Annual report 06 07

34th Annual Report 2006-07 CONTENTS Board of Directors Directors Report Report on Corporate Governance Particulars with respect to Technology Absorption Statutory Auditors’ Report for the Financial Year 2006-2007 Management’s Replies to the Statutory Auditors’ Report Balance Sheet Profit & Loss Account Schedules Part-IV of Schedule-VI (Balance Sheet Abstract and Company’s General Business Profile) Accounting Policy and Notes to the Accounts Cash Flow Statement (Indirect Method) Business Segment Report & Notes thereto

File name : 2(2)

Board of Directors Chairman-cum-Managing Director Shri D. Rath Directors Shri A. Bhattacharya, Director (Commercial) Shri M.K. Deshmukh, Director (Engineering) Shri B. Sankararaman, Director (Projects) Shri L.R. Singh, Director (Technology) (w.e.f. 17.07.2006) Shri A.K. Rath, IAS Shri K.A.S. Deo, IAS (w.e.f. 28.04.2006) Shri H.L. Zutshi Shri Anil Agrawal Shri K. Satyanarayan (w.e.f. 02.05.2006) Company Secretary Ravi Bambha General Manager (Finance) Shri K.R. Venkateswarlu (Up to 19.10.2006) Dy. General Manager I/c (Finance) Shri S. Chattopadhyay Auditors M/s S.N. Rajgarhia & Co., Chartered Accountant Firm, 1st Floor, 39, Shradhanand Road, Ranchi-834001(Jharkhand) Bankers State Bank of India Union Bank of India Indian Overseas Bank IndusInd Bank ICICI Bank UTI Bank HDFC Bank Canara Bank United Bank of India File name: CURRENT FILES/34DIRRPT06-07

2

DIRECTORS’ REPORT FOR THE FINANCIAL YEAR 2006-2007 The Members, Your Directors have the pleasure in presenting 34th Annual Report on the operations of the Company and the Statements of Accounts for the Financial Year ended on 31st March, 2007.

The Report of the Statutory Auditors and the Comments thereon as well as the Review of the Accounts by the Comptroller and Auditor General of India are annexed to this Report.

1.0 PERFORMANCE HIGHLIGHTS Your Company has made all round improvement in its performance during the current financial year. In addition to substantial improvement in the financial performance, the Company has booked large value orders in consultancy and supply.

Certain ongoing major prestigious projects of national importance have been completed during the year. These include As a commercialization effort of R&D, MECON has been successful in receiving an order from DRDO, Delhi for supply of battery operated heating gloves & socks. These were successfully designed and developed by R&D Division of MECON for Defence personnel for enhancing their performance in extremely cold areas like SIACHEN (where temperature dips up to -400 C) and prevention /amelioration from cold injuries. This Development was sponsored by Defence Institute of Physiology & allied Sciences (DIPAS),Delhi.

Successful commissioning of technologically upgraded Blast Furnace No. 7 of SAIL, Bhilai Steel Plant (BSP) carried out by MECON as a consortium leader with Danieli Corus, Netherlands and Beekay Engineering, Bhilai. The intricacy of dismantling was to change blast furnace shell from tuyere zone to the stack zone without disturbing furnace foundation and top structures. The herculean task for MECON engineers was to implement increased nos. of tuyeres from 20 to 24 and retrofitting of runners. The bell-less top charging equipment was dismantled, erected and commissioned for the first time in India

by MECON led consortium. Among the new technological features introduced in Blast Furnace No. 7 are closed loop cooling system, hi-pressure File name: CURRENT FILES/34DIRRPT06-07

tuyere cooling and de-mineralised water along with heat flux monitoring system and leak detection system, etc. After up gradation of Blast Furnace No. 7, the furnace useful volume will increase form 2000 m3 to 2355 m3 which makes it the largest blast furnace in SAIL Steel Plant. .

Athermalisation (maintaining a constant temperature) of Infrared (IR) Optics of Anti –Tank NAG Missile was successfully designed and solved by R&D Division of our Company.

This problem of temperature fluctuations was causing error in IR Camera (Thermal Camera) of Anti-Tank missile being used by Defence and it was missing the target. This problem aggravates in the case of imported system, since it was basically designed to suit the designer’s ambient temperature and not for Indian ambient..

The project was sponsored by M/s DRDO to MECON and our R&D Division accepted the challenge in the National Interest..

The problem has been successfully solved by designing the critical Thermoelectric array across the periphery of the lens along with the electronic circuit to control the temperature, where the space & weight were real constraint for the Missile.

The final completion report of the project has been submitted to DRDO and the same has been accepted and well appreciated by them.

A letter of appreciation from Project Director was also received by our Company.

Successful design and development of “Athermailisation of IR Optics in a Tracking Missile” for Defence Research and Development Laboratory (DRDL), Hyderabad. Optical systems in anti-tank missile are used for targeting objects. At places were ambient temperature is beyond the design range, for targeting an object, the target distance obtained from the focussing distance by the optical system is not an accurate one and if any missile is fired on the basis of this measured distance the missile misses the target. To avoid the situation it was necessary to bring the optical components e.g. lenses, prisms, mirrors, etc. within the design temperature range during targeting any object. The problem has been successfully solved by designing the critical thermoelectric array across the periphery of the lenses along with the electronic circuits to control the temperature, where the space and weight were real 3

constraint for the missile. The final completion report of the project has been submitted to DRDO and same has been accepted and well appreciated by them.

Handling unit of Coke Ovens. Coke Oven and Oxygen Plant are already commissioned, Sinter Plant, EOF, CCP and Rolling Mills are likely to be commissioned shortly in phases.

Successful heating-up of MECON design new generation emission free Coke Oven Battery for SAIL, Bokaro Steel Plant (BSL) at Bokaro – heatingup of rebuilt Coke Oven Battery No. 5 was done on 27 February 2007. The battery has been rebuilt by MECON on turnkey basis. The battery design envisages several new features viz. zero leak doors, water sealed AP lid, hi-pressure ammonical liquor aspiration system, hi-pressure hydro jet door cleaner, spillage coke conveyor, leak proof goose neck / wall box joints, sliding joint at oven top brick work with auxiliary anchorage, stainless steel sheet embedded in brick work, computerized combustion control system, etc. With the new designed features the battery will cater to pollution norms of Central Pollution Control Board, New Delhi.

Capacity Expansion Project of Indian Rare Earths Ltd., Chavara – Your company is responsible for supply of indigenous equipment, construction, erection work and commissioning assistance as a subcontractor to ROCHE Mining MT, Australia. Out of four circuits, two circuits are commissioned and operational.

Successful commissioning of mini Blast Furnace of Sunflag Iron and Steel Company at Bhandara, Nagpur. The state-of-the art design 350 Cu.M Blast Furnace propels MECON as the sole indigenous leader for designing small blast furnaces. This is the fourth MECON design 350 Cu.M module blast furnace. MECON design 350 Cu.M blast furnace has many modern features like free standing BF shell, four posters, economical and spacious top structure, Stave cooler, integral metal transfer bay, advanced automation, and control system, top equipment suitable for high top pressure operation, nondrainable runner system, etc.

Successful commissioning of Steel Melting Shop of Essar Steel Limited, Hazira. Your company has provided detailed engineering and designers’ supervision at site for the expansion of Steel Melting Shop from 2.0 Mtpa to 4.6 Mtpa capacity with addition of major units such as Slab Caster No.3, Electric Arc Furnace No.4, Ladle Heating Furnace No.4 and RH Degaser with all associated utilities and service facilities.

Expansion of SISCOL Steel Plant from 0.3 Mtpa to 1.0 Mtpa capacity. The main units for which MECON has provided detailed engineering and consultancy services are 550 Cu.M Blast Furnace and PCI, 90 sq.m. Sinter Plant with Circular cooler, 65 t EOF, 65 t LRF and VD units, 3 Strand Bloom Caster and 10-stand No Twist Mil. Coal Handling and Coke File name: CURRENT FILES/34DIRRPT06-07

Successful design engineering for Valve Station of CAS-OB project at BOF Complex of JSW Steel Ltd., Toranagallu has been completed.

Your company has been providing Engineering and Project Management Consultancy services to GAIL as well as other clients for Natural Gas pipeline projects.

Various gas pipeline projects have been completed / are under execution all over the country for extending natural gas network of GAIL as well as of other clients. The major assignments completed during the year are: Successful commissioning of pipeline projects for gas supply to independent power producers and other consumers in KG Basin area of Andhra Pradesh for GAIL (India) Ltd. The project is continuing with the addition of additional pipelines by GAIL. Ahead of schedule successful commissioning of gas pipelines from Kelaras to Malanpur in Gwalior region of Madhya Pradesh for GAIL (India) Ltd. Successful commissioning of Natural Gas pipelines project from Ibrahimpur to Dholpur for GAIL (India) Ltd. Successful commissioning of various pipeline projects of BPCL in the state of Gujarat. This includes pipelines to Sintex plant, Gandhinagar and pipeline to Himmatnagar near Gandhinagar, etc.

Your company has made a niche in the area of CNG & City Gas projects. In addition to the projects in the cities of Vijayawada, Agra, Lucknow, Ahmedabad and Agartala, your company has also been assigned similar projects in city of Pune for Maharashtra Natural Gas Ltd. & Greater Noida and Ghaziabad for Indraprastha Gas Ltd. 4

Detailed reports have been prepared for CNG facilities and City Gas distribution in the following areas : • • •

Cities of Sonepat & Panipat Cities of Ujjain & Gwalior Towns along pipeline route from Kochi to Bangalore and Kochi to Mangalore

These projects are being executed by various joint venture companies.

Your company has made a breakthrough for the first time in country in providing consultancy services for commercialization of coal bed methane. First project has been undertaken for M/s. Great Eastern Energy Corporation Ltd. in Raniganj area for processing gas from 23 wells and supply of the same for CNG and other commercial usages in Burdwan-Barakar region of West Bengal. Further expansion is planned by connecting 100 wells in the region Your Company has carved out a niche for providing consultancy and engineering services for Large/ Medium Warehousing Projects in the country. It has developed the expertise in Automated Storage and Retrieval System based large warehousing projects over the years.

Feasibility Report has been prepared for a model store in Ankleshwar for ONGC. Similar report is also being prepared for a model store in Ahmedabad.

The construction of townships under Married Accommodation Project for Ministry of Defence is in progress. Your company has completed peer review of DPR for the project in Agra during the year.

Quality Audit services are being provided for the project at Agra, Secunderabad, Ahmedabad, Bhatinda, Dehradun, Amritsar and Jalandhar.

Your Company is serving a large number of clients in the Public and Private sector. Some of the major clients in Public Sector include SAIL, RINL, KIOCL, MMTC, ONGC, GAIL, IOCL, BPCL, HPCL, BGL, IGL, DVC, BSPCL, NLC, KMML, NALCO, NINL, NMDC, IREL besides Ministry of Power, Govt. of India, the State Electricity Boards in Jharkhand, West Bengal, Delhi, Chhatisgarh, Rajasthan, Tamil Nadu , Uttaranchal, etc.

JSWL, JSPL, JSL, BSSL, BSPL, ESSAR, WELSPUN, etc. are some of the major clients in the private sector. In addition to above some of the major clients to whom we have been providing our services during the year include File name: CURRENT FILES/34DIRRPT06-07

NLC, MRPL, NHAI, NTPC, TTPL, HPCL, GWSSB, BPSCL, SISCOL, OMCL & RLUL, etc. The Company is also providing services for Defence Sector and Dept. of Science & Technology.

MECON has bagged an Award from Engineering Export Promotion Council, Kolkata for excellent export performance for the year 2004-2005.

Further, Consulting Engineers Association of India (CEAI) has awarded a Certificate of Merit in engineering consultancy services to MECON for the project “Coke Oven & Power Plant Complex for Neelachal Ispat Nigam Limited” for the year 2005.

Your Company is at present having a unique opportunity of riding on the upsurge in the Steel Sector, which is accepted as traditional core competence of the Company. In order to capitalize on this opportunity, technologically oriented turnkey projects are the need of the day for your company. Your customers have a lot of expectations from the Company to contribute in the national steel building capacity in the next 5 to 10 years.

Power is a potential area wherein your company can play a major role in setting-up power plants.

2.0

BUSINESS DIVERSIFICATION

In view of the cyclic demand / investments in the Steel Sector over the past several years, your Company has made forays into a number of diversified sectors of the economy especially Oil & Gas, Power and Infrastructure.

The Company has gained substantial experience and recognition in some of these sectors and would like to build a strong portfolio of services to meet the growing demand of Clients. This would also help the Company in adjusting to the sectoral market fluctuations by aligning itself towards the sectors having higher opportunities in future.

During the year, consultancy business procured from the diversified sectors (other than metals) has been significant. In Engineering and Consultancy, the Company’s order booking is 24.81% (previous year 24.14%) in the diversified sectors and 75.19% (previous year 75.86%) in Metals Sector. In case of supply / turnkey projects, it is 100% in Metals Sector (previous year 0.6%).

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Business Procured (Consultancy) Metals

Non-Metals

In Rs. Crores

400 300 200 100 0 2002-03 2003-04 2004-05 2005-06 2006-07 Year

Business Procured (Supply) Metals

Such initiatives have not only inculcated confidence among the engineers but also on the client’s project team.

Non-Metals

4.0 MOU WITH MINISTRY PERFORMANCE

400

In Rs. Crores

Indian Companies/ institutions, entering into strategic alliances, multi-skilling of personnel for productivity improvement, enterprise wide networking for e-working, project progress monitoring, shared resources, access to ASTM, IS and other standards online, use of latest softwares for planning, designing and execution etc. were few such major endeavors to meet project deliverables on time. Further it has been planned to implement earchives and integrated financial accounting system during the current financial year.

300 200 100 0 2002-03 2003-04 2004-05 2005-06 2006-07

Year

STEEL

ON

Like in the previous years, your Company had signed an MOU with Ministry of Steel for the performance of 20062007.

ISO – 9001 CERTIICATION

Sectorwise Business Procured (Consultancy) 2006-07

17%

OF

4% 4%

75%

Metals Power Oil & Gas Infrastructure

MECON is the first consultancy organization in the country to be accredited with ISO-9001: 2000 Certification. This certification for Consultancy, Design & Engineering, Procurement of Plant & Equipment, Construction & Project Management Services and Execution of Turnkey Projects is valid till January 2006.

The re-certification audit by TUV, India (on behalf of TUV, Germany) has been completed successfully in the month of December’05. TUV Germany has since issued a fresh ISO9001:2000 Certification valid for 3 years upto January, 2009.

5.0

INDIAN ASSIGNMENTS

Your company has procured following major work orders in: Metals sector

3.0

MANAGEMENT INITIATIVES

Keeping in view the Emerging Business Scenario, a number of initiatives have been taken by the management. A good number of MOUs/Agreements on Technology & Business Promotion have been signed with reputed foreign companies for synergizing mutual strengths and addressing the present market needs.

Consortium working philosophy with leading foreign and File name: CURRENT FILES/34DIRRPT06-07

•

Detailed engineering & consultancy for SAIL, ISP, Burnpur.

•

Consultancy services for NINL Steel Plant at Duburi.

•

Consultancy services for Blast Furnace No. 3 at JSW Steel Ltd.

6

•

Consultancy services for Kumaraswamy Iron Ore Project at Donimalai, Bellary for NMDC Ltd.

•

Preparation of technical specification for 550 Tpd Oxygen Plant at SAIL, BSP, Bhilai.

•

Detailed engineering & consultancy services for BOF/CCP No. 2 for JSW Steel Ltd., Toranagallu.

•

•

Preparation of feasibility report and technical specification for normalising furnace in Plate Mill for SAIL, BSP, Bhilai.

Detailed engineering & consultancy services for installation of Phase-II facilities in COB No. 4 at RINL, VSP, Vizag.

•

•

Basic engineering for raw material handling system for COREX Module No. 1 & 2 for Essar Steel Ltd., Hazira.

Detailed engineering & project management services for installation of MSDS-V and installation of Material Handling System Part-A for SAIL, BSP, Bhilai.

•

Preparation of feasibility report for expansion project for SAIL, BSP, Bhilai.

•

Consultancy services for New Roaster & Acid Plant at Debari, Hindustan Zinc Ltd.

•

•

Detailed engineering & consultancy services for Crude Benzol Recovery & Distillation Plant at BRP-I at SAIL, BSL, Bokaro.

Detailed engineering & consultancy services for replacement of 2 nos. of TGs for SAIL, BSP, Bhiali.

•

Consultancy services for setting-up of Ductile Iron Spun Pipe Plant for Kudremukh Iron Ore Co. Ltd.

•

Preparation of feasibility report for capacity agumentation to 6.5 Mt/yr. for SAIL, BSL, Bokaro.

Power sector

•

Preparation of technical specification for New Slag Yard and Modernization of Billet Caster for SAIL, DSP, Durgapur.

•

Detailed engineering & consultancy services for setting-up of 262 m3 Blast Furnace at Topadihi, Keonjhar for Deepak Steel & Power Ltd.

•

Preparation of composite feasibility report for expansion project for SAIL, RSP, Rourkela.

•

Consultancy services for electrical power distribution system for Essar Steel Ltd.

•

Consultancy services for revamping / replacement of 2 nos. of ATC at Oxygen Plant No. 2 for SAIL, BSP, Bhilai.

•

Detailed Project Report alongwith detailed engineering & consultancy services and commissioning for upgradation of distribution network of 13 towns of Chhattisgarh for CSEB, Raipur.

•

Detailed engineering & consultancy services for 2 x 500 MW Thermal Power Project at Tuticorin for NLC, Tamilnadu.

•

Consultancy services for Rural Electrification Work under RGGVY Project for Govt. of Mizoram, Power & Electricity Department, Mizoram.

•

Detailed engineering & consultancy services for APDRP programme in 7 towns for WBSEB, Kolkata.

