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Monday, September 08, 2008

Sintex Industries

Sintex Industries

Eveninger - Sep 8 2008

Eveninger - Sep 8 2008

Power Sector Update

Power Sector Update

NTPC - Annual Report - 2007-2008




Dear Members,

Your Directors are pleased to present the 32nd Annual Report and the audited accounts for the year ended March 31, 2008.


Rs. MillionIncome 2007-08 2006-07

Sale of Energy 369462 325344 Consultancy 1039 608Other income (Includingenergy internally consumed) 29612 27814Gross Income 400113 353766ExpenditureFuel 220202 198181Employees Remuneration& Benefits 18960 11632Generation, Administration& other expenses 16284 15567Interest 10312 9746Finance charges 7669 8848Depreciation 21385 20754Total Expenditure 294812 264728Profit before tax, provisionsand prior period adjustments 105301 89038Tax 28401 20427Profit after tax but beforeprovisions and prior periodadjustments 76900 68611LessPrior Period Adjustments (Net) 2745 (109)Provisions (Net) 7 73Net Profit after tax 74148 68647Appropriations 2007-08 2006-07 Transfer to Bonds RedemptionReserve 3822 3487Interim Dividend 22263 19789Proposed Dividend 6596 6596Tax on Dividend 4905 3896Transfer to General Reserve 39000 36000Transfer to Capital Reserve * 4



The total income of the company for the year increased by 13.10% to Rs.400,113 million from Rs. 353,766 million during the previous year. The profit after tax but before provisions and prior period adjustments increased by 12.08% to Rs. 76,900 million from Rs. 68,611 million. Net profit after tax increased to Rs. 74,148 million from Rs. 68,647 million registering a growth of 8% over last year.


In addition to interim dividend of Rs. 2.70 per share paid in February 2008, your Directors have recommended a final dividend of Rs. 0.80 per share for the year 2007-08. The total dividend for the year is Rs 3.50 per share as against Rs. 3.20 per share paid last year. The final dividend shall be paid after your approval at the Annual General Meeting. The total dividend pay-out for the year amounting to Rs. 28,859 million represents 38.92% of the profits after tax as against 38.43% in the previous year. The total dividend payout including tax accounts for 45.54% of profit after tax. The dividend has been recommended in accordance with the Company's policy of balancing dividend pay-out with the requirement of deployment of internal accruals for its growth plans. Your Directors believe that growth of the company through capacity addition, backward and forward integration and strategic diversification of its operations would lead to increase in shareholders value.


During the year, the power stations of your Company generated 200.863 billion units of electricity which was 28.51% of the total power generated in India with a share of 19.12% in the total installed capacity of the country. The power generated by the company has registered an increase of 6.46% over the previous year's generation of 188.674 billion units. During the year, the coal based stations of the company operated at a plant load factor of 92.24% (highest since inception) as compared to 89.43% during the previous year. However, the gas stations of the company operated at a plant load factor of 68.14% as against 71.90% last year due to non-availability of gas. The average availability for coal and gas based stations for the year was 92.12% and 85.93% respectively.

A detailed discussion on the operations and performance for the year is given in the 'Management Discussion and Analysis' included as a separate section in the annual report.


During the year, your Company realized 100% of payment of current bills raised for sale of power. For the fifth consecutive year the Company has been able to achieve 100% realization of current bills.

All the beneficiaries are paying within 30 days of billing except UP and J&K who are paying in 60 days cycle.

All the beneficiaries have opened and are maintaining LC equal to or more than 105% of average monthly billing as per One-Time Settlement Scheme except New Delhi Municipal Corporation (NDMC) and Military Engineering Services. NDMC is in the process of establishing LC shortly. NTPC Payment Rebate Scheme for the year 2007-08 resulted in realization of nearly 68% of the energy bills within a week of presentation of bill for the month.

One unit of 500MW of Vindhyachal STPP stage-III was declared commercial with effect from 15.07.2007. Due to non-availability of water at Sipat Super Thermal Project, the 500MW unit of stage-II could not be declared ready for commercial operation although the same was commissioned in May'2007. However, this unit was declared commercial with effect from 20.06.2008.


During the year, a total capacity of 1740 MW was added to NTPC's installed capacity. Your Company commissioned one 500 MW unit at Sipat-II (Unit-IV) and one 500 MW Unit at Kahalgaon-II (Unit-VI). In addition, 740 MW (Module-III) was added through its Joint Venture, Ratnagiri Gas and Power Private Limited (RGPPL) at Dabhol. Further, one 250 MW unit at Bhilai Expansion Project was commissioned on April 20, 2008 through its Joint Venture Company, NTPC-SAIL Power Company Pvt. Ltd (NSPCL). Thus, the total installed capacity of the NTPC Group has increased from 27,904 MW to 29,394 MW. Detail of the installed capacity is given below:

Owned by NTPC MW

Coal based projects 23,395Gas based projects 3,955Sub-total 27,350Joint venturesNSPCL (Coal) 564RGPPL (Gas) 1480Sub-total 2,044Total 29,394


In order to actualize the vision of becoming a world class integrated power major, your company has embarked upon a substantial capacity addition program so as to become 50000 MW plus company by the year 2012 and to have installed capacity of 75000 MW plus by 2017. Your Company has adopted a multi-pronged growth strategy which includes capacity addition through green field projects, expansion of existing stations, joint ventures and takeover of stations.

By 2017, the power generation portfolio is expected to have a diversified fuel mix with coal based capacity of around 53000 MW, 10000 MW through gas, 9000 MW through Hydro generation, about 2000 MW from nuclear sources and around 1000 MW from Renewable Energy Sources (RES).

As a step towards promotion of generation of electricity from RES, your Company had signed an MOU with Asian Development Bank for establishing a generating capacity of about 500 MW through Renewable Energy Sources. Your Company is expected to have a stake of 40% alongwith other global core investors contributing the balance 60% of equity. The global core investors are expected to be finalized shortly.


During the year, projects having aggregate capacity of 6570 MW were approved covering an investment of Rs. 359,734 million. This will help to achieve the capacity addition target of 22430 MW during XI plan. As against this target, your Company commissioned 1740 MW last year. In addition, a unit of 250 MW was commissioned at Bhilai expansion project in April'2008. Various projects having aggregate capacity of 16680 MW including 3750 MW to be added by projects undertaken by Joint Venture companies are under construction. For the balance capacity addition, Feasibility Reports have been finalized and Main Plant Bids have been received/invited. A list of the projects expected to be commissioned by your Company as well as under its joint ventures with other companies till the year 2012 and beyond are as follows:

Name of the Project Capacity Capacity (MW) Addition by 2012Projects under NTPC LTD.

A. Coal Based-Ongoing Projects1. Kahalgaon-II, Phase II, Unit - VII 500 5002. Sipat -II, Unit- V 500 5003. Sipat-I 1980 19804. Barh-I 1980 19805. Korba-III 500 5006. NCTPP-II, Dadri 980 9807. Farakka-III 500 5008. Simhadri-II 1000 10009. Bongaigaon 750 75010. Mauda 1000 100011. Barh-II 1320 1320Sub Total (A) 11010 11010

B. Hydro Electric Power Projects(HEPP)-Ongoing

12. Koldam 800 80013. Loharinag Pala 600 60014. Tapovan Vishnugad 520 520Sub Total (B) 1920 1920Total ongoing projects (A)+(B) 12930 12930C. Coal Based-New projects15. North Karanpura 1980 66016. Rihand-III 1000 500D. Gas Based-New Projects17. Kawas- II 1300 130018. Jhanor- Gandhar- II 1300 1300Total of new projects (C) + (D) 5580 3760Grand Total (A)+(B)+(C)+(D) 18510 16690

Korba- Stage-III, Farakka-Stage-III, Loharinag Pala HEPP and Tapovan Vishnugad HEPP are being developed as merchant power projects.

The company is also exploring/identifying new sites for setting up of power projects based on availability of infrastructure and fuel etc. These locations would be added to the plans at a future date.

Capacity addition through Subsidiaries and Joint Ventures (JVs)

Besides adding capacities on its own, your Company has also plans to add capacities through some of its subsidiaries and joint ventures.

By leveraging our project execution strength, out of the total capacity addition of 22430 MW during XI plan, your Company is setting up 4000 MW (about 18% of the capacity addition) with JV partners giving them a better dispensation in terms of allocation of power, resulting in a win-win' situation for both. Four projects having a total capacity of 4000 MW are under construction. The detail of JV Companies/Subsidiaries alongwith details of Joint Venture partners for addition of capacity is as under:

JV Partner Company Details

Steel Authority NTPC-SAIL A 50:50 Joint Ventureof India Limited Power Supply Company formed to(SAIL) Co. Pvt. Ltd. own and operate captive power plants at Durgapur(120 MW), Rourkela (120 MW) and Bhilai Steel Plant (74 MW). The JV Company has undertaken expansion at Bhilai by adding two coal based units of 250 MW each.Tamil Nadu NTPC Tamil A 50:50 Joint VentureElectricity Nadu Energy Company formed forBoard Company setting up a coal based Limited. project having two units of 500 MW each at Ennore, Tamil Nadu. Main plant & offsite civil work package for Phase-I has been awarded.

Indraprastha Aravali Power The Joint VenturePower Company Company shall set upGeneration Private Limited a coal based projectCo. Ltd. (IPGCL) named Indira Gandhiand Haryana Super Thermal PowerPower Project consisting ofGeneration three units of 500 MWCo. Ltd. each. NTPC Ltd., IPGCL(HPGCL). and HPGCL contributed equity in the ratio of 50:25:25. Most of the packages for the project have been awarded. Civil works are in full swing.

Indian Railways Bhartiya Rail A subsidiary of NTPC Bijlee Company formed as a Joint Limited Venture with Ministry of Railways having contribution in the ratio of 74:26 for setting up of a power project of 1000 MW capacity of four units of 250 MW each at Nabinagar. Award of main plant for SG and TG Package has been placed on BHEL.

Details of commissioning schedules of the projects being implemented through joint ventures are given below:

Name of the Project Capacity Addition by 2012

Projects with JV partners

A. Coal Based-Ongoing Projects1. Bhilai Power expansion 2502. Indira Gandhi STPP 15003. Vallur STPP 10004. Nabinagar STPP 1000 TOTAL 3750

In addition to the above, a unit of 250 MW was commissioned on April 20, 2008 by NSPCL at Bhilai expansion project.

Vaishali Power Generating Company Limited (VPGCL) is a subsidiary of your Company which took over Muzaffarpur Thermal Power Station having two units of 110 MW each from Bihar State Electricity Board. Your Company has contributed 51% of equity and balance equity was contributed by Bihar State Electricity Board. The equity contribution of your Company is expected to increase upto 74% depending on final transfer value of the station to VPGCL. The second Unit has been successfully resynchronized on 17.10.2007 after four years of being idle. Renovation and Modernization of first Unit is under progress. The Company was rechristened as Kanti Bijlee Utpadan Nigam Limited on 10.04.2008.

A JV Company named 'Meja Urja Nigam Private Limited' was formed with Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL) for setting up 1320 MW coal based power project in Tehsil Meja of Allahabad District in Uttar Pradesh. Both NTPC and UPRVUNL have contributed 50% each in the equity of the JV Company. Site leveling work is in progress at this project.

Your Company has signed a Joint Venture Agreement with Bihar State Electricity Board (BSEB) for setting up 3X660 MW power project at Nabinagar in Bihar.

Set up to undertake development of small hydro projects having capacity upto 250 MW, NTPC Hydro Limited, a wholly owned subsidiary of your company, is implementing the following projects:

Project Location Capacity

Lata Tapovan Uttarakhand 171 MWRammam-III West Bengal 120 MW

The techno economic clearance of CEA and environmental clearance of Ministry of Environment and Forest have been obtained for both these projects. The land for Lata Tapovan HEPP has been acquired.


In order to strengthen its competitive advantage in power generation business, the Company also plans to diversify its portfolio to emerge as an integrated power major, with presence across entire energy value chain through backward and forward integration into areas such as coal mining, LNG Value Chain, manufacturing activities, power trading, distribution, etc.

Business opportunities are being continuously explored through environment scanning and new business plans are adopted accordingly.

Your Company has formed a Joint Venture Company with Bharat Heavy Electricals Limited named 'NTPC-BHEL Power Projects Pvt. Limited' on April 28, 2008 with 50:50 equity participation for taking up activities of Erection, Procurement and Construction of Power Plants and manufacturing of equipment.

Another JV Company named 'BF-NTPC Energy Systems Limited' was also formed on June 19, 2008, between your company and Bharat Forge Limited (BFL) for setting up a new facility to take up manufacturing of castings, forgings, fittings and high pressure piping required for power projects and other industries, balance of plant equipment for power sector. Your company will hold 49% equity and the balance equity will be held by BFL.

Last year, your Company had signed a Business Collaboration and Shareholders Agreement with Transformers and Electricals Kerala Ltd., TELK and the Government of Kerala for synergy in the field of manufacturing and repair of Power Transformers etc. As per the agreement, your Company had agreed to acquire 44.6% stake in TELK from Government of Kerala and its undertakings. The approval from BIFR has been obtained for restructuring package and action is being taken for delisting of shares of the existing company. On completion of such formalities the acquisition of stake will take place.


Your Company is keenly exploring opportunities to mark its footprints in different parts of the world.

In line with its Globalization strategy, your Company is making consistent efforts to enter the overseas markets and is focusing its efforts in the Middle East, Asia-Pacific and Africa regions for business. A Representative office is functioning in Dubai. A site has been identified for setting up a 2X250 MW coal based power plant in Trincomalee region, Sri Lanka in Joint Venture with Ceylon Electricity Board. Energy Audit of 15 Units of Saudi Electric Company has been successfully completed. Pursuant to signing of MoU with Government of Nigeria, our team is working on selection of prospective site for setting up one 700 MW Gas based and one 500 MW coal based power plant in Nigeria. In lieu of this, Government of Nigeria shall provide LNG for our stations.


All the planned capacity addition programs shall be financed with a debt to equity ratio of 70:30. Your directors believe that internal accruals of the company would be sufficient to finance the equity component for the new projects. Given its low gearing and strong credit ratings, your Directors believe that your Company is well positioned to raise the required borrowings.

Your Company is exploring domestic as well as international borrowing options including overseas development assistance provided by bilateral agencies to mobilize debt required for the planned capacity expansion program.

During the year, your Company has tied up a loan for USD 380 million under the guarantee of Japan Bank for International Co-operation and another loan of Euro 68.56 million from Nordic Investment Bank at competitive terms. The company also mobilized new term loans aggregating to Rs. 44,750 million from domestic banks and financial institutions. Bonds of Rs. 10,000 million were placed with Life Insurance Corporation of India to finance capital expenditure of projects.


The cumulative deposits received by your Company from 367 depositors as at March 31, 2008 stood at Rs 130 million. Further an amount of Rs. 19 million has not been claimed on maturity by 70 depositors as on that date.


Your company is the largest consumer of coal in the country. Total domestic coal received by your company during the financial year 2007-08 was 120.20 million tonnes, which was about 9.51% more than the previous year. To overcome temporary shortages in coal supply, your company resorted to import of coal to the tune of 2.74 million tonnes being 2.21% of total coal consumed during the year 2007-08. Your Company also intends to import 5 Million Tonnes of coal during 2008-09.

During the year, your company obtained long term coal linkages for its various projects from various subsidiary companies of Coal India Limited (CIL).

In order to have long-term fuel security, your company is also exploring the possibility of acquiring acreages in the coal assets abroad for which NTPC teams visited various countries.

Coal Mining

Your Company has been allotted six coal blocks namely Pakri Barwadih, Chatti Bariatu, Kerendari, Dulanga, Talaipalli and Chatti-Bariatu (South) with estimated Geological Reserves of plus 3 billion tonnes and production potential of about 48 Million Tonnes Per Annum (MTPA).

These blocks are targeted to be developed to entail overall coal production of about 14 MTPA by 2012. Process of selection of Mine Developer cum Operator for Pakri Barwadih mine is at an advanced stage. Mining plans for Chatti Bariatu and Kerandari have been submitted to Ministry of Coal. Land acquisition for five Coal Blocks is under progress.

Your Company has formed a Joint Venture Company named NTPC SCCL Global Ventures Private Limited' with Singareni Collieries Company Limited for undertaking coal mining in India and abroad.

