Power Grid Corporation of India Ltd

Ladies & Gentlemen,

It is my pleasure to present, on behalf of the Board of Directors, the 21^stAnnual Report on the performance of your Company during the financial year that ended onMarch 31, 2010 along with audited Statement of Accounts, Auditors’ Report, commentson the Accounts by the Comptroller and Auditor General of India for the reporting period.

POWERGRID has been contributing significantly towards development of Indian powersector by undertaking coordinated development of power transmission network throughcontinuous innovations in technical & managerial fields along with effective andtransparent operation of regional grids. Your company has once again displayed commendableperformance during the year in all areas of its operations and established new benchmarks.

Highlights of achievements of your Company during FY 2009-10 are briefly mentioned hereto give an overview of success achieved in all fronts:

Your company made an investment of Rs. 10,617 Crore during the year forimplementation of various transmission projects, an increase of about 30% over theinvestment made in last year (Rs. 8,167 Crore). The requisite funds were mobilised fromdomestic market, proceeds of loan form multilateral funding agencies namely, The WorldBank (WB) and Asian Development Bank (ADB), besides internal resources. As on 31st March,2010, your company owns and operates a transmission network of about 75,290 ckt kms ofinter-State transmission lines, 124 nos. of EHV & HVDC substations with transformationcapacity of about 83,100 MVA. Transmission Projects worth Rs. 3,610 Crore wereCommissioned during the year. Under RGGVY, POWERGRID created infrastructure forelectrification in 3402 un-electrified villages against a target of 3100villages, achievement of 110%. Service connections to about 6.87 Lakh BPL householdswere provided against a target of 6 Lakh, achievement of about 115%. Transmissionsystem availability of 99.77% was achieved, highest so far in the history of the Company.There was no major grid disturbance in any part of the country during the year andregional grids were operated smoothly.

220/110/20 kV Chimtala Substation, in Kabul, Afghanistan along with the Pul-e-Khumri- Kabul 220 kV Double circuit transmission line completed by POWERGRID last year underthe consultancy assignment, was inaugurated by His Excellency Mr. Hamid Karzai, thePresident of Islamic Republic of Afghanistan in May, 2009. With the commissioning ofChimtala Substation and associated transmission system in Afghanistan, power flow toKabul has commenced from neighboring country Uzbekistan. It was one of the largestinfrastructure projects ever undertaken in Afghanistan and through this system, for thefirst time in decades, Kabul’s four million people can enjoy the benefits of a stablesource of electricity. Certificates of appreciation were given by Hon’ble Minister ofEnergy and Water, Afghanistan in recognition of the difficulties and challenges involvedin the project implementation and contributions made by POWERGRID.

On the MoU front, based on overall performance, Company has posted "Excellent"for FY 2009-10, continuing the track record of achieving "Excellent"rating since signing of its first MoU for 1993-94.

Your Company has featured in the list of top 250 global energy companies compiled byPlatts, a leading provider of energy and commodities information and named in the20 fastest-growing Asian companies.

Your Company has been conferred with three Gold Shields and one Silver Shield in theNational Awards for Meritorious Performance in Power Sector for the year 2008-09. In this,Western Region-I Transmission System and North-Eastern Region Transmission System wereawarded Gold Shields for Transmission System Availability, while the 220 kV Double CircuitTransmission Line from Pul-e-Khumri to Kabul in Afghanistan was bestowed with Gold Shieldas a Special Award for early completion of project. Eastern Region-I Transmission Systembagged the Silver Shield for Transmission System Availability. It is a matter of pridethat your Company has been receiving these awards continuously for the last five years.

In addition, during FY 2009-10, POWERGRID has been conferred with "Certificateof Merit Award" for its contribution towards Human Resource Development (HRD) by InternationalFederation of Training and Development Organization Limited, Geneva, Switzerland.POWERGRID has also received "INFOCOM CMAI National Telecom Award 2009" for"Utilities Providing Best Telecom Infrastructure" and prestigious ‘2^ndIndia Power Award 2009’ under ‘Overall Utility Performance Category’,by Council of Power Utilities & KW Conference.