•

Consultancy services and preparation of DPRs for 5 districts for Rural Electrification Work in Orissa & Jharkhand for NESCL (NTPC), Noida.

•

Detailed engineering & consultancy services for Iron Ore Handling complex for JSPL, Barbil.

•

Preparation of techno-economic feasibility report for conversion of iron ore fines into pellets and beneficiation at Dalli Mines for SAIL, BSP, Bhilai.

•

Detailed engineering & consultancy services for implementation of Rural Electrification Work for Govt. of Sikkim, Gangtok.

•

Consultancy services for 204 m3 Sinter Plant at JSW, Toranagallu.

•

Consultancy and surveillance services as Advisorcum-Consultant for the States of Jharkhand, Rajasthan & Tamilnadu for APDRP, Ministry of Power, Govt. of India, Delhi.

File name: CURRENT FILES/34DIRRPT06-07

7

•

Consultancy services for Dry Ash Evacuation System in Units 1 & 6 of Captive Power Plant for NALCO, Bhubaneswar.

Minerals •

Oil & Gas sector •

Engineering & project management consultancy services for City Gas Distribution and CNG Project for Maharashtra Natural Gas Ltd., Pune.

•

Project management & consultancy services for City Gas Distribution project of Indraprastha Gas Ltd., New Delhi.

•

Detailed engineering consultancy services and project management services for pipe networking for CBM well to GGS, CGS and pipe laying from well for Great Eastern Energy Corporation Ltd.

•

Phase – I Capacity enhancement to 40000 TPA (Residual EPCM).

Phase – II Capacity expansion up to 60,000 TPA from 40,000 TPA initiated by KMML and residual balance EPCM through Consultant) Phase – III Capacity expansion up to 100,000 TPA from 60,000 TPA (Total EPCM through Consultant).

•

M/s Travancore Titanium Products Limited (TTPL) has entrusted us project management and implementation services and procurement services for integrated project for De-bottlenecking, modernization, capacity enhancement and diversification into premium rutile grades of pigment along with complete effluent treatment plant. The job is in progress.

•

We are doing design, supply, fabrication, erection, testing, commissioning and demonstration of performance guarantee for modification & up gradation of existing Beach Sand Mining & Mineral Plant for M/s. Indian Rare Earth Limited at Chavara, Quilon, Kerala.

Detailed engineering & consultancy services for Pipeline Projects for Gujarat State Petronet Ltd., Gandhinagar.

Infrastructure sector •

Carrying out third party inspection and site services for Delhi Jal Board, Delhi.

•

Consultancy services for development of Township for Paradip Refinery Project for Indian Oil Corporation Ltd., New Delhi.

•

Project management & consultancy services for modernisation of Central Ordnance Deport (COD) Kanpur for Ministry of Defence, Govt. of India.

•

Consultancy services for water supply scheme under Gujarat Earthquake Reconstruction & Rehabilitation Programme for Gujarat Water Supply & Sewerage Board, Gujarat.

•

Consultancy services for development of multipurpose terminal at Dahej for Adani Petronet Port Pvt. Ltd., Dahej.

OTHER ASSIGNMENTS Engineering Consultancy services for the following areas are in progress:

File name: CURRENT FILES/34DIRRPT06-07

Kerala Minerals and Metals Limited (KMML) is executing the projects in the following three phases and we are rendering Engineering, procurement and Construction Management for all the projects. The job is in progress.:-

Mining With long standing expertise in ferrous and non-ferrous mining industries , your Company took large strides in the diversified field of coal mining sector , by securing a prestigious assignment from M/s NTPC for preparation of Statutory Mining Plan Report and Feasibility Report for development of 15 Mt/r capacity coal mine, the largest proposed opencast coal mine in the Country, at PakriBarwadhi in Hazaribagh district of Jharkhand. The Mining Plan Report has received due approval from Ministry of Coal, Govt. of India.

6.0

FOREIGN ASSIGNMENTS

Various overseas assignments bagged by your company are highlighted below:

8

•

MECON has received an assignment for vetting of bankable feasibility report for Iron Ore Project in Bapy, Kazakhastan for Oliex NV, Netherlands

•

NTS Steel Group Company Ltd., Thailand has placed the order on MECON for preparation of techno-economic feasibility report for Mini Blast Furnace Project.

Sherman International, USA has taken MECON specialist on deputation.

• •

•

•

JP Steel Plantech Co., Japan has placed order on MECON for preparation of project design document for re-generative furnaces for SAIL, BSL, Bokaro under Clean Development Mechanism (CDM).

MECON has received an assignment for detailed engineering & consultancy services for setting-up of 180,000 t/yr. Structural Rolling Mill for Star Steel International, Dubai.

•

JP Steel Plantech Co., Japan has placed order on MECON for preparation of local portion estimate and project design document for Coke Dry Quenching Plant for SAIL Plant.

•

MECON bagged the order of detailed engineering & consultancy services for 500 Tpd Sulphuric Acid Plant for Preminco Ltd., Dubai, UAE.

•

capacity iron ore mine at Bapy in Central Kazakhstan. The BFR was updated and the assignment was completed.

Smace Nigeria Ltd., Nigeria has awarded MECON for preparation of feasibility report for the manufacturing of fasteners.

Various overseas assignments being executed by your company are highlighted below: •

We have received an assignment from M/s Star Steel International, U.A.E. for providing Detailed Engineering and Consultancy Services for their proposed 3,60,000 t/yr Re-bar Mill being set up in Dubai. The work of this project is in progress.

•

M/s Essar Construction Limited, Iran have issued MECON a work assignment to us for carrying out Basic Engineering for their 1.4 Mt/yr Integrated Steel Plant being set up at Bandar Abbas, Iran. The work of this project is in progress.

•

MECON has received an assignment from M/s Oilex N, Kazakhstan to review and vet the Bankable Feasibility Report (BFR), on development of 3 Mt/yr

File name: CURRENT FILES/34DIRRPT06-07

M/s Jindal Steel & Power Limited, on getting an assignment from Bolivia Government, assigned MECON to prepare a Technical Proposal for development of iron ore deposit to produce 51 Mt/yr iron ore and 10.9 Mt/yr of processed iron ore concentrate at Bolivia’s Mutun iron ore deposit, the largest known iron ore deposit of the world. The proposal has been prepared in a time bound manner.

Related Party Disclosure: Company : METALLURGICAL & ENGINEERING CONSULTANTS (NIGERIA) LIMITED

•

A company was set up in Nigeria jointly by this Company with two Nigerian Govt. Companies and Nigerian citizens in the name of METALLURGICAL & ENGINEERING CONSULTANTS (NIGERIA) LIMITED and registered in the Federal Republic of Nigeria. The Company was incorporated on 28th October, 1982 under the Companies Act, 1968, of Federal Republic of Nigeria.

The prime objective of this company is to design, establish, provide, maintain and perform engineering and related technical and consultancy services for the development of various sectors of engineering and for the advancement and development of the different industries etc.

5000 shares of 10 Naira each of METALLURGICAL & ENGINEERING CONSULTANTS (NIGERIA) LIMITED is held by MECON LIMITED against consideration of Rs.7.60 lakhs. As per provisional accounts for the year ending 30th December. 2006, the Company has made a profit after tax of Naira 11.175 million.

There is no transaction between these two companies during the financial Year 2006-07.

Considering the market value of Naira, MECON LIMITED has made provision for diminution in the value of investment to the extent of Rs.7.60 lakhs during the financial year 2004-05 against Investment of Rs.7.60 lakhs.

9

FINANCIAL RESULTS

CUMULATIVE DIVIDEND & TAX

(Rs. In Lakhs) 2006-07 2005-06 4013.84 241.84

7.1

Paid-up Capital

7.2

Reserves and Surplus (Including revaluation reserve)

2439.98

2464.61

7.3

Turnover

36561.56

25379.08

7.4

Profit before Tax

2338.15

1927.41

The Reserve & Surplus as on 31st March, 2007 represents revaluation reserve and committed reserve.

In Rs. Crores

7.0

70 60 50 40 30 20 10 0 Equity

9.0

Tax

EARNING PER EMPLOYEE

Earning per employee per year has been improving since 2004-2005.

Turnover

EARNING PER EMPLOYEE In Rs. Lakhs

400 In Rs. Crores

Dividend

300 200

30 20 10 0 2002-03 2003-04 2004-05 2005-06 2006-07

100 0

Year 2002-03 2003-04 2004-05 2005-06 2006-07

Year

10.0 8.0 DIVIDEND This year your Directors have not recommended payment of Dividend.

8.1 CUMULATIVE DIVIDEND & TAX PAID Your company which had paid up capital of Rs.3973.53 Lakhs and issued Bonus Shares worth Rs. 40.31 lakhs, has paid cumulative dividend of Rs. 870.23 Lakhs and cumulative income tax to the exchequer amounting to Rs. 6354.51 Lakhs since its inception.

Your company accepts Engineering Consultancy & Project Management Consultancy (PMC) services as the thrust area of business procurement and therefore concentrating to procure and execute more jobs of this nature. The Company has laid emphasis for procurement of business in the different sectors of operation in this area. Business procurement in the area of engineering consultancy & PMC services had shown an excellent upward trend. It has increased from Rs. 268.26 Crores in previous year to Rs.410.97 Crores during the year showing an increase of around 65%. Your company has decided to effectively utilize the costly man hour towards high value jobs and out source the low return areas.

11.0 •

File name: CURRENT FILES/34DIRRPT06-07

FUTURE BUSINESS VISION

RESEARCH & DEVELOPMENT Development and implementation of slag detection system for converter and caster: The objective of the project is to indigenously design and develop an Infrared (IR) camera based slag detection system for converter and vibration based 10

slag detection system for caster. These latest techniques of slag detection are envisaged to eliminate the problems of poor yield, high inclusion, high risk of caster nozzle clogging, high wear of ladle refractory, envisaged to improve slag carry over consistency and extension of the sequence length of tundish etc. The project is sponsored by SDF, Ministry of Steel and is in progress.

•

Development of Coke Dry Cooling Technology (CDCT) for Non-recovery Coke Ovens: The objective is to develop/modify the orientation, plant layout, equipments, control system etc. so that CDCT can be suitably installed to serve the nonrecovery coke oven battery also. The major development shall be in the area of hot coke receiving from non-recovery Coke Ovens, its transportation to Coke Dry Cooling Plant and lifting for charging into cooling chamber.

This project is sponsored by SDF, Ministry of Steel and the project is in progress.

•

•

•

High Efficiency High temperature Top Fired Stoves :The ultimate objective is to independently design, develop and install top fired stove with all indigenous supplies to cater to higher blast temperature demand of Indian Blast Furnace.

This project is sponsored by SDF, Ministry of Steel and the project is in progress.

Development of Continuous NOx Monitoring System: Oxides of Nitrogen (NOx) contributes, to a large extent, to the production of acid rain, smog and depletion of ozone layer and are accordingly considered the most important pollutant left in the atmosphere through stacks and chimneys.

Development of continuous Nox monitoring system will be useful to SAIL in its efforts to contain emission, which are harmful to the environment.

SDF, Ministry of Steel has approved and funded the project and will start from April 2007.

Solid State Cooling Drinking Water Tank for MBT Arjun : An invited proposal from DRDO, Ministry of Defence, on Development of Solid State Cooling/Heating Drinking Water facilities at MBT Arjun has been submitted. Presently this is an acute problem for Indian Army to use the water for drinking purpose, from a water tank attached outside the vehicle which is exposed to the open atmosphere.

MECON’s Solid State Cooling/Heating Technology provides powerful solution to such problems

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presented by demanding thermal conditions and space constraint.

Yet to receive an order from CVRDE, Avadi, Chennai, a unit of DRDO. •

Feasibility Study on Development of Stokes Vector Polarimeter : In order to determine the purity of active chemical substances as well as sugar solution, an R&D project proposal for the development of automatic Stokes Vector Polarimeter was submitted. The equipment finds applications in pharmaceutical, chemical and sugar industries. This project has been submitted to DST, Govt. of India and presented before DST expert committee.

•

Repeat order on Miniaturized Solid State Cooling Unit :Repeat order is expected from DRDO (Defence). Offer has been submitted to DIPAS, Delhi, (DRDO). Awaiting for their concurrence.

•

Laser Based Positioning System for Pusher Car :Offer for 2 Nos. of Laser Based Positioning System for Pusher Car has been submitted to Rourkela Steel Plant on March 06, 2007.

•

Stove Heating Model and Automatic Stoves Changeover for Blast Furnace No. 4, RSP, SAIL : This project has been submitted to SDF, Ministry of Steel for funding.

The proposal was examined by the EG and decided to recommended for the consideration of EC subject to the condition that RDCIS, SAIL should share part of the project cost as RSP, SAIL is the beneficiary.

The proposal was deferred and RDCIS, SAIL was asked to firm up their financial contribution to this project and come up for the consideration of the EC in its next meeting.

•

Indigenous development of Mini Pellet Plant of 0.5 Mt/year for utilization of Iron Ore Ultra Fines : The main objective is to indigenously design, develop and to set up mini pellet plant of 0.5Mt/Yr in India with indigenously developed process technology to utilize iron ore ultra fines which are being dumped in the mines, and also those accumulated through decades of mining.

This project is sponsored by SDF, Ministry of Steel.

The Chairman of SDF noted the status of the Project and advised to discuss with NML, study the potential of success of the experiments and possibility of 11

propagation the technology among the Indian steel plants. A revised joint proposal with NML may be submitted at the earliest for consideration of EC as this is considered an important project.

12.0

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION

12.1

CONSERVATION OF ENERGY

Top priority is given by the company for adoption of energy conservation measures in the iron and steel sector. As competitiveness of iron and steel sector depends on reduction of energy cost, adoption of energy conservation measures have been suggested for all the projects being handled by MECON. The major thrust areas are as follows.

-

-

-

•

Recovery of energy in the form of power generation from coke dry quenching facilities.

Power generation using top pressure recovery turbine in blast furnaces.

Replacement of coke with non-coking coal dust injection in blast furnaces.

Reduction of fuel rate in blast furnaces through technology upgradation and use of prepared burden.

Power generation using waste heat recovery boiler in coal based DR kilns.

Use of hot DRI (gas based) in electric arc furnaces Use of hot metal in electric arc furnace Adoption of near net shape casting Hot charging in rolling mills Energy recovery in blast furnaces, sinter plants, steelmaking shops, etc. like energy recovery from hot sinter, heat recovery from stove flue gas, recovery of converter gas using suppressed combustion system. .

Recovery of heat from flue gas by Recuperator in Reheating Furnace of Hot Rolling Mill.

Use of Tunnel Furnace from Thin Slab Caster Plant to Continuous Strip Mill for conserving sensible heat.

Use of variable speed drive for Sinter Plant main exhauster : Energy saving opportunity approximately 20-30%.

Introduction of vapour absorption based Refrigeration System by utilizing waste heat of low pressure steam.

With the introduction of Energy Bill – 2000 in the Parliament on 24th February, 2000, Energy Audit has become mandatory for Power Intensive Industries.

MECON has been registered as an Authorised

File name: CURRENT FILES/34DIRRPT06-07

Energy Auditor by the Ministry of Power, Industrial Development Bank of India and various State Governments.

•

MECON has more than ten energy auditors in different disciplines certified by BEE, Govt. of India.

•

In the design of 262 m3 BF, in order to minimize the electrical energy consumption, low cost, low power consuming fans in series have been adopted in place of conventional blowers. By this method electrical energy consumption for the Blast Furnace has been reduced by 15% to 20%.

•

The Company has successfully reconstructed 2000m3 Blast Furnace at Bhilai Steel Plant, with modified close circuit cooling system and refractory design as well as state of the art technology for most economic operation and the furnace volume has been increased to 2363 M3 after reconstruction.

•

Preparation of report on cooler waste heat recovery system of sinter plant in RINL, Vizag, including indigenous cost estimate has been completed.

•

Engineering for installation of an integrated steel plant based on DRI production utilizing coal gas generated from non-coking coal and use of hot DRI in EAF has been started for M/s Jindal Steel and Power Limited. This process route of steelmaking will not only save energy but also metallurgical coal / natural gas availability of which is limited in the country.

12.2

TECHNOLOGY ABSORPTION

The detailed information on technology absorption as per Form-B under the Companies Disclosure of Particulars and Rules, 1988 is enclosed at Annexure-I to this Report.

13.0

FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company has earned Rs 305.21 Lakhs in Foreign Exchange during the Year 2006-07. The expenditure in Foreign Exchange remitted/actually spent during the year was Rs 502.34 Lakhs as per details given below:

12

Particulars - Engineering Fee

(Rupees in Lakhs) 43.00

- Other matters (purchase of equipment, components foreign supervisory services, capital goods etc.)

Total 14.0

459.34 502.34

HUMAN RESOURCE DEVELOPMENT

A well-conceived training program can help an organisation succeed. A program structured with the company’s strategy and objectives in mind can lead to improvement in productivity of the organisation. So, planning the training should be an essential part of the organization.

The training target for the year 2006-2007 was successfully achieved in all categories. The figures achieved as compared to the target set are as under: 1. Man days of training: Targeted: 1155 Achieved: 2811 2. Multi-skilling: Targeted: 68 employees Achieved: 72 employees In 2006-07, external and internal trainings /seminars / conferences and technical presentations were attended by total 819 employees. Trainings / Seminars / Conferences etc. were conducted in technical, behavioural and managerial areas. Total 453 employees participated in external trainings / seminars / conferences etc. In-house trainings were imparted to 362 employees.

Apart from these, 4 employees went abroad to attend training programmes.

