Neyveli Lignite Corporation Ltd

To

The Members,

Neyveli Lignite Corporation Limited

Your Directors have great pleasure in presenting the 54^th Annual Report ofyour Company together with theaudited accounts for the year ended 31^st March,2010.

Performance Highlights

Physical Performance

During the year2009-10 your Company has achieved all around growth since inception interms of overburden removal, lignite production, generation and export of power as under:

• Overburden removal of 1594.25 Lakh Cubic Metre (LM³) from all Minesput together.

• Total lignite production of 223.38 Lakh Tonnes (LT) from all Mines.

• Aggregate power generation of 17656.04 Million Units (MU)from all PowerStations.

• Export of power from all Power Stations put together at 14828.22 MU.

• Overburden (OB) removal of 782.63 LM³ from Mine-ll.

• Power generation fromTPS-ll at 10559.69 MU.

Financial Performance

Your Company during the year under review registered a sales turnover of Rs.4121.03crore and profit after tax of Rs.1247.46 crore, which are the highest since inception.

Segment-wise Performance Mines

During the year 2009-10, the total Overburden removal was 1594.25 LM³compared to 1463.44 LM³ achieved in the year 2008-09, registering a growth of8.94%. The total Lignite production during the year 2009-10 was 223.38 LT as against213.07 LT achieved in the year 2008-09, recording a growth of 4.84%.

The detailed Mine-wise performance for the year 2009-10 compared to 2008-09 is asbelow:

During the year under review Mine-I had exceeded the last year's performance in removalof OB and lignite production. OB removal in Mine-IA during the year 2009-10 was marginallyhigher compared to the year2008-09 while the lignite production was less compared to theprevious year.

Members may be aware that Mine-IA, since commissioning, was working beyond theinstalled capacity mainly to supplement the lignite requirement of Thermal PowerStation-ll as the production of lignite in Mine-ll got affected during the earlier yearsdue to non-availability of required land for mining. As the availability of land forMine-ll has since improved and the production of lignite in Mine-ll also increased andconsequently the production from Mine-IA was maintained at optimum level during thefinancial year under review.

As seen from the above table, the performance of Mine-ll during the year under reviewwas remarkable. The OB removal in Mine-ll during theyear2009-10 was the highestforanyyearsince inception, recording a growth of 18.65% compared to the previous year ended 31^stMarch, 2009, while the lignite production recorded a growth of 14.64% during the yearunder review compared to the previous year2008-09.

Lignite production from Barsingsar Mine in Rajasthan commenced in November 2009 andattained the rated capacity on 31^st January, 2010. Both OB removal and ligniteproduction were less during the year under review as the same were regulated due to slowprogress of the work in the linked power plant under implementation and consequent lowerrequirement of lignite.

Power

During the year 2009-10, the total power generation (Gross) from all power plants ofthe Company was 17656.04 MU compared to 15767.98 MU recorded during the year 2008-09,registering a growth of 11.97%. The power export during the year under review was 14828.22MU as against 13204.05 MU made during the year 2008- 09, recording a growth of 12.30%. Thetotal power generation and export during the year 2009- 10 were the highest sinceinception.

The detailed Plant-wise performance for the year2009-10 compared to 2008-09 is asunder:

Thermal Power Station-I is one of the oldest power plants in the country, having servedfor more than 40 years and almost nearing its extended life. It was a remarkableperformance from this plant, to register a growth of 15.01% in the generation during theyear 2009-10 compared to the generation of 2008-09. Considering the age of this plant, itwas earlier decided to taper down the generation between the years 2009 and 2014 in phasesdepending upon the condition of the Plant. However, TNEB as well as the Government ofTamil Nadu requested your Company directly and also through Ministry of Coal, to defer theretirement of Units for some more time in view of the prevailing power deficit situationin the State. In view of the above it has been decided to defer the programme of taperingdown generation for the time being and firm up the same at a later date depending upon theperformance of Units and the Residual Life Assessment (RLA) study results. The RLA studyhas been completed for two units and the study has indicated that the operation of thesaid units could be continued for a further period of about 5 years with some minorreplacements. In respect of the balance seven units, the RLA study will be carried out foreach unit on completion of the extended life period of 15 years.

During the year 2009-10, the power generation from TPS-I Expn., was less compared tothe previous year2008-09 by 4.69% due to extended maintenance works carried out in boththe units. The power generation from TPS-II during the year 2009-10 was the highest sinceinception, registering a growth of 16.50% compared to previous year 2008-09. This plantperformed exceedingly well compared to previous years on account of availability ofrequired quantum of lignite on sustained basis from Mine-I I and the transportation ofsurplus lignite from other Mines. The Unit-I of Barsingsar TPS generated in-firm power of2.48 MU since its synchronisation in October 2009.

Financial Performance

During the year under review, your Company recorded a sales turnover of Rs.4121.03crore compared to Rs.3354.91 crore achieved in the year 2008-09. The profit before tax forthe year under review was Rs.1604.86 crore (previous year Rs.1046.01crore) while theprofit after tax was Rs. 1247.46 crore (previous year Rs. 821.09 crore).

The increase in the sales turnover and the profit for the year ended 31^stMarch, 2010 compared to previous year ended 31^st March, 2009 was mainly onaccount of higher generation and export of power during the year 2009-10 and also due toadoption of higher tariff rate as per the tariff petitions filed before CERC.

The details of profit earned for the financial year ended 31^st March, 2010and appropriation of the same in comparison with the previous year ended 31^stMarch, 2009 are as under:

Dividend

Your Company paid an Interim Dividend @10% for the financial year 2009-10 during themonth of March 2010. The Board of Directors of your Company have recommended a finaldividend @ 10% (Re.1/- per share) for the year 2009-10. With this the total dividend forthe financial year 2009-10 aggregates to 20% (previous year 20%). The total outgo onaccount of the dividend for the year 2009-10 including distribution tax will be Rs. 391.91crore, which works out to 31.42% on Profit After Tax(PAT).