As a part of developing strategic alliances as well as deriving technical strengths, your Company has entered into Memorandum of Understanding with RINL, SAIL, NMDC and CIL for sourcing coking coal and thermal coal from abroad.

Exploration Activities

Your Company, along with M/s Geopetrol International Inc. and M/s Canoro Resources Ltd, has been allotted a block for exploration activities in Arunachal Pradesh, for which it has signed a production sharing contract with Government of India. Your company has 40% participating interest in it. M/s Geopetrol International has been designated as the Operator of the block. Subsequent to the issuance of the Petroleum License by the State Government, the operator had initiated various exploration activities. The geological, geochemical, geo microbiological and 2D seismic survey has been completed. Environmental clearance has been granted and necessary infrastructure is being created for initiating exploratory well drilling.

Near Term Strategies

For optimum utilization of the capacity of its Gas based stations, your Company continued with the procurement of Spot Re-gasified LNG in order to mitigate gas shortages at its existing gas based stations.


Your Company considers Renovation and Modernization (R&M) as quick result low investment option to extract higher generation from old power stations. R&M is being undertaken in project mode with focus on feasible and cost effective technology upgrade, with capacity and efficiency improvements to bring the old vintage units near to the latest design. It gives an opportunity to leverage the technological advancement which has taken place in the power industry so as to continue economical power generation. Introduction of advance technologies is expected to result in improvement in efficiency of the units. It may also help to reduce green house gases and avail Clean Development Mechanism benefits apart from life extension of the plant.


Your Company takes pride in its highly motivated and trained Human Resource that has contributed its best to bring NTPC to its present height. The company has continuously added to its installed capacity and the Man-MW ratio has improved consistently. The attrition rate among the executives during the year was 3.1%. The total employee strength of the company stands at 24,547 as on 31.3.2008 as against 24,375 as on 31.3.2007.

Fiscal 2008 Fiscal 2007NTPCNumber of employees 23674 23602Man / MW ratio 0.87 0.91Generation per employee 8.48 7.99Subsidiaries & Joint VenturesEmployees of NTPC inSubsidiaries & Joint Ventures 873 773Total employees 24,547 24,375

NTPC follows 'People First' approach to leverage the potential of its employees to execute its business plans.

Employee Relations

Employee relations scenario in NTPC continued to be cordial marked by industrial harmony and mutual trust during the year.

The scheme for Employees Participation in Management continued to function successfully all over the Company.

The unions and associations and also the individual employees complimented the efforts of the management in developing and sustaining an enabling performance culture in the organisation. There has been continuous interactions between the management and the apex fora of workmen and executives. Safe methods are practiced in all areas of Operations & Maintenance and Construction & Erection activities for the protection of workers against injury and diseases. Occupational safety at workplace is given utmost importance.

Training and Development

Your Company, as part of its endeavour of being a learning organization, has created training and development infrastructure both at its sites as well as at the corporate level. The employee development centers at our projects and at Power Management Institute (PMI), Noida impart training in diverse areas including managerial skill, power station operation and maintenance and project construction, erection and commissioning and information technology. Special emphasis is given to developing knowledge and skills of the employees in the new business areas of coal mining, hydro power, nuclear power, power trading and distribution etc.

In addition to training its own employees, your Company has been providing a platform for imparting training to other constituents of the power sector - State Utilities, Independent Power Producers, Central Power Sector Undertakings. In the year 2007-08, a total of 324 programmes were conducted at PMI which were attended by a total of 8529 participants.


Vitally engaged in the endeavour of nation building, your Company is not only a partner in powering India's growth, it is also a partner in making Indian society more humane and just. Corporate Social Responsibility is an article of faith for us.

Your Company is providing sponsorship to candidates from villages in the vicinity of NTPC projects for ITI training at Government/ Government recognized private ITIs in the trades of welder, fitter, instrument mechanic and electrician. Close to 750 village youth have been sponsored during the year. Your Company also proposes to set up an ITI at Chatra District in Jharkhand State at an estimated cost of Rs. 67.10 million on land to be provided by the State Government of Jharkhand.

As a health care measure, your Company is providing support to Hyderabad Eye Research Foundation for three specialized Eye Centers at Bhubaneshwar Eye Hospital.

In the field of education, your Company is committed to provide support for setting up two technical polytechnics at Uttarakhand at Kaladungi District Nainital and a women's Polytechnic at Gopeshwar District Chamoli. Support has also been extended by NTPC for delivery vehicles for mid-day meal programme for the children of Government schools located in the National Capital Region through Food Relief Foundation of ISKON and for assistance in self reliance for 200 tribal girls/ women in the tribal area of Jhamar Kotra in Udaipur District of Rajasthan.

Committed to its social responsibilities, your Company became a member of Global Compact, a voluntary initiative of the UN for CSR. Your Company confirms its involvement in various CSR activities in line with the 10 Global Compact principles and share the experiences with the representatives of the world through 'Communication on Progress'. A report on progress made in this area is enclosed at Annex-IX to Directors' Report.

NTPC Foundation

NTPC Foundation has been established by the Company under Indian Trust Act, 1882 for addressing the identified areas of social development at national level through supportive interventions.

NTPC Foundation provides loans, training and medical treatment to physically challenged persons and economically weaker sections in a phased manner.

Rehabilitation & Resettlement

Your Company is committed to help the populace displaced for execution of its projects and has been making efforts to improve the Socio-economic Status of Project Affected Persons (PAPs) and also undertaking community development works in and around the projects. Social Impact Evaluation (SIE) for Simhadri and Sipat projects were completed during the year.


Your Company has made vigorous efforts for the propagation and successful implementation of the Official Language Policy of the Government of India. Several Hindi workshops and competitions were conducted at projects, regional offices and corporate centre during the year to encourage the employees to use maximum Hindi in official work. All office orders, formats and circulars were issued in Hindi as well. All important advertisements and house journals were released in bilingual form- in Hindi and in English. One Hindi word is being displayed over the intranet daily. Your company's website also has a facility of operating in bilingual form- in Hindi as well as in English. Hindi software 'Saransh' was procured and installed on computers to facilitate working in Hindi.


As a proactive measure to address issues concerning sustainable energy development, your Company had established Center for Power Efficiency and Environmental Protection (CenPEEP) more than a decade ago with the help of US DoE and USAID. CenPEEP took various initiatives for improvement in efficiency and maintenance to achieve sustainable GHG emission reduction from existing thermal power capacities. Methodology of acquisition of state-ofthe- art technologies and systems, demonstration in local conditions and widespread dissemination in power sector was adopted through technical assistance of USAID and USDoE.

A customized Efficiency Management System' has been developed and is under implementation in NTPC plants for sustaining the efficiency improvements.

Encouraged by the success of its efforts in GHG emission reduction, the USAID extended its technical cooperation with CenPEEP for a period of two years up to 2010.


Your Company has adopted the following vision statement on sustainable energy development:

'Going Higher on Generation, lowering GHG intensity'

A multi-dimensional approach is proposed to be adopted covering reduction of CO2 intensity through fuel portfolio management, adoption of state-of-the-art technology and special thrust on renewable energy sources; developing green building space within your Company's premises; spearheading awareness campaign nationally to orient people at large to support and contribute to measures for sustainable energy development; strengthening Government's efforts for dissemination and adoption of cleaner technologies by the stakeholders, engaging future generation into the cause of promoting clean and green energy through awareness programmes conducted in schools like tree plantation, environment quizzes etc.

Your Company would allocate up to 0.5% of distributable profit annually for undertaking/sponsoring research leading to sustainable energy development.


Your Company's Research & Development Centre is ISO 17025 accredited and provides high end scientific services to all the company's stations as well as many outside stations resulting in improving availability and reliability of stations by providing condition assessment, failure analysis, solving and analyzing specific problems, and helping our stations in increasing the availability and reliability of their units.

R&D has filed 4 patent applications viz ANN based Expert system for health assessment of high voltage transformers; Heat treatment technique for determining constituents of wear particles in lubricating oil and hydraulic fluids; readyto- use Fly ash based product through setting properties enhancement by using a dry plasticizer; Fly-ash Based utensil cleaning powder.

R&D along with BARC has developed and installed real time monitoring of creep fatigue life of high temperature pipings. The system continuously indicates the life of components consumed and suggests timely actions for inspection and repair.


Your Company's Energy Technologies Centre has started its research activities in-house and through networking with established research and academic institutes in India. As a step in this direction, Energy Technologies Centre has earlier networked with 8 institutes for 12 research projects in areas like carbon capture, power plant efficiency improvement, waste heat utilization, flue gas conditioning etc. Other research projects would include development of Coal Gasification Technology for commercial use, reducing cost of harnessing Solar Energy, LED lighting etc.

Energy Technologies has entered into a MoU with BARC, Mumbai for the Development of Automated Boiler Tube Inspection System for Coal Based Thermal Power Plants. Another MoU was signed with Heavy Water Board, Mumbai for the transfer of Ammonia Based Flue Gas Conditioning technology to NTPC, on non-exclusive basis, for its use in NTPC power stations.


Your Company is undertaking massive afforestation programme covering vast areas of land in and around its projects and till date has planted more than 18.37 million trees at its projects throughout the country. The afforestation has not only contributed to the aesthetics but also has been serving as a 'sink' for the pollutants released from the station and thereby protecting the quality of ecology and environment in and around the projects. For hydro projects, Catchment Area Treatment (CAT), Compensatory Afforestation, Rim Plantation etc. are finalised and implemented in consultation with respective State Governments.

All NTPC stations have been certified with ISO 14001 and OHSAS 18001 by reputed National and International certifying agencies.

Your Company has adopted advanced and high efficiency technologies such as super critical boilers for the up-coming Greenfield Projects. Your Company has also designed plants for use of beneficiated coal and imported low ash coal.

These measures will not only help in reducing pollution and minimizing use of precious natural resources but also lead to reduction of CO2 emissions and thereby reducing global warming.


Your Company is a pioneer in the power sector in development of CDM projects in India. The methodology developed by your Company for supercritical power plants in respect of North Karanpura project has been approved by 'United Nations Frame Work Convention on Climate Change (UNFCCC)' as 'ACM 0013' which will be globally used for CDM projects related to supercritical power plants. It is indeed a path breaking effort in power sector.

Host country approval has already been accorded by national CDM authority for three projects viz. North Karanpura STPP, Tapovan Vishnugad HEPP & Loharinag Pala HEPP. More projects are in the pipeline for posing for host country's approval. These endeavors shall help in getting/ earning 'Certified Emission Reduction' and will facilitate development of advanced energy efficient technologies.


During the year 2007-2008, about 23.7 million tonne of ash was utilized accounting for 55.1% of total ash generation. Important area of ash utilization were of Manufacturing Cement, Concrete, Ash based products, Asbestos sheets etc., Construction of Road Embankment, Ash Dyke Raising, Mine filling, and Land Development.

During the year, issue of fly ash to cement and concrete industry was 8.69 million tonne, 16.6% more than last year's issue. All coal based stations are having Pilot ash brick manufacturing plants.

Construction works at all expansion projects like Dadri-II, Kahalgaon-II and Rihand-II including their townships are being done with ash bricks only. Ash Bricks have also been used in green field project at Sipat project.

MoU has been signed with Railway Design & Specification Organization (RDSO) Lucknow to explore use of ash in Railway embankments. A number of studies have been taken up to explore new areas of Ash utilization in association with various research Institutes- such as Central Road Research Institute (CRRI), New Delhi, Institute of Mineral and Materials Technology (IMMT), Bhubaneshwar, National Institute for Interdisciplinary Science & Technology (NIIST), Thiruvanthapuram etc. for increased usage of ash in bricks and other building products.

Ash is also being exported to Middle East, Bangladesh & Nepal from our stations located at Simhadri, Farakka and Unchahar respectively.


Your Company believes in keeping pace with latest technology and acquiring the latest know-how, in line with its growth and diversification plans. The company is in the process of completing Enterprise Resource Planning (ERP) implementation, covering most of the processes of the organization at all its locations. The ERP package has been implemented at 28 locations of NTPC, its subsidiaries and is being implemented at the balance locations. In addition to the core business processes and Employee Self Service (ESS) functionality, ERP solution also includes eprocurement, Knowledge Management, Business Intelligence, Document Management, and Workflow etc.

The SAP Implementation in NTPC has been honored with SAP ACE award for best implementation in Utilities.


The Government of India reposes a lot of confidence on your Company's abilities in implementing plans and projects. This confidence has led the Government of India to make your Company a partner in a number of its initiatives. Some of the key initiatives are:

Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY)

Your Company has been entrusted by Government of Indiafor rural electrification work under Rajeev Gandhi Grameen Vidyutikaran Yojana in 6 States and one Union Territory (UT) covering approximately 40,000 villages. The work is in progress in 8 districts i.e. West Midnapore (West Bengal), Ashok Nagar & Guna (Madhya Pradesh), Janjgir- Champa (Chhattisgarh), Angul & Nayagrah (Orissa) and Deoghar & Jamtara (Jharkhand) during the X plan. 22 more projects have been sanctioned for XI plan period. The work is under progress in 9414 villages. Out of these, 1253 villages have been charged/ made ready for charging.

Partnership in Excellence

In a mission to increase capacity addition and meet the objective of Power for all by year 2012, Ministry of Power launched the Partnership in Excellence (PIE) Programme to improve the under performing stations in India. Under this programme, 13 stations with an operating capacity of 5050 MW were entrusted to NTPC. Performance turnaround has taken place at all the 13 power stations. The plants entrusted to NTPC recorded an additional generation of 2859 MUs in the year 2007-08 from the existing installed capacity which is equivalent to 440 MW of additional capacity.


Your Company has formed a number of joint venture and subsidiary companies for undertaking specific business activities. The names of these companies and the percentage of your Company's stake in these Companies is as follows.

The name of Vaishali Power Generating Company Limited has been changed to Kanti Bijlee Utpadan Nigam Limited on April 10, 2008.

The performance of these companies as well as the Consolidated Financial Statements are briefly discussed in the Management Discussion & Analysis section. The financial statements of subsidiary Companies along with the respective Directors' report are placed elsewhere in this Annual Report.


Information required to be furnished as per the Companies Act, 1956, Listing Agreement with Stock Exchanges, Government guidelines etc. is annexed to this report as below:

Particulars Annexure

Management Discussion & Analysis I

Report on Corporate Governance II

Information on conservation ofenergy, technology absorption andforeign exchange earnings and outgo III

Information as per Companies(Particulars of Employees) Rules, 1975 IV

Statement pursuant to Section 212 ofthe Companies Act, 1956 relating tosubsidiary companies V

Statistical data of the grievances VI

Statistical information on personsbelonging to Scheduled Caste / Tribecategories VII

Information on Physically Challengedpersons VIII

UNGC Communications onprogress 2007-08 IX


The Statutory Auditors of your Company are appointed by the Comptroller & Auditor General of India. M/s Varma & Varma, B.C. Jain & Co., Parakh & Co., S.K. Mittal & Co., Dass Gupta & Associates and S.K. Mehta & Co. were appointed as Joint Statutory Auditors for the financial year 2007-08.


The Statutory Auditors of the Company have given an unqualified report on the accounts of the Company for theFinancial Year 2007-2008.


As advised by the office of The Comptroller & Auditor General of India (C&AG), the comments of C&AG and Management's replies thereto on the accounts for the year 2007-08 are being placed with the report of Statutory Auditors of your Company elsewhere in this Annual Report.


The Cost Audit Reports for the year 2005-06 were submitted for the first time to the Cost Audit Branch in August 2006. The cost audit for the year 2007-08 has been completed and the Cost Audit reports are scheduled to be submitted shortly.


Shri T. Sankaralingam ceased to be the Chairman & Managing Director of the Company with effect from April 30, 2008 on superannuation. The Board wishes to place on record its deep appreciation for the valuable services rendered by Shri T. Sankaralingam during his association with NTPC.

Shri R.S. Sharma, Director (Commercial), took over as the Chairman & Managing Director with effect from May 1, 2008.

Shri V.P. Joy, Joint Secretary (Thermal), Ministry of Power joined the Board of the Company with effect from 30.08.2007 in place of Shri Harish Chandra who ceased to be a Director of the Company with effect from 31.07.2007. The Board wishes to place on record its deep appreciation for the valuable services rendered by Shri Harish Chandra during his association with NTPC.