Some of the topics covered in In-house, External & Foreign Trainings / Seminars / Conferences etc. are as follows: In-House Programs: - Work Motivation - Auto plant - Cryogenics - Service Tax and other Prevailing Taxes & Managing Contract Labour - Key Managerial Skills - Communication Skills

File name: CURRENT FILES/34DIRRPT06-07

External Programs: - Control of Instrumentation for Thermal Power Station - Hazardous Waste Incineration, Tail Gas Treatment and Management - Steel & Allied Industries – a win-win proposition - Electronics Control & Communication - Labour Laws - Competency Mapping - People Capability Maturity Model Foreign Training Programs: -

Management of Change Coal Mining Operation and Economics Asian Steel Conference-2007

Multiskilling was also done in 2006-07 and the target set

by MOU was achieved successfully. The programmes covered under were Trenchless Technology Technique, MineSched Software, Non-Destructive Testing and Evaluation of Concrete Structures, Auto Plant etc.

From 2006-07, following two dimensions of Knowledge Management have been incorporated in our HRD strategy: 1. Organisation of in-house workshops for sharing knowledge and best practices.

2. Identification of best practices in other industries and exposing our knowledge workers for enhancing their technical capabilities.

A workshop was also organised to sensitize our executives on the issue of Knowledge Management. A task force has been formed to implement the Knowledge Management System in the organization.

Like previous year, Competency Mapping exercise was carried out, for skill gap identification, by all sections at all locations of MECON in 2006-07. Awareness programmes on HIV/AIDS were also conducted in 2006-07.

15.0

PERSONNEL & WELFARE

Employee strength of MECON at the end of the year as on 31.03.2007 went up to 1631 from 1513 last year as on 31.03.2006, out of which 383 belong to SC and ST categories.

13

The Company continued with the Voluntary Retirement Scheme till 31.12.2006. During the year, 3 employees have separated under the Scheme financed from the loan taken against Government of India guarantee.

(Personnel) as Liaison Officer. The SC/ST Cell maintains proper record regarding recruitment and promotion and statistics of SC/ST employees and furnishes reports to the Ministry of Steel on regular basis.

During the year, none of the employees was covered under the purview of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1998 and 1999.

Towards its Corporate Social Responsibility, MECON has also undertaken various activities for the welfare and upliftment of weaker sections (SC/ST and Backward Communities) in and around Ranchi through the Company’s Community Development Programmes since several decades. For this purpose a Community Development Committee (CDC) has been formed in 1976 which organizes developmental activities for SC/ST and weaker sections of the society. To implement the programmes, the Company provides fund as required.

For the purpose of development of SC/ST population in Ranchi, particularly those who are residing close to the office location, the Company has implemented various programmes through its Community Development Committee (CDC).

16.0

INDUSTRIAL RELATIONS

At the industrial relations front, your Company continued to have peaceful and cordial relations with the employees. Most of the issues were settled through dialogues with the representatives of non-executive and executive employees.

17.0

ACTIVITIES / STEPS TAKEN FOR THE WELFARE OF SC / STs in THE COMPANY.

In addition to its corporate and business objectives, the Company is fully aware of its social responsibilities for development and welfare of members of Scheduled Caste/Scheduled Tribes Communities. The strength and number of SC/ST candidates presently employed in MECON are indicated below : Category Group A B C D (excluding Safai worker) D (Safai worker) Total

Manpower as on 31.03.200 7 1419 63 144 4

Total No. of SC/ ST 263 32 85 2

%age of SC

%age of ST

12.90 22.22 22.22 -

5.64 28.57 36.81 50.00

1 1631

1 383

-

100

The Company has adopted adequate measures for safeguarding their interests and welfare, such as promotion as per general trend, proper regard for human rights, equality and impartiality in all spheres of activities and providing abundant opportunities for self development through technical upgradation, sports, cultural, educational and recreational facilities. Scheduled Caste/Scheduled Tribe employees and their families enjoy all the facilities available to others. In order to implement the Government of India Directives and postbased rosters with regard to recruitment and promotion of SCs/STs, an SC/ST Cell has been formed with a DGM File name: CURRENT FILES/34DIRRPT06-07

This group is provided with an objective, full corporate support and a budget to carry out the development activities for the poor, slum dwellers and villagers, most of whom belong to SC/S/OBC and Minority category. A number of villages have been adopted by MECON and developmental activities carried out effectively. The artisans and farmers are scientifically educated in the vocational institutes so that they learn the details of a particular field. This leads them to perform things in a scientific manner. As such, following activities have been carried out in the adopted villages especially Dibadih, Argora, Jiyarap and Rai to encourage and facilitiate self employment to the people of these localities : 01. Training in sewing and donation of Stitching Machines.

02. Training in Knitting and donation of Knitting Machines.

03. Training in Spinning.

04. Formation of Tailoring Co-operatives.

05. Training in Honey Bee keeping and donation of Wooden Boxes.

06. Training in Poultry.

07. Training in Dairy.

08. Training in Piggery/Goatry.

09. Community Adult Education.

10. Training in Chalk making and donation of equipment.

Through CDC, arrangements are also made for medical camps, eye camps and free homeopathic medical treatment to the rural poor.

14

Under the aegis of National Open School (NOS), New Delhi, a vocational training institute was started through the CDC to impart technical education to the poor boys of slum areas and villages in the field of Radio & TV technical, Electrical technician and Welding technology.

This training institute, over the years has produced a number of technicians who are helping the community. In the community education schools, preference is given to the local educated un-employed women/youths, as they reside in the same village and can give their full time in imparting education to the poor children. The stitching centers for girls and women imparts training not only in stitching but also helps them in building their confidence, sense of independence and improving their standard of living – either hygienically or economically.

Through the above activities MECON has contributed immensely in improving the educational, Social, economic and overall living standard of SCs/STs. 18.0

OFFICIAL LANGUAGE POLICY (USE OF RAJBHASHA)

As per constitutional provisions various activities to motivate the employees for official work were undertaken during the year. Official Language Policy of the Government of India is being implemented with full vigour in the Head Office and other Site Offices of MECON. Besides coaching, workshop and Hindi Training, Quiz competitions, debates were also organized to overcome reluctance among employees to work in Hindi.

Town Official Language Implementation Committee (TOLIC), Ranchi, which functions under the aegis of Chairman-cum-Managing Director, MECON, organized Rajbhasha seminar on the subject “ Soochana Ka Adhikar ”. A two days Rajbhasha Symposium were also organized on “ Implementation of Rajbhasha Hindi – Achievments & Future Challenges. ” Hindi week was observed in the Head Office and its Site Offices during the period from 14th to 20th September, 2006. On the occasion, employees resolved to maximize the use of Hindi.

During the “ Productivity Week ” which was also celebrated in the Company from 14th to 20th Feb, 2007, a debate was organized in Hindi on the subject – “ Kya Sarvajanik Upakramon Ka Ekmatra Lakshya Kewal Utpadakta Vridhi Honi Chahiye ”.

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19.0

VIGILANCE

The Vigilance Department of the Company functions independently headed by Chief Vigilance Officer and supported by Dy. General Manager (Vigilance). Chief Vigilance Officer reports directly to Chairman-cumManaging Director.

Emphasis is laid on preventive vigilance, spreading awareness, surveillance and analysis of systems & procedures in detail to ensure optimum utilisation of resources, appropriate & timely decisions, corrective action against defaulters and transparency and accountability in the system. A number of suggestions given by Vigilance for systems improvement and curbing of wasteful expenditures have already been implemented and this process is continuing.

Surprise and routine checks are conducted regularly to detect loopholes in the system for irregularities.

Complaints are investigated promptly. Corrective measures for administrative reforms and system improvements are suggested. Sensitive areas have been identified for job rotation which is being effected gradually keeping in view that the work is not hampered.

Your Company is pleased to inform that it has obtained ISO:9001:2000 Certification for their Vigilance Wing.

Vigilance Awareness Week was observed in all the offices of the company from 06.11.2006 to 10.11.2006.

Articles on Preventive Vigilance and Vigilance Awareness were published in In-house Journal of MECON both in English and Hindi.

20.0

CORPORATE GOVERNANCE

The company has complied with the requirements of Corporate Governance. The detail in this regard form part of this report.

21.0

AUDITORS

M/s. S.N. Rajgarhia & Co., Chartered Accountants, Ranchi were appointed as Auditors to audit the accounts of the Company for the financial year 2006-2007 by the Comptroller & Auditor General of India.. They have also been appointed as Auditors for carrying out the audit under Section 44AB of the Income Tax Act, 1961 for the year 2006-07.

15

22.0

DIRECTOR’S RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to Director’s Responsibility Statement, it is hereby confirmed that: i)

In the preparation of the Annual Accounts for the financial year ended 31st March, 2007 the applicable accounting standards had been followed along with proper explanation relating to material departures;

ii)

The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities to the best of knowledge and abilities; iv) The Directors had prepared the accounts for the financial year 31st March, 2007 on a ‘going concern’ basis.

23.0 ACKNOWLEDGEMENT Your Directors are pleased to place on record their appreciation of the contribution of all concerned towards the successful working of the Company during the year.

We offer our sincere thanks for the support provided by the Ministry of Steel, Govt. of India in getting the revival/restructuring package of the Company. The Directors also express their sincere and grateful thanks to the Company’s trusted clients, suppliers, sub-contractors and other partners in business for enabling it to perform up-to the expectations of the customers. The Company is also grateful for the assistance provided to it from time to time by the Ministry of Steel and various other Ministries, Govt. of Jharkhand and Departments of the Central and State Governments and Indian Embassies abroad.

For and on behalf of the Board of Directors of MECON LIMITED

Pace :Doranda,Ranchi Dated :18.08.2007

- Sd ( D. Rath ) Chairman-cum-Managing Director

File name: CURRENT FILES/34DIRRPT06-07

16

REPORT ON CORPORATE GOVERNANCE The Directors present the Company’s Report on Corporate Governance as on 31.03.2007.

The Company’s Corporate Governance practice is based on the principles of integrity, fairness, equity, transparency, accountability and commitment to values that governs relationship with all its stakeholders and attaining maximum level of enrichment of the enterprise. The said practice of Corporate Governance stem from its professionalism. MECON trust on the conduct of its business activities and enhance the value of all those who are associate with the Company viz.

Shareholders, Customer, Suppliers, Government of India, Ministry of Steel, Department of Public Enterprises, various State Governments, other Government Agencies/Departments and the society at large.

Board of Directors: The Board of Directors oversees all major actions proposed to be taken by the Company. The Board also reviews and approves the strategic and business plans including monitoring corporate performance.

Composition of Board of Directors : (i) (ii) (iii)

Functional Directors including CMD (Whole time) Part-time Government Directors Part-time Independent Directors

5 2 3 -----Total 10 -----The terms, conditions and tenure of appointment of Chairman-cum-Managing Directors as well as Full-time and Part-time Directors are decided by the Government of India, Ministry of Steel.

Remuneration / Compensation to Board of Directors : The Chairman-cum-Managing Director and Whole-time Directors are paid monthly remuneration as fixed by Government of India. The Part-time Independent Directors are paid sitting fees for attending each meeting of the Board of Directors. The Company bears all the expenditure of the Part-time Government Directors and Part-time Independent Directors for attending the Board Meetings.

Board Meetings : .

The Board Meets statutorily and also as many times as may be warranted. The Board Meetings are held not only at company’s Registered Office at Ranchi, but also at its Engineering Office at New Delhi. The Company Secretary serves as Secretary to the Board Meetings.

Number of Board Meetings : During the year 2006-07, four (4) Meetings were held, the details of which are given below : Sl.No

Date of Meeting

Board Strength

1 2 3 4

29.06.2006 01.08.2006 28.11.2006 20.03.2007

9 10 10 10

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No. of Directors Present 8 9 10 10

17

Particulars of the Directors including their attendance at the Board meeting from 1st April, 2006 to 31st March, 2007.

Name of Directors I. Whole time Directors 1. Shri D.Rath, CMD 2. Shri A. Bhattacharya Director (Commercial) 3. Shri M.K. Deshmukh, Director (Engineering) 4. Shri B. Sankararaman, Director (Projects) 5. Shri L.R. Singh, Director, (Technology) II. Part-time Government Directors 1. Shri A.K. Rath, I.A.S SS&FA to Govt. of India, Ministry of Steel, N. Delhi.

2. Shri Ajoy Kumar, I.A.S Jt.Secretary to Govt. of India Ministry of Steel, N. Delhi.

3. Shri K.A.S. Deo, I.A.S Jt.Secretary to Govt. of India Ministry of Steel, N. Delhi.

III. Part-time Independent Directors 1. Shri H.L.Zutshi 2. Shri Anil Agrawal 3. Shri K.Satyanarayan

Period

No. of Board Meetings held.

No. of Board Meetings attended.

to

FOUR

FOUR

to

FOUR

THREE

to

FOUR

FOUR

to

FOUR

FOUR

to

THREE

THREE

01.04.2006 31.03.2007

to

FOUR

THREE

01.04.2006 28.04.2006

to

Nil

Nil

28.04.2006 31.03.2007

to

FOUR

FOUR

01.04.2006 31.03.2007 01.04.2006 31.03.2007 02.05.2006 31.03.200

to

FOUR

FOUR

to

FOUR

THREE

to

FOUR

FOUR

01.04.2006 31.03.2007 01.04.2006 31.03.2007 01.04.2006 31.03.2007 01.04.2006 31.03.2007 17.07.2006 31.03.2007

Board Committee : The Board of Directors in its Meeting held on 20.03.2007 constituted a Three member Audit Committee comprising of Two Part-time Independent Director and one Whole Time Director. The Chairman of the Audit Committee is Parttime Independent Director.

Members of the Audit Committee are : 1. Shri H.L.Zutshi, Director 2. Shri Anil Agrawal, Director 3. Shri A.Bhattacharya, Director (Commercial)

-

Chairman Member Member

The Company Secretary will act as Secretary during the meeting of the Committee.

File name: CURRENT FILES/34DIRRPT06-07

18

Annexures to Directors’ Report for the year 2006-2007 TECHNOLOGY INNOVATION Annexure-I Form-B Form for disclosure of particulars with respect to technology innovation .

Sl. No. 1.

2.

3.

4.

5.

6.

7

8.

9.

Technology

Benefits derived

Basic design and complete know-how for MECON designed coke oven batteries are already in installation of coke oven batteries (4.5m and operation at SAIL/RSP, SAIL/DSP & SAIL/ISP. One 5 m high) from concept to commissioning.

Battery at RSP (No.1)has been commissioned and one at BSL (Battery No.5) is under heating up and ISP Battery No.10 is under implementation.

7m tall 41.6 m3 ovens.

Battery No.9 & 10 at SAIL/BSP and Batteries 1,2 & 3 of VSP and another Battery at NINL, Duburi are under operation. One more battery No.4 is under implementation at VSP. High Pressure Ammonical Liquor Absorption MECON designed plant is under operation at SAIL/BSL System for coke oven batteries. and the plant meets stringent pollution control norms. The system is fully commercialized at SAIL/RSP Battery No.5 and NINL Battery No.1 and are operating quite well.

Similar system is under implementation at RSP’s Battery No.1, BSL’s Battery No. 5 , VSP’s Battery No. 4 & ISP Battery No.10.

Water sealed AP Caps for pollution control.

MECON designed water sealed AP caps for pollution control is successfully functioning at Battery No.5 at RSP and at NINL Battery No.1. Similar system is implemented at RSP Battery No. 1 ,and is being implemented at BSL Battery No. 5, VSP’s Battery No.4 and ISP Battery No.10.

Rapid Water Quenching System for Design completed and successfully commissioned at Thermo-Mechanical treatment of Rebar.

IISCO and SISCOL. Laser Based Positioning System for This is an import substitution product and had given MECON an edge over other regarding turnkey supply of alignment of Coke Oven Service machine. coke oven batteries. This has a very good market as Patented vide Patent No.184585 in the year stand alone unit also. Two units were installed at SAIL/RSP & VSP respectively.

2001.

Laser Line Projection System to align long sheet/plate in Laser Line Projection System Patented vide Patent No. 198129 in the year side trimming machine is developed and two such systems were supplied to SAIL/BSP. The product has an 2006. extremely good market. BSP has taken offer for four additional units.

Optical Setting Device for alignment of Entry This is an import substitution product. This equipment has been supplied to TISCO & VSP. This has a very good Roller Guides.

Patented vide Patent No. 182193 in the year market potential.

1995.

Optical Setting Projector for alignment of This is an import substitution product. This equipment finishing mill guides. has been supplied to VSP. This equipment is having a good market potential.

File name: CURRENT FILES/34DIRRPT06-07

19

Sl. No. 10.

Technology

Benefits derived

Thermoelectric Cold-chain Chest Operated Thermoelectric Cold-chain Chests developed by by 12V DC Vehicular Battery.

MECON are suitable for use in medical and health-

care programmes for storing and/or transporting

Patented vide Patent No. 198979 in the year medicine, drugs, vaccines, serum, semen and 2006.

diagnostic materials for urban as well as rural areas.

These Cold Chain-Chests have very good market potential.

11.

12.

13.

14.

Off-line Diagnostic Expert System for The system has been installed successfully at Upper India Continuously Cast Product e.g. Billet, Steels Ltd., Modern Steel Ltd., VSP and Rajindera Steel Bloom, Slab.

Ltd. This has a very good market in other steel plants also.

Distribution of piped natural gas for Project has been successfully carried out at Delhi. domestic and commercial use.

Distribution of Compressed Natural Gas Project has been successfully carried out at Delhi.

(CNG) for use in automobiles.

Solid State Microclimate Conditioning Unit Solid State Microclimate Conditioning Unit developed for Defence Personnel.

by MECON provides powerful solutions to the

problems

presented

by

demanding

thermal

Patented vide Patent No. 195457 in the year conditions i.e. CFC free, highly reliable and easily 2005.

maintainable. This system is having a good market potential.

15

16.

17.

18.

19.

Development of confocal microscope for Because of the fast development in biotechnology, biological applications. confocal microscope possesses excellent market potential. This pilot project for technology demonstration was sponsored by DST and was successfully completed in time. The project completion report was submitted to DST. Based on this development of laboratory model a proposal for development of industrial prototype of confocal microscope was submitted to planning commission for funding.

