Download complete report for financial year 2005-06 - Ntpc

CONTENTS• Letter to Shareholders ...................................................................................................................................... 5• Notice of AGM .................................................................................................................................................. 6• Awards & Accolades........................................................................................................................................... 11• Station-wise Generation .................................................................................................................................... 13• Selected Financial Information….......................................................................................................................... 15• Board of Directors............................................................................................................................................... 16• Senior Management Team.................................................................................................................................... 19• Directors’ Report.................................................................................................................................................. 20• Management Discussion and Analysis................................................................................................................. 27• Report on Corporate Governance........................................................................................................................ 43• Accounting Policies............................................................................................................................................. 70• Balance Sheet....................................................................................................................................................... 74• Profit & Loss Account........................................................................................................................................... 75• Cash Flow Statement............................................................................................................................................ 106• Auditors Report.................................................................................................................................................... 107• Employee Cost Summary..................................................................................................................................... 110• Revenue Expenditure on Social Overheads......................................................................................................... 110• Fund Flow Statement........................................................................................................................................... 111• Subsidiary Companies......................................................................................................................................... 112• Consolidated Financial Statements ..................................................................................................................... 13130th Annual Report 3

THE YEAR AT A GLANCE2006 2005Commercial Generation Million Units 169789 158271Sale of Energy Rs Million 260701 225069Profit before tax “ 60224 60782Profit after tax “ 58202 58070Dividend “ 23087* 19790Dividend tax “ 3238 2680Retained Earnings “ 31877 35600Net Fixed Assets “ 230895 223148Net Worth “ 449587 417763Loan Funds “ 201973 170878Capital Employed “ 523572 500540Net Cash From Operations “ 62064 50998Value Added “ 97482 88415No. of Employees # “ 21870 21420Value added per employee Rs Million 4.46 4.13Debt to Equity Ratio 0.45 0.41Return on Capital Employed (%) % 12.46 12.77Face Value per share Rs. 10.00 10.00Dividend Per share “ 2.80* 2.40Book Value per Share “ 54.53 50.67# excluding JVs, Subsidiaries and BTPS (owned by NTPC w.e.f. 1 st June, 2006)* including final dividend recommended by the Board430th Annual Report

NOTICENotice is hereby given that the Thirtieth Annual General Meeting of the members of NTPC Limited will be held onTuesday, September 19, 2006 at 11.30 a.m. at NDMC Indoor Stadium, Talkatora Garden, New Delhi – 110 001 to transactthe following business:Ordinary Business1. To receive, consider and adopt the audited Balance Sheet as at March 31, 2006 and Profit & Loss Account for thefinancial year ended on that date together with Report of the Board of Directors and Auditors thereon.2. To confirm interim dividend and declare final dividend for the year 2005-06.3. To appoint a Director in place of Shri R.S. Sharma, who retires by rotation and being eligible, offers himself for reappointment.4. To appoint a Director in place of Shri R.K. Jain, who retires by rotation and being eligible, offers himself for reappointment.5. To appoint a Director in place of Shri A.K. Singhal, who retires by rotation and being eligible, offers himself for reappointment.6. To fix the remuneration of the Auditors.By order of the Board of DirectorsRegd. Office:NTPC Bhawan, 7, Institutional Area,Lodi Road, New Delhi-110 003Date: August 4, 2006(A.K. Rastogi)Company SecretaryNOTES :-1. A Member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and voteinstead of himself/herself and the proxy need not be a Member of the Company. In order to be effective,the Proxy form duly completed should be deposited at the registered office of the company not less thanforty-eight hours before the scheduled time of the Annual General Meeting. Blank proxy form is enclosed.2. As required by clause 49 of the Listing Agreement entered into with the Stock Exchanges the relevant details of ShriR.S. Sharma, Shri R.K. Jain and Shri A.K. Singhal, Directors retiring by rotation and seeking re-appointment under ItemNo. 3, 4 and 5 aforesaid in accordance with applicable provisions of the Articles of Association of the Company aswell as those directors who have been appointed since the last Annual General Meeting are also annexed. Thetenure of Shri R.S. Sharma, Shri R.K. Jain and Shri A.K. Singhal is upto October 7, 2009, December 31, 2009 and July31, 2010 respectively as per terms of their appointment by the Government of India.3. The Register of Members and Share Transfer Books of the Company will remain closed from September 1, 2006 toSeptember 15, 2006 (both days inclusive). The dividend on equity shares, as recommended by the Board of Directors,subject to the provisions of section 206A of the Companies Act, 1956, if declared at the Annual General Meeting,will be paid on or after September 22, 2006 to the Members or their mandates whose names appear on the Company’sRegister of Members on September 15, 2006 in respect of physical shares. In respect of dematerialized shares, thedividend will be payable to the “beneficial owners” of the shares whose names appear in the Statement of BeneficialOwnership furnished by National Securities Depository Limited and Central Depository Services (India) Limited atthe close of business hours on August 31, 2006.630th Annual Report

4. Members are requested to:-i) note that copies of Annual Report will not be distributed at the Annual General Meeting.ii) bring their copies of Annual Report, Notice and Attendance Slip duly completed and signed at the meeting.iii) deliver duly completed and signed Attendance Slip at the entrance of the meeting venue as entry to the Hallwill be strictly on the basis of the entry slip available at the counters at the venue to be exchanged with theattendance slip.iv) quote their Folio / Client ID & DP ID Nos. in all correspondence.v) note that due to strict security reasons mobile phones, brief cases, eatables and other belongings arenot allowed inside the Hall.vi) note that no gifts/coupons will be distributed at the Annual General Meeting.5. Members are advised to submit their Electronic Clearing System (ECS) mandates, to enable the Company to makeremittance by means of ECS. Those holding shares in physical form may obtain and send the ECS mandate form toKarvy Computershare Private Limited, Registrar & Transfer Agent of the Company. Those holding shares in ElectronicForm may obtain and send the ECS mandate form directly to their Depository Participant (DP). Those who havealready furnished the ECS Mandate Form to the Company/ Registrar & Transfer Agent /DP with complete details neednot send it again.The shareholders who do not wish to opt for ECS facility may please mail their bankers’ name, branch address andaccount number to Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company to enable themto print these details on the dividend warrants.6. Members holding shares in different folios in physical mode are requested to apply to the Company or its Registrar& Transfer Agent for consolidation and send relevant Share Certificates for consolidation.7. The Board of Directors in its meeting held on January 30, 2006 had declared an interim dividend @ 20% on the paidupequity share capital of the company. Members who have not received or not encashed their dividend warrantsmay approach Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company, for revalidating thewarrants or for obtaining duplicate warrants.8. Pursuant to Section 205A read with Section 205C of the Companies Act, 1956, the dividend amounts which remainunpaid / unclaimed for a period of seven years, are required to be transferred to the Investors Education & ProtectionFund of the Central Government. After such transfer, there remains no claim of the members whatsoever on the saidamount. Therefore, Members are advised to encash their Dividend warrants immediately .9. Members may avail of the facility of nomination in terms of Section 109A of the Companies Act,1956 by nominatingin the Form-2B as prescribed in the Companies (Central Government’s) General Rules and Forms, 1956, any person towhom their shares in the Company shall vest on occurrence of events stated in the Form. Form-2B is to be submittedin duplicate to Karvy Computershare Private Limited, Registrar & Transfer Agent of the Company. In case of sharesheld in dematerialized form, the nomination has to be lodged with the respective Depository Participant.10. Annual listing fee for the year 2006-07 has been paid to all Stock Exchanges wherein shares of the Company are listed.11. Pursuant to Section 619(2) of the Companies Act, 1956, the Auditors of a Government Company are to be appointedor re-appointed by the Comptroller and Auditor General of India (C & AG) and in terms of Clause (aa) of sub-section (8)of Section 224 of the Companies Act, 1956 their remuneration has to be fixed by the Company in the Annual GeneralMeeting. The Members of the Company in the 29 th Annual General Meeting held on September 23, 2005 authorised theBoard of Directors to fix the remuneration of Statutory Auditors for the year 2005-06. Accordingly, the Board of Directorsfixed audit fee of Rs.40,00,000/- for the Statutory Auditors for the financial year 2005-06 in addition to applicableservice tax and reimbursement of actual traveling and out-of-pocket expenses for visits to accounting units. Further,Statutory Auditors of the Company for the year 2006-2007 has been appointed by C&AG of India, the Members mayauthorise the Board to fix an appropriate remuneration of Auditors as may be deemed fit by the Board.30th Annual Report 7

12. Corporate Members intending to send their authorized representatives to attend the Meeting are requested to senda certified copy of the Board Resolution authorizing their representative to attend and vote on their behalf at theMeeting.13. Member are requested to notify immediately any change of address:i. to their Depository Participants (DP) in respect of shares held in dematerialized form, andii. to the Company at its Registered Office or to its Registrar & Transfer Agent, Karvy Computershare Pvt. Ltd. inrespect of their physical shares, if any, quoting their folio number.14. Members desirous of getting any information on any items of business of this Meeting are requested to address theirqueries to Shri A.K. Kundu, Executive Director (Finance) and Public Spokesperson of the Company at the registeredoffice of the company at least ten days prior to the date of the meeting, so that the information required can bemade readily available at the meeting.15. All documents referred to in the accompanying notice are open for inspection at the registered office of the Companyon all working days (barring Saturday and Sunday) between 11.00 a.m. to 1.00 p.m. prior to the Annual GeneralMeeting.BRIEF RESUME OF THE DIRECTORS SEEKING RE-ELECTION AND ALSO OF DIRECTORS APPOINTED SINCE LAST ANNUAL GENERAL MEETINGDirectors seeking re-election at the 30 th AGMName Shri R.S. Sharma Shri R.K. Jain Shri A.K. SinghalDate of Birth & Age 10.08.1950/ 56 yrs 15.12.1949/ 57 yrs 10.01.1954/ 52 yrs.Date of Appointment 08.10.2004 05.05.2005 01.08.2005Qualifications Graduate in Mechanical Engineering Graduate in Mechanical Engineering Chartered AccountantExpertise in specificfunctional areaShri R.S. Sharma has vast and richexperience of around 35 years inThermal Power Stations. Prior to joiningNTPC, he has worked in MadhyaPradesh State Electricity Board. He alsoserved as Executive Director(Commercial) looking after theCommercial Functions of the company.He has been author to a number ofTechnical papers on various subjects ofPower Plant Operation & Maintenance.Shri R.K. Jain has vast experience ofover 34 years in thermal and gas powerprojects in the area of ProjectPlanning, Conceptualisation, Design/Engineering, Contract & Materials etc.He has also served as General Manager(Consultancy & Joint Ventures),Executive Director (Corporate Contract& Materials) and Executive Director(National Capital Region).Shri A.K. Singhal has with himvast and rich professionalexperience of over 29 years ofhandling all the facets inCorporate Finance and Accounts.Prior to joining NTPC in 2001, hewas the Executive Director(Finance) in National FertilizersLimited (NFL) as head of Finance& Accounts department. He heldvarious managerial positions inKrishak Bharati CooperativeLimited (KRIBHCO) andEngineering Projects of IndiaLimited (EPIL).Directorship heldin other companiesPart-time Chairman1 NTPC SAIL Power Co. Pvt. Ltd.2 Bhilai Electric Supply CompanyPrivate LimitedPart-time Director1. NTPC Electric Supply Co. Ltd.2. NTPC Vidyut Vyapar Nigam Ltd.3. PTC India Ltd.Part-time Director1 NTPC Tamil Nadu Energy Co. Ltd.2 NTPC Electric Supply CompanyLtd.Part-time Chairman1. Utility Powertech LimitedPart-time Director1. NTPC-Electric SupplyCompany Ltd.2. NTPC Vidyut Vyapar Nigam Ltd.3. NTPC Tamil Nadu Energy Co.Ltd.4. NTPC Hydro Ltd.5. NTPC-SAIL Power CompanyPvt. Ltd.6. Bhilai Electric Supply CompanyPvt. Ltd.7. NTPC Alstom Power ServicesPvt. Ltd.8. Ratnagiri Gas and Power Pvt.Ltd.830th Annual Report

Memberships/Chairmanship ofCommittees across allPublic CompaniesNTPC Vidyut Vyapar Nigam Ltd.Member – Audit CommitteeNTPC LimitedMember – Shareholders/ InvestorsGrievance CommitteeNTPC Vidyut Vyapar Nigam Ltd.Member – Audit CommitteeNTPC Hydro LimitedMember – Audit CommitteeDirectors appointed since last Annual General Meeting held on September 23, 2005Name Prof. Ashok Misra Dr. R.K. Pachauri Shri G.P. Gupta Shri M. I. Beg Shri R.C. ShrivastavDate of Birth & Age 30.07.1947/59 yrs 20.08.1940/66 yrs 11.01.1941/65 yrs 30.06.1939/67 yrs 08.06.1950/56 yrsDate of Appointment 30.01.2006 30.01.2006 30.01.2006 30.01.2006 24.05.2006QualificationsChemical Engineeringfrom IIT, M. Sc. andPh.D. in PolymerScience & EngineeringPh.D in IndustrialEngineering and Ph.Din Economics,Master of Science inIndustrialEngineeringPost Graduate inCommerceMaster in Economicsand Bachelor ofScience in ElectricalEngineeringGraduate in ElectricalEngineeringExpertise in specificfunctional areaProf. Ashok Misra is aBachelor ofTechnology inChemicalEngineering fromIndian Institute ofTechnology and aMaster of Science inChemicalEngineering fromTufts University, USA.He also did hisMaster of Scienceand Ph.D. in PolymerScience &Engineering fromUniversity ofMassachusetts, USA.Prof. Ashok Misraalso successfullycompleted his EDPfrom Kellogs Schoolof Management,NorthwesternUniversity, USA.Currently he is aDirector, IndianInstitute ofTechnology,Mumbai.Dr. R.K. Pachauri, aPadma Bhushanawardee, obtained aMaster of Science inIndustrialEngineering,Ph.D in IndustrialEngineering andPh.D in Economicsfrom North CarolinaState University,Raleigh, NorthCarolina, USA. Heassumed his currentresponsibilities asthe head of TataEnergy ResearchInstitute, New Delhi(now known as TheEnergy andResources Institute)in 1981, first asDirector and sinceApril 2001, asDirector-General.Shri G.P. Gupta hasbeen the Chairmanand ManagingDirector of IDBI &Chairman of UTI. Hehas 40 years ofexperience invarious financialinstitutions and heldDirectorships invarious organizationslike LIC, GIC, EXIMBank, IFCI and BHELin the past.–Shri Mirza IshtiaqBeg is formerChairman of CentralElectricity Authority& Ex-officioSecretary to theGovernment of India.He obtained Masterdegree in Economicsand Bachelor ofScience in ElectricalEngineering. Shri M.I.Beg was with CentralElectricity Authorityfor 34 years and hasbeen earlier on theBoard of PowerFinance CorporationLimited and NuclearPower Corporationof India Limited.Shri R.C. Shrivastavhas a rich anddiverse experienceof more than 30years in the powersector. He startedhis carrier in powerplant operation incaptive powerplant of SteelAuthority of IndiaLimited. He joinedNTPC in 1981 andworked in variouscapacities in theareas ofconstruction,commissioning andoperation &maintenance ofpower stations aswell as corporateoperation services.Directorship held inother companiesPart-time Director1. RelianceIndustriesLimitedPart-time Director1. Oil and NaturalGas CorporationLimitedPart-time Chairman1. EMKAY Share &Stock BrokersLimitedPart-time Director1. PTC India Limited2. Jammu andKashmir BankLimited3. Swaraj EnginesLimited– –30th Annual Report 9

4. Aditya Birla NuvoLimited5. Su-Raj Diamonds& JewelleryLimited6. Birla Sun LifeInsuranceCompany Limited7. M.P. PowerGeneratingCompany Limited8. SIDBI VentureCapital Limited9. Power FinanceCorporationLimited10. Shree DigvijayCementCompany Limited11. HindustanAeronautics Ltd.Memberships/Chairmanship ofCommittees acrossall Public Companies–NTPC LimitedMember – AuditCommitteeNTPC LimitedChairman – AuditCommitteePower FinanceCorporationLimitedNTPC LimitedMember – AuditCommitteeNTPC LimitedMember –Shareholders/Investors GrievanceCommitteeChairman – AuditCommitteeJammu and KashmirBank LimitedMember – AuditCommitteeMember –InvestorsGrievanceCommitteeSwaraj EnginesLimitedMember – AuditCommitteeBirla Sun LifeInsurance CompanyLimitedMember – AuditCommitteeAditya Birla NuvoLimitedMember – AuditCommitteePTC India LimitedMember – AuditCommitteeHindustanAeronautics Ltd.Member – AuditCommitteeShree DigvijayCement CompanyLimitedMember – AuditCommittee1030th Annual Report

AWARDS & ACCOLADESNTPC has received the International Project ManagementAward 2005 for its Simhadri project at the International ProjectManagement Association World Congress. NTPC is the only AsianCompany to receive this award.Shri C.P. Jain, ex CMD, NTPC has been adjudged Ernst and YoungManager Entrepreneur of the Year for the year 2005NTPC was recipient of Golden Peacock EnvironmentManagement Award instituted by the “World EnvironmentFoundation” for the year 2006Amity Excellence in Corporate Social Responsibility Awardfor Social Welfare was awarded to NTPC during the InternationalBusiness Summit in February, 2006NTPC was ranked as Third Great Place to Work for in India for the second time in succession by a survey conducted byGrow Talent and Business World 2005NTPC was awarded MOU Award for Excellence in Performance for 2003-04 and ranked first among the top ten PublicSector Enterprises.NTPC has received the award for Innovative HR Practices at world HR Congress in February, 2006.NTPC has bagged the Platts Global Energy Award 2005 for the “Community Development Programme of the Year”.NTPC has bagged the BML Munjal Award for encouraging Learning and Development and using it as a strategic HR tool.30th Annual Report 11

1230th Annual Report

STATION-WISE GENERATION 2005-06STATIONS Capacity(MW) Gen. (MU)GrossNorthern Region 5280 36465Singrauli 2000 15503Rihand 2000 10591Unchahar 840 7041Tanda 440 3330National Capital Region 3152 22206Dadri ( Coal ) 840 6768Anta ( Gas ) 413 2809Auraiya ( Gas ) 652 4282Dadri ( Gas ) 817 5394Faridabad ( Gas ) 430 2953Western Region 5653 41668Korba 2100 16001Vindhyachal 2260 18305Kawas ( Gas ) 645 2884Jhanor Gandhar ( Gas ) 648 4478Eastern Region 5900 42751Farakka 1600 11464Kahalgaon 840 6572Talcher - Kaniha 3000 21185Talcher -Thermal 460 3530Southern Region 3950 27791Ramagundam 2600 19691Simhadri 1000 7742Rajiv Gandhi CCP ( Liquid Fuel ) 350 358Total 23935 170880Badarpur (Owned by NTPC w.e.f. 1 st June, 2006) 705 538030th Annual Report 13

1430th Annual Report

SELECTED FINANCIAL INFORMATIONRs. in Million2005-06 2004-05 2003-04 2002-03 2001-02A) Operating IncomeEarned fromSale of Energy 260701 225069 188178 190019 177697Consultancy & Other Income 26806 24110 61816 4492 7076Total 287507 249179 249994 194511 184773Paid & Provided forFuel 163947 137235 122150 110312 103991Employees Remuneration & Benefits 9684 8823 8835 8268 8036Generation, Administration & other expenses 12721 12062 9813 10814 11531Provision (Net) 334 (6160) (3813) 1567 1730Prior Period/Extra Ordinary Items 2488 (102) 183 803 (500)Profit before depreciation, Interest & Finance Charges and Tax 98333 97321 112826 62747 59985Depreciation 20477 19584 20232 15291 13784Profit before Interest & Finance Charges and Tax 77856 77737 92594 47456 46201Interest & Finance Cost 17632 16955 33697 9916 8680Profit before tax 60224 60782 58897 37540 37521Tax (Net) 2022 2712 6289 1465 2125Profit after tax 58202 58070 52608 36075 35396Dividend 23087 19790 10823 7080 7079Dividend tax 3238 2680 1387 395 -Retained Profit 31877 35600 40398 28600 28317B) What is OwnedGross Fixed Assets 460396 431062 400281 366106 328912Less : Depreciation 229501 207914 187736 167456 152131Net block 230895 223148 212545 198650 176781Capital Work-in-progress, Construction Stores & Advances 136340 99285 74953 63863 65550Investments 192891 207977 173380 36674 40281Current Assets, Loans & Advances 157245 129073 135468 194132 167799Total Net Assets 717371 659483 596346 493319 450411C) What is OwedLong Term Loans 201195 166719 149415 127090 113161Working Capital Loans 778 4159 5113 5067 2651Current Liabilities & Provisions 61402 67467 80941 45850 48146Total Liabilities 263375 238345 235469 178007 163958D) OthersDeferred Revenue - Advance against deprectiaion 4408 3374 1591 271 -Development surcharge fund - - 3784 - -Total 4408 3374 5375 271 -E) Net WorthShare Capital 82455 82455 78125 78125 78125Reserves & Surplus 367132 335308 277376 237002 208400Miscellaneous Expenditure (To the extent not written off or adjusted) - - - (87) (72)Net Worth 449587 417763 355501 315040 286453F) Capital Employed 523572 500540 458267 386343 356526G) Value Added 97482 88415 66749 88084 80889H) No. of Shares 8245464400 8245464400 7812549400 7812549400 78125494I) No. of Employees* 21870 21420 20971 21408 21383J) RatiosReturn on Capital Employed (%) 12.46 12.77 12.93 10.88 11.93Return on Net Worth (%) 14.16 14.33 14.94 12.13 12.98Book Value per Share (Rs.) 54.53 50.67 45.50 40.32 3666.58Current Ratio 2.56 1.91 1.67 4.23 3.49Debt to Equity 0.45 0.41 0.43 0.42 0.40Value Added/Employee (Rs. Million) 4.46 4.13 3.18 4.11 3.78* Excluding JVs, Subsidiaries, BTPS (owned by NTPC w.e.f. 1 st June, 2006) & BALCO30th Annual Report 15

DIRECTORS’ PROFILEShri T.Sankaralingam (58 yrs) has been serving the power sector for the past 37 years. Before joiningNTPC in 1977, he was associated with TNEB and BHEL. Prior to taking over as Chairman and ManagingDirector, NTPC Limited, on April 01, 2006, he has been Director (Projects) since August 2001.Shri Sankaralingam has rich hands-on experience in all facets of electricity generation andtransmission. In recognition of his expertise, he has been elected as Vice-Chairman of CIGRE,India and awarded ‘Eminent Engineer Award’ by Institution of Engineers. He is a Member ofIEEE, USA; Honorary Fellow of Project Management Association; Member of the Committeeappointed by Government of India to evaluate adoption of 800 MW Super Critical Units; Memberof Expert Committee of CERC to formulate the Operational Norms for Tariff under ABT Regime;Member of the Board of University of Petroleum and Energy Studies; Member of SteeringCommittee of Centre for Research on Energy Security, TERI.Shri T. Sankaralingam was holding 8894 equity shares in the company as on March 31, 2006.Shri Chandan Roy (56 yrs), Director (Operations) is a graduate in Mechanical Engineering. Apower engineer of repute with rich and varied experience of about 34 years in different areas ofpower station design, engineering and O&M. He has held various responsible positions in Indiaand abroad. In NTPC, he has served various divisions like Engineering, Operation Services andRegional Head Quarter. Prior to joining us, he worked for ACC Vickers Babcock Ltd. and Babcock& Wilcox, London. He joined the Board in January 2004. He is also Chairman of Ratnagiri Gas andPower Private Limited, a Joint Venture of NTPC and GAIL (India) Limited.Shri Chandan Roy was holding 14516 equity shares in the company as on March 31, 2006.Shri R.S. Sharma (56 Yrs.), started his career in Madhya Pradesh State Electricity Board in PowerGeneration in the year 1971 and worked in unit operation and various areas of plant maintenance.He joined NTPC in early February, 1980 and headed various projects of NTPC, prior to joining asExecutive Director (Corporate Planning). He also served as Executive Director (Commercial) lookingafter the Commercial Functions of the company. He has taken over as Director (Commercial) sinceOctober, 2004. He has very vast and varied experience of around 35 years in various functions oflarge thermal power stations in the country. He has been the author of number of Technical Paperson various subjects of Power Plant Operation & Maintenance.Shri R.S. Sharma was holding 2304 equity shares in the company as on March 31, 2006.Shri R.K. Jain (57 Yrs), Director (Technical) since May 5, 2005, has vast experience of over 34 yearsin thermal and gas power projects in the area of Project Planning, Conceptualisation, Design/Engineering, Contract & Materials etc. He has also served as General Manager (Consultancy & JointVentures), Executive Director (Corporate Contract & Materials) and Executive Director (NationalCapital Region). Prior to joining NTPC in 1977, he worked with Central Electricity Authority. As Director(Technical), he is responsible for Engineering/Design of Thermal and Hydro Power Plants, ConsultancyServices and Information Technology, induction of new technologies like Supercritical Units, nonconventionalenergy resources. He has also been responsible for NTPC’s globalisation initiatives inthe areas of Operation & Maintenance and Engineering Services for Power Plants in other countries.Shri R.K. Jain was holding 369 equity shares in the company as on March 31, 2006.1630th Annual Report

Shri A.K. Singhal (52 yrs), Director (Finance) since August 2005, comes with rich experience of 29years of Corporate Finance Management. He is also a member of All India Management Association(AIMA) and Institute of Internal Auditors (IIA). Prior to joining NTPC in 2001, he was the ExecutiveDirector (Finance) in National Fertilizers Limited (NFL) as head of Finance & Accounts department.He held various managerial positions in Krishak Bharati Cooperative Limited (KRIBHCO) and EngineeringProjects of India Limited (EPIL). As Finance Director on the Board of NTPC, he is responsible forformulating financial strategies and plans to enable the company in achieving its Vision. He givesdirections with respect to the entire gamut of Financial Management of the organization includingtimely financial resource mobilization at minimum possible cost from Domestic & Global sources including equity issues,optimum utilization of funds, formulation of company’s annual financial budget and undertaking budgetary controls. Heis also responsible for designing internal control systems commensurate with the size of the organization and for ensuringcompliance of such systems. Being responsible for compliances of Company Law and other statutory requirements, healso gives direction to the Corporate Governance framework of the company. After company became listed, he has beenacting as one of the vital links between the shareholders of the company and the rest of the Board.Shri A.K. Singhal was holding 10829 equity shares in the company as on March 31, 2006.Shri R.C. Shrivastav (56 yrs.), Director (Human Resources) is a Graduate in Electrical Engineering. Hehas a rich and diverse experience of more than 30 years in the power sector. He started his carrier inpower plant operation in captive power plant of Steel Authority of India Limited. He joined NTPC in1981 and worked in various capacities in the areas of construction, commissioning and operation &maintenance of power stations as well as corporate operation services. He headed a number ofpower stations of NTPC and was elevated to the post of Executive Director (Southern Region) in2002. He later handled the responsibility as Chief Executive Officer of NTPC Electric Supply CompanyLimited, a wholly owned subsidiary Company of NTPC engaged in electricity distribution beforeappointment as Director (HR) of NTPC in May 2006. As Director (HR) Shri Shrivastav is overall in-charge of Human Resourcefunction for the entire organization. He is also responsible for Power Management Institute of NTPC and other corporatefunctions such as Industrial Safety, Resettlement & Rehabilitation, Corporate Communication and Corporate SocialResponsibility.Shri R.C. Shrivastav was holding 2304 equity shares in the company as on March 31, 2006.Shri M. Sahoo (52 yrs), is an Indian Administrative Services Officer from Andhra Pradesh Statecadre. Prior to joining Ministry of Power, Government of India, with effect from July 1, 2002, Shri M.Sahoo has held the positions of Secretary, Finance and Secretary, Urban Development, Governmentof Andhra Pradesh. He is on the Board of the Company as a part-time Director nominated by theGovernment of India with effect from July 2002.Shri M. Sahoo was holding 18440 equity shares in the company as on March 31, 2006.Shri Harish Chandra (59 yrs.), an Indian Administrative Services officer of Uttar Pradesh Cadre, hasover 30 yrs. of experience in various Deptts. of Government of Uttar Pradesh. Prior to joining as JointSecretary, Ministry of Power, Government of India, he has held the positions of Commissioner, Deptt.of Revenue, Secretary, Deptt. of Public Enterprises, Secretary, Deptt. of Finance and Principal Secretary,Deptt. of Revenue in Government of Uttar Pradesh. As Joint Secretary of the Union Ministry of Power,he is on the Board of the Company as Government of India nominee with effect from July 11, 2005.Shri Harish Chandra was holding NIL equity shares in the company as on March 31, 2006.30th Annual Report 17

Dr. R.K. Pachauri (66 yrs), a Padma Bhushan awardee, obtained a Master of Science in IndustrialEngineering in 1972, Ph.D in Industrial Engineering and a Ph.D in Economics from North CarolinaState University, Raleigh, North Carolina, USA. He assumed his current responsibilities as the head ofTata Energy Research Institute, New Delhi (now known as The Energy and Resources Institute) in1981, first as Director and since April 2001, as Director-General. He has been on the Board of theCompany with effect from January 30, 2006 as a non-official part-time director.Dr. R.K. Pachauri was holding 1850 equity shares in the company as on March 31, 2006.Prof. Ashok Misra (59 yrs) is a Bachelor of Technology in Chemical Engineering from Indian Instituteof Technology and a Master of Science in Chemical Engineering from Tufts University, USA. He alsodid his Master of Science and Ph.D. in Polymer Science & Engineering from University of Massachusetts,USA. Prof. Ashok Misra also successfully completed his EDP from Kellogs School of Management,Northwestern University, USA. Currently he is a Director at Indian Institute of Technology, Mumbai.He authored one book on Polymers, published several articles in international journals and has beenawarded six patents. He is a member of several scientific associations and societies. He is also onthe Board of Reliance Industries Limited. He has been on the Board of the Company with effectfrom January 30, 2006 as a non-official part-time director.Prof. Ashok Misra was holding 369 equity shares in the company as on March 31, 2006.Shri Gian Prakash Gupta (65 yrs), Post Graduate in Commerce, was the Chairman and ManagingDirector of IDBI & Chairman of UTI. He has 40 years of experience in various financial institutions andheld Directorships in various organizations like LIC, GIC, EXIM Bank, IFCI and BHEL in the past. He ispresently on the Board of various companies namely NALCO, Hindustan Aeronautics Ltd., PTC andIndo Gulf Fertilizers Limited. He has been on the Board of the Company with effect from January30, 2006 as a non-official part-time director.Shri Gian Prakash Gupta was holding 3714 equity shares in the company as on March 31, 2006.Shri Mirza Ishtiaq Beg (67 yrs) is former Chairman of Central Electricity Authority & Ex-officio Secretaryto the Government of India. He obtained Master degree in Economics and Bachelor of Science inElectrical Engineering. Shri M.I. Beg was with Central Electricity Authority for 34 years and has beenon the Board of Power Finance Corporation Limited and Nuclear Power Corporation of India Limited.He has undergone 6 months training in Design and Construction of Power Project at New Brunswiek,Canada. He has been on the Board of the Company with effect from January 30, 2006 as a nonofficialpart-time director.Shri Mirza Ishtiaq Beg was holding 214 equity shares in the company as on March 31, 2006.Shri G.S. Sarna (51 yrs), is an Indian Revenue Service Officer. Prior to the present deputation as theChief Vigilance Officer, NTPC Ltd., he was Commissioner of Central Excise. In the Customs he hasheld similar senior appointments at the International Airport and the Air Cargo at Delhi besideshaving been also on deputation in the Commerce Ministry.1830th Annual Report

SENIOR MANAGEMENT TEAMS. No. Executive Directors1 Dubey,Kailash Bihari2 Jha,M.3 Trivedi,S.4 Agarwal,G.K.5 Sonde,R.R.6 Rao,Karanam Prakasa7 Singh,B.P.8 Jha,J.9 Yadav,S.R.10 Sharma,R.S.11 Kapoor,L.M.12 Parswal,I.S.13 Misra,Narendra Nath14 Dave,Ambarish Nath15 Kundu,A.K.16 Perwaiz,M.A.A.17 Kumar,Swatantra18 Sharma,S.C.D.19 Kumar,Dinesh20 Pandey, I. B.General Managers1 Pandey,S.N.2 Chakrabarti,A.K.3 Nebhnani,M.C.4 Ray,Manoj Kumar5 Maitra,A.K.6 Mohapatra,J.7 Vishwa Roop8 Banerjee,Some Nath9 Gupta,Vijay10 Choudhary,V.N.11 Chakraborty,Pradip Kumar12 Prasad,L.13 Chatterjee,T.K.14 Chowdhury,B.15 Jiban Krishna, S.16 Jain,V.B.K.17 Dr Chandra,S.18 Sen,R.N.19 Mattoo,R.L.20 Krishnamurthy,R.21 Jawada,Vinod Kumar22 Bose,Sankar LalS. No. S. No.23 Chatterjee,Subir24 Chaturvedi,A.25 Gupta,L.D.26 Datt,R.27 Modi,P.K.28 Binepal,H.S.29 Sharma,N.K.30 Soin,Malvinder Singh31 Agrawal,G.D.32 Kapoor,I.J.33 Chawla,M.S.34 Banerji,Ashok Kumar35 Gopal,Ram36 De,S.B.37 Kurien,Ashoka38 Roy,P.K.39 Pradhan,Bisikeshan40 Agrawal,P.K.41 Maken,O.P.42 Kristam,Siva Kumar43 Sohal,T.R.44 R Ramesh45 Dutta,S.K.46 Krishna,Gopal47 Kumar,A.48 Gupta,R.P.49 Joshi,D.P.50 Sharma,Vinod51 Jha,A.K.52 Agrawal,D.K.53 Kishore Sharma,K.54 Ganeshan,Amudhan55 Anand,Sharad56 Pandey,S.C.57 Deshpande,G.J.58 Reddy,V.K.59 Ahuja,Anil Kumar60 Seth,K.K.61 Kumbhaj,P.C.62 Sikri,R.K.63 Mehrotra,R.N.64 Alapati,Radhakrishna65 Paranjothi,Muthu Kumar66 Gupta,Vinay Kumar67 Saha,N.K.68 Bose,Suprakash Kumar69 Pathak,Ram Bachan70 Chatterjee,A.71 Gahlowt,Rajendra Kumar Singh72 Singh,M.P.73 Kumar,A.74 Dhar,S.K.75 Singh,Radhey Shyam76 Yadav,B.N.77 Agrawal,D.78 Khetarpal,Rakesh79 Goel,S.N.80 Ganguly,Satyendranath81 Chudhari,A.82 Sharma,A.K.83 Gupta,V.K.84 Bisht,B.S.85 Rao,M.K.V.R.86 Gaur,R.K.87 Panda,K.K.Posted in Subsidiary/Joint VentureCompanies and othersS. No. Executive Directors1. Agrawal, S.B.2. Ghosh, B.C.3. Singh, Shailendra Pal4. Sivaramakrishnan, KrishnamurthyGeneral Managers1. Banerjee, Mukul2. Sinha, Shiva Kumar3. Agarwal, Kamal Kumar4. Jain, D.K.5. Saxena, A.K.6. Choudhary, Dilip Kumar7. Dhup, Rakesh Chander8. Mehta, J.K.9. Mukherjee, Biswanath10. Narayanan, Kannan11. Pani, U.P.12. Roy, Saptarshi13. R, Venkateswaran30th Annual Report 19

DIRECTORS’ REPORTDear Members,Your Directors are pleased to present the 30th Annual Reportand the audited accounts for the year ended March 31,2006.FINANCIAL RESULTSRs. MillionIncome 2005-06 2004-05Sale of Energy 260701 225069Consultancy 452 333Other income (Including 26354 23777energy internally consumed)Gross Revenue 287507 249179ExpenditureFuel 163947 137235Employees Remuneration 9684 8823& BenefitsGeneration, Administration &other expenses 12721 12062Interest 4845 5830Finance charge 12787 11125Depreciation 20477 19584Total Expenditure 224461 194659Profit before tax, provisions 63046 54520and prior period adjustmentsTax 2022 2712Profit after tax but before 61024 51808provisions and prior periodadjustmentsLess :Prior Period Adjustments (Net) 2488 (102)Provisions (Net) 334 (6160)Net Profit after tax 58202 58070Appropriations:Transfer to Bonds RedemptionReserve 2926 2351Interim Dividend 16491 9895Proposed Dividend 6596 9895Tax on Dividend 3238 2680Transfer to General Reserve 29000 33000Transfer to Capital Reserve 29 22CHANGE OF NAMEAs approved by you in last Annual General Meeting, yourcompany had changed its name from “National ThermalPower Corporation Limited” to “NTPC Limited”.FINANCIAL PERFORMANCETotal revenues of the company for the year increased by15.38% to Rs. 287,507 million from Rs. 249,179 millionduring the previous year. Profit after tax but beforeprovisions and prior period adjustments increased by17.79% to Rs. 61,024 million from Rs. 51,808 million. Netprofit after tax increased marginally to Rs. 58,202 millionfrom Rs. 58,070 million.DIVIDENDYour Directors have recommended a final dividend of Rs.0.80 per share in addition to Rs. 2 per share of interimdividend paid in February 2006. The dividend for the yearthus aggregates to Rs.2.80 per share as against Rs. 2.40 pershare paid last year. The final dividend shall be paid afteryour approval at the Annual General Meeting. The totaldividend pay-out for the year amounting to Rs. 23,087million represents 40% of the profits after tax as against adividend pay-out of 34% in the previous year. The dividendhas been recommended in accordance with the Company’spolicy of balancing dividend pay-out with the need ofinternal accruals for its growth plans. Your Directors believethat growth of the company through capacity additionwould lead to increase in shareholder value.OPERATIONAL PERFORMANCEDuring the year the power stations of the companygenerated 170.88 billion units of electricity which was27.68% of the total power generated in India. The powergenerated by the company has registered an increase of2030th Annual Report

7.40% over the previous year’s generation of 159.11 billionunits. During the year the coal stations of the companyoperated at a plant load factor of 87.54% as compared to87.51% during the previous year. Gas stations of thecompany operated at a plant load factor of 65.81% ascompared to 65.35% in the previous year. The averageavailability for coal and gas stations for the year was 89.91%and 82.15% respectively.COMMERCIAL PERFORMANCEDuring the year, your company realized in full, the amountsdue from customers against bills raised for sale of power.The Company would also make all efforts to ensure that therealizations are maintained at these levels in the future.A detailed discussion on the operations and performancefor the year is given in the “Management Discussion andAnalysis” included as a separate section in the annual report.INSTALLED CAPACITYPresently your company owns 25,140 MW and partly owns1,054 MW through joint venture companies. Details of thecapacities are given below:MWOwned by NTPCCoal 21,185Gas 3,955Sub-total 25,140Joint venturesSAIL (Coal) 314Ratnagiri (Gas) 740Sub-total 1,054Total 26,194CAPACITY ADDITION PROGRAMYour company had announced a capacity addition programof about 26000 MW for the period 2002-2012. During theyear the company commissioned the second unit at itsRihand project ahead of schedule. A 500 MW unit ofVindhyachal project has also been commissioned in July 2006.Thus the capacities aggregating to 4500 MW out of theannounced program have already been commissioned.During the year, your directors have given investmentapproval for putting up a 500 MW unit at the existing powerplant located at Korba. In June 2006, your directors haveapproved investment proposal for setting up of a 600 MWhydro-electric power plant located at Loharinag Pala in thestate of Uttaranchal. The project would comprise four unitsof 150 MW each. In July 2006, investment approvals havebeen given for a 500 MW unit at Farakka power plant andsetting up two units of 490 MW each at the National CapitalPower Station at Dadri. All these power projects exceptDadri are envisaged to be set up as merchant power plants.Thus, capacities cumulating to 11,050 MW are underconstruction. Out of these efforts are being made tocommission 3210 MW in the year 2006-07.The company has also prepared feasibility / detailed projectreports in respect of certain projects and these are undervarious stages of clearances.The company is also identifying new sites for setting up ofpower projects and based on availability of infrastructure,fuel availability, etc. these locations would be added tothe plans at a future date.The company has also submitted a Request for Qualificationfor the ultra mega project having a capacity of 4000 MWlocated at Sasan in the state of Madhya Pradesh.CAPACITY ADDITION THROUGH SUBSIDIARIES ANDJOINT VENTURESBesides adding capacities on its own, your company hasalso plans to add capacities through some of its subsidiariesand joint ventures. Hydro projects planned forimplementation by NTPC Hydro Limited, a wholly ownedsubsidiary of the company are as follows:Project Location CapacityLata Tapovan Uttaranchal 171 MWRammam-III West Bengal 120 MWDetails of the projects being implemented and planed forimplementation through joint ventures are given below:JV Partner Company Project locationand capacitySteel Authority NTPC-BHILAI Expansion of existingof India Limited Electric Supply capacity by adding(SAIL) Company 2x 250 MW of coalPrivate based units. TheLimited expansion is underexecution and isscheduled forcommissioning by theyear 2008.Tamil Nadu NTPC Tamil A coal based projectElectricity Nadu Energy having a capacity ofBoard Company Ltd 1000 MW located atEnnore in the State ofTamil Nadu.30th Annual Report 21

Indian Railways. Company under A coal based projectNTPC will have formation having a capacity of49% equity 1000 MW located atparticipationNabinagar in theand 51% willState of Bihar.be contributedby RailwaysGujarat Power Presently A coal based powerCorporation Pipavav Power plant having aLimited and Development capacity of 1000 MWGujarat Corporation located at Pipavav inElectricity Limited, the State of Gujarat.Board. An MOU is a whollywas signed for ownedforming a Joint subsidiaryVenture of NTPCCompanyCAPACITY ADDITION THROUGH ACQUISITIONSDuring the year your company made an investment ofRs. 5000 million for a 28.33% stake in Ratnagiri Gas and PowerPrivate Limited, a company formed as a joint venturebetween your company, GAIL, Indian Financial Institutionsand Maharashtra SEB Holding Co. Ltd. to take over the 2150MW(net) gas based Dabhol Power Project. The joint venturecompany has already restarted the existing capacity of 740MW.Your company entered into an understanding with theGovernment of Bihar and the Bihar State Electricity Boardfor takeover of 220 MW Muzzafarpur Thermal Power Stationby setting up of a joint venture company of NTPC and BiharState Electricity Board. Your company will have a minimumof 51% and upto 74% stake in this joint venture company.Your company is also contemplating to take over an existingpower plant located at Bongaigaon in the state of Assam.The existing assets would be dismantled and a new plantwith 500/750 MW capacity comprising two or three unitsof 250 MW each would be constructed at the same location.The Government of India has transferred the generationassets of the 705 MW Badarpur Thermal Power Stationlocated at New Delhi to your company w.e.f. 1st June 2006.Until now, your company was managing this power stationon behalf of the government. The power station is beingtaken over at net book value, excluding land; land is beinggiven on a 50 years lease. The consideration to be paid bythe company is to be communicated by government. Thepower station has been performing well with the Plant LoadFactor of the station for the year being 87%. The tariff forthe station would be determined by the regulator as perthe existing regulations. Your company would be drawingup plans for renovation and modernization of the stationand would also consider expansion of the power station.GLOBALISATION INITIATIVESYour company is keenly pursuing proposals to increase itsfootprint in different parts of the world. The companyprovides consultancy services in engineering, projectmanagement, construction management, operation andmaintenance of power plants to clients within as well asoutside India. In order to scout for more businessopportunities in the Middle East countries, your companyis in the process of setting up a representative office inDubai.PROJECTS PLANNEDInitially the Company had a capacity addition programmeof 17,333 MW in XI Plan, which has now been enhanced to21,941 MW. Taking into account all the plans andagreements, the list of the projects which the company isworking on for commissioning upto the year 2012 andbeyond are presently as follows:MWSr. Name of the Capacity By 2007-12no. ProjectMarch2007Ongoing Projects1. Vindhyachal-III 500 5002. Kahalgaon-II, Phase I 1000 10003. Kahalgaon-II, Phase II 500 5004. Unchahar-III 210 2105. Sipat –II 1000 10006. Sipat-I 1980 19807. Barh 1980 19808. Korba-III 500 5009. Bhilai Power expansion 500 50010. Koldam HEPP 800 80011. Loharinag Pala HEPP 600 60012. Farakka-III 500 50013. NCTPP-II, Dadri 980 980Sub-total of ongoing 11050 3210 7840projectsNew Projects14. Tapovan Vishnugad HEPP 520 52015. North Karanpura 1980 198016. Nabinagar-JV with 1000 1000Railways2230th Annual Report

17. Lata Tapovan HEPP 171 171through NTPC Hydro Ltd.18. Rammam III HEPP throughNTPC Hydro Ltd 120 12019. Rajiv Gandhi-II CCPP 1950 195020. Ennore -JV with TNEB 1000 100021. Simhadri-II 1000 100022. Barh-II 1320 66023. Darlipali - IntegratedPower Project 3200 80024. Bongaigaon, Assam 500 50025. Mauda, Maharashtra 1000 100026. Ultra Mega Power Project 4000 80027. Kawas-II, Gujarat 1300 130028. Gandhar-II, Gujarat 1300 1300Sub-total of newprojects 20361 - 14101TOTAL 31411 3210 21941FINANCING OF NEW PROJECTSYour company is undertaking an aggressive capacityaddition program after having assessed the requirement offinances for putting up these capacities. All the plannedcapacity addition programs are to be financed with a debtto equity ratio of 70:30. Your directors believe that internalaccruals of the company would be sufficient to financethe equity portion of the investments. As far as the debtcomponent is concerned, your directors believe that yourcompany is well positioned to raise the required borrowing,as your company is presently geared with a debt to equity(MTN) programme for USD 1 billion to finance its capitalexpenditure requirement. The first offering off the MTN shelfwas made by issuing 10-year Fixed Rate Notes amountingto USD 300 million. The issue was the first corporate dealout of India for a 10-year bond deal since 1997. The issuewas over-subscribed by more than five times. The Notes,maturing in March 2016, were priced at 140 bps over thebenchmark ten-years US Treasury with a coupon of 5.875%.FUEL SECURITYFuel is one of the vital inputs for maintaining continuedoperation of a power plant and it is the responsibility ofthe generator to ensure availability of fuel for its powerstations. Your company has a policy of securing long termtie-up for fuel before investment decisions are made for aproject. Even though the cost of fuel is a pass- through tothe customers, your company always attempts to procurefuel for its stations at the most competitive rates to ensurethat the tariff of its stations is competitive. With a view toensure fuel supply for its power plants and competitiveprice of fuel, the company had evolved a strategy forbackward integration to enter into coal mining and oil &gas exploration activities.COAL MININGThe Government of India has allotted six coal mining blocksto the company for captive use. The government has alsoallotted two mining blocks to be developed through a jointventure between the company and Coal India Limited. Allthese mining blocks together have a production potentialof more than 50 million tonnes per annum. Your companyhas initiated activities for development of these mines andfirst of these mines is expected to start production of coalby the year 2008.EXPLORATION ACTIVITIESA consortium comprising NTPC Ltd, Canoro Resources Ltdand Geopetrol International has been allotted a petroleumblock in the state of Arunachal Pradesh under the fifth roundNew Exploration Licensing Policy (NELP-V) of theGovernment of India. The Production Sharing Contract hasbeen signed with the government and exploration activitiesat site have commenced. Your company is also planning tobid for more exploration blocks under the next round ofbidding.ratio of 0.45. Your company would tap domestic as well asoverseas markets for raising borrowings. During the year yourcompany had successfully established a Medium Term NoteThe company is also exploring the possibility of equityparticipation / investment in different elements of LiquifiedNatural Gas (LNG) Value Chain viz. Exploration & Production(E&P), Liquefaction, Re-gasification etc in various countries.30th Annual Report 23

The company is also exploring the possibility of sourcinggas from Nigeria.NEAR TERM STRATEGIESBesides the above long term strategies for securing fuel forits power plants, your company has also adopted measuresto secure coal and gas in the short term for its existingstations. The company would resort to import of coal toovercome any temporary shortages. Your directors have alsoapproved a proposal of the company to secure gas suppliesin the spot market subject to the customers of the companyagreeing to the prices at which such gas is procured. Thecompany has also entered into an understanding withPetronet LNG Limited for exploring supply of gas for itsexisting stations.LEVERAGING COMPANY’S CAPABILITIES FORGOVERNMENT INITIATIVESThe Government of India reposes a lot of confidence onyour company’s abilities in implementing plans andprojects. This confidence has led the Government of Indiato make your company a partner in a number of its initiatives.Some of the key initiatives in which your company ispartnering the government are:RAJIV GANDHI GRAMEEN VIDHYUTIKARAN YOJANA (RGGVY)Ministry of Power has introduced the scheme Rajiv GandhiGrameen Vidhyutikaran Yojana (RGGVY) which aims atproviding electricity in all villages and habitations in fouryears and provides access to electricity to all ruralhouseholds. Subsidy towards capital expenditure to thetune of 90% under the scheme will be provided, throughRural Electrification Corporation Limited (REC),a Governmentof India enterprise, which is the nodal agency forimplementation of the scheme. Your company has enteredinto an understanding with the REC for assisting them in theexecution of Rural Electrification projects in the States ofChattisgarh, Madhya Pradesh and Orissa.PARTNERSHIP IN EXCELLENCECentral electricity authority (CEA) has identified 26 powerstations which are operating at a PLF of less than 60%. UnderAccelerated Generation & Supply Programme (AG&SP) ofMinistry of Power, it has been decided that these stationswould enter into partnership with better performing utilities,so as to achieve an improvement in performance in shortestpossible time. Your Company has been made a partner in15 of these stations.JOINT VENTURES AND SUBSIDIARIESYour company has formed a number of joint venture andsubsidiary companies for undertaking specific businessactivities. The names of these companies and thepercentage of your company’s stake in them are as follows:NTPC VidyutVyapar NigamLimited100%NTPC-SAILPower CompanyPvt. Limited50%NTPC TamilnaduEnergy Co.Limited50%SubsidiariesNTPC ElectricSupply Co.Limited100%Bhilai ElectricSupply Co. Pvt.Limited50%NTPC LimitedJoint VenturesPTC IndiaLimited8%Pipavav PowerDevelopmentCo. Ltd100%NTPC AlstomPower ServicesPvt. Limited50%Ratnagiri Gasand PowerPrivate Ltd28.33%The performance of these companies as well as theConsolidated Financial Statements are briefly discussed inthe Management Discussion & Analysis section. The financialstatements of subsidiaries along with the respectiveDirectors’ report are placed elsewhere in this annual report.STATUTORY AND OTHER INFORMATIONInformation required to be furnished as per the CompaniesAct, 1956, Listing Agreement with Stock Exchanges,Government guidelines etc. is annexed to this report as below:ParticularsManagement Discussion & AnalysisReport on Corporate GovernanceInformation on conservation of energy,technology absorption and foreignexchange earnings and outgoInformation as per Companies (Particulars ofEmployees) Rules, 1975Statement pursuant to Section 212 ofthe Companies Act, 1956 relating tosubsidiary companiesNTPC HydroLimited100%UtilityPowertechLimited50%AnnexureIIIIIIIVV2430th Annual Report

Review of the Accounts for the yearended March 31, 2006 by C& AGStatistical data of the grievancesStatistical information on persons belongingto Scheduled Caste / Tribe categoriesInformation on Physically Challenged personsUNGC Communications on progress 2005-06VIVIIVIIIFIXED DEPOSITSThe cumulative deposits received by your company from1068 depositors as at March 31, 2006 stood at Rs 778million. Further an amount of Rs. 8 million has not beenclaimed on maturity by 148 depositors as on that date.STATUTORY AUDITORSThe Statutory Auditors of your Company are appointed bythe Comptroller & Auditor General of India. M/s. Kalani &Co., Amit Ray & Co., Umamaheswara Rao & Co., S.N. Nanda& Co.and T.R. Chadha & Co. were appointed as JointStatutory Auditors for the financial year 2005-06.MANAGEMENT COMMENTS ON STATUTORY AUDITORS’REPORTIn their report, the statutory auditors of the company havedrawn the attention of the members to Note no.3 and 5 ofSchedule 27 to the financial statements.The note 3 referred by the Auditors explains the basis forrecognition of sales revenue. The Central ElectricityRegulatory Commission (CERC) has directed by notificationthat pending determination of tariff effective from 1 st April2004, billing of sales shall continue to be done on the samebasis as on 31 st March 2004. The amount so billed shallhowever be subject to adjustment after final determinationof tariff. Sales as per CERC regulations are likely to be lowerthan the billed amount and accordingly, the same has beendealt with in the books of accounts by provisionallyrecognizing sales on the basis of tariff worked out as perCERC regulations pending final determination of tariff byCERC. This fact has been explained in note no. 3(a) of theAnnual Accounts.The note 5 pertains to non-recognition of company’s shareof net profits of Badarpur Thermal Power Station for theyears 1986-87 to 2004-05. Till May 31, 2006 the companyhas been managing this station on behalf of the Governmentof India. In terms of the management contract with theGovernment, the company was entitled for a certain fee aswell as a share in the profits of the station. However, theGovernment of India is yet to sanction in full the share ofIXXprofits, which are due to the company for the period 1986-87 to 2004-05. Due to uncertainty of realization in theabsence of sanction by the Government of India, thecompany has not given recognition to the income in itsaccounts.COST AUDITSubsequent to Department of Company Affairs notifyingCost Accounting Records (Electricity Industry) Rules, 2001in December 2001, Cost Audit Branch of the Ministry ofCompany Affairs issued orders dated 16th September 2005,directing audit of the cost accounts maintained at thecompany’s generating stations, from the financial year 2005-06 onwards. Cost Auditors for the year 2005-06 wereappointed with the approval of Central Government forconduct of cost audit and have submitted the Cost Auditreport in terms of the said orders and the Cost Audit (Report)Rules, 2001.BOARD OF DIRECTORSProf. Ashok Misra, Dr. R.K. Pachauri, Shri M.I. Beg, Shri G.P.Gupta took over as non-official part-time Directors w.e.fJanuary 30, 2006.Shri C.P. Jain ceased to be the Chairman & Managing Directorof the Company with effect from March 31, 2006 onsuperannuation. The Board wishes to place on record itsdeep appreciation for the valuable services rendered byShri C.P. Jain during his association with NTPC.Shri T. Sankaralingam took over as the Chairman & ManagingDirector with effect from April 1, 2006.Shri R.C. Shrivastav has taken over as Director (HumanResources) with effect from May 24, 2006.In accordance with the provisions of Article 41(iii) of theArticles of Association of the company, S/Shri R.S. Sharma,R.K. Jain and A.K. Singhal, Directors shall retire by rotationat the Annual General Meeting of your company and, beingeligible, offer themselves for re-election.DIRECTORS’ RESPONSIBILITY STATEMENTAs required under Section 217(2AA) of the Companies Act,1956 your Directors confirm that:1. in the preparation of the annual accounts, theapplicable accounting standards had been followedalong with proper explanation relating to materialdepartures;2. the Directors had selected such accounting policiesand applied them consistently and made judgments30th Annual Report 25

and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of thecompany at the end of the financial year 2005-06 andof the profit of the company for that period;3. the Directors had taken proper and sufficient care forthe maintenance of adequate accounting records inaccordance with the provisions of the Companies Act,1956 for safeguarding the assets of the company andfor preventing and detecting fraud and otherirregularities; and4. the Directors had prepared the Annual Accounts on agoing concern basis.ACKNOWLEDGEMENTYour directors also convey their gratitude to theshareholders, various International and Indian Banks,Financial Institutions for the confidence reposed by themin the company. The Board also appreciates thecontribution of contractors, vendors and consultants in theimplementation of various projects of the Company. Wealso acknowledge the constructive suggestions receivedfrom Government and the Statutory Auditors.We wish to place on record our appreciation for the untiringefforts and contributions made by the employees at all levelsto ensure that the company continues to grow and excel.For and on behalf of the Board of DirectorsYour Directors acknowledge with deep sense ofappreciation the co-operation received from theGovernment of India, particularly the Ministry of Power,Ministry of Finance, Ministry of Environment & Forests,Ministry of Coal, Ministry of Petroleum & Natural Gas, PlanningCommission, Department of Public Enterprises, CentralElectricity Authority, Central Electricity RegulatoryCommission, State Governments, Regional Electricity Boardsand State Electricity Boards.Place: New DelhiDate: July 31, 2006(T. Sankaralingam)Chairman & Managing Director2630th Annual Report

