MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS
(DEPARTMENT OF COMPANY AFFAIRS)
NEW DELHI, the 21st December, 2001
G.S.R. 913(E).- In exercise of the powers conferred by sub-section (1) of section 642, read with clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following rules, namely:-
1. Short title and commencement .-
(1) These rules may be called the Cost Accounting Records (Electricity Industry) Rules, 2001.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Application .- These rules shall apply to every company engaged in any of the following activities, namely :-
(1) Generation of electricity from:-
(a) thermal power
(b) gas turbine
(c) hydro-electric power
(d) atomic power
(e) solar power
(f) wind power
(g) any other source of energy;
(2) Transmission and bulk supply of electricity;
(3) Distribution and retail supply of electricity :
Provided that these rules shall not apply to a company,-
(a) the aggregate value of the machinery and plant installed wherein, as on the last date of the preceding financial year, does not exceed the limits as specified for a small scale industrial undertaking under the provisions of Industries (Development and Regulation) Act, 1951 (65 of 1951); and
(b) the aggregate value of the turnover made by the company from sale or supply of all its products or activities during the preceding financial year does not exceed ten crores of rupees.
3. Maintenance of records .- (1) Every company to which these rules apply shall, in respect of each of its financial year commencing on or after the commencement of these rules, keep proper books of account relating to utilisation of materials, labour and other items of cost in so far as they are applicable to any of the activities referred to in rule 2. The books of account, so maintained, shall contain, inter-alia, the particulars specified in the Schedule annexed to these rules and Proformae A, B C, D, E and F mentioned in the said Schedule :
Provided that if the said company is manufacturing any other product(s)or is engaged in other activities in addition to generation, transmission, distribution and supply of electricity, the particulars relating to utilisation of materials, labour and other items of cost in so far as they are applicable to such other products or activities shall not be included in the cost of the activities referred to in rule 2.
(2) The books of account referred to in sub-rule (1) shall be kept on a regular basis in such a manner as to make it possible to calculate the cost of each activity referred to in rule 2 for every financial year from the particulars entered therein. Every such book of account and the proformae specified in the said Schedule, shall be completed not later than ninety days from the close of the financial year of the company to which it relates.
(3) The statistical and other records shall be maintained in accordance with the provisions of the Schedule to these rules in such a manner as to enable the company to exercise, as far as possible, control over the various operations and costs with a view to achieve optimum economies in cost. These records shall also provide the necessary data required by the Cost Auditor to suitably report on all the points referred to in the Cost Audit (Report) Rules, 1996 as amended from time to time.
(4) It shall be the duty of every person, referred to in sub-section (6) and (7) of section 209 of the companies Act, 1956 (1 of 1956), to take all reasonable steps to secure compliance by the company with the provisions of sub-rules (1),(2)and (3) of this rule in the same manner as he is liable to maintain accounts required under sub-section (1) of section 209 of the said Act.
4. Penalty .- If a company contravenes the provisions of rule 3, the company and every officer thereof who is in default, including the persons referred to in sub-rule (4) of rule 3 shall, subject to provisions of section 209 of Companies Act,1956 (1 of 1956) be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day, after the first day during which such contravention continues.
[See rule 3]
(1) The proper records shall be maintained showing all receipts, issues and balances both in quantities and values of all major fuel such as coal, lignite, gas, naphtha, bagasse alongwith their calorific values and other materials used in the generation, transmission, distribution or supply of electricity. These records shall contain such details so as to enable the company to determine the quantity and cost of receipt (including all direct charges upto the works in respect of major materials/fuels), issues and balances in quantity as well as value of each item of all such materials. The basis on which said cost of issue and consumption have been calculated shall be indicated in the cost records and followed consistently. The records shall indicate quantity and expenses incurred for loading and unloading, transport, handling, grinding charges etc. The quantity and cost of transportation of material by different modes of transportation viz. road, conveyer, rail, pipeline, rope way etc shall be indicated separately. In the case of imported materials/fuels proper records of quantity and value shall be maintained for each item showing FOB value, overseas freight, insurance, customs duty, clearing charges, inland freight etc. If both indigenous and imported materials are consumed, the records showing details of percentage mix of the same, have to be maintained for each item. In the case of imported materials, proper records shall also be maintained showing license-wise allowed quantities, actual quantities imported, actual quantities consumed, quantities in stock and quantities yet to be imported out of total licensed quantities.
(2) Where any material such as coal, lignite etc are used from mines owned or leased by the company or by its wholly owned subsidiary, separate records showing the cost of raising such materials shall be maintained in such details as may enable the company to fill up particulars in proforma ‘B’ or any other proforma as thereto practicable.
(3) The proper records shall be maintained showing the receipts, issues and balances both in quantity and value of each item of consumable stores (station stores), small tools and other materials required for any of the activities referred to in rule 2. The value shown shall include all direct charges up to works whenever specifically incurred. In the case of consumable stores, the value of which are not significant, the company may, if so desires, maintain such records for the main group of such items. The value of consumable stores, consumed for the power system shall be charged to the relevant head of accounts.
