STATUTORY AUDITORS

Remuneration paid to the Statutory Auditors during the year 2012-13 was Rs.20 lacs (exclusive of service tax and cess wherever applicable). It includes Statutory Audit Fee, Certification Charges, Reimbursement of Expenses and Other services


50

nc pandey & associatescoMpany secRetaRies

25/1A, Lane No. 36, INDRA PARK (Mangal Bazar) Palam Colony, New Delhi-11004509350606095/09810313481/9871607555/011 25055123

[email protected]/[email protected]/[email protected]

ThE CERTIFICATE ON COMPLIANCE OF CORPORATE GOVERNANCE NORMS

To

The Members,

M/s Bharat Sanchar Nigam Limited,

New Delhi.

We have examined the relevant books, records and statements in connection with compliance of the condi-tions of Corporate Governance by M/s Bharat Sanchar Nigam Limited for the financial year ended 31.3.201 , as enunciated in the “Guidelines on Corporate Governance Norms for the Central Public Sector Enterprises 2007”, issued by Govt. of India, Ministry of Heavy Industries and Public Enterprises, Department of Public En-terprises, vide Office Memorandum No. 18(8)/2005-GM, dated the 22nd June 2007 and revised further vide No.18(8)/2005-GM, dated 14.5.2010.

The compliance of the conditions of the Corporate Governance norms is the responsibility of the Manage-ment. Out examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of corporate governance as laid down in the guidelines. Our Report / Certification is neither an audit nor an expression of the 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 certify that the Company has complied with the conditions of Corporate Governance Norms as stipulated in the “Guidelines on Corporate Norms for the CPSEs”, issued by the Department of Public Enterprises.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency of the effectiveness with which the management has conducted the affairs of the Company.

For N.C.Pandey & Associates,Practising Company Secretaries,

Sd/-(CS N. C. Pandey)

PROPRIETORPlace : New Delhi. C.P. No. 3195Dated : 1 th September 2019 3

3

51


ANNUAL ACCOUNTS, AUDITORS REPORT, COMMENTS OF C&AG OF INDIA AND MANAGEMENT REPLIES


52

Notes As at As at 31st March 2013 31st March 2012 I. EQUITY AND LIABILITIES Shareholder’s Funds Share capital 3 1,250,000 1,250,000 Reserves and surplus 4 5,076,240 5,867,102 Deferred government grant 5 37,633 - 6,363,873 7,117,102 Non-current liabilities Long term borrowings 6 170,318 170,318 Other long term liabilities 7 403,725 426,257 Long term provisions 8 687,008 627,981

1,261,051 1,224,556 Current liabilities Short term borrowings 9 256,114 132,047 Trade payables 10 950,092 984,668 Other current liabilities 11 684,617 678,929 Short term provisions 12 53,184 46,231

1,944,007 1,841,875 TOTAL 9,568,931 10,183,533 ASSETS II. Non-current assets Fixed assets 13 - Tangible assets 4,555,753 5,006,679 - Intangible assets 1,528,885 1,620,053 - Capital work-in-progress 369,600 422,705 - Intangible assets under development 1,462 2,043 6,455,700 7,051,480 Non-current investments 14 657,511 601,352 Deferred tax assets (net) 15 13,330 6,238 Long-term loans and advances 16 684,728 650,476 7,811,269 8,309,546 Current Assets Inventories 17 377,209 359,678 Trade receivables 18 295,339 396,218 Cash and Bank balances 19 116,125 188,509 Short-term loans and advances 20 92,617 114,142 Other current assets 21 773,914 691,825 1,655,204 1,750,372 Intra/Inter circle remittances 33 102,458 123,615 TOTAL 9,568,931 10,183,533 Summary of significant Accounting Policies 2 The accompanying notes are an integral part of the financial statements 1-47

This is the Balance Sheet referred to in our report of even date. for Walker, Chandiok & Co For and on behalf of Bharat Sanchar Nigam Limited Chartered Accountants Sd/- FRN 001076N R.K. Upadhyay Chairman and Managing Director Sd/- Sd/- Atul Seksaria K.C.G.K Pillai Partner Director (Finance)M.No: 86370 Sd/- Rajeev Singh General Manager (Corporate Accounts) Sd/- Place : New Delhi H.C.Pant Date : 30 August 2013 Company Secretary and Sr. General Manager (Legal)


BALANCE SHEET(All amounts in Rs. lacs, unless stated otherwise)

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STATEMENT OF PROFIT AND LOSS (All amounts in Rs. lacs, unless stated otherwise)

Notes For the Year Ended For the Year Ended 31st March 2013 31st March 2012 Revenue from Operations 22 2,565,481 2,598,213 Other income 23 147,308 195,137 Total Revenue 2,712,789 2,793,350 Employees’ remuneration and benefits 24 1,375,782 1,340,604 Financial expenses 25 35,147 18,412 Depreciation and amortisation 13 833,643 917,432 Other expenses - Administrative, operating and other expenses 26 1,040,235 1,029,391 - Licence and Spectrum fee 29 205,236 352,772 Total Expenses 3,490,043 3,658,611 Profit/(Loss) before prior period items (777,254) (865,261) Prior-period items (net) 27 (18,282) (16,832) Profit/(Loss) before tax (795,536) (882,093) Tax expense : - Deferred tax 7,092 (2,977)Profit/(Loss) for the year (788,444) (885,070) Earnings per share (in Rs.) 34 (15.77) (17.70) Summary of significant accounting policies 2 The accompanying notes are an integral part of the financial statements. 1-47 This is the Statement of Profit and Loss referred to in our report of even date.

for Walker, Chandiok & Co For and on behalf of Bharat Sanchar Nigam Limited Chartered Accountants Sd/- FRN 001076N R.K. Upadhyay Chairman and Managing Director Sd/- Sd/- Atul Seksaria K.C.G.K Pillai Partner Director (Finance)M.No: 86370 Sd/- Rajeev Singh General Manager (Corporate Accounts) Sd/- Place : New Delhi H.C.Pant Date : 30 August 2013 Company Secretary and Sr. General Manager (Legal)


54


CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2013(All amounts in Rs. lacs, unless stated otherwise) Particulars For the Year ended For the Year ended 31st March 2013 31st March 2012 A. Cash Flow from Operating Activities Net Profit/(Loss) before tax (795,536) (882,093) Adjustments for : Depreciation 833,643 917,432 Depreciation under prior period items 14,642 8,318 Interest/Financial charges 34,916 18,089 Provision for Impairment of CWIP (1,085) 115 Provision for Decommissioned Assets (30) 16,583 Provision for Trade Receivable 15,439 19,579 Wealth Tax charged to P&L accoun 85 93 Interest Income (13,824) (32,526) Profit on sale of Fixed Assets (4,859) (5,898) Capitalization of Overheads (46,939) (48,123) Provision for obsolete inventories 524 (2,889) Provision for doubtful items (111) (1,787) Write off and Losses other than Bad debts 22,463 43,708 Bad-Debt Provision other than services 2,266 2,778 Bad-Debt actually written off 24,701 23,491 Provision for doubtful debts and disputed bill 41,534 38,049 Excess provision written back 66,792 75,495 Adjustment of Grant in aid (22,867) 967,290 - 1,072,507 Operating profit before working capital changes 171,754 190,414 Adjustment for change in working capital : Change in Inventories (18,190) 37,850 Changes in Trade Receivables 19,205 (34,156) Changes in Other Receivables (current & non current) (55,523) 199,263 Changes in Other Payables (101,487) (329,335) (current & non current Change in Provisions 65,988 34,975 Changes in Remittances 21,157 (68,850) 29,134 (62,269) Cash from Operations Before Taxes 102,904 128,145

Wealth Tax Paid (92) (99) Income Tax Paid (39,269) (39,361) (46,018) (46,117) Net cash generated from operative activities 63,543 82,028

B. Cash Flow from Investing Activities Proceeds from sale of fixed assets 77,774 78,299 Interest received 13,910 32,698 Purchase of fixed assets (279,618) (333,799) Earmarked deposit with bank 271 926 Investments on retirement benefits (56,159) (243,822) (51,211) (273,087)

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C. Cash Flow from Financing Activities Increase in Short Term Borrowing 124,067 132,047 Interest on Deposits and Others (15,901) 108,166 (1,561) 130,486 Net (Decrease)/Increase in Cash and Cash equivalents (A+B+C) (72,113) (60,573) Cash and Cash equivalents as on 01 April 2012 188,116 248,689 Cash and Cash equivalents as on 31 March 2013 116,003 188,116 Cash and Cash equivalents as on 31 March 2013 comprise : Balance with bank 113,090 186,081 Cash in hand 2,913 116,003 2,035 188,116 Notes: 1. In the absence of adequate data regarding assets appearing in the deletions/adjustments column

of the Note No 12 of Fixed assets all deletions (Except amount transferred as decommissioned assets) have been assumed to be cash sales.

2. In the absence of adequate details regarding unreconciled inter circle remittances with the subsidiary records, all the inter circle remittance have been treated as part of working capital changes.

3. The above cash flow statement has been prepared under the 'Indirect Method' as set out in the Ac-counting Standard - 3 on 'Cash Flow Statement' as notified under Companies (Accounting standard Rules) as amended.

4. Previous year figures have been regrouped and/or reclassified where ever necessary to conform to those of current year grouping and/or classification.

5. Figures in bracket shows outflows.

This is the Cash Flow Statement referred to in our report of even date. for Walker, Chandiok & Co For and on behalf of Bharat Sanchar Nigam Limited Chartered Accountants Sd/- FRN 001076N R.K. Upadhyay Chairman and Managing Director Sd/- Sd/- Atul Seksaria K.C.G.K Pillai Partner Director (Finance)M.No: 86370 Sd/- Rajeev Singh General Manager (Corporate Accounts) Sd/- Place : New Delhi H.C.Pant Date : 30 August 2013 Company Secretary and Sr. General Manager (Legal)


56

1. CORPORATE INFORMATION

Bharat Sanchar Nigam Limited (the “Company” or “BSNL”) is a Public Sector Company fully owned by Government of India and was formed on 15 September 2000 in pursuance of Telecom Policy 1999, to take over the ongoing business of the Department of Telecom Services (DTS) and Department of Telecom Operations (DTO) from 01 October 2000. The Company has been incorporated as a company with limited liability by shares under the Companies Act, 1956 with its registered Corporate, office in New Delhi.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation of Financial Statements

The financial statements of the Company are prepared under the historical cost convention adopting the accrual method of accounting in accordance with Indian Generally Accepted Accounting Principles and in accordance with the provisions of the Companies Act, 1956 and it requires the management to make estimates & assumptions and actual may differ from these which are recognised in the period it is ascertained. The Company is preparing its financials in revised schedule VI as per Government Notification No F. No. 2/6/2008-C-L-V dated 30 March 2011.

2.2 REVENUE RECOGNITION

Income from services is accounted for on accrual basis and in conformity with Accounting Standard – 9. Accordingly,

a) Revenue for all services is recognised when earned and are realizable at the time of billing. Un-billed revenues from the billing date to the end of the year are recorded as accrued revenue during the period in which the services are provided. Provisions are made for debts outstanding for more than two years and for debts less than two years which are considered disputed (based on management decision), to the extent considered necessary by the management.

b) Installation Charges recovered from subscribers at the time of new telephone connections are recognized as income in the first year of the billing.

c) In terms of the arrangement between Department of Telecommunications (“DoT”) and the Company, the charges for telecommunication services and other infrastructural services provided by BSNL to DoT are neither billed nor provided for.

d) Sale proceeds of scrap arising from maintenance and project works are taken into miscellaneous income in the year of sale.

e) Income from SIMs, Recharge Coupons of Mobile, Prepaid Calling Cards, and Prepaid Internet Connection Cards are treated as income of the year in which the payment is received since the extent of use of these cards within the financial year could not be ascertained.

f) Wherever there is uncertainty in realisation of income, such as liquidated damages, claims on Government Departments & Local Authorities etc., these are recognised on realisation basis.

g) The claims receivable on account of provision of infrastructure, operation & maintenance of Village Public Telephones (VPTs) & Rural Household Connections (RDELs) etc. and operational sustainability of rural wire line network from U.S.O. fund are accounted for as other operating income.

h) The interest on surplus fund which are placed generally in fixed deposits with banks is recognised on accrual basis.

i) Other income by way of interest on loans to employees, security deposit with Government


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013

57


Departments and local authorities, being not material, are accounted for on collection basis.

2.3 FIXED ASSETS

a) Fixed assets are carried at cost less depreciation. Cost includes directly related establishment and other expenses including employee remuneration and benefits, directly identifiable to the construction or creation of the assets.

b) Expenditure on replacement of assets, equipments, instruments and rehabilitation works is capitalised if, in the opinion of the management, it results in enhancement of revenue generating capacity.

c) Assets are capitalised to the extent completion certificates have been obtained, wherever applicable.

d) The cost of stores and materials at the time of issue to a project is debited to CWIP.

e) Apparatus and plants principally consisting of telephone exchanges, transmission equipments and air conditioning plants etc. are capitalized as and when an exchange is commissioned and put to use.

f) Cables are capitalized as and when ready for connection to the main system.

g) Intangible assets are stated at cost of acquiring the same less accumulated depreciation / amortization.

2.4 DEPRECIATION / AMORTIZATION

a) Depreciation is provided based on the Written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956 except for Subscriber Installation. The Subscriber Installation is depreciated over the useful life of 5 years on Written down value method.

b) Assets costing up to Rs. 5,000 are depreciated fully in the year of purchase. Similarly, partition works and paintings costing up to Rs. 200,000 are depreciated fully in the year of construction/ acquisition.

c) The depreciation on machinery & tools used both for project and maintenance work is charged to Statement of Profit and Loss instead of capitalization.

d) All telephone exchange buildings, administrative offices and captive consumption assembling premises/workshops are considered as building (other than factory building). Accordingly depreciation is charged uniformly.

e) Intangible assets such as Entry License Fee, One Time Spectrum Fee for Telecom service operations are amortized over the license period (i.e. 20 years) and standalone computer software applications are amortized over the license period (subject to maximum of 10 years) as per straight line method.

2.5 IMPAIRMENT OF ASSETS

Assets, which are impaired by disuse or obsolescence, are segregated from the concerned assets category and shown as ‘Decommissioned Assets’ and provision is made for the loss, if any, due to the difference between their net carrying cost and the net realizable value.

2.6 INVESTMENTS

Long-term investments are carried at cost, after providing for any diminution in value, if such diminution is other than temporary.

2.7 INVENTORIES

Inventories are valued at cost or net realizable value as the case may be – the cost is ascertained generally on weighted average method, obsolete/non moving inventories are valued at net realizable value.



58

2.8 FOREIGN CURRENCY TRANSACTIONS

a) Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction i.e. on the date of payment or the billing as the case may be.

b) All foreign currency liabilities and monetary assets are stated at the exchange rate prevailing as at reporting date and the difference taken to Statement of Profit and Loss as exchange fluctuation loss or gain.

2.9 EXTRAORDINARY ITEMS

Extra-ordinary items of income and expenditure, as covered by AS – 5, are disclosed separately.

2.10 EMPLOYEES’ BENEFITS

a) SHORT TERM EMPLOYEE BENEFITS:

Short Term employee benefits are recognised in the period during which the services have been rendered.

b) LONG TERM EMPLOYEE BENEFITS:

DEFINED CONTRIBUTION PLAN:

i) Pension Contribution (including gratuity)

The employees of DoT who have opted for absorption / absorbed in the company, and the employees on deemed deputation from Government are eligible for pension, which is a defined contribution plan. The company makes monthly contribution (including liability on account of gratuity) at the applicable rates as per Government Pension Rules, 1972 and FR & SR, to the Government who administers the same.

ii) Employees’ Provident Fund

All directly recruited employees of the company are entitled to receive benefits under the Provident Fund. Both employee and employer make monthly contribution to the plan at a predetermined rate of employee’s basic salary and dearness allowance. These contributions to provident fund are administered by the Provident Fund Commissioner. Employer’s Contributions to Provident Fund are expensed in the Statement of Profit and Loss.

iii) Contribution for Leave Salary

For employees on deemed deputation from Government, Leave salary contribution is paid by BSNL to DoT for the deputation period in accordance with FR115(b) of FRSR Part I. Consequently the leave salary payable for those on deputation during the period of leave rests with Government. Further any leave encashment either before or after quitting service is also the responsibility of Government.

DEFINED BENEFIT PLAN:

i) Leave Encashment

The liability on account of un-availed leave in respect of absorbed employees and directly recruited employees at the year end is provided for based on actuarial valuation.

ii) Gratuity

The company provides for gratuity, a defined benefit plan (the Gratuity Plan) covering all directly recruited eligible employees. In accordance with the payment of Gratuity Act, 1972, the Gratuity Plan provides a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation on balance sheet date and are expensed in the Statement of Profit and Loss.


59


iii) Other benefits including post employment medical care

Medical reimbursements and other personal claim bills of existing / retired employees are accounted for on actual basis in respect of bills received till the cut off period in the accounts at the concerned primary units as per the prescribed limits.

