Annual Report - NTPC - 2008-2009

NTPC LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Dear Members,

Your Directors are pleased to present the 33rd Annual Report and the
audited accounts for the year ended March 31, 2009.

FINANCIAL RESULTS:

Rs. Million
Income 2008-09 2007-08

Sale of Energy 417,913 369,462
Consultancy 1,325 1,039
Other income (Including energy internally 33,320 29,612
consumed)
Total Income 452,558 400,113
Expenditure:
Fuel 271,107 220,202
Employees Remuneration & Benefits 24,631 18,960
Generation, Administration & other expenses 18,192 16,284
Interest 12,750 10,312
Finance charges 7,479 7,669
Depreciation 23,645 21,385
Total Expenditure 357,804 294,812
Profit before tax, provisions and prior 83,172 76,900
period adjustments
Tax 11,582 28,401
Profit after tax but before provisions 83,172 76,900
and prior period adjustments
Less:
Prior Period Adjustments (Net) 1,083 2,745
Provisions (Net) 76 7
Net Profit after tax 82,013 74,148
Appropriations:
Transfer to Bonds Redemption Reserve 4,537 3,822
Interim Dividend 23,087 22,263
Proposed Dividend 6,596 6,596
Tax on Dividend 5,017 4,905
Transfer to General Reserve 44,000 39,000
Transfer to Capital Reserve 86 *

*Rs.12,723/-.

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FINANCIAL PERFORMANCE:

The total income of the company for the year increased by 13.11% to
Rs.452,558 million from Rs.400,113 million during the previous year. The
profit after tax but before provisions and prior period adjustments
increased by 8.16% to Rs.83,172 million from Rs.76,900 million. Net profit
after tax increased to Rs.82,013 million from Rs.74,148 million registering
a growth of 10.61% over last year.

DIVIDEND:

In addition to interim dividend of Rs.2.80 per share paid in February 2009,
your Directors have recommended a final dividend of Rs.0.80 per share for
the year 2008-09. The total dividend for the year is Rs.3.60 per share as
against Rs.3.50 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. 29,683 million represents 36.19% of the
profits after tax. The total dividend payout including tax accounts for
42.31% of profit after tax. The dividend has been recommended in accordance
with your 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.

OPERATIONAL PERFORMANCE:

During the year, the power stations of your Company generated 206.939 BU of
electricity which was 28.60% of the total power generated in India with a
share of 18.82% in the total installed capacity of the country. The power
generated by the company has registered an increase of 3.03% over the
previous year's generation of 200.863 BU Your Company contributed 31.4% of
the generation increase in the country during the year. The coal based
stations of your company operated at a Plant Load Factor (PLF) of 91.14%
(National PLF 77.19%) and an all time high Availability Factor of 92.47% at
bar during the year. Your Company has an installed coal based capacity of
23,895 MW comprising 79 units with average fleet age of 18 years. During
the year, 10 coal based stations out of 15 achieved more than 90% PLF
including four stations registering above 95% PLF This included Talcher
Thermal Power Station having an average age of 36 years, achieving 92.7%
PLF Further, another station, National Capital Thermal Power Station, Dadri
achieved an all time high PLF of 99.4%. However, the gas stations having a
capacity of 3955 MW, operated at a PLF of 67.01% as against 68.14% last
year due to reduced availability of gas. The average availability for gas
based stations for the year was 86.65% as compared to 85.93% during
previous year.

A detailed discussion on the operations and performance for the year is
given in the 'Management Discussion and Analysis', Annexure-I included as a
separate section to this report.

COMMERCIAL PERFORMANCE:

During the year, your Company realized 100% payment of current bills raised
for sale of power. All the beneficiaries are paying within 30 days of
billing except the states of UP and J&K which are making payment in
permissible 60 days period. Rebate scheme of providing incentive for early
payment based on provisional bill has helped in achieving early realization
of dues. This has resulted in realization of nearly 66% of the energy bill
within a week of presentation of the bill for the month.

All the beneficiaries have established and are maintaining Letters of
Credit (LC) to the extent of 105% of monthly billing. As on date, your
Company has LCs of Rs.33,679 million. RBI, on behalf of State Governments,
serviced redemptions due on bonds and half yearly interest installments on
bonds in time as per One Time Settlement Scheme.

Your Company had signed Power Purchase Agreements (PPAs) with 24
beneficiaries for new projects of 5820 MW capacity during the year Payment
Security Mechanism (PSM) by way of Tripartite Agreements (TPA) amongst
respective State Governments, Central Government and Reserve Bank of India
are in place upto 2016. In order to ensure PSM beyond 2016, bilateral
agreements having escrow arrangement have been signed with most of the
state utilities.

The following units were declared commercial during the year adding 2000 MW
to commercial capacity of your Company:

Project/Unit Capacity COD
(MW)

Sipat Stage-II(1st Unit) 500 20.06.08
Sipat Stage-II (2nd Unit) 500 01.01.09
Kahalagaon Stage-II (1st Unit) 500 01.08.08
Kahalgaon Stage-II (2nd Unit) 500 30.12.08
Total 2000

COD- Commercial Operation Date.

The above increase in commercial capacity was the highest in last 14 years.

For further strengthening relationship with customers, your Company rolled
out Customer Satisfaction Index (CSI) in all the regions to have feedback
from customers and their perception about the Company.

On January 19, 2009, Central Electricity Regulatory Commission issued
Central Electricity Regulatory Commission (Terms and Conditions of Tariff)
Regulations, 2009 applicable for a period of five years unless reviewed
earlier or extended by the Commission. The same are discussed in
'Management Discussion and Analysis', Annexure-I included as a separate
section to this report.

INSTALLED CAPACITY:

Your company has surpassed 30,000 MW mark. During the year, your Company
has added 1,000 MW capacity detailed as under:

Description Date of Commensing MW

1. Sipat-11 13.08.08 500
2. Bhilai expansion 20.04.08 250
JV with SAIL 28.03.09 250
Total 1000

Thetotal installed capacity of the NTPC Group has increased from 29,144 MW
to 30,144 MW at the end of the year. With the commissioning of unit 7 of
Kahagaon Super thermal Project on June 28, 2009, the installed capacity of
your Company is 30,644 MW as detailed below:

Owned by NTPC MW

Coal based projects 24,395

Gas based projects 3,955

Sub-total 28,350

Joint Ventures:

NSPCL (Coal)-JV with SAIL 814

RGPPL (Gas)-JV with GAIL, MSEB 1,480
and Indian Financial Institutions

Sub-total 2,294

Total 30,644

CAPACITY ADDITION PROGRAM:

Towards its aim of empowering India's growth, your Company has embarked
upon an ambitious capacity addition program so as to be a 50,000 MW company
by the year 2012 and to have an installed capacity of 75,000 MW plus by
2017. Your company has adopted a multi-pronged growth strategy which
includes capacity addition through green field projects, brown field
expansions, joint ventures and acquisitions.

Projects planned:

Projects having an aggregate capacity of 17,930 MW including 4,000 MW
undertaken by JV companies are under various stages of construction.
Further, during the year, Feasibility Reports have been finalized for a
total capacity of 4,350 MW consisting of Solapur STPP (2x660MW), Tanda
Stage-II (2x660MW), Meja STPP (2x660MW, under JV Company) and Muzaffarpur
TPS (2x195MW, under JV Company).

A list of projects under construction is furnished below:

Name of the Project Capacity (MW)

Project under NTPC Ltd.:
A. Coal Based-Ongoing Projects:
1. Sipat-I 1980
2. Barh-I 1980
3. Korba-III 500
4. NCTPP-II, Dadri 980
5. Farakka-III 500
6. Simhadri-II 1000
7. Bongaigaon 750
8. Mauda 1000
9. Barh-II 1320
10. Rihand-III 1000
11. Vindhyachal-N 1000
Sub Total (A) 12010
B. Hydro Electric Power Projects (HEPP)-Ongoing:
12. Koldam 800
13. Loharinag Pala 600
14. Tapovan Vishnugad 520
Sub Total(B) 1920
C. Projects with Subsidiaries/JVs 4000
Total 17930

Details of units planned to be commissioned during 2009-10 are as under:

Description MW

1. Kahalgaon (Unit 7 of Stage-II) 500*
2. Sipat (Unit 1 & 2 of Stage-I) 1320
3. Dadri (Unit 5 & 6 of Stage-II) 980
4. Korba (Unit 7 of Stage-III) 500
Total 3300

* Commissioned on 28.06.2009.

Your Company is also identifying new sites for setting up of power projects
during XII Plan and beyond. These projects would be added to the plans
after project viability is established.

During the year 2008-09, investment amounting to Rs.121,458 million was
approved for 2 projects namely Rihand Stage-III and Vidhyachal-IV each
having capacity of 1000 MW.

Capacity addition through Subsidiaries and Joint Ventures (JVs):

By leveraging its project execution strength, your Company is setting up
about 18% of the capacity addition during XI plan 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
4,500 MW are planned to be commissioned to add benefits during XI plan. Out
of this, during the year 2008-09, two units, each of 250 MW of Bhilai
expansion power project of NTPC SAIL Power Company Private Limited (NSPCL)
have been commissioned and the balance 4000 MW is under construction. The
details of NTPC Group of companies engaged in the task of setting up power
projects during XI plan are as under:

Name of the Company JV Partner Details

NSPCL Steel Authority Equity contribution of
(NTPC-SAIL of India Limited 50:50 by NTPC Ltd and
Power Supply (SAIL) SAIL
Co. Ltd.) (2x250 MW
commissioned)

NTECL Tamil Nadu A 50:50 Joint Venture
(NTPC Tamil Electricity Board Company of NTPC Ltd.
Nadu Energy (TNEB) and TNEB for setting
Company Ltd.) up coal based power
project having 2 units
of 500 MW each at
Vallur, Tamil Nadu. In
addition investment
approval accorded for
setting up another unit
of 500 MW

APCPL Indraprastha Equity contribution in
(Aravali Power Power the ratio of 50:25:25 by
Company Generation Co. NTPC, IPGCL and
Private Ltd) Ltd. (IPGCL) HPGCL respectively for
and Haryana setting up coal based
Power power project having
Generation Co. 3 units of 500 MW each
Ltd. (HPGCL). at Jhajjar, Haryana.

Bhartiya Rail Ministry of Equity contribution in
Bijlee Company Railways, GOI the ratio of 74:26 by
Limited NTPC and Ministry of
Railways for setting up
coal based power project
having 4 units of 250 MW
each at Nabinagar, Bihar.

In addition to the above projects, your Company has formed following Joint
Venture Companies to add another 3,690 MW The units of two of these
projects are likely to be ordered under bulk supply tender.

Company Location/Project

Meja Urja Nigam Equity contribution in the ratio of
Pvt. Ltd. 50:50 by NTPC and Uttar Pradesh Rajya
Vidyut Utpadan Nigam Ltd. for setting
up coal based power project having
2 units of 660 MW each at Meja, UP

Nabinagar Power Equity contribution in the ratio of
Generating Co. 50:50 by NTPC and Bihar State Electricity
Pvt. Ltd. Board for setting up coal based
power project having 3 units of 660
MW each at Nabinagar, Bihar.

Kanti Bijlee Equity contribution in the ratio of
Utpadan Nigam 51:49 by NTPC and Bihar State
Limited Electricity Board for setting up coal
based power project having 2 units
of 195 MW each at Muzaffarpur, Bihar.

Diversified Fuel Mix:

Although coal will remain the mainstay for adding generation capacity owing
to its abundant reserves in the country, your Company is progressively
diversifying its fuel mix to increase the share of non fossil fuel with a
view to promote sustainable energy development and further reduce COQ
intensity of power generation.

At present, hydroelectric projects of 1920 MW consisting of Koldam (4x200
MW), Loharinag Pala (4x150 MW) and Tapovan Vishnugad (4x130 MW) are under
advanced stage of construction. Another hydroelectric power project namely
Rupsiabagar-Khasiabara HEPP having 3 units of 87 MW to be set up in the
state of Uttarakhand has already received Techno

Economic Clearance by Central Electricity Authority (CEA). This project has
also been accorded approval of Ministry of Environment and Forests (MoEF).
Further, a Memorandum of Agreement has been signed with State Govt. of
Mizoram for implementation of Kolodyne HEPP (4x115 MW). Detailed Project
Report for the same is under updation.

Your Company is also setting up the following hydroelectric generation
capacity through its wholly owned subsidiary NTPC Hydro Limited (NHL), set
up to undertake development of small hydro projects having capacity upto
250 MW.

Project Location Capacity

Lata Tapovan Uttarakhand 171 MW
Rammam-III West Bengal 120 MW

The techno economic clearance of CEA and environmental clearance of MoEF
have been obtained for both these projects. The land for Lata Tapovan HEPP
and Rammam-ill HEPP has been acquired. Infrastructure development
activities are under progress at these projects. Both the projects are
scheduled to be commissioned during XII plan.

Your Company has signed an MOU with Nuclear Power Corporation of India
Limited for setting up nuclear power projects.

For a greener tomorrow, your Company has signed an MOU with Karnataka Power
Corporation Ltd. (KPCL) for developing 500 MW Wind Energy Farm in
Karnataka. Further, a Joint Venture Agreement with Asian Development Bank
and Kyushu Electric Power Company Inc. for setting up power generation
facility through Renewable Energy Sources (RES) is under finalization.

By the end of XII Plan period, the power generation portfolio of your
Company will have a diversified fuel mix with about 53,000 MW of coal based
capacity, 10,000 MW through gas, 9,000 MW through Hydro, 2,000 MW from
nuclear generation and around 1,000 MW from RES. Thus by the year 2017, the
share of coal based projects in the Group's total installed capacity will
reduce from the present 82% to around 71%. The share of hydroelectric
projects, nuclear projects and projects based on renewables is likely to be
12%, 3% and 1% respectively by the year 2017.

STRATEGIC DIVERSIFICATION- INCREASING SELF-RELIANCE:

Your Company is continuously looking for opportunities in the related
business areas such as coal mining, LNG Value Chain, manufacturing
activities, power trading, distribution, etc. in its endeavour to become
'an integrated power major'. Your Company is firmly on its course to add
manufacturing capacity through strategic alliances.

NTPC-BHEL Power Projects Pvt. Limited (NBPPL), a joint venture of your
Company with BHEL, incorporated on 28.04.2008, has commenced operations.
CMD and two full time directors and two part time directors are in place.
Implementation of Singrauli STPS Stage-III has been assigned in principle
to this company on EPC contract basis. Further, BHEL has issued a Letter of
Intent to NBPPL for taking up EPC contract for Balance of Plant equipment
at Palatana CCPP having a capacity of 726.6 MW in the state of Tripura.

Another joint venture Company, BF-NTPC Energy Systems Limited was
incorporated with Bharat Forge Limited on 19.06.2008 to take up
manufacturing of castings, forgings, fittings and high pressure piping
required for power projects and other industries. A consultant is to be
appointed shortly for preparation of Business plans for this Company.

Consequent upon signing of 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., your Company has acquired 44.6% stake in TELK
from Government of Kerala on June 19, 2009.

Your Company has incorporated a joint venture Company under the name
'National High Power Test Laboratory Private Limited' with NHPC, Powergrid
and DVC for setting up an online high power test laboratory for short
circuit testing in the country. This will go along way in saving time and
reducing cost since at present manufacturers and utilities have to send
their equipments to overseas testing labs.

Your Company has also signed a Memorandum of Understating with Hindustan
Aeronautics Ltd. (HAL) for preparation of a detailed project report for
'Repairs of Hot gas path components in Gas Turbine' which may eventually
graduate to manufacturing facility creation for GT components by forward
and reverse engineering.

In order to facilitate trading of electrical power including ancillary
services, a Joint Venture Company has been incorporated under the name
'National Power Exchange Limited' amongst NTPC, NHPC, PFC and TCS. Please
refer to 'Management Discussion and Analysis', Annexure-I included as a
separate section to this report for further details.

GLOBALISATION INITIATIVES:

Your Company is continuously scanning business potential that global
opportunities offer. A representative office is functioning in Dubai for
marketing of its services in Middle East Region. Your Company has received
4 orders in Dubai for carrying out engineering, design and review of
substations. It has also completed supervision of erection, testing and
commissioning of 800 MW Az-Zour power station in Kuwait.

After identification of site for setting up a 2X250 MW coal based power
plant in Trincomalee region, Sri Lanka in Joint Venture with Ceylon
Electricity Board, your Company is in the process of finalizing Joint
Venture Agreement, Power Purchase Agreement and other definitive
agreements. In another international venture proposed to be taken up in
Nigeria, pre-feasibility report for setting up the proposed 500 MW coal
based and 700 MW gas based power plants has been submitted to Federal
Government of Nigeria.

Your Company is exploring the possibility of setting up of new coal power
project, taking up Renovation & Modernization of old stations and also
sourcing of fuel in Kazakhstan.

FINANCING OF NEW PROJECTS:

The 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 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 the debt required for the planned capacity expansion
program.

During the year 2008-09, your Company has tied up loans of Rs.115,750
million including a large ticket loan of Rs.100,000 million with Power
Finance Corporation Limited. Further, recently, your Company has entered
into a loan agreement with State Bank of India for Rs. 85,000 million for
part funding of debt requirement in respect of capex for next three years.
In addition, loans amounting to Rs. 35,500 million have been tied with
other banks to fulfill the debt requirement for next three years.

Bonds amounting to Rs.19,000 million were raised from domestic market for
financing the capital expenditure and refinancing of the loans. The latest
10 year bond offering amounting to Rs.7,000 million subscribed at 7.89% per
annum bears testimony to the confidence reposed by investors in your
Company.

Fixed Deposits:

The cumulative deposits received by your Company from 285 depositors as at
March 31, 2009 stood at Rs 14 million. Further, an amount of Rs. 5 million
has not been claimed on maturity by 57 depositors as on that date.

FUEL SECURITY:

In pursuance of New Coal Distribution Policy introduced by Ministry of Coal
in October 2007, your Company has signed Long Term Model Coal Supply
Agreement with Coal India Limited on May 29, 2009 for supply of coal to its
stations.

The Coal Supply Agreement would be for a period of 20 years or till the end
of the life of the power stations, whichever is earlier with provisions of
joint review of Annual Contracted Quantity (ACQ) after every five years.
The agreement provides for guaranteed supply/off-take at 90% of ACQ for
determining incentives/penalties, which are like mirror images on either
side of the 90% trigger level.

During the financial year 2008-09 your Company received 129.78 Million
Tonnes of coal consisting of domestic coal of 124.37 Million Tonnes, about
3.47% higher than the coal received in previous year and imported coal to
the tune of 5.41 Million Tonnes, at the stations.

An agreement with State Trading Corporation of India Limited (STC) for
supply of 8.25 Mil lion Tonnes (+/-2%) of imported coal was entered into by
your Company in 2008-09. Further, to ensure uninterrupted power generation,
your Company has decided to import additional 12.5 Million Tonnes of coal
during 2009-10.

Your Company has taken initiatives including tie up for additional gas/RLNG
in order to augment gas supplies on medium and long term basis. Further,
bidding for oil and gas blocks during various rounds of NELP, possible
equity stake in foreign oil and gas blocks/LNG terminals etc. are also some
of the measures taken by the Company to enhance gas supply security.

GAIL is our main supplier for APM/PMT gas (at APM price fixed by Ministry
of Petroleum and Natural Gas) for the gas based stations. Your Company
received 10.74 Million Metric Standard Cubic Meters per Day (MMSCMD) of gas
during the fiscal 2009 as against 11.76 MMSCMD received in fiscal 2008.
This includes 1.99 MMSCMD of spot RLNG received as compared to 2.77 MMSCMD
of gas received during previous year. The supplies of APM/PMT gas declined
on account of shutdowns at platforms and force majeure at one of the gas
fields of PMT. The availability of spot gas was adversely affected on
account of capacity constraint at the re-gasification terminal.

