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Aspiration

• Be the leading Telecom Service Provide in India with global presence.

• Create a customer focused organization with excellence in sales,marketing and customer care.

• Leverage technology to provide affordable and innovative products/services across customer segments.

• Provide a conducive work environment with strong focus onperformance.

• Establish efficient business processes enabled by IT

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Contents

Directors Report 6

Management Discussion and Analysis Report 15

Report on Corporate Governance 18

Annual Accounts [Balance Sheet, Profit and Loss 34Account, Schedules and Accounting Policy]

Auditor’s Report 65

Addendum to Directors’ Report 79

Comments of the C & AG of India on the accounts 83

Replies of the Management to the Comments of 86C & AG of India

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

Statutory AuditorsSharma Goyal & Co., Chartered Accountants, Y-59, Hauz Khas, New Delhi-110 016.

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

BANKERSState Bank of India, Punjab National Bank, ICICI Bank, Indian Bank, HDFC Bank,

Canara Bank, Union Bank of India, Corporation Bank

Shri Gopal DasChairman and Managing Director/Director(HR)/Director (Finance)[Wef 1.8.2010]

Shri Kuldeep GoyalChairman and Managing Director[Upto 31.7.2010]

Shri Rajendra SinghDirector [Enterprise][Upto 31.5.2010]

Shri R.K. AggarwalDirector [CM] & [Enterprise]

Shri Rajesh WadhwaDirector [CFA]

Shri J.S. DeepakGovernment Director[Upto 17.3.2010]

Shri P.K. MittalGovernment Director[Upto 12.2.2010]

Shri R.N. JhaGovernment Director[Wef 12.2.2010]

Dr. S.K. KakDirector

Shri Mahesh ShahDirector

Shri Sanjiv GuptaDirector

Shri Ashish GuhaDirector[Wef 21.5.2010]

Board of Directors(2009-2010)

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Dear Members,

Your Directors have pleasure in presenting the 10th Annual Report of your company, along with the Audited Statement ofAccounts, Auditors’ Report and Comments & Review of the Comptroller & Auditor General of India, on the Accounts for thefinancial year ended March 31, 2010.

FINANCIAL PERFORMANCE

The financial performance for fiscal 2009-10 is summarised as below:-

2009-10(Rs. in Lakhs)

Income from Services 2,791,344

Other Income 413,197

Expenditure (excluding Interest & Depreciation) 2,452,964

Profit before interest, depreciation and tax (EBIDTA) 751,577

Depreciation 919,679

Interest 35,161

Profit before prior period adjustment (203,263)

Prior period adjustments 16,485

Profit/Loss Before Tax (219,748)

Provision for Deferred Tax (52,100)

Tax Provision for the year 116

Tax Provision for the earlier years 14,501

Net Profit/Loss for the Year (182,265)

During the year 2009-10, the Company incurred a loss of Rs. 1,822.65 Crores, which is mostly attributed to the increase inexpenditure due to wage revisions and reduction in revenue from services. Some of the prime factors, which were instrumentalin reduction of revenue are as under:-

Decline in Wire-Line income

• Telephones: Declining numbers and declining tariff and preference for wire-less lines

• PCO: increasing tele-density & drastic reduction in tariff

Stiff Competition in Mobile

• Increased pressure on pricing due to Price War

• Subscriber base increasing, ARPU decreasing.

• Commoditization of Mobile Services

Reduction in financial Support from Government

• Phasing out of ADC

• Non reimbursement of license fee and spectrum charges

• Withdrawal of moratorium on interest on government loan

With the arrival of more players in the market, the telecom sector witnessed a hyper competitive tariff regime; and, in fact,the whole of the telecom sector faced a declining trend in the overall revenues, to which, your company was no exception.All out efforts are being made to reverse the trend.

DIVIDENDS AND BORROWINGS

As the Company does not have distributable profits as on 31.03.2010, your Directors do not recommend any dividend forthe year. During the year under review, your company has not raised any borrowings by issue of Bonds / Debentures or anyother debt instrument.

Directors' Report

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SERVICES AND PLANS

Your Company provides a complete Bouquet of telecom services at affordable tariffs to the common man of the country.The products and services offered comprise of Wire line Services, WLL Limited Mobility Services , GSM Mobile Services,National Long Distance Services, International Long Distance Services, Internet and Broadband services, IN services viz. Prepaid Calling cards etc., Leased circuits i.e. Bandwidth on Demand and VSAT Services.

Your Company, with its pan-India presence, has the widest reach, connecting the nook and corners of the Country. It has thelargest switching network with 38,423 Digital Exchanges and 29421 Rural Exchanges on reliable media. It has provided5,66,279 Village Public Telephones.

With an OFC network of 6,46,695 Route Kms, M/W Network of 50,430 Route Kms and 197 Satellite Earth Stations, YourCompany has one of the largest transmission networks in the country.

Customer base of Your Company, as on 21st May 2010, is as under:-

SNo Products/Services Customer Base[In Millions]

1 Wireline 27.20

2 Wireless

(a) GSM 65.64

(b) WLL 6.05

3 Broadband

(a) Wireline 5.67

(b) Wireless 1.37

4 Internet 3.81

Despite entry of multiple new pan-India players, Your Company continues to be the most preferred brand of the consumersacross the country. Even though the Sector witnessed a growth of 55%, still, the sectoral revenue stood constant at theprevious year’s level for all the incumbent operators, including Your Company. In addition to the competitive tariff war, thewage revision of the employees added further pressure on the coffers. Despite these factors, BSNL could register a growthof 35% against the industry’s growth of 50% in Mobile segment.

MOBILE SEGMENT

Despite a positive growth in terms of numbers, the revenue growth of this segment witnessed a dip in ARPU levels. Mobilesegment, since the launch of services has been contributing significantly towards the revenues of the Company. Use ofmultiple SIMs, Aggressive Tariffs of competitors and Migration of marginal customers could be some of the factors, whichslowed down the upward trend in this segment.

Constant monitoring and innovative tariff pattern, with focus on VAS content in the 3G services have set the motion forhigher growth in the coming days. The 3G Data Cards sales witnessed a robust upward trend and the target was exceeded.

With the competitive tariffs and all India roaming facilities, Your Company’s EVDO services will be aggressively marketed inthe coming days.

For GSM, a target of 27.8 Million has been set for 2010-11 and for the WiMax connections, a target of 1 Million has been set.

A glimpse of Your Company’s GSM Coverage and Reach is as under:-

SNo Parameter Total Covered % Coverage

1 District Headquarters 621 621 100

2 Block Headquarters 6,185 6,075 98.22

3 Villages 5,93,601 3,78,966 63.86

4 National Highways (Kms) 62,643 57,210 91.33

5 State Highways (Kms) 1,32,455 88,892 67.11

6 Railway Route (Kms) 53,522 44,336 82.84

7 Area (Sq Km) 32,83,762 16,74,185 50.98

8 Population (in Lakh) 11,793 7,080 60.04

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GROWTH OF 3G & WIMAX SERVICES

3G Services

3G Technology Provides high speed data services (2 Mbps to14.4 Mbps) as compared to:- (a) GPRS: which provides 110kbps (b) EDGE: which provides 384 kbps. In 3G TechnologyServices such as High Speed Internet, Video Conferencing,Video streaming, gaming, Video on Demand, Full track music,Multi screen TV, Video ring tone etc., are offered.

Your Company’s 3G Services were rolled out in March 2009.So far, Services are available in over 450 Cities with a totalCustomer base of 1.3 Mn.

Your Company plans to add 3 Million Customers duringcurrent year, and, plans to cover about 750 cities by the endof the financial year 2010-11.

Wi-MAX Services

Wi-Max is another area which Your Company plans to forayin this year. Wi-Max along with DSL will be leveraged forproviding BB Connectivity to Panchayats. The launch of Wi-Max services is planned in the following manner:-

For Rural areas, the Deployment is planned under followingtwo Phases, i.e.Phase I with a tentative plan for 1000 BTS;and, Phase II with 7863 BTS.

For Urban areas, the Deployment is planned under the modelsof a Mix of Franchisee and Procurement. While Kerala andPunjab Circles will be covered in Procurement mode,remaining Circles will be covered through Franchisee Servicesavailable in over 450 Cities

FIXED ACCESS SEGMENT

There has been a sharp decline in the fixed access servicesrevenue and number of subscribers, which is attributed mainlyto customer’s preference to wire-less services over wire-line.However, the Broadband services have contributedsignificantly in arresting the decline to some extent.

To arrest the decline and promote wire-line services, YourCompany has initiated various measures to strengthen theSales and Distribution and Marketing set ups. “ProjectUdaan” is one such initiative under “Project Shikhar”, whichaims to bring back the wireline business to growth path.

The key enabler of the Project Udaan is “Creation ofdedicated sales team”, as a result, BSNL’s own strong salesteam of 4500 personnel have started selling products. Besidesfocus on sales, following initiatives have also been takento promote the wire-line business:-

(a) Introduction and offering of VAS Services to Wire-line subscribers, such as-

• PRBT services in 5ESS & EWSD Exchanges introduced(265 exchanges);

• PRBT extended to more than 40,000 customers;

• Combined nationwide landline and nationwide mobileVPN over IN platform;

• Universal access number services;

• Free phone services etc.; and

• ITC tariff has been rationalized and made on per secondsbasis.

(b) Up-gradation of networks and implementation ofCDR based Convergent billing systems:-

To improve the wire-line network, exercise for up-gradationof exchange plants is underway. Initiatives have been takenfor introduction of NGN. IPTAX – 24 KC commissioned, 1100KC installed and is under testing. In addition, to serve thecustomer better, following initiatives are underway:-

• CDR based billing system is under implementation;

• Special focus is being given to High ARPU Customers

• New tariff scheme commensurate with market demandare being implemented; and

• Old telephones instruments are being replaced with CLIPphones.

ENTERPRISE BUSINESS

To give focussed attention to enterprise customers, a thirdBusiness Vertical, namely, the Enterprise Business had beencreated, in addition to Consumer Mobility and Fixed Access.Consequently, based upon the expected size of the business,categorisation of enterprise customers have been made intoPlatinum, Gold and Silver. The enterprise business unit hasshown quite encouraging results.

BROAD BAND SERVICES

Rural Broadband expansion under USO Fund:-

Your Company has undertaken to provide around 9 lakh ruralbroadband connections through more than 27,500 ruralDSLAMs in 5 years starting from 2009-10, including providingbroadband in rural areas with cheaper tariff, free broadbandmodem, providing computers at concessional rate and alsosetting up 28,000 rural broadband kiosks meant for thoserural population which cannot afford broadband.

During 2009-10, Your Company has provided 1,30,000 ruralbroadband connections and also provided around 10,000computers at concessional rates in the rural areas.

Connectiong Universities and Colleges with Broadbandunder National Mission for Education(NME):-

Under this plan [ 2009-10 to 2012-13] approximately 20,000colleges and more than 400 universities are planned to beprovided with broadband [512 kbps connectivity to 20 Nos.of Broadband-VPN to each college and 1 Gbps connectivityto each University with LAN], Your Company has alreadyprovided 35,000 broadband-VPN connections toapproximately 8,000 Colleges..

Connecting 1 Lakh Common Service Centres(CSCs) acrossentie rural India:-

Your Company is implementing the ambitious plan of givingbroadband connectivity to Common Service Centres acrossthe rural India by using wire-line (ADSL 2+), WiMAX, EVDOand DSPT technologies. So far, connectivity to more than38,000 CSCs have been extended.

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Broadband connectivity to Village Panchayats:-

Under the Government’s Plan of providing broadband connectivity to all the Village Panchayats of 2,50,000 in the countryby 2012. So far, 93,000 Village Panchayats have been made Broadband enabled by using wire-line (ADSL 2+) technology.

Your Company is hopeful of covering more than 90% of the Village Panchayats of the Country with broadband connectionsusing ADSL 2+ and WiMAX technology by March 2012.

The Customer base and market share of wireline broadband connections have witnessed upward trend in the previous threeyears:-

Status as on 31.3.2007 31.3.2008 31.3.2009 31.3.2010

Customer Share (in Million) 0.976 2.032 3.557 5.376

Market Share (%) 41.72 52.11 57.19 61.44

A glimpse of Your Company’s pan-India coverage of broadband service as on 31.5.2010 is as under:-

SNo Parameter Total Covered % Coverage

1 DHQ 621 617 99.36

2 BHQ 6,185 5,763 93.18

3 Cities 4,629 4,260 92.03

4 Villages 5,93,601 1,69,176 28.50

Your Company has also provided 1.168 Million 3G connections in 09-10, resulting in number of broadband connectionsincreased to 6.544 Million and market share to 75%.

INTERNET SERVICES

Your Company is the largest Internet Service Provider, with a customer base of 3.81 Million. Internet nodes are operationalat all District Headquarters. All wire-line connections are enabled for Dial-up internet services.

DEVELOPMENT OF RURAL TELECOM NETWORK

Contribution of Your Company is significant in bridging the digital divide between urban and rural areas of the country.Some of the significant rural communication network programmes are as follows:-

A quick glimpse of rural coverage

Service Total Villages Covered % Coverage

VPT (Village Public Telephones) 5,93,601 5,66,279 95.40

GSM 5,93,601 3,78,966 63.84

CDMA 5,93,601 4,71,346 79.40

Broadband 5,93,601 1,69,176 28.50

Village Public Telephones [VPTs] – Bharat Nirman Programme

Your company had entered into an agreement with USO Fund for provisioning of VPTs in 62,302 undisputed, undisturbed,accessible and inhabited villages having population more than 100 as per Census-1991. Provisioning of these 62,302 VPTsformed a part of Bharat Nirmal Programme.

Under Bharat Nirman Programme, the provisioning of VPTs on DSPT for highly inaccessible and remotely located villages isbeing done on DSPT (Digital Satellite Phone Terminal). The DSPT services have been launched in the Company’s network inAugust 2008 and nearly 4980 DSPTs have been installed for VPTs. The DSPT system is having hub at ‘Sikanderabad andnearly 700 DSPT systems are under commissioning. During the year 2009-10, 4494 DSPTs have been installed.

Another agreement has been entered with the USOF for provisioning of VP facility in 62,443 newly identified uncoveredinhabited villages of Census 2001.Out of awarded 62,443 villages, your company has covered 38,959 villages with VPTfacility till 31.3.2010. Remaining villages will be covered by Feb 2011.

Rural DELs

Pursuant to an agreement with USO Fund, upto 31.3.2010, Your Company has provided 28.5 lakh Rural DELs in 1267specified SDCAs.

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Replacement of Multi Access Radio Relay (MARR) VPTs

Pursuant to an agreement with USOF DOT, for replacementof 185,121 number [Revised] of Village Public Telephones,which were earlier working on Multi Access Radio Relay(MARR) technology, which were installed before 1.4.2002,a total number of 184521 MARR VPTs have been replacedon reliable technology till 31.3.2010.

In pursuance of the MoU signed with USOF DoT during2008-09, Your Company has received Rs.1377.61 crores inlieu of ADC during the year 2009-10.

SHARING OF INFRASTRUCTURE

The other major initiative taken for increasing the revenuewas allowing other operators to share Company ’sInfrastructure so as to minimise the OPEX on infra facilitiesand optimise the use of assets.

MEMORANDUM OF UNDERSTANING (MoU) WITH THEDEPARTMENT OF TELECOM

In compliance with the guidelines for “MoU Signing andMonitoring Mechanism” issued by the Department of PublicEnterprises, Government of India, Your company has beenentering into and signing the MoU with the Department ofTelecommunications since 2004-05.

MAJOR INITIATIVES TAKEN DURING THE YEAR UNDERREVIEW

(i) Strengthening of marketing, sales and distributionChannels (Project Vijay)

The fast commoditization of the telecom service/products had necessitated strong initiatives in the Salesand Distribution network. As part of strengthening thesales and distribution channels for ensuring continuousand uninterrupted supply of products, Your Companyhas initiated steps for increasing the No of territoriesfrom 1,601 to 2,147; increase in No of retailers from3,88,565 to 8,00,000; and creation of a dedicated Salesteam of 4500 BSNL employees.

(ii) IT tool (Sancharsoft) has been developed to monitordifferent channels of distribution and to ease paymentof commission

(iii) Continous improvement in Customer Care (ProjectSmile)

With a view to make the CSCs more effective andcustomer friendly, Business Processes tailored for singlewindow service are being introduced; backend staff isbeing shifted to customer facing CSC; and, workinghours of payment counters are being increased. In orderto decongest the CSCs, alternate bill paymentmechanisms, e.g., payment machines and kiosks, dropboxes, tie-ups with banks also being put in place

(iv) Implementation of CDR billing system

In the direction of CDR based Customer Care andConvergent billing system for wire-line and Broadbandservices, four Data Centres for CDR Projects, located at

Hyderabad, Pune, Kolkatta and Chandigarh have beencommissioned. So far, about 88 SSAs have beensuccessfully migrated to CDR based billing systems.

Your Directors are hopeful that by the end of the year2010, CDR billing system will be completelyimplemented in all SSAs throughout the country. Thiswill make a significant transformation of fixed accessbusiness, which will provide various other facilities tothe customers of fixed access.

(v) Internet Data Centre (IDC)

Efforts are underway for setting up of Internet DataCentres.

(vi) ERP system implementation plan

The ERP and Business Process re-engineering for country-wide implementation has been kick-started. Whole ofthe process have already been documented and the blueprint is ready. Whole range of activities and processessuch as Material Management, Project Management,Human Resources Management etc., will be completelycomputerised. Complete Implementation of ERP andBusiness Process Re-engineering project is expected topave way for savings in OPEX and increased operationalefficiency.

TELECOM FACTORIES

The Telecom Factories of your Company are located atKolkata, Gopalpur, Kharagpur, Jabalpur, Richhai, Bhilai &Mumbai. These are in-house manufacturing units, currentlyengaged in the production of GSM Tower, SIM card, PayPhones, Mini Pillar, MPJ Box, CT Boxes, DP Boxes, Line JackUnits, Drop-wire, OFC Accessories, FDMS, Jointing Kits etc.,employing 3309 persons.

During 2009-10, the production output of factories wasRS.445.93 crores. During the year under review, TelecomFactories have supplied 5050 nos. of GSM Towers and 1.125Crore SIM Cards. Capacity of SIM Card Plant at TF Mumbaihas been increased from 10 Million per annum to 40 Millionper annum during 2009-10. Production of PLB HDPE Pipe,LJU cum Splitter, SPV Power Unit for PWT & Transient SafetyDevice has been started at TF Kolkatta.

NEW DEVELOPMENTS AFTER THE CLOSE OF FINANCIALYEAR

Payment of 3G and BWA Spectrum Fee to theGovernment

After the close of the financial year 2009-10, the Governmenthad started the process of auctioning 3G and BWA Spectrum.Your Company has paid the highest bid price for 3G andBWA spectrum fee as Rs.10186 crores and Rs.8313.80 croresfor 3G spectrum and BWA Spectrum, respectively.

Levying of Sales Tax on transmission of informationthrough optical fibre media

Commercial Tax Authorities of the Karnataka StateGovernment have passed assessment order, imposing sales/value added tax for transmission of information through

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optical fibre media, on the grounds that where information is transmitted on optical fibre media, the operator is sellingArtificially Created Light Energy(ACLE) to the customer, who, in turn, superimposes his data on this energy and carries it inthe network.

The issue of levy of sales tax on BSNL services has been contested by the Karnataka Circle before the Hon’ble High Court ofKarnataka at Bangalore.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Corporate Restructuring

The transformation exercise undertaken by the Company, with the assistance of M/s Boston Consulting Group is nowcomplete upto SSA levels. As a part of the exercise, following new initiatives, aiming to tone up the functioning of theorganisation have been introduced:-

• Group Performance Management System(GPMS), enabling the measurement of groups based on Key PerformanceIndicators(KPIs)

• Field-level Performance Management System – to enable the Circles to perform in a competitive way, this has beenintroduced for staff associated with sales, quality of service and customer service roles.

• New staffing norms have been devised, which are under study for getting feedbacks of the units.

• Revised performance appraisal system, i.e., APAR has been introduced for the executives of the Company. Under thissystem, the employee’s performance is weighed on a scale of 01 to 09 with due weightages, with reference to theassigned tasks.

• With the implementation of Project Sanchaya, Company has brought down the expenditure involved in engaging ofsecurity personnel.

Industrial Relations & Training

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

92170 employees of the Company were put to training with a cumulative 481,666 Man-Days of training. In addition, witha view to gainfully utilize the training infrastructure of the Company, 456,313 Man-Days of training was imparted to non-BSNL employees.

IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY

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

RESERVATION POLICIES OF THE CENTRAL GOVERNMENT

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

A glimpse of representation of Scheduled Caste/Trib/ Ex-servicemen/Women/Disabled employees in the organisationAs on 31.3.2010

Group No. of Employees belonging to

employees Scheduled Scheduled Ex- WomenCaste Tribe Servicemen

A 7610 1274 449 4 439

B 47822 7304 2108 154 7213

C 192559 35085 9841 712 24902

D 41496 9607 2350 28 7533

Industrial workers 2613 520 237 1 121

Total 292100 53790 14985 899 40208

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Number of Disabled employees

Details Numbers

Blindness of low vision 34

Hearing Impairment 34

Locomotor disability or cerebral palsy 442

Total 510

STAFF GRIEVANCES REDRESSAL MACHINERY

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

COMPLAINTS COMMITTEE FOR REDRESSAL OF SEXUAL HARASSMENT AT WORK PLACES

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

CORPORATE SOCIAL RESPONSIBILITIES

Your Company’s philosophy of corporate social responsibility revolves around the Welfare of the Employees, and, thesociety in general. Assisting in promoting integrated health, education and preservation of cultural heritage of the country;apart from serving the mankind during hours of need in disaster management processes.

To give impetus to R & D activities in Telecom Sector, BSNL IIT Kanpur Telecom Centre of Excellence has been established atIIT Kanpur.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION

Being a service providing Company, these rules are not applicable to your Company. Being a leading telecom serviceprovider of the country, Your Company is fully concerned regarding its responsibility for Environmental Protection andEnergy Conservation. Various initiatives have been taken for promoting use of Renewable and Alternate Energy Resourcesand use of measures to save energy.

AWARDS AND ACCOLADES

Prestigious CNBC Consumer Awards, 2010, in the category of Best Broadband Service Provider of the country was awardedto your Company in a function held at Mumbai on 28th June, 2010.

National Telecom Operators Award in the Category of “Best Internet Service Provider in India” was awarded to yourCompany in a function held at New Delhi on 28th May 2010.

Your Company was given the Award for “Heavy Weight Mini Navratna – Non-manufacturing” at a function in New Delhion 6th April 2010.

“Best Long Distance Operator & Best Fixed Line Operator” Award was given to Your Company at a function held in NewDelhi on 7th April 2010.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Earned: - Rs. 20,071 lakh

Used: - Rs. 47,709 lakh

CORPORATE GOVERNANCE

Pursuant to the Government of India’s directives for implementation of Corporate Governance Norms for the UnlistedCPSEs, your Directors had decided to implement the same voluntarily from the financial year 2008-09.

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

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

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• Management Discussion and Analysis Report, Report on

Corporate Governance, together with the Certificate on

compliance of conditions of corporate governance as

stipulated in the Guidelines on Corporate Governance

for Central Public Sector Enterprises 2007, and revised

further vide No.18(8)/2005-GM, dated 14.5.2010,

issued by the Department of Public Enterprises forms

part of this Report and the requisite quarterly progress

reports are being sent regularly to the Administrative

Ministry.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the

Companies Act, 1956, the Directors of the Company hereby

confirm:

(i) that in the preparation of the annual accounts, the

applicable accounting standards had been followed along

with proper explanation relating to material departures;

(ii) that the Directors had selected such accounting policies

and applied them consistently and made judgments and

estimates that are reasonable and prudent so as to give

a true and fair view of the state of affairs of the Company

at the end of the financial year and of the profit or loss

of the Company for that period;

(iii) that the Directors had taken proper and sufficient care

for the maintenance of adequate accounting records in

accordance with the provisions of this Act for

safeguarding the assets of the Company and for

preventing and detecting fraud and other irregularities;

(iv) that the Directors had prepared the annual accounts on

a going concern basis.

STATUTORY DISCLOSURES

� None of the Directors of your Company is disqualified

as per provision of Section 274(1)(g) of the Act. Your

Directors have made necessary disclosures, as required

under various provisions of the Act.

� None of the employees of your Company is drawing

remuneration exceeding the limits laid down under

provisions of section 217(2A) of the Act read with

Companies (Particulars of Employees) Rules, 1975.

DIRECTORS

Pursuant to Govt. of India, M/o C & IT, Department of

Telecommunications Notification No.A-12023/5/89/OC-

PSA, dated 12.2.2010, Shri R.N.Jha, DDG[IR] in the

Department of Telecommunications was appointed as

Government Director in place of Shri P.K.Mittal former

DDG[AS-II] in the D/oTelecom.

Pursuant to Govt. of India, M/o C & IT, Department of

Telecommunications Notification No. A-12023/6/89-OC/

PSA, dated 17.3.2010, Shri J.S.Deepak, JS(T) in the

Department of Telecommunication ceased to be Government

Director wef 17.3.2010.

Government of India, M/o Communications and IT, D/o

Telecommunications, vide Notification No.1-17/06-PSA,

dated 7.5.2010, appointed Shri Ashish Guha as Non-official

Part-Time Director, for a period of three year or until further

orders, whichever is earlier. Shri Guha assumed the charge

of office on 21.5.2010.

In terms of Govt. of India, Ministry of Communications and

IT, D/o Telecommunications No.1-3/2007-PSA, dated

31.5.2010, consequent upon attaining the age of

superannuation, Shri Rajendra Singh, Director(Enerprise)

retired from service wef the A/N 31.5.2010.

Govt. of India, Ministry of Communications and IT, D/o

Telecommunications have, vide Notification No.1-10/2009-

PSA, dated 2.6.2010, entrusted the charge of the post of

Director (Enterprise) to Shri Gopal Das Director(HR) with

immediate effect, for a period of three months or till the

appointment of regular incumbent or till further orders,

whichever is the earliest, in addition to his present charge

without any additional remuneration.

Govt. of India, Ministry of Communications and IT, D/o

Telecommunications have, vide Notification No.1-10/2009-

PSA, dated 28.7.2010, in supercession of earlier order of

even number dated 2.6.2010, entrusted the charge of the

post of Director (Enterprise) to Shri R.K.Agarwal

Director(Consumer Mobility) with effect from 01.08.2010,

for the balance period of one month or till the appointment

of regular incumbent or till further orders, whichever is the

earliest, in addition to his present charge.

In continuation to Notification No.1-10/2009-PSA, dated

28.7.2010, GoI MoC & IT, DoT have, vide Notification of

even number dated 31.8.2010, extended the entrustment

of the additional charge of the post of Director(Enterprise)

to Shri R.K.Agarwal Director(CM) wef 1.9.2010 to

30.11.2010 or till the appointment of regular incumbent or

further orders, whichever is the earliest.

In terms of Govt. of India, Ministry of Communications and

IT, D/o Telecommunications No.1-8/2006-PSA, dated

31.07.2010, consequent upon attaining the age of

superannuation, Shri Kuldeep Goyal, Chairman and

Managing Director retired from service wef the afternoon

of 31.07.2010.

GoI, MoC & IT, DoT, vide 1-11/2009-PSA, dated 30.7.2010,

entrusted the charge of the post of CMD BSNL to Shri Gopal

Das Director(HRD) with effect from 1.8.2010 for a period

of three months or till the appointment of regular incumbent

or till further orders, whichever is the earliest, in addition to

his present charge, without any extra remuneration. Shri

Gopal Das assumed the charge of office of CMD on 1.8.2010.

Your Directors place on record their deep appreciation of the

valuable services rendered by Shri Kuldeep Goyal Chairman

and Managing Director, Shri P.K.Mittal and Shri J.S.Deepak

Govt. Directors and Shri Rajendra Singh Director(Enterprise)

during their association with the Company.

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AUDIT COMMITTEE

The Audit Committee of the Board comprised of Shri Mahesh

Shah Chairman, Dr.S.K.Kak Director and Shri Rajendra Singh

Director(Enterprise) as Members. Consequent upon the

retirement of Shri Rajendra Singh Director(Enterprise), the

committee was re-constituted by induction of Shri Gopal Das

Director(HR) in place of Shri Rajendra Singh. Majority of the

Members of the Committee are independent non-official

part-time Directors, in compliance with the provisions of

Section 292A of the Companies Act 1956.

AUDITORS

M/s Sharma Goel & Co., Chartered Accountants, New Delhi

were appointed as Statutory Auditors of the Company by

the Comptroller & Auditor General of India. In addition to

the Statutory Auditors, 48 Branch Auditors were also

appointed for the year 2009-10. The Report of the Statutory

Auditors and the comments of the Comptroller and Auditor

General of India, alongwith replies of the Management

thereto are attached as Addendum forming part of this

Report.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their sincere

appreciation and gratitude to the subscribers of its telecom

services, the stakeholders, and bankers and to all the State

Governments for their continued cooperation and invaluable

support.

Your Directors express their deep appreciation and sincere

gratitude for the valuable guidance, support and assistance

it received from various Ministries of the Government of India,

particularly from the Ministry of Communications and IT,

Department of Telecommunications.

Your Directors would like to place on record their hearty

appreciation to all the employees of the Company for their

performance.