In accordance with the provisions of Article 41(iii) of the Articles of Association of the company three directors - Dr. R.K. Pachauri, Prof. Ashok Misra and Shri R.C. Shrivastav shall retire by rotation at the Annual General Meeting of your Company and, being eligible, offer themselves for reappointment.


As required under Section 217(2AA) of the Companies Act, 1956 your Directors confirm that:

1. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. 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 2007-08 and of the profit of the company for that period;

3. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

4. the Directors had prepared the Annual Accounts on a going concern basis.


Your Directors acknowledge with deep sense of appreciation the co-operation received from the Government of India, particularly the Prime Minister's Office, Ministry of Power, Ministry of Finance, Ministry of Environment & Forests, Ministry of Coal, Ministry of Petroleum & Natural Gas, Planning Commission, Department of Public Enterprises, Central Electricity Authority, Central Electricity Regulatory Commission, State Governments, Regional Electricity Boards and State Electricity Boards.

Your directors also convey their gratitude to the shareholders, various International and Indian Banks, Financial Institutions for the confidence reposed by them in the company. The Board also appreciates the contribution of contractors, vendors and consultants in the implementation of various projects of the Company. We also acknowledge the constructive suggestions received from Government and the Statutory Auditors.

We wish to place on record our appreciation for the untiring efforts and contributions made by the employees at all levels to ensure that the company continues to grow and excel.

For and on behalf of Board of Directors

Place: New Delhi (R.S. Sharma)Date : 9th July, 2008 Chairman & Managing Director

Annex-I to Directors' Report



In order to sustain a GDP growth rate of 8% plus per annum, the Power Sector also needs to grow at an appropriate pace in the medium to long term. The growth of GDP vis-a-vis growth in gross generation of power for the last 7 years is given below:

The Government of India has drawn a capacity addition target of 78.577 GW during XI Plan, on an average adding a capacity of over 15 GW per annum in the country.

The PLF for the country was 78.61%, higher by 1.81% points over last year indicating improved efficiency. Even though there is an improvement in the power sector performance as a whole, the energy shortage at 9.8% and peaking shortage at 16.6% at the end of fiscal 2008 is a pointer for a dire need of rapid capacity addition in the country.

As per Report of Expert Committee on Integrated Energy Policy issued by Planning Commission, the energy requirement considering 8% growth in GDP over next 24 years is under:

Year Installed Capacity Energy Req. Req. (GW) (Billion Kwh)

2007-08 143 7372011-12 220 10972016-17 306 15242021-22 425 21182026-27 575 28862031-32 778 3880

Source: Integrated Energy Policy, Planning Commission

Indian economy is among the fastest growing economies in the world with 8.74% growth in the last five years. Our manufacturing and service sectors are logging double digit growth rates. This is a result of the favourable climate created for investment and enterprise in the country. The power sector has made good progress over the past few years. It has also seen significant changes. Utilities have been restructured. A solid regulatory foundation has been laid. The tariff setting is participative. Efforts are on to improve the financial health of the state utilities. Some of the major challenges alongwith remedial actions taken are discussed below.


1. Transparency and Competition

Lack of transparency and competition was a major challenge which has been addressed by the promulgation of the Electricity Act 2003 (EA 2003). The Act promotes a liberal, transparent and enabling legal framework for power development. It facilitates investment by creating competitive environment and reforming distribution segment of power industry. Broad measures under the Act are:

* Generation freed from licensing

* Trading recognized as a distinct activity

* Open access in transmission; and distribution

- Regulatory oversight for fixation of tariff, Licensing, Open Access and Market Development

- Multiple licenses in distribution allowed

- National Electricity Policy (NEP) 2005 issued.

- Competitive bidding guidelines 2005 issued

- Tariff Policy 2006 issued

The Electricity (Amendment) Act, 2007, enacted on May 29, 2007 amends certain provisions of the EA, 2003. Its main features are:

* The Central Government, jointly with the State Governments will endeavour to provide access to electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households

* No licence is required for sale from captive units

* Deletion of provision for elimination of cross subsidies. The provision for reduction of cross subsidies would continue

* Definition of theft expanded to cover the use of tampered meters and use for unauthorized purpose. Theft is made explicitly cognizable and non-bailable

2. Open Access in Transmission

* EA 2003 allows for open Access in transmission. Central Electricity Regulatory Commission (CERC) issued regulations in 2004 to facilitate open access in interstate transmission. Open access in inter-state transmission is fully operational

* In order to facilitate open access in transmission, national grid capacity is being expanded from current 17,000 MW to 37,700 MW

3. Open Access in Distribution

Reforms in distribution system is a key area for infusing efficiency and commercial viability to the power sector. Steps taken in this regard by Government of India are:

* Open access to consumers above 1 MW within five years commencing from 27th Jan 2004 (date of enforcement of amendment to EA in 2003)

* 23 SERCs have issued regulations on open access in Distribution

* 19 SERCs have issued methodology for determining charges for transmission, wheeling and cross subsidy surcharge

* 29 applications of open access in 9 States have been approved

* 9 have already been implemented

4. Power Trading

Trading of power is recognized as a distinct license activity under the EA 2003. The Central and State Electricity Regulatory Commissions have powers to grant inter state and intra-state trading licenses. So far 26 companies have been granted license for inter-state trading. Guidelines for setting up and operation of power exchange were issued by CERC on 6.2.2007. Approval has been accorded to set up the Power Exchange.

During fiscal 2008, 20.96 BUs representing 3.15% of the total electricity generated were traded.

5. Persisting Shortages

The Indian Power sector is fraught with persisting shortages. Although the PLF of stations has increased from 72.2% to 78.61% over last 7 years, the existing generation level needs to be enhanced substantially by the end of XI plan to realize the objective of Govt. of India of providing 'Power for all' by 2012. This requires gearing up not only the supply side but also demand side of power management.

6. Market determined generation price

* NEP emphasis on adopting economics of generation as a criterion for choice of fuel

* EA 2003, Sec 63 requires regulator to adopt tariff if it is determined through bidding process

* Central Government has already issued the guidelines for procurement of power through bidding process by distribution licensees

* Tariff Policy 2006 sets a time limit of 5 years for public sector projects to come on the bidding route

* Three Ultra Mega Power Projects awarded under competitive bidding route

* Govt. has issued guidelines for setting up of Merchant Power Plants for which fuel tie-up would be facilitated. These plants will not have any guarantees for minimum off -take

7. Rural Electrification

As per 2001 Census, 56% of rural households are unelectrified. The Central Govt. launched a scheme 'Rajiv Gandhi Grameen Vidhutikaran Yojana' (RGGVY) in April 2005 with the goal of electrifying all un-electrified villages and hamlets and providing access to electricity to all households in next five years. The progress so far is as under:

* So far over 44,430 villages have been electrified. 1.82 million Below Poverty Line (BPL) households connected

* Franchisees are in place in over 73,422 villages

* Rural Electricity Policy launched on August 23, 2006

8. Financial viability of State Utilities

Due to high incidence of Aggregate Technical & Commercial (AT&C) losses, the state utilities have been left cash strapped. The Reduction in AT&C losses and improving quality of supply holds the key. Some of the steps taken by the Government are:

* EA 2003 provides creation of one or more companiesfrom SEB

* Retail tariff determined by independent regulator

* Subsidy to be paid upfront

* Metering made mandatory

* Theft provisions made further stringent through recent amendment of EA (Theft made explicitly cognizable and non-bailable)

* Accelerated Power Development and Reforms Programme (APDRP) launched in X Plan, modified during 2007-08. The revised APDRP is linked to actual demonstrable performance in terms of AT&C loss reduction. Establishment of reliable automated systems for collection of accurate baseline data and the adoption of information technology in the areas of energy

accounting are necessary preconditions for sanctioning of projects for strengthening and up-gradation of subtransmission and distribution network

* AT&C losses are showing declining trend- reduced from 38.86% in 2001-02 to 32.07% (provisional) in 2006-07. The AT&C losses in 169 towns have declined to less than 20%

9. Development of Renewable Sources of Energy for generation of power

Renewable energy currently contributes a small fraction and it is expected to grow rapidly especially in areas like wind and solar power. Over the longer term, its importance would be more strategic so that the country can build a certain level of self-reliance in renewable technologies of the future. The steps taken by Govt. for increasing generation from renewable energy resources are :

* Electricity Act requires SERCs to specify a percentage for purchase of electricity from cogeneration or renewable sources termed as Renewable Purchase Obligation (RPO).SERCs in 12 States have already specified the percentage -Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Orissa, Rajasthan, Tamil Nadu, Kerala, Haryana, Maharashtra, Uttar Pradesh and West Bengal (Source: Ministry of New and Renewable Energy)

* Tariff Policy provides for competitive bidding for procurement of power from such sources - bidding to be done amongst suppliers offering power from same type of renewable source

* Procurement of power at preferential tariffs to be allowed by SERC

* Special scheme by MNRE for promoting solar power

10. Dispute resolution

Appellate Tribunal was operationalized in 2005 to hear appeals against orders of Electricity Regulatory Commissions. Recently, tribunal was mandated to hear appeals against orders passed by Petroleum Regulatory Board also.


While initiatives for addition to capacity to meet the growing demand for power are important in their own right, environmental considerations and the need for efficient use of resources make it imperative to pay focused attention to 'demand-side management' as well.

A study conducted for the Asian Development Bank estimated an immediate energy saving potential of 54,500 million Kwh and peak saving of 9,240 MW.


Generating capacity needs to grow rapidly from the current level to 778 GW by 2032 according to the estimate in the Integrated Energy Policy of the Planning Commission. Hence, huge potential for growth of the Indian power sector is envisaged in future. The Indian energy basket is weighted towards coal accounting for 53% and hydro for 25% of installed capacity. From a long term energy security perspective, it is necessary to diversify the energy basket. Since the known coal reserves are expected to exhaust in about 45 years, assuming an annual growth in domestic production of 5%, it would be a challenge to replace 53% of the energy basket. Diversification would mean increasing the share of Natural Gas, Nuclear and Hydro energy apart from a strategic thrust towards renewable energy.

Some of the specific measures taken aimed at inducing rapid growth in the sector and at the same time diversification/augmentation of fuel mix include the following:

New Hydro Policy launched

Coal is expected to continue to be the dominant energy source. However, India would have to actively develop noncoal sources given that a growth rate of 5 percent in coal production may not be sufficient to sustain desired growth in generation. Enhanced thrust is therefore required on power generation from other energy resources. A detail of estimated reserves for various energy resources is as under:

Resource Unit Reserves

Coal-Extractable Mtoe 13,489Oil Mtoe 786Gas-including coalbed methane Mtoe 1,866Uranium-metal Tonnes 61,000Thorium-metal Tonnes 225,000Hydel MW 150,000

(Million tonne oil equivalent-Mtoe)

Source: Integrated Energy Policy, Planning Commission

India is endowed with an estimated hydro power potential of more than 1,50,000 MW detailed as under:

Basin/River Potential at Probable 60% Load Installed Factor Capacity (MW)

Indus 19988 33832Ganga 10715 20711Central Indian Rivers 2740 4152West-flowing Rivers 6149 9430East-flowing Rivers 9532 14511Brahmaputra 34920 66065Total 84044 Say 150000

Source: Ministry of Power

However, only 24% of the potential has been developed till date and 45 hydro projects having aggregate capacity of 15,365 MW are presently under development. The main reasons for the slow development include difficult and inaccessible potential sites, difficulties in land acquisition, rehabilitation, environmental and forest-related issues, inter- State issues, geological surprises and long gestation period.

In order to give enhanced impetus to development of Hydro sector, a Hydro Power Policy 2008 was approved by cabinet on January 3, 2008. Under this policy, the Private producers can undertake Hydro projects in difficult and remote areas based on PPA route. The developer will have a facility of merchant sale upto 40% from saleable energy from hydro plant. An additional 1% free power over and above 12% has been earmarked for Local Area Development Fund aimed at providing infrastructure creation and welfare schemes in the affected areas.

Development of Coal value chain

India is currently the third largest coal producer in the world after USA and China. The power sector is a major consumer of coal utilizing about 78 per cent of the country's coal production. Coal-fired thermal units account for around 62% of total power generation in the country. Thus, coal continues to be the mainstay for the power sector. The total domestic production of coal during 2007-08 was ~430 million MT and the consumption was ~470 million MT. Of this, about 40 million MT was imported in 2007-08. Apart from bridging the demand - supply gap, blending of imported high quality coal with high ash domestic coal helps thermal power stations to adhere to the environmental stipulations of using coal with less than 34 percent ash content.

The sector has traditionally been characterized by - state monopoly, lack of independent regulation and lack of transparency in tariff determination. The recent measures adopted by government to usher structural reforms and for introducing competition through private participation are:

* During the year, 45 coal blocks with geological reserves of 11,384.49 Million Tonnes were allocated to the Government and private sector companies

* Notification specifying coal gasification and liquefaction as end uses was published in the gazette of India on July 12, 2007

* New Coal Distribution policy was notified on October 18, 2007. Under the policy there is a provision for appointment of a Coal Regulator

* Customs duty exempted on coking coal

* 100 percent income tax exemption on port development projects

* 100 percent Foreign Direct Investment (FDI) for port development under the automatic route

* The royalty rates on coal and lignite have been revised in July 2007 on the basis of formula consisting of advalorem plus a fixed component

Ultra Mega Power Projects

The Government of India launched an initiative for development of coal based Ultra Mega Power Projects (UMPPs), each with a capacity of 4000 MW or above. Originally, nine sites were identified by CEA in nine States for the proposed UMPPs. These include four pithead sites, one each in Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa, and five coastal sites, one each in Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. It is proposed to set up pithead projects as integrated projects with captive coal mines. The Ministry of Coal has allocated captive coal mining block(s) for Sasan UMPP in Madhya Pradesh, for Orissa UMPP (except for Chaturdhara block), for Tilaiya UMPP in Jharkhand and for Chattisgarh UMPP. For the coastal projects usage of imported coal is envisaged. The UMPP projects would help lower the cost of power to consumers and reduce emissions.

The bidding process in respect of Sasan, Mundra and Krishnapatnam UMPPs has been completed. The bidding process in respect of Tilaiya UMPP has been initiated by the SPV i.e. Jharkhand Integrated Power Ltd. The RFQ stage is over.

Way forward

Sustaining economic growth is critically dependent on significant supply augmentation and change in the composition of energy use. Import dependence, for meeting the primary energy demand in the country, has been increasing over a long period. Reducing dependence of the country's energy requirement in the medium to long term entails a number of measures:

* tapping India's coal reserves with appropriate\ technology and reforms in the coal sector to increase competition

* mitigating transportation constraints on availability of coal

* accelerating exploration of oil and gas

* fully exploiting the nuclear and hydro potential for power generation, and expediting programmes for energy generation through renewable and nonconventional sources

We attempt to give some more details concerning certain aspects of the sector and the Company by way of information and analysis.


The total installed capacity in the country as on March 31, 2008 was 143.061 GW with State Sector leading with a share of 52% followed by Central Sector representing 34% share and balance 14% is contributed by Private Sector entities.

Total Capacity GW % share

State 74.689 52%Centre 48.361 34%Private 20.011 14%Total 143.061 100%

Source: CEA's executive summary

The total thermal capacity, including gas stations and diesel generation, accounts for about 64% of installed capacity of the country followed by hydro capacity at 25%. Nuclear stations account for 3% and the balance 8% is towards Renewable Energy Sources.

With about 53% capacity based on coal in the country, coal continues to remain as mainstay of power generation.

Total Capacity GW % share

Thermal 91.907 64%Hydro 35.909 25%Nuclear 4.120 3%R.E.S.@ 11.125 8%Total 143.061 100%

@ Renewable Energy Sources

Source: CEA's executive summary, Economic Survey 2007-08

Out of 9.263 GW added during the year in the country, the Central Sector contributed to an addition of about 34.98% by installing 3.240 GW and your company contributed to 19% by installing 1.740 GW (including 740 MW added by Ratnagiri Gas and Power Pvt. Limited, a joint venture company).


The total power generation in the country during the year 2007-08 was 704.451 billion units as compared to 662.52 billion units generated during last year registering a growth of 6.33%.