Augumenting gas supplies for 2009-10:

For meeting the shortfall in gas supplies, your Company is at an advanced
stage of finalization of agreement with GAIL for supply of 2.5 MMSCMD of
RLNG for a period of 10 years. Under this agreement, the supply of gas is
to commence from December'09.

During the first quarter of 2009-10, on an average, over 14 MMSCMD of
gas/RLNG has been received in view of improved supplies.

Your Company has entered into medium term agreement for Naphtha supplies
for many of its plants with some Oil Marketing Companies. To further
enhance fuel security of gas based stations, increasing the capacity of
liquid fuel storage tank is also under consideration at some of our
stations.

During fiscal 2009, your Company has strengthened fuel security for its
Rajiv Gandhi Combined Cycle Power Project (RGCCPP) by entering into an
agreement having enhanced quantity of committed Naphtha supply commensurate
with the revised CERC norms of 85% Normative Annual Plant Availability
Factor (NAPAF).

Diversifying Into Coal Mining:

Coal mining is integral to your Company's fuel security strategies. Your
Company realizes that greater self reliance on coal will go along way in
ensuring the sustained growth of generation. To give greater thrust to the
mining activities, each of the coal blocks allotted to your Company is
being undertaken in 'project mode'. The development of PB Coal Mining
Project (Pakri-Barwadih Coal Mining Block) is under progress. In addition
to approval of mining plan, this project has also received environmental
clearance. Mining Area of 1459.4 Acres (Phase I) and 4121.99 Acres (Phase
II) has been acquired for your Company by Ministry of Coal (MoC). For
acquisition of 1153.32 Acres of Mining Area land (Phase III), notification
is under process at MoC.

Coal block development activities are under progress in the remaining four
coal mining blocks, namely CB Coal Mining Project (Chatti-Bariatu coal
block), KD Coal Mining Project (Kerandari coal block), DL Coal Mining
Project (Dulanga coal block) and TL Coal Mining Project (Talaipalli coal
block). Mining Plans for CB Coal Mining Project and KD Coal Mining Project
have been approved by MoC. Mining Plan for DL Coal Mining Project is under
approval. The Environmental clearance(s) for CB Coal Mining Project and KD
Coal Mining Project are expected shortly.

These blocks have estimated geological reserves of over 3 Billion Tonnes
and production potential of about 48 Million Tonnes Per Annum (MTPA) by
2012. An expenditure of Rs. 250 million was incurred on coal mining during
2008-09.

Other Initiatives for securing coal supply:

To leverage the strength of established players in mining and related
areas, your Company has formed following Joint Venture Companies:

Name of the Company JV Partner Purpose

NTPC SCCL Global Singareni For undertaking coal
Ventures Pvt. Ltd., Collieries mining in India and
(incorporated on Company abroad.
31.07.2007) Ltd.

International Coal SAIL, CIL, RINL For securing
Ventures Pvt. Ltd., and NMDC metallurgical coal
(incorporated on and thermal coal
20.05.2009) assets overseas

ICVL is exploring various opportunities in Australia, Mozambique, Canada,
Indonesia and USA, etc., for acquisition of stake in coking coal and
thermal coal mines.

Your Company on its own is proposing acquisitions of stake in coal mines in
Indonesia and Mozambique for which due diligence is in progress.

Pursuant to the signing of Memorandum of Understanding for development of
Brahmini and Chichro Patsimal coal blocks, a Joint Venture Agreement for
development of these blocks is under finalization with Coal India Ltd.
(CIL).

Further, a Memorandum of Understanding was entered into with Inland
Waterways Authority of India (IWAI) for exploring the feasibility of
transportation of imported coal covering entire gamut of economics to
Farakka and Kahalgaon projects.

Exploration Activities:

Exploration work on a petroleum block awarded under NELP V in Arunachal
Pradesh is in full swing. Geological survey, geo microbiological survey, 2D
seismic data processing and interpretation and 3D seismic data processing
and interpretation have been completed.

BUSINESS EXCELLENCE:

GLOBAL BENCHMARKING:

As a step towards developing 'Total Quality' culture in the organization,
your Company took forward Quality Circle and Professional Circle movement
for its employees. These fora provide opportunities to the employees to get
together, network and share knowledge and experience on issues of
professional interest. There are 800 QC teams and 300 PC teams across the
Company creating refreshing learning culture.

With the objective of benchmarking the performance of its units with
international units, your Company became a member of North American
Electric Reliability Corporation (NERC). NERC has database of more than
5000 units world wide under Generating Availability Data System (GADS).
Your Company's coal units of 200 MW and 500 MW capacity were benchmarked
with equivalent sized units amongst their peer group. The comparison
revealed that 200 MW as well as 500 MW units performed better than the peer
group units on parameters of availability, forced outage, planned outage
and capacity outage.

RENOVATION & MODERNISATION:

Your Company undertakes Renovation & Modernization (R&M) under project mode
with focus on feasible and cost effective technology upgrade, 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. It may also help to reduce emission of green house gases and
avail Clean Development Mechanism benefits apart from life extension of the
plant.

Your company is addressing the issue of ageing of its fleet. Around 36% of
our coal based units have logged over 1,50,000 hours of operation. R&M
requirement of these units is being taken up on priority with an objective
of extending the useful life of the units by around 10-15 years and
complying with statutory requirements in terms of increasingly stringent
environmental norms. Mid-life R&M intervention is provided to units which
have completed more than 1,00,000 hours of operation.

During the year 2008-09, your Company decided to take up investment
amounting to Rs.6,086 million in respect of following R&M schemes:

Station Estimated Cost
(Rs. Million)

Rihand Super Thermal Power Station
(2X500 MW) -Phase-I extension works 545

Korba Super Thermal Power Station
(3X500 MW) - Phase-II extension works 673

Auraiya Gas Power Station (652 MW) 4868

INTEGRITY PACT:

Your Company is striving to bring more transparency to its business
processes and as a step in this direction has signed a Memorandum of
Understanding with Transparency International India in December, 2008. It
has been decided that in the first stage, the Integrity Pact is to be
implemented for tenders having estimated value >= Rs.100 million. For
tenders having estimated value >= Rs. 1000 million, Independent External
Monitors (IEMs) will be appointed. The relevant bidding documents will
henceforth contain the necessary provisions for implementation of Integrity
Pact.

HUMAN RESOURCE MANAGEMENT:

Your Company takes pride in its highly motivated and competent human
resource that has contributed its best to bring the Company to its present
stature. The productivity of employees is reflected in the consistent
improvement of Man-MW ratio over the years. The over-all Man-MW ratio on
31.3.2009 excluding JV/subsidiary capacity is 0.85 and has improved by 20%
over last 7 years. Generation per employee has increased to 8.75 MUs i.e.
by 40% over the same period.

The total employee strength of the company stands at 24,713 as on 31.3.2009
against 24,547 as on 31.3.2008.

Fiscal 2009 Fiscal 2008

NTPC:
Number of employees 23,639 23,674
Subsidiaries & Joint Ventures:
Employees of NTPC in Subsidiaries & 1,074 873
Joint Ventures
Total employees 24,713 24,547

The attrition rate of the executives during the year was 1.88% as compared
to 3.1% in the previous year.

Employee Relations and Safety:

During the year, employee relations scenario in your Company continued to
be cordial marked by industrial harmony and mutual trust. Continuous
interactions take place amongst the management and apex forums of workmen
called National Bipartite Committee and with executives forum named NTPC
Executive Federation of India. Your Company has effective multi-tier
bipartite forums covering areas relating to plants and townships.

Safe methods are practised 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 a policy of continuously investing in training and development of not
only its own employees but also of all professionals of the power sector.
The Company imparts training at its sites as well as at the corporate level
in diverse areas including managerial topics, power station operation and
maintenance and project construction, erection and commissioning and
information technology.

In pursuit of developing manpower in power sector, your Company established
a dedicated training institute - Power Management Institute (PMI) at Noida
in 1994. Since then PMI has grown into an impressive centre of learning. In
the year 2008-09, PMI conducted a total of 310 programmes which were
attended by a total of 8513 participants. It also organized a workshop on
'Corporate Governance' at Geneva for CEOs and CMDs of many companies from
India arid abroad. Focused plans are under implementation for installing
internet-based on-line training modules and hands on training through
simulator remote terminals for super-critical technology.

INCLUSIVE GROWTH:

Your Company is committed to inclusive growth through its Corporate Social
Responsibility initiatives.

With a view to improve the employability of the village youth and also to
improve availability of skilled manpower around projects, your Company is
providing sponsorship to candidates from these villages for ITI training in
the trades of welder, fitter, instrument mechanic, electrician etc. Close
to 700 village youth have been sponsored during the year 200809. Support
has been extended for assistance in self reliance for 500 tribal
girls/women in tribal area of Jhamar Kotra in Udaipur Dist. of Rajasthan.

Your Company is adopting 16 ITIs located in the vicinity of its projects
under Public Private Partnership/Bilateral Agreement Schemes. Apart from
this, your Company will also set up 6 new ITIs. Your Company is also
setting up a power training institute at Solapur. To contribute in the
field of higher technical education in the country, your Company is also
setting up International Institute of Information Technology (IIIT) in
Chattisgarh.

As a measure to contribute towards conservation of selected national
monuments, your Company in association with Archaeological Survey of India
(ASI), has identified 3 sites for financial support. Your Company was also
closely associated in formation of IS:16001:2007 on 'Organisational
Accountability at the Workplace- Requirements' prepared by Bureau of Indian
Standards (BIS). Your Company was also involved in preparation of draft on
'ISO 26000 guidance on Social Responsibility and the implications for
developing countries' by BIS.

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 shares its experience 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 is engaged in serving and empowering the physically
challenged and economically weaker sections of the society. The Information
and Communication Technology (ICT) Centre, set up jointly by NTPC
Foundation and University of Delhi enables approximately 1000 physically
challenged students to learn IT Skills and help them move along with the
mainstream society. The Foundation is also extending similar ICT facilities
to the existing blind schools in Lucknow, Ajmer, Thiruvanathapuram and
Mysore.

Tanda project has been identified by the Foundation as pilot project for
operating District Disability Rehabilitation Centre (DDRC) in collaboration
with National Institute for the Orthopedically Handicapped (NIOH), Ministry
of Social Justice and Empowerment, Govt. of India.

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 activities in and around the projects. Rehabilitation Action
Plans are implemented in most of the projects. During 2008-09, Socio-
Economic Surveys (SES) were completed for 6 projects including 2 mining
projects.

Your Company has formulated 'Initial Community Development' (ICD) policy to
take up community development activities in greenfield/expansion projects.
As a proactive measure, the policy provides for implementation of Community
Development activities prior to formulation of Rehabilitation &
Resettlement plan.

IMPLEMENTATION OF OFFICIAL LANGUAGE:

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 maximize the use of Hindi in official work. Office orders,
formats and circulars were issued in Hindi as well. AI I 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.

SUSTAINABLE ENERGY DEVELOPMENT:

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

'Going Higher on Generation, lowering GHG intensity'

Your Company is committed for development of renewable energy in view of
global warming and fast depletion of fossil fuel.

A memorandum of understanding has been signed with Swiss Agency for
Development and Cooperation (SDC) to formulate along term strategy for
technology up-gradation and implementation of Renewable Energy and
Distributed Generation projects.

Your Company has already commissioned 10 Decentralized Distributed
Generation projects, out of which 5 projects are in Uttar Pradesh, 4 in
Chattisgarh and 1 in Rajasthan.

A pilot scale Bio-methanation Plant has been set up at Faridabad in order
to convert the waste into useful energy and bio-fertilizer.

NETRA-Thrust on development of Green Power:

In order to bring synergy between Energy Technologies department and
Research & Development department and integrate their efforts and resources
to enable quick maturing of research projects into a deployable technology,
these departments were merged to form NTPC Energy Technology Research
Alliance (NETRA). NETRA is envisioned as a state-of-the-art centre for
research, technology development and scientific services in the domain of
electric power to enable seamless work flow right from concept to
commissioning. NETRA complex is the first ECBC (Energy Conservation
Building Code) compliant building in NTPC.

NETRA's laboratories are ISO 17025 accredited and provide high end
scientific services to all the Company's stations as well as many outside
stations resulting in improved availability and reliability of stations by
providing condition assessment, failure analysis, by solving and analyzing
specific problems, and helping our stations in increasing the availability
and reliability of their units. It is also providing consultancy to
Fujairah Combined cycle Gas and Water Plant, UAE.

NETRA has filed 12 patent applications for various activities like
assessment of high voltage transformers, fly ash based utensil cleaning
powder, C02 capturing Zeolites from flue gas; etc. It focuses on developing
cutting edge technologies by carrying out applied research which will
manifest into cost reduction and environment protection. Collaborative
research work is being carried out with other premier academic institutions
and labs under 12 research projects.

NETRA is continuously taking initiatives to develop technologies for
reducing forced outages, installing smart intelligent systems for online
monitoring of critical components, understanding the likely damages due to
corrosion and providing appropriate solutions, etc. With prime thrust on
clean and economic power generation, efforts are being made to reduce cost
of generation by either increasing the overhaul cycle or reducing overhaul
duration through correct and proper health assessment of critical
components; developing diagnostic tools and ensuring environmental & safety
compliances.

Towards green power development, NETRA has taken up projects for Solar
Heating, Ventilation and Air Conditioning (HVAC), solar experimental power
plant and Flue Gas Heat Recovery. It is poised to take up collaborative
research for biological fixation of carbon dioxide through marine micro
algae. In order to improve efficiency through low grade heat recovery,
liquid ammonia binary cycle is under development through collaborative
research.

Environment Management:

Your Company has adopted advanced and high efficiency technologies such as
super critical boilers for the up-coming greenfield projects. The company
is also supplementing the high ash Indian coal with washed / beneficiated
coal and imported low ash coal in its operating plants. Presently, good

quality coal is imported forming around 5%-8% of total coal feed. This also
helps in conservation of precious domestic natural resources.

All plants are provided with High efficiency Electro-static Precipitators
(ESPs) with efficiency of the order of 99.9% or higher and advanced control
systems to keep Suspended Particulate Matter (SPM) for outlet dust burden
of below 100 mg/Nm3. Flue Gas Conditioning (FGC) system has also been
provided at our old Units which are helping in reduction of SPM emissions
below statutory limits as and when coal quality is deteriorating. Flue Gas
De-sulphurising (FGD) technology is being taken up for the first time in
the country at the coal based power plant (3X250MW) at Bongaigaon in Assam.
This project is expected to be operational during XI Plan.

In the area of water management, your Company has implemented the concept
of 3Rs - Reduce, Recycle & Re-use in its power stations. Provision of
advanced treatment facilities in its Liquid Waste Treatment Plants (LWTP),
installation of recycling systems for ash pond effluent called Ash Water
Recirculation System (AWRS) and installation / operation of closed cycle
condenser cooling water systems with higher Cycle of Concentration (CCK)
are some of the measures implemented in most of our stations. With
implementation of improved cooling water treatment system, your Company has
achieved operating CCK of 4.5 to 5.0 against design COC of 1.65 to 2.0 at
gas based combined cycle power plants at Kawas and Gandhar. This has
resulted in considerable reduction in fresh water intake of the order of
20% to 30% and reduction in effluent discharge from the power plants.

Ash dykes have been engineered to ensure that all safety and environmental
issues are addressed at design stage itself. Multi-lagoon ash ponds with
provision of over flow lagoons and garlanding arrangement for change over
of ash slurry feed points have been provided for effective settlement of
ash particles. Water sprinklers have been provided in the Ash Pond areas
for control of fugitive dust.

61 continuous Ambient Air Quality Monitoring System (AAQMS) are presently
under final stage of commissioning at 20 stations located all over India in
order to monitor key environmental parameters of stack emissions, ambient
air and effluents. Online C02 monitoring equipments are being installed at
all the new projects starting from Bath STPP Stage-I.

The Company has been undertaking Afforestation, covering vast areas of land
in and around its projects and till date has planted more than 18.50
million trees throughout the country which has not only contributed to the
aesthetics but has also been serving as a carbon sink for our stations and
nearby industries.

As a result of pursuing sound environment management systems and practices,
all NTPC stations have been certified with ISO 14001 and OHSAS 18001 by
reputed National and International certifying agencies.

Clean Development Mechanism (CDM):

Your Company has decided to set aside 1% of its distributable profit for
research and development including 0.5% for research activities related
to 'clean coal' and climate change initiatives.

The consolidated baseline and monitoring methodology for new grid connected
fossil fuel fired power plants using less GHG intensive technology prepared
by your Company for Super Critical Technology has been approved by 'United
Nations Frame Work Convention on Climate Change (UNFCCC)' under 'Approved
Consolidated Methodology 13'. This is a path breaking development for
entire power sector.

Host country approval has already been accorded by National CDM Authority
for three projects viz. North Karanpura STPP, Tapovan Vshnugad HEPP and
Loharinag Pala HEPR Super critical units at Barh STPP Stage-II and many
other projects are in the pipeline for host country approval. These
endeavors shall help in getting/earning 'Certified Emission Reduction' and
will facilitate development of advanced energy efficient technologies.

Your Company is amongst the cleanest fossil fuel based power generators in
the world with its C02 intensity of power generation comparable with the
best.

Ash Utilisation:

During the year 2008-09, about 24.4 million tonne of ash has been utilized
for various productive purposes which is 56.7% of the total ash generation
against MoU target of 55%. Over the last 7 years, Ash utilization as a
percentage of total ash generation has increased by more than 5 times.

Important areas of ash utilization are- manufacturing cement, concrete, ash
based products, asbestos sheets, construction of road embankment, ash dyke
raising, mine filling and land development. Issue of fly ash to cement and
concrete industry this year has been 10 Million Tonnes, about 15% more than
last year's issue.

Your Company has pilot ash brick manufacturing plants at all NTPC coal
based stations. The bricks have been utilized for construction activities
including green field projects and townships within NTPC. Farmers are being
made aware of the use of ash in fields.

About 1.14 Million Tonnes of ash from Talcher-Thermal has been successfully
used for reclamation of abandoned coal mine of South Balanda of MCL in
Orissa. So far 3.64 Million Tonnes of ash has been used in this mine. MoC
is associated for pilot project of random filling of ash with overburden of
an operating mine.

Your Company has signed an MoU with Research Designs & Standards
Organization (RDSO), Lucknow to explore use of ash in Railway embankments.

CenPEEP- Thrust on efficiency:

Center for Power Efficiency and Environmental Protection (CenPEEP), setup
with technical assistance of USAID/USDOE is a symbol of your Company's
commitment towards green house gas (GHG) reduction and an example of
successful international cooperation. Various state-of-the-art technologies
and practices for improvement in efficiency and maintenance have been
demonstrated in local conditions and disseminated to power stations through
hands-on-training, guidelines and workshops.

Efficiency Management System (EMS) has been implemented at all stations to
focus on periodic performance evaluation, analysis and development of
action plans for performance restoration. 'Low cost high benefit'
technologies, systems and tools have been introduced such as thermodynamic
model studies, high accuracy instruments alongwith portable DAS condenser
tube cleaning systems, helium leak detection, infrared and acoustics based
diagnostic tools etc.

CenPEEP's capabilities and efforts have been recognized by public and
private organisations. Government of India identified CenPEEP to support
demonstration of best practices in some of the state generating companies
under Asia Pacific Partnership (APP) on clean development and climate.
During these demonstrations, substantial potential for CO2 reduction was
identified. For its efforts on GHG reduction in power sector, Council of
Power Utilities has conferred 'India Power Award 2008' upon CenPEEP-NTPC.