For and on behalf of the Board of Directors

Sd/-

[GOPAL DAS]

Chairman & Managing Director

Place: New Delhi

Date: 24.09.2010

Shri R.Chandrasekhar, Secretary Telecom, Shri Gurudas Kamat., Hon’ble MOS, C & IT, Thiru A.Raja, Hon’ble MOC &IT, Shri Sachin Pilot,Hon’ble MOS, C&IT along with ShriGopal Das, CMD, BSNL presenting the prestigious Bharat Sanchar Seva Padak Awards, 2010 on 26thOct, 2010 at New Delhi.

14

DECLARATION BY THE CHAIRMAN AND MANAGING DIRECTOR REGARDING

COMPLIANCE WITH THE CODE OF CONDUCT BY THE BOARD MEMBERS AND THE

SENIOR MANAGEMENT PERSONNEL OF THE COMPANY DURING THE FINANCIAL

YEAR 2009-10

I, GOPAL DAS, Chairman and Managing Director, Bharat Sanchar Nigam Limited, do hereby declare that all the Members

of the Board and the Senior Management Personnel of the Company have affirmed their compliance of the Code of

Conduct for Board Members and Code of Conduct for the Senior Management Personnel during 2009-10.

Sd/-

[GOPAL DAS]

Chairman and Managing Director

Place: New Delhi

Dated: 08.09.2010

Shri PJ Thomas, CVC [Former Secretary, DoT] along with Mr Pradeep Gupta, Chairman, Cybermedia Group Handing over the PrestigousV&D Telecom Awards for Best Broadband Service Provider, Best Fixed Line Service Provider & Best 3G Service Provider to Shri Gopaldas,CMD BSNL in a function in Delhi recently.

15

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

1.1 Major Regulatory Developments

Completion of 3G and BWA WiMax spectrum auctions

have already fuelled the market’s expectations for

premium services. Huge financial outgo from the telcos

for the spectrum charges is expected to reduce the

margins. Absorbing the higher capex and sustaining the

operations would be a huge task before the operators.

Hon’ble TDSAT, on petitions of the private telecom

service providers have passed judgment that Revenues

from non-telecom business shall not be considered for

the purposes of calculation of license fee and spectrum

charges. Accordingly, Government was requested for

allowing BSNL also to avail the benefit of the judgment.

DoT had not agreed to the same. The Government had

contested TDSAT’s judgment before the Hon’ble Apex

Court, wherein, the Hon’ble Apex Court has not granted

any stay against the implementation of the TDSAT

judgment. Although Your Board has decided to take

advantage of the orders and avail the benefits, final

outcome of the judgement in the Hon’ble Apex Court

will have a major impact.

The recent policy of the sector regulator asking for

surrender of the spectrum beyond 8MHz in Circles and

beyond 10 MHz in Metros; and payment for extra

spectrum are of great concern to the incumbent players.

The outcome of the recommendations of the EGoM on

the same and final orders of the licensor may influence

the future growth and expansion plans of the Company.

2. STRENGTH/OPPORTUNITIES/WEAKNESSES/

THREATS

The Mobile and Broadband subscriber base has been

witnessing an upward growth trend and has even

surpassed the targets of NTP-99. Huge telecom network

infrastructure, network capability, high quality of service

standards coupled with a spirited workforce are the core

assets and major strength of Your Company.

The ever increasing demand for multi-media contents is

expected to fuel the ARPU growth. NGN framework

will help in minimising capex.

The NGN framework provides for a structured

architecture that enables ease of provisioning security,

synchronisation, content storage and applications

through an integrated control layer, with seamless way

to migrate to IMS, with the customer being able to secure

any service, through any device using any access

technology, without ever getting to know the backend

complexities.

Your Company, being a CPSE of the Ministry of

Communications and IT, also carries on the mandate of

the achieving Government’s goals of providing

connectivity in rural and unconnected areas and other

social obligations; and, therefore occupies an unique

position amongst other operators.

3. OUTLOOK

As part of the business transformation exercise, the

business verticals of Consumer Mobility, Consumer Fixed

Access and the Enterprise have been created, as business

enablers, wherein:- The Mobility segment will play

the role of “Resurgent Attacker”; and, will provide

an Extensive and strong distribution and retail footprint;

with affordable and transparent products. This segment

will be Pioneering new technologies (e.g. 3G/WiMax).

The Fixed Access segment, will play the role of

“Leader and Shaper”, which will resort to proactive

selling at customer’s doorstep, offer high speed

connectivity at lowest price and Offer Innovative bundles

of services and tariffs to the customers. The Enterprise

segment will play the role of “Provider of Choice”;

which will Manage Key Accounts, Ensure Competitive

service levels and offer more Managed services & new

solutions to the enterprise customers.

Further, as part of nation-building exercise and

fulfilling the social obligations of connecting India,

Your Company will like to actively pursue the goal of:-

(a) Rollout services in all villages across the country:-

With (i) VPTs (CDMA, DSPT), (ii) Broadband (DSL,

GSM, EVDO, WiMAX) and (iii) Mobile (GSM)

Services across all rural areas, wherever the fixed

line is not available or it is uneconomical.

(b) An inclusive development of the Country

enabled by Broadband:-

With focus on key sectors like Education, Health

and Public Administration.

Through a series of innovative measures as part of

business process re-engineering and transformation,

the Directors are working actively to transform the

Company. The focus is being enhanced across all

the Business verticals in the areas of Sales &

Distribution, Marketing, IT enablement, Customer

Service, Network Operations.

4. RISKS AND CONCERNS

Gradual paradigm shift of telecom sector into a fast

moving consumer goods(FMCG) category, coupled with

very huge financial outgo for 3G and BWA WiMax

Spectrum charges have put the margins under stress.

Blended ARPU of all the operators remained under

pressure in the previous year; and, it may remain so in

the coming years too due to above factors. With

Management Discussion and Analysis Report

16

aggressive marketing and sales plans, Your Company is

planning to penetrate the market further to enhance

the revenues.

5. INTERNAL CONTROL SYSTEMS AND THEIR

ADEQUACY

Being the successor of erstwhile Central Government

Departments of Telecom Services and Telecom

Operations, your company has a well defined and

planned internal control systems and procedures

commensurate with its size and operations. Internal

checks are routinely carried out by the internal audit

teams all over the country.

Apart from its own Internal Audit machinery, Your

Company, being the Central Public Sector Enterprise, is

subject to the Resident Audit Office scheme of the

Director General of P & T Audit under the aegis of C &

AG of India, CVC Mechanism and the Guidelines of the

Department of Public Enterprises.

In accordance with the Guidelines on Corporate

Governance Norms issued by the Department of Public

Enterprises, the Audit Committee of the Board, in its

various meetings had discussions with the Branch

Auditors as well as the Internal Audit Teams and reviewed

the Internal Audit Paras.

6. DISCUSSION ON FINANCIAL PERFORMANCE WITH

RESPECT TO OPERATIONAL PERFORMANCE

During the year the Company earned a total revenue of

Rs. 32,045 crores as compared to Rs.35,812 Crore for

the previous year. The revenues from both wire-line and

wire-less services have declined.

The Company has incurred total expenditure of Rs.

34,078 crore against Rs. 34,354 crore in the previous

year. The increase in staff expenditure was mainly

contributed by the enhanced remuneration due to

implementation of pay commission recommendations.

The other items of increase in expenditure are

Interconnect Usage Charges(IUC) payment to other

operators under administrative and operative expenses.

This is however, offset due to reduction in commission

charges payable to franchisees due to decline in STD/

PCO revenues.

During the year, the Company has posted a net loss of

Rs.1,822.65 Crore.

The Authorised Share Capital of the Company is divided

into 1000 crore equity shares of Rs.10/- each and 750

crore 9% non-cumulative preference share of Rs.10/-

each. Out of which, 500 crore equity shares and 750

crore Preference Share have been issued as fully paid to

the Govt. of India.

The Gross Block of Fixed Assets of the Company is

Rs.160,470 Crore [Previous year Rs.132,243 Crore].

7. MATERIAL DEVELOPMENTS IN HUMAN

RESOURCES, INDUSTRIAL RELATIONS FRONT,

INCLUDING NUMBER OF PEOPLE EMPLOYED.

Consequent upon Government of India accepting the

6th Pay Commission’s Recommendations and 2nd Pay

Revision Committee’s recommendations for CPSU

Executives, the pay of the Executives on Deputation as

well as Your Company’s Executives have been revised

with effect from 1st January 2006 and 1st January 2007,

respectively; and, the remaining 60% of the arrears due

was paid to them. As also Pay revision of the unionised

workers has also been completed and arrears paid.

With the successful completion of the transformation

exercise, the Sales and Marketing set up of the Company

has been fine tuned. To address the gap in trained

manpower efforts are underway for induction at DGM

levels in Telecom and Finance disciplines, apart from

selection of 600 Management Trainees in various

disciplines.

To give focus to the Company ’s IT needs, for

monitoring/implementation and integration of all IT

assets/applications, Your Board has decided to appoint

an officer having domain knowledge and expertise as

ED(IT).

Your company maintains a healthy relationship with its

employees through an enabling and participative work

environment. Your company commits itself to the values

of integrity, commitment, passion, seamlessness and

speed; it invests heavily in people and skills

development.

8. ENVIRONMENTAL PROTECTION AND

CONSERVATION, TECHNOLOGICAL CONSERVATION,

RENEWABLE ENERGY DEVELOPMENTS, FOREIGN

EXCHANGE CONSERVATIONS

Although the rules are not applicable to your Company,

which is a service provider, but, as a responsible corporate

citizen, Your Company is fully concerned and committed

as regards its responsibility for Environmental Protection,

Energy Conservation and Use of Alternate / Renewable

Energy Resources.

9. CORPORATE SOCIAL RESPONSIBILITY

Your Company, being the successor and assigns of

erstwhile Central Government Departments, is a fore-

runner in the Welfare and Corporate Social Responsibility

segments.

Employee’s and their Family Welfare Schemes

Wide spectrum of the employees are the core strength

of the organisation. Realising this, Your Company

nurtures very close relationship with the employees and

their families. BSNL Medical Reimbursement Scheme

extends further to take care of the spouse, wards and

dependents of the employees, including their post-

17

retirement stages. Apart from this, P & T Dispensaries

are also being run at select places.

The Welfare set up of the Company has a wide array of

Scholarships and Aid Schemes for the meritorious

children of the wards.

Creches and Vocational training centres for the wards

and spouses are also run under the welfare schemes.

Annual Tours are undertaken by group of employees to

places of historic and religious importance at subsidised

transportation rates.

Safety of the Employees

All required pre-cautions are always in place to ensure

the comfort and safety of the employees as prescribed

under various legislations.

Social Responsibility in the sphere of Community

Welfare

Services of Your Company touches the significant portion

of the population of the country, and, thus, remains the

life-line of masses. It has been the cardinal principle of

the corporate philosophy and tradition of the Company,

to care for the welfare of these stakeholders during the

times of natural disasters and calamities, apart from

ensuring speedy restoration of the communication

networks and installation of dedicated support lines, Your

Company and its employees immediately move forward

for making their contribution for relief and rehabilitation.

For promoting integrated health and education, Your

Company arranges for donation of Computers and

Ambulances to the Hospitals and Educational

Institutions.

To ensure seamless connectivity of the Amarnath Pilgrims

with their near and dear, Your Company has mobile

communication network between the Amarnath Cave

pilgrimage route and the rest of the country.

P & T Schools run at various places cater to the needs of

the children of the employees as well as general public.

10. CAUTIONARY STATEMENT

These discussions are “forward looking” within the

meaning of the applicable laws and regulations. Actual

performance may deviate from the explicit or implicit

expectations.

Shri Kuldeep Goyal, former CMD, BSNL and Shri M.V. Nair, CMD, UBI joins hand with UNION BANK OF INDIA for “Launch of billpayment & Mobile TOP-UP through Mobile UBI ATM”.

18

Report on Corporate GovernanceIt has been our endeavour that the global best practices are put in place and practiced while marching towards our aspirationof “Be the leading Telecom Service Provider in India with global presence”. Corporate Governance per se is deeply embeddedin the corporate philosophy of organisation. Although the Corporate Governance Norms for the Unlisted Central PublicSector Enterprises issued by the Department of Public Enterprise has codified the requirements, BSNL, as part of its agenda,always surges ahead and adopts global best practices like Integrity Pact with prospective vendors aimed to free the societyfrom the malice of corruption.

1.1 With an effective blend of corporate ethics and governance as part of its core existence and journey, BSNL has alreadybeen complying with most of the applicable norms, viz,:-

Composition of the Board;Complete following of Board procedure, specially, the Secretarial Standards laid down by the Institute of CompanySecretaries of India;Constitution of the Audit Committee of the Board with 2/3rd of the Members comprising of other than Whole-timeDirectors;Clear cut demarcation of powers with Delegation of Financial and Administrative Powers to the Management Committeeof the Board, CMD and the Functional Directors, and below Board-level executives;Conduct, Discipline and Appeal Rules for the Employees and reporting systems;Appointment of Statutory and Branch Auditors by the C & AG of India;Audit jurisdiction of the DG P & T’s Resident Audit Office scheme,Dedicated Internal Audit Set up;Amenability with the Guidelines of Central Vigilance Commission;Outside independent personnel as CVO;Dedicated and full-fledged Vigilance set up across the units of the country;Compliance of the Orders and Guidelines of the Government of India - Department of Public Enterprises, AdministrativeMinistry and host of other compliances.

1.2 However, with the introduction of “Guidelines on Corporate Governance Norms for the Unlisted CPSEs”, by theDepartment of Public Enterprises, wherever required, the Company has modified/augmented/put in place all therequisite reporting systems, so as to ensure complete compliance of the norms.

2. Board of Directors

(a) Size of the Board

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

(b) Composition of the Board

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

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

Whole-Time Directors [06 including CMD]

1. Shri Kuldeep Goyal CMD [upto 31.7.2010]

2. Shri Gopal Das, Director [HR] *and CMD [*wef 01.08.2010]

3. Shri Rajendra Singh, Director [Enterprise Business] [upto 31.5.2010] [wef 1.8.2010 charge vest withDirector(CM)]

4. Shri R.K.Agarwal, Director [Consumer Mobility] & * [Enterprise] [*wef 1.8.2010]

5. Shri Rajesh Wadhwa, Director [Consumer Fixed Access]

6. Director [Finance] Vacant – Charge vest with the CMD.

Government Nominee Directors [02]

1. Shri J.S.Deepak, JS (T) in DoT [upto 17.3.2010]

2. Shri P.K.Mittal, DDG[AS-II] in DoT [upto 12.2.2010]

3. Shri R.N.Jha, DDG[IR]in DoT [wef 12.2.2010]

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Non-official Part-Time Directors [04]

1. Dr.S.K.Kak Director

2. Shri Mahesh Shah Director

3. Shri Sanjiv Gupta Director

4. Shri Ashish Guha Director [wef 21.5.2010]

Detailed profiles of the Directors are as follows:-

Shri Gopal Das Director(HR) & CMD :-

Shri Gopal Das took over as Director(HRD) in BSNL on 4th October 2007. Consequent upon the retirement of ShriKuldeep Goyal CMD on his superannuation, Govt. of India have entrusted the charge of CMD to Shri Gopal Das wef1.8.2010. The charge of Director(Finance) also vest with him. He is responsible for formulating and implementingpolicies pertaining to Establishment, personnel, industrial relations, training, restructuring and other HR related affairs.

He obtained his B.E. Degree with honors from Banaras Hindu University in the year 1972. He joined Departmentof Telecommunications, Government of India through Indian Telecommunications Services Group ‘A’ Service inJune 1975.

Prior to his present assignment Shri Das was Chief General Manager, (Wireless Services) in Mahanagar TelephoneNigam Limited at Mumbai.

He has vast experience of 32 years in Telecom Industry in the Department of Telecommunications and MahanagarTelephone Nigam Limited in different capacities. He has received training in Operation and Maintenance of ElectronicExchanges in France and he was also one of the members of the Special Study Group of ITU for Mobile Networkrelating to IMT 2000 and beyond.

Shri Gopal Das was deputed in Kingdom of Saudi Arabia as Project Director for handling the various Telecomprojects in the city of Dammam during the period from 1987 to 1992. He has also worked on Deputation inNigeria for about 3 years as Project Director and handled many Optical Fibre and transmission projects. Shri Dashas visited different countries like USA, UK, France, Australia, Singapore, Korea etc. to get exposure of managementof telecom systems at international level.

During his tenure in Department of Telecommunications and Mahanagar Telephone Nigam Limited, he worked invarious capacities as Area Director, General Manager and Chief General Manager and possesses wide experience inOperations, maintenance and development of telecom network including functions related to personnel, commercial,marketing and project implementations. Right from inception of GSM network in MTNL Mumbai, as General Manager,he was actively involved in planning, installation and operation of GSM network and while working as Chief GeneralManager (Wireless Services), he was responsible for planning installation, operation and maintenance of GSM andCDMA networks an contributed to the rapid growth of Wireless network in MTNL, Mumbai.

Shri Kuldeep Goyal CMD & Director (Finance) [ upto 31.07.2010 ]:-

Shri Kuldeep Goyal has taken over as Chairman & Managing Director of BSNL on August 1, 2007. Shri KuldeepGoyal joined the Indian Telecommunication Service of Govt. of India in 1972. He is an Engineering Graduate fromIIT Roorkee.

Just prior to taking over as CMD, BSNL, Shri Goyal has worked as Director (Planning & New Services) and wasresponsible for planning and execution of strategy for expansion of BSNL’s network.

With more than 35 years of service, Shri Goyal has vast experience in telecom sector viz. planning, installation,operation and maintenance of wirelines and wireless services, data services, computerization of various activities intelecom network and provision of value added services.

While working as chief General Manager, Maharashtra Telecom circle, he was in charge for operations, planningand expansion of telecom network of the largest circle of BSNL and contributed to rapid growth of telecomnetworks in Maharashtra and Goa. During his short tenure of ten months as Executive Director, MTNL Mumbai, hewas able to double the connections in GSM network of MTNL Mumbai and MTNL’s market share was enhancedfrom 8.93% to 15.5%. During his tenure, broadband service was also started in January 2005 and 40000 subscriberswere enrolled during a short period of nine months.

Shri Goyal has worked in Yemen on a foreign project through Telecommunications Consultants India Ltd. He wasalso a Member of National Working Group of ITU-T Study Group 2 on operational aspect of service, provision andperformance of telecom networks and participated in meeting of ITU-T Study Group 2 at Geneva.

Shri Goyal has delivered a number of talks on various topics relating to telecom in various forums like GSMAssociation, Institute of Engineers, Institute of Electrical and Telecommuincations Engineers, CII, Door Darshan and

20

A.I.R. Some of his articles - “Telecommunication Industry at a Glance”, “Universal access - An internationalperspective” and “Trade in Telecommunications” have been published in Telecommunications Journal.

Shri Rajesh Wadhwa Director (CFA):-

Shri Rajesh Wadhwa took over as Director (Operations) in BSNL on 1st August 2008. Shri Wadhwa is a B. Tech inElectrical Engineering in first class with distinction from I.I.T. Delhi. He has also done MBA from Faculty ofManagement Studies, University of Delhi. He joined the Department of Telecommunications, Government ofIndia through Indian Telecommunications Services Group ‘A’ in December 1975. Since then he has worked invarious capacities in different units of DoT/ BSNL/MTNL and has versatile experience covering almost all the fieldsin telecommunications including operations, development and management of landline and mobile networks,sales and marketing and financial management etc.

Before joining as Director (Operations) on the BSNL Board, he was working as Chief General Manager (North) inMahanagar Telephone Nigam Ltd., Delhi and had also worked as Executive Director, MTNL, Delhi for sometime. In MTNL, he had been mainly responsible for provision, operations & maintenance of landlines and broadbandservices, mobile services, management of transmission and leased line network, optical fibre network, marketingand distribution channels and revenue management. He was actively involved in extensive induction of IT enabledcomputerized Operational and Customer Interface Systems and for introducing the concept of paperless workingin many areas.

As Director (Operations), BSNL, he is mainly responsible for improving the Systems and Methods to achieveoptimal performance and maximum utilization of BSNL’s extensive country-wide Infrastructure and network. Heis also responsible for achieving short-term and long-term business interests of the Company by way of highcustomer satisfaction and timely provision of satisfactory and quality services through close coordination withvarious field units. He is also responsible for induction and adaptation of new technologies and managingtechnological changes and providing state-of-the-art modern and world class integrated telecom services in thehighly competitive environment.

Shri R.K.Agarwal Director(CM) & *(Enerprise) [*wef 1.8.2010]:-

Shri Rakesh Kumar Agarwal has done his B.E. from Indian Institute of Science, Bangalore in 1973 and then M.Techin Communications from IIT Delhi in 1975. Thereafter he joined Department of Telecommunications and workedin various fields of telecommunications. He did installation of C-400 Cross Bar Exchanges till 1983. He was sent toFrance for training for the installation of Digital Electronic Exchange of E-10B make in 1983 and thereafter workedas Deputy General Manager (Installation) for E-10B Exchanges in MTNL, Mumbai from 1983 till 1991.

He was DoT representative for the System Selection Committee set up to finalise gateway switches for VSNL.During 1990 he represented India for APT Conference in Indonesia. He was also deputed as Project Director, TCILto Sultanate-of-Oman from 1991 to 1996 where he handled all the projects related to setting up the externalplant network for copper cable and Optical Fibre Network in Sultanate-of-Oman. From 1996-98 he worked asChief General Manager, Andaman & Nicobar Telecom Circle and thereafter handled the charge of Jaipur TelecomDistrict, Rajasthan from 1998-99. He was posted as General Manager (Development) in Pune in 1999 and wasincharge of complete planning and installation of all switching and transmission network in Pune District. He wasalso in-charge of computerization as well as introduction of new services in the network in Pune.

He was closely involved with planning, evaluation of tender as well as implementation and maintenance of GSMMobile Services in Maharashtra since 2002. As Chairman of the Validation Committee he successfully carried outthe validation of mobile switch for West Zone installed at Pune. He was in-charge of all the Central Platforms forGSM Mobile Services for West Zone installed at Pune namely pre-paid platform, billing system and value addedservices for mobile. Later on he finalized expansion of mobile network in West Zone for 4 million lines and wasinvolved in the commissioning and maintenance of GSM Mobile Network. He was also closely involved with thesetting up of Call Centre at Pune for handling Customer Care and Marketing of Mobile Services till May, 2006.InJune, 2006, he was posted as Chief General Manager, BSNL Bihar Telecom Circle. He has taken over the charge ofDirector (Planning & New Services) in BSNL Board w.e.f. 11th April, 2008.

Shri Rajendra Singh Director(Enterprise) [ Upto 31.5.2010]:- Shri Rajendra Singh joined BSNL Board asDirector (Commercial & Marketing) on 7th November, 2007. After the restructuring in BSNL in May, 2009, hisdesignation has been changed as Director (Enterprise), along with the change of responsibilities.

Shri Rajendra Singh belongs to 1972 batch of Indian Telecom Service. He obtained his Bachelor’s Degree in ElectricalEngineering in 1972 from Punjab Engineering College Chandigarh and joined the Department of Telecommunicationsin March 1974. Before joining the BSNL Board, during his more than three decades of service, he successfully heldvarious important and prestigious positions in the Department of Telecommunications, MTNL and BSNL. Duringhis tenure as the Chief General Manager of Himachal Pradesh and Punjab Telecom Circles, these Circles recorded

21

significant growth, both in terms of quality and quantity. While working at different positions, he acquired vastexperience and knowledge in various streams of telecommunications.

He worked on various key projects in Saudi Arabia and Malawi (Africa) during his deputation to TCIL and has atrack record of completing the TCIL projects before time, which resulted in higher profit margins for TCIL. Duringhis illustrious career, he has undergone several trainings in India, Japan and U.K. He also participated in a StudyGroup meeting at ITU HQ Geneva, Switzerland in 2002.

As Director (Enterprise), BSNL Board, he is responsible for formulating and implementing policies for sustainablegrowth of the Enterprise & Wholesale businesses and managing the core network. Enterprise customers includesmall, medium and large Corporates, Central / State Government Departments and PSUs. The wholesale businesscovers Indian and International carriers and ISPs. All deals pertaining to the international long distance and nationallong distance network fall within this jurisdiction. His core network responsibilities include Procurement, Installation,Commissioning and Operation & Maintenance of all transmission equipment as well as Planning, Installation,Maintenance and Management of all MPLS core network.

As head of these businesses, he is responsible for the creation of innovative and affordable products, superior sales,marketing & customer service and excellence in network operations.

Shri J.S.Deepak Govt Nominee Director [upto 17.3.2010]:-

Shri Deepak, is M.Sc. in Electronics from Bangalore University and MBA from Indian Institute of Management(IIM)Ahmedabad with specialisation in Marketing and Finance.

He is an I.A.S officer of the 1982 batch at present working as Joint Secretary (Telecom) in the Department ofTelecommunications, handling the following key responsibilities:-

� Formulation and Implementation of National Telecom Policy,

� Rural Telephony and convergence issues

� Matters relating to FDI and investment promotion in the telecom sector

� WTO matters and bilateral issues dealing with telecommunications

� Setting up of Telecom Centres of Excellence in PPP mode Organising India Telecom 2008 and other promotionalevents in the telecom sector

� Administrative, Operational and policy matters relating to BSNL and MTNL

� Administration of the TRAI Act and other administrative matters relating to TRAI and TDSAT

� Issues relating to auction of 3G and Wi-Max Spectrum.

During his 25 years career span in the Indian Administrative Service, he has held various important assignments inthe State of Uttar Pradesh in the capacities of Principal Secretary, Industrial Development, Export CommissionerGovt. of UP, Managing Director UP Export Corporation Limited, Deputy Managing Director State IndustrialDevelopment Corporation of UP.

In the international sector, from 1997 to 2002, he was Consultant with the Policy Project, US Agency for InternationalDevelopment, Washington DC.

He is also the Government Nominee Director on the Board of Directors of MTNL and Millennium Telecom Limited,a subsidiary of MTNL.

Shri P.K.Mittal Govt. Nominee Diector [upto 12.2.2010]:-

Shri. P.K.Mittal has done his B.Sc (Electronics), Electrical Engineering from Delhi College of Engineering, Universityof Delhi. He joined the Department of Telecom in 1981. He has more than 27 years of experience with departmentof Telecom. He is presently responsible for implementation and monitoring or access service licences in the country.

He has extensive experience of policy formulation and implementation for liberalisation of telecommunicationsservice sector, licensing and regulation of various services. He has been associated with formulation of policy andlicensing framework for National Long Distance services, International Long Distance Services, Data Services, BasicServices and Unified Access Services. He has vast experience in planning, installation, commissioning and managementof telecommunications systems and networks. He also has experience in standardisation of telecom equipmentand international relations.

He has been a member of the governing council of Software Technology Parks of India (STPI) and ERNET and hasbeen a Government Director on the Board of Directors of HTL.

Prior to joining the Department of Telecom, he has worked in private sector for three years.

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Shri R.N.Jha Govt. Nominee Director[wef 12.2.2010]:-

Shri. Rabindra Nath Jha was appointed as Government Nominee Director on the Board of Directors of BSNL witheffect from 12.2.2010. Presently Shri Jha is Deputy Director General (International Relations), Department ofTelecommunication, Ministry of Communications & IT, Government of India. He is a councilor from India in theInternational Telecommunication Union (ITU) Council. He was elected as the Vice-Chairman of 2009 Session ofITU Council. He is also on the board of Directors of TCIL (Telecom Consultants India Ltd.).

He did B-Tech in Radio Physics and Electronics from the University of Calcutta. He had been a recipient of Centreof Advanced Studies National Scholarship as well as National Scholarship. Before joining Department of Telecom asan ITS officer, he worked as Senior Scientific Assistant, National Test House, Kolkata under the Ministry of Commerceand Industry and as a Scientist B in Explosives Research and Development Laboratory, DRDO, Ministry of Defence,Pune.

He worked as Divisional Engineer (Internal) in Ahmedabad Telecom District and maintained internal as well asexternal plant of Telecom Network of Navrangpura Telephone Exchange. As Divisional Engineer (Rural) and DivisionalEngineer (Planning) in Patna Telecom District, he had been responsible for planning Telecom network anddimensioning the exchanges. As Deputy General Manager, MTNL Delhi, he had been maintaining the externalplant network of Central and Jorbagh areas two very important localities of Delhi. He was also posted as Director(Engineering and Network Planning) in TEC and had been instrumental in formulating National Plan for ‘Switching’and ‘Routing’. Also, forecasted the TAX capacity both of level I and Level II of all the Secondary Switching Areaincluding MTNL Bombay and Delhi. Further, he worked as Director (OSP), DOT and had been instrumental informulating guidelines for the registration of Call Centers under OSP categories. He organized India NationalPavilion in ITU Telecom Asia, Hong Kong in the year 2002, ITU Telecom World in Geneva in 2003 and Supercommin Atlanta in the year 2003.

As the General Manager (Corporate Sales and Business Development) in MTNL Delhi he had been promotingMTNL’s services to the commercially important customers in the highly competitive market. As the nodal officer ofMTNL he had been coordinating with the Embassies, PMO, MEA, Ministry of Finance, NDMC, MCD, Governmentof Delhi etc. He had been instrumental in formulating various tariff plans to beat the competitions.

Shri Jha, as Deputy Director General (International Relations) in the Ministry of Communications & IT is the nodalpoint for coordinating with the International Organizations like ITU, APT, CTO, SAARC and bilateral issues with theother individual countries. As an expert, he represented the country in APT Forum in the Seminar on ‘Introductionand Implementation of IMT- 2000’. Availed ITU, APT fellowships and participated in the Telecom DevelopmentSymposium during ITU World 2003 event in Geneva. During the course of work, he visited countries like Thailand,USA, Hong Kong, Switzerland, Turkey, Spain, Singapore, China, Tunisia, Malaysia, Portugal, South Africa, etc.

