Auditor Report of Rashtriya Chemicals & Fertilizers Ltd.

Mar 31, 2024

We have audited the accompanying Standalone Ind AS Financial Statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED ("the Company"), which comprise the Balance Sheet as at March 31, 2024, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year ended March 31, 2024 and notes to the financial statements, including a summary of material accounting policies and other explanatory information (hereinafter referred to as "the Standalone Ind AS Financial Statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2024 and its profit and total Comprehensive Income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Ind AS Financial Statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor''s Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS Financial Statements.

Emphasis of Matter

We draw attention to the following matters:

a) Note No. 46 - Property, Plant and Equipment: Title

deeds of Immovable properties:

In respect of immovable properties other than

land, i.e. building and other structures situated at its Trombay and Thal units, the Company has self-constructed properties on the land owned by the Company as evidenced by property cards/title deeds of land.

The Company has contested that major portion of the immovable assets became vested with the Company as a result of Government of India reorganizing certain fertilizers companies in the past. Based on the legal opinion obtained, the company is of the view that it has clear title to the same and also initiated the process of obtaining evidence of title towards self-constructed properties.

Apart from such properties, immovable properties, including land for which title deeds are not in the name of the Company is mentioned in the standalone Ind AS financial statements.

b) Note No. 48 - Gas pooling applicable to Fertilizer (Urea) sector:

The Company has recognized a receivable of Rs.0.73 crores for the Year ended March 2024 and Rs. 80.57 crore cumulatively till March 2024 from Department of Fertilizers on account of pooled price differential raised by GAIL India Limited on account of substitution of EPMC and Spot gas used for Urea operations with cheaper market priced gas.

c) Note No. 50 - Subsidy of Sulphur Coated Urea

The Company has undertaken production of Sulphur Coated Urea of 3791.72 MT for commercial purpose. Government of India has notified the Maximum Retail Price (MRP) which is on similar lines as that of Neem Coated Urea, however as the subsidy rates are yet to be notified, Company has estimated the subsidy income amounting to Rs. 10.81 crore based on the proportionate Nitrogen content of notified subsidy rates of Neem Coated Urea. The Company has approached DOF for notifying the subsidy of Sulphur Coated Urea.

d) Note No. 51 - Revised NBS Subsidy rates by Government:

Government of India announced reduction in rates of Nutrient Based Subsidy (NBS) which has adversely impacted profitability of imported NPK Fertilizers, to ensure availability of Phosphatic and Potassic (P&K) fertilizers in Rabi 2023-24 and undertake such procurement on priority. The price adversity if any beyond applicable NBS rates will be addressed by DOF to protect at no profit no loss basis.

Accordingly, the Company has undertaken import of DAP and NPK Fertilizers during the period October to March 2024 and has recognized compensation towards such differential which is over and above the notified NBS rates based on its estimates amounting

to Rs. 207.23 crore for the period, in line with DOF''s assurance.

e) Note No. 66 - Exceptional Item:

The Company has sold 16,530 sq meters of Transferable Development Rights (TDR) during the quarter ended 30th June,2023 and realized a gain of Rs 25.28 Crores.

The Company has done fair valuation of TDR and recognized a gain of Rs. 15.04 crores as at 31^st March, 2024.

These items has been reported as an exceptional item.

Our opinion is not modified in respect of the above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone Ind AS financial statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters identified in our audit are:

1. Revenue Recognition and measurement in respect of subsidy income.

2. Estimation of Provision & Contingent Liabilities.

3. Information Technology General Control.

Sr. No.	Key Audit matter	Response to Key Audit Matter
1.	Revenue recognition and measurement in respect to subsidy income. Recognition of subsidy is generally made on the basis	Our Procedure included: Accounting policies and principles:
	of in principle recognition/approval /settlement of	We have reviewed the Companys accounting policies
	claims from Government of India/Fertilizer Industry Co-	for Subsidy on Urea as mentioned under "Note A.
	ordination Committee while finalizing the standalone	Statement of Material Accounting policies (MI) B)
	Ind AS financial statements.	Revenue Recognition" of the standalone Ind AS financial statements and the same is compared with
	During the year, Subsidy adjusted on account of the escalations/de-escalations basis for the year amounts	the applicable Ind AS.
	to Rs. 409.39 Crore refundable to FICC/DOF (PY Rs. 114.53 Crore refundable).	Tests of controls: We have evaluated the design, implementation
	Such adjustments have been done for escalations/de-	and operating effectiveness of key controls over
	escalations in the cost of inputs and other costs, as	recognition of subsidy income.
	estimated by the management based on the prescribed	Tests of details:
	norms in line with known policy parameters.
	MRP of Urea being fixed by Government of India,	We have verified the supporting documentation for
	the Company is entitled for subsidy wherein certain	determining that the subsidy was recognized in the
	inputs costs are a pass through and compensation	correct accounting period and as per notified rates.
	for production beyond a level of production known as	In absence of notified rates, we have verified
	Reassessed capacity is restricted to lower of Import	calculation of estimated rates based on information
	Parity Price (IPP) of Urea plus other incidental charges	available with the Company for such costs which are
	which the government incurs on imported Urea, or its own concession price, as determined under extant	a pass through.
	policies for Urea. Further subsidy income is net of	In case estimation of income is based on other
	adjustments of recoveries towards sale/transfer for	parameters like IPP of Urea etc. The verification of the
	surplus ammonia or non-conversion of entire ammonia	same is based on available information, judgments the
	into Urea.	management made in relation to the notifications/ policies ,subsequent evidence etc. as applicable.
	Since there is a time lag between actual expenditure	Testing reasonability of assumptions based on past
	incurred and notification of concession rates for the	trends, consistency in application and changes in the
	year, Management exercises significant judgement in arriving at the income entitlement on account of same for the year.	same owing to change in Government policies.

Sr. No.	Key Audit matter	Response to Key Audit Matter
	Therefore, there is a risk of revenue being misstated on account of errors in estimation of concession/IPP rates yet to be notified, due to absence of notification available and change in methodology/ calculation, if any for arriving at price concession.	Performing substantive analytical procedures: - Ascertainment and analysis of variations with respect of amounts estimated and actually entitled upon notification with respect to previous years. We also assessed as to whether the disclosures in respect of revenue were adequate.
2	Estimation of Provision & Contingent Liabilities	Internal enquiry:
	In the recognition and measurement of provisions, there is uncertainty about the timing or amount of the future expenditure required to settle the liability. In respect of contingent liabilities, there are estimates and assumptions made to determine the amount to be disclosed. As at the year ended 31 March 2024, the amounts involved are significant. There is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities. There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated.	We enquired of the senior management and inspected the minutes of the board and various committees of the board where relevant, for claims arising and challenged whether provisions are required. Tests of details: In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where available. Enquiry and confirmation of lawyers: In respect of matters which are under dispute, we have assessed opinion of the Company''s in-house Legal Department / external lawyers wherever necessary.
3	Information Technology Controls A significant part of the Company''s financial reporting process is heavily reliant on IT systems with automated processes and controls over the capture, storage and extraction of information. A fundamental component of these processes and controls is ensuring appropriate user access and change management protocols exist and being adhered to. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner. As our audit sought to place a high level of reliance on IT systems and application controls related to financial reporting, high proportion of the overall audit effort was in Information Technology (IT) Systems and Controls. We focused our audit on those IT systems and controls that are significant to the Company''s financial reporting process.	We focused our audit on those IT systems and controls that are significant to the Company''s financial reporting process. We assessed the design and tested the operating effectiveness of the Company''s IT controls including those over user access and change management as well as data reliability. In a limited number of cases, we adjusted our planned audit approach as follows: - We extended our testing to identify whether there had been unauthorized or inappropriate access or changes made to critical IT systems and related data; - Where automated procedures were supported by systems with identified deficiencies, we extended our procedures to identify and test alternative controls; and
		- Where required, we performed a greater level of testing to validate the integrity and reliability of associated data and reporting.
		Further, We have relied on provisional observations of independent consultant''s past reports and the Company''s replies to the observations raised by the consultants.

Other Information

The Company''s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report but does not include the standalone Ind AS financial statements and our auditor''s report thereon. The Company''s Annual report is expected to be made available to us after the date of this auditor''s report.

Our opinion on the standalone Ind AS financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the standalone Ind AS financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Company''s annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Management and Board of Directors'' Responsibilities for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, the financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Ind AS Financial Statements, management is responsible for assessing the Company''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management

either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Ind AS Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Ind AS Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to the standalone Ind AS financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the Standalone

Ind AS Financial Statements or if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Ind AS Financial Statements, including the disclosures and whether the Standalone Ind AS Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Ind AS Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone Ind AS financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone Ind AS financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Ind AS Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

a) The Standalone financial Results of the Corporation for the year ended March 31, 2023 were audited by M M Nissim & Co. LLP and Gokhale & Sathe (Joint Auditors) whose report dated May 30, 2023, expressed an unmodified opinion on those standalone financial results.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2020 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in "Annexure B" the directions and sub-directions issued by the Comptroller and Auditors General of India (CAG), the action taken thereon and its impact on the accounts and the standalone Ind AS financial statements of the Company.

3. Non - Compliance of the SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015 - as per Regulation 17(1)(b), the Chairman being an Executive Director, at least half of the Board of Directors should be comprised of Independent Directors including one Women Independent Director. Currently, the Company does not have required number of Independent Directors on its board. (Refer Note 42.1.3 to the standalone Ind AS Financial Statements)

4. (A) As required by section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Standalone Balance sheet, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flow dealt with by this report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act.

e) The Company being a government company, the provision of section 164(2) is not applicable in accordance with the Notification No. GSR 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs. Accordingly, no reporting regarding Clause 3(g) of section 143 is required.

f) With respect to the adequacy of the internal financial controls with reference to the standalone Ind AS financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure C".

(B) In accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS Financial Statements - Refer Note 42 to the Standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There is no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

iv. a) The management has represented that,

to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:

• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Company or

• provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall:

• directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever ("Ultimate Beneficiaries") by or on behalf of the Funding Party or

• provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries; and

c) Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under clause (iv) (a) and (iv) (b) contain any material mis-statement.

v. The dividend declared or paid during the year by the Company is in compliance with section 123 of the Act.

(C) With respect to the other matters to be included in the Auditor''s Report as per section 197 (16) of the Act:

In accordance with requirements of section 197 (16) of the act as amended: As per notification number G.S.R. 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs, Section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

(D) Based on our examination which included test checks, the Company has used an SAP HANA software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of audit we did not come across any instance of audit trail feature being tampered with. [Additionally, the audit trail has been preserved by the Company as per the statutory requirements for record retention.]

For K. Gopal Rao & Co For Parakh & Co.

Chartered Accountants Chartered Accountants

FRN : 000956S FRN : 001475C

Gopal Krishna Raju Shalabh Jain

Partner Partner

M. No.: 205929 M. No.: 441015

UDIN: 24205929BKGVLH7548 UDIN: 24441015BKCZYF5767

Place: Mumbai Date: 17^th May, 2024

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Mar 31, 2023

Independent Auditor’s Report

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND
FERTILIZERS LIMITED

Report on the Audit of the Standalone Ind AS Financial
Statements

Opinion

We have audited the accompanying Standalone Ind AS
Financial Statements of RASHTRIYA CHEMICALS AND

FERTILIZERS LIMITED ("the Company”), which comprise
the Balance Sheet as at March 31, 2023, the Statement of
Profit and Loss (including Other Comprehensive Income),
Statement of Changes in Equity and Statement of Cash
Flows for the year ended March 31, 2023 and notes to the
financial statements, including a summary of significant
accounting policies and other explanatory information
(hereinafter referred to as "the Standalone Ind AS Financial
Statements”).

In our opinion and to the best of our information and according
to the explanations given to us, the aforesaid Standalone Ind
AS Financial Statements give the information required by the
Companies Act, 2013 ("the Act”) in the manner so required
and give a true and fair view in conformity with the Indian
Accounting Standards prescribed under section 133 of the
Act read with the Companies (Indian Accounting Standards)
Rules, 2015, as amended, ("Ind AS”) and other accounting
principles generally accepted in India, of the state of affairs
of the Company as at March 31, 2023 and its profit and total
Comprehensive Income, changes in equity and its cash flows
for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Ind AS Financial
Statements in accordance with the Standards on Auditing
specified under section 143(10) of the Act (SAs). Our
responsibilities under those Standards are further described
in the Auditor’s Responsibilities for the Audit of the
Standalone Ind AS Financial Statements section of our
report. We are independent of the Company in accordance
with the Code of Ethics issued by the Institute of Chartered
Accountants of India (ICAI) together with the independence
requirements that are relevant to our audit of the Standalone
Ind AS Financial Statements under the provisions of the
Act and the Rules made thereunder, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements and the ICAI’s Code of Ethics. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the
Standalone Ind AS Financial Statements.

Emphasis of Matter

We draw attention to the following matters:

a) Note No. 48 - Property, Plant and Equipment:
Title deeds of Immovable properties:

In respect of immovable properties other than land, i.e.
building and other structures situated at its Trombay
and Thal units, the Company has self-constructed
properties on the land owned by the Company as
evidenced by property cards/title deeds of land.

The Company has contested that major portion of the
immovable assets became vested with the Company
as a result of Government of India reorganizing certain
fertilizers companies in the past. Based on the legal
opinion obtained, the company is of the view that it has
clear title to the same and also initiated the process of
obtaining evidence of title towards self-constructed
properties.

Apart from such properties, immovable properties,
including land for which title deeds are not in the name
of the Company is mentioned in the standalone Ind AS
financial statements.

b) Note No. 50 - Gas pooling applicable to Fertilizer
(Urea) sector:

During the year 2022-23, the Company has recognized
a receivable of '' 79.84 crores recoverable from
Department of Fertilizers on account of pooled price
differential for the Year 2021-22 and for the period
December 2022 to February 2023 raised by GAIL India
Limited on account of substitution of EPMC and Spot
gas used for Urea operations with cheaper market
priced gas.

c) Note No. 67 - Exceptional Item:

Pursuant to the Ministry of Petroleum & Natural Gas
(MoPNG) order No. L-13013/3/2012-GP-I, dated: 16^th
December 2015, GAIL had sought a differential levy
on usage of gas for non-fertilizer/non-Urea operations,
amounting to '' 1457.92 crores for the period
commencing from 1^st July 2006 till 30^th June, 2019 by
initiating arbitration proceedings before Administrative
Mechanism for Resolution of CPSEs Disputes (AMRCD).
The Liability pertaining to period 1^st July 2006 till
31^st March 2016 was settled and excess provision of
'' 147.00 crores were reported as an exceptional item
in Year 2021-22. During the current year 2022-23,
the liability from Financial Year 2016-17 onwards is

crystalized and '' 30.15 crores excess provision is not
considered necessary has been derecognized and
reported as an exceptional item.

Our opinion is not modified in respect of the above
matters.

Key Audit Matters

Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
standalone Ind AS financial statements of the current period.

These matters were addressed in the context of our audit
of the Standalone Ind AS Financial Statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.

The key audit matters identified in our audit are:

1. Revenue Recognition and measurement in respect of
subsidy income.

2. Estimation of Provision & Contingent Liabilities.

3. Information Technology General Control.

Other Information

The Company’s Board of Directors is responsible for the
other information. The other information comprises the
information included in the Annual report but does not
include the standalone Ind AS financial statements and our
auditor’s report thereon. The Company’s Annual report is
expected to be made available to us after the date of this
auditor’s report.

Our opinion on the standalone Ind AS financial statements
does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the standalone Ind AS
financial statements, our responsibility is to read the other
information and in doing so, consider whether the other
information is materially inconsistent with the standalone
Ind AS financial statements, or our knowledge obtained in
the audit or otherwise appears to be materially misstated.

When we read the Company’s annual report, if we conclude
that there is a material misstatement therein, we are
required to communicate the matter to those charged with
governance.

Management and Board of Directors’
Responsibilities for the Standalone Ind AS
Financial Statements

The Company’s Board of Directors is responsible for the
matters stated in section 134(5) of the Companies Act,
2013 ("the Act”) with respect to the preparation of these
Standalone Ind AS Financial Statements that give a true and
fair view of the financial position, the financial performance,
total comprehensive income, changes in equity and cash
flows of the Company in accordance with the accounting
principles generally accepted in India, including the Indian
Accounting Standards (Ind AS) prescribed under section 133
of the Act.

This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of
the Act for safeguarding the assets of the Company and
for preventing and detecting frauds and other irregularities;
selection and application of appropriate accounting policies;
making judgments and estimates that are reasonable and
prudent; and design, implementation and maintenance of
adequate internal financial controls that were operating
effectively for ensuring the accuracy and completeness
of the accounting records, relevant to the preparation and
presentation of the Standalone Ind AS Financial Statements
that give a true and fair view and are free from material
misstatement, whether due to fraud or error.

In preparing the Standalone Ind AS Financial Statements,
management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless management either
intends to liquidate the Company or to cease operations or
has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the
Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the
Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about
whether the Standalone Ind AS Financial Statements as a
whole are free from material misstatement, whether due to
fraud or error and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance
with SAs will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these Standalone Ind
AS Financial Statements.

As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:

• Identify and assess the risks of material misstatement
of the Standalone Ind AS Financial Statements,
whether due to fraud or error, design and perform audit
procedures responsive to those risks and obtain audit
evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations or
the override of internal control.

