DIRECTORS' REPORT Dear Shareholders, Your Directors have pleasure in presenting their Thirty Ninth annual report and the audited statement of accounts for the year ended September 30, 2009. DIVIDEND Your Directors have not recommended any dividend on equity shares for the financial year under review. DELISTING OF EQUITY SHARES FROM THE CALCUTTA STOCK EXCHANGE ASSOCIATION LIMITED The Company had made an application on September 07, 2006 for voluntary delisting of its 3,60,00,000 Equity Shares of Re.1/- each from The Calcutta Stock Exchange Association Limited (CSE) after complying with necessary formalities stipulated under Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003. CSE vide their Letter No.CSEA/ID/032/2009 dated 27th January, 2009 accorded its approval for voluntary delisting of the said Equity Shares of the Company with effect from January 12, 2009. The Equity Shares of the Company continue to remain listed at Bombay Stock Exchange Limited. EMPLOYEE STOCK OPTION Out of 11,00,000 Stock options granted to eligible employees of the holding company, 6,45,000 stock options were outstanding as of October 01, 2008. During 2008-09, no stock options were exercised /lapsed. The information required to be disclosed in terms of the provisions of the SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is enclosed as per Annexure A to this report. SCHEME OF ARRANGEMENT The scheme of arrangement which inter alia envisaged merger of Phenil Sugars Private Limited with the Company has yet to receive approval from its major lender-International Finance Corporation, Washington. On receipt of the same, requisite application with Bombay High Court to seek necessary directions inter alia for holding of the meetings of shareholders, creditors etc. is proposed to be filed. Phenil Sugars Private Limited has filed Petition for approval of Scheme of Arrangement, which is pending before Delhi High Court. FINANCE Based on the approval accorded by the shareholders by passing a special resolution at the Extraordinary General Meeting of the Company held on May 25, 2009, the Company started exploring the buyers through Qualified Institutional Placement and will continue to explore various fund raising options to meet its long/ short term requirements. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry Structure and Development World sugar production was drastically lower at 153 MMT in 2008-09 as against 167 MMT recorded in 2007-08, a dip mainly due to lower production in India. The inventory at the beginning of the year was 74 MMT and the closing inventory was 63 MMT. Global Consumption of sugar has grown steadily upwards from 159 MMT in 2007-08 to 161 MMT in 2008-09. In 2008-09, Imports were 54 MMT whereas exports were 57 MMT. The global demand supply situation is expected to tighten on account of steady consumption growth coupled with rising import demand from India. Indian sugar production in 2008-09 was plummeted at around 15 MMT from around 26 MMT in 2007-08. Government Policies Sugar is the second largest agro processing industry in India after textiles. Sugar being an essential commodity and having a high weightage (3.63 %) in the WPI, is regulated by the Government through control on cane pricing, external trade, and control on sugar that can be sold in the open market. The Central Government decides the minimum support price, called the Statutory Minimum Price (SMP), at which sugar mills have to purchase sugarcane from farmers. The SMP is based on the recommendations of the Commission for Agricultural Costs and Prices. For the 2008-09 sugar season, the SMP was fixed at Rs.81.18 per quintal linked to a base sugar recovery of 9% with Rs.0.90 for each incremental 0.1% recovery. On top of the SMP, every state government also has the power to declare a State Advised Price (SAP) for sugarcane. The Government of Uttar Pradesh (UP) announced a price of Rs.140 per quintal for the sugar season 2008-09. However, the Court has upheld the Government fixed SAP of Rs.140 per quintal for the Sugar season 2008-09. Through a new ordinance dated October 22, 2009, the Central Government has changed the structure of cane pricing mechanism. The new ordinance will be applicable from Sugar season 2010. The Central Government has amended Essential Commodities Act, 1955 to replace SMP for cane to Fair Remunerative Price (FRP) which will now be the price that mills across the country need to pay. The FRP announced for the sugar season 2009-10 is Rs.129.84 per quintal linked to recovery of 9.5% subject to premium of Rs.1.37 per quintal for every 0.1 per cent increase in recovery. Domestic sugar sales are regulated by the Central Government which decides how much a mill can sell in the open market i.e. free sale quota and how much is to be released by the mills for distribution through the public distribution system that is levy quota which is presently at 10%. This levy quota has now been increased to 20%. Also in view of SMP being replaced by FRP, the levy price will also undergo a revision since now levy sugar price will be calculated by taking FRP as a base instead of SMP. Levy sugar prices are usually lower than market prices. Sugar sales are subject to release orders from time to time. Due