Status of land acquisition

As stated earlier, the availability of land for mining especially for Mine-ll hasimproved to a great extent during the year under review. During the year 320 hectares ofland have been taken possession and further requisition for 144.04 hectares of land hasbeen placed before the District Administration. Your Company is actively pursuing theissue with the State Government, the District Administration and statutory authoritiesconcerned for continued availability of land for mining. Based on the settlement reachedbetween your Company and the land owners for payment of enhanced compensation for theacquisition, your Company during the year 2009-10 paid enhanced compensation of aboutRs.11 crore through Lok Adalat.

Sanctioned Projects Expansion Programme

The Government of India had sanctioned implementation of Mine-ll Expn., linked toTPS-llExpn., project at Neyveli at an aggregate revised capital cost of Rs.4749.50 crore. YourCompany is also implementing a Mine-cum-Power Project at Barsingsar in Rajasthan at anaggregate revised capital cost of Rs.1880.69 crore.

The status of implementation of the above projects is as under:

Mine-ll Expansion (10.5 MTPA to 15.0 MTPA) .

Your Company has successfully completed the implementation of this project and thisMine attained rated production capacity during March 2010. Mine-ll Expansion was formallydedicated to the Nation on 5^th April, 2010 by Shri. Sriprakash Jaiswal, theHon'ble Union Minister of State (Independent Charge) for Coal, Statistics and ProgrammeImplementation. Overburden removal from Mine-ll Expansion during 2009-10 was 226.55 LM³against the target of 190.00 LM³. The cumulative expenditure incurred upto 31^stMarch, 2010 was Rs. 1808.34 crore.

Thermal Power Station-ll Expansion (2x250 MW)

During the year 2009-10 hydro test of the Boiler for Unit-I and construction of Chimneyand Cooling Tower-ll were completed. 400 KV switch yard was also commissioned during theyear and the Generator Stator has been lifted and positioned. Erection of Water Treatmentand Effluent Treatment Plants and Lignite Handling System are nearing completion. Erectionof Boilers and Turbo-generators, Circulating Water System & Fire Protection System,Power Transformers, Ash Handling System and other miscellaneous works are in progress.

The anticipated commissioning of Unit-I and Unit-ll as per the present progress ofimplementation is December 2010 and June 2011 respectively. Members may be aware thatM/s.BHEL the Main Plant Package contractor, delayed in the initial stages the starting ofthe civil works and consequent erection works. The erection works are also progressing ata slow pace. Continuous review is being done at various levels with the top management ofBHEL besides apprising Ministry of Coal, Ministry of Power and Ministry of HeavyIndustries and also CEAfor expediting the erection activities by BHEL and for earlycommissioning of the project. The cumulative expenditure incurred upto 31^stMarch, 2010 was Rs. 1948.27 crore.

Barsingsar Mine Project in Rajasthan (2.1 MTPA)

Overburden removal during the year 2009-10 was 101.24 LM³. Ligniteexcavation commenced on 23^rd November, 2009 and production attained the ratedcapacity on 31^st January, 2010.

The Lignite production in this Mine during the year 2009-10 was 0.25 LT against thetarget of 5.00 LT. As stated earlier production during the year under review was regulatedbased on the slow progress of the power plant under implementation. The cumulativeexpenditure incurred upto 31^st March,2010 was Rs.214.51 crore.

Barsingsar Thermal Power Station (2x 125 MW)

The Unit-I (125 MW) of the Barsingsar Thermal Power Project was synchronised duringOctober 2009 and was formally dedicated to the Nation on 5^th June, 2010 byShri. Sriprakash Jaiswal, the Hon'ble Union Minister of State (Independent Charge) forCoal, Statistics and Programme Implementation. The Unit-ll (125MW) of the above projecthas also been synchronised on 5^th June, 2010 after completion of major erectionactivities and the commissioning of this Unit is expected by September 2010. Projectexecution got delayed due to initial delay in supply and erection activities of Main PlantPackage, Switchyard and Power transformer by M/s. BHEL. The cumulative expenditureincurred upto 31^st March, 2010 was Rs.1407.82 crore.

Joint Venture Project

Coal based Thermal Power Plant at Tuticorin (2x500 MW)

The Joint Venture Project between your Company and the Tamil Nadu Electricity Board(TNEB) viz., coal based thermal power plant of 2x500 MW capacity at Tuticorin in TamilNadu, is being implemented by your Company at a GOI sanctioned cost of Rs.4909.54 crorethrough NLC Tamil Nadu Power Limited, the Subsidiary Company. The equity participation inthe JV Company by NLC and TNEB is in the ratio of 89:11 and share of equity contributionof around Rs.1311 crore to be made by your Company will be met through internal accrualsover a period of time. The JV Company had earlier tied up with M/s.Rural ElectrificationCorporation Limited (REC) for its entire debt requirement of Rs.3437 crore. With a view toreduce the cost of debt component of the project, the JV Company has decided to replacethe REC loan partially with a rupee term loan of Rs.2500 crore from Bank of Baroda andBank of India consortium and this exercise would reduce the overall cost of the projectand would also reduce the power tariff for the end consumers. The balance debt requirementhas been proposed to be partially tied up through External Commercial Borrowings andthrough other forms of borrowing viz., issue of bonds etc.

In respect of Main Plant Package of Steam Generator, Turbo Generator and ElectrostaticPrecipitator, the contract has been awarded to M/s. BHEL during the month of January 2009.M/s. BHEL has since commenced civil works for Boiler and ESP foundations and the suppliesare also in progress. Other major contracts for this project viz., Coal Handling package,Circulating Water System package, Bi-flue Chimney package, Transformer package and NaturalDraft Cooling Towers package have also been awarded. In respect of other packages award ofwork is under finalisation.