• Obtain an understanding of internal financial controls
relevant to the audit in order to design audit procedures
that are appropriate in the circumstances. Under
section 143(3)(i) of the Act, we are also responsible for
expressing our opinion on whether the Company has
adequate internal financial controls with reference to
the standalone Ind AS financial statements in place and
the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by management.

• Conclude on the appropriateness of management’s use
of the going concern basis of accounting and based
on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that
may cast significant doubt on the Company’s ability
to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures
in the Standalone Ind AS Financial Statements or if such
disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease
to continue as a going concern.

• Evaluate the overall presentation, structure and
content of the Standalone Ind AS Financial Statements,
including the disclosures and whether the Standalone
Ind AS Financial Statements represent the underlying
transactions and events in a manner that achieves fair
presentation.

Materiality is the magnitude of misstatements in the
Standalone Ind AS Financial Statements that, individually or
in aggregate, makes it probable that the economic decisions
of a reasonably knowledgeable user of the standalone Ind
AS financial statements may be influenced. We consider

quantitative materiality and qualitative factors in (i) planning
the scope of our audit work and in evaluating the results
of our work; and (ii) to evaluate the effect of any identified
misstatements in the standalone Ind AS financial statements.

We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify
during our audit.

We also provide those charged with governance with a
statement that we have complied with relevant ethical
requirements regarding independence and to communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence and
where applicable, related safeguards.

From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the Standalone Ind AS Financial
Statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated
in our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public
interest benefits of such communication.

Report on Other Legal and Regulatory
Requirements

1. As required by the Companies (Auditor’s Report) Order,
2020 ("the Order”) issued by the Central Government
in terms of Section 143(11) of the Act, we give in
“Annexure A” a statement on the matters specified in
paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in
“Annexure B” the directions and sub-directions issued
by the Comptroller and Auditors General of India (CAG),
the action taken thereon and its impact on the accounts
and the standalone Ind AS financial statements of the
Company.

3. Non - Compliance of the SEBI Listing Obligation and
Disclosure Requirements (LODR) Regulations, 2015
- as per Regulation 17(1)(b), the Chairman being an
Executive Director, at least half of the Board of Directors
should be comprised of Independent Directors
including one Women Independent Director. Currently,
the Company does not have required number of
Independent Directors on its board. (Refer Note 44.1.3
to the standalone Ind AS Financial Statements)

4. (A) As required by section 143(3) of the Act, we report

that:

a) We have sought and obtained all the
information and explanations which to

the best of our knowledge and belief were
necessary for the purposes of our audit.

b) In our opinion, proper books of account
as required by law have been kept by the
Company so far as it appears from our
examination of those books.

c) The Standalone Balance sheet, the
Standalone Statement of Profit and Loss
(including Other Comprehensive Income),
Standalone Statement of Changes in Equity
and the Standalone Statement of Cash Flow
dealt with by this report are in agreement
with the relevant books of account.

d) In our opinion, the aforesaid Standalone Ind
AS Financial Statements comply with the
Indian Accounting Standards prescribed
under Section 133 of the Act.

e) The Company being a government company,
the provision of section 164(2) is not
applicable in accordance with the Notification
No. GSR 463 (E) dated June 5, 2015 issued by
Ministry of Corporate Affairs. Accordingly, no
reporting regarding Clause 3(g) of section 143
is required.

f) With respect to the adequacy of the internal
financial controls with reference to the
standalone Ind AS financial statements of the
Company and the operating effectiveness of
such controls, refer to our separate report in
“Annexure C”.

(B) In accordance with Rule 11 of the Companies

(Audit and Auditors) Rules, 2014, as amended in

our opinion and to the best of our information and

according to the explanations given to us:

i. The Company has disclosed the impact of
pending litigations on its financial position in
its Standalone Ind AS Financial Statements
- Refer Note 44 to the Standalone Ind AS
financial statements;

ii. The Company has made provision, as required
under the applicable law or accounting
standards, for material foreseeable losses,
if any, on long-term contracts including
derivative contracts;

iii. There is no delay in transferring amounts,
required to be transferred, to the Investor
Education and Protection Fund by the
Company.

iv. a) The management has represented

that, to the best of its knowledge and
belief, no funds have been advanced or

loaned or invested (either from borrowed
funds or share premium or any kind
of funds) by the Company to or in any
other persons or entities, including
foreign entities (“Intermediaries”), with
the understanding, whether recorded
in writing or otherwise, that the
Intermediary shall:

• directly or indirectly lend or invest in
other persons or entities identified in
any manner whatsoever (“Ultimate
Beneficiaries”) by or on behalf of the
Company or

• provide any guarantee, security
or the like to or on behalf of the
Ultimate Beneficiaries.

b) The management has represented, that,
to the best of its knowledge and belief, no
funds have been received by the Company
from any persons or entities, including
foreign entities (“Funding Parties”), with
the understanding, whether recorded in
writing or otherwise, that the Company
shall:

• directly or indirectly, lend or invest in
other persons or entities identified in
any manner whatsoever (“Ultimate
Beneficiaries”) by or on behalf of the
Funding Party or

• provide any guarantee, security
or the like from or on behalf of the
Ultimate Beneficiaries; and

c) Based on such audit procedures as
considered reasonable and appropriate
in the circumstances, nothing has come
to our notice that has caused us to believe
that the representations under clause (iv)
(a) and (iv) (b) contain any material mis¬
statement.

v. The dividend declared or paid during the year
by the Company is in compliance with section
123 of the Act.

(C) With respect to the other matters to be included in
the Auditor’s Report as per section 197 (16) of the
Act:

In accordance with requirements of section 197
(16) of the act as amended: As per notification
number G.S.R. 463 (E) dated June 5, 2015 issued
by Ministry of Corporate Affairs, Section 197 of the
Act as regards the managerial remuneration is not
applicable to the Company, since it is a Government
Company.

(D) Proviso to Rule 3(1) of the Companies (Accounts)
Rules, 2014 for maintaining books of account
using accounting software which has a feature of
recording audit trail (edit log) facility is applicable
to the Company with effect from April 1, 2023,
and accordingly, reporting under Rule 11(g) of
Companies (Audit and Auditors) Rules, 2014 is not
applicable for the financial year ended March 31,
2023.

For M M Nissim & Co LLP For Gokhale & Sathe

Chartered Accountants Chartered Accountants

Firm Regn. No.107122W/W100672 Firm Regn. No. 103264W

N. Kashinath Atul Kale

Partner Partner

Membership No. 036490 Membership No. 109947

UDIN: 23036490BGXRYV2718 UDIN: 23109947BGVVQE8885

Place: Mumbai
Dated: May 30, 2023

---

Mar 31, 2022

Report on the Audit of the Standalone Ind AS Financial StatementsOpinion

We have audited the accompanying Standalone Ind AS Financial Statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED (“the Company”), which comprise the Balance Sheet as at March 31, 2022, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year ended March 31, 2022 and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the Standalone Ind AS Financial Statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2022 and its profit and total Comprehensive Income, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the Standalone Ind AS Financial Statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS Financial Statements.

Emphasis of Matter

We draw attention to the following matters:

a) Note No. 93 - Revision / Restatement of Standalone Ind AS Financial Statements:

We had issued our audit report dated May 27, 2022 on Standalone Ind AS Financial Statements, approved by the Board of Directors in their meeting held on May 27, 2022. On receipt of Expert Advisory Council (EAC) opinion from the Institute of Chartered Accountants of India on accounting treatment of captive generation and consumption of power and steam generated from the Company’s Gas Turbine Power Generation Plant and Heat Recovery Steam Generation Plant and pending closure of audit of Consolidated Financial Statements by Comptroller Auditor General of India, the Company has decided to revise the Standalone Ind AS Financial Statements and restatement of previous year comparative figures along with Opening Balance sheet as at April 1, 2020, giving effect to the EAC opinion. Accordingly, the Standalone Ind AS Financial Statements have been revised/restated to that extent and approved by the Board of Directors on August 12, 2022. Our audit procedures in relation to the subsequent events are restricted solely to revision/ restatement to the Standalone Ind AS Financial Statements pursuant to the decision of the Board of Directors

b) Note No. 49 - Property, Plant and Equipment: Title deeds of Immovable properties:

In respect of immovable properties other than land, situated at its Trombay and Thal units they are self-constructed properties on the land owned by the Company as evidenced by property cards/title deeds of land.

The Company asserts that all these properties are its own and has clear title to the same since such properties are self-constructed on the Company’s land, although no separate title documents for self-constructed properties are readily available. The Company has obtained opinion to that effect from legal and regulatory experts on land matters and also has other documentary evidence in that regard.

The Company had come into existence in 1978 as a result of Government of India reorganising Fertilizer Corporation of India Ltd. and National Fertilizers Ltd. Consequent to the same, major portion of immovable assets at its Trombay unit became vested with the Company. In case of Thal unit, such properties on the Company’s land were erected over the years following land acquisition effected around 1978. Thus, records pertaining to self-constructed properties are not readily available since they date back to more than 40

had indicated a total estimated repair expenditure of about 98 Million SEK (Rs. 74.51 Crore excluding taxes and duties). The said GTG plants have been sent to the OEM for repairs and they have been received duly repaired. In the interim, the Company has initiated arbitration proceedings for costs and loss of profits and does not consider a provision necessary as the said costs are covered under warranties. In response, counter claims have been made by the contractor.

e) Note no. 96 - Impact of COVID-19 Pandemic:

Although no significant impact of Covid 19 pandemic has been noted on the financial and operational results for the year ended 31st March 2022, the continuing Covid 19 epidemic could result in consequences on the external economic environment. A definitive assessment of the said impact on the Company is highly uncertain and being dependent on the evolving situation can be undertaken only after the situation stabilises.

Our opinion is not modified in respect of the above matters.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters identified in our audit are:

1. Revenue Recognition and measurement in respect of subsidy income.

2. Estimation of Provision & Contingent Liabilities.

3. Information Technology General Control.

years. The Company has initiated the process of obtaining appropriate evidence of the approvals/permissions taken for construction of the self-constructed properties from the respective regulatory authorities.

Apart from such properties, immovable properties, including land for which title deeds are not in the name of the Company is mentioned in the financials statements. (Refer Note 50 to Financial Statements)

c) Note No. 52 - Gas pooling applicable to Fertilizer (Urea) sector:

Pursuant to the Ministry of Petroleum & Natural Gas (MoPNG) order No. L-13013/3/2012-GP-I, dated: 16th December 2015, GAIL had sought a differential levy on usage of gas for non-fertilizer/Non-Urea operations, amounting to Rs. 1457.92 Crore for the period commencing from 1st July, 2006 till 30th June, 2019 by initiating arbitration proceeding before Administrative Mechanism for Resolution of CPSEs Disputes (AMRCD).

The matter was heard in the meeting of the AMRCD on 17th June 2021 and vide its order dated 6th July 2021, AMRCD has determined the total claim to be paid by the Company in this regard at an amount of Rs. 87.17 Crore. This sum thus settles the price differential towards the use of APM/Domestic gas for non-fertilizer/Non-Urea operations for the period commencing from 1st July 2006 till 15th May, 2016 (subsequent to which the Company sourced market priced gas). Further, a related claim by GAIL in regard to the Gas Transportation Charges of Rs. 19.65 Crore, for the period December 2013 to January 2016 have also been directed to be paid. The aggregate sum of Rs. 106.82 Crore has been fully paid by the Company in accordance with the resolution by AMRCD.

Possible liability for the period 16th May 2016 onwards is yet to be crystalised as the Company has submitted the data to FICC for verification in order to recalculate the claim as per MoPNG directives dated 16th December 2015 as per highest rate of RLNG. Taking a conservative estimate of any liability arising from such claim, the excess provision of Rs. 127.35 Crore not considered necessary has been derecognized and reported as exceptional item.

d) Note No. 53 - Gas turbine Generator (GTG) plants at Thal unit:

Pursuant to the sudden failure of both Gas Turbine Generator (GTG) plants at Thal unit in March 2019, the matter for effecting repairs under the warranty period was taken up with the LSTK contractor. Through the contractor the Original Equipment Manufacturer (OEM)

Sr. No.	Key Audit matter	Response to Key Audit Matter
1.	Revenue recognition and measurement in respect to subsidy income. Recognition of subsidy is generally made on the basis of in principle recognition/approval /settlement of claims from Government of India/Fertilizer Industry Co-ordination Committee while finalizing the financial statements. During the year, Subsidy adjusted on account of the escalations/de-escalations basis for the year amounts to Rs. 1588.30 Crore receivable from FICC/DOF (PY Rs. 82.44 Crore refundable). Such adjustments have been done for escalations/de-escalations in the cost of inputs and other costs, as estimated by the management based on the prescribed norms in line with known policy parameters. MRP of Urea being fixed by Government of India, the Company is entitled for subsidy wherein certain inputs costs are a pass through and compensation for production beyond a level of production known as Reassessed capacity is restricted to lower of Import Parity Price (IPP) of Urea plus other incidental charges which the government incurs on imported Urea, or its own concession price, as determined under extant policies for Urea. Further subsidy income is net of adjustments of recoveries towards sale/transfer for surplus ammonia or non-conversion of entire ammonia into Urea. Since there is a time lag between actual expenditure incurred and notification of concession rates for the year, Management exercises significant judgement in arriving at the income entitlement on account of same for the year. Therefore, there is a risk of revenue being misstated on account of errors in estimation of concession/IPP rates yet to be notified, due to absence of notification available and change in methodology/ calculation, if any for arriving at price concession.	Our Procedure included: Accounting policies and principles: We have reviewed the Company''s Accounting policies for Subsidy on Urea as mentioned under “Note A. Statement of Significant Accounting policies III) D) Revenue Recognition” of the financial statements and the same is compared with the applicable Ind AS. Tests of controls: We have evaluated the design, implementation and operating effectiveness of key controls over recognition of subsidy income. Tests of details: We have verified the supporting documentation for determining that the subsidy was recognized in the correct accounting period and as per notified rates. In absence of notified rates, we have verified calculation of estimated rates based on information available with the Company for such costs which are a pass through. In case estimation of income is based on other parameters like IPP of Urea etc. verification of the same is based on available information in public domain. Testing reasonability of assumptions based on past trends, consistency in application and changes in the same owing to change in Government policies. Performing substantive analytical procedures: - Ascertainment and analysis of variations with respect of amounts estimated and actually entitled upon notification with respect to previous years. We also assessed as to whether the disclosures in respect of revenue were adequate.
2	Estimation of Provision & Contingent Liabilities In the recognition and measurement of provisions, there is uncertainty about the timing or amount of the future expenditure required to settle the liability. In respect of contingent liabilities, there are estimates and assumptions made to determine the amount to be disclosed. As at the year ended 31 March 2022, the amounts involved are significant. There is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities. There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated.	Internal enquiry: We enquired of the senior management and inspected the minutes of the board and various committees of the board where relevant, for claims arising and challenged whether provisions are required. Tests of details: In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where available. Enquiry and confirmation of lawyers: In respect of matters which are under dispute, we have assessed opinion of the Company’s in-house Legal Department / external lawyers wherever necessary.

Sr. No.	Key Audit matter	Response to Key Audit Matter
3	Information Technology Controls A significant part of the Company’s financial reporting process is heavily reliant on IT systems with automated processes and controls over the capture, storage and extraction of information. A fundamental component of these processes and controls is ensuring appropriate user access and change management protocols exist and being adhered to. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner. As our audit sought to place a high level of reliance on IT systems and application controls related to financial reporting, high proportion of the overall audit effort was in Information Technology (IT) Systems and Controls. We focused our audit on those IT systems and controls that are significant to the Company’s financial reporting process.	We focused our audit on those IT systems and controls that are significant to the Company''s financial reporting process. We assessed the design and tested the operating effectiveness of the Company’s IT controls including those over user access and change management as well as data reliability. In a limited number of cases, we adjusted our planned audit approach as follows: - We extended our testing to identify whether there had been unauthorized or inappropriate access or changes made to critical IT systems and related data; - Where automated procedures were supported by systems with identified deficiencies, we extended our procedures to identify and test alternative controls; and
		- Where required, we performed a greater level of testing to validate the integrity and reliability of associated data and reporting.
		Further, We have relied on provisional observations of independent consultant’s report.

Other Information

The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual report but does not include the financial statements and our auditor’s report thereon. The Company’s Annual report is expected to be made available to us after the date of this auditor’s report.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Director’s Report, Management Discussion & Analysis Report, Business Responsibility Report and Corporate Governance Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Management and Board ofDirectors’ Responsibilities for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, the financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Ind AS Financial Statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Ind AS Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Ind AS Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Standalone Ind AS Financial Statements or if such disclosures are inadequate, to modify our opinion. Our c-onclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Ind AS Financial Statements, including the disclosures and whether the Standalone Ind AS Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Ind AS Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Ind AS Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our

report because the adverse consequences of doing so would

reasonably be expected to outweigh the public interest benefits

of such communication.

Other Matter

Pursuant to Note 93 to the Standalone Ind AS Financial

Statements

i. On accounting treatment of captive generation and consumption of power and steam generated from the Company’s Gas Turbine Power Generation Plant and Heat Recovery Steam Generation Plant opinion issued by the EAC this Audit report supersedes our earlier report dated May 27, 2022.

ii. As observed by Comptroller and Auditor General of India on Cash flow statements; rental income on investment properties classified under operating cash flows has now been reported under cash flows from investing activities.

Our Opinion is not modified with respect to the above matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2020 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in “Annexure B” the directions and sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statements of the Company.