MANAGEMENT DISCUSSION AND ANALYSISAnnex-I to Directors’ ReportINDUSTRY OVERVIEWCapacitiesAs on March 31, 2006, India’s power system had an installedgeneration capacity of 124,287 MW. During the year 2005-06 the total power generated in the country was 617.38billion.As far as the ownership of the power generating capacitiesare concerned, the state government owned generatingutilities accounted for 55% of the capacities, while theCentral Government owned power utilities accounted forapproximately 32% and private players accounted forapproximately 13%. The capacities owned by us (includingthrough joint ventures) were 24,249 MW as on 31 st March2006 which represents a share of 19.51% of the country’scapacity while our share in generation was 27.68% with ageneration of 170.88 billion units.Demand and SupplyAlthough electricity generation capacity has increasedsubstantially in recent years, the demand for electricity inIndia is still substantially higher than the available supply. Inthe year 2005-06, India faced an energy shortage ofapproximately 8.3% of total energy requirement and 12.3%of peak demand requirement.The following table presents data showing the gap betweenthe total requirement for electricity versus its availability fromfiscal 2002 to fiscal 2006.Actual Power Supply PositionFiscal Requirement Availability Surplus/DeficitYear (+/-)(million (million (million (%)units) units) units)2002 522,537 483,350 -39,817 -7.5%2003 545,983 497,890 -48,093 -8.8%2004 559,264 519,398 -39,866 -7.1%2005 591,373 548,115 -43,258 -7.3%2006 631,024 578,511 -52,513 -8.3%Source: Ministry of Power Annual Report, CEA Executive Summary,March 2006ConsumptionThe end users of power in India can be broadly classifiedinto industrial, agricultural, domestic and commercialcategories. The share of each of these categories in theconsumption of electricity during the fiscal 2005 wasapproximately 36%, 23%, 25% and 8% respectively. Thebalance of sales pertained to various other consumers. Theper capita consumption of electricity is quite low incomparison to the global average. The following tablecompares per capita electricity consumption in India, withsome other countries and the world average consumptionas of 2002.CountryPer Capita ElectricityConsumption in KwhUnited States of America 13456Australia 11299United Kingdom 6614Brazil 2183China 1484Egypt 1287India 569World Average 2465Source: UNDP Human Development Indicators 2005Capacity UtilisationCapacity utilisation in the Indian power sector, as measuredby plant load factor (PLF) has been improving over the yearsand the PLF for coal-fired plants has increased from 63.0%in fiscal 1996 to 73.6% in fiscal 2006.Transmission and DistributionIn India, the power transmission and distribution (T&D)system is a three-tier structure comprising regional grids,state grids and distribution networks. The distributionnetwork and the state grids are owned and operated bySEBs or state governments through SEBs. Most of the interstatetransmission links are owned and operated byPowergrid Corporation of India Limited. In order to facilitatethe transfer of power between neighbouring states, stategrids are interconnected to form regional grids.Peak demand does not occur simultaneously in all statesgiving rise to situations in which there is surplus of powerin one state while another state faces a deficit. The regionalgrids facilitate transfers of power from a surplus state to adeficit state. The grids also facilitate the optimal schedulingof maintenance outages and better co-ordination betweenthe power plants. The regional grids are to be graduallyintegrated to form a national grid enabling interregionaltransfer of power thereby facilitating a more optimal30th Annual Report 27

utilisation of the national generating capacity. At present,the national grid has a capacity of 9,000 MW and it isexpected that same would be of the order of 30,000 MWby fiscal 2012.The T&D system in India is characterized by high lossesincluding technical as well as commercial losses which onan average were 31% during 2004-05 as compared to T&Dlosses of 10 to 15% in developed countries.Regulatory FrameworkResponsibility for the development of the power industryis shared between the Central Government and the Stategovernments. The Electricity Act 2003 provides the overalllegislative framework for the sector.The Ministry of Power (MoP) oversees the operation of allCentral Sector Power utilities. The government has also setup Central Electricity Authority which advises the MoP onelectricity policy and technical matters. The governmenthas also constituted Central Electricity RegulatoryCommission (“CERC”) as per legislative requirement toregulate the tariffs for the Central Power utilities and otherentities with interstate generation or transmission operations.The Electricity Act also requires state governments to setup State Electricity Regulatory Commissions for therationalization of energy tariffs and the formulation of policywithin each state. As of March 31, 2006, twenty-four stateshave set up their regulatory commissions.Recent Policy Initiatives of Government with respect toPower SectorUltra Mega Power ProjectsThe Ministry of Power, Govt. of India, in association withCEA and Power Finance Corporation Ltd., has launched aninitiative for development of coal based Ultra Mega PowerProjects in India, each with a capacity of 4000 MW or above.These projects will be awarded to developers on the basisof tariff based competitive bidding. The government hasidentified seven sites for setting up ultra mega projects.Request For Qualification (RFQ) documents have beensought by the government for two of these projects namely,Sasan in Madhya Pradesh and Mundra in Gujarat. NTPC hassubmitted RFQ for the Sasan project.National Electricity PolicyGovernment of India has also formulated the NationalElectricity Policy as required under the Electricity Act. Thepolicy aims to accelerate development of the power sector,provide supply of electricity to all areas and protect interestsof consumers and other stakeholders. The objectives of thepolicy include access to electricity to all households bythe year 2012, power demand to be fully met, supply ofreliable and quality power, per capita availability ofelectricity to be increased to over 1000 units by 2012,commercial viability of electricity sector and protection ofconsumers’ interests.The Policy has set the goal of adding new generationcapacity of more than one lakh MW by the year 2012including a spinning reserve of 5% in the system.Tariff PolicyAs required under the Electricity Act the Government ofIndia has notified a Tariff Policy. The tariff policy is aimed atproviding policy framework for regulators both at the centraland State level for determining tariff for various constituentsin the power sector. The policy emphasises the need tobalance the requirement for promoting investments in thepower sector against the need to reduce end-user tariff. Italso requires regulators to continue with the systems ofsetting norms for operations which would provide incentivefor efficiency in operations.CompetitionNTPC is the largest power generating company in Indiahaving a market share of nearly 20% of the installed capacityin the country and nearly 28% of the electricity generatedin the country. The reforms taking place in the sector areexpected to bring in more investments into sector and thuscompetition is expected to increase. We believe that NTPCis well positioned to take benefit of the opportunities inthe sector and maintain its market share.Risk ManagementThe strategies we have adopted for our growth are rapidcapacity expansion by adding larger capacities in shortertime spans, foray into hydroelectric power, securing fuelsupply by undertaking mining business and stepping intonatural gas value chain. We also have the strategy ofmaintaining high levels of operational efficiencies so thatwe are always assured of high availability and generationof our plants which also enable us to earn efficiency gainsfrom our operations. We are aware of the fact that theexecution of these strategies may be impacted by certainrisks. Since the inception of the company we are havingsystems and practices which have helped us in identifyingrisks and taking measures to mitigate those risks. As a furtherstep towards institutionalising this system we have now putin place a Risk Management Policy. As an initial step thepolicy has identified the risks being faced by the company,the short-term as well long-term measures to mitigate thoserisks and also a reporting system which would enable criticalrisks beyond certain tolerance levels to be reported forfurther action. We are also in the process of putting a riskmanagement tool across the company which would enable2830th Annual Report

smooth implementation of the Risk Management Policy andintegrate the same at all working levels.The risk assessment which has been carried by the companyhas identified the following risks:Fuel RiskOperationalRisksProjectImplementationRisksRegulatoryRisksBusiness RisksCustomer RiskAsset RisksFinancial RisksHumanResource riskIT RisksFuel availability & PricingMachine/ System breakdown & sparesavailability, water availabilitySuppliers’/Agencies not meeting theproject requirements, Hydro-GeologicalSurprises, Dependence on single source,Equipment, technology, experience ofcontractor/ supplier/ manufacturer, NewTechnological product/ systems, provenness of equipmentAdverse change in tariff Regulation,policy, environment regulation etc.Non-compliance of contractualcommitments in international business ,Entry in newer business areasRevenue Realisation, Transmission riskNatural calamities like storm, hurricaneearthquake ,flood etc Fire- explosion/implosion and other major accidentsFunding Risk, Foreign ExchangeFluctuations, Financial FraudsAttraction / Retention of quality people,Safety & SecurityFailure of servers for BusinessApplications, Failure of BusinessApplicationsThe company has identified mitigation measures for all ofthese risks and the same are also communicated to variouslevels In the company.Internal ControlThe Company has a sound system of Internal Controls forfinancial reporting of various transactions, efficiency ofoperations and compliance with relevant laws andregulations. Suitable delegation of powers and guidelinesfor accounting has been issued for uniform compliance.In order to ensure that all checks and balances are in placeand all internal control systems are in order, regular andexhaustive internal audits are conducted by experiencedfirms of Chartered Accountants in close co-ordination withCompany’s own Internal Audit Department. Besides, theCompany has two Committees of the Board viz. AuditCommittee and Committee on Management Controls whichperiodically review the important findings of differentAudits keeping a close watch on compliance with InternalControl System.Performance During The YearOperationsThe power stations of the company performed well duringthe year. Details of the electricity generated and capacityutilisation levels are as follows:Fiscal 2006 Fiscal 2005Million unitsGross generation 170880 159110Commercial generation 169789 158271Electricity sold out ofcommercial generation 159019 147792Plant Load Factor in %Coal-fired stations 87.54 87.51Gas-fired stations 65.81 65.35Human ResourcesThe employees on the rolls of the company andproductivity parameters for fiscal 2006 and 2005 are givenbelow:Fiscal 2006 Fiscal 2005NTPCNumber of Employees 21,870 21,420Man / MW ratio 0.91 0.91Generation per employee 7.81 7.43Subsidiaries & Joint VenturesEmployees of NTPC 2174 2071posted in subsidiaries andjoint venturesTotal Number of employees 24,044 23,491The success of human resource initiatives of the companyis reflected in the low attrition rate of 0.41% for theexecutives of the company. NTPC has been ranked fifthamong the top ten “Best companies to work for in India”by Mercer HR Consulting-Business Today Survey 2005 andthe 3rd “Great Place to work for in India” by a reputedHuman Resources consultant Grow Talent and BusinessWorld .To achieve the ambitious growth targets, the company hasevolved a Leadership Assessment and Developmentsystem for identifying potential leaders for strengtheningthe succession planning process. For this purpose the30th Annual Report 29

company has partnered Ernst & Young, one of the leadinginternational HR consulting firm and has developed acomprehensive Leadership Competency Model.Training And DevelopmentContinual training and upgradation of skills of its employeesis an area of special focus of the company. The PowerManagement Institute (PMI) located at NOIDA near Delhi isthe company’s apex training and development centreproviding planned as well as need-based programmes intechnical, managerial and information technology areas.Employees of other companies in the power sector tooparticipate in the training programs conducted by theinstitute.During the fiscal 2006, 330 training programs wereconducted against 321 programs in the previous year. Thenumber of participants to whom training was given duringthe year was 8439 as against 7855 in the previous year.The institute was awarded ‘The Golden Peacock NationalTraining Award’ for the year 2005 by the Institute of Directors,New Delhi in recognition of PMI’s outstanding contributionin the area of training and development of powerprofessionals across the nation. This was the third successiveyear that PMI received this award.Corporate Social ResponsibilityThe Company has always appreciated its socialresponsibility as a part of its Corporate Governancephilosophy. It follows the global practice of addressing CSRissues in an integrated multi stake-holder approach coveringthe environment and social aspects. In its endeavor todischarge its responsibility, it has undertaken activities inthe following areas:Resettlement & Rehabilitation:The company is committed to help the people who aredisplaced because of execution of its projects and hasbeen making efforts to improve the Socio-economic statusof Project Affected Persons (PAPs). In line with its socialobjective, the company has focused on effectiveresettlement and rehabilitation of its PAPs and alsoCommunity Development works in and around the projects.The Company has formulated policies which are alignedwith “National Policy on R&R” of Govt. of India.The company has also formulated and adopted CSR-CDpolicy for carrying out CSR activities in remote rural areasadjoining the company stations, which are socioeconomicallybackward and deficient in basic civicamenities. Under this policy, company is providing financialsupport essentially in the areas of Primary Education,Community Health, Basic Infrastructure Development, andVocational Training etc in rural areas. Starting of Qualitycircles, establishment of District Disability RehabilitationCentres and similar such efforts are being made in thevillages in the periphery of company stations as a part ofthis policy.Global CompactThe Global Compact of UN is the largest voluntary corporateresponsibility initiative, with nearly 2000 companiesparticipating from over 80 countries. Keenly conscious ofits social responsibilities, the company became memberof Global Compact. The company is committed to adheringto the principles of global compact.As per the recent policy of Global Compact Office onCommunication on Progress, a report on the progress madein this area is at Annex-X to the Directors’ Report.Distributed GenerationAs a part of its CSR activities, the company for the past twoyears has been taking up Distributed Generation projectsfor rural electrification through non-conventional energysources. To take this initiative forward, the company hasentered into an understanding with The Energy andResources Institute (TERI) for implementation of distributedgeneration projects in villages in India. TERI would provideassistance in identifying potential villages, preparation ofpre-feasibility report(s), achieving financial closure for suchprojects with maximum grant component from local andinternational sources.NTPC FoundationThe Company has set up a Foundation for addressing theniche domains of social development at National level withspecial focus on Physically Challenged Persons. ADevelopment Centre for the Physically Challenged Personsis planned to be developed by the Foundation and landhas already been acquired for setting up the same.During the year the company made a contribution of Rs. 65million to Uttaranchal Forest Trust Hospital, Haldwani forpurchase of advanced Medical Equipment. A contributionof Rs. 30 million was also made to the Government ofUttaranchal to create an ‘NTPC Chair’ to serve as Director of‘Centre of Excellence in Public Policy, Regulatory andStrategic Studies’ in the School of Social Sciences. In themonth of June 2006, the company has committed a financialassistance of Rs. 22.50 million to Hyderabad Eye ResearchFoundation for establishing special services at BhubaneswarEye Institute.Technological DevelopmentsNew Initiatives: The company is constantly looking tointroduce new technologies in its effort to attain higher3030th Annual Report

levels of efficiency and economy in its operation. Some ofthe technologies being introduced by the company are:• Introduction of 800 MW capacity units: Presently thelargest unit sizes of units being set up by the companyare 660 MW which are under construction at twolocations. Higher size super critical units are planned forintegrated coal based thermal power projects withcaptive mining in the states of Orissa and Chattisgarh.This technology will not only result in improvement inthermal efficiency but also reduce emissions ofgreenhouse gases significantly. Such integrated plantsshall have benefits of fuel availability at lower cost andlow project cost due to economy of scale.• Integrated Gasification Combined Cycle (IGCC)Technology: The company is implementing a plan fordevelopment of an IGCC pilot plant of a capacity of100 MW for power generation. IGCC is an upcomingclean coal technology which is likely to give efficiencylevel higher than the conventional coal fired plants.• Energy Technologies Centre: The company has set upan Energy Technologies Centre with a mandate of beinga world class Research Institute. The Center will work inboth fundamental and applied research with ultimateobjective of developing the technologies both withinand outside India. The center would developtechnologies through collaborative research with bestof the R&D and academic institutions in India.The Company has a Research and Development centrewhich provides technical support to all power stationsof the company as well as of other power utilities. Theengineers at the R&D centre have examined, analysedand solved various operational problems referred bystations. R&D centre has developed Fly-Ash basedproduct for part replacement of cement to be usedfor general building construction. R&D centre tookinitiative for Distributed Power Generation in rural areasthrough Bio-Diesel, which can be produced locally atvillage level by a simple method developed by R&D.This probably is the first initiative to use Bio Diesel forDistributed Power Generation.EnvironmentThe Company has taken a number of measures forimprovements in the area of Environment Management. Ithas initiated several measures for mitigating green house gas(GHG) emission by adopting more efficient technology suchas adoption of super critical parameters, renovation andmodernization of older stations etc. As a result of soundenvironment management systems and practices adopted,all operating stations of the company have been accreditedwith ISO-14001 Certification.The reduction in GHG emission is one of the critical issuesinternationally. The Kyoto Protocol, which has been adoptedby more than 150 countries, is an international treaty thatrequires the member countries to reduce their GHGemissions. This treaty recognizes the Clean DevelopmentMechanism (CDM) as one of the means available to theindustrialized countries to reduce their GHG emission byinvesting in emission reducing projects in developingcountries as an alternative to costly emission reductions intheir own countries. As India is also one such investingdestination for industrialized countries, post Kyoto scenariois seen by the Company as an opportunity for furtherdemonstrate its commitment for clean environment. TheCompany is identifying the potential areas to take advantageon CDM benefits by working on a number of projects whichfulfils the emission reduction requirement.Financial Discussion and analysisA Results of operations1 Gross RevenueRs MillionFiscal 2006 Fiscal 2005Units of electricity sold 159019 147792(million units)RevenuesAmount in Rs. MillionEnergy Sales (Excl. 260,701 225,069Electricity Duty)Energy Internally Consumed 276 248Consultancy 452 333Other income (excluding 8,003 6,525income related to one timesettlement scheme & surcharge)Gross Revenue (excl. income 269,432 232,175related to one time settlement& surcharge)Income related to one time 18,075 17,004settlement scheme& surchargeGross Revenue 287,507 249,179The gross revenue of the company comprises sale ofelectricity, revenue from consultancy and other services,and interest earned on investments such as term depositsand bonds issued under one-time-settlement scheme. Thegross revenue of the company for the fiscal 2006 was Rs.287,507 million as against Rs. 249,179 million in the previousyear registering an increase of 15.38%.1.1 Sale of ElectricityRevenue from sale of electricity for the fiscal 2006 wereRs. 260,701 million which constituted 90.68% of grossrevenue. The revenue from sale of electricity hasincreased by 15.83% over the previous year’s revenueof Rs. 225,069 million primarily because of a 7.6%30th Annual Report 31

increase in units sold, as a result of increase in thecommercial capacity by 1,000 MW and higher PLF ofexisting capacities and higher variable charges. Ouraverage selling price this year was Rs. 1.64 per unitcompared to Rs.1.52 per unit in the previous year.We sell electricity to bulk consumers comprising mainlyelectricity utilities owned by State Governments. Saleof electricity is made pursuant to long-term powerpurchase agreements, which run for 25 years in the caseof most of our coal-fired plants and 15 years in the caseof most of our gas-fired plants, which is the estimatedaverage life of the plants. The agreements are typicallyrenewed or extended upon expiry of the initial term.In the past, we have had difficulty recovering our duesfrom the SEBs. After the implementation of the OneTime Settlement Scheme and signing of TripartiteAgreements under which the SEBs were required toestablish letters of credit (“LCs”) to cover 105% of ouraverage monthly billing to them for the preceding 12months the realization of the amounts due from thecustomers for the sale of electricity has been 100%for the past three years.1.2 TariffsOur charges for electricity are based on tariff rates setby the Central Electricity Regulatory Commission(CERC). The tariff rates reflect a fixed charge based onplant availability, variable charges based primarily onfuel costs and an unscheduled interchange chargewhich is a payment (or penalty) designed to createincentives for grid discipline. The CERC sets our tariffrates on a plant-by-plant basis on the basis of the tariffnorms it has promulgated.From April 1, 2004, our tariffs are determined pursuantto the CERC’s tariff regulations that are applicable forfiscal 2005 to fiscal 2009. The following are thesignificant elements of the fixed charges permissibleunder the regulations:• The return on equity at 14%, on a post-tax basisbased on a prescribed 70:30 debt to equity ratiofor new projects• Actual interest cost incurred on debt• Interest on working capital determined on anormative basis• Depreciation on plant and machinery calculatedat 3.6% for coal based stations and 6% for gasbased stations• Operation and maintenance costs determinednormatively by the CERC based on class of unit,on a per megawatt basisVariable charges on the electricity sold aredetermined on the basis of landed cost of fuelapplied on quantity of fuel determined on the basisof norms for heat rate, auxiliary consumption,specific oil consumption etc.Besides the fixed capacity charges and the variablecharges, the other elements of tariff are:• Incentives payable at the rate of Rs. 0.25 per unitfor operating plants at PLF of more than 80%• Exchange rate variations as per Regulations• The unscheduled interchange charge payable (orreceivable) at rates prescribed in the regulations1.3 Provisional TariffsIn any fiscal year, there are a number of stations for whichCERC tariffs are unavailable because the CERC has notyet fixed the final tariff. However, we book revenuesbased on our assessment of the likely final tariff basedon the CERC regulations. When CERC fixes the final tariff forthese stations, we make adjustments to our revenues onthe basis of the final order to the extent of the differencebetween the provisionally booked revenues and therevenues based on the tariffs determined by CERC.1.4 Consultancy ServicesWe also earned Rs. 452 million as revenue fromconsultancy services as against Rs. 333 million in theprevious year and other sources. We intend to expandour consultancy business and enter certain newbusinesses.1.5 Other IncomeOur other income in fiscal 2006 was Rs. 26,078 million ascompared to Rs.23,529 million in the fiscal 2005. Theother income earned by us comprised the following:Rs MillionFiscal 2006 Fiscal 2005Income related to one-timesettlementscheme & surchargei) Interest for the year 15,413 14,763ii) Previous year interest(non-recurring) 2,278 (219)iii) Late payment Surcharge(non-recurring) 384 2,460Sub-total 18,075 17,004Income on investment ofsurplus cash 6,401 4,839Dividend from JVs andSubsidiaries 148 1173230th Annual Report

Income earned on other headssuch as hire charges, profit ondisposal of assets, etc 2,111 2,628Total 26,735 24,588Less: Transfer to incidentalexpenditure duringconstruction period 657 1,059Net other income 26,078 23,5291.6 Adjusted Gross RevenueThe gross revenue reported for the year includes certainrevenues pertaining to previous years. The revenuesfrom sale of electricity for the fiscal 2006 includesRs.3,522 million pertaining to previous years which havebeen recognized in sales due to revision in the amountsbilled based on the orders of the CERC /AppellateTribunal issued during the year , issue of final tarifforders by CERC for the period upto 31 st March 2004 forcertain stations and CERC admitting additional capitalexpenditure for some of the stations. Similarly, for fiscal2005, an amount of Rs.3,689 million pertaining toprevious years were included in the sales. Interest onbonds under one time settlement scheme recognizedduring the year includes arrear interest of Rs.2,278million pursuant to issue of bonds by the states of Biharand Jharkhand retrospectively with effect from October1, 2001. In the last fiscal, the amount of long-termadvance to Government of National Capital Territory ofDelhi was reduced with effect from October 1, 2001resulting in an adjustment of interest amounting toRs.219 million. If the revenues relating to previous yearsare adjusted, the gross revenue for the fiscal 2006 andfiscal 2005 would be as follows:Rs. MillionFiscal 2006 Fiscal 2005Gross Revenue 287,507 249,179Less:Sales of previous years 3,522 3,689Arrears of interest on bonds 2,662 2,241under one time settlementscheme and Late paymentsurchargeAdjusted Gross Revenue 281,323 243,2492 Expenditures2.1 Expenditure related to operationsRs.MillionExpenditures Fiscal Rs per Fiscal Rs per2006 kwh 2005 kwhCommercial 169789 158271Generation (Mus)Fuel 163,947 0.97 137,235 0.87Employees’ 9,684 0.06 8,823 0.06remunerationand benefitsGeneration, 12,721 0.07 12,062 0.08administration andother expensesTotal 186,352 1.10 158,120 1.00The expenditure incurred on fuel, employees,generation, administration and other expenses for thefiscal 2006 was Rs. 186,352 million which is 17.85% morethan the expenditure of Rs. 158,120 million on theseheads in the last year. In terms of expenses per unit ofpower produced it was Rs. 1.10 per unit in fiscal 2006in comparison to Rs. 1.00 per unit in the previous year. Adiscussion on each of these heads is given below.2.1.1 FuelThe primary fuels we use in power generation arecoal and natural gas. We also use oil as asecondary fuel for our coal-fired plants and usenaphtha as an alternate fuel in our gas-fired plants.Expenditure on fuel constituted 88% of the totalexpenditure on the above heads as compared to87% in the previous year. Expenditure on fuel wasRs. 163,947 million in fiscal 2006 in comparisonto Rs. 137,235 million in fiscal 2005 representingan increase of 19.46%. The higher fuel expenseswere mainly due to increases in fuel prices, useof imported coal as well as increased fuelconsumption due to higher generation. Fuel costper unit generated increased to Rs. 0.97 in fiscal2006 from Rs. 0.87 in fiscal 2005.Under the tariff norms set by the CERC, we areallowed to pass on our fuel charges through thetariff, provided we meet certain operatingparameters.We purchase coal pursuant to long term coalsupply arrangements with subsidiaries of CoalIndia Limited and with Singareni CollieriesLimited. The price is determined by a formula30th Annual Report 33

comprising a base price with an agreed priceadjustment mechanism. The price also dependson the heat value of the coal. During the yearour coal based stations consumed 105 milliontones of coal as against 94 million tones in thefiscal 2005. To overcome temporary shortagesin the coal supply, we have also resorted toimport of coal during the fiscal 2006. Thecompany during the year tied up with MMTC Ltd.and State Trading Corporation Ltd. for suppliesof 2.1 million metric tones and 1.9 million metrictones respectively of imported coal of which 3.3million metric tones has been received.We source gas domestically under anadministered price and supply regime. Our maingas supplier is GAIL. Gas prices are fixed by theMinistry of Petroleum and Natural Gas. Wereceived a supply of 10.91 MMSCMD of gasduring the fiscal 2006 as against 10.37 MMSCMDreceived in fiscal 2005. The company is makingall efforts to source gas from open market for itsexisting stations so as to improve the capacityutilization at these stations.Some of our gas based stations also use Napthafor operations depending upon the demandfrom our customers.2.1.2 Employees’ Remuneration and BenefitsEmployees’ remuneration and benefits expensesinclude salaries and wages, bonuses,allowances, benefits, contribution to providentand other funds and welfare expenses.Employee pay scales are determined by ourBoard based on the guidelines provided by theGovernment. For our unionised employees, payscales are decided by our Board as part of anegotiated settlement based on the DPEguidelines. For our employees are affiliated withworkers’ unions, we have a 10 year agreementthat fixes their wages and benefits which is validuntil December 2006. For our non-unionisedemployees, pay scales are decided by our Boardas per Government guidelines after consultingwith the relevant employee associations. Thesepay scales are valid until December 2006.Employees’ remuneration and benefits expensesrepresent approximately 5% of our operationalexpenses. Employees’ remuneration and otherbenefits increased by 9.76% to Rs. 9,684 millionin fiscal 2006 from Rs. 8,823 million in fiscal 2005.This increase was primarily due to regular annualpay increments, which are generally 4% ,increases in dearness allowance which is linkedto price index and also due to increase in numberof employees. We had 24,044 employees on ourpayroll as of March 31, 2006, compared to23,491 employees as of March 31, 2005. Theemployee cost per unit of generation was Rs. 0.06– the same as in the previous year.2.1.3 Generation, Administration and Other ExpensesGeneration, administration and other expensesconsist primarily of repair and maintenance ofbuildings, plant and machinery, power and watercharges, security, insurance, training andrecruitment expenses and expenses for travel andcommunication. These expenses representapproximately 7% of our operationalexpenditures in fiscal 2006. These expensesincreased by 5.5% to Rs. 12,721 million in fiscal2006 from Rs.12,062 million in fiscal 2005.However, in terms of expenses per unit ofgeneration it was Rs. 0.07 in fiscal 2006 as againstRs. 0.08 in the previous year.One of the main items of expenditure under thishead is Repair & Maintenance which hasincreased by 11.63% to Rs.7,813 million fromRs.6,999 million. In terms of expenses per unit ofgeneration, repair and maintenance on plant andmachinery was Rs. 0.05 per unit – almost the sameas in the previous year.2.2 DepreciationThe depreciation charged to the profit and loss accountincreased during the year to Rs. 20,477 million ascompared to Rs.19,584 million in fiscal 2005, mainlybecause of the increase in gross block to Rs. 460,396million from Rs. 431,062 million in the fiscal 2005. Theincrease in gross block is largely on account ofcommencement of commercial operation of 2 units of500 MW each at Rihand and Talcher.As per the accounting policy of the company,depreciation is charged on straight line method as perthe rates given in schedule set forth in the CompaniesAct, 1956 except for some items for which depreciationat higher rates is charged.3430th Annual Report

2.3 Provisions made (and written back)During the fiscal 2006, the company had madeprovisions amounting to Rs. 357 million in comparisionto Rs. 75 million provided for in fiscal 2005. Theprovisions were made mainly in respect of doubtfuladvances and claims and for other items. During thefiscal 2006, the company had also written backprovisions made in earlier years amounting to Rs. 23million in comparison to Rs. 6,235 million of provisionswritten back in fiscal 2005.2.4 Interest and Finance ChargesThe interest and finance charges for the fiscal 2006 wereRs. 17,632 million in comparison to Rs. 16,955 millionin fiscal 2005. The details of interest and finance chargesare tabulated below:Rs.Million2006 2005Interest on borrowings 11,852 10,308Finance Charges 13,159 12,315Total 25,011 22,623Less: Adjustments and transfersExchange differences regarded 2,469 568as adjustment to interest costsInterest and finance charges 4,910 5,100capitalisedNet interest and finance charges 17,632 16,955Our borrowings are denominated in Rupees and foreigncurrencies. The exchange differences in respect ofoverseas borrowings relating to fixed assets/capitalwork-in-progress acquired from a country outside Indiais treated as part of carrying cost. However, in case thefixed assets/capital work-in-progress is acquired withinIndia, the exchange differences are added to whenunfavourable (and reduced from, if favourable) tointerest cost to the extent regarded as interest chargesas per the accounting standards applicable in India.During the fiscal 2006, a favorable exchange ratevariation amounting to Rs. 2,469 million was reducedfrom the interest expenses while an amount of Rs. 568million was reduced from interest cost in fiscal 2005.For the fiscal 2006 an amount of Rs. 4,910 million relatingto interest and finance charges of projects underconstruction were capitalized while the correspondingamount for the previous year was Rs. 5,100 million.The Finance charges also include, among other things,the rebates to customers paid pursuant to one timesettlement scheme amounting to Rs. 8047 million incomparison to Rs. 6813 million in the previous year.The increase includes arrears of rebate amounting toRs. 892 million paid on bonds which were issued thisyear with retrospective effect from October 1, 2001.In the last fiscal, the amount of long-term advance toGovernment of National Capital Territory of Delhi wasreduced with effect from October 1, 2001 resulting inan adjustment in rebate under Scheme for settlementof SEB dues amounting to Rs.134 million.The adjusted interest and finance charges without takinginto account the exchange differences considered asadjustment to interest costs and rebate paid in arrearsare as follows:Rs. Million2006 2005Adjusted interest cost 7,314 6,398Adjusted finance charges 11,895 11,259Adjusted Interest and 19,209 17,657Finance chargesThe rebate under one time settlement scheme at therate of 4% of the bond issued under the scheme waspayable upto March 31, 2006. Taking into account 100%realization of amounts billed during the last three years,the company has decided to continue with a modifiedrebate scheme. Under the revised scheme (madeeffective from April 1, 2006) an incentive at the rate of2% (1% semi annual) per annum of the bondsoutstanding may be paid to customers who are makingthe payments as per the company’s revised scheme.2.5 Prior period income / expenditureCertain elements of income and expenditure have beencharged to the profit and loss account relating toprevious years. For the fiscal 2006 a net amount of Rs.2,488 million was charged to the profit and loss accountas prior period expenditure while a net amount of Rs.102 million was booked as prior period income in theprevious year.Of the net prior period expenditure amounting to Rs.2,488 million, a sum of Rs. 1,986 million relates toadjustment consequent upon the change in accountingof exchange differences on loans contracted prior to1 st April 2000 as explained in note 13(a) of the Noteson Accounts(Schedule 27).3 Profit before tax, provisions and prior period adjustmentsThe profit of the company before tax and prior periodadjustments for the current and the previous year bothon reported and adjusted basis is tabulated below:30th Annual Report 35

Rs.MillionReported AdjustedFiscal Fiscal Fiscal Fiscal2006 2005 2006 2005Gross Revenue 287,507 249,179 281,323 243,249Expenditure related 186,352 158,120 186,352 158,120to operationsDepreciation 20,477 19,584 20,477 19,584Interest and Finance 17,632 16,955 19,209 17,657chargesProfit before tax, 63,046 54,520 55,285 47,888provisons and priorperiod adjustments4 Provision for TaxThe company provides for current tax, deferred tax andfringe benefit tax computed in accordance withprovisions of Income Tax Act, 1961. As per tariffregulations, the company recovers actual tax paymentsin respect of generation business from its customerswhile taxes on the income from all other activities areborne by the company.Rs.MillionFiscal 2006 Fiscal 2005Current Deferred Fringe Total Current Deferred Totaltax tax benefit tax taxtaxProvision 13,497 2,654 209 16,360 10,390 (1,710) 8,680for currentyearAdjustment (5,536) - (5,536) (332) - (332) -for earlieryears(Recoverable (5,666) (2,654) (197) (8,517) (7,346) 1,710 (5,636)from) /payableto customersCapitalised (275) - (10) (285) - - -Netprovision 2,020 - 2 2,022 2,712 - 2,712Net provision of tax for the fiscal 2006 was Rs. 2022 millionin comparison to Rs. 2712 million in the fiscal 2005. Thereduction in the tax is mainly on account of adjustment oftaxes for earlier years.5 Profit After Tax before provisions made and written backand prior period adjustmentsRs.MillionReported AdjustedFiscal Fiscal Fiscal Fiscal2006 2005 2006 2005Profit before tax, 63,046 54,520 55,285 47,888provisons and priorperiod adjustmentsTax 2,022 2,712 2,022 2,712Profit after tax 61,024 51,808 53,263 45,176(before provisionsand prior periodadjustments)The profits as above on a reported basis have grown by17.79% while on an adjusted basis have grown by 17.90%.6 Net Profit After TaxThe net profit after tax after provisions (made andwritten back) and prior period adjustments on areported and adjusted basis are as follows:Rs.MillionReported AdjustedFiscal Fiscal Fiscal Fiscal2006 2005 2006 2005Profit after tax(before provisionsand prior periodadjustments) 61,024 51,808 53,263 45,176Provisions (net ofwrite back) -334 6,160Prior periodadjustments -2,488 102Net profit after tax 58,202 58,070 53,263 45,176On a reported basis, the net profit after tax for the currentfiscal has remained almost at the same level incomparison to previous fiscal. However, on an adjustedbasis, the net profit after tax has grown by 17.90%.7 Segment-wise performanceFor the purpose of compiling segment-wise results, thebusiness of the company is segregated into‘Generation’ and ‘other business’. The company’sprincipal business is generation and sale of bulk power.Other business includes providing consultancy, projectmanagement and supervision, oil and gas explorationand coal mining.3630th Annual Report

The profit before tax and interest for the Generationbusiness for the fiscal 2006 was Rs. 45,837 million andfor the Other Business it was Rs. 224 million.B Financial Condition1 Net worthThe networth of the company at the end of fiscal 2006was Rs. 449,587 million an increase of Rs. 31,824 millionover the previous year mainly due to retained earnings.2 Loan FundsOur loans outstanding as at March 31, 2006 stood atRs. 201,973 million in comparision to Rs. 170,878 millionas at March 31, 2005. A summary of the loansoutstanding is given below:Rs.MillionAs at March 31 st2006 2005 % changeSecured LoansBonds 47,044 32,077 47%Foreign Currencyterms loans 10,274 12,319 -17%Other 9 11 -18%Sub-total 57,327 44,407 29%Unsecured LoansFixed Deposits 778 4,159 -81%Bonds 5,000 -100%Foreign CurrencyBonds / Notes 22,475 8,814 155%Foreign CurrencyTerm loans 33,336 32,608 2%Rupee term loans 87,821 75,339 17%Loans fromGovernmentof India 236 551 -57%Sub-total 144,646 126,471 14%Total 201,973 170,878 18%The change in the loans outstanding is mainly becauseof the borrowings and repayments made during theyear. During the year the company issued one series ofrupee denominated bonds through private placementamounting to Rs.10,000 million. The bonds carry acoupon of 7.125% p.a.. The bonds have been issuedfor a period of 14 years with redemptions in equal semiannualinstallments beginning at the end of three years.We also issued US$ 300 million Fixed Rate Notes (Rs.13,485 million) during the year with coupon of 5.875%p.a. payable semi-annually and maturity of 10 years.These Notes were issued under Medium Term NoteProgramme of USD 1 billion established duringFebruary 2006 to finance capital expenditure of ourprojects.The credit rating by CRISIL and ICRA of the company asan issuer, the rating for rupee bonds issued and fixeddeposits program continued to be ‘AAA’. The foreigncurrency rating for the company is BB+ with positiveoutlook which is at par with the sovereign rating of thecountry. The ratings have been assigned by Standard &Poors’ and Fitch Ratings.The debt to equity ratio at the end of fiscal 2006 of thecompany went up to 0.45 from 0.41 at the end theprevious fiscal.The maturity profile of the borrowings by the Companyis as under:Rs.MillionRupee Foreign TotalLoans CurrencyloansWithin 1 year 12,115 3,467 15,5821 – 3 years 36,609 6,385 42,9943 – 5 years 38,987 15,619 54,6065 – 10 years 37,677 24,631 62,308Beyond 10 years 10,500 15,983 26,483Total 135,888 66,085 201,9733 Fixed AssetsRs.MillionAs at March 31 st2006 2005 % ChangeGross block 460,396 431,062 7%Net Block 230,895 223,148 3%Capital Work-in-Progress 103,999 67,063 55%Construction storesand advances 32,341 32,189 0%Total fixed assets 367,235 322,400 14%30th Annual Report 37

During the year we added Rs. 29,334 million to ourgross block mainly on account of capitalization of thecapital-works-in-progress pertaining to projects whichwere commercialized during the year. With capitalexpenditure being incurred on various on-goingprojects the capital-work-in-progress has shown asubstantial increase.4 InvestmentsOur investments comprise bonds issued by various stategovernments under the one-time-settlement scheme,equity investments in joint venture and subsidiarycompanies and investments out of surplus cash in variousinstruments as per the policy of the company. The broadbreak-up of our investments is as follows:Rs.MillionAs at March 31 st2006 2005Bonds issued under One timesettlement scheme 171,762 164,107Investments in Joint Ventures 6,818 1,318Investment in subsidiaries 304 252Investment of surplus cash invarious instruments 8,508 32,504OthersBonds against dues (issued priorto one time settlement scheme) 5,306 7,428Investments of developmentsurcharge on behalf of customers 193 2,368Total investments 192,891 207,977The State governments of Bihar and Jharkhand hadduring the year issued bonds under the one-timesettlementscheme amounting to Rs. 7,655 million.During the year, we invested Rs. 5,000 million for a stakeof 28.33% as a joint venture partner in Ratnagiri Gasand Power Private Ltd which was formed for taking overthe assets of the erstwhile Dabhol Power Project. Amajor portion of surplus cash during the year was keptas term deposit with banks and are included in thecurrent assets. There has been decrease in ourinvestments during the year due to maturity of many ofthese instruments and also return of investments madeagainst development surcharge explained below .Investments of Development SurchargeDuring the earlier years, we had recovereddevelopment surcharge from our customers, asprovided under the tariff regulations at that time. Suchdevelopment surcharge was required by CERCregulations to be kept invested in various interestyielding tax free instruments till the time they wereutilized in construction of projects as permissible underthe Regulations. However, the recovery of developmentsurcharge has been done away with in subsequentregulations and these investments are to be transferredback to the customers from whom they wererecovered. We have since returned these to all of ourcustomers after completing certain formalities.5 Current AssetsThe current assets and current liabilities as at March31, 2006 and March 31, 2005 and the changes thereinwere as follows:Rs.MillionAs at March 31 st2006 2005 ChangeCurrent Assets Amount % of Amount % of Amount %currentcurrentassets assetsInventories 23,405 15% 17,819 14% 5,586 31%SundryDebtors 8,678 6% 13,747 11% -5,069 -37%Cash andBank balances 84,714 54% 60,783 47% 23,931 39%Other CurrentAssets 10,161 6% 9,764 7% 397 4%Loans andAdvances 30,287 19% 26,993 21% 3,294 12%Total CurrentAssets 157,245 100% 129,106 100% 28,139 22%A major part of current asset comprised Cash and Bankbalances. As at March 31, 2006, the cash and bankbalances stood at Rs. 84,714 million being 54% of thetotal current assets in comparison to Rs. 60,783 millionas at March 31, 2005 which was 47% of the total currentassets as on that date. Of these, Rs. 82,887 million werekept as term deposits with banks as on March 31, 2006while the term deposits for the last year was Rs. 57,050million.The next largest component of our current assets is Loansand Advances which mainly include a sum of Rs. 9,573million as loan to the government of Delhi subsequentto the conversion of the dues of Delhi Vidyut Board intoloan under the one-time-settlement scheme. Thegovernment of Delhi pays us 8.5% tax-free interest onthese Bonds. The other loans and advances are mostlyloan and advances to employees given for variouspurposes such as building of house, purchase of vehiclesetc. as per the policies of the company.3830th Annual Report

Inventories as at March 31, 2006 were Rs. 23,405 millionbeing 15%of current assets as against Rs. 17,819 millionas on March 31, 2005 which was 14% of the currentassets as on that date. Our inventories mainly comprisecomponents and spares and coal which we maintainfor operating our plants. Components and spares wereRs. 12,894 million as against Rs. 11,904 million in thelast year. Coal inventories amounted to Rs. 7,476 millionas against Rs. 3,115 million in the previous yearindicating improved coal supply position.6 Current LiabilitiesRs.MillionAs at March 31 st2006 2005 ChangeCurrent Assets Amount % of Amount % of Amount %currentcurrentliabilitiesliabilitiesLiabilities 49,102 80% 52,306 78% -3,204 -6%Provisions 12,300 20% 15,161 22% -2,861 -19%Total CurrentLiabiities 61,402 100% 67,467 100% -6,065 -9%Our current liabilities as at March 31, 2006 wereRs. 49,102 million as against Rs. 52,306 million in theprevious year. Our current liabilities mainly comprisecreditors for capital expenditure, creditors for supplyof goods and services, deposits and retention moneyfrom contractors. The liabilities for these at the end ofthe year stood at Rs. 36,057 million as against Rs. 33,168million in the previous year. Besides these, we alsoowed a sum of Rs. 9,886 million to our customers asagainst Rs. 14,431 million in the previous year. Thesesums include amount payable to the customers sincewe are billing our customers for electricity onprovisional tariffs as per directions of CERC, which arehigher than the tariffs estimated by us as per CERCRegulations. These amounts would be paid or adjustedagainst future billings as and when the final tariff forvarious stations are determined by the regulator.7 ProvisionsAs at March 31, 2006 we had provisions for certainliabilities outstanding amounting Rs. 12,300 million asagainst Rs. 15,161 million on 31 st March 2005. This mainlycomprised Rs. 6,596 million as proposed dividendwhich we would be paying to our shareholders afterthey approve the same in the shareholders’ meeting.We also had a provision outstanding of Rs. 4,770 milliontowards retirement benefits payable to our employees.8 Cash flowsThe cash and cash equivalents and cash flows onvarious activities for the past five years are tabulatedbelow:Rs.MillionFor the year ended March 31 st2006 2005 2004 2003 2002Opening Cashand cashequivalents 60,783 66,351 23,894 13,659 12,015Net cash fromoperatingactivities 62,064 50,998 58,118 47,402 29,372Net cash usedin investingactivities (27,136) (64,136) (24,597) (31,881) (28,377)Net cash flowfrom financingactivities (10,997) 7,570 8,873 (5,271) 630Intangibles 63 (15) 19Change in Cashand cashequivalents 23,931 (5,568) 42,457 10,235 1,644Closing cashand cashequivalents 84,714 60,783 66,351 23,894 13,659Our net cash from operating activities for the yearended March 31, 2006 increased by 22% from theprevious year. The net cash from operating activitieswas Rs. 62,064 million as against Rs. 50,998 million forthe previous year.Our net cash used in investing activities decreased toRs 27,136 million in fiscal 2006 from Rs. 64,136 millionin the previous year. Cash flows on investing activitiesarise from expenditure on setting up power projects,investment of surplus cash in various securities,investments of development surcharge recovered fromcustomers (refer para 4.1 above), investments in jointventures and subsidiaries. The cash utilised for purchaseof fixed assets increased by 25% from Rs. 53,699 millionin the previous year to Rs. 66,956 million during thisyear. Cash was also realized on maturity of certaininvestments during the year.30th Annual Report 39

During the year we used Rs. 10,997 million of cash onfinancing activities. In the previous year we had a netinflow of Rs. 7,570 million from financing activitiesmainly due to receipt of Rs. 26,841 million as proceedsfrom our initial public offering of shares. During thecurrent year we had inflow of Rs. 48,226 million fromlong term borrowings as against Rs. 29,592 million inthe previous year. The cash used for repayment of longterm borrowings this year was Rs. 17,131 million asagainst Rs. 13,242 million repaid in the previous year.The cash used for paying dividend and the tax thereonwas Rs. 30,087 million as against Rs. 23,397 million inthe previous year.Business and Financial Review of SubsidiariesThe company has formed four wholly owned subsidiaries.The financial statements of these subsidiaries are includedin this Annual Report elsewhere. Their performance is brieflydiscussed here:a) NTPC Electric Supply Company Limited (NESCL)The financial highlights of the Company are as under:Particulars Fiscal 2006 Fiscal 2005Rs.MillionNTPC’s investment in equity 0.8 0.8Gross Income 92 75Profit After Tax 4.52 0.40Rs Per ShareBook Value per share 50.93 14.18Earnings Per Share 55.86 4.96NESCL was incorporated with the main object ofundertaking business of distribution and supply ofelectrical energy. The company is exploring businessopportunities in various states of the country. However,the company has not yet been assigned any distributioncircle. The company is however carrying out the workof “Advisor-cum-consultant” for Ministry of Power,Government of India for implementation of schemesunder the Accelerated Power Development andReforms Program (APDRP). The company is also involvedin the execution of work under the government’s ruralelectrification program namely “Rajiv Gandhi GrameenVidyuti-Karan Yojana”. The Company is also renderingProject management and supervision services to MadhyaKshetra Vidyut Vitaran Company Ltd., a distributioncompany of the government of Madhya Pradesh.The Company has proposed a dividend of Rs.1 millionthis fiscal year.b) NTPC Vidyut Vyapar Nigam Limited (NVVN)The financial highlights of the Company are as under:Particulars Fiscal 2006 Fiscal 2005Rs.MillionNTPC’s investment in equity 200 200Gross Income 4,441 5,992Profit After Tax 33 57Rs. Per ShareBook Value per share 12.95 12.43Earnings per share 1.66 2.87The company was formed with an objective toundertake business of trading of electric power. Duringthe year the company transacted business with 18utilities spread all over the country and traded 1643million units of electricity in comparison to 2616 millionunits traded in the previous year. NVVN is also engagedin facilitating development of Power exchange in India.The Company has during this fiscal paid an interimdividend of Rs.10 million and recommended finaldividend of Rs.10 million.c) NTPC Hydro Limited (NHL)The financial highlights of the Company are as under:Particulars Fiscal 2006 Fiscal 2005Rs.MillionNTPC’s investment in equity 100 48Loss 33 30Rs per shareBook Value per share 1.89 0.08Earnings per share (5.71) (13.85)The company was formed with an objective to developsmall and medium hydroelectric power projects up to250 MW. Presently the company is implementing twoprojects namely, Lata Tapovan hydro electric project(171 MW) in the state of Uttranchal. and Rammam-III(120 MW) in the state of West Bengal. Implementation4030th Annual Report

activities for the above projects have been initiatedand the projects are scheduled to be commissionedby March 2012.d) Pipavav Power Development Company LimitedThe financial highlights of the company are givenbelow:Particulars Fiscal 2006 Fiscal 2005NTPC’s investment in equity 3.7 3.65(Rs. Million)Loss (Rs.) 40,083 24,252Book Value per share (Rs) 0.03 -Earnings per share (Rs) (0.11) (0.07)We had entered into an understanding with GujaratPower Corporation Ltd (GPCL) and Gujarat ElectricityBoard to set up 1000 MW Thermal Power Project atPipavav in Gujarat through a joint venture between NTPCand GPCL. The company is presently a wholly ownedsubsidiary of NTPC and shall be converted to a Jointventure Company by transferring 50% of ourshareholding to GPCL. Site Specific Studies for theproject are in progress. Draft Shareholders Agreementis ready and shall be finalized and signed afterallocation of Distribution Circle.Business And Financial Review Of Joint Venture Companiesa) PTC India LimitedThe financial highlights of the Company are as under:Particulars Fiscal 2006 Fiscal 2005Rs.MillionNTPC’s investment in equity 120 120Gross Income 31,206 20,373Profit After Tax 406 240Rs per ShareBook Value per share 16.30 14.59Earnings per share 2.71 1.60The main objective of the company includes tradingof power, import/export of power and purchase ofpower from identified private power projects and sellsit to identified SEBs/others. The Company has a paidupcapital of Rs.1500 million had 8% equitycontribution each from NTPC, Power Grid Corporationof India Ltd., Power Finance Corporation Limited andNHPC and the balance from Damodar ValleyCorporation, Financial Institutions, Banks and generalpublic. PTC has traded a total 10,119 MUs in the fiscal2006 as compared to 8,887 MUs in fiscal 2005registering an increase of 13.86%.The Company has paid a dividend of 150 million forfinancial year 2005-06 as compared to 120 million forfinancial year 2004-05 and correspondingly share ofNTPC dividend increased to 12 million from 9.6 million.b) Utility Powertech Limited (UPL)The financial highlights of the Company are as under:Particulars Fiscal 2006 Fiscal 2005Rs.MillionNTPC’s investment in equity 10 10Gross Income 1,478 1,125Profit After Tax 61 57Rs Per ShareBook Value per share 67.41 54.01Earnings per share 30.50 28.63UPL is a 50:50 joint venture company of NTPC andReliance Energy Limited formed to take up assignmentsof construction, erection and supervision in powersector and other sectors in India and abroad.The company has in the current year paid the samedividend @150%, being Rs.30 million as in the previousyear. NTPC’s share amounts to Rs.15 million.c) NTPC-SAIL Power Company Pvt. Ltd. (NSPCL) and BhilaiElectric Supply Company Private Limited (BESCL)The financial highlights of these companies are as under:Particulars Fiscal 2006 Fiscal 2005NSPCL BESCL NSPCL BESCLRs MillionNTPC’s investmentin equity 586.5 1,066 586.5 566Gross Income 1,316 577 1,322 607Profit After Tax 243 64 233 61Rs. Per ShareBook Value per share 13.38 10.91 11.95 11.30Earnings per share 2.07 0.30 1.99 0.54These joint venture companies were formed foroperating and maintaining the captive power plants ofSteel Authority of India Limited (SAIL). The total capacityunder operation of these companies is 314 MW. Thesecompanies generated 2454 MU in the current year ascompared to 2447 MU last year.30th Annual Report 41

BESCL is also implementing the expansion of powerplant at Bhilai by adding two 250 MW units.Construction activities are progressing as per scheduleat the site.NSPCL and BESCL have declared a dividend of Rs.75million and Rs.15 million respectively.e) NTPC-ALSTOM Power Services Private Limited (NASL)The financial highlights of the Company are as under:Particulars Fiscal 2006 Fiscal 2005Rs.MillionNTPC’s investment in equity 30 30Gross Income 730 1021Profit After Tax 31 21Rs Per ShareBook Value per share 16.30 12.56Earnings per share 5.11 3.50NASL is a joint venture company with equal equitycontribution from NTPC and Alstom Power GenerationAG, Germany. The company was formed for taking upRenovation & Modernization assignments of powerplants both in India and abroad.The company has proposed a dividend of Rs.7.2million and the share of NTPC is Rs. 3.6 million.f) NTPC Tamil Nadu Energy Company Ltd.The company is formed as a 50:50 joint venturebetween NTPC and Tamil Nadu Electricity Board to setup a coal-based power station of 1000 MW capacity,at Ennore, using Ennore port infrastructure facilities. Allsite specific studies have been completed. The draftFeasibility Report is ready and would be finalized afterreceiving data on the price of land and allocation ofcoal mine blockThe construction activities are yet to commence. Theexpenses incurred by the company during the yearresulted in a loss of Rs.3 million for the fiscal 2006 asagainst a loss of Rs.2 million in the previous year.g) Ratnagiri Gas And Power Pvt. LimitedRatnagiri Gas and Power Pvt Ltd has been formed asjoint venture between NTPC, GAIL, MSEB HoldingCompany Limited and Indian Financial institutions withNTPC having a stake of 28.33% for taking over andoperating erstwhile Dabhol Power Project.Consolidated Financial Statements of NTPC Ltd, itsSubsidiaries and Joint Venture CompaniesThe consolidated Financial statements have beenprepared in accordance with Accounting Standards(AS)-21 –” Consolidated Financial Statements” andAccounting Standards(AS)27-”Financial reporting ofInterests in Joint Ventures” and are included in thisAnnual Report. A brief summary of the results on aconsolidated basis is given below:Rs millionFiscal 2006 Fiscal 2005Gross Revenue 296,124 265,125Profit before tax 60,510 61,075Profit after Tax 58,408 58,286Net Cash from operatingactivities 63,037 51,545CAUTIONARY STATEMENTStatements in the Management Discussion and Analysis andin the Directors’ Report, describing the Company’sobjectives, projections and estimates, contain words orphrases such as “will”, “aim”, “believe”, “expect”, “intend”,“estimate”, “plan”, “objective”, “contemplate”, “project” andsimilar expressions or variations of such expressions, are“forward-looking” and progressive within the meaning ofapplicable laws and regulations. Actual results may varymaterially from those expressed or implied by the forwardlooking statements due to risks or uncertainties associatedtherewith depending upon economic conditions,government policies and other incidental factors. Readersare cautioned not to place undue reliance on these forwardlookingstatements.Place: New DelhiDate: July 31, 2006For and on behalf of the Board of Directors(T. Sankaralingam)Chairman & Managing Director4230th Annual Report

REPORT ON CORPORATE GOVERNANCEAnnex-II to Directors’ ReportCorporate Governance is a process that aims to meetshareholders aspirations and societal expectations. It is acommitment that is backed by the fundamental belief ofmaximising shareholders value, transparency in functioning,values and mutual trust amongst all the constituents oforganisation. Its not a discipline imposed by a Regulator,rather a culture that guides the Board, management andemployees to function towards best interest ofstakeholders.In our Company, Corporate Governance philosophy stemsfrom our belief that corporate governance is a key elementin improving efficiency and growth as well as enhancinginvestor confidence and accordingly the CorporateGovernance philosophy has been scripted as under:“As a good corporate citizen, the Company is committedto sound corporate practices based on conscience,openness, fairness, professionalism and accountability inbuilding confidence of its various stakeholders in it therebypaving the way for its long term success.”We are making continuous efforts to adopt the bestpractices in corporate governance and we believe that thepractices we are putting into place for the company shallgo beyond adherence to regulatory framework. Ourcorporate structure, business and disclosure practices havebeen aligned to our Corporate Governance Philosophy.2. BOARD OF DIRECTORS2.1 Size of the BoardWe are a Government Company within the meaning ofsection 617 of the Companies Act, 1956 as the Presidentof India presently holds 89.5% of the total paid-up sharecapital. As per Articles of Association of the company,the powers to appoint Directors rest with the Presidentof India.In terms of the Articles of Association of the Companystrength of our Board shall not be less than four Directorsor more than twenty Directors. These Directors may beeither whole-time functional Directors or part-timeDirectors.2.2 Composition of the BoardAs on 31 st March 2006 the Board comprised twelvedirectors out of which six were whole-time functionaldirectors including the Chairman & Managing Director.Two directors are nominees of the Government of India.The Board also has four independent directors who havebeen appointed by the Government of India through asearch committee constituted for the purpose. Thedirectors bring to the Board wide range of experienceand skills. Brief profile of the Directors is set outelsewhere in the Annual Report.The listing agreements with stock exchanges stipulatethat half of the board members to be independentdirectors. The company has requested Government ofIndia to initiate necessary steps for appointment ofadequate number of independent Directors so thatBoard composition be in compliance with the ListingAgreement.Details regarding Independent Directors on the Boardof the Company during the year is as under:Period Requirement ActualApril 1, 2005 toAugust 26, 2005 4 1August 27, 2005 toJanuary 29, 2006 4 -January 30, 2006 toMarch 31, 2006 6 42.3 Age limit and tenure of DirectorsThe age limit of the Chairman & Managing Director andother whole-time functional directors is 60 Years.The Chairman & Managing Director and other whole timeFunctional Directors are appointed for a period of fiveyears from the date of taking over of charge or till thedate of superannuation of the incumbent, or till furtherinstructions from the Government of India, whicheverevent occurs earlier.Government Nominees representing Ministry of Power,Government of India retire from the Board on ceasingto be officials of the Ministry of Power.Independent Directors are appointed by theGovernment of India usually for tenure of three years.2.4 Board MeetingsThe meetings of the Board of Directors are normally heldat the Company’s registered office in New Delhi. TheCompany has defined procedures for meetings of theBoard of Directors and Committees thereof so as tofacilitate decision-making in an informed and efficientmanner.Thirteen Board Meetings were held during the financialyear 2005-06 on April 8, May 28, June 13, July 9, July27, August 12, September 10, September 27, October27, December 7, 2005, January 30, March 14, March 24,2006. Details of number of Board meetings attendedby Directors, attendance at last AGM, number of otherdirectorships/committee memberships (viz., AuditCommittee and Shareholders Grievance Committee asper SEBI’s Corporate Governance Code) held by themduring the year 2005-06 are tabulated below:30th Annual Report 43