to acute shortage faced by the country, the government has come out with slew of measures to contain the sugar prices from rising. These measures are allowing duty free import of raw sugar without export obligation. Allowing duty free import of white sugar, Imposing stock limits on dealers, wholesalers as well as industrial users of sugar etc. In spite of these efforts, the prices are ruling at Rs.35 per KG in the retail market. Sugar companies based in UP with power cogeneration capacities may see a sustainable boost to their revenues and profit starting this fiscal year, with the UP Electricity Regulatory Commission hiking the tariffs for purchase of electricity from sugar mills to Rs. 4 a unit from 2009-10 to 2012-14. Outlook The demand for sugar in India is driven by the increase in population and the rise in income levels. Driven by double whammy of worst monsoon in the last 37 years, untimely late rainfall in Southern Indian states and an estimated decline in area under sugarcane, the sugar production in India will continue to remain low even in Sugar season 2009-10 at around 15 million tonnes. With the expected consumption of 23-24million tonnes, there will be an expected depletion of stock to the tune of 8-9 million tonnes. India has already imported roughly more than 2 million tones in Sugar Season 2009 and needs to import more if it has to balance its inventory. Sugar Season 2008-09 saw a weak sugarcane crop and as a consequence, fall in sugarcane and sugar production. However, sugarcane was not available in Uttar Pradesh despite the SAP fixed by the Government being at Rs.140. The result was again underutilization of the plant capacities, though the industry recovered from the losses made in the recent past. Domestic sugar prices have continued to surge due to tightness of sugar supply. Due to drastic fall in production in Sugar Season 2008-09, the stocks to use ratio has come down to its lowest level in the last 50 years . As a result price of Sugar has risen from about Rs.1,750 per quintal in December, 2008 to about Rs. 3,000 per quintal in September, 2009. Sugar prices are expected to remain firm throughout 2010 due to expected lower production in 2010 also. Sugar Season 2009-10 is again likely to witness a poor sugarcane crop and the crisis with respect to procurement of sugarcane will continue. However, the government has allowed duty free import of raw sugar by sugar traders and manufacturers up to March, 2010. Accordingly, sugar manufacturers can import raw sugar and refine the same at their plant in addition to manufacturing sugar from sugarcane. This will ensure better utilization of the plant capacities and help the sugar mills to make adequate earnings to cover their fixed costs and also make some profits. Anticipating huge import orders from India, International price of sugar has moved upwards. New York futures spiked to high seen in 28 years on speculative buying. It is expected that in short term the sugar prices in India will fall due to various Government initiatives to control inflation. However, in long term, the prices are expected to move upwards. Non-disbursal of incentives by the State Government has been a matter of concern. The incentives are essentially a combination of cash disbursement and exemption of certain duties/ taxes imposed by the State. The exemption portion has been availed by the industry and State Government's attempt to enforce recovery thereof were litigated and decided in favor of the industry. However, cash disbursement by the State is still hanging and the State has not fulfilled its part of promise made at the time of attracting huge investment in sugar sector. Nonetheless, the industry is hopeful of succeeding in getting these disbursements with the intervention of Court in near future. Opportunities, Threats / Risks and Concerns Sugar industry in India is cyclical in nature & primarily faces the following risks: 1. Uncontrollable risks A. Raw material risk B. Sugar price risk C. Regulatory risk A. Raw material risk Sugarcane is the principal raw material used for the production of sugar. Business depends on the availability of sugarcane and any shortage of sugarcane may adversely affect operations. A variety of factors beyond our control may contribute to a shortage of sugarcane in any given harvest period. Some of the main factors that could contribute to a shortage of sugarcane are set forth below: i) Diversion from cane production to other cash crops; ii) Adverse weather conditions, crop disease; iii) Drop in Drawal rate and iv) Unremunerative cane procurement price declared by the State Government and/or Central government. The Company has sought to mitigate raw material availability risk by diversifying into multiple locations within Uttar Pradesh and at the same time has an impeccable record of cordial relationship with farmers. B. Sugar price risk The market price for sugar is function of demand and supply. Fluctuations in demand and supply are due to various reasons, including: i) changes in the availability and price of sugarcane; ii) variances in the production capacities of our competitors; iii) the availability of substitutes for the sugar products and iv) International demand and Supply. The