The sector wise break up as well as fuel wise break-up of generation for the year 2007-08 is detailed as under:

Total Generation Billion Units % share

State Sector 338.052 48%Central Sector 298.949 42%Pvt. Sector 62.160 9%Others 5.290 1%Total 704.451 100%

Total Generation Billion Units % share

Thermal 558.815 79%Hydro 123.570 18%Nuclear 16.776 2%Others 5.290 1%Total 704.451 100%

Source: CEA's executive summary

Although the State Sector accounts for 52% of installed capacity, its contribution to national generation is only 48%. Central Sector utilities have better performing stations as compared to those of State utilities and contribute 42% of nation's generation with a share of 34% in installed capacity.


With approximately 1/5th of capacity, NTPC contributes to over 28% of nation's generation.

All India NTPC % share

Capacity (GW) 143.061 27.350 19.12%Generation (BU) 704.451 200.863 28.51%Capacity incl. JVs(GW) 143.061 29.144 20.37%Generation incl. JVs(BU) 704.451 208.301 29.57%

Source: Ministry of Power

Your Company is the fifth largest generating company in Asia after Tokyo Electric Power Company, Japan, Korea Electric Power Company, Korea, Taiwan Power, Taiwan and Huaneng Power International Inc., China (Source- Datamonitor, UK).


India has one of the lowest per capita energy consumptionin the world. In order to sustain the GDP growth at the desired level of over 8% per annum, the growth in generation of electricity has to be commensurate. Central Electricity Authority in its 17th EPS has projected that in order to completely wipe off the energy deficit, the energy requirement at the power station bus bar would be of the order of 968.659 Billion Units in 2011-12. Presently, the sector is characterized by acute shortages. The peaking shortage as on March 31, 2008 was 16.6% as against the deficit of 9.8% in power supply position during 2007-08. The last fiveyear demand and supply position in the country is indicated as under:

Actual Power Supply Position

Fiscal Requirement Availability Surplus/DeficitYear (+/-) (MU) (MU) (MU) (%)

2004 559,264 519,398 -39,866 -7.1%2005 591,373 548,115 -43,258 -7.3%2006 631,554 578,819 -52,735 -8.4%2007 690,587 624,495 -66,092 -9.6%2008 737,052 664,660 -72,392 -9.8%

MU denotes Million units, Source: Annual Report- 2007-08, Ministry of Power, Executive Summary of CEA.


The end users of power in India are broadly classified into industrial, domestic, agricultural and commercial categories. The share of each of these categories in the consumption of electricity during the fiscal 2007 was approximately 38%, 24%, 22% and 8% respectively. The balance of sales pertained to various other consumers. The per capita consumption of electricity is quite low in comparison to the global average.

The per capita electricity consumption in India, with other developed and other major emerging nations as of 2004 is given below:

Country Per Capita Country Per Capita Electricity Electricity Consumption Consumption in Kwh in Kwh

USA 14240 Brazil 2340Australia 11849 Mexico 2130South Korea 7710 China 1684U.K. 6756 Egypt 1465Russia 6425 India 618Malaysia 3196 World Average 2701

Source: UNDP Human Development Indicators' 2007/2008

The per capita consumption of electricity has improved to 704 kwh in the year 2007-08.


Capacity utilisation in the Indian power sector, as measured by plant load factor (PLF) has been improving over the years and the PLF for coal-fired plants has increased from 76.80% in 2006-07 to 78.61% in 2007-08. Over the last fiscal, operationally NTPC stations performed better than collective performance of any other sector.


2007-08 2006-07 Increase

Central sector 86.74 84.2 2.54State sector 71.89 71.71 0.18Pvt sector 90.77 86.35 4.42National avg. 78.61 76.80 1.81NTPC 92.24 89.43 2.81


In India, the power transmission and distribution (T&D) system is a three-tier structure comprising of distribution net-works, state grids and regional grids. The distribution networks are owned by the Distribution licensees and thestate grids are primarily owned and operated by respective state utilities. In order to facilitate the transmission of power among neighbouring states, state grids are interconnected to form regional grids.

Most of the inter-state transmission links are owned and operated by Power Grid Corporation of India Limited. Powergrid also owns and operates many inter-regional transmission lines (forming a part of the national grid), in order to primarily facilitate the transfer of power from a surplus region to a deficit region. The regional grids are being gradually integrated to form a national grid enabling interregional transmission of power facilitating optimal utilisation of the national generating capacity. The geographical distribution of primary sources of power generation in the country is uneven. The hydro potential is in the Northern and North-Eastern States and coal is primarily located in the Eastern part of the country. Development of strong National Grid has become a necessity to ensure optimal supply of power to all. The Ministry of Power has envisaged establishment of an integrated National Power Grid in the country by the year 2012. The program envisages addition of over 60,000 ckt km of Transmission Network in a phased manner by 2012. The integrated grid shall evacuate additional 100,000 MW and carry 60% of the power generated in the country. The existing inter-regional transmission capacity of about 17,000 MW connects the northern, eastern, north-eastern and western regions in synchronous mode and the southern region asynchronously.

The inter-regional power transmission capacity of 17,000 MW at end of fiscal 2008 is expected to be further augmented to 37,700 MW by 2012. The southern region will also be connected to rest of the regions forming an all- India synchronous grid.

Government has notified Tariff Based Competitive Bidding guidelines for Transmission Service to encourage competition in development of transmission projects. 14 such transmission projects have been identified for development by Private sector by an empowered committee constituted under CEA. REC and PFC have been entrusted with the task of formulating FRs/DPRs for these projects and to invite bids.


Responsibility for the development of the power industry is shared between the Central Government and the State governments. The Electricity Act 2003 provides the overall legislative framework for the sector.

The Ministry of Power (MoP) oversees the operation of all Central Sector Power utilities. The Central Electricity Authority advises the MoP on electricity policy and technical matters. The government has constituted CERC as per legislative requirement to regulate the tariffs for the central power utilities and other entities with inter-state generation or transmission operations. The EA 2003 also requires state governments to set up State Electricity Regulatory Commissions for rationalization of energy tariffs and formulation of policy within each state. As of March 31, 2008, twenty-five states have set up their regulatory commissions.


Being the largest power generating company in the country with market share of 20% in terms of installed capacity and about 30% in terms of national generation, your Company is a dominant player in the field of generation. The entity with the next largest market share of 6.72% in the country is Maharashtra State Power Generation Co.Ltd. having an installed capacity of 9621 MW. With the capacity expansion plans in place, your Company is poised to retain its leadership position in future as well even though the competition may increase due to enhanced investments in the sector ushered by reforms.


The Company has to sustain its growth, retain its leadership position in the country and at the same time improve its operational efficiency. In order to reduce dependence on conventional fuel, the Company is foraying into hydro, nuclear and non-conventional energy sources. As a step in backward integration, the Company is entering into coal mining business and also natural gas value chain.

The strategies adopted to achieve above activities make us susceptible to various risks. We have taken adequate measures to address such concerns by developing adequate systems and practices. In order to institutionalize the risk management in the Company, a Risk Management Policy was formulated in fiscal 2005. As an initial step, the policy has identified various risks in the areas of fuel, operations, project implementation, regulatory environment, business, customers, assets, financial, human resource and IT. After careful analysis of business environment, corporate plan and business practices and with a view to enhance business performance, your Company has adopted a two pronged strategy - the short-term as well long-term measures to mitigate these risks and also to put in place a reporting system which would enable critical risks beyond certain tolerance levels to be reported for further action.

In order to imbibe the best practices prevalent in the industry, your Company has appointed a reputed Consultant to develop and implement a Framework for Compliance under clause 49 of the listing agreements with Bombay Stock Exchange/National Stock Exchange. After holding detailed deliberations involving all the units of the Company, an entity wide Risk Register is under development. A Risk reporting framework alongwith mitigation measures is under finalization.


Your Company has a sound system of Internal Controls for financial reporting of various transactions, efficiency of operations and compliance with relevant laws and regulations. Suitable delegation of power and also the guidelines for preparation of accounts have been issued for uniform compliance. In order to ensure that all checks and balances are in place and all internal control systems are in order, regular and exhaustive internal audits are conducted by experienced firms of Chartered Accountants in close co-ordination with Company's own Internal Audit Department. Besides, the Company has two Committees of the Board viz. Audit Committee and Committee on Management Controls which periodically review important findings of different Audits, keeping a close watch on compliance with Internal Control Systems.

Under the Consultancy assignment for development and implementation of the Framework for Compliance under clause 49 of the listing agreements with BSE/NSE, a detailed and structured Internal Control Framework is also under development. Gaps, if any, under the existing system are being examined and the mitigation measures for the same are being devised.


A. Results of Operations1. Gross Income Fiscal 2008 Fiscal 2007Units of electricity sold(million units) 187988 176530

Income Amount in Rs. Million

Energy Sales(Excl Electricity Duty) 369,462 325,344

Energy Internally Consumed 409 365Consultancy & other services 1,039 608Other income (excludingincome related to OTSS*) 16,242 12,400Income related to OTSS * 12,961 15,049Gross Income 400,113 353,766

*OTSS-One Time Settlement Scheme

The gross income of the Company comprises of income from sale of electricity, consultancy and other services, and interest earned on investments such as term deposits and bonds issued under one-time-settlement scheme. The gross income of the Company for the fiscal 2008 was Rs. 400,113 million as against Rs. 353,766 millionin the previous year registering an increase of 13%. This gross income excludes provisions written back. Each element of income is discussed below.

1.1 Sale of Electricity

Your Company sells electricity to bulk consumers comprising, mainly, electricity utilities owned by State Governments. Sale of electricity is made pursuant to long-term power purchase agreements entered into for 25 years in case of most of our coal-fired plants and for 15 years in case of most of our gas-fired plants in line with the estimated average life of the plants. The agreements are renewed or extended upon expiry of the initial term.

Income from sale of electricity for the fiscal 2008 was Rs. 369,462 million which constituted 92% of the gross income. The income from sale of electricity has increased by 14% over the previous year's income of Rs. 325,344 million because of a 6.49% increase in units sold as a result of increase in the commercial capacity by 500 MW of Vindhyachal-III and also on account of one unit each of Vindhyachal-III (500 MW), Unchahar-III (210 MW) and Badarpur (705 MW) being in commercial operation for the entire fiscal 2008 as compared to part of fiscal 2007. The generation was also higher due to increase in PLF of existing stations by about 2.81%. Income from sale of electricity also includes the actual tax payments in respect of generation business recoverable from the customers as per tariff regulations which has increased by 36% from Rs.22,761 million for the current fiscal as against Rs.16,760 million for the last fiscal. The increase of Rs 6,001 million is primarily due to increase of 12% in profit before tax on generation income. For calculation of Income tax, Advance Against Depreciation (AAD) is also considered and grossed up tax has been computed. The impact of tax due to AAD is Rs.2,578 million. The average selling price this year has also increased to Rs. 1.97 per unit compared to Rs 1.84 per unit in the previous year. The increase is mainly due to increase in variable and partly due to increase in fixed charges and incentives. The average tariff includes adjustments pertaining to previous years. Excluding adjustment of sales pertaining to previous period, the average selling price would be Rs. 1.91 per unit in the current year as against Rs. 1.81 per unit in the previous year.

There has been 100% actual realization of the dues during the last five years. All the beneficiaries have opened and are maintaining LC equal to or more than 105% of average monthly billing as per One-Time Settlement Scheme. In order to ensure prompt and early payment of bills for supply of energy to beneficiaries, your company has formulated a Rebate Scheme which provides additional incentive for early payment of bills based on the provisional bill raised on the last working day of the month. This has resulted in realization of nearly 68% of the energy bill within a week of presentation of bill for the month.

1.2 Tariffs

Our charges for electricity are based on tariff rates determined by the CERC. The tariff rates consist of a fixed charge based on plant availability, variable charges based primarily on fuel costs and an unscheduled interchange charge which is a payment (or penalty) under Availability Based Tariff designed to bring grid discipline. The CERC sets tariff rates on a plant-by-plant basis in accordance with the tariff regulations/norms notified by them.

Since April 1, 2004, our tariffs are determined pursuant to the CERC's tariff regulations applicable for fiscal 2005 to fiscal 2009. The significant elements of the fixed charges permissible under the regulations are:

* Return on equity at 14%, on a post-tax basis based on a prescribed 70:30 debt to equity ratio for new projects

* Actual interest cost incurred on normative debt

* Interest on working capital determined on a normative basis

* Depreciation on plant and machinery calculated at 3.6% for coal based stations and 6% for gas based stations

* Operation and maintenance costs determined normatively by the CERC based on size of unit, on a per megawatt basis Variable charges on the electricity sold are determined on the basis of landed cost of fuel applied on the quantity of fuel consumption derived on the basis of norms for heat rate, auxiliary consumption, specific oil consumption etc.

Besides the fixed capacity charges and the variable charges, the other elements of tariff are:

* Incentives payable at the rate of Rs. 0.25 per unit for operating plants at PLF of more than 80%

* Exchange rate variations as per Regulations

* The unscheduled interchange charge payable (or receivable) at rates prescribed in the Regulations

* Taxes related to income arising from the generation activities of the Company are recoverable from the customers

1.3 Provisional Tariffs

In case of stations where CERC has not yet fixed the final tariff, revenues are booked based on the assessment of the likely final tariff based on the CERC regulations. When CERC fixes the final tariff for these stations, adjustments are made to revenues on the basis of the final order to the extent of the difference between the provisionally booked revenues and the revenues based on the tariffs determined by CERC.

For the current fiscal year, CERC has issued final tariff orders in respect of all but two units/stations, namely, Vindhyachal-III and Unchahar-III. Accordingly sales of Rs.15,028 million for fiscal 2008 relating to these units/ stations have been recognized on provisional basis (explained in note 2(a) of the Notes on Accounts, Schedule-27).In addition sales of Rs. 13,074 million in respect of Badarpur Thermal Power Station has been provisionally recognized based on orders issued before transfer of ownership to the Company (explained in note 2(c) of the Notes on Accounts, Schedule-27).

1.4 Consultancy and other services

The Company provides consultancy services in engineering, project management, construction management, operation and maintenance of power plants to clients within as well as outside India. During the year, Consultancy Division posted an income of Rs 1,039 million as against Rs 608 million achieved in the last fiscal. In the fiscal 2008, it has recorded a profit of Rs 368 million as against Rs. 230 million in the last fiscal. A total of 62 orders valued at Rs.1,792 million were secured by the Division during the year including 4 overseas assignments of Rs. 9 million.

1.5 Other Income

'Other income' in fiscal 2008 was Rs. 29,203 million as compared to Rs.27,449 million in the fiscal 2007. Broadly the break up of other income is as under:

Rs Million Fiscal 2008 Fiscal 2007Interest for the year on taxfree bonds /Loan toState Govt. 12,961 15,049Income on investment ofsurplus cash 14,136 9,218Dividend/Income from JVsand Subsidiaries 110 150Income earned on otherheads such as hire charges,profit on disposal ofassets, etc 2,391 1,760Interest on income taxrefunds(non-recurring) - 1,442Total 29,598 27,619Less: Transfer to IEDC/development of coal mines 395 170Net other income 29,203 27,449

Our 'other income' mainly comprises of income from bonds issued under One Time Settlement Scheme (OTSS), income from investment of surplus cash, dividend on our equity investment in joint ventures and subsidiaries and miscellaneous income.

Interest income from OTSS bonds for fiscal 2008 is Rs.12,961 million as compared to Rs.15,049 million in fiscal 2007.The reduction in interest income to the extent of Rs.2,088 million is due to redemption of OTSS bonds amounting to Rs. 16,515 million. This reduction in interest income on OTSS bonds is partly offset by income of Rs.4,918 million earned on account of investments made from surplus cash. The investment of surplus cash has registered a 53% increase from Rs.9,218 million in fiscal 2007 to Rs.14,136 million in the current fiscal.

We have earned Rs.96 million as dividend from our investments in joint venture and subsidiary companies. Another Rs.14 million has been earned as interest from loan of Rs.200 million extended to Kanti Bijlee Utpadan Nigam Limited, one of our subsidiaries. Further, an amount of Rs.2,391 million has been earned from various other sources such as hire charges, profit on disposal of assets, interest from joint venture company etc. as compared to Rs.1,760 million earned in the last fiscal, registering an increase of 36%. This also includes interest of Rs.159 million earned during the current year from loan of Rs.1700 million extended to Ratnagiri Gas and Power Private Ltd., a joint venture company.