International cooperation for climate change has been expanded with signing
of an agreement between Ministry of Power, NTPC Ltd. and Japan
International Agency for Cooperation (JICA) to undertake a 'Study on
enhancing Efficiency of Operating Thermal Power Plants in NTPC-India'. The
study will identify areas for efficiency enhancement in selected coal-fired
power plants of your Company with support from JICA study team comprising
experts from a consortium of three Japanese utilities namely Electric Power
Development Co, Kyushu Electric Power Co. and The Chugoku Electric Power
Co.

MANAGEMENT OF CHANGE:

Your Company has taken several initiatives to improve business processes,
promote innovation and leverage information & communication technology for
over-all productivity enhancement.

Implementation of ERP:

Your Company believes in keeping pace with latest technology and acquiring
the latest know-how, in line with its growth and diversification plans.
Enterprise Resource Planning (ERP) has been implemented at all NTPC
projects as well as at its subsidiaries. Besides the implementation of
Employee Self Service (ESS) functionality, Core Business processes such as
Finance, HR, Material, e-procurement, Knowledge Management (KM), Business
Intelligence (BI), Document Management, and Workflow etc. have also been
implemented.

A state-of-the-art Data Centre with centralized ERP Servers has been set up
at NOIDA for the entire Company. The Disaster Recovery site is planned to
be setup at Hyderabad. Dedicated Multi Protocol Label Switching-Virtual
Private Network (MPLS/VPN) for ERP from BSNL has been made operational to
cover 48 locations.

Promoting innovation for productivity enhancement:

IPON (Idea Portal of NTPC), a web based platform has been created for
receiving the suggestions from employees for improving performance,
productivity and growth of the organization.

Using Information and Communication technology for productivity
enhancement:

Your Company has already implemented video-conferencing at all its plant
locations and at number of its subsidiaries, which is being used
extensively for Management Committee meetings and Projects Monitoring on
regular basis. A web based monitoring system has been implemented at NCTPP,
Dadri on a pilot basis. For NCTPP Stage-II which is under construction,
this system has integrated the major suppliers and monitors more than
30,000 activities on a real time basis. This system is planned to be rolled
out at some other projects in future.

CONTRIBUTION TO THE SECTOR:

Government of India reposes confidence in your Company's abilities in
implementing plans and projects. Under Rajiv Gandhi Grameen Vidyutikaran
Yojana (RGGVY), Ministry of Power has given your Company, the
responsibility of electrification of approximately 38500 villages in 6
States and one Union Territory. During the year 2008-09, more than 4000
villages were electrified and electricity connections were provided to 1.68
lac below Poverty Line households. Consultancy services were provided for
R&M/ Life Extension of 2x110 MW units of Barauni Thermal Power Station in
Bihar and 5X200 MW units of Obra Thermal Power State in U.P.

Your Company has provided training to state utilities' personnel at PMI and
technical and managerial services were provided to the State Utilities.

NTPC GROUP: JOINT VENTURES AND SUBSIDIARIES:

Your Company has formed 15 joint venture companies and 6 subsidiary
companies for undertaking specific business activities.

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.

STATUTORY AND OTHER INFORMATION REQUIREMENTS:

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 of III
energy, technology absorption and
foreign exchange earnings and outgo

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

Statement pursuant to Section 212 of V
the Companies Act, 1956 relating to
subsidiary companies

Statistical data of the grievances VI

Statistical information on persons VII
belonging to Scheduled Caste/Tribe
categories

Information on Physically Challenged VIII
persons

UNGC Communications on progress IX
2008-09

Presidential Directives X

STATUTORY AUDITORS:

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 2008-09.

MANAGEMENT COMMENTS ON STATUTORY AUDITORS' REPORT:

The Statutory Auditors of the Company have given an unqualified report on
the accounts of the Company for the Financial Year 2008-09.

REVIEW OF ACCOUNTS BY COMPTROLLER & AUDITOR GENERAL OF INDIA:

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 2008-09 are being placed with the report of Statutory
Auditors of your Company elsewhere in this Annual Report.

COST AUDIT:

As prescribed under the Cost Accounting Records (Electricity Industry)
Rules, 2001, the Cost Accounting Records are being maintained by all
stations of the Company since the year 2002-03. The cost audit for the year
2008-09 has been completed and the Cost Audit reports are scheduled to be
submitted shortly.

BOARD OF DIRECTORS:

Shri M.N. Buch, Shri Shanti Narain, Shri P.K. Sengupta, Shri K. Dharmarajan
and Dr. M. Govinda Rao have joined the Board as Non-official Part-Time
Director with effect from August 26, 2008. Shri I.J. Kapoor has taken over
as Director (Commercial) with effect from December 26, 2008.

Shri G.P. Gupta, Shri M.I. Beg, Dr. R.K. Pachauri and Prof. Ashok Misra
ceased to be the Non-official Part-time Directors of the Company with
effect from January 29, 2009 on completion of their respective tenure. Shri
Kanwal Nath, Shri Adesh Jain, Shri AX Sanwalka and Shri S. Nautiyal have
joined as Non-official Part-time Director of the Company with effect from
January 30, 2009.

Shri Rajesh Verma ceased to be the Part-time Director of the Company with
effect from March 26, 2009. Shri V.P. Joy has ceased to be the Part-time
Director of the Company w.e.f. May 4, 2009.

Shri I.C.P. Keshari and Shri Rakesh Jain have joined as Part-time Directors
(Government Nominee) with effect from May 4, 2009 and June 9, 2009
respectively.

Shri K.B. Dubey ceased to be Director on the Board of your Company w.e.f.
July 31, 2009 consequent upon attaining the age of superannuation and in
his place Shri B.P. Singh, Executive Director (Coal Mining & Coal
Washeries), NTPC has joined as Director (Projects) w.e.f. August 1, 2009.

The Board wishes to place on record its deep appreciation for the valuable
services rendered by Shri G.P. Gupta, Shri M.I. Beg, Dr. R.K. Pachauri,
Prof. Ashok Misra, Shri Rajesh Verma, Shri V.P. Joy and Shri K.B. Dubey
during their association with NTPC.

In accordance with the provisions of Article 41(iii) of the Articles of
Association of the company four directors - Shri Chandan Roy, Shri R.K.
Jain, Shri A.K. Singhal and Shri M.N. Buch shall retire by rotation at the
Annual General Meeting of your Company and, being eligible, offer
themselves for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT:

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 2008-09 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.

ACKNOWLEDGEMENT:

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, Ministry of
Railways, Planning Commission, Department of Public Enterprises, Central
Electricity Authority, Central Electricity Regulatory Commission, Appellate
Tribunal for Electricity, State Governments, Regional Power Committees and
State Electricity Boards.

Your directors also convey their gratitude to the shareholders, various
International and Indian Banks and 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 the Board of Directors

Place: New Delhi (R.S. Sharma)
Date: August 1, 2009 Chairman & Managing Director

Annex-I to Directors' report

MANAGEMENT DISCUSSION AND ANALYSIS:

INDUSTRY STRUCTURE AND DEVELOPMENTS:

GENERATION:

Existing Installed Capacity:

The power sector in India is characterized by deficits with demand
outstripping the supply. Going forward, it is likely that the same
situation will continue till the end of XII plan.

The total installed capacity in the country as on March 31, 2009 was
147,965 MW with State Sector leading with a share of 51.4%, followed by
Central Sector representing 33.1% share and balance 15.5% is contributed by
Private Sector entities.

Total Capacity MW % Share

State 76,116 51.4%
Centre 48,970 33.1%
Private 22,879 15.5%
Total* 147,965 100.0%

* Excluding captive generating capacity connected to the grid 19781.79 MW
as on 31.3.2009

Source: CEA's executive summary

Out of 3,454 MW added during the year in the country, the Central Sector
contributed to an addition of about 22%, state sector 53% and 25% was
contributed by private sector. The total thermal capacity, including gas
stations and diesel generation accounts for about 63.3% of installed
capacity of the country followed by hydro capacity at 24.9%. Nuclear
stations account for 2.8% and the balance 9.0% is contributed by Renewable
Energy Sources.

Total Capacity MW % Share

Thermal 93,725 63.3%
Hydro 36,878 24.9%
Nuclear 4,120 2.8%
R.E.@ 13,242 9.0%
Total 147,965 100.0%

@ Renewable Energy Sources.

Source: CEA's executive summary

With about 77,649 MW of the installed capacity contributed by coal based
stations which is 52% of nation's capacity, coal remains a key fuel for
power generation.

Existing Generation:

The total power generation in the country during the year 2008-09 was
723.794 billion units as compared to 704.451 billion units generated during
last year registering a growth of 2.74%.

The sector wise break up as well as fuel wise break-up of generation for
the year 2008-09 is detailed as under:

Total Generation Million Units % Share

State Sector 344.975 47.7%
Central Sector 304.033 42.0%
Pvt. Sector 68.887 9.5%
Others 5.899 0.8%
Total 723.794 100.0%
Thermal 590.101 81.6%
Hydro 113.081 15.6%
Nuclear 14.713 2.0%
Others 5.899 0.8%
Total 723.794 100.0%

Source: CEA's executive summary

Although the State Sector accounts for 51.4% of installed capacity, its
contribution to national generation is only 47.7%. 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 33.1% in installed
capacity.

Demand and Supply position:

As per Global Economic outlook (January, 2009) of the Economist, India's
GDP is still expected to grow next only to China in the range of 8.3% to
6.5% per annum in comparison to negative GDP growth predicted for all the
other major economies in the world. In a recent report issued by World Bank
on 'Prospects of Global Economy', in the year 2010, the estimated growth of
GDP of 8.0% in India will overtake the GDP growth of 7.5% estimated for
China. In order to sustain the above GDP growth rate, the Power Sector also
needs to grow at an appropriate pace in the medium to long term. However,
the past trend shows otherwise.

Central Electricity Authority in its 17th Electric Power Survey (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.

Currently, the sector is characterized by acute shortages. At the end of
fiscal 2009, the energy shortage was at 11.1% and peaking shortage was at
11.9% indicating huge gap between demand and supply of electricity. The
demand and Supply position during the last five year in the country is
indicated as under:

Actual Power Demand- Supply Position:

Financial Recruitment Availability Surplus/Deficit (+/-)
Year (MU) (MU) (MU) (%)

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%
2009 777,039 691,038 -86,001 -11.1%

MU denotes Million units, Source: Executive Summary of CEA.

Consumption:

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 2008
was approximately 38%, 24%, 22% and 8% respectively The balance pertains to
various other consumers. As per 'Eleventh Five Year Plan' of planning
commission, India is world's 511 largest energy consumer accounting for
3.45% of global energy consumption. However, the per capita energy
consumption in India remains low. Energy consumption includes electricity,
petrol, gas, coal, firewood etc. The per capita consumption of electricity
of 704 Kwh in India is quite low as compared to global average of 3240 Kwh.
The per capita electricity consumption of major developed nations and other
major emerging economies as of 2006/2007 is given below:

Country Per Capita Electricity
Consumption in Kwh

USA 12924
Australia 10721
Japan 7702
South Korea 7516
Russia 6969
U.K. 5774
Malaysia 3725
China 2179
Brazil 2117
Mexico 1858
Egypt 1276
India* 704
World Avg 3240

Source: CIA World factbook, for the year 2007-08 as per CEA

Capacity Utilisation:

Capacity utilisation in the Indian power sector is measured by Plant Load
Factor (PLF). The PLF for coal-fired plants during 2008-09 was 77.19% as
compared to 78.60% during 200708. The reduction in PLF is due to negative
growth in power generation from hydro stations mainly due to less inflow
into reservoirs resulting from low rainfall during monsoon. Generation of
power from nuclear power stations also registered negative growth owing to
fuel supply constraint.

TRANSMISSION AND DISTRIBUTION:

Currently India has Transmission and Distribution network of 6.78 million
circuit kilometres which is the third largest in the world. 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 the state
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 utilization 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. Transmission system planning has shifted
from generation evacuation system planning to integrated system planning.
The Ministry of Power (MoP) 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 connects the northern, eastern, northeastern and
western regions in synchronous mode and the southern region asynchronously.
The inter-regional power transmission capacity as on March 2009 is 20,750
MW as, compared to 17,000 MW at end of fiscal 2008. This capacity is
expected to be further augmented to 37,700 MW by 2012. High capacity
transmission corridors need to be developed for the viable and economic
evacuation of such a quantum of power. For this, high capacity HVDC links
and 1,200 kV and 765 KV UHV (Ultra High Voltage) AC corridors with pooling
stations at suitable locations in Jharkhand, Orissa, Chattisgarh, Madhya
Pradesh, Andhra Pradesh and Tamil Nadu have been envisaged. Work has
started on the first 800 KV HVDC bipole line from the north-eastern region
to the northern region.

POLICY FRAMEWORK:

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

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, 2009 all the
states except Arunachal Pradesh have set up their Regulatory Commissions.
In addition, two Joint Electricity Regulatory Commissions have been set up
for Manipur & Mizoram and Goa & UTs. 16 states have unbundled so far into
Generation Cos., Transmission Cos., and Distribution Cos. Chattisgarh State
Electricity Board has recently unbundled into 5 different companies.

Broadly various reforms ushered in by amending the legislative framework in
power sector are:

1. Promulgation of the Electricity Act 2003. The Act promoted a liberal,
transparent and enabling legal framework for power development for creation
of a competitive environment and reforming distribution segment of power
industry.

2. EA 2003 allowed open access in transmission and distribution.

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

4. Multiple licenses in distribution allowed.

5. National Electricity Policy (NEP) 2005 issued.

6. Tariff Policy 2006 issued.

7. Appellate Tribunal operationalized in 2005 to hear appeals against
orders of Electricity Regulatory Commissions.

8. Rural Electricity Policy launched in August'2006-joint efforts of
Central Government and the State Governments to provide access to
electricity to all areas including villages and hamlets through rural
electricity infrastructure and electrification of households.

9. No licence is required for sale from captive units.

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

11. National Hydro Policy launched in fiscal 2008Amongst other area of
thrust, private producers can undertake Hydro projects based on PPA route.
with a facility of merchant sale upto 40% from saleable energy from hydro
plant.

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 CERC has
granted 43 inter state trading licences, of which 41 are in existence as on
31.3.2009.

India's first power exchange - Indian Energy Exchange (IEX) became
operational and trading was launched on June 27, 2008. The IEX is promoted
by Financial Technologies (India) Limited (FTIL) and PTC India Financial
Services Ltd. Another power exchange namely Power Exchange India Limited
(PXIL), promoted by NSE and National Commodities & Derivatives Exchange
Ltd. (NCDEX), started operations from October 22, 2008. Both the power
exchanges are operating successfully contributing to trade and distribution
of market information, promoting competition and creation of liquidity in a
deregulated power market. The trading is done through on line satellite
connected exchange that ensures transparency and price discovery.

During fiscal 2009, 21.92 BUs were traded in the country representing
around 3% of total generation in the country. (Source: Economic Survey
2008-09)

Latest Developments in Power Sector:

* CERC's 2009-14 Regulations:

With an objective of making investment in generation and transmission
infrastructure more attractive without compromising consumer interest, on
January 19, 2009, CERC announced tariff regulation for power generation and
transmission for 2009-14. The key high lights are as under:

- The base rate of RoE raised from 14% (post tax) to base rate of 15.5% to
be grossed up with normal tax rate as applicable to the concerned utility.
There is an additional 0.5% RoE if projects are commissioned within given
time-lines.

- To boost the hydro power sector, CERC has insulated new hydro projects
from shortfalls in generation resulting from hydrological factors for a
period of 10 years after COD. If there is an energy shortfall the energy
charge for the following year would be computed on the basis of actual
power generated rather than designed power generation.

- For hydro plants Normative Annual Plant Availability Factor (NAPAF)
fixed.

- Advance against depreciation removed.

- Depreciation rates to be calculated annually using straight line method
as per Companies Act. The salvage value of assets fixed at 10%. After
initial 12 years, the remaining depreciation to be spread over the rest of
useful life of the asset.

- O&M expenses recoverable on normative basis for thermal and hydro plants.
For transmission systems, O&M costs would be calculated by multiplying
number of bays and Kilometers of line length with the benchmarks set for
the year.

- The availability targets for thermal power plants raised from 80% to 85%
to recover fixed costs.

- Incentives linked to plant availability factor instead of PLF for thermal
plants.

- Normative auxiliary consumption reduced in certain unit sizes.

- Reduction in normative heat rate for units of 500 MW size.

- Recovery of capacity charge, energy charge, transmission charge and
incentives would be based on operational performance.

- The norm for secondary oil consumption reduced from 2 ml per unit to 1 ml
per unit, the savings in secondary oil consumption are to be shared with
the beneficiaries in the 50:50 ratio.

- Generation/Transmission project developer can retain 100% carbon credits
in the first year following the date of commercial operation.

- Generation/Transmission companies can hedge foreign exchange exposure
with respect to interest on foreign currency loans and repayment of loan.
Recovery of the cost of hedging and foreign exchange variation to be made
directly without any application to the CERC.

* Competitive bidding tariff guidelines amended:

Ministry of Power in January 2005 issued guidelines for tariff
determination through bidding for procurement of power by distribution
licensees with an objective to facilitate transparency and fairness in the
procurement process, facilitate reduction of information asymmetries for
various bidders and protect consumer interest by facilitating competition.
The guidelines have been recently amended to encourage sale of electricity
outside the ambit of long term PPAs. Key highlights of amendment are:

1. Guidelines will be applicable for 15% of the new generating capacity
which may be sold outside long term PPAs to promote market development.

2. Separate Request For Proposal (RFPs) to be invited for base load and
peak load and seasonal load requirements.

3. Provision for multi-part tariff for procurement under Case 2 bidding.

4. Hydro power tariff can be determined by the SERC provided 60% of the

total saleable energy is committed to a long term PPA.

* Amendment to short tern interstate open access regulations:

With the objective of streamlining and rationalizing inter-state open
access, the following provisions have been made by CERC:

- In case the State Load Dispatch Centre does not give concurrence to an
inter-state open access proposal in 7 working days on first occasion and 3
working days on subsequent occasion, the concurrence of the LDC shall be
deemed to have been given.

- The State Load Dispatch Centres will check only two parameters i.e.
availability of transmission capacity and availability of metering
infrastructure.

- Open access customer can now request for change in schedule at notice of
two days instead of the presently provided period of five days.

- The transmission charges for short-term open access have been
rationalized.

- Charges on short-term open access will be disbursed directly to the long
term customer by RLDC instead of routing the same through Central
Transmission Utility.

- All disputes under inter-state access regulation to be decided by CERC.

* R-APDRP:

Accelerated Power Development and Reforms Programme (APDRP) was launched in
X Plan by Govt. of India. This programme was modified and renamed as
Restructured APDRP (R-APDRP) in 2007-08. The R-APDRP is linked to actual
demonstrable performance in terms of AT&C loss reduction to 15% or less by
the end of XI plan. 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 sub-
transmission and distribution network. It also includes adoption of IT
applications for meter reading, billing and collection, energy accounting
and auditing, management information systems, redressal of consumer
grievances and establishment of IT-enabled consumer service centres,
besides asset mapping of the distribution network. Since its launch, the R-
APDRP has made rapid headway and by February 2009, had sanctioned 599
projects in various towns and cities at a cost of Rs. 19.5 billion. Andhra
Pradesh, Karnataka and Rajasthan together account for over 55 per cent of
the total amount sanctioned so far.

AT&C losses are showing a declining trend and have come down from 38.86% in
2001-02 to 33.07% in 2006-07. (Source: Economic Survey 2008-09)

* Rural Electrification:

As per Central Electricity Authority (CEA), over 82% villages have been
electrified. The Central Govt. launched a scheme 'Rajiv Gandhi Grameen
Vidyutikaran Yojana' (RGGVY) in April 2005 with the goal of electrifying
all (around 125000) unelectrified villages and hamlets and providing access
to electricity to all households in next five years. Under RGGVY, 59,882
villages have been electrified and connections to 53.78 lakh BPL households
have been released up to 31.3.2009. (Source: Economic Survey 2008-09)

* 100 days Agenda:

There has been a concerted effort to ensure that development in Power
sector is not derailed. For the short term, a 100 days agenda has been
drawn by MoP with a capacity addition target of 5,653 MW Also, a high level
committee /group has been set up to monitor ongoing projects and ensure
their timely commissioning. Accordingly, your company also had drawn 100
days agenda which was part of overall plan of MoP for 100 days.