FINANCIAL RESULTS

OPERATIONAL EXCELLENCE

Over a decade and half of excellent business operations, your Company has developedstrong in-house expertise in all specialised areas of power transmission business and hascarved a niche for itself amongst the largest transmission utilities in the world. As on31^st March, 2010, your company owns and operates a transmission network ofabout 75,290 ckt kms of inter-State transmission lines, 124 nos. of EHV & HVDCsubstations with transformation capacity of about 83,100 MVA and about 50% of total powergenerated in the country is wheeled over it. For the year, availability of 99.77%was achieved for the transmission system, highest ever in the history of the company, andnumber of tripping per line was contained at 2.07 against MoU target (Excellent) of 2.60.

To enhance the efficiency of its operations, State-of-the-art O&M measures likeHotline Maintenance, Emergency Restoration System and the cleaning of insulators throughhelicopters was adopted. Equipment health is being assessed periodically using"Condition Assessment Techniques" with sophisticated tools. All shut down andnon shut down maintenance activities are planned in advance and an "AnnualMaintenance Plan" is worked out for each and every asset. There are well definedlevels for approval of test results depending on their importance and criticality. As aresult, your company has been able to display its capability in consistently maintainingthe high transmission system availability, comparable with the best internationalstandards. In addition, State-of-the-art "Emergency Restoration System" werealso deployed for restoration of collapsed transmission lines in minimum possible time.Further, appropriate initiatives have been taken up to replace ageing transmission assetsas per prevalent CERC tariff regulations.

O&M activities of your company are ISO certified and systems and procedures arebeing modified periodically to keep abreast with the latest technology. Documents ofmaintenance schedule, procedures and formats have been standardized for all assets. Allsubstations and line offices can access these documents through Company’s websiteportal. Periodical reviews are conducted at Substations and Line offices to evaluateimplementation of the systems and procedures.

As on date about 16 sub-stations are operated remotely. Keeping in view the successfulexperience of remote operation and international trend of unmanned sub-stations, actionsare being initiated to establish "National Transmission Management Centre" tocontrol & operate most of the sub-stations remotely and "maintenance hub" tocater to the maintenance requirements of nearby group of sub-stations rather than placingstaff in each sub-station for optimal utilisation of manpower & also to reduce theresponse time in case of fault.

Transformer On-Line Condition Monitoring system (TOLCM) was installed at Mandola &Rihand substations to assess the condition of transformers. This system measures bushingCapacitance & Tan delta, DGA, moisture, OLTC monitoring, loading profile, oiltemperature, winding temperature and residual life assessment and is helpful in takingadvance action in case of any abnormality to avoid catastrophic failures.

Your company has also entered into a contract with M/s UMS Group, USA in March 2010 forthe International Benchmarking of its O&M practices through International TransmissionOperations & Maintenance Study (ITOMS) based on cost, productivity, service levels,equipment maintenance, Asset Management, safety etc. This exercise will pinpoint areasrequiring improvements with respect to similar utilities in the world and will help inidentifying opportunities for improvement and discovering best practices in Operations,Maintenance and Technology.

A conference on ‘International Best Practices in O&M of EHV TransmissionSystem’ was organized by POWERGRID on 5^th and 6^th March, 2010at Gurgaon. International experts from various renowned utilities and institutions such asDoble-USA; Hydro-Quebec, Canada; BC Hydro, Canada; TEPCO, Japan; NGC, UK; Furnas, Brazil;ASU, USA had participated in the conference and delivered lectures on the best practicesbeing followed in their system. The conference was also attended by executives from allthe Regions and Corporate Centre. The conference provided a platform for the employees tolearn various emerging techniques in the field of O&M in EHV Transmission System andalso to interact with various experts from different utilities across the globe. Further,your company is exploring options to carry out aerial patrolling of transmission linesthrough helicopter on trial basis and on its successful completion, it is planned to bedeployed country wide to optimise manpower & for better efficiency in maintaining thetransmission lines.