As regards coal handling for the project, it is proposed to have a dedicated coal berthfor which Tuticorin Port Trust has been entrusted with the construction and the work isunder progress. The cumulative expenditure incurred for this project upto 31^stMarch, 2010 was Rs.725 crore.

As per the sanction of GOI, Unit-I of the project is to be commissioned by March 2012and Unit-ll by August 2012. Power purchase agreements have been signed with TNEB, ESCOMsof Karnataka State, Puducherry Electricity Department and Kerala State Electricity Board.

Wind Power Project

Your Company, as part of diversification programme to sustain and improve upon thegrowth rate, has decided to venture into green energy business by setting up a wind basedpower project, with an initial capacity of 50 MWin Tirunelveli District in the State ofTamil Nadu at an estimated cost of Rs.312.50 crore with a time schedule of 10 months fromthe zero date i.e. the date of placement of order. However, one machine will be installedwithin four months from the zero date. Feasibility Report has been prepared by ITCOTConsultancy Services and the Technical Consultant for this project is Centre for WindEnergy Technology (CWET), a R&D department under the Ministry of New & RenewableEnergy Resources. Tender has been floated for procuring Wind Turbine Generator and theevaluation of the bids received is in process. Wind energy being a green energy sourcethis project will be entitled to get carbon credit for the power generated which wouldmake the project economically viable.

Project Funding

The projected debt funding requirement for the projects under implementation viz.,Mine-ll Expn., TPS-II Expn. and Barsingsar Mine-cum-Power Project is around Rs 4641 crore.Your Company has already tied up rupee term loan for Rs.2500 crore, through a consortiumof domestic banks with Canara Bank as the consortium leader and EURO 50 million foreigncurrency loan under External Commercial Borrowing (ECB) route, syndicated by Calyon Bankpresently renamed as Credit Agricole Corporate & Investment Bank to fund the aboveprojects. Your Company has also issued Secured Redeemable Non-convertible Bonds for anaggregate amount of Rs.600 crore through private placement to meet part of the debtrequirement for the above projects. The balance fund requirement of Rs.1250 crore has beentied up in the form of another rupee term loan with a consortium of domestic banks withCanara Bank as the consortium leader.

Status of Advance Action Proposals (AAP) sanctioned by Government of India (GOI)Thermal Power Project in Neyveli

Your Company has proposed to set up a new power plant of 1000 MW capacity as areplacement to the existing Thermal Power Station-I at Neyveli. Ministry of Coal (MOC) hadaccorded sanction for Advance Action proposals for Rs.17.85 crore that includedaugmentation studies for the existing mines. The proposal for setting up the above ThermalPower Project (2x500 MW) at an estimated cost of Rs.5596 crore has been submitted to theGovernment in October 2009 for obtaining sanction. Necessary study for augmentation oflignite from Mine-I and Mine-IA to meet the additional requirement of lignite for thepower project is in process. EIA/EMP Report has been submitted to Ministry of Environmentand Forests in January 2010 for the issue of environmental clearance and the same has beenconsidered by the Expert Appraisal Committee. NOC from Airport Authority has beenreceived. All the constituent States of Southern Region have expressed their willingnessto buy powerfrom this project and signing of Power Purchase Agreement (PPA) is in process.Ministry of Power has been addressed to decide the power allocation to the beneficiaryStates and also to accord Mega Power Project status for this project so as to availcertain duty concessions.

Bithnok Thermal Power Project with linked Mine

It is proposed to set up a Thermal Power Plant of 250 MW capacity with linked mine of2.25 MTPA at Bithnok in Bikaner District in the State of Rajasthan. Ministry of Coal (MOC)has approved the Advance Action Proposal (AAP) at an estimated cost of Rs.10.45 crore forcarrying out certain pre-project sanction activities for Mine and Power Projects. TheProject proposal for setting up of 2.25 MTPA Mine at an estimated cost of Rs. 365.71crore, with outsourcing option for both overburden and lignite removal and Thermal PowerProject of 250 MW at an estimated cost of Rs.1670.54 crore, has been submitted to theGovernment during October 2009 for obtaining sanction. Public consultation process hasbeen completed for both Mine and Power Projects. Expert Appraisal Committee of Ministry ofEnvironment and Forest has considered the mining project. State Environmental Committeehas issued the environmental clearance for the power project. NOC from Airport Authorityhas been received. Notification has been issued by Government of Rajasthan (GoR) foracquisition of required land for the project. Mining Plan has been approved by MOC andobtaining mining lease from GoR is in process.

Barsingsar Extension Power Project and Hadla & Palana Lignite Mine

Your Company also proposes to set up a Mine (2.5 MTPA) linking both Hadla & Palanalignite Blocks with the 250 MW power plant in Bikaner District of Rajasthan, as anextension of the on-going Barsingsar Power Project and with a view to utilise the lignitedeposits in Hadla and Palana lignite blocks. Ministry of Coal has accorded sanction forthe Advance Action Proposal (AAP) at an estimated cost of Rs.10.85 crore for carrying outcertain pre-project sanction activities. Preparation of Feasibility Report (FR) for HadlaMine and Thermal Power Project have been completed while the preparation of FR for PalanaBlock is in process. As per the Feasibility Reports the estimated cost of Hadla Mineproject with outsourcing option for both overburden and lignite removal is Rs.350.13 crorewhile the estimated cost of the power project is Rs.1691.65 crore. Preparation of EIA/EMPreport for Mine and Power project is in advanced stage.