OPPORTUNITIES AND THREATS:

Continuity in Government agenda:

Energy security continues to be the focus area of new Govt. which is
expected to maximise the potential of all energy sources - coal, gas, hydro
and nuclear. There will be a higher thrust for achieving an installed
capacity of over 2,00,000 MW and providing 'Power for all' by 2012.

Enabling Legislation:

As discussed above, considerable impetus has been laid by Govt. of India to
attract investment in power sector by developing a transparent and
competitive legislative framework. 100% FDI is allowed in Generation,
Transmission and Distribution segments. Government of India has allowed
Income-Tax holiday for a block of consecutive 10 years in the first 15
years of operation. Further incentives from Government include waiver of
duties on capital equipment under mega-power project policy.

Persisting Shortages:

Though there has been substantial growth in the power generation in the
country, the demand is also increasing rapidly and as result the Indian
Power sector continues to face shortages. While demand always outstrips the
supply of power in India, during last year, even the base load deficit has
moved into double digit. The CAGR of demand for last 5 years is 6.80% as
against CAGR of 5.88% for supply of electricity. The main reasons for
increased demand of power consumption are:

* Rapid economic growth and faster industrialization.

* Increasing per capita income level and changing life style.

* More and more number of rural areas and remote villages getting access to
electricity supply.

Need for Acceleration in capacity addition:

As per Integrated Energy Policy issued by Planning Commission, the energy
requirement considering 8% growth in GDP over next 23 years is as under:

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

2008-09* 147 735
2011-12 220 1097
2016-17 306 1524
2021-22 425 2118
2026-27 575 2886
2031-32 778 3880

Source: Integrated Energy Policy, Planning Commission

* Actuals as per CEA.

Even after the global meltdown, the Indian economy is growing steadily. For
the last 5 years the average growth in GDP is 8.46%.

The Government of India has drawn a capacity addition target of 78,700 MW
during XI Plan, on an average adding a capacity of over 15,000 MW per annum
in the country. As against the target, 9,263 MW and 3,454 MW were added
during 2007-08 and 2008-09 respectively. As per MOP, projects having an
aggregate capacity of over 65,000 MW are under implementation.

Ultra Mega Power Projects:

Recognizing the fact that economies of scale leading to cheaper power can
be secured though large size power projects, Govt. of India launched
development of coal based Ultra Mega Power Projects (UMPPs), each with a
capacity of 4000 MW or above under Public -Private Partnership mode. So far
4 such projects have been awarded namely Sasan in MP, Mundra in Gujarat,
Krishnapatnam in AP and Tilaiya in Jharkhand. Two of these projects have
linked coal mines while the other two are based on imported fuel.

Fuel Security Mechanism:

During fiscal 2009, 66% of total power generation was from coal stations.
Although the coal production of 493.20 Million Tonnes was higher by 8% over
last year's production of 457.08 Million Tonnes, only 351.04 Million Tonnes
was received by coal power stations in the country against coal linkage of
395 Million Tonnes. This shortage was partly made good by importing 60
Million Tonnes of coal during 200809. (Source: Economic Survey 2008-09)

Although India has total coal reserves estimated at 257 Billion Tonnes
(proven reserves of around 99 Billion Tonnes, indicated reserves of 120
Billion Tonnes and balance inferred), the known coal reserves are expected
to exhaust in about 45 years, assuming an annual growth in domestic
production of 5% as per Integrated Energy Policy issued by Planning
Commission. Going forward, coal will remain the main stay for power
generation in India. However, it would be a challenge to diversify the fuel
basket to reduce uncertainties of supply of energy.

India is endowed with an estimated hydro power potential of more than
150,000 MW. However, installed capacity of hydro electric projects is only
36,878 MW contributing to only 24.9% of the fuel basket. Hydro- electric
power contributed 15.62% of total generation during last fiscal. The share
in generation is low since hydro projects are dependent on the rain fall
and are used exclusively to meet peaking demand. The hydroelectric
potential has been given thrust by Government of India by launching New
Hydro Power Policy 2008 offering incentives to investors in order to
increase the installed capacity of hydro projects to over 50,000 MW by
2012.There are 40 hydro projects with an aggregate capacity of 13,085 MW
under construction. Private sector participation has been increasing; there
are 11 schemes undertaken by private companies with an installed capacity
of 4,111 MW under construction. (Source: Economic Survey 2008-09)

Gas based power stations accounted for 10% of nation's capacity during last
fiscal. It is expected to retain its share by adding 6,843 MW during XI
plan. The total proven and indicative reserves of natural gas at the end of
2007 were estimated at 1060 million cubic meters. During 2008-09, total gas
production was 90 MMSCMD. In addition around 30 MMSCMD of LNG was imported
(source MoPNG). The supply is expected to increase to 200 MMSCMD by 2012
mainly due to participation by private sector players. The improved gas
supply is however limited by the infrastructure available for transmission
and distribution. The gas transmission network is around 9500 kms (GAIL
accounting for 7000 kms, 1375 kms owned by RGTIL and 1130 owned by GSPL) as
on 31.3.2009 and is mainly concentrated in Western and North Western India.

Health of customers:

The average electricity tariffs are lower than the average cost of supply
(cost of generation plus T&D costs). T&D losses represent the difference in
the amount of electricity supplied and the amount actually metered. High
T&D losses are also attributed to the transmission and distribution of a
large amount of power at low voltage. The gap between average tariff and
average cost of supply, which was historically high, has declined to around
49 paisa per kWh in 2006-07.

The main reason for this high gap is the increasing annual losses of SEBs
on account of inadequate metering and theft of electricity. The tariffs for
agricultural and domestic consumers is subsidised in most states. To
compensate for this, most states charge much higher tariffs to commercial
and industrial consumers. Even after the enactment of EA 2003, only 16 SEBs
have unbundled so far and they continue to work under administrative
control of respective State Governments. Cross subsidisation of tariff
remains an issue impacting the financial health of SEBs.

While some progress has been made on account of metering, agriculture
segment lags behind with less than 40% of consumers being metered. There
are about 150 million electricity consumers in India with domestic
consumers having the largest share of 79% followed by commercial segment at
10%, agriculture at 8%, industrial segment at 1 % and balance 2% is
represented by others, such as railway traction etc.

Development of Renewable Energy Sources (RES) for generation of power:

RES of 13,242 MW accounting for 9% of total installed capacity, is targeted
to grow to over 24,300 MW contributing to 11 % of fuel basket by 2012. Over
the longer term, its importance would be more strategic in view of its
important role in mitigating the effects of climate change. It is
imperative for India to build a certain level of self-reliance in renewable
technologies of the future. The Government, in its quest for long-term
energy and environmental security, is seeking to enhance the share of power
from renewable sources in the overall fuel basket. India has potential for
45,000 - 65,000 MW of on shore wind power. 70% of renewable energy is
contributed by wind power generation. During past one year, solar energy,
which currently contributes a little over 2 MW to the grid, received a
significant boost with the National Action Plan for Climate Change
mandating the setting up of a National Solar Mission. The mission is
targeting 20,000 MW of solar based capacity by 2020.

The steps taken by Govt. for increasing generation from renewable energy
resources are:

* EA 2003 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 and plans for Generation
Based Incentives under National Solar Mission.

* CERC is in the process of finalization of regulations for sale of power
generated based on RES.

Problems faced for development of RES:

* Power generation from renewables increases the uncertainty in accurate
availability of power which in turn affects grid reliability and
operations.

* The developer of renewable generation has to provide for transmission
line for power evacuation from the plant to the nearest HT Sub-station
unlike conventional plants where transmission utility evacuates power.

* The PPA for renewables requires the. developer to guarantee the supply of
a certain quantity of electricity. However, it does not require the
transmission utility to provide any guarantee for grid availability.

* The wind generation requires back-up capacity between the forecast and
actual generation posing difficulty in open access and scheduling the
power.

Wind energy has separate grid codes in major wind based power generating
countries. A draft grid code is under development for wind power.

OUTLOOK:

Power sector in India is experiencing continuous growth in line with growth
of Indian economy. The fuel mix is getting further diversified with more
power generation expected from gas, nuclear and RES. Achieving Energy
Security is a step towards achieving self-reliance in energy sector.

The main objective of India's energy security programme would be:

* To reduce uncertainties of supply of energy.

* To reduce price vulnerability.

* Minimize the risk of non-availability of energy sources during emergency
situations.

* Minimize the risks arising out of equipment failures.

As regards enhancing fuel security, Govt. has taken measures such as
allotting coal mines to power generating companies in Central sector, State
sector and Private sector companies, paving way for appointment of a Coal
Regulator, allowing 100% FDI in coal mining for captive purpose to power
companies and creating a SPV for acquiring coal assets abroad with an
equity base of Rs. 35,000 million.

In order to reduce supply risk, Govt. has already initiated bulk ordering
of capital equipment for 11 units with a stipulation that selected
contractors would set up manufacturing facility in India resulting in
transfer of technology.

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

NTPC VIS-A-VIS ALL INDIA:

With approximately 20% of capacity, your Company contributes to around 29%
of nation's generation.

All NTPC % Share
India

Capacity (MW) 147,965 27,850 18.82%
Generation (MU) 723,794 206,939 28.59%
Capacity incl. JVs (MW) 147,965 30,144 20.37%
Generation incl. JVs (MU) 723,794 212,539 29.36%

Source: All India Data - CEA's executive summary

Your Company is 25th largest amongst listed global utilities as per Forbes
Global 2000 ranking published in the year 2009. It is also ranked as fourth
amongst Asian utilities after Korea Electric Power Company, Korea, Kansai
Electric Power, Japan and Chubu Electric Power, Japan and also as 317
largest company in the world by Forbes Global 2000.

Over the last fiscal, operationally NTPC stations performed better than
collective performance of any other sector.

PLF COMPARISON (%):

2008-09 2007-08 Increase

Central sector 84.30 86.74 -2.44
State sector 71.17 71.89 -0.72
Pvt sector 91.01 90.77 0.24
National avg. 77.19 78.61 -1.42
NTPC 91.14 92.24 -1.10

After excluding your Company's PLF, national average PLF will reduce to
72.23% approximately during fiscal 2009 as compared to 73.60% approximately
during last fiscal.

National Availability Factor for coal stations was 85.04% during fiscal
2009 as compared to 84.76% last year. As against national AVF, your
Company's coal stations had AVF of 92.23% during fiscal 2009 as compared to
93.86% last year.

COMPETITION:

Being the largest power generating company in the country with market share
of 20% in terms of installed capacity and about 29% 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 7.14% is Maharashtra State
Generating Co. which has an installed capacity of 10,563 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.

RISKS AND CONCERNS:

The Company has to sustain its leadership position in the country by
growing at a CAGR of 10.59% till 2017 and at the same time improve its
operational efficiency to continue to generate at high PLF minimizing the
outages. 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 LNG 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, an elaborate Enterprise Wide Risk
Management framework is being finalized. As part of the implementation of
ERM framework, an Enterprise Risk Management Committee (ERMC) with various
Executive Directors as its members, has been constituted with an objective
to review & strengthen the risk management framework. Enterprise risk
management committee after deliberations has identified enterprise wide
risk and various action plans for short term as well as long term are being
formulated to mitigate these risks.

INTERNAL CONTROL:

Your Company has robust internal systems and processes in place for smooth
and efficient conduct of business. Your Company complies 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
coordination with Company's own Internal Audit Department. Besides, the
Company has two Committees of the Board viz. Audit Committee and Committee
on Management Controls to keep a close watch on compliance with Internal
Control Systems.

During last fiscal, a well defined Internal Control Framework has been
developed identifying key controls and supervision of operational
efficiency of designed key controls by Internal Audit. The framework is
presently under implementation phase and is aimed at providing elaborate
system of checks and balances based on self assessment as well as audit of
controls conducted by Internal Audit at process level. The system will
facilitate identification of gaps, if any, under design or operational
phase and reporting of the same to Audit Committee. The CEO/CFO
certification on adequacy of Internal Control will be based on this system.

This will go along way in reinforcing the commitment to adopt best
corporate governance practices in respect of internal controls over
financial reporting.

FINANCIAL DISCUSSION AND ANALYSIS:

A detailed financial discussion and analysis is furnished below on Reported
Audited Financial Statements and Adjusted Profit. The Adjusted Profit has
been arrived at after adjustments on account of one-off items/extra
ordinary items which have been indicated against each broad category of
revenue and expense to explain better the YoY performance.

A. Results of Operations:

1. Gross Income:

Fiscal 2009 Fiscal 2008 % Change

Units of electricity 193688 187988 3.03%
sold (million units)

Fiscal 2009 Fiscal 2008 % Change
Income Amount in Rs. Million

Energy Sales (Excl 417,913 369,462 13.11%
Electricity Duty)

Energy Internally 514 409 25.67%
Consumed

Consultancy & other 1,325 1,039 27.53%
services

Other income 21,330 16,242 31.33%
(excluding
income related
to OTSS*)

Income related to 11,476 12,961 -11.46%
OTSS*

Gross Income 452,558 400,113 13.11%

* 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 for fiscal 2009 is Rs.452,558 million
as against Rs.400,113 million in 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 customers 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 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 2009 was Rs.417,913 million
which constituted 92% of the gross income. The income from sale of
electricity has increased by 13% over the previous year's income of Rs.
369,462 million partly due to increase in fuel cost which is a pass through
and partly due to a 3.03% increase in units sold as a result of increase in
the commercial capacity by 2000 MW comprising two units of 500 MW each of
Sipat Stage-II and Kahalgaon Stage II. Sale of electricity is also higher
on account of one unit of Vindhyachal-III (500 MW), which was in commercial
operation for the entire fiscal 2009 as compared to part of fiscal 2008. In
line with tariff regulations, income from sale of electricity also includes
the actual tax payments in respect of generation business recoverable from
the customers amounting to Rs.7,583 million for fiscal 2009 as against
Rs.22,761 million for the last fiscal. The reduction in tax recoverable
from customers is primarily due to receipt of income tax refund amounting
to Rs.13,953 million pertaining to previous years received during fiscal
2009, of which Rs.11,553 million is payable to customers. If the income tax
recoverable from beneficiaries is excluded from income from sale of
electricity, it has increased by 18% over last fiscal.

The average selling price this year has increased to Rs. 2.12 per unit
compared to Rs.1.84 per unit in the previous year. The increase is mainly
due to increase in variable changes on account of fuel and partly due to
increase in fixed charges. The average tariff includes adjustments
pertaining to previous years. Excluding adjustment of sales pertaining to
previous period, the average selling price would be Rs. 2.07 per unit in
the current year as against Rs. 1.79 per unit in the previous year.

There has been 100% realization of the dues during the last six years. All
the beneficiaries have opened and are maintaining Letter of Credit 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 an innovative Rebate
Scheme byway of providing graded incentive for early payment based on the
provisional bill raised on the last working day of the month. This has
resulted in realization of nearly 66% of the energy bill within a week of
presentation of bill for the month.

Tariffs:

The charges for electricity are based on tariff rates determined by the
CERC. The tariff rates consist of a fixed charge which is recoverable based
on plant availability, variable charges on account of fuel costs and an
unscheduled interchange charge for the deviation in generation with respect
to schedule payable (or receivable) at rates linked to frequency prescribed
in the regulation 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.

* Normative operation and maintenance costs determined by the CERC based on
size of unit, on a per megawatt basis.

Variable charges for 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.

Tariff for all the stations is based on orders issued by CERC. Final tariff
orders have been issued for Vindhyachal-Ill and Unchahar-III, during the
fiscal 2009. For the rest of the stations tariff orders were issued prior
to fiscal 2009.

CERC has issued new Tariff Regulations for the period 2009-14, which is a
balanced regulation for both consumers and investors.

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.

CERC is yet to issue final tariff orders in respect of two stations,
namely, unit 1 and 2 each of Sipat-II and Kahalgaon-II. Accordingly, sales
of Rs.13,172 million for fiscal 2009 relating to these units/stations have
been recognized on provisional basis (explained in note 2(a) of Note on
Accounts, Schedule-26).In addition sales of Rs. 14,402 million in respect
of Badarpur Thermal Power Station has been provisionally recognized on the
basis of principles enunciated under CERC Regulations, 2004. (explained in
note 2(c) of Note on Accounts, Schedule-26).

1.2 Energy Internally Consumed:

Energy internally consumed relates to own consumption of power for
construction works at station(s), township power consumption etc. It is
valued at variable cost of generation and is shown in sales with a debit to
respective expense head under power charges. The increase in energy
internally consumed by 26% is commensurate with increase in fuel charges
over the previous year.

1.3 Consultancy and other services:

Accredited with an ISO 9001:2000 certification, the Consultancy Division of
your Company undertakes the consultancy and turnkey project contracts for
domestic and international clients in the different phases of power plants
viz engineering, project management, construction management, operation and
maintenance of power plants.

During the year, Consultancy Division posted an income of Rs 1,325 million
as against Rs.1,039 million achieved in the last fiscal. In the fiscal
2009, it has recorded a profit of Rs. 452 million as against Rs. 368
million in the last fiscal. A total of 53 orders valued at Rs 1,888 million
were secured by the Division during the year including 7 overseas
assignments of Rs 40 million.

1.4 Other Income:

'Other income' in fiscal 2009 was Rs. 32,806 million as compared to
Rs.29,203 million in the fiscal 2008. Broadly the break up of other income
is as under:

Rs. Million
Fiscal 2009 Fiscal 2008

Interest for the year on tax 11,476 12,961
free bonds /Loan to State Govt.

Income on investment of surplus cash 16,270 14,136

Dividend from JVs and Subsidiaries/ 180 110
Interest from subsidiaries

Income earned on other heads such 3,705 2,391
as hire charges, profit on disposal
of assets, etc.

Interest on income tax refunds 2,199 -
(non-recurring)

Total 33,830 29,598

Less: Transfer to EDC/development 414 395
of coal mines

Less: Transfer to Deferred Foreign 610
Currency Fluctuation Liability

Net other income 32,806 29,203

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

Interest income from OTSS bonds for fiscal 2009 is Rs.11,476 million as
compared to Rs. 12,961 million in fiscal 2008.The reduction in interest
income to the extent of Rs.1,485 million is due to redemption of OTSS bonds
amounting to Rs.16,515 million. This reduction in interest income on OTSS
bonds is partially offset by increase in income of Rs.2,134 million earned
on account of investments made from surplus cash. The income on investment
of surplus cash has registered a 15% increase over last fiscal. The income
on investment of surplus cash also includes dividend earned from mutual
fund investments amounting to Rs.361 million.

We have earned Rs.138 million as dividend from our investments in joint
venture and subsidiary companies. Another Rs.4Q million has been earned as
interest from loan of Rs.300 million extended to Kanti Bijlee Utpadan Nigam
Limited, one of our subsidiaries. Further, an amount of Rs.3,705 million
has been earned from various other sources such as hire charges, profit on
disposal of assets, interest on loans to joint venture company etc. as
compared to Rs.2,391 million earned in the last fiscal, registering an
increase of 55%. The increase is mainly due to increase in interest
received from customers as per CERC regulations. This also includes
interest of Rs.220 million earned during the current year from loan of Rs.1
700 million extended to nagiri Gas and Power Private Ltd., a joint venture
company.