wholesale price of sugar has a significant impact on our profits. Like other agricultural commodities, sugar is subject to price fluctuations resulting from weather, natural disasters, domestic and foreign trade policies, shifts in supply and demand and other factors beyond control. In addition, approximately 15% to 30% of total worldwide sugar production is traded on exchanges and is thus subject to speculation, which could affect the price of sugar worldwide and our results of operations. As a result, any prolonged decrease in sugar prices could have a material adverse effect on our Company. The Group has addressed this issue to an extent with its expansion plans whereby, Bajaj Hindusthan Limited & Bajaj Hindusthan Sugar and Industries Limited in aggregate have become the largest sugar producers in India with an overall share of more than 20% of the Uttar Pradesh production. This would enable better pricing power while reducing costs. C. Regulatory risk i. Environmental risk The Industry & Company is subject to environmental regulations and may be exposed to liability as a result of our handling of hazardous materials and potential costs for environmental compliance. ii. Government policy related risk The Industry is regulated and the Company operates in a regulated environment. Central and State Government, policies and regulations, affect the agricultural sector and related industries and affect our operations and our profitability. Ethanol business is highly dependent on Government policy. Sugarcane price is controlled by the State Government and is generally increased every year. This is a systemic risk, which cannot be alleviated unless the industry is completely decontrolled. 2. Controllable risks 1. Productivity; 2. Drawal rate and 3. Management Bandwidth. Selection of appropriate machinery and maintenance of the same is critical for continuous operations during the crushing season. With its leadership position in the industry and professional work practices, the Company is able to hire and retain appropriate talent. De-Risking Strategy As a matter of conscious business strategy, the Company is progressively de-risking its sugar business with investments in distillery and Co-generation. As these new businesses are non cyclical, BHSIL is expected to generate steady cash flows year after year. Segment-wise / Product-wise Performance Though Company has Distillery and co-generation as its segments, sugar remains the main product under review. Internal control systems and their adequacy The Company has in place, adequate systems of internal control to reasonably safeguard its assets against loss through unauthorised use and pilferage. A comprehensive system of internal controls employed by the Company ensures optimal use of the resources available at its disposal. Internal audits and checks are an ongoing process within the Company. The internal audit department has looked into various functional areas of the Company with the following primary objectives: • To ensure strong internal control system to minimize the risk of accidental or deliberate errors & omissions, safeguarding of assets and compliance with internal operating policies and guidelines. • To ensure critical examination and identification of weaknesses in the system and suggest measures to address them suitably. • To ensure cost consciousness through pre audit & post audits. • To ensure proper compliance of Standard Operating Procedures (SOPs) to achieve overall uniformity in operations and reporting across all the units. • To ensure compliance of corporate policies and procedures in line with Delegation & HR manuals. • To submit reports along with recommendations and to ensure their timely implementation. The internal audit department submits its reports to the management, outlining its findings, along with analytical reviews of the functional areas looked into, and providing practical solutions for the problems observed. An illustrative list of scope of activities of areas of Internal Audit is broadly summarized as under: • Checking of Accounts vouchers on test check basis with respect to accounting treatment and approving authorities as per delegation manual. • Checking the correctness of interest charged by banks on Cash Credit accounts. • Availing of input CENVAT credit for service tax on bank charges. • Checking of Excise and Service Tax Reconciliations for timely availing input credit in eligible cases. • Pre Audit of Purchase and Work orders issued from units & Post Audit at Corporate Head office. • Verification of system of recording all incoming materials including freight incurred thereon, preparation of Goods Received Notes and other stores records. • Physical verification of stores inventory & Fixed Assets items. • Surprise check of Cane centers and records maintained thereat. • Checking of safety measures and civic conditions of Sugar Godowns at Units. • Other Assignments as attributed from time to time with specific instructions from management. Human Resources/ Industrial Relations The industrial relations at the Company's Sugar Mills and Head Office were cordial throughout the year under review. As at September 30, 2009, the Company has 1,604 employees. The Company is