1.6 Adjusted Gross Income

The gross income reported for the year includes certain revenues pertaining to previous years. The revenues from sale of electricity for the fiscal 2008 includes Rs.11,336 million pertaining to previous years which have been recognized in sales based on the orders of the CERC / Appellate Tribunal (explained in note 2(d) of the Notes on Accounts, Schedule-27). Similarly, for fiscal 2007, an amount of Rs.5,424 million pertaining to previous years were included in the sales.

As per CERC Tariff Regulations, 2004 exchange rate variation on interest payments and loan repayments corresponding to the normative loans considered for tariff of stations/units is payable/ recoverable to/from the beneficiaries on repayment of the loans and interest thereon.

The company was accounting for Foreign Exchange Rate Variation (FERV) arising on foreign currency loans on accrual basis as per the provisions of AS11 (revised) and consequently the foreign currency loan is restated at the balance sheet date while the revenue for recovery/ refund of FERV which is allowed from/to the beneficiaries as per CERC Tariff Regulations, 2004 was being recognised on actual repayment of loan and payment of interest in foreign currency at a later date. Pursuant to opinion of Expert Advisory Committee of the ICAI, foreign exchange variation on restatement of foreign currency loans as at the Balance Sheet date which is payable/recoverable to/from customers later on settlement is accounted for by creating a deferred liability/asset in the accounts instead of adjusting the same in the profit & loss account. Such exchange differences for the year 2007-08 amounting to Rs. 250 million have been accounted for during the year by credit to 'Sales - Exchange Fluctuation Receivable from Customers' (explained in note 14(b) of the Notes on Accounts, Schedule-27).

In the fiscal 2007, Commissioner of Income Tax (Appeals) had issued a favourable decision on taxability of Surcharge Income relating to Assessment Year 2003-04 resulting in interest income amounting to Rs.1,442 million on account of income tax refund.

The gross income of the company after such adjustments is as under:

Rs Million Fiscal 2008 Fiscal 2007

Gross Income 400,113 353,766Less:Sales of previous years 11,336 5,424Exchange Fluctuationreceivable from customers 250Interest on incometax refunds 1,442Adjusted Gross Income 388,527 346,900

2. Expenditures

2.1 Expenditure related to operations

Rs.MillionExpenditures Fiscal Rs per Fiscal Rs per 2008 kwh 2007 kwh

CommercialGeneration -MU 200280 188140Fuel 220,202 1.10 198,181 1.06Employees'remunerationand benefits 18,960 0.10 11,632 0.06Generation,administrationand otherexpenses 16,284 0.08 15,567 0.08Total 255,446 1.28 225,380 1.20

The expenditure incurred on fuel, employees, generation, administration and other expenses for the fiscal 2008 was Rs. 255,446 million which is 13.34% more than the expenditure of Rs. 225,380 million incurred during the previous year. In terms of expenses per unit of power produced, it was Rs. 1.28 per unit in fiscal 2008 in comparison to Rs. 1.20 per unit in the previous year. This increase is partly due to commercialization of one unit of 500 MW of Vindhyachal w.e.f. 15.07.2007 and also on account of one unit each of Vidhyachal-III

(500 MW), Unchahar-III (210 MW) and Badarpur (705 MW) being in commercial operation for the entire fiscal 2008 as compared to part of fiscal 2007.The increase in commercial generation due to additional capitalization has resulted in an additional operational expenditure of Rs.10,367 million. A discussion on each of these components is given below.

2.1.1 Fuel

Expenditure on fuel constituted 86% of the total expenditure relating to operations as compared to 88% in previous year. Expenditure on fuel was Rs.220,202 million in fiscal 2008 in comparison to Rs. 198,181 million in fiscal 2007 representing an increase of 11%. The higher fuel expenses were mainly due to increase in fuel prices. Fuel cost per unit generated increased to Rs.1.10 in fiscal 2008 from Rs. 1.06 in fiscal 2007.The increase in fuel cost due to addition of commercial capacity is Rs.8,634 million.

The power plants of the company use Coal and natural gas as the primary fuels. The oil is used as a secondary fuel for our coal-fired plants and naphtha as an alternate fuel in our gasfired plants. Under the tariff norms set by the CERC, your Company is allowed to pass on fuel charges through the tariff, provided the company meets certain operating parameters. The company purchases coal under the long term coal supply agreements with subsidiaries of Coal India Limited (CIL) and with Singareni Collieries Company Limited. A new Model Coal Supply Agreement (CSA) has been initialed on March 29, 2007 with CIL which inter-alia contains the various provisions under which coal would be sourced from the various subsidiaries of CIL by our power stations. As per the Model Coal Supply Agreement, coal price shall be determined by a formula comprising a base price which shall be increased initially by CIL by 10% and thereafter, the base price shall be updated on 1st April each year based on the movement of inflation index with escalation neutralization having a cap of 50%. CIL has revised coal prices for its subsidiary companies with effect from December 13, 2007 by about 10% in accordance with the model CSA.

During the fiscal 2008, coal based stations consumed 123.92 million tonnes of coal as against 113.45 million tonnes in the fiscal 2007.This was including 2.64 million tonnes of coal which was imported as compared to 2.43 million tonnes imported in fiscal 2007.

The company sources gas domestically under an administered price and supply regime. Our main gas supplier is GAIL. Gas prices are fixed by the Ministry of Petroleum and Natural Gas. We received a supply of 11.76 Million Metric Standard Cubic Meters per Day (MMSCMD) of gas during the fiscal 2008 as against 12.67 MMSCMD received in fiscal 2007. This includes 2.77 MMSCMD of spot gas as compared to 2.98 MMSCMD last year. In addition, last year gas supply includes gas procured from GSPC (0.14 MMSCMD) and fall back arrangement amounting to 0.16 MMSCMD. The reason for reduction in the supply of APM/PMT gas was on account of shutdown of the ONGC platforms in January and March 2008.

To meet the shortfall in supply of Natural Gas from GAIL, the Company sought supplies of RLNG on Limited tender basis from all the known gas suppliers in the country. These supplies are being contracted on best effort basis with no penalty either on the supplier or the buyer for supplies not offered / not off taken. During the fiscal 2008, supplies to the extent of 1014.16 MMSCM were received from the various suppliers.

Rajiv Gandhi Combined Cycle Power Project (RGCPP), Kerala generates power on naptha as no gas supply is available. Besides RGCPP, other gas based stations also used Naphtha depending upon the demand from customers and schedule from load dispatch centers.

During the fiscal 2008, 0.683 million MT of naptha was consumed as against 0.580 million MT in the previous year.

2.1.2 Employees' Remuneration and Benefits

Employees' remuneration and other benefits have increased by 63% from Rs. 11,632 million in fiscal 2007 to Rs.18,960 million in fiscal 2008. Employees' remuneration and benefits expenses include salariesand wages, bonuses, allowances, benefits, contribution to provident and other funds and welfare expenses. These expenses account for approximately 7% of our operational expenditure in fiscal 2008 as compared to 5% in fiscal 2007.

The primary reason for increase in employee cost is the provision made for pay revision of the employees of the Company which is due w.e.f. 1st January 2007. Pending recommendation of the committee formed by GOI for pay revision, a provision of Rs.4,094 million has been made towards wage revision arrears on estimated basis for fiscal 2008 as compared to a provision of Rs.979 million for three months for fiscal 2007 (explained in note 6(a) of the Notes on Accounts, Schedule-27). Out of the total wage provision of Rs. 4,094 million, an amount of Rs. 3,635 million was included in employee remuneration expenses. The balance amount includes additional incentives and other related benefits to employees alongwith normal annual cost increase in employee remuneration and benefits. This resulted in an increase in the employee cost per unit of generation from Rs.0.06 in the previous fiscal to Rs.0.10 in the current fiscal. The increase in employee cost due to additional commercial capacity is Rs.1,078 million.

2.1.3 Generation, Administration and Other Expenses

Generation, administration and other expenses consist primarily of repair and maintenance of buildings, plant and machinery, power and water charges, security, insurance, training and recruitment expenses and expenses for travel and communication. These expenses represent approximately 6% of our operational expenditure in fiscal 2008 as compared to 7% in fiscal 2007. In absolute terms, these expenses increased by 5% to Rs.16,284 million in fiscal 2008 from Rs.15,567 million in fiscal 2007. In term of expenses per unit of generation, it was Rs. 0.08 in fiscal 2008 same as in the previous year. The increase in Generation, administration and other expenses due to addition of commercial capacity is Rs. 655 million.

Repair & Maintenance expenses constitute 63% of total Generation, Administration and Other Expenses and have increased to Rs. 10,255 million from Rs.9,358 million resulting in an increase of 10%.The other increase in generation & administration expenses is mainly attributable to increase in security expenses.

The security expenses have increased by 29% to Rs.1,535 million from Rs. 1,190 million mainly due to provision of Rs.518 million for fiscal 2008 in comparison to Rs.276 million for fiscal 2007 towards salary of CISF and others for VI Pay commission which is pending since January 1, 2006 (explained in note 6(b) of the Notes on Accounts, Schedule-27). Out of the total wage provision of Rs. 518 million, an amount of Rs. 481 million was included in security expense.

In the last fiscal there was a one time write-off of interest of Rs.640 million towards settlement reached with GRIDCO (explained in note 9 of the Notes on Accounts, Schedule-27 to Accounts of 2006-07).

2.1.4 Adjusted Expenditure related to Operations

If the impact of wage revision and settlement with GRIDCO is adjusted, the operational expenditure for the fiscal 2008 and fiscal 2007 would be as follows:

Rs Million Fiscal 2008 Fiscal 2007

Total Expenditure related toOperations 255,446 225,380Less:Wage revision provision 8,096 1,255Waiver of interest underGRIDCO Settlement 640Adjusted Expenditurerelated to Operations 247,350 223,485

2.2 Depreciation

The depreciation charged to the profit and loss account during the year was Rs. 21,385 million as compared to Rs. 20,754 million in fiscal 2007, registering an increase of 3%. This is due to increase in gross block by Rs.26,407 million i.e. from Rs. 507,273 million in the previous fiscal to Rs. 533,680 million in the current fiscal. The increase in gross block is largely on account of commencement of commercial operation of one unit of 500 MW at Vindhyachal which has resulted in capitalization of Rs. 14,135 million. The impact on depreciation for additional capitalization during the fiscal 2008 is Rs. 1,747 million which is partly offset due to reduced depreciation for older stations.

As per the accounting policy of the Company, depreciation is charged on straight line method as per the rates given in the schedule set forth in the Companies Act, 1956 except for some items for which depreciation at higher rates is charged (please refer to Accounting Policy no. 12.2.1).

2.3 Provisions made (and written back)

During the fiscal 2008, the Company had made provisions amounting to Rs. 71 million in comparison to Rs. 114 million provided for in fiscal 2007. The provisions were made mainly in respect of doubtful advances and claims, obsolescence in value of surplus stores and for other items. During the fiscal 2008, the Company had also written back provisions made in earlier years amounting to Rs. 64 million in comparison to Rs. 41 million of provisions written back in fiscal 2007.

2.4 Interest and Finance Charges

The interest and finance charges for the fiscal 2008 were Rs. 17,981 million in comparison to Rs. 18,594 million in fiscal 2007. The details of interest and finance charges are tabulated below:

Rs. Million Fiscal 2008 Fiscal 2007Interest Charges:

Interest on borrowings 17,838 14,837Interest on Amount payableto customers 15 2,091Total Interest charges 17,853 16,928Finance Charges 8,198 9,074Total 26,051 26,002Less: Adjustments andtransfers

Exchange differencesregarded as adjustmentto interest costs 1,255 1,227Interest charges capitalised 6,286 5,955Finance charges capitalised 529 226Total Interest and financecharges capitalised 6,815 6,181Net interest andfinance charges 17,981 18,594

Interest amount on borrowings has increased by 20% over last fiscal due to increase in long term borrowings during the year by Rs. 27,062 million. Our borrowings are denominated in Rupees and foreign currencies. The exchange differences in respect of overseas borrowings relating to fixed assets/capital work-in-progress are added to when unfavorable (and reduced from, if favorable) to the interest cost to the extent regarded as interest charges as per the Accounting Standards applicable in India. Out of this, the exchange differences in respect of assets during the period of construction / renovation and modernisation are capitalized by transfer to IEDC. During the fiscal 2008, a favorable exchange rate variation amounting to Rs. 1,255 million reduced the interest expenses while an amount of Rs. 1,227 million was reduced from interest expenses in fiscal 2007. The amount of reduction in exchange rate variation is slightly higher in fiscal 2008 as compared to fiscal 2007 due to depreciation of US dollar as the USD denominated loan contributed about 67% of the loan basket in the fiscal 2008 as compared to 64% in previous fiscal. The Interest Charges for fiscal 2007 under amount payable to customers included an amount of Rs.1,988 million payable to customers pursuant to the order of Appellate Tribunal for Electricity.

The finance charges have decreased by 10% from Rs.9,074 million in fiscal 2007 to Rs.8,198 million in fiscal 2008. The reduction is mainly due to decrease in rebate payable to customers as per the Rebate Scheme of the company from Rs.8,377 million in previous fiscal to Rs.7,203 million in current fiscal. In order to secure 100% realization of amounts billed, the Company has continued with its revised incentive scheme. The current Rebate Scheme provides for a rebate of 2.25% on the amounts credited to the Company's account on the first day of the month which gets reduced by 0.05% for each day's delay upto the 5th day of the month. Beyond 5th day, 2% rebate is allowed for credit to Company's account which gets progressively reduced and becomes nil after 30 days. The Customer Reward which was paid during last fiscal @ 1% was reduced to 0.75% of the outstanding Bond amount issued under One Time Settlement Scheme as on 30.9.2007 and 31.3.2008. Customer reward reduces to 0.50% if the customers make full payment of the monthly bills within 45 days of presentation of current bill. The Customer Reward is payable on half yearly basis on fulfillment of certain conditions. Besides reduction in rate of Customer Reward, the reduction in outstanding amount of tax free bonds have also led to reduction of rebate.

For the fiscal 2008, an amount of Rs. 6,815 million relating to interest and finance charges of projects under construction was capitalized while the corresponding amount for the previous year was Rs. 6,181 million. However, if the impact of exchange difference is excluded, the interest and finance charge capitalized is Rs.9,193 million as against Rs.6,713 million last year registering an increase of 37%. This is due to deploymentof debt in 10 projects where construction is in progress.

The interest and finance charges for fiscal 2008 after these adjustments and without taking into account the exchange differences considered as adjustment to interest costs is Rs.16,858 million.

Rs. Million Fiscal 2008 Fiscal 2007Total Interest charges excl.Exchange diff. regarded asadjust. to interest cost &interest charges capitalised 10,312 9,746Total Finance chargesexcluding finance chargescapitalised 7,669 8,848Net interest and financecharges 17,981 18,594Add : Adjustment of exchange differences chargedto revenue (1,123) 695Less: Amount of interestpayable to customers - 1,988Total Adjusted Interestand Finance charges 16,858 17,301

2.5 Prior period income/expenditure

Certain elements of income and expenditure have been charged to the profit and loss account relating to previous years. For the fiscal 2008 a net amount of Rs. 2,745 million was charged as prior period expenditure whereas a net amount of Rs.109 million was booked as prior period income to the profit and loss account in the previous year.

In the current fiscal, based on the opinion of Expert Advisory Committee of the ICAI, foreign exchange variation on restatement of foreign currency loans as at the Balance Sheet date which is payable/recoverable to/from customers later on settlement is accounted for by creating a deferred liability/asset in the accounts instead of adjusting the same in profit & loss account. This change in accounting policy is with retrospective effect from 1st April 2004 (explained above under 'Adjusted Gross Income') and accordingly adjustmentup to 31st March 2007 has been accounted as 'Prior Period Income/Expenditure (net) amounting to Rs. 2,918 million by debit to prior period sales (explained in note 14(b) of the Notes on Accounts, Schedule-27).