Commissioner of Income Tax (Appeals) had issued a favourable decision on
certain issues relating to previous years consequent to which net tax
refund of Rs.2,400 million has become payable to your company and the
interest earned on this refund amounting to Rs.2,199 million has been.
accounted under 'other income' for fiscal 2009.

1.5 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
2009 include Rs.10,201 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 Note on Accounts, Schedule-26). Similarly, for
fiscal 2008, an amount of Rs.11,336 million pertaining to previous years
was 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. 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 recoverable from customers amounting to Rs.1,894 million were
accounted in the sales during fiscal 2009 as against Rs. 250 million
accounted in previous year.

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

Rs. Million
Fiscal Fiscal
2009 2008

Gross Income 452,558 400,113

Less: Sales of 10,201 11,336
previous years

Exchange Fluctuation 1,894 250
receivable from
customers

Interest on income 2,199 -
tax refunds

Adjusted Gross Income 438,264 388,527

2. Expenditure:

2.1 Expenditure related to operations:

Rs. Million
Expenditure Fiscal Rs. per Fiscal Rs. per
2009 kwh 2008 kwh

Commercial
Generation -MU 206156 200280

Fuel 271107 1.32 220202 1.10

Employees'
remuneration
and benefits 24631 0.12 18960 0.10

Generation,
administration
and other
expenses 18192 0.09 16284 0.08

Total 313930 1.53 255446 1.28

The expenditure incurred on fuel, employees, generation, administration and
other expenses for the fiscal 2009 was Rs.313,930 million which is 23% more
than the expenditure of Rs.255,446 million incurred during the previous
year. In terms of expenses per unit of power produced, it was Rs. 1.53 per
unit in fiscal 2009 in comparison to Rs.1.28 per unit in the previous year.
This increase is mainly due to increase in imported coal consumption and
also increase in transportation cost of coal. The increase in commercial
generation due to additional capitalization has resulted in an additional
operational expenditure of Rs.10,764 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, same as in previous year. Expenditure on fuel was Rs.271,107
million in fiscal 2009 in comparison to Rs. 220,202 million in fiscal 2008
representing an increase of 23%.The break-up of fuel cost in percentage
terms is as under:

Fiscal 2009 Fiscal 2008

Fuel cost (Rs. Million) 271,107 220,202
% break-up

Coal 70% 70%
Gas 15% 17%
Oil 10% 8%
Naphtha 5% 5%

The higher fuel expenses were mainly due to increase in fuel prices. Coal
India Limited (CIL) had increased the price of coal from December 13, 2007
by about 10%. This increase was reflected only for last quarter during
fiscal 2008 while increase is reflected for full year during fiscal 2009.
There has also been increase in the price of gas and oil during fiscal
2009. Fuel cost per unit generated increased to Rs.1.32 in fiscal 2009 from
Rs. 1.10 in fiscal 2008.The increase in fuel cost due to addition of
commercial capacity is Rs. 9,249 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 coal-fired plants and
naphtha as an alternate fuel in gas-fired 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 model Coal Supply Agreement (CSA) has been signed with
CIL on May 29, 2009 which is valid for 20 years with a provision for review
after every 5 years.

In an effort to encourage coal companies to supply Annual Contracted
Quantity (ACQ), new CSA provides for incentive payments as a percentage of
Weighted Average base price of coal in the following three slabs:

Supplies in the range of Rate of Incentive

90%-95% of the ACQ 10%
95%-100% of the ACQ 20%
Supplies exceeding ACQ 40%

CSA also contains clauses of penalty for under supply/ under off-take by
coal companies and power plants respectively The price and other charges
for coal, as per new CSA, will be as notified by CIL for its subsidiary
companies from time to time.

Separate CSAs have to be signed by each station with the respective
subsidiaries of CIL. Six stations have signed CSAs with CIL subsidiaries in
line with model CSA till July 27, 2009.

During the fiscal 2009, coal based stations consumed 129.49 Million Tonnes
of coal as against 123.96 Million Tonnes in the fiscal 2008.This was
including 4.71 Million Tonnes of coal which was imported as compared to
2.63 Million Tonnes imported in fiscal 2008.

The company sources gas domestically under an administered price and supply
regime. The main gas supplier is GAIL. Gas prices are fixed by the Ministry
of Petroleum and Natural Gas. 10.76 Million Metric Standard Cubic Meters
per Day (MMSCMD) of gas was received during the fiscal 2009 as against
11.80, MMSCMD received in fiscal 2008. This includes 2.08 MMSCMD of spot
gas and fall back RNLG as compared to 2.81 MMSCMD of spot gas last year.
The reduction in the supply of APM/PMT gas was on account of shutdown of
the ONGC platforms in June 08, Jan 09 and March 09. Further, due to high
prices of spot RLNG till July 08, there were fewer schedules received from
the beneficiaries on RLNG, Further, since October 08 onwards, there was a
fall in crude oil prices resulting in Naphtha price becoming cheaper than
Spot RLNG. Accordingly, liquid fuel consumption at the stations increased
due to higher scheduling by the beneficiaries on Naphtha as it was cheaper.

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 fiscal 2009, supplies to the
extent of 730.05 MMSCM were received from the various suppliers. Further,
supplies were also received from IOCL on 'fall back' basis to the extent of
10.62 MMSCM. Thus, the total consumption of RLNG during the year was 740.67
MMSCM.

Rajiv Gandhi Combined Cycle Power Project (RGCPP), Kerala generates power
on naphtha 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 centres. During the fiscal 2009, 0.923 million
MTs of naphtha was consumed as against 0.683 million MTs in the previous
year.

2.1.2 Employees' Remuneration and Benefits:

Employees' remuneration and other benefits have increased by 30% from
Rs.18,960 million in fiscal 2008 to Rs.24,631 million in fiscal 2009.
Employees' remuneration and benefits expenses include salaries and wages,
bonuses, allowances, benefits, contribution to provident and other funds
and welfare expenses. These expenses account for approximately 8% of our
operational expenditure in fiscal 2009 as compared to 7% in fiscal 2008.

The primary reason for increase in employee cost is the increase in
provision made for pay revision of the employees of the Company which is
due w.e.f. 1st January 2007. Pending implementation of pay revision,
provision of Rs.5,342 million has been updated for fiscal 2009 as compared
to a provision of Rs.4,094 million for fiscal 2008 towards wage revision on
an estimated basis having regard to the guidelines issued by Department of
Public Enterprises, GoI. Out of the total wage provision of Rs. 5,342
million, an amount of Rs. 3,142 million has been paid as ad-hoc advance
towards pay revision (explained in note 5 of Note on Accounts, Schedule-
26).

On acceptance of recommendation of 2nd pay revision committee by the Govt.
of India increasing the ceiling of gratuity payment to Rs.1 million from
Rs. 0.35 million for an employee, during fiscal 2009, an amount of Rs.4,837
million has been recognized as expense for gratuity/ pension as compared to
Rs.572 million last fiscal (explained in note 16 of Note on Accounts,
Schedule26). The balance increase includes additional incentives and other
related benefits to employees alongwith normal annual increase in employee
remuneration and benefits. This resulted in an increase in the employee
cost per unit of generation from Rs.0.10 in the previous fiscal to Rs.0.12
in the current fiscal. The increase in employee cost due to additional
commercial capacity is Rs.868 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 2009, same as in fiscal 2008. In absolute
terms, these expenses increased to Rs.18,192 million in fiscal 2009 from
Rs.16,284 million in fiscal 2008 registering a hike of 12%. In term of
expenses per unit of generation, it was Rs. 0.09 in fiscal 2009 as compared
to Rs. 0.08 in previous fiscal. An amount of Rs. 647 million out of the
above of Rs.1,908 million increase is attributable to addition of
commercial capacity during fiscal 2009.

Repair & Maintenance expenses constitute 60% of total Generation,
Administration and Other Expenses and have increased to Rs. 10,992 million
from Rs. 10,255 million resulting in an increase of 7%.

The other increase in generation & administration expenses is mainly
attributable to increase in miscellaneous expenses. The miscellaneous
expenses have increased to Rs.1,027 million in fiscal 2009 from Rs. 477
million mainly due to Rs.531 million on account of arbitration award issued
against the Company for one of our gas projects.

2.1.4 Adjusted Expenditure related to Operations:

The expenses pertaining to employees remuneration & benefits and
generation, administration and other expenses incurred at Corporate Centre
(CC)/ Regional Headquarters/T&CC offices and which are common to operation
and construction activities were hitherto allocated to Profit & Loss A/c
and Incidental Expenditure during Construction (IEDC) in proportion of
sales to annual capital outlay in the case of Corporate Office and sales to
accretion to capital work-in-progress in the case of projects. Such CC
expenses allocated to projects along-with expenses of the projects treated
as IEDC were included in the cost of the related assets. This treatment of
IEDC was as per the provisions of Accounting Standard (AS) 10 on
'Accounting for Fixed Assets' notified under the Companies (Accounting
Standards) Rules, 2006 and the 'Guidance Note on Treatment of Expenditure
during Construction Period' issued by the ICAI. During the fiscal 2009, due
to withdraw[ of the 'Guidance Note on Treatment of Expenditure during
Construction Period' by the ICAI, your Company has modified accounting
policy in relation to 'Treatment of Expenditure during Construction
Period'. The administration and general overhead expenses directly
attributable to construction of fixed assets at the corporate office and
construction projects were allocated on a systematic basis and included the
same in the cost of related assets and shown in the Schedule no. 25 renamed
as 'Expenditure During Construction Period (Net)'. Thus profit for the
fiscal 2009 are lower by Rs. 733 million due to reduced capitalization of
expenses by lower transfer to EDC (explained in note 13b of Note on
Accounts, Schedule26).

If the impact of wage revision is adjusted, the operational expenditure for
the fiscal 2009 and fiscal 2008 would be as follows:

Rs. Million
Fiscal 2009 Fiscal 2008

Total Expenditure related to Operations 313,930 255,446
Less:
Wage revision provision/Pension/Gratuity 9,579 5,506
Additional Incentive provision 1,047 2,590
Provision on account of arbitration award 531
Impact due to withdrawal of guidance note 733
on IEDC
Adjusted Expenditure related to Operations 302,040 247,350

2.2 Depreciation:

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).

The depreciation charged to the profit and loss account during the year was
Rs. 23,645 million as compared to Rs. 21,385 million in fiscal 2008,
registering an increase of 11%. This is due to increase in gross block by
Rs.89,850 million i.e. from Rs.533,680 million in the previous fiscal to
Rs. 623,530 million in the current fiscal. The increase in gross block is
largely on account of increase in commercial capacity by 2000 MW resulting
in additional capitalization amounting to Rs. 68,987 million. Further, one
500 MW unit of Vindhyachal-III was declared commercial on July 15, 2007
with the result that while for previous year, depreciation was charged for
9 months, it has been charged for the entire fiscal 2009. The impact on
depreciation for additional capitalization during the fiscal 2009 is
Rs.2,391 million which is partly offset due to reduced depreciation for
older stations.

2.3 Provisions made (and written back):

During the fiscal 2009, the Company had made provisions amounting to Rs.246
million in comparison to Rs.71 million provided for in fiscal 2008. The
provisions were made mainly in respect of doubtful advances and claims,
obsolescence /diminution in value of surplus stores and for other items.
The increase in provision is mainly attributable to diminution in value of
surplus items of inventory. During the fiscal 2009, the Company had also
written back provisions made in earlier years amounting to Rs. 170 million
in comparison to Rs. 64 million of provisions written back in fiscal 2008.
During the fiscal 2009, write back is on account of receipt of Rs.142
million in lieu of settlement of dues with M/s. Gridco, Orissa in respect
of taken over Talcher thermal power project.

2.4 Interest and Finance Charges:

The interest and finance charges for the fiscal 2009 were Rs. 20,229
million in comparison to Rs. 17,981 million in fiscal 2008. The details of
interest and finance charges are tabulated below:

Rs. Million
Fiscal 2009 Fiscal 2008

Interest Charges:
Interest on borrowings 21,532 17,679
Others 701 174
Total Interest charges 22,233 17,853
Finance Charges 7,902 8,198
Total 30,135 26,051
Less: Adjustments and transfers
Exchange differences regarded as adjustment (2,688) 1,255
to interest costs
Transfer to Foreign Currency Fluctuation 342
Asset
Interest charges capitalised 12,171 6,286
Finance charges capitalised 81 529
Interest and finance charges capitalised 21,259 6,815
Net interest and finance charges 20,229 17,981

Interest amount on long term borrowings (including Interest during
Construction) has increased by 22% over last fiscal due to increase in long
term borrowings during the year by Rs. 73,914 million. However our average
cost of borrowing has reduced to 7.16% in fiscal 2009 from 7.22 % in
previous fiscal due to your company's ability to raise loans at competitive
rates from domestic as well international sources. During fiscal 2009, the
debt utilized by the Company had more proportion of foreign loans carrying
lower rates of interest as compared to interest payable on domestic loans.
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 treated in accordance with
provisions of Accounting Standard (AS) 11 issued by ICAI based on
guidelines issued by Companies (Accounting Standards) Rules, 2006 issued by
National Advisory Committee on Accounting Standards from time to time. Out
of this, the exchange differences in respect of assets during the period of
construction /renovation and modernisation are capitalized by transfer to
EDC.

During the fiscal 2009, an unfavourable exchange rate variation treated as
adjustment to interest costs amounting to Rs. 2,688 million increased the
interest expenses while an amount of Rs. 1,255 million was reduced from
interest expenses in fiscal 2008. The reason for adverse amount of exchange
rate variation is appreciation in the currencies of all our foreign
denominated loans against Indian rupee namely, US dollar by 28%, Japanese
yen by 31 % and Euro by 8%. The USD, Japanese yen and Euro denominated
loans contributed to about 67%, 29% and 4% respectively in the loan basket
at the end of fiscal 2009 as compared to 67% and 32% in previous fiscal.
The component of Euro has increased due to Euro denominated drawdowns made
from loan extended by NIB during the year.

Interest charges (others) also include Rs. 538 million towards interest
cost on account of award issued by the Arbitration Tribunal for one of our
Gas Project.

The finance charges have decreased by 4% from Rs. 8,198 million in fiscal
2008 to Rs.7,902 million in fiscal 2009. The reduction is mainly due to
decrease in rebate payable to customers as per the Rebate Scheme of the
company from Rs.7,203 million in previous fiscal to Rs.6,700 million in
current fiscal. In order to secure 100% realization of amounts billed, the
Company had introduced a revised incentive scheme in 2008-09. 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 51' day of the month provided that entire
amount is credited to the Company's account. Beyond 52' day, 2% rebate is
allowed for credit to Company's account which gets progressively reduced to
nil after 30 days. However, the Customer Reward of 0.75% of the outstanding
Bond amount issued under One Time Settlement Scheme, which was paid during
last fiscal, has been discontinued in the new Scheme.

For the fiscal 2009, an amount of Rs. 12,252 million relating to interest
and finance charges of projects under construction was capitalized while
the corresponding amount for the previous year was Rs. 6,815 million.
However, if the impact of exchange difference is excluded, the interest and
finance charge capitalized is Rs.11,441 million as against Rs.8,734 million
last year registering an increase of 31%. This is due to deployment of debt
in 15 projects where construction is in progress. During fiscal 2009, an
amount of Rs.342 million has been transferred to Deferred Foreign Currency
Fluctuation Asset on account of exchange differences recoverable from
customers at a later date as per the accounting policy of the company.

The interest and finance charges for fiscal 2009 after these adjustments
and without taking into account the exchange differences treated as
adjustment to interest costs is Rs.17,814 million.

Rs. Million
Fiscal 2009 Fiscal 2008

Total Interest charges less 12,750 10,312
interest charges capitalised

Total Finance charges 7,479 7,669
excluding finance charges
capitalised & transferred
to FC Fluctuation Asset

Net interest and finance charges 20,229 17,981

Less: Adjustment of exchange 1,877 1,123
differences regarded as borrowing
cost

Less: Interest cost on account of 538
arbitration award

Total Adjusted Interest and 17,814 16,858
Finance Charges

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 2009 a net
amount of Rs. 1,083 million was charged as prior period expenditure whereas
a net amount of Rs. 2,745 million was booked as prior period income to the
profit and loss account in the previous year.

During fiscal 2009, there has been an impact on the profits of the Company
due to change in accounting policies in respect of exchange differences.
Based on the opinions of the Expert Advisory Committee (EAC) of the ICAI,
foreign exchange gains amounting to Rs.7,536 million arising on foreign
currency borrowings, which were hitherto charged to profit, have been
reduced from the cost of asset to the extent the exchange loss has been
earlier capitalized as per applicable Accounting Standards during
construction period. Due to the above adjustment, depreciation of Rs.2,478
million pertaining to previous years has been written back through 'Prior
Period Depreciation' (explained in note 13(a)I(i) of Note on Accounts,
Schedule-26).

Similarly, as per the opinion of the EAC of the ICAI, foreign exchange
(gain) of Rs. 99 million for the financial years 2004-05 to 2006-07 arising
from restatement/ settlement of foreign currency monetary items in respect
of transactions entered into on or after 151 April 2004, which were
hitherto treated as I EDC at units under construction have been recognized
in the P&L A/c through 'Prior Period Interest/Exchange differences'. Due to
this adjustment, depreciation amounting to Rs. 2 million pertaining to
previous years has been charged to 'Prior Period Depreciation' (explained
in note 13(a)I(ii) of Note on Accounts, Schedule-26).

Consequent to the above, the balance of Rs.2,554 million appearing in the
'Deferred Foreign Currency Fluctuation Liability' at the end of fiscal 2008
has been written back through 'Prior Period Adjustment'. In respect of
operating stations, an amount of Rs.2,080 million recoverable from the
beneficiaries in future years as per CERC Regulations corresponding to
exchange differences recognised in the Profit & Loss A/c for the periods up
to fiscal 2008 has been recognised as 'Deferred Foreign Currency
Fluctuation Asset' through 'Prior Period Sales'. Due to accounting of such
exchange differences, corresponding decrease in depreciation amounting to
Rs.736 million has been credited to 'Deferred Expenditure from Foreign
Currency Fluctuation' by debit to 'Prior Period Depreciation out of
Deferred Expenses/Income from Foreign Currency Fluctuation' (explained in
note 13(a)III of Notes on Accounts, Schedule-26).

In case of projects under construction, 'Deferred Foreign Currency
Fluctuation Asset/Liability' has been created corresponding to exchange
differences recognised in the statement of Profit & Loss A/c which are
admissible for inclusion in capital cost for tariff determination as per
CERC Regulations, relating to prior years amounting to Rs.250 million
(explained in note 13(a) III of Notes on Accounts, Schedule-26).

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
Fiscal Fiscal Fiscal Fiscal
2009 2008 2009 2008

Gross Income 452,558 400,113 438,264 388,527

Expenditure related 313,930 255,446 302,040 247,350
to operations

Depreciation 23,645 21,385 23,645 21,385

Interest and Finance 20,229 17,981 17,814 16,858
charges

Prof before tax, prov. 94,754 105,301 94,765 102,934
& prior period adjust.

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 bome by the Company.

Fiscal 2008 (Rs. Million)
Current Deferred FBT Total
Tax Tax

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

* Rs.22,761 million is recoverable from customers.

Fiscal 2008 (Rs. Million)
Current Deferred FBT Total
Tax Tax

Provision for fiscal 2009 25,337 4,488 210 30,035
Adjustment for earlier years (13,953) - - (13,953)
(Recoverable from)/payable to - (4,488) - (4,488)
customers
Capitalised - - (12) (12)
Net prov. as per P/L AC 11,384** - 198 11,588

* FBT Fringe Benefit Tax.