committed to create an organization that nurtures the talents and enterprise of its people, helping them grow and find fulfillment in an open culture. Its growth strategies are based on a strong Human Resource (HR) foundation created through a judicious use of innovative and complementary HR processes and systems. The various HR initiatives introduced by the Company during the year are listed below: • Introduction of "Quality Circle" in all units to improve and maintain the quality, services, to reduce/eliminate defects, errors, wastage, enhance productivity, cost-effectiveness and safety. • 5s practice was introduced in all units to improve and minimize search time. • Need based training Programmes on safety, house keeping, fire fighting, communication skills, team building, etc. • Recognition of long service. • Induction Programmes for new employees. • 360 degree performance Appraisal was introduced across the organization. • Introduction of Budgetary Control. • Executive health check-up. The Company continued its programme of providing training to its workers with a view to improve efficiency, quality of products and avoid breakdowns in areas like SAP and ERP awareness, team building, workers' development program, behavioral / attitudinal training programmes for Executives and Managers, technical training programme for Engineers and Executives, Computer and IT related training programme, HR related training and workshop and training for Cane growers, etc. INFORMATION TECHNOLOGY The Company has an integrated IT environment and it uses SAP R/3 version ECC 6.0 application to manage its real time information needs. Since it is highly flexible and scalable, ensures real time updating, provides for electronic documents and aides in control of their business. Guidelines have been laid down for the employees using the Company's computing facilities, including SAP applications, computer hardware, printers, software, e-mail, internet and intranet access. A robust firewall has been implemented to protect company to risks of unauthorized access to data both for employees and outside world. SAP R/3 is implemented using HP UNIX as the operating system and Oracle 10g as the Relational Database Management System (RDBMS). The Module implemented are Financial accounting, Controlling, Material management, Sales and Distribution, Project system, Quality Management, Plant Maintenance and Human Resource and development. Major benefits achieved are budgetary control, asset management, unification of activities such as common procurement, tax and excise returns. The Company also uses AKSmake cane application to cater the requirement of cane procurement management system. For decision making Company has implemented business intelligence tool of SAP. FINANCIAL ANALYSIS Overview The Company has four sugar plants with the aggregate sugarcane crushing capacity of 40,000 TCD and a distillery of 160 kilolitres per day. The Company's co-generation plants have an aggregate power generation capacity of 88 MW. Analysis of sales During the year, the Company sold 1,42,847 MT of sugar and 17,202 KL of Alcohol as compared to 153,555 MT of Sugar and 24,703 KL of Alcohol during the previous year. Appreciation in sales value was due to better sales realization. Other Income Other income was at Rs.554.78 million during the year ended September 30, 2009 as compared to Rs.34.72 million during the previous year. The major components of other income was write back of provision for exchange fluctuation of Rs.374.61 million, write back of provision made in earlier years which are no longer required of Rs.106.28 million, scrap and store sales of Rs.67.53 million (Previous year Rs.27.14 million). The balance amount was miscellaneous receipts. Other expenses Other expenses during the year were Rs.394.02 million as compared to the last year figure of Rs.956.22 million. Decrease in other expenses was mainly on account of capitalization of Loss due to Foreign Exchange Fluctuation, Previous year expenses include foreign exchange loss amounting to Rs.633.38 million. Earnings before Interest, Depreciation, Tax and Amortization (EBIDTA) Improved EBIDTA margin in the year 2008-09 was mainly because of higher sales realization in current year. Interest The Company during the year ended September 30, 2009 had an interest expense of Rs.722.02 million as compared to amount of Rs.472.49 million recorded during the previous year. Increase in the interest amount was mainly on account of charge of interest on ECB, FCCB & Holding Company's loan post capex to Profit & Loss Account. Depreciation The depreciation charge for the year is at Rs.802.08 million as compared to the previous year figure of Rs.474.32 million. The increase was mainly due to commissioning of three new sugar plants at Kundarkhi, Rudauli & Utraula during the current year. Provision for Tax Due to loss, no provision for income tax was made during the year. Share capital During the year, Authorised Capital of the Company has been increased from Rs.400 million to Rs.1,000 million. There was no change in the paid-up Capital of the Company. Reserves and surplus Deduction to Securities Premium represent Provision for Premium on redemption of Foreign Currency Convertible