S. Directors Meeting No. of Attendance Number Number ofNo. held during Board at the last of other Committeerespective Meetings AGM Directorships memberships intenures of Attended (held on held on companiesDirectors 23.09.2005) 31.03.06 on 31.03.06As Chairman As MemberFunctional Directors1 Sh. C.P.JainChairman & Managing Director 13 13 Yes 4 - -2 Sh. K.K. SinhaDirector (HR)(Upto 27.06.2005) 3 3 NA* NA* NA* NA*3 Sh. P.NarasimharamuluDirector (Finance)(Upto 31.07.2005) 5 5 NA* NA* NA* NA*4 Sh. T. SankaralingamDirector (Projects) 13 12 Yes 3 - -5 Sh. Chandan RoyDirector (Operations) 13 13 Yes 5 - -6 Shri R.S. SharmaDirector (Commercial) 13 12 Yes 6 - -7 Shri R.K. JainDirector (Technical)(From 05.05.2005) 12 10 Yes 2 - 18 Shri A.K. SinghalDirector (Finance)(From 01.08.2005) 8 8 Yes 9 - 3Non-executive Directors(Government Nominees)9 Sh. M.SahooJS&FA,Ministry of Power 13 12 Yes 11 1 310 Sh. Arvind JadhavJS (Thermal), Ministry of Power(Upto 11.07.2005) 4 2 NA* NA* NA* NA*11 Shri Harish ChandraJS(Thermal), Ministry of Power(From 11.07.2005) 9 7 No - - -Independent Directors12 Dr. R.K. PachauriDirector-General, TERI(Upto 26.08.2005 andfrom 30.01.2006) 8 1 NA* - - 113 Prof. Ashok MisraDirector IIT, Powai(From 30.01.2006) 2 2 NA* 1 - -14 Shri G.P. GuptaEx-CMD, IDBI(From 30.01.2006) 2 2 NA* 11 - 915 Shri M.I. BegEx-Chairman, CEA(From 30.01.2006) 2 2 NA* - - 1*NA indicates that concerned person was not a Director on NTPC’s Board on the relevant date.4430th Annual Report

2.5 Information placed before the Board of Directors, interalia, include:The Board has complete access to any informationwithin the Company. The information regularly suppliedto the Board includes:• Annual operating plans and budgets and anyupdates.• Capital Budgets and any updates.• Annual Accounts, Directors’ Report etc.• Quarterly results of the company.• Minutes of meetings of Audit Committee and otherCommittees of the Board.• The information on recruitment and promotion of Sr.Officers to the level of Executive Director which isjust below the Board level and of Company Secretary.• Fatal or serious accidents, dangerous occurrencesetc.• Operational highlights and substantial non-paymentfor goods sold by the company.• Major investments, formation of subsidiaries andJoint Ventures, Strategic Alliances etc.• Award of large contracts.• Disclosure of Interest by Directors about directorshipand committee positions occupied by them in othercompanies.• Quarterly Report on foreign exchange exposures.• Any significant development in Human Resources/Industrial Relations front like signing of wageagreement, implementation of Voluntary RetirementScheme, etc.• Non-Compliance of any regulatory, statutory or listingrequirements and shareholders services such as nonpaymentof dividend, delay in share transfer etc.• Short term investment of surplus funds.• Information relating to major legal disputes.• Other materially important information.3. COMMITTEES OF THE BOARD OF DIRECTORSThe Board has established the followingCommittees:-i) Audit Committee.ii) Shareholders’/Investors’ Grievance Committee.iii) Committee on Management Controls.iv) Contracts Sub- Committee.v) Project Sub Committee.vi) Investment/Contribution Sub-Committee.vii) Committee of the Board for allotment and postallotmentactivities of NTPC’s Securities.3.1 AUDIT COMMITTEEThe constitution, quorum, scope etc. of the AuditCommittee are in line with the Navratna Guidelines, theCompanies Act, 1956 and provisions of ListingAgreement.Scope of Audit Committee1. Discussion with Auditors periodically about internalcontrol systems and the scope of audit includingobservations of the auditors.2. Reviewing, with the management, the quarterly andhalf-yearly financial statements before submissionto the Board for approval.3. Ensure Compliance of Internal Control Systems.4. Oversight of the company’s financial reportingprocess and the disclosure of its financialinformation to ensure that the financial statementis correct, sufficient and credible.5. Noting appointment and removal of externalauditors. Recommending the fixation of audit feeof external auditors and also approval for paymentfor any other services.6. Reviewing, with the management, the annualfinancial statements before submission to theboard for approval, with particular reference to:a. Matters required to be included in theDirector’s Responsibility Statement to beincluded in the Board’s report in terms ofclause (2AA) of section 217 of the CompaniesAct, 1956;b. Changes, if any, in accounting policies andpractices and reasons for the same;c. Major accounting entries involving estimatesbased on the exercise of judgment bymanagement;d. Significant adjustments made in the financialstatements arising out of audit findings;30th Annual Report 45

e. Compliance with listing and other legalrequirements relating to financial statements;f. Disclosure of any related party transactions;g. Qualifications in the draft audit report.7. Reviewing, with the management, performance ofstatutory and internal auditors, the adequacy ofinternal control systems and suggestion forimprovement of the same.8. Reviewing the adequacy of internal audit function,including the structure of the internal auditdepartment, staffing and seniority of the officialheading the department, reporting structurecoverage and frequency of internal audit.9. Discussion with internal auditors any significantfindings and follow up there on. Review of internalaudit observations outstanding for more than twoyears.10. Reviewing the findings of any internal investigationsby the internal auditors into matters where there issuspected fraud or irregularity or a failure of internalcontrol systems of a material nature and reportingthe matter to the Board.11. Discussion with statutory auditors before the auditcommences, about the nature and scope of auditas well as have post-audit discussion to ascertainany area of concern.12. To look into the reasons for substantial defaults inthe payment to the depositors, debenture holders,shareholders (in case of non payment of declareddividends) and creditors.13. Review of observations of C&AG including statusof Government Audit paras.14. To review the functioning of the Whistle Blowermechanism, as and when the same is formulatedand made effective.15. Investigation into any matter in relation to the itemsspecified above or referred to it by the Board.ConstitutionThe Audit Committee has been constituted with themembership of:i) Joint Secretary & Financial Advisor (JS & FA), Ministryof Power (MOP), Government of India nominated onthe Board of NTPC andii)Three independent Directors to be nominated by theBoard from time to time.CompositionDuring the year the composition of the Audit Committeeunderwent changes from time to time. However,it became compliant with the Listing requirementsw.e.f. February 15 th 2006 consequent to the appointmentof Independent Directors by the Government of India.During the year details of composition of AuditCommittee has been as under:Period Membership IndependentDirectorsRequirement Actual Requirement ActualApril 1, 2005 to 3 3 2 1August 26, 2005August 27, 2005 to 3 2 2 0December 6, 2005December 7, 2005 to 3 3 2 0February 14, 2006February 15, 2006 to 3 4 3 3March 31, 2006As on 31 st March 2006, the Audit Committee comprisedthe following members:-Shri G.P. GuptaShri M. SahooDr. R.K. PachauriShri M.I. BegIndependent DirectorJS & FA, MOPIndependent DirectorIndependent DirectorSenior most independent Director on the Audit Committeeshall be Chairman of the Audit Committee.Director (Finance), Head of Internal Audit and the StatutoryAuditors are invited in the Audit Committee Meeting forinteracting with the members of the committee. Seniorexecutives from various functions are also invited as andwhen required to provide necessary inputs to thecommittee.Meetings and AttendanceSix meetings of the Audit Committee were held during thefinancial year 2005-06 on April 20, June 13, July 27, August11, October 27, 2005 and January 30, 2006.The details of the meetings of Audit-Committee attendedby the members are as under:-4630th Annual Report

Members of Meetings held MeetingsAudit Committee during his tenure attendedShri M. Sahoo 6 6Dr. R.K. Pachauri(upto 26.08.2005 4 4and from 15.02.2006 )Shri Arvind Jadhav(upto 11.07.2005) 2 1Shri Harish Chandra(11.07.2005 to 15.02.2006) 4 3Shri T. Sankaralingam(07.12.2005 to15.02.2006) 1 1Shri G.P. Gupta(from 15.02.2006)No meetings wereShri M.I. Begheld during their tenure(from 15.02.2006)Director (Finance), Head of Internal Audit were present inall Audit Committee Meetings held during the year underreview as invitees as per requirement of Listing Agreement.3.2 SHAREHOLDERS’/INVESTORS’ GRIEVANCE COMMITTEEThe Company has constituted ‘Shareholders’ / Investors’Grievance Committee’.Scope of the CommitteeThis Committee looks into redressal of Shareholders’ andInvestors’ complaints like delay in transfer of shares, nonreceiptof Balance Sheet, non-receipt of declared dividendetc. as well as complaints/grievances of the Bondholdersand also of the Depositors under the Public Deposit Scheme.ConstitutionThe Committee has been constituted with themembership of:i) One Nominee Director of Ministry of Power representedon the Board of NTPCii) Director (Finance), NTPC andiii) Director (HR) or Director (Technical), NTPC.CompositionAs on 31 st March 2006, this committee comprised thefollowing Directors :Shri M. SahooGovernment NomineeShri R.K. JainDirector (Technical)Shri A.K. Singhal Director (Finance)Shri M. Sahoo is the Chairman of the Committee.Meeting and AttendanceTwo meeting of the Shareholders’/Investors’ GrievanceCommittee were held during the financial year 2005-06 onJuly 27, 2005 and February 16, 2006.Members of Meetings MeetingsShareholders / Investors held attendedGrievance CommitteeShri M. Sahoo 2 2Shri R.K. Jain 2 1Shri A.K. Singhal 2 2Name and designation of Compliance OfficerShri A.K. Rastogi, Company Secretary is the complianceofficer in terms of Clause 47 of the Listing Agreement.Investor GrievancesDuring the financial year ending 31 st March 2006, Companyhas attended its investor grievances expeditiously exceptfor the cases constrained by disputes or legal impediments.The status of the complaints during the year are asunder:ParticularsOpening Received Resolved PendingBalance during during as onthe year the year 31.03.06SEBI / Stock - 269 269 NILExchange complaintsOther IPO related 26 2307 2331 2complaintsOther Dividend 8 5084 5085 7related complaintsTotal 34 7660 7685 9Investor complaints shown pending as on March 31, 2006have been attended subsequently.Number of pending share transfersAs on March 31, 2006, no share transfer request waspending. Share Transfers have been effected during the yearwell within the time prescribed by the Stock Exchangesand a certificate to this effect duly signed by a PracticingCompany Secretary has been furnished to StockExchanges.3.3 COMMITTEE ON MANAGEMENT CONTROLSOn being conferred enhanced autonomy by theGovernment of India under ‘Navratna Guidelines’, thiscommittee was constituted for establishing transparent andeffective system of internal monitoring. This Committee,inter alia, reviews the Management Control Systems,significant deviations in project implementation andconstruction, operation and maintenance budgets etc.As on March 31, 2006, the committee comprised thefollowing Directors:30th Annual Report 47

Shri M. SahooShri Chandan RoyShri A.K. SinghalProf. Ashok MisraGovernment nomineeDirector (Operations)Director (Finance)Independent Director3.4 COMMITTEE FOR CONTRACTSThis Committee has been constituted for approval of awardof contracts of value exceeding Rs. 25 crore but notexceeding Rs.100 crore and consultancy assignmentsexceeding Rs. 2 crore each. As on March 31, 2006, theCommittee for Contracts comprised the following members:Shri C.P.JainShri T. SankaralingamShri M.SahooShri R.K. JainShri Harish ChandraShri A.K. SinghalChairman & Managing DirectorDirector (Projects)Government nomineeDirector (Technical)Government nomineeDirector (Finance)3.5 PROJECT COMMITTEEThe Project Committee examines and makesrecommendations to the Board on proposals for Investmentin New/Expansion Projects and Feasibility Reports of newprojects. As on 31st March 2006, the Committee comprisedthe following members:Shri C.P.JainShri T. SankaralingamShri M. SahooShri Chandan RoyShri R.S. SharmaShri R.K. JainShri Harish ChandraShri A.K. SinghalShri M.I. BegChairman & Managing DirectorDirector (Projects)Government nomineeDirector (Operations)Director (Commercial)Director (Technical)Government nomineeDirector (Finance)Independent Director3.6 INVESTMENT/CONTRIBUTION COMMITTEEThe terms of reference of Investment/ContributionCommittee of the Board is for deployment of surplus fundsas per Govt. Guidelines issued from time to time, andacceptance of Bonds/Debt Instruments in lieu of settleddues with State Electricity Boards or State TransmissionCompanies and deciding terms and conditions thereof.This committee also approves contribution/donation fornational, public, benevolent or charitable cause, purposeor object or other funds not directly related to the businessof the company or welfare of its employees between Rs. 5lakh to Rs. 20 lakh subject to maximum limit of Rs. 1 crore ina year.As on 31st March 2006, the Committee comprised thefollowing Members:Shri C.P.JainShri Chandan RoyShri A.K. SinghalChairman & Managing DirectorDirector (Operations)Director (Finance)In case of investment of funds and contribution mattersDirector (HR) and in case of Commercial matters Director(Commercial) are co-opted in the meeting.3.7 COMMITTEE FOR ALLOTMENT AND POST-ALLOTMENTACTIVITIES OF NTPC’S SECURITIESThe Committee has been constituted for Allotment andPost-allotment activities of Company’s Securities. The scopeof work of this committee is allotment, issue, Certificate/Letter of allotment, transfer, transmission, re-materialisation,issue of duplicate certificates, consolidation/split of NTPC’sdomestic and foreign Securities. As on 31st March 2006,the Committee comprised the following Members:Shri T. SankaralingamShri A.K. SinghalShri Chandan RoyShri R.K. JainDirector (Projects)Director (Finance)Director (Operations)Director (Technical)3.8 REMUNERATION COMMITTEE/ REMUNERATION OFDIRECTORSOur Company, being a Central Public Sector Undertaking,the appointment, tenure and remuneration of Directors aredecided by the President of India. Hence, the Board doesnot decide remuneration of the Directors. IndependentDirectors are paid only sitting fees at rate fixed by the Boardwithin the ceiling fixed under the Companies Act, 1956and approved by the Government for attending the BoardMeetings as well as Committee Meetings.Details of remuneration of functional Directors of thecompany:4830th Annual Report

(in Rupees)Sl. Name of the Director Salary Benefits Bonus/ Performance TotalNo. Commission LinkedIncentives1 Sh. C.P.Jain 1,741,471 282,730 - 149,036 2,173,2372 Sh. K.K. Sinha (upto 27.06.2005) 716,467 184,214 - 49,446 950,1273 Sh. P.Narasimharamulu (upto 31.07.2005) 901,139 153,078 - 84,396 1,138,6134 Sh. T. Sankaralingam 597,912 170,319 - 163,130 931,3615 Sh. Chandan Roy 576,600 691,211 - 152,877 1,420,6886 Sh. R.S. Sharma 868,490 182,662 - 155,619 1,206,7717 Shri R.K. Jain (From 05.05.2005) 722,928 116,138 - 123,352 962,4188 Shri A.K. Singhal (From 01.08.2005) 514,192 78,124 - 103,796 696,112Performance linked incentives paid is based on the incentive scheme applicable to all employees of the company.Details of payments towards sitting fees to independent Directors during the year 2005-06 are given below:(in Rupees)Name of Part-time non-official Directors Sitting Fees TotalBoard Meeting Committee MeetingDr. R.K. Pachauri(Upto 26.08.2005 and From 30.01.2006) 10,000 40,000 50,000Prof. Ashok Misra (From 30.01.2006) 20,000 10,000 30,000Shri G.P. Gupta (From 30.01.2006) 20,000 - 20,000Shri M.I. Beg (From 30.01.2006) 20,000 10,000 30,0004. GENERAL BODY MEETINGSAnnual General MeetingDate, time and location where the last three Annual General Meetings were held are as under:Date September 24, 2003 July 29, 2004 September 23, 2005Time 3.00 P.M 2.00 P.M. 10.00 A.M.Venue NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Siri Fort Auditorium Complex, AugustLodi Road, New Delhi -110 003 Kranti Marg, New Delhi – 110 049Special NIL NIL Change of name of the CompanyResolutionfrom National Thermal PowerCorporation Limited to NTPC LimitedSpecial Resolution passed through Postal BallotCompany has passed a Special Resolution to amend theexisting Clause 4 of the Main Objects under the ObjectClause of the Memorandum of Association of the Companyby bifurcating it in two separate sub-clauses in a moreenlarged and explicit manner for undertaking diversifiedrange of fuel related activities. Notice dated 23 rd April 2005was served to all shareholders for voting through postalballot as per provisions of section 192A of the CompaniesAct, 1956, read with the Companies (Passing of theResolution by Postal Ballot) Rules, 2001 and said specialresolution was approved by the Shareholders on 26 th May2005.Ms. Madhurima Mukherjee, partner, M/s. Amarchand &Mangaldas & Suresh A. Shroff & Co. was appointed asscrutinizer to conduct Postal Ballot. Out of total 40,520 BallotPapers received 37,867 (representing 99.90% of total votescast) voted in favour of the resolution.No special resolution is proposed to be passed throughPostal Ballot at the Annual General Meeting.30th Annual Report 49

5. DISCLOSURESThe transactions with related parties contain (i) payment tocompanies under Joint Venture Agreement and on accountof contracts for works/ services, (ii) remuneration to keymanagement personnel and (iii) equity contribution tosubsidiaries, which are not in nature of potential conflictswith interest of the company at large. Details of related partytransactions are included in the Notes to the Accounts asper Accounting Standard – 18 issued by the Institute ofChartered Accountants of India.The company has complied with all the requirements ofthe Listing Agreement with Stock Exchanges as well asRegulations and Guidelines prescribed by SEBI. There wereno penalties or strictures imposed on the company by anystatutory authorities for non-compliance on any matterrelated to capital markets, during the last three years.The Company has adopted all suggested items to beincluded in the Report on Corporate Governance.Information on adoption (and compliance) / non-adoptionof the non-mandatory requirements is at Annex-1.6. MEANS OF COMMUNICATIONThe Company communicates with its shareholders throughits Annual Report, General Meetings and disclosures throughweb site.The Company also communicates with its institutionalshareholders through a combination of analysts briefing andindividual discussions as also participation at investorconferences from time to time.Information and latest updates and announcementregarding the company can be accessed at company’swebsite: www.ntpc.co.in including the following:• Quarterly / Half-yearly / Annual Financial Results• Shareholding Pattern• Transcripts of conferences with analysts• Corporate disclosures made from time to time to StockExchangesQuarterly resultsNewspapersDate of publication of results for thequarter ended30.06.2005 30.09.2005 31.12.2005Financial Express 28.07.2005 28.10.2005 31.01.2006Jansatta 28.07.2005 28.10.2005 31.01.2006These results are also displayed at Company’s websitewww.ntpc.co.in• Official Releases and PresentationsThe Company’s official news releases, other press coverage,presentations made to institutional investors or to theanalysts were also made on the website.In order to make the general public aware of theachievements of the company, a press conference is heldafter the close of the financial year where the highlights ofthe company during the year are briefed to the Press forinformation of the stakeholders with prior intimation to theStock Exchanges.7. CODE OF CONDUCTThe Board of Directors has laid down two separate Codesof Conduct - one for Board Members and another for SeniorManagement Personnel in alignment with Company’s Visionand Values to achieve the Mission & Objectives and aimsat enhancing ethical and transparent process in managingthe affairs of the Company. A copy each of the Codes ofConduct is available at the website of the Company.Based on the affirmation received from Board Membersand Senior Management Personnel, declaration regardingcompliance of Codes of Conduct made by the Chairman &Managing Director is given below:All the members of the Board and Senior ManagementPersonnel have affirmed compliance of respective Codeof Conduct for the financial year ended on March 31, 2006.(T. Sankaralingam)Chairman & Managing Director8. Code of Insider TradingIn pursuance of the Securities Exchange Board of India(Prohibition of Insider Trading) Regulations, 1992 the Boardhas laid down “Code of Conduct for Prevention of InsiderTrading” with the objective of preventing purchase and/orsale of shares of the Company by an Insider on the basis ofunpublished price sensitive information. Under this Code,Insiders (Officers and Designated Employees) areprevented from dealing in the Company’s shares duringthe closure of Trading Window. To deal in Securities,beyond limits specified permission of Compliance Officeris required. All Directors/Officers/Designated Employeesare also required to disclose related informationperiodically as defined in the Code, which in turn, is beingforwarded to Stock Exchanges, wherever necessary.Company Secretary has been designated as ComplianceOfficer for this Code.9. SHAREHOLDERS’ INFORMATIONi) Annual General MeetingDate : September 19, 2006Time : 11.30 a.m.Venue : NDMC Indoor Stadium, Talkatora Garden,New Delhi – 110 001ii) Financial Calendar for FY 2006-075030th Annual Report

ParticularsDateAccounting Period April 1, 2006 to March 31, 2007Unaudited financial results for the Announcement within a month from thefirst three quartersend of each quarterFourthQuarter Results Announcement of Audited Accounts on or before June 30, 2007AGM (Next year)September 2007 (Tentative)iii) Book ClosureThe Register of Members and Share Transfer Books of the Company will remain closed from September 1, 2006to September 15, 2006 (both days inclusive).iv) Payment of DividendThe Board of Directors of the Company has recommended payment of a final Dividend of 8% (Rs. 0.8 per share)for the financial year ended March 31, 2006 in addition to the Interim Dividend of 20% (Rs. 2 per share) paid onFebruary 27, 2006.The record date for the payment of Dividend is August 31, 2006.v) Dividend HistoryYear Total paid-up Total amount of Date of AGM in Date of paymentcapital dividend paid which dividend(Rs. in crore) (Rs. in crore) was declared2000-01 7812.55 747.00 25.09.2001 26.09.20012001-02 7812.55 707.93 23.09.2002 25.09.20022002-03 7812.55 708.00 24.09.2003 24.09.20032003-04 7812.55 1082.30 29.07.2004 30.07.20042004-05 8245.46 1978.90 23.09.2005 27.09.200512.02.2005* 10.03.20052005-06 8245.46 1649.09 30.01.2006* 27.02.2006* Date of Board Meeting for interim dividend.vi) Listing on Stock ExchangesNTPC equity shares are listed on the following Stock Exchanges:National Stock Exchange of India LimitedBombay Stock Exchange LimitedScrip Code: NTPC EQ Scrip Code: 532555Stock Code : ISIN – INE733E01010vii)Market Price - NSEMonth High (Rs.) Low (Rs.) Closing (Rs.)April 99.00 80.00 82.15May 86.00 81.15 83.50June 87.70 82.00 83.00July 97.90 82.95 93.80August 102.65 93.20 102.05September 109.75 99.00 105.95October 109.75 91.80 97.15November 107.75 95.95 104.25December 113.90 101.00 112.00January 118.00 110.20 114.50February 135.00 114.60 131.15March 142.00 130.55 134.10viii) Market Price Data –BSEMonth High (Rs.) Low (Rs.) Closing (Rs.)April 88.30 80.90 82.20May 86.00 80.10 83.45June 88.10 82.20 83.05July 97.85 83.40 93.85August 102.50 93.00 102.05September 109.50 98.05 106.00October 110.25 91.80 97.15November 107.70 95.10 101.40December 113.90 102.50 112.10January 117.40 109.50 114.55February 135.60 114.60 131.10March 142.00 130.00 134.0030th Annual Report 51

ix) Performance in comparison to indices xii) Distribution of ShareholdingShares held by different categories of shareholders andaccording to the size of holdings as on 31 st March 2006are given below:x) Registrar and Transfer AgentKarvy Computershare Pvt. LtdKarvy House, 46, Avenue 4, Street No. 1Banjara Hills, Hyderabad – 500 034Phone No. : 040-2331 2454Fax No. : 040-2331 1968Email-id : ntpcipo@karvy.comxi) Share Transfer SystemEntire share transfer activities under physical segmentare being carried out by Karvy Computershare PrivateLimited. The share transfer system consists of activitieslike receipt of shares along with transfer deed fromtransferees, its verification, preparation of Memorandumof transfers etc. Shares transfers are approved by Sub-Committee of the Board for Allotment and Postallotmentactivities of NTPC’s Securities.Pursuant to clause 47(C) of the Listing Agreement withStock Exchanges, certificate on half-yearly basisconfirming due compliance of share transfer formalitiesby the Company from Practicing Company Secretaryhave been submitted to Stock Exchange withinstipulated time.According to Sizea. Distribution of shareholding according to size, % ofholding as on March 31 2006:Number Number % of Total No. % ofof shares of share share of shares sharesholders holders1-5000 596434 93.51% 99170377 1.20%5001-10000 23399 3.67% 17859826 0.22%10001-20000 10052 1.58% 14468899 0.18%20001-30000 3348 0.52% 8265947 0.10%30001-40000 1191 0.19% 4200064 0.05%40001-50000 914 0.14% 4230227 0.05%50001-100000 1214 0.19% 8687335 0.11%100001and above 1252 0.20% 8088581725 98.10%Total 637804 100% 8245464400 100%b. Shareholding pattern as on March 31, 2006Category Total no. of shares % to EquityGOI 7379634400 89.50FIIs 582968040 7.07Indian Public 167152659 2.03Banks & FI 45792086 0.56Private Corp. Bodies 24977300 0.30Mutual Funds 38898556 0.47NRI / OCBs 2805654 0.03Others 3235705 0.04Total 8245464400 100.00c. Major ShareholdersDetails of Shareholders holding more than 1% of thepaid-up capital of the Company as on March 31, 2006are given below:5230th Annual Report

Name of No. of % to Paid- CategoryShareholder Shares up CapitalGovernmentof India 7379634400 89.50 GovernmentCapitalResearchMNGT.Co. 115168548 1.40 ForeignA/C Capt.InstitutionalWorldInvestorGrowth &incomefundxiii) Dematerialisation of SharesThe shares of the Company are in compulsory dematerialsedsegment and are available for trading system of both NationalSecurities Depository Ltd. (NSDL) and Central DepositoryServices (India) Limited (CDSL).Secretarial Audit Report for reconciliation of the sharecapital of the Company obtained from Practicing CompanySecretary have been submitted to Stock Exchange withinstipulated time.No. of shares held in dematerialized and physical modeNo. of shares % of totalcapital issuedHeld indematerializedform in CDSL 19162138 0.23Held indematerializedform in NSDL 8226253910 99.77Physical 48352 0.00Total 8245464400 100.00The names and addresses of the Depositories are as under:1. National Securities Depository Ltd.Trade World, 4 th FloorKamala Mills CompoundSenapathi Bapat Marg,Lower Parel, Mumbai-400 0132. Central Depository Services (India) LimitedPhiroze Jeejeebhoy Towers28 th Floor, Dalal Street, Mumbai-400 023xiv) Outstanding GDRs/ADRs/Warrants or any Convertibleinstruments, conversion date and likely impact onequityNo GDRs/ADRs/Warrants or any Convertible instrumentshas been issued by the Companyxv) Locations of NTPC plantsi) Address for correspondence:NTPC Bhawan, SCOPE Complex7, Institutional Area, Lodi Road,New Delhi – 110003The phone numbers, fax numbers and e-mail ids forcommunication are given below:Telephone No. Fax No.Registered Office 2436 0100 2436 1018Investor Services 2436 7072 2436 1724Departmente-mail idisd@ntpc.co.inPublic Spokesperson 2436 9335 24365742Mr. A.K. Kundu,Executive Director(Finance)e-mail idakkundu@ntpc.co.inCompany SecretaryMr. Anil Kumar Rastogi 2436 0071 2436 0241e-mail idakrastogi@ntpc.co.inFor and on behalf of Board of DirectorsPlace: New DelhiDate: 31 st July, 2006(T. Sankaralingam)Chairman & Managing Director30th Annual Report 53

Annex-1Non-Mandatory requirements1. The Board: The Company is headed by an executive Chairman. No Independent Director has been appointed for theperiod exceeding, in the aggregate, a period of nine years, on the Board of the company.2. Remuneration Committee: This aspect has been dealt elaborately in para 3.8 of this Report.3. Shareholders' rights: Separate half-yearly report has not been sent to each household of shareholders. However, thefinancial results for the half-year ended September 30, 2005 were published in Financial Express and Jansatta datedOctober 28, 2005 and also put up on website of the company.4. Audit Qualification: The financial statement for the year 2005-06 has no audit qualifications.5. Training to Board Members: Board Members are deputed to attend various training programmes, seminars, conferences,meets etc. from time to time.6. Mechanism for evaluating non-executive Board Members: Not yet adopted by the Company.7. Whistle Blower Policy: The Company has not adopted/introduced Whistle Blower Policy. However, the Company has notdenied access to any employee to approach the Management.To the MembersNTPC LimitedWe have examined the compliance of conditions of corporate governance by NTPC Limited, for the year ended on March 31,2006 as stipulated in clause 49 of Listing Agreements in respect of Equity Shares of the said Company with Stock Exchanges.The compliance of conditions of corporate governance is the responsibility of the management. Our examination is limited toprocedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of theCorporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.In our opinion and to the best of our information and according to the explanations given to us, we certify that, except thecomposition of the Board of Directors and Audit Committee as reported in para 2.2 and para 3.1 of Report on CorporateGovernance, the Company has complied with the conditions of Corporate Governance as stipulated in the Listing Agreements.We further state that, such compliance is neither an assurance as to the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairs of the Company.For Kalani & Co.Chartered Accountants(K.L. Jhanwar)PartnerM. No. 14080For Umamaheswara Rao & Co.Chartered Accountants(G. Sivaramakrishna Prasad)PartnerM. No. 24860For T.R. Chadha & Co.Chartered Accountants(Sanjay Gupta)PartnerM. No. 87563For Amit Ray & Co.CharteredAccountants(Amitava Ray)PartnerM. No. 06947For S.N. Nanda & Co.Chartered Accountants(S.N. Nanda)PartnerM.No. 5909Place: New DelhiDate: 31 st July, 20065430th Annual Report

Annex-III to Directors’ ReportPARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORTOF 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 2005-2006 in different areas are as under:ENERGY AUDITSDuring the year 2005-06, 103 in-house energy audits in the areas of auxiliary power consumption, water balance,cooling water system, compressed air, coal handling plant, MGR, Lub Oil System, Air Conditioning, ash handlingsystem, GT compressors, GT open cycle efficiency, WHRB performance, lighting, thermal insulation etc. were carriedout at different stations of NTPC. In addition, a workshop on Energy Conservation Potential in Air Pre-heaters and DraftSystem was also conducted at NTPC- Dadri. During the year, bids for carrying out energy audits of 14 external powerutilities and other industries were also submitted through the Consultancy Wing of NTPC.Till now 446 executives of NTPC have passed the Energy Auditors Examination of Bureau of Energy Efficiency tobecome accredited energy auditors. In addition, 9 executives have also qualified to be the Certified Energy Managers.The details of various measures taken during the year under various heads of energy conservation are as below:AUXILIARY POWER CONSUMPTIONOperation of CW pumps & cooling towers based on ambient conditions and actual requirement of plants (at Anta,Simhadri, Kawas, Dadri-gas & Coal and Unchahar etc) monitoring of running hours for auxiliary cooling water pumps,air compressors etc (at Farakka, Kahalgaon, Talcher Thermal, Unchahar, Rihand, Simhadri, Vindhyachal etc.), use ofvapour absorption system for air conditioning (at Ramagundam, Korba, Farakka, Vindhyachal), use of energy savers forwindow air conditioners (at Talcher Thermal, Singrauli, Kawas, Korba etc), polymer coating of pump internals to reducefriction and power consumption (at Kawas etc) are some of the measures taken to reduce APC.LIGHTINGInstallation of timer switches in plant and Township lighting (at Anta etc), use of energy savers (at Kawas etc), replacementof conventional GLS lamps and conventional FLTs with CFLs and conventional FLTs with energy efficient tube lights (atDadri-gas etc), Lighting voltage optimization, replacement of HPMV Lamps with HPSV lamps and cleaning of lightfittings (at Unchahar, Singrauli etc), use of electronic ballasts (at Gandhar & Kayamkulam etc) use of CFLs, HPSV lamps,metal halide lamps and energy efficient tube lights (at Singrauli etc).HEAT ENERGYRe-use of recovered coal from settling tank & yard (at Dadri-Coal etc), repair of thermal insulation and cladding (atFarakka, Unchahar, Singrauli, Ramagundam, Badarpur etc), external cleaning of WHRB tubes with ammonia (at Auraiyaetc), conco tube cleaning of condenser tubes (at Talcher Thermal etc).FUEL OILUsing MPSP internals in coal mills and reduction in unit start-up and shut-down time (at Farakka etc),LUBRICANTSOn-line centrifuging mill gear box lub. oil (at Kahalgaon etc), use of waste lub.oil for marshalling yard fittings works (atBadarpur etc), Attending lub oil leakages and changing / topping up oil on actual condition basis (at Badarpur andFarakka etc), recycling of used up oils for reuse (at Kahalgaon, Talcher Thermal and Vindhyachal etc).DM WATERAttending DM water / steam leakages (at Kahalgaon etc), diverting drip of chimney steam condenser to hot well (atTalcher Thermal etc), Installation of SWAS recycle system (at Kawas etc).MISCELLANEOUS WATERCollecting waste water in the sump and re-pumping it to ash water sump (at Talcher Thermal etc), maintaining appropriateCOC in circulating water system (at Jhanor-Gandhar), bringing clarified water headers from underground level toground level for timely detecting and attending water leakages (at Talcher Thermal etc).30th Annual Report 55

DIESEL / MGR FUELAdoption of 4 rake operation from 3 rake operation (at Korba), hauling of empty rake with a single loco (at Korba),monitoring and reducing of idle running of locos and dozers, monitoring cycle time of MGR (at Dadri-Coal & Rihand etc).NON CONVENTIONAL ENERGYUsing solar water heaters in canteen and guest houses (Talcher Thermal etc).b) Additional investments and proposals for reduction in consumption of energy:Provision of Rs. 26.5 millions has been kept in BE 2006-07 for different energy conservation schemes like :- Energy meters, power analysers and other portable energy audit instruments and on-line energy monitoringsystem- Vapor absorption system for Air Conditioning- Energy efficient devices in lighting- Solar water heaters, solar PV lighting and solar PV pumps.c) Impact of measures taken for energy conservation :Savings achieved during 2005-2006 on account of specific efforts for energy conservation :-S.No Area/Activities SavingsEnergy Unit Qty. of units Rs. (Million)(1) Electricals (including 4.995 MU savings in lighting) MU 126.96 174.780(2) Heat Energy (equivalent MT of coal) MT 78264 89.812(3) Fuel Oil KL 1767.3 35.35(4) D. M. Water MT 90384.5 1.54(5) Miscellaneous Water M.Cu.M 4.21 16.31(6) Diesel/MGR Fuel KL 922.6 31.07(7) Lubricants KL 75.68 4.35(8) Miscellaneous/NCES 0.06Grand Total 353.272Savings achieved during 2004-05 was Rs. 414 MillionB. TECHNOLOGY ABSORPTIONEfforts made towards technology as per Form-B(Form-B is enclosed)C. FOREIGN EXCHANGE EARNINGS AND OUTGOActivities relating to export initiative taken to increase export, development of new export markets for products andservices and export plan:Total Foreign Exchange Used/EarnedRs./Million1. Foreign Exchange Outgoa) Value of Imports calculated on CIF basis:Capital Goods 6380Spare Parts 518b) Expenditure:Professional and Consultancy Charges 10Interest 1849Others 26182. Foreign Exchange EarnedConsultancy 3Interest 3Others 15630th Annual Report

Form-BFORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION OF TECHNOLOGYResearch & Development (R&D)1.0 Specific areas in which R&D activities have been carried out during 2005- 06:a. Rejuvenation studies of aged corrugated liner using solution heat treatment & analysis of microstructure &mechanical properties.b. Process optimization of trans-esterification for bio-diesel preparation by villagers from non-edible oil.c. Study of metallurgical degradation of blade coating in gas turbines.d. Development of technique for rapid assessment of integrity of paints/organic coatings.e. Number of visits were made by R&D Experts to various stations for condition assessment, failure analysis and tosolve/analyse their specific problems, and help them in increasing the availability & reliability of the units.f. R&D has developed Fly-Ash based product for part replacement of cement to be used for general buildingconstruction and has also developed fly-ash based Utensil Cleaning Powder which also contains Satritha as anorganic content.g. R&D has signed a MOU with BARC for developing software for on-line blade failure & shaft crack detection inturbine generators.h. Problem of high exit gas temperature at Auraiya has been studied and root cause analysis has been carried out.Recommendations for controlling high exit gas temperatures have been given. Fouled HRSGs were cleanedusing alkaline water washing procedure developed by R&D.i. Detailed investigations are being carried out to improve the performance of cooling towers and chemicaltreatments based on non-proprietary chemicals are being developed for Talcher Kaniha, Unchahar, Gandharand Auraiya.j. RSOP project assigned by Ministry of Power through CPRI, on “Ways and means of estimating and controllingcolloidal silica in raw & DM water” is on the verge of completion.k. Environmental Appraisal of all the operating stations assessing air & water quality, condition of monitoringequipment, etc has been carried out.l. R&D provided Consultancy for oxide characterization & solvent selection for acid cleaning of boilers at IP Station,Delhi; Panipat Thermal station, Haryana; Lehra Mohabbat Station, Punjab; Muzzaffarpur station, etc2.0 Benefits derived as a result of above R&D:R&D activities as carried out have helped in increasing the availability, reliability and efficiency of the stations. Developmentof value added products from flyash will help in generating new markets and thus help in increasing its utilization.Process of trans-esterification as developed will make available bio-diesel fuel for distributed generation. Rejuvenationstudies will help in refurbishment of GT components thereby increasing their life. Consultancy provided to variousutilities in terms of characterization of oxides selection of solvent for chemical cleaning of boiler tubes will help theutilities in improving the efficiency of boilers.The timely and scientific failure analysis of various components helped in identifying the cause of failure and thus providingnecessary input for taking corrective action in preventing re-occurrence of similar failures thereby increasing the availabilityof power plant equipment.3.0 Future Plans1. It is intended to appoint Indian Institute of Science (IISc) Bangalore as consultants for up-gradation of R&DCentre to make it World –class. The Consultants will carry out benchmarking & gap analysis, recommend theCentres of Excellence to be created, and prepare the road map.30th Annual Report 57

2. R&D will be working with BARC for hardware procurement & software development for developing techniquesfor online blade damage detection & shaft crack detection.3. R&D will work on application of techniques of fracture toughness through Small Punch & coating assessmentthrough eddy current and for further reducing boiler tube failures by employing predictive method of BoilerTube Failure at critical locations.4. Four research projects will also be undertaken, namely - Weldability study of Hot gas path components made ofInconel – 617, development of testing procedure for eddy current examination of steam turbine blades in insitucondition, to study the effectiveness of ion-exchange resin for controlling acidity levels in FRF system w.r.t.fuller earth and to resolve the problem of deposition and fouling of cooling tower fills and cooling water systemof Talcher Kaniha and Gandhar stations.4.0 Expenditure of R&D(Rs./Millions)2005-06 2004-2005a) Capital 5 3b) Recurring 58 42c) Total 63 45d) Total R&D expenditure as a percentage of total turnover 0.02412% 0.0199%5.0 Technology Absorption, Adaptation and InnovationParticulars of some of the important technology imported during last five (5) years are as follows:S.No. Technology Year Stations1. Performance Analysis, Diagnostics and Optimization 2004 Implemented in Simhadri will beSoftware calculates the Equipment Performance andcontinued in future Projects.deviation and deviation from ideal conditions, togetherwith reason for shortfall, indicating losses in Rupee terms.This package also calculates set point, which will result inoptimized Heat Rate or Specific Coal consumption.2 Super critical Technology with 247 Kg/cm 2 Steam Pressure 2004 Being implemented at Sipatand 540/568 MS/RH steam temperature is adopted for its(3x660 MW), Barh (3x660MW)improvement in thermal efficiency and reduced emissionand North Karanpura STPP.of green house gasses.3 Boiler Flame Analysis System (BFAS) observes the flame 2005 Implemented in Simhadri.intensity and regulates the secondary air flow for achievingoptimized combustion.4 765 KV Switchyard & associated equipments including 2005 Being implemented at Sipat24KV/ 765KV Generator Step up (GSU) Trans-former.5 Switchyard Control & Data Acquisition (SCADA) System 2005 - do -based on universal protocol IEC 61850.For and on behalf of the Board of DirectorsPlace: New DelhiDated: July 31, 2006(T. Sankaralingam)Chairman & Managing Director5830th Annual Report

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT, 1956Annex- IV to Directors’ ReportName Designation and Remuneration Qualification Date of Exp. Age Last Employment RemarksNature of duties Commencement (Yrs.) (Yrs.) heldof Employment1. 2. 3. 4. 5. 6. 7. 8.Employed for whole of the YearNILEmployed for the part of the YearBajaj H L Executive Director 917415 M.Sc. Elec. Engg. 31.12.87 17 59 BHEL ResignedChohdda S P Mgr. (PE), CC 712145 Dip. (Mech) 21.12.86 19 60 Inspector of Engg. Deptt. RetiredGupta O P GM (Fin.), CC 825424 SAS 28.12.82 23 60 Scooter India Limited RetiredHirani M GM (R&D), CC 1010344 BE (Elect), MBA 17.11.77 28 60 Renusagar Power Plant RetiredKalia Om Prakash GM (ES), CC 3206192 M.Sc. (Mech. Engg.) 09.10.80 25 56 EIL VRSKaushik A K Dy. Mgr. (F&A), CC 708240 B.Com. 01.09.79 26 56 BHEL ExpiredNarasimharamulu P Director (Finance) 1126460 CA, LLB, M.Com. 12.09.79 26 60 Indo Nippon Precision RetiredBearings Ltd.Pattanayak N G Sr. Mgr. (AUD), CC 2004629 B.Tech. 23.02.84 21 56 HCL VRSRaghavaiha B V S GM (F&A) , CC 1121282 FCWA 06.02.86 19 60 Ballarpur Industries Limited RetiredRawat Ganesh Singh GM, CC 993257 PGDPM 01.02.80 26 60 RetiredSharma D S ED (OS) , CC 1258293 BE, ME 15.04.82 23 60 Tata Consult. Engg. RetiredSinha K K Director (HR) 972248 B.A. (Hons.) Economics, 05.07.84 21 58 HSCL ResignedM.A. Labr. & Social Welfr.Singh Mohar AE (PE-C&I) , CC 511644 ITI (D.Man) 01.03.80 25 60 CEA RetiredVadhera Sudhir AGM (CP), CC 390992 B.Sc. Mech. Engg., PG Dip. 01.12.77 28 50 Escorts Employees ResignedComp. Sc., PG Dip.Bus. Mgt. Ancillaries LimitedNotes:1 Persons named above were Directors/ employees of the Company.2 Remuneration includes salary, allowances, leave encashment, leave travel concession, payment for subsidized leased accommodation, reimbursement ofmedical expenses to employees and employer’s contribution to Provident Fund and other funds. However, it does not include the monetary value of themedical treatment provided in the Company’s dispensaries/hospitals at Project sites, since it can not be quantified employees-wise. In addition, theemployees are entitled to gratuity/group insurance in accordance with Company’s Rules.3 None of the employees listed above is related to any director of the company.4 Remuneration mentioned above is inclusive of retirement /separation benefits paid during the year and is not indicative of any regular remunerationstructure of Directors/ employees of the CompanyFor and on behalf of the Board of DirectorsPlace: New Delhi (T. Sankaralingam)Date: July 31, 2006 Chairman & Managing Director30th Annual Report 59

Annex-V to Directors’ ReportSTATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARYCOMPANIESNAME OF THE PIPAVAV NTPC NTPC VIDYUT NTPC HYDROSUBSIDIARY POWER ELECTRIC VYAPAR NIGAM LTD.DEVELOPMENT SUPPLY LTD.COMPANY LTD. COMPANYLTD.1. Financial year of the Subsidiary March 31, 2006 March 31, 2006 March 31, 2006 March 31, 2006ended on2. Date from which they became December 20, 2001 August 21, 2002 November 1, 2002 December 12, 2002Subsidiary3. Share of the subsidiary held by thecompany as on March 31, 2006a) Number & face value 370000 equity 80910 equity 20000000 equity 10000000 equityshares of Rs. 10/- shares of Rs. 10/- shares of Rs. 10/- shares of Rs. 10/-each each each eachb) Extent of holding 100% 100% 100% 100%4. The net aggregate amount of thesubsidiary companies Profit/(loss)so far as it concerns the member ofthe holding companya) Not dealt with in the holdingcompany’s accountsi) For the financial year ended (Rs. 40083) Rs. 4519915 Rs. 33269919 (Rs. 33427394)March 31, 2006ii) Upto the previous financial years (Rs. 24252) Rs. 401003 Rs. 57364365 (Rs. 30467227)of the subsidiary companyb) Dealt with in the holdingcompany’s accountsi) For the financial year ended Nil Nil Nil NilMarch 31, 2006ii) For the previous financial year of Nil Nil Nil Nilthe subsidiary company sincethey become the holdingcompany’s subsidiariesFor and on behalf of Board of DirectorsPlace : New DelhiDated : July 31, 2006(T. Sankaralingam)Chairman & Managing Director6030th Annual Report

Annex-VI to Directors’ ReportREVIEW OF ACCOUNTS OF NTPC LIMITED ( FORMERLY NATIONAL THERMAL POWER CORPORATION LTD.), NEWDELHI FOR THE YEAR ENDED 31 ST MARCH 2006 BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA .NOTE: This review of accounts has been prepared without taking into account comments under Section 619(4) of theCompanies Act, 1956, and qualifications contained in the Statutory Auditor’s Report.1. FINANCIAL POSITIONThe table below summaries the financial position of the Company under broad headings for the last three years(Rs. in Million)2003-2004 2004-2005 2005-2006Liabilitiesa) Paid up capitali) Government 78125 73796 73796ii) Indian banks and financial institutions - 831 847iii) Foreign banks and foreign companies/institutions - 4802 5830iv) Public in India and/or outside - 3026 1982b) Reserves and Surplusi ) Free Reserves and Surplus 276113 311693 343543ii) Share Premium Account - 22334 22281iii) Foreign Project Reserve 4 2 -iv) Capital Reserve 1259 1279 1308c) Borrowingsi) From Government of India 984 551 236ii) From Financial Institutions 57675 75339 87821iii) Foreign Currency Loans 58642 53741 66085iv) Cash Credit - - -v) Others 37227 41247 47831vi) Interest Accrued and Due - - -d) i) Current Liabilities & Provisions 80565 67237 61184ii) Provision for Gratuity 376 230 218e) i) Deferred Tax Liability 1 1 1ii) Advance Against Depreciation 1591 3374 4408iii) Development Surcharge Fund 3784 - -Total 596346 659483 717371Assetsf) Gross Block 400281 431062 460396g) Less: Depreciation 187736 207914 229501h) Net Block 212545 223148 230895i) Capital Work-in-Progress & Construction Stores & Advances 74953 99252 136340j ) Investments 173380 207977 192891k) Current Assets, Loans & Advances 135468 129106 157245l) Deferred Tax Assets - - -m) Misc. Expenditure (to the extent not written off or adjusted) - - -n) Accumulated Loss - - -Total 596346 659483 71737130th Annual Report 61

o) Working Capital [k- d(i) -c (vi)] 54903 61869 96061p) Capital Employed [h + o] 267448 285017 326956q) Net Worth [a+ b (i)+b (ii) - (n + m)] 354238 416482 448279r) Net Worth per rupee of Paid-up Capital (in Rs.) 4.53 5.05 5.442. SOURCES AND UTILISATION OF FUNDSFunds amounting to Rs.127004 Million from internal and external sources were realised and utilised during the yearas detailed below:(Rs. in Million)Sources of Fundsa) Funds from operations:Profit after tax 58202Add: Depreciation 21587 79789b) Increase in Borrowings 31095c) Increase in Advance Against Depreciation 1034d) Decrease in Investments 15086Total 127004Utilisation of fundsa) Increase in Working Capital 30495(excluding Proposed Dividend & Tax on Proposed Dividend)b) Increase in Capital Work in Progress and Construction Stores & Advances 37088c) Increase in Fixed assets 29334d) Dividend & Dividend Tax paid 30087Total 1270043. WORKING RESULTSThe working results of the Company for the last three years ending 31 st March 2006 are given below(Rs. in Million)2003-2004 2004-2005 2005-2006(i) Turnover (including Electricity Duty & Consultancy Income ) 189923 227076 262910(ii) Other income 61310 23529 26078(iii) Profit Before Tax, Prior Period & Extra Ordinary Items 59080 60680 62712(iv) Prior Period & Extra Ordinary Items 183 (102) 2488(v) Profit Before Tax 58897 60782 60224(vi) Provision for Taxation 6289 2712 2022(vii) Profit After Tax 52608 58070 58202(viii) Interim Dividend and Dividend Tax - 11187 18804(ix) Proposed Dividend and Dividend Tax 12210 11283 75214. RATIO ANALYSISSome important ratios on the financial health and working of the Company at the end of the last three years ending31 st March 2006 are as under:2003-2004 2004-2005 2005-2006i) Liquidity ratio 1.68 1.92 2.57Current ratio [k/{d(i)+c(vi)}]ii) Debt equity ratioLong term debt to net worth {c(i to iii)+c (v)/q)] 0.44 0.41 0.456230th Annual Report

Profitabily Ratios (in percentage)a) Profit Before Tax to :i) Capital Employed {3(v)/p} 22.02 21.33 18.42ii) Net Worth {3(v)/q} 16.63 14.59 13.43iii) Turnover (including Electricity Duty &Consultancy income ) {3(v)/3(i)} 31.01 26.77 22.91b) Profit After Tax to Equity 67.34 70.43 70.59c) Earning per Share (in Rs) 6.73 7.26 7.065. INVENTORY LEVELSThe inventory levels at the close of the last three years ending 31 st March 2006 are as under:(Rs. in Million)2003-2004 2004-2005 2005-2006i) Coal, Fuel Oil and Naptha 4407 4583 9053ii) Chemicals and Consumables 661 670 759iii) Components and Spares 11742 11904 12894iv) Loose tools 47 41 42v) Others 696 817 8816 SUNDRY DEBTORSThe Sundry debtors and Sales in the last three years ending 31 st March 2006 are as follows:(Rs. in Million)As at Sundry Debtors Turnover Pecentage31st March (including Electricity of SundryDuty & Debtors toConsultancy ) TurnoverConsidered Considered TotalGood Doubtful2004 4699 14287 18986 189923 10.002005 13747 8360 22107 227076 9.742006 8678 8363 17041 262910 6.48Sundry debtors to turnover decreased from 9.74 percent in 2004-2005 to 6.48 percent in 2005-2006The age-wise break-up of the Sundry debtors at the end of 31 st March 2006 is as under:Debtors Outstanding for(Rs. in Million)Less than six months 8022Six months to one year 75One year to three years 584More than three years 8360Total 17041Place: New DelhiDated: 7 th July, 2006(Meera Swraup)Principal Director of Commercial Audit andEx-officio Member Audit Board-III,New Delhi30th Annual Report 63

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIESACT, 1956, ON THE ACCOUNTS OF NTPC LIMITED, NEW DELHI, FOR THE YEAR ENDED 31 MARCH 2006I have to state that the Comptroller and Auditor General of India has no comments upon or supplement to the Auditors’Report under Section 619(4) of the Companies Act, 1956, on the accounts of NTPC Limited, New Delhi for the yearended 31st March 2006.Place: New DelhiDated: 7 th July, 2006(Meera Swraup)Principal Director of Commercial Audit andEx-officio Member Audit Board-III,New Delhi6430th Annual Report

STATISTICAL DATA OF GRIEVANCE CASESAnnex- VII to Directors’ Report2005-06S. No. Particulars Public Grievance Cases Staff Grievances Cases1. Grievance cases outstanding at thebeginning of the year - 022. Grievance cases received during the year - 343. Grievance cases disposed of during the year - 314. Grievance Cases outstanding at the end of - 5the yearFor and on behalf of the Board of DirectorsPlace : New DelhiDated : July 31, 2006(T. Sankaralingam)Chairman & Managing Director30th Annual Report 65

STATISTICAL INFORMATION ON RESERVATION OF SCs/STs FOR THE YEAR 2005Annex-VIII to Directors’ ReportRepresentation of SCs/STs as on 01.01.2006:Group Employees on Roll SCs %age STs %ageA 10054 1022 10.16 225 2.23B 2868 379 13.21 169 5.89C 8355 1429 17.10 521 6.23D 2609 533 20.42 264 10.11Total 23886 3363 14.07 1179 4.93Recruitment of SCs/STs during the year 2005.Group Total Recruitment SCs %age STs %age(1) (2) (3) (4) (5) (6)A 804 111 13.80 81 10.07B - - - - -C 35 3 8.57 1 2.85D 2 - - - -Total 841 114 13.55 82 9.75Promotions of SCs/STs during the year 2005.Group Total SCs %age STs %age(1) (2) (3) (4) (5) (6)A 2048 230 11.23 35 1.70B 758 110 14.51 44 5.80C 1470 295 20.06 81 5.51D 56 11 19.64 7 12.50Total 4332 646 14.91 167 3.85- The guidelines on reservation were followed in letter and spirit.- Welfare measures as under were taken by NTPC for SC/ST employees and students:i) Award of Annual Scholarship to SC/ST students pursuing Degree/ Diploma in Engineering courses and MBA/PGDBM (HR/Finance) courses.Degree (Engg.)/MBA/PGDBM(HR/Finance) : Rs.1500/-pmDiploma (Engg.) : Rs.1000/-pmii) NTPC Gold medal award with XISS, Ranchi for one student each topping the merit list of SC/ST candidates inPersonnel Management course and Rural Development course.iii) Liaison Officers for SC/STs have been nominated at each project/RHQ for handling SC/ST related matters.iv) Annual Conference of Liaison Officers was organized to make such officers aware of developments in reservationpolicy so as to ensure proper implementation of the same.For and on behalf of the Board of DirectorsPlace : New DelhiDated : July 31, 2006(T. Sankaralingam)Chairman & Managing Director6630th Annual Report

PHYSICALLY CHALLENGED PERSONSWith a view to focus on its role as a socially responsible and socially conscious organization, NTPC has endeavoured totake responsibility for adequate representation of physically challenged persons in its workforce. 128 and 169 physicallychallenged persons were recruited in separate phases. With this there are a total of 406 physically challenged personson the rolls of NTPC. Some of the other initiatives taken for the welfare of physically challenged persons by NTPC are asunder:- Screen reading software and Braille shorthand machines has been made available.- Sign language’ training for the employees in general, where hearing impaired candidates is posted.- Barrier free access to physically challenged has been provided.- Allotments of quarters to physically challenged are being generally made on the ground floor.- Special parking enclosure near the ramp at the office entrance as well as PH friendly toilet and lift at CC and Projects.- Wherever required, gates/door of the quarter has been widened and wider covers provided on drains to facilitatemovement.- 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.- Shops have been allotted in NTPC Townships 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.- 05 number of Scholarships @ Rs. 1500/- per month/ per student are given to PH students pursuing Degree in EngineeringCourse.- 05 number of Scholarships @ Rs. 1500/- per month/ per student are given to PH students pursuing MBA/ PGDBMCourse.- 13 Telephone booths have been installed in different corners of Delhi for disabled persons, to support VRC’s effortsfor financial assistance to disabled persons who were allotted such booths.- In our Vindhyachal Project, a school named Asha Kiran for deaf/ dumb and mentally retarded children, is running.- Inclusive education at all the three schools located at Dadri project has started.Annex-IX to Directors’ Report- Petty contracts like book binding, scribbling pad preparation from waste paper, file binding, furniture repair, screenprinting, spiral binding, painting contract are also being given to disabled persons.- Physically challenged (Orthopaedically handicapped) employees have been allowed to purchase a three wheelervehicle with a hand fitted engine against their normal entitlement (advance for scooter /motorcycle /moped) underNTPC Conveyance Advance Rules.- Reimbursement towards low vision aids, dark glasses etc, subject to maximum of Rs. 1000/- every year has beenintroduced. Similarly hearing aid: behind the ear model for each ear restricted to Rs. 10,000/- or actual cost, whicheveris lower has been introduced.30th Annual Report 67