2.11 MANUFACTURING EXPENSES

Expenses incurred at factory units are allocated to the cost of the manufactured products.

2.12 PRIOR PERIOD ITEMS

Items of income/expenditure exceeding Rs. 5 lakh are only considered for being treated as ‘prior period items’.

2.13 TAXES ON INCOME

Taxes on income for the current period are determined on the basis of taxable income and tax credits computed in accordance with the provisions of the Income Tax Act, 1961.

In accordance with the AS-22, Deferred Tax Liability is recognised on the timing differences between accounting income and the taxable income for the period taking into consideration the contents of Accounting Standard Interpretations (ASI) - 3 and quantified using the tax rates in force or substantively enacted as on the reporting date.

Deferred Tax Assets are recognized and carried forward to the extent there is a virtual certainty that such deferred tax assets can be realized.

2.14 PROVISIONS

Provisions are recognised when the Company has a present obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.

2.15 CONTINGENT LIABILITIES

Liabilities, though contingent, are provided for if there are reasonable chances of maturing such liabilities as per management. Other contingent liabilities, barring frivolous claims, not acknowledged as debts, are disclosed by way of notes.

2.16 EARNINGS PER SHARE

Earnings Per Share (“EPS”) comprises the Net profit after tax (excluding extraordinary income net of tax). The number of shares used in computing Basic & Diluted EPS is the weighted average number of shares outstanding during the year.

2.17 SEGMENT REPORTING

The primary segment consists of ‘Basic’, ‘Cellular’ and ‘Broad Band’ services provided. The manufacturing activities have not been treated as a separate segment since such activities are essentially carried on as support service to other segments mainly for Captive Consumption.

The following specific accounting policies have been followed for segment reporting:

a) Segment Revenue includes service income and other income directly identifiable with/allocable to the segment.

b) Income/expense, which relates to the Company, as a whole and not allocable to individual business segment is included in “Un-allocable Income/expense respectively”.

c) Expenses that are directly identifiable with/allocable to segments are considered for determining Segment Results.

d) Segment Assets and Liabilities include those directly identifiable with the respective segments. Un-allocable corporate assets and liabilities represent the assets and liabilities that relate to the Company as a whole and not allocable to any segment.



60

3. SHARE CAPITAL

As at 31st March

2013

As at 31st March

2012

Authorised

10,000,000,000 (P. Y.: 10,000,000,000) Equity Shares of Rs. 10/- each

1,000,000 1,000,000

7,500,000,000 (P.Y.: 7,500,000,000) Preference Shares of Rs. 10/- each

750,000 750,000

1,750,000 1,750,000

Issued , Subscribed and Fully Paid Up

5,000,000,000 (P. Y. : 5,000,000,000) Equity Shares of Rs. 10/- each

500,000 500,000

7,500,000,000 (P. Y. : 7,500,000,000) 9% Non- Cumulative Preference Shares of Rs 10/- each

750,000 750,000

Total of Issued, Subscribed and Fully Paid up Share 1,250,000 1,250,000

Reconciliation of number of shares

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

Number of shares

(Rs. In Lakh) Number of shares

(Rs. In Lakh)

Equity shares

Balance at the beginning of the year 5,000,000,000 500,000 5,000,000,000 500,000

Changes during the year - - - -

Balance at the end of the year 5,000,000,000 500,000 5,000,000,000 500,000

Preference shares

Balance at the beginning of the year 7,500,000,000 750,000 7,500,000,000 750,000

Changes during the year - - - -

Balance at the end of the year 7,500,000,000 750,000 7,500,000,000 750,000

Details of shares held by shareholders having more than 5% shares in the company

As at 31st March 2013


Equity shares

Central government (numbers) 4,999,998,400 4,999,998,400

Holding (%) 99.99% 99.99%

Preference shares

Central government (numbers) 7,500,000,000 7,500,000,000

Holding (%) 100% 100%

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013(All amounts in Rs. lacs, unless stated otherwise)

61


Notes:

a) Out of the shares issued by the Company 4,999,998,400 (P.Y. 4,999,998,400) equity shares of Rs. 10/- each and 7,500,000,000 (P.Y. 7,500,000,000) Preference share of Rs. 10/- each were allotted as fully paid up for consideration other than cash in the financial year 2000-01 and 2001-02 respectively. The President of India through its nominees is holding 1,600 shares of Rs. 10/ each as subscribers to the Memorandum and Articles of Association.

b) Vote of members : Every member present on person and being a holder of Equity Share shall have one vote and every person either as a General Proxy on behalf of a holder of Equity Share, shall have one vote or upon a poll every Member shall have one vote for every share held by him. On poll the voting rights of holder of Equity Share shall be specified in Section 87 of the Companies Act, 1956. The holder of Preference Share have a right to vote on resolution placed before the Company which directly affects the rights attached to their Preference Shares and subject to aforesaid, the holders of Preference Shares shall in respect of such capital be entitled to vote on every resolution placed before the Company at a meeting if the dividend due on such capital or any part of such dividend remains unpaid in respect of an aggregate period of not less than two years preceding the date of commencement of the Meeting and where the holders of any Preference Shares have a right to vote as aforesaid on any resolution every such Member personally present shall have one vote and on a poll his voting right in respect of such Preference Share bears to the total paid up equity capital of the Company.

c) Division of profit : The profit of the Company, subject to any special rights relating thereto created or authorised to be created by the Articles had subject to the provisions of the Articles and also subject to the provisions of Section 205(2A) of the Companies Act, 1956 and, regarding transfer of the amount to reserve of the Company, shall be divisible among the Members with the approval of the President of India, in the proportion of the amount of capital paid or credited as paid-up on the shares held by them respectively.

4. RESERVES AND SURPLUS



(a) Capital Reserves [Refer Note 28]

Balance at the beginning of the year 4,026,257 4,030,960 Add: Assets recognised (2,388) (4,604)Less: Liabilities identified & transferred to liabilites 30 99 Balance at the end of the year 4,023,839 4,026,257

(b) General Reserves 430,084 430,084

(c) Contingency Reserves [Note a] 200,000 200,000

(d) Surplus/ (Deficit) in statement of profit and loss

Balance at the beginning of the year 1,210,761 2,095,831 Add: Profit/(Loss) for the year (788,444) (885,070)Balance at the end of the year 422,317 1,210,761 Total of Reserves and Surplus 5,076,240 5,867,102

Note:

a) The contingency reserve was created in the financial year 2003-04 by appropriation of profits to meet various contingencies that may arise in future based on the decision made by the Board.



62

5. DEERRED GOVERNMENT GRANT



Grant in aid [Note a] 37,633 - Total of Deferred Government Grant 37,633 -

Note:

a) The Department of Information Technology (DIT) has sanctioned a sum of Rs 60,500 lacs towards “Provision of Wireless and Wireline connectivity” to 41,500 Common service centers (CSC) through the Company ( Rs 17,000 lacs for wireline and Rs 43,500 lacs for wireless).The amount was received in six installments starting from December, 2006 to Feburary, 2010. As the Grant is linked to provision of service and the BSNL’s network is one seemless entity, the “grant” can not be tied to any particular asset. Hence, during the current year, in accordance with AS-12 on Accounting for Government Grants notified by Companies Accounting Standards Rules 2006, such capital grant has been presented separately as “Deferred Income” and such deferred income is being recognized in the Statement of Profit and Loss on systematic and rational basis by applying the depreciation of 13.91% which is applicable to Base Transceiver Station (BTS).

6. LONG-TERM BORROWINGS As at

31st March 2013 As at

31st March 2012

Unsecured Loans

- 15 Year Government of India Loan (Note a) 98,318 98,318

- Government of India (Non refundable and non interest bearing ) [Note b]

72,000 72,000

Total of Long Term Borrowings 170,318 170,318

Note:

a) Loan from Goverment of India

The Notional Loan of Rs. 750,000 lacs, which is a part of capital structure of the Company, had a moratorium on repayment of the principal and interest thereon up to 31 March 2005. The Company has been representing since long to the Government of India for reduction in the rate of interest and withdrawal of terms and conditions towards penal interest and prepayment charges. However, since the Ministry of Finance, Government of India has not agreed to extend any relief in the form of reduction of interest rate on the loan, as informed by the DoT through letter No. I-432008-B dated 21 June 2011, the difference of Rs. 18,868 lacs between the books of BSNL and DoT in respect of outstanding principal amount of the loan has been accounted in the books of the Company in the financial year 2010-11. During the current period no repayment of loan was made however the interest @14.5% (penal interest @ 2.75% on interest due but not paid) is accounted for on the amount of outstanding principal and the interest due but not paid.

b) Non-refundable and Non-Interest bearing Loan from Govt. of India

The Govt. of India has sanctioned a non-refundable and non-interest bearing advance of Rs 72,000 lacs as budgetary support for the ongoing VPT program of BSNL vide NO.25-1/2001-SAT/pp(pt) dated 13 January 2003. The amount has already been utilised for the purpose for which it was sanctioned. Approval of DoT has already been sought to convert this into other income.

NOTES TO ThE fINANcIAL STATEMENTS fOR ThE yEAR ENDED 31 MARch 2013(All amounts in Rs. lacs, unless stated otherwise)

63


7. OTHER LONG-TERM LIABILITIES



Deposit from customers and others

- Security Deposits 50,847 49,505

- After Connection Deposits 352,878 376,752

Total of Other Long Term Liabilities 403,725 426,257

8. LONG-TERM PROVISIONS



Provision for employee benefits

- Post retirement benefit of serving employees [Refer Note 29] 687,008 627,981

Total Long Term Provisions 687,008 627,981 9. SHORT TERM BORROWINGS

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

Short term loan from :

Loan from Banks (unsecured) [Note a] 256,114 132,047

Total of short term borrowings 256,114 132,047

Note:a) Short term loans from the bank comprises of the following: (i) Short term loan of Rs. 182,047 lacs sanctioned by Union Bank is repayable on demand and carries interest

rate at base rate with monthly rests. Short term loan of Rs. 169,809 lacs is availed at 10.50% p.a (floating). (ii) Short term loan of Rs. 125,000 lacs sanctioned by Corporation Bank is repayable on demand and carries interest @ base rate with monthly rests. Short term loan of Rs. 86,305 lacs is availed at 10.50% p.a (floating).

10. TRADE PAYABLES



Sundry Creditors [Including Rs. Nil Lakh dues to MSMEs (P.Y. Rs. 332 Lakh)]

802,057 829,567

Claims payable to MTNL 97,747 92,448

Claims payable on Interconnection Usage Charges (IUC) 49,120 61,540

Satellite Based Broadband (SBB) and Access Network Services 759 469

Claims payable on Universal Service Organisation (USO) towers 380 644

Internet data center (IDC) 29 -

Total of Trade Payable 950,092 984,668

Note:a) No IUC agreement exists between BSNL and MTNL for carriage of traffic in each other’s network. During the year the

company has computed and accounted for the interconnect charges based on the rates prescribed by TRAI in IUC regulation. The claims raised by both the parties are disputed. The net claim receivable/payable as on 31 March 2013 from MTNL is subject to confirmation and reconciliation.

b) The Company is in the process of identification of Micro, Small and Medium Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) except for twenty one circles (P.Y. twenty five circles). The



64


required information in terms of section 22 of MSMED Act to the extent available in respect of twenty seven circles (P.Y. eleven circles) are given below:

Particulars As at 31st March 2013

The principal amount due to suppliers NIL

The amount of interest paid by the buyer in terms of section 16 of the MSMED Act, 2006 NIL

The amount of interest due and payable for the period of delay in making payment NIL

The amount of interest accrued and remaining unpaid at the end of each accounting year NIL

The amount of further interest remaining due and payable even in the succeeding years as per Section 23 of MSMED Act, 2006

NIL

11. OTHER CURRENT LIABILITIES



Interest accrued and due on the Government (Govt.) loan 50,570 30,971

Interest accrued and due on bank loan 204 203

Advances received from customers and others 63,051 129,706

Advance received from Bharat Broadband Nigam Limited (BBNL) 14,191 -

Deposits from customers and others 55,966 44,761

Income received in advance against service 214,818 201,290

Claims payable to DoT [Refer Note 32] 47,207 36,943

Claims payable to other Govt. Deptt. 9,285 9,056

Statutory dues

- Tax deducted at source (TDS) 13,727 12,473

- Service tax (net) 47,835 70,185

- Employees’ provident fund (EPF) 1,757 1,640

License fee, Spectrum charges and Transponder charges payable

24,213 5,020

Payable for revised wages 246 1,139

Liability towards employees 22,027 24,213

Liability for services 30,755 28,083

Liabilities for construction account 25,164 16,461

Security deposits 1,351 -

Other liabilities 62,249 66,785

Total of Other Current Liabilities 684,617 678,929 12. SHORT-TERM PROVISIONS



Provision for:

- Wealth Tax 390 397

- Leave encashment to retired staff 2,525 -

- Gratuity liability [Refer Note 29] 7,187 9,074

- Post retirement benefit of serving employees [Refer Note 30] 43,082 36,760

Total of Short Term Provisions 53,184 46,231

65


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66

14. NON-CURRENT INVESTMENTS

(At Cost, Unquoted, Non-trade) As at 31st March 2013


20,000,000 (P. Y. 20,000,000) 7% Redeemable Cumulative Preference Shares of Rs. 100/- each Fully Paid in ITI Limited (A Government of India owned company) [Note a].

20,000 20,000

Investments in Retirement Benefit Plan [ Refer Note No. 30] 637,511 581,352

Total of Non- Current Investments 657,511 601,352

Note:

a) All the five installments of Rs. 4,000 lacs each are overdue for redemption of 7% Redeemable Cumulative Preference shares in respect of investment in M/s ITI Ltd. at the end of the year and no dividend has been received till date. However, management is of the view that provision for diminution, other than temporary, in the value of investment is not required considering the recoverable value would not be less than its cost.

15. DEFERRED TAX ASSETS(NET)

As at 31st March

2013

As at 31st March

2012

The movement of deferred tax account is as follows :

Balance at the beginning of the year 6,238 9,215

Write back/(Provision) for deferred tax (Net) 7,092 (2,977)

Balance at the end of the year 13,330 6,238

Note:

a) Deferred Tax assets and liabilities are being offset as they relate to taxes on income levied by the same governing taxation laws. The following amounts are shown in the Balance Sheet:



Deferred Tax Assets

Provision for bad & doubtful debts 132,336 138,756

Unabsorbed depreciation 259,055 259,055

Provision for leave encashment 99,525 99,657

Provision for decommissioned assets,wage revision etc. 14,485 17,505

Others 15,126 15,164

Total A 520,527 530,137

Deferred Tax Liabilities

Depreciation 489,829 506,531

Others 17,368 17,368

Total B 507,197 523,899

Net Deferred Tax Asset A-B 13,330 6,238


67


b) The deferred tax has been dealt with in accordance with the contention of the Company before the tax

authorities. The Company contends that the capital reserve arising out of the capital structure at the time

of incorporation of the company is not in the nature of financial relief and hence not to be reduced from

the value of fixed assets. According to the company’s contention, the depreciation provided in the book

on the value of assets without deducting the amount involved in capital reserve is admissible in income

tax. On this basis, the Company is recognising the deferred tax assets/liabilities.

c) The Company, being a Company providing telecommunication services is eligible to claim deduction

under Section 80 IA of the Income Tax Act, 1961 with respect to 100 % of the profits and gains derived

from this business for the first five years and thereafter at 30% of the profits for the second five years (re-

ferred to as the Tax Holiday Period). Accordingly, the Company has opted for Tax Holiday Period from

financial year 2003-04 and onwards.

d) In accordance with Accounting Standard Interpretation (ASI)-3 issued by the Institute of Chartered Ac-

countants of India, the deferred tax in respect of timing differences which originates and gets reversed

during the tax holiday period have not been recognized. Deferred tax in respect of timing differences

which originate during the tax holiday period but gets reversed after the tax holiday period, have been

recognized in the year in which the timing differences have originated. For this purpose, as a conserva-

tive measure, deferred tax provision has been made in respect of the period when only 30% of the profits

would be tax free assuming that only 70% of the timing differences would reverse.

e). During the current year all provisions of outstanding deferred tax assets/liabilities have been reviewed and

accordingly Deferred Tax Assets has been adjusted. As on 31 March 2013, the outstanding Deferred Tax Assets is Rs. 520,527 lacs and Deferred Tax Liabilities is Rs. 507,197 lacs.