Bonds (FCCB). Secured loans There was increase in term loans during the year on account of revalorization of respective ECB loan in line with the Accounting Standard AS - 11 "The Effects of changes in Foreign Exchange Rates" (Revised) issued by the Institute of Chartered Accountants of India. However the resulting net decrease is due to repayment of ECB and other secured loans. Unsecured loans Increase in Unsecured loan was mainly on account of revalorization of respective FCCB loan in line with the Accounting Standard AS - 11 "The Effects of changes in Foreign Exchange Rates" (Revised) issued by the Institute of Chartered Accountants of India. Fixed assets The increase in net fixed assets of Rs.1,403.34 million (including CWIP) was due to capitalization of an amount Rs.1,173.62 million towards exchange fluctuation loss on foreign currency loan. The Company's assets continued to be adequately insured against the risk of fire, riot and earthquake among other perils. Investments No change in the Investment made during the year as compared to the previous year. Inventories Sugar inventory at the end of the year was 26,334 MT as compared to 54,489 MT at the end of the previous period and Alcohol inventory at the end of the year was 4,139 kilolitres as compared to 1,031 kilolitres of the previous year. Molasses stock at the end of the year was 10,647 MTs as compared to the previous year figure of 7,958 MT. In view of expected volume growth, the inventory liquidation is monitored very closely. Debtors Efforts are being made to improve the debtor's turnover ratio of the Company. Contingent liabilities The status of contingent liabilities as at September 30, 2009 has been reviewed by the management and in view of a favourable legal position, no provision has been considered necessary. Efforts are being made for speedy settlement of pending cases. Control measures for cane procurement Besides smooth functioning of plants, timely and regular procurement of sugarcane is the most important activity for the Company. Continuous efforts are being made to ensure systematic indenting, procurement and crushing of cane. The regular supply of cane also depends upon regular flow of payment to the farmers for which the Company has a good reputation in the industry. Though the current systems are adequate, as a matter of routine, these systems are being reviewed by the senior management team from time to time and corrective measures as required are taken to ensure smooth flow of cane supplies. Distillery Division The Company has a distillery at Rudauli having a capacity to produce Industrial Alcohol of 160 kilolitres per day. During the year distillery division produced 20,399 kilolitres of industrial alcohol (including Ethanol) as against 24,229 kilolitres during the previous year. Sales aggregated at 17,202 kilolitres against 24,703 kilolitres in the previous year. In value terms, sale of industrial alcohol (including Ethanol) during the year 2008-09 was Rs.415.70 million as against Rs.539.60 million. Co-generation Division The Company's 4 Co-generation plants have an aggregate installed power generation capacity of 88 MW. During the year Co-generation division produced 37,242 MW power as against 44,564 MW during the previous year. Power sales aggregated 36,795 MW as against 44,542 MW in the previous year. In value term, sale of power made mainly to UPPCL and to a fellow subsidiary was Rs.66.99 million as against Rs.16.78 million in previous year. Accounting Policies The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles in India. The management of Bajaj Hindusthan Sugar & Industries Limited accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates/ judgments used in preparation of these statements. The estimates and/ or judgments have been made on a consistent, reasonable and prudent basis to reflect true and fair picture of the state of affairs and loss of the Company. Cautionary/Futuristic Statements Statements in the management discussion and analysis report describing the Company's objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable laws and regulations and futuristic in nature. Actual performance may differ materially from those either expressed or implied. Such statements represent intentions of the management and the efforts put in to realise certain goals. The success in realising these depends on various factors, both internal and external. Investors, therefore, are requested to make their own independent judgments before taking any investment decisions. DIRECTORS Dr. Swatantra Singh Kothari and Mr. Rakesh Bhartia resigned from the Board on January 12, 2009 and April 22, 2009 respectively. The Board recorded its appreciation for the contribution made by Dr. Swatantra Singh Kothari and Mr. Rakesh Bhartia during their tenure of Directorships. Mr. Pradeep Kumar Mittal and Mr. K.S. Vaidyanathan, Directors of the Company, will retire by rotation and being eligible, offer themselves for re-appointment. The Notice convening the Annual General Meeting includes proposals for re-appointment of Directors. All the appointments of the Directors of the Company are in compliance with the provisions of Section 274 (1) (g) of The Companies Act, 1956. ENVIRONMENTAL