** Rs.7,583 million is recoverable from customers.

Net provision of tax for the fiscal 2009 was Rs. 11,582 million in
comparison to Rs. 28,401 million in the fiscal 2008, a decrease of
Rs.16,819 million. This decrease is due to tax refund of Rs.13,953 million
on account of the favourable decisions relating to previous years by CIT
(Appeal) which has been accounted during fiscal 2009. Out of this an amount
of Rs.2,400 million will be retained by your company and the balance amount
of Rs.11,553 million is payable to customers. As a result, tax payment in
respect of generation business recoverable from the customers has also
reduced to Rs.7,583 million for the current fiscal as against Rs.22,761
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
2009 2008 2009 2008

Profit before tax, 94,754 105,301 94,765 102,934
provisions and
prior period
adjustments

Tax as per P&L (11,582) (28,401) (11,582) (28,401)

IT refund/adjustment (2,400) 607
for previous yours

Profit after tax 83,472 76,900 80,783 75,140
(before prov. and
prior period
adjust.)

The increase in adjusted as well as reported profits before prior period
adjustments and provisions over the last fiscal remains same at 8%.

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
2009 2008 2009 2008


Profit after tax 83,172 76,900 80,783 75,140
(before provisions
and prior period
adjustments)

Provision (net) (76) (7) (76) (7)
of written back

Provisions on income 747
tax refund
pertaining to
previous year

Prior period (1,083) (2,745)
adjustments

Net profit after tax 82,O13 74,148 81,454 75,133

On a reported basis, the net profit after tax for the fiscal 2008 has
increased by about 10.60% while on an adjusted basis, the net profit after
tax has grown by 8.41%.

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 business
includes 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 2009 was Rs. 90,531 million as against Rs. 90,808 million for fiscal
2008.Excluding income tax recoverable from customers amounting to Rs. 7,583
million for fiscal 2009 and Rs. 22,761 million for fiscal 2008, the above
has increased by 22% mainly on account of increased generation. For the
'Other Business' it was Rs. 418 million for fiscal 2009 and Rs. 288 million
for the previous fiscal.

8. Financial Condition:

1. Net worth:

The net worth of the Company at the end of fiscal 2009 increased to
Rs.573,701 million from Rs.526,386 million in the previous year registering
an increase of 9% mainly due to retained earnings. Correspondingly, the
book value per share also increased from Rs. 63.84 to Rs.69.58.

2. Loan Funds:

The loans as on March 31, 2009 were Rs.345,678 million in comparison to
Rs.271,906 million as on March 31, 2008. A summary of the loans outstanding
is given below:

Rs. Million
As at March 31
2009 2008 % change

Secured Loans:

Bonds 82,500 66,000 25%

Foreign Currency 7,180 7,140 1%
terms loans

Other 16 7 129%

Sub-total 89,696 73,147 23%

Unsecured Loans:

Fixed Deposits 14 130 -89%

Foreign Currency 25,775 20,095 28%
Bonds/Notes

Foreign Currency 78,281 51,639 52%
loans

Rupee term loans 151,911 126,859 20%

Loans from GoI 1 36 -97%

Sub-Total 255,982 198,759 29%

Total 345,678 271,906 27%

GoI-Government of India

Over the last fiscal, the debt has registered a growth of 27%. Debt funds
of Rs.96,428 million were utilized to finance capital expenditure of
projects under construction. This amount consisted of Rs.60,500 million
raised and utilized from domestic markets and disbursements amounting to
Rs.35,928 million received by way of foreign loans. The domestic debt funds
included term loans amounting Rs.41,500 million raised and the bonds
aggregating to Rs.19,000 million (including bonds of Rs.5,500 million for
refinancing loans) privately placed during the year.

During the year, fresh agreements for term loans aggregating Rs.115,750
million were entered as under:

Rs. Million

Dena Bank 2,000
Andhra Bank 1,500
PFC 100,000
LIC Term Loan 10,000
United Bank III 2,250

The loan Agreement of Rs.100,000 million with Power Finance Corporation was
entered on June 30, 2008 to finance the expenditure on the on-going
capacity addition programme including Renovation and Modernization and Coal
Mining and Coal Washeries. The tenure of the loan is 16 years with a
moratorium of 4 years. The repayments are to take place in 48 quarterly
installments after moratorium.

Your Company has redeemed bonds amounting to Rs.2,500 million during the
year. Repayments amounting to Rs.16,484 million were made under various
term loans extended by Indian Banks and Govt. of India. Repayment of
Rs.3,566 million was made during the year towards foreign currency loans.
Fixed Deposits for Rs.121 million were also discharged during the year.

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 the 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'. In addition, during the fiscal 2009, ICRA has assigned
'LAAA' rating for sanctioned lines of credit extended from domestic banks.

During the year, Standard and Poors' and Fitch Ratings maintained the
'Investment Grade' foreign currency ratings of your company. While, Fitch
Ratings continued to maintain the 'stable' outlook for the ratings, the
outlook on the company's rating was revised to 'negative' by

Standard and Poors' following similar action on the outlook on rating of
India. The Company's foreign currency ratings are at par with sovereign
ratings of India.

The debt to equity ratio at the end of fiscal 2008-09 of the Company went
up to 0.60 from 0.52 at the end of the previous fiscal.

The Debt Service Coverage Ratio (DSCR) for the year is 3.67 and Interest
Service Coverage Ratio for the year is 10.19. Formula used for computation
of coverage ratios DSCR = Earning before Interest, Depreciation and Taxi
(Interest net off transferred to expenditure during construction +
Principal repayment) and ISCR = Earning before Interest, Depreciation and
Tax/(Interest net off transferred to expenditure during construction).

The maturity profile of the borrowings by the Company is as under:

Rs. Million
Rupees Foreign Total
Loans Currency
Loans

Within 1 year 23,312 4,192 27,504
1-3 years 47,802 28,082 75,884
3-5 years 50,210 18,867 69,077
5-10 years 100,565 39,153 139,718
Beyond 10 years 12,553 20,942 33,495
Total 234,442 111,236 345,678

3. Fixed Assets:

During the year your Company added Rs.89,850 million to the gross block
mainly on account of capitalization of two units of Sipat-II (500MWx2)
Power Project and two units of Kahalgaon-II (500MWx2) Power Project. Due to
increase in construction activities, there was an addition of Rs.27,822
million in the capital-work-in-progress registering an increase of 15% over
the last year.

In addition, there was also an increase of 28% in Construction Stores and
Advances.

Rs. Million
As at March 31
2009 2008 % change

Gross block 623,530 533,680 17%
Net Block 329,377 260,937 26%
Capital Work-in-Progress 212,211 184,389 15%
Construction stores and 51,838 40,394 28%
advances
Total fixed assets 593,426 485,720 22%

Further, in line with Gazette Notification no 193 dated 31st March 2009,
issued by Ministry of Company Affairs, Govt. of India, para 46 has been
inserted in Accounting Standard (AS) 11 relating to -'The effects of
changes in Foreign Exchange Rates' in the Companies (Accounting Standards)
Rules, 2006 which provides that exchange differences arising on reporting
of long term foreign currency monetary items, in so far as they relate to
the acquisition of a depreciable capital asset, can be added to or deducted
from the cost of the asset and shall be depreciated over the balance life
of the asset. Accordingly, exchange differences arising for the fiscal 2008
and 2009 amounting to Rs.152 million have been adjusted in the cost of
related assets and of this Rs.2 million, being the exchange differences
arising during fiscal 2008 have been credited to the General Reserve as per
the transitional provisions provided in the aforesaid Notification.
(explained in note 13(a)II of Note on Accounts, Schedule-26).

4. 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 82% of total
investments at the end of fiscal 2009.

Broadly the break-up of investments is as follows:

Rs. Million
As at March 31,
2009 2008

Bonds issued under One time
settlement scheme 114,732 131,247
Investments in Joint Ventures 18,849 15,547
Investment in subsidiaries 4,146 3,355
Investment of surplus cash in various instruments 1,865 1,875
Others:
Bonds against dues (issued prior to one time 243 648
settlement scheme)
Total investments 139,835 152,672

During the fiscal 2009 investments reduced by about 8% 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 2008-09.

Your company partly redeemed 10% Secured Non-Cumulative Non-Convertible
Redeemable GRIDCO Bonds as per redemption plan, during the fiscal 2009.

Your company invested Rs.1,929 million in Ratnagiri Gas & Power Pvt. Ltd.
and Rs. 850 million in NTPC SAIL Power Company Pvt. Ltd. Besides, the
company also invested Rs. 464 million in Bhartiya Rail Bijlee Company Ltd a
subsidiary with 74% equity stake promoted along with Ministry of Railways,
Rs. 304 million in NTPC Hydro Ltd., a wholly owned subsidiary of your
company and Rs. 302 million in Meja Urja Nigam Pvt. Ltd., a joint venture
of your Company.

During the year, your company has not made any non-trade investments.

5. Current Assets:

The current assets and current liabilities as on March 31, 2009 and March
31, 2008 and the changes therein are as follows:

Rs. Million
As at March 31 y-o-y % change
2009 2009 change
Current Assets Amt Amt Amt

Inventories 32434 26757 5677 21%
Sundry Debtors 35842 29827 6015 20%
Cash and Bank balances 162716 149332 13384 9%
Other Current Assets 9792 9218 574 6%
Loans and Advances 68469 40354 28115 70%
Total Current Assets 309253 255488 53765 21%

A major portion of current assets comprised of Cash and Bank balances. As
on March 31, 2009, the cash and bank balances stood at Rs.162,716 million
being 53% of the total current assets in comparison to Rs.149,332 million
as at March 31, 2008 which was 58% of the total current assets as on that
date. Of this, Rs.159,998 million was kept as term deposits with banks as
on March 31, 2009 while the term deposits for the last year was Rs. 144,536
million.

The next largest component of current assets is Loans and Advances. Besides
advance tax and tax deducted at source (net of provisions) amounting to
Rs.34,963 million, this includes a loan of Rs.7,179 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 8.5% tax-free interest on this loan. 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 your Company. The advances
to employees mainly include Rs.3,142 million paid pending pay revision
(explained in note 5 of Notes on Accounts, Schedule-26).

Inventories as at March 31, 2009 were Rs.32,434 million being 10% of
current assets as against Rs.26,757 million as on March 31, 2008. Our
inventories mainly comprise of components and spares and coal which we
maintain for operating our plants. Components and spares were Rs.17,429
million as against Rs.15,609 million in the last year. Coal inventory
amounted to Rs. 11,133 million as against Rs.6,694 million in the previous
year.

Sundry Debtors net of provisions have increased from Rs 29,827 million in
previous fiscal to Rs. 35,842 million showing an increase of 20%
corresponding to increase in sale of energy after adjusting for income tax
recoverable from customers. As on 31.03.2009, Sundry Debtors amounted to Rs
44,203 million as compared to Rs.38,189 million as on 31.03.2008. As a
percentage of sales the sundry debtors have remained at around 10%, at the
same level as at the end of the last fiscal. The Sundry debtors were
equivalent to 38 days of sales for current as well as last fiscal year.

6. Current Liabilities:

Rs. Million
As at March 31 y-o-y % change
2009 2009 change
Amt Amt Amt

Liabilities 74,391 55,483 18,908 34%
Provisions 32,495 23,816 8,679 36%
Total Current Liabilities 106,886 79,299 27,587 35%

The current liabilities as at March 31, 2009 were Rs. 74,391 million as
against Rs. 55,483 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. 64,469 million as against Rs.48,263 million in the previous year.
Besides these, we also owed a sum of Rs. 4,520 million to our customers as
against Rs. 2,958 million in the previous year. These sums include amount
payable to the customers on account of income tax refunds.

Current Liabilities for the year also include Rs. 4,691 million being
gratuity liability of the company as on 31.03.2009 as compared to Rs. 513
million as on 31.03.2008. This is higher in comparison to previous year due
to revision of gratuity ceiling from 0.35 million to ks 1 million during
the year.

7. Provisions:

As on March 31, 2009, your Company had provisions outstanding amounting to
Rs. 32,495 million as against Rs. 23,816 million on 31St March 2008. This
mainly comprised Rs.21,927 million (previous year Rs. 15,293 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.5,342 million provision
for employee benefits pending pay revision and Rs.3,199 million due to
increase in estimated benefits payable to employees as per actuarial
valuation. An amount of Rs.1,907 million was paid during the year
(explained in note 5 and 16 of Notes on Accounts, Schedule-26).

The provisions for the current year also includes an amount of Rs. 2,842
million made towards expenditure on resettlement & rehabilitation
activities including the amount payable to the project affected persons
(PAPs) in respect of land in possession of the company. The same has also
been included in the cost of land. The provision has been made based on the
opinions of the Expert Advisory Committee (EAC) of the ICAI received during
the year (explained in note 9 of Notes on Accounts, Schedule-26).

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.1,103 million included in the Provisions of fiscal
2009.

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,
2009 2008 2007 2006 2005

Opening Cash and cash 149,332 133,146 84,714 60,783 66,351
equivalents

Net cash from operating 96,881 97,860 80,653 59,720 50,998
activities

Net cash used in investing -75,004 -58,187 -31,458 -26,992 -64,136
activities

Net cash flow from -8,493 -23,487 -763 -8,797 7,570
financing activities

Change in Cash and cash 13,384 16,186 48,432 23,931 -5,568
equivalents

Closing Cash and cash 162,716 149,332 133,146 84,714 60,783
equivalents

The net cash from operating activities for the year ended March 31, 2009
reduced by 1% from the previous year because of deployment of cash in
working capital. The net cash from operating activities was Rs.96,881
million as against Rs.97,860 million for the previous year.

The net cash used in investing activities increased to Rs 75,004 million in
fiscal 2009 from Rs. 58,187 million in the previous year registering an
increase of 29%. 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 25% from Rs. 79,964
million in the previous year to Rs. 100,087 million during fiscal 2009. Net
cash realized from sale of investments (after adjusting purchase of
investments and the redemption of OTSS bonds) reduced by Rs.548 million
during the year. No call option was exercised by SEBs on OTSS bonds during
the fiscal 2009. The investment in Joint Venture companies and subsidiaries
was Rs. 4,093 in current fiscal as against Rs.9,218 million during fiscal
2008. Cash generated from investing activities also reduced due to
reduction in interest on OTSS bonds.

During the year, out of the cash raised from operating activities the
company paid net Rs. 8,493 million of cash for servicing financing
activities as against Rs.23,487 million in the previous year. During the
fiscal 2009 the company had an inflow of Rs.73,600 million from long term
borrowings as against Rs. 50,231 million in the previous year. The cash
used for repayment of long term borrowings during the current fiscal was
Rs.22,666 million as against Rs. 21,987 million repaid in the previous
year. The cash used for paying dividend and the tax thereon was Rs.34,718
million as against Rs. 33,764 million in the previous year.

BUSINESS AND FINANCIAL REVIEW OF SUBSIDIARIES:

NTPC has formed six subsidiary companies. The financial statements of the
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:

Fiscal 2009 Fiscal 2008

NTPC's investment in equity 0.8 0.8
Gross Income 785 419
Profit After Tax 185 127
Rs. Per Share
Earnings Per Share 2,284.54 1,565.34

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 30 districts and 5 states, namely,
Chattisgarh, Jharkhand, Madhya Pradesh, Orissa and West Bengal and a Union
Territory of Lakshdweep covering approximately 38,500 villages. During the
year 2008-09, the Company achieved electrification of 4,107 villages and
provided electricity connection to 1,68,633 BPL households. So far the
Company has achieved electrification of 4,709 villages. 22 more projects
have been sanctioned under XI plan.

* The company has successfully completed the assignment of 'Advisor-cum-
Consultant' for Ministry of Power for implementation of schemes under the
Accelerated Power Development and Reforms Program (APDRP).

* The Company is assisting the DISCOMs and utilities for enhancement and
bringing the sectoral reforms process and has been participating in the
distribution infrastructural development programme under consultancy
assignments. The Company has won a contract under competitive bidding for
project management consultancy work for setting up 220 KV substations,
switch yard and associated facilities at BPCL Kochi Refinery with the
comprehensive scope of concept to commissioning.

* The Company has also been assigned implementation of works of power
supply arrangement for Port based Special Economic Zone at Vallarpadam for
Cochin Port Trust (CPT).

NESCL has paid dividend of Rs.25 million for fiscal 2009 as against Rs 17.5
million paid in the previous year.

Joint venture of NESCL:

NESCL has setup a JV with Kerala Industrial Infrastructure Development
Corporation (KINFRA), a statutory body of Government of Kerala with equity
participation of 50% each named as KINESCO Power and Utilities Pvt. Ltd on
September 17, 2008, to take up retail distribution of power in various
Industrial parks developed by KINFRA in Kerala and other SEZs and
industrial areas. KINESCO has applied to the State Regulator for the
transfer of the distribution license on March 27, 2009. Investment
appraisal is under finalization by IDFC. The JV is expected to start
operations from fiscal 2010.

(b) NTPC Vidyut Vyapar Nigam Limited (NWN):

The financial highlights of the Company are as under:

Particulars Fiscal 2009 Fiscal 2008

Rs. Million
NTPC's investment in equity 200 200
Gross Income 19,799 7,961
Profit After Tax 495 190
Rs. Per Share
Earnings per share 24.76 9.52

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.

During the year 2008-09 the company transacted business with various state
electricity boards spread all over the country and traded 4.831 billion
units of electricity in comparison to 3.324 billion units traded in the
previous year.

As a part of its new business initiative, the company has traded ash in the
domestic market at a value of Rs 287.19 million as compared to Rs. 2.84
million in the previous year registering substantial growth. The Company
also exported fly ash at a value of Rs.20.69 million and sold Cenosphere at
a value of Rs.5.12 million during 2008-09 as compared to export of fly ash
of Rs. 11.64 million and sale of Cenosphere of Rs. 6.76 million in the
previous year.

NVVN has paid dividend of Rs. 100 million for fiscal 2009 (including
interim dividend of Rs. 20 million) as against Rs 40 million paid in the
previous year.

(c) NTPC Hydro Limited (NHL):

The financial highlights of the Company are as under:


Patriculars Fiscal 2009 Fiscal 2008

NTPC's investment in equity (incl. share 927 623
capital deposit) (Rs. Million)

Loss (Rs.) 10,800 -

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.
All the statutory clearances have been obtained and entire land required
for the project has been physically acquired. The main plant award is
envisaged during the fiscal 2010. The project is to be developed as a
regional power station with 12% free power to Govt. of Uttarakhand and
balance to be supplied to the beneficiaries of Northern states. The project
is slated for commissioning during XII Plan. The approval from MoEF has
been obtained. Land acquisition has been completed.

* Rammam-III (120 MW) is situated in the state of West Bengal. All the
statutory clearances have been obtained and majority of land acquisition
activities have been completed. The various infrastructure developmental
works are under progress. The main plant package is currently under
tendering process and award is envisaged during the fiscal 2010.The project
is for the benefit of West Bengal and Sikkim states and is slated for
commissioning during XII Plan.

(d) Pipavav Power Development Company Limited (PPDCL):

NTPC Ltd. disassociated from the Pipavav Power Project on May 24, 2007
after obtaining approval from the MoR Based on the settlement between NTPC,
GPCL and GEB, an amount of Rs.109 million was paid to NTPC towards final
settlement in respect of cost of land during 200708. During the year, a sum
of Rs.22 million has been paid by M/s GPCL to NTPC. Further, the Board of
Directors of NTPC accorded approval to proceed with the winding up
procedure of PPDCL subject to approval of Ministry of Power as required
under guidelines issued by Deptt. of Public Enterprises. The Govt. of India
had permitted NTPC Ltd. for winding up of PPDCL pending final settlement of
claims with Gujarat Power Corporation Ltd./Govt. of Gujarat.