In addition, MPGATSV tax on coal is levied by the Government of Madhya Pradesh with effect from September 2005. This tax was challenged by the coal supplier and its collection has been stayed. A legal opinion has been obtained as per which the claim of the coal supplier is not payable and so, the liability of Rs. 2,105 million provided up to 31st March 2007 in respect of MPGATSV tax has been reversed and resultant benefit was passed on to customers through 'Prior Period Income/Expenditure (net)'. (Explained in note 3(a) of the Notes on Accounts, Schedule-27).

Similarly, surface transportation charges liability of Rs.469 million provided upto 31st March 2007 has been reversed and the resultant benefit passed on to the customers through 'Prior Period Income/Expenditure (net)' (explained in note 3(b) of the Notes on Accounts, Schedule-27). The corresponding adjustment amounting to Rs.2,574 million on account of write back of MPGATSV tax and surface transportation charges is included in cost of fuel in prior period expenditure.

3. Profit before tax, provisions and prior period adjustments

The profit of the Company before tax and prior period adjustments for the current and the previous year, both on reported and adjusted basis, is tabulated below:

Rs. Million

Reported Adjusted Fiscal Fiscal Fiscal Fiscal 2008 2007 2008 2007

Gross Income 400,113 353,766 388,527 346,900Expenditure relatedto operations 255,446 225,380 247,350 223,485Depreciation 21,385 20,754 21,385 20,754Interest and Financecharges 17,981 18,594 16,858 17,301Profit before tax,prov. and priorperiod adjust. 105,301 89,038 102,934 85,360

4. Provision for Tax

The Company provides for current tax, deferred tax and fringe benefit tax computed in accordance with provisions of Income Tax Act, 1961. As per tariff regulations, the Company recovers actual tax payments in respect of generation business from its customers while taxes on the income from all other activities are borne by the Company. Further, from the fiscal 2007 onwards,the Company has included the taxes recovered from its customers as a part of its sales.

Fiscal 2007 (Rs Million) Current Deferred Fringe Total tax tax benefit tax

Provision for fiscal 2007 16,730 1,203 154 18,087Adjustment forearlier years 3,550 - - 3,550(Recoverable from) /payable to customers - (1,203) - (1,203)Capitalised - - (7) (7)Net provision as perP&L Account 20,280 - 147 20,427

Fiscal 2008 (Rs Million) Current Deferred Fringe Total tax tax benefit tax

Provision for fiscal 2008 24,637 1,411 214 26,262Adjustment forearlier years 3,680 - (45) 3,635(Recoverable from) /payable to customers - (1,411) - (1,411)Capitalised (70) - (15) (85)Net provision asper P&L Account 28,247 - 154 28,401

Net provision of tax for the fiscal 2008 was Rs. 28,401 million in comparison to Rs.20,427 million in the fiscal 2007, registering an increase of Rs.7,974 million. This is due to increase in income tax on other income of the company from Rs.3,666 million in fiscal 2007 to Rs.5,639 million in fiscal 2008. This amount includes Rs 607 million on account of section 14A of Income Tax Act whereby the assessing officer has enhanced our tax liability.Further, the tax payment in respect of generation business recoverable from the customers has also increased from Rs.22,761 million for the current fiscal as against Rs.16,760 million for the last fiscal.

5. Profit After Tax before provisions made and written back and prior period adjustments

Rs. Million

Reported Adjusted Fiscal Fiscal Fiscal Fiscal 2008 2007 2008 2007Profit before tax,provisons andprior periodadjustments 105,301 89,038 102,934 85,360

IT adjustment forprevious period 607 -

Tax (28,401) (20,427) (28,401) (20,427)

Profit after tax(before prov.and prior periodadjust.) 76,900 68,611 75,140 64,933

The profits before prior period adjustments and provisions on a reported basis have grown by almost 12% while on an adjusted basis have grown by 16%.

6. Net Profit After Tax

The net profit after tax after provisions (made and written back) and prior period adjustments on a reported and adjusted basis are as follows:

Rs. Million

Reported Adjusted Fiscal Fiscal Fiscal Fiscal 2008 2007 2008 2007Profit after tax(before provisionsand prior periodadjustments) 76,900 68,611 75,140 64,933Provisions (netof write back) (7) (73) (7) (73)Tax on income taxrefund pertainingto previous years - 486Prior periodadjustments (2,745) 109 -Net profit after tax 74,148 68,647 75,133 65,346

On a reported basis, the net profit after tax for the fiscal 2008 has increased by about 8% while on an adjusted basis, the net profit after tax has grown by 15%.

7. Segment-wise performance

For the purpose of compiling segment-wise results, the business of the Company is segregated into 'Generation' and 'Other Business'. The Company's principal business is generation and sale of bulk power. Other businessincludes providing consultancy, project management and supervision, oil and gas exploration and coal mining.

The profit before tax and interest for the generation business for the fiscal 2008 was Rs. 90,808 million as against Rs. 74,944 million for fiscal 2007 mainly on account of increased generation. For the 'Other Business'it was Rs. 288 million for fiscal 2008 and Rs. 180 million for the previous fiscal.

B. Financial Condition

1. Net worth

The net worth of the Company at the end of fiscal 2008 increased to Rs. 526,386 million from Rs. 485,968 million in the previous year registering an increase of 8.3% mainly due to retained earnings. Correspondingly, the book value per share also increased from Rs.58.94 to Rs.63.84.

2. Loan Funds

The loans as on March 31, 2008 were Rs. 271,906 million in comparison to Rs. 244,844 million as on March 31, 2007. A summary of the loans outstanding is given below:

Rs. Million As at March 31 2008 2007 % changeSecured LoansBonds 66,000 59,500 11%Foreign Currencyterms loans 7,140 8,724 -18%Other 7 5 40%Sub-total 73,147 68,229 7%Unsecured LoansFixed Deposits 130 328 -60%Foreign CurrencyBonds / Notes 20,095 21,930 -8%Foreign CurrencyTerm loans 51,639 41,883 23%Rupee term loans 126,859 112,394 13%Loans from GOI 36 80 -55%Sub-total 198,759 176,615 13%Total 271,906 244,844 11%

GOI-Government of India

The debt has increased to Rs. 271,906 million from Rs 244,844 million registering a growth of 11%. Borrowings of Rs. 50,229 million (excluding Rs 3 million raised through Public Deposits) were utilized to finance capital expenditure of projects under construction. This amount consisted of Rs. 38,500 million raised and utilized from domestic markets and disbursements amounting to Rs 11,729 million received by way of foreign loans. The domestic debt funds included term loans amounting Rs 28,500 million raised

from Indian Banks and the two series of bonds aggregating to Rs 10,000 million placed with LIC. These bonds carry coupon of 9.37% p.a. and 9.06% p.a. respectively. The door to door maturity of bonds is 11 years with redemption in 14 half yearly installments starting June 04, 2012.

During the year, the company tied up a loan of USD 380 million under guarantee of Japan Bank for International Co-operation (JBIC). The loan is an unsecured facility without sovereign guarantee bearing interest linked to LIBOR with a door to door maturity of 18 years including availability period of 4 years. Out of this, USD 12.5 millionequivalent to Rs. 500 million was drawn to finance capital expenditure of Barh project during the year 2007-08. Inaddition an agreement for a term loan of Euro 68.563 million (equivalent USD 100 million) was signed with Nordic Investment Bank, an international financialInstitution based in Finland. The loan is an unsecured facility with a door to door maturity of 12 years. During fiscal 2008, Euro 10 million equivalent to Rs. 641.9 millionwas drawn for Renovation and Modernization of certain plants.

As regards disbursement from other foreign loans, disbursement from ADB was of the order of USD 159 million equivalent to Rs.6,361 million drawn under loan of USD 300 million executed in fiscal 2007. Under other foreign currency loans, an amount of USD 68.731 million equivalent to Rs. 2,767 million was drawn from loan extended by The Export Import Bank of Korea and an amount of USD 6.357 million equivalent to Rs. 262 million was availed under Swedish credit.

The Company has redeemed bonds amounting to Rs.3,500 million during the year. Repayments amounting to Rs.14,035 million were made under various term loans extended by Indian Banks. The company also partly prepaid JBIC Loans amounting to JPY 3060 million (equivalent to Rs. 1,135 million) drawn in case of Simhadri. This prepayment was made to align the actual loan outstanding with the loan component admissible for tariff purposes by CERC so as to reduce the Foreign Exchange risk and interest cost of the company not covered by the tariff. The company would be saving Rs. 341 million on account of guarantee fee payable to Govt. of India on guarantee extended for these loans. Foreign currency loans amounting to Rs. 4,210 million were repaid during the year. In addition Fixed deposits and others accounted for Rs. 187 million discharged during fiscal 2008.

The credit rating of the Company by CRISIL and ICRA of the Company as an issuer and also the rating for rupee bonds & fixed deposits program continued to be 'AAA' and 'LAAA' respectively being highest rating. During the rating exercise of our domestic borrowings from banks including the amounts committed by them, CRISIL has assigned the highest possible rating i.e. 'AAA'.

During the year, the foreign currency rating agencies upgraded your Company to 'Investment Grade'. Fitch Ratings revised the rating of the Company to BBB- with positive stable outlook on 20th June 2007 followed by Standard and Poor revising the ratings to BBB- with stable outlook in November 2007. The ratings accorded by International Agencies are at par with the sovereign rating of the country.

The debt to equity ratio at the end of fiscal 2008 of the Company went up to 0.52 from 0.50 at the end of theprevious fiscal. The maturity profile of the borrowings by the Company is as under:

Rs million Rupee Foreign Total Loans Currency loans

Within 1 year 18,965 3,076 22,0411 - 3 years 47,576 17,819 65,3953 - 5 years 42,164 14,514 56,6785 - 10 years 64,864 28,376 93,240Beyond 10 years 19,463 15,089 34,552Total 193,032 78,874 271,906

3. Fixed Assets

Rs. Million As at March 31 2008 2007 % change

Gross block 533,680 507,273 5%Net Block 260,937 256,481 2%Capital Workin-Progress 184,389 128,567 43%Construction storesand advances 40,394 39,825 1%Total fixed assets 485,720 424,873 14%

During the year we added Rs. 26,407 million to our gross block mainly on account of capitalization of one unit of Vindhyachal Power Project. Due to increase in construction activities, there was an addition of Rs. 55,822million in the capital-work-in-progress registering anincrease of 43% over the last year. In addition, there was also marginal increase in Construction Stores and Advances.

3. Investments The Investments consist mainly of bonds issued under One Time Settlement Scheme and bonds issued against outstanding dues besides equity participation in joint ventures and subsidiaries. The investments also include the deployment of surplus cash generated out of operations in various treasury instruments issued by Government of India. The bonds issued against settlement of receivables account for 86% of total investments at the end of fiscal 2008.

Broadly the break-up of our investments is as follows:

Rs. Million As at March 31 2008 2007Bonds issued under One timesettlement scheme 131,247 147,762Investments in Joint Ventures 15,547 9,092Investment in subsidiaries 3,355 592Investment of surplus cash invarious instruments 1,875 2,446OthersBonds against dues (issuedprior to one time settlementscheme) 648 1,051Total investments 152,672 160,943

During the fiscal 2008 investments decreased by about 5% mainly on account of redemption of bonds issued under One Time Settlement Scheme (OTSS) amounting to Rs. 16,515 million. These OTSS bonds carry a 'call option' giving right to SEBs to redeem the bonds before scheduled redemption date. However, no call option was exercised by any SEB during the year 2007-08.

During the year, company partly redeemed 10% Secured Non- Cumulative Non-Convertible Redeembable GRIDCO Bonds as per redemption plan.

During the year, company invested Rs. 1,885 million in NTPC-Tamilnadu Energy Company Ltd. and Rs. 4,570 million in Aravali Power Company Pvt. Ltd., being joint venture companies. Besides, the company also invested Rs. 1,957 million in Bhartiya Rail Bijlee Company Ltd a subsidiary with 74% equity stake promoted along with Ministry of Railways and Rs. 571 million in Kanti Bijlee Utpadan Nigam Ltd., a subsidiary promoted along with BSEB for taking over of Muzaffarpur Thermal Power Station.

There has been decrease in investment of surplus cash in treasury bills and Govt. of India dated securities as surplus cash has been kept in term deposits with banks, and the same is included in current assets.

5. Current Assets

The current assets and current liabilities as on March 31, 2008 and March 31, 2007 and the changes therein are as follows:

Rs.Million As at March 31 2008 2007 Y-o-Y % change changeCurrentAssets Amt Amt

Inventories 26,757 25,102 1,655 7%Sundry Debtors 29,827 12,523 17,304 138%Cash and Bankbalances 149,332 133,146 16,186 12%Other CurrentAssets 9,218 10,580 -1,362 -13%Loans andAdvances 40,354 40,476 -122 0% Total CurrentAssets 255,488 221,827 33,661 15%

A major portion of current asset comprised of Cash and Bank balances. As on March 31, 2008, the cash and bank balances stood at Rs. 149,332 million being 58% of the total current assets in comparison to Rs. 133,146 million as at March 31, 2007 which was 60% of the total current assets as on that date. Of this, Rs. 144,536 million was kept as term deposits with banks as on March 31, 2008 while the term deposits for the last year was Rs. 125,578 million.

The next largest component of our current assets is Loans and Advances besides advance tax is a loan of Rs. 8,137 million to the government of Delhi subsequent to the conversion of the dues of Delhi Vidyut Board under the one-time-settlement scheme. The Government of Delhi pays us 8.5% tax-free interest on these loans. The other loans and advances are mostly to suppliers and contractors and also on account of advances extended to employees for various purposes such as building of house, purchase of vehicles etc. as per the policies of the Company.

Inventories as at March 31, 2008 were Rs. 26,757 million being 10% of current assets as against Rs. 25,102 million as on March 31, 2007. Our inventories mainly comprise of components and spares and coal which we maintain for operating our plants. Components and spares were Rs. 15,609 million as against Rs. 14,293 million in the last year. Coal inventory amounted to Rs. 6,694 million asagainst Rs. 7,318 million in the previous year.

6. Current Liabilities

Rs.Million As at March31 2008 2007 Y-o-Y % change change Amt Amt

Liabilities 55,483 53,235 2,248 4%Provisions 23,816 17,028 6,788 40%Total CurrentLiabiities 79,299 70,263 9,036 13%

Our current liabilities as at March 31, 2008 were Rs.55,483 million as against Rs. 53,235 million in the previous year. The current liabilities mainly comprise of creditors for capital expenditure, creditors for supply of goods and services, deposits and retention money from contractors. The creditors and retention money, deposits etc. at the end of the year stood at Rs. 48,263 million as against Rs. 41,635 million in the previous year. Besides these, we also owed a sum of Rs. 2,958 million to our customers as against Rs. 7,705 million in the previous year. These sums include amount payable to the customers since we are billing our customers for electricity on provisional tariffs as per directions of CERC, which are higher than the tariffs estimated by us as per CERC Regulations. These amounts would be paid or adjusted against future billings as and when the finaltariff for various stations is determined by the regulator.

7. Provisions

As on March 31, 2008 we had provisions outstanding amounting Rs. 23,816 million as against Rs. 17,028 million on 31st March 2007. This mainly comprised Rs.15,293 million (previous year Rs.9,007 million) being provision for estimated employee benefits under AS 15 (Revised 2005) 'Employee Benefits' and estimated benefits payable pending pay revision w.e.f. 01.01.07. The increase is mainly due to Rs.4,094 million provision for employee benefits pending pay revision and Rs. 3,097 million due to increase in estimated benefits payable to employees as per acturial valuation. An amount of Rs.905 million was paid during the year. (Explained in note 6(a) and 17 of the Notes on Accounts, Schedule-27). Further, provisions include Rs 6,596 million on account of proposed dividend which we would be paying to our shareholders after they approve the same in the shareholders' meeting. The income tax payable on the proposed dividend is Rs. 1,121 million included in the Provisions of fiscal 2008.