QUALITY MANAGEMENT

Your Company, in all its endeavours, is committed to provide cost effective &quality services to its valued customers thereby deriving high customer satisfaction. Toachieve this, quality improvement measures/ techniques are being adopted at every stagefrom conceptualisation of project till commissioning and subsequently during operationphase to identify the areas of improvement and develop action plans for achieving thedesired level of quality in all of its activities.

During the year, Quality Management System (QMS) of your Company was reviewed and basedon evaluation of implementation of the latest systems and procedures the revisedcertification with validity upto June, 2013 was obtained. Today, your company standscertified with Integrated Management System (IMS) as per Publicly AvailableSpecification, PAS 99:2006 integrating requirement of ISO 9001:2008 (Quality),ISO 14001:2004 (Environment) and OHSAS 18001:2007 (Occupational Health & SafetyManagement System). POWERGRID also stands audited for Social Accountability System, SA8000:2008 for all its establishments. With the accreditation of ISO 9001:2000for all Regional Load Dispatch Centres (RLDCs) during the last year, QMS certification forall establishments of POWERGRID has been completed.

GRID MANAGEMENT AND OPEN ACCESS

Optimum utilization of generation resources requires development of a strongtransmission network and its implementation has been taken up by your Company in a phasedmanner. Planned rapid expansion of regional grids and their integration to form NationalGrid poses great challenges in Grid Operation & Management. Toward this, variousinter-regional links have been implemented matching with generation capacity additionprogramme and growing power demand in the country. Central Sector Generating Stations havenot faced any generation evacuation problem on account of transmission constraints duringthe year, as the strong and robust transmission network set up by your Company is there totake care of evacuation related issues.

Reliable and stable operation of regional power grids has always been a matter of highpriority for your company. The facilities at all the five Regional Load Despatch Centers(RLDCs) and National Load Despatch Centre (NLDC) are being upgraded continuouslyconsidering the increased complexity of grid operation in the country. Our initiativestowards effective grid management are paying rich dividends leading to minimal griddisturbances along with improvement in vital grid parameters such as voltage andfrequency. Indian Power Grids have not experienced any major grid disturbance during thelast seven years. Even minor grid disturbances in regional grids have come downsignificantly. Further, grid frequency was maintained in the prescribed band as per IEGC,i.e. 49.2 Hz to 50.3 Hz for large percentage of time in all the five regions during theyear.

Development of various inter-regional transmission links, strong transmission networkand modernised Regional Load Despatch Centers (RLDCs) have also facilitated manifoldgrowth in inter-regional power exchanges on real-time basis. During FY 2009-10, about52,000 MUs of inter-regional energy transfer was facilitated across the country ascompared to about 46,000 MUs during FY 2008-09. The increased inter-regional powerexchanges have helped in meeting more demand in energy deficit regions besides achievingoverall economy.

On behalf of various State Power utilities and other players in the regional pool, yourcompany, through RLDCs, facilitated settlement of UI charges to the tune of Rs. 12,290Crore in FY 2009-10 (as compared to Rs. 14,000 Crore in FY 2008-09).

Further, in line with GoI directive, your Company has established M/s Power SystemOperation Corporation Limited (POSOCO), a 100% subsidiary of POWERGRID, in March, 2009to look after Grid Management function. However, pending determination and transfer ofassets, Grid management function continued to be operated by your Company.

Inter-State power exchange in an Open Access environment:

Non-discriminatory Open Access is the key for development of a successful CompetitiveElectricity Market. Short-Term Open Access is applicable for utilization of surpluscapacity available on the inter-State transmission System by virtue of inherent designmargins, margins available due to variations in the power flows and margins available dueto in-built spare transmission capacity created to cater to the future load growth orgeneration addition.