16. LONG-TERM LOANS AND ADVANCES



Secured and considered good

- Advances recoverable in cash or in kind or for value to be received [Refer Note 20] 37,782 41,878

Unsecured but considered good

- Capital advance 24,097 25,018

Other loans and advances

- Advance income tax[Net of provision for tax Rs. 717,196 lacs (P.Y. Rs. 717,196 lacs)] 616,951 577,682

- Advance payment of fringe benefit tax[Net of provision for tax Rs. 15,300 lacs (P.Y. Rs. 15,300 lacs)] 5,898 5,898

Total of Long Term Loans and Advances 684,728 650,476



68

17. INVENTORIES



Building materials 373 365

Lines & Wires 9,433 9,735

Cables 89,422 92,899

Apparatus & Plants 209,494 183,483

Telephone and Telex Instruments 14,777 14,107

Telegraph and Telex instruments 88 102

Broad Band Equipments 26,821 26,206

Raw Material (at Factory) 16,928 16,532

Finished Goods (at Factory) 675 495

Finished Stock(at Various Circles) 8,427 12,303

Other Stores 25,716 27,873

(Excess)/Short in Inventory Account 48 52

Inventory for construction account 5 -

402,207 384,152

Less: Provision for obsolete inventory/short inventory 24,998 24,474

Total of Inventories 377,209 359,678

Notes:

a) At several locations physical verification of stock has been conducted by the management during the year. Physical inventory taken is being reconciled with the detailed inventory records and the same will be further reconciled with the balance as per the financial books. In six circles (P.Y. thirteen circles) there is difference between the Store Ledger and the General Ledger. The difference between the Store Ledger and the General Ledger to the extent identified in six Circles (P.Y. twelve circles) amounting to Rs 2,108 lacs (net) (P.Y. Rs. 3,578 lacs (net)) is under reconciliation. The consequential adjustment will be made after the process of reconciliation is over.

b) In five circles (P.Y. fifteen circles) the non-moving, slow moving and obsolete inventories are in the process of identification. Pending finalisation of the process, no provision if any, that may be required, has been made.

c) In certain cases, the Company has placed orders for procuring inventory at provisional prices say 80-90% of the previous purchase price. Final purchase price in such cases is determined at a later date. Price difference in such cases is adjusted on the total material available in stock at the time of finalization of purchase price. The proportionate price differential on the already consumed material is adjusted on the existing stock.


69


18. TRADE RECEIVABLES



Trade Receivable 725,748 811,188

Less : Provision for doubtful receivable 430,409 414,970

Total of Trade Receivables 295,339 396,218

Note:a) In twenty-six circles (P.Y. twenty six circles), there is difference in the closing balance of trade receivable

between the subsidiary ledger and the general ledger. To the extent identified, the general ledger bal-ance which are considered for preparation of financial statement, is more by Rs. 22,917 lacs (P.Y. Rs. 25,304 lacs ) than the subsidiary ledger. The management is in the process of reconciling these differ-ences, pending reconciliation no adjustment has been made. The provision for doubtful receivables is made on the basis of information available in the subsidiary records.

b) The age-wise analysis of the trade receivables as per sub ledger is given below:



Trade receivable exceeding six months 551,861 636,464

Other Trade receivable 150,970 149,420

Total 702,831 785,884

c) The classification of the trade receivables as secured (to the extent of the security deposits held by the company), unsecured/considered good and considered doubtful, to the extent available as per sub ledger is as follows:



Considered good in respect of which the company is fully secured

133,244 130,680

Considered good but unsecured 149,203 246,098

Doubtful receivable 420,384 409,106

Total 702,831 785,884

19. CASH AND BANK BALANCES



Cash and cash equivalents

- Balance with bank

In current account including sweep-in-deposit 113,090 155,855

In fixed deposits accounts with original maturity within 3 months - 30,226

- Cash on hand (Including Cheques in hand) 2,913 2,035

116,003 188,116

Other bank balances

- Earmarked deposits with bank (including Bank Guarantee, Margin Money etc)

122 393

Total of Cash and Bank balances 116,125 188,509



70

Notes:a) In ten circles (P.Y. twelve circles), it has been noticed that cheques deposited with the bank & Telegraphic

Transfer (TT) sent, have not been credited in the relevant bank accounts of the company amounting to Rs. 3,442 lacs (P.Y. Rs. 6,481 lacs) as on 31 March 2013. The management has taken up the case with the concerned banks for early crediting of the amount in the respective account.

b) In ten circles (P.Y. sixteen circles), unlinked credit items amounting to Rs. 482 lacs (P.Y. Rs. 513 lacs) and in eight circles (P.Y. twelve circles) unlinked debit items amounting to Rs. 428 lacs (P.Y. Rs. 146 lacs) are appearing in the bank reconciliation statement as at 31 March 2013. The management is in the process of reconciling all such items at the earliest possible.

c) Bank balances in three circles (P.Y. one circle) include cheques in hand pending to be deposited in bank on 31 March 2013. Amount quantified in two circles (P.Y. nil Circle) is Rs. 1,005 lacs (P.Y. nil ).

20. SHORT TERM LOANS AND ADVANCES



Unsecured, considered good unless otherwise stated

- Advances recoverable in Cash or in kind or for value to be received 92,617 114,142

Total of Short term Loans and Advances 92,617 114,142

Notes:a) The amount of Rs. 149,940 lacs (P.Y. Rs. 172,417 lacs) under ‘advances recoverable in cash or in kind

or for value to be received’ includes the amount due from employees of Rs. 14,192 lacs (P.Y. Rs 19,856 lacs) whose break up is as under:



Considered good in respect of which the company is fully secured

6,612 9,062

Considered good but unsecured 7,580 10,794

Total 14,192 19,856

b) In fifteen circles (P.Y. seventeen circles), it has been noticed that there are differences in the subsidiary ledger of loans & advances with those appearing in general ledger. The management is in the process of reconciling the differences of current assets as well as other current liabilities.

21. OTHER CURRENT ASSETS



Amount recoverable in Cash or in kind or for value to be received [Refer Note No. 20] 19,541 16,397

Accrued Revenue 275,704 197,274

Amount recoverable from DoT on Current Account [Refer Note No. 32] 170,985 177,347

- For employees on deputation 1,581 1,302

Amount recoverable from govt deptt/govt companies

- Government departments 4,895 5,109

- Government companies 339,875 322,383


71




Claims recoverable from others 21,922 17,075

Claims recoverable towards defence telecom projects (Net of advances) 12,359 14,118

Operating lease charges recoverable 1,298 1,383

Sales tax recoverable from customers 25 57

Service tax recoverable from customers 77,213 85,714

Balances with Excise and other tax authorities 54,119 57,173

Interest accrued

- on bank deposits 149 232

- on loans advances and investments 207 210

Call detail record (CDR) based claims recoverable 4,033 6,155

983,906 901,928

Less: Provision for doubtful items 209,992 210,103

Total of other current assets 773,914 691,825 Notes:a) Four circles (P.Y. Six circles) has reported that there is a difference between the subsidiary ledger and

the general ledger, under claims recoverable from MTNL. To the extent identified, the general ledger balance which are considered for preparation of financial statement, is more by Rs. 141 lacs (P.Y. Rs. 88 lacs) than the subsidiary ledger. The management is in the process of reconciling these differences, pending reconciliation no adjustment has been made.

b) Cenvat on account of Service Tax, Excise Duty & Custom Duty on capital goods & inputs is under recon-ciliation in some circles. identification of these errors for rectification.

22. REVENUE FROM OPERATIONS



Revenue from sale of services

- Telephones (Other than Wireless in Local Loop(WLL)) 494,717 565,298

- Cellular 1,012,051 974,138

- Income from WLL 22,105 33,116

- Income from broad band services 397,478 356,891

- Leased lines 179,674 180,375

- Other services 1,553 3,196

- Telegraphs & telex 1,088 1,307

- Income from passive infrastructure 7,512 4,595

- Receipts from other operators 318,157 317,388

2,434,335 2,436,304

- Other operating income [Note a] 113,907 144,536

- Other 17,239 17,373

131,146 161,909

Total of Revenue from Operations 2,565,481 2,598,213



72

Notes:

a) Other operating income represents subsidy from USO and DoT.

b) Telephones disconnected due to non-payment are considered to be working for a period of 30 days from the date of disconnection of outgoing facility. During this period, the incoming facility is provided and fixed monthly charges are billed for this period.

c) Indo-Nepal Telecom Traffic A/c

i) Revenue receivable for Rs. 289 lacs (P.Y. Rs. 245 lacs) & payable Rs. 760 lacs (P.Y. Rs.1,302 lacs) in respect of Indo-Nepal Traffic A/c has been considered on accrual basis in the accounts for the financial year 2012-13.

ii) Nepal Telecom has disputed the outstanding dues of Rs. 44 lacs pertaining to period from May 2003 to December 2004. A provision of Rs.43 lacs which has been made by the corporate Office on behalf of the circle in the year 2009-10 in this regard has been retained. However the disputed outstanding dues to Nepal Telecom have been settled during current financial year.

d) Indo-Bangladesh Telecom Traffic A/c.

Revenue receivable for Rs. 7 lacs (P.Y. Rs. 6 lacs) and payable Rs. 8 lacs (P.Y. Rs. 4 lacs) in respect of Indo-Bangladesh Traffic A/c has been considered on accrual basis in the accounts for the financial year 2012-13.

e) Indo-Myanmar Telecom Traffic A/c.

No receivable & payable amount has been booked during the financial year 2012-13 as there is no traf-fic between the countries during the current financial year. In the previous year, revenue receivable for Rs.15 lacs and payable Rs.31 lacs has been considered on accrual basis in the accounts.

23. OTHER INCOME



Interest income

- On deposits in Banks 6,762 11,289

- Others 7,062 21,237

13,824 32,526

Other non-operating income

- Profit on sale of assets (net) 4,859 5,898

- Liquidated damages 31,178 44,313

- Excess provision written back 66,792 75,495

- Rent of staff quarters 2,657 2,152

- Sale of scrap 4,204 5,376

- Others including sale of publications, forms, waste paper etc.

18,415 25,252

- Reimbursement from USO Administrator for USO Towers 5,379 4,125

133,484 162,611

Total of Other Income 147,308 195,137


73


24. EMPLOYEES’ REMUNERATION AND BENEFITS As at


31st March 2012

Salaries, wages, allowance and other benefits 1,208,068 1,162,141

Leave encashment (including provision) [Note b] 64,550 40,692

Pension contribution 91,641 117,965

Employer’s contribution towards EPF 15,933 14,004

Gratuity (including provision) 4,142 3,045

Leave salary contribution 808 929

Medical expenditure 30,585 43,078

Staff welfare expenses 1,913 2,282

1,417,640 1,384,136

Less : Allocated to capital work-in-progress 41,858 43,532

Total of Employees Remuneration and Benefits 1,375,782 1,340,604

Notes:a) During the year, company has paid Rs. 500 lacs ( P.Y. Rs. 1,000 lacs) to Staff Welfare Board and Rs. 100

lacs (P.Y. Rs. 200 lacs) to Sports and Cultural Board for promoting welfare activities at various circles.

b) Leave encashment of Rs. 55,359 lacs (P.Y. Rs. 56,736 lacs) has been paid by the Company considering the unfunded position of the related fund.

25. FINANCIAL COSTS



Interest expense - Interest on government loan 19,599 16,715

- Interest on subscribers deposit 28 461

- Interest on bank loan 15,099 820

- Interest on others 190 93

Total of Financial Cost 35,147 18,412

26. ADMINISTRATIVE, OPERATING AND OTHER EXPENSES As at


31st March 2012

Rent 32,322 32,175

Lease charges 456 439

Rates and taxes 6,184 6,160

Power and fuel 253,256 228,509

Insurance 195 186

Repairs and maintenance

-Buildings 27,077 27,794

-Plant and machinery 85,119 82,480



74



-Cables 42,993 40,628

-Others 7,219 7,482

Professional and consultancy charges 2,119 2,664

Payment to auditors [Refer Note 37] 298 282

Printing and stationery 6,886 7,871

Commission on franchise services 51,201 40,734

Advertisement 900 913

Business promotion and marketing expenses 3,170 3,975

Travel expenses 8,376 10,359

Postage and courier charges 7,115 8,038

Security services 27,805 29,649

Vehicle running expenses (Including hired vehicles) 20,691 20,215

IUC to other service providers 225,858 229,839

Expenditure on services and other expenses 136,411 138,222

Expenditure relating to IDC 38 -

Penalty for Customer Application Form (CAF) verification 1,992 -

Wealth tax 85 93

Write off and losses other than bad debts 22,463 43,708

Bad-debt provision other than services 2,096 2,778

Bad-debt actually written off 24,701 23,491

Provision for doubtful debts and disputed bills 41,534 38,049

Write off of unrecovered service tax 170 19

Foreign exchange fluctuation loss/ (gain) (net) 1,074 3,404

Loss/(profit) from factories [Note a & b] 6,111 4,112

Loss/(Profit) from construction/Telecom services projects (599) (286)

1,045,316 1,033,982

Less: Allocated to capital project works 5,081 4,591

Total of Administrative, Operating and Other expenses 1,040,235 1,029,391

Note:Telecom factories manufacturing account :

Particulars For the year ended

31 March 2013 For the year ended

31 March 2012

Opening stock - Raw material & scraps 11,833 10,341

Purchases 8,106 10,657


75





Direct expenses 12,207 12,459

Change in inventory (1,093) 1,731

Closing stock - Raw material & scraps (8,379) (11,585)

Total (A) 22,674 23,603

Internal transfer (B) 16,562 19,491

Loss/(Profit) from factories 6,111 4,112

b) Prices for the transfer of stock from Telecom Factories to circles for self-consumption are predetermined. The predetermined rates include direct cost including overhead allocation at a fixed rate. This practice has resulted in internal loss of Rs. 6,111 lacs (P.Y. Rs. 4,112 lacs) for the year ended 31 March 2013 aris-ing out of such transfer. The said amount has been netted off against the administrative expenses in the Statement of Profit and Loss for the year since it is not possible to identify the individual items of stores, which have been capitalized or expensed off.

27. PRIOR PERIOD ITEMS As at


31st March 2012

Prior period income

- Telephones (WLL) 7 13

- Income WIMAX 0 17

- Value added service 1,018 219

- Broadband services 775 396

- Misc income 300 1,027

- Telegraphs 3 -

- Subsidy from DIT for Rural BB (wireline) 16,786 -

18,889 1,672

Expenditure booked earlier now reversed

- Salaries and staff expenses 457 (350)

- USO Towers - 626

- License fee 1,003 -

1,460 276

Total A 20,349 1,948

Prior period income booked earlier now reversed

- Cellular mobile service 282 (201)

- IUC 2,213 1,339

- Income - telephones (other than WLL) 908 (806)

- Income on telephone circuits 8,317 (1,256)

- Income on telegraph circuits 303 (95)

- USO Subsidy 1,345 352

13,368 (667)


76

28. ASSETS AND LIABILITIES TAKEN OVER FROM DoT28.1 In pursuance of the Memorandum of Understanding dated 30 September 2000 executed between

Government of India and the Company, all assets and liabilities in respect of business carried on by DTS and DTO were transferred to the Company with effect from 01 October 2000 at a provisional value of Rs. 6,300,000 lacs and up to the current financial year BSNL has identified net assets of Rs. 6,329,439 lacs (P.Y. Rs. 6,331,857 lacs) against it.

During the current financial year, the management based on physical verification of fixed assets and inventory and reconciliation of various heads of assets and liabilities in the subsidiary and general ledgers which has resulted in increase/decrease in the following assets and liabilities which were taken over as on 01 October 2000 amounting to net reduction in the assets of Rs. (2,418) lacs [P.Y. (4,703) lacs] :

(Rs. In Lakh)

Particulars Up to 31st March, 2012

Additions/ (Deletions) during the year

Up to 31st March, 2013

Assets

Fixed assets 5,411,323 (2,252) 5,409,071

Capital work-in-progress 502,628 (1) 502,627

Inventory 187,985 (135) 187,850

Sundry debtors 683,196 - 683,196

Advance to contractors 39,448 - 39,448

Deposit with electricity boards /others 2,184 - 2,184

Total-A 6,826,764 (2,388) 6,824,376

Liabilities

Customer deposits 393,704 - 393,704

Earnest money deposits 12,122 - 12,122

Security deposits from contractors /suppliers 29,005 - 29,005

Working expense liability as on 01 October 2000 43,483 30 43,513

Contractors bills payable as on 01 October 2000 16,593 - 16,593

Total-B 494,907 30 494,937

Net Assets taken over by the Company (A-B) 6,331,857 (2,418) 6,329,439

Previous Year 6,336,560 (4,703) 6,331,857




Expenditure

- Rent, rate & taxes 18 583

- Repairs 1,138 1,042

- Depreciation [Refer Note 13] 14,642 8,552

- Interest 0 (53)

- Power and fuel 545 44

- Interconnect Usage Charges (IUC) 1,164 6,121

- Other services 7,756 3,158

25,263 19,447

Total B 38,631 18,780

Net amount of Prior Period Items (A-B) (18,282) (16,832)

77


The net assets and the contingent liabilities transferred to the Company as on 01 October 2000 are subject to confirmation by DoT as regard to their ownership and the value.