He took very active part in the ITU Plenipotentiary Conference -06 held in Antalya, Turkey in 2006 and canvassedfor getting India elected as Council Member of ITU and also for election of Indian nominee as one of the membersof Radio Regulation Board of ITU.

Shri Jha attended World Radio Conference (WRC-07), World Telecom Standardization Assembly (WTSA-08), WorldTelecom Policy Forum 2008 & a number of ITU Council meetings & world telecom events. Elected as Vice-Chairmanof RPM for WTDC-09 and also chaired the Management & Budget Group of ITU Council in 2010. Shri Jha wasinstrumental in signing of an agreement between Ministry of Communications & IT, Government of India and ITUfor effective co-operation between the Telecom Centre of Excellence of India and ITU. He had been a member ofHigh level delegation led by Shri G. K. Pillai, Secretary (Commerce) to Democratic Republic of Congo in June,2008. This delegation was the special emissary of Hon’ble Prime Minister of India to Democratic Republic ofCongo.

Dr. S.K. Kak, Director:-

Dr. Kak, is an M.Tech in Electronics Engineering [Microwave Engineering] and Ph.D in Electronics Engineering[Digital Communications] is Vice-Chancellor of chaudhary Charan Singh (CCS) University, Meerut, Uttar Pradesh.He entered upon the office of Director of the Company wef 20.2.2008. His areas of interest include Communicationsystems /Design, digital and Data communication, Computer Networking, Optical communication and SignalProcessing. Has more than 34 years of Research Experience in the fields of Communication Engineering,Communications systems, Optical and Fire Optic communication, Data Networks, Signal processing and AIEngineering and Expert Systems. He was instrumental in designing and installation of Campus wide TelephoneNetwork and Computer network in BHU. Also possess very rich experience in Administration. Has delivered morethan 22 research papers in international seminars; and participated in over 30 workshops, seminars etc. Heldimportant assignments such as Chairman, PDR of VSAT Monitoring system for DRDO 2004, Chairman, PDR,FLIR for ALH Version of NAG 1996 etc., to name a few. Also held important positions in various scientific andeducational institutions of national importance.

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Shri Mahesh Shah Director:-

Shri Mahesh Shah is a B.Com., LLB., FCA, FCS, FICWA, MBA[USA], MBIM[UK]. He entered upon the office ofDirector of the Company wef 20.2.2008. He is a Corporate Advisor on Company Law, Finance, Tax, Audit,Corporate Governance, Costing, Capital Market, Restructuring etc. He was very closely associated with all theprofessional bodies such as ICSI and ICWAI in various capacities such as Central Council Member, President, Vice-President; and is a former Member of Accounting Standard Board of the ICAI. He is a Member of the TechnicalGroup for Depository System, Ministry of Finance, Government of India. Also associated with various trade bodiessuch as FICCI, ASSOCHAM, ICC etc., as Member of various committees. Has also authored a book titled Guide toNon Banking Financial companies, Procedure and Regulations. He has participated in large number of national andinternational seminars and presented papers. Is actively associated with many social bodies such as Bharat ReliefSociety, Bharatiya Vidya Bhawan, IRC, Chinmaya Mission etc.

Shri Sanjiv Gupta Director:-

Shri Sanjiv Gupta, 46, an alumnus of IIT Delhi, has had a long and distinguished career in marketing and operationsin diverse categories.

A Chemical Engineer, Shri Sanjiv started professional career with Hindustan Lever Limited in 1984 and very quicklymoved across the organisation in Sales and Marketing. In the last two years of his stint, he was the National MediaManager for the whole Unilever Group in India to consolidate buying and negotiation across all group companiesand profit centres to tackle the imminent privatization and mushrooming of media. He joined the Coca-colacompany in India in 1997 as Vice-President Marketing and was instrumental in providing a bold new direction toits marketing campaigns; connecting with consumers with relevant brand messages like never before”!

Following a successful inning in marketing, Shri Sanjiv took over as Head of Operations for the company-owned bottlingoperations of Coca-Cola in India. He was elevated as the Deputy President of Coca-Cola India Division in April 2002,with above 60 plants under his supervision. During this period, he brought about significant operational improvementsat the marketplace, resulting in the company reaching the break-even profit stage in 2001-2 and the India Divisionreceiving the prestigious Woodruff Cup in 2002. He steered the company’s owned bottling as well as franchise operationsand led the Indian operations to the country’s premier total beverage company. Under Shri Gupta, the Coca-Colacompany was poised to change the beverage landscape once again with an exciting range of new product offerings inJuice, Carbonated Soft Drinks and numerous Packaging innovations. The company in India has consolidated its leadershipposition of a 60.2% Market Share and is a strategic market for the overall Coca-Cola Company.

Shri Sanjiv is now associated with a Infrastructure Fund focussed on the growing infrastructure sector in India. Hehas delivered lectures in national and international forums and is actively associated with various commerce andtrade bodies such as FICCI, CII etc., in various capacities

Shri Ashish Guha Director[w.e.f. 21.5.2010]:-

Shri Ashish Guha entered upon the office of Director of the Company wef 21st May 2010. Shri Ashish Guha joinedHeidelbergCement Group in August 2006 as the Managing Director of Heidelberg Cement India Limited. Mr.Guhaconsolidated Heidelberg Cement’s entry into India and has been instrumental in transforming the businesses of theacquired companies.

Prior to joining Heidelberg Cement, Mr.Guha was an investment banker, a career spanning over two decades. Hewas the CEO of Lazard India and subsequently a senior partner with Amit Corproate Finance. Mr. Guha has had thedistinction of varied experience in investment banking ranging from Treasury, Research, Capital Markets and Mergerand Acquisitions.

He has advised large multinational corporate on their entry into India as well as acquisitions. Some of the prominentclients handled by Mr.Guha include BAT, Baxter, France Telecom, General Motors, Lafarge.

Mr.Guha has been involved with various industry forums like Confederation of Indian Industry (CII) and Federationof Indian Chambers of Commerce and Industry (FICCI) and has represented India as a delegate in many nations.He was also an active participant in the World Economic Forum at Davos in the late90’s. He has been part of manyGovernment bodies including the one on Privatisation. Mr.Guha is an Honours Graduate in Economics and analumnus of London Business School.

(d) Appointment and Tenure of the Directors

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

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

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

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

3. Board/Committee Meetings and Procedures

(a) Institutionalised Decision Making Process

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

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

The other standing Committee, in accordance with the provisions of Section 292A of the Companies Act 1956,Audit Committee of the Board has been constituted.

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

(b) Role of the Company Secretary in overall Governance Process

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

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

(c) Guidelines for the Board/Committee Meetings

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

(d) Observance of the Secretarial Standards issued by the Institute of the Company Secretaries of India

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

(e) Code of Conduct for the Members of the Board and the Senior Management Personnel

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

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

(f) Scheduling of Board/Committee Meetings and Submission of Agenda Items for the Board/Committeemeetings.

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

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

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

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

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

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

(g) Recording of Minutes of the Board/Committee meetings

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

(h) The mechanism of follow up actions

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

(i) Compliances

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

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

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

4. Information placed before the Board of Directors

Subject to the provisions of the Companies Act 1956, Memorandum and Articles of Association of the Company, andthe directives, guidelines of the Government on the subject, the Board of Directors have delegated all general powersof managing the company’s affairs to the Management Committee of the Board comprising of CMD and FunctionalDirectors and to the CMD and the Functional Directors; and the Senior Management Personnel of the Company.

List of Powers that has been reserved for exercise by the Board is as under:-

(1) BUDGET

a. Annual Budget Estimates and revised budget estimates for capital expenditure;

b. Annual Budget Estimates and revised budget estimates for revenue account for operational expenditure; and

c Budget requirements for five year plans.

(2) PLANS

a Annual Plans;

b Five Year Plans;

c Manpower Plans;

d Corporate Plans; and

e Resource Mobilisation Plans.

(3) ACQUISITIONS

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

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(4) STRATEGIC DECISIONS

a. Agreement involving foreign collaboration proposed to be entered into by the Company irrespective of theconsideration involved;

b Strategic Investments/decision and acquisition of shares/controlling stake/debentures/bonds of othercompanies; and Decision with regard to formation of joint ventures, subsidiary companies and restructuring oforganization.

(5) PERSONNEL

a. Creation of posts of the level of Executive Director;

b. Formulation of any changes in wage structure and scales of pay of employees of the company;

c. Policy matters relating to allowances of the employees such as HRA, Performance Related Pay, Bonus etc.

(6) ACCOUNTS

Acceptance of periodical profit and loss accounts; and Declaration of Dividend.

(7) POWER TO INVEST

Investment of the surplus funds of the company in acquisition of controlling stake/shares/debentures/bondsin other companies.

(8) POWERS RESERVED FOR EXCLUSIVE CONSIDERATION BY THE BOARD OF DIRECTORS BY THE COMPANIESACT 1956

(i) PROVISIONS OF SECTION 292 OF THE ACT

(ii) PROVISIONS OF SECTIONS 262, 297, 299, 308, 316, 386 AND 373 OF THE ACT

(9) POWERS WHICH ARE EXERCISABLE BY THE BOARD OF DIRECTORS ONLY WITH THE CONSENT OF THECOMPANY IN THE GENERAL MEETING.

(I) PROVISIONS OF 293 (1) (a) to (e) OF THE ACT

(10)PROVISIONS OF SECTION 294A OF THE ACT Appointment of sole selling agents

(11)PROVISIONS OF SECTION 293A OF THE COMPANIES ACT 1956 To contribute to political parties or donationfor political purposes;

(12)PROVISIONS CONTAINED IN THE ARTICLES OF ASSOCIATION OF THE COMPANY RESERVING CERTAINITEMS FOR PRIOR APPROVAL OF THE PRESIDENT OF INDIA Article 144: Matters requiring approval of thePresident

Notwithstanding any of the provisions contained in the other articles, prior approval of the president shallbe obtained in respect of:-

1. Appointment, which term will include initial appointment, extension in service and re-employment of personnelwho have attained the age of 60 years on a pay (including pension and pensionery equivalent of retirementbenefits) exceeding Rs. 20,500 ( Rs Twenty Thousand and Five Hundred) per mensem;

2. Winding Up of the company;

3. Sale, lease or disposal of any land and/or building having an original book value of Rs. 1 Crore (Rupees OneCrore) and above;

4. Issue of Debentures;

5. Company’s long term and Annual Plans for Development and Capital Budgets;

6. Agreement involving foreign collaboration to be entered into by the Company;

7. Revenue Budget of the company in case there is an element of deficit, which is proposed to be met byobtaining funds from central Government.

(13)COMPLIANCE REPORTINGS UNDER THE CORPORATE GOVERNANCE NORMS

(14)GENERAL

Any other item, which, the Board may like to reserve for consideration by the Board of Directors; Any other item,which is reserved for consideration by the Board of Directors or the Central Government, as the case may be, byvirtue of any amendments in the Companies Act 1956 or the Alteration/Amendment to the clauses of Memorandumand Articles of Association of the company.

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5. Number of Board meetings held during 2009-10; and, Attendance of Directors in the Board Meetings and lastAnnual General Meeting

Number of Meetings Held: 10

Name and No. of Board Attended Directorships RemarksDesignation meetings the last in other

attended AGM companies

Shri Kuldeep Goyal 10 Yes * Retired from service wef the A/NCMD & Dir (Finance) of 31.7.2010. Charge of Director

(Finance) vest with the CMD.

Shri Gopal Das 9 Yes. ** Assumed the charge of CMD wefDirector (HR) & (Fin) 1.8.2010. Charge of Director (Fin.)

also vest with the CMD.

Shri Rajendra Singh 10 Yes 1 $ Retired from service wef A/NDirector (Enterprise) 31.5.2010.

Shri R.K.Agarwal 10 Yes 1$ Charge of Dir (Enterprise) vest withDirector (Consumer Mobilty) Dir (CM) wef 1.8.2010.

Shri Rajesh Wadhwa 10 Yes - -Director (Consumer Fixed Access)

Shri J.S.Deepak Govt. Director 9 - 2# Pl. See Note (1) below

Shri P.K.Mittal Govt. Director 7 - - Pl. See Note (2) below

Shri R.N.Jha Govt. Director 3 N.A. 1## -

Dr.S.K.Kak Director 8 Yes - -

Shri Mahesh Shah 10 Yes 1& -Director, Chairman,Audit Committee of the Board.

Shri Sanjiv Gupta Director 10 Yes 3@

Shri Ashish Guha Joined on 21.5.2010. 3^ Pl. See note (3) below

Note:-

(1) Government of India, Ministry of Communications and IT, vide their No.A-12023/5/89-OC/PSA, dated 17.3.2010have, in terms of Article No.111 of the AoA of the Company, intimated the withdrawal of nomination of Shri J.S.DeepakJS(T) as Government Director from the Board of Directors of the Company, with immediate effect.

(2) Govt. of India, M/o c & IT, DoT, vide No. A-12023/5/89-OC/PSA, dated 12.2.2010, appointed Shri R.N.Jha as Govt.Director, with immediate effect in place of Shri P.K.Mittal.

(3) Government of India, M/o Communications and IT, D/o Telecommunications, vide Order No.1-17/06-PSA, dated7.5.2010, appointed Shri Guha as Non-official Part-Time Director, for a period of three year or until further orders,whichever is earlier. Shri Guha attended the Special meeting of the Board of Directors held on 21.5.2010 and accordingly,assumed office on 21.5.2010.

# Govt. Director in MTNL and Millennium Telecom Limited

@ Non-Executive Director in Getit Infomediary India, Indo Alternate Energy India, Four Cross Media UK

* Chairman, Millennium Telecom Limited [upto 31.7.2010 A/N being date of retirement]

** Nominee Director of BSNL in Millennium Telecom Limied [ in place of Shri Rajendra Singh, who had retired]. Wef1.8.2010, consequent upon his assuming the charge of CMD BSNL, he is also the Chairman of the Board ofDirectors of Millennium Telecom Limited.

$ Nominee Director of BSNL in Millennium Telecom Limited

& Director in Kitply Industries Limited.

## Government Nominee Director in TCIL.

^ MD – Heidelberg cement Limited, Chairman-Cochin Cements Limited, Director-Ballarpur Industries Limited

The disclosure of Directorships are based on the disclosures received from the Directors.

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6. Details of Number of Committee Memberships and Chairmanships

Name and Designation Details of Board Committee Details of Board CommitteeMembership Chairmanship

Name of Name of Name of Name ofCompany Committee Company Committee

Shri Kuldeep Goyal CMD ~ - - Millennium Chairman ofTelecom Limited the Board

[upto 31.7.2010]

Shri Gopal Das Director (HR) @ BSNL Remuneration Millennium Chairman ofCommittee Telecom Limited the Board

[ wef 1.8.2010]

BSNL Audit Committee - -of the Board

Shri Rajendra Singh # BSNL 1. Marketing - -Director (Enterprise) Committee of

the Board

BSNL 2. Audit Committee - -of the Board

Shri R.K. Agarwal - - - -Director (Consumer Mobilty)

Shri Rajesh Wadhwa Director BSNL Remuneration - -(Consumer Fixed Access) Committee

BSNL Board’s - -Sub-committeeon CDN Project

Shri J.S. Deepak Govt. Director $ BSNL Marketing Committee - -of the Board

MTNL Audit Committee - -

Shri P.K.Mittal Govt. Director % - - - -

Shri R.N.Jha Govt. Director - - - -

Dr.S.K.Kak Director BSNL Audit Committee BSNL Board’sof the Board Sub-committee

on CDN Project

Shri Mahesh Shah Director Kitply Industries Audit Committee BSNL Audit CommitteeLimited of the Board

Shri Sanjiv Gupta Director - - BSNL MarketingCommittee ofthe Board

- - BSNL RemunerationCommittee

BSNL Board’s - -Sub-committeeon CDN Project

Shri Ashish Guha Director ^^ Heidelberg Audit Committee - -Cement Ltd

Heidelberg Shareholders/Investors - -Cement Ltd Grievances Committee

Cochin Audit Committee Cochin Chairman of theCements Ltd Cements Ltd Board of Directors

Ballarpur Risk ManagementIndustries Ltd Committee

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~ Retired from Service wef A/N 31.7.2010

@ Inducted in the Audit Committee in place of Shri Rajendra Singh Dir(E) who has since retired. Consequent upon theretirement of Shri Kuldeep Goyal wef A/N of 31.7.2010, Shri Gopal Das assumed the charge of office of CMD BSNLwef 1.8.2010.

# Shri Rajendra Singh had retired from service wef A/N of 31.5.2010.

$ Shri J.S.Deepak cease to be Govt. Director wef 17.3.2010

% Shri P.K.Mittal cease to be Govt. Director wef 12.2.2010.

% Shri R.N.Jha has been appointed as Govt. Director in place of Shri P.K.Mittal wef 12.2.2010.

^^ Shri Ashish Guha, who was appointed as Non official Part Time Director by the Govt. of India, assumed office on21.5.2010.

Notes:-

(i) Being a Central PSU, all Directors are appointed/nominated by the President of India.

(ii) The Directorship/Committee memberships are based on the disclosures received from the Directors.

(iii) In terms of Guidelines on Corporate Governance for the CPSEs issued by the Department of Public Enterprises, for thepurposes of considering the limit of the committees on which a director can serve, all public limited companies, whetherlisted or not, shall be included; and, also for this purpose, Chairmanship/Membership of the Audit Committee and theShareholder’s Grievance Committee alone shall be considered. However, for the sake of disclosure all such Memberships/Chairmanships, including those received in the year 2010-11 from new appointees have also been disclosed.

(iv) The Marketing Committee of the Board has now been dissolved.

7. Board Committees

The Company has the following Committees of the Board.

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

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

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

(b) Remuneration Committee

The Board of Directors, in their 117th meeting held on 7.1.2009, while considering the “Revision of IDA pay scalesto Board level and below Board level executives and Non-Unionised Supervisors in BSNL, as per para (iv) of theannex III to DPE OM of 26.11.2008, constituted constituted Remuneration committee of the Board comprising ofDirector(HR), Director(Fin), Director(Ops) and Shri Sanjiv Gupta non official part time Director as Chairman of theCommittee to study and recommend for implementations of the PRP (Performance related pay).

(c) Sub-Committee of the Board on CDN Project

The Board of Directors, in the 127th meeting held on Wednesday, the 25th day of March 2010, constituted a Sub-Committee of Directors comprising of Dr.S.K.Kak and Shri Sanjiv Gupta Directors and Shri Rajesh WadhwaDirector(CFA) to examine the status regarding technologies for finalisation of the case for execution of CDNProject. The Committee, in its first meeting held on 28th day of May 2010 elected Dr.S.K.Kak as Chairman of theCommittee.

(d) Marketing Committee of the Board

The Board of Directors in their 115th meeting held on Friday, the 26th day of September 2008, vide Item No.115.03, have constituted a Committee of Directors named as Marketing Committee of the Board, with Shri SanjivGupta, Director, Shri J. S. Deepak, Director, Shri S. D. Saxena, Director(Finance) and Shri Rajendra Singh, Director[C & M] as Members and Company Secretary as Secretary of the Committee. The Committee has been dissolved.

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8. Audit Committee of the Board

The terms of reference the Audit Committee are in accordance with the provisions of the Section 292A of the CompaniesAct 1956 and the Corporate Governance norms issued by the Department of Public Enterprises for the unlisted CPSEs.The Board of Directors have constituted the Audit Committee of the Board, comprising of 3 Directors, of which two areNon-official Part-Time Directors [other than Functional Directors] and the other Member is a Functional Director.

At present, the Audit Committee comprise of the following Members:-

� Shri Mahesh Shah, Non-Official Part-Time Director, Chairman

� Shri Rajendra Singh Director(Enterprise) – Member [upto 31.5.2010]

� Shri Gopal Das, Director(HR) Member – [ Wef 8.6.2010]

� Dr.S.K.Kak, Non-official Part-Time Director, Member.

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

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

Number of meetings held and Attendance 2009-10

Number of Meetings Held:- 06

Name and Designation No. of meetings attended Remarks

Shri Mahesh Shah Chairman 6 -

Shri Rajendra Singh Director (Enterprise) Member 6 -

Dr. S.K. Kak Director Member 5 -

Apart from the Members and the Secretary, Shri S.R.Kapoor, Executive Director (Finance) attended all the meetings asSpecial Invitee.

9. Disclosures

Directors Remuneration

Functional Directors

BSNL being a Government Company, and in terms of Article No.111 of the Articles of Association of the Company, theremuneration payable to the Directors is determined by the President of India.

The salary and other perks paid to the Functional Directors during the year under review is as follows:-

(Amount in Rs.)

NAMES/Shri DESGN. SALARY OTHER PLI CONTRIBUTION TOTALINCL DA BENEFITS IN CPF &

& PERKS OTHER FUNDS

KULDEEP GOYAL CMD & DIR(FIN) 14,57,647 89,006 5,000 3,86,579 19,38,232

GOPAL DAS DIRECTOR[HR] & (ENT.) 14,37,549 89,006 5,000 1,66,189 16,97,744

RAJENDRA SINGH DIRECTOR[ENTERPRISE] 16,73,914 80,394 5,000 1,63,953 19,23,261[Upto 31.5.10]

R.K.AGARWAL DIRECTOR[CM] 14,36,117 89,006 5,000 1,47,603 16,77,726

RAJESH WADHWA DIRECTOR[CFA] 10,29,201 89,006 3,329 99,003 12,20,539

Government Nominee Directors

The Government Nominee Directors are not paid any remuneration.

Non-official Part-Time Directors

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

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

31

Shareholdings by the Directors and Stock options

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

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

Material contracts/Related party Transactions

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

Transactions with related parties are disclosed in Note No.17 Schedule U to the Accounts in the Annual Report.

List of Presidential Directives Issued in the past three years

SNo Year of Issue Subject Status of Implementation

1 2007-08 - -

2 2008-09 Under Article 145 of the AoA of the The revision of pay scales of theNo.61-01/2009-SU, Company, regarding the pay scales fitment Executive employees of thedated 27.2.2009, under formula, DA guidelines and other relevant Company has been implementedArticle 145 of the AoA issues in respect of Board level and below wef 1.1.2007.of the Company, Board level executives for implementation

wef 1.1.2007.

3 2009-10 Nil Nil

Annual General Meetings

Venue, Date and Time, where the previous three Annual General Meetings of the Company were held is as follows:-

Meeting and Date Time Venue Details of SpecialResolutions passed in theprevious three AGMs

7th AGM, 19.9.07 11.30 A.M. Regd. & Corp. Office: Board Room, 3rd floor, -Bharat Sanchar Bhawan, H.C. Mathur Lane,Janpath, New Delhi-110 001.

8th AGM, 23.9.08 11.30 A.M. Regd. & Corp. Office: Board Room, 3rd floor, -Bharat Sanchar Bhawan, H.C. Mathur Lane,Janpath, New Delhi-110 001.

9th AGM, 16.9.2009 11.30 A.M. Regd. & Corp. Office: Board Room, 3rd floor,Bharat Sanchar Bhawan, H.C. Mathur Lane,Janpath, New Delhi-110 001. -

10th AGM, 28.9.2010 11.00 A.M. Regd. & Corp. Office: Board Room, 3rd floor,Bharat Sanchar Bhawan, H.C. Mathur Lane,Janpath, New Delhi-110 001.

Means of Communications

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

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

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

Training of Directors

The Company is managed by the Sectoral Experts/Specialists having domain knowledge and expertise of the core sector,that is “Telecom Services Management”. In addition, BSNL, with its state-of-art Training Centres and an exclusive Training

32

Division, keeps deputing the Senior Management Personnel and the Functional Directors for various International andNational level training programmes for participation in trainings, seminars and contact programmes.

Non-official Part-Time Directors, being men of public eminence and proven experts, bring their own value addition to themanagement of the company. Still, they are also nominated for various national level seminars, workshops, trainingprogrammes.

Risk Management

By virtue of BSNL being the successor of erstwhile Central Government Departments, had a codified set up with inbuiltmechanism to foresee and potential risks and methods to arrest, control and respond to the various types of risks. In linewith the Corporate Governance Norms issued by the Department of Public Enterprises for the Unlisted CPSEs, the Companyvisited the subject again and put down a composite Enterprise Risk Management Policy of the Company.

Business Heads of the Corporate office and the Other Units Heads of field units, being responsible for the respective linefunction in accordance with the delegation of powers, undertake the role of ‘Risk Management Administrator’, thus,ensuring the process as an integral part of decision making and a continuous one.

Compliance Certificate of the Auditors and Secretarial Compliance Report

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

Whistle Blower Policy

Being a Central Public Sector Enterprise, the guidelines of Central Vigilance Commission are applicable. Further, Companyhas a well laid Vigilance Mechanism, which is headed by an independent Chief Vigilance Officer. Therefore, no suchseparate mechanism has been formulated.

Fee to Statutory Auditors

Remuneration paid to the Statutory Auditors during the year 2009-10 was Rs.16.94 lakhs. It includes Statutory Audit Fee,Certification Charges, Charges for Management Services and Reimbursement of Expenses.

33

N.C. Pandey & AssociatesCompany Secretaries

25/1A, Lane No. 36

Indra Park (Mangal Bazar)

Palam Colony

New Delhi-110 045

THE CERTIFICATE ON COMPLIANCE OF CORPORATE GOVERANCE NORMS

To

The Members,

M/s Bharat Sanchar Nigam Limited,

New Delhi.

We have examined the relevant books, records and statements in connection with compliance of the conditions of Corporate

Governance by M/s Bharat Sanchar Nigam Limited for the financial year ended 31.3.2010, as enunciated in the “Guidelines

on Corporate Governance Norms for Central Public Sector Enterprises 2007”, issued by Govt. of India, Ministry of Heavy

Industries and Public Enterprises, Department of Public Enterprises vide Office Memorandum No.18(8)/2005-GM, dated

the 22nd June 2007 and revised further vide No.18(8)/2005-GM, dated 14.5.2010.

The compliance of the conditions of the Corporate Governance Norms is the responsibility of the Management. Our

examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance

of the conditions of corporate governance as laid down in the guidelines. Our Report/Certification is neither an audit nor an

expression of the opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the

Company has complied with the conditions of Corporate Governance Norms as stipulated in the “Guidelines on Corporate

Norms for the CPSEs”, issued by the Department of Public Enterprises.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency of

the effectiveness with which the management has conducted the affairs of the company.

For N.C. PANDEY & ASSOCIATES

[Practising Company Secretaries]

Sd/-

[N.C. PANDEY, FCS]

PROPRIETOR

Place: New Delhi

Dated: 08.09.2010

34

Balance Sheet as at 31st March 2010As at As at

Schedule 31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SOURCES OF FUNDSShareholder’s FundsCapital A 1,250,000 1,250,000Reserves and Surplus B 7,397,566 7,613,358Loan FundsUnsecured Loans C 153,370 341,384Deferred Tax Liability-Net(Refer Note 19.1 on Schedule U) 12,384 64,484

8,813,320 9,269,226

APPLICATIONS OF FUNDSFixed Assets DGross Block 16,046,962 13,224,291Less: Depreciation 8,658,930 7,792,203

Net Block 7,388,032 5,432,088Capital Work-in-Progress E 596,523 492,864Decommissioned Assets F 7,897 4,644

7,992,452 5,929,596Investments G 20,000 20,000Current Assets, Loans and AdvancesInventories H 505,833 457,258Sundry Debtors I 474,457 472,054Cash and Bank Balances J 3,034,340 3,813,430Other Current Asset - Accrued interest 85,521 87,239Loans and Advances K 1,397,028 944,880

5,497,179 5,774,861Less : Current Liabilities and ProvisionsCurrent Liabilities L 4,277,642 2,072,702Provisions M 557,602 493,878

4,835,244 2,566,580Net Current Assets 661,935 3,208,281Inter/Intra Circle Remittance(Refer Note 14 on Schedule U) 138,933 111,349

Total 8,813,320 9,269,226

Accounting Policies TNotes to Accounts U

The Schedules referred to above, form an integral part of the Balance Sheet.

As per our report of even date For and on behalf of Bharat Sanchar Nigam Limited

For Sharma Goel & Co.Chartered AccountantsFRN 000643N

Sd/- Sd/- Sd/-Amar Mittal Kuldeep Goyal Gopal DasPartner Chairman and Managing Director Director (HRD)M. No: 017755

Sd/- Sd/- Sd/-S R Kapoor Arundati Panda H.C.Pant

Executive Director Sr. General Manager Company Secretary and(Finance) (Corporate Accounts) Sr. General Manager (Legal)

Place: New DelhiDate: 30th July 2010

35

Profit and Loss Account for the Year Ended 31st March 2010For the Year ended For the Year ended

Schedule 31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

INCOME

Service Revenue and Other Operating Income N 2,791,344 3,016,942

Other Income O 413,197 564,250

3,204,541 3,581,192

EXPENDITURE

Employees’ Remuneration and Benefits P 1,345,504 1,136,323

Licence fee and Spectrum fee (Refer Note 13 on Schedule U) 87,555 264,635

Administrative, Operating and Other Expenses Q 1,019,905 1,137,797

Financial Expenses R 35,161 44,325

Depreciation D 919,679 852,341

3,407,804 3,435,421

Profit/(Loss) before Prior period items -203,263 145,771

Prior period items (Net) S -16,485 -18,608

Profit/(Loss) before taxation -219,748 127,163

Current Tax 0 132,322

Tax for earlier years 14,501 0

Deferred Tax -52,100 -66,569

Fringe Benefit Tax 0 3,800

Wealth Tax 116 125

Profit/(Loss) for the year after taxation -182,265 57,485

Appropriation:

Proposed Dividends:

- On Equity Share Capital 0 0

- On Preference Share Capital 0 0

Tax on Dividends 0 0

Transfer to General Reserve 0 0

Surplus/Loss carried to Balance Sheet -182,265 57,485

-182,265 57,485

Earnings Per Share (In Rs.)