Short-Term Open Access in inter-State transmission has been successfully implementedand facilitated for development of a vibrant short-term electricity market. Around hundredcaptive power plants across the country have also exploited the benefit of short-term openaccess. Under open access, more than 18,244 transactions were approved during the yearinvolving about 39,500 MUs of energy. Thus, the Company facilitated flow of power acrossthe country effectively utilising the available transmission capacities, thus bringingmuch needed open access to reality. Since introduction of Short-term open access ininter-State transmission in May, 2004, more than 40,000 bilateral transactions has takenplace and more than 152,500 MUs have been exchanged.

Open access environment encourages exchange of power as per the market conditions. Forthis purpose, two Power Exchanges have been established in the country, which facilitatescollective transactions discovered through a transparent, anonymous double sided basedbidding mechanism. In a short-span of less than 2 years, around 10,000 MUs have beenexchanged through power exchanges. In this financial year itself, around 7,000 MUs havebeen exchanged.

PROJECT IMPLEMENTATION

Your Company gives utmost priority for implementation of its projects with economy andwithin stipulated time frame to be eligible for additional return on equity of 0.5% as perthe prevailing CERC tariff norms and to derive maximum economic benefits. Yourcompany’s advanced and cost effective Integrated Project Management and ControlSystem (IPMCS) for total project review and monitoring has been contributingsignificantly. Project implementation activities involves total project review andmonitoring including Standardisation of Designs, Project Review Meetings (PRMs) at regularintervals through video conferencing, pre-emptive measures and advance actions on variousproject linked activities such as land acquisition, survey and soil investigations, tenderactivities, funding tie-up, etc. in parallel with project investment approval process.

During FY 2009-10, transmission projects worth about Rs. 3,610 Crore were commissioned.These additions to the Company’s network have helped in improving power supplysituation in various regional grids, facilitating enhanced inter-regional power transferand improved reliability of the system. Further, Board of Directors of your company haveaccorded investment approval for 14 new transmission projects with an estimatedcost of about Rs. 13,450 Crore comprising of 6,500 ckm of transmissionlines, 20 no. sub-stations and transformation capacity of about 27,825 MVA.Major projects includes Transmission System associated with generation Projects likePallatana GBPP (726 MW), Bongaigaon TPS (750 MW), Mauda (2x500), Kalpakkam PFBR (500 MW),Nabinagar TPS (1000 MW), Simhadri-II (2x500MW), Vindhyachal–IV (1000MW),Rihand–III (1000MW), System Strengthening in Northern Region for Sasan & MundraUltra Mega Power Projects, 765 KV System for Central Part of Northern Grid(Part-II&III), Northern Regional Transmission Strengthening Scheme, etc..Implementation activities of these projects have already commenced.

At the end of March, 2010, transmission projects at a cost of over Rs. 81,000Crore involving about 42,000 ckm of transmission lines, 58 new substations andtransformation capacity of 88,675 MVA are under various stages of implementation.

Your Company has also been entrusted by Govt. of India to develop associatedtransmission systems for evacuation of power from four Ultra Mega Power Projects (UMPPs)viz. Mundra, Sasan, Krishnapatnam and Tilaiyya UMPP. Necessary actions are being taken bythe Company for implementation of these projects matching with the generation projects. Inthis, Associated Transmission Systems for Mundra and Sasan UMPPs have been approved andimplementation has commenced while transmission system for Krishnapatnam UMPP is underinvestment approval & that for Tillaiyya UMPP is under finalisation.

FINANCIAL MANAGEMENT

The year 2009-10 has been another year of impressive financial performance for yourCompany, with a Turnover of Rs. 7504 Crore and Net Profit of Rs. 2041Crore as compared to Rs. 6,139 Crore and Rs. 1,691 Crore respectively during FY2008-09, an increase of 22.2% and 20.7% respectively. The Gross Asset Base of theCompany has been enhanced to Rs. 43,202 Crore in 2009-10 from Rs. 40,319 Crore in2008-09.