28.2 The capital structure for BSNL concurred by the Ministry of Finance and conveyed by the Department of Telecommunications vide their U.O. No. 1-2/2000-B (Pt.) dated 13 December 2001 has been treated as consideration for transferring the above stated assets and liabilities is as follows:

(Rs. In Lakh)

Particulars As at 01st October 2000 (as on 31.03.2012)

Additions/ (Deletions)

during the year ended 31st

March 2013

Total structure as at 01st October

2000 (as on 31.03.2013)

Equity 5,00,000 - 5,00,000

9% Non-cumulative preference shares 7,50,000 - 7,50,000

15 year government loan (Interest at prevalent government lending rate) 7,50,000 - 7,50,000

Loan from MTNL # 3,05,600 - 3,05,600

Capital reserves* 40,26,257 (2,418) 40,23,839

Total 63,31,857 (2,418) 63,29,439

# the entire amount has already been repaid.# the entire amount has already been repaid.

* Represents the difference between the total value of the assets taken over and the long term identified liabilities & the capital structure, as on 01 October 2000 as communicated by DoT.

28.3 In pursuance of clause 13 of Agreement of Transfer executed between the Government of India and BSNL dated 30 September 2000 all costs, charges and expenses including stamp duties, registration charges, transfer duties, any other taxes, levies, duties or charges relating to or in con-nection with completion of transfer of assets and liabilities shall be borne by the Government of India.

29. LICENSE FEE AND SPECTRUM CHARGES

29.1 During the year there was no change of formula in distribution of the revenue between various components and thus the same formula adopted during 2010-11 is followed this year also, as per the following percentage:-

Service Basic CMTS NLD ILD

Leased Circuits 30% - 70% -

Basic Services 70.72% - 17.58% 11.7%

CMTS Services - 75.50% 21.26% 3.24%

The NLD/ILD portion of POI revenue has been taken on actual basis.

29.2 During the year the DoT vide letter no 20-281/2010-AS-I(Vol. II) (Pt.) Dated 25.06.2012, has changed the License fee from 10% to 9% for ‘A’ category circles, from 6% to 7% for ‘C’ category circles and from 6% to 7% for ISP,VSAT,NLD & ILD. There is no change in the ‘B’ category circles. This was effective from 01 July 2012.



78

30. EMPLOYEE COST

30.1 The Company has made pension contribution as per applicable rates to DoT on the basis of pay scales for absorbed employees and for other employees working on deemed deputation as per the CDA pay scales in accordance with Financial Rule 116 of the Government of India. The liabil-ity on account of pension payable to all such employees will be that of Government of India as communicated by the Secretary, DoT vide their DO No. 1-45/2003-B dated 15 March 2005. How-ever, in the year 2006-07 DoT vide their letter No. 1-45/2003-B dated 15 June 2006 has intimated that annual pension liability of the Government in respect of employees of DoT / DTS / DTO who retired prior to 01 October 2000 and those who have worked / are working in BSNL on deemed deputation and for those who are absorbed in BSNL shall not exceed 60% of the annual receipts to Government from the item (a) Dividend income from MTNL/BSNL, (b) License fee from MTNL/BSNL, (c) Corporate Tax/Excise Duty/Service Tax paid by BSNL. Any amount exceeding the receipts on account of 3 items mentioned above shall be borne by MTNL/BSNL. BSNL has taken up the matter with the Government stating that its liability is restricted to pension contribution as per the rates prescribed in Financial Rules.

30.2 During the year, the Company has recognised the following amounts in the Statement of Profit and Loss :

a) Defined Contribution Plans

Contribution to defined contribution plan i.e. Employer’s contribution to provident fund and pension contribution to Government of India for the year is charged to Statement Profit & Loss. These amounts are shown as under:

(Rs. In Lakh)

Particulars Year ended March 31, 2012

Year ended March 31, 2011

Employer’s Contribution to Provident Fund 15,932 14,003Pension Contribution to Government of India 91,641 117,965

a) Defined Benefit Plans

• Gratuity

The Employees’ Gratuity Fund Scheme administered by BSNL Employees Gratuity Fund Trust through two fund managers namely Life Insurance Corporation of India and SBI Life Insurance Company Limited, is a defined benefit plan. The present value of obligation is determined on actuarial valuation done by LIC using Projected Unit Credit Method to arrive the final obligation.

i) Defined benefits / expenses for Gratuity recognized for the year

(Rs. In Lakh)



Current service cost 3,388 3,120

Interest cost 2,289 1,703

Expected return on Plan Assets (-) 2,443 (-) 1,314

Total actuarial (gain)/loss 908 2,655

Past service cost - -

Curtailment and Settlement cost/(credit) - -

Net Cost 4,142 6,164


79


ii) The assumptions used to determine the benefit obligations are as follows:(Rs. In Lakh)



Discount Rate 8% 8%

Expected Rate of Increase in Compensation Levels

7% 7%

Expected average remaining working lives of employees (years)

24.94 26.23

Mortality Table LIC (1994-96) Ultimate

LIC (1994-96) Ultimate

iii) Reconciliation of opening and closing balances of defined benefit obligations for Gratuity

(Rs. In Lakh)



Present value of obligations as at beginning of year

28,617 21,289



Benefits paid (-) 74 (-) 150

Actuarial (gain)/loss on obligations 908 2,655

Present value of obligations as at end of year 35,128 28,617

iv) Reconciliation of opening and closing balances of fair value of plan assets for Gratuity

(Rs. In Lakh)



Fair value of plan assets at beginning of year 19,543 18,379

Contributions during the year 6,029 -

Expected return on plan assets 2,443 1,314

Benefits paid (-) 74 (-) 150

Actuarial gain / (loss) on Plan assets - -

Fair value of plan assets at the end of year 27,941 19,543

v) Reconciliation of fair value of assets and obligations for Gratuity(Rs. In Lakh)





Unfunded amount recognized in Balance Sheet 7,187 9,074



80

vi) Gratuity Fund Investment details (Fund manager wise, to the extent funded)(Rs. In Lakh)



Life Insurance Corporation of India 24,676 16,547

SBI Life Insurance 3,265 2,996

Total 27,941 19543

• Leave Encashment:Leave encashment is also a defined benefit plan. The liability towards leave encashment has been determined through actuarial valuation as per Accounting Standard 15 (revised 2005) ‘Employee Benefits’ using Projected Unit Credit Method. i) Defined benefits / expenses for Leave Encashment recognised for the year

(Rs. In Lakh)





Expected return on Plan Assets (-) 56,159 (-) 51,211

Total actuarial (gain)/loss 2,151 (14,576)

Past service cost - -

Curtailment and Settlement Cost/(Credit) - -

Net Cost 9,190 (8,255)

ii) The assumptions used to determine the benefit obligations are as follows:



Discount rate 8% 8%

Expected rate of increase in compensation levels

7% 7%

Expected average remaining working lives of employees (years)

10 11

Withdrawal Rate 1% to 3% depending on age

1% to 3% depending on age

Mortality Table LIC (1994-96) Ultimate LIC (1994-96) Ultimate

iii) Reconciliation of opening and closing balances of defined benefit obligations for Leave Encashment.

(Rs. In Lakh)



Present value of obligations as at beginning of year 664,741 621,785



Benefits paid - -

Actuarial (gain)/loss on obligations (balancing figure) 2,151 (14576)


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2013(

81


iv) Reconciliation of opening and closing balances of fair value of plan assets for Leave Encashment.

(Rs. In Lakh)



Fair value of plan assets at beginning of year 581,352 530,141

Contributions during the year - -

Expected return on plan assets 56,159 51,211

Benefits paid - -

Actuarial gain / (loss) on plan assets - -


v) Reconciliation of fair value of assets and obligations for Leave Encashment as on March 31, 2012

(Rs. In Lakh)





Unfunded amount recognised in Balance Sheet 92,579 83,389

vi) Leave Encashment Fund Investment details (Fund manager wise, to the extent funded)

(Rs. In Lakh)



Life Insurance Corporation of India (100%) 637,511 581,352

Total (100%) 637,511 581,352

31. FIXED ASSETS / DEPRECIATION / CAPITAL WORK IN PROGRESS31.1 Fixed Assets taken over from DoT as on 01 October 2000 are based on physical verification

conducted by the management. The value of fixed assets taken over including capital work-in-progress has been determined by the management using the original cost of the asset (wherever available) or alternatively the value arrived at by applying Strategic Business Plan (“SBP”) rates, which is based on technical assessment, as reduced by the depreciation up to 30 September 2000 on Straight Line Basis at the rates prescribed by DoT. Capital assets acquired by the company after 01 October 2000 is valued at the cost including all direct charges incurred up to the time of installation or put to use.

The transfer values, as indicated above, in respect of assets transferred from DoT on 01 October 2000 have been treated as its original cost and depreciation has been provided on written down value method at the rates prescribed in Schedule XIV of the Companies Act, 1956 without reassessing the remaining useful life of such assets as on that date. Depreciation has been provided at the rates as stated above for all the assets acquired after 01 October 2000 except in the case of Subscribers Installations which are depreciated over the useful life of 5 years on written down value method. Depreciation has been calculated by the circles, as per the policies of the Company.

31.2 Land at several locations has been taken over at a nominal value say Re. 1, wherever original cost is not available. As at 31 March 2013 thirty two circles (P.Y. thirty six circles) have identified the leasehold land. In the absence of the information relating to such acquisition in other cases, no adjustment has been made for amortizing the cost of such unidentified lease hold land over the lease period.



82

The lease period of a few leasehold lands on which buildings are constructed, have not been renewed / or the renewals are under dispute. No provision has been made for the ‘surrender value / written down value of the building’ in the hope that the leases would be ultimately renewed.

31.3 Pending transfer of the immovable property in the name of the Company, documents in respect of some land & buildings acquired during the period are under legal process/execution. Further in respect of assets taken over from DoT, formalities for vesting the assets in favour of the Company wherever necessary/applicable are under process. Further some of the assets acquired by the Company are yet to be registered in the name of the Company.

31.4 The Company, as per instructions issued by the Ministry of Communications & IT through letters having number P-11014/13/2008-PP dated nil and number P-11014/13/2008-PP dated 12 June 2010, has provided Rs. 1,018,658 lacs and Rs. 831,380 lacs as one time charge for 3G spectrum and BWA spectrum respectively in the financial year 2009-10, which was earmarked for the Company on 08 August 2008. Above-mentioned amount has been paid to the Government of India during the financial year 2010-11. As per terms and conditions of NIA the right to use above-mentioned spectrum is for 20 years from the date of awards of right to commercially use the allocated spectrum block. Accordingly the Company is amortizing the one time spectrum fee over the period of twenty years as per straight-line method.

31.5 Certain assets that have been completed and put to use, have not been capitalized in thirteen circles (P.Y. seventeen circles) pursuant to the policy of capitalizing only after completion certificates have been obtained and till then these are still shown as capital work-in-progress. The amount ascertained in respect of nine circles (P.Y. five circles) is Rs. 33,292 lacs (P.Y. Rs 3,977 lacs). To that extent, these have not been depreciated on account of the fact that the total expenditure on such capital works is still to be classified under the proper heads.

31.6 Establishment and administration expenses incurred in units where project work is also undertaken, are allocated to capital and revenue based either on man-month allocated or proportionate basis.

31.7 In one circle (P.Y. one circle), there is difference between the CWIP subsidiary ledger and general control ledger.

32. DoT BALANCESNet amount of Rs. 123,777 lacs (P. Y. Rs. 134,431 lacs) recoverable on current account from DoT is subject to confirmation, reconciliation and consequential adjustment. There is no agreement between the Company and DoT for interest recoverable / payable on outstanding amounts of DoT on current account. Hence no accrual for interest has been made on the amount payable to / recoverable from DoT.

33. INTER/INTRA CIRCLE REMITTANCEThe management is in the process of reconciling the various differences between the subsidiary records and the corresponding control accounts and the balance of Rs. 102,458 lacs (P.Y. Rs. 123,615 lacs) in Inter/Intra-Circle Remittances account. The cumulative impact of such differences between control accounts and subsidiary ledger and the un-reconciled balance in Inter/Intra Circle Remittance account on the affected accounts of income, expenditure, assets and liabilities is currently not ascertainable.

34. EARNINGS PER SHARE

Description Unit F.Y. 2012-13 F.Y. 2011-12

Loss after tax (Rs. in lacs) (788,444) (885,070)

*Less: Preference dividend including tax (Rs. in lacs) - -

Balance for Equity Shareholders (Rs. in lacs) (788,444) (885,070)

Number of Equity shares outstanding (in number) 5,000,000,000 5,000,000,000

Face value of shares (in Rs.) 10 10

Basic/Diluted earnings per share (in Rs.) (15.77) (17.70)

* No provision for dividend on preference share capital has been made due to loss.


83


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84

36. RELATED PARTY DISCLOSURE

36.1 Key Management Personnel

Designation Name Remarks

CMD Shri R k Upadhyay From 30 April 2011 (A/N)

Director (F)

Shri R.k. Upadhyay From 30 April 2011 to 25 April 2012

Shri k.C.G.k. Pillai From 25 April 2012 (A/N)

Director (Consumer Mobility) Shri R. k. Agarwal From 11 April 2008

Director (HRD)Shri R.k. Upadhyay

From 05 March 2012 to 18 June 2012

Shri. A.N. Rai From 19 June 2012

Director (Consumer Fixed Access)

Shri Rajesh Wadhwa From 01 August 2008 to 31 May 2012

Shri N. k Gupta From 01 June 2012 (F/N)

Director (Enterprise) Shri A.N.Rai From 19 September 2011

Govt. Director Shri S.R.Rao From 13 April 2011 to 29 May 2012

Govt. Director Shri Shahbaz Ali From 14 February 2012

Govt. DirectorMs. Rita Amitabh Teaotia

From 04 September 2012

Non-official part-time Director Shri Ashish Guha From 21 May 2010

Non-official part-time Director Prof. N. Balakrishnan From 17 July 2012

Non-official part-time Director Shri. Ajai Vikram Singh From 17 July 2012

36.2 Disclosure of transactions between the Company and related parties and the status of outstanding balances

(Rs. In Lakh)

Name of the Party

Description of Transactions Year ended March 31, 2013


Remuneration paid

key Management Personnel

Payment of salary and allowances 101 89

Perquisites 5 4

Sitting fees 2 1

Total 108 94

Advance given:

Opening balance

Extended During the year

Total

-

13

13

10

9

19

Repayment of Advance 12 19

Outstanding Advance 1 -

36.3 The Company being a wholly State owned enterprise, hence disclosure as regards related party relationship with other State controlled enterprises and transactions with such enterprises has not been made in accordance with “Accounting Standard-18 Related party disclosures”.


85


37. AUDITOR’S REMUNERATION (STATUTORY/BRANCH AUDITORS)

(Rs. In Lakh)



Statutory Auditor

Branch Auditor

Statutory Auditor

Branch Auditor

Statutory Audit Fee 13 227 11 189

Certification Charges 1 36 5 54

Reimbursement of Expenses 2 19 2 21

Total 16 282 18 264

Other Services 4 - 4 6

Tax Audit fee - 22 - 21

Note: Fees exclusive of Service Tax & Cess wherever applicable.

38. AS 29 DISCLOSURE REQUIREMENT

The disclosure relating to provisions in terms of AS 29, to the extent available, are as under:

(Rs. In Lakh)

Name of Provisions Opening Balance

as at 01.04.2012

Fresh Provision made during

the year

Provision utilized

during the year

Provision written back during the

year

Closing balance as at

31.03.2013

Wealth Tax397 85 92 - 390

(403) (92) (98) - (397)

Dividend- - - - -

- - - - -

Tax on Dividend- - - - -

- - - - -

Phased out assets- - - - -

- - - - -

Leave Encashment664,741 65,349 - - 730,090

(629,574) (42,956) - (7,789) (664,741)

Gratuity9,074 4,142 6,029 - 7,187

(6,044) (3,044) (14) - (9,074)

Contingencies1,192 120 56 - 1,256

(623) (631) (60) (2) (1,192)Total 675,404 69,696 6,177 - 738,923

(636,644) (46,723) (172) (7,791) (675,404)

Note: Figures in bracket denotes previous year figures.



86

39. OTHER SCHEDULE-VI REQUIREMENTS

nformation required as per Note 5(viii) of General Instructions for preparation of Statement of Profit and Loss, Part II of Revised Schedule VI of Companies Act, 1956, to the extent available, are as under:

39.1 Value of Imports on CIF Basis:

(Rs. In Lakh)



Raw Material 2,401 -

Components & Spares Parts - -

Capital Goods 57,861 579

Total 60,262 579

* One circle has not ascertained the value of import on CIF basis.