(e) Kanti Bijlee Utpadan Nigam Limited:

As per the decision of Govt. of India, a new company named 'Uaishali Power
Generating Company Ltd.' was incorporated on September 6, 2006 as a
subsidiary of NTPC to take over Muzaffarpur Thermal Power Station (2 x 110
MW). The Company was rechristened as 'Kanti Bijlee Utpadan Nigam Limited'
on April 10, 2008. Upon the final determination of the value of the assets
of the plant, NTPC will be allotted shares subject to the minimum of 51%
and maximum of 74% of the total issued, subscribed and paid-up capital of
the Company.

Both units of the transferred station were under renovation and
modernisation since the date of transfer (and not in operation). From
29.01.08, unit no. 02 (1X110 MW) after restoration and refurbishment is on
trial operation for attaining stability in operation. In financial year
2008-09, the second unit generated 226 MUs, highest generation by this unit
since 1999-2000. Renovation and Modernization of first Unit is under
progress. Further, pre-award activities for expansion stage consisting of
two units of 195 MW each are under progress.

The financial highlights of the Company are given below:

Particulars Fiscal 2009 Fiscal 2008

NTPC's investment in equity (incl. share 595 572
capital deposit) (Rs. Million)

Loss (Rs.) 27,866 53,350

Earnings per share (Rs.) (0.28) (0.53)


(f) Bhartiya Rail Bijlee Company Limited (BRBCL):

Bhartiya Rail Bijlee Company Limited was incorporated as a subsidiary of
NTPC on November 22, 2007 having equity participation of 74:26 by 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, district
Aurangabad, Bihar. Land acquisition activities are in advance stage.

The financial highlights of the Company are given below:

Particulars Fiscal 2009 Fiscal 2008

Rs. Million

NTPC's investment in equity (incl. share 2,421 1,957
capital deposit)

Loss 4 1
Rs. Per Share
Earnings per share (0.03) (8.28)

BUSINESS AND FINANCIAL REVIEW OF JOINT VENTURE COMPANIES:

a) Utility Powertech Limited (UPL):

The financial highlights of the Company are as under:


Particulars Fiscal 2009 Fiscal 2008
Rs. Million

NTPC's investment in equity 10 10
Gross Income 2,383 2,199
Profit After Tax 8 125
Rs. Per Share
Earnings per share 2.03 31.18

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. The Company has
proposed a dividend of Rs.6 million for fiscal 2009 with NTPC' share of
Rs.3 million. During the fiscal 2009, Rs. 20 million of paid-up equity
capital has been issued as fully paid bonus shares.

b) 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. August 2, 2006 in pursuance of the
order of the Hon'ble High Court of Delhi dated August 2, 2006.

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. During 2008-09, one unit of 250 MW of Bhilai Expansion Project was
commissioned during April 2008 and the second 250 MW unit was commissioned
on 28.03.09. The total capacity of NSPCL as on 31.03.09 is 814 MW. Out of
500 MW commissioned during 2008-09, 255 MW capacity is allocated for
captive use and the balance 245 MW is allocated for CSEB,UT Daman & Diu and
UT Dadra & Nagar Haveli.

The above stations generated a total of 2.389 BUs during 2008-09 as
compared to 2.576 BUs during the corresponding previous year. The captive
power plants at NSPCL namely Durgapur, Rourkela and Bhilai maintained
average PLF of 87% during 2008-09.

The financial highlights of this Company are as under:

Particulars Fiscal 2009 Fiscal 2008
Rs. Million

NTPC's investment in equity 4,752 3,902
Gross Income 2,697 2,522
Profit After Tax 355 322
Rs. Per Share
Earnings per share 0.42 0.41

NSPCL has recommended a final dividend of Rs.90 million of which NTPC's
share is Rs.45 million.

c) NTPC-ALSTOM Power Services Private Limited (NASL):

The financial highlights of the Company are as under:

Particulars Fiscal 2009 Fiscal 2008

Rs. Million

NTPC's investment in equity 30 30
Gross Income 597 1,008
Profit After Tax 34 38
Rs. Per Share
Earnings per share 5.73 6.40

NASL is a joint venture company between NTPC and ASLTOM DEUTSCHLAND AG,
Germany. The company was formed for taking up Renovation & Modernization
assignments of power plants both in India and abroad. NASL has recommended
a final dividend of Rs.12 million with NTPC's share of Rs.6 million, same
as in the previous year.

d) NTPC Tamil Nadu Energy Company Ltd. (NTECL):

NTPC Tamil Nadu Energy Company Ltd, was formed as a 50:50 joint venture
between NTPC and Tamil Nadu Electricity Board (TNEB) on May 23, 2003 to set
up a coal-based power station of 1000 MW capacity, at Vallur. The project
is named as Vallur Thermal Power Project and is expected to use Ennore port
infrastructure facilities. Financial closure for the project was achieved
on signing of loan Agreement with M/s. REC on 28.03.08 for Rs 37,964.8
million for Phase- I (2x500MW). The Feasibility Report for Phase - II
(1x500 MW) expansion of the project was approved by NTECL Board on
24.11.07. Mega Power Status has been accorded to the project (3x500 MW) on
12.03.08.The construction work at site is in full progress.

The paid up capital of the Company is Rs. 3,800 million and out of this,
50% has been contributed by NTPC Ltd. Further as on 31.3.2009, the amount
of Share Capital Deposit pending allotment is Rs. 320 million. Out of this,
Rs.160 million was contributed by NTPC Ltd. during 2008-09.

e) Ratnagiri Gas and Power Pvt. Limited:

Ratnagiri Gas and Power Private Ltd has been formed as joint venture
company 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 and LNG Terminal. The total
generation from Power Block II (740 MW) and Power Block III (740 MW) during
2008-09 is 5213 MUs which includes infirm power. The commercial generation
is 3873 MUs.

The financial highlights of the Company are as under:

Particulars Fiscal 2009 Fiscal 2008

Rs. Million

NTPC's investment in equity (incl. share 6,929 5,000
capital deposit)
Gross Income 12,612 10,840
Loss 6,551 153
Rs. Per Share
Earnings per share (3.71) (0.09)

f) 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 Indira
Gandhi 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-to-commissioning basis. NTPC would also operate and
maintain the station on Management Contract basis for 25 or more 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. Financial closure for the project was achieved on signing of loan
Agreement with M/s. PFC on 24.01.08 for Rs. 51,800 million.

Construction activities of the site are in full swing. Boiler drum for
Unit-I and Unit-II have been lifted on 12.12.08 and 07.04.09 respectively.
For the Unit-III, boiler erection has commenced on 19.03.09. Unit-I is
expected to be ready during 2010-2011.

As on 31.3.2009, the paid up capital of the Company is Rs. 9,170 million
with 50% being contributed by NTPC Ltd.

g) NTPC-SCCL Global Venture Pvt. Ltd.:

'NTPC-SCCL Global Venture Pvt. Ltd.' was incorporated on July 31, 2007 as a
JV Company of NTPC with Singareni Collieries Company Ltd. to jointly
undertake the development and operation & maintenance of coal Blocks and
integrated coal based power projects in India and abroad.

The paid up capital of the Company is Rs.1 million and out of this, 50% has
been contributed by NTPC Ltd.

h) Meja Urja Nigam Private Limited:

Meja Urja Nigam Private Limited was formed as a 50:50 joint venture between
NTPC and Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited on April 2, 2008
for setting up a power plant of 1320 MW (2X660 MW) at Meja Tehsil in
Allahabad district in the state of Uttar Pradesh. All significant
clearances except MOEF clearance has been obtained and major site-specific
sUrvey and investigation studies have been completed. The project has been
accorded Mega status. Private land of 606.773 hectares has been acquired.
Further, efforts are being made to acquire Govt. land.

As on 31.3.2009, the paid up capital of the Company is Rs. 1 million and
out of this, 50% has been contributed by NTPC Ltd. Further as on 31.3.2009,
out of Share Capital Deposit pending allotment amounting to Rs 602 million,
an amount of Rs. 301 million has been contributed towards equity by NTPC
Ltd.

i) NTPC BHEL Power Projects Pvt. Ltd.-NBPPL:

A JV Company with Bharat Heavy Electrical Ltd.(BHEL) under the name of
'NTPC BHEL Power Projects Pvt. Ltd.' was formed on April 28, 2008 for
carrying out Engineering Procurement and Construction (EPC) activities in
the power sector and to engage in manufacturing and supply of equipment for
power plants and other infrastructure projects in India and Abroad. Both
NTPC and BHEL are in the process of allocating EPC projects to NBPPL on
nomination basis so that NBPPL can develop sufficient experience and skills
to compete in open market. NTPC has in principle approved assigning
implementation of one unit of 500 MW of Singrauli STPS expansion on turnkey
EPC contract basis. BHEL has issued LOI for BOP works of 726 MW CCPP at
Palatana, Tripura and EPC works of 100 MW CCPP at Namrup, Assam to NBPPL.

The Authorised Share capital of the Company has been increased to Rs. 3,000
million from 50 million. The Boards of Directors of NTPC and BHEL have
agreed to contribute Rs. 1,000 million each towards the equity of JV
Company. The present contribution of both the partners is Rs. 50 million
each towards the investment in equity of this JVC. As on 31.3.2009, out of
Share Capital Deposit pending allotment amounting to Rs 99 million, 50% has
been contributed by NTPC Ltd. during 2008-09.

j) BF-NTPC Energy Systems Limited:

NTPC Ltd. has formed a JV Company, 'BF-NTPC Energy Systems Limited' , with
Bharat Forge Limited on June 19, 2008 to establish a facility to take up
manufacturing of castings, forgings, fittings and high pressure piping
required for power projects and other industries, Balance of Plant (BOP)
equipment for the power sector. NTPC shall hold 49% and Bharat Forge
Limited shall hold 51% of the equity share capital of this Company. The
Company is in the process of developing its comprehensive business model.

As on 31.3.2009, the paid up capital of the Company is Rs. 1 million with
49% being contributed by NTPC Ltd. during 2008-09.

k) Nabinagar Power Generating Company Private Limited:

NTPC formed a JV Company with Bihar State Electricity Board under the name
'Nabinagar Power Generating Company Private Limited' on September 9, 2008,
with equal equity contribution for setting-up of a coal based power project
at New Nabinagar in district Aurangabad of State of Bihar. The project will
have a capacity of 1980 MW (3X660 MW). The Company will also undertake
their operation & maintenance of the project after its commissioning. Land
for the project has been identified and Feasibility Report is under
finalization.

As on 31.3.2009, the paid up capital of the Company is Rs. 1 million with
50% being contributed by NTPC Ltd. during 2008-09.

l) National Power Exchange Limited- NPEX:

A JV Company has been incorporated on December 11, 2008 with NHPC Ltd.,
Power Finance Corporation Ltd. and Tata Consultancy Services Ltd. under the
name 'National Power Exchange Limited' to operate a Power Exchange at
National level. This Power Exchange would provide a neutral and transparent
electronic platform for trading of power on 'day ahead basis' and ensure
clearing of all trades in a transparent, fair and open manner with access
to all players in the power markets. NTPC Ltd. & NHPC Ltd. will contribute
16.67% equity each, Power Finance Corporation Ltd. will contribute 16.66%
of equity while Tata Consultancy Services shall contribute 50% equity in
the share capital of this Company. The in-principle approval by CERC for
setting up the power exchange was received on July 1, 2009.

As on 31.3.2009, the paid up capital of the Company is Rs.50 million with
Rs.8.3 million (16.67%) contributed by NTPC Ltd. during 2008-09.

m) International Coal Ventures Private Limited (ICVL):

International Coal Ventures Private Limited has been incorporated on May
20, 2009 as a Joint Venture Company of NTPC Limited, Steel Authority of
India Ltd.(SAIL), Coal India Limited (CIL), Rashtriya Ispat Nigam Limited
(RINL) and NMDC Limited (NMDC). SAIL, CIL, RINL, NMDC and NTPC shall
contribute in the equity share capital of the Company in the ratio of
2:2:1:1:1 respectively.

The Company has been incorporated for the purpose of carrying on business
for overseas acquisition and/ or operation of coal mines or blocks/
companies for securing coking and thermal coal supplies.

n) National High Power Test Laboratory Private Limited (NHPTLPL):

NTPC has formed a JV Company, 'National High Power Test Laboratory Private
Limited' on May 22, 2009 in association with NHPC Limited (NHPC), Power
Grid Corporation of India Limited (Power Grid) and Damodar Valley
Corporation (DVC). NTPC, NHPC, Power Grid and DVC shall equally contribute
in the equity share capital of the Company.

The Company has been incorporated to set up an Online High Power Test
Laboratory for short-circuit test facility in the Country.

o) PTC India Limited:

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. NTPC holds 5.28% of PTC's paidup
capital. During the fiscal 2009, the applicability of the provisions of
Accounting Standard (AS) 27-'Financial Reporting of Interests in Joint
Ventures' to the investment made in PTC India Ltd was reviewed. Since, NTPC
is of the view that provisions of this Standard are not applicable to
investment In PTC India Ltd., the same has been excluded ftnm the
disclosures during the year.

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 2009 Fiscal 2008


Gross Income 476,472 416,370
Profit before Tax 93,073 103,510
Profit after Tax 80,925 74,699
Net Cash from operating activities 102,417 100,258

CAUTIONARY STATEMENT:

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 forward-looking statements.

For and on behalf of Board of Directors

Place: New Delhi (R.S. Sharma)
Date : August 1, 2009 Chairman & Managing Director

Annex-III to Directors' Report

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE
REPORT OF THE BOARD OF DIRECTORS) RULES, 1988:

A. CONSERVATION OF ENERGY:

a) Energy conservation measures taken:

Some of the important energy conservation measures taken during the year
2008-2009 in different areas are as under:

ENERGY AUDITS:

During the year 2008-09, 104 in-house energy audits in the areas of
auxiliary power consumption, water balance, cooling water system,
compressed air, coal handling plant, MGR, Lube Oil System, Air
Conditioning, Ash handling system, GT Compressors, GT open cycle
efficiency, WHRB performance, lighting etc. were carried out at different
stations of NTPC. During the year, NTPC has successfully completed external
energy audit of combined cycle power plant of Puducherry Power Corporation,
Puducherry.

Till now 194 executives of NTPC have passed Energy Auditors Examination of
Bureau of Energy Efficiency to become Certified Energy Auditors / Managers.

The details of various measures taken during the year under various heads
of energy conservation are as below:

AUXILIARY POWER CONSUMPTION:

Replacement of inefficient BFP cartridges, overhauling of BFPs and
attending of recirculation valves of BFPs at Korba, Vindhyachal, Kawas,
Kahalgaon, Dadri Gas, Dadri Coal, Kayamkulam, etc., Application of
efficiency improvement coating on cooling water pump internals at Kawas,
Draft power reduction by attending flue gas duct, air duct, APH seal
adjustment and reducing PA header pressure at Tanda, Vindhyachal, Talcher
Kaniha, Kahalgaon, Badarpur, Dadri Coal, Unchahar etc., Coal mill liner
replacements, mill overhauling to reduce specific power consumption at
Vindhyachal, Rihand, Singrauli, Unchahar, etc., Installation of FRP blades
in HVAC cooling towers and Fin fan Coolers at Kawas, Optimized running of
LPBFP/ HPBFP at Auraiya, Gandhar, etc., Optimization of operation of CW
pumps, ARCW pumps & Cooling Tower Fans at Anta, Tanda, Vindhyachal, Talcher
Kaniha, Korba, Rihand, Auraiya, Singrauli, Simhadri, Kahalgaon, etc.,
Optimizing ash - water ratio at Talcher Kaniha, Running of efficient ash
water recirculation pumps in place of inefficient pumps at Talcher Kaniha,
Reduction in pressure setting of compressed air at Faridabad, Maintaining
optimum DP across Feed Regulating Station at Korba, Reduced running of Fly
ash water pumps, HP/LP water pumps at Kahalgaon, Dadri coal, Rihand,
Singrauli, etc., External cleaning of Heat exchangers by steam jetting at
Kawas, Replacement of standard motors with energy efficient motors at
Kawas, Optimizing ESP power through charge ratio at Badarpur, External
cleaning of boiler for efficiency improvement at Dadri gas, are some of the
measures taken to reduce APC.

LIGHTING:

Installation of timer switches in plant and township lighting at Simhadri,
Replacement of conventional GLS lamps and conventional FTLs with CFLs at
Kawas, Badarpur, Kahalgaon, Singrauli etc., Lighting voltage optimization
by tap adjustment at Ramagundam, Optimising lighting load at Gandhar,
Installation of energy savers in lighting circuits at Badarpur, Unchahar
etc.

HEAT ENERGY:

Repair of Thermal Insulation and cladding at Talcher Kaniha, Unchahar,
Faridabad, etc., Reduction of boiler flue gas exit temp by adopting
chemical cleaning of boilers at Ramagundam, Replacement of HP heaters and
arresting passing at Korba and Singrauli, Cleaning of Boiler with
ammonia/C02 at Auraiya.

FUEL OIL:

FSSS Logic for ignition support modification at Simhadri.

LUBRICANTS:

Adoption of best practices, attending lube oil leakages and changing/toping
up oil on actual condition basis at Singrauli, Recycling of used up oils
for reuse at Korba.

DM WATER:

Reuse of uncontaminated SWAS drains at Kawas.

MISCELLANEOUS WATER:

Diversion of cooling water to service water for reuse at Unchahar,
Recycling of water used for dust suppression system at Korba, Recirculation
of Ash water at Korba, 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, Reuse of Compressor, coal crusher clarified
cooling water at Korba.

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

Provision of Rs.689 lacs has been kept in BE 2009-10 for different energy
conservation schemes like: - On-Line Energy Management System and Variable
Frequency Drives - Vapor absorption system for Air Conditioning - Energy
efficient devices in lighting.

c) Impact of measures taken for energy conservation:

Savings achieved during 2008-2009 on account of specific efforts for energy
conservation:

Area/Activities Energy Savings
Unit Qty. of Rs.
units (Million)

1. Electrical MU 206.37 325.56

2. a. Heat Energy (equivalent MT 57249 88.14
MT of coal)

2. b. Heat Energy (equivalent MCM 1.691 7.61
MCM of Gas)

2. c. Fuel Oil KL 200 7.00

3. a. D.M. Water MT 6000 0.12

3. b. Miscellaneous Water M. Cu M 32.73 67.31

4. Lubricants KL 35.59 2.28

Grand Total 498.02

Savings achieved during 2007-08 : Rs. 490.20 Million

B. TECHNOLOGY ABSORPTION:

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

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

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 Outgo:

a) Value of Imports calculated on CIF basis:

Capital Goods 10386
Spare Parts 919

b) Expenditure:

Professional and Consultancy Charges 24
Interest 4067
Others 601

2. Foreign Exchange Earned:

Consultancy 21
Interest 14
Others 1

Form-B

FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION OF
TECHNOLOGY:

1.0 Specific areas In which NETRA activities have been carried out during
2008-09:

1.1 Modeling of variable coal orifice for coal flow optimization.

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

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

1.4 Studies on near zero liquid discharge from Faridabad station.

1.5 Development of Robotic crawler for inspection of Boiler Water Wall.

1.6 Development of Low grade heat recovery process and system for
refrigeration / air-conditioning.

1.7 Development of Multi component Ammonia Liquor Absorption Engine (MALAE)
process and System for low grade heat recovery.

1.8 Development of Artificial intelligence based plant advisory system.

1.9 Development of Boiler CFD model.

1.10 Development of Ionic membrane for CO2 capture.

1.11 Development of Pressure Swing Absorption based CO2 capture.

1.12 Development of COQ to methane conversion.

1.13 Development of Flue Gas Conditioning technologies.

1.14 Failure analysis of PA fan blades at Simhadari; LP Turbine blades,
Badarpur; MGR rail, Farakka; Boiler tube leakage, Singrauli; Compressor
blade, Dabhol.