Dividend Payout

In addition to interim dividend of Rs. 0.50 per share paid in January, 2010, yourDirectors have recommended a final dividend of Rs. 1.0 per share for the year 2009-10. Thetotal dividend payout for the year is Rs. 1.50 per share as against Rs. 1.20per share paid last financial year. The final dividend shall be paid after your approvalat the Annual General Meeting. The total dividend pay-out for the year amounts to Rs.631.34 Crore representing 30.93% of the profits after tax for the year. Earning per sharehas also increased to Rs. 4.85 as against Rs. 4.02 last year.

To remain a financially progressive organisation and enhance value for our shareholdersin emerging market conditions, company is taking all possible steps to further improve itsfinancial performance by expanding the consultancy activities in synergic businesses suchas consultancy assignments at National and International level in transmission,distribution, telecom etc.. Your Directors believe that strategic diversification intosynergic business would lead to increase in shareholders’ value.

Directors’ Responsibility Statement

As required u/s 217 (AA) of the Companies Act, 1956, your Directors confirm that:

• In the preparation of the Annual Accounts, the applicable accounting standardshave been followed;

• The Directors have 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 for that period;

• The Directors have taken proper and sufficient care for maintenance of adequateaccounting records in accordance with provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and

• The Directors have prepared the annual accounts on a going concern basis.

XI Plan Investment programme

Government of India’s mission of ‘Power for All by 2012’ envisagessufficient, reliable & quality power to all at optimum cost, and, inter-alia achievingGDP growth rate of 8-9%. The gigantic task can only be accomplished with matchinginvestments in the power sector. For development of inter-State transmission system, aninvestment of about Rs. 55,000 Crore is planned by the Company during XI Plan forfurther developing National Grid including inter-regional transmission systems, systemstrengthening schemes, transmission system for evacuation of power from generationprojects under central sector and Ultra Mega Power Projects (UMPPs). In fact, during first3 years of XI plan, investment of Rs. 25,440 Crore (46% of planned investment) hasalready been made. For the FY 2010-11, an outlay of Rs. 12,900 Crore has been kept.Balance expenditure of about Rs. 16,700 Crore is envisaged to be made in FY 2011-12 basedon the generation capacity addition.

Your Company is placed in a comfortable position in terms of resource mobilisation, asit enjoys an excellent credit rating with financial institutions at national andinternational level. Our ongoing transmission projects, which are at various stages ofimplementation, are progressing as per schedule. Your company does not envisage anyproblem in mobilizing the resources for meeting the planned investment during XI planperiod. Loan requirement shall be met through borrowings from multilateral fundingagencies (such as The World Bank and Asian Development Bank)/ supplier’s credit andbalance from domestic sources on yearly basis as per requirement. Presently, about 80% offund requirement has already been tied-up/ identified and balance shall be mobilized asper requirement. Being a AAA rated, your Company is not foreseeing any problem inmobilizing the resources from domestic market at competitive rates. Equity requirement ofabout Rs. 16,500 Crore shall be met through internal resources, sale of bonds, follow-onpublic issue etc. as per requirement/ approval from Govt. of India.

COMMERCIAL PERFORMANCE

Your company’s performance has been highly satisfactory on commercial front, interms of realisation of transmission charges. Current realisation of about Rs. 6570Crore stood at about 100% of billed amount during the year 2009-10 against Rs. 5,877Crore realised last year. POWERGRID is continuously realising 100% of its current dues forthe last six years. Post-securitisation, outstanding dues (beyond 90 days of billing)stands at nil as on March 31, 2010. The present LC coverage of about Rs. 503 Croreis equivalent to more than 100% of average monthly billing.