Jayamkondam Lignite based Mine-cum-Thermal Power Project

Your Company has proposed to set up a Lignite Mine(13.5 MTPA)-cum-Power (2x800 MW)project at Jayamkondam in the State of Tamil Nadu, at an aggregate estimated cost ofRs.18184 crore. Ministry of Coal has accorded sanction of Rs.11.90 crore for the AdvanceAction Proposal (AAP) for taking up certain preliminary works related to this project.Administrative sanction of State Government for acquisition of the required extent of landhas been sought and also for the mining lease and allocation of water from Kollidam river.Preparation of Feasibility Reports and the composite environmental report covering mineand power projects are under finalisation. Geological exploration, soil investigation,contour survey and pump test have been completed. Socio Impact Assessment Study as per therequirement of National Rehabilitation and Resettlement Plan (NRRP)- 2007 Notification isunder progress. Approval forthe mine plan has been received.

Gujarat Power Project with linked Lignite Mine

Your Company has proposed to set up a Mine (8.0 MTPA)-cum- Power (1000 MW) Project inthe State of Gujarat, at an aggregate estimated cost of Rs.6400 crore as a Joint Venturewith Gujarat

Power Corporation Limited. Ministry of Coal has sanctioned Rs 6.20 crore for theAdvance Action Proposal (AAP) for taking up certain preliminary activities. The request ofGovernment of Gujarat for allocation of higher share of power has been referred toMinistry of Power. However, GoG has evinced interest to develop the lignite block on itsown to generate power for the State and the issue has been referred to Ministry of Coal.

Coal based Thermal Power Plant at Orissa

A mega coal based Thermal Power Plant of capacity (4x500 MW) has been proposed to beset up in the State of Orissa at an estimated cost of Rs.10000 crore for which Ministry ofCoal has accorded sanction for the Advance Action Proposal at an estimated cost of Rs.18.65 crore for carrying out certain pre-project sanction activities. Allocation of landin Rengali Taluk has been requested with the State Government for setting up the powerplant. Participation of Mahanadi Coalfields Limited (MCL) in the above project, as a jointventure partner is also being contemplated.

Mine-Ill and Thermal Power Station-Ill at Neyveli

Your Company is updating the feasibility report prepared earlier to analyse thetechno-economical viability of Mine-Ill project of capacity 8.0 MTPA. On completion of thesame, the feasibility report for the Thermal Power Station-Ill of capacity of 1000 MW willbe finalised.

New initiatives for Power Generation and Mining Power Project in Uttar Pradesh

Your Company has proposed to enter into a Joint Venture Agreement with Uttar PradeshRajya Vidyut Utpadan Nigam Limited (UPRVUNL) for setting up a coal based power plant witha capacity of 2000 MW at an estimated cost of Rs.10000 crore, in the State of UttarPradesh. Action has been initiated to sign an MoU with UPRVUNL and also to prepare FR& EIA/EMP reports. MOC has been requested to accord sanction for Advance ActionProposal for the proposed project to take up pre-project activities. A suitable site inKanpur Nagar district has been identified for setting up the power plant. Topographicalsurvey of the site is proposed to be carried out by IIT, Kanpur. Government of UttarPradesh has been requested to provide basic infrastructural facilities like land, waterfrom Yamuna river, supply of power and water for construction etc.

Joint Venture project in Orissa

A Joint Venture Company among Mahanadi Coalfields Limited (MCL), Hindalco and yourCompany with an equity participation of 70:15:15 respectively has been established formining coal from Talabira II and III coal blocks. MCL, being the lead partner is carryingout all pre-project activities to establish a Mine of 20.0 MTPA capacity. Mine plan hasbeen approved and land acquisition is in process. The share of coal mined from this blockwill be shared in the same ratio as equity and will be utilised by your Company for powergeneration.

Devangudi Mine Project

Your Company has proposed to explore the possibility of developing the Devangudi mineproject of capacity of 1.7 MTPA located in the Neyveli lignite field.

Ultra Mega Power Projects

To meet the growing demand for energy, Government of India (GOI) has planned fordeveloping large size power projects called Ultra Mega Power Projects (UMPP), with acapacity of 4000 MW each in various States. Your Company is exploring the feasibility oftaking part in UMPP at Cheyyur in the State of Tamil Nadu, as and when notified by GOI.

Energy from other sources

Your Company as a part of diversification has also proposed to set up a 25 MW SolarPower Project. Other sources of energy viz., hydeland nuclear power projects will also beconsidered by your Company depending upon their viability.

Development of Coal Blocks

Earlier your Company had planned to acquire coal blocks abroad by forming NLC Videsh, aSubsidiary Company, to meet its coal requirements for the new coal based power projects.MOC has advised your Company to consider having an arrangement with Coal India Limited(CIL) in the efforts towards acquisition of coal assets abroad and also to consider toassociate CIL as a JV Partner in this regard.

Your Company also intends to take up development of coal blocks allotted to StateGovernment(s) and/or Private Companies either individually or jointly with StateGovernments and/or private Companies as a Public/Private Partnership project.

Power Project in Madhya Pradesh

Members may be aware that your Company had earlier planned to set up a power plant witha capacity of 1000 MW in the State of Madhya Pradesh, as a joint venture with NorthernCoal Fields Limited, with 50:50 equity participation. Preliminary study indicated that thelimited source of coal from Block-B might not be adequate for setting up a pithead powerplant and in view of the same, further activities in connection with this project are notbeing taken up for the present.

Power Tariff

In accordance with the Tariff Regulations 2004, which allows tariff revision twiceduring the tariff period (2004-09), the Central Electricity Regulatory Commission (CERC)has issued final tariff order during the year, revising the annual fixed charges on theadditional capitalisation for the period 2007-09 in respect of all the power stations ofthe Company.

During the last year, the Terms and Conditions of Tariff Regulations for the period2009-14 was notified by CERC. The objective behind the new regulation is to encouragehigher performance for which adequate incentives have been provided. While the operatingnorms have been made more stringent, the return on equity has been increased. Tariffpetitions, as per the above Tariff Regulations 2009 in respect of all the existing powerstations and the Barsingsar TPS for the period 2009-14 have been filed with the CERC andthe hearing is in process.