(4) The proper records shall be maintained showing the quantity and value of wastage, spoilage, rejections and losses of input materials/fuels and consumable stores whether in transit, storage, operation or at any other stage. The method followed for adjusting the above losses as well as income derived from the disposal of rejected and waste materials including spoilage, if any, in determining the cost of activities, shall be indicated in the cost records.
(5) The proper records shall also be maintained to indicate the value of materials which have not moved for more than twelve months for effective control of inventory.
(6) Where any credit under Central Value Added Tax (CENVAT) under the Central Excise Act, 1944 (1 of 1944) or any other benefits of the nature of CENVAT credit, are received/receivable on any item of material and/or consumable stores or spares, the cost of such material and/or consumable stores/spares should be shown after adjusting such credit or benefits.
2. SALARIES AND WAGES:
(1) The proper records shall be maintained to show the attendance and earnings of all employees function-wise or activity-wise and the works on which they are employed. The records shall also indicate the following separately for each such function or activity:
(a) piece rate wages (wherever applicable);
(b) incentive wages, either individually or collectively as production bonus or under any other scheme based on output;
(c) overtime wages;
(d) earnings of casual or contractual labour;
(e) bonus or gratuity, statutory as well as other;
(f) contribution to superannuation scheme; and
(g) any other earnings of the nature specified in (a) to (f) above.
(2) The records shall be maintained in such a manner as to enable the company to furnish necessary particulars under this head in Proformae A, B, C, D, E and F of Schedule I annexed to these rules. The records may be maintained to book these expenses function-wise or activity-wise. Where the employees work in such a manner that it is not possible to identify them with any specific function or activity, the employees cost shall be apportioned to the functions or activities on equitable and reasonable basis and applied consistently.
(3) The idle labour cost, other than due to backing down demand from customers, shall be separately recorded under classified headings indicating the reasons therefor. The method of accounting followed for accounting of idle time payments shall be disclosed in the cost records.
(4) Any wages and salaries allocable to capital works, such as, additions to plant and machinery, buildings or other fixed assets shall be accounted for under the relevant capital heads. Similarly, payments in the nature of deferred revenue expenditure shall be separately recorded under separate classified headings indicating the reasons therefor. The method followed for accounting of such payments in determining the cost of the product or service shall be on equitable and reasonable basis and applied consistently. The said method shall be disclosed in the cost records also.
(5) The cost of termination benefits payable to employees shall be recorded under separate head. The method followed for such cost in determining the cost of the electricity generated, transmitted or distributed shall be on equitable and reasonable basis, applied consistently and disclosed separately. Only the termination benefits say in respect of voluntary retirement scheme, which are payable in addition to the normal retirement benefits and that are likely to provide benefits in terms of savings in cost in future shall be treated as deferred revenue expenditure over a period not exceeding five years. These costs shall not form part of salaries and wages and shall be shown separately. Such costs shall be excluded from valuation of inventories since these do not result in putting the inventories to their present location and condition.
3. SERVICE DEPARTMENT EXPENSES:
The proper records shall be maintained to indicate expenses incurred in respect of each service department or function like laboratory, welfare measures, safety implementation, transport, dispensary, school, crèche, township etc. These expenses shall be apportioned to other services and power activities on equitable and reasonable basis and applied consistently. Where these services are utilized for other products or activities of the company also, the basis of apportionment of such expenses to other products or activities shall be on equitable and reasonable basis and applied consistently.
(1) The proper records showing quantity and cost of water collection, water treatment, ash handling, effluent treatment etc. shall be maintained by the company for the activities under reference.
(2) The cost statements for each utility shall be maintained separately in respect of each such utility in Proforma ‘A’.
5. WORKSHOP OR REPAIRS AND MAINTENANCE OR TOOL ROOMS:
(1) The proper records showing the expenditure incurred by the workshop or tool room under different heads and on repairs and maintenance shall be maintained function-wise or activity-wise. The amount incurred on schedule/annual maintenance shall be separately recorded under the head preventive maintenance. The records shall also indicate the basis of charging the workshop or tool room or repairs and maintenance expenses to different activities. Where maintenance work is done by direct workers of any of the generation, transmission, distribution & supply department, the wages and salaries of such workers shall be treated as direct expenses of the respective function or department. If the services are utilized for other products or activities also, the manner of charging a share to such products or activities shall be on equitable and reasonable basis and applied consistently.
(2) The records shall also indicate the quantity and amount and also the proportion of closing inventories of stores and spare parts representing items which have not moved for over twenty four months.
(3) The expenditure on major repair work from which benefit is likely to accrue for more than one financial year shall be allocated over the period expected to benefit on equitable and reasonable basis and applied consistently. Such costs shall be shown separately and the method of accounting alongith the basis of allocation of such costs shall also be clearly indicated in cost records.