Representation of Physically challenged in NTPC:Group Emp. on Roll No. of Persons Percentage Backlogwith PhysicallyVacancies*disabilitiesactually employedA 10054 38 0.38 25B 2868 6 0.21 -C 8355 241 2.88 -D 2609 121 4.64 -Total 23886 406 1.70 25* vacancies have been advertised for filling up in the ongoing recruitment exercise as backlog vacancies.For and on behalf of the Board of DirectorsPlace : New DelhiDated : July 31, 2006(T. Sankaralingam)Chairman & Managing Director6830th Annual Report

UNGC – Communications on Progress (2005-06)Annex-X to Directors’ ReportNTPC expresses its continued support for the Global Compact and its commitment to take action in this regard, as wascommunicated by the Chairman & Managing Director, NTPC in his letter dated May 29, 2001 addressed to SecretaryGeneral, 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 also communicated to all employees through in-house magazines, internal training programmesand posters. NTPC actively participated in the 2 nd National Convention of Global Compact Society held at Delhi on 2 ndFeb. 2006 wherein NTPC’s initiatives in implementing the Global Compact principles were shared with the participantsof the Convention.Human Rights: Principle 1-2Most of NTPC’s 20 operating power stations are located in remote rural areas which are socio-economically backwardand deficient in the basic civic amenities. NTPC, as responsible corporate citizen has been addressing the issue ofcommunity development in the neighbourhood areas of its stations, which had been impacted due to establishment ofthe project.While, this has been initially administered as part of resettlement and rehabilitation effort, NTPC recognized its socialresponsibility to continue community and peripheral development works where the same has been closed under R&Rpolicy. Towards this, NTPC during 2004-05 adopted “Corporate Social Responsibility – Community Development (CSR-CD) Policy”, July’ 04.Under this policy NTPC allocated a fund of Rs. 54 million to 20 operating stations for carrying out community developmentwork in the area of health, education, drinking water and peripheral development.NTPC provided financial assistance to various Institutions/ Bodies as detailed below:(i) Rs. 65.0 million to Uttaranchal Forest Trust Hospital, Haldwani for purchase of advanced Medical Equipment.(ii) Rs. 1.5814 million for setting up 3 Community Information Centres in Lakshwadeep Islands.(iii) Rs. 1.0 million to Him Jyoti Foundation, Dehradun for two perpetual student’s scholarships.(iv) Rs. 0.972 million to Mahavir International, Delhi for Mobile Clinic.(v) Rs. 0.25 million to M/s VIDYA, Delhi for support to their capacity building programme for 200 women.(vi) Rs. 0.15 million to Business & Community Foundation, Delhi for organizing Abilities MELA.(vii) Rs 0.13 million to Rath Mahavidyalaya, Uttaranchal for purchase of Personal Computers.(viii) Rs. 0.1 million to M/s APARNA, Delhi for their environment based project and apprenticeship training for youth.Labour Standard: Principle 3-6For addressing the issue of labour standard in comprehensive manner, NTPC has decided to adopt international standardslike SA-8000 and OHSAS-18001.During the year 2005-06, three of the NTPC stations viz. Badarpur, Simhadri and Talcher Thermal received SA-8000accreditation while Anta, Auraiya and Simhadri were accredited in 2004-05 and Ramagundam was accredited in theyear 2003-04.Similarly, three of NTPC stations viz. Rihand, Singrauli and Badarpur received accreditation under OHSAS 18001 during2005-06 bringing all the 20 operating stations under accreditation of OHSAS 18001.Environment: Principle 7-9Towards its commitment to environment NTPC has decided to adopt ISO-14001 and obtained accreditation for all its 20operating stations.During the year 2005-06, Talcher Thermal and Talcher Kaniha have been re-certified.For and on behalf of the Board of DirectorsPlace : New DelhiDated : July 31, 2006(T. Sankaralingam)Chairman & Managing Director30th Annual Report 69

ACCOUNTING POLICIES1. GRANTS-IN-AID1.1 Grants-in-aid received from the Central Government or other authorities towards capital expenditure as wellas consumers’ contribution to capital works are treated initially as capital reserve and subsequently adjustedas income in the same proportion as the depreciation written off on the assets acquired out of the grants.1.2 Where the ownership of the assets acquired out of the grants vests with the government, the grants are adjustedin the carrying cost of such assets.1.3 Grants from Government and other agencies towards revenue expenditure are recognized over the period inwhich the related costs are incurred and are deducted from the related expenses.2. FIXED ASSETS2.1 Fixed Assets are shown at historical cost.2.2 Intangible assets are recorded at their cost of acquisition.2.3 Capital expenditure on assets not owned by the Company is reflected as a distinct item in Capital Work-in-Progress till the period of completion and thereafter in the Fixed Assets.2.4 Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expensesrelatable to land in possession are treated as cost of land.2.5 In the case of commissioned assets, where final settlement of bills with contractors is yet to be effected,capitalisation is done on provisional basis subject to necessary adjustment in the year of final settlement.2.6 Assets and systems common to more than one generating unit are capitalised on the basis of engineeringestimates/assessments.3. CAPITAL WORK-IN-PROGRESS3.1 In respect of supply-cum-erection contracts, the value of supplies received at site and accepted is treated asCapital Work-in-Progress.3.2 Incidental Expenditure during Construction (net) including corporate office expenses (allocated to the projectspro-rata to the annual capital expenditure) for the year, is apportioned to Capital Work-in-Progress on the basisof accretions thereto.3.3 Deposit work/cost plus contracts are accounted for on the basis of statements of account received from thecontractors.3.4 Claims for price variation/exchange rate variation in case of contracts are accounted for on acceptance.4. OIL AND GAS EXPLORATION COSTS4.1 The Company follows ‘Successful Efforts Method’ for accounting of oil & gas exploration activities.4.2 Cost of surveys and prospecting activities conducted in the search of oil and gas are expensed in the year inwhich these are incurred.4.3 All acquisition costs are initially capitalized as “Exploratory Wells-in-Progress” under Capital Work-in-Progress.5. DEVELOPMENT OF COAL MINESExpenditure on exploration of new coal deposits is capitalized as “Development of coal mines” under CapitalWork-in-Progress till the mines project is brought to revenue account.7030th Annual Report

6. FOREIGN CURRENCY TRANSACTIONS6.1 Foreign currency transactions are initially recorded at the rates of exchange ruling at the date of transaction.6.2 At the balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetaryitems denominated in foreign currency are reported at the exchange rate ruling at the date of transaction.6.3 Exchange differences in respect of loans/deposits/liabilities relating to fixed assets/capital work-in-progressacquired from a country outside India are adjusted in the carrying cost of related assets.6.4 Exchange differences in respect of loans relating to fixed assets/capital work-in-progress acquired withinIndia to the extent regarded as an adjustment to interest cost are treated as borrowing cost.6.5 Exchange differences, in respect of loans (other than regarded as borrowing cost)/deposits/liabilities relatingto fixed assets/capital work-in-progress acquired within India, arising out of transactions entered prior to01.04.2004, are adjusted in the carrying cost of related assets. Such exchange differences in respect oftransactions entered after 01.04.2004 are treated as Incidental Expenditure During Construction till the assetsare ready for their intended use.6.6 Other exchange differences are recognized as income or expense in the period in which they arise.7. BORROWING COSTSBorrowing costs attributable to the fixed assets during their construction/renovation and modernisation are capitalised.Such borrowing costs are apportioned on the average balance of capital work-in-progress for the year. Otherborrowing costs are recognised as an expense in the period in which they are incurred.8. INVESTMENTS8.1 Current Investments are valued at lower of cost and fair value determined on an individual investment basis.8.2 Long term investments are carried at cost. Provision is made for diminution, other than temporary, in the valueof such investments.8.3 Premium paid on long term investments is amortised over the period remaining to maturity.9. INVENTORIES9.1 Inventories are valued at the lower of cost, determined on weighted average basis, and net realizable value.9.2 Dimunition in value of obsolete and unserviceable stores and spares is ascertained on review and providedfor.10. PROFIT AND LOSS ACCOUNT10.1 INCOME RECOGNITION10.1.1 Sale of energy is accounted for based on tariff rates approved by the Central Electricity RegulatoryCommission. In case of power stations where the tariff rates are yet to be approved /agreed withbeneficiaries, provisional rates are adopted.10.1.2 The incentives/disincentives are accounted for based on the norms notified/approved by the CentralElectricity Regulatory Commission or agreements with the beneficiaries. In cases of power stations wherethe same have not been notified/approved/agreed with beneficiaries, incentives/disincentives areaccounted for on provisional basis.30th Annual Report 71

10.1.3 Advance against depreciation, forming part of tariff to facilitate repayment of loans, is reduced from salesand considered as deferred revenue to be included in sales in subsequent years.10.1.4 The surcharge on late payment/overdue sundry debtors for sale of energy is recognized when no significantuncertainty as to measurability or collectability exists.10.1.5 Interest/surcharge recoverable on advances to suppliers as well as warranty claims/liquidated damagesare not treated as accrued due to uncertainty of realisation/acceptance and are therefore accounted foron receipt/acceptances.10.1.6.1 Income from Consultancy service is accounted for on the basis of actual progress/technical assessmentof work executed, in line with the terms of respective consultancy contracts.10.1.6.2 Claims for reimbursement of expenditure are recognized as other income, as per the terms of Consultancyservice contracts.10.1.7 Scrap other than steel scrap is accounted for in the accounts as and when sold.10.1.8 Insurance claims for loss of profit are accounted for in the year of acceptance. Other insurance claims areaccounted for based on certainty of realisation.10.2 EXPENDITURE10.2.1 Depreciation is charged on straight line method at the rates specified in Schedule XIV of the CompaniesAct, 1956 except for the following assets in respect of which depreciation is charged at the rates mentionedbelow:a) Kutcha Roads 47.50 %b) Enabling works- residential buildings including their internal electrification. 6.33 %- non-residential buildings including their internal electrification,water supply, sewerage & drainage works, railway sidings,aerodromes, helipads and airstrips. 19.00 %10.2.2 Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basisfrom/up to the month in which the asset is available for use/disposal.10.2.3 Assets costing up to Rs.5000/- are fully depreciated in the year of capitalization.10.2.4 Cost of Computer software recognized as intangible assets is amortised on straight line method over aperiod of legal right to use or 3 years, whichever is earlier.10.2.5 Where the cost of depreciable assets has undergone a change during the year due to increase/decreasein long term liabilities on account of exchange fluctuation, price adjustment, change in duties or similarfactors, the unamortised balance of such asset is depreciated prospectively over the residual lifedetermined on the basis of the rate of depreciation.10.2.6 Machinery spares which can be used only in connection with an item of fixed asset and whose use isexpected to be irregular are capitalised and depreciated over the residual useful life of the related plantand machinery.7230th Annual Report

10.2.7 Capital expenditure on assets not owned by the Company is amortised over a period of 4 years from theyear in which the first unit of project concerned comes into commercial operation and thereafter fromthe year in which the relevant asset becomes available for use. However, such expenditure for communitydevelopment in case of stations fully under operation is charged off to revenue.10.2.8 Leasehold buildings are amortised over the lease period or 30 years, whichever is lower. Leasehold landand buildings, whose lease period is yet to be finalised, are amortised over a period of 30 years.10.2.9.1 Expenses on training, recruitment and ex-gratia payments under Voluntary Retirement Scheme are chargedto revenue in the year of incurrence.10.2.9.2 Research and development expenses, other than fixed assets, are charged to revenue in the year ofincurrence.10.2.9.3 Preliminary expenses on account of new projects incurred prior to approval of feasibility report arecharged to revenue in the year of incurrence.10.2.10 Expenditure on leave travel concession to employees is recognized in the year of availment due touncertainties in accrual.10.2.11 Expenses common to operation and construction activities are allocated to Profit and Loss Account andIncidental Expenditure during Construction in proportion of sales to annual capital outlay in the case ofCorporate Office and sales to accretion to Capital Work-in-Progress in the case of projects.10.2.12 Net pre-commissioning income/expenditure is adjusted directly in the cost of related assets and systems.10.2.13 Prepaid expenses and prior period expenses/income of items of Rs.100,000/- and below are charged tonatural heads of accounts.10.2.14 Carpet coal is charged off to coal consumption. However, during pre-commissioning period, carpetcoal is retained in inventories and charged off to consumption in the first year of commercial operation.Windage and handling losses of coal as per norms are included in cost of coal.11. RETIREMENT BENEFITS11.1 The liability for retirement benefits of employees in respect of Provident Fund and Gratuity, which is ascertainedannually on actuarial valuation at the year end, are accrued and funded separately.11.2 The liabilities for leave encashment and post retirement medical benefits to employees are accounted for onaccrual basis based on actuarial valuation at the year end.12. FINANCE LEASES12.1 Assets taken on lease are capitalized at fair value or net present value of the minimum lease payments, whicheveris lower.12.2 Depreciation on the assets taken on lease is charged at the rate applicable to similar type of fixed assets as perAccounting Policy 10.2.1. If the leased assets are returnable to the lessor on the expiry of the lease period,depreciation is charged over its useful life or lease period, whichever is shorter.12.3 Lease payments made are apportioned between the finance charges and reduction of the outstanding liabilityin respect of assets taken on lease.30th Annual Report 73

BALANCE SHEET AS AT T 31st MARCH 2006Rs. millionSCHEDULE 31.03.2006 31.03.2005NO.SOURCES OF FUNDSSHAREHOLDERS’ FUNDSCapital 1 82,455 82,455Reserves and surplus 2 367,132 335,308449,587 417,763Deferred Revenue on account of AdvanceAgainst Depreciation 3 4,408 3,374LOAN FUNDSSecured loans 4 57,327 44,407Unsecured loans 5 144,646 126,471201,973 170,878Deferred Tax Liability (Net) 53,224 50,570Less: Recoverable 53,223 50,5691 1TOTAL 655,969 592,016APPLICATION OF FUNDSFIXED ASSETS 6Gross Block 460,396 431,062Less: Depreciation 229,501 207,914Net Block 230,895 223,148Capital Work-in-Progress 7 103,999 67,063Construction stores and advances 8 32,341 32,189367,235 322,400INVESTMENTS 9 192,891 207,977CURRENT ASSETS, LOANS AND ADVANCESInventories 10 23,405 17,819Sundry debtors 11 8,678 13,747Cash and bank balances 12 84,714 60,783Other current assets 13 10,161 9,764Loans and advances 14 30,287 26,993157,245 129,106LESS: CURRENT LIABILITIES AND PROVISIONSLiabilities 15 49,102 52,306Provisions 16 12,300 15,16161,402 67,467Net current assets 95,843 61,639TOTAL 655,969 592,016Contingent liabilities 17Notes on accounts 27Schedules 1 to 27 and accounting policies form integral part of accounts.Place : New DelhiDated : 31 st May 2006For and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) ( T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao)Partner Partner PartnerM No. 77076 M No 70693 M No. 2275For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Gaurav Nanda )(Sanjay Gupta)PartnerPartnerM No 500417 M No 875637430th Annual Report

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006Rs. millionSCHEDULE Current Year Previous YearNO.INCOMESales (Gross) 18 262,910 227,076Less: Electricity duty 1,757 1,674Sales (Net) 261,153 225,402Energy internally consumed 276 248Provisions written back 19 23 6,235Other income 20 26,078 23,529Total 287,530 255,414EXPENDITUREFuel 163,947 137,235Employees’ remuneration and benefits 21 9,684 8,823Generation, Administration & other expenses 22 12,721 12,062Depreciation 20,477 19,584Provisions 23 357 75Interest and finance charges 24 17,632 16,955Total 224,818 194,734Profit before Tax and Prior Period Adjustments 62,712 60,680Prior Period income/ expenditure (net) 25 2,488 (102)Profit before tax 60,224 60,782Provision for :Current tax 7,961 10,058Deferred tax 2,654 (1,710)Fringe Benefit tax 209 -Less:RecoverableCurrent tax 5,666 7,346Deferred tax 2,654 (1,710)Fringe Benefit tax 197 -Transferred to Incidental Expenditure during construction 285 -2,022 2,712Profit after tax 58,202 58,070Balance brought forward 812 566Write back from Bond Redemption Reserve 16 17Write back from Foreign Project Reserve 2 2Balance available for appropriation 59,032 58,655Transfer to Bonds Redemption Reserve 2,926 2,351Transfer to Capital Reserve 29 22Transfer to General Reserve 29,000 33,000DividendInterim 16,491 9,895Proposed 6,596 9,895Tax on DividendInterim 2,313 1,292Proposed 925 1,388Balance carried to Balance Sheet 752 812Incidental expenditure during construction 26Earning Per Share (Equity shares, face value Rs.10/- each) - Basic and Diluted 7.06 7.26For and on behalf of the Board of Directors(A.K.RASTOGI) (A.K.SINGHAL) ( T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao)Partner Partner PartnerM No. 77076 M No 70693 M No. 2275For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Gaurav Nanda )(Sanjay Gupta)PartnerPartnerPlace : New DelhiDated : 31 st May 2006M No 500417 M No 8756330th Annual Report 75

Schedule 1CAPITALRs. million31.03.2006 31.03.2005AUTHORISED10,000,000,000 equity shares of Rs.10/- each (Previousyear 10,000,000,000 equity shares of Rs.10/- each) 100,000 100,000ISSUED, SUBSCRIBED AND PAID-UP8,245,464,400 equity shares of Rs.10/- each fully paid-up (Previousyear 8,245,464,400 equity shares of Rs.10/- each fully paid-up) 82,455 82,455Schedule 2RESERVES AND SURPLUSCapital ReserveAs per last Balance Sheet 1,279 1,259Add : Additions during the year 29 22Less : Adjustments during the year - 21,308 1,279Share Premium AccountAs per last Balance Sheet 22,334 -Add : Additions during the year - 22,511Less : Adjustment of share issue expenses during the year 53 17722,281 22,334Bonds Redemption ReserveAs per last Balance Sheet 6,405 4,071Add : Transfer from Profit & Loss Account 2,926 2,351Less : Write back during the year 16 179,315 6,405Foreign Project ReserveAs per last Balance Sheet 2 4Less : Write back during the year 2 2*Rs. 81229/- * 2General ReserveAs per last Balance Sheet 304,476 271,476Add : Transfer from Profit & Loss Account 29,000 33,000333,476 304,476Surplus, balance in Profit & Loss Account 752 812Total 367,132 335,308Schedule 3DEFERRED REVENUE - on account of Advance Against DepreciationAs per last Balance Sheet 3,374 1,591Add : Revenue deferred during the year 1,505 1,791Less: Revenue recognised during the year 471 8Total 4,408 3,3747630th Annual Report

Schedule 4SECURED LOANSBonds10.00% Secured Non-Convertible Taxable Bonds of Rs. 10,00,000/- each with five equalSeparately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end ofthe 6 th year and in annual instalments thereafter upto the end of 10 th year respectively from 5 thSeptember 2001 (Twelfth Issue - Private Placement) 19.55% Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds ofRs. 10,00,000/- each redeemable at par in ten equal annual instalments commencing from theend of 6 th year and upto the end of 15 th year respectively from 18 th April 2002 (ThirteenthIssue -Part A - Private Placement) 29.55% Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds ofRs. 10,00,000/- each with ten equal Separately Transferable Redeemable Principal Parts (STRPP)redeemable at par at the end of the 6 th year and in annual instalments thereafter upto the endof 15 th year respectively from 30 th April 2002 (Thirteenth Issue - Part B - Private Placement) 28.05% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 10,00,000/- each with two equal Separately Transferable Redeemable Principal Parts (STRPP)redeemable at par at the end of 4 th and 5 th year respectively from 1 st August 2002 (FourteenthIssue - Private Placement) 213.60% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 1,00,000/- each redeemable at par in three annual instalments of 30%, 30% and 40%commencing from 28 th September 2004 (Fifteenth Issue - Part C - Private Placement) 28.00% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 10,00,000/- each redeemable at par on 10 th April 2018 (Sixteenth Issue -Private Placement) 38.48% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 10,00,000/- each redeemable at par on 1 st May 2023 (Seventeenth Issue - Private Placement) 35.95% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 10,00,000/- each with five equal Separately Transferable Redeemable Principal Parts (STRPP)redeemable at par at the end of 6 th year and in annual instalments thereafter upto the end of 10 th yearrespectively from 15 th September 2003 (Eighteenth Issue - Private Placement) 47.50% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/-each redeemable at par on 12 th January 2019 (Nineteenth Issue - Private Placement) 57.552% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts(STRPP) redeemable at par semi-annually commencing from 23 rd September 2009 and endingon 23 rd March 2019 (Twentieth Issue - Private Placement) 67.7125% Secured Non-cumulative Non-Convertible Redeemable Taxable Bonds ofRs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts(STRPP) redeemable at par semi-annually commencing from 2 nd August 2010 and ending on2 nd February 2020 (Twenty first issue - Private Placement) 7Loans and Advances from BanksForeign Currency Term Loans (Guaranteed by Government of India) (Due for repaymentwithin one year Rs.1,702 million, Previous year Rs.1,633 million) 8Other Loans and AdvancesObligations under finance lease (Due for repayment within one year Rs. 4 million, PreviousYear Rs. 3 million) 9TOTALRs. million31.03.2006 31.03.20055,000 5,0007,500 7,5007,500 7,5005,000 5,00044 771,000 1,000500 5005,000 5,000500 5005,000 -10,000 -10,274 12,3199 1157,327 44,40730th Annual Report 77

Schedule 4SECURED LOANSNote:1 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movableassets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super ThermalPower Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri SuperThermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda ThermalPower Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar PowerStation, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge alreadycreated in favour of the Company’s Bankers on such movable assets hypothecated to them for working capital requirement and (III) EquitableMortgage by deposit of title deeds of the immovable properties pertaining to Singrauli Super Thermal Power Station.2 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movableassets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh SuperThermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project,Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal PowerProject, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station,Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge,ranking pari-passu with charge already created in favour of the Company’s Bankers on such movable assets hypothecated to them forworking capital requirement and (III) Equitable mortgage of the immovable properties pertaining to Singrauli Super Thermal Power Stationby extension of charge already created.3 Secured by (I) English mortgage of the office premises of the Company at Mumbai and (II) Equitable mortgage by deposit of title deedsof the immovable properties pertaining to National Capital Power Station.4 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and future movableassets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh SuperThermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project,Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal PowerProject, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station,Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge,ranking pari-passu with charge already created in favour of the Company’s Bankers on such movable assets hypothecated to them forworking capital requirement and (III) Equitable mortgage of the immovable properties pertaining to National Capital Power Station byextension of charge already created.5 Secured by (I) English mortgage of the office premises of the Company at Mumbai and (II) Hypothecation of all the present and futuremovable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, BarhSuper Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project,Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal PowerProject, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station,Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge,ranking pari-passu with charge already created in favour of the Company’s Bankers on such movable assets hypothecated to them forworking capital requirement.6 Secured by (I) English mortgage of the office premises of the Company at Mumbai and (II) Equitable mortgage by deposit of title deedsof the immovable properties pertaining to Ramagundam Super Thermal Power Station.7 Secured by (I) English mortgage of the office premises of the Company at Mumbai, (II) Hypothecation of all the present and futuremovable assets (excluding receivables) of Barh Super Thermal Power Project as first charge, ranking pari passu with charge already createdin favour of Trustee for other Series of Bonds and (III) Equitable mortgage of the immovable properties pertaining to Ramagundam SuperThermal Power Station by extension of charge already created.8 Secured by English mortage/hypothecation of all the present and future fixed and movable assets of Rihand Super Thermal Power Stationas first charge, ranking pari-passu with charge already created, subject to however, Company’s Banker’s first charge on certain movable assetshyphothecated to them for working capital requirement.9 Secured against fixed assets obtained under finance lease.7830th Annual Report

Schedule 5UNSECURED LOANSFixed DepositsRs. million31.03.2006 31.03.2005778 4,159(Due for repayment within one year Rs. 449 million, Previous year Rs. 3,337 million)Bonds7.552% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs.20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts(STRPP) redeemable at par semi-annually commencing from 23 rd September 2009 andending on 23 rd March 2019 (Twentieth Issue - Private Placement - shown under SecuredLoans in current year on creation of security).Foreign Currency Bonds / Notes5.50 % Eurobonds due for repayment on 10 th March 20115.875 % Fixed Rate Notes due for repayment on 2 nd March 2016Other Loans and AdvancesTOTALFrom Banks and Financial InstitutionsForeign Currency Term Loans (Guaranteed by Government of India)(Due for repayment within one year Rs.181 million , Previous year Rs. Nil)Other Foreign Currency Term Loans (Due for repayment within one year Rs.1,584 million,Previous year Rs.1,667 million)Rupee Term Loans (Due for repayment within one year Rs.8,963 million, Previous yearRs.7,618 million)From OthersLoans from Government of India (Due for repayment within one year Rs.156 million,Previous year Rs.315 million)- 5,0008,990 8,81413,485 -23,064 24,72310,272 7,88587,821 75,339236 551144,646 126,47130th Annual Report 79

Schedule 6FIXED ASSETSRs. millionGross Block Depreciation Net BlockAs at Deductions/ As at As at For Deductions/ Upto As at As at1.04.2005 Additions Adjustments 31.03.2006 1.04.2005 the Year Adjustments 31.03.2006 31.03.2006 31.3.2005TANGIBLE ASSETSLand :(including development)Freehold 9,977 99 (364) 10,440 - - - - 10,440 9,977Leasehold 1,855 600 (117) 2,572 279 44 (9) 332 2,240 1,576Roads,bridges, culverts & helipads 3,626 149 2 3,773 608 63 1 670 3,103 3,018Building :FreeholdMain plant 16,301 416 (41) 16,758 7,973 535 (7) 8,515 8,243 8,328Others 14,466 653 (19) 15,138 3,686 389 5 4,070 11,068 10,780Leasehold 469 - - 469 108 16 - 124 345 361Temporary erection 188 15 - 203 185 12 - 197 6 3Water Supply, drainage &sewerage system 4,963 33 11 4,985 1,231 251 4 1,478 3,507 3,732MGR track and signalling system 6,344 16 (25) 6,385 4,232 268 (4) 4,504 1,881 2,112Railway Siding 2,365 10 (3) 2,378 556 113 1 668 1,710 1,809Earth Dam Reservoir 1,481 - 11 1,470 269 69 - 338 1,132 1,212Plant and machinery 358,736 26,694 616 384,814 182,222 19,268 42 201,448 183,366 176,514Furniture, fixtures & otheroffice equipment 3,117 199 9 3,307 2,072 120 11 2,181 1,126 1,045EDP, WP machines andSATCOM equipment 2,185 185 44 2,326 1,589 141 33 1,697 629 596Vehicles including speedboats 98 4 7 95 81 3 7 77 18 17Construction equipment 944 90 21 1,013 582 51 21 612 401 362Electrical Installations 1,796 90 (40) 1,926 900 79 3 976 950 896Communication Equipments 590 34 1 623 321 20 1 340 283 269Hospital Equipments 195 8 1 202 118 8 1 125 77 77Laboratory and workshop equipments 119 7 - 126 93 2 - 95 31 26Leased assets - Vehicles 14 1 - 15 3 4 - 7 8 11Capital expenditure on assetsnot owned by the Company 1,101 73 (46) 1,220 757 197 - 954 266 344Assets of Government 28 - - 28 - - - - 28 28Less:Grants from Government 28 - - 28 - - - - 28 28Assets held for disposal valued atnet book value or net realisable valuewhichever is less 31 - 17 14 - - - - 14 31INTANGIBLE ASSETSLand - Right of Use 7 - (6) 13 - - - - 13 7Software 94 36 (1) 131 49 44 - 93 38 45Total 431,062 29,412 78 460,396 207,914 21,697 110 229,501 230,895 223,148Previous year 400,281 29,588 (1,193) 431,062 187,736 20,258 80 207,914 223,148 212,545Deduction/Adjustments from Gross Block includes Current Year Previous YearDisposal/Retirement of assets 344 598Cost adjustments (41) 483Assets capitalised with retrospective effect / Write back of excess capitalisation (816) (1,172)Depreciation on construction equipment capitalised as IEDC 6 1Others 585 (1,103)8030th Annual Report

Rs. millionDeduction/Adjustments from Depreciation includes Current Year Previous YearDisposal/Retirement of assets 235 395Assets capitalised with retrospective effect / Write back of excess capitalisation (171) (305)Depreciation on construction equipment capitalised as IEDC 6 1Others 40 (11)Depreciation for the the year is allocated as given below:-Charged to Profit & Loss account 20,477 19,584Adjustment in Cost of Coal / Fuel oil 1,104 567Transferred to Incidental Expenditure during Construction (Schedule 26) 116 10721,697 20,258Schedule 7CAPITAL WORK-IN-PROGRESSAs at Deductions & As at1.04.2005 Additions Adjustments Capitalised 31.03.2006Development of land 1,254 635 13 - 1,876Roads, bridges, culverts & helipads 153 255 (91) 149 350Piling and foundation 1,028 890 - - 1,918Buildings :Main plant 2,968 1,306 1,123 416 2,735Others 1,018 1,303 43 651 1,627Temporary erection 3 20 - 6 17Water supply, drainage and sewerage system 51 146 4 31 162Hydraulic works, Barrages, Dams, Tunnels, and Power Channel 4,005 2,471 - - 6,476MGR track and signalling system 48 1,348 17 16 1,363Railway siding 15 102 - 10 107Earth dam reservoir 136 416 - - 552Plant and machinery :On own account 305 332 394 2 241On supply-cum-erection contract 54,316 54,050 (1,238) 26,326 83,278Furniture, fixtures and other office equipment 11 83 (8) 43 59EDP/WP Machines & SATCOM equipment 13 24 3 25 9Construction Equipments - 5 - - 5Electrical installations 123 236 47 85 227Communication equipment 19 9 1 20 7Intangible assets - software 4 4 - 5 3Capital expenditure on assets not owned by the company 170 168 7 73 258Exploratory Wells-in-Progress (* Rs.55,900/-) - * - - *Development of Coal Mines - 31 - - 3165,640 63,834 315 27,858 101,301Expenditure pending allocationSurvey, investigation, consultancy and supervision charges 411 72 44 - 439Difference in exchange on foreign currency loans 2 175 93 - 84Expenditure towards diversion of forest land 882 145 - - 1,027Pre-commisioning expenses (net) 198 585 548 - 235Incidental expenditure during construction 53 6,574 2 - 6,625Less: Allocated to Capital Work-in-Progress - 5,583 - - 5,58367,186 65,802 1,002 27,858 104,128Less: Provision for unserviceable works 123 6 - - 129Total 67,063 65,796 1,002 27,858 103,999Previous Year 56,413 39,669 774 28,245 67,06330th Annual Report 81

Schedule 8CONSTRUCTION STORES AND ADVANCESRs. million31.03.2006 31.03.2005CONSTRUCTION STORES *(At cost)Steel 3,066 3,452Cement 85 96Others 9,113 6,97812,264 10,526Less: Provision for shortage 5 512,259 10,521ADVANCES FOR CAPITAL EXPENDITURESecured 228 49Unsecured, considered goodCovered by bank guarantees 15,777 17,333Others 4,077 4,286Considered doubtful 74 6620,156 21,734Less:Provision for bad & doubtful advances 74 6620,082 21,668Total 32,341 32,189*includes material in transit, under inspection and with contractors 9,473 7,4538230th Annual Report

Schedule 9INVESTMENTSRs. millionNumber of Face value per 31.03.2006 31.03.2005shares/bonds/ share/bond/securities securityCurrent Year/ Current Year/(Previous Year) (Previous Year)(Rs.)I. LONG TERM (Trade - unless otherwise specified)A) Quoteda) Government of India Dated Securities (Non-Trade) 45500000 100 5,084 5,102(45500000) (100)(Includes Rs. NIL as balance of unutilised monies raised by issue ofshares, previous year Rs.5,102 million)Less:- Amortisation of Premium 413 -4,671 5,102b) Trust Securities ( # )6.60% UTI - ARS NCB Tax Free Bonds, 2009 321746 100 34 230(2171332) (100)6.75% UTI - NCB Tax Free Bonds, 2008 - - - 11(110481) (100)c) Bonds ( # )7.75% IRFC Non Taxable Bonds (Series XXVII), 2011 14 1000000 16 160(135) (1000000)8.50% Housing and Urban Development Corporation Limited 18 500000 10 98(HUDCO) Gujarat Punar Nirman Tax-Free Bonds Series 1A, 2007 (177) (500000)10.40% Power Finance Corporation Ltd. Unsecured Tax-Free Bonds 117 100000 14 1051998 (Series I), 2008 (872) (100000)4.75% Nuclear Power Corporation of India Ltd. Secured Non- - - - 7Convertible Bonds (LOA), Series XXIV, 2019 (7) (1000000)10.40% Nuclear Power Corporation of India Ltd. Tax-Free Secured - - - 198Non Convertible Bonds, Series XI A2, 2007 (1771) (100000)10.50% Nuclear Power Corporation of India Ltd. Tax-Free Secured - - - 15Redeemable Non-Convertible Bonds, Series XII (LOA), 2013 (138) (100000)9.50% National Textile Corporation Limited Tax-Free Non Convertible 445 100000 49 377Bonds, 2006 (3436) (100000)5.00% NABARD Unsecured, Non-Convertible Tax-Free Bonds, Series 2639 10000 27 158IV G, 2008 (15597) (10000)8.25% Nuclear Power Corporation of India Ltd. Tax-Free Secured 24 100000 3 172Redeemable NCB SR-15 (LOA), 2016 (1561) (100000)8.20% Nuclear Power Corporation of India Ltd. Tax- Free Secured 1 100000 * 119Redeemable NCB SR-18 (LOA), 2012 (*Rs.1,07,296/-) (1113) (100000)5.15 % Non Priority Sector Tax-Free Housing and Urban Development 14 1000000 14 286Corporation Limited (HUDCO) Bonds Series XXXIV, 2014 (286) (1000000)d) Equity Shares in Joint Venture CompanyPTC India Ltd. 12000000 10 120 120(12000000) (10)Sub Total (A) 4,958 7,15830th Annual Report 83

Schedule 9INVESTMENTSB) Unquoteda) Bondsi) 8.50 % Tax-Free State Government Special Bonds of the Government of ( ## )Rs. millionNumber of Face value per 31.03.2006 31.03.2005shares/bonds/ share/bond/securities securityCurrent Year/ Current Year/(Previous Year) (Previous Year)(Rs.)Andhra Pradesh 12606500 1000 12,607 12,607(12606500) (1000)Assam 514640 1000 515 515(514640) (1000)Bihar 18944000 1000 18,944 14,667(14666600) (1000)Chattisgarh 4832200 1000 4,832 4,832(4832200) (1000)Gujarat 8372400 1000 8,372 8,372(8372400) (1000)Haryana 10750000 1000 10,750 10,750(10750000) (1000)Himachal Pradesh 333880 1000 334 334(333880) (1000)Jammu and Kashmir 3673600 1000 3,674 3,674(3673600) (1000)Jharkhand 9601216 1000 9,601 6,223(6222716) (1000)Karnataka 1966100 1000 1,966 1,966(1966100) (1000)Kerala 10024000 1000 10,024 10,024(10024000) (1000)Madhya Pradesh 8308400 1000 8,308 8,308(8308400) (1000)Maharashtra 3814000 1000 3,814 3,814(3814000) (1000)Orissa 11028740 1000 11,029 11,029(11028740) (1000)Punjab 3462300 1000 3,462 3,462(3462300) (1000)Rajasthan 2900000 1000 2,900 2,900(2900000) (1000)Sikkim 341960 1000 342 342(341960) (1000)Tamil Nadu 4650660 1000 4,651 4,651(4650660) (1000)Uttar Pradesh 39899000 1000 39,899 39,899(39899000) (1000)Uttaranchal 3996500 1000 3,996 3,996(3996500) (1000)West Bengal 11742480 1000 11,742 11,742(11742480) (1000)8430th Annual Report

Schedule 9INVESTMENTSii)Other BondsRs. millionNumber of Face value per 31.03.2006 31.03.2005shares/bonds/ share/bond/securities securityCurrent Year/ Current Year/(Previous Year) (Previous Year)(Rs.)12.50% Secured Non-Convertible Redeemable Western Electricity 10300 70000 721 1,030Supply Company (WESCO) Bonds, Series - I/2000, 2007 (10300) (100000)12.50% Secured Non-Convertible Redeemable North Eastern 16700 70000 1,169 1,670Electricity Supply Company (NESCO) Bonds, Series - I/2000, 2007 (16700) (100000)12.50% Secured Non-convertible Redeemable Southern Electricity 13000 70000 910 1,300Supply Company (SOUTHCO) Bonds, Series - I/2000, 2007 (13000) (100000)10.00% Secured Non-Cumulative Non-Convertible Redeemable Grid 2660 75000 200 266Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003 , 03/02,2009 (2660) (100000)10.00% Secured Non-Cumulative Non-Convertible Redeemable Grid 19536 87500 1,709 1,953Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003, (19536) (100000)04-09/02,200910.00% Secured Non-Cumulative Non-Convertible Redeemable Grid 5970 100000 597 597Corporation of Orissa (GRIDCO) Power Bonds, (5970) (100000)Series-1/2003 - 10/02,200910.00% Secured Non-Cumulative Non-Convertible Redeemable Grid - - - 612Corporation of Orissa (GRIDCO) Power Bonds, (6119) (100000)Series-1/2003, 02/02 &11/02,20097.90% Secured Non-Convertible Redeemable Tax free PSU Bonds 5 1000000 5 295(VIII issue) - North Eastern Electric Power Corporation Ltd. (NEEPCO) (281) (1000000)Bonds, 2010 #8.75%IREDA (Tax-Free) Bonds (Series IX), 2008 # 5510 1000 6 46(42175) (1000)6.00%IREDA (Tax-Free) Bonds (Series X), 2013 # 6612 1000 7 51(48235) (1000)5.50%IREDA (Tax- Free) Bonds (Series XI), 2013 # 7348 1000 8 40(38445) (1000)b) Equity Shares in Joint Venture CompaniesUtility Powertech Ltd. 1000000 10 10 10(1000000) (10)NTPC-Alstom Power Services Private Ltd. 3000000 10 30 30(3000000) (10)NTPC-SAIL Power Company Private Ltd. 58650050 10 587 587(58650050) (10)Bhilai Electric Supply Company Private Ltd. 106600000 10 1,066 566(56600000) (10)NTPC-Tamil Nadu Energy Company Ltd. 500000 10 5 5(500000) (10)c) Equity Shares in Subsidiary CompaniesPipavav Power Development Company Ltd. 370000 10 4 4(365000) (10)NTPC Electric Supply Company Ltd. 80910 10 * **(current year Rs. 8,09,100/-, previous year Rs.8,09,100/-) (80910) (10)NTPC Vidyut Vyapar Nigam Ltd. 20000000 10 200 200(20000000) (10)NTPC Hydro Ltd. 10000000 10 100 46(4562110) (10)d) Share application money pending allotment in :NTPC Hydro Ltd. - 2Ratnagiri Gas & Power Private Ltd. 5,000 -e) Shares in Cooperative Societies ß ßSub Total (B) 184,096 173,417Sub Total ( I ) 189,054 180,57530th Annual Report 85

Schedule 9INVESTMENTSRs. millionNumber of Face value per 31.03.2006 31.03.2005shares/bonds/ share/bond/securities securityCurrent Year/ Current Year/(Previous Year) (Previous Year)(Rs.)II.CURRENT (Non - Trade - Quoted)Government of India Treasury Bills 40000000 100 3,837 27,079(277902500) (100)Government of India Dated Securities - - - 323(3177320) (100)Sub Total ( II ) 3,837 27,402Total ( I + II ) 192,891 207,977Quoted InvestmentsBook Value 8,795 34,560Market Value 9,516 35,249Unquoted InvestmentsBook Value 184,096 173,417During the year the following current investments were purchased and realised on maturity (at cost)Government of IndiaTreasury bills 42,051 3,432Dated Securities 70 -(#) Development Surcharge Fund Investments(# #) Includes bonds of Rs.34,353 million (previous year Rs. 32,821 million) permitted for transfer/tradingby Reserve Bank of India. Balance can be transferred/ traded subject to prior approval ofReserve Bank of India.ßShares in Co-operative societies (unquoted)NTPC Employees Consumers and Thrift Co-operative 500 10 5,000 5,000Society Ltd. Korba (500) (10)Rs.Rs.NTPC Employees Consumers and Thrift Cooperative 250 10 2,500 2,500Society Ltd. Ramagundam (250) (10)NTPC Employees Consumers Cooperative Society Ltd. Farakka 500 10 5,000 5,000(500) (10)NTPC Employees Consumers Cooperative Society Ltd. Vindhyachal 108 25 2,700 2,700(108) (25)NTPC Employees Consumers Cooperative Society Ltd. Anta 500 10 5,000 5,000(500) (10)NTPC Employees Consumers Cooperative Society Ltd. Kawas 500 10 5,000 5,000(500) (10)NTPC Employees Consumers Cooperative Society Ltd. Kaniha 250 20 5,000 5,000(250) (20)30,200 30,2008630th Annual Report

Schedule 10INVENTORIESRs. million31.03.2006 31.03.2005(Valuation as per Accounting Policy No. 9)Components and spares 12,894 11,904Loose tools 42 41Coal 7,476 3,115Fuel Oil 887 823Naphtha 690 645Chemicals & consumables 759 670Others 805 758Steel Scrap 76 5923,629 18,015Less: Provision for shortage 24 24Provision for obsolete/ unserviceable items 200 172Total 23,405 17,819Inventories include stores in transit 666 684Schedule 11SUNDRY DEBTORSDebts outstanding over six monthsUnsecured, considered good 656 7,866Considered doubtful 8,363 8,3609,019 16,226Other debtsUnsecured, considered good 8,022 5,88117,041 22,107Less: Provision for bad & doubtful debts 8,363 8,360Total 8,678 13,747Schedule 12CASH & BANK BALANCESCash on hand (includes cheques, drafts, stamps on hand Rs.150 million, 153 1,569previous year Rs.1,566 million)Remittances in transit 13 50Balance with Reserve Bank of India earmarked for fixed deposits from public 308 308Balances with scheduled banks (a)Current Account (b) 1,294 1,746Term Deposit Account (c)(d) 82,887 57,050Balance with other banksCall Deposit Account 59 60West Merchant Bank Limited,London(maximum amount outstanding at any time duringthe year Rs.60 million, previous year Rs.60 million)Total 84,714 60,783(a) Includes Rs.1,00,007/-(previous Year Rs.4,32,570/- ) in respect of Development Surcharge.(b) Includes Rs.44 million of Unclaimed Dividend (previous year Rs.37 million)(c) Rs. 14 million (previous year Rs.11 million) deposited as security with Government authorities/as per court orders.(d) Includes Rs.Nil as balance of unutilised monies raised by issue of shares (previous year Rs.11,316 million).30th Annual Report 87

Schedule 13OTHER CURRENT ASSETSRs. million31.03.2006 31.03.2005Interest accrued :Bonds 8,615 8,640Development surcharge investments 6 59Government of India Dated Securities 153 137Term Deposits 1241 834Others 103 65Others Recoverables 43 29Total 10,161 9,764Schedule 14LOANS AND ADVANCESLOANSEmployees (including accrued interest)Secured 4,575 4,696Unsecured, considered good 1,053 1,082Considered doubtful 1 1Government of India (for transfer of transmission systems)Unsecured, considered good 403 722Loan to State Government in settlement of dues from customersUnsecured, considered good 9,573 9,573OthersSecured 500 500Unsecured, considered good 4 206ADVANCES(recoverable in cash or kind for value to be received)Subsidiary CompaniesUnsecured, considered good 238 146Contractors & suppliers, including material issued on loanSecured 6 2Unsecured, considered good 901 546Considered doubtful 1 3Employees (including imprest)Unsecured, considered good 77 68Considered doubtful 1 1OthersUnsecured, considered good 494 765Considered doubtful 289 2118,116 18,332Claims recoverableUnsecured, considered good 965 1,012Considered doubtful 40 40Less: Provision for bad and doubtful loans, advances 332 66and claims18,789 19,318DEPOSITSDeposits with customs, port trust and others (#) 870 691Advance tax deposit & tax deducted at source 35,731 18,590Less: Provision 25,103 11,60610,628 6,984Total 30,287 26,993(#) Sales Tax deposited under protest with sales tax authorities 196 122Due from Directors & Officers of the CompanyDirectors 1 1Officers 438 353Maximum AmountDirectors 2 2Officers 522 4388830th Annual Report

Schedule 15CURRENT LIABILITIESRs. million31.03.2006 31.03.2005Sundry CreditorsFor capital expenditureOther than Small Scale Industrial Undertakings 11,692 12,216For goods and servicesSmall Scale Industrial Undertakings 8 14Others 13,049 11,578Book overdraft 128 -Deposits, retention money from contractors and others 11,289 9,473Less: Investments held as security 109 11336,057 33,168Advances from customers and others 9,886 14,431Investor Education and Protection Fund shall be credited byUnpaid matured Bonds (*Rs.2,000/-) * 1Interest accrued on unpaid matured deposits/bonds (*Rs.3,10,366/-) * 1Other liabilities 977 2,999Unclaimed dividend (#) 44 37Interest Accrued but not due :Loans from Government of India 9 21Foreign currency loans/bonds 362 300Term loans in Indian currency 517 299Bonds 1,173 967Fixed deposits from public 77 82Total 49,102 52,306(#) No amount is due for payment to Investor Education and Protection FundSchedule 16PROVISIONSFringe Benefit TaxAdditions during the year 209 -Less:Advance tax deposited 209 -- -Proposed dividendAs per last balance sheet 9,895 10,823Additions during the year 6,596 9,895Amounts used during the year 9,895 10,8236,596 9,895Tax on proposed dividendAs per last balance sheet 1,388 1,387Additions during the year 925 1,388Amounts used during the year 1,388 1,387925 1,388Retirement benefitsAs per last balance sheet 3,867 3,193Additions during the year 1,279 1,095Amounts used during the year 376 4214,770 3,867Tariff adjustmentAs per last balance sheet - 286Additions during the year - -Amounts reversed during the year - 286- -OthersAs per last balance sheet 11 8Additions during the year 1 4Amounts written off during the year 3 -Amounts reversed during the year - 19 11Total 12,300 15,16130th Annual Report 89

Schedule 17CONTIGENT LIABILITIESRs. million31.03.2006 31.03.2005Claims against the Company not acknowledged as debt in respect of:Capital works 7,153 7,084Land compensation cases 3,166 5,508Others 6,902 5,802Disputed Income Tax demand * 11,269 11Disputed Sales Tax demand 189 197Letters of Credit other than for capital expenditure 2,951 1,008Others 32 58Total 31,662 19,668* Possible reimbursement Rs.6,662 million (Previous year Nil)Schedule 18SALESCurrent YearPrevious YearEnergy Sales (including Electricity Duty) 263,492 228,526Less : Advance against Depreciation deferred 1,505 1,791Add: Revenue recognised out of Advance against Depreciation 471 8262,458 226,743Consultancy, project management and supervision fees (including turnkey construction projects) 452 333Total 262,910 227,076Schedule 19PROVISIONS WRITTEN BACKDoubtful debts - 5,927Doubtful advances and claims 5 5Doubtful construction advances 1 3Adjustment in tariff - 286Shortage in construction stores 2 1Shortage in stores 9 9Obsolescence in stores 6 2Others - 2Total 23 6,2359030th Annual Report

Schedule 20OTHER INCOMERs. millionCurrent Year Previous YearIncome from Long Term InvestmentsTradeDividend from Subsidiaries 30 6Dividend from Joint Ventures 118 111InterestGovernment Securities (8.5% tax free bonds issued by the State Governments) 16,877 13,949Other Bonds (Gross) (Tax deducted at source Rs.161 million, Previous year Rs.195 million ) 700 843Non-TradeInterest from Government of India Securities (Gross) 618 156Less: Amortisation of premium 413 -205 156Income from Current Investments (Non-Trade)Interest from Government of India Securities (Gross) (Tax deducted at source Nil) 14 6Income on redemption of Government of India Treasury Bills 1,399 37Income from OthersInterest (Gross) (Tax deducted at source Rs.1,159 million, Previous year Rs.76 million )Loan to State Government in settlement of dues from customers 814 595Public Deposit Account with Government of India - 3,573Indian banks 4,780 1,065Foreign banks 3 2Employees’ loans 237 259Others 107 152Interest on Income Tax refunds 1,151 -Less: Refundable to customers 1,151 -- -Surcharge on late payment from customers 384 2,460Hire charges for equipment 14 24Profit on disposal of fixed assets 41 37Miscellaneous income 1,012 1,31326,735 24,588Less:Income transferred to Incidental expenditure during construction-Schedule 26 657 1,059Total 26,078 23,529Schedule 21EMPLOYEES’ REMUNERATION AND BENEFITSSalaries, wages, bonus, allowances & benefits 8,582 7,584Contribution to provident and other funds 986 854Welfare expenses 1,807 1,72611,375 10,164Less: Adjusted in fuel cost 522 205Transferred to Development of Coal Mines 12 -Transferred to incidental expenditure during construction - Schedule 26 1,157 1,136Total 9,684 8,82330th Annual Report 91

Schedule 22GENERATION, ADMINISTRATION & OTHER EXPENSESCurrent YearRs. millionPrevious YearPower charges 542 436Less: Recovered from contractors & employees 71 72471 364Water charges 553 442Stores consumed 204 179Rent 108 78Less:Recoveries 60 4848 30Repairs & MaintenanceBuildings 559 568Plant & MachineryPower stations 7043 6,229Construction equipment 8 207,051 6,249Others 264 273Insurance 559 765Rates and taxes 131 164Water Cess & Environment Protection Cess 257 252Training & Recruitment expenses 307 260Less: Fees for training and application 23 25284 235Communication expenses 197 171Travelling Expenses 930 818Tender expenses 81 72Less: Receipt from sale of tenders 9 1072 62Payment to Auditors 20 10Advertisement and publicity 68 57Security expenses 1002 893Entertainment expenses 74 59Expenses for guest house 57 51Less:Recoveries 10 947 42Education expenses 113 120Brokerage & commission 7 9Donations 4 97Community development and welfare expenses 167 72Less: Grants-in-aid 7 -160 72Ash utilisation & marketing expenses 67 79Less: Sale of ash products 1 966 70Books and periodicals 30 31Professional charges and consultancy fees 239 177Legal Expenses 34 79EDP hire and other charges 68 67Printing and stationery 74 74Miscellaneous expenses 556 505Stores written off 2 3Claims/Advances written off - 2Survey & Investigation expenses written off 13 4Loss on disposal/write-off of fixed assets 88 199Loss on maturity of current Investments 6 -14,251 13,142Less: Adjusted in cost of fuel 782 409Transferred to Development of Coal Mines 19 -Transferred to incidental expenditure during construction - Schedule 26 729 671Total 12,721 12,062Stores consumption included in repairs and maintenance 4,453 3,8709230th Annual Report

Schedule 23PROVISIONSRs. millionCurrent YearPrevious YearDoubtful debts 3 -Doubtful advances and claims 292 30Doubtful advances for construction 9 -Shortage in stores 9 7Obsolescence in stores 34 27Shortage in construction stores 3 2Unserviceable capital work-in-progress 6 4Others 1 5Total 357 75Schedule 24INTEREST AND FINANCE CHARGESInterest on :Bonds 3,301 2,814Loans from Government of India 54 99Foreign Currency Term Loans 1,155 1,282Rupee Term loans 6,388 4,959Public deposits 131 378Foreign currency Bonds/Notes 694 624Others 129 152Exchange differences regarded as adjustment to interest costs (2,469) (568)9,383 9,740Finance Charges :Bonds servicing & public deposit expenses 18 13Guarantee Fee 405 443Management Fee - 85Commitment charges/ Exposure premium 99 1,069Rebate under Scheme for Settlement of SEB dues 8,047 6,813Rebate to customers 4,244 3,828Reimbursement of L.C.charges on Sales Realisation 57 13Bank Charges 8 8Bond Issue Expenses 2 5Exchange differences 123 6Foreign currency Bonds/ Notes issue expenses 98 -Others 58 3213,159 12,31522,542 22,055Less: Interest and Finance charges capitalised by transfer to 4,910 5,100incidental expenditure during construction - Schedule 26Total 17,632 16,95530th Annual Report 93

Schedule 25PRIOR PERIOD INCOME/EXPENDITURE (NET)Rs. millionCurrent YearPrevious YearINCOMESales 35 1,080Others 4 2239 1,102EXPENDITURESalary, wages, bonus, allowances & benefits 3 (8)Repairs and Maintenance 86 20Depreciation 171 305Interest 2,197 888Advertisement and publicity - 1Professional consultancy charges - 12Rates & Taxes 64 (1)Power charges - (27)Insurance (6) -Rent 12 -Fuel - (201)Others 34 142,561 1,0032,522 (99)Less: Incidental expenditure during construction - Schedule 26 34 3Total 2,488 (102)9430th Annual Report

Schedule 26INCIDENTAL EXPENDITURE DURING CONSTRUCTIONRs. millionCurrent YearPrevious YearA. Employees remuneration and other benefitsSalaries, wages, allowances and benefits 876 887Contribution to provident and other funds 110 86Welfare expenses 171 163Total (A) 1,157 1,136B. Other ExpensesPower charges 149 103Less: Recovered from contractors & employees 13 10136 93Water charges 3 -Rent 25 17Repairs & maintenanceBuildings 24 49Construction equipment 1 11Others 36 3161 91Insurance 5 4Rates and taxes 16 30Communication expenses 32 28Travelling expenses 138 125Tender expenses 24 27Less: Income from sale of tenders 1 223 25Payment to Auditors 2 2Advertisement and publicity 14 12Security expenses 84 63Entertainment expenses 13 1Guest house expenses 4 3Education expenses - 1Books and periodicals 3 4Community development expenses 7 4Professional charges and consultancy fee 33 37Legal expenses 3 3EDP Hire and other charges 9 9Printing and stationery 11 10Miscellaneous expenses 107 109Total (B) 729 671Depreciation (C) 116 107Total (A+B+C) 2,002 1,91430th Annual Report 95

Rs. millionD. Interest and Finance Charges Current Year Previous YearInterest onBonds 865 650Foreign Currency Term Loans 67 2Rupee Term loans 3,210 2,738Foreign currency Bonds/Notes 396 520Finance ChargesGuarantee Fee - 1,069Commitment charges 11 -Management fee / arrangers fees 88 85Exchange differences 118 -Foreign currency Bonds/Notes issue expenses 98 -Others 57 36Total (D) 4,910 5,100E. Less Other IncomeInterest fromIndian Banks 285 287Employees 21 21Government of India Securities out of unutilisedmonies raised by issue of shares 532 156Less: Amortisation of premium 368 -164 156Others 56 330Hire Charges 8 6Sale of scrap 1 -Miscellaneous income 122 259Total (E) 657 1,059F. Prior Period Adjustments 34 3G. Income / Fringe Benefit Tax 285 -GRAND TOTAL (A+B+C+D-E+F+G) 6,574 5,9589630th Annual Report