Based on the provisional comments/ audit enquiries raised by CAG, we have complied with direction with respect to restructuring/waiver/write off of loans given by the Company and corrections on account of regrouping of stocks of urea reported under RAC and BRAC.

3. Non - Compliance of the SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015 - as per Regulation 17(1)(b), the Chairman being an Executive Director, at least half of the Board of Directors should be comprised of Independent Directors including one Women Independent Director. Currently, the Company does not have required number of Independent Directors on its board. (Refer Note 45.1.3 to Financial Statements)

4. (A) As required by section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Standalone Balance sheet, the Standalone Statement of Profit and Loss (including Other Comprehensive Income), Standalone Statement of Changes in Equity and the Standalone Statement of Cash Flow dealt with by this report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act.

e) The Company being a government company, the provision of section 164(2) is not applicable in accordance with the Notification No. GSR 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs. Accordingly, no reporting regarding Clause 3(g) of section 143 is required.

f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure C”.

(B) In accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS Financial Statements - Refer Note 45 to the Standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There is no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

iv. a) The management has represented that, to the best of its knowledge and belief, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any kind of funds) by the Company to or in any other persons or entities, including foreign entities

(“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall:

• directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Company or

• provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

b) The management has represented, that, to the best of its knowledge and belief, no funds have been received by the Company from any persons or entities, including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the Company shall:

• directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever (“Ultimate Beneficiaries”) by or on behalf of the Funding Party or

• provide any guarantee, security or the like from or on behalf of the Ultimate Beneficiaries; and

c) Based on such audit procedures as considered reasonable and appropriate in the circumstances, nothing

has come to our notice that has caused us to believe that the representations under clause (iv) (a) and (iv) (b) contain any material mis-statement.

v. The dividend declared or paid during the year by the Company is in compliance with section 123 of the Act.

(C) With respect to the other matters to be included in

the Auditor’s Report as per section 197 (16) of the Act:

In accordance with requirements of section 197 (16) of the act as amended: As per notification number G.S.R. 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs, Section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

---

Mar 31, 2021

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED

Report on the Audit of the Standalone Ind AS Financial

Statements

opinion

We have audited the accompanying Standalone Ind AS Financial Statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED (“the Company”), which comprise the Balance Sheet as at March 31, 2021, the Statement of Profit and Loss (including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year ended March 31, 2021 and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as “the Standalone Ind AS Financial Statements”).

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Ind AS Financial Statements give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2021 and its profit and total Comprehensive Income, changes in equity and its cash flows for the year ended on that date.

Basis for opinion

We conducted our audit of the Standalone Ind AS Financial Statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Ind AS Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the Standalone Ind AS Financial Statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS Financial Statements.

Emphasis of Matter

We draw attention to the following matters:

a) note no 48 - Gas pooling applicable to Fertilizer

(Urea) sector: In view of the lack of progress in the matter of levy of a differential price for use of domestic gas for non-urea operations, liability of '' 211.79 Crore recognised for the period commencing from June 1, 2015 to March 31, 2019 continues to be carried forward. The related claim by GAIL for differential levy is pending for resolution before government designated authorities and the balance amount of the claim of '' 1246.21 Crore (net after provision) is reflected as a contingent liability.

b) note no 49 - Gas turbine Generator (GTG) plants at Thal unit: Pursuant to the sudden failure of both Gas Turbine Generator (GTG) plants at Thal unit in March 2019, the matter for effecting repairs under the warranty period was taken up with the LSTK contractor. Through the contractor the Original Equipment Manufacturer (OEM) had indicated a total estimated repair expenditure of about 98 million SEK ('' 74.51 Crore excluding taxes and duties). The said GTG plants have been sent to the OEM for repairs and they have been received duly repaired. In the interim, the Company has initiated arbitration proceedings for costs and loss of profits and does not consider a provision necessary as the said costs are covered under warranties. In response, counter claims have been made by the contractor.

c) note no. 75 - Impact of coVID-19 Pandemic:

Although no significant impact of Covid 19 pandemic has been noted on the financial and operational results for the year ended 31st March 2021, the continuing Covid 19 epidemic could result in consequences on the external economic environment. A definitive assessment of the said impact on the company is highly uncertain and being dependent on the evolving situation can be undertaken only after the situation stabilises.

Our opinion is not modified in respect of the above matters. Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the Standalone Ind AS Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters identified in our audit are:

1. Revenue Recognition and measurement in respect of subsidy income.

2. Estimation of Provision & Contingent Liabilities.

3. Information Technology General Control.

Sr. No.	Key Audit matter	Response to Key audit Matter
1.	Revenue recognition and measurement in respect to subsidy income. Recognition of subsidy is generally made on the basis of in principle recognition/approval /settlement of claims from Government of India/Fertilizer Industry Co-ordination Committee while finalizing the financial statements. During the year, Subsidy adjusted on account of the escalations/de-escalations basis for the year amounts to '' 82.44 Crore refundable to FICC/DOF (PY '' 247.18 Crore receivable). Such adjustments have been done for escalations/de-escalations in the cost of inputs and other costs, as estimated by the management based on the prescribed norms in line with known policy parameters. MRP of Urea being fixed by Government of India, the company is entitled for subsidy wherein certain inputs costs are a pass through and compensation for production beyond a level of production known as Reassessed capacity is restricted to lower of Import Parity Price (IPP) of Urea plus other incidental charges which the government incurs on imported Urea, or its own concession price, as determined under extant policies for Urea. Further subsidy income is net of adjustments of recoveries towards sale/transfer for surplus ammonia or non-conversion of entire ammonia into Urea. Since there is a time lag between actual expenditure incurred and notification of concession rates for the year, Management exercises significant judgement in arriving at the income entitlement on account of same for the year. Therefore, there is a risk of revenue being misstated on account of errors in estimation of concession/IPP rates yet to be notified, due to absence of notification available and change in methodology/ calculation, if any for arriving at price concession.	Our Procedure included: accounting policies and principles: We have reviewed the Company''s Accounting policies for Subsidy on Urea as mentioned under “Note A. Statement of Significant Accounting policies III) D) Revenue Recognition” of the financial statements and the same is compared with the applicable Ind AS. Tests of controls: We have evaluated the design, implementation and operating effectiveness of key controls over recognition of subsidy income. tests of details: We have verified the supporting documentation for determining that the subsidy was recognized in the correct accounting period and as per notified rates. In absence of notified rates, we have verified calculation of estimated rates based on information available with the Company for such costs which are a pass through. In case estimation of income is based on other parameters like IPP of Urea etc. verification of the same based on available information in public domain. Testing reasonability of assumptions based on past trends, consistency in application and changes in the same owing to change in Government policies. Performing substantive analytical procedures: - Ascertainment and analysis of variations with respect of amounts estimated and actually entitled upon notification with respect to previous years. We also assessed as to whether the disclosures in respect of revenue were adequate.
2	Estimation of Provision & contingent Liabilities In the recognition and measurement of provisions, there is uncertainty about the timing or amount of the future expenditure required to settle the liability. In respect of contingent liabilities, there are estimates and assumptions made to determine the amount to be disclosed. As a result, there is a high degree of judgement required for the recognition and measurement of provisions and disclosure of contingent liabilities. Company has reported Provision and Contingencies amounting to '' 1797.74 Crore (PY '' 1697.23 Crore) in the financial statement. There is a risk of material misstatement that the estimates are incorrect and that the provisions or contingent liabilities are materially misstated.	Internal enquiry: We enquired of the senior management and inspected the minutes of the board and various committees of the board where relevant, for claims arising and challenged whether provisions are required. tests of details: In respect of significant claims, we checked the amount of claim, nature of issues involved, management submissions and corroborated the same with external evidence, where available. Enquiry and confirmation of lawyers: In respect of matters which are under dispute, we have assessed opinion of Company’s in-house Legal Department / external lawyers wherever necessary.

Sr. No.	Key Audit matter	Response to Key Audit Matter
3	Information Technology Controls A significant part of the Company’s financial reporting process is heavily reliant on IT systems with automated processes and controls over the capture, storage and extraction of information. A fundamental component of these processes and controls is ensuring appropriate user access and change management protocols exist and being adhered to. These protocols are important because they ensure that access and changes to IT systems and related data are made and authorised in an appropriate manner. As our audit sought to place a high level of reliance on IT systems and application controls related to financial reporting, high proportion of the overall audit effort was in Information Technology (IT) Systems and Controls. We focused our audit on those IT systems and controls that are significant to the Company’s financial reporting process.	We focused our audit on those IT systems and controls that are significant to the Company’s financial reporting process. We assessed the design and tested the operating effectiveness of the Company’s IT controls including those over user access and change management as well as data reliability. In a limited number of cases, we adjusted our planned audit approach as follows: - We extended our testing to identify whether there had been unauthorized or inappropriate access or changes made to critical IT systems and related data; - Where automated procedures were supported by systems with identified deficiencies, we extended our procedures to identify and test alternative controls; and - Where required, we performed a greater level of testing to validate the integrity and reliability of associated data and reporting.

Other Information

The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Director’s Report, Management Discussion & Analysis Report, Business Responsibility Report and Corporate Governance Report but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the Director’s Report, Management Discussion & Analysis Report, Business Responsibility Report and Corporate Governance Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these Standalone Ind AS Financial Statements that give a true and fair view of the financial position, the financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting

Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS Financial Statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the Standalone Ind AS Financial Statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so.

The Board of Directors is also responsible for overseeing the Company’s financial reporting process.

auditor’s Responsibilities for the audit of the Standalone Ind AS Financial Statements

Our objectives are to obtain reasonable assurance about whether the Standalone Ind AS Financial Statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance

with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Ind AS Financial Statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone Ind AS Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Standalone Ind AS Financial Statements or if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Standalone Ind AS Financial Statements, including the disclosures and whether the Standalone Ind AS Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Ind AS Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Ind AS Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in “annexure B” the directions and sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statements of the Company.

3. Non - Compliance of the SEBI Listing Obligation and Disclosure Requirements (LODR) Regulations, 2015 - as per Regulation 17(1)(b), the chairman being an executive director, at least half of the board of Directors should be comprised of Independent Directors including one Women Independent Director. Currently, the Company does not have required number of Independent Directors on its board. (Refer Note 41.1.5 to Financial Statements)

4. As required by section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this report are in agreement with the relevant books of account.

d) In our opinion, the aforesaid Standalone Ind AS Financial Statements comply with the Indian Accounting Standards prescribed under Section 133 of the Act.

e) The Company being a government company, the provision of section 164(2) is not applicable in accordance with the Notification No. GSR 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs. Accordingly, no reporting regarding Clause 3(g) of section 143 is required.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure C”.

g) With respect to the other matters to be included in the Auditor’s Report as per section 143(3)(j):

I. In accordance with requirements of section 197 (16) of the act as amended: As per notification number G.S.R. 463 (E) dated June 5, 2015 issued by Ministry of Corporate Affairs, Section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

II. In accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i. The company has disclosed the impact of pending litigations on its financial position in its Standalone Ind AS Financial Statements - Refer Note 41 to the Standalone Ind AS financial statements;

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There is no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

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Mar 31, 2018

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED.

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Rashtriya Chemicals and Fertilizers Limited (“the Company”), which comprise the Balance Sheet as at 31^st March, 2018, and the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs(financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS 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 including the Ind AS, of the state of affairs (financial position) of the Company as at March 31, 2018, and its profit/loss (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matters

a) Note No 47 (b): The matter relating to the issue of unintended benefits accruing to units using domestic gas for manufacture of nutrient “N” has been referred and is pending before an Inter-Ministerial Committee (IMC) of Government of India (GoI). An amount of Rs, 198.94 crore has been withheld by Department of Fertilizers (DOF) for the period January, 2014 to September, 2015 towards the same. DoF has recently agreed to release the amount withheld against submission of bank guarantee, which has since been submitted. Pending final decision on the said matter and since the Company is of the view that no unintended benefits have accrued to it and is expecting full recoverability of the same, Company has continued to recognize subsidy income on P&K fertilizers at the rates notified by DoF.

b) Note No 48: Consequent to Gas pooling being made applicable to Fertilizer (Urea) sector w.e.f. 1^st June, 2015, it is expected that a differential pricing of gas may be made applicable for non-urea usage. Company has represented to DoF for maintaining supply of domestic gas for P&K fertilizers and chemicals. Further effective from 16^th May, 2016 the Company has entered into a contract for procurement of market priced gas for non-urea operations at Trombay unit.

In the interim, Ministry of Petroleum & Natural Gas (MoPNG) vide its order No. L-13013/3/2012-GP-I, dated: 16^th December, 2015 has directed GAIL (India) Limited to levy a higher gas price (i.e. the highest rate of RLNG used for production of urea) for gas consumed in non-urea operations. As the matter relating to the same is pending before the IMC for decision, Company has represented that any decision on the same be taken only upon the issue being settled by the IMC of GoI.

Pursuant to the said order, GAIL has sought a differential levy amounting to Rs, 1442.84 crore for the period commencing from 1^st July 2006 till 31^st March 2017 and has initiated arbitration proceeding towards non-payment of the same, which has been currently referred to Administrative Mechanism for Resolution of CPSEs Disputes (AMRCD).

Company has also represented this matter to Department of Fertilizers for dispute resolution as the matter relating to the same is pending before the IMC of GoI.

However, pending finalization of price payable as per the MoPNG order, a liability of Rs, 211.79 crore as on 31^st March, 2018 (Rs, 210.63 crore up to 31^st March, 2017) has been recognized for the period commencing from 1^st June, 2015 based on the difference between the domestic gas price and pooled / market price of gas for its non-urea operations as applicable.

c) Note No 65 (a): Net fair value gain of Rs, 107.94 crore on account of valuation of Development Right Certificate received from Municipal Corporation of Greater Mumbai towards surrender of land in accordance with IND-AS 38 and Guidance Note on Accounting for Real Estate Transactions issued by Institute of Chartered Accountants of India. Tax expense includes the Capital Gains Tax impact on the same.

d) Note No 65 (b): Past service gratuity cost ofRs, 108.06 crore on account of increase in gratuity limits from Rs, 10 lakh to Rs, 20 lakh in line with Notification dated 29^th March, 2018 issued by the Ministry of Labour and Employment.

Our opinion is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in “Annexure B” the directions and sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statements of the Company.

3. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

e) On the basis of the written representations received from the directors as on 31^st March, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March, 2018 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure C”.

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone

Ind AS financial statements -Refer Note 41 to the standalone Ind AS financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

iii. There is no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

Referred to in in Para 1 ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditors’ Report to the members of the Company on the standalone Ind AS financial statements for the year ended March 31, 2018.

Statement on Matters specified in paragraphs 3 & 4 of the Companies (Auditor’s Report) Order, 2016:

i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As explained to us, the Plant & Machinery have been physical verified by the management at reasonable intervals during the year and all other fixed assets have been physical verified by the management with the help of an independent outside agency. The discrepancies reported on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of examination of the records of the company, the title deeds of immovable properties are held in the name of the Company except:

Sr. No.	Total No. of Cases	Type of Assets	Gross Block as at March 31, 2018 C Crores)	Net Block as at March 31, 2018 ('' Crores)	Remarks
1	2	Free Hold Land -Thal (1824903 Sq. Mtr. of land)	1.60	1.60	The Company is in the process of Transferring the title deeds.
2	1	FreeHold Land Trombay (378321 Sq. Mtr. of land)	0.24	0.24	The Company is in the process of transferring the title deeds.

ii. In our opinion and according to the information and explanations given to us, physical verification of finished goods, packing materials and raw materials inside the factory premises has been carried out by the management at reasonable intervals and stock of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively. No material discrepancies were noticed on physical verification and the same have been properly dealt with in the books of account.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms, and limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Therefore, the provisions of sub-clause (a), (b) and (c) of paragraph 3(iii) of the Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, the Company has not advanced any loans or made any investments or provided any guarantees or security to the parties covered under section 185 of the Act. The Company has given loans, made investments in the securities of other body corporate and given guarantees within the limit specified by section 186 of the Act and details of such transactions have been disclosed in the standalone Ind AS financial statements.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted any Deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Rules framed there under are not applicable.

vi. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

vii. (a) According to the information and explanations given to us and the records examined by us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Goods and Service Tax Cess and other material statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of outstanding statutory dues in respect of above as on the last day of the financial year for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records examined by us, there are no material dues of Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise and Value added tax outstanding on account of any dispute except:

Sr. No.	Name of the Statute	Nature of Dues	Amount C in Crore)	Period to which the amount relates	Forum where dispute is pending
1	Customs Act, 1962	Demand of Customs duty and penalty (Trombay Unit)	25.62	2004-05	Central Excise, Service Tax Appellate Tribunal
2	Customs Act, 1962	Demand of Differential Customs Duty on import of Urea, MOP & DAP (Marketing)	80.77	2009-10	Assistant Commissioner of Customs, Dharamtar,Alibaug
3	Customs Act, 1962	Demand of Differential customs duty on import of Potash (Marketing)	0.16	2012-13	Commissioner of Customs, Mangalore
4	Income Tax Act, 1961	Disallowance of additional depreciation claimed	3.93	A.Y2013-14	Commissioner of Income Tax (Appeals)
5	Income Tax Act, 1961	Disallowance of additional depreciation claimed	6.55	A.Y2014-15	Income Tax Appellate Tribunal
6	Income Tax Act, 1961	Disallowance of additional depreciation claimed	5.43	A.Y2015-16	Commissioner of Income Tax (Appeals)
7	Income Tax Act, 1961	Demand of Tax for Short Deduction / non deduction of TDS	1.47	A.Y2008-09 to 2017-18	Commissioner of Income Tax (Appeals)
8	Sales Tax, Maharashtra	Disallowance / errors in calculation of set off etc., in the Assessment Order Passed	2.77	2010-11	Joint Commissioner of Sales Tax (Appeals)
			1.23	2011-12
			6.39	2012-13
			6.96	2013-14
9	Central Excise Act, 1944	Demand of Central Excise duty, Interest & Penalty in respect of Naphtha procured at concessional rates used for products which are not exempted (Thal Unit)	2.67	1996-2001	Supreme Court
			3.54	March 2005 to October 2005	Central Excise Tax Appellate Tribunal
			18.61	November 1996 to February 2005 (Interest)	Supreme Court
		Withheld of subsidy on account of Diversion of urea for industrial usages (Thal Unit)	4.12	2015-16	Commissioner of Central Excise