Development of continuous monitoring Continuous monitoring of stacks is becoming essential as system to monitor concentration of dust from directed by Central Pollution Control Board (CPCB) in stacks using the principle of “opacity their publication ”Corporate Responsibilities for Environmental Protection”. MECON designed, developed monitoring”. and field tested opacity monitor has not only increase Patent Application filed in December, 2006. MECON’s reputation for in house R&D in Environment Sector but will also bring more business.

Heating Gloves and Socks for Defence Important development for Defence personnel working at Personnel Working at very low temperature. sub-zero environment. Having good market potential at Defence Sector.

Development of special bellow Type The System has been designed and developed in house compensator and Tuyere Stock for Blast and has been installed in Blast Furnace No.3 of DSP (18 Nos.) and is working satisfactorily. It relates to import Furnace.

Patented vide Patent No.162929 in the year substitution for which earlier SAIL/DSP was importing these items from JAPAN. 1986.

Development of Magnesium Aluminate and Laboratory scale product development process is scaled Magnesium Chromate Spinel Aggregate. up for commercial scale production. A production facility is supplied and commissioned for M/s Burn Standard Company Ltd at Salem.

File name: CURRENT FILES/34DIRRPT06-07

20

Sl. No. 20.

Technology

Benefits derived

Cathodic Protection of Internal Surface of Working satisfactorily at ONGC Balol II & III and High Pressure Separators.

Mehsana.

21.

Development of internal Combustion Seven (7) numbers of such stove plant are under chamber type Stoves with ceramic burner operation, 1No at ECL Khardah, 2Nos at TML, Kharagpur, 2Nos at SESA Goa, 1 No at KIC Metallics, for 1100 Deg.C blast temp.

Durgapur and 1No at Usha Martin Ltd. These stoves are Highly energy efficient of around 80% efficiency.

22.

Development of 350m3 BF with inbuilt Complete design & implementation from concept to coolers for extended Spray cooling. commissioning for 350m3 Blast Furnace with 100% indigenous plant & equipment. Three number of Blast Furnaces of 350m3 size are successfully operating and four more are under execution. To adjust to the requirement of various clients, and site related problems furnace variant with less water consumption has been developed for M/s SAW Pipes Ltd. and hearth design with carbon refractory has been developed for M/s RLUL. Development of 1250m3 BF Design along MECON has done the complete basic and detailed with stoves & associated service and engineering along with supply of design / manufacturing drawings for non-standard equipment for 1 x 1250 m3 auxiliary facilities.

Blast Furnace at Toranagallu, Karnataka for M/s JVSL. The Blast Furnace design has been optimized with respect to lower cost of plant & equipment in order to suit the budget of client. This Blast Furnace has been successfully commissioned and is operating with high productivity.

Development of 262 m3 BF plant design MECON has developed 100% indigenously, process & along with stoves and associated services technology, engineering for 262m3 Blast Furnace. Three and auxiliary facilities. such Blast Furnaces have already been commissioned- 1 No at M/s Neepaz Metallics 1No at SLR Steels Ltd, and 1No at Maheswari Ispat Limited. Another one is in progress at Deepak Steel & Power Ltd. Development of BF hearth and hearth wall BF with such hearth design is under construction at design using semi baked carbon & graphite Neepaz Metallics Rourkela. material.

Quick Retracting Cryo Arm for Launch Cryo Arms have been successfully tested and erected at Vehicles.

Second Launch Pad of ISRO. Development of a heat transfer model for MECON has developed a heat transfer model for determination location of freeze line (1150oC determination location of freezeline (11500C isotherm) in isotherm) in Blast Furnace hearth.

Blast Furnace hearth in association with the Indian Institute of Technology, Kanpur.

Production of alloy pig iron from chromite MECON has successfully established commercial scale overburden. production of alloy pig iron containing Nickel using Chromite over-burden agglomerate in a small Blast Furnace. The technology developed by MECON and demonstrated at commercial scale will establish economic use of Chromite overburden which is a waste material generated during mining of chromites ore and creates environmental pollution.

23.

24.

25.

26.

27.

28.

File name: CURRENT FILES/34DIRRPT06-07

21

Sl. No. 29.

Technology

Benefits derived

Preparation of Project Idea Note (PIN) and Project Design Document under Clean Development Mechanism for achieving the Green House Gas emission reduction target and ultimately help reduce global warming thus climate change, is a thrust area where MECON has entered in a big way.

MECON has been highly benefited to learn the trade in this line. MECON has been financially reimbursed by GTZ, Germany as fees towards preparation of PDD for IPGENCO job. MECON inculcated the resource and knowledge base available in-house from its different Sections.

Starting from PDD preparation job of Indraprastha Power Generation Co. (IPGENCO) in power Sector for their Plant’s modernization & renovation to Bhushan Steel & Strips Ltd., Meramandali, Bokaro Steel Plant’s Energy saving plan from regenerative burners in Reheating Furnace; Durgapur Steel Plant’s Coke Dry Quenching and Heat Recovery from Sinter Plant of Vizag Steel Plant.

30

Athermalisation of NAG IR Optics.

31

Development of Coke Dry Cooling Technology ( CDCT ) for Non-recovery Coke Ovens.

32

Basic Engineering of Ferro-Manganese and Silico-Manganese Furnaces

33

Design and Basic Engineering for various capacity of ladles, transfer cars and slag pots.

34

Development and implementation of slag detection system from converter and caster.

File name: CURRENT FILES/34DIRRPT06-07

From Power Sector, MECON has undertaken PIN & PDD preparation job for Bhushan Steel & Strips Ltd. And the PDD is almost through awaiting approval from Govt. of India. PDDs of other projects for Bokaro, Durgapur & Vizag Steel Plants have already been prepared and are under various procedural stages. Thus, MECON is helping its esteemed clients in lowering of the emission of GHG and thereby helping preservation of Climate.

Clients on their part will earn Certified Emission Reduction (CER) in lieu of saving carbon emission.

Up till now MECON has earned more than Rs. 7.0 million on this account..

A critical problem on Anti-Tank NAG Missile was assigned

by DRDL (DRDO), Hyderabad to us. The project is completed successfully and well appreciated by DRDL. The objective is to develop/modify the orientation, plant layout, equipments, control system etc. so that CDCT can be suitably installed to serve the non-recovery coke oven battery also. The major development shall be in the area of hot coke receiving from non-recovery Coke Ovens, its transportation to Coke Dry Cooling Plant and lifting for charging into cooling chamber. The project is sponsored

by SDF, Ministry of Steel, Govt. of India..

For production of ferro-alloys mainly Fe-Mn and Si-Mn , which are extensively used for steel making, MECON has developed the required engineering design by way of working with equipment suppliers. After necessary design absorption, the basic engineering is being carried out for Jindal Stainless Steel Plant at Duburi, Orissa.

Steel ladles are used for carrying liquid steel for casting.

This vital equipment in the steel melting shop has been designed successfully by MECON for various capacities and being supplied to different steel manufacturers.

The objective of the project is to indigenously design and develop an Infrared (IR) camera based slag detection system from converter and vibration based slag detecting system for caster. These latest techniques of slag detection are envisaged to eliminate the problems of poor yield, high inclusion, high risk of caster nozzle clogging, high wear of ladle refractory, and are envisaged to improve slag carry over consistency and extension of the sequence length of tundish etc. The project is sponsored

by SDF, Ministry of Steel, Govt. of India.

22

Sl. No. 35

36

37

38 39

40 41

Technology

Benefits derived

High Efficiency High temperature Top Fired The ultimate objective is to independently design, develop Stoves. and install top fired stove with all indigenous supplies to cater to higher blast temperature demand of Indian Blast Furnace. The project is sponsored by SDF, Ministry of Steel, Govt. of India.

Use of DRI in BOF charge- mix Continuous feeding of DRI in BOF converter is being envisaged for all BOF based steel making proposals. N2 shielding is being considered at the storage bunkers / feeding equipment to prevent any chance of oxidation / localized heating.

Use of BOF Slag High basicity BOF slag with 18% – 20% FeO is being planned for usage in sinter plant after proper sizing. This will also be used as rail ballast. By adoption of above dumping as a waste will be greatly reduced.

Centralized gas / fuel management system Concept note prepared for SAIL Integrated Steel Plant of Integrated Steel Plant. like BSP, RSP, DSP, BSL, ISP. Charging Car Track supported on Heating It has been suitably used in Coke Oven Battery No.5 of Walls of Coke Oven.

BSL, SAIL.. This has helped in direct transfer of charging car load on heating wall and not on oven roof. Further it led to improvement of oven brickwork life and less repair work thus reducing maintenance time and cost..

Bitumens sealed spigot joints between It has successfully been applied in Coke Oven Battery Goose neck and valve box.

No.5 BSL,SAIL. It helped in reduction of pollution due to no gas leakage. It is also reliable and easy to maintain.

SS sheets inserted in brick work.

It has successfully been applied in Coke Oven Battery No. 5 of BSL, SAIL. It helped in reduction of pollution due to prevention of gas leakage through brickwork at oven roof.

Further it leads to prevention of air ingress through brickwork of regenerator face wall which prevents burning of gas in regenerator and thus reducing energy consumption.

IMPORTED TECHNOLOGY Annexue-I Form - B Form for disclosure of particulars with respect of Imported technology absorption.

Sl.No

Technology Imported

1

Technology for design of coil box of HSM from Steel Tech Ltd

2

Geotechnical Centrifuge, Wyle Laboratories Incorporated, USA

File name: CURRENT FILES/34DIRRPT06-07

Period of Agreement for Import Operative from March,1994

Status of absorption Absorption after receipt of orders for design and supply

1996-97

23

39 Shradhanand Road st 1 Floor Ranchi – 834001 Ph. : 0651 (O)-,2207653, 2205891 Fax - 2205840 Email : snrco@yahoo.co.in

S.N. RAJGARHIA & CO. Chartered Accountants

AUDITOR’S REPORT To, The Members of MECON LIMITED Ranchi.

1.

On completion of Audit of Accounts of Mecon Ltd. for the year ended on 31st March, 2007, we have issued our audit report on 07-07-2007. Subsequent to our report, in the light of the observations arising from the audit by Comptroller and Auditor General of India, the said report has been revised to make further disclosure as indicated in para 5 of this report. This supersedes our earlier report.

2.

We have audited the attached Balance Sheet of MECON LIMITED, Ranchi, as at 31st March 2007, the Profit & Loss Account and also the Cash Flow Statement of the company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

3.

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 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.

4.

As required by the Companies (Auditor’s 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, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

5.

We draw attention to :(i)

The company has not provided future liability against hometown settlement expenses and post retirement medical expenses (refer para no. 11.3 of accounting policies), which are accounted for on actual payment basis. In the absence of sufficient information, the effect of the same on the current financial year could not be ascertained. This in our opinion is not in accordance with the requirements of AS 15.

(ii)

Note No. 6 to Notes on Accounts (Schedule 11) regarding accounting of expenses on cash basis in respect of amount payable to dependants of deceased employees under the Employees Family Benefit Scheme. In the absence of sufficient information, the effect of the same on the current financial year could not be ascertained. This in our opinion is not in accordance with the requirements of AS 15.

(iii)

Note No. 20 to Notes on Accounts (Schedule 11) regarding exclusion of manpower cost in ascertaining cost to complete the project. In the absence of sufficient information, the effect of the same on the current financial year could not be ascertained. This in our opinion is not in accordance with the requirements of AS 7.

(iv)

6.

Note No. 23 to Notes on Accounts (Schedule 11) regarding pending reconciliation of some of the heads under current assets and current liabilities.

The effect of the same could not be ascertained as it is difficult to ascertain the provisions if any, required to be made in the books of account in this regard.

Further to our comments in the Annexure referred to in Para 4 above and Subject to our observations contained in Para 5 above, we report that; (i)

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

(ii)

In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(iii)

The Balance Sheet, Profit & 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 & Loss Account and Cash Flow Statement dealt with by this report comply with the ACCOUNTING STANDARDS referred to in sub-section (3C) of section 211 of the Companies Act, 1956 subject to the deviations reported by us in Para 5 (i), 5 (ii) & 5 (iii) above.

(v)

As per Notification No. 829(E), dated 21-10-2003, section 274(1)(g) of the Companies, Act, 1956 is not applicable to the Govt. Companies;

(vi)

In our opinion and to the best of our information and according to the explanations given to us, except for the effect on the financial statements of the matter referred in Para 5 above, the said statements, read together with the accounting policies and Notes thereon in Schedule 11, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India : (a)

In case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2007;

(b)

In the case of Profit & 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.

Place

: Ranchi

Date

:07.08.2007

For S.N. RAJGARHIA & CO., Chartered Accountants

(S.N. Rajgarhia) Partner Membership Number : 52037

ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph 4 of our report of even date on the accounts of MECON LIMITED for the year ended on 31st March 2007. i)

ii)

iii)

a)

The company has maintained records in respect of fixed assets showing full particulars as required by the Companies Act, 1956. However, in respect of some branches, records for the year have not been updated.

b)

As informed to us, the management has carried physical verification of the fixed assets of the company at the year end but reconciliation with book record is pending. Hence, it is not possible for us to comment upon the discrepancies, if any, between physical verification and book record.

c)

Fixed Assets disposed off during the year do not affect the going concern assumption.

a)

As explained to us, the management has physically verified the stocks of stores & spares, printing & stationery at the year end.

b)

According to the information and explanations given to us, in our opinion, the company has a system of Physical verification of stock of stores & spares and printing & stationary by store officials. The procedure for physical verification of inventory followed appears to be reasonable and adequate having regard to the size of the company and nature of its business.

c)

The company is maintaining proper records of inventory and no material discrepancies were noticed.

a)

The company has not granted any loans, secured or unsecured to any company, firm or other party covered in the register maintained under section 301 of the Companies Act, 1956.

In view of clause (iii) (a) above, the clauses (iii) (b), (iii) (c) and (iii) (d) are not applicable.

e)

The company has not taken any loans, secured or unsecured from any company, firm, or other party covered in register maintained under section 301 of the Companies Act, 1956.

In view of clause (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable.

iv)

In our opinion and according to the information and explanation given to us, there are adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of services. The activity of the company do not involve sale of goods. We have not observed any major weaknesses in internal control system during the course of audit.

v)

a)

b) vi)

According to the information and explanations given to us, during the year under audit, there have been no contracts or arrangements which need to be entered in the register maintained under section 301 of the Companies Act, 1956.

In view of clause (v) (a) above, the clause (v) (b) is not applicable.

The company has not accepted any deposits from the public as defined under section 58A and 58AA of the Companies Act, 1956.

vii)

Internal audit of the company is conducted by a firm of Chartered Accountants. We are of the opinion that the coverage of the internal audit does not commensurate with the size and nature of company.

viii)

According to the information given to us, Central Government has not prescribed the maintenance of cost records for the company under section 209(1)(d) of the Companies Act, 1956.

ix)

(a)

According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company has been regular in depositing during the year the undisputed statutory dues in respect of Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Cess and other material statutory dues as applicable, with the appropriate authorities.

(b)

According to the information and explanations given to us, as at 31st March, 2007 there have been no dues in respect of Income Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty and Cess which have not been deposited on account of dispute other than sales tax, the details of which are as follows :Name of the Statute Central Sales

Period to which relates 1993-1994

STAT, A.P.

Tax Act &

1994-1995

Commissioner of Commercial Taxes,

Sales Tax Acts of

Forum

Amount (in lakhs) 1.15 219.10

Ranchi 1995-1996

various states

Commissioner of Commercial Taxes,

258.12

Ranchi 1999-2000

High Court, Jharkhand

24.51

2001-2002

High Court, Jharkhand

49.47

1993-1994

Appellate Authority, Calcutta

5.15

2001-2002

Asst. Commissioner, Calcutta

68.23

2002-2003

Asst. Commissioner, Calcutta

75.66

2003-2004

Asst. Commissioner, Calcutta

16.47

1993-1994,

JCCT, Dhanbad

0.52

1998-1999

JCCT, Dhanbad

9.18

1996-1997

CCT, Jamshedpur

1.92

1997-1998

Sales Tax Tribunal, Mehesana

52.99

1998-1999

Sales Tax Tribunal, Mehesana

28.09

1999-2000

Sales Tax Tribunal, Palanpura

119.54

2000-2001

Sales Tax Tribunal, Palanpura

3.99

2001-2002

Jt. Commissioner, Mehesana

7.71

1994-1995 & 1996-1997

(x)

The accumulated losses of the company are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and also not incurred cash losses in the immediately preceeding financial year.

(xi)

In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

(xii)

According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and any 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)

The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the order are not applicable to the company.

(xv)

According to the information and explanation given to us, the company has not given any guarantee for loans taken by others from any bank or financial institution.

(xvi)

In our opinion and as per information and explanations given to us, the term loans have been applied for the purpose for which they were raised.

(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) According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act. (xix)

According to the information and explanations given to us, the company has not issued any debenture.

(xx)

According to the information and explanations given to us, the company has not raised any money by public issues during the year.

(xxi)

According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

Place

: Ranchi.

Date

: 07.08.2007

For S.N. RAJGARHIA & CO., Chartered Accountants

(S.N. Rajgarhia) Partner Membership Number : 52037

MANAGAMENT’S REPLIES TO THE STATUTORY AUDITOR’S REPORT FOR THE FINANCIAL YEAR 2006-07 Comments made by the Statutory Auditors in their Audit report for the financial year 2006-07 that requires Management’s Replies are placed below:

COMMENTS 1. On completion of Audit of Accounts of Mecon Ltd. for the year ended on 31st March, 2007, we have issued our audit report on 07-07-2007.