Human Resource Development

Your Company believes that its growth is engineered by the growth of its people and thequality of its human resources. The total manpower of your company as on 31.03.2010 was18,356 including 4,051 executives. Your Company continued its efforts in developing thehuman resources into a rebounding workforce so as to successfully meet challenges andachieve corporate excellence. To infuse young blood, 57 Graduate Executive Trainees wereselected during the year through campus interviews- an attempt made for the first time inthe history of your Company.

Training programmes were organised both in-house and through premier institutes in thecountry for more than 8000 nos. of employees. Under the "Workers EducationScheme" five programmes were conducted during the year under review.

Industrial Relation

Industrial relation scenario was generally peaceful and cordial during the year2009-10. Your Company has a regular system of holding bi-partite meetings with therecognised unions regarding the issues of common interest of all employees. The new schemeof payment of Quarterly Plant Performance Reward (QPPR) & Productivity LinkedIncentive (PLI) were implemented w.e.f. 01.01.2007. Executive pay revision with effectfrom 01.01.2007 has been implemented and Performance Related Pay for the year 2007-08 waspaid during the year under review to executives, following the Department of PublicEnterprises (DPE) Guidelines. MoU has been signed with the recognised unions forimplementing wage revision for workmen and non-executives with effect from 01.01.2007.

Reservation of Posts

Your Company scrupulously follows the directives of the Government of India relating toreservation and welfare of the reserved categories such as Scheduled Caste / ScheduledTribes, OBCs, Physically challenged, Ex-servicemen etc.

Groupwise Men-in-Position and strength of SC/STas on 31.03.2010 are as under:

Implementation of Official Language Policy

In order to fulfill the statutory provisions under the Official Language Act and alsoto follow the guidelines of Government of India with regard to implementation of officiallanguage, your Company has taken many proactive steps to ensure use of Hindi in officialcommunication, besides offering incentives to employees for passing out prescribed Hindiexams. During the year your Company organised Hindi Fortnight and also Hindi workshops andfor the purpose of effective use of Hindi by employees, Spoken Hindi books andAdministrative Glossary (Hindi-English and English-Hindi) were distributed to them.

Environmental Measures

Your Company is an environmental friendly Company and accords highest priority forecological balance and pollution control. Continuous air monitoring, effluent monitoring,mass afforestation programme year after year and implementation of pollution controlmeasures reflect your Company's concern for protecting the nature. Neyveli Townshipincluding the mining area is a total green zone with more than 18 million trees whichsafeguards the ecological balance. Your Company's concern for environment is alsoevidenced by its efforts to make the Neyveli Township, a "Plastic Free Zone".

Safety

Your Company has a well defined safety and health policy which has been formulated inline with the recommendation of Fifth Safety Conference, Ministry of Coal and as per thestatutory requirements. All the machinery/ equipment in the Power Stations and in Mineshave been customised and automated and have also been incorporated with adequate safetyfeatures. Clear commitment at all levels for ensuring safety at work place and area wiseresponsibility has been fixed to ensure safe working environment. Works Committee, PlantSafety Committee/ Bi-partite/Tripartite Committee are functioning for taking up necessarypreventive/corrective actions wherever required and also to create awareness among theemployees on safety and health. Emergency Preparedness Plan is in place in all Mines andThermal Units to meet any contingencies that may arise.

Your Company has achieved Excellent level in the safety parameter in the MoU enteredinto with the Ministry of Coal for the past five years.

Vigilance

In consonance with the CVC guidelines preventive vigilance continued to be one ofthrust areas of Vigilance Branch of your Company during the year. Circulars and guidelinesof the Central Vigilance Commission were issued from time to time for further streamliningthe rules, procedures etc. The Vigilance Awareness Week was celebrated during November2009 and during the celebration the updated compendium of CVC circulars and annual reportof the activities of the Vigilance Branch were released. More thrust is givenfore-governance initiatives with a view to facilitate greater transparency in improvingthe systems and procedures.

MoU with Transparency International

Your Company is one of the few institutions who have signed the Memorandum ofUnderstanding with Transparency International - India. This body is the Indian Chapter ofBerlin based Transparency International, a not-for-profit and non-government organisationcommitted to eradicate corruption in any form.

Township

I Neyveli Township spreading over 50 Sq. Kms., has more than 21000 self-containedquarters with all allied facilities and total population of about 1,50,000 as of date. Thefacilities include schools, college, sophisticated general hospital, library, swimmingpools, auditorium, stadium, community welfare centres, recreation clubs, reading rooms,parks, banks, shopping complex, Government agencies, etc. Your Company has installed awater treatment plant in the township to conserve the precious ground water. Your Companyhas also provided township facilities in 'Shakthi Nagar' to the employees of BarsingsarProject.

Education

Your Company continues to provide quality education to the wards of employees and tothe children from the neighbouring villages through 13 schools with good infrastructureand with grant-in-aid from the State Government. Training programmes such as"Counselling Techniques". "Total Quality Teaching", "InnovativeTeaching Methods" are arranged for the benefit of the teachers of NLC Schools.

Medical Services

Your Company maintains a sophisticated 369 bedded General Hospital for providingquality medical treatment and occupational health services to the regular employees andcontract workers, and their dependants apart from other inhabitants of Neyveli Township.During the year 2009-10, around 7.5 lakh out-patients and 14,947 in-patients were treatedin the Hospital.

Corporate Social Responsibility (CSR)

Your Company during the year has formally adopted CSR Policy for taking up variousprojects / activities surrounding the Company's project sites for the welfare of thesociety at large. It has been decided to earmark 1% of the profit after tax as the budgetfor every year towards the CSR activities.