6. FIXED ASSETS AND DEPRECIATION:
(1) The proper and adequate records shall be maintained for assets used for each of the activities under reference in respect of which depreciation has to be provided for. These records shall inter-alia, indicate the cost of acquisition of each item of asset including installation charges, date of acquisition and rate of depreciation.
(2) Also such records as will enable to identify and/or allocate gross fixed assets, accumulated depreciation upto the year and net fixed assets under the heads; land and building, plant and machinery, furniture and fixtures etc. employed for the production of activities under reference alongwith the method and rate of depreciation shall be maintained. The basis of apportionment of common assets to the product(s) under reference shall also be indicated. In case of revaluation of assets, the same shall be indicated separately. The basis of allocation of indirect assets to the products under reference shall be on equitable and reasonable basis and applied consistently.
(3) The basis on which depreciation is calculated and allocated or apportioned to various cost centres or activities and absorbed on such activities shall be clearly indicated in the cost records. If depreciation charged or chargeable to the cost centres or departments is in excess or lower than the depreciation prescribed and applicable to the company under the Electricity (Supply) Act, 1948 or under the provisions of sub-section (2) of Section 205 of the Companies Act, 1956, as the case may be, such amount of excess or lower depreciation shall be indicated clearly in the cost records. The cost records shall also show the effect of such excess or lower depreciation, as the case may be, on the per unit cost of activity. The cumulative depreciation charged in the cost records, against any individual item of asset shall not, however, exceed the original cost of the respective asset.
7. LEASING CHARGES:
In the case of leasing arrangements, proper record shall be maintained showing details of terms and conditions, leasing charges paid or payable as well as received or receivable.
8. OTHER OVERHEADS:
(1) The proper records shall be maintained for the activities under reference showing the various items of expenses comprising the other overheads. These expenses shall be analyzed, classified and grouped according to functions, namely, operation, administration and sales for each activity under reference.
(2) Where the company is manufacturing products other than the products or activities under reference, the records shall clearly indicate the basis followed for apportionment of the common overheads including head office expenses of the company to such products and to power activities including capital works. Where certain expenses forming part of overheads can be identified with a particular activity or a product, such expenses shall be first segregated and charged to the relevant activity or product and thereafter the residual expenses under the above categories of overheads shall be apportioned on equitable and reasonable basis and applied consistently. The overheads chargeable to capital works shall be indicated separately in the cost records. The basis of apportionment or absorption of overheads to the cost centres or activities and the products shall be indicated in the cost records. The Records shall be maintained in such a manner as to indicate the details of operation, administration and sales overheads.
9. ROYALTY OR TECHNICAL KNOW-HOW FEE :
The adequate records shall be maintained showing royalty and/or technical know-how fee including other recurring or non-recurring payments of similar nature if any, made for the activities under reference to collaborators or technology suppliers in terms of agreements entered into with them. Such records shall be kept separately in respect of each such collaborator or supplier. The basis of charging such amount, including lump sum payment and its treatment shall be indicated in the cost records.
10. RESEARCH AND DEVELOPMENT EXPENSES:
(1) The proper records showing the details of expenses, if any, incurred by the company on the research and development work of the activities covered under these rules shall be maintained.
(2) The method of charging these expenses to the cost of activities under reference and all other products or activities shall be indicated in the cost records. Where the utility of such research and development work extends over more than one financial year, such expenses shall be treated as deferred revenue expenses and charged to the cost of activities under reference and all other products if any, on equitable and reasonable basis and applied consistently. The detailed criteria on which it has been decided to extend the utility period of these expenses to more than one financial year shall be disclosed in the cost records. The following criteria, which are only indicative and not exhaustive, may be adopted in such cases :
(i) the output or process is clearly defined and the costs attributable to the output or process can be separately identified;
(ii) the technical feasibility of the output or process has been demonstrated;
(iii) the management of the enterprise has indicated its intention to produce and market or use the output or process;
(iv) there is a reasonable indication that current and future research and development costs to be incurred on the project together with expected production, administrative and selling costs are likely to be more than covered by related future revenues or benefits; and
(v) adequate resources exist or are reasonably expected to be available to complete the project and market the output or process.
(3) The expenses incurred by the Research and Development Department for providing technical know-how to outsiders shall be recorded separately and excluded from the cost of activities under reference. The amount recovered for providing technical know-how to outsiders shall also be indicated separately and excluded from the income arising from the sale of outputs or activities under reference.
The proper records shall be maintained for money borrowed for each project and/or working capital and interest charges thereon. The amount of interest shall be allocated or apportioned to the activities covered under these rules and other activities on equitable and reasonable basis and applied consistently. The basis of further charging of the share of the interest to the various types of such activities shall also be equitable and reasonable and applied consistently. The basis of such allocation or apportionment shall be spelt out clearly in the cost records and statements. Net interest incurred on borrowed money or outlays for projects under execution, shall be capitalized for the period between the date of conceivement of the project and commencement of commercial activities.
12. EXPENSES OR INCENTIVES ON EXPORTS:
The proper records showing the expenses incurred on the export sales, if any, on the products or services under