39.2 The expenditure in foreign currency: (Rs. In Lakh)



Expenses on Services 7,307 24,264

Travelling 19 37

Others 9,086 3,889

Total 16,412 28,190

39.3 Consumption of imported and indigenous stores & spares parts (to the extent identified):

Particulars Year ended March 31, 2013 Year ended March 31, 2012

(Rs. in lakh) % (Rs. in lakh) %

Imported 12,176 29 3,574 16

Indigenous 22,894 71 18,813 84

Total 35,070 100 22,387 100

39.4 Earnings in Foreign currency: (Rs. In lakh)



Training Fee 51 109

Income from Services 8,423 9,747

Others 569 908

Total 9,043 10,764


87


40. LEASE

The Company has taken vehicles for senior executives under operating leases, which expire between April 2014 to July 2017 (P.Y. October 2012 to December 2016). The gross rental expenses, excluding service tax, for such vehicles are Rs. 92 lacs (P.Y. Rs. 101 lacs). The committed lease rentals in the future are:

(Rs. In Lakh)

ParticularsYear ended

March 31, 2013

Year ended March 31,

2012

Not later than one year (excluding service tax) 88 89

Later than one year and not later than five years (excluding service tax)

121 147

Total 209 236

41. OTHERS

42.1 In the absence of any agreement between BSNL and MTNL generally no income and expenditure have been recognised on account of use of jointly occupied buildings and other infrastructure owned by either party.

42. CONTINGENT LIABILITIES AND COMMITMENTS:

42.1 Contingent Liabilities

(i) Claims not acknowledged as debts are as follows:

Particulars As at 31.03.2013 As at 31.03.2012

No. of Cases

Amount(Rs. In lakh)

No. of Cases

Amount(Rs. In lakh)

TR Billing 55 143 63 113

Enhanced Sales Tax in lieu of C/D Forms 39 2,495 18 2,430

On account of service tax disputed 94 17,127 94 18,076

Sales tax disputed 59 16,747 45 7,812

Customs duty disputed - - 2 2

Central Excise claims 17 3,216 24 1,064

Licence fee and spectrum charges* 1 691,186 - -

Others 633 25,012 190 12,478

Total 898 755,926 436 41,975

* Demand raised by DoT on account of one time spectrum charges for GSM spectrum held by BSNL. Since the matter is subjudice and the amount is not crystallised this amount has been shown as contingent liabilities.

(ii) Claims pending in court related to Land Acquisition, TR Billing, Service Tax, Central Excise &

Sales tax, Arbitration cases and others.

Particulars As at 31.03.2013 As at 31.03.2012

No. of cases 16,520 20,463

Amount (Rs. in lacs) 273,354 1,706,195



88

(iii) Demands raised by the Income Tax Departments not acknowledged as debt are as follows:

Assessment Year

As at 31.03.2013 As at 31.03.2012

Forum where pending Amount(Rs. In lacs)

Forum where pending Amount(Rs. In lacs)

2001-02 (Refer Note 1)

Writ at Hon’ble Delhi High Court against re-assessment u/s 147

81,899 Writ pending at Hon’ble Delhi High Court against re-assessment u/s 147

81,899

2002-03

(Refer Note 2)

Appeal pending at ITAT against penalty Order u/s 271(1)(c)

27,307 Appeal pending at CIT(A) against penalty Order u/s 271(1)(c)

27,307

2003-04 Appeal pending at ITAT against Assessment u/s 143(3)

197,943 Appeal pending at ITAT against Assessment u/s 143(3)

197,943



36,110

2004-05

(Refer Note 3)

Appeal pending at ITAT against Assessment u/s 263 / 143(3)

9,684 Appeal pending at ITAT against Assessment u/s 263 / 143(3)

9,684



31,667

2005-06

(Refer Note 4)

Appeal pending at ITAT against penalty Order u/s 271(1)(c)

115,316 Appeal Filed before ITAT against penalty Order u/s 271(1)(c)

115,316

2006-07

(Refer Note 5)

Appeal pending at ITAT against Assessment u/s 143(3)


92,606

2007-08

(Refer Note 6)

Appeal pending at ITAT against Assessment u/s 143(3)


97,095

2008-09

(Refer Note 7)

Appeal filed at ITAT against Assessment u/s 143(3)

70,891 Appeal being filed in ITAT against Assessment u/s 143(3)

70,891

2009-10

(Refer Note 8)

Appeal filed at ITAT against Assessment u/s 143(3)

59,429 Appeal filed at CIT(A) against Assessment u/s 143(3)

59,429

2010-11 Appeal filed at CIT (A) against Assessment u/s 143(3)

3,071 - -

Total 8,23,018 819,947

Notes:

1. The Income Tax (I.T) Department had re-initiated re-assessment proceedings against the Company for the A.Y. 2001-02 and A.Y. 2002-03. The main contention of the department is that the amount shown in the Balance Sheet of the respective years under the head ‘’Reserve’’ amounting to Rs. 3,316,000 lacs is to


89


be treated as financial relief/grant/subsidy. Hence, is to be reduced from the actual cost of fixed assets. Consequently, the depreciation charged would be lower than what has been claimed by the company. The re-assessment proceedings will be having cascading effect on all the subsequent assessment years also.

The initiation of re-assessment proceedings were challenged in Delhi High Court by BSNL through writ petitions 550/2007 and 7707/2007. Hon’ble High Court passed the judgments on both the writ petitions on 09 May 2013 setting aside the re-assessment proceedings. Thus, demand for 2001-02 is likely to be wiped off unless I.T Department appeals against the judgment in Apex Court. Response from I.T Department to High Court Orders dated 09 May 2013 has not been received by BSNL so far.

2. The appeal filed against the penalty order u/s 271(1)(c) of the I.T. Act, 1961 passed for the AY 2002-03 was decided by CIT(A) in favour of BSNL vide his order dated 03 December 2012. I.T Department has filed appeal in ITAT against the order of CIT(A).

3. Assessment order u/s 263/143(3) dated 25 September 2009 has been passed for A.Y. 2004-05, whereby deduction u/s 80-IA amounting to Rs. 452,830 lacs was disallowed. An additional demand of Rs.100,856 lacs has been raised against the Company. The appeal filed against this assessment has been decided partly by CIT (A) in favour of BSNL vide their order dated 30 April 2010.As per appeal effect u/s 250/263/143(3) dated 30 June 2010 for effecting order of CIT (A) dated 30 April 2010, the additional demand of Rs.100,856 lacs has been reduced to 9,684 lacs. Further appeal has been filed with Hon’ble ITAT against the order of CIT (A).

4. The appeal filed against the penalty for A.Y. 2005-06 under section 271(1)(c) imposed to the extent of Rs. 115,316 lacs has been disposed of by CIT(A) vide their order dated 14 March 2012. Substantial relief has been allowed to the company as mentioned below :

S.No. Particulars Additions under Normal Provisions/Section 115JB

Penalty (100%) (Rs. in lacs)

1 Depreciation Normal 82,994

2 Write off – other than Bad Debts Normal -

3 Disallowance of claims of deductions u/s 80-IA

Normal 25,838

4 Provision of bad & Doubtful debts Section 115JB 5,630

Total 114,462

Further, Second appeal has been filed by both BSNL and Income Tax Department with Hon’ble ITAT against order of CIT(A) vide Appeal No 2196/DEL-2012 and 2799/DEL-2012 respectively.

5. For AY 2006-07, an additional demand of Rs.51,890 lacs was raised against the company vide Assessment order U/s 143(3) dated 27 December 2007. The additional demand for AY 2005-06 has further been increased from Rs.51,890 lacs to Rs.92,606 lacs vide Assessment order u/s 154/143(3) dated 24 September 2010. The appeal filed against this assessment has been decided partly in facvour of BSNL by CIT(AS) vide ther order dated 28 March 2008. The Company has filed a0ppeal before ITAT against the order of CIT(A).

6. For A.Y. 2007-08, an additional demand of Rs. 35,218 lakh was raised against the company vide Assessment Order u/s 143(3) dated 14.12.2009. The additional demand for A.Y. 2007-08 has further been increased from Rs. 35,218 lakh to Rs. 97,095 lakh vide Assessment Order u/s 154/143(3) dated 10.08.10. The Appeal filed against this Assessment has been decided partly in favour of BSNL by CIT (A) vide their Order dated 29.03.2011. The Company has filed appeal before ITAT against the Order of CIT(A).

7. For AY 2008-09, an additional demand of Rs. 100,202 lakh was raised vide Assessment Order dated 23.12.2010. Vide Rectification Order u/s 154/143(3) dated 30.01.2012 , the additional demand raised vide Assessment Order u/s 143(3) dated 23.12.2010 has been reduced from Rs. 100,202 lakh to Rs.



90

70,891 lakh. First Appeal filed before CIT(A) against assessment u/s 143 has been disposed of by CIT(A) vide their Order dated 16.02.2012 and Order u/s 154 dated 12.03.2012 . Second Appeal is being filed with ITAT against abovementioned Orders of CIT (A).

8. During the year additional demand of Rs. 59,429 lakh has been raised vide Assessment Order dated 02.11.2011 for the A.Y. 2009-10. The Company has filed appeal before CIT (A) against the Assessment Order.

9. Penalty proceedings u/s 271(1)(c) of the I.T. Act 1961 which was initiated against the Company for A.Y. 2001-02, A.Y. 2003-04, A.Y. 2004-05, A.Y. 2006-07, A.Y. 2007-08 and 2008-09 has been kept in abeyance. The additional demand, if any has not been quantified.

10. Additional interest u/s 234B and 220, if any, arising out of above-mentioned Income Tax proceedings has not been quantified since demand has not been finally crystallized against the Company.

11. The Advance Income Tax (net of provision for Tax of Rs. 717,196 lakh) which has been shown under other current assets, is Rs. 577,682 lakh. As per records, an amount of Rs. 565,372 lakh (P.Y. 507,726 lakh) has been adjusted by Income Tax Department against the additional demand of Rs. 819,947 lakh (P.Y. 789,829 lakh) mentioned above which is contested by the Company at appropriate forums.(iv) Liability on account of bank guarantees given by the Company.

Item As at 31.03.2013 As at 31.03.2012

With cash margin

Without cash margin

*With cash margin

*Without cash margin

No. of cases 38 366 35 304Amount (Rs. In lakh) 427 5,331 476 5,336

(*) One circle has not ascertained the details of bank guarantee(v) In case of few circles, the amount of contingent liability has not been ascertained.(vi) As per Office Memorandum dated 19 November 2009, pension contribution was payable on

the actual pay drawn as on 01 January 2007 (being the date of implementation of second pay commission for IDA). Whereas BSNL was paying pension contribution on maximum of the scale as advised by DoT. However from 01 December 2011 the management has decided to pay the pension contribution as per office memorandum dated 19 November 2009. For those who are retiring within six months, pension contribution is paid on maximum of the pay scale as per letter no 7-45/2008-TA-I, Dated 19 April 2012 of Director(A/cs-I)IA, DoT. The actual difference between these two methods of Pension Contribution payment upto 31 March 2013 is Rs. 30,844 lacs

42.2 Commitments a) Capital Commitments (i) The estimated amounts of contracts remaining to be executed on capital account and not

provided for in relation to execution of works and purchase of equipments are Rs. 231,039 lacs (P.Y. 192,656 lacs).

(ii) In thirteen circles the estimated amount of contract remaining to be executed on capital account has not been ascertained.

b) Other Commitments(i) The amount of other commitments is unascertained, except one circle.

43. CURRENT TAX The provision for Income Tax for the current year has not been made since the company is not having

any taxable income either under normal provision of Income Tax Act, 1961 or special provision u/s 115JB (MAT) of the Income Tax Act, 1961.


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44. BSNL is executing various projects for various Government departments on reimbursement basis45. (a) Information required relating to consumption of stores & spare parts under Schedule VI of the

Companies Act, 1956 is not ascertainable for the year ended 31 March 2013 (P.Y. unascertainable), since consumption of stores is included under the normal heads of repairs & maintenance.

(b) Information required under Schedule VI of the Companies Act, 1956 in respect of opening stock, closing stock and sales of finished goods have not been shown as the production of goods by the Company is for captive consumption.

46. The Company’s one of the circles in the state of Uttarakhand has tangible assets (net) and current assets aggregating to Rs 70,713 lacs as at 31 March 2013. Subsequent to the Balance Sheet, there was a climatic catastrophe which has caused damage to assets of Uttarakhand circle. The company is in the process of identifying the quantum of loss. Till the complete assessment is over it is not felt necessary to make any provisions

47. Figures of the previous year have been regrouped or reclassified wherever necessary to conform to the current years grouping and classification.

for Walker, Chandiok & Co For and on behalf of Bharat Sanchar Nigam Limited Chartered Accountants Sd/- FRN 001076N R.K. Upadhyay Chairman and Managing Director Sd/- Sd/- Atul Seksaria K.C.G.K Pillai Partner Director (Finance)M.No: 86370 Sd/- Rajeev Singh General Manager (Corporate Accounts) Sd/- Place : New Delhi H.C.Pant Date : 30 August 2013 Company Secretary and Sr. General Manager (Legal)



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Independent AudItors’ reportto the MeMbers of bhArAt sAnchAr nIgAM LIMIted

report on the financial statements

1. We have audited the accompanying financial statements of Bharat Sanchar Nigam Limited, (“the Company”), which comprise the Balance Sheet as at 31 March 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Incorporated in these financial statements are the accounts of Head Office Circle audited by us and of 47 Circles audited by branch auditors appointed under Section 228 of the Companies Act, 1956 by the Comptroller and Auditor - General of India.

Management’s responsibility for the financial statements

2. Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair

presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

Assets taken over from Department of Telecommunication (‘DoT’) and DoT balance

6. As detailed in note 28, 31.1 and 31.3 to the financial statements, net assets (including contingent liabilities) taken over from Department of Telecommunications (‘DoT’) have been verified and valued by the management based on internal calculations are subject to reconciliation and final confirmation from DoT as regards to ownership, value and classification. The consequential impact on the depreciation, if any, as a result of the same is presently not determinable. And the value of net assets, idenftified subsequent to 1 October 2000 has been adjusted to Capital Reserves. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

7. As detailed in note 32 to the financial statements, a net amount of Rs. 123,777 lacs recoverable on current account from DoT is subject to confirmation, reconciliation and consequential adjustments. Due to non-availability of confirmations of aforesaid balances, we are unable to quantify the impact of the adjustments, if any, arising from reconciliation and settlement of account balances on the financial statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Fixed Assets and Capital Work-in-Progress

8. As reported by auditors of certain circles, Capital work-in-progress includes balances pending capitalisation for long-periods of time, pending analysis of status and value and obtaining of commissioning certificates. Thus the consequential

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impact, if any, on account of depreciation of assets from the date of put to use cannot be ascertained. This was also a subject matter of qualification in previous auditor’s report on the audited financial statements for the year ended 31 March 2012.

9. As reported by auditors of certain circles, in the absence of information in respect of certain items of fixed assets capitalised, particularly batteries, it could not be established whether assets capitalised were on account of replacement of existing asset or addition or extention to an existing asset and hence the impact of the same on the classification/value of the assets and depreciation/expenses is currently not ascertainable.

10. As reported by auditors of certain circles, the freehold/leasehold land as identified and valued by the respective circles have only been incorporated in the books of account and amortised with effect from the year of formation of the Company. Hence, in respect of the lands still not identified and incorporated in the books of account of the respective circles, the impact on value of fixed assets and the respective amortisation for the current year and prior periods is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

11. As detailed in note 31.2 to the financial statements, auditors of certain circle reported about the expiry/non renewal of lease period of leasehold lands on which buildings have been constructed and the fact that no provision has been made for the surrender value/written down value of the building in the expectation of ultimate renewal of the leases. The consequential impact of adjustment, if any, on this account cannot be currently ascertained. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

12. As stated in note 13(a) to the financial statements, title deeds are yet to be executed in respect of land purchased/acquired on leasehold/ freehold in certain cases through various authorities. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

13. As stated in note 31.7 to the financial statements, there are differences in Capital-work-in-progress between subsidiary ledger and General ledger/Trial balance, the impact of the same is not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the

financial statements for the year ended 31 March 2012.

14. The following accounting treatments by the Company in respect of fixed assets and Capital works-in-progress are not in accordance with the provisions Accounting Standard - 10, Accounting for fixed assets notified by Companies Accounting Standards Rules, 2006:

a) As detailed in note 31.6 to the financial statements, the Company charges overheads on estimated/fixed percentage/proportionate/payment basis to the Capital work-in-progress rather than the actual usage basis.

b) As reported by certain circle auditors, the Company capitalises the assets either on yearly or quarterly basis rather than the actual put-to-use date.

c) Accounting policies regarding capitalisation, disposal, depreciation and amortization of fixed assets are not uniformly applied across all the circles.