Basic earnings per equity share -3.65 1.15

(Refer Note 18 on Schedule U)

Accounting Policies T

Notes to Accounts U

The Schedules referred to above, form an integral part of the Profit and Loss Account.

As per our report of even date For and on behalf of Bharat Sanchar Nigam Limited

For Sharma Goel & Co.Chartered AccountantsFRN 000643N

Sd/- Sd/- Sd/-Amar Mittal Kuldeep Goyal Gopal DasPartner Chairman and Managing Director Director (HRD)M. No: 017755

Sd/- Sd/- Sd/-S R Kapoor Arundati Panda H.C.Pant

Executive Director Sr. General Manager Company Secretary and(Finance) (Corporate Accounts) Sr. General Manager (Legal)

Place: New DelhiDate: 30th July 2010

36

Schedules Forming Part of the Financial StatementsAs at As at

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE A : CAPITAL(Refer Note 2.2 on Schedule U)Authorised10,000,000,000 (P.Y.: 10,000,000,000) Equity Shares of Rs. 10/- each 1,000,000 1,000,0007,500,000,000 (P.Y.: 7,500,000,000) Preference Shares of Rs. 10/- each 750,000 750,000

1,750,000 1,750,000

Issued , Subscribed and Paid Up5,000,000,000 (P.Y. : 5,000,000,000)Equity Shares of Rs. 10/- each fully paid up 500,000 500,0007,500,000,000 (P.Y. : 7,500,000,000)9% Non-Cumulative Preference Shares ofRs. 10/- each fully paid up 750,000 750,000

1,250,000 1,250,000

Notes: Out of the above Equity shares 4,999,998,400Equity shares of Rs. 10/- each (P.Y. : 4,999,998,400) and7,500,000,000 Preference Shares of Rs. 10/- eachP.Y. : 7,500,000,000) were allotted as fully paid up forconsideration other than cash

SCHEDULE B : RESERVES AND SURPLUS

Capital ReservesAs per last Balance Sheet 4,033,566Add: Assets recognised 113Less: Liabilities identified & transferred to liabilites 454 4,033,225 4,033,566(Refer Note 2.2 on Schedule U)

General ReservesAs per last Balance Sheet 463,270Less:Utilized for Leave Salary Encashment

Provision for earlier period 33,186 430,084 463,270

Contingency Reserves 200,000 200,000Surplus:Profit and Loss AccountAs per last Balance Sheet 2,916,522Add: Carried from P&L account (182,265) 2,734,257 2,916,522

Total 7,397,566 7,613,358

SCHEDULE C : UNSECURED LOANSLoan from Govt. of India(Non refundable & non interest bearing) 72,000 72,00015 Year Government of India Loan (Refer Note 3 on Schedule U) 79,450 269,384Interest accrued and due on the above Govt. loan 1,920 -(Refer Note 3 on Schedule U)Deferred Payment Liabilities - -

Total 153,370 341,384

37

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SC

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has

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Rs.

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lakh

s (P

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Rs.

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hich

has

bee

n ca

pita

lised

.

38

Schedules (Contd...)As at As at

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE E : CAPITAL WORK-IN-PROGRESS(Refer Note 2.1 & 5 on Schedule U)Land 93 5Buildings 21,247 25,435Apparatus and Plants 285,251 185,982Cables 156,621 140,040Subscriber Installations 4,931 4,782Lines and Wires 2,475 1,804Electrical Fittings and Appliances 29,232 31,576Computers 20,869 33,829Masts and Arials 56,715 68,428Installation Test Equipments 20,247 3,067Office Machinery and Equipments 456 225Furniture and fittings 79 161Motor Vehicle and Launches 2 12Intangible Assets 1,399 -Overheads awaiting allocation on the above components 865 919

600,482 496,265Less: Provision for Impairment in pending projects etc. 3,959 3,401

Total 596,523 492,864

SCHEDULE F : DECOMMISSIONED ASSETSDecommissioned Assets 61,118 59,770Less: Provision for diminution in the value of decommissioned assets 53,221 55,126

Total 7,897 4,644

SCHEDULE G : INVESTMENTS(At cost)(Long Term , Unquoted, Non-trade)20,000,000 (P. Y. 20,000,000) 7% Redeemable CumulativePreference Shares of Rs. 100/- each Fully Paid in ITI Limited 20,000 20,000(A Government of India owned company).

Total 20,000 20,000

SCHEDULE H : INVENTORIES(Refer item 7 of Schedule T and Note 6 on Schedule U)Building materials 494 305Lines and Wires 13,564 15,395Cables 117,164 149,346Apparatus and Plants 301,530 214,607Telephone and Telex Instruments 20,026 21,111Telegraph and Telex Spares 119 128Broad Band Equipments 22,269 16,384Raw material (at Factory) 17,697 22,127Finished goods (at Factory) 1,366 1,413Finished Stock (at various Circles) 14,450 14,165Other Stores 22,999 24,329Excess/(Short) in Inventory Account 30 63

531,708 479,373Less: Provision for obsolete inventory/short inventory 25,875 22,115

Total 505,833 457,258

39

Schedules (Contd...)As at As at

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE I : SUNDRY DEBTORS

(Refer Note 7 on Schedule U)

Debtors 672,352 658,587

Less: Provision for Doubtful debts

(Refer accounting policy 2 (a) of Schedule T) 396,231 399,712

276,121 258,875

Accrued Revenue (Bills not raised) 198,336 213,179

Total 474,457 472,054

SCHEDULE J : CASH AND BANK BALANCES

(Refer Note 10 on Schedule U)

Cash and Cheques in hand 2,257 2,415

Balances with Scheduled banks

- Current Account 166,007 277,245

- Deposit Account 2,866,076 3,533,770

Total 3,034,340 3,813,430

SCHEDULE K : LOANS AND ADVANCES

(Refer Note 8 on Schedule U)

(Unsecured, considered good unless otherwise stated)

Advances recoverable in Cash or in kind or for value to be received 286,897 186,080

Capital Advance 33,402 37,222

Amount recoverable from DoT on Current Account 248,237 105,101

Claims recoverable from other Government departments 6,816 7,132

Claims recoverable from other Government companies 311,041 282,851

Claims recoverable from U.S.O. Administrator 137,553 72,674

Claims recoverable from others 12,243 13,614

Claims recoverable towards defence telecom projects (Net of advances) 12,590 8,145

Advance Income Tax 446,173 279,147

(Net of Provision for tax Rs.715150 Lakh (P.Y. Rs.700649 Lakh)

Advance Fringe Benefit Tax 5,898 4,898

(Net of Provision for FBT Rs.15300 Lakh (P.Y. Rs.15300 Lakh)

MAT credit receivable - 21,641

Operating lease Charges 713 -

Excise Duty, Cenvat & Service Tax Recoverable 80,801 80,473

Sales Tax Recoverable 7,328 8,317

1,589,692 1,107,295

Less: Provision for doubtful items 192,665 162,415

Total 1,397,027 944,880

40

Schedules (Contd...)As at As at

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE L : CURRENT LIABILITIES

Sundry Creditors Including Rs. 244 Lakh dues to MSMEs

(P.Y. Rs. 87 Lakh)(Refer note no. 25(d) on Schedule U) 989,466 795,292

Advances received from Customers and others 88,389 65,889

Deposits from Customers and others 525,912 558,034

Income received in advance against services 98,248 66,802

Claims payable to DoT 1,875,599 27,581

Claims payable to departments of Govt. of India 15,719 19,185

Claims payable to Government companies 98,173 98,145

Licence Fee, Spectrum charges and Transponder charges payable (42,681) (746)

(Refer Note 13 on Schedule U)

Excise Duty payable 123 133

Payable for revised wages 412,433 213,758

Salary & Incentive payable to employees 76,318 86,456

Payable to SAARC Countries (Refer Note 12.3 on Schedule U) - 110

Liabilities for services 69,608 75,112

Liabilities for Construction account 1,253 1,201

Claims Payable for USO Tower 3,422 3,330

Other Provisions for expenses 40,696 39,450

Other liabilities 22,767 19,859

Interest accrued but not due on Deposits 2,197 3,111

Total 4,277,642 2,072,702

SCHEDULE M : PROVISIONS

Provision for Wealth Tax 415 418

Provision for Tax on Dividend - -

Proposed Dividend - -

Provision for Leave Encashment ( Refer Note 11.3 of Schedule U) 550,500 489,496

Provision for Gratuity liability (Refer Note 11.3 of Schedule U) 6,687 3,964

Total 557,602 493,878

41

Schedules (Contd...)For the Year ended For the Year ended

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE N : Service Revenue and Other Operating Income

Telephones (other than WLL) 826,770 1,018,535

Cellular 976,089 1,020,253

Wireless in Local Loop (WLL) 57,463 64,520

Income from Broad Band Services 248,532 168,958

Leased line 106,431 100,064

Other Services 3,433 2,407

Installation / Reconnection Charges - -

Surcharge on delayed payments - -

Telegraph & Telex 1,504 1,361

Receipt from other operators 297,779 430,461

Other Operating Income 266,506 207,489

Miscelleneous Services 6,837 2,894

Total 2,791,344 3,016,942

SCHEDULE O : OTHER INCOME

Interest

- On deposits in Banks * 242,202 384,505

- Others 3,497 3,998

Profit on sale of Assets 2,468 2,165

Liquidated Damages 44,108 21,537

Excess provision written back 80,353 117,014

Rent of Staff Quarters 1,308 1,296

Sale of Scrap 4,927 4,339

Others including sale of Directories, Publications, Forms, Waste Paper etc. 30,954 28,756

Misc. Income from USO Towers 3,380 640

Total 413,197 564,250

* Includes TDS: Rs. 31,169.68 lakh (P.Y. Rs. 104,808.03 lakh)

SCHEDULE P : EMPLOYEES REMUNERATION AND BENEFITS

Salaries, Wages, Incentives & Allowances 1,070,564 945,196

Leave Encashment (including provisions) 60,085 49,905

Pension Contribution (Refer Note 11 on schedule U) 202,353 128,839

Contribution to Employees’ Providend Fund and Gratuity

(incl. provisions) 16,814 11,753

Leave Salary Contribution 1,265 71

Medical Expenses 48,406 43,122

Staff Welfare Expenses 2,724 2,885

1,402,211 1,181,771

Less: Allocated to Capital Work-in-Progress/W.I.P. 56,707 45,448

Total 1,345,504 1,136,323

42

Schedules (Contd...)For the Year ended For the Year ended

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE Q : ADMINISTRATIVE, OPERATING AND

OTHER EXPENSES

Rent 35,025 26,357

Rates and Taxes 6,408 5,624

Power and Fuel 203,057 177,997

Insurance 739 1,082

Repairs and Maintenance

- Buildings 29,903 29,013

- Plant and Machinery 74,060 72,590

- Cables 46,376 42,666

- Others 7,952 4,115

Professional and Consultancy charges 6,286 2,992

Printing and Stationery 9,422 10,370

Lease Rent 286 323

Commission on Franchise Services 21,735 46,118

Transponder Charges - 0

Bank charges 522 684

Advertisement 1,638 2,280

Business Promotion and marketing Expenses 31,023 35,536

Social Reponsibility expenses 500 501

Travel Expenses 14,647 15,883

Postage & Courier Charges 8,727 9,580

Security Services 36,021 32,992

Vehicle Running Expenses (Including hired vehicles) 21,129 20,539

IUC payable to other service providers 249,525 351,702

Expenditure on Services and other expenses 95,975 74,931

W/off & Losses other than Bad debts 25,590 22,853

Bad-Debt Provision other than services 4,408 2,014

Bad-Debt actually written off 28,781 68,601

Provision for doubtful debts and disputed bills 67,161 85,640

Foreign Exchange Fluctuation Loss/ (Gain) (Net) (2,500) 3,865

Loss/(Profit) from Factories (Refer Note 6.2 on Schedule U) 2,275 (1,404)

Loss/(Profit) from Construction/Telecom services projects (45) (87)

1,026,626 1,145,357

Less: Allocated to Capital Project Works/W.I.P. 6,721 7,560

Total 1,019,905 1,137,797

SCHEDULE R : FINANCIAL EXPENSES

Interest on Government Loan 34,471 43,154

Interest on Subscribers Deposit 596 1,031

Interest - Others 94 140

Total 35,161 44,325

43

Schedules (Contd...)For the Year ended For the Year ended

31st March 2010 31st March 2009(Rs. in Lakh) (Rs. in Lakh)

SCHEDULE S : PRIOR PERIOD ITEMS

Income

Excess income booked earlier now reversed (1142) (11895)

USO Subsidy (309) 513

Total (1451) (11382)

Expenditure

Rent, Rates & Taxes 75 219

Repairs 605 186

Depreciation (Refer note 5 of Schedule D) 10464 4189

Interest (32) 127

Other services 3779 2811

Expenditure booked earlier now reversed:

- Salaries and Staff Expenses 70 (180)

- Power and Fuel (48) (2)

- Interconnect Usage Charges (IUC) 134 (80)

- USO Towers (13) (44)

Total 15034 7226

Net (16485) (18608)

Shri Gopal Das, CMD addressing the delegates at the Green Telecom India 2010 – 2nd International Conference held on 10.9.2010.

44

Schedules (Contd...)

SCHEDULE T : ACCOUNTING POLICIES

1. BASIS OF PREPARATION OF FINANCIAL

STATEMENTS

The financial statements of Bharat Sanchar Nigam

Limited (the “Company” or “BSNL”) are prepared

under the historical cost convention adopting the

accrual method of accounting in accordance with

Indian Generally Accepted Accounting Principles and

in accordance with the provisions of the Companies

Act, 1956 and it requires the management to make

estimates & assumptions and actual may differ from

these which are recognized in the period it is

ascertained.

2. REVENUE RECOGNITION

Income from services is accounted for on accrual basis

and in conformity with Accounting Standard – 9 .

Accordingly,

a) Revenue for all services is recognized when earned

and are realizable at the time of billing. Un-billed

revenues from the billing date to the end of the

year are recorded as accrued revenue during the

period in which the services are provided.

Provision is made in respect of bills considered to

be disputed (by the management), debts

outstanding for more than two years and for debts

due for less than 2 years, to the extent considered

necessary by the management.

b) Installation Charges recovered from subscribers

at the time of new telephone connections are

recognized as income in the first year of the billing.

c) In terms of the arrangement between Department

of Telecommunications (“DoT”) and the

Company, the charges for telecommunication

services and other infrastructural services provided

by BSNL to DoT are neither being billed nor

provided for.

d) Sale proceeds of scrap arising from maintenance

and project works are taken into miscellaneous

income in the year of sale.

e) Income from SIMs, recharge coupons of Mobile,

Prepaid Calling Cards, and Prepaid internet

connection cards are treated as income of the year

in which the payment is received since the extent

of use of these cards within the financial year

could not be ascertained.

f) Wherever there is uncertainty in realization of

income, such as liquidated damages, claims on

Government Departments & local authorities etc.,

these are recognized on collection basis.

g) The claims receivable on account of provision of

infrastructure, operation and maintenance of

Village Public Telephones (VPTs) & Rural

Household Connections (RDELs) etc. and

operational sustainability of rural wireline network

from U.S.O. fund are accounted for as other

operating income.

h) The interest on surplus fund which are placed

generally in fixed deposits with banks is

recognized on accrual basis.

i) Other income by way of interest on loans to

employees, security deposit with Government

Departments and local authorities, being not

material, are accounted for on collection basis.

3. FIXED ASSETS

3.1 Fixed assets are carried at cost less depreciation. Cost

includes directly related establishment and other

expenses including employee remuneration and

benefits, directly identifiable to the construction or

creation of the assets.

3.2 Expenditure on replacement of assets, equipments,

instruments and rehabilitation works is capitalized if,

in the opinion of the management, it results in

enhancement of revenue generating capacity.

3.3 Assets are capitalized to the extent completion

certificates have been obtained, wherever applicable.

3.4 The cost of stores and materials at the time of issue to

a project, is debited to CWIP.

3.5 Apparatus and plants principally consisting of

telephone exchanges, transmission equipments and

air conditioning plants etc. are capitalized as and when

an exchange is commissioned and put to use.

3.6 Cables are capitalized as and when ready for

connection to the main system.

3.7 Intangible assets are stated at cost of acquiring the

same less accumulated depreciation / amortization.

4. DEPRECIATION / AMORTIZATION

Depreciation is provided based on the Written Down

Value method at the rates prescribed in Schedule XIV

to the Companies Act, 1956 except for Subscriber

45

Installation. The Subscriber Installation is depreciated

over the useful life of 5 years on Written Down Value

method.

Assets costing up to Rs. 5,000 are depreciated fully in

the year of purchase. Similarly, partition works and

paintings costing up to Rs. 2,00,000 are depreciated

fully in the year of construction/ acquisition.

The depreciation on machinery & tools used both for

project and maintenance work is charged to profit

and loss account instead of capitalization.

All telephone exchange buildings, administrative

offices and captive consumption assembling premises/

workshops are considered as normal building and not

as factory building. Accordingly depreciation is charged

uniformly.

Intangible assets such as Entry License Fee, One Time

Spectrum Fee for Telecom Service operations are

amortized over the license period (i.e. 20 years) and

standalone computer software applications are

amortized over the license period subject to maximum

of 10 years as per straight line method.

5. IMPAIRMENT OF ASSETS

Assets, which are impaired by disuse or obsolescence,

are segregated from the concerned assets category

and shown as ‘Decommissioned Assets’ and provision

made for the loss, if any, due to the difference between

their net carrying cost and the net realizable value.

6. INVESTMENTS

Long-term investments are carried at cost, after

providing for any diminution in value, if such

diminution is of a permanent nature.

7. INVENTORIES

Inventories are valued at cost or net realizable value

as the case may be - cost ascertained generally on

weighted average method; obsolete/non moving

inventories are valued at net realizable value.

8 FOREIGN CURRENCY TRANSACTIONS

(i) Transactions in foreign currency are recorded at

the exchange rate prevailing on the date of the

transaction i.e. on the date of payment or the

billing as the case may be.

(ii) All Foreign Currency Liabilities and monetary

assets are stated at the exchange rate prevailing

as at the date of Balance Sheet and the difference

taken to Profit and Loss Accounts as Exchange

Fluctuation Loss or Gain.

9. EXTRAORDINARY ITEMS

Extra-ordinary items of income and expenditure, as

covered by AS – 5, are disclosed separately.

10. EMPLOYEES’ BENEFITS

10.1 SHORT TERM EMPLOYEE BENEFITS:

Short Term employee benefits are recognized in the

period during which the services have been rendered.

10.2 LONG TERM EMPLOYEE BENEFITS:

10.2.1 DEFINED CONTRIBUTION PLAN:

a) Pension Contribution (including gratuity)

The employees of DoT who have opted for

absorption/absorbed in the company, and the

employees on deemed deputation from

Government are eligible for pension, which is a

defined contribution plan. The company makes

monthly contribution (including liability on

account of gratuity) at the applicable rates as per

Government Pension Rules, 1972 and FR & SR to

the Government who administers the same.

b) Employees’ Provident Fund

All directly recruited employees of the company

are entitled to receive benefits under the

Provident Fund. Both employees and employer

make monthly contribution to the plan at a

predetermined rate of employee’s basic salary and

dearness allowance. These contributions to

Provident fund are administered by the Provident

Fund Commissioner. Employer’s Contributions to

Provident Fund are expensed in the Profit and

Loss Account.

c) Contribution for Leave Salary

For employees on deemed deputation from

Government, Leave salary contribution is provided

and such leave salary contribution takes care of

leave encashment also.

10.2.2 DEFINED BENEFIT PLANS:

a) Leave Encashment:

The liability on account of unavailed leave in

respect of absorbed employees and directly

Schedules (Contd...)

46

recruited employees at the year end is provided

for based on actuarial valuation.

b) Gratuity

The company provides for gratuity, a defined

benefit plan (the Gratuity Plan) covering all

directly recruited eligible employees. In

accordance with the payment of Gratuity Act,

1972, the Gratuity Plan provides a lump sum

payment to vested employees on retirement,

deaths, incapacitation or termination of

employment. Liabilities with regard to the

Gratuity Plan are determined by actuarial

valuation on balance sheet date and are expensed

in the profit and loss account

c) Other benefits including post employment

medical care

Medical reimbursements and other personal claim

bills of existing/retired employees are accounted

for on actual basis in respect of bills received till

the cut off period in the accounts at the concerned

primary units as per the prescribed limits.

11. MANUFACTURING EXPENSES

Expenses incurred at Factory units are allocated to the

cost of the manufactured products.

12. PRIOR PERIOD ITEMS

Items of income/expenditure exceeding Rs. 5 lakh are

only considered for being treated as ‘prior period

items’.

13. TAXES ON INCOME

Taxes on Income for the current period are determined

on the basis of taxable income and tax credits

computed in accordance with the provisions of the

Income Tax Act, 1961.

In accordance with the AS-22, Deferred Tax Liability

is recognized on the timing differences between

accounting income and the taxable income for the

period taking into consideration the contents of

Accounting Standard Interpretations 3 and quantified

using the tax rates in force or substantively enacted

as on the Balance Sheet date.

Deferred Tax Assets are recognized and carried

forward to the extent there is a virtual certainty that

such deferred tax assets can be realized.

14. PROVISIONS

Provisions are recognized when the Company has a

present obligation as a result of past events; it is more

likely than not that an outflow of resources will be

required to settle the obligation; and the amount has

been reliably estimated.

15. CONTINGENT LIABILITIES

Liabilities, though contingent, are provided for if there

are reasonable chances of maturing such liabilities as

per management. Other contingent liabilities, barring

frivolous claims, not acknowledged as debts, are

disclosed by way of notes.

16. EARNING PER SHARE

Earning Per Share (“EPS”) comprises the Net Profit

after tax (excluding extraordinary income net of tax).

The number of shares used in computing Basic &

Diluted EPS is the weighted average number of shares

outstanding during the year.

17. SEGMENT REPORTING

The primary segment consists of ‘cellular’ and ‘other

than cellular’ services provided. The manufacturing

activities have not been treated as a separate segment

since such activities are essentially carried on as support

service to other segments mainly for Capitive

Consumption.

The following specific accounting policies have been

followed for segment reporting:

Segment Revenue includes service income and other

income directly identifiable with/allocable to the

segment.

Income/expense, which relates to the Company, as a

whole and not allocable to individual business segment

is included in “Un-allocable Corporate Income/

expense respectively”.

Expenses that are directly identifiable with/allocable

to segments are considered for determining Segment

Results.

Segment Assets and Liabilities include those directly

identifiable with the respective segments. Un-allocable

corporate assets and liabilities represent the assets and

liabilities that relate to the Company as a whole and

not allocable to any segment.

Schedules (Contd...)

47

SCHEDULE - U : NOTES TO ACCOUNTS

1. In pursuance of Telecom Policy 1999, the Government of India formed a Company named “Bharat Sanchar Nigamlimited” (BSNL) on 15th September 2000. BSNL took over the ongoing business of Department of Telecom Services(“DTS”) and Department of Telecom Operations (“DTO”) on 01st October 2000.

2. Assets and Liabilities taken over from DoT

2.1 In pursuance of the Memorandum of Understanding dated 30th September 2000 executed between Government ofIndia and BSNL, all assets and liabilities in respect of business carried on by DTS and DTO were transferred to theCompany with effect from 01st October 2000 at a provisional value of Rs. 6,300,000 lakh and up to previousfinancial year BSNL has identified net assets of Rs. 6,339,166 lakh (P.Y. Rs. 6,346,118 lakh) against it.

During the current financial year, the management based on physical verification of fixed assets and inventory andreconciliation of various heads of assets and liabilities in the subsidiary and general ledgers which has resulted intoincrease/decrease in the following assets and liabilities, has taken over as on 01st October 2000 amounting to netreduction in the assets of (-) Rs. 341 lakh [P.Y. (-) Rs. 6,952 lakh]:

(Figures in Lakh of Rupee)

Particulars Up to During the year Up toMarch 31, 2009 March 31, 2010

Assets

Fixed Assets 5,416,744 287 5,417,031

Capital Work-in-progress 502,631 0 502,631

Inventory 188,127 44 188,171

Sundry Debtors 684,430 (229) 684,201

Advance to contractors 39,448 0 39,448

Deposit with Electricity Boards /others 2,173 11 2,184

Total-A 6,833,553 113 6,833,666

Liabilities

Customer Deposits 393,704 0 393,704

Earnest Money deposits 12,124 (2) 12,122

Security Deposits from Contractors /Suppliers 29,030 (17) 29,013

Working Expense Liability as on 1st October 2000 43,254 236 43,490

Contractors Bills payable as on 1st October 2000 16,275 237 16,512

Total-B 494,387 454 494,841

Net Assets taken over by the Company (A-B) 6,339,166 (341) 6,338,825

Previous Year 6,346,118 (6,952) 6,339,166

The net assets and the contingent liabilities transferred to the Company as on 1st October 2000 are subject toconfirmation by DoT as regard to their ownership and the value.

Schedules (Contd...)

48

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

(Figures in Lakh of Rupee)

Particulars As at Additions/ Total structure as at01st October 2000 (Deletions) during 01st October 2000(as on 31.03.2009) the year ended (as on 31.03.2010)

31st March 2010

Equity 500,000 - 500,000

9% Non-Cumulative Preference Shares 750,000 - 750,000

15 year Government Loan(Interest at prevalent Governmentlending rate) 750,000 - 750,000

Loan from MTNL # 305,600 - 305,600

Capital Reserves* 4,033,566 (341) 4,033,225

Total 6,339,166 (341) 6,338,825

* Represents the difference between the total value of the assets taken over and the long term identified liabilities& the capital structure, as on 01.10.2000 as communicated by DoT.

# The entire amount has already been repaid.

2.3 In pursuance of clause 13 of Agreement of Transfer executed between the Government of India and BSNL dated 30th

September 2000 all costs, charges and expenses including stamp duties, registration charges, transfer duties, anyother taxes, levies, duties or charges relating to or in connection with completion of transfer of assets and liabilitiesshall be borne by the Government of India.

3. Loan from Government of India

The Government Loan of Rs. 750,000 lakh to the Company had a moratorium on repayment of the principal andinterest thereon up to 31st March 2005. The provision for interest @14.5 % p.a., as intimated by the DOT vide letterNo. 1-43/2004-B dated 03.02.2005 but disputed by the company, has been made on the balance principal amountas per its books but BSNL has represented to the Government of India for reduction in the rate of interest. In theabsence of any term/condition in the initial order of the loan, no provision has been made for prepayment charges onloan prepaid, penal charges on alleged delay in payment and date of receipt of the payment etc. amounting to Rs.16,948 lakh (P.Y. Rs. 10,396 lakh), which is also the difference between the outstanding balance principal amount ofthe loan as in the books of BSNL and DOT. The amount outstanding on account of loan as at 31.03.2010 is Rs.81,370 lakh.

4. The value of fixed assets, inventories and debtors taken over by the Company is subject to remarks in Para 5, 6 and7 below.

5. Fixed Assets/Depreciation/Capital Work in Progress

5.1 Fixed Assets taken over from DoT as on 1st October 2000 are based on physical verification conducted by themanagement. The value of fixed assets taken over including capital work-in-progress has been determined by themanagement using the original cost of the asset (wherever available) or alternatively the value arrived at by applyingStrategic Business Plan (“SBP”) rates, which is based on technical assessment, as reduced by the depreciation up to30th September 2000 on Straight Line Basis at the rates prescribed by DoT. Capital assets acquired by the companyafter 01.10.2000 is valued at the cost including all direct charges incurred up to the time of installation or put to use.

The provisional transfer values, as indicated above, in respect of assets transferred from DoT on 1st October 2000have been treated as its original cost and depreciation has been provided on written down value method at the ratesprescribed in Schedule XIV of the Companies Act, 1956 without reassessing the remaining useful life of such assetsas on that date. Depreciation has been provided at the rates as stated above for all the assets acquired after 01.10.2000except in the case of Subscribers Installations which are depreciated over the useful life of 5 years on written downvalue method. However, in three units (P.Y. two units) of one circle (P.Y. two circles), the depreciation has not beencalculated as per the policies of the Company.

49

5.2 The spectrum for 3G services and Broadband Wireless access services has been earmarked for BSNL on 08.08.2008.

As per order of the DoT one time spectrum fee at a price equal to highest bid as will be determined in respective

service areas is payable by the Company. Further BSNL is also to pay annual spectrum usage charge of 1% of AGR

after a period of one year from the date of earmarking of frequencies. As per instructions issued by the Ministry of

Communications & IT through letters having number P-11014/13/2008-PP dated nil and number P-11014/13/

2008-PP dated 12.06.2010 the company has provided in the current financial year for the auction-winning price

amounting to Rs. 10186.58 crore & Rs. 8313.80 crore for 3G spectrum and BWA spectrum respectively. Both the

amounts have been paid in 2010-11. As per terms and conditions of NIA the right to use above-mentioned spectrum

will be for a period of 20 years from the date of award of right to commercially use the allocated spectrum block.

Accordingly the Company is amortizing w.e.f. 08.08.2009 the one time spectrum fee over the period of twenty years

as per straight-line method.