Even prior to formally adopting the CSR policy, your Company has been taking up variousCSR related projects/activities for the benefit of inhabitants of neighbouring villages.Some of the initiatives taken earlier and continued during the year under review are asunder:

• Your Company patronises Neyveli Health Promotion and Social Welfare Society(NHPSWS) to support its social welfare activities. This society serves by way of providingtraining and arranging for job opportunities for the benefit of physically challengedpersons, widows and destitutes within a larger ambit of Neyveli. This Society also runs aSchool "Shravanee" for hearing impaired, Computer Training Institute and provideartificial limbs, etc.

• Your Company is also extending all assistance including grant and infrastructurefacilities in running the Sneha Opportunity School, a day- care centre for mentallydisabled children. This school adopts a holistic approach towards providing individualattention to train children in different skills like arts, crafts, weaving, carpentry,gardening, screen printing, doll making etc., in order to make them self-reliant and fitfor earning their livelihood.

• Your Company also provides quality medical treatment and occupational healthservice through its hospital to all inhabitants of the Neyveli Township and itssurrounding villages. More than one lakh rural population got medical assistance duringthe year 2009-10. An exclusive out-patient services unit is operated at the GeneralHospital wherein medical consultation services are offered free of cost to the generalpublic. Medical treatment identity books have been issued to 10,200 eligible contractworkmen for availing medical treatment for self and their family members includingin-patient treatment, free of cost. A separate dispensary with adequate infrastructure hasbeen opened in April 2009 for extending medical treatment to the contract workmen.Considering the requirements and need to provide medical care to the contract workersaugmentation of further facilities in the General Hospital and building up of otherinfrastructure support are under progress.

• Your Company hospital has taken up CSR health initiatives which involveimmunisation programme, peripheral medical camps and community health screening to benefitthe surrounding rural population. Ten medical camps were conducted during 2009-10 inperipheral villages viz., Matru Kudiiruppu, Kamaraj Nagar, Uyyakundaravi, Mandarakuppam,Kathazhai, Mettukuppam and Serakuppam, which are located within 15-20 kilometre radius ofNeyveli Township. Major objective of the camps was to benefit rural people who had noaccess to health care and to screen them for ailments like diabetes, hyper-tension, dentalproblems, cervix cancer and breast cancerforfurthertreatement at NLC GH.

• Two major community health-screening camps in the Annual Book Fair and SafetyWeek Celebrations were conducted in the year 2009-10 covering around 9,200 visitors whohad volunteered screening for HIV, diabetes, hypertension, obesity etc.

• During the year Diabetic Retinopathy Screening Camp was conducted in associationwith Aravind Eye Hospital, Puducherry benefitting more than 750 persons. Your Company alsocontinued with the medical support forthe elderly people residing atThamaraikulam villagein Cuddalore District, maintained by the HelpAge India.

• As part of National Health Programme and also a CSR measure, the followingprogrammes were undertaken during the year2009-10:

• Anti mosquito control work was carried out effectively under National MalariaEradication Programme in Neyveli.

• Pulse Polio Immunisation Programme was carried out successfully and 12,472children were immunised in the surroundings of Neyveli.

• Under Filaria Control Programme medicine was issued to the entire population ofNeyveli as a prophylactic measure with the help of voluntary organisations.

• Your Company provides infrastructural support and also periodical financialgrants to Jawahar Education Society which provides quality education not only to the wardsof employees but also to the children of villages around Neyveli Township. Further, yourCompany also provides free school diaries, uniforms and footwear to the students ofElementary and Middle Schools, where the majority of the student population is fromneighbouring villages.

• Your Company provides continuous supply of water to nearby villages forirrigating over 23,000 acres of land. Sinking of new bore well and maintenance of theexisting bore wells for providing potable water to more than 70 villages forms part of CSRactivities.

• Construction of bridges, culverts and public toilets in nearby villages werealso undertaken besides laying of roads and de-silting of lakes.

• Establishment of an Industrial Training Institute in Barsingsar village toimpart technical skills in various trades to the population around the project site isalso in process.

• During the year 23 CSR focused training programmes covering 7,871 students and146 teachers from various schools on various themes such as examination skills,motivation, understanding adolescence, road safety, energy conservation etc., wereconducted. 3,615 students were given in-plant training at various units and 1,868 studentshad undertaken projectworkin engineering, management, finance and otherdisciplines.

• In recognition of the past services, your Company is implementing schemes forreimbursement of medical expenses and also extends insurance cover for retired employeesand their spouses under "Retirees Health Insurance Scheme". During the year theamount payable towards reimbursement of medical expenses to the retired employees wasenhanced from Rs.3,500/- to Rs.6,000/-. Family Relief and Death Relief Fund Schemes arealso in operation forthe benefit of eligible dependents of the employees who die inharness.

Contribution to the cause of Women

NLC Chapter of "Forum of Women in Public Sector" (WIPS) under the aegis ofSCOPE is being patronised by your Company. Your Company provides all the requisite supportto this Forum in organising various programme forthe growth and development of women.

Awards

• Your Company has been declared as the "Best Establishment of theRegion" for the year 2008-09 by the Directorate General of Employment and Training,Ministry of Labour & Employment, Govt, of India.

• Your Company has bagged the "Shramik Shiksha Award" for impartingquality education to its workers. The award was instituted by Central Board of WorkersEducation (CBWE), Nagpurfunctioning underthe aegis of Ministry of Labourand Employment,Government of India.

• Your Company has also bagged the Dalai Street Investment Journal PSU Award,forthe year 2010 under "PSU with highest market capitalisation" category.

• During the year, "The longest accident free year for the State" wasreceived from the Government of Tamilnadu forthe calendaryear2006.

• During the year, Quality Circles of the Company participated in the NationalConvention of Quality Circles organised byQCFI, Bengaluru Chapter and won meritorious andexcellence awards.

Compliance under Persons with Disabilities Act, 1995

YourCompany ensures compliance under the Persons with Disabilities Act,1995. Suitableprovisions/ modifications are made in the working place to meet the requirements of suchpersons with disability.