Subsequent to our report, in the light of the observations arising from the audit by Comptroller and Auditor General of India, the said report has been revised to make further disclosure as indicated in para 5 of this report. This supersedes our earlier report.

2 We have audited the attached Balance Sheet of MECON LIMITED, Ranchi, as at 31st March 2007, the Profit & Loss Account and also the Cash Flow Statement of the company for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

3.

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 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.

4. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the Central Government of India in terms of subsection (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Page 1 of 10

MANAGEMENT’S REPLIES

5.

We draw attention to :(i)

(ii)

(iii)

The company has not provided future liability against hometown settlement expenses and post retirement medical expenses (refer para no. 11.3 of accounting policies), which are accounted for on actual payment basis. In the absence of sufficient information, the effect of the same on the current financial year could not be ascertained. This in our opinion is not in accordance with the requirements of AS 15.

AS-15 applies to those retirement benefits which are either in the nature of Defined Contribution Scheme or in the nature of Defined Benefit Scheme. AS-15 does not apply to those retirement benefits for which the employer’s obligation cannot be reasonably estimated.

Note No. 6 to Notes on Accounts (Schedule 11) regarding accounting of expenses on cash basis in respect of amount payable to dependants of deceased employees under the Employees Family Benefit Scheme. In the absence of sufficient information, the effect of the same on the current financial year could not be ascertained. This in our opinion is not in accordance with the requirements of AS 15.

AS-15 is applicable for Retirements Benefits only. MECON Employee Family Benefit Scheme is an employee welfare scheme. It is in no way connected with the retirement of an employee. It is applicable only when an employee expires while he is in service. The benefits may be extended to the dependants of the deceased employee at their option only and future liability can not be reasonably estimated.

Note No. 20 to Notes on Accounts (Schedule 11) regarding exclusion of manpower cost in ascertaining cost to complete the project. In the absence of sufficient information, the effect of the same on the current financial year could not be ascertained. This in our opinion is not in accordance with the requirements of AS 7.

As per AS-7 contract cost should comprise costs that relate directly to the specific contract and costs that can be allocated and/or specifically chargeable to any specific contract. Costs that can not be attributed to contract activity or can not be allocated to a contract and costs for which reimbursement is not specified in the contract, are excluded from the costs of a construction contract.

Schemes for home town settlement on separation from the services of the company and post retirement medical facilities are discretionary as per the present practice and therefore the future liability for the same can not be reasonably estimated. Accordingly, expenses for the scheme are accounted on actual basis. This policy is being consistently followed and disclosed in notes to the accounts as per requirement of AS-1.

Accordingly, expenses for the scheme are accounted on actual basis. This policy is being consistently followed and is disclosed in notes to the accounts.

While executing turnkey project all direct costs and costs attributable and allocated to a contract are considered for estimating the cost to complete of the project. Pay roll cost of own employees is time related fixed cost and not reimbursed by client. This cost has no relevance or Page 2 of 10

relationship with any specific project and it is, therefore, directly charged to P&L A/c. This policy is being consistently followed and disclosed in notes to the accounts.

(iv)

6.

Reconciliation of some of the heads under current assets and Note No. 23 to Notes on Accounts (Schedule 11) regarding pending reconciliation of some of the heads current liabilities are under process. No material impact on profitability under current assets and current liabilities. The effect of of the company on this account has been found out. the same could not be ascertained as it is difficult to ascertain the provisions if any, required to be made in the books of account in this regard.

Further to our comments in the Annexure referred to in Para 4 above and Subject to our observations contained in Para 5 above, we report that; (i)

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

(ii)

In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

(iii)

The Balance Sheet, Profit & 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 & Loss Account and Cash Flow Statement dealt with by this report comply with the ACCOUNTING STANDARDS referred to in subsection (3C) of section 211 of the Companies Act, 1956 subject to the deviations reported by us in Para 5 (i), 5 (ii) & 5 (iii) above.

(v)

As per Notification No. 829(E), dated 21-10-2003, section 274(1)(g) of the Companies, Act, 1956 is not applicable to the Govt. Companies; Page 3 of 10

(vi)

In our opinion and to the best of our information and according to the explanations given to us, except for the effect on the financial statements of the matter referred in Para 5 above, the said statements, read together with the accounting policies and Notes thereon in Schedule 11, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India :

(a)

In case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2007;

(b)

In the case of Profit & 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.

Place : Ranchi Dated :07.08.2007

For S.N.Rajgarhia & CO. Chartered Accountants

Place : Ranchi Dated : 18/08/2007

Sd/(S.N.RAJGARHIA) Partner

For and on behalf of the Board of Directors

(DRONA RATH) Chairman-Cum-Managing Director

Page 4 of 10

ANNEXURE TO THE AUDITORS REPORT COMMENTS Referred to in paragraph 4 of our report of even date on the accounts of MECON LIMITED for the year ended on 31st March 2007. i)

ii)

iii)

MANAGEMENT’S REPLY

a)

The company has maintained records in respect of fixed assets showing full particulars as required by the Companies Act, 1956. However, in respect of some branches, records for the year have not been updated.

b)

As informed to us, the management has carried physical Reconciliation is at an advanced stage. verification of the fixed assets of the company at the year end but reconciliation with book record is pending. Hence, it is not possible for us to comment upon the discrepancies, if any, between physical verification and book record.

c)

Fixed Assets disposed off during the year do not affect the going concern assumption.

a)

As explained to us, the management has physically verified the stocks of stores & spares, printing & stationery at the year end.

b)

According to the information and explanations given to us, in our opinion, the company has a system of Physical verification of stock of stores & spares and printing & stationary by store officials. The procedure for physical verification of inventory followed appears to be reasonable and adequate having regard to the size of the company and nature of its business.

c)

The company is maintaining proper records of inventory and no material discrepancies were noticed.

a)

The company has not granted any loans, secured or unsecured to any company, firm or other party covered in the register maintained under section 301 of the Companies Act, 1956.

The assets of the company have been accounted centrally at the head office with the updated data from all the offices of MECON. However, in a few site office the asset registers are yet to be updated which are being processed.

Page 5 of 10

In view of clause (iii) (a) above, the clauses (iii) (b), (iii) (c) and (iii) (d) are not applicable. e)

The company has not taken any loans, secured or unsecured from any company, firm, or other party covered in register maintained under section 301 of the Companies Act, 1956.

In view of clause (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable.

iv)

In our opinion and according to the information and explanation given to us, there are adequate internal control system commensurate with the size of the company and the nature of its business with regard to purchase of inventory, fixed assets and with regard to the sale of services. The activity of the company do not involve sale of goods. We have not observed any major weaknesses in internal control system during the course of audit.

v)

a)

b)

According to the information and explanations given to us, during the year under audit, there have been no contracts or arrangements which need to be entered in the register maintained under section 301 of the Companies Act, 1956.

In view of clause (v) (a) above, the clause (v) (b) is not applicable.

vi)

The company has not accepted any deposits from the public as defined under section 58A and 58AA of the Companies Act, 1956.

vii)

Internal audit of the company is conducted by a firm of Chartered The company has formed its own Internal Audit Department in 2007-08 Accountants. We are of the opinion that the coverage of the replacing the firm employed earlier. internal audit does not commensurate with the size and nature of company.

viii)

According to the information given to us, Central Government has not prescribed the maintenance of cost records for the company under section 209(1)(d) of the Companies Act, 1956.

Page 6 of 10

ix)

(a)

According to the information and explanations given to us and the records of the company examined by us, in our opinion, the company has been regular in depositing during the year the undisputed statutory dues in respect of Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Cess and other material statutory dues as applicable, with the appropriate authorities.

(b)

According to the information and explanations given to us, as at 31st March, 2007 there have been no dues in respect of Income Tax, Wealth Tax, Service Tax, Excise Duty, Customs Duty and Cess which have not been deposited on account of dispute other than sales tax, the details of which are as follows :-

Name of the Statute Central

Period to which relates 1993-

Sales Tax

1994

Act &

1994-

Commissioner of Commercial

Sales Tax

1995

Taxes, Ranchi

Acts of

1995-

Commissioner of Commercial

various

1996

Taxes, Ranchi

states

1999-

High Court, Jharkhand

24.51

High Court, Jharkhand

49.47

Appellate Authority, Calcutta

5.15

Asst. Commissioner, Calcutta

68.23

Forum STAT, A.P.

Amount (in lakhs) 1.15

219.10

258.12

2000 20012002 19931994 20012002 Page 7 of 10

2002-

Asst. Commissioner, Calcutta

75.66

Asst. Commissioner, Calcutta

16.47

JCCT, Dhanbad

0.52

JCCT, Dhanbad

9.18

CCT, Jamshedpur

1.92

Sales Tax Tribunal, Mehesana

52.99

Sales Tax Tribunal, Mehesana

28.09

Sales Tax Tribunal, Palanpura

119.54

Sales Tax Tribunal, Palanpura

3.99

Jt. Commissioner, Mehesana

7.71

2003 20032004 19931994, 19941995 & 19961997 19981999 19961997 19971998 19981999 19992000 20002001 20012002

Page 8 of 10

(x)

The accumulated losses of the company are more than fifty percent of its net worth. The company has not incurred cash losses during the financial year covered by our audit and also not incurred cash losses in the immediately preceeding financial year.

(xi)

In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to financial institutions, banks or debenture holders.

(xii)

According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and any 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)

The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the order are not applicable to the company.

(xv)

According to the information and explanation given to us, the company has not given any guarantee for loans taken by others from any bank or financial institution.

(xvi)

In our opinion and as per information and explanations given to us, the term loans have been applied for the purpose for which they were raised.

(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) According to the information and explanations given to us, the company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act. Page 9 of 10

(xix)

According to the information and explanations given to us, the company has not issued any debenture.

(xx)

According to the information and explanations given to us, the company has not raised any money by public issues during the year.

(xxi)

According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course of our audit.

Place : Ranchi Dated :07.08.2007

For S.N.Rajgarhia & CO. Chartered Accountants

Place : Ranchi Dated : 18/08/2007

Sd/(S.N.RAJGARHIA) Partner

For and on behalf of the Board of Directors

(DRONA RATH) Chairman-Cum-Managing Director

Page 10 of 10

MECON

LI M I T E D,

Ranchi

1

2006-2007

BALANCE SHEET AS AT 31ST MARCH, 2007

(Rupees in lakhs) AS ON 31.03.2006

AS ON 31.03.2007

SCHEDULE

SOURCE OF FUNDS Shareholders' Funds a) Share Capital b) Reserves & Surplus

1 2A

4,013.84 2,439.98

6,453.82

241.84 2,464.61

2,706.45

Loan Funds a) Secured Loans b) Unsecured Loans

2B 2C

1,669.95 17,975.70 170.00

3,643.15 20,669.01 170.00

TOTAL

26,269.47

27,188.61

Deferred Tax Liability

APPLICATION OF FUNDS Fixed Assets a) Gross Block b) Less : Depreciation c) Net Block

Capital Work-in-Progress Investments Current Assets, Loans & Advances a) b) c) d) e) f)

3A & 3B

10,291.31 3,481.84

6,927.58 23.34 510.00

3C 3D 4A

Inventories Job-in-Progress Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances

Less : Current Liabilities & Provisions

10,604.53 3,676.95

6,809.47 690.00

104.01 918.03 7,694.49 16,004.24 705.14 5,638.92 31,064.83

81.89 383.65 7,895.86 12,831.91 511.07 4,140.10 25,844.48

25,078.82 4,421.92 29,500.74

22,861.31 3,885.27 26,746.58

5

a) Liabilities b) Provisions

Net Current Assets

1,564.09

(902.10)

Miscellaneous Expenditure (to the extent not written off or adjusted)

Deferred Revenue Expenditure

4B

Profit & Loss Account (Debit Balance) TOTAL

963.80

2,272.43

16,280.66

18,318.81

26,269.47

27,188.61

Schedules 1 to 5 and 11 annexed hereto form part of Accounts.

In terms of our report of even date For S.N. RAJGARHIA & COMPANY, CHARTERED ACCOUNTANTS

(S.N. RAJGARHIA) PARTNER Place : Ranchi Dated : 7th July, 2007

(RAVI BAMBHA) COMPANY SECRETARY

(S. CHATTOPADHYAY) DY. GENERAL MANAGER I/C (FINANCE)

(A. BHATTACHARYA) DIRECTOR (COMMERCIAL)

( D. RATH ) CHAIRMAN-cum-MANAGING DIRECTOR

MECON

L I M I T E D,

Ranchi

2

2006-2007

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH,2007

(Rupees in lakhs) Current Year

SCHEDULE

Previous Year

A. INCOME a)

b) c) d) e)

Income from services rendered and construction contract ( includes construction contract Rs. 21,389.09 lakhs Previous year Rs.10,222.67 lakhs) Current Business Income Other Income Accretion/(Decretion) to Jobs-in-Progress Provision no longer required written back

6(A) 6(B) 6(C)

TOTAL (A)

36,561.56

25,379.08

796.43 1,260.97 534.38 508.77

395.67 1,538.00 164.21 2,034.65

39,662.11

29,511.61

9,901.28 776.16 5,876.15 1,159.19 11,498.34 7,805.30 247.94

8,372.10 689.78 6,922.00 1,275.03 1,682.53 8,422.76 251.48

37,264.36

27,615.68

B. EXPENSES a) b) c) d) e) f) g)

Payments to & Provisions for Employees Social Amenities Other Expenses & Provisions Interest & Finance Charges Equipment for Construction Contracts Payment to Sub-Contractors Depreciation

7 8 9 9A

TOTAL (B) Profit/(Loss) for the year Add/(Less) Adjustment relating to earlier years Profit/(Loss) before Tax Less : Provision for taxation Current Tax Deferred Tax Fringe Benefit Tax

2,397.75 (59.60) 2,338.15

10

204.50 95.50

Profit / (Loss) after Tax

300.00

1,895.93 31.48 1,927.41 30.75 170.00 115.00

2,038.15

Transferred to General Reserve Transferred from General Reserve Profit / (Loss) carried over to Balance Sheet

315.75

1,611.66

-

-

2,038.15

1,611.66

Schedules 6 to 11 form an integral part of Accounts In terms of our report of even date For S.N. RAJGARHIA & COMPANY, CHARTERED ACCOUNTANTS

(S.N. RAJGARHIA) (RAVI BAMBHA) PARTNER COMPANY SECRETARY Place : Ranchi Dated : 7th July, 2007

(S. CHATTOPADHYAY) DY.GENERAL MANAGER I/C (FINANCE)

(A. BHATTACHARYA) DIRECTOR(COMMERCIAL)

(D. RATH ) CHAIRMAN-cum-MANAGING DIRECTOR

MECON

L I M I T E D,

Ranchi

3

2006-2007

Schedule forming part of the Balance Sheet as at 31st March 2007 SCHEDULE 1 : SHARE CAPITAL (Rupees in lakhs) AS ON 31.03.2007

AS ON 31.03.2006

AUTHORISED 4,10,00,000 (Previous year 40,00,000) Equity Shares of Rs.10/- each

4,100.00

400.00

4,013.84

241.84

4,013.84

241.84

ISSUED, SUBSCRIBED AND PAID UP 4,01,38,360 ( Previous year 24,18,360 ) Equity Shares of Rs.10/- each.

All these shares have been allotted to the President of India or his nominees as Fully Paid-up Equity Shares including 3,00,00,000 Equity Shares allotted vide Government of India, Ministry of Steel sanction letter no.4(46)/2004-HSM(Vol.IV) dated 27.02.2007.

Out of the total shares, 20,14,800 equity shares have been allotted as Fully Paid-up for consideration other than cash, pursuant to the Government of India, Ministry of Steel & Mines letter No. 6(100)/78-SAIL(1) dated 15th May, 1979 as consideration for net book value of immovable assets of M/s Hindustan Steel Limited at Ranchi transferred to the Company, 4,03,060 shares are alloted as Fully Paid-Up Bonus Shares, 60,00,000 Equity Shares have been allotted as Fully Paid-up against conversion of Government of India Loan outstanding as on 31st March, 2005 and 17,20,000 Equity Shares have been alloted as Fully Paid-up against conversion of Interest on Government of India Loan outstanding as on 31st March, 2005 vide Government of India, Ministry of Steel Order No.4(46)/2004-HSM dated 30th March,2007 TOTAL :

MECON

L I M I T E D,

Ranchi

4

2006-2007

Schedule forming part of the Balance Sheet as at 31st March 2007 (Rupees in lakhs) AS ON 31.03.2006

AS ON 31.03.2007

SCHEDULE 2A : RESERVES & SURPLUS Revaluation Reserve 2,464.61 24.63

As per last Balance Sheet Less : Adjustment due to Transfer of WTC Building, Mumbai to Current Asset Less : Transfer to Profit & Loss Account on adjustment of Depreciation

2,439.98

2,870.93 373.30 33.02

2,464.61

General Reserve -

As per last Balance Sheet Add : Transferred from Profit and Loss Account Less : Transferred to Profit & Loss Account

TOTAL

-

-

2,439.98

2,464.61

N.B.: A Revaluation Reserve of Rs. 3879.23 lakhs was created as on 31.03.2000 due to revaluation of certain Land & Buildings owned by the company. It was adjusted to the extent of Rs. 1414.62 lakhs upto 31st March, 2006 and Rs. 24.63 lakhs adjusted due to depreciation on appreciation of Land & Buildings during the year.

SCHEDULE 2B : SECURED LOANS Loan from Financial Institutions & Banks Add :

-

- for Office Building at Scope Minar, Laxminagar, New Delhi Interest Accrued and Due

Working Capital Borrowings from Bank # TOTAL # Secured by hypothecation of Company's book debts & fixed deposits

-

650.00 2.13

652.13

1,669.95

2,991.02

1,669.95

3,643.15

MECON

L I M I T E D,

Ranchi

5

2006-2007

Schedule forming part of the Balance Sheet as at 31st March 2007

(Rupees in lakhs) AS ON 31.03.2006

AS ON 31.03.2007

SCHEDULE 2C : UNSECURED LOANS Loan from Financial Institutions against equitable mortgage of dwelling units of the employees held by the Company Add : Interest accrued & due

-

Loan from Bank against Govt. Guarantee for VRS Add : Interest accrued & due

5,000.00 29.70

125.87 -

-

5,029.70

5,000.00 86.30

125.87

5,086.30

Non Convertible Bonds* Series

Interest Rate

I

6.90%

II

6.00%

III

6.80%

Face value of Bond(Rs.)