5.3 Land at several locations has been taken over at a nominal value say Rs. 1, wherever original cost is not available. As

at 31.03.2010 thirty circles (P.Y. twenty eight circles) have identified the leasehold land. In the absence of the

information relating to such acquisition in other cases, no adjustment has been made for amortizing the cost of such

unidentified lease hold land over the lease period.

The lease period of a few leasehold lands on which buildings are constructed, have not been renewed / or the

renewals are under dispute. No provision has been made for the ‘surrender value / written down value of the

building’ in the hope that the leases would be ultimately renewed.

Fixed asset amount to Rs. nil (P.Y. Rs. 527 lakh) in circle nil (P.Y. one circle) could not be accounted in the books due

to late identification.

5.4 Pending transfer of the immovable property in the name of the Company, documents in respect of land & buildings

acquired during the period are under legal process/execution. Further in respect of assets taken over from DoT,

formalities for vesting the assets in favour of the Company wherever necessary/applicable are under process. Further

some of the assets acquired by the Company are yet to be registered in the name of the Company.

5.5 Certain assets that have been completed and put to use, have not been capitalized in twenty seven circles (P.Y.

twenty five circles) pursuant to the policy of capitalizing only after completion certificates have been obtained and till

then these are still shown as capital work-in-progress. The amount ascertained in respect of twelve circles (P.Y. eleven

circles) is Rs. 43,434 lakh (P. Y. Rs. 21,476 lakh). To that extent, these have not been depreciated on account of the

fact that the total expenditure on such capital works is still to be classified under the proper heads.

5.6 Establishment and administration expenses incurred in units where project work is also undertaken, are allocated to

capital and revenue based either on man-month allocated or some other proportionate basis.

5.7 In two circles (P.Y. two circles), there is a difference of Rs. 2,527 lakh (net) (P.Y. Rs. 57 lakh -net) between the CWIP

subsidiary ledger and general control ledger.

6. Inventories

6.1 At several locations physical verification of stock has been conducted by the management during the year. Physical

inventory taken is being reconciled with the detailed inventory records and the same will be further reconciled with

the balance as per the financial books. In thirteen circles (P.Y. three circles) there is difference between the Store

Ledger and the General Ledger. The difference between the Store Ledger and the General Ledger to the extent

identified in thirteen circles (P.Y. three circles) amounting to Rs. 9,225 lakh (net) (P.Y. Rs. 575 lakh (net)) is under

reconciliation. The consequential adjustment will be made after the process of reconciliation is over.

6.2 Prices for the transfer of stock from Telecom Factories to circles for self-consumption are predetermined. The

predetermined rates include direct cost including overhead allocation at a fixed rate. This practice has resulted in

internal loss of Rs. 2,275 lakh (P.Y. profit of Rs. 1,404 lakh) for the year ended 31st March 2010 arising out of such

transfer. The said amount has been added to the administrative expenses in the profit and loss statement for the year

since it is not possible to identify the individual items of stores, which have been capitalized or expensed off.

6.3 In twenty one circles (P.Y. twenty circles) the non-moving, slow moving and obsolete inventories are in the process of

identification. Pending finalization of the process, no provision if any, that may be required, has been made.

6.4 In certain cases, the Company has placed orders for procuring inventory at provisional prices say 80-90% of the

previous purchase price. Final purchase price in such cases is determined at a later date. Price difference in such cases

is adjusted on the total material available in stock at the time of finalization of purchase price. The proportionate price

differential on the already consumed material is adjusted on the existing stock.

50

7. Sundry Debtors

7.1 In twenty seven circles (P.Y. twenty eight circles), the difference in the closing balance of subsidiary ledger and thesundry debtor figure of the General Ledger has been noticed - the General Ledger balance which are considered forpreparation of financial statement, being more by Rs. 14,116 lakh (P.Y. Rs. 8,788 lakh - GL excess) to the extentidentified. The management is in the process of reconciling these differences; pending reconciliation no adjustmenthas been made. The provision for doubtful debts is made on the basis of information available in the subsidiaryrecords.

7.2 The age-wise analysis of the sundry debtors as per sub ledger is given below:

(Rs. in Lakh)

Particulars As at 31st As at 31st

March 2010 March 2009

Debtors exceeding six months 525,046 545,615

Other Debtors 132,621 104,251

Total 657,667 649,866

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

(Rs. in Lakh)

Particulars As at 31st As at 31st

March 2010 March 2009

Considered good in respect of which the company is fully secured 131,910 127,592

Considered good but unsecured 130,915 122,543

Doubtful Debts 394,842 399,731

Total 657,667 649,866

7.4 The requirement of Schedule VI of the Companies Act, 1956 has been complied with respect to classification ofSundry Debtors as Secured, Unsecured & Doubtful and with respect to age-wise analysis as Debtors exceeding sixmonths and other debts as per sub ledger and not as per general ledger.

8. Loans & Advances

8.1 The amount of Rs. 286,897 lakh (P.Y. Rs. 186,080 lakh) under ‘advances recoverable in cash or in kind or for value tobe received’ includes the amount due from employees of Rs. 134,346 lakh (P.Y. Rs. 37,264 lakh) whose break up isas under:

(Rs. in Lakh)

Particulars As at 31st As at 31st

March 2010 March 2009

Considered good in respect of which the company is fully secured 14,115 16,917

Considered good but unsecured 120,231 20,347

Total 134,346 37,264

8.2 In twenty eight circles (P.Y. eighteen circles), it has been noticed that there are differences in the subsidiary ledger ofloans & advances with those appearing in general ledger. The management is in the process of reconciling thedifferences of current assets as well as other current liabilities.

9. DoT Balances

9.1 Net amount of Rs.1,627,362 lakh (P. Y. net recoverable - Rs. 77,520 lakh) payable on current account to DoT issubject to confirmation, reconciliation and consequential adjustment.

9.2 There is no agreement between the Company and DoT for interest recoverable / payable on outstanding amounts ofDoT on current account, hence no accrual for interest has been made on the amount payable to / recoverable fromDoT.

51

10. Cash and Bank Balances

10.1 Bank reconciliation statements in respect of three (P.Y. six) collection accounts of units of two circles (P.Y. four circles)have not been prepared.

10.2 In sixteen circles (P.Y. fourteen circles), it has been noticed that cheques deposited with the bank & TT sent, have notbeen credited in the relevant bank accounts of the company amounting to Rs. 7,452 lakh (P.Y. Rs. 8,596 lakh) as on31.03.2010. The management has taken up the case with the concerned banks for early crediting of the amount inthe respective account.

10.3 In sixteen circles (P.Y. sixteen circles), unlinked credit items amounting to Rs. 752 lakh (P.Y. Rs. 1,677 lakh) and infourteen circles (P.Y. thirteen circles) unlinked debit items amounting to Rs. 330 lakh (P.Y. Rs. 1,446 lakh) are appearingin the bank reconciliation statement as on 31.03.2010. The management is in the process of reconciling all suchitems at the earliest possible.

10.4 Bank balances in five circles (P.Y. one circle) include cheques in hand pending to be deposited in to bank on 31.03.2010.Amount quantified in three circles (P.Y. nil circle) is Rs. 581 lakh (P.Y. nil). In two circles (P.Y. three circles) cash/cheque/DD amounting to Rs. 30 lakh (P.Y. Rs. 46 lakh) has been received but remains pending to be accounted in thebooks as on 31.03.2010.

11. Employee Cost

11.1 The Company has made pension contribution as per applicable rates to DoT on the basis of pay scales for absorbedemployees and for other employees working on deemed deputation as per the CDA pay scales in accordance withFinancial Rule 116 of the Government of India. The liability on account of pension payable to all such employees willbe that of Government of India as communicated by the Secretary, Department of Telecommunication vide their DONo. 1-45/2003-B dated 15.03.2005. However, in the year 2006-07 DoT vide their letter No. 1-45/2003-B dt.15.6.2006 has intimated that annual pension liability of the Government in respect of employees of DoT/DTS/DTOwho retired prior to 01.10.2000 and those who have worked / are working in BSNL on deemed deputation and forthose who are absorbed in BSNL shall not exceed 60% of the annual receipts to Government from the item (a)Dividend income from MTNL/BSNL, (b) License fee from MTNL/BSNL, (c) Corporate Tax/Excise Duty/Service Taxpaid by BSNL. Any amount exceeding the receipts on account of 3 items mentioned above shall be borne by BSNL.BSNL has taken up the matter with the Government stating that its liability is restricted to pension contribution as perthe rates prescribed in Financial Rules.

11.2 Negotiations regarding revision of the pay scales of non-executives which is due w.e.f. 01.01.2007 have beencompleted and approved by the Board. Accordingly total actual liabilities towards arrears of pay & allowances,pension contribution, employer’s share of EFP contribution, administrative charges towards EPF contributions etc forthe period from 01.01.2007 to 31.03.2010 come to Rs.393,193 lakh out of which Rs. 289,987 lakh has beenrecognized as expense in the current financial year as the remaining balance of liability amounting to Rs. 103,206lakh has already been accounted for as expense in the financial year 2008-09.

11.3 During the year, the Company has recognized the following amounts in the Profit and Loss Account:

a. Defined Contribution Plans

Contribution to defined contribution plan i.e. Employer’s contribution to Provident Fund & Pension Contributionto Government of India is charged to Profit & Loss Account. These amounts are shown as under:

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Employer’s Contribution to Provident Fund 10,098 6,878

Pension Contribution to Government of India 202,353 128,839

b. Defined Benefit Plans

I) Gratuity:

The Employee’s Gratuity Fund Scheme administered by BSNL Employees Gratuity Fund Trust through fourfund managers namely Life Insurance Corporation of India, SBI Life Insurance Company Limited, HDFCStandard Life Insurance Company Limited and Reliance Life Insurance Company Limited, is a defined benefitplan. The present value of obligation is determined on actuarial valuation using Projected Unit Credit Methodto arrive the final obligation.

52

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

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Current Service Cost 2,529 1,151

Interest Cost 767 430

Expected Return on Plan Assets 535 287

Total actuarial (gain)/loss 3,921 2,667

Past Service Cost - -

Curtailment and Settlement Cost/(Credit) - -

Net Cost 6,682 3,961

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

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Discount Rate 8% 8%

Expected Rate of Increase in Compensation Levels 7% 7%

Expected Rate of Return on Plan Assets 8% 8%

Expected average remaining working lives ofemployees (years) 26.60 26.47

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

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

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Present value of obligations as at beginning of year 9,589 5,378

Interest Cost 767 430

Current Service Cost 2,529 1,151

Benefits Paid 24 0

Actuarial (gain)/Loss on obligations (Balancing Figure) 4,464 2,630

Present value of obligations as at end of year 17,325 9,589

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

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Fair value of plan assets as at beginning of year 5,628 0

Contributions during the year 3,961 5,378

Expected return on plan assets @ 8% 535 287

Benefits paid 24 0

Actuarial Gain/(Loss) on Plan assets 543 (37)

Fair value of plan assets as at the end of year 10,643 5,628

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v) Reconciliation of fair value of assets and obligations for Gratuity as on March 31, 2010

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Fair value of plan assets at the end of year 10,643 5,628

Present value of obligations as at end of year 17,325 9,589

Unfunded amount recognized in Balance Sheet 6,682 3,961

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

(Rs. in Lakh)

Year ended Year endedMarch 31, 2010 March 31, 2009

Life Insurance Corporation of India 3,584 1,997

SBI Life Insurance 1,529 850

HDFC Standard Life Insurance 3,903 1,937

Reliance Life Insurance 1,627 844

Total 10,643 5,628

II) Leave Encashment:

Leave encashment is also a defined benefit plan. The liability towards Leave Encashment has been determinedthrough actuarial valuation as per Accounting Standard 15 (revised 2005) ‘Employee Benefit’ as of 31st

March 2010 and the Company proposes to invest in “Group Leave Encashment Scheme”. As per thetransitional provisions, the additional liability as on March 31, 2010 on account of Leave Encashment liabilitywas Rs. 33,186 lakh (assuming a service cost of Rs.13,293 lakh for the current year being the same as theservice cost for the year 2010-11) which has been adjusted against the opening reserves and surplus.

i) Defined benefits / expenses for Leave Encashment recognized for the year

(Rs. in Lakh)

Leave Encashment unfundedas at March 31, 2010

Current Service Cost 13,293

Interest Cost -

Expected Return on Plan Assets -

Total actuarial (gain)/loss -

Past Service Cost 518,474

Curtailment and Settlement Cost/(Credit) -

Net Cost 531,767

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

Leave Encashment unfunded

Discount Rate 8% p.a.

Expected Rate of Increase in Compensation Levels 7%

Expected Rate of Return on Plan Assets -

Expected average remaining working lives of employees (years) 12

Withdrawal Rate 1% to 3% depending on age

Mortality Table LIC (1994-96) Ultimate

iii) Reconciliation of opening and closing balances of benefit obligations and plan assets, estimated amountsof benefits payable within next year has not been provided since this will be implemented in thefinancial year 2010-11.

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12. Revenues

12.1 TRAI has reduced per minute based ADC on incoming ILD calls to Rs. 0.50 per minute from Rs. 1.00 per minute forthe period of 01.04.2008 to 30.09.2008. The AGR based ADC and ADC on ILD calls (per minute basis) have beenabolished from 01.04.2008 and 01.10.2008 respectively.

12.2 No interconnect (IUC) agreement exists between BSNL and MTNL for carriage of traffic in each other’s network.During the year the company has computed and accounted for the interconnect charges based on the rates prescribedby TRAI in IUC regulation. The claims raised by both the parties are disputed. The net claim receivable as on 31.03.2010from MTNL is subject to confirmation.

12.3 No claim has been received from Bangladesh Telegraph & Telephone Board (BTTB) now known as Bangladesh TelecomCorporation Limited (BTCL) for the period from 01.05.2006 to 31.03.2010 during the current financial year. However,the accounting entry has been made based on BSNL data.

12.4 Telephones disconnected due to non-payment up to three months’ period are considered as working connection andare processed for permanent closure after this period. Pending permanent closure of such telephone the bills forrental amount are issued and accounted for as income.

13. License Fee and Spectrum Charges

13.1 For the purpose of calculation of License fee, the Company is segregating the revenue from National Long Distance(NLD) & International Long Distance (ILD) services from the total billed amount based on sample traffic details. In thecurrent financial year the Company has computed the NLD revenue as 70% (P.Y. 30%) of Leased line revenue. TheNLD & ILD component of POI revenue has been taken on actual basis as was done in previous financial year. For theBasic Service excluding circuit revenue the company has computed NLD & ILD revenue as 14.84% and 6.21%respectively (P.Y. 14.84% and 6.21% respectively) of AGR for the current financial year. Similarly for Cellular Servicerevenue the Company has computed NLD & ILD revenue as 13.48% and 3.93% respectively (P.Y. 11.20 % and 2.61% respectively) of AGR for the current financial year.

13.2 The Company has decided to compute and recognize the License Fee payable as revenue share on AGR after takinginto account the decision of Hon’ble Telecom Dispute Settlement and Appellate Tribunal (the ‘TDSAT’) dated 30th

August 2007 in case of other operators which specifies that revenues not related to licensed activities are not to beincluded in the computation of revenue share. However the decision of the company to recognize the revenue shareon AGR as per Hon’ble TDSAT judgement is subject to final judgement against the Appeal in this regard pendingbefore the Hon’ble Supreme Court in case of other operators. The impact of such decision of the company, which hasbeen accounted in the current financial year is of Rs. 25,359 lakh pertaining to current financial year and Rs.121,061lakh for previous financial years.

14. Inter/Intra Circle Remittance Balance

The management is in the process of reconciling the various differences between the subsidiary records and thecorresponding control accounts and the balance of Rs. 138,933 lakh (P.Y. Rs. 111,349 lakh) in Inter/Intra-CircleRemittances account. The cumulative impact of such differences between control accounts and subsidiary ledger andthe un-reconciled balance in Inter/Intra Circle Remittance account on the affected accounts of income, expenditure,assets and liabilities is presently not ascertainable.

15. Others

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

15.2 Five installments of Rs. 4,000 lakh each are overdue for redemption of 7% Redeemable Cumulative Preferenceshares in respect of investment in M/s ITI Ltd. at the end of the year and no dividend has been received till date.

15.3 The company has taken vehicles for Senior Executives under Operating Lease, which expires between May 2009 toJanuary 2015 (P.Y. nil). The gross rental expenses, excluding service tax, for such vehicles are Rs. 43 lakh (P.Y. nil). Thecommitted lease rentals in the future are:

(Rs. in Lakh)

Particulars 2009-10 2008-09

Not later than one year (excluding service tax) 95 Nil

Later than one year and not later than five years (excluding service tax) 196 Nil

Total 291 Nil

55

16. Segmental Information

Primary Segment: Cellular and Other than Cellular services have been considered as primary business segments forreporting under AS-17 “Segment Reporting” issued by ICAI.

Secondary Segment: The Company caters only to the Indian market representing a singular economic environmentwith similar risks and returns and hence there are no reportable geographical segments.

SEGMENT REPORTING (Rs. in Lakh)

For the year ended 31st March, 2010 For the year ended 31st March, 2009

Particulars Business SegmentsUn-

Business SegmentsUn-

Revenue Other than Cellular allocable Total Other than Cellular allocable TotalCellular Cellular

Income From Services 1,721,600 1,069,744 - 2,791,344 1,898,285 1,118,353 304 3,016,942

Inter Segment Revenue 105,126 43,472 - 148,598 121,980 55,506 - 177,486

Other Income 133,200 32,674 1,624 167,498 161,728 12,218 1,800 175,746

Net Segment Revenue 1,959,926 1,145,890 1,624 3,107,440 2,181,993 1,186,077 2,104 3,370,174

Segment Results

Operating Profit BeforeInterest & Taxes (736,787) 381,711 (58,724) (413,801) (483,673) 533,179 (246,292) (196,786)

Interest Income 5,562 319 239,818 245,699 5,465 115 382,924 388,504

Interest Expenses (596) (0) (34,565) (35,161) (1,031) - (43,294) (44,325)

Profit Before Prior Periodand Extra Ordinary Items (731,821) 382,029 146,529 (203,263) (479,239) 533,294 93,338 147,393

Change in Accounting Policy(Depreciation) - - - - (1,622) - - (1,622)

Prior Period Adjustment (8,357) (8,128) - (16,485) (15,502) (3,005) (101) (18,608)

Profit Before Extra Ordinary Items (740,178) 373,901 146,529 (219,748) (496,363) 530,289 93,237 127,163

Extraordinary Items - - - - - - - -

Profit before tax (740,178) 373,901 146,529 (219,748) (496,363) 530,289 93,237 127,163

Provision for current tax - - (132,322) (132,322)

Provision for Wealth tax - - (116) (116) - - (125) (125)

Provision for Fringe Benefit Tax - - - - - - (3,800) (3,800)

MAT Credit - - - - - - - -

Provision for deferred tax - - 52,100 52,100 - - 66,569 66,569

Provision for earlier year’s tax - - (14,501) (14,501) - - - -

Profit After Tax (740,178) 373,901 184,012 (182,265) (496,363) 530,289 23,559 57,485

Other Information

Segment Assets 8,529,182 2,807,182 3,115,427 14,451,791 7,223,504 2,281,961 5,024,759 14,530,224

Segment Liabilities 1,994,197 2,400,477 1,469,911 5,864,585 2,054,332 1,059,219 1,518,273 4,631,824

Capital Expenditure 506,133 2,423,137 (6,077) 2,923,193 554,622 446,650 2,481 1,003,753

Depreciation 683,147 236,076 456 919,679 718,074 133,625 642 852,341

Non cash expense otherthan Depreciation 104,822 16,459 - 121,281 173,789 21,525 - 195,314

56

17. Related Party Disclosure

17.1 Key Management Personnel

Designation Name Remarks

CMD Shri Kuldeep Goyal From 06.08.2007

Director (F) Shri Gopal Das From 29.10.2008 to 20.06.2009

Shri Kuldeep Goyal From 21.06.2009

Director (Consumer Mobility) Shri R. K. Aggarwal From 11.04.2008

Director (HRD) Shri Gopal Das From 04.10.2007

Director (Consumer Fixed Access Shri Rajesh Wadhwa From 01.08.2008

Director (Enterprise) Shri Rajendra Singh From 07.11.2007

Govt .Director Shri J.S. Deepak From 21.04.2008 to 17.03.2010

Shri P.K. Mittal From 05.06.2008 to 11.02.2010

Shri R.N. Jha From 12.02.2010

Non-offcial Part-time Director Dr. S.K.Kak From 20.02.2008

Shri Mahesh Shah From 20.02.2008

Shri Sanjiv Gupta From 05.09.2008

17.2 Disclosure of transactions between the Company and related parties and the status of outstanding balances as on31st March 2010.

(Rs. in Lakh)

Name of the party Description of transactions Amount of Outstandingtransactions balances as on

31st March 2009

Payment of salary and allowances 84.33 (97.84) –

Advance given:

Key Management Personnel Opening balance 8.41 (6.92) –

Extended During the year 16.20 (28.20) –

Total 24.61 (35.12) –

Repayment of Advance 15.30 (26.71) 9.31 (8.41)

Note: Figures in bracket denotes previous year figures.

17.3 The Company being a wholly State owned enterprise, no disclosure as regards to related party relationship withother State controlled enterprises and transactions with such enterprises has been made.

18. Earning Per Share

Description 2009-10 2008-09

Profit after Tax (Rs. in Lakh) (182,265) 57485

*Less: Preference dividend including tax (Rs. in Lakh) 0 0

Balance for Equity Shareholders (Rs. in Lakh) (182,265) 57485

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

Face value of shares (in Rs.) 10 10

**Basic earnings per Equity share (in Rs.) (3.65) 1.15

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

** There are no diluted equity shares.

57

19. Taxes on Income

19.1 Deferred Tax

The deferred tax has been dealt with in accordance with the contention of the Company before the tax authorities.The Company contends that the Capital reserve arising out of the capital structure at the time of incorporation of thecompany is not in the nature of financial relief and hence not to be reduced from the value of fixed assets. Accordingto the company’s contention, the depreciation provided in the book on the value of assets without deducting theamount involved in capital reserve is admissible in income tax. On this basis, the Company is recognizing the deferredtax assets/liabilities.

The break up of deferred tax assets and liabilities into major components is as under:

(Rs. in Lakh)

2009-10 2008-09

(A) The movement in deferred tax account is as follows

Opening Balance 64,484 131,053

Provision for deferred tax liability (Net) (52,100) (66,569)

Closing Balance 12,384 64,484

(B) Deferred Tax assets and liabilities are being offset as they relate to taxes on income levied by thesame governing taxation laws. The following amounts are shown in the balance sheet:

Deferred Tax Assets 567,152 543,902

Deferred Tax Liabilities 579,536 608,386

Net Deferred Tax Liability 12,384 64,484

(C) Break up of deferred tax assets/liabilities

Deferred Tax Liabilities:

Depreciation 562,168 591,018

Others 17,368 17,368

Total 579,536 608,386

Deferred Tax Assets:

Provision for bad & doubt full debts 153,525 138,299

Unabsorbed Depreciation 259,055 259,055

Provision for leave encashment 104,530 98,061

Provision for decommissioned asset, wage revision etc. 27,700 28,141

Provision for obsolete inventory and CWIP 4,241 3,234

Provision for contingency 50 45

Provision for payment to staff gratuity fund (DR) 1,609 625

Others 16,442 16,442

Total 567,152 543,902

Notes:

a. The Company, being a company providing telecommunication services is eligible to claim deduction underSection 80 IA of the Income Tax Act, 1961 with respect to 100 % of the profits and gains derived from thisbusiness for the first five years and thereafter at 30% of the profits for the second five years (referred to as theTax Holiday Period). Accordingly, BSNL has opted for Tax Holiday Period from financial year 2003-04 and onwards.

b. In accordance with Accounting Standard Interpretation (ASI)-3 issued by the Institute of Chartered Accountantsof India, the deferred tax in respect of timing differences which originate and reverse during the tax holidayperiod have not been recognized. Deferred tax in respect of timing differences which originate during the taxholiday period but reverse after the tax holiday period, have been recognized in the year in which the timingdifferences have originated. For this purpose, as a conservative measure, deferred tax provision has been madein respect of the period when only 30% of the profits would be tax free assuming that only 70% of the timingdifferences would reverse.

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19.2 Current Tax

The provision for income tax for the current year has not been made since the Company is not having any taxableincome either under normal provisions of the Income Tax Act, 1961 or special provision u/s 115JB (MAT) of theIncome Tax Act, 1961. However, provision for income tax for the assessment year 2001-02 amounting to Rs. 14,501lakh has been made during the year since relief cannot be obtained from Hon’ble ITAT due to retrospective change inthe law itself.

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

(Rs. in Lakh)

Name of Opening Fresh Provision Provision Provision written ClosingProvisions Balance as at made during utilized during back during balance as at

01.04.2009 the year the year the year 31.03.2010

Wealth Tax 418 116 119 - 415(415) (125) (122) (-) (418)

Dividend 0 0 0 - 0(120,000) (0) (120,000) (-) (0)

Tax on Dividend 0 0 0 - 0(20,395) (0) (20,395) (-) (0)

Phased out assets 0 - - 0 0(0) (-) (-) (0) (-)

Leave Encashment 489,496 65,212 4,208 0 550,500(461,007) (30,187) (1,698) (-) (489,496)

Gratuity 3,964 6,686 3,963 - 6,687(4,504) (4,840) (5,380) (-) (3,964)

Contingencies 781 233 149 64 801(1,086) (215) (480) (40) (781)

Total 494,659 72,247 8,439 64 558,403(607,407) (35,367) (148,075) (40) (494,659)

Note: Figures in bracket denotes previous year figures.

21. Remuneration to the Chairman-cum-Managing Director and other Directors.

(Rs. in Lakh)

Particulars 2009-10 2008-09

Salaries & Allowances 70.34 88.42

Perquisites 4.36 4.51

EPF Contribution 9.63 4.91

Sitting Fees 4.10 3.15

Total 88.43 100.99

22. Advance to Directors:

(Rs. in Lakh)

Particulars 2009-10 2008-09

Amount due at the end of the year (TA Advance) 9.31 8.41

Maximum amount due during the year 10.97 17.22

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23. Auditors Remuneration: (Statutory/Branch Auditors):

(Rs. in Lakh)

Particulars 2009-10 2008-09

Statutory Branch Statutory BranchAuditor Auditors Auditor Auditors

Statutory Audit Fee 10.56 189 9.60 183

Tax Audit Fee 22 _ 19

As advisor or in any other capacity:

Certification Charges 1.58 27 0.96 18

Management Services 3.40 4 2.90 6

Reimbursement of Expenses 1.40 23 1.17 20

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

24. Information required under Para 4-D of part II of Schedule VI of the Companies Act, 1956, to the extent available,are as under:

i) Value of Imports on CIF Basis:

(Rs. in Lakh)

Particulars 2009-10 2008-09

Raw Material - -

Components & Spares Parts 801 3,496

Capital Goods 80,975 82,854

Total 81,776 86,350

ii) The expenditure in foreign currency:

(Rs. in Lakh)

Particulars 2009-10 2008-09

Expenses on Services 37,880 33,245

Traveling 96 142

Others 9,733 5,039

Total 47,709 38,426

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

Particulars 2009-10 2008-09

(Rs. in Lakh) % (Rs. in Lakh) %

Imported 44,601 40.44 32,004 37.20

Indigenous 65,676 59.56 54,022 62.80

Total 110,277 100.00 86,026 100.00

iv) Earnings in Foreign currency:

(Rs. in Lakh)

Particulars 2009-10 2008-09

Training Fee 8 33

Income from Services 20,063 17,133

Others -

Total 20,071 17,166

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25. (a) Information required relating to consumption of stores & spare parts under paragraphs 3(x)(a) of Part II ofSchedule VI of the Companies Act, 1956 is not ascertainable for the year ended 31st March 2010 (Previous Year -unascertainable), since consumption of stores is included under the normal heads of repairs & maintenance.

(b) Information required under Para 3 (II) (2) of part II of the Schedule VI of the Companies Act, 1956 in respect ofopening stock, closing stock and sales of finished goods have not been shown as the production of goods by theCompany is for captive consumption.

(c) Information required under Para 4 (c) of part II of the Schedule VI of the Companies Act, 1956 in respect ofinstalled capacity and actual production details of the factories of the Company have not been furnished as theproduction of goods by the Company is for captive consumption.

(d) The Company is in the process of identification of Micro, Small and Medium Enterprises under the Micro, Smalland Medium Enterprises Development Act, 2006 except for one circle (P.Y. three circles). The required informationin terms of section 22 of MSMED Act to extent available in respect of the three circles are given below:

(Rs. in Lakh)

Particulars Amount as at 31.03.2010

The principal amount due to any “supplier” 244

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

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

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

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

26. Contingent Liabilities:

a) Claims not acknowledged as debts are as follows:

Particulars As at 31.03.2010 As at 31.03.2009

No. of Cases Amount No. of Cases Amount(Rs. in Lakh) (Rs. in Lakh)

TR Billing 44 22 105 1,587

Enhanced Sales Tax in lieu of C/D Forms 11 1,906 13 1,696

On account of service tax disputed 71 17,829 37 8,249

Sales tax disputed 33 9,348 49 4,635

Customs duty disputed 1 4 1 126

Central Excise claims 18 1,556 27 2,506

Disputed interest, penal interest &pre-payment charges on 15 year 1 16,948 1 10,396Govt. loan

License Fee & Spectrum charges(difference between LF & Spectrum 1 146,420 - -as per non-TDSAT and TDSAT)

Others 65 3950 87 9,334

Total 245 197983 320 38,529

b) Claims pending in court related to Land Acquisition, TR Billing, Service Tax, Central Excise & Sales tax, Arbitrationcases and others.

