Company Overview Financial Statements Notice Statutory Reports 67 Rudolf Atul Chemicals Ltd | Annual Report 2020-21 Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of members. As such, an increase in the salary of the members more than the assumed level will increase the plan’s liability. Investment risk The present value of the defined benefit plan liability is calculated using a discount rate, which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create a plan deficit. Currently, for the plan in India, it has a relatively balanced mix of investments in government securities, and other debt instruments. Concentration risk Plan is having a concentration risk as all the assets are invested with the insurance company and a default will wipe out all the assets. Although probability of this is very less as insurance companies have to follow regulatory guidelines. Expected contributions to post-employment benefit plans for the year ending March 31, 2021, are ` 11.23 lakhs. The weighted average duration of the defined benefit obligation is seven years (2020-21: nine years). The expected maturity analysis of gratuity is as follows: (` lakhs) Particulars Less than a year Between 1-2 years Between 2-5 years Over 5 years Total Defined benefit obligation (gratuity) As at March 31, 2021 4.53 4.66 24.14 62.84 96.17 As at March 31, 2020 5.84 5.75 22.83 32.69 67.11 b) Defined contribution plans The Company pays provident fund contributions to registered provident fund administered by the government at the rate of 12% of basic salary as per regulations. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plan is of ` 16.62 lakhs (March 31, 2020: ` 17.66 lakhs). The Company had taken legal opinion from legal experts and based on that, provident fund payable on universal allowances was worked out and an amount of ` 1.43 lakhs was deposited with provident fund authorities on June 30, 2020. c) The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Mortality rates are obtained from the relevant data. d) The Parliament of India has approved the Code on Social Security, 2020 (the Code), which may impact the contributions by the Company towards provident fund and gratuity. The Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact of the Code when it comes into effect and will record related impact, if any.
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