The resultant impact of the above non compliance with the standard on the value of fixed assets, capital work-in-progress, depreciation and profit/loss is currently not ascertainable. Above mentioned point a) was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Current Assets, Loans and Advances and Current Liabilities

15. The Company does not follow a system of obtaining confirmation of balances in respect of Trade receivables, deposits with departments/companies (including MTNL), claims recoverable from/payable to DoT (including license fees payable as detailed in note 42.1 of the financial statements) or other government departments, subscriber deposit account, claims payable. Due to non-availability of confirmations of aforesaid balances, we are unable to quantify the impact of the adjustments, if any, arising from reconciliation and settlement of account balances on the financial statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

16. As detailed in note 19(a) and 19(b) to the financial statements, Cheques and TT's deposited with the bank for Rs. 3,442 lacs but not creditted by the banks and unlinked debit and credit items


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appearing in Bank reconciliation for Rs. 428 lacs and 482 lacs respectively are still in the process of reconciliation. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

17. As detailed in note 19(c) to the financial statements, in respect of certain circles, the bank balance includes cheques in hand but not deposited till 31 March 2013. In the absence of details available, such cheques in hand have not been disclosed separately under the head ‘Cash and Bank Balances’ in the accompanying financial statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

18. As detailed in note 18(a) to the financial statements, no adjustment has been recorded for the differences of Rs. 22,917 lacs in Trial balance/General ledger and Subsidiary ledger in respect of trade recieveables for certain circles. Further the differences between the revenue records for other circles and the differences between the similar set of accounts in respect of loans and advances, current assets and liabilities is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Inter/ Intra Circle Remittance Account

19. As detailed in note 33 to the financial statements, the amounts lying in the Inter-Circle/Unit remittance balances are yet to be reconciled with the other circles of the Company. Pending such reconciliations, the possible cumulative impact of the adjustments, if any, on Income, Expenditure, Assets and Liabilities are currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

License Fee, Spectrum Charges, Inter Connect Usage Charges

20. As detailed in note 29 to the financial statements, the Company does not have a system of identifying NLD(National long distance)/ILD(International long distance) revenue separately based on the actual usage of pulse. In the absence of such a system, the Company is recognizing the license fees on estimated basis and the consequential impact of adjustment, if any, upon computing the license fees on actual basis is currently not ascertainable.

This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

21. As detailed in note 10(a) to the financial statements, there exists no agreement between the Company and MTNL for carriage of traffic in each other’s network. As a result of this the Company has computed and accounted for the IUC(interconnect usage charges) based on the rates prescribed by TRAI(Telecom regulation authority of India). The impact, if any, of the pending resolution and settlement of disputed amounts on the financial statements is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

22. The Company has assessed provisional amount of the current year and earlier years of Rs. 12,334 lacs and Rs. 6,014 lacs respectively for spectrum charges payable to WPC(Wireless Planning Coordination) for point to point terrestrial MW links and Satellite systems. The same is subject to confirmation and impact of adjustments, if any, on the financial statements is currently not ascertainable.

Revenue

23. As reported by auditors of certain circles, the income from recharge coupons, prepaid calling cards, internet connection cards, sancharnet cards and stock of recharge coupons and prepaid calling cards are subject to reconciliation. In the absence of specific details, the impact of adjustment, if any, on financial statements is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Provisions, Contingent liabilities and Contingent assets

24. The provisions and the disclosures with regard to the matters under litigations have been made based upon the management estimates. Based upon the report of auditors reports for certain circles, sufficient and appropriate audit evidence for examining and verifying the quantum of contingent liabilities disclosed in note 42.1 to the financial statements has not been obtained. In the absence of the required details and documents at some of the circles and pending the responses to our confirmation requests in respect of the litigations at Company level, the impact of adjustment, if any, on the financial statements is currently not ascertainable.

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Miscellaneous

25. The Company has not complied in respect of the following Accounting Standards:

i) As reported by auditors of certain circles, in absence of adequate informations, details and records, Old, Non-moving, damaged and unserviceable inventories could not be identified. Further, as reported by 5 of the circles, old, non-moving, damaged and unserviceable inventories identified amounting to Rs. 1,043 lacs are shown at historical cost. This is not in accordance with the Accounting standard - 2 on Valuation of inventories notified by Companies Accounting Standards Rules, 2006 and adjustment, if any, on account of lower of net realisable value and the cost is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

ii) As reported by Southern Telecom Projects circle, the company has not restated the liability in respect of imported VSAT equipment used for trading/capitalisation at the payment/closing rate (as the case may be), which is not in accordance with Accounting Standard 11 on The Effect of Changes in Foreign Exchange Rates notified by Companies Accounting Standards Rules, 2006, the impact of which on profits/losses, depreciation, fixed assets and inventory is not ascertainable in the absence of specific details.

iii) As detailed in note 35 to the financial statements, reported by 14 circles, the expenses, incomes, assets and liabilities are not properly segregated as required in the Segment reporting disclosure as per Accounting Standard 17 on Segment Reporting notified by Companies Accounting Standards Rules, 2006. In our opinion, the same does not give true and fair view of the segment-wise operations of the Company.

iv) The Company has not accounted for the amount of deferred tax asset as on 31 March 2013 in accordance with Accounting Standard 22 on Accounting for taxes on Income notified by Companies Accounting Standards Rules, 2006. The consequential impact of adjustment, if any, on the financial statements is currently not ascertainable.

v) The Company has not carried out Techno-economic assessement as on 31 March 2013 and hence identification of impairment loss

and provision thereof, if any, has not been made. The same is not in accordance with Accounting Standard 28 on Impairment of asset notified by Companies Accounting Standards Rules, 2006. The consequential impact of adjustment, if any, on the financial statements is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

26. As stated in point 2.2-(e), (f) and (i) of the significant accounting policies, certain items are accounted for on cash basis instead of accrual basis which is not in accordance with the generally accepted accounting principles in India. The impact of adjustment, if any, in respect thereof is currently not ascertainable.

27. The accounting for capital or revenue grant in accordance with Accounting Standard 12 on Accounting for grants notified by Companies Accounting Standards Rules, 2006 is not followed consistently across the circles. In the absence of specific details, the consequential impact of adjustment, if any, on the financial statements is currently not ascertainable.

28. As stated in the point 2.12 of the significant accounting policies, items of income/expenditure exceeding Rs. 5 lacs, applied on each transaction, are only considered as prior-period items. In our opinion the said accounting policy is not in accordance with generally accepted accounting principles in India as any limit should be considered in aggregate instead of on individual basis for adjustment/disclosure in the financial statements. The consequential impact of the adjustment, if any, on the profit/loss for the year is not ascertainable.

29. As detailed in note 17(a) to the financial statements, there are differences in inventory between stores ledger and General ledger/Trial balance, the impact of the same is not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

30. As reported by 3 circles, Term cell of DoT has levied penalty on account of deficient subscriber verification towards CAF application and Rs. 328 lacs paid by the company has been charged to Statement of Profit and Loss which, in our opinion, should be recoverable from the agencies to whom the CAF application verification work was awarded. The losses for the current year and current liabilities are overstated by Rs. 328 lacs.

31. As reported by certain circles and detailed in note


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10(b) to the financial statements, the Company has not identified units covered under Micro, Small and Medium Enterprises Devolopment Act, 2006 (‘’MSMED Act, 2006’’) and hence disclosures as required under Schedule VI (as amended by Notification, F.No. 2/6/2008-C-L-V, dated 30 March 2011) and MSMED Act, 2006 is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

32. As reported by auditors of certain circles, the disclosure requirements of Schedule VI of the Companies Act, 1956 (as amended by Notification, F.No. 2/6/2008-C-L-V, dated 30 March 2011) has not been properly adhered to in the presentation of financial statements of the Company in respect of following aspects:

a) Classification of assets/liabilities as current and non-current, as secured and unsecured wherever applicable

b) Non-disclosure of consumption of stores and spares

c) Capital and other commitments

d) Value of Imports on CIF basis

e) Consumption of imported and indigenous stores and spares parts

f) Expenditure and Earnings in foreign currency

Above mentioned point b) was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

33. As reported by auditors of certain circles, certain units have not applied the Company's policy of valuation of inventory on weighted average method consistently. The impact of the adjustment, if any, is not currently not ascertainable.

34. The accounting policy with respect to the decommissioned assets is not uniformly applied across all circle and in some of the circles, these are not recorded at lower of the cost or net realisable value. In some of the circles, the decommissioned assets are not appropriately adjusted from the block of fixed assets and depreciation is still being charged on such assets. In the absence of details available, we are unable to comment upon the impact of adjustment, if any, arising out of the same is presently not ascertainable.

35. As reported by auditors of certain circles,

compliances with regard to deposition, deduction, reconciliation of Service taxes and Taxes deducted at source are pending to be made. In the absence of specific details, we are unable to comment on its consequential impact, if any, on the financial statements.

36. As detailed in notes 1) and 2) of the Cash Flow Statements disclosure, certain assumptions have been made for the purpose of preperartion of the Cash Flow Statements. In the absence of the appropriate details, we shall not be able to quantify the impact, if any, on the disclosures in the Cash Flow Statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Qualified opinion

37. In our opinion and to the best of our information and according to the explanations given to us, except for the effects/possible effects of the matters described in the Basis for Qualified Opinion paragraph the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2013;

ii) in the case of Statement of Profit and Loss, of the loss for the year ended on that date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date

emphasis of Matter

38. As reported by auditors of certain circles, we draw attention to the financial statements of the Company in respect of the claims raised towards usage of infrastructure charges to private operators on adhoc basis instead of actual consumption basis and accordingly, are subject to reconciliation/confirmation. Pending the final outcome of the matter, no adjustments have been recorded in the accompanying financial statements. Our opinion is not qualified in respect of this matter.

39. We draw attention to note 46 to financial statements in respect of the climatic catastrophe in the state of Uttarakhand, which has caused damage to certain assets of the Uttarakhand circle of the Company. The management is in the process of identifying the damaged assets for ascertaining the loss arising on this account. Pending the final outcome of the

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matter, no adjustments have been recorded as an extraordinary item in the accompanying financial statements. Our opinion is not qualified in respect of this matter.

report on other Legal and regulatory requirements

40. As required by the Companies (Auditor’s Report) Order, 2003 (“the Order”) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

41. As required by Section 227(3) of the Act, we report that:

a. Except for the effects of the matters described in the para 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 20, 22, 23, 24, 25(i), 27, 29, 30, 33, 34, 35 and 36 of Basis of Qualified Opinion paragraph, 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;

b. Except for the effects of the matters described in the para 6, 8, 9, 11, 12, 13, 14, 18, 19, 20, 23, 24, 25(i), 25(ii), 25(iv), 25(v), 26, 27, 28, 29, 32, 33 and 34 of Basis of Qualified Opinion paragraph, 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us. The circle Auditor’s Reports have been forwarded to us and have been appropriately dealt with;

c. We have received the reports on the accounts of the Circle offices audited under section 228 by other auditors and have appropriately dealt with these while forming our audit opinion. Except for the effects of the matters described in the Basis of Qualified Opinion paragraph, the financial statements dealt with by this report are in agreement with the books of account and with the audited returns received from the Circles;

d. Except for the effects of the matters described in the Basis of Qualified Opinion paragraph, in our opinion, the financial statements comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act; and

e. Since, the Company is a Government company, clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 regarding obtaining written

representations from the directors of the Company, is not applicable to the Company in terms of notification no. GSR-829(E) dated 21.10.2003

Other Matter

42. We did not audit the accounts of 47 Circles, which reflect total assets (including intra/inter circle remittances) of Rs. 6,371,764 lacs as at 31 March 2013; total revenues of Rs. 2,612,827 lacs and net cash outflows aggregating to Rs. 7,410 lacs for the year then ended. These financial statements have been audited by other auditors whose reports have been furnished to us by the management, and our opinion on the financial statements of the Company for the year then ended to the extent they relate to the financial statements not audited by us as stated in this paragraph is based solely on the audit reports of the other auditors. Our opinion is not qualified in respect of this matter.

43. This report is effective as of 30 August 2013, the auditors' report date. Certain subsequent events or circumstances may have occurred between the auditors' report date of the respective circles/unit, as the case may be, of the Company and the time this auditors' report date. Such events or circumstances could significantly affect the accompanying financial statements or the related disclosures forming part of these financial statements of the Company. In the absence of sufficient appropriate audit evidence in respect of the other circles, we are currently unable to ascertain the impact of adjustments, if any, or disclosures to be included in these financial statements of the Company.

For Walker, chandiok & co

Chartered Accountants

Firm Registration No.: 001076N

Sd/-

per Atul seksaria

Partner

Membership No. 86370

Place: New Delhi

Date: 30 August 2013


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Annexure to the Independent Auditors’ report of even date to the members of bharat sanchar nigam Limited, on the financial statements for the year ended 31 st Match 2013

Based on the audit procedures performed for the purpose of reporting a true and fair view on the financial statements of the Company and taking into consideration the information and explanations given to us and the books of account and other records examined by us in the normal course of audit, we report that:

(i) (a) Based upon the reports of auditors of other circles, the Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets except in case of 30 circles.

(b) Based upon the reports of auditors of other circles, the fixed assets have been physically verified by the management during the year, except for 11 circles where no physical verification was carried out and the same is in process in respect of two circles. In addition, the auditors of 22 circles have reported that the management has only furnished the certificate of physical verification; however no documentary evidence was made available to them, and therefore, they were unable to comment on material discrepancies noticed on such verification, if any.

(c) Based upon the reports of auditors of other circles, a substantial part of fixed assets has not been disposed off during the year.

(ii) (a) Based upon the reports of auditors of other circles, the management has conducted a physical verification of inventory at reasonable intervals, except for 6 circles, which have not been verified during the year. However, a number of other auditors have reported that no documentary evidence supporting such physical verification was made available.

(b) Based upon the reports of auditors of 12 circles, documentation of the physical verification process followed by the company is inadequate and in addition, the auditors of 16 circles have reported that no documentary evidence, supporting the conduct of such physical verification were made available to them. Accordingly they were unable to comment on the procedures of physical verification and reasonableness thereof.

(c) Based upon the reports of auditors of other circles, 30 circles are not maintaining

proper records of inventory. Consequently, the circle auditors were therefore unable to comment on the discrepancies which could have arisen between physical inventory and book records.

(iii)(a) The Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clauses 4(iii)(b) to 4(iii) (d) of the Order are not applicable.

(e) 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 Act. Accordingly, the provisions of clauses 4(iii)(f) and 4(iii)(g) of the Order are not applicable.

(iv) Based upon the reports of auditors of other circles, the internal control system is not 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. However, we are unable to comment on whether there is a continuing failure to correct major weakness in internal control as none of the other auditors have reported in this regard.

(v) (a) The Company has not entered into any contracts or arrangements referred to in Section 301 of the Act. Accordingly, the provisions of clause 4(v) of the Order are not applicable.

(vi) The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the Companies (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of clause 4(vi) of the Order are not applicable.

(vii) Based upon the reports of auditors of other circles, the Company has an internal audit system, the scope and coverage of which, in our opinion, requires to be further enhanced to be commensurate with its size and the nature of its business.

(viii) Based upon the reports of auditors of other circles, the Company, pursuant to the Rules made by the Central Government for the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act, is generally maintaining the prescribed accounts and records except in case of

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17 circles. Further, such records for the year ended March 31, 2013 are under preparation in respect of 18 circles. Hence, we are unable to comment on the accuracy and completeness of the cost records for the Company as a whole.

(ix) (a) Out of 48 circles, auditors of 15 circles have reported that the Company is not regular in depositing undisputed statutory dues, including investor education and protection fund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, custom duty, excise duty, cess with the appropriate authorities in India. Further, subject to our comments in para 34 in the Basis of Qualified Opinion paragraph of the audit report; undisputed amounts payable in respect in respect of 3 circles,, which were outstanding at the year-end for a period of more than six months from the date they became payable are set out in appendix I to our report and undisputed amounts payable in respect 12 circles, the auditors have reported that such outstanding dues have not been ascertained.

(b) Subject to our comments in para 34 in the Basis of Qualified Opinion paragraph of the audit report, auditors in respect of 40 circles have reported that there are dues outstanding in respect of sales-tax, income-tax, custom duty, wealth-tax, excise duty and which have not been deposited on account of dispute. Except for 6 circles out of 40 circles as mentioned above, the amounts involved and the forum where the dispute is pending have been reported and detailed in appendix II to our report.

(x) In our opinion, the Company’s accumulated losses at the end of the financial year are less than fifty per cent of its net worth. Further, the Company has not incurred cash losses in the current and the immediately preceding financial year.

(xi) In our opinion, the Company has not defaulted in repayment of dues to any bank or financial institution during the year. The Company did not have any outstanding debentures during the year.

(xii) The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly, the provisions of clause 4(xii) of the Order are not applicable.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society. Accordingly, provisions of clause 4(xiii) of the Order are not applicable.

(xiv) In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable.

(xv) The Company has not given any guarantees for loans taken by others from banks or financial institutions. Accordingly, the provisions of clause 4(xv) of the Order are not applicable.

(xvi) The Company did not have any term loans outstanding during the year. Accordingly, the provisions of clause 4(xvi) of the Order are not applicable.

(xvii) In our opinion and based upon examination of the books of account and utilization of funds of the Company on an overall basis, funds raised on short-term basis, prima facie, have been used for long-term purposes.

(xviii) During the year, the Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act. Accordingly, the provisions of clause 4(xviii) of the Order are not applicable.

(xix) The Company has neither issued nor had any outstanding debentures during the year. Accordingly, the provisions of clause 4(xix) of the Order are not applicable.