Schedule 27NOTES ON ACCOUNTS1. The name of the Company has changed from “National Thermal Power Corporation Limited” to “NTPC Limited” with effect from 28 th October, 2005.2. a) The conveyancing of the title to 5,665 acres of freehold land of value Rs. 2,571 million (previous year 7,157 acres, value Rs. 3,126 million)and execution of lease agreements for 6,873 acres of value Rs. 849 million (previous year 6,940 acres, value Rs.733 million) in favour of theCompany are awaiting completion of legal formalities.b) Land shown in the books does not include cost of 1,148 acres (previous year 1,148 acres) of land in possession of the Company. This willbe accounted for on settlement of the price thereof by the State Government Authorities. Land includes 345 acres of value Rs.28 million(previous year 345 acres value Rs.28 million) not in possession of the Company.c) Land includes amount of Rs. 1,206 million (previous year Rs.1,128 million) deposited with various authorities in respect of land in possessionwhich is subject to adjustment on final determination of price.d) The cost of Right of Use of land for laying pipelines amounting to Rs.13 million (previous year Rs.7 million) is included under intangibleassets.3. a) The Central Electricity Regulatory Commission (CERC) has notified by regulations in March 2004, the terms and conditions for determination oftariff applicable with effect from 1 st April 2004 for a period of five years. Pending final determination of tariff for the period 1 st April 2004onwards, CERC has directed by notification that on provisional basis, the annual fixed charges as applicable on 31 st March 2004 shall bebilled at target availability and variable charges based on norms of operation notified in Regulations, 2004. The amount billed for the year onthis basis is Rs. 268,301 million (previous year Rs.230,663 million). Since the amount billed is subject to adjustment with effect from 1 st April2004, pending final determination of the tariff by CERC, sales amounting to Rs. 257,179 million (previous year Rs.221,380 million) for the yearhave been provisionally recognised on the basis of principles enunciated by the CERC in Regulations, 2004.Further, Rs. 603 million pertaining to previous year has been recognised in sales due to revision in the amounts provisionally billed based onorders of the CERC/Appellate Tribunal for Electricity.b) CERC has issued orders in December 2000 with respect to the tariff norms, principles and Availability Based Tariff (ABT). The company filedan appeal against the orders of CERC before the Delhi High Court which has since been transferred to the Appellate Tribunal for Electricity.Pending disposal of the appeal, CERC has notified by regulations, the terms and conditions for determination of tariff, effective from 1 st April2001 to 31 st March 2004. CERC issued final tariff orders based on above regulations in respect of all the stations up to 31 st March, 2004 exceptfor Rihand STPS Stage-I. During the year in respect of Rihand STPS Stage-I, an amount of Rs. 101 million has been accounted for in sales(reduction of Rs.39 million in the previous year) in line with above regulations and principles followed in the final tariff orders issued for otherstations of the company.In case of stations for which final tariff orders have been issued by the CERC for the period up to 31 st March, 2004, sales for the said periodamounting to Rs. 2,282 million (previous year Rs.2,768 million) has been accounted for during the year. Based on the orders ofCERC admitting the additional capital expenditure for some of the stations for the period 2001-04 and the principles enunciated therein,Rs. 536 million (previous year Rs.474 million) has been provisionally accounted as sales during the year which is to be billed on issuance ofstation specific tariff orders by CERC.4. Depreciation has been charged at the rates specified in Schedule XIV of the Companies Act,1956 except as stated in accounting policyNo.10.2.1. The Government of India in January 2006 notified the Tariff Policy under the provisions of the Electricity Act, 2003 which provides thatthe rates of depreciation notified by the CERC would be applicable for the purpose of tariffs as well as accounting. Subsequent to the notificationof the Tariff Policy, CERC has not notified the rates of depreciation. The Company has been advised that the Tariff Policy cannot override theprovisions of the Companies Act,1956 and it is required to follow Schedule XIV of the Companies Act,1956 in the absence of any specificdeviation contained in the Electricity Act, 2003 which could be said to have been saved by Sec.616 of the Companies Act,1956. The Companyhas also been advised that there is no such provision in the Electricity Act,2003 either prescribing the rates of depreciation for the generatingcompany or otherwise empowering any authority for providing depreciation rates for accounting purposes in supercession of the provisions ofthe Companies Act, 1956.5. Due to uncertainty of realisation in the absence of sanction by the Government of India (GOI), the company’s share of net annual profits ofBadarpur Thermal Power Station for the years 1986-87 to 2004-05 amounting to Rs. 1,155 million (previous year Rs. 1,174 million) being balancereceivable in terms of the management contract with the GOI has not been recognised.6. CERC notification dated 26 th March,2001 in respect of tariff norms for the period 2001-04 directed to collect Development Surcharge frombeneficiaries. Subsequently, CERC vide its order dated 9 th November 2004 directed that the amount collected and invested in instrumentscorresponding to the amount contributed by each of the state utilities with interest shall be transferred in the name of concerned utility at thelatter’s expense. The company paid/adjusted the same as per CERC directions and the outstanding balance yet to be transferred as on31 st March, 2006 is as under:(Rs. Million)Sl. No. Description of the Account Schedule No. 31.03.2006 31.03.20051 Investment in different tax-free bonds 9 193 23672 Bank balance in Current Account 12 * **3 Interest accrued on Sl. No. 1 13 6 59Total 199 2426*Rs.1,00,007/- **Rs.4,32,570/-30th Annual Report 97

7. Pursuant to the Government of India Scheme for Settlement of Dues of State Electricity Boards (Scheme), Governments of Jharkhand and Biharissued notifications during December 2005 for issue of 8.5% Tax-Free special bonds with effect from 1 st October 2001 for Rs.3,378 million and Rs.4,277 million respectively towards outstanding dues. Accordingly, Investment of Rs. 7,655 million, interest income on the bonds amounting toRs.2,928 million, rebate of Rs.1,198 million payable to State Electricity Boards/Successor Entities under the Scheme have been recognised,including Rs.2,278 million towards interest and Rs.892 million towards rebate pertaining to the period upto 31 st March, 2005.8. In accordance with the Uttar Pradesh Electricity Reforms (Transfer of Tanda Generation Undertaking) Scheme 2000, the assets for Rs.6,070 million(previous Year Rs.6,070 million) of Tanda Power Station of UP State Electricity Board (UPSEB) were handed over to the Company free from allencumbrances. However, the charge created by UPSEB in favour of Life Insurance Corporation of India (LIC) before the assets were taken over isstill to be vacated by LIC.9. The company has provided Rs.3,401 million in previous years in respect of amounts reimbursable to Government of India (GOI) in terms of PublicNotice No.38 dated 5 th November, 1999 and Public Notice No.42 dated 10 th October, 2002 towards cash equivalent of the relevant deemedexport benefits paid by GOI to the contractors for Talcher Super Thermal Power Project Stage-II based upon the details provided by the contractors.During the year, Rs.2678 million was paid on receipt of procedural details from the GOI for depositing the amount. The balance provision hasbeen revised to Rs.91 million on the basis of additional information received from the contractors, and the difference of Rs.632 million wasadjusted against the related assets. No interest has been provided on the reimbursable amounts as there is no stipulation for payment of interestin the public notices cited above.10. The Company has raised Rs.26,840 million through public issue of shares in 2004-05. The entire proceeds of the issue, net of issue expenses, wereutilised for part financing the capital expenditure on the specified projects.11. Out of Rs.109 million accounted as recoverable from the Government of India (GOI) towards its share of expenses for the initial public issue ofshares made in the previous year, the GOI has approved payment of Rs.56 million. Consequently, an amount of Rs.53 million has been adjustedagainst the Share Premium Account.12. a) Balances shown under advances, creditors and material lying with contractors/ fabricators and material issued on loan in so far as these havesince not been realised/ discharged or adjusted are subject to confirmation/reconciliation and consequential adjustment, if any.b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will notbe less than the value at which these are stated in the Balance Sheet.13. Effects of change in Accounting Policiesa) Exchange differences on foreign currency loans contracted before 1 st April, 2000 for acquisition of fixed assets within India were hithertoadjusted in the carrying cost of related fixed assets. In line with the opinion received from the Institute of Chartered Accountants of Indiaduring the year, the Company has treated such exchange differences to the extent regarded as adjustment to interest cost as ‘borrowingcosts’ w.e.f. 1 st April 2000. Consequently, during the current year there has been decrease in Interest and Finance charges by Rs.1,364 million,increase in Depreciation by Rs.166 million, Prior period adjustment of Rs.1,986 million and decrease in the Profit by Rs.788 million.b) In pursuance of Accounting Policy No.8.3, Rs.413 million has been amortised during the year out of the premium paid on long terminvestments which was hitherto not being done. As a result profit for the year is lower by Rs.45 million and Capital Work-In-Progress ishigher by Rs.368 million.c) Expenses by way of repairs and maintenance, depreciation, employee cost and insurance charges relating to the coal handling system usedfor bringing coal to its present location and condition at the power stations have been considered for valuation of the coal during the yearwhich was hitherto not being done. The total expenses incurred under these items during the year are Rs.1,090 million. Due to inclusion ofthe above expenses, the closing stock of coal and profit for the year is more by Rs.82 million.14. The effect of foreign exchange fluctuation during the year is as under :i) The amount of exchange differences (net) credited to the Profit & Loss Account is Rs. 2 million (previous year credit, Rs.9 million).ii) The amount of exchange differences debited to the carrying amount of fixed assets and Capital Work-in-Progress is Rs.317 million (previousyear credit, Rs.145 million).15. Revenue Grants recognised during the year in respect of expenditure incurred in the previous years amount to Rs.1 million (previous year Nil) .16. Borrowing costs capitalised during the year are Rs. 4,785 million (previous year Rs.5,100 million).17. Segment informationa) Business Segments: The Company’s principal business is generation and sale of bulk power to SEBs/State utilities. Other business includesproviding consultancy, project management and supervision, oil and gas exploration and coal mining.b) Segment Revenue and Expense: Revenue directly attributable to the segments is considered as Segment Revenue. Expenses directly attributableto the segments and common expenses allocated on a reasonable basis are considered as Segment Expenses.c) Segment Assets and Liabilities: Segment assets include all operating assets in respective segments comprising of net fixed assets and currentassets, loans and advances. Construction work-in-progress, construction stores and advances are included in unallocated corporate andother assets. Segment liabilities include operating liabilities and provisions.9830th Annual Report

Rs. MillionBusiness SegmentsGeneration Others TotalCurrent Year Previous Year Current Year Previous Year Current Year Previous YearRevenue :Sale of Energy/Consultancy,Project Management and Supervision fees 260,701* 225,069* 452 333 261,153 225,402Internal Consumption of Electricity 276 248 - - 276 248Total 260,977 225,317 452 333 261,429 225,650Segment Result 45,837# 49,467# 224 188 46,061 49,655Unallocated Corporate Interestand Other Income 24,659 19,843Unallocated Corporate Expenses,Interest and Finance Charges 10,496 8,716Income Taxes (Net) 2,022 2,712Profit after Tax 58,202 58,070Other informationSegment Assets 266,989 259,465 417 402 267,406 259,867Unallocated Corporate and Other Assets 449,965 399,616Total Assets 266,989 259,465 417 402 717,371 659,483Segment liabilities 37,620 38,074 214 176 37,834 38,250Unallocated Corporate and other liabilities 225,541 200,095Total liabilities 37,620 38,074 214 176 263,375 238,345Depreciation 20,320 19,438 1 1 20,321 19,439Non-cash expenses other than Depreciation 355 67 - - 355 67Capital Expenditure 65,854 54,702 32 2 65,886 54,704* Includes Rs.3,522 million ( previous year Rs.3,689 million) for sales related to earlier years.# Segment result would have been Rs. 42,315 million (previous year Rs.45,778 million) without including the sales related to earlier years.d) The operations of the Company are mainly carried out within the country and therefore, geographical segments are inapplicable.18. Related party disclosuresa) Related parties:i) List of joint ventures:Utility Powertech Limited, NTPC-Alstom Power Services Private Ltd., PTC India Ltd.ii)Key Management Personnel:Shri C.P. Jain Chairman and Managing Director 1Shri T. SankaralingamDirector (Projects)Shri K.K.Sinha Director (Human Resources) 2Shri P. Narasimharamulu Director (Finance) 3Shri Chandan RoyDirector (Operations)Shri R.S.SharmaDirector (Commercial)Shri R.K. Jain Director (Technical) 4Shri A.K.Singhal Director (Finance) 51. Superannuated on 31 st March 2006 2. Resigned w.e.f 27 th June 2005 3. Superannuated on 31 st July 2005 4. W.e.f. 5 th May 20055. W.e.f. 1 st August 200530th Annual Report 99

) Transactions with the related parties at a (i) above are as follows :(Rs. Million)Particulars Current Year Previous YearContracts for Works/ Services for services received by the company• Transactions during the year 945 854• Amount recoverable from related parties 42 6• Amount payable to related parties 185 142Contracts for Works/ Services for services provided by the company• Transactions during the year 15 10• Amount recoverable from related parties 3 2Dividend Received 28 21Deputation of Employees• Transactions during the year 11 7• Amount recoverable from the related parties 2 1c) Remuneration to key management personnel is Rs. 10 million (previous year Rs. 8 million) and amount of dues outstanding to thecompany as on 31 st March 2006 are Rs.1 million (previous year Rs.1 million).19. Disclosure regarding leasesa) Finance leasesThe Company has taken on lease certain vehicles and has the option to purchase the vehicles as per terms of the lease agreements,details of which are as under:Rs. million31.03.2006 31.03.2005a) Outstanding balance of minimum lease payments• Not later than one year 4 4• Later than one year and not later than five years 6 9Total 10 13b) Present value of (a) above• Not later than one year 4 3• Later than one year and not later than five years 5 8Total 9 11c) Finance Charges 1 2b) Operating leases:The company’s significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices andguest houses/transit camps. These leasing arrangements are usually renewable on mutually agreed terms but are not non-cancellable.Employees’ remuneration and benefits include Rs. 184 million (previous year Rs. 163 million) towards lease payments, net of recoveries, inrespect of premises for residential use of employees. Lease payments in respect of premises for offices and guest house/transit camps areshown as Rent in Schedule 22 – Generation, Administration and other expenses. Miscellaneous income in Schedule 20 – Other Income,includes Rs.1 million (previous year Rs.1 million) towards sub-lease payments received/recoverable.10030th Annual Report

20. Earnings per shareThe elements considered for calculation of Earning Per Share (Basic and Diluted) are as under:Current YearPrevious yearNet Profit after Tax used as numerator (Rs. Million) 58,202 58,070Weighted average number of equity shares used as denominator 8,245,464,400 7,997,576,085Earning Per Share Basic and Diluted (Rupees) 7.06 7.26Face value per share (Rupees) 10/- 10/-21. Advances- due from subsidiaries (Rs. Million)Name of Subsidiary Outstanding balance Maximum amount31.03.2006 31.03.2005 31.03.2006 31.03.2005NTPC Electric Supply Company Ltd 148 78 148 78NTPC Vidyut Vyapar Nigam Ltd 10 5 16 24Pipavav Power Development Company Ltd 61 61 61 61NTPC Hydro Ltd 19 2 21 12Total 238 146 246 17522. The item-wise details of deferred tax liability (net) are as under: (Rs. Million)31.03.2006 31.03.2005Deferred tax liabilityi) Difference of Book depreciation and tax depreciation 62,656 57,109Less: Deferred tax assetsi) Provisions disallowed for tax purposes 9,336 5,199ii) Disallowed u/s 43B of the Income Tax Act,1961 96 1,3409,432 6,539Deferred Tax Liability (Net) 53,224 50,570The net increase in the deferred tax liability of Rs.2,654 million (previous year decrease Rs.1,710 million) has been debited to Profit andLoss Account. However, the same is recoverable from customers.23. Provision for current tax is after adjustment of refund amounting to Rs.5,536 million (previous year Rs.332 million) pertaining to previousyears and consequent adjustment made in Income Tax recoverable is Rs.5,090 million (previous year Nil).24. Research and Development expenditure charged to revenue during the year is Rs. 58 million (previous year Rs. 42 million).25. Interest in joint ventures:a) Joint venture entities:CompanyProportion of ownership interestas on31.03.2006 31.03.2005Utility Powertech Limited 50% 50%NTPC-Alstom Power Services Private Limited 50% 50%PTC India Limited 8% 8 %NTPC-SAIL Power Company Private Limited 50% 50%Bhilai Electric Supply Company Private Limited 50% 50%NTPC-Tamilnadu Energy Company Limited 50% 50%Ratnagiri Gas and Power Private Ltd.* 28.33% NIL*Shareholders’ agreement is under execution30th Annual Report 101

The above joint venture entities are incorporated in India. The Company’s share of the assets and liabilities as on 31 st March, 2006 andincome and expenses for the year in respect of joint venture entities based on audited accounts are given below:(Rs. Million)31.03.2006 31.03.2005A Assets• Long Term Assets 28,562 2,665• Current Assets 2,376 1,846Total 30,938 4,511B Liabilities• Long Term Liabilities 22,824 2,148• Current Liabilities and Provisions 1,725 881Total 24,549 3,029C Contingent Liabilities 6 1D Capital Commitments 7,762 6,708Current YearPrevious YearE Income 4,547 3,667F Expenses 4,259 3,423b) Joint venture operations: During the year the Company alongwith M/s Geopetrol International Inc. and M/s Canoro Resources Ltd., has participatedin bidding under the Government of India New Exploration Licensing Policy-V for exploration and production of oil and gas and has beenallotted Block AA-ONN-2003/2 in the State of Arunachal Pradesh. The Company together with other consortium members entered into aProduction Sharing Contract with the Government of India. The Company is a non-operator and has 40% share in expenses, income, assetsand liabilities with a minimum work programme commitment of Rs.621 million (previous year Nil) as per the Production Sharing Contract.The Company’s share of assets and liabilities as at 31 st March,2006 and expenditure for the period ended on that day in respect of the abovejoint venture operations has been accounted for based on unaudited statement of accounts submitted by the operator.Rs.MillionExpenses 2Fixed Assets (# Rs.32,117/-) #Other Assets (* Rs.61,180/-) *Current Liabilities 226. As required by Accounting Standard (AS-28) “ Impairment of Assets” issued by the Institute of Chartered Accountants of India, the company hascarried out the assessment of impairment of assets. There has been no impairment loss during the year.27. i) During the year the Company reviewed the disclosure of contingent liabilities keeping in view the provisions of AS-29 ‘Provisions, ContingentLiabilities and Contingent Assets’ issued by the Institute of Chartered Accountants of India as under:a) As on 31 st March, 2006 the estimated financial effect of claims for enhanced compensation for land pending before courts disclosed ascontingent liability is based on judgment of the management, opinion of independent experts or experience of similar transactions.Such claims hitherto were disclosed based on the amounts claimed by the land losers, except to the extent the possibility of a liabilitywas considered remote.b) As on 31 st March 2006 the estimated financial effect of claims for interest on amounts disputed, delayed payments etc. is based on therate of interest claimed or 18%, whichever is lower, unless otherwise provided in any statute, agreement, order etc. Such claims werehitherto disclosed based on the rates demanded by the claimants.Consequently, contingent liabilities as at 31 st March, 2006 are lower by Rs.3,595 million.ii)The outflow on account of the claims against the company not acknowledged as debts, and tax disputes is contingent upon the decision ofthe courts/other authorities and may differ from the amounts disclosed as contingent liability on the basis of estimates.10230th Annual Report

28. Foreign currency exposure not hedged by a derivative instrument or otherwise:Sl.No Particulars Currencies Amount Rs. Million31.03.2006 31.03.2005a. Borrowings, including interest accrued but not due thereon. USD 36,977 20,348JPY 28,574 32,303Others 896 1,390b. Sundry creditors/deposits and retention monies USD 4,729 3,450EURO 787 131Others 536 597c. Sundry debtor and Bank balances GBP 59 60USD 6 -d. Unexecuted amount of contracts remaining to be executed USD 44,044 51,185EURO 5,531 5,477Others 1,187 1,17529. The pre-commissioning expenses during the year amounting to Rs 1,312 million (previous year Rs 1,191 million) have been included inFixed Assets/Capital work-in-progress after adjustment of pre-commissioning sales of Rs. 727 million (previous year Rs. 583 million)resulting in a net pre-commissioning expenditure of Rs. 585 million (previous year Rs.608 million).30. Payment to the Statutory Auditors (Schedule 22)Rs. MillionCurrent Year Previous YearAudit Fees 4 4Tax audit Fees 2 1Certification Fees 8 6Reimbursements- Travelling Expenses 5 4- Service Tax 1 120 16Less: Towards IPO certification included in Issue expenses - 620 1031. List of Small Scale Industrial undertaking to whom payment is outstanding for more than 30 days as on 31 st March, 2006, to the extentavailable to the Company, is as under:Adarsh Engineering Works, Atlas Fasteners, Accurate Metal Industries, Aditya Air Products Pvt.Ltd, Avlani Engineering, Balaji Alum Industries,Bajrang Pharmaceuticals, Bhavesh Corporation, Balaji Industrial Products, Clean Filter Industries Pvt. Ltd., Central India Engineers, DASS & Sons, EDPForms Pvt. Ltd., Flexer Rubber Pvt. Ltd., GEECO Enercon Pvt. Ltd., Gopal Steam Printing Works, Hivelm Industries, Insha Plastic Industries, IMECOLimited, Iyappan Engineering Ind. Pvt. Ltd., Jalan Engineering, Khera Instruments Pvt. Ltd., KPC Flexi Tubes, Kwality Tubes, Modi Gas Products,Poweraid (India) Pvt. Ltd., Prabhu Industries, Panja Valves, Precission Transmatic Dev., Rameswar Iron Foundry, Ray Enterprises, Rasvin Rubber Pvt.Ltd., Shree Vishnu Enterprises, Sudeep Industries Pvt. Ltd., SAP Industries, SPA Instruments (I) Pvt. Ltd., S.D. Instruments & Equipments, Steam &Mining Industries, Teletex Industrial Corpn., Technofab (India), Turbo Engineers (CBE), Upadhyay Valves Mfg., Udyogi Industries, Vishal StructureFabricators.32. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 135,587 million (previous year Rs.148,140million).33. Managerial remuneration paid/ payable to Directors (Rs. Million)Current year Previous yearSalaries & Allowances 8 6Contribution to provident fund & other funds including gratuity & group insurance 1 1Other benefits 1 1Directors’ fees * ** Rs.1,30,000/- (previous year Rs.3,00,000/-)30th Annual Report 103

In addition to the above remuneration the whole time Directors have been allowed the use of staff car including for private journeys onpayment of Rs.780/- per month, as contained in the Ministry of Finance (BPE) Circular No.2 (18)/pc/64 dt.29.11.64, as amended.34. Licensed and Installed Capacities as at 31st March: Current year Previous year(As certified by Management)Licensed Capacity - Not applicableInstalled Capacity (MW Commercial units) 23,497 22,497Quantitative information in respect of Generation and Sale of Electricity (in MUs):a) Pre-commissioning period :Generation 1,091 839Sales 991 713b) Commercial period :Generation 169,789 158,271Sales 159,019 147,792c) Value of imports calculated on CIF basis (Rs. Million):Capital goods 6,380 822Spare parts 518 630d) Expenditure in foreign currency (Rs. Million):Professional and Consultancy fee 10 78Interest 1,849 1,906Others 2,618 12,083e) Value of Components, Stores and Spare parts consumed (Rs. Million):%age Amount %age AmountImported 1.07 1,809 0.37 527Indigenous (including fuel) 98.93 166,795 99.63 140,695f) Earnings in foreign exchange (Rs. Million):Professional & Consultancy fee 3 -Interest 3 3Others 1 235. Previous year figures have been regrouped/rearranged wherever necessary.36. Information pursuant to Part IV of Schedule VI of the Companies Act, 1956.10430th Annual Report

BALANCE SHEET ABSTRACT AND A COMPANY’S GENERAL BUSINESS PROFILEI. Registration DetailsRegistration No. 7 9 6 6 1 9 7 5 - 7 6 State Code: 5 5Balance-sheet date 3 1 0 3 0 6II. Capital Raised during the year (Amount in Rs. Thousands)Public Issue N I L Rights Issue N I LBonus Issue N I L Private Placement N I LIII. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)Total LiabilitiesTotal Assets7 7 0 5 9 4 2 4 7 7 7 0 5 9 4 2 4 7Sources of FundsPaid-up CapitalReserves & Surplus8 2 4 5 4 6 4 4 3 6 7 1 3 1 5 5 0Secured LoansUnsecured Loans5 7 3 2 7 2 8 4 1 4 4 6 4 6 0 6 5Deferred Tax Liability5 3 2 2 4 0 0 0Application of FundsNet Fixed AssetsInvestments2 3 0 8 9 4 9 0 0 1 9 2 8 9 1 3 7 0Net Current AssetsMisc. Expenditure9 5 8 4 2 8 1 2 N I LAccumulated LossesN I LIV. Performance of Company (Amount in Rs. Thousands)TurnoverTotal Expenditure2 6 1 1 5 2 7 1 7 2 2 4 8 1 8 3 9 9Profit/Loss before taxProfit/Loss after tax+ 6 0 2 2 3 9 8 4 + 5 8 2 0 1 9 8 7Earning per share in Rs Dividend Rate %7 . 0 6 2 8 . 0 0V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)Product Description: Item Code No.G E N E R A T I O N O F E L E C T R I C I T Y N AC O N S U L T A N C Y S E R V I C E S N AM A N A G E M E N T O F P O W E R S T A T I O N S N AFor and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) ( T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao)Partner Partner PartnerM No. 77076 M No 70693 M No. 2275For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Gaurav Nanda )(Sanjay Gupta)PartnerPartnerM No 500417 M No 87563Place : New DelhiDated : 31 st May 200630th Annual Report 105

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006Current YearRs. MillionPrevious YearA. CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax and Prior Period Adjustments 62712 60680Adjustment for:Depreciation 20477 19584Provisions 357 75Deferred revenue on account of Advance Against Depreciation 1034 1783Interest charges 11852 10308Guarantee Fee & Other Finance charges 504 1597Interest/Income on Bonds/Investments (19195) (14991)Prior Period Adjustments (Net) (2488) 102Dividend Income (148) (117)Provisions Written Back (23) (6235)Bonds issue and Servicing Expenses 118 18Loss on maturity of Current Investments 6 -12494 12124Operating Profit before Working Capital Changes 75206 72804Adjustment for:Trade and Other Receivables (2589) (2835)Inventories (4510) 105Trade Payables and Other Liabilities (73) (16319)Loans and Advances (1490) 3323Other Current Assets (406) (467)(9068) (16193)Cash generated from operations 66138 56611Direct Taxes Paid (9319) (12959)Income Tax Recoverable 5245 7346Net Cash from Operating Activities - A 62064 50998B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets (66956) (53699)Purchase of Investments (45959) (34167)Sale of Investment 71638 -Invesment in Subsidiaries/Joint Ventures (5552) (430)Loans & Advances to Subsidiary (92) (52)Development Surcharge Account - (1358)Interest/Income on Bonds/Investment Received 19637 25453Dividend Received 148 117Net cash used in Investing Activities - B (27136) (64136)C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of Share capital (Including Premium) - 26841Proceeds from Long Term Borrowings 48226 29592Repayment of Long Term Borrowings (17131) (13242)Interest Paid (11383) (10323)Guarantee Fee & other Finance charges Paid (504) (1597)Dividend Paid (26386) (20718)Tax on Dividend (3701) (2679)Bonds issue and Servicing Expenses (118) (304)Net Cash flow from Financing Activities - C (10997) 7570Net Increase/Decrease in Cash and Cash equivalents (A+B+C) 23931 (5568)Cash and cash equivalents (Opening balance) * 60783 66351Cash and cash equivalents (Closing balance) * 84714 60783NOTES : Cash and Cash Equivalents consists of Cash in Hand, Balance with Banks, Public Deposit Account and interest accrued thereon.Previous year’s figures have been regrouped/rearranged wherever necessary.* Includes Rs. 14 Million deposited as security with Government Authorities as per court orders.For and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) ( T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (V.Umamaheswara Rao)Partner Partner PartnerM No. 77076 M No 70693 M No. 2275For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Gaurav Nanda )(Sanjay Gupta)PartnerPartnerPlace : New DelhiDated : 31 st May 2006M No 500417 M No 8756310630th Annual Report

AUDITORS’ REPORTTo the Members ofNTPC LIMITED1. We have audited the attached Balance Sheet of NTPC LIMITED (formerly NATIONAL THERMAL POWER CORPORATION LIMITED) as at 31 st March,2006, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statementsare the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.2. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit includes examining,on test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.3. As required by the Companies (Auditors’ Report) Order, 2003 (as amended) issued by the Government of India in terms of sub-section (4A) ofsection 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.4. We draw attention to:(i) Note No. 3 of Schedule 27 to the financial statements in respect of accounting of sales on provisional basis pending final determination oftariff by Central Electricity Regulatory Commission.(ii) Note No. 5 of Schedule 27 to the financial statements in respect of share of net annual profit of Badarpur Thermal Power Station amounting toRs.1,155 million relating to earlier years not recognized as revenue.5. Further to our comments in annexure referred to in para 3, and also para 4 above, we report that:a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of ouraudit;b) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of thosebooks;c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the AccountingStandards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;e) Being a Government company, pursuant to the Notification no. GSR 829(E) dated 17.7.2003 issued by Government of India, provisions ofclause (g) of sub-section (1) of section 274 of the Companies Act, 1956, are not applicable to the company;f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts read with the AccountingPolicies and Notes thereon in Schedule 27, give the information required by the Companies Act, 1956 in the manner so required and give atrue and fair view in conformity with the accounting principles generally accepted in India:a. in the case of Balance Sheet, of the state of affairs of the company as at 31 st March, 2006,b. in the case of Profit and Loss Account, of the profit for the year ended on that date, andc. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (V. Umamaheswara Rao)Partner Partner PartnerM.No.77076 M.No. 70693 M.No. 2275For S.N.Nanda & Co.Chartered AccountantsFor T.R.Chadha & Co.Chartered Accountants(Gaurav Nanda)(Sanjay Gupta)PartnerPartnerM.No.500417 M.No. 87563Place : New DelhiDated : 31 st May, 200630th Annual Report 107

ANNEXURE TO THE AUDITORS’ REPORTStatement referred to in paragraph (3) of our report of even date to the members of NTPC LIMITED (Formerly National Thermal PowerCorporation Ltd.) on the accounts for the year ended 31 st March, 2006(i) (a) The company has generally maintained proper records showing full particulars including quantitative details and situation of fixed assets.(b)(c)All the assets have not been physically verified by the management during the year but there is a regular programme of verification which,in our opinion, is reasonable having regard to the size of the company and the nature of its assets. No material discrepancies were noticedon such verification.Substantial part of the fixed assets has not been disposed off during the year.(ii) (a) The inventory has been physically verified by the management at reasonable intervals.(b)(c)The procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size ofthe company and the nature of its business.The Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventories, wherevermaterial, have been properly dealt with in the books of account.(iii) (a) The company has not granted any loans secured or unsecured to any company, firm or other party covered in the register maintained undersection 301 of the Companies Act, 1956.In view of clause (iii) (a) above, the clauses (iii) (b), (iii) (c) and (iii) (d) are not applicable.(e)The company has not taken any loans secured or unsecured from any company, firm, or other party covered in register maintained undersection 301 of the Companies Act, 1956.In view of (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable.(iv)In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with thesize of the company and the nature of its business for purchase of inventory and fixed assets and for sale of goods and services. During thecourse of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems.(v) (a) According to the information and explanations given to us, during the year under audit there have been no contracts or arrangementswhich need to be entered in the register maintained under section 301 of the Companies Act, 1956.(b)In view of clause (v) (a) above, the clause (v) (b) is not applicable.(vi)In our opinion and according to the information and explanations given to us, the company has complied with the provisions of Sections 58Aand 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 with regard tothe deposits accepted from the public. No order has been passed by the Company Law Board or National Company Law Tribunal or Reservebank of India or any court or any other tribunal.(vii) In our opinion, the company has an internal audit system commensurate with the size and the nature of its business. However, it needs to befurther strengthened.(viii) We have broadly reviewed the accounts and records maintained by the company pursuant to the Rules made by the Central Government for themaintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribedaccounts and records have been made and maintained. We have not, however, made detailed examination of the records with a view todetermine whether they are accurate and complete.(ix) (a) Undisputed statutory dues including provident fund, investor education and protection fund, income tax, sales-tax, wealth tax, servicetax, custom duty, excise duty, cess and other statutory dues have generally been regularly deposited with the appropriate authoritiesexcept outstanding dues in respect of electricity duty amounting to Rs.0.49 million as at 31 st March, 2006 due for a period of more than sixmonths from the date they became payable. However, the same has since been deposited by the company.(b)The disputed statutory dues aggregating to Rs.191 million that have not been deposited on account of matters pending before appropriateauthorities are detailed below :Sl.No. Name of Statute Nature of dues Forum where the dispute is pending Rs. Million1 Central Sales Tax and Sales Tax Acts Sales Tax Additional Commissioner of Sales Taxes 81of Various StatesCommissioner of Sales Taxes 25Dy. Commissioner of Sales/ Commercial Taxes 12High Court 2810830th Annual Report

Sl.No. Name of Statute Nature of dues Forum where the dispute is pending Rs. millionSales Tax Tribunal 5Joint Commissioner (Appeal) Trade tax 9Revenue Board *(Rs.25645) *2 Water (Prevention & Water/Pollution Appellate Authority,Control of Pollution) Cess Pollution Control Board 31Cess Act 1977(x)(xi)(xii)(xiii)(xiv)(xv)(xvi)Total 191The company has no accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediatelypreceding financial year.In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to financialinstitutions, banks or debenture holders.According to the information and explanations given to us, company has not granted loans and advances on the basis of security by way ofpledge of shares, debentures and other securities.The company is not a chit fund or a nidhi / mutual benefit fund/ society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’sReport) Order, 2003 are not applicable to the company.The company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) ofthe Companies (Auditor’s Report) Order, 2003 are not applicable to the company.Company has not given any guarantees for loans taken by others from banks or financial institutions.In our opinion, the term loans have been applied for the purpose for which they were raised.(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we report thatno funds raised on short-term basis have been used for long-term investment.(xviii) According to the information and explanations given to us, the company has not made preferential allotment of shares during the year.(xix) According to the information and explanations given to us, during the year covered by our audit report, the company has created security inrespect of the Bonds issued by the Company.(xx) We have verified the end use of the money raised by public issue as disclosed in Schedule 27 ‘Notes on Accounts’ forming part of thefinancial statements.(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the course ofour audit.For Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (V. Umamaheswara Rao)Partner Partner PartnerM.No.77076 M.No. 70693 M.No. 2275For S.N.Nanda & Co.Chartered AccountantsFor T.R.Chadha & Co.Chartered Accountants(Gaurav Nanda)(Sanjay Gupta)PartnerPartnerM.No.500417 M.No. 87563Place : New DelhiDated : 31 st May, 200630th Annual Report 109

EMPLOYEE COST SUMMARY(Rs. million)Description 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06A. Salaries, wages & benefits*(incl.Provident Fund andother contributions) 2,618 3,411 4,363 5,789 7,082 7,494 7,590 8,180 8,248 9,568B. Other Benefits1. Welfare expenses 531 783 733 772 1,044 1,359 1,352 1,430 1,723 1,8072. Township 361 367 461 565 520 469 460 575 629 5673. Educational & school facilities 90 111 116 125 140 121 119 158 160 1604. Medical facilities 153 364 262 284 298 359 383 427 424 4445. Subsidised transport 19 21 28 39 28 39 35 45 47 466. Social & cultural activities 54 60 87 67 133 79 79 109 108 1007. Subsidised canteen 93 104 112 130 142 114 139 159 160 174Total ( B ) 1,301 1,810 1,799 1,982 2,305 2,540 2,567 2,903 3,251 3,298Total ( A+B ) 3,919 5,221 6,162 7,771 9,387 10,034 10,157 11,083 11,499 12,8668. Year end number of employees ** 21,407 20,710 20,798 21,265 21,289 21,383 21,408 20,971 21,420 21,8709. Average number of employees 21,320 21,059 20,754 21,032 21,277 21,336 21,396 21,190 21,196 21,64510.Average Salary, wages & benefitsper employee per annum (Rs.) 122,795 161,974 210,225 275,247 332,848 351,237 354,747 386,040 389,139 442,04211.Average cost of other benefitsper employee per annum (Rs.) 61,023 85,949 86,682 94,237 108,333 119,048 119,979 137,002 153,382 152,36812.Average cost of employeesremuneration & benefitsper annum (Rs.) 183,818 247,923 296,907 369,484 441,181 470,285 474,726 523,042 542,521 594,410* Excluding payment to personnel employed for social amenities** Excluding BTPS, BCPP and Joint Venture Companies.REVENUE EXPENDITURE ON SOCIAL OVERHEADS FOR THE YEAR ENDED 31st MARCH 2006(Rs. million)Particulars Township Educational Medical Subsidised Social and Subsidised Total Land Scaping Previousand School facilities Transport Cultural Canteen and Wasteland YearFacilities Activities development1 Payment to employees 146 24 351 16 23 21 581 - 4842 Material consumed 64 - 53 1 - - 118 - 1383 Rates and taxes 28 - - 1 - - 29 - 564 Welfare expenses 26 107 394 44 72 173 816 3 7995 Others including repairs& maintenance 349 45 16 3 23 - 436 14 4296 Depreciation 208 8 10 - 5 1 232 - 2117 Sub-total (1 to 6) 821 184 824 65 123 195 2212 17 21178 Less : Recoveries 108 - 29 3 - - 140 - 1409 Net expenditure (7-8) 713 184 795 62 123 195 2072 17 197710 Previous Year 730 173 702 62 130 180 1977 5 -11030th Annual Report

FUND FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006Rs. millionCurrent Year Previous YearA. STATEMENT OF SOURCES AND APPLICATION OF FUNDSSOURCESFund Generated from Operating Activities 70445 74468Proceeds from issue of Share Capital (including premium) (53) 26664Deferred revenue on account of Advance Against Depreciation 1034 1783Interest/ Income on Bonds/Investments received 19195 14991Sale of Investment 73839 -Dividend received on Investments 148 117Proceeds from Long Term Borrowings 48226 29592212834 147615APPLICATIONExpenditure on Fixed Assets 66416 55089Purchase of Investment 45546 34167Investment in Subsidiaries/Joint Ventures 5552 430Bonds under One Time Settlement Scheme 7655 -Repayment of Long Term Borrowings 17131 13242Interest 9383 9740Guarantee Commission and other finance charges 622 1615Development Surcharge Fund - 3784Dividend 23087 19790Dividend Tax 3238 2679178630 140536Net Increase / Decrease in Working Capital 34204 7079B. STATEMENT OF CHANGES IN WORKING CAPITALCash and Bank Balances 23931 54692Inventories 5586 397Trade and Other Receivables (5069) 9048Trade Payables & Other Liabilities 6065 13474Loans and Advances 3294 (227)Other Current Assets 397 (70305)Net Increase / Decrease in Working Capital 34204 7079C. FUND FROM OPERATIONSNet Profit before tax, Prior Period Adjustments andExtra Ordinary Items 62712 60680Adjustment for:Depreciation 21581 20151Interest 9383 9740Guarantee Commission and other finance charges 622 1615Interest / Income on Bonds / Investment received (19195) (14991)Prior Period Adjustment (Net) (2488) 102Dividend Income (148) (117)9755 16500Operating Profit 72467 77180Direct Taxes (Net of income tax recoverable) (2022) (2712)Fund Generated from Operating Activities 70445 7446830th Annual Report 111

SUBSIDIARY COMPANIESNTPC ELECTRIC SUPPLY COMPANY LIMITED(A wholly owned subsidiary of NTPC Limited)DIRECTORS’ REPORTTo The Members,Your Directors have pleasure in presenting their Fourth Annual Report on the workingof the Company for the financial year ended on 31 st March 2006 together withAudited Accounts and Auditors’ Report.OPERATIONAL REVIEWThe activities as Advisor-cum-Consultant under the “Accelerated Power DevelopmentReforms Programme” (APDRP), an initiative taken by the Ministry of Power (MoP) forpower development reforms, have been undertaken by your company.A Memorandum of Understanding was signed between NTPC and RuralElectrification Corporation Ltd. (REC) to carry out rural electrification of villages andhouseholds in West Bengal under the Government of India’s “Accelerated RuralElectrification Program”. A quadripartite agreement was signed between West BengalState Electricity Board, Government of West Bengal, NTPC and REC for the same.Upon merging of the AREP with MoP’s programme of rural electrification under thename of “Rajiv Gandhi Grameen Vidyutikaran Yojana” (RGGVY), the earlier agreementwas revised in line with the new scheme. NTPC has also been asked, under thisnew scheme, to carry out rural electrification works in the states of Chattisgarh,Jharkhand, Orissa and Madhya Pradesh for which quadripartite Agreements havebeen signed between REC, NTPC, respective State Governments and State Utilities.Under a Supplementary Agreement, your Company has been assigned to take upthese works on behalf of NTPC.As per these Agreements, your Company will be executing turnkey works inKharagpur area (Blocks I and II) of West Midnapur district of West Bengal, fivedistricts of Chattisgarh, eight districts of Jharkhand, twelve districts of Orissa andfour districts of Madhya Pradesh. In Kharagpur, where the work is in progress,Distribution Transformers have already been charged in 11 villages.Quadripartite Agreements, along with Supplementary Agreements, have also beensigned for consultancy work of post award Project Monitoring and Quality Assuranceservices during execution of RGGVY works in the states of Madhya Pradesh andUttaranchal. As per these Agreements, your Company will be providing servicesfor all the three Discoms of Madhya Pradesh and all thirteen districts of Uttaranchal.Your Company has also been providing consultancy works in the areas of ProjectMonitoring, Quality Assurance and Inspection of APDRP work of Bhopal and Gwaliorregions by Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Ltd. Similarassignments of consultancy work in Indore and Ujjain circles, along with eightdistricts of Western Zone of Madhya Pradesh Paschim Kshetra Vidyut Vitran CompanyLtd., was successfully carried out during the financial year.Chandigarh Administration has entrusted the turnkey contract for design, supply,erection, testing and commissioning of 2 x 20 MVA sub-station along with associatedHT lines at Manimajra to your company, which is in progress.Your Company has also been entrusted, by the Uttaranchal Power Corporation Ltd.,an assignment of carrying out third party inspection of their stock materials.The Company is yet to undertake commercial activities in the are of distribution ofpower. It is exploring various options in this field.FINANCIAL RESULTSDuring the current year, the Company has recorded gross revenue of Rs. 92.14 million(previous year Rs. 74.80 million) and a profit before tax of Rs. 10.33 million ascompared to the profit before tax of Rs. 2.60 million in the previous year. The profitafter tax is Rs. 4.52 million (previous year Rs. 0.40 million) and a sum of Rs. 0.45million was transferred to General Reserve during the current financial year.DIVIDENDYour Directors have recommended a maiden dividend of Rs.1.36 million, i.e. @167.59% of the paid up equity share capital of the Company for the financial year2005-06. The dividend shall be paid after your approval at this Annual General Meeting.PARTICULARS OF EMPLOYEESDuring the period under review the Company had no employees of the category,which falls, under section 217 (2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Rules, 1975.FIXED DEPOSITSThe company has not accepted any fixed deposit during the period ending31 st March 2006.CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGEEARNING & OUTGOThere are no significant particulars, relating to conservation of energy, technologyabsorption under the Companies (Disclosure of particulars in the Report of Boardof Directors) Rules, 1988, as your Company does not own any manufacturing facility.During the period under review there are no foreign exchange earnings and outgo.DIRECTORSShri C.P.Jain ceased to be Chairman of the Company w.e.f. 31.03.2006 A.N.consequent upon his superannuation from the services of NTPC Limited. The Boardplaces on record its deep appreciation for the valuable contributions made byShri C.P.Jain. Pursuant to the Articles of Association of the Company, the Chairman& Managing Director of NTPC Limited shall be the ex-officio part-time Chairman onthe Board of the Company. On taking over as the Chairman & Managing Director ofNTPC Limited, Shri T. Sankaralingam was appointed as Chairman of the Companyw.e.f 01.04.2006.AUDITORS’ REPORT AND C&AG REVIEWThe Comptroller & Auditor General of India (C&AG) has appointed M/s Kanwalia &Company, Chartered Accountants as the Statutory Auditor of the Company for thefinancial year ending 2005-06. There are no adverse comments, observations orreservations in the auditors report on the accounts of the comapany.C&AG vide letter dated 02.06.2006 has decided not to review the report of theAuditors on the accounts of the Company for the year ended 31 st March 2006 and assuch has no comments to make under Section 619(4) of the Companies Act, 1956.A copy of the certificate issued by C&AG in this regard is enclosed as Annex-1.DIRCTORS’ RESPONSIBILITY STATEMENTAs required under Section 217 (2AA) of the Companies Act, 1956 your Directorsconfirm that:i) in the preparation of annual accounts, the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;ii) the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the companyat the end of the financial year 2005-06 and of the profit of the company forthat period;iii) the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the company and forpreventing and detecting fraud and other irregularities; andiv) the directors had prepared the annual accounts on a going concern basis.ACKNOWLEDGEMENTThe Board of Directors wish to place on record their appreciation for the supportand co-operation extended by the Ministry of Power, various state governments,various state utilities, various customers, NTPC Ltd., the Auditors, the Bankers andthe employees of the Company.For and on behalf of the Board of Directors(T. SANKARALINGAM)CHAIRMANPlace: New DelhiDate: 03.08.2006ANNEXURE-ICOMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF NTPCELECTRIC SUPPLY COMPANY LIMITED, NEW DELHI FOR THE YEAR ENDED,31 STMARCH, 2006The Comptroller and Auditor General of India has decided not to review the reportof the Auditors on the accounts of NTPC Electric Supply Company Limited., NewDelhi for the year ended 31st March 2006 and as such he has no comments to makeunder Section 619(4) of the Companies Act, 1956(Meera Swraup)Place: New DelhiPrincipal Director of Commercial Audit andDated: 2 June, 2006Ex-officio Member Audit Board-IIINew DelhiSIGNIFICANT ACCOUNTING POLICIESA. Fixed Assets1. Fixed Assets are shown at historical cost.2. Intangible assets are recorded at their cost of acquisition.B. Income Recognition1. Income from consultancy service is accounted for on the basis of actual progress/technical assessment of work executed, in line with the terms of respectiveconsultancy contracts.2. Claims for reimbursement of expenditure are recognised as other income, as perthe terms of consultancy service contracts.C. Expenditure1. Depreciation is charged on straight-line method at the rates specified inSchedule XIV of the Companies Act, 1956.2. Depreciation on additions to/deductions from fixed assets during the year is chargedon pro-rata basis from/up to the month in which the asset is available for use/disposal.3. Assets costing up to Rs. 5,000/- are fully depreciated in the year of capitalisation.4. Cost of computer software recognized as intangible assets is amortised on straightlinemethod over a period of legal right to use or 3 years, whichever is earlier.5. Where the cost of depreciable assets has undergone a change during the year dueto increase/decrease in long term liabilities on account of exchange fluctuation,price adjustment, change in duties or similar factors, the unamortised balance ofsuch asset is depreciated prospectively over the residual life determined on thebasis of the rate of depreciation.6. Expenditure on training, recruitment and ex-gratia payments under voluntaryretirement scheme are charged to revenue in the year of incurrence.7. Expenditure on leave travel concession to employees is recognised in the yearof availment due to uncertainties in accrual.8. Pre-paid expenses and prior period expenses/income of items ofRs. 1,00,000/- and below are charged to natural heads of accounts.9. The liabilities for retirement benefits in respect of gratuity, leave encashment andpost-retirement medical benefits are ascertained annually by the Holding Companyon actuarial valuation at the year-end. The company provides for retirement benefitsin respect of provident fund, gratuity, leave encashment and post-retirement medicalbenefits as apportioned by the Holding Company.11230th Annual Report

NTPC ELECTRIC SUPPLY COMPANY LIMITEDBALANCE SHEET AS AT 31ST MARCH 2006Rs.Sch. No. 31.03.2006 31.03.2005SOURCES OF FUNDSSHAREHOLDERS’ FUNDSCapital 1 809100 809100Reserves & Surplus 2 3311836 338100TOTAL 4120936 1147200APPLICATION OF FUNDSFixed Assets 3Gross Block 733842 -Less: Depreciation 196089 -Net Block 537753 -CURRENT ASSETS, LOANS AND ADVANCESSundry Debtors 4 149950092 91111986Cash and Bank Balances 5 171524856 72170307Other Current Assets 6 1870276 21451Loans & Advances 7 873051 746653324218275 164050397LESS : CURRENT LIABILITIES AND PROVISIONSLiabilities 8 319095166 162903197Provisions 9 1546179 -320641345 162903197Net Current Assets 3576930 1147200Deferred Tax Assets 6253 -Miscellaneous Expenditure (to the extentnot written off or adjusted) 10 - -TOTAL 4120936 1147200Notes on Accounts 16Schedules 1 to 16, accounting policies and cashflow statement form integral partof Accounts.As per our attached report of even dateFor Kanwalia & Co.Chartered AccountantsFor & on behalf of the Board of Directors(B. K. Kanwalia) (A. K. Singhal) (T. Sankaralingam)Partner Director ChairmanPlace: New DelhiDated: 24 th May, 2006NTPC ELECTRIC SUPPLY COMPANY LIMITEDSCHEDULES FORMING PART OF BALANCE SHEETNTPC ELECTRIC SUPPLY COMPANY LIMITEDPROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006Rs.Sch. No. Current Year Previous YearINCOMESales 11 74612419 61150963Other Income 12 17527042 13649250TOTAL 92139461 74800213EXPENDITUREEmployees’ Remunerationand Benefits 13 65454022 54663655Administration and Other Expenses 14 16144314 17519892Depreciation 196089 -Finance Charges 15 17248 12876TOTAL 81811673 72196423Profit before tax 10327788 2603790Provision for- Current Tax 4621924 2167596- Fringe Benefit Tax 1192202 -- Deferred Tax (6253) 351915807873 2202787Profit after tax 4519915 401003Balance brought forward 338100 (62903)Balance available for appropriation 4858015 338100Transfer to General Reserve 452000 -Proposed Dividend 1356000 -Tax on Proposed Dividend 190179 -Balance carried to Balance sheet 2859836 338100Earning per Share (Equity shares, face valueRs.10/- each) - Basic and Diluted 55.86 4.96For Kanwalia & Co.Chartered AccountantsFor & on behalf of the Board of Directors(B K Kanwalia) (A. K. Singhal) (T. Sankaralingam)Partner Director ChairmanPlace: New DelhiDated: 24 th May, 2006SCHEDULE 1CAPITALRs.31.03.2006 31.03.2005Authorised10,000,000 equity shares of Rs. 10/- each(Previous year 10,000,000 equity sharesof Rs. 10/- each) 100000000 100000000Issued, Subscribed and Paid-Up80,910 equity shares of Rs. 10/- each(Previous year 80,910 equity shares ofRs. 10/- each) are held by the holding company,NTPC Ltd. and its nominees. 809100 809100809100 809100SCHEDULE 2RESERVES AND SURPLUSRs.31.03.2006 31.03.2005General ReserveAs per last Balance Sheet - -Add: Transfer from Profit & Loss Account 452000 -Surplus, balance in Profit & Loss Account 2859836 3381003311836 338100SCHEDULE 3FIXED ASSETSRs.GROSS BLOCK DEPRECIATION NET BLOCKAs at Deductions / As at As at For the Deductions / Up to As at As at01.04.2005 Additions Adjustments 31.03.2006 01.04.2005 year Adjustments 31.03.2006 31.03.2006 31.03.2005Furniture, Fixtures &Other Office Equipments - 164480 - 164480 - 19179 - 19179 145301 -EDP & WP Machines - 66308 - 66308 - 8092 - 8092 58216 -Intangible Assets - Software - 503054 - 503054 - 168818 - 168818 334236 -Total - 733842 - 733842 - 196089 - 196089 537753 -Previous year - - - - - - - - - -30th Annual Report 113

Rs.31.03.2006 31.03.2005SCHEDULE 4SUNDRY DEBTORSDebts outstanding over six months- Unsecured, considered good 115944852 53161773Other debts- Unsecured, considered good 34005240 37950213149950092 91111986SCHEDULE 5CASH AND BANK BALANCESCash on hand (includes cheques & drafts - 13878000on hand )Balances with scheduled banks- Current Account 9024856 3292307- Term Deposit Account 162500000 55000000171524856 72170307Cheques & Drafts on hand - 13878000SCHEDULE 6OTHER CURRENT ASSETSInterest accrued on Short Term Depositswith Indian banks 1870276 214511870276 21451SCHEDULE 7LOANS & ADVANCESADVANCESEmployees- Unsecured, considered good 7500 -Others- Unsecured, considered good 12230 -DEPOSITSAdvance tax deposit & tax deducted at source 8819184 2898390Less: Provision 7965863 2151737853321 746653873051 746653SCHEDULE 8CURRENT LIABILITIESSundry CreditorsFor goods and services 20956251 1130200Deposits, retention money fromcontractors and others 54875 3251021011126 1162710Advances from customers and others 4700000 8485000Other liabilities 12435200 6528443Amount received against deposit works 132508081 68980000Amount payable to NTPC Ltd. 148440759 77747044319095166 162903197SCHEDULE 9PROVISIONSProposed DividendAs per last Balance Sheet - -Additions during the year 1356000 -Amounts used during the year - -1356000 -Tax on Proposed DividendAs per last Balance Sheet - -Additions during the year 190179 -Amounts used during the year - -190179 -1546179 -SCHEDULE 10MISCELLANEOUS EXPENDITURE(To the extent not written offor adjusted)Preliminary (Incorporation) ExpensesBalances as per last Balance Sheet - 617824Additions during the year - -Less: Deductions/Adjustments - 617824- -SCHEDULE 11SALESConsultancy, Project Management andSupervision Fees 74612419 6115096374612419 61150963Current Year PreviousSCHEDULE 12OTHER INCOMEReimbursibles billed to clients 11119422 13622127Interest from Indian Banks (Gross)(Tax deducted at source Rs. 1437935,previous year Rs. 5672) 6407620 2712317527042 13649250SCHEDULE 13EMPLOYEES’ REMUNERATION AND BENEFITSSalaries, wages, bonus, allowances & benefits 51225704 45146739Contribution to provident and other funds 5158483 4699818Welfare expenses 9069835 481709865454022 54663655SCHEDULE 14ADMINISTRATION AND OTHER EXPENSESPower Charges 210772 202220Rent 1186756 1072377Repairs and MaintenanceBuilding 41862 81993Others 51971 4243793833 124430Insurance 3610 8381Training and Recruitment Expenses - 228482Communication Expenses 1418284 1130494Traveling Expenses 9277057 7742421Tender Expenses 801106 227666Less: Receipt from sale of tenders 661500 38250139606 189416Payment to AuditorsAudit Fees 22448 16530Tax Audit Fees 5612 7670In other capacity 16530 1858044590 42780Entertainment Expenses 561132 452221Expenses for Transit Camp 215737 506336Prefeasibility Study Expenses 3159 279578Preliminary Expenses Written Off - 617824Books and periodicals 68999 77035Professional charges & consultancy fees 164113 7648EDP hire and other charges 325692 312274Printing and stationary 245166 276219Miscellaneous expenses 2185808 424975616144314 17519892SCHEDULE 15FINANCE CHARGESBank Charges 17248 1287617248 12876SCHEDULE 16Notes on Accounts1) Related Party Disclosuresa. The Company is a wholly owned subsidiary of NTPC Ltd. (formerly NationalThermal Power Corporation Limited).b. Key Management Personnel (appointed by the Holding Company, i.e. NTPC Ltd.)Shri C. P. Jain ChairmanShri K. K. Sinha Director Ceased to be Director w.e.f. 1 st April 2005Shri P. Narasimharamulu Director Ceased to be Director w.e.f. 1 st April 2005Shri R. S. Sharma DirectorShri R. K. Jain DirectorShri A. K. Singhal Director Appointed w.e.f. 1 st April 2005Shri G. K. Agarwal Director Appointed w.e.f. 1 st April 2005c. The Key Management Personnel are on appointment to the Company on parttimebasis from the Holding Company, NTPC Ltd. The Company pays noremuneration to the key management personnel as their remuneration (beingfull-time employees of the Holding Company) is paid by NTPC Ltd.2) The Company is operating in a single segment, that is providing consultancy,project management and supervision services.3) All the employees of the Company are on secondment from the HoldingCompany, i.e. NTPC Ltd.4) Earning per share:The elements considered for calculation of Earnings per share (Basic & Diluted)are as under:Rs.11430th Annual Report