1.15 Extending safe operation of super heater headers.

1.16 Actions have been initiated for chemically cleaning the fouled PVC
fills of cooling towers.

1.17 Investigation of severe foaming in cooling waters & organic
contamination in DM water.

1.18 Post operational chemical cleaning of boiler tubes of #3 Farakka, #3
Singrauli, #1 Vndhyachal, #3 Tanda, #3 Ramagundam and #1 Unchahar were
carried out successfully under the total supervision and guidance of NETRA.

1.19 Environmental Appraisal of 20 stations were carried out and corrective
actions have been taken by the stations based on the appraisal.

1.20 Investigations on choking of NOx filters and poor quality of DM water.
Corrective measures have been adopted by the station resulting in
improvement.

1.21 Development of chemical cleaning procedure to prevent acid dew point
corrosion, using Magnesium Hydroxide on HRSG surfaces.

1.22 Corrosion audit of CW system and assessment of cooling water related
problems were carried out at Kahalgaon, Talcher Thermal and Talcher Kaniha,
Singrauli & Vindhyachal. At Farakka, assessment of condenser fouling was
also done in addition to corrosion audit of CW system. Sites were appraised
of the findings with recommendations.

1.23 Under fact finding work NETRA experts carried out inspection of
nozzles, buckets, combustion liners, shrouds etc., of GT #2 at Kayamkulam.
Necessary recommendations had been sent to site.

1.24 Development of ultrasonic testing procedure for detection of service
induced defects in ID fan shaft.

1.25 Health assessment of 12 gas turbines, 6 steam turbines & boilers using
advanced NDT techniques.

1.26 NETRA is carrying out condition monitoring of around six hundred, 400
KV Class transformers for their health.

1.27 Over 1300 rotating equipment are being monitored regularly by NETRA
for their health assessment through wear debris analysis.

1.28 NETRA is extending scientific services to various other utilities such
as Kota Super Thermal Power Plant, Lehra Mohabat Thermal Power Plant,
Jindal Power Limited; 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.

1.29 Over 7000 samples of transformer oils, boiler tube deposits, turbine
blade deposits, condenser & cooling tower deposits, effluents, waters,
etc., have been analysed and necessary recommendations have been given.

1.30 Indian Institute of Science, Bangalore was appointed as Consultant
for Restructuring & Strengthening of R&D Centre. Based on Consultants
recommendations R&D and Energy Technology have been integrated into a
single entity namely, 'NTPC Energy Technology Research Alliance (NETRA)'.
NETRA has started functioning from Feb. 2009 and R&D laboratories and
facilities are in the process of shifting to NETRA Complex at Greater
Noida.

2.0 Benefits derived as a result of above Research & Technology
Development:

NETRA activities as carried out have helped in increasing the availability,
reliability and efficiency of the stations. Chemical treatment and
corrosion control measures, NDE & life management of plant components,
transformer condition assessment etc. are helping the stations in improving
the efficiency, availability and life of various critical plant components.
Techniques developed by NETRA 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.

3.0 FUTURE PLANS:

A. Technology Demonstration / Pilot Plants:

1. Development and deployment of Solar HVAC demonstration plant.

2. 1 MW Solar Thermal R&D Plant.

3. Marine Algae to Bio Fuel.

4. Pilot studies for Heat Pipe based Supplementary APH.

5. Feasibility report on development of Plasma based Oil less Coal Burners.

6. Artificial Neural Network based power plant operation and predictive
superheated steam temperature control.

B. Setup of Applied Research Laboratories:

1. Robotics
2. Solar Thermal
3. Advanced Computing
4. Computational Fluid Dynamics
5. Preparation of DPR for establishment of other Laboratories of NETRA

C. Research & Technology Development Projects:

1. Design of integrated bio-diesel pilot unit for using 80% energy from
bio-fruit instead of existing 15%.

2. Lab scale Design and Development of automated LTSH /Economizer tube
surface inspection system.

3. Feasibility study of producing methane from raw water, as a supplemental
fuel to boiler.

4. Development of technique for online monitoring of colloidal silica in
steam water cycle.

5. Demonstration of Robotic Crawler based Boiler Water Wall inspection
system.

6. Demonstration of Low grade heat recovery process and system for
refrigeration / air-conditioning.

NETRA 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. NETRA will also be working on developing schemes for recycling
of waste waters from plants. NETRA will also work on reducing air-pre-
heater seal leakage by deployment of heat pipes for APH.

D. Scientific Services to Power Stations:

NETRA 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. Technology Development & Scientific Support to
Stations for:

i. Reducing overhaul duration and increasing time interval between
overhauls

ii. Reducing forced outages

iii. Cost Reduction

4.0 Expenditure of R&D:

(Rs. Millions)
2008-09 2007-08

a) Capital 12 11
b) Recurring 81 62
c) Total 93 73
d) Total R&D expenditure as a percentage of total 0.0222% 0.0197%
turnover

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, Diagnostics 2004 Implemented in Simhadri
and Optimization Software calculates will be continued in
the Equipment Performance and future Projects.
deviation 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 with 247 2004 Being implemented at
Kg/cm2 Steam Pressure and 540/568 Sipat (3x660 MW), Barh
MS/RH steam temperature is adopted (3x660 MW) and Barh-II
for its improvement in thermal
efficiency and reduced emission of
green house gasses.

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

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

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

For and on behalf of the Board of Directors

Place: New Delhi (R.S. Sharma)
Dated: August 1, 2009 Chairman & Managing Director

Annex-VI to Directors' Report

STATISTICAL DATA OF GRIEVANCE CASES:

2008-09
Particulars Public Grievance Staff Grievances
Cases Cases

1. Grievance cases outstanding at the - 10
beginning of the year

2. Grievance cases received during - 40
the year

3. Grievance cases disposed of during - 47
the year

4. Grievance Cases outstanding at the - 3
end of the year

For and on behalf of the Board of Directors

Place: New Delhi (R.S. Sharma)
Dated: August 1, 2009 Chairman & Managing Director

Annex-VII to Directors' Report:

STATISTICAL INFORMATION ON RESERVATION OF SCs/STS FOR THE YEAR 2008:

Representation of SCs/STs as on 01.01.2009:

Group Total SCs % age STs % age

A 12410 1455 11.72 477 3.84
B 3569 478 13.39 202 5.65
C 7476 1338 17.89 542 7.24
D 1996 438 21.94 216 10.82
Total 25451 3709 14.57 1437 5.64

Recruitment of SCs/STs during the year 2008:

Group Total SCs % age STs % age

A 1033 196 18.97 115 11.13
B - - - - -
C 18 7 38.88 2 11.11
D 75 26 34.66 17 22.66
Total 1126 229 20.33 134 11.90

Promotions of SCs/STs during the year 2008:

Group Total SCs % age STs % age

A 2767 310 11.20 84 3.03
B 811 114 14.05 50 6.16
C 1450 262 18.06 98 6.75
D 92 20 21.73 8 8.69
Total 5120 706 13.78 240 4.68

Efforts of NTPC to fill up the backlog reserved vacancies of SCs and STs in
group 'A' posts in year 2008 are as under:

* NTPC identified 128 backlog vacancies of SCs, STs and OBCs in July 2008
for filling up along with current vacancies. Recruitment process has been
completed. Offers of appointment have been issued.96 persons have joined so
far.

* Further 25 backlog vacancies of SCs, STs and OBCs were identified as on
01.11.2008 which have been advertised for filling up through Special
Recruitment Drive. The recruitment process is in progress.

For and on behalf of the Board of Directors

Place: New Delhi (R.S. Sharma)
Dated: August 1, 2009 Chairman & Managing Director

Annex-VIII to Directors' Report:

PHYSICALLY CHALLENGED PERSONS:

With a view to focus on its role as a socially responsible and socially
conscious organization, NTPC has endeavored to take responsibility for
adequate representation of physically challenged persons in its workforce.
With this in view, NTPC launched a massive recruitment drive to make up the
shortfall, of physically challenged persons. Total 450 physically
challenged persons are on rolls on NTPC as on 01.01.2009. Reservation has
been provided for PH as per rules/ policy. Some of the other initiatives
taken for the. welfare of physically challenged persons by NTPC over the
years are as under:

- For individual needs of the VH employees, screen reading software and
Braille shorthand machines made available by the Projects of NTPC.

- 'Sign language' training for the employees in general.

- NTPC has given instructions to all units to create barrier free
environment for easy access of PH persons. 18 units have completed the
task. The work is in progress at rest of the units.

- At most of the NTPC Projects, wherever houses are located in multi
storied structures, allotments to physically challenged has been made on
the ground floor. .

- Special parking enclosure near the ramp at the office entrance.

- Wheel chairs have been provided to employees with orthopedics
disabilities. If required, the assistance of an attendant has also been
sanctioned.

- Wherever required, gates/door of the quarter has been widened and wider
covers provided on drains to facilitate movement.

- At CC procurement of stationery items like files, envelopes are mainly
being done from NGOs/Agencies like ADDI, MUSKAN, Blind Relief Association
who are working for physically challenged thereby creating indirect
employment. Paintings made by disabled persons have also been procured and
paced at different locations in the Company Offices.

- Medical camps have been organized in various projects of NTPC for
treatment and distribution of aids like artificial limbs, tricycles,
wheelchairs, calipers etc.

- Shops have been allotted to NTPC Township to challenged persons so that
they may earn their livelihood. Similarly, PCOs within/outside plant
premises are also allotted to physically challenged persons.

- Regular interactive meetings are being organized with physically
challenged employees. Training needs are being fulfilled as per the
individual requirement.

- 05 number of Scholarship @ Rs.1500/- per month/per student are given to
PH students pursuing MBA/PGDBM Courses. In our Vindhyachal Project, a
school named Asha Kiran for deaf/dumb and mentally retarded children, is
running.

- Petty contracts like book binding, scribbling pad preparation from waste
paper, file binding, furniture repair, screen printing, spiral binding,
painting contract are also being given to disabled persons.

- Physically challenged (Orthopedically handicapped) employees have been
allowed to purchase a three wheeler vehicle with a hand fitted engine
against their normal entitlement (advance for scooter/motorcycle/moped)
under NTPC conveyance Advance Rules.

- At all Projects/Offices, Nodal Officers (Physically Challenged) have been
nominated.

- Reimbursement towards low vision aids, dark glasses etc. subject to
maximum of Rs.1000/- every year has been introduced. Similarly hearing aid;
behind the ear model for each ear restricted to Rs.10,000/- or actual cost
whichever is lower has been introduced. It may be replaced every four years
subject to certificate of condemnation by ENT Specialist.

- Relaxation in qualifying marks for open recruitment: pass marks only and
also 10% relaxation in written test and interview from the year-2002
onwards.

- NTPC identified 17 backlog reserved vacancies for Physically Challenged
persons in year 2008. Two offers of appointment have been issued from the
recent select panel. One has joined so far. For 15 backlog vacancies
advertisement has been made for filling up through Special Recruitment
Drive. The recruitment process is in progress.

For and on behalf of the Board of Directors


Place: New Delhi (R.S. Sharma)
Dated : August 1, 2009 Chairman & Managing Director

Annex-IX to Directors' Report:

UNGC - Communications on Progress (2008-09):

NTPC expresses its continued support for the Global Compact and its
commitment to take action in this regard, as was communicated by the
Chairman & Managing Director, NTPC in his letter dated May 29; 2001
addressed to Secretary General, United Nations.

NTPC has posted the brief of Global Compact and its commitment to the
principles of GC on its website at www.ntpc.co. in. The principles of GC
were communicated to all employees through in-house magazines, internal
training programmes and posters. NTPC, a core member of Global Compact
Society (GCS), actively participated and assisted in organizing the Annual
Convention of the Global Compact Society on 10th Dec 2008. Director (HR) of
NTPC is nominated as Vice President, Northern Region for Global Compact
Society, India.

Human Rights: Principle 1-2:

Most of NTPC's operating power stations are located in remote rural areas
which are socio-economically backward and deficient in the basic civic
amenities. NTPC, as responsible corporate citizen has been addressing the
issue of community development in the neighbourhood areas of its stations,
which had been impacted due to establishment of the project.

While, this has been initially administered as part of Resettlement and
Rehabilitation effort, NTPC recognized its social responsibility to
continue community and peripheral development works where the same has been
closed under R&R policy. Towards this, NTPC during 2004-05 adopted
'Corporate Social Responsibility-Community Development (CSR-CD) Policy',
July' 04.

Under this policy, during 2008-09, NTPC. allocated a fund of Rs.102.4
million to 20 operating stations for carrying out comprehensive Community
Development work in the area of health, education, drinking water and
peripheral development. In addition, Quality Circles (QCs) are functioning
in neighborhood villages of its stations. The NTPC employees participate in
various CD activities through Employee Voluntary Organization for
Initiative in Community Empowerment (EVOICE).

NTPC provided sponsorship to candidates from villages in the vicinity of
NTPC stations/ Projects for ITI training at Government/ Government
recognized private ITIs in the trades of Welder/ Fitter/ Instrument
mechanic/ Electrician. Close to 700 village youth have been sponsored
during the financial year.

NTPC is committed to provide support for setting up a technical polytechnic
at Uttaranchal, at Kaladungi, Dist. Nainital. Support for a Women's
Polytechnic at Gopeshwar, Dist. Chamoli is also committed.

NTPC Foundation, registered in December'2004, is striving to serve and
empower the physically challenged and economically weaker sections of the
society. The Information and Communication Technology (ICT) Centre, set up
jointly by NTPC Foundation and University of Delhi and inaugurated in
Oct '08, will enable approximately 1000 physically challenged students to
learn IT Skills and help them move along with the mainstream society.
Foundation is also extending similar ICT facilities to the existing blind
schools in Lucknow, Ajmer, Thiruvanathapuram and Mysore.

Tanda, in U.P. has been identified by Foundation as pilot project for
operating District Disability Rehabilitation Centre (DDRC) in collaboration
with National Institute of Orthopedically Handicap (NIOH), Ministry of
Social Empowerment, Govt. of India.

In the area of health, Mobile Vans with diagnostic equipments have been
provided at 4 stations i.e. Rihand, Ramagundam, Singrauli and Vindhyachal
for treatment and diagnosis of the Tuberculosis patients in the
neighbourhood villages of the stations.

NTPC Foundation is also providing grants for setting up of Distributed
Generation Projects for preparation of feasibility report, DPR, Insurance,
Energy Plantation and for meeting funding gap limited to 30% of the
approved project cost.

NTPC supported various Institutions/ Bodies and undertook initiatives for
major activities as detailed below:

(i) Support has been extended for assistance in self reliance for 200
tribal girls/women in tribal area of Jhamar Kotra in Udaipur Dist. of
Rajasthan.

(ii) Assistance is also being extended for construction of School cum
Multipurpose Building for Girls in Village Shaulana, Dist Ghaziabad, Uttar
Pradesh through Nari Jagriti Abhiyan, Hardwar and for construction of one
floor each for Girls Hostel in Distt. Ongole and Guntur of A.P.

(iii) As a CSR initiative in the field of Health, NTPC is providing support
to Hyderabad Eye Research Foundation for three specialized Eye Centers at
Bhubneswar Eye Hospital, Bhubneswar, Orissa. These Centers will provide
free medical facilities to the economically under privileged patients.

In order to contribute in the Conservation of selected National Monuments,
NTPC in association with Archaeological Survey of India (ASI), has
identified 3 sites for financial support.

NTPC members were actively. involved as 'industry, experts on CSR' in
preparation of 'ISO 26000 Guidance on Social Responsibility.

NTPC representatives associated with Confederation of Indian Industry (CII)
as Certified Assessors for the assessment of CIIITC Sustainability Award
constituted by the CIL.

Labour Standard: Principle 3-6:

For addressing the issue of labour standard in comprehensive manner, NTPC
has decided to adopt international standards like SA-8000 and OHSAS-18001.

During the year 2008-09, Jhanor- Gandhar and Singrauli stations of NTPC
received SA-8000 accreditation. The process has been initiated at Kawas
station for accreditation. Anta, Auraiya, Badarpur, Farakka, Faridabad,
Kayamkulam, NCPP-Dadri, Ramagundam, Rihand, Simhadri, Talcher-Thermal,
Tanda, Unchahar and Vindhyachal are already accredited in the previous
years.

All the 20 operating Stations of NTPC have already obtained accreditation
under OHSAS 18001. During 2008-09 Faridabad, Kawas, Talcher Kaniha and
Tanda stations have been re-certified under OHSAS 18001.

NTPC was closely associated in formulation of IS:16001:2007 on
'Organisational Accountability at the Workplace Requirements' prepared by
Bureau of Indian Standard (BIS).

Environment: Principle 7-9:

Towards its commitment to environment NTPC has decided to adopt ISO-14001
and all its 20 operating stations have obtained accreditation for ISO-
14001. Surveillance audit through was done by agencies at various stations
to ensure adherence to the ISO requirements.

During the year 2008-09, 3 stations viz. Faridabad, Kawas and Talcher
Kaniha stations have been re-certified under ISO 14001.

For and on behalf of the Board of Directors

Place: New Delhi (R.S. Sharma)
Dated : August 1, 2009 Chairman & Managing Director

Annex-X to Directors' Report

CONTENTS OF PRESIDENTIAL DIRECTIVES:

1. Pay revision of Board level and below Board level Executives and Non-
unionised Supervisors in Central Public Sector Enterprises (CPSEs) w.e.f.
01.01.2007.

Vide Presidential Directive No. 3/4/2009-TH.I dated 30.04.2009, the
Government of India has directed NTPC Limited to implement revision of pay
and allowances of Board Level and below Board Level Executives in NTPC
Limited strictly as per the guidelines contained in Department of Public
Enterprises (DPE) O.M. No. 2 (70)/08-DPE (WC)GLXVI/08 dated 26.11.2008,
No.2(70)/08-DPE (WC) - GL- IV/09 dated 09.02.2009, No. 2(70)/08-DPE (WC) -
GL-VII/09 dated 02.04.2009 and No. 2(76)/08-DPE (WC) GL - VIII/09 dated
02.04.2009. Special attention is invited to para 2 (ii) of DPE's O.M. No. 2
(70)/08- DPE (WC) - GL- XVII08 dated 26.11.2008, para 2 (vi) of O.M. No.
2(70)/08-DPE (WC)-GLVII/09 dated 02.04.2009 and para 4 of O.M. No.
2(76)/08-DPE - (WC) GL-VIII/09 dated 02.04.2009.

Pending implementation of presidential directive, provision of Rs. 3,575
million for the year and Rs. 6,970 million upto the financial year 2008-09
has been made on account of revision of pay scales of Board level, below
Board level Executives and Non-unionised Supervisors (excluding employees
in workmen category) on an estimated basis having regard to the guidelines
issued by Department of Public Enterprises, Government of India. Further, a
span of Rs.2,394 million has been paid as adhoc advance towards revision of
pay scales of Board level, below Board level Executives and Non-unionised
Supervisors (excluding employees in workmen category) upto the financial
year 2008-09.

2. Winding up of Pipavav Power Development Company Limited (PPDCL) by NTPC
Limited:

Vide Presidential Directive No. 5/5/2004-TH.II dated 03.07.2009, Government
of India is pleased to convey the approval of Government to permit NTPC
Limited for winding up of Pipavav Power Development Company Limited pending
final settlement of claims with Gujarat Power Corporation Limited/
Government of Gujarat.

After decision of disassociation of NTPC Ltd. from Pipavav Project, Rs. 131
million have already been received towards reimbursement of cost of land
and other expenditure incurred by NTPC Ltd for Pipavav Project including
interest thereon. After winding up of Pipavav Power Development Company
Limited, final claims including expenditure incurred by NTPC Ltd., on
winding up of Pipavav Power Development Company Limited shall be recovered
from Gujarat Power Corporation Limited/ Government of Gujarat.

For and on behalf of the Board of Directors

Place: New Delhi (R.S. Sharma)
Dated: August 1, 2009 Chairman & Managing Director