DEVELOPMENT OF NATIONAL GRID

Your company is playing an important role in development of National Grid for optimumutilisation of generation resources and for meeting power demand in various parts of thecountry. As on March 31, 2010, National Power Grid with an inter-regional powertransmission capacity of about 20,800 MW has been established which includes one ofthe largest synchronous grid in the world with installed generation capacity of over1,15,000 MW. Four major regional power system grids, namely Northern, Eastern,North-Eastern & Western are presently operating at same frequency in synchronous mode.Southern Region is connected to this grid through various HVDC links. Substantial amountof power is being exchanged across the country. In fact, establishment of National Grid isalso facilitating transfer of short term surplus power from any place to any other placein the country from generation under State and Private sector as well.

Capacity of National Grid is planned to be enhanced to more than 32,000 MW by end of XIPlan or early XII plan as per materialization of planned generation capacity addition.

HVDC Back to back Station at Sasaram is operating as per system requirements andrevenue is being realised as per CERC norms. Considering the future transmission systemdevelopment in the regions, Standing Committee of Regional Transmission Planning of CEAand Regional power Committees in Southern region, Western Region and Northern Region andconstituents of all the three Regions have agreed to shift HVDC equipment at Sasaram toKolhapur and also to pay transmission charges thereof.

TECHNOLOGY UP-GRADATION, RESEARCH & DEVELOPMENT

In every stage of transmission system development there are challenges, be it Planning,Construction, Operation or Maintenance, Conserving Right-of-Way (RoW), minimizing impacton natural resources and cost effectiveness in evacuation of power, coordinateddevelopment of cost effective Transmission corridor, flexibility in upgradation oftransfer capacity of lines matching with power transfer requirement are major areas ofconcerns in development of transmission network in the country. In order to address theseissues effectively, your Company has undertaken several technological innovations aimed atconserving Right-of-Way (RoW), minimizing impact on natural resources & human habitatand cost effectiveness in evacuation of power from the future generation projects.

Technology upgradation is a continuous process. Liberalisation & globalisation haveled to greater competition from both domestic as well as international companies. This hasreinforced the need for technology upgradation to attain international levels ofcompetitiveness and to be able to offer contemporary levels of technology. In order tomeet these objectives, the development effort is being pursued by entering intocollaboration with reputed foreign manufacturers, forming joint ventures, in-house R&Defforts and through interaction with various research organisations.

For optimum utilisation of precious right of way and effective Grid Operation &Management, Company is deploying state-of-the-art technologies such as High TemperatureConductors, Series Compensation including Thyristor Control, Multi Circuits, Compact &Tall Towers etc. in transmission systems. Having established the 765kV EHV AC &500kV HVDC technologies, as a next step to meet expected accelerated growth, initiativeshave been taken up to introduce next higher transmission voltages in HVDC and AC, HighSurge Impedance Loading (HSIL) Lines, Large Scale Automation of Sub-stations, Use ofHelicopter in construction & maintenance, etc. to ensure development of efficient,coordinated and economical inter-State transmission system for bulk transfer of power.

Towards introduction of next voltage level in HVDC, implementation of 800kV, 6000MW HVDC Bi-pole line from North Eastern Region to Northern Region have commenced. Thislink shall pass through chicken neck area of NorthEastern Region and shall be transmittingpower over a distance of more than 2000 Kms. With regard to AC, establishment of a 1200kVUltra High Voltage AC Test Station at Bina in Western Region is under process as acollaborative effort with manufacturers, who would be able to field test theirindigenously developed 1200kV equipment on long term basis. Presently, designs and prototype testing of 1200kV DA type tower has been successfully completed and the same forother types of towers and most of the sub-station equipment are under progress. Towerfoundations & erection works are under progress. These technological initiatives arepioneering efforts even globally.