PROTECTION AND POLLUTION CONTROL Inception of EHS department as a small seed with the commencement of the company has matured to a tree resulting into safe environment to work for all the employees and communities living in surroundings. Main endeavours of the EHS department were to incorporate integrated Environment, Health & Safety Management System (EMS) and Occupational Health and Safety systems all across the units to ensure that all activities which might have an impact on the Safety and Health of the people are carried out in a safe manner. For the implementation of integrated Environment Management System, pre assessment audit for certification of ISO 9001, 14001 & OHSAS 18001 for Rudauli sugar and distillery units were completed during the year. Pre assessment audit for certification of ISO 14001, OHSAS 18001 for Kundarkhi & Utraula sugar units was also completed whereas Pratappur sugar unit was certified for ISO 14001 & OHSAS 18001 during the year. To achieve the target of zero injuries we take individual responsibility for the safety and health of ourselves, co-workers and our environment. We are having an active program in place to reduce the operational impact on the environment. We complied with Government environmental regulations, identified and addressed key environmental risks, improved environmental awareness of employees and contractors, reduced our use of resources apart from environmental performance measures such as energy usage, air emissions, water consumption and waste generation. To ensure a zero discharge effluent industry Integrated Evaporation Treatment System is installed at Rudauli distillery wherein bio gas plant is also under installation after the Flubex system. Gas produced in the bio-gas plant will be used as fuel in the boiler. Installation of burner for utilisation of bio gas at Rudauli is also under process. The treated effluent of bio-methanation is being used significantly for bio-composting process. Bio-composting is done in well designed compost yards by mixing press mud and treated effluents with a mechanized machine as per guidelines of the CPCB under Corporate Responsibility for Environmental Protection (CREP). We have signed MoUs with major fertilizer companies to supply bio-compost which is being utilized by the farmers for improving soil health, fertility and productivity. Quality bio compost manufactured at our Rudauli plant is being supplied to Eastern U.P. as well as to Bihar, West Bengal, Jharkhand, etc. states too. Also in order to cater the demand of the urban areas, we have planned to launch bio-compost in small packing. Fly ash generated in the boilers during the process of power generation out of the bagasse has a high content of Potash. We are exploring the avenues to generate revenue through the effective utilization of the nutrient value of it. Many companies have shown an interest in this. Multiple measures have been taken to minimise the emission of air pollutants. Processes having potential for particulate emissions are provided with Electrostatic precipitators (ESP) and Wet scrubbers. As a result of these initiatives, there has been a steady reduction in emissions. Adequate attention is paid to fire prevention and protection and safety at different stages such as planning and designing, erection, commissioning, operation and shut-downs. We maintain low inventories of hazardous materials. To prevent the fire accidents, we have developed work permit, standard operation procedures followed by training, house keeping, safety audits, regular drill and demonstration, apart from well designed fire protection systems, which are put in place. Additionally, teams of trained personnel operate fire control appliances across all manufacturing locations with personal protective equipment. Even the tractors or any other vehicles being utilized in hazardous areas is provided with a spark arrestor system. Fire hydrants and fire-fighting networks protect all flammable chemical storages at all the plants. Certain storage tanks, like the molasses storage tank, are covered by water recirculation systems as an additional safety measure. The handling of hazardous chemicals is mainly through a piping and closed system which is handled by trained operators. The 'on-site' emergency plans are regularly updated. Training of personnel is aimed to improve the performance of individuals and groups / teams. Special attention is given on Education, Development, and Job safety training programme. We have developed an elaborated and strict system of inspection of the tankers transporting the Company's products to various parts of the country. Regular training programmes are conducted for the drivers and cleaners of the transport vehicles wherein training on the nature of the chemicals that they are transporting and safety measures to be adopted during transportation of such chemicals, including the Material Safety Data Sheet (MSDS), is imparted. Transporters are provided Transport Emergency (TREM) Cards with pictorial depiction for alcohol leaving the factory premises. These TREM cards - in English and Hindi - incorporate instructions to handle emergency situations during transit. Monitoring, coupled with regular intensive training