Date of redemption

1,000,000 5 equal annual instalments commencing from 24/08/2009 1,000,000 Bullet payment on 24/08/2006

6,000.00

1,000,000 5 equal annual instalments commencing from 27/11/2009

6,500.00

Add : Interest accrued & due

6,000.00

-

1,700.00 12,500.00 -

6,500.00 12,500.00

14,200.00 -

14,200.00

* Non-convertible bonds are guaranteed by Govt. of India and also secured by charge ranking pari-passu interse on immovable property (Book value as on 31/03/2004 Rs.5.10 lakhs) at Mouje Irana of Kadi Taluka, Mehsana, Gujarat.

Government of India Loan for purchase of computers Add : Interest accrued & due

400.00 46.00 TOTAL

446.00 17,975.70

1,000.00 256.84

1,256.84 20,669.01

MECON

L I M I T E D,

Ranchi

2006-2007

6

Schedule forming part of the Balance Sheet as at 31st March,2007

SCHEDULE 3A : FIXED ASSETS (GENERAL) (Rupees in lakhs)

TYPES OF ASSET

1.

2.

3.

4.

5.

6.

7.

8.

9.

As on 01.04.06

COST Sale/ Addition/ Adjustment Adjustment during the during the year year

DEPRECIATION As on 31.03.07

Upto 01.04.06

291.31 0.55 3.86 3,100.74 102.75 385.20 10.07 455.76 1,231.26 1,172.71

179.92 20.82 41.10 118.18 76.62

104.89 10.08 3.08 29.05 17.09 6.95

291.31 0.55 3.86 2,995.85 102.75 555.04 27.81 467.81 1,332.35 1,242.38

0.21 0.97 333.49 20.22 326.74 9.40 333.18 926.84 724.32

TOTAL

6,754.21

436.64

171.14

7,019.71

Previous Year

7,348.56

233.88

828.23

6,754.21

Land Road, Bridges & Culverts Water Supply and Sewerage Building - Freehold - Leasehold Furniture & Fixtures Vehicles Electrical Installation Computer Misc. Articles including Library

On Sale/ During the Adjustment year

NET BLOCK AS ON Upto 31.03.07

31.03.07

31.03.06

(0.01) 11.96 9.49 2.93 27.14 16.24 2.97

0.01 0.06 49.35 1.67 12.78 1.30 17.01 88.96 52.63

0.23 1.03 370.88 21.89 330.03 7.77 323.05 999.56 773.98

291.31 0.32 2.83 2,624.97 80.86 225.01 20.04 144.76 332.79 468.40

291.31 0.34 2.89 2,767.25 82.53 58.46 0.67 122.58 304.42 448.39

2,675.37

70.72

223.77

2,828.42

4,191.29

4,078.84

2,853.20

416.05

238.22

2,675.37

4,078.84

4,495.36

N.B. : The Company has revalued some of its land and buildings on 31.03.2000. As a result the original cost of land of Rs.56.14 lakhs was revalued at Rs.259.00 lakhs and the Gross Block of buildings of Rs.715.41 lakhs (as on 31.03.2000) was revalued at Rs.2332.65 lakhs which stands further adjusted to Rs.2008.29 lakhs as on 31.03.2002 due to transfer of Buildings of Rs.193.96 lakhs to Schedule 3B. Further Rs.153.62 lakhs is added as on 31.03.2002 due to correction in revaluation of W.T.C Property at Mumbai. Thus, Gross Block of Building (leasehold) stands adjusted to Rs.872.39 lakhs as on 31.03.2002. Further, Gross Block of Building(Leasehold) stands adjusted to Rs.431.48 lakhs as on 31.03.06 due to transfer of WTC Property at Mumbai to Current Assets. Gross Block of Building(Leasehold) has been reduced by Rs.328.73 lakhs and Gross Block of Building(Freehold) has been increased by Rs.328.73 lakhs as on 31.03.2007 to depict the appropriate status. Accordingly Provision for Depreciation and Net Block is also adjusted.

MECON

L I M I T E D,

Ranchi

2006-2007

7

Schedule forming part of the Balance Sheet as at 31st March,2007

SCHEDULE 3B : FIXED ASSETS (SOCIAL AMENITIES) (Rupees in lakhs)

TYPES OF ASSET

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

As on 01.04.06

COST Sale/ Addition/ Adjustment Adjustment during the during the year year

DEPRECIATION As on 31.03.07

Upto 01.04.06

On Sale/ During the Adjustment year

NET BLOCK AS ON Upto 31.03.07

31.03.07

31.03.06

1,250.15 38.13 140.44 1,728.37 55.81 3.73 14.43 2.03 135.13 0.94 167.94

11.70 0.07 2.41 21.35 0.20 23.71

3.70 4.71 1.42 1.89

1,250.15 38.13 152.14 1,724.67 51.10 3.80 16.84 0.61 156.48 1.14 189.76

13.18 53.64 491.89 15.56 1.30 13.76 1.58 109.15 0.89 105.52

2.00 2.34 1.35 1.07

0.62 2.44 33.83 0.89 0.15 1.36 0.04 1.93 0.02 7.54

13.80 56.08 523.72 14.11 1.45 15.12 0.27 111.08 0.91 111.99

1,250.15 24.33 96.06 1,200.95 36.99 2.35 1.72 0.34 45.40 0.23 77.77

1,250.15 24.95 86.80 1,236.48 40.25 2.43 0.67 0.45 25.98 0.05 62.42

TOTAL

3,537.10

59.44

11.72

3,584.82

806.47

6.76

48.82

848.53

2,736.29

2,730.63

Previous Year

3,406.75

131.78

1.43

3,537.10

762.27

1.13

45.33

806.47

2,730.63

2,644.48

GRAND TOTAL ( 3A & 3B )

10,291.31

496.08

182.86

10,604.53

3,481.84

77.48

272.59

3,676.95

6,927.58

6,809.47

Previous Year

10,755.31

365.66

829.66

10,291.31

3,615.47

417.18

283.55

3,481.84

6,809.47

7,139.84

Land Road, Bridges & Culverts Water Supply and Sewerage Building Fences Plant & Machinery Furniture & Fixtures Vehicle Electrical Installation Computer Misc. Articles including Library

i) ii) iii)

Depreciation for the year Transfer from Revaluation Reserve on a/c of depreciation Depreciation relating to earlier year

247.94 24.63 0.02 N.B. : 272.59 The Company has revalued its land and buildings on 31.03.2000 of residential flats at Bangalore. As a result, the Gross Block of Buildings (Rs.32.50 lakhs as on 31.03.2000) was revalued at Rs. 2091.62 lakhs. Due to sale of Flats at Indira Nagar, Bangalore & transfer of Buildings of Rs.193.96 lakhs from Schedule 3A, the Gross Block of Land and Buildings stands adjusted to Rs.1250.15 lakhs and Rs.1606.65 lakhs respectively. Further, due to capitalisation of Building Work-in-Progress, the Gross Block of Building stands adjusted to Rs.1728.37 lakhs as on 31.03.2006.

MECON

L I M I T E D,

Ranchi

8

2006-2007

Schedule forming part of the Balance Sheet as at 31st March, 2007

SCHEDULE 3C : CAPITAL WORK-IN-PROGRESS (Rupees in lakhs)

Particulars

1.

Others

TOTAL

Previous Year

As on 31.03.2006

Additions/ Adjustments during the year

Total

Balance as on Capitalised/ Adjustments during the year 31.03.2007 31.03.2006

-

23.34

23.34

-

23.34

-

-

23.34

23.34

-

23.34

-

99.84

-

99.84

99.84

-

99.84

MECON

L I M I T E D,

Ranchi

9

2006-2007

Schedule forming part of the Balance Sheet as at 31st March, 2007

SCHEDULE 3D : INVESTMENT - AT COST

Particulars

AS ON 31.03.2007

(Rupees in Lakhs) AS ON 31.03.2006

A. LONG TERM Traded (Unquoted) 1.

5000 Equity Shares of Niara 10 each fully paid up being 50% of paid up share capital of M/s Metallurgical & Engineering Consultants (Nigeria) Limited, a Company set up in Nigeria jointly by this Company with two Nigerian Government Companies and Nigerian Citizens

7.60

Less : Provision for dimunition in value of investment

7.60

2.

Promoters share in equity of the Joint Venture Company "Kudremukh Iron & Steel Company Limited"

3.

50,00,000 Equity Shares of Rs. 10/- each fully paid up of the Joint Venture Company "Neelachal Ispat Nigam Limited".

4

100,000 Equity Shares of Rs.10/- each fully paid-up of Global Procurement Consultants Limited.

-

-

-

180.00

500.00

500.00

10.00

10.00

510.00

690.00

MECON

L I M I T E D,

Ranchi

2006-2007

Schedule forming part of the Balance Sheet as at 31st March, 2007

10

SCHEDULE 4(A) : CURRENT ASSETS, LOANS AND ADVANCES (Rupees in lakhs) AS ON 31.03.2006

AS ON 31.03.2007

Particulars A. CURRENT ASSETS i) Inventories as taken, valued at cost and certified by the Management (a) Stores and Spares (b) Printing and Stationery (c) Computer Consumables

76.37 23.32 4.32

918.03

104.01

53.68 23.45 4.76

81.89

918.03

383.65

383.65

ii) Job-in-Progress (at lower of Cost or estimated realisable Value) -- for Construction contract -- for Services iii) Sundry Debtors (Unsecured) : Debts outstanding for more than six months Other Debts a) Considered Good b) Considered Doubtful

1,316.11 7,222.91 7,694.49 844.53 8,539.02

8,452.17

7,895.86 556.31 8,452.17

844.53

Less : Provision for doubtful debts iv) Cash & Bank Balance : (a) Cash, Cheques & Stamps in hand (b) With Scheduled Banks - in deposit account includes Rs. 5,650 lakhs (previous year Rs. 5,861 lakhs) lodged with Scheduled Banks as Security against Bank Guarantee & Overdraft (c) With Scheduled Banks in Current Account B. OTHER CURRENT ASSETS i) Interest Accrued but not due ii) Building held for disposal (WTC, Mumbai) iii) Net Foreign Trading Assets at Nigeria Less : Provision for Net Foreign Trading Assets iv) Other Receivables

3,537.75 4,914.42

8,539.02

7,694.49

556.31

28.86 14,532.47

1,442.91

15.45 11,613.44

16,004.24

1,203.02

613.92 12.37 13.01 13.01

78.85

7,895.86

12,831.91

399.98 12.37 13.01 13.01

705.14

98.72

511.07

MECON

L I M I T E D,

Ranchi

2006-2007

Schedule forming part of Balance Sheet as at 31st March, 2007

11

SCHEDULE 4(A) : CURRENT ASSETS, LOANS AND ADVANCES (Contd.)

(Rupees in lakhs) AS ON 31.03.2006

AS ON 31.03.2007

Particulars C. LOANS AND ADVANCES Advances recoverable in cash or in kind or for value to be received :

6.60

401.04

3,355.16

951.29

c) Advance to Employees

484.83

443.49

d) Advance to Others & Canteen

165.12

117.70

37.61

104.01

a) Advance to Contractors b) Advance to Suppliers and Sub-Contractors

e) Prepaid Expenses f) Deposit with : Government Authorities Others Less : Provision for Earnest Money Deposit Less : Provision for Deposit with Others

299.70 67.16

g) Claims Recoverable Less : Provision for Claims Recoverable h) Liquidated Damages Recovered by Clients and Others Less : Provision for Liquidated Damages Recovered

5.41

5.67

232.54

352.48 38.00 -

314.48

250.62 7.96

242.66

351.51 107.77

243.74

144.38 116.80

27.58

572.93 251.85

321.08

i) Advance payment of Income Tax

514.98

662.13

j) Payment against Sales Tax in dispute and under appeal

559.38

568.49

k) Service Tax Receivable Less : Provision for Service Tax Receivable

7.05 TOTAL

7.05

5,638.92 31,064.83

6.98 -

6.98

4,140.10 25,844.48

MECON

L I M I T E D,

Ranchi

2006-2007

12 Schedule forming part of Balance Sheet as at 31st March, 2007

SCHEDULE 4(A) : CURRENT ASSETS, LOANS AND ADVANCES (Contd.)

(Rupees in lakhs) Particulars

AS ON 31.03.2007

AS ON 31.03.2006

PARTICULARS OF LOANS AND ADVANCES Loans and Advances : (a) Secured, considered good (#) (b) Unsecured considered good

15.09 5,623.83 5,638.92

31.32 4,108.78 4,140.10

(#) Secured against Building and Vehicles Debts due by directors or other officers of the Company or any of them either severally or jointly with any other person.

Maximum amount due at any time during the year Rs.2.65 lakhs (previous year Rs.3.28 lakhs)

-

-

MECON LIMITED, Ranchi

13

2006-2007

Schedule forming part of the Balance Sheet as at 31st March, 2007

SCHEDULE 4(B) : MISCELLANEOUS EXPENSES TO THE EXTENT NOT WRITTEN OFF OR ADJUSTED

As on 31.03.2006

Particulars

1.

Deferred Revenue Expenses - Welfare Assistance/Ex-Gratia for Voluntary Retirement Payments TOTAL

Additions/ Adjustments during the year

(Rupees in lakhs) Balance as on Total

Written Off during the year 31.03.2007

31.03.2006

2272.43

26.75

2299.18

1335.38

963.80

2272.43

2272.43

26.75

2299.18

1335.38

963.80

2272.43

MECON

L I M I T E D,

Ranchi

14

2006-2007

Schedule forming part of the Balance Sheet as at 31st March, 2007

SCHEDULE 5 : CURRENT LIABILITIES AND PROVISIONS Particulars 1.

CURRENT LIABILITIES Sundry Creditors - Dues to SSI Undertakings - Others Advances from Clients Securities and other deposits Others Employees Family Benefit Scheme Service Tax Payable Interest accrued but not due for Computer and Bond Loan

294.73 14,481.89

14,776.62 7,597.57 259.30 1,863.57 180.45 0.03 401.28

85.87 13,499.85

13,585.72 6,546.41 252.14 1,851.16 145.12 480.76

25,078.82

22,861.31

1.30 604.10 3,816.52

1.15 56.00 657.12 3,171.00

TOTAL - 2

4,421.92

3,885.27

TOTAL - 1 + 2

29,500.74

26,746.58

TOTAL - 1 2.

(Rupees in lakhs) AS ON 31.03.2006

AS ON 31.03.2007

PROVISIONS Provision for Bonus Provision for Gratuity Provision for Taxation Provision for Leave Encashment

Sundry Creditors others include trade creditors Rs.10,836.34 lakhs (Previous year Rs.8,448.31 lakhs)

MECON

L I M I T E D,

Ranchi

2006-2007

15

Schedule forming part of the Profit and Loss Account for the year 2006-2007

SCHEDULE 6 : OTHER INCOME Particulars

(A)

2006-2007

(Rupees in lakhs) 2005-2006

CURRENT BUSINESS INCOME i)

Interest from Bank (Tax deducted at Source Rs.1.54 lakhs) (Previous year Rs. 0.13 lakhs) TOTAL (A)

(B)

796.43

395.67

796.43

395.67

73.96

1.65

OTHER INCOME i)

Profit on sale of Fixed Assets

ii)

Interest from (a) Income Tax Department (b) Others

0.71 0.66

841.78 -

iii)

Interest on Advance to Employees for conveyance and House Building.

3.77

6.50

iv)

Income from Township

516.43

479.75

v)

Income from Dividend

4.00

1.50

vi)

Subsidy from Government of India against Guarantee Fee

494.54

vii)

Miscellaneous Income including gain on conversion of foreign exchange Rs. NIL (Previous year Rs. NIL).

166.90

206.82 .

TOTAL (B) TOTAL (A) + (B)

1,260.97 2,057.40

1,538.00 1,933.67

MECON

L I M I T E D,

Ranchi

2006-2007

16

Schedule forming part of the Profit and Loss Account for the year 2006-2007

SCHEDULE 6 (C) : ACCRETION/(DECRETION) TO JOB-IN-PROGRESS Particulars Services

2006-2007 Construction contract

Total

Services

(Rupees in lakhs) 2005-2006 Construction contract

Total

Closing Job-in-Progress

918.03

-

918.03

383.65

-

383.65

Opening Job-in-Progress

383.65

-

383.65

219.44

-

219.44

Accretion/(Decretion)

534.38

-

534.38

164.21

-

164.21

MECON

LIMITED

Ranchi

17

2006-2007

Schedule forming part of the Profit and Loss Account for the year 2006-2007

SCHEDULE 7 : PAYMENTS TO AND PROVISIONS FOR EMPLOYEES Particulars

2006-2007

(Rupees in lakhs) 2005-2006

8831.45

7312.91

1.18

0.57

63.63

58.28

Company's Contribution to Provident Fund and Family Pension Fund

749.71

853.06

Leave Travel Concession

255.31

147.28

9901.28

8372.10

1.

Salaries & Wages

2.

Bonus

3.

Premium for Group Gratuity Scheme

4.

5.

TOTAL

SCHEDULE 8 : SOCIAL AMENITIES Particulars

2006-2007

(Rupees in lakhs) 2005-2006

31.05

26.83

357.75

294.62

Social & Cultural Activities

17.04

13.08

4.

Rent (Residential)

80.38

89.71

5.