In India, creation of facilities for short-circuit testing of transformers was longfelt. In this direction, National High Power Test Laboratory (Pvt.) Ltd. (NHPTL), aJoint Venture Company of NTPC, NHPC, POWERGRID and DVC has been created in May, 2009 forestablishment of a fully independent, stand alone, state-of-the-art, professionallymanaged, international class, On Line High Power Short Circuit Test Facility in India.This shall provide a full range of short-circuit test facilities for the electricalequipment manufacturing industry and power utilities in conformance to Indian andInternational Standards. NHPTL is proposed to be established at Bina sub-station of yourcompany in Western Region in four stages. Stage-I & II are proposed to be taken upsimultaneously which will facilitate testing of large power transformers (up to 400 kV& 765 kV voltage levels) for short-circuit withstand capabilities. Estimated cost ofthis facility is envisaged to be about Rs. 340 Crore and the facility is expected to becommissioned by June, 2012.

The latest in the transmission business is the use of Smart Grid technologywhich envisages providing choices to each and every customer for deciding the timing andamount of power consumption based upon the price of the power at a particular moment oftime. Your Company is taking leadership initiative for implementation of Smart GridTechnology in the country for effective transmission & distribution of power. Twopilot projects for transmission system of Northern & Western Region Power System havealready been undertaken which involves deployment of Synchro Phasor based WAMS (Wide AreaMeasurement System) Technology. Your company’s initiative would prompt otherutilities for similar action and we are ready to provide necessary help to all theseorganizations.

A two day international workshop on Smart Grid was organized by your company inJanuary, 2010 for all the Power Utilities of the country at the Gurgaon Office in whichtechnological and strategically important issues involved in implementation of the smartgrid were discussed. The workshop was inaugurated by Hon’ble Union Minister ofPower, Shri Sushilkumar Shinde. Senior officials of Ministry of Power, CentralElectricity Authority, State Power utilities and Industry experts from India, and abroad,etc. have participated in the workshop.

PERFORMANCE IN TELECOM

Your Company is one of the few telecom players with marked presence in remote areas andhas acquired Infrastructure Provider Category-I (IP-I), Internet Service Provider (ISP)Category ‘A’ and National Long Distance (NLD) licenses to provide a variety ofservices. Our major customers include prestigious Government organizations such as ERNET,STPI, NIC and various Government Ministries along with other prime telecom companies. Itis our constant endeavour to provide a robust highway of telecommunication at affordablecost with ultra modern and eco-friendly implementation techniques. In the coming years,Company is also planning to attract customers from entertainment and broadcastingindustry.

At the end of FY 2009-10, your Company has established around 20,600 Kms oftelecom network connecting all metros, major cities & towns. Availability of theTelecom Network has been consistently maintained at 99.9% during 2009-10.

Despite a general slowdown experienced by Telecom industry wherein intense price war isresulting into declining average revenue per user, your Company has achieved a growth andearned revenue of about Rs. 158 Crore in telecom business during FY 2009-10,compared to Rs. 150 Crore in FY 2008-09.

POWERGRID is a consortium member for implementing the prestigious telecominfrastructure project of national importance, namely National Knowledge Network (NKN)project, which envisages a gigantic 3 layer Telecom network of all knowledge centresacross the country such as IITs, IISc, etc. on high speed connectivity at an estimatedtotal project cost of about Rs. 6,000 Crore. Based on the work likely to be allocated toyour company, our investment in the NKN project is expected to be of the order of aboutRs. 560 Core. A revenue of about Rs. 1000 Crore over a period of 10 years is envisaged byyour company from this project.

Your Company has lined up major expansion plans for its telecom network, which includefurther diversification into value added services such as MPLS-VPN, NLD Switched Voice,Data Centres and the Tower Infra business. With the focus now shifting from urban to ruralconnectivity, your Company’s role in telecom becomes even more significant as it haspresence in rural & remote areas of the country by way of its Power Transmissionnetwork which can be leveraged to provide telecom services in such areas by co-locatingWireless Antennas on Power Towers.

During the year, we have added some new customers (viz. HSBC Bank, Videocon, SistemaShyam Teleservices Limited, Loop Telecom, Unitech Wireless Limited (Uninor), etc. from thePrivate Sector and National Disaster Management Authority (NDMA), India InternationalCentre, Prasar Bharti from Govt. Sector, etc.) to our already impressive list ofcustomers.