Current Year Previous YearNet Profit after Tax used as numerator (Rupees) 4519915 401003Weighted average number of equityshares used as denominator 80910 80910Earning per share (Rupees) – Basic & Diluted 55.86 4.96Face value per share (Rupees) 10.00 10.005) Disclosure regarding Operating Leases:The company’s significant leasing arrangements are in respect of operating leasesof premises for residential use of employees, offices and transit camps. Theseleasing arrangements are usually renewable on mutually agreed terms but arenot non-cancellable. Employees’ remuneration and benefits includeRs.52,10,555/- (Previous year Rs. 38,80,146/-) towards lease payments, net ofrecoveries, in respect of premises for residential use of employees. Leasepayments in respect of premises for offices and transit camps are shown asRent in Schedule 13 - Administration and other expenses.6) The item-wise details of Deferred Tax Asset are as under:Rs.31.03.2006 31.03.2005i) Difference of Book depreciation and Tax 3,530 -depreciationii) Provisions disallowed for tax purposes 2,723 -Deferred Tax Asset 6,253 -The net increase in the deferred tax asset of Rs. 6,253/- (Previous year decreaseRs. 35,191/-) has been credited to Profit and Loss Account.7) Previous year’s figures have been regrouped/rearranged wherever necessary.For Kanwalia & Co.Chartered AccountantsFor & on behalf of the Board of Directors(B. K. Kanwalia) (A. K. Singhal) (T. Sankaralingam)Partner Director ChairmanPlace: New DelhiDated: 24 th May, 2006INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:1. Registration Detail State Code: 0 5 5Registration No. U 4 0 1 0 8 D L 2 0 0 2 G O I 1 1 6 6 3 5Date Month YearBalance Sheet Date 3 1 0 3 2 0 0 62. Capital Raised during the year(Rs. in Thousands)Public IssueRight issueN I L N I LBonus IssuePrivate PlacementN I L N I L3. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)Total LiabilitiesTotal Assets3 2 4 7 6 2 3 2 4 7 6 2Source of FundsPaid up CapitalReserve & Surplus8 0 9 3 3 1 2Secured LoansUnsecured LoansN I L N I LDeferred Tax LiabilityN I LApplication of FundsNet Fixed AssetsInvestments5 3 8 N I LNet Current assetsDeferred Tax Asset3 5 7 7 6Misc. ExpenditureAccumulated LossesN I L N I L4. Performance of Company (Amount in Rs. Thousands)TurnoverTotal Expenditure7 4 6 1 2 8 1 8 1 2Profit Before TaxProfit After Tax1 0 3 2 8 4 5 2 0Earning Per Share in Rs. Dividend Rate (%)5 5. 8 6 1 6 7. 5 95. Generic name of three principal products/services of Company(As per monetary terms)Item Code No.N.A.(ITC Code)Product DescriptionConsultancy ServicesFor Kanwalia & Co.Chartered AccountantsFor & on behalf of the Board of Directors(B.K. Kanwalia) (A. K. Singhal) (T. Sankaralingam)Partner Director ChairmanPlace: New DelhiDate : 24 th May, 2006CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006Rs.Current Year Previous YearA. CASH FLOW FROM OPERATINGACTIVITIESNet Profit/(Loss) before taxand Prior Period Adjustments 10327788 2603790Adjustment for:Depreciation 196089 -Preliminary Expenses written off - 617824Interest Received (6407620) (27123)Operating Profit beforeWorking Capital Changes 4116257 3194491Adjustment for:Trade & Other Receivables (58838106) (72258899)Trade Payables & Other Liabilities 156191969 140338299Other Current Assets - -Loans & Advances (19730) 97334133 -Cash generated from operations 101450390 71273891Direct Taxes Paid 5920794 2914249Net Cash fromOperating Activities - A 95529596 68359642B. CASH FLOW FROMINVESTING ACTIVITIESPurchase of Fixed Assets (733842) -Interest Received 4558795 5672Net cash flow fromInvesting Activities - B 3824953 5672C. CASH FLOW FROMFINANCING ACTIVITIESNet Cash flow fromFinancing Activities - C - -D. OTHERS - -Net Increase/Decrease in Cash &Cash equivalents (A + B + C + D) 99354549 68365314Cash & cash equivalents(Opening balance) 72170307 3804993Cash & cash equivalents(Closing balance) 171524856 72170307Notes:Cash & Cash equivalents consist of Cash in Hand and Balance with Banks.Previous year’s figures have been regrouped/rearranged wherever necessaryAs per our Report of even dateFor Kanwalia & Co.Chartered AccountantsFor & on behalf of the Board of Directors(B.K. Kanwalia) (A.K. Singhal) (T. Sankaralingam)Partner Director ChairmanPlace: New DelhiDated: 24 th May, 200630th Annual Report 115

AUDITORS’ REPORTTo the Members ofNTPC ELECTRIC SUPPLY COMPANY LTD.1. We have audited the attached Balance Sheet of NTPC Electric Supply Company Ltd.(a wholly owned subsidiary of NTPC Ltd.) as at 31 st March 2006, the Profit and LossAccount and also the Cash Flow Statement for the year ended on that date annexedthereto. These financial statements are the responsibility of the company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audit.2. We conducted our audit in accordance with the Auditing Standards generallyaccepted in India. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free frommaterial misstatements. An audit includes examining, on test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates madeby the management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issuedby the Government of India in terms of sub-section (4A) of Section 227 of theCompanies Act, 1956, we enclose in the annexure a statement on the mattersspecified in paragraphs 4 and 5 of the said Order.4. Further to our comments in annexure referred to in para 3 above, we report that:(a) We have obtained all the information and explanations, which to the best ofour knowledge and belief were necessary for the purpose of our audit;(b) In our opinion, proper books of account as required by law have been keptby the company so far as appears from our examination of those books;(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealtwith by this report are in agreement with the books of account;(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash FlowStatement dealt with by this report comply with the Accounting Standardsreferred to in sub-section (3C) of Section 211 of the Companies Act, 1956;(e) Being a Government company, pursuant to the Notification No. GSR 829(E)dated 17.07.2003 issued by Government of India, provisions of clause (g) ofsub-section (1) of section 274 of the Companies Act, 1956, are not applicableto the company;(f) In our opinion, and according to the best of our information and according tothe explanations given to us, the said accounts read with the AccountingPolicies and Notes thereon in Schedule 16, give the information required bythe Companies Act, 1956 in the manner so required and gives a true and fairview in conformity with the accounting principles generally accepted in India:a in the case of Balance Sheet, of the state of affairs of the company as at31st March 2006,b. in the case of Profit and Loss Account, of the profit for the year ended onthat date, andc. in the case of Cash Flow statement, of the cash flows for the year endedon that date.For Kanwalia & Co.Chartered Accountants(B.K.Kanwalia)PartnerMembership No.: 7719Place: New DelhiDate : 24 th May, 2006ANNEXURE TO THE AUDITORS’ REPORTReferred to in paragraph 3 of our report of even date.(i) (a) The company has maintained proper records showing full particularsincluding quantitative details and situation of fixed assets.(b) All the assets have been physically verified by the management during theyear and there is a regular programme of verification which, in our opinion,is reasonable having regard to the size of the company and the nature of itsassets. No discrepancies were noticed on such verification.(c) No fixed assets have been disposed off during the year.(ii) (a) The company does not have inventory.Accordingly, the provisions of clause 4(ii) (b) & (c) of the Companies(Auditors’ Report) Order, 2003 are not applicable to the company.(iii) (a) The Company has not granted any loans secured or unsecured to anycompany, firm or other party covered in the register maintained undersection 301 of the Companies Act 1956.In view of (iii) (a) above, the clauses (iii) (b), (iii) (c) and (iii) (d) are notapplicable.(e) The Company has not taken any loans secured or unsecured from anycompany, firm or other party covered in the register maintained under section301 of the Companies Act 1956.In view of (iii) (e) above, the clauses (iii) (f) and (iii) (g) are not applicable.(iv) In our opinion and according to the information and explanations given to us,there is adequate internal control system commensurate with the size of thecompany and nature of its business for purchase of fixed assets and for sale ofservices. During the course of our audit, we have not observed any continuingfailure to correct major weaknesses in internal control systems.(v) (a) The company has not carried out any transactions required to be enteredin the register maintained under section 301 of the Companies Act 1956.(b) In view of clause (v) (a) above, the clause (v) (b) is not applicable.(vi) The Company has not accepted deposits from the public.(vii) The provisions of the Order related to internal audit are not applicable to thecompany as the paid up capital plus reserves of the company are less than Rs.50 lac at the commencement of the year under audit and the average annualturnover for the three consecutive financial years immediately preceding theyear under audit being less than Rs. 5 crore. However, in our opinion, the Companyhas an internal audit system commensurate with the size and nature of its business.(viii) The maintenance of cost records under section 209(1) (d) of the CompaniesAct 1956 is not applicable to the company, as the company has not commencedany activities related to distribution of electricity.(ix) (a) The Company is regular in depositing the statutory dues like Income Tax,Fringe Benefit Tax, Service Tax with the appropriate authorities. Accordingto the information and explanations given to us, no undisputed amountspayable in respect of income tax, wealth tax, sales tax, service tax, customsduty, excise duty and cess were in arrears, as at 31 st of March 2006 for aperiod of more than six months from the date they became payable. Theprovisions related to provident fund, investor education and protectionfund and employees’ state insurance etc. along with the related provisionsof clause (ix) (b) are not applicable to the company.(b) According to the information and explanation given to us, there are nodues of sales tax, income tax, customs duty, wealth tax, excise duty andcess, which have not been deposited on account of any dispute.(x) The company has no accumulated losses and has not incurred cash losses during thefinancial year covered by our audit and the immediately preceding financial year.(xi) Not applicable as the company has not taken any loans from any financialinstitution, bank or by way of issue of debentures.(xii) The company has not granted any loans or advances.(xiii) The company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore,the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003are not applicable to the company.(xiv) The company is not dealing in or trading in shares, securities, debentures andother investments. Accordingly, the provisions of clause 4(xiv) of the Companies(Auditor’s Report) Order, 2003 are not applicable to the company.(xv) The company has not given any guarantees for loans taken by others from banksor financial institutions.(xvi) The company has not raised any term loams.(xvii)The company has not raised any short term or long-term funds.(xviii)The company has not made preferential allotment of shares to companies, firmsor other parties listed in the registers maintained under Section 301 of theCompanies Act, 1956.(xix) The company has not issued any debentures.(xx) The company has not raised money through a public issue.(xxi) According to the information and explanations given to us, no fraud on or bythe company has been noticed or reported during the course of our audit.For Kanwalia & Co.Chartered Accountants(B.K.Kanwalia)Place : New DelhiPartnerDate : 24 th May, 2006 Membership No.: 771911630th Annual Report

NTPC HYDRO LIMITED(A wholly owned subsidiary of NTPC Limited)DIRECTORS’ REPORTTo,The Members,Your Directors have pleasure in presenting their fourth Annual Report on theperformance of the Company for the financial year ended 31 st March 2006 togetherwith the Audited Accounts and Auditors‘ Report thereon.OPERATIONAL REVIEWYour Company’s maiden venture is Lata-Tapovan Hydro Electric Power Project (3x57MW) in the State of Uttaranchal. Detailed Project Report (DPR) of this project hasbeen completed. Techno-Economic Clearance (TEC) from Central ElectricityAuthority (CEA) and Stage I & II clearance form Ministry of Environment & Foresthas also been received. The project is scheduled for commissioning by March,2012. Annual Generation from this project is estimated as approx. 869 MU of this12% is earmarked as free power to the State of Uttranchal.The DPR of Rammam Stage-III Hydro Electric Power Project (3x40MW), in the Stateof West Bengal, has been completed and submitted to CEA for obtaining TEC.Ministry of Environment & Forest has also accorded stage-I & II approval. Theimplementation activities of this project are being initiated. The project is scheduledfor commissioning by March 2012. Annual Generation from this project is estimatedas approx. 467.50 MU out of which 85% of the power generated from this projectshall be given to WBSEB and balance 15% shall rest with the Company.FINANCIAL REVIEWDuring the financial year ending 31 st March 2006 the company has incurredexpenditure of Rs 69 million, out of which Rs. 36 million has been capitalized. TheCompany has incurred loss of Rs. 33 million during the financial year as against lossof Rs. 30 million during the last year. In addition, Rs. 2 million were incurred onfixed assets during the financial year.PARTICULARS OF EMPLOYEESThere being no employee in the Company with earning over the specified amount,the particulars of employees as prescribed under Sec. 217(2A) of Companies Act,1956 read with the Companies (Particulars of Employees) Rules, 1975 are notrequired to be given.FIXED DEPOSITSThe Company has not accepted any fixed deposit during the period ending 31 stMarch, 2006.CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGEEARNING & OUTGOSince the projects undertaken by the Company are in implementation stage, thereare no significant particulars, relating to conservation of energy, technologyabsorption, under the Companies (Disclosure of Particulars in the Report of Boardof Directors) Rule,1988. During the period under review the Company had no earningin foreign exchange. However, an amount of Rs. 1,57,283 was spent in equivalentforeign currency on foreign training.AUDIT COMMITTEEAs per the provisions of Section 292A of the Companies Act, 1956, the Board ofDirectors has constituted an Audit committee comprising of S/Shri T.Sankaralingam,A.K.Singhal and G.K.Agarwal, Directors.DIRECTORSShri C.P.Jain ceased to be Director of the Company w.e.f. 31 st March 2006consequent upon his superannuation from the services of NTPC Limited. Your Boardplaces on record their deep appreciation for the valuable services rendered byShri C.P. Jain during his tenure. Further, consequent upon appointment of ShriT.Sankaralingam as the Chairman & Managing Director of NTPC Limited, he wasappointed as the Chairman of the Company.AUDITORS’ REPORTThe Comptroller and Auditor General of India (C&AG) vide letter dated 30 th August,2005 has appointed M/s S. R. Kapoor & Company, Chartered Accountants as StatutoryAuditor of the Company for the financial year 2005-06. There is no adverse comment,observation or reservation in the auditors’ report on the accounts of the Company.COMPTROLLER & AUDITOR GENERAL REVIEWC&AG vide letter dated 7 th June, 2006 has decided not to review the report of theAuditors on the accounts of the company for the year ended 31 st March 2006 andas such has no comments to make under Section 619(4) of the Companies Act,1956. A copy of the letter issued by C&AG in this regard is at Annex-I.DIRECTORS RESPONSIBILITY STATEMENTPursuant to Section 217(2AA) of the Companies Act, 1956 your Directors confirm that:i) in the preparation of the Annual Accounts for the financial year ended 31 stMarch 2006, the applicable accounting standards have been followed alongwithproper explanation relating to material departures;ii) the directors have selected such accounting policies and applied themconsistently , and made judgments and estimates that are reasonable andprudent so as to give a true and fair view of the state of affairs of the companyas at 31 st March 2006 and of the loss of the company for the said period;iii) the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of theCompanies Act, 1956, for safeguarding the assets of the company and forpreventing and detecting fraud and other irregularities; andiv) the directors had prepared the annual accounts for the financial year ended31 st March 2006, on going concern basis.ACKNOWLEDGEMENTThe Board of Directors wish to place on record their appreciation for the supportand co-operation extended by the NTPC Limited, the holding Company, CentalElectricity Authority and other agencies of Govt. of India/Govt. of Uttranchal/ Govt.of West Bengal, Auditors and the Bankers of the Company.For and on behalf of the Board of DirectorsPlace: New Delhi(T. Sankaralingam)Dated: 29.07.2006 ChairmanANNEXURE-ICOMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF NTPCHYDRO LIMITED, NEW DELHI FOR THE YEAR ENDED,31 ST MARCH, 2006The Comptroller and Auditor General of India has decided not to review the reportof the Auditors on the accounts of NTPC Hydro Limited, New Delhi for the year ended31st March 2006 and as such he has no comments to make under Section 619(4) ofthe Companies Act, 1956Place: New DelhiDated: 7 th June, 2006(Meera Swraup)Principal Director of Commercial Audit andEx-officio Member Audit Board-IIINew DelhiSIGNIFICANT ACCOUNTING POLICIES1. FIXED ASSETS1.1 Fixed Assets are shown at historical cost.1.2 Intangible assets are recorded at their cost of acquisition.1.3 Capital expenditure on assets not owned by the Company is reflected as adistinct item in Capital Work-in-Progress till the period of completion andthereafter in the Fixed Assets.1.4 Deposits, payments/liabilities made provisionally towards compensation,rehabilitation and other expenses relatable to land in possession are treatedas cost of land.2. CAPITAL WORK-IN-PROGRESS2.1 Incidental Expenditure during Construction (net) including corporate officeexpenses (allocated to the projects pro-rata to the annual capitalexpenditure) for the year is apportioned to Capital Work-in-Progress on thebasis of accretions thereto.2.2 Deposit work/ cost plus contracts are accounted for on the basis ofstatements of account received from the contractors.3. PROFIT AND LOSS ACCOUNTEXPENDITURE3.1 Depreciation is charged on straight line method at the rates specified inSchedule XIV of the Companies Act, 1956.3.2 Depreciation on additions to/deductions from fixed assets during the yearis charged on pro-rata basis from/up to the month in which the asset isavailable for use/disposal.3.3 Assets costing up to Rs. 5000/- are fully depreciated in the year ofcapitalization.3.4 Capital expenditure referred to in Para 1.3 is amortised over a period of 4years, from the year in which the first unit of project concerned comes intocommercial operation and thereafter from the year in which the relevantasset becomes available for use.3.5 Expenses on training are charged to revenue in the year of incurrence.3.6 Expenditure on Leave Travel Concession to employees is recognized in theyear of availment due to uncertainties in accrual.3.7 Prepaid expenses and prior period expenses / income of items ofRs. 100,000/-and below are charged to natural heads of accounts.4. RETIREMENT BENEFITSThe liabilities for retirement benefits in respect of gratuity, leave encashment andPost Retirement Medical Scheme are ascertained annually by the holding companyon actuarial valuation at the year end. The company provides for retirementbenefits in respect of provident fund, gratuity, leave encashment and PostRetirement Medical Scheme as apportioned by the holding company.30th Annual Report 117

NTPC HYDRO LIMITEDBALANCE SHEET AS AT 31 ST MARCH 2006Rs.SCHEDULE As at As atNO. 31.03.2006 31.03.2005SOURCES OF FUNDSCapital 1 100,000,000 48,121,100100,000,000 48,121,100APPLICATION OF FUNDSFixed AssetsGross Block 2 5,309,935 3,501,732Less: Depreciation 802,920 582,918Net Block 4,507,015 2,918,814Capital Work In Progress 3 35,705,819 662,063Construction Stores and Advances 4 1,194,698 -41,407,532 3,580,877Current Assets,Loans and AdvancesCash and Bank balances 5 2,879,877 1,328,901Loans and Advances 6 330,211 149,9283,210,088 1,478,829Less:Current Liabilities and ProvisionsLiabilities 7(a) 25,708,351 4,651,248Provisions 7(b) 49,305 -25,757,656 4,651,248Net Current Assets (22,547,568) (3,172,419)Profit & Loss Account 81,140,036 47,712,642TOTAL 100,000,000 48,121,100Notes on Accounts 12Schedules 1 to 12, significant accounting policies form integral part of accounts.For and on behalf of Board of DirectorsAs per our report of even dateFor S.R. Kapur & Co.Chartered Accountants(D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanPlace : New DelhiDated: 25 th May 2006NTPC HYDRO LIMITEDSCHEDULES - FORMING PART OF ACCOUNTSRs.As at As at31.03.2006 31.03.2005SCHEDULE 1CAPITALAUTHORISED25,000,000 Equity shares of Rs. 10/- each 250,000,000 100,000,000(Previous year 10,000,000 Equity sharesof Rs.10/- each)NTPC HYDRO LIMITEDPROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006Rs.SCHEDULE Current Year Previous YearNO.EXPENDITUREEmployees’ remuneration and benefits 8 10,684,979 10,870,779Administration & other expenses 9 22,474,566 19,187,622Depreciation 91,066 407,006Finance charges 10 4,369 1,821Total Expenditure 33,254,980 30,467,227Loss before tax 33,254,980 30,467,227Provision for Fringe Benefit Tax 577,494 -Less : FBT Allocated to IEDC (405,080) -Provision for Fringe benefit tax (Net) 172,414 -Loss after tax 33,427,394 30,467,227Balance brought forward 47,712,642 17,245,415Balance carried to Balance Sheet 81,140,036 47,712,642Incidental Expenditure DuringConstruction 11Earning per share(Basic/Diluted) (5.71) (13.85)For and on behalf of Board of DirectorsAs per our report of even dateFor S.R. Kapur & Co.Chartered Accountants(D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanPlace : New DelhiDated: 25 th May 2006SCHEDULE 1 (Contd.)Rs.As at As at31.03.2006 31.03.2005ISSUED, SUBSCRIBED AND PAID-UP10,000,000 Equity shares of Rs. 10/- each 100,000,000 45,621,100fully paid up (Previous year 4,562,110Equity shares of Rs.10/- each fully paid up)held by the holding company, NTPC Limitedand its nomineesShare Capital Deposit - 2,500,000100,000,000 48,121,100SCHEDULE 2FIXED ASSETSGROSS BLOCK (AT COST) DEPRECIATION NET BLOCKRs.Fixed Assets As at Additions Deductions/ As on As at For the Deductions/ Upto As at As at01.04.2005 Adjustments 31.03.2006 01.04.2005 Year Adjustments 31.03.2006 31.03.2006 31.03.2005Furniture,fixtures & other office 1,770,916 250,715 304,961 1,716,670 391,483 104,724 97,606 398,601 1,318,069 1,379,433equipmentsEDP-Equipments 1,116,444 1,223,475 92,198 2,247,721 149,131 218,601 3,736 363,996 1,883,725 967,313Communication Equipments 55,500 18,784 34,284 40,000 42,304 3,739 6,043 40,000 - 13,196Plant & Machinery - 11,640 - 11,640 - 323 - 323 11,317 -Capital expenditure on Assets 558,872 735,032 - 1,293,904 - - - - 1,293,904 558,872not owned by the Company3,501,732 2,239,646 431,443 5,309,935 582,918 327,387 107,385 802,920 4,507,015 2,918,814Previous Year 1,216,459 2,312,192 26,919 3,501,732 177,616 407,006 1,704 582,918 2,918,814 1,038,843Depreciation for the yare is allocated as given below: Current Year Previous YearCharged to Profit & Loss Account 91,066 -Transferred to IEDC 236,321 -327,387 -11830th Annual Report

SCHEDULE 3CAPITAL WORK-IN-PROGRESSRs.Fixed Assets As at Capitalise As at01.04.2005 Additions during 31.03.2006the YearCapital expenditure on Assets 662,063 72,969 735,032 -not owned by the companySurvey, investigation, consultancy - 6,675,222 - 6,675,222and supervision chargesincidental Expenditure during - 29,030,597 - 29,030,597construction662,063 35,778,788 735,032 35,705,819Previous Year - 662,063 - 662,063SCHEDULE 4CONSTRUCTION STORES AND ADVANCESRs.As at As at31.03.2006 31.03.2005Advance for Captial Expenditure 1,194,698 -Unsecured, considered good1,194,698 -SCHEDULE 5CASH & BANK BALANCESBalances with scheduled banksCurrent Account 2,879,877 1,328,9012,879,877 1,328,901SCHEDULE 6LOANS AND ADVANCESAdvances recoverable in cash or in kind orfor value to be receivedUnsecured, considered goodEmployees 43,051 97,800Others 287,160 52,128330,211 149,928SCHEDULE 7 (a)CURRENT LIABILITIESSundry Creditors for capital expenditureother than small scale undertakings 3,250,880 -Sundry Creditors for goods and servicesother than small scale undertakings 1,405,781 2,240,025Amount payable to NTPC Ltd. 18,738,911 1,774,648Deposits, retention money from contractorsand others 1,906,255 259,307Less: Investments held as security (76,810) (24,450)25,225,017 4,249,530Other Liabilities 483,334 401,71825,708,351 4,651,248SCHEDULE 7 (b)PROVISIONSProvisions for Fringe Benefit tax 577,494 -Less: Advance tax F.B.T. 528,189 -49,305 -SCHEDULE 8EMPLOYEES’ REMUNERATION AND BENEFITSRs.Current Year Previous YearEmployees’ remuneration and benefitsSalaries,wages,bonus,allowances & benefits 22,787,328 8,126,256Contribution to provident and other funds 2,422,927 876,815Welfare Expenses 3,488,405 1,867,70828,698,660 10,870,779Less: Transferred to incidental expenditureduring construction - Schedule 11 18,013,681 -10,684,979 10,870,779SCHEDULE 9Rs.ADMINISTRATION & OTHER EXPENSES Current Year Previous YearPower Charges 188,063 58,332Water Charges 6,859 5,622Rent 3,584,668 1,785,932Repairs & MaintenanceBuilding 437,856 557,317Others 1,649,956 -Others Insurance 4,791 -Environment Protection Cess 400,000 -Training & Recruitment Expenses 458,236 180,356Communication Expenses 693,919 491,718Inland Travel 4,336,464 946,063Remuneration to AuditorsAudit Fee 22,040 16,530In Other Capacity 21,530 21,820Publicity Expenses 37,000 -Entertainment Expenses 397,253 140,162Transit Hostel Expenses 269,930 223,647Books and Periodicals 21,381 20,748Professional charges and consultancy fees 354,995 15,057Legal Expenses 979,500 15,114EDP Hire and other charges 319,888 327,478Printing and Stationery 181,285 55,864Survey, Investigaion, Cosultancy andSupervision Charges 17,012,328 13,177,615Miscellaneous Expenses 1,466,688 1,148,24732,844,630 19,187,622Less: Transferred to incidental expenditureduring construction - Schedule 11 10,370,064 -22,474,566 19,187,622SCHEDULE 10FINANCE CHARGESRs.Bank Charges 9,820 1,821Less: Transferred to incidental expenditureduring construction - Schedule 11 (5,451) -4,369 1,821SCHEDULE 11INCIDENTAL EXPENDITURE DURINGRs.CONSTRUCTION Current Year Previous YearA. Employees’ remuneration and othre benefitsSalaries,wages, allowances & benefits 14,869,569 -Contribution to provident and other funds 1,582,605 -Welfare Expenses 1,561,507 -Total (A) 18,013,681 -B. Othre ExpensesPower Charges 132,505 -Water Charges 5,087 -Rent 2,442,400 -Repairs & Maintenance 1,326,264Hiring of Vehicles 709,915 -Communication Expenses 462,330 -Travelling Expenses 2,665,249 -Advertainment and Publicity 32,000 -Entertainment Expenses 260,707 -Guest House Expenses 165,614 -Books and Periodicals 14,215 -Professional charges and consultancy fees 251,759 -Legal Expenses 979,000 -EDP Hire and other charges 218,527 -Printing and Stationery 102,911 -Miscellaneous Expenses 160,906 -Auditor’s Remuneration in other capacity 38,060Transport Vehicle Running Expenses 2,315 -Subscription to trade & other association 300 -Water Cess & Environment Protection Cess 400,000 -Total (B) 10,370,064 -C. Depreciation 236,321 -D. Interest & Finance Charges CapitalisedBank Charges 5,451 -Total (D) 5,451 -E. Tax provision on IEDC Income 405,080Total (E) 405,080Total (A+B+C+D+E) 29,030,597 -30th Annual Report 119

NTPC HYDRO LIMITEDSCHEDULE 12NOTES ON ACCOUNT1. Estimated amount of contracts remaining to be executed on capital accountand not provided for Rs. 299.29 lakhs.2. Related Party Disclosuresi) The Company is a wholly owned subsidiary of NTPC Ltd.ii) Key Management Perosnnel (appointed by the Holding Companyi.e. NTPC Ltd.)Shri C.P. Jain Chairman *Shri T. SankaralingamDirectorShri A.K. SinghalDirectorShri G.K. AgarwalDirector*superannuated on 31.3.2006iii) The Key Management Personnel are on appointment to the Company onpart-time basis from the Holding Company NTPC Ltd. Company pays noremuneration to the key management personnel as their remuneration(being full-time employees of the Holding Company) is paid by NTPC Ltd.3. Earning Per ShareThe elements considered for calculation of Earning Per Share (Basic andDiluted) are as under :Current Period Previous Yearas on 31.03.06 as on 31.03.05Net Loss used as numerator 33,427,394 30,467,227Weighted Average number of equity 5,855,556 2,200,196.6shares used as denominatorEarning Per Share (Rupees) - Basic and (5.71) (13.85)DilutedFace value per share (Rupees) 10.00 10.004. The company has capitalized incidental expenses during construction periodw.e.f. 2nd August, 2005 relating to Lata Tapovan Project and Corporate Officeas the Detailed Project Report (DPR) has been approved by the Board of Diretorsin their meeting held on 2nd August, 2005. Further Rammam Project was alsoapproved by the Board of Directors on 21st March, 2006 and accordinglyincidental expenses during construction has been capitalized and CorporateOffice expenses has been allocated to Lata Tapovan Project and RammamProject in the ratio of capital expenditure of the projects.5. Cost of building and trees has not been considered for working out theestimated amount of the contract remaining to be executed on capital accountas the amount thereof shall be ascertained only after physical possession ofthe land.6. Previous year’s figures have been regrouped/rearranged wherever necessany.INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIESACT, 1956BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILEI Registration Details State Code : 0 5 5Registration No. U 4 0 1 0 1 D L 2 0 0 2 G O I 1 1 8 0 1 3IIBalance-sheet date 3 1 0 3 0 6Capital Raised during the year (Rs. In Thousands).Public Issue N I LRights Issue N I LBonus Issue N I LPrivate Placement 0 5 4 3 7 8III Position of Mobilization and Deployment of Funds (Amount in Rs. Thousands)Total liabilities Total Assets1 0 0 0 0 0 1 0 0 0 0 0Paid up CapitalCapital Deposit Account1 0 0 0 0 0 N I LSecured LoansReserve & SurplusN I L N I LDeferred Tax LiabilityUnsecured LoansN I L N I LApplication of FundsNet Fixed Assets Investments4 1 4 0 8 N I LNet Current AssetsMisc. Expenditure- 2 2 5 4 8 N I LAccumulated Losses8 1 1 4 0IV. Performance of Company (Rs. in Thousands)Turnover (Including Other Income)Total Expenditure- - - - - - - - - - - 3 3 2 5 5Loss before tax Loss after tax3 3 2 5 5 3 3 4 2 7Earning per share in Rs. Dividend Rate %- 5 . 7 1 N I LV. Generic Names of Three principal Products/Services of Company(As per monetary terms)Product Description:Item CodeG E N E R A T I O N O F E L E C T R I C I T Y N AFor and on behalf of Board of DirectorsIn terms of our report of even dateFor S.R. Kapur & Co.Chartered Accountants(D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanPlace : New DelhiDated: 25 th MAY 2006NTPC HYDRO LIMITEDCASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006Rs.Current Year Previous YearA.CASH FLOW FROM 31.03.2006 31.03.2005OPERATING ACTIVITIESNet Loss (33,254,980) (30,467,227)Adjustment for:Depreciation 91,066 407,00691,066Operating Loss before Working (33,163,914) (30,060,221)Capital ChangesAdjustment for:Trade Payables and Other Liabilities 21,106,408 2,656,211Loans and Advances (180,283) (117,083)20,926,125 2,539,128Cash generated from operations (12,237,789) (27,521,093)Direct Taxes Paid (172,414) -Net Cash from Operating (12,410,203) (27,521,093)Activities-AB.CASH FLOW FROMINVESTING ACTIVITIESPurchase of Fixed Assets & (37,917,721) (2,949,040)CWIP & Const. Advance(50,327,924) (30,470,133)12030th Annual Report

Rs.Current Year Previous YearC.CASH FLOW FROMFINANCING ACTIVITIESProceeds from issuance of 51,878,900 30,573,000share capital51,878,900 30,573,000Net Increase in Cash and 1,550,976 102,867Cash equivalents(A+B+C)Cash and cash equivalents(Opening Balance) 1,328,901 1,226,034Cash and cash equivalents(Closing Balance) 2,879,877 1,328,901As per our report of even date For and on behalf of Board of DirectorsFor S.R. Kapur & Co.Chartered Accountants(D.K.Gupta) (Manish Kumar) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanPlace : New DelhiDated: 25 th May 2006AUDITORS’ REPORTTo the Members ofNTPC Hydro LimitedNew Delhi1. We have audited the attached Balance Sheet of NTPC HYDRO LIMITED, as at31 st March, 2006, the Profit and Loss Account and also the Cash Flow statementfor the year ended on that date annexed thereto. These financial statementsare the responsibility of the company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.2 We conducted our audit in accordance with the auditing standards generallyaccepted in India. Those Standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basisfor our opinion.3. As required by the Companies (Auditor’s Report) Order, 2003 issued by theCentral Government of India in terms of sub-section (4A) of section 227 ofthe Companies Act, 1956, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Order.4. Further to our comments in the Annexure referred to above, we report that:-i. We have obtained all the information and explanations, which to thebest of our knowledge and belief were necessary for the purposes ofour audit.ii. In our opinion, proper books of account as required by law have beenkept by the company so far as appears from our examination of thosebooks.iii. The Balance Sheet, Profit & Loss Account and Cash Flow statement dealtwith by this report are in agreement with the books of account.iv. In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flowstatement dealt with by this report comply with the accounting standardsreferred to in sub-section (3C) of section 211 of the Companies act, 1956;v. We have been informed that the provisions of section 274(1)(g) of theCompanies Act, 1956 are not applicable to the directors of the Company,pursuant to Circular No. 8/2002 dated 22 nd March, 2002 issued byDepartment of Company Affairs, Government of India as the company iswholly owned subsidiary of the Government Company.vi. In our opinion and to the best of our information and according to theexplanations given to us, the said accounts read together with notesthereon, give the information required by the Companies Act, 1956, inthe manner so required and give a true and fair view in conformity withthe accounting principles generally accepted in India;a) in the case of the Balance Sheet, of the state of affairs of the Companyas at 31st March, 2006;b) in the case of the Profit and Loss Account, of the loss for the yearended on that date; andc) in the case of the Cash Flow statement, of the cash flow for the yearended on that date.for S.R. Kapur & Co.Chartered AccountantsPlace : New Delhi(D.K. Gupta)Dated: 25 th May 2006PartnerMembership No. 089480Annexure referred in paragraph 3 of Auditors’ Report to the Members of NTPCHYDRO LIMITED on the accounts for the year ended on 31 st March, 2006i) a) The company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.b) All fixed assets have been physically verified by the management during theyear which, in our opinion, is reasonable having regard to the size of thecompany and the nature of its assets. No material discrepancies were noticedon such verification.c) In our opinion and according the information and explanations given to usno substantial part of fixed assets of the company have been disposed offduring the year.ii) As the company has not purchased / sold goods during the year nor is there anyopening stock, requirement of reporting on physical verification of stocks ormaintenance of inventory records is not applicable.iii) The company has neither taken nor granted loans, secured or unsecured from/ tocompanies, firms and other parties covered in the register maintained under section301 of the Companies Act 1956. Accordingly paragraphs of clauses 4(iii)(b), (c)& (d) of the Companies Auditor’s Report Order 2003 are not applicable.iv)In our opinion and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size ofthe company and the nature of its business with regard to purchase of fixedassets. The company has not made any purchase / sale. During the course of ouraudit, we have not observed any continuing failure to correct major weaknessesin internal control systems.v) a) According to the information and explanations given to us, we are of theopinion that the transactions that needed to be entered into the registermaintained under section 301 of the Companies Act, 1956 have been soentered.b) In our opinion and according to the information and explanations given tous, the transactions made in pursuance of contracts or arrangements duringthe year have been made at prices which are reasonable though companyhas made reimbursements only.vi)vii)According to the information and explanations given to us, the company has notaccepted deposits under the provisions of section 58A & 58AA or any otherrelevant provisions of the Companies Act, 1956 and the Companies (Acceptanceof Deposits) Rules 1975.In our opinion, the company has an internal audit system commensurate with thesize and nature of its business.viii). The Central Government has prescribed the maintenance of cost records forElectricity Industry under section 209 (l)(d) of the Companies Act, 1956. As thecompany has not yet started its commercial production, clause 4(viii) of theCompanies Auditor’s Report Order, 2003 is not applicable.ix) (a) The company is regular in depositing with appropriate authorities undisputedstatutory dues including provident fund, investor education protection fund,employees’ state insurance, income tax, sales tax, wealth tax, service tax, customduty, excise duty, cess and other material statutory dues applicable to it.(b)(c)According to the information and explanations given to us, no undisputedamounts payable in respect of income tax, sales tax, wealth-tax, service tax,customs duty, excise duty and cess were in arrears.According to the information and explanation given to us, there are no duesof sales tax, income tax, customs duty, wealth tax, excise duty and cesswhich have not been deposited on account of any dispute.x) As the company has been registered for a period of less than five years, theprovisions of clause 4(x) of the Company (Auditor’s Report) Order 2003 is notapplicable.xi) According to the information and explanations given to us, the company has nottaken loans from financial institution, banks or debenture holders.xii) The company has not granted loans and advances on the basis of security by wayof pledge of shares, debentures, and other securities.xiii) The company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore,the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 isnot applicable to the company.xiv) The company is not dealing in or trading in shares, securities, debentures andother investments. Accordingly, the provision of clause 4(xiv) of the Companies(Auditor’s Report) Order, 2003 is not applicable to the company.xv)The company has not given any guarantee for loans taken by others from banks orfinancial institutions.xvi) The company has not taken term loans during the year.xvii) The company has not raised short term or long term funds during the year.xviii) According to the information and explanations given to us, the company hasmade preferential allotment of shares to NTPC Limited holding company, coveredin the register maintained under section 301 of the Companies Act, 1956. In ouropinion, the price at which shares have been issued is not prejudicial to theinterest of the company.xix) The Company has not issued debentures during the period covered by our audit.xx) The company has not raised money by public issue.xxi) According to the information and explanations given to us, no fraud on or by thecompany has been noticed or reported during the course of our audit.Place : New DelhiDated: 25 th May 2006for S.R. Kapur & Co.Chartered Accountants(D.K. Gupta)PartnerMembership No. 08948030th Annual Report 121

NTPC VIDYUT VYAPAR NIGAM LIMITED(A wholly owned subsidiary of NTPC Limted)DIRECTORS’ REPORTTo the Members,Your Directors have pleasure in presenting the fourth Annual Report on the workingof the Company for the financial year ended on 31 st March 2006 together withAudited Statement of Accounts, Auditors’ Report and Review by the Comptroller& Auditor General of India for the reporting period.FINANCIAL RESULTS(Amount in Rs.)Year endedYear ended31 st March, 2006 31 st March, 2005Income/Revenue 444,13,91,654 5,99,23,60,451Profit before Tax 5,06,74,996 9,10,28,368Less: Current Tax 1,69,37,865 3,37,54,101Profit after current Tax 3,37,37,131 5,72,74,267Provision for deferred Tax 4,67,212 (90,098)Profit after tax 3,32,69,919 5,73,64,365Balance brought forward 4,50,20,176 1,18,94,920Profit available for appropriation 7,82,90,095 6,92,59,285Transfer to general reserve 8,31,748 14,34,109Interim Dividend 1,00,00,000 -Proposed Dividend 1,00,00,000 2,00,00,000Tax on Interim Dividend 14,02,500 -Tax on proposed Dividend 14,02,500 28,05,000Surplus carried forward 5,46,53,347 4,50,20,176DIVIDENDYour Directors have recommended a final dividend of Rs.10.00 million, i.e. @ 5%on the paid up capital for the financial year 2005-06, thus making the total dividendat Rs. 20 million, including the interim dividend of Rs. 10.00 million.POWER TRADING-BUSINESSDuring the year under review your company had traded 1643.29 MU amounting toRs. 4343.83 million as compared to 2616.253 MU of electricity amounting toRs.5870.50 million in the year 2004-05. The trading activity also included NTPC’sunrequisitioned surplus (URS) power of Liquid Fuel stations. The power tradingactivity has been affected due to licenses issued to many other new tradingcompanies and the state power utilities resorting to the tender route for sale ofpower.NEW BUSINESS INITIATIVESDuring the year new business initiatives for export of Fly Ash and domestic sale ofCenosphere and certified Fly Ash as per IS 3812 part-I were started. The firstconsignment of 7508MT has been shipped on April 10, 2006 from Vizag port.The domestic sale of Cenosphere is being conducted through e-auction portal ofMSTC Limited. An agreement to this effect was signed with them and one lot of50MT has been auctioned and sold successfully during the year.INITIATIVE FOR SETTING UP OF POWER EXCHANGE AT NATIONAL LEVELYour company had appointed a Consortium of Consultants viz. M/S CRISIL Ltd. andM/s Nordpool Consulting, Norway to prepare a detailed Project Report forestablishment of a wholesale Power Exchange at National Level in India. Theconsultants have submitted the DPR. Appropriate further action is being consideredby CERC in this matter.SYSTEMS DEVELOPMENTThe Consortium of Consultants viz. M/s CRISIL Ltd. and M/s Millhouse AssociatesUK is also working for development of IT-enabled trading system for NVVN.PARTICULARS OF EMPLOYEESDuring the period under review the Company had no employees of the category,which falls, under section 217 (2A) of the Companies Act, 1956 read with theCompanies (Particulars of Employees) Rules, 1975.FIXED DEPOSITSThe company has not accepted any fixed deposit during the period ending 31 stMarch 2006.CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGEEARNING & OUTGOThere are no significant particulars, relating to conservation of energy, technologyabsorption under the Companies (Disclosure of particulars in the Report of Boardof Directors) Rules, 1988, as your Company does not own any manufacturing facility.During the period under review the Company had no earning in foreign exchange.However, an amount of Rs.92, 367/- only was spent in equivalent foreign currency.AUDIT COMMITTEEThe Board of Directors during the year had constituted an Audit Committeecomprising S/Shri Shyam Wadhera, R.S.Sharma & A.K.Singhal Directors pursuant tothe requirement of section 292A of the Companies Act, 1956. Three meetings ofthe Audit Committee were held during the financial year 2005-06.BOARD OF DIRECTORSShri C.P.Jain ceased to be Chairman of the Company w.e.f. 31.03.2006 A.N.consequent upon his superannuation from the services of NTPC Limited. The Boardplaces on record its deep appreciation for the valuable contributions made byShri C.P.Jain, under whose dynamic leadership the Company was formed. Pursuantto the Articles of Association of the Company, the Chairman & Managing Directorof NTPC Limited shall be the ex-officio part-time Chairman on the Board of theCompany. On taking over as the Chairman & Managing Director of NTPC Limited,Shri T. Sankaralingam was appointed as Chairman of the Company w.e.f 01.04.2006.AUDIT REPORT & C & A G REVIEWThe Comptroller and Auditor General of India (C & AG) has appointed M/s Rohtas& Hans, Chartered Accountants as Auditor of the Company for the financial year2005-06. There are no adverse comments, observation or reservation in the auditorsreport on the accounts of the Company.The C&AG has reviewed the annual accounts for the year ended 31.3.2006 and hasmade no comment upon or supplement to the Auditors’ Report under Section 619(4) of the Companies Act, 1956. Letter of C & AG on the accounts of the Companyfor the financial year 2005-06 are at Annexure-I.DIRECTORS’ RESPONSIBILITY STATEMENTAs required under Section 217 (2AA) of the companies Act, 1956 your Directorsconfirm that:(i) in the preparation of annual accounts, the applicable accounting standardshad been followed along with proper explanation relating to materialdepartures;(ii) the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the company at theend of the financial year 2005-06 and of the profit of the company for thatperiod;(iii) the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the company and forpreventing and detecting the fraud and other irregularities;(iv) the Directors had prepared the annual accounts on going concern basis.ACKNOWLEDGMENTThe Board of Directors wish to place on record their appreciation for the supportand co-operation extended by NTPC Limited, the Central Electricity RegulatoryCommission, the valued customers of the Company, various State Electricity Boards,the Auditors and the Bankers of the Company.For and on behalf of the Board of DirectorsPlace: New Delhi(T.SANKARALINGAM)Date: 03.08.2006CHAIRMANANNEXURE-ICOMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OFNTPC VIDYUT VYAPAR NIGAM LIMITED, NEW DELHI FOR THE YEAR ENDED,31 STMARCH, 2006I, have to state that the Comptroller and Auditor General of India has no commentsupon or supplement to the Auditors’ Report under section 619(4) of the CompaniesAct, 1956, on the accounts of NTPC Vidyut Vyapar Nigam Limited, New Delhi for theyear ended 31 st March 2006.Place: New DelhiDated: 22 June, 2006(Meera Swraup)Principal Director of Commercial Audit andEx-officio Member Audit Board-IIINew Delhi12230th Annual Report

NTPC VIDYUT VYAPAR NIGAM LTD.ACCOUNTING POLICIES1 FIXED ASSETS1.1 Fixed Assets are shown at historical cost.1.2 Intangible assets are recorded at their cost of acquisition.2 INVENTORIES2.1 Inventories are valued at the lower of cost, determined on weightedaverage basis, and net realizable value.3 FOREIGN CURRENCY TRANSACTIONS3.1 Foreign currency transactions are initially recorded at the rates of exchangeruling at the date of transaction.3.2 At the balance sheet date, foreign currency monetary items are reportedusing the closing rate.4 PROFIT AND LOSS ACCOUNT4.1 INCOME RECOGNITION4.1.1 Sale of energy is accounted for based on rates agreed with the customers.4.1.2 The surcharge on late payment/overdue sundry debtors for sale of energyis recognized when no significant uncertainty as to measurability orcollectability exists.4.2 EXPENDITURE4.2.1 Depreciation is charged on straight-line method at the rates specified inSchedule XIV of the Companies Act, 1956.4.2.2 Depreciation on additions to/ deductions from fixed assets during theyear is charged on pro-rata basis from/up to the month in which the asset isavailable for use/disposal.4.2.3 Assets costing up to Rs.5000/- are fully depreciated in the year ofcapitalization.4.2.4 Cost of Computer software recognized as intangible assets is amortizedon straight-line method over a period of legal right to use or 3 years,whichever is earlier.4.2.5 Expenses on training, recruitment and ex-gratia payments under VoluntaryRetirement scheme are charged to revenue in the year of incurrence.4.2.6 Expenditure on Leave Travel Concession to employees is recognized inthe year of availment due to uncertainties in accrual.4.2.7 Prepaid expenses and prior period expenses/income of items ofRs.1,00,000/- and below are charged to natural heads of accounts.5 RETIREMENT BENEFITS5.1 The liabilities for retirement benefits in respect of Gratuity, leaveencashment and post retirement medical scheme are ascertained annuallyby the Holding Company i.e. NTPC Ltd. on actuarial valuation at the yearend. The company provides for retirement benefits in respect of providentfund, gratuity, leave encashment and post retirement medical scheme asapportioned by the Holding Company.BALANCE SHEET AS AT 31 st MARCH 2006(Rs.)Schedule No. 31.03.2006 31.03.2005SOURCES OF FUNDSSHAREHOLDERS’ FUNDSCapital 1 200000000 200000000Reserves & Surplus 2 59037387 48572468259037387 248572468Deffered Tax Liability (Net) 443564 -TOTAL 259480951 248572468APPLICATION OF FUNDSFIXED ASSETS 3Gross Block 3270886 2607734Less: Depreciation 751402 308889Net Block 2519484 2298845CURRENT ASSETS, LOANS AND ADVANCESInventories 4 7437068 -Sundry Debtors 5 242649199 245757584Cash and Bank balances 6 322306545 234448175Other Current Assets 7 157864 12677Loans and Advances 8 6822516 6229780579373192 486448216LESS: CURRENT LIABILITIES AND PROVISIONSLiabilities 9 310961621 217393241Provisions 10 11450104 22805000322411725 240198241Net Current Assets 256961467 246249975Deferred Tax Asset (Net) - 23648TOTAL 259480951 248572468Notes on accounts 14Cash Flow Statement, Schedules 1 to 14 and accounting policies form integral partof accounts.For and on behalf of the Board of DirectorsAs per our Report of even dateFor Rohtas & HansChartered Accountants(Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanM.No. 82912Place : New DelhiDated: 26 th May 2006NTPC VIDYUT VYPAR NIGAM LTD.PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006(Rs.)Schedule Current PreviousNo. Year YearINCOMESalesPower 4343829121 5870493765Ash/Ash products 750000 4344579121 -Rebate on power purchase 83764179 121587973Interest (Gross)(Tax deducted at sourceRs.2764971/- Previous year Rs.58280/-) 13048354 278713TOTAL 4441391654 5992360451EXPENDITUREPower purchase 4267171550 5746745992Open Access Charges 4298233 6605904Ash/Ash products collection, trading& selling Expenses 11 128748 -Employees’ remuneration and benefits 12 26284202 19027197Administration & Other Expenses 13 9283178 7681137Rebate on power sale 83067740 120838239Depreciation 454083 271821Interest u/s 234C of Income Tax Act 28924 161793TOTAL 4390716658 5901332083Profit beforeTax 50674996 91028368Provision for Tax:a) Current Tax 16599728 33754101b) Deferred Tax 467212 (90098)c) Fringe Benefit Tax 338137 -Total (a+b+c) 17405077 33664003Profit after Tax 33269919 57364365Balance brought forward 45020176 11894920Balance available for appropriation 78290095 69259285Transfer to General Reserve 831748 1434109Dividend- Interim 10000000 -- Proposed 10000000 20000000Tax on Dividend- Interim 1402500 -- Proposed 1402500 2805000Balance carried to Balance Sheet 54653347 45020176Earning per share (Equity share, face valueRs.10/- each)-Basic and diluted 1.66 2.87For and on behalf of the Board of DirectorsAs per our Report of even dateFor Rohtas & HansChartered Accountants(Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanM.No. 82912Place : New DelhiDated: 26 th MAY 2006NTPC VIDYUT VYPAR NIGAM LTD.SCHEDULES - FORMING PART OF ACCOUNTSSCHEDULE 1(Rs.)CAPITAL 31.03.2006 31.03.2005AUTHORISED2,00,00,000 equity shares of Rs. 10/-each(Previous Year 2,00,00,000 equity sharesof Rs. 10/-each) 200000000 200000000ISSUED, SUBSCRIBED & PAID UP2,00,00,000 equity shares of Rs. 10/-eachfully paid-up (Previous Year 2,00,00,000equity shares of Rs. 10/- each fully paid up)All shares are held by the holding company,NTPC Limited and its’ nominees.200000000 200000000SCHEDULE 2RESERVES & SURPLUSGeneral ReserveAs per last Balance Sheet 3552292 2118183Add: Transfer from Profit and Loss Account 831748 14341094384040 3552292Surplus, balance in Profit and Loss Account 54653347 45020176TOTAL 59037387 4857246830th Annual Report 123

SCHEDULE 3FIXED ASSETS(Rs.)GROSS BLOCK DEPRECIATION NET BLOCKAs at Additions Deductions/ As at As at For the Deductions/ upto As at As at1.04.2005 Adjustments 31.03.2006 1.04.2005 Year Adjustments 31.03.2006 31.03.2006 31.03.2005Furniture,fixtures &other office equipment 426491 178775 116487 488779 46501 66667 11570 101598 387181 379990EDP & WP machines 2167723 578879 - 2746602 253374 374919 - 628293 2118309 1914349Intangible assets-software 13520 21985 - 35505 9014 12497 - 21511 13994 4506Total 2607734 779639 116487 3270886 308889 454083 11570 751402 2519484 2298845Previous Year 845690 1793744 31700 2607734 37295 271821 227 308889 2298845 808395(Rs.)SCHEDULE 4 31.03.2006 31.03.2005INVENTORIES(Valuation as per Accounting Policy No.2)Fly Ash (packed bags) 4680652Packing material 2594973 -Cenosphere 161443 -TOTAL 7437068 -SCHEDULE 5SUNDRY DEBTORSDebts outstanding over six months- Unsecured, considered good 2918337 334796Other debts- Unsecured, considered good 239730862 245422788TOTAL 242649199 245757584SCHEDULE 6CASH & BANK BALANCESCash on hand 930 1930Balances with Scheduled Banks-Current Account 13373 192392300-Current account linked-Term Deposit Account 322292242 42053945TOTAL 322306545 234448175SCHEDULE 7OTHER CURRENT ASSETSInterest accrued 157864 12677SCHEDULE 8LOANS AND ADVANCESADVANCES(recoverable in cash or kind for value to be received)Advance deposit with RLDCs-Unsecured, considered good 3408865 3093312Earnest money deposit with suppliers-Unsecured, considered good 1000000 13000004408865 4393312Advance Income Tax Deposit & Tax deductedat source 19013379 35590569Less: Provision for Income Tax 16599728 337541012413651 1836468TOTAL 6822516 6229780SCHEDULE 9CURRENT LIABILITIESSundry CreditorsFor goods and services- Suppliers & Contractors 275149476 209161366- NTPC Ltd. (Holding Company) 10775851 5735928- Others 949397 70528Book Overdraft 3582897 -Deposits, retention money from buyers 1089327 -291546948 214967822Advances from customers and others 19367068 2425419Other liabilities 47605 -TOTAL 310961621 217393241SCHEDULE 10PROVISIONSProposed dividendAs per last balance sheet 20000000 6354548Additions during the year 10000000 20000000Amounts used during the year 20000000 6354548Closing Balance (Proposed Dividend) 10000000 20000000(Rs.)31.03.2006 31.03.2005Tax on proposed dividendAs per last balance sheet 2805000 814176Additions during the year 1402500 2805000Amounts used during the year 2805000 8141761402500 2805000Provision for Interest u/s 234C of Income Tax Act 28924 161793Less: Interest paid - 16179328924 -Provision for Fringe Benefit Tax 338137 -Less: Fringe Benefit Tax paid 319457 -18680 -TOTAL 11450104 22805000SCHEDULE 11 Current PreviousASH/ASH PRODUCTS COLLECTION, TRADING Year Year& SELLING EXPENSESAsh testing charges 30636 -Cenospere collection charges 73317 -E-auction charges 24795 -TOTAL 128748 -SCHEDULE 12EMPLOYEES’ REMUNERATION AND BENEFITSSalaries,wages,bonus,allowances & benefits 21071079 14956229Contribution to provident and other funds 2212497 1529986Welfare expenses 3000626 2540982TOTAL 26284202 19027197SCHEDULE 13ADMINISTRATION & OTHER EXPENSESPower Charges 39000 29400Repairs & MaintenanceLeased building-residential 399226 241174Office 42180 61675Rates & Taxes 1511600 1058600Training & recruitment expenses 750 840613Communication expenses 610253 449857Travelling expenses 3171333 2424197Tender expenses 1342467 21000Less: Receipt from sale of tenders 215000 1127467 -Remuneration to auditorsAudit fee 33060 33060Tax audit fee 9918 9918In other capacity 16530 20872Out of pocket expenses 11305 -Business promotion and advertisement 31000 289482Entertainment expenses 266438 75012Brokerage & commission 3350 -Books and periodicals 24332 25992Professional charges and consultancy fee 81983 140089Legal Expenses 1380 180EDP hire and other charges 203601 212231Printing & stationery 166153 166102Loss on disposal of fixed assets 9762 7471Bank and other Charges 1036890 1414137Miscellaneous expenses 485667 160075TOTAL 9283178 7681137SCHEDULE 14NOTES ON ACCOUNTS1. Balances shown under debtors, advances and creditors in so far as thesehave not been since realized/discharged or adjusted are subject toconfirmation/reconciliation and consequential adjustment, if any.2. The Sales and Purchase are recognized on the basis of monthly Regional EnergyAccounts (REA) issued by the concerned Regional Electricity Boards (REBs).12430th Annual Report

3. Contingent liability: Claims against the company not acknowledged as Debtsis Rs.NIL (Previous year-Rs. NIL).4. The effect of foreign exchange fluctuation during the year is as under:a) The amount of exchange difference debited to the Profit and Loss Accountis Rs.3904/- (Previous year Rs. NIL)5. Segment informationAccounting standard (AS-17) ‘Segment Reporting’ is applicable to thecompany but there are no reportable segments.6. Related Party Disclosuresa) The Company is a wholly owned subsidiary of NTPC Limited.b) Key Management Personnel (appointed by the Holding Company i.e. NTPCLimited.)Shri C.P.JainChairmanShri R.S.SharmaDirectorShri Shyam Wadhera DirectorShri Chandan Roy DirectorShri A.K.SinghalDirectorShri G.K.AgarwalDirectorc) The Key Management Personnel are on appointment to the Company onpart-time basis from the Holding Company NTPC Limited. The Companypays no remuneration to the key management personnel as theirremuneration (being full-time employees of the Holding Company) ispaid by NTPC Limited. In case of Shri Shyam Wadhera, as he is full timeemployee of Power Finance Corporation Ltd. (PFC Ltd.), his remunerationis paid by PFC Ltd.7. Earnings per shareThe elements considered for calculation of Earning per share (Basic) are asunder:Current Year Previous YearNet Profit/(Loss) after Tax used as 33269919 57364365numerator (Rupees)Weighted average number of equity 20000000 20000000shares used as denominatorEarning/(Loss) per share (Rupees) 1.66 2.87Face value per share (Rupees) 10 108. In compliance of Accounting Standard –22 on “Accounting for taxes onIncome” issued by the Institute of Chartered Accountants of India, the itemwise details of Deferred tax liability (net) are as under:(Rs.)31.03.2006 31.03.2005Deferred Tax liabilityi) Difference of Book depreciation 446335 293344and Tax depreciation446335 293344Less: Deferred Tax Assetsi) Provision disallowed for tax purpose 2771 5541ii) Disallowed u/s 43B of the - 311451Income Tax Act, 19612771 316992Deferred Tax Liability/(Asset) (net) 443564 (23648)The net increase in the deferred tax liability of Rs. 467212/- (Previous year(-) Rs.90098/-) has been debited to Profit & Loss Account.9. Licensed and Installed Capacities:a) Licensed Capacity - Not Applicableb) Installed Capacity - Not Applicable10. Quantitative information:a) Purchase and sale of power (in KWH)Current Year Previous YearPurchase 1643299451 2616252909Sale 1643299451 2616252909b) Trading of Fly Ash and ash basedproducts (MT) 50 NIL11. Expenditure in foreign currency (Rs.)a) Training & recruitment expenses NIL 153893b) Foreign travel 92367 NIL12. All the employees of the company are on secondment from the HoldingCompany.13. Previous year’s figures have been regrouped/rearranged wherever necessary.For and on behalf of the Board of DirectorsAs per our Report of even dateFor Rohtas & HansChartered Accountants(Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanM.No. 82912Place : New DelhiDated: 26 th May 2006INFORMATION PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIESACT, 1956BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILEI. Registration Detail State Code: 0 5 5Registration No. U 4 0 1 0 8 D L 2 0 0 2 G O I 1 1 7 5 8 4Date Month YearBalance Sheet Date 3 1 0 3 2 0 0 6II. Capital Raised during the year(Rs. in Thousand)Public IssueRight issueN I L N I LBonus IssuePrivate PlacementN I L N I LIII.Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)Total LiabilityTotal Assets5 8 1 8 9 3 5 8 1 8 9 3Source of FundsPaid up CapitalReserves & Surplus2 0 0 0 0 0 5 9 0 3 7Secured LoansUnsecured LoansN I L N I LDeferred Tax Liabilites4 4 4Application of FundsNet Fixed AssetsInvestment2 5 2 0 N I LNet Current assetsMisc. Expenditure2 5 6 9 6 1 N I LAccumulated LossesN I LIV. Performance of Company (Amount in Rs. Thousands)TurnoverTotal Expenditure4 3 4 4 5 7 9 4 3 9 0 7 1 7Profit/Loss before TaxProfit After Tax5 0 6 7 5 3 3 2 7 0Earning Per Share in Rs. Dividend Rate (%)1. 6 6 1 0V. Generic name of three Principal Products/Services of Company(As per monetary terms)Product DescriptionItem Code No.1. Trading of Electric Power N A2. Trading of Fly Ash and Ash based products N AFor and on behalf of the Board of DirectorsAs per our Report of even dateFor Rohtas & HansChartered Accountants(Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanM.No. 82912Place : New DelhiDated: 26 th May 200630th Annual Report 125