10	Central Excise Act, 1944	Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)	2.99	September 1989 to December 2015	Commissioner of Central Excise (Appeals)
		Rapid Wall Plaster cleared with Nil Rate of duty (Trombay Unit)	3.19	July 2010 to March 2016	Dy. Commissioner / Commissioner of Central Excise (Appeals)
		Wrong availment of CENVAT Credit on Angles, Channels, TMT Bars. Etc. (Trombay Unit)	0.10	April 2007 to August 2011	Dy. Commissioner Central Excise (Appeals)
		Withheld of subsidy on account of Diversion of urea for industrial usages (Trombay Unit)	0.72	2015-16	Commissioner of Central Excise
11	Service Tax	Demand of Service Tax on supply of Btal wagons (IPD Dept.)	0.14	April 2008 to December 2012	Appellate Authority , Mumbai
12	Service Tax	Demand of Service Tax on Dispatch Money (Mktg. Dept.)	0.24	April 2015 to March 2017	Asst. Commissioner of CGST & C.X. Division-1 , Mumbai
13	Service Tax	Demand of Service Tax on LD (Corporate Dept.)	0.03	April 2012 to March 2015	Dy. Commissioner of Central Excise, Customs & Service Tax
14	Service Tax	Demand of Service Tax on wrong availment and distribution of CENVAT (Corporate Dept.)	0.10	April 2014 to March 2015	Dy. Commissioner of Central Excise, Customs & Service Tax
15	Service Tax	Demand of Service Tax on Handling Charges	0.01	April 2006 to March 2008	Superintendent Service Tax, Aurangabad
16	Service Tax	Demand of Service Tax on supply of wagon to Central Railway (Thal Unit)	2.05	April 2008 to December 2015	Commissioner of Central Excise, Customs & Service Tax
17	Service Tax	Demand of Service Tax on fees received for Operation and maintenance of HWP (Thal Unit)	14.36	October 2006 to June 2017	Addl. Commissioner of Central Excise, Customs & Service Tax
18	Service Tax	Demand of Service Tax on wrong availment of CENVAT credit in respect of input services used in the manufacture of exempted goods (Thal Unit)	11.57	April 2011 to June 2017	Commissioner of Central Excise, Customs & Service Tax
19	Service Tax	Penalty on account of no deduction of service tax on gross assessable value (Thal Unit)	0.16	October 2011 to May 2012	Addl. Commissioner of Central Excise, Customs & Service Tax

20	Service Tax	Non-payment of service Tax on Routine Maintenance Charges of private railway Siding (Thal Unit)	1.93	March 2012 to August 2015	Commissioner of Central Excise, Customs & Service Tax
21	Service Tax	Demand of Service Tax on wrong a ailment of CENVAT credit in respect of imported goods (Thal Unit)	0.08	March 2012 to September 2013	Addl. Commissioner of Central Excise, Customs & Service Tax

viii. According to information and explanation given to us and based on examination of the records, the Company has not defaulted in repayment of loans or borrowings to bank. The Company does not have any dues to financial institution, government or debenture holders.

ix. The Company has not raised money through initial public offer or further public offer (including debt instruments). In our opinion and according to the information and explanations given to us and based on the documents and records examined by us on an overall basis, the term loans obtained by the Company were applied for the purpose for which the loans were obtained.

x. During the course of our examination of the books of account and records of the Company, and according to the information and explanation given to us and representations made by the Management, no material fraud by or on the Company by its officers or employees, has been noticed or reported during the year.

xi. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanation given to us, the Company is not a Nidhi Company. Accordingly, provisions of paragraph 3(xii) of the Order are not applicable

xiii. According to the information and explanation given to us and based on our examination of the records of the Company, transactions with related parties are in compliance with sections 177 and 188 of the Act, where applicable, and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not entered into non- cash transactions with the directors or persons connected with him. Hence the provisions of Section 192 of the Act are not applicable.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934, hence the provisions of paragraph 3 (xvi) of the Order are not applicable.

Referred to in Para 2 ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditor’s Report to the members of the Company on the standalone Ind AS financial statements for the year ended 31^st March, 2018.

Report on the Directions and Sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statement of the Company under Section 143(5) of the Act:

A. Directions

1. Whether Company has clear title / lease deeds for freehold and leasehold land respectivelyRs, If not, please state the area of freehold and leasehold land for which title/lease deeds are not available.

Based on the audit procedures performed by us and as per the information and explanations given to us, the details of freehold land and title deeds available/not available with the company are as under:-

A) Information of Freehold Land

i. TROMBAY

Location	Particulars	Total Area (in Sq. Mtr.)	Area in the name of RCF (in Sq. Mtr.)	Remarks
RCF Trombay	Freehold Land	30,89,013	27,10,692	The company does not have clear title for free hold land at Trombay measuring 3,78,321 Sq. Mtr. As informed to us, matter is being taken up with concerned authorities for reconciliation of area

ii. THAL

Location	Particulars	Total Area (in Sq. feet/ Sq meter/ Acre/ hectares	Area in the name of RCF (in Sq. feet/Sq meter/ Acre/hectares)	Remarks*
RCF Factory & Roads	Freehold Land	313-52.12 hectares	241-49.52 hectares	As per 7/12 extract the area in the name of the Company is 253-73.70 Hectares.
Township Kihim	Freehold Land	7-10.10 hectares		The land is in possession of RCF. As informed, transfer of title deeds is in process.
Township -Kurul - Veshvi - Chendhare	Freehold Land	83-23.71 hectares	81-26.21 hectares	Balance 1-97.50 Hectares of land, is not in name of RCF. Steps are being taken for the transfer of title deeds.
Railway Land	Freehold Land	101-38.83 Hectares		As informed, request letter has been sent to concerned authorities for providing 7/12 extract for the said area.
Total Thal Freehold Land		505-24.76 Hectares	322-75.73 Hectares	The company does not have clear titles for free hold land at Thal measuring 18,24,903 sq. Mtr. As informed to us, matter is being taken up with concerned authorities for reconciliation of area.

* The matter is being taken up with the concerned authorities for reconciliation of area.

Location	Particulars	Area (in Sq. feet/ Sq meter/ Acre	Whether company has clear title deed to the land
AHMEDNAGAR Survey No.20,II Lines, Karachi wala Nagar, Near Mahesh Talkies Ahmednagar, Maharashtra- 414001.	Freehold Land	840 Sq meters	YES
LUCKNOW TC/10 V, Vibutikhand Gomtinagar, Lucknow, U.P.	Freehold Land	1000 Sq meters	YES
DELHI OFFICE H-9 Green Park Extension New Delhi -110016	Freehold Land	387.06 Sq meters	YES

iii. MARKETING/AREA OFFICES/CORPORATE

B) Information on Leasehold land

The leased deeds and other details of leased hold land are separately available with the Company. As regards disclosure of the same in the books of account/financial statements of the Company under Ind AS, the carrying value of the same amounts to ''.2.76 Crore, which has been reported as leased premium prepaid under Note no- 8 and Note no. 15 of standalone Ind AS financial statements.

2. Please report whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons there for and the amount involved

Based on the records examined by us,

during the year an amount of '' 0.50 crore has been written off towards bad debts. This is in line with the Company’s accounting policy on provision for bad and doubtful debts and write off of the same.

3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities

Based on the audit procedures performed by us and as per the information and explanations given to us, proper records are maintained for inventories lying with third parties and are confirmed on the basis of warehousing certificates and confirmations.

Based on the records examined by us, during the year, the Company has not received any assets as gift from Government or other authorities.

B. Sub-directions

1. State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

To the best of our knowledge and belief and according to the information and explanations given to us, instances of encroachment of land have been observed at Trombay unit which are as under:-

i. Approx. 5 acres of land which is in the name of RCF has been encroached since the time of FCI. The value of the land cannot be determined exactly. RCF has approached the agencies like MMRDA for development of this land.

ii. Approx. 15 Acres is under slum/encroached since 1980.Slums from other pockets were shifted on this land and is without clear title in favour of RCF. The matter is taken up with appropriate authorities for obtaining clear title in favour of RCF.

Both the matters are pending in Mumbai High Court for resolution. As explained to us, other than the above there are no cases of encroachment of land at other locations.

2. (i) Whether subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted.

Based on the audit procedures performed by us and as per the information and explanations given to us, subsidy received/ recoverable from Government of India has been properly accounted for as per claims admitted. In addition to the same, for the rates yet to be notified due to escalations/ de-escalations in the cost of inputs and other costs, subsidy has been accounted on estimated basis which is in line with its stated accounting policy of revenue recognition given in notes to the standalone Ind AS financial statements for the year 2017-18.

(ii) Whether subsidy received during the year has been reconciled with subsidy disbursed by the Government of India.

Subsidy received during the year amounting to '' 3879.22 Crore is in agreement with the amount disbursed by the Government of India.

3. Whether the Transferable Development Rights (TDR) from Maharashtra Government properly valued and accounted for during 2017-18.

Company has received Development Right Certificate (TDR Credit) on 01.11.2017 from

MCGM for 16530 Sq. Mtrs which was initially recognized at Fair Value for of '' 63.04 crores.

In accordance with Development Control Regulation of Greater Mumbai, 1991, Company has also recognized additional TDR credit, being 20% bonus on the unencumbered land surrendered amounting to '' 6.30 crore as recommended by MMRDA.

For remaining 40,585 sq. mtrs of encumbered land, the Company has recognised additional TDR credit receivable amounting to '' 38.60 Crores in accordance with Regulation 34 of Development Control Regulation of Greater Mumbai, 1991 as recommended by MMRDA.

Particulars	Area (Sq. Mtr.)	TDR Rate	TDR Received (Sq. Mtr.)	TDR Accrued (Sq. Mtr.)	TDR Values '' Crore
Unencumbered Land	8,265	2 times 20% Bonus	16,530	1,653	69.34
Encumbered Land	40,585	0.25 times		10,146	38.60
	48,850		16,530	11,799	107.94

Referred to in Para 3 (f) ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditor’s Report to the members of the Company on the standalone Ind AS financial statements for the year ended March 31, 2018.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED (“the Company”) as of March 31, 2018 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Ind AS financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Ind AS financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the Ind AS financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2018, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India”

For KALYANIWALLA & MISTRY LLP For CHHAJED & DOSHI

Chartered Accountants Chartered Accountants

Firm Regn. No. 104607W / W100166 Firm Regn. No 101794W

Sai Venkata Ramana Damarla Nitesh Jain

Partner Partner

Membership. No. 107017 Membership. No. 136169

Place: Mumbai

Dated: May 28, 2018

---

Mar 31, 2017

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of Rashtriya Chemicals and Fertilizers Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2017, and the Statement of Profit and Loss (including Other Comprehensive Income), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Ind AS Financial Statements

The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone Ind AS financial statements that give a true and fair view of the state of affairs (financial position), profit or loss (financial performance including other comprehensive income), cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) prescribed under section 133 of the Act.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit of the standalone Ind AS financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone Ind AS financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone Ind AS financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone Ind AS 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 including the Ind AS, of the state of affairs (financial position) of the Company as at March 31, 2017, and its profit (financial performance, including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

Emphasis of Matters

a) Note No 46 (b): The matter relating to unintended benefits accruing to units using domestic gas for manufacture of nutrient “N” has been referred to and is pending before an Inter-Ministerial Committee (IMC) of Government of India (GoI). An amount of Rs.198.94 Crore has been withheld as at March 31, 2017 (Rs.198.94 Crore as at March 31, 2016) by Department of Fertilizers (DoF) towards the same matter.

Pending final decision on the said matter and in the Company view that no unintended benefits have accrued, it has continued to recognize subsidy income on P&K fertilizers at the rates notified by DoF.

b) Note No 47: As per notification no L-120223/2015-GP-II dated May 20, 2015 of Ministry of Petroleum & Natural Gas (MoPNG), gas pooling has become applicable from June 1, 2015 onwards for all Urea manufacturing units. Under this mechanism, Gas for urea production will be made available at a uniform price of pooled gas for production of urea. Consequently, it is expected that a differential pricing of gas may be made applicable for nonurea usage also. Company has represented to DoF for maintaining supply of domestic gas for P&K fertilizers and chemicals.

MoPNG vide its letter no. L-13013/3/2012-GP-I, dated: December 16, 2015 has directed GAIL (India) Limited (GAIL) to levy a higher gas price (i.e. the highest rate of RLNG used for production of urea) for use of gas in non-urea operations. Company has represented that any decision on the same be taken only upon the issue being settled by the IMC of GoI. Effective from May 16, 2016 Company has entered into a contract for procurement of Market Priced Gas for non-urea operations at Trombay unit. However, pending finalization of price payable as per the said letter of MoPNG, a liability of Rs.210.63 Crore as on March 31, 2017 C181.97 Crore as on March 31, 2016) has been recognized based on the pooled price of gas / Market price of gas, also for its non-urea operation as applicable.

In pursuant to said order GAIL has sought a differential levy amounting to Rs.1244.80 Crore for the period commencing from July 1, 2006 till March 31, 2016 and has initiated arbitration proceeding towards non-payment of the same. The Company has represented this matter to Department of Fertilizers for dispute resolution as the matter relating to the same is pending before the IMC of GoI.

Our opinion is not modified in respect of these matters. Other Matter

The comparative financial information of the Company for the year ended March 31, 2016 and the transition date opening balance sheet as at April 1, 2015 included in these standalone Ind AS financial statements, are based on the previously issued statutory financial statements prepared in accordance with the Companies (Accounting Standards) Rules, 2006 audited by the predecessor auditor whose report for the year ended March 31, 2016 and March 31, 2015 dated May 26, 2016 and May 21, 2015 respectively expressed an unmodified opinion on those standalone financial statements, as adjusted for the differences in the accounting principles adopted by the Company on transition to the Ind AS, which we have been audited by us on which we have issued separate auditor’s reports, to the Board of Directors dated May 5, 2017.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure A” a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in “Annexure B” the directions and sub-directions issued by the Comptroller and Auditor General of India, the action taken thereon and its impact on the accounts and financial statements of the Company.

3. As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards prescribed under section 133 of the Act.

e) On the basis of the written representations received from the Directors as on 31^st March, 2017 taken on record by the Board of Directors, none of the Directors are disqualified as at March 31, 2017 from being appointed as a director in terms of Section 164(2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure C”.

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements -Refer Note 40 to the standalone Ind AS financial statements

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts.

iii. There is no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

iv. The Company has provided requisite disclosures in the financial statements as to holdings as well as dealings in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016. Based on audit procedures and relying on the management representation we report that the disclosures are in accordance with books of account maintained by the Company and as produced to us by the Management - Refer Note 72 to the financial statements.

ANNEXURE A TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in Para 1 ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditors’ Report to the members of the Company on the standalone financial statements for the year ended March 31, 2017.