Premium for Group Term Insurance

20.33

15.11

6.

Staff Welfare (Others)

269.61

250.43

776.16

689.78

1.

Education

2.

Medical

3.

TOTAL

MECON

LIMITED

Ranchi

18

2006-2007

Schedule forming part of the Profit and Loss Account for the year 2006-2007

SCHEDULE 9 : OTHER EXPENSES AND PROVISIONS 1 2 3 4 5 6 7 8 9 10 11 12 13

Particulars Expenses on Foreign Experts Travelling Expenses Foreign Deputation Maintenance & Repairs to Buildings Repairs (Others) Stores & Spares consumed Printing & Stationery consumed Expenses on Software Expenses on Computer Consumables Rent (Non-residential) Rates & Taxes Advertisement & Publicity Auditor's Remuneration :

14 15 16

Insurance Expenses on Export Market Development Training Expenses :

17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

Postage,Telephones & Telegraphs Computer Services Electricity Charges Legal & Professional Charges Miscellaneous Expenses including donation Rs.0.82 lakhs (Previous year Rs. 1.05 lakhs) Fees Bill Withdrawn Processing Charges for VRS Loan Provision for Bad & Doubtful Debts Bad Debts written off Loss on Sale of Assets Deferred Revenue Expenses written off Expenses on Liquidated Damages Provision for Liquidated Damages recovered by Clients Expenses on Family Benefit Scheme Service Tax Provisions for Claims Recoverable Provision for Deposit with Others

TOTAL

2006-2007

(Rupees in lakhs) 2005-2006

0.05 1,287.00 88.00 411.78 23.90 78.12 138.62 25.19 45.10 32.63 22.66 43.10 Fees Other services Expenses

0.50 0.55 2.10

Inland Foreign

25.80 0.45

3.15 6.35 26.25 138.56 84.55 381.86 38.71 359.76 435.62 2.46 470.27 0.16 6.48 1,335.38 240.15 43.47 35.95 2.25 1.46 67.16 5,876.15

0.77 1,142.15 41.44 344.14 25.58 61.25 101.82 10.11 42.34 32.06 24.58 82.21 0.50 0.55 2.10

8.89 -

3.15 3.72 0.11 8.89 123.62 61.18 363.28 21.17 191.78 1,036.11 2.49 417.03 42.55 25.93 1,554.68 1,035.73 83.20 30.25 8.68 6,922.00

MECON

LIMITED

Ranchi

19

2006-2007

Schedule forming part of the Profit and Loss Account for the year 2006-2007

SCHEDULE 9A : INTEREST AND FINANCE CHARGES Particulars

2006-2007

(Rupees in lakhs) 2005-2006

A) INTEREST CHARGES 1 2 3 4 5 6

Interest on loan from Banks Interest on loan from Banks for VRS Less : Interest subsidy from Government of India Interest on term loan from Financial Institutions Interest on Government Guaranteed Bond Less : Interest subsidy from Government of India Interest on Computer Loan (Govt.)

Interest on Loan for Office Premises

TOTAL (A)

136.42 350.00 175.00 896.80 406.00

175.00 4.13 490.80 46.00 42.02

215.73 350.00 175.00 958.00 374.16

175.00 12.47 583.84 101.71 75.98

894.37

1,164.73

29.81 36.78 198.23

36.03 53.04 21.23

264.82

110.30

1,159.19

1,275.03

B) FINANCE CHARGES 1.

2.

3.

Bank Charges Bank Guarantee Commission Charges Guarantee Fee to Government of India for VRS Loan

TOTAL (B) TOTAL (A) + (B)

MECON

LIMITED

Ranchi

2006-2007

20

Schedule forming part of the Profit and Loss Account for the year 2006-2007

SCHEDULE 10 : ADJUSTMENT RELATING TO THE EARLIER YEARS Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

2006-2007 DEBIT CREDIT

Particulars Salaries & Wages Printing & Stationery Depreciation Interest Computer Services Rent (Residential) Rent (Non-Residential) Medical Expenses Rates & Taxes Purchase of Equipments Leave Travel Concession Payment to Sub-contractors Miscellaneous Repair & Maintenance (Adm. Bldg.)

Repair & Maintenance (Others) Income from Services Rendered Service Tax Social Welfare Share ofTownship Maint. Cost Electricity Charges Leave Encashment Travelling Expenses Group Term Insurance ITDS Certificate Receivable Advertising Expenses Foreign Deputation Suppliers Bills Claims Recoverable STDS Certificate Receivable Provision for Bad & Doubtful Debts Earnest Money Deposit with Clients NET DEBIT/(CREDIT)

2.52 0.23 3.74 13.33 0.17 22.19 5.96 1.44 6.71 3.27 1.67 0.10 12.19 8.81 3.52 0.17 40.62 126.64

0.38 0.21 30.60 0.43 2.63 21.36 0.32 0.10 11.01 67.04 59.60

(Rupees in lakhs) 2005-2006 DEBIT CREDIT

0.86 0.47 0.05 0.15 0.17 43.93 0.38 1.79 182.38 14.68 0.31 0.66 6.50 0.16 6.48 0.48 0.44 59.85 0.71 320.45

3.58 1.00 0.40 0.57 28.74 10.76 14.27 284.10 0.29 5.99 2.23 351.93 (31.48)

MECON

L I M I T E D,

Ranchi

2006-2007

21

PART - IV OF SCHEDULE VI Balance Sheet Abstract and Company's General Business Profile I

Registration Details Registration No :

01199

Balance Sheet Date

II

31 Date

03 Month

2007 Year

Capital Raised during the year Public Issue NIL Bonus Issue NIL

III

(Rs. In Lakhs)

Rights Issue NIL Private Placement 3,772.00

(Issued to Government of India under Restructuring Plan)

Position of Mobilisation and Deployment of Funds

Sources of Funds :

Application of Funds :

Total Liabilities 26269.47

Total Assets 26269.47

Paid up Capital 4013.84

Reserves & Surplus 2439.98

Unsecured Loan 17975.70

Deferred Tax Liability 170.00

Net Fixed Assets 6927.58

Work-in-Progress 23.34

Investments 510.00

Net Current Assets 1564.09

Misc. Expenditure 963.80

Accumulated Losses 16280.66

Secured Loan 1669.95

MECON

L I M I T E D,

Ranchi

2006-2007

22 IV

Performance of the Company Turnover 36561.56 Profit/(Loss) Before Tax 2338.15

Profit/(Loss) after Tax 2038.15

Earnings per Share (Rs.) 5.08

Dividend Rate % 0.00%

(#) Does not include :a) Current Business Income b) Other Income c) Provision no longer required written back d) Accretion/(Decretion) to Job-in-Progress

V

Total Expenditure 37323.96

(#)

796.43 1260.97 508.77 534.38 3100.55

Generic Names of Three Principal Products/Services of the Company Item Code No. : -Product Description : Rendering Engineering and Consultancy Services Item Code No. : -Product Description : Project Management and Technical Services Item Code No. : -Product Description : Execution of Construction Contracts including Supply of Equipment and Components.

(RAVI BAMBHA) COMPANY SECRETARY

(S. CHATTOPADHYAY) DY.GENERAL MANAGER I/C (FINANCE)

(A. BHATTACHARYA) DIRECTOR(COMMERCIAL)

( D. RATH ) CHAIRMAN-cum-MANAGING DIRECTOR

MECON LIMITED

2006-07

SCHEDULE 11 : ACCOUNTING POLICY AND NOTES TO THE ACCOUNTS 2006-2007 I. ACCOUNTING POLICY 1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS : 1.1 The financial statements are prepared under the historical cost concept on accrual basis in accordance with generally accepted accounting principles.

2. FIXED ASSETS : 2.1 Fixed assets including lease-holds are stated at cost including expenses incidental to acquisition and installation and includes amount added on revaluation of certain land and buildings less accumulated depreciation.

2.2 Assets purchased during the year costing upto Rs.1000/- each are charged to revenue.

3. DEPRECIATION A.

Tangible Assets

3.1 Depreciation on Fixed Assets is provided on Straight Line Method at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956 (as amended), read with Section 205(2)(b) of the said Act, except for the following which are depreciated at the rates mentioned against them on the basis of management’s estimate of their useful life. a) Internal Partition

6.33%

b) Air-conditioning machinery, Room Airconditioner & Water Coolers

7.07%

c) Assets of value in excess of Rs. 1000/- and upto Rs. 5000/- each

100%

d) On revalued assets depreciation is charged over useful life of the assets w.e.f. 31.03.2000.

3.2 Leasehold assets are written off over the lease period.

MECON LIMITED

B.

2006-07

Intangible Assets

3.3 Expenditure incurred on acquisition of technical know-how and engineering materials is treated as intangible assets and is amortised over a period of five years.

3.4 Expenditure on Voluntary Retirement Compensation is treated as Deferred Revenue Expenditure and is written off in five years, irrespective of the remaining service period of an employee.

4.

INVESTMENTS

4.1 Investments held or intended to be held for a period exceeding one year are grouped under long-term investments.

4.2 Unquoted investments which are valued at average cost of acquisitions, provision for diminution is made other than temporary, on individual investment basis.

4.3 Quoted investments are valued at cost or market value whichever is lower.

5. INVENTORIES 5.1 Closing stock of stores & spares, printing & stationery items and other consumables are valued at lower of cost, on First in First Out (FIFO) basis or on net realisable basis. Consumption of the above items during the year is arrived at the end of the year by deducting such value of physical stock in hand from the value of opening stock plus purchases.

6.

SUNDRY DEBTORS

6.1 Sundry Debtors for the engineering & consultancy services and projects executed are recognised on the basis of technical assessment of the progress achieved with deduction of appropriate percentages for the future contingencies as per Clause No. 9.1 of Accounting Policy.

7. ENGINEERING RESEARCH & DEVELOPMENT 7.1 Expenditure incurred on Engineering Research and Development activities are charged to revenue in the relevant years.

MECON LIMITED

2006-07

8. FOREIGN CURRENCY TRANSLATION 8.1 All Current Assets and Current Liabilities are translated at the relevant rates of exchange prevailing at the year end and the translation differences are recognised in the profit and loss account.

9. INCOME 9.1 Engineering & Consultancy Services 9.1.1 Credit for Engineering & Consultancy services rendered to the clients against contracts or Letters of Intent or Work orders or exchange of letters which stipulate Lumpsum fee is taken on the basis of technical estimate of percentage of progress achieved at the end of the Financial year at fixed levels (on the basis of value of jobs) after deducting ten percent and this ten percent is taken into account in the year in which 100% progress is achieved 9.1.2 Credit for services rendered otherwise than Lumpsum fee basis is recognised at 100% value of the bills raised for the services rendered during the financial year.

9.1.3 Credit for reimbursable expenses is taken at 100% value of such bills raised during the financial year.

9.2. Execution of Projects 9..2. 1 Credit for execution of projects to the clients against contracts or letters of Intent or work orders or exchange of letters which stipulate fixed price is taken into account on the basis of percentage of progress achieved during the financial year.

9.2. 2 Matching cost against a contract is accounted for based on the latest technical estimates of the cost to complete the contract.

9.2.3 Estimated future loss against a contract (excluding the payroll cost of own manpower ) is accounted for in full in the year in which such loss is ascertained.

9.2. 4 Credit for sale of spares is taken at 100% of the spares supplied.

MECON LIMITED

2006-07

9.2. 5 Credit on account of escalation, additional or extra claims and other miscellaneous items like project insurance claims is taken at 100% value as and when they are admitted. Where escalation in price is provided in the contract with formulae the same is recognised as accrued during the financial year as per the provisions of the contract.

9.3 OTHERS 9.3.1 Dividend income from Investments is recognised as and when the right to receive the payment is established.

10. JOB-IN-PROGRESS 10.1 For Lump sum Fee Engineering & Consultancy jobs, where the progress achieved in respect of a job is below the Fixed Level, the lower of cost or value of the work done, computed on the basis of technical estimate of the percentage of progress achieved, is carried forward under Job-in-progress.

10.2. Where the work has started on the basis of job allotted by means of a letter or communication from the client, but the fee is yet to be settled, the cost incurred against such jobs is carried forward under job-in-progress.

11. RETIREMENT BENEFITS 11.1 Payment of Premium as determined and claimed by LIC towards Gratuity-cum-Insurance Policy taken by “Board of Trustees, MECON Gratuity Trust� is charged to Profit & Loss Account.

However, the past service liability accrued due to changes like, enhancement in ceiling limit, revision in wages etc. the same shall be charged to Profit & Loss Account on the basis of number of annual installments determined by the LIC. 11.2 Leave Encashment liability is provided on actuarial valuation method.

11.3 Expenses on employee welfare measures including but not limited to, home town settlement expenses on separation from services of the company, post retirement medical expenses etc. are accounted at actuals.

12. PRIOR PERIOD 12.1 Any expenditure or income relating to earlier years less than Rs. 10,000/- excepting depreciation which is on actual basis are accounted for under the respective heads of account in the current year.

MECON LIMITED, Ranchi 2006-07

II.

NOTES TO THE ACCOUNTS

LAND 1.

(i)

Under Section 7 of Public Sector Iron & Steel Companies (Restructuring) and Miscellaneous Provisions Act, 1978, all the lands measuring 118.95 Acres for residential colony and 10.25 Acres for the administrative building acquired by the Government of India for the erstwhile HSL was transferred in favour of MECON by the Gazette Notification dated 30.4.1978. Deed of conveyance in this respect has not yet been executed by the Government of Jharkhand in favour of MECON. Govt. of Jharkhand has been approached for deed of conveyance in favour of MECON Limited and the matter is in progress. Out of the said land, 20 Acres have been allotted to SAIL, RDCIS, Ranchi in 1980-81 for which transfer deed is still pending. The amount received for such transfer has been taken in the accounts.

(ii)

Deed of conveyance has not been executed for 103.33 acres of land for township at Ranchi acquired from Govt of Bihar by the Company in 1978-79. Govt. of Jharkhand has been approached for deed of conveyance in favour of MECON Limited as the properties are now situated in the state of Jharkhand and the matter is in progress. Pending execution of deed of conveyance in respect of above, transfer deed in favour of SAIL, RDCIS, Ranchi for 4.64 acres (previous year 4.64 acres) of land and in favour of SAIL, MTI, Ranchi for 5.40 acres (previous year 5.40 acres) of land could not be executed. The amount received for such transfer has been taken in the accounts.

(iii)

1.50 acres (Previous year 1.50 acres) of land for township at Ranchi acquired from Govt. of Bihar for which no deed of conveyance has been executed in favour of the Company. Govt. of Jharkhand has been approached for deed of conveyance in favour of MECON Limited as the properties are now situated in the state of Jharkhand and the matter is in progress.

Page 1 of 10

MECON LIMITED, Ranchi 2006-07 2.

Building i)

Residential buildings at Rourkela, Gross block Rs.5.12 lakhs (Previous year Rs.5.12 lakhs) and at Durgapur, Gross block Rs.8.62 lakhs (Previous year Rs.8.62 lakhs) have been constructed on the land belonging to SAIL for which the depreciation is being charged at the rate applicable for Building.

ii)

No deed of conveyance confirming title to MECON has been executed in respect of Office space at Vashi, Navi Mumbai acquired from City and Industrial Development Corporation of Maharashtra Ltd.

3.

Pending determination of the proportionate value of the land in respect of Buildings acquired at Gaziabad, Navi Mumbai and Kolkata the cost of acquisition of flats has been considered as Building and depreciation thereon has been provided at the rate as applicable for Building.

4.

The balance appearing under the head Sundry Debtors is subject to confirmation and resultant reconciliation / adjustment, if any. The amounts, which remain unrecovered, will be written off as and when finally settled.

5.

Rs 26.75 lakhs (Previous Year Rs. 39.79 lakhs) has been disbursed towards Ex-gratia payment and other terminal benefits under VRS. In view of the Accounting Policy Clause no. 3.4, Rs. 1335.38 lakhs (Previous year Rs.1554.68 lakhs) is charged to Profit & Loss Account under “Deferred Revenue Expenditure” during the year.

6.

Current Liabilities include Rs.180.45 lakhs (Previous year Rs. 145.12 lakhs) received from the dependents of deceased employees under the “ MECON Employees Family Benefit Scheme” and the Company is in return paying the last pay drawn to the dependents of deceased non-executive employees and 1.15 times of last basic drawn to the dependents of deceased executive employees till the deemed age of superannuation of such employees. Such expenses are accounted on actual basis.

Page 2 of 10

MECON LIMITED, Ranchi 2006-07

7.

Contingent liabilities not provided for or not acknowledged as debts :-

( Rupees in Lakhs)

damage

Current Year 2006-07 19.80

Previous Year 2005-06 313.39

390.80

1632.88

10148.69

11366.69

NIL

43.67

a)

Claims made against Company under liquidated clause by the Clients.

b)

Letters of Credit opened with Bankers for purchase of equipment & components and technical services.

c)

Guarantees given by Banks for and on behalf of the Company

d)

Income tax demands pending appeals with Appellate Authorities

e)

Income tax paid under dispute.

10.47

362.81

f)

Sales tax demands pending appeals with Appellate Authorities.

944.83

854.37

g)

Claims against Company by Contractors/Suppliers

719.38

1023.03

h)

Claims against electricity supply by JSEB

148.65

148.65

i)

As per the communication from the Government of India, Ministry of Steel dated 24.06.2002, the payment of arrear arising due to revision of pay scale of the employees for the period from 01.01.1997 to 31.12.2000 would be considered only when MECON’s financial health improves.

8590.94

8590.94

Page 3 of 10

MECON LIMITED, Ranchi 2006-07 ( Rupees in Lakhs)

j)

The Regional Provident Fund Commissioner-II, Jharkhand, Ranchi ordered for payment of Rs. 385.27 Lakhs by way of interest and penalty to the BOT, arising out of delayed remittances by the company to the BOT, MECON Employees PF Trust. The company disputed the same and filed an appeal with EPF, Appellate Tribunal, New Delhi after depositing Rs. 96.32 Lakhs as interim adhoc advance.