Compliance under the Right to Information Act, 2005

Your Company ensures compliance under the Right to Information Act, 2005. A CentralPublic Information Officer, Appellate Officer and Central Assistant Public InformationOfficers representing different functional area have been nominated to attend to thequeries/appeals received underthe RTI Act in a time bound manner. During the year 2009-10,227 nos. of requests containing more than 833 queries were received from the generalpublic and all requests have been complied with.

Citizen's Charter

Your Company maintains Citizen's Charter, indicating details of clients, customersunder different heads, system of redressal of grievance available and nodal authoritiesfor redressal of grievance. The Citizen's Charter is regularly updated.

Energy Conservation and Research & Development

The particulars required under Section 217(1)(e) of the Companies Act, 1956 read withthe Companies (Disclosure of particulars in the Report of the Board of Directors) Rules,1988 regarding the energy conservation measures, technology absorption and expenditure onR&D are furnished in Annexure-1.

Management Discussion & Analysis Report and Report on Corporate Governance

The Management Discussion & Analysis Report is furnished in Annexure-2. The reporton Corporate Governance together with the Auditors' Certificate on the compliance ofCorporate Governance conditions stipulated by Clause-49 of the Listing Agreement arefurnished in Annexure-3 and 4 respectively.

Auditors Cost Audit

S.Mahadevan & Co., Cost Accountants, have been appointed as the Cost Auditors forthe year 2009-10 to carry out the cost audit for the three Power Stations of the Company.

Statutory Audit

Ganesan and Company, Chartered Accountants and L.U.Krishnan & Company, CharteredAccountants, were appointed by the Comptroller & Auditor General of India (C&AG),as Joint Statutory Auditors for the year2009-10 under Section 619(2) of the Companies Act,1956. The Board of Directors of the Company has fixed Rs.9.0 lakh as the Statutory Auditfees, to be shared equally by the Joint Auditors in addition to reimbursement of out ofpocket expenses at actuals. Reply to Statutory Auditors' observation on the accounts ofthe Company for the year ended 31^st March, 2010 is furnished inAnnexure-5.

C&AG's Comments

C & AG's Comments on the accounts for the year ended 31^st March, 2010are furnished in Annexure-6.

Directors' Responsibility Statement as per Section 217(2AA) of the Companies Act, 1956

The Board of Directors declares:-

a. that in the preparation of the annual accounts, the applicable accounting standardshad been followed along with proper explanation relating to material departures;

b. that the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit of the Company forthat period;

c. that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

d. that the Directors had prepared the annual accounts on a going concern basis.

Board of Directors

Shri.J.N.Prasanna Kumar and Shri. V.Sethuraman, relinquished their office on 30.09.2009and 31.03.2010 respectively on attaining their age of superannuation. Dr.M.S.Ananth,Part-time Non-official Director who was on the Board of Directors of the Companyrelinquished his office w.e.f. 31.10.2009 on completion of three year tenure. Dr. RajivSharma, the then Additional Secretary, Ministry of Coal, Government of India and ShriM.F.Farooqui, the then Secretary to Government of Tamil Nadu, Industries Department,relinquished from the Board of Directors of the Company w.e.f. 31.07.2009 and 07.12.2009respectively. Sarvashri Y.N.Apparao, Shashi Kumar, Dr. Krishna Kumar, Ravindra Sharma,P.K. Choudhury, Prof. S. Sadagopan and S. Rammohan, Part-time Non-official Directorsrelinquished their office w.e.f. 01.06.2010 on expiry of the tenure as perthe terms andconditions of their appointment. Sarvashri R.Kandasamy, K.Sekar, Alok Perti and RajeevRanjan were inducted into the Board of Directors of the Company during the year underreview. Dr. Sanjay Govind Dhande has been inducted as a Part-time Non-official Director onthe Board of the Company with effect from 26.06.2010.

The Board places on record its appreciation forthe valuable contribution and guidanceprovided by Sarvashri J.N.Prasanna Kumar, V.Sethuraman, Dr.M.S.Ananth, Dr.Rajiv Sharma,M.F.Farooqui, Y.N. Apparao, Shashi Kumar, Dr. Krishna Kumar, Ravindra Sharma, P.K.Choudhury, Prof. S. Sadagopan and S. Rammohan, during their tenure as Directors of theCompany. Shri B. Surender Mohan, Director, retires by rotation at the forthcoming AnnualGeneral Meeting and being eligible offers himself for re-election.

Particulars of Employees

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956,read with the Companies (Particulars of Employees) Rules, 1975- Nil.

Acknowledgement

The Board of Directors of your Company places on record its sincere appreciation forthe continued support and guidance extended by Ministry of Coal, Ministry of Power,Ministry of Environment & Forest, Central Electricity Authority, Ministry of Industry,Ministry of Labour, Planning Commission, Central Electricity Regulatory Commission, StateElectricity Boards and DISCOMsof Tamil Nadu,Andhra Pradesh, Karnataka, Kerala andPuducherry. The Board of Directors of your Company is pleased to acknowledge withgratitude the co-operation and continued support extended by the Government of Tamil Naduand the Cuddalore District Administration. The support and co-operation by the Comptrollerand Auditor General of India, the StatutoryAuditors, Director General of Mine Safety, theFactory & Boiler Inspectorates, the Chief Inspector of Boilers and Factories, CentralPollution Control Board, State Pollution Control Board, Chief Controller of Explosives,Regional LabourCommissioner, Regional Provident Fund Commissioner, the Company's Bankersand KfW of Germany need special mention and the Directors acknowledge the same.