Particulars As at 31.03.2010 As at 31.03.2009

No. of cases 25,680 27,889

Amount (Rs. in Lakh) 879,161 123,614

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

Assessment Year As at 31.03.2010 As at 31.03.2009

Forum where Amount Forum where Amountpending (Rs. in Lakh) pending (Rs. in Lakh)

2001-02 Appeal decided by - ITAT against 14,501ITAT against Assessment u/s 143assessment u/s 143(3)

2001-02 (Refer Note-1) Writ pending at 81,899 Hon’ble Delhi High 81,899Hon’ble Delhi High Court againstCourt against re-assessment u/s 147re-assessment u/s 147

2002-03 (Refer Note-2) Appeal decided by - ITAT against 2,757ITAT against Assessment u/s 143assessment u/s 143(3)

2002-03 (Refer Note-3) Appeal pending at 27,307 CIT (A) against Penalty 27,307CIT(A) against penalty proceedingsorder u/s 271(1)(c) u/s 271(1)(c) (pending

to be filed beforeCIT Appeal)

2003-04 Appeal pending at 197,943 ITAT against 197,943ITAT against Assessment u/s 143assessment u/s 143(3)

2004-05 Appeal pending at 36,110 ITAT against 36,110ITAT against Assessment u/s 143assessment u/s 143(3)

2004-05 (Refer Note-4) Appeal pending at 100,856 - -ITAT against assessmentu/s 263/143(3)

2005-06 Appeal pending at 31,667 ITAT against 31,667ITAT against Assessment u/s 143assessment u/s 143(3)

2005-06 (Refer Note-5) Appeal pending at 115,316 - -CIT(A) against penaltyorder u/s 271(1)(c)

2006-07 (Refer Note-6) Appeal being filed at 51,890 CIT (A) against 51,890ITAT against Assessment u/s 143assessment u/s 143(3)

2007-08 (Refer Note-7) Appeal pending at 35,218 - -CIT(A) againstassessment u/s 143(3)

Total 678,206 444,074

Note:

(1) The Income Tax Department has initiated re-assessment proceedings against the Company for the A.Y.2001-02 and A.Y. 2002-03. The main contention of the department is that the amount shown in thebalance sheet of the respective years under the head “Reserve” amounting to Rs. 3,316,000 lakh is to betreated as financial relief/grant/subsidy hence is to be reduced from the actual cost of fixed assets.Consequently the depreciation charged would be lower than what has been claimed by the Company. There-assessment proceedings will have cascading effect on all the subsequent assessment years also.

(2) Appeal at ITAT against Assessment u/s 143 pertaining to A.Y. 2002-03 has been partly decided partly infavour of BSNL and Appeal effect of the same has been adjusted by Assessing Officer against pendingdemand of A.Y. 2005-06.

(3) Penalty Order u/s 271(1)(c) of the I.T. Act, 1961 has been passed for the A.Y. 2002-03 and the demand ofRs. 27,307 lakh has been raised against the Company. The Company is in appeal against it before CIT (A).

62

(4) Assessment Order u/s 263/143(3) dated 25.09.2009 has been passed for the A.Y. 2004-05, wherebydeductions u/s 80-IA amounting to Rs. 452,830 lakh was disallowed. An additional demand of Rs. 100,856lakh has been raised against the company. The Appeal filed against this Assessment has been decided partlyby CIT (A) in favour of BSNL vide their Order dated 30.04.2010 and Appeal effect of the same is stillawaited. Further Appeal has been filed with Hon’ble ITAT against the Order of CIT (A).

(5) During the year penalty for A.Y. 2005-06 u/s 271 (1) (c) has been imposed to the extent of Rs. 115,316lakh. The Company is in appeal against the same before CIT (A).

(6) Appeal for the A.Y. 2006-07 has been decided by CIT (A). However, Appeal effect of the same is pending.

(7) During the year the assessment for A.Y. 2007-08 has been finalized creating a demand of Rs. 35,218 lakhagainst which the Company is in appeal before CIT (A).

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

(9) Additional Interest u/s 234B and 220, if any, arising out of abovementioned Income Tax proceedings has notbeen quantified since demand has not been finally crystallized against the company.

(10)Amount shown are nearest to rupees in Lakh.

d) Liability on account of bank guarantees given by the Company.

Item As at 31.03.2010 As at 31.03.2009

With cash Without cash With cash Without cashmargin margin margin margin

No. of cases 29 234 21 241

Amount (Rs. in Lakh) 459 4,172 306 4,286

e) The Government of Jammu & Kashmir vide notification SRO No. 117 dated 30th March, 2007 has levied tax @8% on service provided by Telecom / Cellular Phone Agencies in the State of Jammu & Kashmir. This notificationis on the amendment of SRO No.51 dated 01st March 2005 where services provided by Telecom / Cellular PhoneAgencies were brought to the tax net and demand has been raised for Rs.1,733 lakh. Relying on Hon’bleSupreme Court Judgement dated March 2003 in Writ Petition Civil No. 183 of 2003, J&K Telecom Circle hasneither collected tax from subscribers nor deposited with the Government of Jammu & Kashmir.

f) In case of few circles, the amount of contingent liability and estimated amount of contract remaining to beexecuted on capital account has not been ascertained.

27. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances)in relation to execution of works and purchase of equipment, to the extent available, is Rs. 303,477 lakh (P.Y. Rs.427,207 lakh).

28. BSNL is executing various projects for various Government departments on reimbursement basis.

29. Figures of the previous year have been regrouped or reclassified wherever necessary to conform to the current yearsgrouping and classification.

63

Cash Flow Statement for the Year Ended 31st March, 2010(Rs. in Lakh)

Particulars Year ended Year ended31st March 2010 31st March 2009

A. Cash flow from operating activities:

Net (loss)/profit before tax but after Prior period and Extraordinary items (219,748) 127,163Adjustments for:Depreciation 919,679 852,341Utilization of General Reserve for leave encashment provision for earlier period (33,187) -Prior period depreciation 10,464 4,189Interest/Finance charges 35,161 44,325Interest Income (245,699) (388,504)Loss/(Profit) on Fixed Assets sold (2,468) (2,165)Debts/Advances Written off 54,371 91,453Provision for Bad and Doubtful Debts 67,161 85,640Excess provision written back (80,353) (117,014)Prior Period item other than depreciation 6,021 14,419Foreign Exchange Loss (2,500) 3,865Other Provision 176,742 905,392 176,091 764,640Operating profit before working capital changes 685,644 891,803Adjustments for changes in working capital :- Inter Circle Remittance (27,584) (45,118)- Sundry Debtors (121,664) (83,612)- Other Receivables (338,413) (152,971)- Trade and Other Payables 2,205,401 1,717,740 326,506 44,805Cash generated from operations 2,403,384 936,608Taxes paid (161,006) (237,808)Prior Period item other than depreciation (6,021) (167,027) (14,419) (252,227)Net cash from operating activities 2,236,357 684,381

B. Cash flow from Investing activities:Inventories Purchased (48,533) (132,712)Purchase of fixed assets (3,016,422) (860,242)Capital Work in Progress (102,619) (226,409)Proceeds from Sale of fixed assets 128,798 36,597Interest Received 247,418 (2,791,358) 438,952 (743,814)

C. Cash flow from financing activities:Interest Paid (34,155) (41,901)Repayment of Government Loan (189,934) -Dividend Paid - (120,000)Dividend Distribution Tax Paid - (224,089) (20,394) (182,295)Net cash used in financing activitiesNet Increase/(Decrease) in Cash and Cash Equivalents (779,090) (241,728)Opening Cash and cash equivalents 3,813,430 4,055,158Cash and cash equivalents as at 31.03.2010 3,034,340 3,813,430Cash and cash equivalents compriseCash, Cheques and Drafts (in hand) 2,257 2,415Balances with banks 3,032,083 3,034,340 3,811,015 3,813,430

Notes: 1. In the absence of adequate data regarding assets appearing in the deletions/adjustments column of the fixed assets schedule alldeletions have been assumed to be cash sales.

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

3. Figures in bracket shows outflows.

As per our report of even date For and on behalf of Bharat Sanchar Nigam Limited

For Sharma Goel & Co.Chartered AccountantsFRN 000643N

Sd/- Sd/- Sd/-Amar Mittal Kuldeep Goyal Gopal DasPartner Chairman and Managing Director Director (HRD)M. No: 017755

Sd/- Sd/- Sd/-S R Kapoor Arundati Panda H.C.Pant

Executive Director Sr. General Manager Company Secretary and(Finance) (Corporate Accounts) Sr. General Manager (Legal)

Place: New DelhiDate: 30th July 2010

64

Balance Sheet Abstract and Company’s General Business Profile

I Registration Details

Registration No. 107739 State Code 55

Balance Sheet Date 31 03 2010

Date Month Year

II Capital Raised during the year (in Rupees)

Public Issue Nil Rights Issue Nil

Bonds Issue Nil Pvt Placement Nil

III Position of Mobilisation and Deployment of Funds (in Rupees)

Total Liabilities Rs. 8,813,320 lakh Total Assets Rs. 8,813,320 lakh

Sources of Funds:

Paid Up Capital Rs. 1,250,000 lakh Reserves and Surplus Rs. 7,397,566 lakh

Secured Loans Rs. Nil lakh Unsecured Loans Rs. 153,370 lakh

Application of Funds:

Net Fixed Assets & CWIP Rs. 7,992,452 lakh Investment Rs. 20,000 lakh

Net Current Assets Rs. 661,935 lakh Misc Expenditure Rs. Nil

Preoperative Expenditure Nil

IV Performance of the Company (in Rupees)

Turnover Rs. 3,204,541 lakh Total Expenditure Rs. 3,407,804 lakh

Profit/(Loss) Before Tax Rs. (219,748) lakh Profit/(Loss) after Tax Rs. (182,265) lakh

Earning per share Rs. (3.65) Dividend Rs. - lakh

V Generic Names of Principal products / Services of the Company as per monetary terms:

Item Code ITC CodeNot available

Product Description All types of Teleocm Services

For and on behalf of Bharat Sanchar Nigam Limited

Sd/- Sd/-Kuldeep Goyal Gopal Das

Chairman and Managing Director Director (HRD)

Sd/- Sd/- Sd/-S R Kapoor Arundati Panda H.C.Pant

Executive Director Sr. General Manager Company Secretary and(Finance) (Corporate Accounts) Sr. General Manager (Legal)

Place: New DelhiDate: 30th July 2010

65

Auditors’ Report

TO THE MEMBERS OF BHARAT SANCHAR NIGAM

LIMITED

A. We have audited the attached Balance Sheet of Bharat

Sanchar Nigam Limited as at 31st March, 2010, the

related Profit and Loss Account and the Cash Flow

Statement for the year ended on that date, annexed

thereto.

These financial statements are the responsibility of the

company’s management. Our responsibility is to

express an opinion on these financial statements,

based on our audit.

B. We conducted our audit in accordance with the

auditing standards generally accepted in India. Those

Standards require that we plan and perform the audit

to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the

accounting principles used and significant estimates

made by management, as well as evaluating the overall

financial statement presentation. We believe that our

audit provides a reasonable basis for our opinion.

Our report has taken into consideration the audited

accounts and the report of H.O. units audited by us and

of Branch auditors of 48 units (circles, districts, regions,

training institutions, stores, factories etc) appointed

by the Comptroller and Auditor - General of India

and noted by the Board of Directors of the Company.

C. As required by the Companies (Auditor’s Report)

Order, 2003, as amended by the Companies (Auditor’s

Report) (Amendment) Order,2004, issued by the

Central Government of India in terms of sub-section

(4A) of Section 227 of The Companies Act, 1956 of

India (the ‘Act’) and on the basis of such checks as we

considered appropriate and according to the

information and explanations given to us, we set out

in the Annexure a statement on the matters specified

in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to

in paragraph ‘C’ above:

D. Attention is invited to the facts stated in the following

paragraphs:

1. Assets taken over from Department of

Telecommunications (D.O.T) and D.O.T balances

a) As referred to in Note No. 2 in Schedule U, the

process of taking over the assets and liabilities

from Department of Telecommunications (D.O.T)

is still in progress and the fact that the value of

net assets, identified subsequent to 01.10.2000,

has been adjusted to Capital Reserves.

b) As referred to in Note No. 5.4 of Schedule-U,

the title to the various immovable properties taken

over from D.O.T. are yet to be transferred in the

name of the Company.

c) As referred to in Note No. 5.1 of Schedule – U,

the fact that the method of valuation adopted

for assets taken over is also the basis for treating

them as original cost for the purpose of providing

depreciation.

2. Unsecured Loan

As referred to in Schedule - C and in Note No. 3 of

Schedule U- the closing balance of 15 years

Government of India loan is less by Rs.16,948 lacs

due to non provision of disputed penal interest,

prepayment charges etc.

3. Fixed Assets and Capital Work-in-Progress

a) As stated in Note No. 1 on Schedule – D, title

deeds are yet to be executed in respect of land

purchased/ acquired on leasehold/ freehold in

certain cases through various authorities.

b) As stated in Note No. 2 on Schedule – D, leasehold

lands which have been identified as such have

only been amortized.

c) As referred to in Note No. 5.3 on Schedule - U,

about the expiry/ non renewal of lease period of

the leasehold lands on which buildings have been

constructed and the fact that no provision has

been made for the “surrender value/ written

down value of the building” in the expectation

of ultimate renewal of the leases.

d) As referred to in Note No. 5.5 on Schedule – U,

certain assets still shown under ‘Capital-work-in-

progress’ though completed and put to use, has

not been capitalized and no depreciation provided

on them.

e) As referred to in Note No. 5.7 on Schedule – U,

there are differences in CWIP between subsidiary

ledger and financial ledger.

4. Depreciation

As referred to in Accounting Policy 4 in ‘Schedule T’,

depreciation on factory buildings & administrative

66

buildings have been provided at the rate applicable

to the normal buildings. Moreover, three units of one

circle has not provided depreciation as per the

Company’s Accounting Policy on Depreciation.

5. Current Assets, Loans and Advances and Current

Liabilities

a) As referred to in Note No. 6.1 of Schedule-U,

the fact that no adjustment has been made for

the difference of Rs.9225 lacs (net) between

stores ledger and general ledger which is under

reconciliation.

b) As referred to in Note Nos. 7.1 & 8.2 of Schedule-

U, the fact that no adjustment has been made

for the difference of Rs. 14,116 lacs between the

General Ledger and Subsidiary Ledger of Sundry

Debtors and the difference between similar sets

of accounts in respect of loans and advances and

other current assets and liabilities (amount

unascertained) pending reconciliation.

c) As referred to in Note No. 10.1 on Schedule U,

Bank Reconciliation Statements have not been

prepared in respect of three bank accounts of units

under two Circles.

d) As stated in Note Nos. 10.2 & 10.3 of Schedule –

U, Cheques and TT’s deposited with the Bank for

Rs. 7,452 lacs but not credited by the banks and

unlinked debit & credit items appearing in Bank

Reconciliation for Rs. 330 lacs and Rs. 752 lacs,

respectively are still in the process of

reconciliation.

e) As referred to in Note No. 10.4 of Schedule-U,

the fact that Bank Balance includes cheques in

hand but not deposited instead showing the same

separately under the head Cash and Bank

balances.

f) The fact that the balances due to and due from

DOT, DOP, M.T.N.L., C-DOT and Other

Government Departments/Companies on current

account are subject to confirmation and

reconciliation.

6. Inter/Intra Circle Remittance Account

As stated in Note No. 14 in Schedule U, regarding

Inter/Intra Circle Remittance balances, the possible

cumulative effect of adjustment necessitated by such

reconciliation on income, expenditure, assets and

liabilities are not ascertainable.

7. Others

a) As stated in Note No. 25 (d) in Schedule U, the

Company has not identified units covered under

Micro, Small and Medium Enterprises

Development Act, 2006 in respect of 26 Circles

with whom they are dealing and hence disclosure

as required under Schedule VI and M.S.M.E.D

Act, 2006 respectively, could not be disclosed/

accounted for in respect of such Circles.

b) As stated in Note No. 26 (f) and Note No. 27 in

Schedule U, in certain units, contingent liabilities

and estimated amount of contracts remaining to

be executed have not been ascertained.

c) The fact that certain assumptions as stated in Note

Nos. (1) & (2) in Cash Flow Statement have been

made for the purpose of preparation of ‘Cash

Flow Statement’.

8. License Fee, Spectrum Charges, Inter Connect

Usage Charges

The fact that the licence fee has been accrued based

on Note No. 13 of Schedule U and the interconnect

revenue between BSNL & MTNL is based on the Note

No. 12.2 of Schedule – U, and the accounting for the

revenue from D.O.T has been made as stated in the

Accounting Policy 2(c) of Schedule ‘T’.

9. Revenue

a) Income from recharge coupon, prepaid calling

cards, ITC cards, Sancharnet Cards and stock of

recharge coupons and prepaid calling cards, are

subject to reconciliation in fourteen circles.

b) The booking of rental income on disconnected

telephones as stated in Note No. 12.4 of

Schedule--U, quantum not ascertained.

E. We report that:

(a) We have obtained all the information and

explanations, which to the best of our knowledge

and belief were necessary for the purposes of our

audit;

(b) In our opinion, proper books of accounts 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

purpose of our audit have been received from

the branches not visited by us;

67

(c) We have received reports on accounts of branch

offices audited by other auditors and the same

has been dealt with by us in our report.

(d) The balance sheet, profit and loss account and

cash flow statement dealt with by this report are

in agreement with the books of accounts and with

the audited returns from branches.

(e) In our opinion, the balance sheet, profit and loss

account and cash flow statement dealt with by

this report comply with the accounting standards

referred to in sub-section (3C) of Section 211 of

the Companies Act, 1956 except for :

- Accounting Standard - 2 for valuation of

inventory and others have not been

followed in 8 Circles as reported by branch

auditors and in 21 Circles due to pending

identification of non-moving, slow

moving and obsolete inventories; their

valuation has not been done on realizable

value.

- Accounting Standard - 10 for charging of

overhead on proportionate basis to the

Capital Work-in-Progress (Note No. 5.6 of

Schedule-U) instead of on actual basis.

- Accounting Standard - 15 regarding

provision for the ‘liability on account of

post retirement medical benefits’ of

employees including retired employees is

made on actual basis in respect of bills

received till the cut off date instead of on

the basis of actuarial valuation.

- Accounting Standard - 28 regarding non-

identification of impairment loss and

provision for obsolescence thereof, if any,

in absence of carrying out any

Technoeconomic assessment as on 31st

March 2010.

(f) On the basis of written representations received

from the directors as on 31st March, 2010 and

taken on record by the Board of Directors of the

Company, we report that none of the directors is

disqualified as on 31st March, 2010 from being

appointed as a director in terms of clause (g) of

sub-section (1) of Section 274 of the Companies

Act, 1956.

(g) Subject to items 1 to 9 contained in D above,

to which attention have been drawn and the

consequential effect of adjustment on the

value of assets, liabilities, the quantum of

income and expenditure and their effect on

the loss for the year (which are

unascertainable), in our opinion and to the best

of our information and according to the

explanations given to us, the said accounts read

together with the Accounting Policies and Notes

thereon give the information required by the

Companies Act, 1956, except for the non

disclosure of the matters referred to in Note

No. 25 (a) of Schedule ‘U’ and information

relating thereto in the manner so required and

give a true and fair view in conformity with the

accounting principles generally accepted in India;

(i) in the case of the Balance Sheet, of the state

of affairs of the Company as at 31st March,

2010; and

(ii) in the case of the Profit and Loss Account, of

the loss for the year ended on that date and

(iii) in the case of the Cash Flow Statement, of

the cash flow for the year ended on that date.

For Sharma Goel & Co.

Chartered Accountants

Firm Registration No.000643N

Sd/-

(Amar Mittal)

Partner

M.No. 017755

Place: New Delhi

Date: 30.07.2010

68

Fixed Assets

4(i)(a) The records maintained by the Company in respect

of its fixed assets are not considered to be proper

in so far as records of 35 Circles do not give full

particulars including quantitative details and

situation of fixed assets. The fixed asset register

has not been updated in 22 Circles as reported

by the Branch Auditors.

4(i)(b) It has been represented that fixed assets have been

physically verified by the Management at the year-

end except in 12 Circles. Branch Auditors have stated

that no material discrepancies have been noticed

between book records and physical verification. The

branch auditors of 29 Circles have, however,

reported that no documentary evidence

supporting such physical verification carried out,

were made available to them, and hence they

are unable to express any opinion on the material

discrepancies noticed on such verification.

4(i)(c) The Company has not disposed off any substantial

part of its fixed assets during the year.

Inventory

4(ii)(a) It has been reported by the Branch Auditors that

inventory has been physically verified by the

Management during the year except in 17 Circles.

4(ii)(b) Based upon observations made by Branch

Auditors of 5 Circles, documentation of the

physical verification process followed by the

company is inadequate and Branch auditors of

18 Circles have, however reported that no

documentary evidence supporting such physical

verification carried out, were made available to

them; as such we are unable to comment on

the reasonableness and adequacy of procedure

of physical verification of inventories followed

by the Management.1.Assa

4(ii)(c) On the basis of examination of inventory records,

as reported by most of the branch auditors, the

Company is not maintaining proper records of

inventory at 26 Circles. Consequently the Branch

Auditors were unable to express any opinion as

to whether the discrepancies noticed, were

material or not. However, the discrepancies

noticed were properly dealt with in the books.

Loans and Advances

4(iii)(a) The Company has not granted any loans, secured

or unsecured to companies, firms or other parties

covered in the register maintained under Section

301 of the Companies Act 1956.

4(iii)(b) to

4(iii)(d) In view of 4 (iii) (a) above, Clause 4(iii) (b) to 4(iii)

(d) of the CARO are not applicable.

4(iii)(e) The company has not taken any loans, secured or

unsecured from companies, firm or other parties

covered in the register maintained under Section

301 of the Companies Act 1956.

4(iii)(f) &

4(iii)(g) In view of 4(iii)(e), these clauses are not applicable.

Internal Control

4(iv) In our opinion and according to the information and

explanations given by the company, there is

adequate internal control system commensurate

with the size of the company and the nature of its

business with regard to purchase of inventory and

fixed assets and for sale of goods and services,

however, on the basis of the Branch Auditors

reports, we are of the opinion that the internal

control procedure for material management

including material with third parties,

capitalization of fixed assets, reconciliation

between subsidiary and general ledger in respect

of Debtors, Creditors, Loans and Advances and

Current Liabilities and obtaining of confirmation

of balances, timely bank reconciliation, custody,

sale and accounting of prepaid coupons,

availment of CENVAT Credit & Service Tax,

compliance of the Income Tax Act for obtaining

of PAN numbers of all contractors & other

deductees, timely and correct issuance of ATD /

ATC, inter/intra unit transfer/transaction, non-

exceeding the authority, fixing staff

accountability for serious lapses, funds and

material management, recovery of advances

given to employees and others, which needs

follow up and adjustment on regular intervals,

need to be strengthened to make them

commensurate with the size and nature of the

business of the Company. Further in view of the

complexity, volume, technical peculiarities and

time constraints, some of the Branch Auditors

were unable to comment on the systems/

procedures with regard to purchases done

through tenders, quotations etc.,Though there

have been improvements, some of the branch

auditors have reported that there is continuing

failure to correct major weakness.

The Annexure referred to in paragraph C of the Main Auditors’ Report (Bharat SancharNigam Limited) of even date :

69

4(v)(a) There are no transactions that need to be entered

in the register maintained in pursuance of Section

301 of the Companies Act 1956.

4(v)(b) In view of 4(v) (a) above, Clause 4(v) (b) of the

CARO is not applicable.

4(vi) The Company has not accepted any deposits from

the Public.

4(vii) On the basis of information and explanation

provided to us and reports of branch auditors, the

Company’s present internal audit system needs

to be strengthened by increasing the scope of

the audit of billing packages, revenue assurance

mechanism for CMTS and inter-operator billing

system (IOBAS), verification & reconciliation of

fixed assets & inventory and review of details

and documents for legal cases. There is room

for further improvement in the frequency of

audit to bring about the desired improvement.

4(viii) The Company has maintained the cost records as

prescribed by the Central Government under clause

(d) of sub section (1) of Section 209 of the

Companies Act, 1956 for the financial year 2008-

09 however for the financial year 2009-10,

records are under preparation.

4(ix)(a) The Company except in 22 circles as reported by

the Branch Auditors, is generally regular in

depositing undisputed statutory dues (including

Provident Fund, Income Tax, Sales Tax, Wealth Tax,

Property Tax, Service Tax, Custom Duty, Excise Duty,

Cess and other statutory dues) with the appropriate

authorities. The undisputed statutory dues

outstanding as at March 31, 2010 for a period

of more than six months from the date, they

became payable amounts to Rs. 241.45 lacs for

12 Circles, (the nature wise dues are referred in

Statement-I). Branch Auditors of 16 circles

reported that the dues outstanding for more

than six months have not been ascertained by

the Circle.

4(ix)(b) The amount of disputed dues in respect of

Provident Fund, Sales Tax, Entry Tax, Property

Tax, Income Tax, Wealth Tax, Service Tax, Excise

Duty, Cess and other Statutory dues which have

not been deposited till 31.3.2010 amounted to

Rs. 474,766.43 lacs. The Statement - II gives

the nature of dues with the amount and the

forum where disputes are pending.

4(x) The Company has no accumulated losses at the end

of the financial year. It has not incurred cash losses

neither during the financial year nor in the

immediately preceding financial year.

4(xi) The Company has neither taken any loans from

financial institutions or bank nor issued debentures

and hence this clause is not applicable.

4(xii) The Company has not granted any loans and

advances on the basis of security by way of pledge

of shares, debentures and other securities.

Accordingly, the provisions of clause 4(xii) of the

Order is not applicable to the Company.

4(xiii) In our opinion, the Company is not a chit fund or a

nidhi/ mutual benefit fund/ societies accordingly,

the provisions of clause 4 (xiii) (a) to (d) of the Order,

are not applicable to the Company.

4(xiv) In our opinion, the company is not dealing or trading

in shares, securities, debentures and other

investments. Accordingly, this clause is not

applicable.

4(xv) The Company has not given any guarantee for loans

taken by Others from Banks or Financial Institutions

during the year, hence this clause is not applicable.

4(xvi) The Company has not obtained any term loan,

hence this clause is not applicable.

4 (xvii) The Company has not raised any fund on short term

basis.

4(xviii) The Company has not made any preferential

allotment of shares to parties and companies

covered in the register maintained under Section

301 of the Companies Act 1956, during the year.

4(xix) The Company has not issued any debentures since

the inception.

4(xx) The Company has not raised any money by public

issue during the year.

4(xxi) Frauds on the Company amounting to Rs. 263.94

lacs have been brought to the notice of the

Company. The Statement-III gives the nature of

fraud, the amount recovered, the expected

recovery thereof and the amount defrauded.

For Sharma Goel & Co.

Chartered Accountants

Firm Registration No. 000643N

Sd/-

(Amar Mittal)

Partner M.No. 017755

Place: New Delhi

Date: 30.07.2010

70

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ion

Labour

Wel

fare

Ces

s106,8

70.0

0W

ork

ers

Act

,1996

CTO

Pro

ject

Del

hi Build

ing &

Oth

er C

onst

ruct

ion

Labour

Wel

fare

Ces

s127,1

91.0

0W

ork

ers

Act

,1996

5Te

leco

m F

acto

ry M

um

bai

CG

HS

CG

HS

13

0,7

80

.00

6Te

leco

m S

tore

s C

alcu

tta

EPF

Act

, 1

95

2EP

F1

,54

9.0

0

7G

MM

Chen

nai

Finan

ce A

ct,

1994

Serv

ice

Tax

59

,43

6.0

0

8J

& K

Tel

ecom

Jam

mu

Inco

me

Tax

Act

,1961

TD

S2

,64

4.0

0

Inco

me

Tax

Act

,1961

TD

S1

,94

6.0

0

9N

ort

h E

aste

rn R

egio

n-i

TCD

, Si

lchar

Work

er W

elfa

re C

ess

Act

Work

er W

elfa

re C

ess

25

,67

1.0

0

10

ALT

TCFi

nan

ce A

ct,

1994

Serv

ice

Tax

74

,74

3.0

0

11

Mah

aras

htr

a Te

leco

mSa

les

Tax

Act

Sale

s Ta

x3

,61

3,1

63

.23

12

Tele

com

Fac

tory

Jab

alpur

TH

WT

Mad

hya

Pra

des

h C

om

mer

cial

Tax

VA

T6

1,2

20

.00

Gra

nd T

ota

l24,1

45,4

84.2

3

Sta

tem

ent-

I

71

Sta

tem

ent-

II

Bhara

t Sanch

ar

Nig

am

Lim

ited

Audit

Report

under

CA

RO

[C

lause

-4(ix)(

b)]

for

the F

inanci

al Ye

ar

2009-1

0Sta

tuto

ry D

ues

not

deposi

ted o

n a

ccount

of

dis

pute

s as

on 3

1.0

3.2

010

Sl.

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cle N

am

eSSA

’sN

am

e o

f Sta

tue

Natu

re o

f D

ues

Am

ount

(Rs.