(xx) The Company has not raised any money by public issues during the year. Accordingly, the provisions of clause 4(xx) of the Order are not applicable.

(xxi) During the course of our examination of the books and records of the Company carried out in accordance with generally accepted auditing practices in India, we have not come across any instance of fraud by the Company, noticed or reported during the year. However, based on the information given by the Company and reported by certain other circle auditors, there were instances of fraud on the Company, the details of which are given in Appendix III to our report.

For Walker, chandiok & coChartered AccountantsFirm Registration No.: 001076N

Sd/-per Atul seksariaPartner Membership No.: 86370

Place: New DelhiDate: 30 August 2013


100

Ap

pe

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, sta

tes

tha

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som

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co

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on

sale

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go

vern

me

nt, w

hic

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pe

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g fo

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ng

time

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the

r , s

om

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uni

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101


Ap

pe

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- II

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Aud

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102

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2008

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2004

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tax

35

6,10

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2009

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2,

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Raja

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co

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MT

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1994

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2008

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79

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1994

Serv

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2010

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1994

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2005

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6,71

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2009

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GM

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nanc

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1994

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2004

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2005

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2010

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Addendum to Director’s report: -The replies of Management to Auditor’s report 2012-13 are given below:

Audit Para Management reply

6. As detailed in note 28, 31.1 and 31.3 to the financial statements, net assets (including contingent liabilities) taken over from Department of Telecommunications (‘DoT’) have been verified and valued by the management based on internal calculations are subject to reconciliation and final confirmation from DoT as regards to ownership, value and classification. The consequential impact on the depreciation, if any, as a result of the same is presently not determinable. And the value of net assets, identified subsequent to 1 October 2000 has been adjusted to Capital Reserves. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

7. As detailed in note 32 to the financial statements, a net amount of Rs. 123,777 lacs recoverable on current account from DoT is subject to confirmation, reconciliation and consequential adjustments. Due to non-availability of confirmations of aforesaid balances, we are unable to quantify the impact of the adjustments, if any, arising from reconciliation and settlement of account balances on the financial statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Fixed Assets and capital Work-in-Progress

8. As reported by auditors of certain circles, Capital work-in-progress includes balances pending capitalisation for long-periods of time, pending analysis of status and value and obtaining of commissioning certificates. Thus the consequential impact, if any, on account of depreciation of assets from the date of put to use cannot be ascertained. This was also a subject matter of qualification in previous auditor’s report on the audited financial statements for the year ended 31 March 2012.

9. As reported by auditors of certain circles, in the absence of information in respect of certain items of fixed assets capitalized, particularly batteries, it could not be established whether assets capitalized were on account of replacement of existing asset or addition or extension to an existing asset and hence the impact of the same on the classification/ value of the assets and depreciation/ expenses is currently not ascertainable.

Noted. The difference is less than 0.50% between provisional amount on which assets were transferred and net additional assets identified till date.

The circle authorities are being instructed again to carry out reconciliation of the balance due to and due from DOT.

The Circles are being instructed to capitalize the works as and when completed and put to use and depreciation provided from that date.

This pertains to only four (04) circles. The concerned circles are being instructed to account for such types of transactions as per accounting circulars issued in this regard.

Assets taken over from Department of Telecommunication (DoT) and Dot balance

129


10. As reported by auditors of certain circles, the freehold/leasehold land as identified and valued by the respective circles have only been incorporated in the books of account and amortised with effect from the year of formation of the Company. Hence, in respect of the lands still not identified and incorporated in the books of account of the respective circles, the impact on value of fixed assets and the respective amortisation for the current year and prior periods is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

11. As detailed in note 31.2 to the financial statements, auditors of certain circle reported about the expiry/non renewal of lease period of leasehold lands on which buildings have been constructed and the fact that no provision has been made for the surrender value/written down value of the building in the expectation of ultimate renewal of the leases. The consequential impact of adjustment, if any, on this account cannot be currently ascertained. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

12. As stated in note 13(a) to the financial statements, title deeds are yet to be executed in respect of land purchased/acquired on leasehold/ freehold in certain cases through various authorities. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

13. As stated in note 31.7 to the financial statements, there are differences in Capital-work-in-progress between subsidiary ledger and General ledger/Trial balance, the impact of the same is not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

14. The following accounting treatments by the Company in respect of fixed assets and Capital works-in-progress are not in accordance with the provisions Accounting Standard - 10, Accounting for fixed assets notified by Companies Accounting Standards Rules, 2006:

a) As detailed in note 31.6 to the financial statements, the Company charges overheads on estimated/ fixed percentage/ proportionate/ payment basis to the Capital work-in-progress rather than the actual usage basis.

All leasehold/ freehold land which are known/ identified have been accounted for.

The concerned circles are being instructed to expedite the process of getting the lease of lands renewed.

The company is in the process of executing the title deeds of the lands purchased / acquired, wherever required.

As stated in Note 31.7 to the financial statements, the difference is in case of one circle only. The concerned circle is being instructed to reconcile the subsidiary ledger of CWIP with the booked figures in General Ledger and neutralize the difference between the two sets of records.

Accounting policy of BSNL in this regard states that the cost includes directly related establishment and other expenses including employee remuneration and benefits, directly identifiable to the construction or creation of assets.


130

b) As reported by certain circle auditors, the Company capitalizes the assets either on yearly or quarterly basis rather than the actual put-to-use date.

c) Accounting policies regarding capitalization, disposal, depreciation and amortization of fixed assets are not uniformly applied across all the circles.

The resultant impact of the above non-compliance with the standard on the value of fixed assets, capital work- in-progress, depreciation and profit/loss is currently not ascertainable. Abovementioned point a) was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Current Assets, Loans and Advances and Current Liabilities

15. The Company does not follow a system of obtaining confirmation of balances in respect of Trade receivables, deposits with departments/companies (including MTNL), claims recoverable from/payable to DoT (including license fees payable as detailed in note 42.1 of the financial statements) or other government departments, subscriber deposit account, claims payable. Due to non-availability of confirmations of aforesaid balances, we are unable to quantify the impact of the adjustments, if any, arising from reconciliation and settlement of account balances on the financial statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

16. As detailed in note 19(a) and 19(b) to the financial statements, Cheques and TT’s deposited with the bank for Rs. 3,442 lacs but not credited by the banks and unlinked debit and credit items appearing in Bank reconciliation for Rs. 428 lacs and 482 lacs respectively are still in the process of reconciliation. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

In case, the costs are not directly attributable for e.g. administration and other associated costs where an employee is devoting his time to various jobs simultaneously during the month then such expenditure is divided among the different job on the basis of ratio of actual time spent by him over the various jobs or if it is not practically possible to find such division then on an appropriate empirical ratio and accordingly decision regarding charging of the same towards CWIP or revenue heads is taken.

The concerned circles are being instructed to capitalize the works as and when completed and put to use.

The concerned circles are being instructed to strictly adhere on the accounting policies and instructions issued from time to time.

As per Industry practice including MTNL, taking confirmation for trade receivables and subscribers deposits from huge subscribers’ base is neither practical nor possible.

For balances due to or due from other parties i.e. DOT, DOP, other Govt. departments/ companies including MTNL etc., circles are instructed again to carry out reconciliation on regular intervals.

The concerned circles are being instructed to take appropriate action for unlinked debit and credit items as well as Cheques / TTs deposited but not credited by banks, and settle the same immediately.

131


17. As detailed in note 19(c) to the financial statements, in respect of certain circles, the bank balance includes cheques in hand but not deposited till 31 March 2013. In the absence of details available, such cheques in hand have not been disclosed separately under the head ‘Cash and Bank Balances’ in the accompanying financial statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

18. As detailed in note 18(a) to the financial statements, no adjustment has been recorded for the differences of Rs. 22,917 lacs in Trial balance/General ledger and Subsidiary ledger in respect of trade receivables for certain circles. Further the differences between the revenue records for other circles and the differences between the similar set of accounts in respect of loans and advances, current assets and liabilities is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Inter/ Intra Circle Remittance Account

19. As detailed in note 33 to the financial statements, the amounts lying in the Inter-Circle/Unit remittance balances are yet to be reconciled with the other circles of the Company. Pending such reconciliations, the possible cumulative impact of the adjustments, if any, on Income, Expenditure, Assets and Liabilities are currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

License Fee, Spectrum Charges, Inter Connect Usage Charges

20. As detailed in note 29 to the financial statements, the Company does not have a system of identifying NLD (National long distance)/ ILD(International long distance) revenue separately based on the actual usage of pulse. In the absence of such a system, the Company is recognizing the license fees on estimated basis and the consequential impact of adjustment, if any, upon computing the license fees on actual basis is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

21. As detailed in note 10(a) to the financial statements, there exists no agreement between the Company and MTNL for carriage of traffic in each other’s network. As a result of this the Company has

Circles are being instructed to take appropriate action immediately.

The concerned circles are being instructed to carry out the reconciliation and take necessary action to sort out the difference between the two sets of records.

The circles are being instructed again for prompt acceptance of ATD / ATC so that the outstanding is kept to the barest minimum possible. The reconciliation of remittance items and accounting the same under final head are continuously being done by the circles which resulted in continuous decrease in the pending remittances for last three financial years.

Noted.

Noted. MOU is being signed between the two organizations enumerating the principles of business transactions.


132

computed and accounted for the IUC(interconnect usage charges) based on the rates prescribed by TRAI (Telecom regulation authority of India). The impact, if any, of the pending resolution and settlement of disputed amounts on the financial statements is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

22. The Company has assessed provisional amount of the current year and earlier years of Rs. 12,334 lacs and Rs. 6,014 lacs respectively for spectrum charges payable to WPC(Wireless Planning Coordination) for point to point terrestrial MW links and Satellite systems. The same is subject to confirmation and impact of adjustments, if any, on the financial statements is currently not ascertainable.

Revenue

23. As reported by auditors of certain circles, the income from recharge coupons, prepaid calling cards, internet connection cards, sancharnet cards and stock of recharge coupons and prepaid calling cards are subject to reconciliation. In the absence of specific details, the impact of adjustment, if any, on financial statements is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Provisions, Contingent liabilities and Contingent assets

24. The provisions and the disclosures with regard to the matters under litigations have been made based upon the management estimates. Based upon the report of auditors reports for certain circles, sufficient and appropriate audit evidence for examining and verifying the quantum of contingent liabilities disclosed in note 42.1 to the financial statements has not been obtained. In the absence of the required details and documents at some of the circles and pending the responses to our confirmation requests in respect of the litigations at Company level, the impact of adjustment, if any, on the financial statements is currently not ascertainable.

Miscellaneous

25. The Company has not complied in respect of the following Accounting Standards:

i) As reported by auditors of certain circles, in absence of adequate information, details and records, Old, Non-moving, damaged

Noted.

The concerned circles are being instructed to take necessary action in the matter.

Most of the circles had provided the details of litigation/ claims lodged or defended and BSNL counsel to the auditor. However, the concerned circles are further advised to provide the same to auditors.

The concerned circles are being instructed to take necessary action in the matter.

133


and unserviceable inventories could not be identified. Further, as reported by 5 of the circles, old, non-moving, damaged and unserviceable inventories identified amounting to Rs. 1,043 lacs are shown at historical cost. This is not in accordance with the Accounting standard - 2 on Valuation of inventories notified by Companies Accounting Standards Rules, 2006 and adjustment, if any, on account of lower of net realisable value and the cost is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

ii) As reported by Southern Telecom Projects circle, the company has not restated the liability in respect of imported VSAT equipment used for trading/ capitalization at the payment/ closing rate (as the case may be), which is not in accordance with Accounting Standard 11 on The Effect of Changes in Foreign Exchange Rates notified by Companies Accounting Standards Rules, 2006, the impact of which on profits/ losses, depreciation, fixed assets and inventory is not ascertainable in the absence of specific details.

iii) As detailed in note 35 to the financial statements, reported by 14 circles, the expenses, incomes, assets and liabilities are not properly segregated as required in the Segment reporting disclosure as per Accounting Standard 17 on Segment Reporting notified by Companies Accounting Standards Rules, 2006. In our opinion, the same does not give true and fair view of the segment-wise operations of the Company.

iv) The Company has not accounted for the amount of deferred tax asset as on 31 March 2013 in accordance with Accounting Standard 22 on Accounting for taxes on Income notified by Companies Accounting Standards Rules, 2006. The consequential impact of adjustment, if any, on the financial statements is currently not ascertainable.

v) The Company has not carried out Techno-economic assessment as on 31 March 2013 and hence identification of impairment loss and provision thereof, if any, has not been made. The same is not in accordance with Accounting Standard 28 on Impairment of asset notified by Companies Accounting Standards Rules, 2006. The consequential impact of adjustment, if any, on the financial statements is currently not ascertainable. This

The concerned circle is being instructed to give necessary accounting effect in financial year 2013-14.

The disclosure of Segmental Reporting as per AS-17 on Segment Reporting is required at Company level only. The Segmental Reporting at Company level is disclosed on the basis of booking in respective account heads under various segments which is not affected by the figures given by circles in relevant annexure meant only for additional confirmation in segment reporting of the company. However, the concerned circles are being instructed to give proper segregated details in the relevant annexure.

Noted.

The operations of BSNL are of such a nature where assets are in use 24x7. As and when any asset is found non-repairable or non-functional or obsolete, the same is decommissioned and necessary provision is being created in books of accounts. The assets are impaired as and when the necessity arises. This is a running process continuously followed throughout the year in each circle of BSNL.


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was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

26. As stated in point 2.2-(e), (f) and (i) of the significant accounting policies, certain items are accounted for on cash basis instead of accrual basis which is not in accordance with the generally accepted accounting principles in India. The impact of adjustment, if any, in respect thereof is currently not ascertainable.

27. The accounting for capital or revenue grant in accordance with Accounting Standard 12 on Accounting for grants notified by Companies Accounting Standards Rules, 2006 is not followed consistently across the circles. In the absence of specific details, the consequential impact of adjustment, if any, on the financial statements is currently not ascertainable.

28. As stated in the point 2.12 of the significant accounting policies, items of income/ expenditure exceeding Rs. 5 lacs, applied on each transaction, are only considered as prior-period items. In our opinion, the said accounting policy is not in accordance with generally accepted accounting principles in India as any limit should be considered in aggregate instead of on individual basis for adjustment/disclosure in the financial statements. The consequential impact of the adjustment, if any, on the profit/loss for the year is not ascertainable.

29. As detailed in note 17(a) to the financial statements, there are differences in inventory between stores ledger and General ledger/Trial balance, the impact of the same is not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

30. As reported by 3 circles, Term cell of DoT has levied penalty on account of deficient subscriber verification towards CAF application and Rs. 328 lacs paid by the company has been charged to Statement of Profit and Loss which, in our opinion, should be recoverable from the agencies to whom the CAF application verification work was awarded. The losses for the current year and current liabilities are overstated by Rs. 328 lacs.

31. As reported by certain circles and detailed in note 10(b) to the financial statements, the Company has not identified units covered under Micro, Small and Medium Enterprises Development Act,

Noted. Adequate disclosures are already given in the books of accounts of BSNL as required by AS-1 and AS-9 issued by ICAI..

Noted. Adequate disclosure is already given in the books of accounts of BSNL as required by AS-1 and AS-9 issued by ICAI.

Noted.

As detailed in note 17(a), the number of circles and amount involved are lesser as compared to previous year. However, the concerned circles are being instructed to carry out the reconciliation and take necessary action to neutralize difference.

Specific instructions are being issued to the circles to identify the errors and take appropriate corrective actions. Wherever the franchises are involved, efforts will be made to recover penalty amount from them.

The concerned circles are being instructed to take necessary action.

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2006 (‘’MSMED Act, 2006’’) and hence disclosures as required under Schedule VI (as amended by Notification, F.No. 2/6/2008-C-L-V, dated 30 March 2011) and MSMED Act, 2006 is currently not ascertainable. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

32. As reported by auditors of certain circles, the disclosure requirements of Schedule VI of the Companies Act, 1956 (as amended by Notification, F.No. 2/6/2008-C-L-V, dated 30 March 2011) has not been properly adhered to in the presentation of financial statements of the Company in respect of following aspects:

a) Classification of assets/liabilities as current and non-current, as secured and unsecured wherever applicable

b) Non-disclosure of consumption of stores and spares

c) Capital and other commitments

d) Value of Imports on CIF basis

e) Consumption of imported and indigenous stores and spares parts

f) Expenditure and Earnings in foreign currency

Above-mentioned point b) was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

33. As reported by auditors of certain circles, certain units have not applied the Company’s policy of valuation of inventory on weighted average method consistently. The impact of the adjustment, if any, is not currently ascertainable.

34. The accounting policy with respect to the decommissioned assets is not uniformly applied across all circle and in some of the circles, these are not recorded at lower of the cost or net realisable value. In some of the circles, the decommissioned assets are not appropriately adjusted from the block of fixed assets and depreciation is still being charged on such assets. In the absence of details available, we are unable to comment upon the impact of adjustment, if any, arising out of the same is presently not ascertainable.