Statement on Matters specified in paragraphs 3 & 4 of the Companies (Auditor’s Report) Order, 2016:

i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As explained to us, the Plant & Machinery have been physical verified by the management at reasonable intervals during the year and all other fixed assets have been physical verified by the management with the help of an independent outside agency. The discrepancies reported on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of examination of the records of the company, the title deeds of immovable properties are held in the name of the Company except:

Sr. No.	Total No. of Cases	Type of Assets	Gross Block as at March 31, 2017 (Rs. Crore)	Net Block as at March 31, 2017 (Rs. Crore)	Remarks
1	2	Free Hold Land - Thal (1848933 Sq. Mtr. of land)	1.62	1.62	The Company is in the process of transferring the title deeds.
2	1	Free Hold Land- Trombay (378321 Sq. Mtr. of land)	0.24	0.24	The Company is in the process of transferring the title deeds.

ii. In our opinion and according to the information and explanations given to us, physical verification of finished goods, packing materials and raw materials inside the factory premises has been carried out by the management at reasonable intervals and stock of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively. The discrepancies reported on such verification were not material and have been properly dealt with in the books of account.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Therefore, the provisions of sub-clause (a), (b) and (c) of paragraph 3(iii) of the Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, the Company has not advanced any loans or made any investments or provided any guarantees or security to the parties covered under section 185 of the Act. The Company has given loans, made investments in the securities of other body corporate and given guarantees within the limit specified by section 186 of the Act and details of such transactions have been disclosed in the standalone financial statements.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted any Deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Rules framed there under are not applicable.

vi. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

vii. (a) According to the information and explanations given to us and the records examined by us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other material statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of outstanding statutory dues in respect of above as on the last day of the financial year for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records examined by us, there are no material dues of Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise and Value added tax outstanding on account of any dispute except:

Sr. No.	Name of the Statute	Nature of Dues	Amount (Rs.in Crore)	Period to which the amount relates	Forum where dispute is pending
1	Customs Act, 1962	Demand of Customs duty and penalty (Trombay Unit)	25.62	2004-05	Central Excise, Service Tax Appellate Tribunal
2	Customs Act, 1962	Demand of Differential Customs Duty on import of Urea, MOP & DAP (Marketing)	80.77	2009-10	Assistant Commissioner of Customs, Dharamtar,Alibaug
3	Customs Act, 1962	Demand of Differential customs duty on import of Potash (Marketing)	0.16	2012-13	Commissioner of Customs, Mangalore
4	Income Tax Act, 1961	Disallowance of additional depreciation claimed	5.08	A.Y 2010-11	Income Tax Appellate Tribunal
5	Income Tax Act, 1961	Disallowance of additional depreciation claimed	6.40	A.Y2011-12	Income Tax Appellate Tribunal
6	Income Tax Act, 1961	Disallowance of additional depreciation claimed	6.55	A.Y 2014-15	Commissioner of Income Tax (Appeals)
7	Income Tax Act, 1961	Disallowance of additional depreciation claimed & other additions erroneously done	0.31	A.Y2013-14	Income Tax Appellate Tribunal
8	Income Tax Act, 1961	Demand of Tax for Short Deduction / non deduction of TDS	2.73	A.Y 2008-09 to 2017-18	Commissioner of Income Tax (Appeals)
9	Sales Tax, Maharashtra	Disallowance / errors in calculation of set off etc., in the Assessment Order Passed	18.24	2006-07	Joint Commissioner of Sales Tax (Appeals)
			3.01	2008-09
			6.58	2009-10
			2.77	2010-11
			1.23	2011-12
			6.43	2012-13

10	Central Excise Act, 1944	Demand of Central Excise duty, Interest & Penalty in respect of Naphtha procured at concessional rates used for products which are not	2.67	1996-2001	Supreme Court
			1.77	March 2005 to October 2005	Central Excise Tax Appellate Tribunal
		exempted (Thal Unit)	18.61	November 1996 to February 2005 (Interest)	Supreme Court
		Demand of Excise Duty on account of Diversion of urea for industrial usages (Thal Unit)	4.11	2015-16	Commissioner of Central Excise
11	Central Excise Act, 1944	Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products and molten Sulphur and captive consumption of ammonia (Trombay Unit)	3.03	September 1989 to December 2015	Commissioner of Central Excise (Appeals)
		Rapid Wall Plaster cleared with Nil Rate of duty	2.83	July 2010 to March 2016	Dy. Commissioner / Commissioner of Central Excise (Appeals)
		Wrong availment of CENVAT Credit on Angles, Channels, TMT Bars. Etc. (Trombay Unit)	0.10	April 2007 to August 2011	Dy. Commissioner Central Excise (Appeals)
		Demand of Excise Duty on account of Diversion of urea for industrial usages (Trombay Unit)	0.72	2015-16	Commissioner of Central Excise
12	Service Tax	Demand of Service Tax on supply of wagons to Central Railway (Thal Unit)	1.89	April 2008 to December 2015	Commissioner of Central Excise, Customs & Service Tax
13	Service Tax	Demand of Service Tax on fees received for Operations and maintenance of HWP (Thal Unit)	10.61	October, 2006 to December 2015	Additional Commissioner, Central Excise & Service Tax Mumbai
14	Service Tax	Penalty on account of nondeduction of Service Tax on gross assessable value (Thal Unit)	0.20	October, 2011 to March, 2012	Additional Commissioner, Central Excise & Service Tax Mumbai
15	Service Tax	Wrong availment of Cenvat Credit on Imported goods (Thal Unit)	0.09	March, 2012 to September, 2013	Additional Commissioner, Central Excise & Service Tax Mumbai

16	Service Tax	Wrong availment of Cenvat credit in respect of input service used in the manufacture of exempted goods (Thal Unit)	8.37	FY 2011-12 to 2014-15	Commissioner, Central Excise & Service Tax Mumbai
17	Service Tax	Service Tax on rent on BTAL Wagons (Mktg. Unit)	0.14	2008-09 to June 2011	Additional Commissioner, Central Excise & Service Tax, Mumbai
18	Service Tax	Demand of Service Tax on Handling by Transporter Service (Mktg. Unit)	0.01	2006-07 & 2007-08	Superintendent (S.T Special Cell), Aurangabad

viii. According to information and explanation given to us and based on examination of the records, the Company has not defaulted in repayment of loans or borrowings to bank. The Company does not have any dues to financial institution, government or debenture holders.

ix. The Company has not raised money through initial public offer or further public offer (including debt instruments). In our opinion and according to the information and explanations given to us and based on the documents and records examined by us on an overall basis, the term loans obtained by the Company were applied for the purpose for which the loans were obtained.

x. During the course of our examination of the books of account and records of the Company, and according to the information and explanation given to us and representations made by the Management, no material fraud by or on the Company by its officers or employees, has been noticed or reported during the year.

xi. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanation given to us, the Company is not a Nidhi Company. Accordingly, provisions of paragraph 3(xii) of the Order are not applicable.

xiii. According to the information and explanation given to us and based on our examination of the records of the Company, transactions with related parties are in compliance with sections 177 and 188 of the Act, where applicable, and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with the directors or persons connected with him. Hence the provisions of Section 192 of the Act are not applicable.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934, hence the provisions of paragraph 3 (xvi) of the Order are not applicable.

ANNEXURE B TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in Para 2 ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditor’s Report to the members of the Company on the standalone financial statements for the year ended 31^st March, 2017.

Report on the Directions and Sub-directions issued by the Comptroller and Auditor General of India, the action taken thereon and its impact on the accounts and financial statement of the Company under Section 143(5) of the Act:

A. Directions

1. Whether Company has clear title / lease deeds for freehold and leasehold land respectivelyRs. If not, please state the area of freehold and leasehold land for which title/lease deeds are not available.

Based on the audit procedures performed by us and as per the information and explanations given to us, the details of freehold land and title deeds available/not available with the company are as under:-

A) Information of Freehold Land

i. TROMBAY

Location	Particulars	Total Area (in Sq. Mt.)	Area in the name of RCF (in Sq. Mt.)	Remarks
RCF Trombay	Freehold Land	30,89,013	27,10,692	As informed to us, matter is being taken up with concerned authorities for reconciliation of area

ii. THAL

Location	Particulars	Total Area (in Sq. feet/ Sq meter/ Acre/hectares	Area in the name of RCF (in Sq. feet/ Sq meter/ Acre/hectares)	Remarks*
RCF Factory & Roads	Freehold Land	313-52.12 hectares	241-49.52 hectares	As per 7/12 extract the area in the name of the Company is 253-73.70 Hectares.
Township Kihim	Freehold Land	7-10.10 hectares	-	The land is in possession of RCF. As informed, Transfer of title deeds is in process.
Township - Kurul - Veshvi -Chendhare	Freehold Land	83-23.71 hectares	78-85.91 hectares	Balance 4-37.8 Hectares of land, is not in name of RCF. As informed, steps are being taken for the transfer of title deeds.
Railway Land	Freehold Land	101-38.83 Hectares	-	As informed, request letter has been sent to concerned authorities for providing 7/12 extract for the said area.
Total Thal Freehold Land		505-24.76 Hectares	320-35.43 Hectares

* The matter is being taken up with the concerned authorities for reconciliation of area.

iii. MARKETING/AREA OFFICES/CORPORATE

Location	Particulars	Area (in Sq. feet/ Sq meter/ Acre	Whether company has clear title deed to the land
AHMEDNAGAR Survey No.20 ,II Lines, Karachi wala Nagar, Near Mahesh Talkies Ahmednagar, Maharashtra-414001.	Freehold Land	840 Sq meters	YES
LUCKNOW TC/10 V ,Vibutikhand Gomtinagar, Lucknow, U.P.	Freehold Land	1000 Sq meters	YES
DELHI OFFICE H-9 Green Park Extension New Delhi -110016	Freehold Land	387.06 Sq meters	YES

B) Information on Leasehold land

The leased deeds and other details of leased hold land are separately available with the Company. As regards disclosure of the same in the books of accounts / financial statements of the Company under IND-AS, the carrying value of the same amounts to Rs.2.90 Crore, which has been reported as leased premium prepaid under Note no.8 & Note no. 15 to the consolidated Ind AS financial statements respectively.

2. Please report whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons there for and the amount involved

Based on the records examined by us, during the year an amount of Rs.0.93 crore has been written off towards bad debts. This is in line with the Company’s accounting policy on provision for bad and doubtful debts and write off of the same.

3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities

Based on the audit procedures performed by us and as per the information and explanations given to us, proper records are maintained for inventories lying with third parties and are confirmed on the basis of warehousing certificates and confirmations.

Based on the records examined by us, during the year, the Company has not received any assets as gift from Government or other authorities.

B. Sub-directions

1. State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

To the best of our knowledge and belief and according to the information and explanations given to us, instances of encroachment of land have been observed at Trombay unit which are as under:-

i. Approx. 5 acres of land which is in the name of RCF has been encroached since the time of FCI. The value of the land cannot be determined exactly. RCF has approached the agencies like MMRDA for development of this land.

ii. Approx. 15 Acres is under slum/encroached since 1980.Slums from other pockets were shifted on this land and is without clear title in favour of RCF. The matter is taken up with appropriate authorities for obtaining clear title in favour of RCF.

Both the matters are pending in Mumbai High Court for resolution. As explained to us, other than the above there are no cases of encroachment of land at other locations.

2. Whether subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted.

Based on the audit procedures performed by us and as per the information and explanations given to us, subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted. In addition to the same, for the rates yet to be notified due to escalations/de-escalations in the cost of inputs and other costs, subsidy has been accounted on estimated basis which is in line with its stated accounting policy of revenue recognition given in notes to the standalone financial statements for the year 2016-17.

3. Whether subsidy received during the year has been reconciled with subsidy disbursed by the Government of India.

Subsidy received during the year amounting to ‘. 4633.34 crore is in agreement with the amount disbursed by the Government of India.

4. Independent verification may be made, of information/inputs furnished to Actuary, viz. number of employees, average salary, retirement age etc. and assumptions made by the Actuary regarding the discount rate, future cost increase, mortality rate, etc. for arriving at the provision for liability of retirement benefits, viz. gratuity, leave encashment, post-retirement medical benefit etc.

Based on the audit procedures performed on test check basis for the purpose of verification of information/inputs furnished by the company to Actuary, viz. number of employees, average salary, retirement age etc. and no material discrepancies were noticed.

Following are the assumptions used by the Actuary:-

Sr No.	Particulars	Rate
1	Discount Rate	7.12%
2	Attrition Rate	2.00%
3	Salary Escalation Rate	8.00%
4	Mortality Rate	IALM (2006-08) Ultimate

Assumptions made by Actuary regarding Salary Escalation Rate & Attrition Rate is as advised by the Company. Based on the audit procedure performed on test check basis on the data given by the management and according to information and explanation given by the management, the said assumptions appear to be reasonable.

For KALYANIWALLA & MISTRY LLP For CHHAJED & DOSHI

Chartered Accountants Chartered Accountants

Firm Regn. No. 104607W / W100166 Firm Regn. No 101794W

Sai Venkata Ramana Damarla Nitesh Jain

Partner Partner

Membership. No. 107017 Membership. No. 136169

Place: Mumbai

Dated: May 19, 2017

---

Mar 31, 2016

TO THE MEMBERS OF RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED.

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED (“the Company”), which comprises the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone 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 specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provision of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditor’s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s 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 financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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, of the state of affairs of the Company as at March 31, 2016, and its profit and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matters in the notes to the standalone financial statements:

a) Note No. 33, Consequent to Gas pooling being made applicable to Fertilizer (Urea) sector w.e.f. June 1, 2015, it is expected that a differential pricing of gas may be made applicable for non-Urea usage. Company has represented to Department of Fertilizer (DoF) for maintaining supply of domestic gas for P&K fertilizers and chemicals. Ministry of Petroleum & Natural Gas (MoPNG) vide its order No. L- 13013/3/2012-GP-I, dated: December 16, 2015 has directed GAIL (India) Limited to levy a higher gas price (i.e. the highest rate of Re-gasified Liquefied Natural Gas (RLNG) used for production of urea) for gas consumed in non-urea operations. As the matter relating to the same is pending before the Inter

Ministerial Committee (IMC) of Government of India for decision, Company has represented that any decision on the same be taken only upon the issue being settled by the IMC. However, pending finalization of price payable as per the said order, Company has recognized a liability of '' 181.97 crore for the year ended March 31, 2016 based on the pooled price of gas for its non-urea operations.

b) Note No. 34, Company expects the compensation towards recognition of increase in cost of gas on account of Petroleum & Natural Gas Regulatory Board order in urea subsidy for the periods relating to 2008-09 to 2010-11 to be notified by Government of India. Accordingly it has not provided for an amount of Rs, 16.22 crore recognized as subsidy receivable towards the same which is outstanding for a period more than three years.

c) Note No. 10.4, regarding the non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

d) Note No. 32, regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

Our report is not modified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A”, a statement on the matters specified in the paragraph 3 and 4 of the Order.

2. As required by Section 143 (5) of the Act, we give in “Annexure B” the directions and sub directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statement of the Company.

3. Non- Compliance of the Act:

a. The Board of Directors comprises seven directors, consisting of four Executive Directors (Including the Chairman cum Managing Directors); two Nominee Directors and one Independent Director. Section 149 of the Act requires that there should be at least one woman Director and one third of the total number of directors should be independent directors. The Company does not have a woman Director and has only one Independent Director

b. The Audit Committee comprises three directors, consisting of one Executive Director, one Independent Director and one Nominee Director. Section 177 of the Act requires that majority of directors of Audit Committee should be independent. The Company does not have the required number of independent directors on its Audit Committee.

c. The Nomination and Remuneration Committee comprises three Directors of which two are Nominee Directors and One Independent Director. Section 178 of the Act required that Independent Directors should be at least half of the total strength of Nomination and Remuneration Committee. The Company does not have the required number of Independent Directors on its Nomination and Remuneration Committee.

d. As per the Schedule IV (Code for Independent Directors) pursuant to Section 149(8) of the Act, a separate meeting of Independent Director should be held to review the performance of NonIndependent, Chairperson and Board as a whole. A separate meeting of Independent Directors has not been held during the period under review.

4. As required by Section 143 (3) of the Act, we

report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

e) On the basis of the written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure C”; and

g) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 25 to the standalone financial statements.

ii. The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contract including derivative contracts.

iii. There is no delay, during the year, in transferring the amount required to be remitted to the Investor Education and Protection Fund by the Company.

Referred to in Para 1 ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditors’ Report to the members of the Company on the standalone financial statements for the year ended March 31, 2016.

Statement on Matters specified in paragraphs 3 & 4 of the Companies (Auditor’s Report) Order, 2016:

i. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As explained to us, the Plant & Machinery have been physical verified by the management at reasonable intervals during the year and all other fixed assets have been physical verified by the management with the help of an independent outside agency. The discrepancies reported on such verification were not material and have been properly dealt with in the books of account.

(c) According to the information and explanations given to us and on the basis of examination of the records of the company, the title deeds of immovable properties are held in the name of the Company except:

Sr. No.	Total No. of Cases	Type of Assets	Gross Block as at March 31, 2016 (Rs, Crore)	Net Block as at March 31, 2016 (Rs, Crore)	Remarks
1	2	Free Hold Land-Thal (1848933 Sq. Mtr. of land)	1.62	1.62	The Company is in the process of transferring the title deeds.
2	1	Free Hold Land- Trombay (378321 Sq. Mtr. of land)	0.24	0.24	The Company is in the process of transferring the title deeds.

ii. In our opinion and according to the information and explanations given to us, physical verification of finished goods, packing materials and raw materials inside the factory premises has been carried out by the management at reasonable intervals and stock of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively. No material discrepancies were noticed on physical verification and the same have been properly dealt with in the books of account.

iii. The Company has not granted any loans, secured or unsecured, to companies, firms, limited liability partnerships or other parties covered in the register maintained under section 189 of the Act. Therefore, the provisions of sub-clause (a), (b) and (c) of paragraph 3(iii) of the Order are not applicable.

iv. In our opinion and according to the information and explanations given to us, the Company has not advanced any loans or made any investments or provided any guarantees or security to the parties covered under section 185 of the Act. The Company has given loans, made investments in the securities of other body corporate and given guarantee within the limit specified by section 186 of the Act and details of such transactions have been disclosed in the standalone financial statements.

v. In our opinion and according to the information and explanations given to us, the Company has not accepted any Deposits from the public and hence the directives issued by the Reserve Bank of India and the provisions of Sections 73 to 76 or any other relevant provisions of the Act and the Rules framed there under are not applicable.

vi. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

vii. (a) According to the information and

explanations given to us and the records examined by us, the Company is generally regular in depositing undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other material statutory dues with the appropriate authorities. According to the information and explanations given to us, there are no arrears of outstanding statutory dues in respect of above as on the last day of the financial year for a period of more than six months from the date they became payable.