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 ST MARCH 2006(Rs.)Current Year Previous YearA. CASH FLOW FROM OPERATING ACTIVITIESNet profit before tax 50674996 91028368Adjustment for:Depreciation 454083 271821Interest income (13048354) (278713)Interest paid u/s 234C of Income tax Act 28924 161793Operating profitbefore Working Capital Changes 38109649 91183269Adjustment for:Inventories (7437068) -Trade and Other Receivables 3108385 (17660556)Trade Payable and Other Liabilities 93568380 14589262Loans and Advances (15553) (4393312)Cash generated from operations 127333793 83718663Direct Taxes Paid (17496368) (36401528)Net cash from Operating Activities-A 109837425 47317135B. CASH FLOW FROM INVESTING ACTIVITIESExpenditure on Fixed Assets (674722) (1762271)Interest received 12903167 266036Net Cash in Investing Activities -B 12228445 (1496235)C. CASH FLOW FROM FINANCING ACTIVITIESDividend (30000000) (6354548)Tax on Dividend (4207500) (814176)Net Cash flow from Financing Activities-C (34207500) (7168724)Net Increase/(Decrease) in Cash andCash equivalents (A+B+C) 87858370 38652176Cash and Cash equivalents(Opening balance) * 234448175 195795999Cash and Cash equivalents(Closing balance)* 322306545 234448175*NOTE: Cash and Cash Equivalents consist of Cash in Hand & Balance with Banks.For and on behalf of the Board of DirectorsAs per our Report of even dateFor Rohtas & HansChartered Accountants(Hans Kumar Jain) (Nitin Mehra) (A.K.Singhal) (T.Sankaralingam)Partner Company Secretary Director ChairmanM.No. 82912Place : New DelhiDated: 26 th MAY 2006AUDITORS’ REPORTTo the Members ofNTPC Vidyut Vyapar Nigam Limited1. We have audited the attached Balance Sheet of NTPC VIDYUT VYAPAR NIGAMLIMITED, as at 31st March 2006, the Profit and Loss Account and also the CashFlow Statement for the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audit.2. We conducted our audit in accordance with Auditing Standards generallyaccepted in India. Those Standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free frommaterial misstatement. An audit includes examining, on test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended)issued by the Government of India in terms of Section 227 (4A) of the CompaniesAct, 1956, we enclose in the Annexure a statement on the matters specified inparagraphs 4 & 5 of the said order.4. Further to our comments in the Annexure referred to above, we report that:a. We have obtained all the information and explanations, which to the best ofour knowledge and belief were necessary for the purposes of our audit;b. In our opinion, proper books of account as required by law have been keptby the company so far as appears from our examination of those books;c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealtwith by this report are in agreement with the books of account;d In our opinion, the Balance Sheet, Profit and Loss Account and Cash FlowStatement dealt with by this report comply with the accounting standardsreferred to in sub-section (3C) of section 211 of the Companies Act, 1956;e Being a Government Company, pursuant to the Notification no. GSR 829 (E)dated 21.10.2003 issued by Government of India, provisions of Section 274(1) (g) of the Companies Act, 1956, are not applicable to the Company;f. In our opinion, and to the best of our information and according to theexplanations given to us, the said accounts read with the Accounting Policiesand Notes thereon in Schedule 14, give the information required by theCompanies Act, 1956, in the manner so required and gives a true and fairview in conformity with the accounting principles generally accepted in India;i. in the case of Balance Sheet, of the state of affairs of the Company as at31 st March, 2006,ii. in the case of Profit and Loss Account, of the profit for the year ended onthat date, andiii. in the case of Cash Flow Statement, of the cash flows for the year endedon that date.For Rohtas & HansChartered Accountants(Hans Kumar Jain)PartnerM.N.82912Place : New DelhiDated : 26 th May 2006Annexure to the Auditor’s ReportStatement referred to in paragraph (3) of our report of even date to the members of NTPCVIDYUT VYAPAR NIGAM LIMITED on the accounts for the year ended 31 st March 2006.(i) (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.(b) Physical verification of fixed assets has been carried out by an independentChartered Accountant firm appointed for the purpose, which in our opinion isconsidered reasonable having regard to the size and nature of its assets & nomaterial discrepancies were noticed on such verification.(c) No substantial part of fixed assets has been disposed off during the year.(ii) (a) The physical verification of inventory has been conducted by the management.(b) The procedure of the physical verification of Inventory followed by themanagement is reasonable and adequate in relation to the size of the companyand the nature of its business.(c) The company has maintained proper records of inventory and no materialdiscrepancies were noticed on such verification.(iii) (a) The Company has not granted or taken any loans, secured or unsecured to/from companies, firms or other parties listed in the register maintained undersection 301 of the Companies Act, 1956.(b) In view of clause (iii) (a) above, the clause (iii) (b), (iii) (c) and (iii) (d), are notapplicable.(iv) In our opinion and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size of thecompany and nature of its business with regard to purchase of Inventory, fixedassets and sale of goods. During the course of audit, we have not observed anycontinuing failure to correct major weaknesses in internal control systems.(v) (a) According to the information and explanation given to us, during the yearunder audit there have been no transaction which need to be entered into theregister maintained under section 301 of the companies Act, 1956.(b) In view of clause (v) (a) above, the clause (v) (b) is not applicable.(vi) The Company has not accepted deposits from the public.12630th Annual Report

(vii) The Company has appointed a Chartered Accountant firm separately to conductInternal audit during the year and in our opinion, this is commensurate with thesize of the company and nature of its business.(viii)The Central Government has not prescribed maintenance of cost records undersection 209(l)(d) of the Companies Act, 1956.(ix) (a) The employees of NVVN are on secondment basis from its holding companyi.e. NTPC Ltd. Both companies are regular in depositing undisputed statutorydues including dues like Provident Fund, Income Tax, Sales Tax and Service Taxetc. with appropriate authorities. According to the information and explanationsgiven to us, there are no undisputed Provident Fund, Income Tax, Sales Tax andService Tax etc. in arrear as at 31.03.2006 for a period of more than six monthsfrom the date they became payable.(b) In view of clause (ix) (a) above, the clause (ix) (b) is not applicable.(x) The clause is not applicable.(xi) The clause is not applicable.(xii) The clause is not applicable.(xiii) The clause (xiii) (a), (b), (c) and (d) are not applicable.(xiv) The clause is not applicable.(xv) The clause is not applicable.(xvi) The clause is not applicable.(xvii) The clause is not applicable.(xviii)The clause is not applicable.(xix) The clause is not applicable.(xx) The clause is not applicable(xxi) According to the information and explanations given to us, no fraud on or bythe company has been noticed or reported during the course of our audit.For Rohtas & HansChartered AccountantsPlace : New DelhiDated : 26 th May 2006To,PIPAVAV POWER DEVELOPMENT COMPANY LIMITED(A wholly owned subsidiary of NTPC Limted)DIRECTORS’ REPORT(Hans Kumar Jain)PartnerM.N.82912The Members,Your Directors have pleasure in presenting their 5 th Annual Report and Auditedstatement of Accounts for the financial year ended 31 st March 2006 together withthe Auditors‘ Report thereon.OPERATIONAL REVIEWDuring the period under review, studies pertaining to fuel transportation and seismicstudy have been completed. Environmental Impact Assessment study, Area drainagestudy and feasibility study are in progress.Various agencies like NTPC Vidyut Vyapar Nigam Ltd. and Madhya Pradesh StateElectricity Board have expressed their willingness for purchasing power from theproposed power project carried out by the Company. Efforts are on for obtaining“Mega Power Project” status.The Company has applied for allotment of “ Nuagaon, Telishahi” coal mine blockand is pursuing the matter with concerned authorities.FINANCIAL REVIEWDuring the year Company has incurred loss of Rs. 40,083/- as against loss ofRs. 24,252/- incurred last year.PARTICULARS OF EMPLOYEESSince, the company has no employee on the rolls, the particulars prescribed underSection 217(2A) of the Companies Act, 1956 read with the Companies (Particularsof Employees) Rules, 1975 are not applicable.AUDITORS’ REPORTThe Comptroller and Auditor General of India (C&AG) has appointed M/s SanjeevChopra & Company, Chartered Accountants as Auditor of the Company for thefinancial year 2005-06. There are no adverse comments, observation or reservationin the auditors’ report on the accounts of the Company.COMPTROLLERS & AUDITOR GENERAL REVIEWC&AG vide letter dated 7 th June, 2006 has decided not to review the report of theAuditors on the accounts of the company for the year ended 31 st March 2006 andas such has no comments to make under Section 619(4) of the Companies Act,1956. A copy of the letter issued by C&AG in this regard is at Annex-I.SECRETARIAL COMPLIANCE REPORTThe Company appointed M/s. K.K. Malhotra & Company, Company Secretaries forthe Certificate of compliance under Section 383A(1) of the Companies Act, 1956for the financial year 2005-06. The Certificate is attached with the Directors’ Reportas Annex-II.FIXED DEPOSITSThe Company has not accepted any fixed deposit during the period ending 31 stMarch 2006.CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGNEXCHANGE EARNING & OUTGOSince the Company’s activities are in project formulation stage and no commercialactivity was carried out by the Company, particulars in respect of conservation ofenergy, technology absorption and foreign exchange earnings and outgo are notapplicable to the Company.DIRECTORS’ RESPONSIBILITY STATEMENTAs required under Section 217(2AA) of the Companies Act, 1956 your Directorsconfirm that:i) In the preparation of the Annual Accounts, the applicable accounting standardshad been followed alongwith proper explanation relating to materialdepartures;ii) The Directors had selected such accounting policies and made judgementsand estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company as on 31 st March 2006 and of the loss ofthe company for that period;iii) The Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the company and forpreventing and detecting fraud and other irregularities; andiv) The Directors had prepared the annual accounts on going concern basis.DIRECTORSSmt. Vijaylaxmi Joshi, Chairman and Managing Director, Gujarat State ElectricityCorporation Limited was nominated by Gujarat State Electricity Corporation to theBoard of the Company w.e.f.24 th July, 2005.Dr. Joy I. Cheenath, ceased to be Director of the Company w.e.f. 14 th March 2006.Directors place on record deep appreciation for valuable contributions made byhim.ACKNOWLEDGEMENTThe Board of Directors wish to place on record their appreciation for the supportand co-operation extended by the Union Ministry of Power, Government of Gujarat,NTPC Ltd., Gujarat Power Corporation Ltd., Gujarat State Electricity Corporationand other agencies of Govt. of India/Govt. of Gujarat, Auditors and the Bankers ofthe company.For and on behalf of the Board of DirectorsPlace: New DelhiDated:14 th June, 2006(T. Sankaralingam)ChairmanCOMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDERSECTION 619 (4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OFPIPAVAV POWER DEVELOPMENT COMPANY LIMITED, NEW DELHI FOR THE YEARENDED,31ST MARCH, 2006The Comptroller and Auditor General of India has decided not to review the reportof the Auditors on the accounts of Pipavav Power Development Company Limited.New Delhi for the year ended 31st March 2006 and as such he has no comments tomake under Section 619(4) of the Companies Act, 1956Place: New DelhiDated: 7th June, 2006(Meera Swraup)Principal Director of Commercial Audit andEx-officio Member Audit Board-IIINew Delhi30th Annual Report 127

Annex-IIThe MembersPipavav Power Development Company LimitedWe have examined the registers, records, books and papers of PIPAVAV POWERDEVELOPMENT COMPANY LIMITED (the Company) as required to be maintainedunder the Companies Act, 1956 (the Act) and the rules made thereunder and also theprovisions contained in the Memorandum and Articles of Association of the companyfor the financial year ended 31 March, 2006 (Financial Year). In our opinion and to thebest of our information and according to the examination carried out by us andexplanations furnished to us by the company, its officers and agents and on the basisof the Auditors’ Report, we certify that in respect of the aforesaid financial year:1. The company has kept and maintained all registers as stated in the Annexure ‘A’to this certificate, as per the provisions of the Act and the rules made thereunderand all entries therein have been duly recorded.2. The company has duly filed the forms and returns as stated in the Annexure ‘B’to this certificate, with the Registrar of Companies, Regional Director, CentralGovernment, Company Law Board or other authorities within the time prescribedunder the Act and the rules made there under.3. The Company being a public limited company, comments are not required.4. The Board of Directors duly met 4(Four) times respectively on 30/5/2005,28/9/2005, 23/12/2005 and 25/03/2006 in respect of which meeting proper noticeswere given and the proceedings were properly recorded and signed includingthe circular resolutions passed in the Minutes Book maintained for the purpose.5. The company has not closed its Register of members or Debenture holders duringthe financial year.6. Tte Annual General Meeting for the financial year ended on 31 st March, 2005 washeld on 15th July 2005 after giving due notice to the members of the companyand other concerned and the resolutions passed thereat were duly recorded inMinutes Book maintained for the purpose.7. No Extra Ordinary General Meeting was held during the financial year.8. The Company has not advanced any loans to its directors or persons or firms orcompanies referred to under section 295 of the Act during the financial year.9. The Company has not entered into any contracts falling within the purview ofsection 297 ot the Act.10. The Company was not required to make any entries in the register maintainedunder section 301(1) of the Act. However, it made all the necessary entries in theregister maintained under section 301(3) of the Act.11. As there were no instances falling within the purview of section 314 of the Act,the company has not obtained any approvals from the Board of Directors, Membersor Central Government.12. The Company has not issued any duplicate share certificates during the financial year.13. The company has:(i) delivered all the certificates on Allotment of shares & lodgement thereofand on transfer/transmission of securities in accordance with the provisionsof the Act.(ii) not deposited any amount in a separate Bank Account as no dividend wasdeclared during the financial year.(iii) not posted warrants to any member of the company as no dividend wasdeclared during the financial year.(iv) not transferred any amounts to the Investor Education and Protection Fundduring the year.(v) duly complied with the requirements of section 217 of the Act.14. The Board of Directors of the company is duly constituted and the appointmentof directors, additional directors, alternate directors and directors to fill the casualvacancies have been duly made.15. The company has not appointed any Managing Director/Whole time Director/Manager during the financial year.16. The company has not appointed any sole -selling agent during the financial year.17. The company has not obtained any approvals of the Central Government, CompanyLaw Board, Regional Director, Registrar and/or such other authorities prescribedunder the various provisions of the Act during the financial year.18. The Directors have disclosed their interest in other firms/companies to the Boardof Directors pursuant to the provisions of the Act and the rules made there under.19. The company has issued 5000 Equity Shares during the financial year and dulycomplied with the provisions of the Act.20. The company has not bought back any shares during the financial year.21. There was no redemption of preference shares or debentures during the financial year.22. There were no transactions necessitating the Company to keep in abeyance rights todividend, rights shares and bonus shares pending registration of transfer of shares.23. The company has not invited/accepted any deposits including any unsecuredloan falling within the purview of section 58 A during the financial year.24. The company has not made any borrowing during the financial year ended 31stMarch,2006.25. The company has not made any loans or advances or given guarantees or providedsecurities to other bodies corporate and consequently no entries have been madein the register kept for the purpose.26. The company has not altered the provisions of the Memorandum with respect tosituation of the company’s registered office from one state to another during theyear under scrutiny.27. The company has not altered the provisions of the Memorandum with respect tothe objects of the company during the financial year under scrutiny.28 The company has not altered the provisions of the Memorandum with respect tothe name of the company during the financial year under scrutiny.29. The company has not altered the provisions of the Memorandum with respect tothe share capital of the company during the financial year under scrutiny.30. The company has not altered its Articles of Association during the financial year.31. There was no prosecution initiated against or show cause notices received by thecompany and no fines or penalties or any other punishments were imposed onthe company during the financial year, for offences under the Act.32. The company has not received any money as security from its employees duringthe financial year.33. The company has not constituted a separate provident Fund trust for its employeesor any class of its employees as contemplated under section 418 of the Act.For K.K. Malhotra & Co.Company SecretariesPlace : New DelhiK.K. MalhotraDate : 25 th May 2005 C.P. No. 446Annexure ARegisters as maintained by the company:1. Register of members u/s 150.2. Index of members u/s 151.3. Registers of transfers.4. Books of accounts u/s 209.5. Register of contracts under which directors are interested u/s 301.6. Register of Directors, Managing Director, Secretary, Manager u/s 303.7. Register of Director’s Shareholding u/s 307.8. Register of Directors attendance.9. Minutes books of General/Board Meetings.10. Register of Share application & allotment.Annexure BForms and Returns as filed by the Company with Registrar of Companies, RegionalDirector, Central Government or other authorities during the financial year ending 31 stMarch, 2006.1. Annual Return u/s 159 on 29/07//20052. Balance Sheet u/s 220 on 27/07/2005.3. Compliance certificate u/s 383A on 27/07/2005.4. Form no. 32 u/s 303(2) on 17/08/2005 .PIPAVAV POWER DEVELOPMENT COMPANY LIMITEDBALANCE SHEET AS AT 31 ST MARCH 2006(Rs.)Schedule 31.03.2006 31.03.2005No.SOURCES OF FUNDSSHAREHOLDERS’ FUNDSCapital 1 37,00,000 36,50,000APPLICATION OF FUNDSCURRENT ASSETS, LOANSAND ADVANCESCash and Bank balances 2 30,379 17,632Loans & Advances 3 6,05,00,000 6,05,00,0006,05,30,379 6,05,17,632LESS : CURRENT LIABILITIESAND PROVISIONSLiabilities 4 6,05,20,462 6,05,17,632Net Current Assets 9,917 -Profit & Loss Account 36,90,083 36,50,000TOTAL 37,00,000 36,50,000Notes on Accounts 5Schedules 1 to 5 form integral part of Annual Accounts.For and on behalf of Board of Directors(K. Prakasa Rao) (T. Sankaralingam)Director ChairmanIn terms of our report of even dateFor Sanjeev Chopra & Co.Chartered Accountants(Praveen Kumar)PartnerPlace : New DelhiDated : 25 th May 200612830th Annual Report

PIPAVAV POWER DEVELOPMENT COMPANY LIMITEDPROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006Rs.Current Year Previous YearEXPENDITUREFiling fees 3,000 2,000Bank charges - 300Secretarial audit fees 4,490 4,408Audit fees 13,428 17,544Travelling Expenses 18,075 -Miscellaneous Expenses 1,090 -Total 40,083 24,252Profit/ (Loss) before Tax (40,083) (24,252)Balance brought forward (36,50,000) (36,25,748)Balance carried to Balance sheet (36,90,083) (36,50,000)Earnings per share (Equity share,face value Rs.10/- each) - Basic and Diluted (0.11) (0.07)For and on behalf of Board of Directors(K. Prakasa Rao) (T. Sankaralingam)Director ChairmanIn terms of our report of even dateFor Sanjeev Chopra & Co.Chartered Accountants(Praveen Kumar)PartnerPlace : New DelhiDated : 25 th May 2006PIPAVAV POWER DEVELOPMENT COMPANY LIMITEDSCHEDULES - FORMING PART OF ACCOUNTSSCHEDULE 1Rs.CAPITAL 31.03.2006 31.03.2005Authorised1,00,00,000 equity shares of Rs. 10/- each 10,00,00,000 10,00,00,000Issued , Subscribed and Paid-up3,70,000 equity shares (Previous year 37,00,000 36,50,0003,65,000 equity shares) of Rs. 10/- eachheld by the holding company, NTPC Limitedand its nomineesSCHEDULE 2CASH AND BANK BALANCESCash in hand 199 749Balance with scheduled Bank in Current Account 30,180 16,883Total 30,379 17,632SCHEDULE 3LOANS & ADVANCES(Advances recoverable in cash or in kind orfor value to be received)Unsecured, considered goodAdvance to Gujarat Power Corporation Limited 6,05,00,000 6,05,00,000SCHEDULE 4CURRENT LIABILITIES & PROVISIONSSundry Creditors - For Goods & Services 20,462 17,632Other Liabilities - Advance from NTPC Limited 6,05,00,000 6,05,00,000Total 6,05,20,462 6,05,17,632SCHEDULE-5Notes on Accounts :1. Pursuant to Presidential Directive received under Articles of Association ofNTPC Limited, NTPC had paid a sum of Rs.6,05,00,000 for acquisition of 212hectares of land in Amreli District of Gujarat to M/s Gujarat Power CorporationLtd. (GPCL). The payment was made by NTPC on behalf of Pipavav PowerDevelopment Company Limited and accordingly it has been shown as advanceto GPCL. The land is yet to be transferred in the name of the Company.2. GPCL has given No Objection Certificate to Revenue Deptt. of Govt. of Gujaratfor transfer of 3.68 hectare of land (out of 212 hectare) to Railways for layingnew railway line between Rajula and Pipavav port. An amount of Rs. 10.85 lachas since been received by GPCL from Western Railways. Cost of 3.68 hectaresof land transferred to Railways and received by GPCL shall be recovered fromGPCL once the net cost of the land is determined as per the Joint VentureAgreement to be executed between NTPC, GPCL and Gujarat Urja Vikas NigamLtd. or its associates.3. Related Party Disclosures :a. The company is a wholly owned subsidiary of NTPC Limited.b. Key Management Personnel [appointed by NTPC Limited, GPCL and GujaratState Electricity Corporation Limited (GSECL)]:Sh. T. Sankaralingam ChairmanSh. S. TrivediDirectorSh. K. Prakasa Rao DirectorDr. Joy I. Cheenath Director w.e.f. 01.05.2005Smt. Vijaylaxmi Joshi Director w.e.f. 24.07.2005c. The Key Management Personnel are on appointment to the company on parttimebasis. The Company pays no remuneration to the key managementpersonnel as their remuneration is paid by NTPC Limited or GPCL or GSECL.4. Earning per Share :The elements considered for calculation of Earning per Share (Basic andDiluted) are as under :Current Year Previous YearNet Profit before Tax used as numerator (40,083) (24,252)Weighted Average number of EquityShares used as denominator 3,65,096 3,65,000Earning per Share – Basic and Diluted (0.11) (0.07)Face value per share 10 10BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE:1. Registration Detail State Code : 0 5 5Registration No. U 4 0 1 0 5 D L 2 0 0 1 U G C 1 1 3 5 0 8Date Month YearBalance Sheet Date 3 1 0 3 2 0 0 62. Capital Raised during the year (Amounts in Rs. Thousand)Public IssueRight issueN I L N I LBonus IssuePrivate PlacementN I L 5 03. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand)Total Liabilities Total Assets6 4 2 2 0 6 4 2 2 0Source of FundsPaid up Capital Reserve & Surplus3 7 0 0 N I LSecured Loans Unsecured LoansN I L N I LApplication of FundsNet Fixed Assets InvestmentsN I L N I LNet Current assetsMisc. Expenditure1 0 N I LAccumulatedLosses3 6 9 04. Performance of Company (Amount in Rs. Thousand)Turnover Total ExpenditureN I L 4 0Loss Before Tax Loss After Tax4 0 4 0Earning Per Share in Rs.Dividend(-) 0 . 1 1 N I L5. Generic name of three principal products/services of Company(As per monetary terms)Item Code No. -(ITC Code)Product Description -For and on behalf of the Board of Directors(K. Prakasa Rao) (T. Sankaralingam)Director ChairmanIn terms of our report of even dateFor Sanjeev Chopra & Co.Chartered Accountants(Praveen Kumar)PartnerPlace : New DelhiDated : 25 th May 200630th Annual Report 129

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006RsCurrent Year Previous YearA. CASH FLOW FROM OPERATING ACTIVITIESNet Operating Profit (Loss) beforeworking capital changes (40,083) (24,252)Adjustment for sundry creditors 2,830 2,512Net Cash flow outgo fromoperating activities - A (37,253) (21,740)B. CASH FLOW FROM FINANCING ACTIVITIESIssue of share capital 50,000 -Net Cash flow (outgo) fromFinancing activities - B 50,000 -Net Increase (Decrease) in cash andcash equivalents (A+B) 12,747 (21,740)Cash & Cash equivalents (Opening Balance) 17,632 39,372Cash & Cash equivalents (Closing Balance) 30,379 17,632Note: Cash & Cash equivalents includes cash in hand and balance with banks.For and on behalf of Board of Directors(K. Prakasa Rao) (T. Sankaralingam)Director ChairmanIn terms of our report of even dateFor Sanjeev Chopra & Co.Chartered Accountants(Praveen Kumar)PartnerPlace : New DelhiDated : 25 th May 2006Auditor’s ReportTo the Members ofPipavav Power Development Company LimitedWe have audited the attached balance sheet of Pipavav Power DevelopmentCompany Limited, New Delhi as at 31st March 2006, the profit & loss account andalso the cash flow statement for the year ended on that date annexed thereto. Thesefinancial statements are the responsibility of the company’s management. Ourresponsibility is to express an opinion on these financial statements based on ouraudit.We conducted our audit in accordance with auditing standards generally acceptedin India. Those standards require that we plan and perform the audit to obtainreasonable assurances about whether the financial statements are free of materialmisstatement(s). An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.We report that:(i) We have obtained all the information and explanations, which to the best of ourknowledge and belief were necessary for the purposes of our audit;(ii) In our opinion, proper books of account as required by law have been kept bythe company so far as appears from our examination of those books;(iii) The balance sheet, profit & loss account and cash flow statement dealt with bythis report are in agreement with books of account;(iv) In our opinion, the balance sheet, profit & loss account and cash flow statementdealt with by this report comply with the accounting standards referred to insub-section (3C) of section 211 of the Companies Act, 1956;(v) Being a Government Company, clause (g) of sub-section (1) of section 274 ofthe Companies Act, 1956 is not applicable to the company (Notification No.GSR 829 (E) dated 21.10.2003 issued by the Department of Company Affairs);(vi) In our opinion and to the best of our information and according to theexplanations given to us, the said accounts give the information required by theCompanies Act, 1956, in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India:(a) in the case of balance sheet, of the state of affairs of the company as at 31stMarch, 2006;(b) in the case of profit & loss account, of the loss for the year ended on thatdate; and(c) in the case of cash flow statement, of the cash flows for the year ended onthat date.As required by the Companies (Auditor’s Report) Order, 2003 (the Order) issued bythe Central government of India under sub-section (4 A) of section 227 of theCompanies Act, 1956, we further report in terms of matters specified in paragraphs 4and 5 of the said Order that:(i) Since the company has not commenced any business operations and is nothaving any fixed assets/stocks, clauses (i) & (ii) of the paragraph 4 of the Orderare not applicable to the company;(ii) Since the company has neither granted nor taken any loans, secured orunsecured to/from companies, firms or other parties covered in the registermaintained under section 301 of Act, clause (iii) of the paragraph 4 of theOrder is not applicable to the company;(iii) Since there is no inventory, fixed assets and sale of goods, clause (iv) of theparagraph 4 of the Order is not applicable to the company;(iv) According to the information given to us, there are no transactions that needto be entered in the register maintained u/s 301 of the Act, therefore clause (v)of the paragraph 4 of the Order is not applicable to the company;(v) According to the information and explanations given to us, the company hasnot accepted any deposits from public during the year, therefore, clause (vi)of the paragraph 4 of the Order is not applicable to the company;(vi) Since the company is neither a listed company and/nor having a paid up capitalexceeding Rs. 50 Lakhs as at the commencement of the financial year concernednor having an average annual turnover exceeding five crore rupees for a periodof three consecutive financial years immediately preceding the financial yearconcerned, clause (vii) of the paragraph 4 of the Order is not applicable to thecompany;(vii) The Central Government has not prescribed the maintenance of cost recordsunder clause (d) of sub-section (1) of section 209 of the Companies Act, 1956for the company, therefore, clause (viii) of the paragraph 4 of the Order is notapplicable to the company;(viii) According to the information and explanations given to us, since the companyhas not commenced any business operations, various provisions with regardto payments of Provident Fund, Investor Education and Protection Fund,Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty,Excise Duty, cess and any other statutory dues are not applicable to companyfor the time being, therefore, clause (ix) of the paragraph 4 of the Order is notapplicable to the company;(ix) Since the company is in existence for a period less than five years, clause (x) ofthe paragraph 4 of the Order is not applicable to the company;(x) As per the information and explanations given to us, clause (xi) of the paragraph4 of the Order is not applicable to the company, since there is no dues payableby the company to a financial institutions or bank or debenture holders;(xi) The company has not granted loans and advances on the basis of security byway of pledge of shares, debentures and other securities, therefore, clause(xii) of the paragraph 4 of the Order is not applicable to the company;(xii) Since the company is not a chit fund/nidhi/mutual benefit fund/society, clause(xiii) of the paragraph 4 of the Order is not applicable to the company;(xiii) Since the company is not dealing or trading in shares, securities, debenturesand other investments, clause (xiv) of the paragraph 4 of the Order is notapplicable to the company;(xiv) As per the information and explanations given to us, the company has notgiven any guarantee for loans taken by others from bank or financial institutions,therefore, clause (xv) of the paragraph 4 of the Order is not applicable to thecompany;(xv) Since the company has not taken/raised any loans, clauses (xvi) & (xvii) of theparagraph 4 of the Order are not applicable to the company;(xvi) As per the information and explanations given to us, the company has notgiven any preferential allotment of shares to parties and companies covered inthe Register maintained under section 301 of the Act, therefore, clause (xviii)of the paragraph 4 of the Order is not applicable to the company;(xvii) Since the company has not issued any debentures, clause (xix) of the paragraph4 of the order is not applicable to the company;(xviii) Since the company has not raised money by public issue, clause (xx) of theparagraph 4 of the Order is not applicable to the company;(xix) As per information and explanations given to us, there are not frauds on or bythe company has been noticed or reported during the year, therefore, clause(xxi) of the paragraph 4 of the Order is not applicable to the company.For Sanjeev Chopra & CompanyChartered Accountants(Praveen Kumar)Place : New Delhi (M.S.No. 88192)Date : 25 th May, 2006Partner13030th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)ACCOUNTING POLICIES1. GRANTS-IN-AID1.1 Grants-in-aid received from the Central Government or other authorities towards capital expenditure as well as consumers’contribution to capital works are treated initially as capital reserve and subsequently adjusted as income in the sameproportion as the depreciation written off on the assets acquired out of the grants.1.2 Where the ownership of the assets acquired out of the grants vests with the government, the grants are adjusted in thecarrying cost of such assets.1.3 Grants from Government and other agencies towards revenue expenditure are recognized over the period in which therelated costs are incurred and are deducted from the related expenses.2. FIXED ASSETS2.1 Fixed Assets are shown at historical cost.2.2 Intangible assets are recorded at their cost of acquisition.2.3 Capital expenditure on assets not owned by the company is reflected as a distinct item in Capital Work-in-Progress till theperiod of completion and thereafter in the Fixed Assets.2.4 Deposits, payments/liabilities made provisionally towards compensation, rehabilitation and other expenses relatable toland in possession are treated as cost of land.2.5 In the case of commissioned assets, where final settlement of bills with contractors is yet to be effected, capitalisation isdone on provisional basis subject to necessary adjustment in the year of final settlement.2.6 Assets and systems common to more than one generating unit are capitalised on the basis of engineering estimates/assessments.3. CAPITAL WORK-IN-PROGRESS3.1 In respect of supply-cum-erection contracts, the value of supplies received at site and accepted is treated as Capital Workin-Progress.3.2 Incidental Expenditure during Construction (net) including corporate office expenses (allocated to the projects pro-rata tothe annual capital expenditure) for the year, is apportioned to Capital Work-in-Progress on the basis of accretions thereto.3.3 Deposit work/cost plus contracts are accounted for on the basis of statements of account received from the contractors.3.4 Claims for price variation/exchange rate variation in case of contracts are accounted for on acceptance.4. OIL AND GAS EXPLORATION COSTS4.1 The Company follows ‘Successful Efforts Method’ for accounting of oil and gas exploration activities.4.2 Cost of surveys and prospecting activities conducted in the search of oil and gas are expensed in the year in which theseare incurred.4.3 All acquisition costs are initially capitalized as “Exploratory Wells-in-Progress” under Capital Work-in-Progress.5. DEVELOPMENT OF COAL MINESExpenditure on exploration of new coal deposits is capitalized as “Development of coal mines” under Capital Work-in-Progresstill the mines project is brought to revenue account.6. FOREIGN CURRENCY TRANSACTIONS6.1 Foreign currency transactions are initially recorded at the rates of exchange ruling at the date of transaction.6.2 At the balance sheet date, foreign currency monetary items are reported using the closing rate. Non-monetary itemsdenominated in foreign currency are reported at the exchange rate ruling at the date of transaction.6.3 Exchange differences in respect of loans/deposits/liabilities relating to fixed assets/capital work-in-progress acquired froma country outside India are adjusted in the carrying cost of related assets.6.4 Exchange differences in respect of loans relating to fixed assets/capital work-in-progress acquired within India to theextent regarded as an adjustment to interest cost are treated as borrowing cost.6.5 Exchange differences, in respect of loans (other than regarded as borrowing cost)/deposits/liabilities relating to fixedassets/capital work-in-progress acquired within India, arising out of transactions entered prior to 01.04.2004, are adjustedin the carrying cost of related assets. Such exchange differences in respect of transactions entered after 01.04.2004 aretreated as Incidental Expenditure During Construction till the assets are ready for their intended use.30th Annual Report 131

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)6.6 Other exchange differences are recognized as income or expense in the period in which they arise.7. BORROWING COSTSBorrowing costs attributable to the fixed assets during their construction/renovation and modernisation are capitalised. Suchborrowing costs are apportioned on the average balance of capital work-in-progress for the year. Other borrowing costs arerecognised as an expense in the period in which they are incurred.8. INVESTMENTS8.1 Current investments are valued at lower of cost and fair value determined on an individual investment basis.8.2 Long term investments are carried at cost. Provision is made for diminution, other than temporary, in the value of suchinvestments.8.3 Premium paid on long term investments is amortised over the period remaining to maturity.9. INVENTORIES9.1 Inventories are valued at the lower of cost, determined on weighted average basis, and net realizable value.9.2 Dimunition in value of obsolete and unserviceable stores and spares is ascertained on review and provided for.10. PROFIT AND LOSS ACCOUNT10.1 INCOME RECOGNITION10.1.1 Sale of energy is accounted for based on tariff rates approved by the Central Electricity Regulatory Commission. Incase of power stations where the tariff rates are yet to be approved /agreed with beneficiaries, provisional rates areadopted.10.1.2 The incentives/disincentives are accounted for based on the norms notified/approved by the Central ElectricityRegulatory Commission or agreements with the beneficiaries. In cases of power stations where the same have notbeen notified/approved/agreed with beneficiaries, incentives/disincentives are accounted for on provisional basis.10.1.3 Advance against depreciation, forming part of tariff to facilitate repayment of loans, is reduced from sales andconsidered as deferred revenue to be included in sales in subsequent years.10.1.4 The surcharge on late payment/overdue sundry debtors for sale of energy is recognized when no significant uncertaintyas to measurability or collectability exists.10.1.5 Interest/surcharge recoverable on advances to suppliers as well as warranty claims/liquidated damages are not treatedas accrued due to uncertainty of realisation/acceptance and are therefore accounted for on receipt/acceptances.10.1.6.1 Income from Consultancy service is accounted for on the basis of actual progress/technical assessment of workexecuted, in line with the terms of respective consultancy contracts.10.1.6.2 Claims for reimbursement of expenditure are recognized as other income, as per the terms of Consultancy servicecontracts.10.1.7 Scrap other than steel scrap is accounted for in the accounts as and when sold.10.1.8 Insurance claims for loss of profit are accounted for in the year of acceptance. Other insurance claims are accountedfor based on certainty of realisation.10.2 EXPENDITURE10.2.1 Depreciation is charged on straight line method at the rates specified in Schedule XIV of the Companies Act, 1956except for the following assets in respect of which depreciation is charged at the rates mentioned below:a) Kutcha Roads 47.50 %b) Enabling works- residential buildings including their internal electrification 6.33 %- non-residential buildings including their internal electrification, 19.00 %water supply, sewerage & drainage works, railway sidings,aerodromes, helipads and airstrips13230th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)10.2.2 Depreciation on additions to/deductions from fixed assets during the year is charged on pro-rata basis from/up to themonth in which the asset is available for use/disposal.10.2.3 Assets costing up to Rs.5000/- are fully depreciated in the year of capitalization.10.2.4 Cost of computer software recognized as intangible assets is amortised on straight line method over a period of legalright to use or 3 years, whichever is earlier.10.2.5 Where the cost of depreciable assets has undergone a change during the year due to increase/decrease in long termliabilities on account of exchange fluctuation, price adjustment, change in duties or similar factors, the unamortisedbalance of such asset is depreciated prospectively over the residual life determined on the basis of the rate ofdepreciation.10.2.6 Machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to beirregular are capitalised and depreciated over the residual useful life of the related plant and machinery.10.2.7 Capital expenditure on assets not owned by the company is amortised over a period of 4 years from the year in whichthe first unit of project concerned comes into commercial operation and thereafter from the year in which the relevantasset becomes available for use. However, such expenditure for community development in case of stations fullyunder operation is charged off to revenue.10.2.8 Leasehold buildings are amortised over the lease period or 30 years, whichever is lower. Leasehold land and buildings,whose lease period is yet to be finalised, are amortised over a period of 30 years.10.2.9.1 Expenses on training, recruitment and ex-gratia payments under Voluntary Retirement Scheme are charged to revenuein the year of incurrence.10.2.9.2 Research and development expenses, other than fixed assets, are charged to revenue in the year of incurrence.10.2.9.3 Preliminary expenses on account of new projects incurred prior to approval of feasibility report are charged to revenuein the year of incurrence.10.2.10 Expenditure on leave travel concession to employees is recognized in the year of availment due to uncertainties inaccrual.10.2.11 Expenses common to operation and construction activities are allocated to Profit and Loss Account and IncidentalExpenditure During Construction in proportion of sales to annual capital outlay in the case of Corporate Office andsales to accretion to Capital Work-in-Progress in the case of projects.10.2.12 Net pre-commissioning income/expenditure is adjusted directly in the cost of related assets and systems.10.2.13 Prepaid expenses and prior period expenses/income of items of Rs.100,000/- and below are charged to naturalheads of accounts.10.2.14 Carpet coal is charged off to coal consumption. However, during pre-commissioning period, carpet coal is retainedin inventories and charged off to consumption in the first year of commercial operation. Windage and handling lossesof coal as per norms are included in cost of coal.11. RETIREMENT BENEFITS11.1 The liability for retirement benefits of employees in respect of Provident Fund and Gratuity, which is ascertained annually onactuarial valuation at the year end, are accrued and funded separately.11.2 The liabilities for leave encashment and post retirement medical benefits to employees are accounted for on accrual basisbased on actuarial valuation at the year end.12. FINANCE LEASES12.1 Assets taken on lease are capitalized at fair value or net present value of the minimum lease payments, whichever is lower.12.2 Depreciation on the assets taken on lease is charged at the rate applicable to similar type of fixed assets as per AccountingPolicy 10.2.1. If the leased assets are returnable to the lessor on the expiry of the lease period, depreciation is charged overits useful life or lease period, whichever is shorter.12.3 Lease payments made are apportioned between the finance charges and reduction of the outstanding liability in respect ofassets taken on lease.30th Annual Report 133

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)BALANCE SHEET AS AT 31st MARCH 2006Rs. MillionSCHEDULE 31.03.2006 31.03.2005SOURCES OF FUNDS NO.SHAREHOLDERS’ FUNDSCapital 1 82,455 82,455Reserves and surplus 2 367,551 335,621450,006 418,076Deferred Revenue on account of Advance Against Depreciation 3 4,408 3,374LOAN FUNDSSecured loans 4 59,664 46,408Unsecured loans 5 165,133 126,619224,797 173,027Deferred Tax Liability (Net) 53,479 50,791Less: Recoverable 53,439 50,75940 32TOTAL 679,251 594,509APPLICATION OF FUNDSGOODWILL ON CONSOLIDATION 756 6FIXED ASSETS 6Gross Block 463,648 433,767Less: Depreciation 230,607 208,779Net Block 233,041 224,988Capital Work-in-Progress 7 129,297 67,157Construction stores and advances 8 33,504 32,927395,842 325,072INVESTMENTS 9 185,922 206,565CURRENT ASSETS, LOANS AND ADVANCESInventories 10 23,679 18,002Sundry debtors 11 9,725 14,673Cash and bank balances 12 86,075 61,983Other current assets 13 10,229 9,802Loans and advances 14 30,597 27,028160,305 131,488LESS: CURRENT LIABILITIES AND PROVISIONSLiabilities 15 51,152 53,304Provisions 16 12,422 15,31863,574 68,622Net current assets 96,731 62,866TOTAL 679,251 594,509Contingent liabilities 17Notes on accounts 27Schedules 1 to 27 and accounting policies form integral part of accounts.For and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad)Partner Partner PartnerM No. 77076 M No 70693 M No. 24860For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Bhavna Nanda )(Sanjay Gupta)PartnerPartnerM No 95275 M No 87563Place : New DelhiDated : 31 st May 200613430th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006Rs. MillionSCHEDULE NO. Current Year Previous YearINCOMESales (Gross) 18 271,519 236,738Less:Electricity duty 1,938 1,825Sales (Net) 269,581 234,913Energy internally consumed 276 248Provisions written back 19 23 6,236Other income 20 26,244 23,728Total 296,124 265,125EXPENDITUREFuel 163,963 137,248Electricty purchased 6,189 7,303Cost of material and services 952 904Employees’ remuneration and benefits 21 9,964 9,082Generation, Administration & other expenses 22 13,148 12,497Depreciation 20,710 19,824Provisions 23 358 75Interest and finance charges 24 17,842 17,219Total 233,126 204,152Profit before Tax and Prior Period Adjustments 62,998 60,973Prior Period income/ expenditure (net) 25 2,488 (102)Profit before tax 60,510 61,075Provision for:Current tax 2,366 2,782Fringe Benefit tax 16 -Less :Tansferred to Incidental expenditure during construction 288 -Profit after current tax 58,416 58,293Provision for Deferred tax 8 7Profit of the Group after tax 58,408 58,286Balance brought forward 1,028 726Write back from Bond Redemption Reserve 16 17Write back from Foreign Project Reserve 2 2Balance available for appropriation 59,454 59,031Transfer to Bonds Redemption Reserve 2,926 2,351Transfer to Capital Reserve 29 22Transfer to General Reserve 29,039 33,022DividendInterim 16,501 9,895Proposed 6,683 10,013Tax on DividendInterim Dividend 2,314 1,292Proposed Dividend 937 1,408Balance carried to Balance Sheet 1,025 1,028Incidental expenditure during construction 26Earning Per Share (Equity shares, face value Rs.10/- each) - Basic and Diluted 7.08 7.29Total Income includes Rs.4,547 million share of jointly controlled entities.Total Expenditure includes Rs. 4,259 million share of jointly controlled entitiesFor and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad)Partner Partner PartnerM No. 77076 M No 70693 M No. 24860For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Bhavna Nanda )(Sanjay Gupta)PartnerPartnerM No 95275 M No 87563Place : New DelhiDated : 31 st May 200630th Annual Report 135

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 1Rs. millionCAPITAL 31.03.2006 31.03.2005AUTHORISED10,000,000,000 equity shares of Rs. 10/- each (Previousyear 10,000,000,000 equity shares of Rs. 10/- each) 100,000 100,000ISSUED, SUBSCRIBED AND PAID-UP8,245,464,400 equity shares of Rs. 10/- each fully paid up (Previousyear 8,245,464,400 equity shares of Rs. 10/- each fully paid up) 82,455 82,455Schedule 2RESERVES AND SURPLUSCapital ReserveAs per last Balance Sheet 1,279 1,259Add: Additions during the year 29 22Less: Adjustments during the year - 21,308 1,279Share Premium AccountAs per last Balance Sheet 22,360 26Add: Additions during the year - 22,511Less : Adjustment of share issue expenses during the year 53 17722,307 22,360Bonds Redemption ReserveAs per last Balance Sheet 6,405 4,071Add: Transfer from Profit and Loss Account 2,926 2,351Less : Write back during the year 16 179,315 6,405Foreign Project ReserveAs per last Balance Sheet 2 4Less : Write back during the year 2 2*Rs. 81,229 * 2General ReserveAs per last Balance Sheet 304,547 271,525Add: Transfer from Profit and Loss Account 29,039 33,022Add: Adjustment towards dividend 10 -333,596 304,547Surplus, balance in Profit & Loss Account 1,025 1,028Total 367,551 335,621Includes Rs.447 million share of jointly controlled entities.Schedule 3DEFERRED REVENUE - on account ofAdvance Against DepreciationAs per last Balance Sheet 3,374 1,591Add: Revenue deferred during the year 1,505 1791Less: Revenue recognised during the year 471 8Total 4,408 3,37413630th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 4Rs. millionSECURED LOANS 31.03.2006 31.03.2005Cash credit from scheduled banks (secured by the hypothecation of Stock & Book Debts of Bhilai ElectricSupply Company Pvt. Ltd.)Bonds10.00% Secured Non-Convertible Taxable Bonds of Rs.10,00,000/- each with five equal Separately TransferableRedeemable Principal Parts (STRPP) redeemable at par at the end of the 6 th year in annual instalments thereafterupto the end of 10 th year respectively from 5 th September, 2001 (Twelfth Issue - Private Placement) 19.55% Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds of Rs. 10,00,000/- eachredeemable at par in ten equal annual instalments commencing from the end of 6 th year and upto the end of15 th year respectively from 18 th April 2002 (Thirteenth Issue -Part A - Private Placement) 29.55% Secured Non-Cumulative Non-Convertible Taxable Redeemable Bonds of Rs. 10,00,000/- each with tenequal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of the 6 th yearand in annual instalments thereafter upto the end of 15 th year resepectively from 30 th April, 2002 - (ThirteenthIssue - Part B - Private Placement) 28.05% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- each withtwo equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of 4 th and5 th year respectively from 1 st August, 2002 (Fourteenth issue - Private Placement) 213.60% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 1,00,000/- eachredeemable at par in three annual instalments of 30%, 30% and 40% commencing from 28 th September 2004(Fifteenth Issue - Part C - Private Placement) 28.00% Secured Non-cumulative Non-Convertible Redeemable Taxable Bonds of Rs. 10,00,000/- eachredeemable at par on 10 th April 2018 (Sixteenth Issue -Private Placement) 38.48% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs10,00,000/- each redeemableat par on 1 st May 2023 (Seventeenth Issue - Private Placement) 35.95% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs 10,00,000/- each with fiveequal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par at the end of 6 th year andin annual instalments thereafter upto the end of 10 th year respectively from 15 th September 2003 (EighteenthIssue - Private Placement) 47.50% Secured Non-Cumulative Non-Convertible Redeemable Taxable Bonds of Rs.10,00,000/- eachredeemable at par on 12 th January, 2019 (Nineteenth Issue - Private Placement) 57.552% Secured Non Cumulative Non-Convertible Redeemable Taxable Bonds of Rs.20,00,000/- each withtwenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeemable at par semi-annuallycommencing from 23 rd September 2009 and ending on 23 rd March 2019 (Twentieth Issue - Private Placement) 67.7125% Secured Non-cumulative Non-convertible Reedemable Taxable Bonds of Rs.20,00,000/- each withtwenty equal Separately Transferable Redeemable Principal Parts (STRPP) redeembale at par semi-annuallycommencing from 2 nd August 2010 and ending on 2 nd February 2020 (Twenty first issue - Private Placement) 7Loans and Advances from BanksForeign Currency Term Loans (Guaranteed by Government of India) (Due for repayment within one yearRs.1,702 million, Previous year 1,633 million) 8Rupee Term Loans (Due for repayment within one year Rs.300 million, Previous year Rs. 247 milion) 9- 485,000 5,0007,500 7,5007,500 7,5005,000 5,00044 771,000 1,000500 5005,000 5,000500 5005,000 -10,000 -10,274 12,3191,682 1,453Other Loans and AdvancesRupee Term loans (Due for repayment within one year Rs.nil, Previous year Rs.Nil) 10Obligation under finance lease (Due for repayment within one year Rs.4 million, Previous yearRs.3 million) 11TOTALIncludes Rs. 2,337 million share of jointly controlled entities655 5009 1159,664 46,40830th Annual Report 137

Schedule 4SECURED LOANSNTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Note:1 Secured by (I) English mortgage of the office premises of National Thermal Power Corporation Ltd.at Mumbai, (II) Hypothecation of all thepresent and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya GasPower Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, KoldamHydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, TalcherSuper Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, DadriGas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Projectas first charge, ranking pari-passu with charge already created in favour of the Company’s Bankers on such moveable assets hypothecatedto them for working capital requirement and (III) Equitable Mortgage by deposit of title deeds of the immovable properties pertaining toSingrauli Super Thermal Power Station.2 Secured by (I) English mortgage of the office premises of National Thermal Power Corporation Ltd., the company at Mumbai, (II)Hypothecation of all the present and future movable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta GasPower Station, Auraiya Gas Power Station, Barh Super Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon SuperThermal Power Station, Koldam Hydel Power Project, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, TalcherThermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station,National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project andTapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge already created in favour of the Comany’s Bankerson such moveable assets hypothecated to them for working capital requirement and (III) Equitable mortagage of the immovableproperties pertaining to Singrauli Super Thermal Power Station by extension of charge already created.3 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai and (II) Equitable mortgage by deposit of title deeds ofthe immovable properties pertaining to National Capital Power Station.4 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai, (II) Hypothecation of all the present and future movable assets(excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, Barh Super Thermal PowerProject, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel Power Project, Simhadri Super ThermalPower Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super Thermal Power Project, Tanda Thermal PowerStation, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas Power Station, Feroze Gandhi Unchahar PowerStation, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as first charge, ranking pari-passu with charge alreadycreated in favour of the Company’s Bankers on such moveable assets hypothecated to them for working capital requirement and (III) Equitablemortgage of the immovable properties pertaining to National Capital Power Station by extension of charge already created.5 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai and (II) Hypothecation of all the present and futuremovable assets (excluding receivables) of Singrauli Super Thermal Power Station, Anta Gas Power Station, Auraiya Gas Power Station, BarhSuper Thermal Power Project, Farakka Super Thermal Power Station, Kahalgaon Super Thermal Power Station, Koldam Hydel PowerProject, Simhadri Super Thermal Power Project, Sipat Super Thermal Power Project, Talcher Thermal Power Station, Talcher Super ThermalPower Project, Tanda Thermal Power Station, Vindhyachal Super Thermal Power Station, National Capital Power Station, Dadri Gas PowerStation, Feroze Gandhi Unchahar Power Station, Loharinag Pala Hydro Power Project and Tapovan-Vishnugad Hydro Power Project as firstcharge, ranking pari-passu with charge already created in favour of the Company’s Bankers on such moveable assets hypothecated tothem for working capital requirement.6 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai and (II) Equitable mortgage by deposit of title deeds ofthe immovable properties pertaining to Ramagundam Super Thermal Power Station.7 Secured by (I) English mortgage of the office premises of NTPC Ltd. at Mumbai, (II) Hypothecation of all the present and future moveableassets (excluding receivables) of Barh Super Thermal Power Project as first charge, ranking pari passu with charge already created infavour of Trustee for other Series of Bonds and (III) Equitable mortgage of the immovable properties pertaining to Ramagundam SuperThermal Power Station by extension of charge already created.8 Secured by English mortgage/hypothecation of all the present and future fixed and movable assets of Rihand Super Thermal PowerStation as first charge, ranking pari-passu with charge already created, subject to however, Company’s Banker’s first charge on certainmoveable assets hypothecated to them for working capital requirement.9 Secured by (I) Equitable mortagage/hypothecation of all the present and future fixed assets and movable assets of Bhilai Captive PowerPlant II and Registered Office at New Delhi and (II) Secured by equitable mortgage/hypothecation of all the present and future fixedassets and movable assets of Bhilai Expansion Project and Secured by equitable mortgage/hypothecation/ranking paripassu of all presentand future fixed and movable assets of Durgapur and Rourkela Captive Power Plants and Corporate Office, Delhi.10 Secured by equitable mortgage/hypothecation of all the present and future assets and movable assets of Bhilai Expansion Project.11 Secured against fixed assets obtained under finance lease.13830th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 5UNSECURED LOANSRs. million31.03.2006 31.03.2005Fixed Deposits(Due for repayment within one year Rs.449 million, Previous year Rs.3,337 million) 778 4,159Bonds7.552% Secured Non-Cummulative Non-Convertible Redeemable Taxable Bonds of - 5,000Rs. 20,00,000/- each with twenty equal Separately Transferable Redeemable Principal Parts(STRPP) redeemable at par semi-anually commencing from 23 rd September, 2009 and endingon 23 rd March 2019 (Twentieth Issue - Private Placement - shown under Secured Loans incurrent year on creation of security)Foreign Currency Bonds/ Notes5.5% Eurobonds due for repayment on 10 th March 2011 8,990 8,8145.875% Fixed Rate Notes due for repayment on 2 nd March 2016 13,485 -Other Loans and AdvancesFrom Banks and Financial InstitutionsForeign Currency Term Loans (Guaranteed by Government of India) (Due for repayment 23,064 24,723within one year Rs.181 million, Previous year Nil)Other Foreign Currency Term Loans (Due for repayment within one year 10,272 7,885Rs.1,584 million, Previous year Rs.1,667 million )Rupee Term Loans (Due for repayment within one year Rs.8,963 million, 99,342 75,339Previous year Rs. 7,618 million )From OthersLoan from Government of India (Due for repayment within one year 236 551Rs. 156 million, Previous year Rs. 315 million )Others (Due for repayment within one year Rs.425 million, Previous year Rs. Nil) 8,966 148TOTAL 165,133 126,619Includes Rs. 20,487 million share of jointly controlled entities30th Annual Report 139