8. Cash flows

The cash, cash equivalents and cash flows on various activities for the past five years are tabulated below:

Rs. Million For the year ended March 31 2008 2007 2006 2005 2004Opening Cashand cashequivalents 133,146 84,714 60,783 66,351 23,894Net cash fromoperatingactivities 101,711 80,653 59,720 50,998 58,118Net cash usedin investingactivities -62,038 -31,458 -26,992 -64,136 -24,597Net cash flowfrom financingactivities -23,487 -763 -8,797 7,570 8,873Intangibles 63Change in Cashand cashequivalents 16,186 48,432 23,931 -5,568 42,457Closing cashand cashequivalents 149,332 133,146 84,714 60,783 66,351

Our net cash from operating activities for the year ended March 31, 2008 increased by 26% from the previous year. The net cash from operating activities was Rs. 101,711 million as against Rs. 80,653 million for the previous year.

Our net cash used in investing activities increased to Rs 62,038 million in fiscal 2008 from Rs. 31,458 million in the previous year registering an increase of 97%. Cash flows on investing activities arise from expenditure on setting up power projects, investment of surplus cash in various securities, investments in joint ventures and subsidiaries. The cash utilized for purchase of fixed assets increased by 4% from Rs. 79,503 million in the previous year to Rs. 82,353 million during fiscal 2008. Net cash realized from sale of investments (after adjusting purchase of investments and the redemption of OTSS bonds) reduced by Rs. 16,091 million during the year.

No call option was exercised by SEBs on OTSS bonds during the fiscal 2008. The investment in Joint Venture companies and subsidiaries was higher by Rs 6,656 million during the current fiscal. Cash generated from investing activities also reduced due to reduction in interest on OTSS bonds and also due to increase in income tax on interest earned from deposits held with banks.

During the year, we used Rs. 23,487 million of cash on financing activities as against an outflow of Rs. 763 million in the previous year. During the fiscal 2008 we had inflow of Rs. 50,231 million from long term borrowings as against Rs. 60,500 million in the previous year. The cash used for repayment of long term borrowings this year was Rs. 21,987 million as against Rs. 16,140 million repaid in the previous year. The cash used for paying dividend and the tax thereon was Rs. 33,764 million as against Rs. 30,085 million in the previous year.


NTPC has formed six subsidiary companies. The financial statements of our subsidiaries are included in this Annual Report elsewhere. Their performance is briefly discussed here:

a) NTPC Electric Supply Company Limited (NESCL)

The financial highlights of the Company are as under:

Particulars Fiscal 2008 Fiscal 2007 Rs. Million

NTPC's investment in equity 0.8 0.8Gross Income 419 207Profit After Tax 127 29Rs Per ShareBook Value per share 1,472.59 160.30Earnings Per Share 1,565.34 362.49

The company was formed on August 21, 2002 as a wholly owned subsidiary company of NTPC with an objective to make a foray in the business of distribution and supply of electrical energy as a sequel to reforms initiated in the Power Sector. Presently the company is involved in the following activities:

* The company has been involved in the execution of work on turnkey basis under the government's rural electrification program namely 'Rajiv Gandhi Grameen Vidyuti-Karan Yojana' in 6 states, namely, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa , West Bengal and Kerala and a Union Territory of Lakshdweep covering approximately 40,000 villages

* The Company is in an advanced stage of forming a joint venture with Kerala Industrial Infrastructure Development Corporation (KINFRA) for acquiring the business of retail distribution of electricity in various industrial parks being developed by KINFRA in state of Kerala

* The company is also carrying out the work of 'Advisorcum- consultant' for Ministry of Power for implementation of schemes under the Accelerated Power Development and Reforms Program (APDRP)

* The Company is also rendering services for post award Project monitoring and supervision of quality work for the projects being executed by the state utilities in the states of Uttrakhand, Madhya Pradesh and Karnataka

* The Company is assisting the DISCOMs & utilities in enhancement & bringing the sectoral reforms process and has been participating in the distribution infrastructural development programme under consultancy assignments

b) NTPC Vidyut Vyapar Nigam Limited (NVVN)

The financial highlights of the Company are as under:

Particulars Fiscal 2008 Fiscal 2007 Rs Million

NTPC's investment in equity 200 200Gross Income 7,961 8,808Profit After Tax 190 65Rs. Per ShareBook Value per share 20.86 13.68Earnings per share 9.52 3.26

The company was formed on November 1, 2002 as a wholly owned subsidiary company of NTPC with an objective to undertake business of sale and purchase of electric power, to effectively utilise installed capacity and thus enabling reduction in the cost of power. The activities of the companies are briefly described below: During the year 2007-08 the company transacted business with various state electricity boards spread all over the country and traded 3.324 billion units of electricity in comparison to 2.664 billion units traded in the previous year.

As a part of its new business initiative, company has exported fly ash at a value of Rs.14.48 million and sold Cenosphere at a value of Rs.6.76 million during 2007-08 as compared to export of fly ash of Rs. 17.83 million and sale of Cenosphere of Rs.1.67 million in the previous year.

NVVN is also engaged in facilitating development of Power exchange in India

c) NTPC Hydro Limited (NHL)

The financial highlights of the Company are as under:

Particulars Fiscal 2008 Fiscal 2007 Rs Million

NTPC's investment in equity 623 381Loss - 0.18Rs per shareBook Value per share 8.56 7.87Earnings per share - (0.01)

The company was formed on 12th December 2002 as a wholly owned subsidiary company of NTPC with an objective to develop small and medium hydro electric power projects up to 250 MW. Presently the company is implementing the following projects:

* Lata Tapovan hydro electric project (171 MW) in the state of Uttrakhand. Central Electricity Authority (CEA) has accorded Techno-Economic clearance for the project and Environmental Clearance of Ministry of Environment and Forest (MOEF) has been obtained. Land acquisition has been completed

* Rammam-III (120 MW) in the state of West Bengal.

Detailed Project Report for the project has been formulated; Central Electricity Authority (CEA) has accorded Techno-Economic Clearance in September 2006. All clearances excepting formal forest clearance have been received. Land acquisition activities are under progress

d) Pipavav Power Development Company Limited (PPDCL)

The financial highlights of the Company are given below:

Particulars Fiscal 2008 Fiscal 2007

NTPC's investment in equity(Rs. Million) 3.7 3.7Loss (Rs.) 26,135 25,457Earnings per share (Rs) (0.07) (0.07)

As per the direction of Ministry of Power, a memorandum of understanding was signed between NTPC, Gujarat Power Corporation Limited (GPCL) and Gujarat Electricity Board (GEB) in the year 2004 for development of 1000 MW thermal power project at Pipavav in Gujarat by forming a new Joint Venture Company between NTPC and GPCL with 50:50 equity participation. Expenditure on studies and other services was incurred by NTPC on behalf of the proposed joint venture company. Pursuant to the directive, NTPC Ltd. paid a sum of Rs. 61 million for acquisition of land and had incurred Rs. 10 million towards other direct expenditure on the proposed project.

It was, however, decided by the Gujarat Government that the project would be developed based on imported coal or any other suitable fuel, if necessary, in collaboration with a strategic partner on a fast track basis and that NTPC and GPCL should amicably settle the issues relating to the expenditure incurred so far on the project for land, studies etc. NTPC Ltd., therefore, dissociated from Pipavav Power Project on 24.5.2007 after obtaining approval of Ministry of Power. Based on the settlement reached amongst NTPC Ltd., GEB and GPCL, an amount of Rs. 109 million was received during fiscal 2008 towards cost of land inclusive of simple interest @ 10% p.a. thereon. Balance amount of Rs 4 million towards direct expenses remains recoverable from M/S GPCL.

e) Kanti Bijlee Utpadan Nigam Limited (formerly known as Vaishali Power Generating Company Limited)

As per the decision of Govt. of India to take over Muzaffarpur Thermal Power Station (2 x 110 MW), a subsidiary company named 'Vaishali Power Generating Company Ltd. (VPGCL)' was incorporated on September 6, 2006 with NTPC Ltd. contributing 51% of equity and balance equity was contributed by Bihar State Electricity Board. This Company was formed to renovate the existing units and run the plant. The second Unit has been successfully resynchronized on 17.10.2007 after four years of being idle. Renovation and Modernization of first Unit is under progress. The Company was rechristened 'Kanti Bijlee Utpadan Nigam Limited' on 10.04.2008.

The financial highlights of the Company are given below:

Particulars Fiscal 2008 Fiscal 2007NTPC's investment in equity(Rs. Million) 0.51 0.51Loss (Rs.) 53,350 39,500Book Value per share (Rs) 11,259 9,760Earnings per share (Rs) (0.53) (0.74)

f) Bhartiya Rail Bijlee Company Limited (BRBCL)

A subsidiary of NTPC under the name of 'Bhartiya Rail Bijlee Company Limited' was incorporated with Railways on 22.11.2007 with 74:26 equity contribution from NTPC LTD. and Ministry of Railways, Govt. of India respectively for setting up of 4 units of 250 MW each of coal based power plant at Nabinagar, Bihar. Investment approval for the project was accorded in January 2008.

The financial highlights of the Company are given below:

Particulars Fiscal 2008 Rs Million

NTPC's investment in equity 0.74Loss 0.83Rs Per ShareBook Value per share 1.72Earnings per share (8.28)


a) PTC India Limited

The financial highlights of the Company are as under:

Particulars Fiscal 2008 Fiscal 2007 Rs Million

NTPC's investment in equity 120 120Gross Income 39,493 37,859Profit After Tax 487 351Rs per ShareBook Value per share 65.06 17.60Earnings per share 2.93 2.34

The main objective of the company includes trading of power, import/export of power and purchase of power from identified private power projects and sells it to identified SEBs/others. PTC has traded a total 9.889 BUs in financial year 2007-08 as compared to 9.549 BUs in the previous financial year.

b) Utility Powertech Limited (UPL)

The financial highlights of the Company are as under:

Particulars Fiscal 2008 Fiscal 2007 Rs Million

NTPC's investment in equity 10 10Gross Income 2,199 1,809Profit After Tax 125 93Rs Per ShareBook Value per share 130.93 90.93Earnings per share 62.35 46.63

UPL is a joint venture company of NTPC and Reliance Infrastructure Limited formed to take up assignments of construction, erection and supervision in power sector and other sectors in India and abroad.

c) NTPC-SAIL Power Company Pvt. Ltd. (NSPCL)

Bhilai Electric Supply Company Pvt. Ltd.(BESCL), a joint venture company with 50:50 equity participation by NTPC and SAIL, having generating capacity of 74 MW was merged with NTPC-SAIL Power Company Pvt. Ltd (NSPCL), another joint venture company, w.e.f 2nd August 2006 in pursuance of the order of the Hon'ble High Court of Delhi dated 2nd August 2006.

The total investment of NTPC in equity share capital of NSPCL stands at Rs.3,903 million. NSPCL owns and operates a capacity of 314 MW as captive power plants for SAIL's steel manufacturing facilities located at Durgapur, Rourkela and Bhilai. These power plants generated a total of 2.576 BUs as compared to 2.503 BU during the corresponding previous year. The captive power plants at NSPCL namely Durgapur, Rourkela and Bhilai maintained average PLF of 93% during 2007-08. One Unit of 250 MW of Bhilai Expansion Project was commissioned during April 2008. Another unit of 250 MW is expected to be commissioned shortly.

The financial highlights of this Company is as under:

Particulars Fiscal 2008 Fiscal 2007 Rs Million

NTPC's investment in equity 3,903 3,903Gross Income 2,518 2,300Profit After Tax 322 390Rs Per ShareBook Value per share 11.40 11.12Earnings per share 0.41 1.07

NSPCL has paid an interim dividend of Rs.30 million and recommended a final dividend of Rs.60 million with NTPC's share of Rs.15 million and Rs.30 million respectively.

d) NTPC-ALSTOM Power Services Private Limited (NASL)

The financial highlights of the Company are as under:

Particulars Fiscal 2008 Fiscal 2007 Rs Million

NTPC's investment in equity 30 30Gross Income 1,008 465Profit After Tax 38 30Rs Per ShareBook Value per share 23.95 19.88Earnings per share 6.40 4.96

NASL is a joint venture company between NTPC and ASLTOM POWER GENERATION AG, Germany. The company was formed for taking up Renovation & Modernization assignments of power plants both in India and abroad.

e) NTPC Tamil Nadu Energy Company Ltd.

NTPC Tamil Nadu Energy Company Ltd, was formed as a joint venture between NTPC and Tamil Nadu Electricity Board (TNEB) on 23.05.2003 to set up a coal-based power station of 1000MW capacity, at Vallur Thermal Power Project, using Ennore port infrastructure facilities. The project was accorded Mega Status. Long term coal linkage has been accorded to the project in December 2006 and MOEF clearance for the project has been received in April 2007. The Main Plant award was issued in August 2007. The construction work at site is under progress.

f) Ratnagiri Gas and Power Pvt. Limited

Ratnagiri Gas and Power Supply Private Ltd has been formed as joint venture between NTPC, GAIL, Maharashtra State Electricity Board and Indian Financial institutions with NTPC having a stake of 28.33% for taking over and operating gas based Dabhol Power Project alongwith LNG terminal. NTPC's shareholding is to be revised to 32.88%. The total generation from Power Block II (740 MW) and Power Block III (740 MW) during 2007- 08 is 4862 MUs which includes infirm power. The commercial generation is 3665 MUs.

g) Aravali Power Company Private Limited

Aravali Power Company Private Limited (A Joint Venture Company with Indraprastha Power Generation Co. Ltd. [IPGCL] of Delhi Govt. and Haryana Power Generation Corp. Ltd. [HPGCL] of Haryana Govt.), is setting up Aravali Super Thermal Power Project of 1500 MW (3x500 MW), a coal fired power plant, in Jhajjar District of Haryana. The project is being set up by NTPC on concept-tocommissioning basis. NTPC would also operate and maintain the station on Management Contract basis for atleast 25 years. The project is being set up for meeting the power requirement of Haryana and NCT of Delhi and the Commonwealth games to be held in Delhi in the year 2010. The power will be shared on 50:50 basis between Haryana and NCT of Delhi.

Construction activities at the site have since taken off and the Unit-I is expected to be ready during 2010- 2011.

(h) NTPC-SCCL Global Venture Pvt. Ltd

NTPC has formed a JV Company, 'NTPC-SCCL Global Venture Pvt. Ltd.', with Singareni Collieries Company Ltd. (SCCL), to jointly undertake the development and operation & maintenance of coal Blocks and integrated coal based power projects in India and abroad. The Company was incorporated on 31.07.2007. Consolidated Financial Statements of NTPC Ltd, its Subsidiaries and Joint Venture Companies The consolidated Financial statements have been prepared in accordance with Accounting Standards (AS)-21 - ' Consolidated Financial Statements' and Accounting Standards(AS) 27 -'Financial reporting of Interests in Joint Ventures' and are included in this Annual report. A brief summary of the results on a consolidated basis is given below:

Rs million Fiscal 2008 Fiscal 2007

Gross Income 416,370 366,518Profit before Tax 103,510 89,614Profit after Tax 74,699 68,983Net Cash from operatingactivities 104,083 83,063


Statements in the Management Discussion and Analysis and in the Directors' Report, describing the Company's objectives, projections and estimates, contain words or phrases such as 'will', 'aim', 'believe', 'expect', 'intend', 'estimate', 'plan', 'objective', 'contemplate', 'project' and similar expressions or variations of such expressions, are 'forward-looking' and progressive within the meaning of applicable laws and regulations. Actual results may vary materially from those expressed or implied by the forward looking statements due to risks or uncertainties associated therewith depending upon economic conditions, government policies and other incidental factors. Readers are cautioned not to place undue reliance on these forwardlooking statements.

For and on behalf of Board of Directors

Place : New Delhi (R.S. Sharma)Date : 9th July, 2008 Chairman & Managing Director

Annex-III to Directors' Report



a) Energy conservation measures taken

Some of the important energy conservation measures taken during the year 2007-2008 in different areas are as under:


During the year 2007-08, 105 in-house energy audits in the areas of auxiliary power consumption, water balance, cooling water system, compressed air, coal handling plant, MGR, lub oil System, air conditioning, ash handling system, GT compressors, GT open cycle efficiency, WHRB

performance, lighting etc. were carried out at different stations of the Company. In addition, special APC audits in Badarpur and NCPP Dadri stations were carried out. Also, a workshop on Energy Conservation Potential in Feed Water System was conducted at NTPC-NRHQ, Lucknow. During the year, the Company has successfully completed external energy audits of auxiliary power consumption at Panipat Thermal Power Station, Panipat, Haryana. The Company has also completed energy audit job of 15 units of different power plants in the Kingdom of Saudi Arabia.