)Peri

od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

1Bih

ar C

ircl

eFi

nan

ce A

ct,1

994

Serv

ice

Tax

135,5

00,0

00.0

0-

CES

TAT,

KO

LKA

TTA

Tota

l1

35

,50

0,0

00

.00

2C

hen

nai

Tel

ephones

Finan

ce A

ct,1

994

Serv

ice

Tax

14,4

75,0

00.0

0-

CES

TAT

Finan

ce A

ct,1

994

Serv

ice

Tax

153,0

72,0

00.0

0-

Com

mis

ioner

of

Serv

ice

Tax

Inco

me

Tax

Act

,1961

TD

S5,3

75,0

00.0

0-

Com

mis

ioner

of

Inco

me

Tax

(Appeal

s)

Tota

l1

72

,92

2,0

00

.00

3Q

A B

anglo

reIn

com

e Ta

x A

ct,1

961

Pro

fess

ional

Tax

48,0

00.0

0-

-

Sale

s Ta

x A

ctV

AT

552.0

0-

-

Tota

l4

8,5

52

.00

4U

ttra

nch

al T

elec

om

Wea

lth T

ax A

ct,

1957

House

Tax

912,3

59.0

02007-0

8,

2008-0

9M

unic

ipal

Corp

ora

tion,

Roork

ee

Inco

me

Tax

Act

,1961

Inco

me

Tax

1,6

40,5

42.0

02008-0

9C

om

mis

sioner

Of

Inco

me

Tax

Appea

ls (

Deh

radun)

Inco

me

Tax

Act

,1961

Inco

me

Tax

850,3

38.0

02009-1

0C

om

mis

sioner

Of

Inco

me

Tax

Appea

ls (

Deh

radun)

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x147,2

00.0

02004-0

5A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), H

arid

war

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x216,3

04.0

02005-0

6A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), H

arid

war

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x267,5

47.0

02005-0

6A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), H

arid

war

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x6,0

00.0

02008-0

9A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), H

arid

war

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x1,5

00.0

02009-1

0A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), H

arid

war

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x525,0

00.0

02005-0

6A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), R

ishik

esh

Utt

rakh

and T

rade

Tax

Act

, 1948

Trad

e Ta

x100,0

00.0

02005-0

6A

ssis

tant

Com

mis

sioner

(Com

mer

cial

Tax

), R

ishik

esh

Finan

ce A

ct,

1994

Serv

ice

Tax

1,4

66,3

36.0

02006-0

7C

esta

t, N

ew D

elhi

Tota

l6

,13

3,1

26

.00

72

Sta

tem

ent-

II (

Contd

...)

Sl.

Cir

cle N

am

eSSA

’sN

am

e o

f Sta

tue

Natu

re o

f D

ues

Am

ount

(Rs.

)Peri

od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

5U

P-W

est

Tele

com

GM

TD

-Noid

aEn

try

Tax

Act

Entr

y Ta

x128,1

36.0

02003-0

4A

llahbad

Hig

h C

ourt

Entr

y Ta

x A

ctEn

try

Tax

1,6

81,1

49.0

02004-0

5C

om

mer

cial

Tax

Tribunal

, G

.B.

Nag

ar

Sale

stax

Act

Sale

s Ta

x6,0

46,8

95.0

01998-9

9 t

o 2

003-0

4Jt

. C

om

mis

sioner

(A

ppea

l)

GM

TD

-Agra

Inco

me

Tax

Act

,1961

TD

S on P

CO

Com

mis

ion

3,0

57,8

81.0

02005-0

6In

com

e Ta

x A

ppel

late

Tribunal

Inco

me

Tax

Act

,1961

TD

S on P

CO

Com

mis

ion

1,6

19,3

17.0

02006-0

7In

com

e Ta

x A

ppel

late

Tribunal

TCD

-Agra

Sale

stax

Act

Sale

s Ta

x121,6

51.0

02002-0

3Tr

ade

Tax

Trib

unal

Sale

stax

Act

Sale

s Ta

x182,5

69.0

02003-0

4Jo

int

Com

mis

sioner

Appea

l

GM

TD

-Alig

arh

Finan

ce A

ct,

1994

Serv

ice

Tax

17,3

52,8

69.0

0Ju

ne-

03 t

o D

ec.0

3C

entr

al E

xcis

e &

Ser

vice

Tax

Appel

late

Tribunal

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty4,3

38,2

17.0

0Ju

ne-

03 t

o D

ec.0

3C

entr

al E

xcis

e &

Ser

vice

Tax

Appel

late

Tribunal

Finan

ce A

ct,

1994

Serv

ice

Tax

2,6

28,1

31.0

0O

ct-0

0 t

o S

ep.0

1C

entr

al E

xcis

e &

Ser

vice

Tax

Appel

late

Tribunal

TD

M-R

ampur

Finan

ce A

ct,

1994

Serv

ice

Tax

6,0

07,5

09.0

0Ju

ne-

03 t

o N

ov.

-03

Com

mis

sioner

Exc

ise

& S

ervi

ce T

ax

GM

TD

-In

com

e Ta

x A

ct,

1961

TD

S on P

CO

Com

mis

ion

1,8

13,9

41.0

02002-0

3C

om

mis

sioner

of

Inco

me

Tax

Muza

ffar

nag

ar(A

ppeal

s)

Entr

y Ta

x A

ctEn

try

Tax

3,4

78,3

07.0

02000-0

5H

igh C

ourt

, A

llahbad

GM

TD

-Sah

aran

pur

Entr

y Ta

x A

ctEn

try

Tax

2,4

52,4

55.0

02000-0

1,

2001-0

2H

igh C

ourt

, A

llahbad

Finan

ce A

ct,

1994

Serv

ice

Tax

12,4

63,7

80.0

0A

ug.2

002 t

o J

an.2

003

CES

TAT

CG

MT-

Mee

rut

Sale

stax

Act

Sale

s Ta

x28,5

78,4

26.0

02005-0

6 &

2006-0

7Jo

int

Com

mis

sioner

(A

ppea

l) T

rade

Tax

GM

TD

-Ghaz

iabad

Finan

ce A

ct,

1994

Serv

ice

Tax

69,3

22,9

95.0

0Ju

ly,

1994 t

oC

om

mis

sioner

(A

ppea

ls)

Mar

ch,1

998

CM

TS-

Meeru

tSa

lest

ax A

ctW

ork

Contr

act

Tax

Penal

ty154,3

06,7

01.0

02005-0

6 t

o 2

008-0

9A

ppea

l ye

t to

be

file

d

Tota

l3

15

,58

0,9

29

.00

6Jh

arkh

and T

elec

om

Ran

chi

Finan

ce A

ct,

1994

Serv

ice

Tax

146,3

77,8

77.0

0N

ov

2000 t

o A

ug 2

003

CES

TAT,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty146,3

77,8

77.0

0N

ov

2000 t

o A

ug 2

003

CES

TAT,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

16,3

12,7

78.0

02004-0

5C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

Pen

alty

16,3

12,7

78.0

02004-0

5C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

1,9

63,0

69.0

02005-0

6C

om

mis

sioner

Cen

tral

Exc

ise,

Ran

chi

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty44,2

00.0

01994-9

9C

om

mis

sioner

Cen

tral

Exc

ise,

Ran

chi

73

Sta

tem

ent-

II (

Contd

...)

Sl.

Cir

cle N

am

eSSA

’sN

am

e o

f Sta

tue

Natu

re o

f D

ues

Am

ount

(Rs.

)Peri

od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

Dhan

bad

Finan

ce A

ct,

1994

Serv

ice

Tax

127,5

78,4

33.0

0A

pril 2000 t

o S

ep 2

003

CES

TAT,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty127,5

78,4

33.0

0A

pril 2000 t

o S

ep 2

003

CES

TAT,

Kolk

ata

Dum

kaFi

nan

ce A

ct,

1994

Serv

ice

Tax

63,0

86,1

64.0

0A

pril 1999 t

o S

ep 2

003

CES

TAT,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty45,6

50,7

23.0

0A

pril 1999 T

o S

ep 2

003

CES

TAT,

Kolk

ata

Dal

tongan

jFi

nan

ce A

ct,

1994

Serv

ice

Tax

25,7

66,0

00.0

02001-0

2 t

o 2

005-0

6C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty14,5

02,9

31.0

02001-0

2 t

o 2

005-0

6C

ESTA

T,

Kolk

ata

Jam

shed

pur

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax7,6

38,5

95.0

02003

CES

TAT,

Kolk

ata

Haz

arib

agh

Finan

ce A

ct,

1994

Serv

ice

Tax

59,0

11,9

12.0

02008

CES

TAT,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

Pen

alty

59,0

11,9

12.0

02008

CES

TAT,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

4,5

60,7

56.0

02009

Com

mis

sioner

Cen

tral

Exc

ise,

Ran

chi

Tota

l8

61

,77

4,4

38

.00

7K

arnat

aka

Tele

com

Mys

ore

Finan

ce A

ct,

1994

Serv

ice

Tax

on P

co6,2

23,1

76.0

0Ja

n.0

8 t

o J

une,

09

Cust

om

Exc

ise

and S

ervi

ce T

axA

ppel

atte

Tribunal

, Ban

glo

re

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty &

6,2

23,1

76.0

0Ja

n.0

8 t

o J

une,

09

Cust

om

Exc

ise

and S

ervi

ce T

axIn

tere

stA

ppel

atte

Tribunal

, Ban

glo

re

Has

san

Finan

ce A

ct,

1994

Serv

ice

Tax

on P

co3,1

34,9

08.0

0Ja

n.0

8 t

o D

ec.0

8C

om

mis

ioner

(ap

pea

ls)

of

Cen

tral

Exci

se,

Cust

om

& S

ervi

ce T

ax,

Man

glo

re

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty &

3,1

34,9

08.0

0Ja

n.0

8 t

o D

ec.0

8C

om

mis

ioner

(ap

pea

ls)

of

Cen

tral

Inte

rest

Exci

se,

Cust

om

& S

ervi

ce T

ax,

Man

glo

re

Man

dya

Finan

ce A

ct,

1994

Serv

ice

Tax

on P

co2,2

37,7

61.0

0Ja

n.0

8 t

o M

ar.0

9C

om

mis

ioner

(ap

pea

ls)

of

Cen

tral

Exci

se,

Cust

om

& S

ervi

ce T

ax,

Man

glo

re

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty &

2,2

42,7

61.0

0Ja

n.0

8 t

o M

ar.0

9C

om

mis

ioner

(ap

pea

ls)

of

Cen

tral

Inte

rest

Exci

se,

Cust

om

& S

ervi

ce T

ax,

Man

glo

re

Shim

oga

Finan

ce A

ct,

1994

Serv

ice

Tax

111,0

69.0

01994-2

002

Cest

at,C

hennai

Kar

war

Finan

ce A

ct,

1994

Serv

ice

Tax

on P

CO

2,8

70,8

32.0

0M

ar.0

8 t

o M

ar.0

9C

ust

om

Exc

ise

and S

ervi

ce T

axA

ppel

atte

Tribunal

, Ban

glo

re

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty &

2,8

70,8

32.0

0M

ar.0

8 t

o M

ar.0

9C

ust

om

Exc

ise

and S

ervi

ce T

axIn

tere

stA

ppel

atte

Tribunal

, Ban

glo

re

Man

glo

reFi

nan

ce A

ct,

1994

Serv

ice

Tax

on P

CO

10,1

63,2

86.0

0Ja

n.0

8 t

o M

ar.0

9C

ust

om

Exc

ise

and S

ervi

ce T

axA

ppel

atte

Tribunal

, Ban

glo

re

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty &

10,1

63,2

86.0

0Ja

n.0

8 t

o M

ar.0

9C

ust

om

Exc

ise

and S

ervi

ce T

axIn

tere

stA

ppel

atte

Tribunal

, Ban

glo

re

74

Sta

tem

ent-

II (

Contd

...)

Sl.

Cir

cle N

am

eSSA

’sN

am

e o

f Sta

tue

Natu

re o

f D

ues

Am

ount

(Rs.

)Peri

od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

Rai

chur

Finan

ce A

ct,

1994

Serv

ice

Tax

on I

UC

3,3

62,7

32.0

02004-0

5C

ESTA

T,

Ban

glo

re

Hubli

Cen

vat

Cre

dit R

ule

s, 2

004

Cen

vat

Cre

dit

341,6

97.0

02004-0

5H

igh C

ourt

of

Kar

nat

ka

CM

TS

Cen

vat

Cre

dit R

ule

s, 2

004

Cen

vat

Cre

dit o

n43,9

76,2

79.0

0Ju

ly 0

8 t

o M

ar.

09

Cust

om

Exc

ise

and S

ervi

ce T

axEx

cise

Duty

Appel

atte

Tribunal

, Ban

glo

re

Cen

vat

Cre

dit R

ule

s, 2

004

Penal

ty &

Int.

on

43,9

76,2

79.0

0Ju

ly 0

8 t

o M

ar.

09

Cust

om

Exc

ise

and S

ervi

ce T

axEx

cise

Duty

Appel

atte

Tribunal

, Ban

glo

re

CM

TS

Cen

vat

Cre

dit R

ule

s, 2

004

Cen

vat

Cre

dit o

n2,1

53,3

18.0

0N

ov.

07 t

o J

une.

08

Cust

om

Exc

ise

and S

ervi

ce T

axEx

cise

Duty

Appel

atte

Tribunal

, Ban

glo

re

Cen

vat

Cre

dit R

ule

s, 2

004

Penal

ty &

Int.

on

2,1

53,3

18.0

0N

ov.

07 t

o J

une.

08

Cust

om

Exc

ise

and S

ervi

ce T

axEx

cise

Duty

Appel

atte

Tribunal

, Ban

glo

re

Circl

e O

ffic

eSa

les

Tax

Act

Sale

s Ta

x183,5

39,1

39.0

02001-0

2C

om

mis

ioner

of

Sale

s Ta

x, B

anglo

re

Sale

s Ta

x A

ctSa

les

Tax

12,6

24,7

84.0

02002-0

3C

om

mis

ioner

of

Sale

s Ta

x, B

anglo

re

Tota

l3

41

,50

3,5

41

.00

8R

ajas

than

Tel

ecom

CG

MT,

Jaip

ur

Finan

ce A

ct,

1994

Serv

ice

Tax

2,2

01,5

22.0

02008-0

9A

dditio

nal

Com

mis

ioner

Cen

tral

Exci

se ,

Jai

pur

PG

MTD

JP

Finan

ce A

ct,

1994

Serv

ice

Tax

Pen

alty

2,0

37,0

58.0

02004-0

5C

ESTA

T,

New

Del

hi

GM

TD

, Bhar

atpur

Finan

ce A

ct,

1994

Serv

ice

Tax

169,7

93.0

02010

Ass

t. C

om

mis

ioner

Cen

tral

Exc

ise,

Alw

ar

GM

TD

JJN

Finan

ce A

ct,

1994

Serv

ice

Tax

4,3

45,6

16.0

02010

Jt.C

om

mis

ioner

Cen

tral

Exc

ise,

Jai

pur

Entr

y Ta

x A

ctEn

try

Tax

372,6

10.0

02010

Hig

h C

ourt

, R

ajas

than

TD

M S

WM

Cen

vat

Cre

dit R

ule

s, 2

004

Cen

vat

Cre

dit

6,5

45,8

23.0

02007-0

8C

ESTA

T,

New

Del

hi

Finan

ce A

ct,

1994

Serv

ice

Tax

3,4

03,4

18.0

02007-0

8C

ESTA

T,

New

Del

hi

Finan

ce A

ct,

1994

Serv

ice

Tax

143,5

20.0

02008-0

9Su

per

iten

den

t Se

rvic

e Ta

x, K

ota

CTSD

JP

Entr

y Ta

x A

ctEn

try

Tax

7,0

55,9

71.0

02005-0

6H

igh C

ourt

, R

ajas

than

GM

TD

SG

NR

Finan

ce A

ct,

1994

Serv

ice

Tax

11,1

96,7

68.0

02003-0

4C

om

mis

ioner

Cen

tral

Exc

ise,

Jai

pur

GM

TD

SG

NR

Entr

y Ta

x A

ctEn

try

Tax

91,0

00.0

02005-0

6Ta

x Boar

d,

Ajm

er

GM

TD

Kota

Finan

ce A

ct,

1994

Serv

ice

Tax

8,8

64,9

73.0

02009

Com

mis

ioner

Cen

tral

Exc

ise,

Jai

pur

GM

TD

Kota

Entr

y Ta

x A

ctEn

try

Tax

276,3

98.0

02009

Hig

h C

ourt

, Ja

ipur

GM

TD

Churu

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

471,0

54.0

02008

CES

TAT,

New

Del

hi

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

844,6

36.0

02007

CES

TAT,

New

Del

hi

Finan

ce A

ct,

1994

Serv

ice

Tax

Pen

alty

35,7

00.0

02007

Com

mis

ioner

(A

ppea

l) S

T J

aipur

GM

TD

Churu

Finan

ce A

ct,

1994

Serv

ice

Tax

Penal

ty2,0

00.0

02007

Com

mis

ioner

(A

ppea

l) S

T J

aipur

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

373,5

82.0

02010

Dy.

Com

mis

ioner

, Si

kar

Entr

y Ta

x A

ctEn

try

Tax

356,1

00.0

02009

Hig

h C

ourt

, R

ajas

than

75

Sta

tem

ent-

II (

Contd

...)

Sl.

Cir

cle N

am

eSSA

’sN

am

e o

f Sta

tue

Natu

re o

f D

ues

Am

ount

(Rs.

)Peri

od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

TD

M J

hal

war

Finan

ce A

ct,

1994

Serv

ice

Tax

686,8

65.0

02007

CES

TAT,

New

Del

hi

Finan

ce A

ct,

1994

Serv

ice

Tax

822,6

36.0

02010

CES

TAT,

New

Del

hi

Finan

ce A

ct,

1994

Serv

ice

Tax

124,4

86.0

02006

Additio

nal

Com

mis

ioner

Cen

tral

Exci

se,

Jaip

ur

Finan

ce A

ct,

1994

Serv

ice

Tax

126,1

45.0

02006

Additio

nal

Com

mis

ioner

Cen

tral

Exci

se,

Jaip

ur

Pali

Mar

war

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

1,3

14,5

08.0

02009-1

0A

dditio

nal

Com

mis

ioner

Cen

tral

Exci

se,

Jaip

ur

CG

MT J

aiput

Finan

ce A

ct,

1994

Serv

ice

Tax

3,6

00,0

00.0

02008

CES

TAT,

New

Del

hi

Bundi

Finan

ce A

ct,

1994

Serv

ice

Tax

28,5

43.0

02006

Cen

tral

Exc

ise,

Kota

Finan

ce A

ct,

1994

Serv

ice

Tax

31,5

57.0

02007

CES

TAT,

New

Del

hi

Finan

ce A

ct,

1994

Serv

ice

Tax

88,2

30.0

02008

Cen

tral

Exc

ise,

Kota

Finan

ce A

ct,

1994

Serv

ice

Tax

50,2

50.0

02008

Cen

tral

Exc

ise,

Kota

Finan

ce A

ct,

1994

Serv

ice

Tax

312,0

86.0

02008

Cen

tral

Exc

ise,

Kota

Finan

ce A

ct,

1994

Serv

ice

Tax

660,1

41.0

02008

Jt.

Com

mis

ioner

, Ja

ipur

Finan

ce A

ct,

1994

Serv

ice

Tax

128,5

54.0

02009

Cen

tral

Exc

ise,

Kota

Finan

ce A

ct,

1994

Serv

ice

Tax

1,4

56,0

51.0

02009

Jt.

Com

mis

ioner

, Ja

ipur

Finan

ce A

ct,

1994

Serv

ice

Tax

155,9

80.0

02009

Cen

tral

Exc

ise,

Kota

GM

TD

SG

NR

Finan

ce A

ct,

1994

Serv

ice

Tax

46,0

51.0

02003

Appea

l, R

ajas

than

Hig

h C

ourt

JP

Tota

l5

8,4

19

,62

5.0

0

9Punja

b T

elec

om

Punja

b V

at A

ct,

2005

Sale

s Ta

x14,2

72,1

33.0

01998-9

9Punja

b &

Har

yana

Hig

h C

ourt

Punja

b V

at A

ct,

2005

Sale

s Ta

x20,9

19,4

48.0

01999-0

0Punja

b &

Har

yana

Hig

h C

ourt

Finan

ce A

ct,

1994 &

Adju

stm

ent

of

Serv

ice

1,3

86,1

07.0

02006-0

7C

ESTA

T,

New

Del

hi

Serv

ice

Tax

Rule

s, 1

994

Tax

Paid

in E

xces

s

Finan

ce A

ct,

1994 &

Ava

iling C

enva

t C

redit

8,6

76,2

43.0

02004-0

5 t

o 2

007-0

8C

om

mis

ioner

Cen

tral

Exc

ise,

Cen

vat

Cre

dit R

ule

s, 2

004

on T

ow

ers

Chan

dig

arh h

as r

ejec

ted a

nd n

ow

Appea

l is

to b

e file

d in C

ESTA

T,

New

Del

hi

Cen

vat

Cre

dit R

ule

s, 2

004

Ava

iling C

enva

t C

redit

2,9

00,6

43.0

0O

ct 0

8 t

o M

ar 0

9A

dditio

nal

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mis

sioner

( P

& V

),on T

ow

ers

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tral

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ise,

Chan

dig

arh

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vat

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dit R

ule

s, 2

004

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ng A

vaili

ng o

f705,7

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pr

06 t

o M

ar 0

8C

om

mis

sioner

(A

ppea

ls)

Cen

vat

Cre

dit

Finan

ce A

ct,

1994 &

Short

Pay

men

t D

ue

to2,6

36,0

54.0

0A

pr

06 t

o S

ep.0

6C

ESTA

TSe

rvic

e Ta

x R

ule

s,1994

Wro

ng D

iffe

rence

Finan

ce A

ct,

1994 &

Short

Pay

men

t D

ue

to11,5

59,9

71.0

0O

ct.0

2 t

o M

ar.0

5C

ESTA

TSe

rvic

e Ta

x R

ule

s,1994

Wro

ng D

iffe

rence

76

Sta

tem

ent-

II (

Contd

...)

Sl.

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cle N

am

eSSA

’sN

am

e o

f Sta

tue

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re o

f D

ues

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ount

(Rs.

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od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

Finan

ce A

ct,

1994 &

Self A

dju

stm

ent

of

380,0

71.0

0N

ov.

02 t

o S

ep.0

3C

ESTA

TSe

rvic

e Ta

x R

ule

s,1994

Exce

ss P

aym

ent

EPF

Act

, 1952

Del

ay D

eposi

t of

EPF

3,2

97,1

94.0

0Fe

b.0

2 t

o J

une.

04

EPF

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unal

, N

ew D

elhi

Finan

ce A

ct,

1994 &

Paym

ent

of

Serv

ice

Tax

110,8

43,5

86.0

0O

ct.0

0 t

o F

eb.0

4M

ember

Fin

ance

Serv

ice

Tax

Rule

s, 1

994

to D

OT I

nst

ead o

fD

eposi

t by

TR

-6 C

hal

lan

Cen

vat

Cre

dit R

ule

s, 2

004

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ice

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d731,8

30.0

0O

ct.0

5 t

o J

an.0

8O

rder

Fro

m O

/O C

om

mis

ioner

Aw

aite

d

Cen

vat

Cre

dit R

ule

s, 2

004

Serv

ice

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Short

Pai

d2,2

26,1

13.0

0O

ct.0

5 t

o M

ay.0

7U

nder

Pro

cess

for

filin

g A

ppea

l to

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mis

ioner

(ap

pea

ls)

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vat

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dit R

ule

s, 2

004

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ice

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d239,6

95.0

0Fe

b.0

8 t

o F

eb.0

9U

nder

Pro

cess

for

filin

g A

ppea

l to

Com

mis

ioner

(ap

pea

ls)

Punja

b V

AT A

ct,

2005

VA

T o

n I

nco

me

from

807,9

22,8

59.0

0F.

Y. 2

008-0

9Ex

cise

& T

axat

ion O

ffic

er,

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tric

tBro

adban

d S

ervi

ces

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Nag

ar (

mohal

i)

Serv

ice

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Rule

s, 1

994

Short

Pay

men

t4,5

43,7

27.0

0A

pr.05 T

o S

ep.0

5C

om

mis

ioner

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ice

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Rule

s, 1

994

Short

Pay

men

t2,8

47,7

69.0

0A

pr.04 T

o S

ep.0

4C

om

mis

ioner

Serv

ice

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Rule

s, 1

994

Short

Pay

men

t599,3

16.0

02007-0

8 &

upto

Sep

.09

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mis

ioner

EPF

Act

, 1952

Short

Ded

ution o

f EP

F287,0

07.0

02000-0

3Tr

ibunal

, N

ew D

elhi

Finan

ce A

ct,

1994 &

Adju

stm

ent

of

Exce

ss P

aid

5,2

13,2

51.0

0A

pr.07 t

o M

ar.0

8C

esta

t, N

ew D

elhi

Serv

ice

Tax

Rule

s,1994

Am

ount

on P

rovi

sional

Bas

is in P

revi

ous

Month

under

Rule

4a

(Adju

stm

ent

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ount

more

than

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50,0

00

Trea

ted b

y Se

rvic

e Ta

xD

eptt

. as

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men

t)

Finan

ce A

ct,

1994 &

Adju

stm

ent

of

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ss P

aid

2,5

77,6

77.0

0A

pr.08 t

o S

ep.0

8C

om

mis

ioner

(A

ppea

ls),

Cen

tral

Serv

ice

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Rule

s,1994

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ount

on P

rovi

sional

Exci

se C

han

dig

arh I

IBas

is in P

revi

ous

Month

under

Rule

4a

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ount

more

than

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1,0

0,0

00

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ted b

y Se

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. as

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men

t)

Punja

b V

at A

ct,2

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n B

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ban

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14,9

42,2

50.0

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y. E

xcis

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atio

nC

om

mis

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, Lu

dhia

na

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, 1952

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ayed

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men

t of

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191,5

77.0

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n 0

3 t

o J

un 0

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F Tr

ibunal

, N

ew D

elhi

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, 1952

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on E

nhan

ced L

imit

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86,0

97.0

0Ju

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ibunal

, N

ew D

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86,3

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0

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am

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e o

f Sta

tue

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re o

f D

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ount

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od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

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tes

is p

endin

g

10

Tam

il N

adu T

elec

om

CBT

Finan

ce A

ct,

1994

Serv

ice

Tax

1,1

28,0

34.0

0-

CES

TAT,

Sez,

Chen

nai

Finan

ce A

ct,

1994

Serv

ice

Tax

1,5

53,6

51.0

0-

CES

TAT,

Sez,

Chen

nai

Finan

ce A

ct,

1994

Serv

ice

Tax

1,5

65,7

58.0

0-

CES

TAT,

Sez,

Chen

nai

SLM

Finan

ce A

ct,

1994

Serv

ice

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11,5

86,3

20.0

0-

CES

TAT,

Sez,

Chen

nai

Finan

ce A

ct,

1994

Serv

ice

Tax

152,0

00.0

0-

CES

TAT,

Sez,

Chen

nai

KM

BFi

nan

ce A

ct,

1994

Serv

ice

Tax

270,4

80.0

0-

CES

TAT,

Sez,

Chen

nai

Erode

Finan

ce A

ct,

1994

Serv

ice

Tax

1,7

09,0

61.0

0-

CES

TAT,

Sez,

Chen

nai

Finan

ce A

ct,

1994

Serv

ice

Tax

200,0

95.0

0-

CES

TAT,

Sez,

Chen

nai

Vel

lore

Finan

ce A

ct,

1994

Serv

ice

Tax

3,3

28,1

06.0

0-

CES

TAT,

Sez,

Chen

nai

Tota

l2

1,4

93

,50

5.0

0

11

Gm

m N

. D

elhi

A.O

. C

ash

Finan

ce A

ct,

1994

Serv

ice

Tax

2,7

09,8

96.0

0-

CES

TAT,

New

Del

hi

Tota

l2

,70

9,8

96

.00

12

Chat

tisg

arh T

elec

om

GM

TD

, R

aipur

Finan

ce A

ct,

1994

Serv

ice

Tax

632,0

00.0

01994-9

5H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

Tax

2,6

94,0

00.0

01995-9

6H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

Tax

6,1

24,0

00.0

01996-9

7H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

Tax

8,0

29,0

00.0

01997-9

8H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

Tax

11,4

73,0

00.0

01998-9

9H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

Tax

26,0

43,0

00.0

01999-0

0H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

Tax

7,4

93,0

00.0

02000-0

1H

igh C

ourt

, C

G

Finan

ce A

ct,

1994

Serv

ice

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860,0

00.0

02003-0

4C

esta

t,D

elhi

GM

TD

, D

urg

Finan

ce A

ct,

1994

Serv

ice

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8,3

60,0

00.0

02006-0

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est

at,D

elh

i

Tota

l7

1,7

08

,00

0.0

0

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t Ben

gal

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ecom

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l Sa

les

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s Ta

x on T

elep

hone

86,7

00,0

00.0

02003-0

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ppel

late

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ority

(C

om

mis

sioner

)

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ices

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l Sa

les

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s Ta

x on T

elep

hone

27,3

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00.0

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0A

ppel

late

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ority

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om

mis

sioner

)

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ices

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l Sa

les

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s Ta

x on T

elep

hone

125,0

61,0

00.0

02002-0

3A

ppel

late

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ority

(C

om

mis

sioner

)

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ices

Finan

ce A

ct,

1994

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ice

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1,0

80,0

00.0

02007-0

8C

om

mis

sioner

of

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ice

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GPF

& O

ther

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PF

& O

ther

s2,6

37,0

00.0

02007-0

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OT-

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l2

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,77

8,0

00

.00

78

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tem

ent-

II (

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...)

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cle N

am

eSSA

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e o

f Sta

tue

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re o

f D

ues

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ount

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od t

o w

hic

hFo

rum

where

dis

pute

sN

o.

the A

mount

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tes

is p

endin

g

14

Tele

com

Fac

tory

Khar

agpur

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

5,3

51,0

00.0

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ct.0

0 t

o J

une.