35. As reported by auditors of certain circles, compliances with regard to deposition, deduction, reconciliation of Service taxes and Taxes deducted at source are pending to be made. In the absence

The circles are being instructed to strictly adhere to the accounting instructions issued on the subject matter.

The concerned circles [i.e. West Bengal and UP(East)] are being instructed to strictly adhere to the company’s accounting policy in this regard.

The circles are being instructed to adhere to the accounting instructions issued from time to time in this regard.

The concerned circles are being instructed to make necessary compliances with regard to deposition, deduction and reconciliation of service tax and other statutory dues.


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of specific details, we are unable to comment on its consequential impact, if any, on the financial statements.

36. As detailed in notes 1) and 2) of the Cash Flow Statements disclosure, certain assumptions have been made for the purpose of preparation of the Cash Flow Statements. In the absence of the appropriate details, we shall not be able to quantify the impact, if any, on the disclosures in the Cash Flow Statements. This was also a subject matter of qualification in previous auditor’s report on the financial statements for the year ended 31 March 2012.

Emphasis of Matter

38. As reported by auditors of certain circles, we draw attention to the financial statements of the Company in respect of the claims raised towards usage of infrastructure charges to private operators on adhoc basis instead of actual consumption basis and accordingly, are subject to reconciliation/confirmation. Pending the final outcome of the matter, no adjustments have been recorded in the accompanying financial statements. Our opinion is not qualified in respect of this matter.

39. We draw attention to note 46 to financial statements in respect of the climatic catastrophe in the state of Uttarakhand, which has caused damage to certain assets of the Uttarakhand circle of the Company. The management is in the process of identifying the damaged assets for ascertaining the loss arising on this account. Pending the final outcome of the matter, no adjustments have been recorded as an extraordinary item in the accompanying financial statements. Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

41. As required by Section 227(3) of the Act, we report that:

a. Except for the effects of the matters described in the para 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 20, 22, 23, 24, 25(i), 27, 29, 30, 33, 34, 35 and 36 of Basis of Qualified Opinion paragraph, 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;

b. Except for the effects of the matters described in the para 6, 8, 9, 11, 12, 13, 14, 18, 19, 20,

No comments.

The practice is as per the written agreement and also the norms in the telecom industry. Diesel and electricity charges are to be paid by other USPs to BSNL initially in advance on estimation basis which will be adjusted subsequently when the actual expenditure on diesel and electricity will be known based on electricity bills and diesel consumed.

Noted.

No comments.

No comments.

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23, 24, 25(i), 25(ii), 25(iv), 25(v), 26, 27, 28, 29, 32, 33 and 34 of Basis of Qualified Opinion paragraph, 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us. The circle Auditor’s Reports have been forwarded to us and have been appropriately dealt with;

c. We have received the reports on the accounts of the Circle offices audited under section 228 by other auditors and have appropriately dealt with these while forming our audit opinion. Except for the effects of the matters described in the Basis of Qualified Opinion paragraph, the financial statements dealt with by this report are in agreement with the books of account and with the audited returns received from the Circles.

d. Except for the effects of the matters described in the Basis of Qualified Opinion paragraph, in our opinion, the financial statements comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Act; and

e. Since, the company is a Government company, clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 regarding obtaining written representations from the directors of the company, is not applicable to the Company in terms of Notification no.GSR-829(E) dated 21.10.2003

other Matter

42. We did not audit the accounts of 47 Circles, which reflect total assets (including intra/inter circle remittances) of Rs. 6,371,764 lacs as at 31 March 2013; total revenues of Rs. 2,612,827 lacs and net cash outflows aggregating to Rs. 7,410 lacs for the year then ended. These financial statements have been audited by other auditors whose reports have been furnished to us by the management, and our opinion on the financial statements of the Company for the year then ended to the extent they relate to the financial statements not audited by us as stated in this paragraph is based solely on the audit reports of the other auditors. Our opinion is not qualified in respect of this matter.

No comments.

No comments.

No comments.

No comments.


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43. This report is effective as of 30 August 2013, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date of the respective circles/unit, as the case may be, of the Company and the time this auditors’ report date. Such events or circumstances could significantly affect the accompanying financial statements or the related disclosures forming part of these financial statements of the Company. In the absence of sufficient appropriate audit evidence in respect of the other circles, we are currently unable to ascertain the impact of adjustments, if any, or disclosures to be included in these financial statements of the Company.

For and on behalf of the Board of Directors

Sd/-(r. K. Upadhyay)

Chairman & Managing DirectorBHARAT SANCHAR NIGAM LIMITED

Date: 23.09.2013

There is no such significant event or circumstances which have not been disclosed and which could affect the accompanying financial statements.

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No.: rep-BSNL & MTNL/F-60/BSNL/Ann Accts/12-13/57

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Director General of Audit, Post & TelecommunicationsSham Nath Marg, (Near old Secretariat), Delhi-110402

Dated: 30-09-2013

To

The chairman and Managing Director,Bharat Sanchar Nigam LimitedNew Delhi.

Subject: comments of comptroller and Auditor General of India under Section 619(4) of the companies Act, 1956 on the accounts of Bharat Sanchar Nigam Limited for the year ended 31st March 2013.

Sir,

I am to forward hearewith the comments of the Comptroller and Auditor General of India under Section 619(4) of the Companies Act, 1956 on the annual accounts of Bharat Sanchar Nigam Limited for the year ended 31 March 2013 for information and further necessary action.

Kindly acknowledge receipt.

Your faithfully,

Sd/-(R.B. Sinha)

Director General of Audit (P&T)

Encl(s): As Above


140

comments of the comptoller & Auditor General of India under Section 619(4) of the companies Act, 1956 on the annual accounts of Bharat

Sanchar Nigam Limited for the year ended 31 March 2013.

The preparation of financial statements of Bharat Sanchar Nigam Limited (BSNL), for the year ended 31 March 2013 in accordance with the financial reporting frame work prescribed under the Companies Act, 1956 is the responsibility of the Management of the BSNL. The Statutory Auditors appointed by the Comptroller & 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 Standards on Auditing 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 30 August 2013.I, on behalf of the Comptroller & Auditor General of India, have conducted a supplementary audit under Section 619(3) (b) of the Companies Act, 1956 of the financial statements of Bharat Sanchar Nigam Limited for the year ended 31 March 2013. This supplementary audit has been carried out independently without access to the working papers of the statutory auditor and is limited primarily to enquiries of the statutory auditor and BSNL personnel and a selective examination of some of the accounting records. Based on my supplementary audit, I would like to highlight the following significant matters under Section 619 (4) of the Companies Act, 1956 which have come to my attention and which in my view are necessary for enabling a better understanding of the financial statements and the related Audit Report.A. BALANcE SHEET1. other current Liabilities (Note 11) Income received in advance against service: rs.2148.18 crore Amount of bills for advance rentals raised during 2012-13 pertaining to service to be rendered in the

next year i.e. 2013-14 was accounted as ‘Income Received in Advance against Service’ under other current liabilities. The amount not received against the bills was accounted as ‘Trade Receivables’ in current assets. Resultantly ‘Service Tax Recoverable’ and ‘Service Tax Payable’ was also accounted. As neither service was rendered nor full amount of advance rental income was received during the year, a separate disclosure of non-realised advance income against the bills raised included in ‘Income Received in Advance against Service’ and ‘Trade Receivable’ should have been made in the accounts.

Audit noticed in 25 circles test checked of BSNL non-realised bills for advance rentals amounting to Rs.913.61 crore raised during 2012-13 pertaining to the next year i.e. 2013-14 accounted as ‘Trade Receivables’ and ‘Income Received in Advance against Service’

2. other current Assets (Note 21) Amount recoverable from Govt Deptt /companies: rs.3398.75 crore The above is overstated by Rs.3059.95 crore due to non-provisioning for doubtful debts for an amount

of Rs.1264.13 crore as required under Accounting Policy No. 2.2(a) and balance provision for doubtful debts of Rs.1795.82 crore is appearing under ‘Trade Receivable’ instead of ‘Amount recoverable from Govt Deptt/Companies’. This resulted in understatement of loss for the year by Rs.1264.13 crore. Further, this resulted in understatement of ‘Trade Receivables’ by Rs.1795.82 crore.

B. ProFIT AND LoSS AccoUNT1. revenue from operations (Note 22): rs.25654.81 crore Accounting Policy No. 2.2(e) on revenue recognition for income from SIMs, Recharge Coupons of

Mobile, Prepaid Calling Cards and Prepaid Internet Connection Cards as income of the year in which payment is received since the extent of use of these cards within the financial year could not be ascertained is in contravention of Accounting Standard 9 of ICAI. This resulted in overstatement of ‘Revenue from Operations’ and understatement of ‘Income received in advance against service’ by an unascertainable amount.

2. other Income (Note 23) : rs.1473.08 crore As per Accounting Policy No. 2.2 (i) on revenue recognition income by way of interest on loans to

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employees, security deposit with Government Departments and local authorities are accounted for on collection basis instead of on a time proportion basis as per Accounting Standard 9 of ICAI. This resulted in understatement of ‘Other income’ and overstatement of loss for the year.

3. Employees remuneration and benefits (Note 24) : rs.13757.82 crore The Accounting Policy No. 2.10(b)(iii) of the company under Defined Benefit Plan for other benefits

including post employment medical care is in contravention of Accounting Standard 15 of ICAI which resulted in non-provision of liability towards post employment medical care as per Accounting Standard 15 of ICAI. Thus expenditure on employees remuneration and benefits with corresponding non-current liabilities and loss for the year are not correctly determined.

c. GENErAL coMMENT1. Persistent Non-reconciliation of balance with MTNL As per accounts of BSNL for the year 2012-13, the amount recoverable from and the amount payable

to Mahanagar Telephone Nigam Limited (MTNL) have been accounted as Rs. 3334.54 crore and Rs.977.47 crore respectively, resulting in net recoverable amount of Rs. 2357.07 crore from MTNL. However, as per approved annual accounts of MTNL for the year 2012-13, the amount recoverable from and the amount payable to the Company are Rs.3609.74 crore and Rs.1634.51 crore respectively, resulting in a net recoverable amount of Rs.1975.23 crore from BSNL. Thus, there is net difference of Rs.4332.30 crore (previous year Rs.3787.21 crore) in the receivable/payable amounts between these two government companies under the same Ministry.

For and on behalf of the

Comptroller and Auditor General of India

Sd/-(r.B. Sinha)

Director General of Audit(P & T)Place : DelhiDated : 30th September 2013.


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Final comments of c&AG for 2012-13

c&AG comments Management reply

A BALANcE SHEET

1 other current Liabilities (Note 11) Income received in ` 2148.18 crore advance against service:

Amount of bills for advance rentals raised during 2012-13 pertaining to service to be rendered in the next year i.e. 2013-14 was accounted as ‘Income Received in Advance against Service’ under other current liabilities. The amount not received against the bills was accounted as ‘Trade Receivables’ in current assets. Resultantly ‘Service Tax Recoverable’ and ‘Service Tax Payable’ was also accounted. As neither service was rendered nor full amount of advance rental income was received during the year, a separate disclosure of non-realised advance income against the bills raised included in ‘Income Received in Advance against Service’ and ‘Trade Receivable’ should have been made in the accounts.

Audit noticed in 25 circles test checked of BSNL non-realised bills for advance rentals amounting to ` 913.61 crore raised during 2012-13 pertaining to the next year i.e. 2013-14 accounted as ‘Trade Receivables’ and ‘Income Received in Advance against Service’.

2 other current Assets (Note 21) Amount recoverable from Govt. Deptt/ companies:

` 3398.75 crore

The above is overstated by `3059.95 crore due to non-provisioning for doubtful debts for an amount of `1264.13 crore as required under Accounting Policy No. 2.2(a) and balance provision for doubtful debts of `1795.82 crore is appearing under ‘Trade Receivable’ instead of ‘Amount recoverable from Govt Deptt/ Companies’. This resulted in understatement of loss for the year by `1264.13 crore. Further, this resulted in understatement of ‘Trade Receivables’ by `1795.82 crore.

B ProFIT AND LoSS AccoUNT

1 revenue from operations: `25654.81 crore (Note 22) Accounting Policy No. 2.2(e) on revenue recognition

for income from SIMs, Recharge Coupons of Mobile, Prepaid Calling Cards and Prepaid Internet Connection Cards as income of the year in which payment is received since the extent of use of these cards within the financial year could not be ascertained is in contravention of Accounting Standard 9 of ICAI. This resulted in overstatement of ‘Revenue from Operations’ and understatement of ‘Income received in advance against service’ by an unascertainable amount.

The billing of advance fixed charges/ rental is done as per the industry practice which is being followed by all the op-erators including MTNL and to secure the revenue at least equivalent to fixed charges.

This is the policy of the company which is continuing from the DTO/DTS period and as such there is no change in the billing principle. Once billing is done, the entire amount has to be accounted as revenue or advance revenue de-pending upon the period involved.

However, BSNL is taking necessary action to capture the advance income actually received and outstanding at the end of the year separately from the forthcoming year 2013-14 onwards, for proper presentation in financial state-ments as suggested by C&AG.

MTNL is a Govt. of India undertaking and comes under the same ministry. The possibilities of recovery of dues cannot be compared with ordinary subscriber for whom provision is made for outstanding dues of more than 2 years. As suf-ficient provision already exists, no further provision was con-sidered necessary.

Necessary action will be taken in the financial year 2013-14 to show both Claims Recoverable from MTNL and Provision for Bad Debts (MTNL) under the same Head.

As per Para 27 of AS-1 issued by ICAI, “if a fundamental accounting assumption is not followed, the fact should be disclosed”.

In this regard, it is submitted that this fact is already dis-closed in accounting policy of BSNL which is reproduced below:

“Income from SIMs, Recharge Coupons of Mobile, Prepaid Calling Cards and Prepaid Internet Connection Cards are treated as income of the year in which the payment is received since the extent of use of these cards within the financial year could not be ascertained.” (Note 2.2(a))

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2 other Income (Note 23): ` 1473.08 crore

As per Accounting Policy No. 2.2 (i) on revenue recognition income by way of interest on loans to employees, security deposit with Government Departments and local authorities are accounted for on collection basis instead of on a time proportion basis as per Accounting Standard 9 of ICAI. This resulted in understatement of ‘Other income’ and overstatement of loss for the year.

3 Employees remuneration ` 13757.82 crore and benefits (Note 24):

The Accounting Policy No. 2.10(b)(iii) of the company under Defined Benefit Plan for other benefits including post employment medical care is in contravention of Accounting Standard 15 of ICAI which resulted in non-provision of liability towards post employment medical care as per Accounting Standard 15 of ICAI. Thus expenditure on employees remuneration and benefits with corresponding non-current liabilities and loss for the year are not correctly determined.

c GENErAL coMMENT

1 Persistent Non-reconciliation of balance with MTNL

As per accounts of BSNL for the year 2012-13, the amount recoverable from and the amount payable to Mahanagar Telephone Nigam Limited (MTNL) have been accounted as ̀ 3334.54 crore and ̀ 977.47 crore respectively, resulting in net recoverable amount of `2357.07 crore from MTNL. However, as per approved annual accounts of MTNL for the year 2012-13, the amount recoverable from and the amount payable to the Company are `3609.74 crore and `1634.51 crore respectively, resulting in a net recoverable amount of `1975.23 crore from BSNL. Thus, there is net difference of `4332.30 crore (previous year `3787.21 crore) in the receivable/payable amounts between these two government companies under the same Ministry.

For and on behalf of theComptroller and Auditor General of India

(r.B. Sinha)Director General of Audit (P&T)

However, the company is examining technical feasibility in this regard. If found feasible, the same will be imple-mented from the next financial year.

In this regard, the accounting policy of BSNL is reproduced below:

“Other income by way of interest on loans to employees, security deposit with Government Departments and local authorities, being not material, are accounted for on col-lection basis.” (Note 2.2(i)).

As per Para 27 of AS-1 issued by ICAI, “if a fundamental accounting assumption is not followed, the fact should be disclosed”.

Adequate disclosure has been made in the books of ac-counts of BSNL.

As per the accounting policy as disclosed, claims for med-ical facility received from the employees of BSNL (including retirees) up to the cut off date of finalisation of annual ac-counts, are treated as liability of the company for the said financial year.

The post employment medical care extended to its retired employees as per the present policy of BSNL is more like facility, which may be revised by the Management any time, depending upon the relevant factors prevailing at that time.

However, policy of medical facilities to BSNL employees (including retired employees) is already under review. Based on such review, appropriate action for provision will be taken in the forthcoming year.

BSNL and MTNL have now signed a MOU on agreed princi-ples of charges to each other. Hence, in future there shall not be any difference between these two organisations on account of receivable and payable reconciliations. For the past period amounts, the issues shall be taken up sub-ject matter-wise and principles of reconciliation and reso-lution shall be worked out.

For and on behalf of the Board of Directors

Sd/-(r. K. Upadhyay)

Chairman & Managing DirectorBharat Sanchar Nigam Limited


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