(b) According to the information and explanation given to us and the records examined by us, there are no material dues of Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise and Value added tax outstanding on account of any dispute except:

(Rs, Crore)

Sr. No.	Name of the Statute	Nature of Dues	Amount (Rs,Crore)	Period to which the amount relates	Forum where dispute is pending
1	Customs Act, 1962	Demand of Customs duty and penalty (Trombay Unit)	16.35	2004-05	Central Excise, Service Tax Appellate Tribunal
2	Customs Act, 1962	Demand of Differential Customs Duty on import of Urea, MOP & DAP (Marketing)	80.77	2009-10	Assistant Commissioner of Customs, Dharamtar Alibaug
3	Customs Act, 1962	Demand of Differential customs duty on import of Potash (Marketing)	0.16	2012-13	Commissioner of Customs, Mangalore
4	Income Tax Act, 1961	Disallowance of additional depreciation claimed	0.53	A.Y 2009-10	Income Tax Appellate Tribunal
5	Income Tax Act, 1961	Disallowance of provision towards wage revision	4.85	A.Y 2007-08	Income Tax Appellate Tribunal
6	Income Tax Act, 1961	Disallowance of additional depreciation claimed	5.08	A.Y 2010-11	Income Tax Appellate Tribunal
7	Income Tax Act, 1961	Demand of Tax for Short Deduction / non deduction of TDS	0.21	A.Y 2009-10 to 2010-11	Commissioner of Income Tax (Appeals)
8	Sales Tax, Maharashtra	Disallowance / errors in calculation of set off etc., in the Assessment Order Passed	6.58	A.Y 2009-10	Joint Commissioner of Sales Tax (Appeals)
			18.24	A.Y 2006-07
9	Central Excise Act, 1944	Demand of Central Excise duty, Interest & Penalty in respect of Naphtha procured at concessional rats used for products which are not exempted (Thal Unit)	2.67	1996-2001	Supreme Court
			3.54	March 2005 to October 2005	Central Excise Tax Appellate Tribunal
			18.61	November 1996 to February 2005 (Interest)	Supreme Court
10	Central Excise Act, 1944	Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)	3.66	Prior to 1997 to March 2006	Commissioner, Central Excise, Service Tax Appellate Tribunal
		Demand of Central Excise duty in respect of Low Sulphur High Stock / Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)	2.92	August 1986 to February 2000	Commissioner of Central Excise (Appeals)
		Demand of Central Excise Duty in respect of Methanol Consumed in ETP (Trombay Unit)	1.45	2001 - 2006	Central Excise, Service Tax Appellate Tribunal.

11	Service Tax	Demand of Service Tax on supply of wagons to Central Railway	1.54	April 2008 to December 2011	Commissioner of Central Excise, Customs & Service Tax
			0.18	January 2012 to December 2014	Assistant Commissioner, Central Excise, Customs & Service Tax Appellate Tribunal .
12	Service Tax	Demand of Service Tax on Handling by Transporter Service	0.01	2006-07 & 2007-08	Superintendent (S.T Special Cell), Aurangabad
13	Service Tax	Demand of Service Tax on fees received for operations and maintenance of HWP (Thal Unit)	8.01	October, 2006 to December 2014	Additional Commissioner, Central Excise & Service Tax Mumbai
14	Service Tax	Service Tax on rent on BTAL Wagons	0.14	2008-09 to June 2011	Additional Commissioner, Central Excise & Service Tax, Mumbai
15	Service Tax	Deputation of officials to Joint Venture	0.08	2008-09 to 2013 14	Additional Commissioner, Central Excise & Service Tax, Mumbai

viii. According to information and explanation given to us and based on examination of the records, the Company has not defaulted in repayment of loans or borrowings to bank. The Company does not have any dues to financial institution, government or debenture holders.

ix. The Company has not raised money through initial public offer or further public offer (including debt instruments). In our opinion and according to the information and explanations given to us and based on the documents and records examined by us on an overall basis, the term loans obtained by the Company were applied for the purpose for which the loans were obtained.

x. During the course of our examination of the books of account and records of the Company, and according to the information and explanation given to us and representations made by the Management, no material fraud by or on the Company by its officers or employees, has been noticed or reported during the year.

xi. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act.

xii. In our opinion and according to the information and explanation given to us, the Company is not a Nidhi Company. Accordingly, provisions of paragraph 3(xii) of the Order are not applicable.

xiii. According to the information and explanation given to us and based on our examination of the records of the Company, transactions with related parties are in compliance with sections 177 and 188 of the Act, where applicable, and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

xiv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year.

xv. According to the information and explanation given to us and based on our examination of the records of the Company, the Company has not entered into non- cash transactions with the directors or persons connected with him. Hence the provisions of Section 192 of the Act are not applicable.

xvi. The Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934, hence the provisions of paragraph 3 (xvi) of the Order are not applicable.

Referred to in Para 2 ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditor’s Report to the members of the Company on the standalone financial statements for the year ended 31^st March, 2016.

Report on the Directions and Sub-directions issued by the Comptroller and Auditors General of India, the action taken thereon and its impact on the accounts and financial statement of the Company under Section 143(5) of the Act:

A. Directions

1. Whether Company has clear title / lease deeds for freehold and leasehold land respectively? If not, please state the area of freehold and leasehold land for which title/lease deeds are not available.

Based on the audit procedures performed by us and as per the information and explanations given to us, the details of freehold land and title deeds available/not available with the company are as under:-

A) Information of Freehold Land

i. TROMBAY

Location	Particulars	Total Area (in Sq. Mt.)	Area in the name of RCF (in Sq. Mt.)	Remarks
RCF -Trombay	Freehold Land	30,97,278	27,18,957	As informed to us, matter is being taken up with concerned authorities for reconciliation of area

ii. THAL

Location	Particulars	Total Area (in Sq. feet/ Sq meter/ Acre/ hectares	Area in the name of RCF (in Sq. feet/ Sq meter/ Acre/hectares)	Remarks*
RCF Factory & Roads	Freehold Land	313-52.12 Hectares	241-49.52 Hectares	As per 7/12 extract the area in the name of the Company is 253-73.70 Hectares.
Township Kihim	Freehold Land	7-10.10 hectares		The land is in possession of RCF. As informed, Transfer of title deeds is in process.
Township -Kurul - Veshvi - Chendhare	Freehold Land	83-23.71 Hectares	78-85.91 Hectares	Balance 4-37.8 Hectares of land, is not in name of RCF. As informed, steps are being taken for the transfer of title deeds.
Railway Land	Freehold Land	101-38.83 Hectares		As informed, request letter has been sent to concerned authorities for providing 7/12 extract for the said area.
Total Thal Freehold Land		505-24.76 Hectares	320-35.43 Hectares

* The matter is being taken up with the concerned authorities for reconciliation of area.

Location	Particulars	Area (in Sq. feet/ Sq meter/ Acre	Whether company has clear title deed to the land
AHMEDNAGAR Survey No.20 ,II Lines, Karachi wala Nagar, Near Mahesh Talkies Ahmednagar, Maharashtra-414001.	Freehold Land	840 Sq meters	YES
LUCKNOW TC/10 V ,Vibutikhand Gomtinagar, Lucknow, U.P.	Freehold Land	1000 Sq meters	YES
DELHI OFFICE H-9 Green Park Extension New Delhi -110016	Freehold Land	387.06 Sq meters	YES

B) Information on Leasehold land

iii. MARKETING/AREA OFFICES/CORPORATE

Details of Leased land are separately available with the Company and are separately disclosed in the asset register.

(Rs, Crore)

Gross Block as on 01.4.2015	Additions	Deletions	Gross Block as on 31.3.2016	Accumulated Depreciation (Net of deletions) As on 31.03.2016	Carrying Amount As on 31.3.016
5.14	-	-	5.14	1.42	3.72

2. Please report whether there are any cases of waiver/ write off of debts/loans interest etc., if yes, the reasons there for and the amount involved Based on the records examined by us, during the year an amount of Rs,0.06 crore has been written off towards bad debts. This is in line with the Company’s accounting policy on provision for bad and doubtful debts and write off of the same.

3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities

Based on the audit procedures performed by us and as per the information and explanations given to us, proper records are maintained for inventories lying with third parties and are confirmed on the basis of warehousing certificates and confirmations.

Based on the records examined by us, during the year, the Company has not received any assets as gift from Government or other authorities.

B. Sub-directions

1. State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

To the best of our knowledge and belief and according to the information and explanations given to us, instances of encroachment of land have been observed at Trombay unit which are as under:-

i. Approx. 5 acres of land which is in the name of RCF has been encroached since the time of FCI. The value of the land cannot be determined exactly. RCF has approached the agencies like MMRDA for development of this land.

ii. Approx. 15Acres is under slum/encroached since 1980.Slums from other pockets were shifted on this land and is without clear title in favor of RCF. The matter is taken up with appropriate authorities for obtaining clear title in favor of RCF.

Both the matters are pending in Mumbai High Court for resolution. As explained to us, other than the above there are no cases of encroachment of land at other locations.

2. Whether subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted.

Based on the audit procedures performed by us and as per the information and explanations given to us, subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted. In addition to the same, for the rates yet to be notified due to escalations/ de-escalations in the cost of inputs and other costs, subsidy has been accounted on estimated basis which is in line with its stated accounting policy of revenue recognition given in Note no.32 to the standalone financial statements for the year 201516.

3. Whether subsidy received during the year has been reconciled with subsidy disbursed by the Government of India.

Subsidy received during the year amounting to Rs, 3788.01 crore is in agreement with the amount disbursed by the Government of India.

4. (i) Whether amount of (a) bank balance (b)

trade receivable (c) trade payables (d) loans and advances for which third party confirmation was not made available has been reported.

(ii) Where such balance has been confirmed by respective parties, whether it varies widely from the amounts reflected under respective heads in the financial.

The balance confirmation letters were available in case of the balances with the banks and bank loans and the same are reconciled.

In respect of Trade Receivables, as informed to us, during the year 2015-16, the statement of balances was taken from SAP system and sent to the parties for confirmation and about 80.45 % confirmation of balances from debtors has been received and no material differences were noticed.

As regards balance confirmation relating to trade payables despite the Company sending balance confirmation letters, receipt of confirmation of balances is very insignificant despite repeated follow-up. To facilitate reconciliation and review of balances by customers and vendors on a periodic basis, Company has also installed Customer and Vendor Portal in its website which would enable them to view their account online. Further disclosure of amounts in dispute with vendors is included under claims not acknowledged as debts in the notes forming part of financial statements.

Balances of subsidy claim receivables and tax refunds from Government authorities are subject to confirmation which has also been disclosed in note no. 31 of financial statements.

5. Independent verification may be made, of information/inputs furnished to Actuary, viz. number of employees, average salary, retirement age etc. and assumptions made by the Actuary regarding the discount rate, future cost increase, mortality rate, etc. for arriving at the provision for liability of retirement benefits, viz. gratuity, leave encashment, post-retirement medical benefit etc.

Based on the audit procedures performed on test check basis for the purpose of verification of information/inputs furnished by the company to Actuary, viz. number of employees, average salary, retirement age etc. and no material discrepancies were noticed.

Following are the assumptions used by the Actuary:-

Sr No.	Particulars	Rate
1	Discount Rate	7.56%
2	Attrition Rate	2.00%
3	Salary Escalation Rate	8.00%
4	Mortality Rate	IALM (2006-08) Ultimate

Assumptions made by Actuary regarding Salary Escalation Rate & Attrition Rate is as advised by the Company. Based on the audit procedure performed on test check basis on the data given by the management and according to information and explanation given by the management, the said assumptions appear to be reasonable.

Referred to in Para 4 (f) ‘Report on Other Legal and Regulatory Requirements’ in our Independent Auditor’s Report to the members of the Company on the standalone financial statements for the year ended March 31, 2016.

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

We have audited the internal financial controls over financial reporting of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED (“the Company”) as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A Company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India”

For NBS & Co For Kalyaniwalla & Mistry

Chartered Accountants Chartered Accountants

Firm Regn. No. 110100W Firm Regn. No. 104607W

Devdas Bhat Sai Venkata Ramana Damarla

Partner Partner

Membership. No. 048094 Membership. No. 107017

Place: Mumbai

Dated: May 26, 2016

---

Mar 31, 2015

We have audited the accompanying standalone financial statements of RASHTRIYA CHEMICALS AND FERTILIZERS LIMITED("the Company"), which comprise the Balance Sheet as at 31st March, 2015, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements.

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these standalone 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 specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. 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.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's 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 financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial control system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone 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, of the state of affairs of the Company as at 31st March, 2015, its profits and its cash flows for the year ended on that date.

Emphasis of Matters

We draw attention to the following matter in the Notes to the financial statements:

a. Note No. 50 in the Financial Statements indicate that the company with effect from 1st April, 2014, has charged depreciation based on the revised remaining useful life of the assets, wherever appropriate, as per the requirements of schedule II of the companies Act, 2013. As a result of these changes, the depreciation charge for the year ended 31st March, 2015 is higher by Rs. 34.57 Crore and the assets and reserves & surplus being lower by the said amount. Further, consequent to Notification GSR 627(E) dated 29th August, 2014 of the Companies Act, 2013, Company has during the year charged off transitional depreciation amounting to Rs. 42.56 Crore to Statement of Profit and Loss.

b. Note No. 10(5) in the Financial Statements regarding non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

c. Note No. 32 in the Financial Statements regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act we give in the annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

As required by Section 143(5) of the Act, we give in the annexure the directions and sub-directions issued by the Comptroller and Auditor-General of India, the action taken thereon and its impact on the accounts and financial statement of the company.

As required by Section 143 (3) of the Act, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 25 to the financial statements;

ii. The Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

iii. There is no delay, during the year, in transferring the amount required to be remitted to Investor Education and Protection Fund.

Annexure to the Independent Auditors' Report

(Referred to in our report of even date to the members of Rashtriya Chemicals and Fertilizers Limited as at and for the year ended 31st March, 2015).

i) In respect of its Fixed Assets:

a) The company has maintained proper records showing full particulars, including quantitative details and situation of Fixed Assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited;

b) As explained to us, the Plant & Machineries have been physically verified by the management at reasonable intervals during the year and all other fixed assets have been physically verified during the year by the management with the help of an independent outside agency. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material;

ii) In respect of its inventories:

a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively;

b) In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business;

c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii) The company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Act. Accordingly the clauses 3(iii) (a) & (b) of the Order are not applicable;

iv) In our opinion and according to information and explanations given to us, there are adequate internal control procedures commensurate with the size of the company and the nature of its business with regard to purchase of inventories, fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in internal control system, in respect of these areas.

v) The Company has not accepted any deposits during the year from public.

vi) We have broadly reviewed the books of account maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 148 (1) of the Act, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

vii) a) In our opinion, the procedure followed as per

Note No. 49 to the Financial Statements in respect of deduction and payment of income tax results into delays in certain cases. The exact delays are not ascertained. Except the above, undisputed statutory dues, including Provident Fund, Employees' State Insurance, Income Tax, Sales- Tax, Wealth Tax, Service Tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with appropriate authorities, where applicable have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March, 2015 for a period of more than six months from the date they became payable.

b) According to the records of the company, the dues of income-tax, sales-tax, wealth-tax, service tax, duty of customs, duty of excise, value added tax and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name Nature of Amount Years to Forum of the, dues (Rs. which where statute in the dispute is Crore) amount pending relates

Customs Demand of 16.35 2004-05 Central Excise, Act 1962 Customs duty Service Tax and penalty Appellate (Trombay Unit) Tribunal

Customs Demand of 80.77 2009-10 Assistant Act, 1962 Differential Commissioner Customs Duty on of Customs, import of Urea, Dharamtar, MOP & DAP Alibaug (Marketing)

Customs Demand of 0.16 2012-13 Commissioner Act, 1962 differential of Customs, custom duty on Mangalore import of Potash (Marketing)

Income Disallowance 0.53 A.Y. Income Tax Tax Act, of additional 2009-10 Appellate 1961 depreciation Tribunal claimed

Income Disallowance 4.85 A.Y. Income Tax Tax Act, of provision 2007-08 Appellate 1961 towards wage Tribunal revision

Income Disallowance 5.08 A.Y. Income Tax Tax Act, of additional 2010-11 Appellate 1961 depreciation Tribunal claimed

Sales Tax, Disallowance/ 6.58 A. Y. Joint Maha- errors in 2009-10 Commissioner rashtra calculation of of Sales Tax set off etc.,in (Appeals) the Assessment 18.24 A.Y Joint Order Passed 2006-07 Commissioner of Sales Tax (Appeals)

Income Demand of 0.21 A. Y. Commissioner Tax Act, Tax for Short 2009-10 to of Income Tax 1961 Deduction/non 2010-11 (Appeals) deduction of TDS

Central Demand of 2.67 1996-2001 Supreme Court Excise Central Excise Act, 1944 duty, Interest & Penalty 3.54 March, Central Excise, in respect 2005 to Service Tax of Naphtha October, Appellate procured at 2005 Tribunal concessional rates used for 18.61 November, Supreme Court products which 1996 to are not exempted February, (Thal Unit) 2005 (Interest)

Central Demand of 19.67 Prior to Central Excise, Excise Central Excise 1997 to Service Tax Act,1944 duty in respect March Appellate of Low Sulphur 2006 Tribunal High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Demand of 2.90 August Commissioner Central Excise 1986 to of Central duty in respect February Excise of Low Sulphur 2000 (Appeals) High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

1.54 April, Commissioner 2008 to of Central December, Excise, 2011 Customs, Demand of &Service Tax Service Tax Service on supply of 0.18 January, Assistant Tax wagons to 2012 to Commissioner , Central Railway December, Central Excise, 2014 Customs & Service Tax Appellate Tribunal

Service Demand of 0.01 2006-07 & Superintendent, Tax Service Tax 2007-08 (S. T. on Handling Special Cell), by Transporter Aurangabad Service

Demand of 8.01 October, Additional Service Tax on 2006 to Commissioner, Service fees received December, Central Excise Tax for Operation & 2014 & Service Tax, maintenance of Mumbai HWP (Thal Unit)

Service Service Tax on 0.14 2008-09 Additional Tax rent on BTAL to June, Commissioner, Wagons 2011 Central Excise & Service Tax, Mumbai

Service Deputation of 0.08 2008-09 to Additional Tax officials to joint 2013-14 Commissioner, Venture Central Excise & Service Tax, Mumbai

Service Renting of 0.31 2008-09 Commissioner Tax immovable of Central property (Office Excise premises) (Appeals)

c) Based on the records examined by us, there is no delay, during the year, in transferring the amount required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companied Act, 1956 (1 of 1956) and rules made thereunder.

viii) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current financial year and in the immediately preceding financial year.

ix) The company has not defaulted in repayment of its dues to banks. The company does not have any borrowings from Financial Institutions or by way of debentures.

x) According to the information and explanations given to us, the company has given a corporate guarantee for loan from Bank taken by its Joint Venture Company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interest of the Company.

xi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

xii) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

Annexure to the Independent Auditors' Report under Section 143(5) of the Act:

(Referred to in our report of even date to the members of Rashtriya Chemicals and Fertilizers Limited as at and for the year ended 31st March, 2015).