02

Cust

om

Exc

ise

& S

ales

Tax

Kolk

atta

Appel

late

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TF

Gopal

pur

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

14,2

98,0

00.0

0-

CES

TAT

Finan

ce A

ct,

1994

Serv

ice

Tax

2,2

09,0

00.0

0-

CES

TAT

TF

Alip

ore

Cen

tral

Exc

ise

Act

, 1944

Exci

se D

uty

19,7

98,0

00.0

02003-0

4 t

o 2

006-0

7C

ESTA

T

Cen

tral

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ise

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, 1944

Exci

se D

uty

825,0

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ec.

03

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mis

sioner

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ppea

ls)

Tota

l4

2,4

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15

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com

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tory

Bom

bay

Sal

es T

ax A

ctBom

bay

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es T

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mis

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ppea

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bay

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es T

ax A

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tere

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mis

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ppea

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bay

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es T

ax A

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es T

ax A

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bay

Sal

es T

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es T

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bay

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es T

ax A

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94,0

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bay

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bay

Sal

es T

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78,0

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es T

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31,0

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200,0

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01991-9

2M

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bay

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es T

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bay

Sal

es T

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59,0

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01992-9

3M

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es T

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bay

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es T

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86,0

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es T

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bay

Sal

es T

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Sal

es T

ax9,2

56,0

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01993-9

4M

ahar

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es T

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bay

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ax A

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62,0

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80,0

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bay

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es T

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80,0

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5M

ahar

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es T

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ribunal

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bay

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es T

ax A

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tere

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56,0

00.0

01994-9

5M

ahar

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bay

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Sal

es T

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25,0

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es T

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bay

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tere

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26,0

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01995-9

6M

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es T

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es T

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bay

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es T

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ctPe

nal

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79

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pute

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endin

g

Bom

bay

Sal

es T

ax A

ctBom

bay

Sal

es T

ax604,0

00.0

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1M

ahar

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es T

ax T

ribunal

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bay

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es T

ax A

ctIn

tere

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ashta

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es T

ax T

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bay

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es T

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ctPe

nal

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tral

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17,0

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mis

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ppea

ls)

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tral

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es T

ax A

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1989-9

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mis

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ppea

ls)

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tral

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es T

ax A

ctPe

nal

ty46,0

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mis

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ppea

ls)

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tral

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es T

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les

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3,2

51,0

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01996-9

7M

ahar

ashta

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es T

ax T

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tral

Sal

es T

ax A

ctIn

tere

st5,3

02,0

00.0

01996-9

7M

ahar

ashta

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es T

ax T

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tral

Sal

es T

ax A

ctPe

nal

ty327,0

00.0

01996-9

7M

ahar

ashta

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es T

ax T

ribunal

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tral

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es T

ax A

ctSa

les

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2,8

58,0

00.0

01997-9

8M

ahar

ashta

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es T

ax T

ribunal

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tral

Sal

es T

ax A

ctIn

tere

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90,0

00.0

01997-9

8M

ahar

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es T

ax T

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tral

Sal

es T

ax A

ctPe

nal

ty287,0

00.0

01997-9

8M

ahar

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es T

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tral

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es T

ax A

ctSa

les

Tax

5,1

36,0

00.0

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9M

ahar

ashta

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es T

ax T

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tral

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es T

ax A

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tere

st5,7

68,0

00.0

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9M

ahar

ashta

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es T

ax T

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tral

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es T

ax A

ctPe

nal

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00.0

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9M

ahar

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es T

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Tota

l3

80

,85

7,0

00

.00

16

Tele

com

Sto

res

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tral

Sal

es T

ax A

ct,

1956

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s Ta

x316,0

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ourt

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olk

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cutt

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tral

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, 1944

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se D

uty

1,8

97,0

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igh C

ourt

, K

olk

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pen

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KO

PT

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d

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s Ta

x A

ctSa

les

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138,3

97,0

00.0

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ahar

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les

Tax

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unal

Tota

l1

44

,78

8,0

00

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17

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com

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bal

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99,7

95,0

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2,2

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tral

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s Ta

x A

ctSa

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25,0

06,0

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010

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b a

nd H

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na

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h C

ourt

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han

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l1

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,41

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.00

18

GM

M C

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TW

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of

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s Ta

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am

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am

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f Sta

tue

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ount

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hic

hFo

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where

dis

pute

sN

o.

the A

mount

Rela

tes

is p

endin

g

19

Ass

am C

ircl

eBongai

gao

nFi

nan

ce A

ct,

1994

Serv

ice

Tax

9,3

45,6

98.0

0Ju

ly 9

4 t

o M

ar 0

4C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax6,7

94,1

98.0

0Ju

ly 9

4 t

o M

ar 0

4C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Penal

ty o

n S

ervi

ce T

ax9,3

45,6

98.0

0Ju

ly 9

4 t

o M

ar 0

4C

ESTA

T,

Kolk

ata

Nag

aon

Finan

ce A

ct,

1994

Serv

ice

Tax

4,9

51,2

28.0

0Ju

ly 9

4 t

o S

ep 0

4C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax510,0

66.0

0Ju

ly 9

4 t

o S

ep 0

4C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Penal

ty o

n S

ervi

ce T

ax4,9

51,2

28.0

0Ju

ly 9

4 t

o S

ep 0

4C

ESTA

T,

Kolk

ata

Kam

rup

Finan

ce A

ct,

1994

Serv

ice

Tax

6,4

20,5

67.0

0Ju

l 94 t

o J

un 9

9C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Serv

ice

Tax

8,4

56,5

08.0

0Ju

l 99 t

o A

ug 0

3C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax2,5

28,2

56.0

0Ju

l 99 t

o A

ug 0

3C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Penal

ty o

n S

ervi

ce T

ax8,4

56,5

08.0

0Ju

l 99 t

o A

ug 0

3C

ESTA

T,

Kolk

ata

CM

TS

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax1,9

35,1

10.0

02004-0

5D

eputy

Com

mis

sioner

Cen

tral

Exci

se,

Guw

ahat

i

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax1,9

22,8

67.0

02005-0

6D

eputy

Com

mis

sioner

Cen

tral

Exci

se,

Guw

ahat

i

Finan

ce A

ct,

1994

Inte

rest

on S

ervi

ce T

ax9,4

73,4

42.0

02006-0

7D

eputy

Com

mis

sioner

Cen

tral

Exci

se,

Guw

ahat

i

Tezp

ur

Finan

ce A

ct,

1994

Serv

ice

Tax

161,7

11.0

0A

pr-

04 t

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ep 0

7C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Penal

ty o

n S

ervi

ce T

ax161,7

11.0

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pr-

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o S

ep 0

7C

ESTA

T,

Kolk

ata

Finan

ce A

ct,

1994

Cen

vat

Cre

dit

253,6

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ay 0

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ESTA

T,

Kolk

ata

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ce A

ct,

1994

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ty o

n C

enva

t C

redit

253,6

07.0

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ay 0

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o A

ug 0

6C

ESTA

T,

Kolk

ata

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ce A

ct,

1994

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rest

on S

ervi

ce T

ax2,7

38,5

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8,6

60

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0

20

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ales

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s Ta

x90,0

12,3

53.0

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om

mis

ioner

of

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s Ta

x, J

amm

u

Tax

Act

, 1962

Sale

s Ta

x50,1

92,9

35.0

02003-0

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om

mis

ioner

of

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s Ta

x, J

amm

u

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s Ta

x33,0

60,8

82.0

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of

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amm

u

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l1

73

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21

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rat

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com

GM

TD

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ajko

tSe

rvic

e Ta

x A

ctIn

tere

st &

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alty

113,7

00,0

00.0

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arch

,2006

CU

STO

M,

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se &

Ser

vice

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Dep

tt., A

hem

dab

ad

CM

TS

Bom

bay

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mp A

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amp D

uty

& P

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ty47,2

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pril,2

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rat

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oda

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ice

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Inte

rest

& P

enal

ty40,2

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ctober

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Cod C

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ount

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pute

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the A

mount

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tes

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endin

g

22

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des

hA

PG

ST A

ctSa

les

Tax

446,3

45,0

00.0

02003-0

4A

ndhra

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des

h,

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ourt

Tele

com

APG

ST A

ctSa

les

Tax

434,2

79,0

00.0

02004-0

5A

ndhra

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des

h,

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ourt

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ST A

ctSa

les

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733,1

11,0

00.0

02005-0

6A

ndhra

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des

h,

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h C

ourt

APG

ST A

ctSa

les

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599,3

44,0

00.0

02006-0

7A

ndhra

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des

h,

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h C

ourt

APG

ST A

ctSa

les

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524,1

32,0

00.0

02007-0

8A

ndhra

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des

h,

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h C

ourt

Tota

l2

,73

7,2

11

,00

0.0

0

23

Nort

h E

aste

rnA

gar

tala

Finan

ce A

ct,

1994

Serv

ice

Tax

15,3

12,5

35.0

02002-0

5 t

o 2

007-0

8C

od C

lear

ence

Aw

aite

d

Regio

n-I

Meghal

aya

Finan

ce A

ct,

1994

Serv

ice

Tax

5,3

19,5

10.0

02004-0

5C

ESTA

T E

ZB,

Kolk

atta

Tota

l2

0,6

32

,04

5.0

0

24

GM

P D

elhi

Del

hi Sa

les

Tax

Act

L.S.

T45,0

00.0

02001-0

2A

ddl.

Com

mis

sioner

-II

Cen

tral

Sal

es T

ax A

ctC

entr

al S

ales

Tax

2,2

42,0

00.0

02001-0

2A

ddl.

Com

mis

sioner

-II

Tota

l2

,28

7,0

00

.00

25

Up-e

ast

Tele

com

Tcd-1

, K

anpur

Up T

rade

Tax

Act

, 1948

Trad

e Ta

x86,0

43.0

01987-8

8H

igh C

ourt

, A

llahab

ad

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rade

Tax

Act

, 1948

Trad

e Ta

x191,2

90.0

01988-8

9H

igh C

ourt

, A

llahab

ad

Up T

rade

Tax

Act

, 1948

Trad

e Ta

x272,7

81.0

01989-9

0H

igh C

ourt

, A

llahab

ad

Bal

iya

TD

MFi

nan

ce A

ct,

1994

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ice

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11,4

77,8

83.0

02002-0

6C

ESTA

T,

New

Del

hi

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mgar

h G

MTD

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rade

Tax

Act

, 1948

Entr

y Ta

x1,6

00,0

00.0

02004-0

5H

igh C

ourt

, A

llahab

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pur

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Finan

ce A

ct,

1994

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ice

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1,4

40,5

26.0

02008-0

9C

ESTA

T,

New

Del

hi

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anas

i G

MTD

Finan

ce A

ct,

1994

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ice

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11,0

01,2

48.0

02004-0

5C

ESTA

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New

Del

hi

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hab

ad G

MTD

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ce A

ct,

1994

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ice

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76,3

18,1

55.0

02002-0

3C

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Del

hi

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l1

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,38

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26

.00

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aras

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entr

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xcis

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1944

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rest

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ce A

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rest

on S

ervi

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ax926,0

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ce A

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1994

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rest

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mis

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vice

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tral

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ise

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, 1944

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rest

on S

ervi

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ax178,1

53.0

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late

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of

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ce A

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1994

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46,0

18.0

01998-9

9 t

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001

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bai

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ce A

ct,

1994

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on S

ervi

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ax61,2

89.0

02002-0

3C

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bai

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ce A

ct,

1994

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rest

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ervi

ce T

ax796,5

57.0

01998-9

9C

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bai

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gad

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nve

l)Fi

nan

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ct,

1994

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ax7,1

03,0

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02004-0

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mis

sioner

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avi M

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pute

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nve

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com

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1961

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00.0

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me

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l

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me

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, 1961

TD

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63,3

99.0

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6 t

o 2

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7C

om

mis

sioner

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ppea

l),

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yan

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me

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, 1961

TD

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45,1

69.0

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36,0

74.0

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T,

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bai

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l1

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03

.00

27

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hya

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hEn

try

Tax

Act

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y Ta

x8,3

12,5

73.0

01.1

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000 t

o 1

3.6

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mis

sioner

of

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mre

cial

Tele

com

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(appea

l)

Entr

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x A

ctEn

try

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sioner

of

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mre

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(appea

l)

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x A

ctEn

try

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55,7

67.0

02004-0

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pct

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late

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4,8

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l)

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9,3

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51,1

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86,8

49.0

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mis

sioner

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mre

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l)

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MPC

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l)

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pute

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tes

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mer

cial

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pre

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mer

cial

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68,0

93.0

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ourt

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ious

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28,9

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ario

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late

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Year

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late

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l5

41

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61

.00

28

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cutt

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lephones

Finan

ce A

ct,

1994

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ice

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310,3

00,0

00.0

0Ju

ly 9

4 t

o S

ep 9

8C

esta

t/C

om

mis

sioner

of

Cen

tral

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ise-I

Finan

ce A

ct,

1994

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ice

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14,9

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00.0

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ct 0

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o S

ep 0

3C

ESTA

T

Tota

l3

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0,0

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com

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tory

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tral

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se C

ases

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TC

om

mis

sioner

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tral

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2002-0

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tral

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, 1944

2003-0

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2006-0

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tral

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, 1944

Exci

se C

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32,6

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mis

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tral

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tral

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, 1944

2005-0

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2006-0

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se,

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2007-0

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tral

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, 1944

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se C

ases

679,0

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2007-0

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mis

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tral

2008-0

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, Ja

bal

pur

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ax A

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les

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late

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les

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57,0

00.0

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mis

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mer

cial

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, Bhopal

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tral

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ax A

ctSa

les

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54,1

60,0

00.0

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mis

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mer

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2004-0

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mer

cial

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2003-0

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itan

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mis

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mer

cial

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2006-0

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alpur

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ce A

ct,

1994

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ice

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2005-0

6.

Tota

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79

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00

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84

30

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xcis

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1944

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162,3

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ervi

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tral

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72,6

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eport

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-Pin

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’s w

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rom

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010. The

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wer

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in IN

2.6

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Nov

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to M

ay 1

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009-2

010.

86

Addendum to Director’s Report: -The replies of Management to Auditor’s Report are given below:

Audit Para Management Reply

D.1. Assets taken over from Department of

Telecommunications(DOT) and DOT balances

(a) As referred to in Note No. 2 in Schedule U, the

process of taking over the assets and liabilities

from Department of Telecommunications (DOT)

is still in progress and the fact that the value of

net assets, identified subsequent to 01.10.2000,

has been adjusted to Capital Reserves.

(b) As referred to in note no. 5.4 of Schedule - U,

the title to the various immovable properties

taken over from D.O.T.are yet to be transferred

in the name of the company.

(c) As referred to in note no. 5.1 of Schedule - U,

the fact that the method of valuation adopted

for assets taken over is also the basis for treating

them as original cost for the purpose of providing

depreciation.

D.2. Unsecured Loan

As referred to in Schedule - C and in Note No. 3 of

Schedule - U the closing balance of 15 years

Government of India loan is less by Rs.16,948 lacs

due to non provision of disputed penal interest,

prepayment charges etc.

D.3. Fixed Assets and Capital Work-in-Progress

(a) As stated at Note No. 1 on Schedule - D, title

deeds are yet to be executed in respect of land

purchased / acquired on leasehold / freehold in

certain cases through various authorities.

(b) As stated in Note no. 2 on Schedule - D,

leasehold lands which have been identified as

such have only been amortized.

(c) As referred to in Note No. 5.3 on Schedule - U,

about the expiry / non renewal of lease period

of the leasehold lands on which buildings have

been constructed and the fact that no provision

has been made for the ‘surrender value / written

down value of the building’ in the expectation

of ultimate renewal of the leases.

(d) As referred to in Note No. 5.5 on Schedule - U,

certain assets still shown under ‘Capital Work-

in-Progress though completed and put to use,

has not been capitalized and no depreciation

provided on them.

(e) As referred to in Note No. 5.7 on Schedule - U,

there are differences in CWIP between

subsidiary ledger and financial ledger.

Noted.

Noted.

Noted.

The Administrative Ministry has been requested to withdraw

the terms and conditions of penal interest and prepayment

charges, which have been imposed at a far later date and

not in accordance with the provisions of GFR 155.

Noted. The company is in the process of executing the title

deeds of the lands purchased / acquired, wherever required.

Noted. Efforts will be made to complete the process.

Noted. The concerned circles will be instructed to expedite

the process of getting the lease of lands renewed.

Noted. The Circles will be instructed to capitalize the works

as and when completed and put to use and depreciation

provided from the date of its put to use.

Noted. The circles will be instructed to reconcile the

subsidiary ledger of CWIP with the booked figures in

General Ledger and neutralize the difference between the

two sets of records.

87

Audit Para Management Reply

D.4. Depreciation

As referred to in Accounting Policy 4 in ‘Schedule -

T’, depreciation on factory buildings & administrative

buildings has been provided at the rate applicable

to the normal buildings. Moreover, three units of

one circle has not provided depreciation as per the

Company’s Accounting Policy on Depreciation.

D.5. Current Assets, Loans and Advances and Current

Liabilities.

(a) As referred to in Note No.6.1 of Schedule - U,

the fact that no adjustment has been made for

the difference of Rs.9225 lacs (net) between

stores ledger and general ledger which is under

reconciliation.

(b) As referred to in Note Nos. 7.1 & 8.2 of

Schedule - U, the fact that no adjustment has

been made for the difference of Rs.14,116 lacs

between the General Ledger and Subsidiary

Ledger of Sundry Debtors and the difference

between similar sets of accounts in respect of

loans and advances and other current assets

(amount unascertained) pending reconciliation.

(c) As referred to in Note 10.1 on Schedule U, Bank

Reconciliation Statements have not been

prepared in respect of three bank accounts of

units under two circles.

(d) As stated in Note Nos. 10.2 & 10.3 of Schedule -

U, Cheques and TTs deposited with the Bank

for Rs. 7,452 lacs but not credited by the banks

and unlinked debit & credit items appearing in

Bank Reconciliation for Rs.330 lacs and Rs.752

lacs, respectively are still in the process of

reconciliation

(e) As referred to in Note No.10.4 of Schedule-U,

the fact that Bank Balance includes cheques in

hand but not deposited instead showing the

same separately under the head Cash and Bank

balances.

(f) The fact that the balances due to and due from

DOT, DOP, M.T.N.L, C-DOT and other

Government Departments / Companies on

current account are subject to confirmation and

reconciliation.

D.6. Inter / Intra Circle Remittance Account

As stated in Note No. 14 on Schedule - U, regarding

Inter / Intra Circle Remittance balances, the possible

cumulative effect of adjustment necessitated by such

reconciliation on income, expenditure, assets and

liabilities are not ascertainable.

Noted. The concerned circle will be instructed to charge

depreciation as per Accounting Policy of BSNL.

Noted. The concerned circles will be instructed to carry out

the reconciliation and take necessary action to neutralizing

the difference.

Noted. The concerned circles will be instructed to carry out

the reconciliation and take necessary action to sort out the

difference between the two sets of records

Noted. Necessary instruction will be issued to the concerned

circles so that the Bank Reconciliation is done.

Noted. The concerned circles will be instructed to take

appropriate action for unlinked debit and credit items as

well as Cheques / TTs deposited but not credited by banks,

and settle the same immediately.

Noted.

Noted.

Noted. The reconciliation of remittance items and

accounting the same under final head are continuously

being done by the circles. The circles will again be instructed

for prompt acceptance of ATD / ATC so that the outstanding

is kept to the bare minimum possible.

88

Audit Para Management Reply

D.7. Others

(a) As stated in Note No 25 (d) in Schedule - U, the

company has not identified units covered under

Micro, Small and Medium Enterprises

Development Act, 2006 in respect of 26 circles

with whom they are dealing and hence

disclosure as required under Schedule VI and

M.S.M.E.D. Act,2006 respectively, could not be

disclosed / accounted for in respect of such

Circles.

(b) As stated in Note No 26(f) and Note No.27 in

Schedule U, in certain units, contingent liabilities

and estimated amount of contracts remaining

to be executed have not been ascertained.

(c) The fact that certain assumptions as stated in

Note No. (1) & (2) on Cash Flow Statement have

been made for the purpose of preparation of

‘Cash Flow Statement’.

D.8. License Fee, Spectrum Charges, Inter connect

Usage Charges

The fact that the license fee has been accrued based

on Note No. 13 of Schedule - U and the interconnect

revenue between BSNL & MTNL is based on Note

No. 12.2 of Schedule - U, and the accounting for

the revenue from D.O.T. has been made as stated in

the accounting policy 2(c) of Schedule ‘T’.

D.9. Revenue

(a) Income from recharge coupon, prepaid calling

cards, ITC cards, Sancharnet Cards and stock of

recharge coupons and prepaid calling cards, are

subject to reconciliation in fourteen circles.

(c) The booking of rental income on disconnected

telephones as stated in Note No. 12.4 of

Schedule - U, quantum not ascertained

E. GENERAL

- Accounting Standard-2 for valuation of inventory and

others have not been followed in 8 Circles as reported

by branch auditors and in 21 circles due to pending

identification of non-moving, slow moving and

obsolete inventories; their valuation has not been

done on realizable value.

- Accounting Standard-10 for charging of overhead

on proportionate basis to the Capital Work in

Progress (Note No. 5.6 of Schedule - U) instead of

on actual basis.

Noted. The concerned circles will be instructed to take

necessary action.

Noted.

Noted.

Noted.

Noted. The concerned circles will be instructed to take

necessary action in the matter.

Noted. However, as per the existing policy during the initial

three months period of temporary disconnection, the

telephone line is considered as working line and bills of

rental are issued and accounted as revenue

The concerned circles will be instructed to take necessary

action in the matter.

The concerned circles will be instructed to take necessary

action in the matter.

89

For and on behalf of the Board of Directors

Sd/-

(Gopal Das)Chairman & Managing Director

BHARAT SANCHAR NIGAM LIMITED

Date: 10.08.2010

Audit Para Management Reply

- Accounting Standard-15 regarding provision for the

‘liability on account of post retirement medical

benefits’ of employees including retired employees

is made on actual basis in respect of bills received till

the cut off date instead of on the basis of actuarial

valuation.

- Accounting Standard-28 regarding non-identification

of impairment loss and provision for obsolescence

thereof, if any, in absence of carrying out any Techno

economic assessment as on 31st March, 2010

Efforts will be made to make provision for liability on account

of post retirement medical benefits of employees including

retired employees through actuarial valuations as per

provisions of AS-15.

Noted.

Shri Pranab Mukherjee, Hon’ble Union Finance Minister presenting the prestigious CNBC Consumer Awards 2010, in the category of BestBroadband Service Provider of the country to Shri Kuldeep Goyal, former CMD BSNL, at a function held at Mumbai on 28.6.2010.

90

v/Z 'kkldh; Øekad@D.O. No.: Rep-II/F-142/Ann.acts./BSNL/2009-10/Vol-II/341

dk;kZy;

egkfuns'kd ys[kkijh{kk] Mkd o nwjlapkj'kke ukFk ekxZ (lehi iqjkuk lfpoky;)] fnYyh&110 402

OFFICE OF THE

Director General of Audit, Posts & TelecommunicationsSham Nath Marg (Near Old Secretariat), Delhi-110 402

fnukad@Date: 24 September 2010

To

The Chairman and Managing Director,Bharat Sanchar Nigam Limited,New Delhi.

Subject: Comments of the Comptroller and Auditor General of India under Section 619 (4) of the Companies Act,1956 on the accounts of Bharat Sanchar Nigam Limited for the year 2009-10.

Sir,

I am to forward herewith the comments of the Comptroller and Auditor General of India under Section 619 (4) of the

Companies Act, 1956 on the annual accounts of Bharat Sanchar Nigam Limited for the year ended 31 March 2010 for

information and further necessary action.

Kindly acknowledge the receipt.

Yours faithfully,

Sd/-

(R.P. Singh)Director General of Audit (P&T)

Encl(s): As above

rkj@Telegram: CENOFF, DELHI

iSQDl@Fax: 91-011-23813822nwjHkk"k@Telephone: 23812666, 23814533

91

Comments of the Comptroller & Auditor General of

India under Section 619(4) of the Companies Act, 1956

on the annual accounts of Bharat Sanchar Nigam

Limited for the year ended 31 March 2010.

The preparation of financial statements of Bharat Sanchar

Nigam Limited (BSNL), for the year ended 31 March 2010

in accordance with the financial reporting frame work

prescribed under the Companies Act, 1956 is the

responsibility of the Management of the company. The

Statutory Auditors appointed by the Comptroller & Auditor

General of India under Section 619(2) of the Companies

Act, 1956 are responsible for expressing opinion on

independent audit in accordance with the Auditing and

Assurance Standards prescribed by their professional body,

the Institute of Chartered Accountants of India. This is stated

to have been done by them vide their Audit Report dated

30th July 2010.

I, on behalf of the Comptroller & Auditor General of India,

have conducted a supplementary audit under Section

619(3) (b) of the Companies Act, 1956 of the financial

statements of Bharat Sanchar Nigam Limited for the year

ended 31 March 2010. This supplementary audit has been

carried out independently without access to the working

papers of the statutory auditor and is limited primarily to

enquiries of the statutory auditor and company personnel

and a selective examination of some of the accounting

records. Based on my supplementary audit, I would like to

highlight the following significant matters under Section

619(4) of the Companies Act, 1956 which have come to

my attention and which in my view are necessary for

enabling a better understanding of the financial statements

and the related Audit Report.

A) Persistent Non-reconciliation of debtors and

creditors with MTNL

Proper action has not been taken on the following

persistent irregularity despite being repeatedly

commented upon by the CAG of India from the year

2001-02.

As per accounts of BSNL for the year 2009-10, the

amount recoverable from and the amount payable to

Mahanagar Telephone Nigam Limited (MTNL) on

current account have been shown as Rs. 3,062.72 crore

and Rs. 981.73 crore respectively, resulting in net

recoverable amount of Rs. 2,080.99 crore from MTNL.

However, as per approved annual accounts of MTNL

for the year 2009-10, the amount recoverable from

and the amount payable to the company on current

account by MTNL are Rs. 2,031.83 crore and Rs.

451.72 crore, respectively, resulting in a net recoverable

amount of Rs. 1,580.11 crore from BSNL. Thus, there

is net difference of Rs. 3,661.10 crore (previous year

Rs. 3,224.53 crore) in the receivable/payable amounts

between these two government companies under the

same Ministry. It is evident that the difference is

increasing year after year, which needs immediate

reconciliation.

B) Non-disclosure of a significant fact

The department of Commercial Taxes, Government of

Karnataka State has raised a demand of Rs. 6,381.95

crore on Karnataka Circle of the Company on 18 June

2010 towards commercial taxes, penalty and interest

etc. has not been disclosed by the Company in its

accounts suitably.

For and on the behalf of the

Comptroller and Auditor General of India

Sd/-

(R.P. Singh)

(Director General of Audit (P&T)

Place: Delhi

Date: September 24, 2010

92

Addendum to Director’s Report: -Replies of Management to the comment of the Comptroller and Auditor’s General of India on the annual accountsof BSNL for the year ended 31st March 2010:

Comment of the C & AG of India Replies of the Management

A) Persistent Non-reconciliation of debtors and

creditors with MTNL

Proper action has not been taken on the following

persistent irregularity despite being repeatedly

commented upon by the CAG of India from the year

2001-02.

As per accounts of BSNL for the year 2009-10, the

amount recoverable from and the amount payable to

Mahanagar Telephone Nigam Limited (MTNL) on

current account have been shown as Rs. 3,062.72 crore

and Rs. 981.73 crore respectively, resulting in net

recoverable amount of Rs. 2,080.99 crore from MTNL.

However, as per approved annual accounts of MTNL

for the year 2009-10, the amount recoverable from

and the amount payable to the company on current

account by MTNL are Rs. 2,031.83 crore and Rs.

451.72 crore, respectively, resulting in a net recoverable

amount of Rs. 1,580.11 crore from BSNL. Thus, there

is net difference of Rs. 3,661.10 crore (previous year

Rs. 3,224.53 crore) in the receivable/payable amounts

between these two government companies under the

same Ministry. It is evident that the difference is

increasing year after year, which needs immediate

reconciliation.

B) Non-disclosure of a significant fact

The Department of Commercial Taxes, Government

of Karnataka State has raised a demand of Rs. 6,381.95

crore on Karnataka Circle of the Company on 18 June

2010 towards commercial taxes, penalty and interest

etc. has not been disclosed by the Company in its

accounts suitably.

For and on the behalf of the

Comptroller and Auditor General of India

Sd/-

(R.P. Singh)

(Director General of Audit (P&T)

Place: Delhi

Date: 24.09.2010

The bookings made by BSNL in the accounts in respect of

amounts recoverable and payable from/to MTNL are based

on billing and other data as maintained by BSNL and which

are authentic. The Statutory & Branch Auditors and

Government Audit have audited the accounts of BSNL.

Neither the Statutory Auditors nor the Govt. Audit have

commented adversely about the authenticity of the data

relating to claims recoverable/payable from/to MTNL

during the audit of the financial statements or at the time

of proprietary audit.

BSNL has no comment about the booking made by MTNL

as well as the net difference of Rs. 3,661.10 crore between

the bookings made by BSNL and MTNL, as mentioned in

the Comments.

Noted.

For and on behalf of the Board of Directors

Sd/-

(Gopal Das)

Chairman & Managing Director

Bharat Sanchar Nigam Limited

Place: New Delhi

Date: 24.09.2010