Your Directors also wish to place on record their appreciation forthe dedicated workput-forth by the employees at all levels. The positive role played by the recognised TradeUnions and Associations of the Engineers and Officers in maintaining cordial industrialrelations deserves special mention.

a. Energy conservation measures taken

• Detailed energy audit was conducted in Unit-2 (210 MW) & station auxiliariesin TPS-I Expansion and the recommendations are being implemented in a phased manner.

• 1000 LPD Solar Water Heater is installed forsteam cooking in TPS-I Expansion.

• In all the new machines and drive heads for the Mine-ll Expansion, ProgrammableLogic Control Systems are used instead of the conventional contactors. Control circuitsand variable voltage and variable frequency systems speed control techniques for all mainmotor loads have been introduced to save considerable energy.

• In vulcanising division in Mines the conveyor belt joints are being carried outusing ceramic heater plates instead of the conventional heater plates which consume only50 % of energy compared to the conventional one.

• As a part of energy conservation measures in TPS-II one stage of CondensateExtraction Pump in three units (4, 5 & 6) of Stage-ll was reduced after studying thetechno economical feasibility. As a result of this stage reduction, about 87 KW of powerin each Condensate Extraction Pump is being saved which helps to earn revenue of aboutRs.40 lakh per year without any appreciable modification cost.

• Installation of timer switches, replacement of conventional Sodium Vapour Lampswith Compact Flourescent Lamps, replacement of conventional energy meters with electronicenergy meters are being done in plants and Township which save lot of energy.

b. Additional Investment proposals for the year 2010-11

The estimated cost of additional investment proposals for reduction in energyconsumption is Rs.300.63lakh.

c. Impact of the measures at (a) and (b) for reduction of energy consumption andconsequent impact on the cost of production of goods.

• The recommendation based on energy audit carried out earlier in Thermal PowerStation-I, Thermal Power Station-I Expansion and Mine-ll are being implemented and duringthe year 2009-10 an energy saving of 44,32,121 units (Kw/Hr.) has been achieved in all theMines combined and in Power stations, Auxilary Power consumption has reduced from 10.08%in 2008-09 to 9.93% in 2009-10 of total generation in all the Power Stations combined.

Efforts made in technology absorption

As perform B annexed.

Total foreign exchange earnings and outgo

I. Specific area in which R&D is carried out by the Company: The thrust areas ofR&D during the year are:

i. Fly ash based pesticide and bio-pesticides were developed and tested in crops inassociation with Annamalai University and mosquito larvae with VCRC, Puducherry. Pesticideresidue survey in and around Neyveli-water bodies, aquifer, soil and plant samples werecarried out and the analysis of soil and water samples showed no residue of pesticide. Allthese activities are carried out under the Coal S&T project 'Development and use ofFly ash based pesticides'.

ii. Under the Coal S&T project titled 'Survey and ecological conservation of NLCenvironment through bioremediation', pollution tolerant and sensitive tree species havebeen identified. Trees with high C0₂, S0₂ and N0₂assimilation rate also have been identified. The draft project completion report has beensubmitted to CMPDI, Ranchi.

iii. Laboratory scale production of zeolite from fly ash was optimised in associationwith IIT/Kharagpur and its efficiency to remove calcium from ground water is beingstudied.

iv. Problems associated in mining viz., the issues associated with corrosion in SMEtrack frames were extensively studied by CECRI / Karaikudi and suitable corrosionprevention coating was developed and applied to a spreader in Mine-ll. After about sixmonths of severe exposure the surface was examined and found the coating intact and norust spot was observed.

v. To prevent corrosion problems in storm water control pumps a joint R&D projecthas been taken up with National Institute ofTechnology/Trichy. Through lab tests suitablecoatings to withstand corrosion have been identified and the coating agencies are beingidentified forfield trial.

vi. Preliminary studies on power factor improvement at higher capacity conveyor driveheads were conducted. Appropriate improvement measures are identified and the design ofcapacitor bank is in progress.

vii. The geo-physical electrical resistivity survey for delineating subsurface hardrocks in Mine-I and geo-physical electrical self potential survey for delineating massivemarcasite occurrences in Mine-ll were carried out. Further studies to identify hard bandsat different depth will be taken up.

viii. Ajoint project has been taken up with VIT/Vellore to do a mathematical modelingof dispersion of pollutants from thermal power plants at NLC. Preliminary data has beengiven to VIT and modeling and validation works are in progress.

II. Benefits derived as a result of R&D

1. Commercialisation of the patented process for the production of potassium humatefrom lignite through M/s. NRDC is in progress. About 101.6 Kilo liters of potassium humatewas produced in the pilot plant and the revenue earned from this was Rs.18.26 lakh.Response and feed back from the farmers for this product are encouraging.

2. The ambient air C0₂ level in and around Neyveli was recorded in 33locations and the trend in C0₂ values have been studied in relation toparameters like temperature, humidity and photo synthetically active radiation. Avegetation map for Neyveli area has been prepared in association with M/s.Salim Ali Centrefor Ornithology and Natural History (SACON), Hyderabad. The tolerant tree speciesidentified under the S&T Project 'Survey and ecological conservation of NLCenvironment through bioremediation with tree species' will be included in NLC'safforestation programme for perpetuation and sustaining a clean environment.

3. Periodical long term studies conducted in abandoned ash pond for sub-soil ashleaching in and around the ash pond bore wells of TPS-I revealed that the parameters arewithin the prescribed limits mentioned in Bureau of Indian Standards for drinking waterincluding heavy metals.

4. Application for the grant of patent of the process 'Activated carbon from NeyveliLignite' has been filed jointly with M/s. NIIST, Thiruvananthapuram.

III. Future Plan of action

i. Utilisation of bottom ash for the replacement of river sand.

ii. Geochemical studies in lignite zone through Global Positioning System.

iii. Failure analysis of track link pins in mining equipment.

iv. Improvement of mined out water quality for utilisation in down stream units througha hybrid process.

v. Carbon di-oxide sequestration by biological methods.

IV. Expenditure on R&D