A. Directions

1. If the Company has been selected for disinvestment, a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities (including Committed & General Reserves) may be examined including the mode and present stage of disinvestment process

To the best of our knowledge and belief and according to the information and explanations given to us, the Company has not been slated for disinvestment in 2014-15.

2. Please report whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons there for and the amount involved

Based on the records examined by us, during the year an amount of Rs. 1.92 Crore has been written off towards bad debts. This is in line with the Company's accounting policy on provision for bad and doubtful debts and write off of the same.

3. Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt, or other authorities

Based on the audit procedures performed by us and as per the information and explanations given to us, proper records are maintained for inventories lying with third parties and are confirmed on the basis of warehousing certificates and confirmations.

Based on the records examined by us, during the year, the Company has not received any assets as gift from Government or other authorities.

4. A report on age-wise analysis of pending legal/ arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases(foreign and local) may be given.

Based on the audit procedures performed by us and as per the information and explanations given to us, out of total 146 legal cases outstanding as on 31st March, 2015, 141 cases are pending for more than 3 years.

To the best of our knowledge and belief and according to the information and explanations given to us, Services of legal counsels are availed by the Company depending upon the nature of disputes and considering that a favourable outcome would emerge based on the legal stand taken and merits of the case. Appointment of legal counsels is governed Company's Delegation of Power's and thus the monitoring mechanism of expenditure on legal cases is effective.

B. Sub Directions

1. Whether Company has clear title / lease deeds for freehold and leasehold land respectively? If not, please state the area of freehold and leasehold land for which title/lease deeds are not available.

Based on the audit procedures performed by us and as per the information and explanations given to us, the details of freehold land and title deeds available/not available with the company are as under:-

A) Information of Freehold Land

i. TROMBAY Area in Total the name Location Particulars Area(in of RCF Remarks Sq. Mt.) (in Sq. Mt.)

As informed to us, matter is being Freehold taken up Trombay Land 30,97,278 27,04,080 with concerned authorities for reconciliation of area

ii. THAL

Area in Total the name Location Parti Area(in of RCF Remarks* culars Sq. Ft./ (in Sq. Sq meter feet/ sq Acrehect meter/ Ac area) rehect)

RCF Free- 313-52.12 241-49.52 As per 7/12 extract the Factory hold hectares hectares area in the name of the & Roads Land Company is 253-73.70 Hectares.

Township Free- 7-10.10 - The land is in pos- Kihim hold hectares session of RCF. As Land informed, Transfer of title deeds is in process.

Township Free- 83-23.71 78-85.91 Balance 4-37.8 Hect- - Kurul hold hectares hectares ares of land, is not in - Veshvi Land name of RCF. As in- - Chend- formed, steps are being hare taken for the transfer of title deeds.

Railway Free- 101-38.83 - As informed, request Land hold Hectares letter has been sent to Land concerned authorities for providing 7/12 extract for the said area.

Total Thai 505-24.76 320-35.43 Freehold Land Hectares Hectares

* The matter is being taken up with the concerned authorities for reconciliation of area.

iii. MARKETING / AREA OFFICES / CORPORATE

Area Whether Partic- (in Sq. company Location ulars feet/ Sq has clear meter/ title deed Acre to the land

AHMEDNAGAR Survey No.20 II Lines Freehold 840 Sq Karachi wala Nagar, Near Land meters YES Mahesh Talkies Ahmed- nagar, Maharashtra-414001.

LUCKNOW Freehold TC/10 V ,Vibutikhand Land 1000 Sq YES Gomtinagar, Lucknow, U.P. meters

DELHI OFFICE H-9 Green Park Extension Freehold 387.06 Sq YES New Delhi -110016 Land meters

B) Information on Leasehold land

Details of Leased land are separately available with the Company and are separately disclosed in the asset register.

(Rs. in Crore)

Accumulated Gross Gross Depreciation Carrying Block Addi- Dele- Block (Netofdele- Amount as on tions tions as on tions) As on 01.4.2014 31.3.2015 As on 31.3.2015 31.03.2015

14.11 - 8.97 5.14 (3.49-2.24)- 3.89 * 1.25 *

*Deductions / Adjustments includes an amount of Rs. 6.73 Crore (Rs. 8.97 Crore - Rs. 2.24 Crore ) towards leasehold land proposed to be surrendered to Vizag Port Trust authorities in view of non-usage of said allotted land for specific purpose. (Refer Note no. 10to financial statements).

2. State the area of land under encroachment and briefly explain the steps taken by the Company to remove encroachments.

To the best of our knowledge and belief and according to the information and explanations given to us, instances of encroachment of land have been observed at Trombay unit which are as under:-

i. Approx. 5 acres of land which is in the name of RCF has been encroached since the time of FCI. The value of the land cannot be determined exactly. RCF has approached the agencies like MMRDA for development of this land.

ii. Approx. 15 Acres is under slum/encroached since 1980.Slums from other pockets were shifted on this land and is without clear title in favour of RCF. The matter is taken up with appropriate authorities for clear title in favour of RCF.

Both the matters are pending in Mumbai High Court for resolution.

As explained to us, other than the above there are no cases of encroachment of land at other locations.

3. Whether subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted.

Based on the audit procedures performed by us and as per the information and explanations given to us, subsidy received/recoverable from Government of India has been properly accounted for as per claims admitted. In addition to the same, for the rates yet to be notified due to escalations/ de-escalations in the cost of inputs and other costs, subsidy has been accounted on estimated basis which is in line with its stated accounting policy of revenue recognition given in Note no.32 to the financial statements for the year 2014-15.

4. (i) Whether amount of (a) bank balance (b) trade receivable (c) trade payables (d) loans and advances for which third party confirmation was not made available has been reported.

(ii) Where such balance has been confirmed by respective parties, whether it varies widely from the amounts reflected under respective heads in the financial.

The balance confirmation letters were available in case of the balances with the banks and bank loans and the same are reconciled.

In respect of Trade Receivables, as informed to us, during the year 2014-15, the statement of balances was taken from SAP system and sent to the parties for confirmation and about 83% confirmation of balances from debtors has been received and no material differences were noticed.

As regards balance confirmation relating to trade payables despite the Company sending balance confirmation letters, receipt of confirmation of balances is very insignificant despite repeated follow-up. To facilitate reconciliation and review of balances by customers and vendors on a periodic basis, Company has also installed Customer and Vendor Portal in its website which would enable them to view their account online. Further disclosure of amounts in dispute with vendors is included under claims not acknowledged as debts in the notes forming part of financial statements.

Balances of subsidy claim receivables and tax refunds from Government authorities are subject to confirmation which has also been disclosed in note no. 31 of financial statements.

5. Independent verification may be made, of information/inputs furnished to Actuary, viz. number of employees, average salary, retirement age etc. and assumptions made by the Actuary regarding the discount rate, future cost increase, mortality rate, etc. for arriving at the provision for liability of retirement benefits, viz. gratuity, leave encashment, post-retirement medical benefit etc.

Based on the audit procedures performed on test check basis for the purpose of verification of information/inputs furnished by the company to Actuary, viz. number of employees, average salary, retirement age etc. and no material discrepancies were noticed.

Following are the assumptions used by the Actuary:-

Sr No. Particulars Rate

1 Discount Rate 7.95%

2 Attrition Rate 2.00%

3 Salary Escalation Rate 8.00%

4 Mortality Rate IALM (2006-08) Ultimate

Assumptions made by Actuary regarding Salary Escalation Rate & Attrition Rate is as advised by the Company. Based on the audit procedure performed on test check basis on the data given by the management and according to information and explanation given by the management, the said assumptions appear to be reasonable.

For M. M. NISSIM & Co. For NBS & Co. Chartered Accountants Chartered Accountants Firm Regn. No. 107122W Firm Regn. No. 110100W

(Dhiren Mehta) (Devdas Bhat) Partner Partner Mem. No.: 109883 Mem. No. 048094

Mumbai, May 21, 2015

---

Mar 31, 2014

We have audited the accompanying Financial Statements of Rashtriya Chemical and Fertilizer Limited-(''the."company'') which comprise the Balance Sheet as .at''March, 2014,- and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and the Explanatory Information.

Management''s Responsibility for the Financial Statements

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 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.

Auditor''s Responsibility

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.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s 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, but not for the purpose of expressing an opinion on the effectiveness of the entity''s internal control. 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.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required by the Act and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

b) In the case of Statement of Profit and Loss, of the Profit for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to:

a) Note No. 10(5) to the accounts regarding non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

b) Note No. 30 to the accounts which states that some of the Balances of Trade Receivables, Trade Payables, Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

c) Note No. 32 to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

d) Note No. 40 to the accounts regarding non provision for diminution in the value of investment and loans in respect of the Joint Venture Company, FACT - RCF Building Products Limited.

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. 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 Companies Act, 1956 (the ''Act'') we give in the annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

a. 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. 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;

c. The Balance Sheet, Statement of Profit & Loss and Cash Flow statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow statement dealt with by this report comply with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Act;

e. Central Government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of Clause (g); of sub section (1) of Section 274 of the Act is not applicable to a Government Company.

Annexure referred to in our report of even date Re: Rashtriya Chemicals & Fertilizers Limited (''the Company'').

i) a) The Company has maintained proper records

showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material.

c) During the year, the Company has not disposed of a substantial part of its fixed assets.

ii) a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

b) In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by the management are reasonable and adequate tin relation to the size of the Company and the nature of its business.

c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the - Company, and the same .have been properly dealt with in the books of-account.

iii) As per the information furnished, the Company has not granted or taken''any loans secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under clause

iii- (a) to (f) of the Order is not applicable to the Company.

iv) - In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, with regard to purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956 by the Company. Accordingly clause 4 (v) b of the Order is not applicable.

vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

viii) We have broadly reviewed the books of account maintained by the Company in respect of its products pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

ix) a) In our opinion, the procedure followed as per Note No 50 to the accounts in respect of deduction and payment of income tax results into ^ delays int certain cases. The exact delays are ¦ not. ascertained. Except the above, the undisputed -statutory *dues including provident fund, ''investor,'' education and protection fund, employees'' state-insurance, income-tax, sales- tax, wealth-tax,, service. .ta''x, customs duty, excise duty, cess and other undisputed statutory dues have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding, at the year end, for a period of more than six months from the "date - they became payable.

b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise'' duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Years to Amount Forum where Name of Nature of dues rs in which the dispute is the statute amount pending Crore) relates

Customs Demand of 16.35 2004-05 Central Excise Act 1962 Customs duty , Service Tax and penalty Appellate (Trombay Unit) Tribunal

Customs Demand of 80.77 2009-10 Assistant Act, 1962 Differential Commissioner Customs Duty on of Customs, import of Urea, Dharamtar, MOP & DAP Alibaug (Marketing)

Customs Demand of 0.16 2012-13 Commissioner Act, 1962 differential of Customs, custom duty on Manglore import of Potash (Marketing)

Income Disallowance 0.49 A.Y. 2009- Income Tax Tax Act, of additional 10 Appellate 1961 depreciation Tribunal claimed

Sales Tax, Disallowance/ 6.58 A. Y. Joint Maha- errors in 2009-10 Commissioner rashtra calculation of of Sales Tax set off etc., in the Assessment Order Passed

18.24 A. Y. Joint 2006-07 Commissioner of Sales Tax (Appeals)

Income Demand of 2.47 A. Y Commissioner Tax Act, Tax for Short 2008-09 to of Income Tax 1961 Deduction/non 2011-12 (Appeals) deduction of TDS

Central Demand of 2.67 1996-2001 Supreme Court Excise Act, Central Excise 1944 duty, Interest & 354 March, Central Excise Penalty in respect 2005 to , Service Tax of Naphtha October, Appellate procured at 2005 Tribunal concessional 18.61 November, Supreme Court rates used for 1996 to products which February, are not exempted 2005 (Thal Unit) (Interest)

Central Demand of 18.76 Prior to Central Excise Excise Act, Central Excise 1997 to Service Tax 1944 duty in respect March Appellate of Low Sulphur 2006 Tribunal High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Demand of 2.90 August Commissioner Central Excise 1986 to of Central duty in respect February Excise of Low Sulphur 2000 (Appeals) High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

1.54 April, Commisioner 2008 to of Central December, Excise, Demand of 2011 Customs, Service Tax on &Service lax Service supply of wagons Tax 0.18 January, Assistant Com- to Central 2012 to missioner Railway December, Central Excise, 2014 . Customs & Service Tax

Service Demand of 0.01 2006-07 & Superin- Tax Service Tax 2007-08 tendent, (S. T. on Handling Special Cell), by Transporter Aurangabad Service

Service Demand of 15.21 October, Tax Service Tax on 2006 to fees received December, for Operation & 2014 maintenance of HWP (Thal Unit)

Service Service Tax on 0.14 2008-09 Additional Tax rent on BTAL to June, Commissioner, Wagons 2011 Central Excise & Service Tax, Mumbai

x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

xii) Based on our examination of documents and records and as per information and explanations given, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4

(xiii) of the Order are not applicable to the Company.

xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the "Company.

xvi) To the best - of" our. .knowledge and belief and according to''.the information -and explanations given to us in our opinion term loans availed by the Company''were,'' applied''by the Company during the year for,the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

xvii). According to the information and explanations given to us and on an overall examination of the balance sheet of the Company we report that no funds raised on short-term basis have been used for long-term investment.

xviii) The Company has not made any allotment of shares during the year.

xix) The Company has not issued any debentures during the year.

xx) The Company has not raised any money by public issue during the year.

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For NBS & Co. For M M NISSIM AND CO. Chartered Accountants Chartered Accountants Firm Regn. No. 110100W Firm Regn. No. 107122W

Devdas Bhat Dhiren Mehta Partner Partner Mem. No. 048094 Mem. No.: 109883

Mumbai, May 14, 2014

---

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying Financial Statements of Rashtriya Chemicals and Fertilizers Limited (''the company'') which comprise the Balance Sheet as at 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 the Explanatory Information.

Management''s Responsibility for the Financial Statements

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 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.

Auditor''s Responsibility

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.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s 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.

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

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required by the Act and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

b) In the case of Statement of Profit and Loss, of the Profit for the year ended on that date; and

c) In the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to:

a) Note No. 10(5) to the accounts regarding non-disclosure of cost and depreciation of assets leased to certain Public Sector Undertaking and others.

b) Note No. 30 to the accounts which states that some of the Balances of Trade Receivables, Trade Payables, Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

c) Note No. 32 to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

d) Note No. 51 to the accounts regarding adjustment to sales made on the stocks held by dealers/retailers expected to be sold at reduced MRP to farmers consequent to Department of Fertilizer''s notification No. 23011/5/2013-MRP dated 3rd May, 2013 and further directives received from Government of India

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

1. 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 Companies Act, 1956 (the ''Act'') we give in the annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

a. 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. 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;

c. The Balance Sheet, Statement of Profit & Loss and Cash Flow statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit & Loss and Cash Flow statement dealt with by this report comply with the Accounting Standards referred to in sub- section (3C) of Section 211 of the Act;

e. Central Government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of Clause (g); of sub section (1) of Section 274 of the Act is not applicable to a Government Company.

i) a) The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material.

c) During the year, the Company has not disposed of a substantial part of its fixed assets.

ii) a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

b) In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

iii) As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under clause iii (a) to (f) of the Order is not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, with regard to purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956 by the Company. Accordingly clause 4 (v) b of the Order is not applicable.

vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

viii) We have broadly reviewed the books of account maintained by the Company in respect of its products pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

ix) (a) In our opinion, the procedure followed as per Note No 49 to the accounts in respect of deduction and payment of income tax results into delays in certain cases. The exact delays are not ascertained. Except the above, the undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty, cess and other undisputed statutory dues have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding, at the year end, for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name Nature of dues Amount of the (Rs. in statute Crore)

Customs Demand of 16.35 Act 1962 Customs duty and penalty (Trombay Unit)

Customs Demand of 80.77 Act, 1962 Differential Customs Duty on import of Urea, MOP & DAP (Marketing)

Customs Demand of 1.56 Act, 1962 differential custom duty on import of Potash (Marketing)

Income Disallowance 17.43 Tax Act, of Provision for 1961 revised salary and wages

Income Demand of 0.09 Tax Act, Tax for Short 1961 Deduction/non deduction of TDS

Name of the Statute Years to Forum where which the dispute is amount pending relates

Customs Act 1962 2004-05 Central Excise, Service Tax Appellate Tribunal

Customs Act 1962 2009-10 Assistant Commissioner of Customs, Dharamtar, Alibaug

Customs Act 1962 2012-13 Commissioner of Customs, Manglore

Income Tax Act 1961 A.Y. 2007- Commissioner 08 of Income Tax (LTU), Mumbai

Income Tax Act 1961 A. Y. Commissioner 2008-09 & of Income Tax 2009-10 (Appeals)

x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

xii) Based on our examination of documents and records and as per information and explanations given, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company we report that no funds raised on short-term basis have been used for long-term investment.

xviii) The Company has not made any allotment of shares during the year.

xix) The Company has not issued any debentures during the year.

xx) The Company has not raised any money by public issue during the year.