has reduced the number of transportation-related incidents. We have also developed a TREM card for immediate response during transportation. For improvement in the area of Safety we follow monthly internal safety audit & implementation of recommendations, Six-monthly external EHS audit by DNV & implementation of recommendations, Conducting internal & external training programmes on EHS, Six-monthly Mock Drill and implementation of its outcome. To improve the efficiency we also conduct Root Cause Failure Analysis, Monthly audit on house keeping, Visible Management, Drill and Demonstration "on Site Emergency Plan" and application of Permit System for Hot work, Height Job, Confined Space entry, Digging work & Cold work. The efforts made in the area of energy conservation have resulted in a significant decline in specific energy consumption in the manufacturing facilities, even as a Company sustains its effort towards a further reduction in energy consumption. We have identified key areas of focus from the health perspective and are encouraging its facilities to develop initiatives to address them. The group is procuring portable and fixed-type work zone monitoring systems for all the distilleries to detect and measure the presence of organic vapours and other gases in the work zone atmosphere and take actions against any fugitive emissions. Periodically, specialists from nearby cities are invited and health camps organised for both employees and their families. The Company's medical team is headed by an experienced and qualified Medical officer who is supported by medical staff. Under the Kyoto Protocol, Company has identified Clean Development Mechanism (CDM), Chicago Climate Exchange (CCX) & Voluntary Carbon Standard (VCS) projects for bagasse based cogeneration plants in sugar units and biogas based power generation in distillery unit. Validation and verification of VCS project for Kundarkhi sugar unit are under progress. We excel to develop an integrated Environment Health and Safety management system which become a land mark for others to follow ensuring the safety of all the concerned associated with us including community in vicinity. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to provisions of Section 217(2AA) of the Companies Act, 1956, as amended, with respect to the directors' responsibility statement, it is hereby confirmed: (i) that in the preparation of the accounts for the year ended 30th September, 2009, the applicable accounting standards have been followed along with a proper explanation relating to material departures; (ii) that our Directors have 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 loss of the Company for that period; (iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a 'going concern' basis. CORPORATE GOVERNANCE REPORT A report on Corporate Governance vide Clause 49 of the Listing Agreement with the Stock Exchanges, along with a certificate of compliance from the Company's Auditors is annexed and forms part of this Report. AUDITORS & AUDITORS' REPORT M/s. Dalal & Shah, Chartered Accountants, existing Statutory Auditors will retire at the conclusion of the ensuing (39th) Annual General Meeting and have convened in writing their intention not to seek re-appointment as Statutory Auditors of the Company at the ensuing Annual General Meeting. Special Notice has been received by the Company from a member proposing the appointment of M/s. Chaturvedi & Shah as Statutory Auditors of the Company from conclusion of 39th Annual General Meeting till conclusion of 40th Annual General Meeting. The Company has received certificates from M/s. Chaturvedi & Shah to the effect that their appointment, if made, would be within the limits prescribed under Section 224(1B) of The Companies Act, 1956. The Board of Directors recommends to the shareholders the appointment of M/s. Chaturvedi & Shah as Statutory Auditors of the Company. The comments on the statement of account referred in the report of the Auditors are self explanatory and are explained in the notes to accounts. COST AUDITORS M/s. B.J.D. Nanabhoy & Co., Cost Accountants, Mumbai has been appointed as the Cost Auditors of the Company. Necessary application for government approval has been made by the Company. FIXED DEPOSITS The Company has not accepted any deposits from members or employees. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as prescribed under sub-section (1)(e) of Section 217 of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure B attached hereto and forms part of this report. PARTICULARS OF EMPLOYEES As required under the provisions of sub-section (2A) of Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, particulars of employees are set out in the Annexure C attached hereto and forms part of this Report. INDUSTRIAL RELATIONS The industrial relations have been cordial at the plants of the Company. ACKNOWLEDGEMENT Your Directors express their apprecation of the sincere co-operation and assistance of state & central government authorities, bankers, customers and suppliers as well as all of the Company's employees & shareholders. For and on behalf of the Board Bajaj Hindusthan Sugar and Industries Limited Pradeep Parakh Director Gautam Ashra Director |