8

Estimated amount of contracts remaining to be executed on capital account and not provided for.

9 a)

Expenses on Advertisement & Publicity i)

Advertisement

Previous Year 2005-06 385.27

93.78

30.93

41.74

ii) Publicity b)

Current Year 2006-07 385.27

1.36

Expenses on Public Relations Establishment

10.

Expenses on Engineering, Research & Wing/establishment, including capital assets.

Development

11.

Particulars of remuneration of whole time Directors including Managing Director :

81.33 43.10

0.88

21.54

19.29

28.03

22.84

i) Salaries & Allowances

32.47

20.84

ii) Company's Contribution to Provident Fund & Gratuity

3.62

2.17 36.09

Page 4 of 10

82.21

23.01

MECON LIMITED, Ranchi 2006-07 ( Rupees in Lakhs) Current Year 2006-07

Previous Year 2005-06

305.21

235.76

43.00

874.69

51.25

30.34

Remuneration excludes medical facilities provided at Company's hospital, monetary value of the same not ascertainable.

12.

Earnings in Foreign Exchange received during the year (on cash basis) Fees for services rendered.

13.

Expenditure in Foreign Currency remitted/actually spent during the year.(on cash basis) i) Engg. Fees ii) Other matters Total

14.

15.

94.25

905.03

a) Equipment, components & spares parts used in construction contract

408.09

205.21

b) Capital goods

Nil 408.09

Nil 205.21

Value of imports (Calculated on CIF basis)

In view of the legal opinion obtained on 6.11.90 by the Company from Solicitor General of India, disclosure of quantitative detail of sales, purchases, jobs in progress (both opening & closing) in respect of equipment & components are not required in respect of Companies rendering Consultancy & Supply Services. Further, in view of varieties of materials in different Projects, which cannot be categorised in different groups, it is not possible to list out quantitative details.

Page 5 of 10

MECON LIMITED, Ranchi 16.

2006-07 Age of Sundry Debtors (six months and above & less than six months) is determined on the basis of technical estimate of Progress achieved as on 31st March in respect of both Construction Contracts and Engineering Services Contracts.

17.

Claims Recoverable from others include a sum of Rs.85.80 lakhs deducted by Allahabad Bank from the proceeds of fixed deposit on maturity on account of Bank Guarantee commission which is contrary to their sanction and such deduction has been disputed by the Company. After obtaining advice from High Powered Committee of the Government of India to take appropriate legal action, a Civil suit was filed before the Hon. Sub. Judge 1, Ranchi. The suit is decreed on contest with cost and the Bank is directed by the Hon’ble Sub-Judge IV, Ranchi to pay Rs.87.24 lakhs with pendentelite and future interest.

Accordingly the Company has lodged its claim on the Bank for Rs.501.47 lakhs including the accrued interest. The company has received Rs 300.00 Lakhs from the Bank against equivalent Bank Guarantee (BG) as per the interim order of the Hon’ble Jharkhand High Court pending final order. Based on the order of Hon’ble Jhardhand High Court dated 8.11.2004, the company after adjusting the deducted amount together with accrued interest , refunded Rs. 78.60 lakhs to the Bank requesting them to release the said Bank Guarantee. The Bank disputed the rate of interest applied by MECON and did not return the BG. The matter is pending with the Hon’ble Supreme Court of India.

18.

The Board of Directors approved the implementation of Employees Voluntary Pension Scheme in MECON. As per the Scheme some employees contributed 2% of salary. Subsequent to withdrawal from the scheme by some employees an amount of Rs.8.85 lakhs (Previous year Rs.9.21 lakhs) is being held by the Company on behalf of the Board of Trustee of MECON Employees Superannuation Benefit Fund and is included under the head “Current Liabilities”.

19.

Actuarial valuation towards "Gratuity-cum-Insurance Policy" is done by the Life Insurance Corporation of India. As per the valuation, the past service (accrued) liability as on 31.03.2007 is estimated at Rs.2397.07 lakhs (Previous Year Rs 2584.56 Lakhs). Based on fund available with LIC as on 31st March 2007, provision is not required to be made during the year (Previous Year Rs 56.00 lakhs ) . The cumulative provision as on 31st March 2007 stands at NIL (Previous year Rs. 56.00 Lakhs).

20.

Since the projects are executed by various sub-contractors under company’s own supervision, proportionate pay roll cost of own personnel being a time related fixed cost is not considered as part of the project cost.

21.

In respect of consultancy jobs, cost incurred is mostly pay roll cost of own man power which is a time related fixed cost and therefore it is not considered in estimation of contract costs.

Page 6 of 10

MECON LIMITED, Ranchi 22.

2006-07 Monitoring for collection of TDS certificates in respect of Income Tax deduction and Sales Tax deduction are being done from different clients which includes various PSUs and Govt. Department also. We are hopeful to collect the certificates and accordingly no provision is considered necessary.

23.

Reconciliation of balances under different heads of current assets and current liabilities are done on a regular basis. However, reconciliation/adjustment in respect of sundry creditors, advances from clients, LD recovered and advance to suppliers is in progress and necessary provision/write back , if any, will be done after completion of reconciliation.

24.

Payments of Sales Tax under dispute of Rs. 242.95 Lakhs was made due to direction of stay proceedings, which has not been accepted by the company as liability and hence challenged before various appropriate courts of law. This being contingent in nature, no provision is considered necessary.

25.

Reconciliation of balances lying under provision for Income Tax and Income Tax paid under dispute is in progress and necessary adjustments will be done in the next year.

26.

Advance received from the client is fully adjusted at the end of the year against dues from clients instead of prorata adjustment against progressive billing.

27.

During the year Rs.900.00 lakhs is provided on estimated basis towards Interim Relief for 14 months, 4% increment on Basic pay w.e.f. 01.04.2005 and arrear wages due w.e.f. 01.01.2007.

28.

Leave encashment liability as on 31.03.2007 arrived at on actuarial valuation is estimated at Rs. 3816.52 lakhs (Previous year Rs.3127.31 lakhs). Provision of Rs.645.52 lakhs has been made during the year (Previous Year NIL).

29.

Payment against Supplies & Services from SSI Units are generally made in accordance with agreed credit terms and there is no overdue amount.

Page 7 of 10

MECON LIMITED, Ranchi 2006-07 30.

There are no reported Micro, Small and Medium Enterprises as defined in the “The Micro, Small and Medium Enterprises Development Act, 2006, to whom the company owes dues.

31.

As per Para 17 of Accounting Standard -22, Deferred tax asset should be recognized only to the extent, that there is virtual certainty of sufficient future taxable income available, in respect of the tax on which such Deferred tax asset can be realised.

In the present context, there is no discernible virtual certainty of sufficient future Taxable Income being available and hence no deferred tax asset is created during the year.

Hence, Deferred Tax Liability for Rs. 170 Lakhs brought forward from earlier year will be adjusted in future when Deferred Tax Assets will be recognised.

32.

Considering the nature of company’s business and the type of assets held by the company, there is no indication of loss due to impairment of assets as at 31.03.2007 as per Accounting Standard -28.

33.

Owing to uncertainty, income from foreign consultancy jobs is recognised on realisability basis.

34.

Cash and Bank balance includes Rs. 231.95 lakhs with interest in Fixed Deposit (Previous year Rs.196.13 lakhs), being the amount recovered from employees towards tax on perquisites, as per the interim directive of the Hon’ble Kolkata High Court.

35.

Cash & Bank balance includes Rs.563.89 lakhs in Fixed Deposit (Previous year Rs.2303.17 lakhs), being the balance unutilised amount out of VRS fund raised by issue of Bonds (Series III) against Govt. of India guarantee.

36.

During the year, Office space (355.56 sq. mtr.) at 1st Floor SCOPE Minar, Laxmi Nagar, Delhi has been sold at Rs.160.00 lakhs against Book Value Rs. 92.93 lakhs. As a result, profit on sale of Office Building to the extent of Rs.65.08 lakhs has been considered during the year.

37.

As per communication no. 4(46)/2004-HSM(Vol. IV) dated 14/02/2007 the Govt. of India, Ministry of Steel has approved the proposal for Revival / Restructuring of the company. The Govt. has approved infusion of Equity Share Capital Rs.3000.00 lakhs, 5% Non-Cumulative Redeemable Preference Share Capital Rs.6300.00 lakhs, conversion of GOI loan Rs.600.00 lakhs Page 8 of 10

MECON LIMITED, Ranchi 2006-07 as on 31/03/2005 into Equity Share Capital, conversion of interest outstanding on GOI Loan Rs.172.00 lakhs as on 31.03.2005 into Equity Share Capital and subsidy towards Guarantee Fee on VRS loan Rs.494.53 lakhs etc. Accordingly, Authorized Share Capital is increased from Rs. 400 lakhs to Rs. 4100 lakhs and Issued, subscribed & paid up capital is also increased from Rs.241.84 lakhs to Rs. 4013.84 lakhs during the year.

38.

Non-convertible Bonds (Series II) of Rs. 1700 lakhs guaranteed by Govt. of India has been redeemed on 24/08/2006.

39.

Expenditure under Schedules 7,8,9 & 10 includes an amount of Rs.829.82 lakhs (Previous Year 807.21 lakhs) being the company’s share of township maintenance cost.

40.

Particulars of Provisions : (Rs. in lakhs)

PARTICULARS

Opening Balance as on 01/04/2006 Add : Provision made during the year Less : Provision utilised during the year Less : Unused provision reversed during the year Closing Balance as on 31/03/2007

Prov. for Gratuity

Prov. for Royalty

Prov. for Bonus

Prov. for Bad & Doubtful Debts

Prov. For Leave Encashm ent

56.00 56.00

16.80 -

1.14 1.18 1.02 -

556.31 470.27 43.54 138.51

3171.00 645.52 -

251.84 43.47 10.26 168.25

107.77 1.45 101.26 -

Prov. for Earnest Money Deposit 38.00 38.00 -

-

16.80

1.30

844.53

3816.52

116.80

7.96

-

Page 9 of 10

Prov. for L.D. recovered

by Clients

Prov. for Claims Recover able

Prov. for Deposit for Others 67.16 67.16

MECON LIMITED, Ranchi 2006-07 41.

Related Party Disclosures (AS-18) :

a). The list of Related Parties with whom transactions have taken place and their relationships are given below: Nature of Relationship Key Management Personnel

Name of the related party Shri D. Rath Shri A. Bhattacharya Shri M. K. Deshmukh Shri B. Sankararaman Shri L. R. Singh

Nature of Relationship J V / Associates

Name of the related party M/s Kudermukh Iron & Steel Company Limited M/s Global Procurement Consultants Limited

b). The details of transactions between the Company and the Related Parties are given below:

Sl. No. i) ii) iii)

Nature of transactions

Managerial Remuneration Dividend Refund of Application Money

Key Management Personnel 2006-07 2005-06 36.09 23.01

(Rs. in Lakhs) J V / Associates 2006-07

2005-06

4.00 180.00

1.50 -

42.

Previous year’s figures have been regrouped / recast wherever necessary.

43.

Schedules 1 to 11 form an integral part of accounts.

Page 10 of 10

Schedule No.

7: Payment to and Prov. for Employees 6: Other Income 3D: Investment

MECON LIMITED, Ranchi

CASH FLOW STATEMENT (Indirect Method) Amount (Rs. In lakhs) 2005-2006

2006-2007 Cash Flows from Operating Activities Net Profit/(Loss) before Taxation Add : Adjustments for Depreciation Loss on Sale of Fixed Assets Provision for Bad Debts Bad Debts written off DRE written off Interest and Finance Charges

2,338.15 247.96 6.48 470.27 0.16 1,335.38 1,159.19

1,927.41 250.53 25.93 417.03 42.55 1,554.68 1,275.03

3,219.44 Less : Adjustments for Profit on Sale of Fixed Assets Interest Income Other Income

73.96 801.57 1,181.87

Operating Profit/(Loss) before Working Capital Changes Add : Adjustments for Inventories Jobs-in-Progress Debtors Other Current Assets Loans and Advances Liabilities and Provisions

3,565.75 1.65 1,243.95 688.07

2,057.40

1,933.67

3,500.19

3,559.49

2,454.16

3,430.22 2,702.67 2,454.16

Less : Adjustments for Inventories Jobs-in-Progress Debtors Other Current Assets Loans and Advances Liabilities and Provisions DRE (Additions)

22.12 534.38 269.06 194.07 1,498.82 26.75

6,132.89 12.43 164.21 3.58 4,365.33 39.79

2,545.20 3,409.15

Net Cash from Operating Activities {A} Cash Flows from Investing Activities Purchase of Fixed Assets Fixed Assets sold/discarded Proceeds from Investments Interest Income Dividend Received Other Income Interest Paid Net Cash from Investing Activities {B}

(519.42) 172.86 180.00 801.57 4.00 1,177.87 (42.02)

Cash Flows from Financing Activities Proceeds from Issue of Equity Shares Proceeds from Long Term Loan (Net) Repayment of Short Term Borrowings Interest and Finance Charges Net Cash from Financing Activities {C}

3,000.00 (2,573.44) (1,321.07) (1,117.17)

4,585.34 5,107.04

(265.82) 14.90 1,243.95 1.50 686.57 (75.98) 1,774.86

1,605.12

1,088.17 (2,756.29) (1,199.05) (2,011.68)

(2,867.17)

Net Increase/(Decrease) in Cash & Cash Equivalent {A}+{B}+{C} Cash and Cash Equivalent at the beginning

3,172.33

3,844.99

12,831.91

8,986.92

Cash and Cash Equivalent at the end

16,004.24

12,831.91

NOTES : 1.

2.

Cash and Cash Equivalent as on 31st March, 2007 includes Cash in Hand Rs. 28.86 lakhs, Cash at Bank Rs.1,442.91 lakhs and Fixed Deposit with Banks Rs.14,532.47 lakhs.

Cash and Cash Equivalent as on 31st March, 2007 also includes fixed deposit of Rs.231.95 lakhs recovered from employees against perquisites tax and fixed deposit of Rs.563.89 lakhs against unutilised amount out of VRS Fund which is available for use against respective purposes only.

For S.N. RAJGARHIA & COMPANY, CHARTERED ACCOUNTANTS

(S.N. RAJGARHIA) PARTNER

(RAVI BAMBHA) COMPANY SECRETARY

Place : Ranchi Dated : 7th July, 2007

(S. CHATTOPADHYAY) Dy.GENERAL MANAGER I/C (FINANCE)

(A. BHATTACHARYA) DIRECTOR (COMMERCIAL)

(D. RATH) CHAIRMAN-cum-MANAGING DIRECTOR

MECON LIMITED Ranchi 2006-2007

BUSINESS SEGMENT (PRIMARY SEGMENT) REPORTING FOR 2006-2007

SEGMENTS Particulars Segment Revenue

METALS Current Previous Year Year

POWER Current Previous Year Year

INFRASTRUCTURE Current Previous Year Year

OIL & GAS Current Previous Year Year

TOTAL Current Previous Year Year

22,768.63

17,421.66

4,978.17

3,914.71

7,161.25

2,460.01

1,653.51

1,582.70

36,561.56

25,379.08

4,062.08

1,383.14

996.68

(305.94)

(10.86)

337.64

536.52

328.08

5,584.42

1,742.92

Unallocated Corporate Expenses

3,845.77

1,092.40

Operating Profit/(Loss)

1,738.65

650.52

Interest & Finance Charges

1,159.19

1,275.03

Interest Income

801.57

1,243.95

Income Taxes

300.00

315.75

Non Operating Loss

1,341.86

1,580.61

Non Operating Income

1,255.83

689.72

Accretion/(Decretion) to Job-in-Progress

534.38

164.21

Provision written Back

508.77

2,034.65

Net Profit/(Loss)

2,038.15

1,611.66

Capital Employed

8,491.67

5,907.37

Segment Result [Profit/(Loss)]

NOTES ON SEGMENT REPORT 2006-2007 1)

“Business Segments” have been identified as Primary Segments in accordance with the guidelines of “Accounting Standard-17” on Segment Reporting issued by ICAI considering the return/risk profiles of the businesses, the organisation structure and the management reporting system.

2) As a part of business restructuring process, the core business activities of the organisation have been regrouped and classified into four “Strategic Business Units” (SBUs) in line with the recommendation of the Consultants w.e.f.

2004-05 as below : Segment Definitions: i)

”Metals” includes Iron & Steel, Rolling Mills, Non-Ferrous, Raw Materials & Mining, Refractories etc.

ii)

“Power” includes Power plant- Thermal & Hydel, Transmission & Distribution, RLA & RMU studies etc.

iii)

”Oil & Gas” includes Oil & Gas pipelines, Petro-chemical & Refineries, POL Depots, Retail Outlets etc.

iv)

”Infrastructure” includes Civil & Structural Engineering, Architecture & Town Planning, Ports & Material Handling, Roads, Highways, Bridges, & Flyovers, Defence, Environmental & Hydro engineering, Management Advisory Services, Information Technology etc.

Previous years figures have been regrouped to fall in line with the above.

3)

Segment Revenue comprises income from Construction Contracts and income from Engineering & Consultancy Services for the Jobs in India and abroad.

4)

Unallocated corporate expenditure includes expenses incurred on corporate services provided to Business Segments and other expenses not allocable on a reasonable basis to Business Segments..

5)

Disclosure of Information on Geographical Segment (Secondary Segment) is not made considering the risk and return of business activities / operations being carried out by the company which are not affected by the geographical conditions / locations of the Business Centres / Project Sites etc.

6)

Fixed assets used in the company’s business or liabilities contracted are common in nature for all and cannot be attributed to a specific segment. Therefore, segmentwise assets, liabilities and capital employed cannot be disclosed.