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 6FIXED ASSETS Rs. millionGross Block Depreciation Net BlockAs at Deductions/ As at As at For Deductions/ Upto As at As at1.04.2005 Additions Adjustments 31.03.2006 1.04.2005 the Year Adjustments 31.03.2006 31.03.2006 31.03.2005TANGIBLE ASSETSLand :(including development)Freehold 9,977 201 (364) 10,542 - - - - 10,542 9,977Leasehold 1,859 940 (117) 2,916 279 45 (9) 333 2,583 1,580Roads,bridges, culverts & helipads 3,632 152 2 3,782 610 63 1 672 3,110 3,022Building :FreeholdMain plant 16,503 416 (41) 16,960 8,020 545 (7) 8,572 8,388 8,483Others 14,703 668 (20) 15,391 3,716 399 5 4,110 11,281 10,987Leasehold 469 - - 469 108 16 - 124 345 361Temporary erection 189 15 - 204 185 13 - 198 6 4Water Supply, drainage & sewerage 4,966 33 11 4,988 1,231 251 4 1,478 3,510 3,735MGR track and signalling system 6,344 16 (25) 6,385 4,232 268 (4) 4,504 1,881 2,112Railway Siding 2,371 10 (3) 2,384 559 114 1 672 1,712 1,812Earth Dam Reservoir 1,481 - 11 1,470 269 70 - 339 1,131 1,212Plant and machinery 360,915 26,726 609 387,032 182,988 19,474 42 202,420 184,612 177,927Furniture, fixtures & other officeequipment 3,145 213 9 3,349 2,081 124 11 2,194 1,155 1,064EDP, WP machines and SATCOMequipment 2,196 194 44 2,346 1,592 144 33 1,703 643 604Vehicles including speedboats 98 4 7 95 81 3 7 77 18 17Construction equipment 951 97 21 1,027 584 52 21 615 412 367Electrical Installations 1,804 99 (40) 1,943 900 80 3 977 966 904Communication Equipments 591 36 1 626 321 20 1 340 286 270Hospital Equipments 195 8 1 202 118 7 1 124 78 77Laboratory and workshopequipments 124 7 - 131 95 3 - 98 33 29Leased assets - Vehicles 14 1 - 15 3 4 - 7 8 11Capital expenditure on assetsnot owned by the Company 1,105 77 (47) 1,229 757 198 - 955 274 348Assets held for disposal valuedat net book value or net realisablevalue whichever is less 31 - 17 14 - - - - 14 31Assets of Government 28 - - 28 - - - - 28 28Less:Grants from Government 28 - - 28 - - - - 28 28INTANGIBLE ASSETSLand- Right of Use 7 - (6) 13 - - - - 13 7Software 97 38 - 135 50 45 - 95 40 47Total 433,767 29,951 70 463,648 208,779 21,938 110 230,607 233,041 224,988Previous year 402,917 29,644 (1,206) 433,767 188,362 20,497 80 208,779 224,988 214,555Net Fixed Assets includes Rs.2,137 million share of jointly controlled entities14030th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 7CAPITAL WORK-IN-PROGRESS Rs. millionAs at Deductions & As at1.04.2005 Additions Adjustments Capitalised 31.03.2006Development of land 1,254 702 13 - 1,943Roads, bridges, culverts & helipads 153 258 (91) 152 350Piling and foundation 1,028 890 - - 1,918Buildings :Main plant 2,968 1,618 1,123 417 3,046Others 1,022 1,313 43 658 1,634Temporary erection 3 20 - 6 17Water supply, drainage and sewerage system 51 146 4 31 162Hydraulic works, Barrages, Dams, Tunnels, and Power Channel 4,005 2,471 - - 6,476MGR track and signalling system 48 1,348 17 16 1,363Railway siding 15 102 - 10 107Earth dam reservoir 136 416 - - 552Plant and machinery :On own account 306 901 394 4 809On supply-cum-erection contract 54,319 77,970 (1,238) 26,343 107,184Furniture, fixtures and other office equipment 11 84 (8) 44 59EDP/WP Machines & SATCOM equipment 14 27 3 29 9Construction Equipments - 5 - - 5Electrical installations 125 245 47 94 229Communication equipment 19 10 1 22 6Intangible assets - software 4 4 - 5 3Capital expenditure on assets not owned by the company 178 171 13 77 259Exploratory Wells-In-Progress (*Rs.55,900/-) - * - - *Development of Coal Mines - 31 - - 3165,659 88,732 321 27,908 126,162Expenditure pending allocationSurvey, investigation, consultancy and supervision charges 484 106 44 - 546Difference in exchange on foreign loans 2 175 93 - 84Expenditure towards diversion of forest land 882 145 - - 1,027Pre-commissioning expenses (net) 198 585 548 - 235Incidental expenditure during construction 55 7,020 2 - 7,073Less: Allocated to Capital Work-in-Progress - 5,701 - - 5,70167,280 91,062 1,008 27,908 129,426Less: Provision for unserviceable works 123 6 - - 129Total 67,157 91,056 1,008 27,908 129,297Previous Year 56,454 39,782 800 28,279 67,157Includes Rs.25,263 million share of jointly controlled entities30th Annual Report 141

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 8CONSTRUCTION STORES AND ADVANCESRs. million31.3.2006 31.03.2005CONSTRUCTION STORES *(At cost)Steel 3,066 3,452Cement 85 96Others 9,199 6,98212,350 10,530Less: Provision for shortages 5 512,345 10,525ADVANCES FOR CAPITAL EXPENDITURESecured 229 49Unsecured, considered goodCovered by bank guarantees 16,760 18,067Others 4,170 4,286Considered doubtful 74 6621,233 22,468Less:Provision for bad & doubtful advances 74 6621,159 22,402Total 33,504 32,927* includes material in transit, under inspection and with contractors 9,474 7,455Includes Rs.1,161 million share of jointly controlled entities14230th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 9INVESTMENTSI. LONG TERM (Trade - unless otherwise specified)Rs. millionNumber of Face 31.03.2006 31.03.2005shares/bonds/ value persecurities share/bond/Current Year/ security(Previous Year) Current Year/(Previous Year)(Rs.)A) Quoteda) Government of India Dated Securities (Non-Trade) 45500000 100 5084 5102(Includes Rs. Nil as balance of unutilised monies raised by issue of (45500000) (100)shares, previous year Rs.5,102 million)Less:- Amortisation of Premium 413 -4671 5102b) Trust Securities (#)6.60% UTI - ARS NCB Tax Free Bonds, 2009 321746 100 34 230(2171332) (100)6.75% UTI - NCB Tax Free Bonds, 2008 - - - 11(110481) (100)c) Bonds (#)7.75% IRFC Non-Taxable Bonds (Series XXVII), 2011 14 1000000 16 160(135) (1000000)8.50% Housing and Urban Development Corporation Limited (HUDCO) 18 500000 10 98Gujarat Punar Nirman Tax-Free Bonds Series 1A, 2007 (177) (500000)10.40% Power Finance Corporation Ltd. Unsecured Tax-Free Bonds 117 100000 14 1051998 (Series I), 2008 (872) (100000)4.75% Nuclear Power Corporation of India Ltd. Secured Non- - - - 7Convertible Bonds (LOA), Series XXIV, 2019 (7) (1000000)10.40% Nuclear Power Corporation of India Ltd. Tax Free Secured - - - 198Non-Convertible Bonds, Series XI A2, 2007 (1771) (100000)10.50% Nuclear Power Corporation of India Ltd. Tax-Free Secured - - - 15Redeemable Non-Convertible Bonds, Series XII (LOA), 2013 (138) (100000)9.50% National Textile Corporation Limited Tax-Free Non-Convertible 445 100000 49 377Bonds, 2006 (3436) (100000)5.00% NABARD Unsecured, Non-Convertible Tax-Free Bonds, 2639 10000 27 158Series IV G, 2008 (15597) (10000)8.25% Nuclear Power Corporation of India Ltd. Tax-Free Secured 24 100000 3 172Redeemable NCB SR-15 (LOA), 2016 (1561) (100000)8.20% Nuclear Power Corporation of India Ltd. Tax- Free Secured 1 100000 * 119Redeemable NCB SR-18 (LOA), 2012 (*Rs.1,07,296/-) (1113) (100000)5.15 % Non Priority Sector Tax-Free Housing and Urban Development 14 1000000 14 286Corporation Limited (HUDCO) Bonds Series XXXIV, 2014 (286) (1000000)Sub Total (A) 4838 7038B) Unquoteda) Bondsi) 8.50 % Tax-Free State Government Special Bonds of the Government of (##)Andhra Pradesh 12606500 1000 12,607 12,607(12606500) (1000)Assam 514640 1000 515 515(514640) (1000)Bihar 18944000 1000 18,944 14,667(14666600) (1000)Chattisgarh 4832200 1000 4,832 4,832(4832200) (1000)Gujarat 8372400 1000 8,372 8,372(8372400) (1000)30th Annual Report 143

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)ii)Rs. millionNumber of Face 31.03.2006 31.03.2005shares/bonds/ value persecurities share/bond/Current Year/ security(Previous Year) Current Year/(Previous Year)(Rs.)Haryana 10750000 1000 10,750 10,750(10750000) (1000)Himachal Pradesh 333880 1000 334 334(333880) (1000)Jammu and Kashmir 3673600 1000 3,674 3,674(3673600) (1000)Jharkhand 9601216 1000 9,601 6,223(6222716) (1000)Karnataka 1966100 1000 1,966 1,966(1966100) (1000)Kerala 10024000 1000 10,024 10,024(10024000) (1000)Madhya Pradesh 8308400 1000 8,308 8,308(8308400) (1000)Maharashtra 3814000 1000 3,814 3,814(3814000) (1000)Orissa 11028740 1000 11,029 11,029(11028740) (1000)Punjab 3462300 1000 3,462 3,462(3462300) (1000)Rajasthan 2900000 1000 2,900 2,900(2900000) (1000)Sikkim 341960 1000 342 342(341960) (1000)Tamil Nadu 4650660 1000 4,651 4,651(4650660) (1000)Uttar Pradesh 39899000 1000 39,899 39,899(39899000) (1000)Uttaranchal 3996500 1000 3,996 3,996(3996500) (1000)West Bengal 11742480 1000 11,742 11,742(11742480) (1000)Other Bonds12.50 % Secured Non-convertible Redeemable Western Electricity Supply 10300 70000 721 1,030Company (WESCO) Bonds, Series - I/2000, 2007 (10300) (100000)12.50 % Secured Non-convertible Redeemable North Eastern Electricity 16700 70000 1169 1,670Supply Company (NESCO) Bonds, Series - I/2000, 2007 (16700) (100000)12.50 % Secured Non-convertible Redeemable Southern Electricity Supply 13000 70000 910 1,300Company (SOUTHCO) Bonds, Series - I/2000, 2007 (13000) (100000)10.00 % Secured Non-Cumulative Non-Convertible Redeemable Grid 2660 75000 200 266Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003 , 03/02,2009 (2660) (100000)10.00 % Secured Non-Cumulative Non-Convertible Redeemable Grid 19536 87500 1709 1,953Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003, 04-09/02,2009 (19536) (100000)10.00 % Secured Non-Cumulative Non-Convertible Redeemable Grid 5970 100000 597 597Corporation of Orissa (GRIDCO) Power Bonds, Series-1/2003 - 10/02,2009 (5970) (100000)10.00 % Secured Non-Cumulative Non-Convertible Redeemable Grid - - - 612Corporation of Orissa (GRIDCO) Power Bonds Series-1/2003, 02/02 & (6119) (100000)11/02,20097.90 % Secured Non-Convertible Redeemable Tax free PSU Bonds 5 1000000 5 295(VIII issue) - North Eastern Electric Power Corporation Ltd. (NEEPCO) (281) (1000000)Bonds, 2010 (#)8.75 % IREDA (Tax-Free) Bonds (Series IX), 2008 (#) 5510 1000 6 46(42175) (1000)14430th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Rs. millionNumber of Face 31.03.2006 31.03.2005shares/bonds/ value persecurities share/bond/Current Year/ security(Previous Year) Current Year/(Previous Year)(Rs.)6.00 % IREDA (Tax-Free) Bonds (Series X), 2013 (#) 6612 1000 7 51(48235) (1000)5.50 % IREDA (Tax- Free) Bonds (Series XI), 2013 (#) 7348 1000 8 40(38445) (1000)b) Others 102 136Sub Total (B) 177,196 172,103Sub Total ( I ) 182,034 179,141II.CURRENT (Non - Trade - Quoted)Government of India Treasury Bills 40000000 100 3,837 27,079(277902500) (100)Government of India Dated Securities - - - 323(3177320) (100)Others (Non-Trade- Unquoted) 51 22Sub Total ( II ) 3,888 27,424Total ( I + II ) 185,922 206,565Includes Rs.153 million share of jointly controlled entities(#) Development Surcharge Fund Investments(##) Includes bonds of Rs.34,352 million (previous year Rs. 32,821 million) permittedfor transfer/trading by Reserve Bank of India. Balance can be transferred/ traded subjectto prior approval of Reserve Bank of India.30th Annual Report 145

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Rs. million31.03.2006 31.03.2005Schedule 10INVENTORIES(Valuation as per Accounting Policy No. 9)Components and spares 12,966 11,956Loose tools 42 41Coal 7,476 3,115Fuel Oil 905 831Naphtha 690 645Chemicals & consumables 769 677Others 980 874Steel Scrap 76 5923,904 18,198Less: Provision for shortages 25 24Provision for obsolete/ unserviceable items 200 172Total 23,679 18,002Inventories include stores in transit 676 694Includes Rs.267 million share of jointly controlled entitiesSchedule 11SUNDRY DEBTORSDebts outstanding over six monthsUnsecured, considered good 927 8,120Considered doubtful 8,363 8,3609,290 16,480Other debtsUnsecured, considered good 8,798 6,553Considered doubtful - -8,798 6,55318,088 23,033Less: Provision for bad & doubtful debts 8,363 8,360Total 9,725 14,673Includes Rs.654 million share of jointly controlled entities14630th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 12Rs. millionCASH & BANK BALANCES 31.03.2006 31.03.2005Cash on hand (includes cheques, drafts, stamps on hand of Rs.158 million, 162 1,597previous year Rs.1,594 million)Remittances in transit 13 50Balance with Reserve Bank of India earmarked for fixed deposits from public 308 308Balances with scheduled banks (a)Current Account (b) 1,387 2,363Term Deposit Account (c) (d) 84,146 57,605Balance with other banksCall Deposit Account 59 60West Merchant Bank Limited,London(maximum amount outstanding at any time duringthe year Rs.60 million, previous year Rs.60 million)Total 86,075 61,983Includes Rs.865 million share of jointly controlled entities(a) Includes Rs. 1,00,007/- (previous year Rs. 4,32,570) in respect of Development Surcharge.(b) Includes Rs.44 million of Unclaimed Dividend (previous year Rs. 37 million).(c) Rs.14 million (previous year Rs. 11 million) deposited as security with Government authorities/as per court orders.(d) Includes Rs.Nil as balance of unutilised monies raised by issue of shares (previous year Rs.11,316 million).Schedule 13OTHER CURRENT ASSETSInterest accured :Bonds 8,615 8,640Development surcharge investment 6 58Government of India Dated Securities 153 137Term Deposits 1,306 834Others 106 65Other Recoverables 43 68Total 10,229 9,802Includes Rs.66 million share of jointly controlled entities30th Annual Report 147

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 14Rs. millionLOANS AND ADVANCES 31.03.2006 31.03.2005LOANSEmployees (including accrued interest)Secured 4,591 4,711Unsecured, considered good 1,065 1,088Considered doubtful 1 1Government of India (for transfer of transmission systems)Unsecured, considered good 403 722Loan to State Government in settlement of dues from customersUnsecured, considered good 9,573 9,573OthersSecured 500 500Unsecured, considered good 4 206ADVANCES(recoverable in cash or kind for value to be received)Contractors & suppliers, including material issued on loanSecured 6 2Unsecured, considered good 922 556Considered doubtful 1 3Employees (including imprest)Unsecured, considered good 79 69Considered doubtful 1 1OthersUnsecured, considered good 705 881Considered doubtful 289 2118,140 18,334Claims recoverableUnsecured, considered good 965 1,012Considered doubtful 40 40Less: Provision for bad and doubtful loans, advances and claims 332 6618,813 19,320DEPOSITSDeposits with customs, port trust and others (#) 897 709Advance tax deposit & tax deducted at source 36,158 18,772Less: Provision 25,271 11,77310,887 6,999Total 30,597 27,028(#)Sales Tax deposited under protest with sales tax authorities 196 122Includes Rs.479 million share of jointly controlled entities14830th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 15Rs. millionCURRENT LIABILITIES 31.03.2006 31.03.2005Sundry CreditorsFor capital expenditureOther than Small Scale Industrial Undertakings 12,010 12,222For goods and servicesSmall Scale Industrial Undertakings 19 15Others 13,939 12,272Book Overdraft 140 -Deposits, retention money from contractors and others 11,534 9,490Less: Investments held as security 109 11337,533 33,886Advances from customers and others 9,968 14,609Investor Education and Protection Fund shall be credited byUnpaid matured Bonds (* Rs.2,000/-) * 1Interest accrued on unpaid matured deposits/bonds (*Rs.3,10,366/-) * 1Other liabilities 1,421 3,099Unclaimed dividend (#) 44 37Interest accrued but not due :Loans from Government of India 9 21Foreign currency loans/bonds 362 300Term loans in Indian currency 565 301Bonds 1,173 967Fixed deposits from public 77 82Total 51,152 53,304(#)No amount is due for payment to Investor Education and Protection FundIncludes Rs.1,571 million share of jointly controlled entities30th Annual Report 149

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 16Rs. millionPROVISIONS 31.03.2006 31.03.2005Fringe Benefit TaxAdditions during the year 217 -Less: Advance tax deposited 216 -1 -Proposed dividendAs per last balance sheet 10,013 10,940Additions during the year 6,683 10,013Amounts used during the year 10,013 10,9406,683 10,013Tax on proposed dividendAs per last balance sheet 1,408 1,402Additions during the year 937 1,408Amounts used during the year 1,408 1,402937 1,408Retirement benefitsAs per last balance sheet 3,871 3,196Additions during the year 1,097 1,096Amounts used during the year 191 4214,777 3,871Tariff adjustmentAs per last balance sheet - 286Additions during the year - -Amounts reversed during the year - 286- -OthersAs per last balance sheet 26 24Additions during the year 1 6Amounts used during the year 3 3Amounts reversed during the year - 124 26Total 12,422 15,318Includes Rs.108 million share of jointly controlled entities15030th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 17Rs. millionCONTINGENT LIABILITIES 31.03.2006 31.03.2005Claims against the Company not acknowledged as debts in respect of:Capital Works 7,157 7,084Land compensation cases 3,166 5,508Others 6,904 5,803Disputed Income Tax demand * 11,269 11Disputed Sales Tax demand 189 197Letters of Credit other than for capital expenditure 2,951 1,008Others 32 58Total 31,668 19,669*Possible reimbursement Rs.6,662 million (Previous year Nil).Includes Rs.6 million share of jointly controlled entitiesSchedule 18 Current Year Previous YearSALESEnergy Sales (including Electricity Duty) 270,932 237,082Less : Advance Against Depreciation deferred 1,505 1,791Add: Revenue recognised out of Advance Against Depreciation 471 8269,898 235,299Consultancy, project management and supervision fees 1,621 1,439(including turnkey construction projects)Total 271,519 236,738Includes Rs.4,646 million share of jointly controlled entitiesSchedule 19PROVISIONS WRITTEN BACKDoubtful debts - 5,927Doubtful claims and advances 5 5Doubtful construction advances 1 3Adjustment in Tariff - 286Shortages in construction stores 2 1Shortages in stores 9 9Obsolescence in stores 6 2Others - 3Total 23 6,236Includes Rs.Nil share of jointly controlled entities30th Annual Report 151

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 20OTHER INCOMERs. millionCurrent Year Previous YearIncome from Long Term InvestmentsTradeDividend from Joint Ventures 118 113Interest (Gross)Government Securities (8.5% tax free bonds issued by the State Government) 16,877 13,949Other Bonds (Tax deducted at source Rs.161 million, previous year Rs.195 million) 700 843Non -TradeInterest from Government of India Securities, Gross 618 156Less: Amortisation of premium 413 -205 156Income from Current Investments (Non-Trade)Interest from Government of India Securities (Gross) (Tax deducted at source Nil) 14 6Income on redemption of Government of India Securities 1,399 37Income from OthersInterest (Gross) (Tax deducted at source Rs. 1,165 million, previous Rs. 83 million )Loan to State Government in settlement of dues from customers 814 595Public Deposit Account with Government of India - 3,573Indian banks 4,839 1,097Foreign banks 3 2Employees’ loans 239 260Others 107 153Interest on Income Tax refunds 1,151 -Less: Refundable to customers 1,151 -- -Surcharge on late payment from customers 384 2,460Hire charges for equipment 14 24Profit on sale of fixed assets 41 37Miscellaneous income 1,158 1,48526,912 24,790Less:Income transferred to Incidental expenditure during construction-Schedule 26 668 1,062Total 26,244 23,728Includes Rs.82 million share of jointly controlled entitiesSchedule 21EMPLOYEES’ REMUNERATION AND BENEFITSEmployees’ remuneration and benefitsSalaries, wages, bonus, allowances & benefits 8,842 7,795Contribution to provident and other funds 1,012 879Welfare expenses 1,849 1,75811,703 10,432Less: Adjusted in fuel cost 522 205Transferred to Development of Coal Mines 12 -Transferred to incidental expenditure during construction - Schedule 26 1,205 1,145Total 9,964 9,082Includes Rs.179 million share of jointly controlled entities15230th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 22Rs. millionGENERATION, ADMINISTRATION & OTHER EXPENSESCurrent Year Previous YearPower charges 560 438Less: Recovered from contractors/employees 71 72489 366Water charges 590 477Stores consumed 213 187Rent 128 94Less: Recoveries 60 4868 46Repairs & MaintenanceBuildings 571 573Plant & MachineryPower station 7,236 6,431Construction equipment 8 207,244 6,451Others 280 285Insurance 593 774Rates and taxes 136 170Water Cess & Environment Protection Cess 257 252Training & Recruitment expenses 311 264Less: Fees for training and application 23 25288 239Communication expenses 205 178Travelling Expenses 970 847Tender expenses 85 72Less: Receipt from sale of tenders 10 1075 62Payment to Auditors 20 10Advertisement and publicity 70 58Security expenses 1,023 907Entertainment expenses 77 59Expenses for guest house 58 51Less:Recoveries 10 948 42Education expenses 113 120Brokerage & commission 7 9Donations 4 97Community development and welfare expenses 167 72Less: Grants-in-aid 7 -160 72Ash utilisation & marketing expenses 67 79Less: Sale of ash products 1 966 70Books and periodicals 31 31Professional charges and consultancy fees 250 189Legal Expenses 35 89EDP hire and other charges 70 69Printing and stationery 78 78Miscellaneous expenses 595 539Stores written off 2 3Claims/Advances written off - 2Deferred revenue expenditure written off 6 16Survey & Investigation expenses written off 31 18Loss on disposal/write-off of fixed assets 96 199Loss on maturity of current Investments 6 -14,767 13,584Less: Adjusted in cost of fuel 782 409Transferred to Development of Coal Mines 19 -Expenses transferred to incidental expenditure during construction - Schedule 26 818 678Total 13,148 12,497Stores consumption included in repairs and maintenance 4,453 3,870Includes Rs.368 million share of jointly controlled entities30th Annual Report 153

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 23PROVISIONSRs. millionCurrent Year Previous YearDoubtful debts 3 -Doubtful advances and claims 292 30Doubtful advances for construction 9 -Shortage in stores 10 7Obsolescence in stores 34 27Shortage in construction stores 3 2Unserviceable CWIP 6 4Others 1 5Total 358 75Includes Rs.1 million share of jointly controlled entitiesSchedule 24INTEREST AND FINANCE CHARGESInterest on :Bonds 3,301 2,814Loans from Government of India 54 99Foreign Currency Term Loans 1,155 1,282Rupee Term loans 6,778 5,069Public deposits 131 378Foreign currency Bonds/ Notes 694 624Others 130 159Exchange difference regarded as adjustment to interest cost (2,469) (568)9,774 9,857Finance Charges :Bonds servicing & public deposit expenses 18 13Guarantee Fee 405 443Management/Arrangers’ fee - 85Commitment charges/ Exposure premium 99 1,069Rebate under Scheme for Settlement of SEB dues 8,047 6,813Rebate to customers 4,368 3,981Reimbursement of L.C. Charges on Sales Realisation 57 13Bank Charges 13 12Bond Issue Expenses 2 5Exchange differences 123 9Eurobonds/ Foreign currency notes issue expenses 98 -Others 59 3213,289 12,47523,063 22,332Less: Interest and Finance charges capitalised by transfer to incidentalexpenditure during construction - Schedule 26 5,221 5,113Total 17,842 17,219Includes Rs 125 million share of jointly controlled entities15430th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 25PRIOR PERIOD INCOME/EXPENDITURE (NET)Rs. millionCurrent Year Previous YearINCOMESales 35 1,080Others 4 2239 1,102EXPENDITURESalary, wages, bonus, allowances & benefits 3 (8)Repairs and Maintenance 86 20Depreciation 171 305Interest 2,197 888Advertisement and publicity - 1Professional consultancy charges - 12Rates & Taxes 64 (1)Insurance (6) -Power Charges - (27)Rent 12 -Fuel - (201)Others 34 142,561 1,0032,522 (99)Less: Incidental expenditure during construction - Schedule 26 34 3Total 2,488 (102)Includes Rs.Nil share of jointly controlled entities30th Annual Report 155

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 26INCIDENTAL EXPENDITURE DURING CONSTRUCTIONRs. millionCurrent Year Previous YearA. Employees remuneration and other benefitsSalaries, wages, allowances and benefits 914 894Contribution to provident and other funds 115 87Welfare expenses 176 164Total (A) 1,205 1,145B. Other ExpensesPower 166 104Less: Recovered from contractors 13 10153 94Water Charges 3 -Rent 30 20Repairs & maintenanceBuildings 27 49Construction equipment 1 11Others 39 3167 91Insurance 29 4Rates and taxes 17 30Communication expenses 33 28Travelling expenses 146 126Tender expenses 24 27Less: Income from sale of tenders - 224 25Remuneration to Auditors 2 2Advertisement and publicity 14 12Security expenses 90 63Entertainment expenses 13 1Guest house expenses 5 3Education expenses - 1Books and periodicals 3 4Community development expenses 7 4Professional charges and consultancy fee 33 37Legal expenses 4 3EDP Hire and other charges 9 9Printing and stationery 11 10Miscellaneous expenses 125 111Total (B) 818 678Depreciation (C) 122 108Total (A+B+C) 2,145 1,93115630th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)Schedule 26INCIDENTAL EXPENDITURE DURING CONSTRUCTIONCurrent YearRs. millionPrevious YearD. Interest and Finance Charges CapitalisedInterest onBonds 865 650Foreign Currency Term Loans 67 2Rupee Term loans 3,520 2,738Foreign Currency Bonds/Notes issue expenses 396 520Finance ChargesGuarantee Fee - 1,069Commitment Charges 11 -Management fee / arrangers fees 88 85Exchange Differences 118 -Foreign Currency Bonds/Notes issue expenses 98 -Others 58 49Total (D) 5,221 5,113E. Less Other IncomeInterest fromIndian Banks 296 290Employees 21 21Government of India Securities out of unutilised moniesraised by issue of shares 532 156Less:- Amortisation of premium 368 -164 156Others 56 330Hire Charges 8 6Sale of scrap 1 -Miscellaneous income 122 259TOTAL (E) 668 1,062F. Prior Period Adjustments 34 3G. Income/Fringe Benefit Tax 288 -GRAND TOTAL (A+B+C+D-E+F+G) 7,020 5,985Includes Rs.419 million share of jointly controlled entities30th Annual Report 157

SCHEDULE 27NOTES ON ACCOUNTSNTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)1. The name of the Company has changed from “National Thermal Power Corporation Limited” to “NTPC Limited” with effect from 28 th October,2005.2. BASIS OF CONSOLIDATION2.1 The consolidated financial statements relate to NTPC Ltd. (The Company), its Subsidiaries and interest in Joint Ventures.a) Basis of Accounting:i) The financial statements of the subsidiary companies in the consolidation are drawn up to the same reporting date as of thecompany.ii) The consolidated financial statements have been prepared in accordance with Accounting Standards (AS) 21 - ‘ConsolidatedFinancial Statements’ and (AS) 27 – ‘Financial Reporting of Interest in Joint Ventures’ issued by the Institute of CharteredAccountants of India and generally accepted accounting principles.b) Principles of consolidation:The consolidated financial statements have been prepared as per the following principles:i) The financial statements of the company and its subsidiaries are combined on a line by line basis by adding together the bookvalue of like items of assets, liabilities, income and expenses, after eliminating intra-group balances, intra-group transactions andunrealised profits or losses.ii) The consolidated financial statements include the interest of the company in joint ventures, which has been accounted for usingthe proportionate consolidation method of accounting and reporting whereby the company’s share of each of assets, liabilities,income and expenses of a jointly controlled entity is considered as separate line item.iii) The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events insimilar circumstances and are presented to the extent possible, in the same manner as the company’s separate financial statementsexcept as otherwise stated in the notes to the accounts.iv) The difference between the cost of investment in the joint venture and the share of net assets at the time of acquisition of sharesin the joint venture is identified in the financial statements as goodwill or capital reserve as the case may be.2.2 The Subsidiary and Joint Venture companies considered in the financial statements are as follows:Name of the CompanySubsidiary Companies:Proportion (%) of Shareholding as on31.3.2006 31.3.2005NTPC Electric Supply Company Ltd. 100 100NTPC Hydro Ltd. 100 100Pipavav Power Development Company Ltd. 100 100NTPC Vidyut Vyapar Nigam Ltd. 100 100Joint Venture Companies:Utility Powertech Ltd. 50 50NTPC -Alstom Power Services Private Ltd. 50 50PTC India Ltd. 08 08NTPC-SAIL Power Company Private Ltd. 50 50Bhilai Electric Supply Company Private Ltd. 50 50NTPC-Tamilnadu Energy Company Ltd. 50 50Ratanagari Gas & Power Private Limited* 28.33 Nil* Shareholders’ agreement is under executionAll the above Companies are incorporated in India2.3 Joint venture operations: During the year the Company alongwith M/s Geopetrol International Inc. and M/s Canoro Resources Ltd., has participatedin bidding under the Government of India New Exploration Licensing Policy-V for exploration and production of oil and gas and has beenallotted Block AA-ONN-2003/2 in the State of Arunachal Pradesh. The Company together with other consortium members entered into a ProductionSharing Contract with the Government of India. The Company is a non-operator and has 40% share in expenses, income, assets and liabilitieswith a minimum work programme commitment of Rs.621 million (previous year Nil) as per the Production Sharing Contract.15830th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)The Company’s share of assets and liabilities as at 31 st March 2006 and expenditure for the period ended on that date in respect of the abovejoint venture operations has been accounted for based on unaudited statement of accounts submitted by the operator.Rs.MillionExpenses 2Fixed Assets (# Rs.32,117) #Other Assets (* Rs.61,180) *Current Liabilities 23. a) The conveyancing of the title to 5,665 acres of freehold land of value Rs. 2,571 million (previous year 7,157 acres, value Rs. 3,126 million)and execution of lease agreements for 6,873 acres of value Rs.849 million (previous year 6,940 acres, value Rs.733 million) in favour of theCompany are awaiting completion of legal formalities.b) Land shown in the books does not include cost of 1,148 acres (previous year 1,148 acres) of land in possession of the Company. This will beaccounted for on settlement of the price thereof by the State Government Authorities. Land includes 345 acres of value Rs. 28 million(previous year 345 acres value Rs.28 million) not in possession of the Company.c) Land includes amount of Rs. 1,206 million (previous year Rs.1,128 million) deposited with various authorities in respect of land in possessionwhich is subject to adjustment on final determination of price.d) The cost of Right of Use of land for laying pipelines amounting to Rs.13 million (previous year Rs.7 million) is included under intangible assetse) At Pipavav Power Development Company Ltd.:(i) Pursuant to Presidential directive received under Articles of Association of the Company, the Company had paid a sum of Rs. 60.50million for acquisition of 212 hectares of land in Amreli District of Gujarat to M/s Gujarat Power Corporation Ltd. (GPCL). The payment wasmade by the Company on behalf of Pipavav Power Development Company Limited and accordingly it has been shown as advance toGPCL. The land is yet to be transferred in the name of the Company.(ii) GPCL has given No Objection Certificate to Revenue Deptt. of Govt. of Gujarat for transfer of 3.68 hectare of land (out of 212 hectare) toRailways for laying new railway line between Rajula and Pipavav port. An amount of Rs.1.08 million has since been received by GPCL fromWestern Railways. Cost of 3.68 hectares of land transferred to Railways and received by GPCL shall be recovered from GPCL once the netcost of the land is determined as per the joint venture agreement to be executed between NTPC Ltd, GPCL and Gujrat Urja Vikas NigamLtd. or its associates.4. a) The Central Electricity Regulatory Commission (CERC) has notified by regulations in March 2004, the terms and conditions for determination oftariff applicable with effect from 1 st April 2004 for a period of five years. Pending final determination of tariff for the period 1 st April 2004onwards, CERC has directed by notification that on provisional basis, the annual fixed charges as applicable on 31 st March 2004 shall bebilled at target availability and variable charges based on norms of operation notified in Regulation, 2004. The amount billed for the year onthis basis is Rs. 268,301 million (previous year Rs.230,663 million). Since the amount billed is subject to adjustment with effect from 1 st April2004, pending final determination of the tariff by CERC, sales amounting to Rs. 257,179 million (previous year Rs.221,380 million) for the yearhave been provisionally recognised on the basis of principles enunciated by the CERC in Regulations, 2004.Further, Rs. 603 million pertaining to previous year has been recognised in Sales due to revision in the amounts provisionally billed based onorders of the CERC/Appellate Tribunal for Electricity.b) CERC has issued orders in December 2000 with respect to the tariff norms, principles and Availability Based Tariff (ABT). The company filedan appeal against the orders of CERC before the Delhi High Court which has since been transferred to the Appellate Tribunal for Electricity.Pending disposal of the appeal, CERC has notified by regulations, the terms and conditions for determination of tariff, effective from 1 st April,2001 to 31 st March 2004. CERC issued final tariff orders based on above regulations in respect of all the stations up to 31 st March 2004 exceptfor Rihand STPS Stage-I. During the year in respect of Rihand STPS Stage-I, an amount of Rs. 101 million has been accounted for in sales(reduction of Rs.39 million in the previous year) in line with above regulations and principles followed in the final tariff orders issued for otherstations of the company.In case of stations for which final tariff orders have been issued by the CERC for the period up to 31 st March, 2004, sales for the said periodamounting to Rs. 2,282 million (previous year Rs.2768 million) has been accounted for during the year.Based on the orders of CERC admitting the additional capital expenditure for some of the stations for the period 2001-04 and the principlesenunciated therein, Rs. 536 million (previous year Rs.474 million) has been provisionally accounted as sales during the year which is to bebilled on issuance of station specific Tariff orders by CERC.5. Depreciation has been charged at the rates specified in Schedule XIV of the Companies Act,1956 except as stated in accounting policy no.10.2.1.The Government of India in January 2006 notified the Tariff Policy under the provisions of the Electricity Act, 2003 which provides that the rates ofdepreciation notified by the CERC would be applicable for the purpose of tariffs as well as accounting. Subsequent to the notification of theTariff Policy, CERC has not notified the rates of depreciation. The Company has been advised that the Tariff Policy cannot override the provisionsof the Companies Act, 1956 and it is required to follow Schedule XIV of the Companies Act, 1956 in the absence of any specific deviationcontained in the Electricity Act, 2003 which could be said to have been saved by Sec.616 of the Companies Act, 1956. The Company has alsobeen advised that there is no such provision in the Electricity Act, 2003 either prescribing the rates of depreciation for the generating company orotherwise empowering any authority for providing depreciation rates for accounting purposes in supercession of the provisions of CompaniesAct, 1956.30th Annual Report 159

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)6. Due to uncertainty of realisation in the absence of sanction by the GOI, the company’s share of net annual profits of Badarpur Thermal PowerStation for the years 1986-87 to 2004-05 amounting to Rs.1,155 million (previous year Rs.1,174 million) being balance receivable in terms of themanagement contract with the GOI has not been recognised.7. CERC notification dated 26 th March 2001 in respect of tariff norms for the period 2001-04 directed to collect Development Surcharge frombeneficiaries. Subsequently, CERC vide its order dated 9 th November 2004 directed that the amount collected and invested in instrumentscorresponding to the amount contributed by each of the state utilities with interest shall be transferred in the name of concerned utility at thelatter’s expense. The company paid/adjusted the same as per CERC directions and the outstanding balance to be transferred as on 31 st March isas under:(Rs. Million)Sl. No. Description of the Account Schedule No. 31.03.06 31.03.051 Investment in different tax-free bonds 9 193 2,3672 Bank balance in Current Account 12 * **3 Interest accrued on Sl. No. 1 13 6 59Total 199 2,426* Rs.1,00,007/- **Rs.4,32,570/-8. Pursuant to the Government of India Scheme for Settlement of Dues of State Electricity Boards (Scheme), Governments of Jharkhand and Biharissued notifications during December 2005 for issue of 8.5% Tax-Free special bonds with effect from 1 st October 2001 for Rs.3,378 million and Rs.4,277 million respectively towards outstanding dues. Accordingly, Investment of Rs. 7,655 million, interest income on the bonds amounting toRs.2,928 million, rebate of Rs.1,198 million payable to State Electricity Boards/Successor Entities under the Scheme have been recognised,including Rs.2,278 million towards interest and Rs.892 million towards Rebate pertaining to the period upto 31 st March 2005.9. In accordance with the Uttar Pradesh Electricity Reforms (Transfer of Tanda Generation Undertaking) Scheme 2000, the assets for Rs.6,070 million(previous Year Rs.6,070 million) of Tanda Power Station of UP State Electricity Board (UPSEB) were handed over to the Company free from allencumbrances. However, the charge created by UPSEB in favour of Life Insurance Corporation of India (LIC) before the assets were taken over isstill to be vacated by LIC.10. The Company has provided Rs.3,401 million in the previous years in respect of amounts reimbursable to Government of India (GOI) in terms ofPublic notice No.38 dated 5 th November 1999 and Public Notice No.42 dated 10 th October 2002 towards cash equivalent of the relevantdeemed export benefits paid by GOI to the contractors for Talcher Super Thermal Power Project Stage-II based upon the details provided by thecontractors. During the year Rs.2,678 million was paid on receipt of procedural details from the GOI for depositing the amount. The balanceprovision has been revised to Rs.91million on the basis of additional information received from the contractors, and the difference of Rs.632million was adjusted against the related assets. No interest has been provided on the reimbursable amounts as there is no stipulation for paymentof interest in the public notices cited above.11. The Company has raised Rs.26,840 million through public issue of shares in 2004-05. The entire proceeds of the issue, net of issue expenses, wereutilised for part financing the capital expenditure on the specified projects.12. Out of Rs.109 million accounted as recoverable from the Government of India (GOI) towards its share of expenses for the initial public issue ofshares made in the previous year, the GOI has approved payment of Rs.56 million. Consequently, an amount of Rs.53 million has been adjustedagainst the Share Premium Account.13. a) Balances shown under advances, creditors and material lying with contractors/ fabricators and material issued on loan in so far as these havesince not been realised/ discharged or adjusted are subject to confirmation/reconciliation and consequential adjustment, if any.b) In the opinion of the management, the value of current assets, loans and advances on realisation in the ordinary course of business, will notbe less than the value at which these are stated in the Balance Sheet.14. Effects of change in Accounting Policies:a) Exchange differences on foreign currency loans contracted before 1 st April, 2000 for acquisition of fixed assets within India were hithertoadjusted in the carrying cost of related fixed assets. In line with the opinion received from the Institute of Chartered Accountants of Indiaduring the year, the Company has treated such exchange differences to the extent regarded as adjustment to interest cost as ‘borrowingcosts’ w.e.f. 1 st April, 2000. Consequently, during the current year there has been decrease in Interest and Finance charges by Rs.1,364million, increase in Depreciation by Rs.166 million, Prior period adjustment of Rs.1,986 million and decrease in the Profit by Rs.788million.b) In pursuance of Accounting policy no.8.3, Rs.413 million has been amortised during the year out of the premium paid on long terminvestments which was hitherto not being done. As a result profit for the year is lower by Rs.45 million and Capital Work-In-Progress ishigher by Rs.368 million.c) Expenses by way of repairs and maintenance, depreciation, employee cost and insurance charges relating to the coal handling system usedfor bringing coal to its present location and condition at the power stations have been considered for valuation of the coal during the yearwhich was hitherto not being done. The total expenses incurred under these items during the year are Rs.1,090 million. Due to inclusion ofthe above expenses, the closing stock of coal and profit for the year is more by Rs.82 million.16030th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)15. The effect of foreign exchange fluctuation during the year is as under :i) The amount of exchange differences (net) credited to the Profit & Loss Account is Rs. 2 million (previous year credit, Rs.6 million).ii) The amount of exchange differences debited to the carrying amount of fixed assets and Capital Work-in-Progress is Rs.317 million (previousyear credit, Rs.145 million).16. Revenue Grants recognised during the year in respect of expenditure incurred in the previous years amount to Rs.1 million (previous year ‘Nil’)17. Borrowing costs capitalised during the year are Rs. 5,095 million (previous year Rs.5,113 million).18. Segment information:a) Business Segments:Principal business of the Company, its subsidiaries & Joint Ventures is generation and sale of bulk power to SEBs/State utilities. Otherbusiness includes providing consultancy, project management and supervision, maintenance services, Power trading and distribution of bulkpower, oil and gas exploration and coal mining.b) Segment Revenue and Expense:Revenue directly attributable to the segments is considered as Segment Revenue. Expenses directly attributable to the segments and commonexpenses allocated on a reasonable basis are considered as Segment Expenses.c) Segment Assets and Liabilities:Segment assets include all operating assets in respective segments comprising of net fixed assets and current assets, loans and advances.Construction work-in-progress, construction stores and advances are included in unallocated corporate and other assets. Segment liabilitiesinclude operating liabilities and provisions.Rs. MillionBusiness Segments TotalGenerationOthersCurrent Year Previous Year Current Year Previous Year Current Year Previous YearRevenue :Sale of Energy/Consultancy, ProjectManagement and Supervision fees 261,626 226,009* 7,955 8,904 269,581 234,913Internal Consumption of Electricity 276 248 - - 276 248Total 261,902 226,257 7,955 8,904 269,857 235,161Segment Result 46,029 49,589# 378 358 46,407 49,947Unallocated Corporate Interest and OtherIncome 24,679 19,958Unallocated Corporate expenses, interestand finance charges 10,576 8,830Income Taxes (Net) 2,102 2,789Profit after Tax 58,408 58,286Other informationSegment assets 269,684 262,083 1,970 1,637 271,654 263,720Unallocated Corporate and other assets 471,171 399,411Total assets 742,825 663,131Segment liabilities 38,516 38,327 1,490 1,110 40,006 39,437Unallocated Corporate and other liabilities 248,365 202,244Total liabilities 288,371 241,681Depreciation 20,549 19,675 5 4 20,554 19,679Non-cash expenses other than Depreciation 358 67 - - 358 67Capital Expenditure 92,027 55,548 36 7 92,063 55,555* includes Rs.3,522 Million (previous year Rs.3,689 million) for Sales related to earlier years.# Segment result would have been Rs. 42,507 million (previous year Rs. 45,898 million) without including the Sales related to earlieryears.30th Annual Report 161

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)d) The operation of the Company, its subsidiaries and its Joint Ventures are mainly carried out within the country and therefore, geographicalsegments are inapplicable.19. Related party disclosuresa) Related parties:i) List of joint ventures:Utility Powertech Limited, NTPC-Alstom Power Services Private Ltd., PTC India Ltd.ii) Key Management Personnel:Shri C.P. Jain Superannuated on 31 st March 2006Shri T. SankaralingamShri K.K.Sinha Resigned w.e.f 27 th June 2005Shri P. Narasimharamulu Superannuated on 31 st July 2005Shri Chandan RoyShri R.S.SharmaShri R.K. Jain W.e.f 5 th May 2005Shri A.K.Singhal W.e.f 1 st Aug 2005Shri G.K.AgarwalShri S.TrivediShri K.Prakasa RaoDr. Joy I.Cheenath W.e.f. 1 st May 2005Smt Vijayalaxmi Joshi W.e.f 24 th July 2005Shri Shyam Wadherab) Transactions with the related parties at a (i) above are as follows :(Rs. Million)Particulars Current Year Previous YearContracts for Works/ Services for services received by the company• Transactions during the year 945 854• Amount recoverable from related parties 42 6• Amount payable to related parties 185 142Contracts for Works/ Services for services provided by the company• Transactions during the year 15 10• Amount recoverable from related parties 3 2Dividend Received 28 21Deputation of Employees• Transactions during the year 11 7• Amount recoverable from the related parties 2 1c) Remuneration to key management personnel is Rs. 13 million (previous year Rs. 8 million) and amount of dues outstanding to the companyas on 31 st March 2006 are Rs.1 million (previous year Rs.1 million).20. Disclosure regarding Leases:a) Finance Leases:The Company has taken on lease certain vehicles and has the option to purchase the vehicles as per terms of the lease agreements, detailsof which are as under:Rs. million31.03.2006 31.03.2005a) Outstanding balance of minimum lease payments• Not later than one year 4 4• Later than one year and not later than five years 6 9Total 10 13b) Present value of (a) above• Not later than one year 4 3• Later than one year and not later than five years 5 8Total 9 11c) Finance Charges 1 216230th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)b) Operating leases :The company’s significant leasing arrangements are in respect of operating leases of premises for residential use of employees, offices andguest houses/transit camps. These leasing arrangements are usually renewable on mutually agreed terms but are not non-cancellable.Employees’ remuneration and benefits include Rs. 189 million (previous year Rs. 163 million) towards lease payments, net of recoveries, inrespect of premises for residential use of employees. Lease payments in respect of premises for offices and guest house/transit camps areshown as Rent in Schedule 22 – Generation, Administration and other expenses. Miscellaneous income in Schedule 20 – Other Income,includes Rs.1 million (previous year Rs.1 million) towards sub-lease payments received/recoverable.21. Earnings Per Share:The elements considered for calculation of Earning Per Share (Basic and Diluted) are as under:Current Year Previous YearNet Profit after Tax used as numerator (Rs. Million) 58,408 58,286Weighted Average number of equity shares used as denominator 8,245,464,400 7,997,576,085Earning Per Share (Basic and Diluted) Rupees 7.08 7.29Face value per share (Rupees) 10/- 10/-22. i) Current Tax: (Rs.Million)31.03.2006 31.03.2005Current Tax for the year 13,599 10,472Less: Written back from earlier years 446 332Less: Recoverable 10,787 7,358Net current tax debited to Profit & Loss Account 2,366 2,782ii) Deferred Tax:31.03.06 31.03.2005Deferred Tax Liabilityi) Difference of Book depreciation and Tax depreciation 62,914 57,410ii) Others - 162,914 57,411Less: Deferred Tax Assetsi) Provisions disallowed for tax purposes 9,338 5,279ii) Disallowed u/s 43B of the Income Tax Act,1961 97 1,3419,435 6,620Deferred Tax Liability (Net) 53,479 50,791The net increase in the deferred tax liability of Rs. 2,688 million (Previous year decrease Rs. 1,658) has been debited to Profit and Loss Account.Out of the same amount Rs. 2,680 million (Previous year decrease Rs. 1665 million) is recoverable from customers.23. Research and Development expenditure charged to revenue during the year is Rs. 58 million (Previous year Rs. 42 million).24. As required by Accounting Standard (AS 28) “Impairment of Assets” issued by the Institute of Chartered Accountants of India, the company hascarried out the assessment of impairment of assets. There has been no impairment loss during the year.25. i) During the year the Company reviewed the disclosure of contingent liabilities keeping in view the provisions of AS-29 ‘Provisions, ContingentLiabilities and Contingent Assets’ issued by the Institute of Chartered Accountants of India as under:a) As on 31 st March, 2006 the estimated financial effect of claims for enhanced compensation for land pending before courts disclosed ascontingent liability is based on judgment of the management, opinion of independent experts or experience of similar transactions.Such claims hitherto were disclosed based on the amounts claimed by the land losers, except to the extent the possibility of a liabilitywas considered remote.b) As on 31 st March, 2006 the estimated financial effect of claims for interest on amounts disputed, delayed payments etc. is based on therate of interest claimed or 18%, whichever is lower, unless otherwise provided in any statute, agreement, order etc. Such claims werehitherto disclosed based on the rates demanded by the claimants.Consequently, contingent liabilities as at 31 st March, 2006 are lower by Rs.3,595 million.ii)The outflow on account of the claims against the company not acknowledged as debts, and tax disputes is contingent upon the decision ofthe courts/other authorities and may differ from the amounts disclosed as contingent liability on the basis of estimates.30th Annual Report 163

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)26. Foreign currency exposure not hedged by a derivative instrument or otherwise:Sl.No Particulars Currencies Amount Rs. Million31.03.2006 31.03.2005a) Borrowings, including interest accrued but not due thereon. USD 36,977 20,348JPY 28,574 32,303Others 896 1,390b) Sundry creditors/deposits and retention monies USD 4,729 3,450EURO 826 131Others 537 597c) Sundry debtor and Bank balances GBP 59 60USD 6 -d) Unexecuted amount of contracts remaining to be executed USD 44,044 51,185EURO 5,531 5,477Others 1,187 1,17527. The pre-commissioning expenses during the year amounting to Rs. 1,312 million (previous year Rs 1,191 million) have been included in FixedAssets/Capital work-in-progress after adjustment of pre-commissioning sales of Rs.727 million (previous year Rs. 583 million) resulting in a netpre-commissioning expenditure of Rs. 585 million (previous year Rs.608 million)28. Estimated amount of contracts remaining to be executed on capital account and not provided for is Rs. 143,379 million, (previous yearRs. 154,848 million) which includes an amount of Rs. 7,762 million (previous year Rs.6,708 million) in respect of Jointly Controlled Entities.29. For certain items, the Company and its Joint Ventures have followed different accounting policies. However, impact of the same is not material.30. Previous year figures have been regrouped/rearranged wherever necessaryFor and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad)Partner Partner PartnerM No. 77076 M No 70693 M No. 24860For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Bhavna Nanda )(Sanjay Gupta)PartnerPartnerM No 95275 M No 87563Place : New DelhiDated : 31 st May 200616430th Annual Report

NTPC Limited Consolidated Financial Statements (Formerly National Thermal Power Corporation Ltd.)CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2006Rs. MillionCurrent Year Previous YearA. CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax and Prior Period Adjustments 62998 60973Adjustment for:Depreciation 20710 19824Provisions 358 75Deferred revenue on account of Advance Against Depreciation 1034 1783Interest charges 12243 10425Guarantee Fee & other Finance charges 504 1597Interest/Income on Bonds/Investment (19195) (14991)Prior Period Adjustments (Net) (2488) 102Dividend Income (118) (113)Provisions Written Back (23) (6236)Deffered Revenue Expenditure Written off 6 16Others (Bonds issue and Servicing Expenses) 118 18Loss on maturity of current Investment 6 -13155 12500Operating Profit before Working Capital Changes 76153 73473Adjustment for:Trade and Other Receivables (2710) (2969)Inventories (4602) 99Trade Payables and Other Liabilities 635 (16169)Loans and Advances (1614) 3154Other Current Assets (436) (392)(8727) (16277)Cash generated from operations 67426 57196Direct Taxes Paid (9671) (13009)Income Tax Recoverable 5282 7358Net Cash from Operating Activities - A 63037 51545B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets (92818) (54565)Investment in Goodwill (750) -Purchase of Investments (45959) (34219)Sale of Investment 71643 -Development Surcharge Account - (1358)Interest/Income on Bonds/Investment Received 19637 25453Dividend Received 118 119Net cash used in Investing Activities - B (48129) (64570)C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from issue of Share capital (Including Premium) - 26841Proceeds from Long Term Borrowings 69402 30328Repayment of Long Term Borrowings (17632) (13579)Interest Paid (11728) (10438)Guarantee Fee & other Finance charges Paid (504) (1597)Dividend Paid (26514) (20835)Tax on Dividend (3722) (2694)Others ( Equity /Bonds issue & Servicing Expenses) (118) (304)Net Cash flow from Financing Activities - C 9184 7722Net Increase/Decrease in Cash and Cash equivalents (A+B+C+D) 24092 (5303)Cash and cash equivalents (Opening balance) * 61983 67286Cash and cash equivalents (Closing balance) * 86075 61983NOTES : Cash and Cash Equivalents consists of Cash in Hand, Balance with Banks, Public Deposit Account and interest accrued thereonPrevious year figures have been regrouped/rearranged wherever necessary.* Includes Rs.14 million deposited as security with Government Authorities as per court orders.For and on behalf of the Board of Directors( A.K.RASTOGI ) (A.K.SINGHAL) (T.SANKARALINGAM)Company Secretary Director (Finance) Chairman & Managing DirectorAs per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad)Partner Partner PartnerM No. 77076 M No 70693 M No. 24860For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Bhavna Nanda )(Sanjay Gupta)PartnerPartnerM No 95275 M No 87563Place : New DelhiDated : 31 st May 200630th Annual Report 165

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS OF NTPC LIMITED (formerly NationalThermal Power Corporation Ltd.), ITS SUBSIDIARIES AND JOINT VENTURES.1. We have audited the attached Consolidated Balance Sheet of NTPC LIMITED (formerly National Thermal Power Corporation Limited) (the Company),its Subsidiaries and Joint Ventures (NTPC Group) as at 31 st March 2006 and also the Consolidated Profit & Loss Account and the ConsolidatedCash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s Managementand have been prepared by the management on the basis of separate financial statements and other financial information regarding components.Our responsibility is to express an opinion on these financial statements based on our audit.2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by the management as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.3. We did not audit the financial statements of the Company’s following Subsidiaries and Joint Ventures which have been audited by other auditorswhose reports have been furnished to us and our opinion, insofar as it relates to the amounts included in respect of the Subsidiaries and JointVentures, is based solely on the reports of the other auditors. The details of the assets, revenues and net cash flows in respect of these Subsidiariesand Joint Ventures to the extent to which they are reflected in the consolidated financial statements are given below:(Rs.Million)Name Total Assets Total Revenues Net Cash FlowsSubsidiaries:NTPC Electric Supply Company Ltd. 325 92 100NTPC Hydro Ltd. 43 - 2Pipavav Power Development Company Ltd. 61 - -NTPC Vidyut Vyapar Nigam Ltd. 581 4,442 88Joint Ventures:Utility Powertech Ltd. 383 739 19NTPC-Alstom Power Services Pvt. Ltd. 409 364 (7)PTC India Ltd. 313 2,496 39NTPC-SAIL Power Company Pvt. Ltd. 2,066 658 (67)Bhilai Electric Supply Company Pvt. Ltd. 2,881 288 (349)NTPC-Tamilnadu Energy Company Ltd. 2 - -Ratnagiri Gas & Power Pvt. Ltd.* 24,991 2 336*Shareholders Agreement is under execution.4. We report that the consolidated financial statements have been prepared by the Company’s Management in accordance with the requirements ofAccounting Standard (AS) 21, ‘Consolidated Financial Statements’ and Accounting Standard (AS) 27, ‘Financial Reporting of Interests in JointVentures’ issued by the Institute of Chartered Accountants of India.5. We draw attention to:(i) Note no. 4 of Schedule 27 to the financial statements in respect of accounting of sales on provisional basis pending final determination oftariff by Central Electricity Regulatory Commission.(ii) Note no. 6 of Schedule 27 to the financial statements in respect of share of net annual profit of Badarpur Thermal Power Station amounting toRs.1,155 million relating to earlier years not recognized as revenue.6. Further to our comments in para 5 above, we report that on the basis of our audit, the information and explanations given to us and on theconsideration of the separate audit reports on individual audited financial statements of the NTPC group, we are of the opinion that the saidconsolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India,i) in case of Consolidated Balance Sheet, of the state of affairs of the NTPC Group as at 31 st March, 2006;ii) in case of Consolidated Profit & Loss Account, of the profit for the year ended on that date; andiii) in case of Consolidated Cash Flow Statement, of the cash flows for the year ended on that date.Place : New DelhiDated : 31 st May 2006As per our report of even dateFor Kalani & Co. For Amit Ray & Co. For Umamaheswara Rao & Co.Chartered Accountants Chartered Accountants Chartered Accountants(Vikas Gupta) (Pradeep Mukherjee) (G. Sivaramakrishna Prasad)Partner Partner PartnerM No. 77076 M No 70693 M No. 24860For S.N. Nanda & Co.For T.R. Chadha & Co.Chartered AccountantsChartered Accountants(Bhavna Nanda )(Sanjay Gupta)PartnerPartnerM No 95275 M No 8756316630th Annual Report

NTPC Limited(Formerly National Thermal Power Corporation Limited)Regd. Office : NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Lodi Road, New Delhi-110003ATTENDANCE SLIP30 th Annual General Meeting to be held on Tuesday, September 19, 2006 at 11.30 a.m.NAME OF THE ATTENDING MEMEBR(IN BLOCK LETTERS)*Folio. No.DP ID No.Client ID No.No. of shares HeldNAME OF PROXY(IN BLOCK LETTERS, TO BE FILLEDIN IF THE PROXY ATTENDS INSTEAD OF THE MEMBER)I, hereby record my presence at the 30 th Annual General Meeting of the Company at NDMC Indoor Stadium, Talkatora Garden, New Delhi – 110 001,on Tuesday, September 19, 2006.Signature of Member/Proxy*Applicable in case of shares held in Physical Form.NTPC Limited(Formerly National Thermal Power Corporation Limited)Regd. Office : NTPC Bhawan, SCOPE Complex, 7, Institutional Area, Lodi Road, New Delhi-110003DP ID :Client ID :No. of SharesFORM OF PROXYRegd. Folio No.:(in case of shares held in Physical Form)I/We...................…………………………………………………………………………......................................................……………...of……………………….................................…………………………………………………………………...................................................in the District of........................................................................................................................................ being a member/ members of the abovenamed Company, hereby appoint …………………..............................……………… of ….....................………… in the District of .................................................................................................or failing him/her..................................................................................................................of……….................................................................……………………………………….......……………………................................................................of……....................................................................………………………………………………………………...........................in the District of...................... ................................. as my/our proxy to vote for me/us on my/our behalf at the 30 th Annual General Meeting of theCompany to be held on Tuesday, September 19, 2006 and at any adjournments thereof.Affix OneSigned this ..........................................................day of ................................ 2006.RupeeRevenueStampSignatureThis form is to be used in favour of resolution(s) no………….and against resolution(s) no………... Unless otherwise instructed, the Proxy willact as he thinks fit.Notes:a) The form should be signed across the stamp as per specimen signature registered with the Company.b) The form should be deposited at the Registered Office of the Company not less than forty-eight hours before the time for holding the Meeting.30th Annual Report 167