Till now 110 executives of the Company have passed Energy Auditors Examination of Bureau of Energy Efficiency to become accredited energy auditors. In addition, 34 executives have also qualified to be the certified energy managers. The details of various measures taken during the year under various heads of energy conservation are as below:-


Replacement of inefficient BFP cartridges, overhauling of BFPs and attending of recirculation valves of BFPs (at Korba, Kawas, Dadri, Kahalgaon, Ramagundam etc), Installation of FRP blades in Cooling Towers at Ramagundam, Optimized running of HPBFP at Gandhar, use of vapour absorption machine for air conditioning at Kahalgaon, Optimization of operation of CW pumps, ACW pumps & Cooling Tower Fans (at Rihand, Dadri-Coal, Dadri-Gas, Auraiya, Faridabad, Kahalgaon etc.), Optimized running of HVAC and air washer system at Gandhar, Attending leakages in Compressed air system and optimization of running of compressors (at Badarpur, Rihand, Unchahar, Simhadri Gandhar, Dadri-Coal, Dadri-Gas, etc), Reduced pressure setting of Instrument air / Plant air in compressed air system (at Badarpur, Simhadri etc ), Arresting flue gas leakages (at Tanda, Rihand, Unchahar, Dadri-Coal, Talcher Thermal, Talcher Kaniha, Kahalgaon, etc.), Maintaining optimum DP across Feed Regulating Station (at Vindhyachal, Korba, Talcher Thermal, Kahalgaon etc), optimizing crusher operation and running CHP conveyor with one motor in place of dual motor at Korba, External cleaning of Heat exchanger through steam jetting at Kawas are some of the measures taken to reduce APC.


Installation of timer switches in plant and township lighting at Simhadri, Provision of Group switching for ON/OFF' control at Farakka, replacement of conventional GLS lamps and conventional FTLs with CFLs (at Unchahar, Korba, Kahalgaon Singrauli, Ramagundam etc), Lighting voltage optimization at Dadri, replacement of HPMV and HPSV lamps at Singrauli etc.


Repair of Thermal Insulation and cladding (at Rihand, Talcher Kaniha, Talcher Thermal, Simhadri, Singrauli, Vindhyachal, Korba, Farakka, Unchahar, Badarpur etc), Re-use of recovered coal from settling tank & yard at Dadri-Coal, Cleaning & replacement of CT nozzles, fills, drift eliminators (at Simhadri, Vindhyachal, Talcher Kaniha, Gandhar etc.), HP Turbine efficiency improvement by wet steam washing at Badarpur, Acid cleaning of condenser tubes at Badarpur, Arresting various air ingress points in flue gas ducts and condenser at Tanda, Minimizing Super heater & Re-heater atemporation and arresting high energy drain passing at Korba.


Off line compressor washing of Gas Turbine at Kayamkulam, Attending insulation hot spots in WHRB at Kayamkulam, Optimizing oil consumption during starting (at Korba, Talcher Thermal, Singrauli etc.), Using J-11 oil guns at Unchahar.


Off line compressor washing of gas turbines at Auraiya, Cleaning of condenser tubes and water box at Auraiya, GT inlet air filter cleaning and replacement at Auraiya and Gandhar.


Attending lub oil leakages and changing/toping up oil on actual condition basis (at Badarpur, Singrauli, Kayamkulam etc), recycling of used up oils for reuse (at Unchahar, Korba, Kayamkulam, Kahalgaon, Talcher Thermal and Vindhyachal etc).


Reuse of uncontaminated SWAS drains at Kawas, Attending DM water and steam leakages (at Tanda, Singrauli, Unchahar, Ramagundam and Talcher Thermal), diverting drip of chimney steam condenser to hot well at Talcher Thermal.


Substitution of makeup water in AC, AHP and CHP cooling water systems by clarified water and flow adjustment at Unchahar, Recycling of water used for dust suppression system at Korba, Recirculation of ash water at Korba, Ramagundam and Talcher Kaniha, Reducing leakages in raw water lines and ash water return line at Talcher Kaniha, reuse of rinse water & blow down water for horticulture at Gandhar.


Reducing MGR cycle time and reduction in specific oil consumption at Korba and Singrauli, Optimizing operation of locos, Dozers and pay loaders at Badarpur.


Optimizing consumption of Tri sodium Phosphate and NaOH at Badarpur.

b) Additional investments and proposals for reduction in consumption of energy:

Provision of Rs.825 lacs has been kept in BE 2008-09 for different energy conservation schemes like:

- Energy meters, power analyzers and other portable energy audit instruments and online energy monitoring system.

- Vapor absorption system for Air Conditioning.

- Energy efficient devices in lighting.

c) Impact of measures taken for energy conservation:

Savings achieved during 2007-2008 on account of specific efforts for energy conservation:

S.No Area/Activities Savings Energy Unit Qty. of Rs./ units Million 1 Electrical MU 172.17 203.592.a Heat Energy (equivalent MT of coal) MT 145789.85 131.802.b Heat Energy (equivalent MCM of Gas) MCM 3.29 25.532.c Fuel Oil KL 1195.33 31.693.a D.M. Water MT 312943.00 4.063.b Miscellaneous Water M.Cu M 15.66 83.454 Diesel/MGR Fuel KL 140.05 4.385 Lubricants KL 45.80 2.966 Chemical KL 109.50 2.74 Grand Total 490.20

Savings achieved during 2006-07 was Rs. 489.40 Million.


Efforts made towards technology as per Form-B (Form-B is enclosed)


Activities relating to export initiative taken to increase export, development of new export markets for products and services and export plan:

Total Foreign Exchange Used/Earned Rs./Million

1. Foreign Exchange Outgoa) Value of Imports calculated on CIF basis:Capital Goods 11802Spare Parts 493b) Expenditure:Professional and Consultancy Charges 44Interest 3189Others 7952. Foreign Exchange EarnedConsultancy 30Interest 4Others 1



Research & Development (R&D)

1.0 Specific areas in which R&D activities have been carried out during 2007 - 08:

1.1 Enhancement of life of coal burner nozzle tips.

1.2 Development of method to chemically remove deposits in generator stator bars of 200 MW units.

1.3 Development of methodology for evaluation of mechanical properties of critical components of power plants through small punch technique.

1.4 Development of chemical formulation for online cleaning of fouled of PVC film type fills of cooling towers.

1.5 Post operational chemical cleaning of boilers.

1.6 Development of Specifications for dosing & Testing of chlorine dioxide as a biocide.

1.7 Studies & recommendations on problems of organic fouling, fouling of CT fills.

1.8 Studies on Restoration of Heat Transfer of HRSGs fouled with Acid Dew Point Corrosion products.

1.9 Development of chemical formulation for controlling scaling, fouling & corrosion in CW system of Kota Super Thermal Power station.

1.10 Corrosion Assessment of Power Plant systems such as CW systems, HRSGs, Condensers & water boxes, structural corrosion, etc.

1.11 Health assessment of 9 gas turbines, 6 steam turbines & boilers using advanced NDT techniques.

1.12 R&D is carrying out condition monitoring of around six hundred, 400 KV Class transformers for their health.

1.13 Over 1300 rotating equipment are being monitored regularly by R&D for their health assessment through wear debris analysis.

1.14 The timely and scientific failure analysis of various components such as Coal bunker hopper cracks; LP turbine blades; compressor blade failures; condenser tube leakages; drinking water pipeline; etc. helped in identifying the cause of failure and thus providing necessary input for taking corrective action in preventing re-occurrence of similar failures thereby increasing the availability of power plant equipment.

1.15 Environmental Appraisal of all the operating stations assessing air & water quality, condition of monitoring equipment, etc has been carried out and suggestions for necessary actions required to meet the statutory obligations have been given.

1.16 R&D provided Consultancy for acid cleaning of condensers of unit # 6 of Panipat Thermal Power station, Haryana.

1.17 R&D is extending scientific services to various other utilities such as Kota Super Thermal Power Plant, Lehra Mohabat Thermal Power Plant, Indian Airlines, PSEB, Panipat, MPPGC, RGPPL IP station, Delhi; Chandrapura, DVC; PGCIL, NHPC, Barauni Thermal Power Station, Mathura Refinery works etc for development of chemical treatment program, Coal quality and particle count of contaminants in lube oils, Quality of Cenospheres, health assessment of water wall tubes, testing of transformer oils, examination of replicas, failure investigations, etc.

1.18 Over 8000 samples of transformer oils, boiler tube deposits, turbine blade deposits, condenser & cooling tower deposits, effluents, waters, etc have been analysed till now and necessary recommendations have been given.

1.19 Three papers were published in International Journals.

1.20 R&D has filed 4 patent applications namely ANN based Expert system for health assessment of high voltage transformers; Heat treatment technique for determining constituents of wear particles in lubricating oil and hydraulic fluids; Ready-to-use Fly ash based product through setting properties enhancement by using a dry plasticizer; Fly-ash Based utensil cleaning powder.

1.21 New Facilities like - Dynamic Cooling Water Corrosion Test Rig; Total Organic Carbon Analyser; Advanced Eddy Current Inspection system, etc have been created.

1.22 Indian Institute of Science, Bangalore is appointed as Consultant for Restructuring & Strengthening of R&D Centre. Review of recommendations & implementation are in progress.

2.0 Benefits derived as a result of above R&D: R&D activities as carried out have helped in increasing the availability, reliability and efficiency of the stations. Chemical treatment and corrosion control measures suggested is helping the stations in improving the efficiency, availability and life of various heat exchangers/cooling towers. Techniques developed by R&D are implemented at stations, which are enhancing the life of boiler & turbine components. The timely and scientific failure analysis of various components helped in identifying the cause of failure and thus providing necessary input for taking corrective action in preventing re-occurrence of similar failures thereby increasing the availability of power plant equipment.


1. Implementations of the recommendations of the Consultants, M/s IISc Bangalore.

2. R&D will be working on predictive techniques for reducing forced outages such as Advanced Thermal Monitoring and Steam/Water ratio monitoring for reducing boiler tube failures, carrying out comprehensive on-line monitoring of critical rotating equipment, and conducting corrosion audits of power plants, etc.

3. Technology Development & Scientific Support to Stations for:

i. Reducing overhaul duration and increasing time interval between overhauls

ii. Reducing forced outages

iii. Cost Reduction

4. R&D will work on development of techniques for measurement of pollutants such as Mercury, Arsenic, low levels of SOx, NOx, etc as a proactive approach for more stringent environmental requirements that are anticipated. R&D will also be working on developing schemes for recycling of waste waters from plants.

5. Three research projects will also be undertaken, namely -

* Modeling of variable coal orifice for coal flow optimization

* Lab scale development of technique to determine steam water ratio (online) in boiler tubes

* Modeling and simulation of ID fan loading through extraction of moisture from flue gases

4.0 Expenditure of R&D (Rs./Millions) 2007-2008 2006-2007

a) Capital 11 7b) Recurring 62 54c) Total 73 61d) Total R&D expenditure as a percentage of total turnover 0.0197% 0.0187%

5.0 Technology Absorption, Adaptation and Innovation

Particulars of some of the important technology imported during last five (5) years are as follows:

Technology Year Stations

1. Performance Analysis, 2004 Implemented in Simhadri. Will Diagnostics and Optimization be continued in future Software calculates the Projects.Equipment Performance anddeviation and deviation from ideal conditions, together with reason for shortfall, indicating losses in Rupee terms. This package also calculates set point, which will result in optimized Heat Rate or Specific Coal consumption.

2. Super critical Technology 2004 Being implemented with 247 Kg/cm2 Steam Pressure at Sipat (3x660 MW), Barh and 540/568 MS/RH steam (3x660MW) and North temperature is adopted for its Karanpura STPP improvement in thermal efficiency and reduced emissionof green house gasses.

3. Boiler Flame Analysis 2005 Implemented in Simhadri.System (BFAS) observes the flame intensity and regulates the secondary air flow for achieving optimized combustion.

4. 765 KV Switchyard & associated 2005 Being implemented at Sipatequipments including 24KV/ 765KV Generator Step up (GSU) Transformer.

5. Switchyard Control & Data Acquisition (SCADA) System 2005 -do-based on universal protocol IEC 61850.

For and on behalf of the Board of Directors

Place : New Delhi (R.S. Sharma)Dated : 9th July, 2008 Chairman & Managing Director



The preparation of financial statements of NTPC Limited, New Delhi for the year ended 31 March 2008 in accordance with the financial reporting framework prescribed under the Companies Act, 1956, is the responsibility of the management of the company. The statutory auditors appointed by the Comptroller and Auditor General of India under Section 619 (2) of the Companies Act, 1956, are responsible for expressing opinion on these financial statements under section 227 of the Companies Act, 1956, based 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 29 May 2008.

I, on behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under section 619 (3) (b) of the Companies Act, 1956 of the financial statements of NTPC Limited, New Delhi for the year ended 31 March 2008. This supplementary audit has been carried out independently without access to the working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors 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 section619 (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. Comment on Profitability

Profit & Loss Account

Sales (Schedule 18): Rs.37050.10 crore

A reference is invited to note no. 2 (b) of Notes on Accounts (Schedule 27). Pending disposal of the appeal filed by the Central Electricity Regulatory Commission (CERC) before the Supreme Court of India, the Company accounted sales for the year amounting to Rs.30701.30 crore based on the provisional tariff as per the methodology and directions given by the Appellate Tribunal for Electricity.

These sales include a sum of Rs.938.30 crore (including Rs.621.80 crore pertaining to previous years 2004-05 to 2006-07) on account of certain parameters which have been disputed by CERC. As the case was sub-judice, the income recognition should have been postponed to the extent of Rs.938.30 crore as required by the Accounting Standard -9 prescribed under section 211 (3C) of the Companies Act, 1956.

Management Reply:

The Company appealed before the Appellate Tribunal for Electricity (ATE) against the tariff orders issued by the Central Electricity Regulatory Commission (CERC) for determination of tariff for its power stations. The ATE upheld the appeals of the Company and directed the CERC to revise the tariffs as provided in its order. CERC has filed an appeal before the Hon'ble Supreme Court on some of the issues decided by the ATE, mainly on the grounds that ATE's order is contrary to the provisions of Tariff Regulations, 2004 notified by the CERC.

In the opinion of the management, duly supported by independent legal advice, the ATE's order is entirely in conformity with the Tariff Regulations, 2004 and it is reasonable to expect ultimate collection. Pending disposal of the appeal, sales have been correctly accounted for based on ATE's order, in accordance with Accounting Standard (AS) 9 Revenue Recognition' prescribed under section 211 (3C) of the Companies Act, 1956 and accounting policies of the Company.


B. Comment on financial position

Current Liabilities and Provisions: Rs.7929.90 crore

The above did not include Rs.25.81 crore towards the net present value of the forest land diverted for Rihand thermal power station, payable as per directions issued by the Compensatory Afforestation Fund Management and Planning Authority in compliance with the orders dated 15 September 2006 of the Supreme Court of India. Disclosing this amount under Contingent Liabilities (Schedule 17) has resulted in overstatement of the Contingent Liabilities and understatement of the Current Liabilities as well as gross block of Fixed Assets (Schedule 6) by Rs.25.81 crore.

Management Reply:

The Company has complied with the conditions stipulated in the In-principle approval' granted by the Ministry of Environment and Forests for diversion of the subject forest land in the year 1997. The management is of the view that the directions issued by the Compensatory Afforestation Fund Management and Planning Authority referred by audit are applicable only in cases where approval for change of user agency is given after 29/30 October 2002 and are not applicable in the instant case. The Company has also contested the additional demand made by the Forest Officer as not being payable. Disclosure of the amount demanded by the Forest Officer as contingent liability is thus in accordance with Accounting Standard (AS) 29 Provisions, Contingent Liabilities and Contingent Assets' prescribed under section 211 (3C) of the Companies Act, 1956 and the accounting policies of the Company.

For and on behalf of the Comptroller & Auditor General of India For and on behalf of the Board of Directors (Ghazala Meenai) Principal Director of Commercial Audit & (R.S. Sharma) Ex-officio Member, Audit Board - III, Chairman and Managing Director New Delhi Place : New Delhi Place : New Delhi Dated : 29 July, 2008 Dated : 17 July 2008