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For M. M. NISSIM AND CO. For NBS & Co.

Chartered Accountants Chartered Accountants

Firm Regn. No. 107122W Firm Regn. No. 110100W

Dhiren Mehta Devdas Bhat

Partner Partner

Mem. No.: 109883 Mem. No. 048094

Mumbai, May 13th, 2013

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of Rashtriya Chemicals & Fertilizers Limited ('the Company'), as at 31st March 2012, and also the Statement of Profit & Loss and the Cash Flow Statement for the year ended on that date annexed thereto which we have signed under reference to this report. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. 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 Companies Act, 1956 (the 'Act') we give in the annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

4. Without qualifying our report, we draw attention to:

a. Note No. 10 (6) regarding non disclosure of cost and depreciation of assets leased to certain Public Sector Undertakings and others.

b. Note No. 31 to the accounts which states that some of the Sundry Debtors, Sundry Creditors Other Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

c. Note No. 33 to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

d. Note No. 49 regarding change in accounting policy relating to exchange differences on long term foreign currency monetary items for acquisition of fixed assets.

5. Further to our comments in the Annexure referred to above.

we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act;

e. Central government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of clause (g) of sub-section (1) of section 274 of the Act is not applicable to a government company.

f. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies and the notes forming part of accounts 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 March 31,2012;

ii. in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

i) a) The Company has maintained proper records showing

particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material, ,

c) During the year, the Company has not disposed of a substantial part of its fixed assets.

ii) a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. - Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

b) In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have beer properly dealt with in the books of account.

iii) As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under clause iii (a) to (f) of the Order is not applicable to the Company.

iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, with regard to purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) According to the information and explanations given to us, there are no transactions that need to be entered in the register maintained in pursuance of Section 301 of the Companies Act, 1956 by the Company. Accordingly clause 4' (v) b of the Order is not applicable.

vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

viii) We have broadly reviewed the books of account maintained by the Company in respect of its products pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained.

ix) (a) In our opinion, the procedure followed as per Note No 51 to the accounts in respect of deduction and payment of income tax results into delays in certain cases. The exact delays are not ascertained. Except the above, the undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other undisputed statutory dues have been regularly deposited with the appropriate authorities.

According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding, at the year end, for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name of the Nature of dues Amount Years to Forum where statute (Rs in which the dispute is Crore) amount pending relates

CustomsAct Demand of Customs 16.35 2004-05 Central Excise, 1962 duty and penalty Service Tax (Trombay Unit) Appellate Tribunal

CustomsAct, Demand of Differential 80.77 2009-10 Assistant 1962 Customs Duty on Commissioner of import of Urea,MOP & Customs, DAP Dharamtar. Alibaug

Income Tax Disallowance of certain 0.52 A.Y. 2009-10 Commissioner of Act, 1961 expenditure & certain Income Tax additions at the time of (Appeals) assessment

Central Excise Demand of Central 14.33 1996-2001 Appealto Act, 1944 Excise duty & Penalty Supreme Court in respect of Naphtha being filed procured at 3.54 2005-2006 Appeal to Central concessional rates used Excise, Service for products which are Tax Appellate not exempted (Thal Tribunal Unit) 17.88 July 2007 to Disputed by the August 2009 company before Commissioner of Central Excise

Central Excise Demand of Central 18.00 Prior to 1997 to Central Excise, Act, 1944 Excise duty in respect March 2006 Service Tax of Low Sulphur High Appellate Stock/Fumace Oil Tribunal procured at concessional rates used for other than fertilizer products (Trombay Unit) Demand of Central 2.90 August 1986 to Commissioner of Excise duty in respect February 2000 Central Excise of Low Sulphur High (Appeals) Stock/Fumace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Name of the Nature of dues Amount Years to Forum where statute (Rs in Which the dispute is Crore) amount pending relates Uttarkhand Additional duty 0.32 2006-07 Asst Value Added imposed due to wrong Commissioner Tax, 2005 identification of Commercial Tax - product ingredient Uttarakhand

Service Tax Demand of Service Tax 0.01 2006-07 Superintendent, on Handling by & 2007-08 (S. T. Special Cell), Transporter Service Aurangabad

Service Tax Service Tax on rent on 0.14 2008-09 to June, Additional BTAL Wagons 2011 Commissioner, Central Excise & Service Tax, Mumbai

x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial - Institution.

xii) Based on our examination of documents and records and as per information and explanations given, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company we report that no funds raised on short-term basis have been used for long-term investment.

xviii) The Company has not made any allotment of shares during the year.

xix) The Company has not issued any debentures during the year.

xx) The Company has not raised any money by public issue during the year.

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For JCR & Co. For M. M. NISSIM AND CO.

Chartered Accountants . Chartered Accountants

Firm Regn. No. 105270W Firm Regn. No. 107122W

Saiprabha. R Dhiren Mehta

Partner Partner

Mem. No. 034716 Mem. No.: 109883

Mumbai, May 30, 2012

---

Mar 31, 2011

1. We have audited the attached Balance Sheet of Rashtriya Chemicals & Fertilizers Limited ('the Company') as at March 31, 2011 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003 (as amended) issued by the Central Government of India irr terms of sub-section (4A) of Section 227 of the Companies Act, 1956 ('the Act'), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. .

4. Without qualifying our report, we draw attention to:

a. Note No. 8 of Schedule XVI to the accounts regarding the claim of subsidy accounted on estimated basis, pending final settlement of such claims.

b. Note No. 19 of Schedule XVI to the accounts regarding the classification of Fertilizer Bonds with the carrying amount of Rs. 305.94 Crores as current assets instead of Investments as per schedule VI of the Companies Act, 1956.

c. Note No. 6 of Schedule XVI to the accounts which states that some of the Sundry Debtors, Sundry Creditors, Other Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

5. Further to our comments in the Annexure referred' to above, we report that:

We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

a. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

b. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

c. Central government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of clause (g) of sub- section (1) of Section 274 of the Act is not applicable to a government company;

d. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies and the notes forming part of accounts 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 March 31, 2011;

ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditors' Report

Annexure referred to in paragraph 3 of our report of even date RE: Rashtriya Chemicals and Fertilizers Limited (The Company')

(i) (a) The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed On physical verification of fixed assets as compared to the book records were not material.

(c) During the year, the Company has not disposed of a substantial part of its fixed assets.

(ii) (a) Physical verification of finished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

(b) In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

(iii) As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under clause iii (a) to (f) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, with regard to purchase of inventories arid fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) According to the information and explanations given to us, we are of the opinion that there are no transactions that need to be entered into register in pursuance of Section 301 of the Companies Act, 1956.

(vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed thereunder. Hence, clause 4(vi) of the Order is not applicable.

(vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business.

(viii) We have broadly reviewed the books of account maintained by the Company in respect of its product i.e. Methanol, Sulphuric Acid and Fertilizers pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 for other products of the Company.

(ix) (a) In our opinion, the procedure followed as per Note No 24 of Schedule XVI to the accounts in respect of deduction and payment of income tax results into delays in some cases. The exact delays are not ascertained. Delays have also been observed in depositing the tax with local authorities in case of Thai unit. Except this, the undisputed statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other undisputed statutory dues have generally been regularly deposited with the appropriate authorities.

Further, since the Central Government has till date not prescribed the amount of cess payable under section 441 A of the Act, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name of the Nature of dues Amount Years to Forum where Statute (Rs in which the dispute is lacs) amount pending relates

Customs Act Demand of 1,635.00 2004-05 Central Excise, 1962 Custpms duty and Service Tax penalty Appellate Tribunal (Trombay Unit)

Income Tax Disallowance of 49.05 A.Y. 2008-09 Commissioner Act, 1961 certain expenditure of Income Tax & certain additions (Appeals) at the time of assessment

Income Tax Tax Deducted at 77.94 A.Y. 2006-07 Commissioner

Act, 1961 Source on Salaries 0.44 A.Y. 2008-09 of Income Tax

10.96 A.Y. 2009-10 (Appeals)

Central Demand of Central 1,298.36 November Central Excise,

Excise Act, Excise duty in 1996 to March Service Tax 1944 respect of Naphtha 2001 and Appellate Tribunal procured at March 2005 to concessional rates October 2005 used for products 998.72 April 2001 to Appeal to Central which are not February 2005 Excise, Service Tax exempted Thai Appellate Tribunal Unit is being filed

1,788.55 July 2007 to Disputed by the August 2009 company before Commissioner of Central Excise

Central Demand of Central 1,744.66 Prior to 1997 to Central Excise, Excise Act, Excise duty in March 2006 Service Tax 1944 respect of Low Appellate Tribunal Sulphur High Stock/Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Demand of Central 290.34 August 1986 to Commissioner of Excise duty in February 2000 Central Excise respect of Low (Appeals) Sulphur High Stock/Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Uttarakhand Additional 32.16 2006-07 Asst Commissioner Value Added duty imposed Commercial Tax- Tax, 2005 due to wrong Uttarakhand identification of product ingredient

(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as p,er the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

(xii) Based on our examination of documents and records and as per fnformation and explanations given, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 (as amended) are not applicable to the Company.

(xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company 'viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied by the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of trie Company .we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any allotment of shares during the year.

(xix) The Company has not issued any debentures.

(xx) The Company has not raised any money by public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For JCR & Co. For G. D. Apte & Co.

Firm Registration Number 105 270W Firm Registration Number 100 515W

Chartered Accountants Chartered Accountants

Saiprabha. R U. S. Abhyankar

Partner Partner

Membership No. 34716 Membership No. 113053

Mumbai Mumbai

Date : May 10, 2011 Date : May 10, 2011

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of Rashtriya Chemicals & Fertilizers Limited (the Company) as at March 31, 2010 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (the Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our report, we draw attention to:

a. Note No. 8 of Schedule XVI to the accounts regarding the claim of subsidy accounted on estimated basis, pe/iding final settlement of such claims.

b. Note No. 19 of Schedule XVI to the accounts regarding the classification of Fertilizer Bonds with the carrying amount of Rs. 612.59 Crores as current assets instead of Investments as per schedule VI of the Companies Act, 1956

c. Note No. 6 of Schedule XVI to the accounts which states

that some of the Sundry Debtors, Sundry Creditors Other Current Liabilities and Loans and Advances are subject to confirmation, reconciliation and consequential adjustments, if any.

5. Further to our comments in the Annexure referred to above, we report that:

i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act.

v. Central government has directed vide notification number G.S.R. 829(E) dated 21st October, 2003 of clause (g) of sub-section (1) of section 274 of the Act is not applicable to a government company.

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies and the notes forming part of accounts 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;

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2010;

b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

c) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

Annexure to the Auditors Report Annexure referred to in paragraph 3 of our report of even date RE: Rashtriya Chemicals and Fertilizers Limited (The Company)

(i) (a) The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets with original cost and depreciation written off in respect of identifiable units of assets and where such information for identifiable units of assets is not available, the records show the cost and depreciation written off in respect thereof as a group or class. The items of assets in respect of which quantitative details are not linked with the cost or book value are of small value acquired prior to April 1978 and are fully depreciated particularly in respect of movable items acquired from Fertilizers Corporation of India Limited.

(b) As informed to us, the fixed assets have been physically verified by the management with the help of an independent outside agency at reasonable intervals. We have been informed that discrepancies noticed on physical verification of fixed assets as compared to the book records were not material.

(c) During the year, the Company has not disposed of a substantial part of its fixed assets,

(ii) (a) Physical verification offinished goods, packing materials and raw materials inside factory premises has been carried out by the management at reasonable intervals and the stocks of stores and spare parts has been conducted by them with the help of an independent outside agency in a phased programme so as to complete the verification of all items over a period. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively

(b) In our opinion and according to the information and explanations given to us, the procedures for the physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account.

(iii) As per the information furnished, the Company has not granted or taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Hence reporting under clause iii (b)/(c)/ (d) of the Order is not applicable to the Company.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, with regard to purchase of inventories and fixed assets and for the sale of goods. In our opinion and according to the information and explanations given to us, during the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

(v) (a) According to the information and explanations given to us, transactions that need to be entered into register in pursuance of Section 301 of the Companies Act, 1956 have been entered into by the Company.

(b) In our opinion, the aforesaid transactions have been made at prices which are reasonable having regard to the market prices prevailing at the relevant time by the Company.

(vi) According to the information and explanations given to us, the Company has not accepted any deposit during the year from public within the meaning of the provisions of Section 58A and Section 58AA of the Companies Act, 1956 and the rules framed there under. Hence, clause 4(vi) of the Order is not applicable.

(vii) The Company has its own internal audit department which conducts the internal audit and in our opinion, the present internal audit system is commensurate with the size and the nature of its business. However, in our opinion, the coverage at Corporate Office needs to be extended to certain areas.

(viii) We have broadly reviewed the books of account maintained by the Company in respect of its product i.e. Methanol, Sulphuric Acid and Fertilizers pursuant to the order of Central Government for maintenance of cost records prescribed under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been made and maintained. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed maintenance of cost records under Section 209(1) (d) of the Companies Act, 1956 for other products of the Company.

(ix) (a) In our opinion, the procedure followed as per Note No 25 of Schedule XVI to the accounts in respect of deduction and payment of income tax results into delays in some cases. The exact delays are not ascertained. Except this, the undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other undisputed statutory dues have generally been regularly deposited with the appropriate authorities.

Further, since the Central Government has till date not prescribed the amount of cess payable under section 441 A of the Act, we are not in a position to comment upon the regularity or otherwise of the Company in depositing the same.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the information and explanations given to us, the dues of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute and the forum where the dispute is pending are as follows:

Name of the Nature of dues Amount Years to Statute (Rs in which the lacs) amount relates

Central Demand of Central 1,298.36 November Excise Act. Excise duty in 1996 to March 1944 respect of Naphtha 2001 and procured at March 2005 to concessional rates October 2005 used tor products 998 72 April 2001 to which are not February 2005 exempted (Thai Unit)

1,788.55 July 2007 to August 2009

Central Demand of Central 1,689.52 Prior to 1997 Excise Act, Excise duty in to March 2006 1944 respect ot Low Sulphur High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)





Name of the Statue Forum where dispute is pending

Central Excise Act. 1944 Central Excise, Service Tax Appellate Tribunal

Appeal to Central Excise, Service Tax Appellate Tribunal is being filed

Disputed by the company before Commissioner of Central Excise Central Excise Act, 1944 Central Excise Service Tax Appellate Tribunal

Name of the Nature of dues Amount Years to Statute (Rs in which the lacs) amount relates

Demand of Central 290.34 August 1986 Excise duty in to February respect of Low 2000 Sulphur High Stock/ Furnace Oil procured at concessional rates used for other than fertilizer products (Trombay Unit)

Uttarakhand Additional duty 32.16 2006-07 Value Added imposed due to Tax. 2005 wrong identification of product ingredient

Bihar Value Difference between 8.42 2007-08 added Tax, original return and 2005 revised return not agreed.



Name of the Statue Forum where dispute is pending

Commissioner of Central Excise (Appeals)

Uttarakhand Value Added Tax. 2005 Asst Commissioner Commercial Tax- Uttarakhand Bihar Value added Tax, 2005 Dy Commissioner of Commercial Tax-Patna

The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

(xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a bank. The company has not issued any debentures and has not obtained any loan from Financial Institution.

(xii) Based on our examination of documents and records and as per information and explanations given, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

(xiii) The Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company,

(xiv) According to the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company

(xv) According to the information and explanations given to us, the Company has given a corporate guarantee for loan from bank taken by its joint venture company viz. FACT RCF Building Products Ltd., the terms and conditions whereof in our opinion, are not prima-facie prejudicial to the interests of the Company.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, applied b" the Company during the year for the purposes for which the loans were obtained other than funds temporarily invested pending utilization for the intended use.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company we report that no funds raised on short-term basis have been used for long-term investment.

(xviii) The Company has not made any allotment of shares during the year.

(xix) The Company has not issued any debentures.

(xx) The Company has not raised any money by public issue during the year.

(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For JCR & Co. For G. D. Apte & Co.

Firm Registration Number 105 270W Firm Registration Number-100 515W

Chartered Accountants Chartered Accountants

A.M. Vyavaharkar C. M. Dixit

Partner Partner

Membership No. 16731 Membership No. 17532

Mumbai Mumbai

Date : 06.05.2010 Date : 06.05.2010