BUSINESS DEVELOPMENT & CONSULTANCY

Backed by its strong in-house expertise in various facets of Transmission,Sub-transmission, Distribution and Telecom sectors, POWERGRID is executing variousconsultancy assignments in the areas of Planning, Engineering, Load Despatch &Communication, Telecommunication, Contracting, Financial and Project Management atnational & international level.

In the international arena, your Company has emerged as a strong player in transmissionsector in South Asia and is providing consultancy services in United Arab Emirates (UAE),Nigeria and Bangladesh in the field of transmission, grid management and telecom whichwould help these countries in smooth operation of the links. Further, a high capacitycross border transmission corridor for bulk transfer of power between India and Nepal isbeing implemented by two separate Joint Venture companies for Indian portion & Nepalportion wherein POWERGRID, SJVNL, Nepal Electricity Authority and IL&FS are thestakeholders and the project is expected to be completed by 2012 at an estimated cost ofRs. 205 Crore. This high capacity transmission line will initially help Nepal in meetingpart of its deficit by importing power from India and subsequently for export of power toIndia. In addition, interconnection between India and Bangladesh has been finalized, and,besides taking up activities for implementation of India portion of the line, your Companyis also providing consultancy to Power Grid Company of Bangladesh (PGCB) for constructionof Bangladesh portion of the interconnection as well as capacity building of PGCB’smanpower.

Your Company has been keenly participating in tenders floated by ADB, The World Bank,and other foreign organizations and has also collaborated with internationally reputedcompanies like KEMA, Netherlands and is submitting Expressions of Interest andPrequalification documents to clients in various countries like Vietnam, China, Kenya,Ethiopia, Uzbekistan, Afghanistan & Bangladesh for participating in InternationalCompetitive Bidding.

During the year 2009-10, business development opportunities continued to receivefocussed attention and thrust across the entire value chain of the power sector. YourCompany has realised revenue of about Rs. 269 Crore during FY 2009-10 asconsultancy fee from its various ongoing assignments as compared to Rs. 216 Crore realisedlast year. Further, during the year, 24 nos. repeat orders have been received fromcustomers who placed orders for consultancy jobs in the previous financial year. This isthe highest so far achieved and shows high level of customer satisfaction.

CONTRIBUTION IN DISTRIBUTION REFORMS

A well planned generation system, integrated transmission system & reliabledistribution system penetrated through remotely located villages & habitations is theneed of the hour. You can proudly claim that your Company is playing a significant role incarrying forward the distribution reforms through Govt. of India’s sponsoredAccelerated Power Development & Reforms Programme (APDRP) and Rajeev Gandhi GrameenVidyutikaran Yojna (RGGVY) schemes in various parts of the Country. These schemes areaimed at bringing qualitative improvement in distribution sector and expected to achievereduction of AT&C losses.

With its strong managerial and technical expertise, your Company is assisting Govt. ofIndia under APDRP for improvement of distribution system in various States. Most of theseschemes have been commissioned/ are nearing completion. Under RGGVY, your Company has beenassigned the job for execution of rural electrification works in 68 districts in thecountry covering around 74,000 villages at an estimated cost of about Rs. 6,400 Crore.For the year 2009-10, infrastructure has been created for electrification in 3402 un-electrifiedvillages against a target of 3100 villages, achievement of 110%. Service connectionsto about 6.87 Lakh BPL households were provided against a target of 6 Lakh,achievement of about 115%. Cumulatively, till March, 2010, your Company has establishedinfrastructure for electrification of 37,923 villages. Further, service connection toabout 16.20 Lakh BPL households has also been released under RGGVY.

E-GOVERNANCE:

Your Company is committed to fulfilment of the expectations of stakeholders throughcontinual enhancement of Effectiveness, Efficiency and Transparency in its functions. Inorder to meet the above objective potential of Information technology as an enabler in itspursuit to achieve operational excellence is being leveraged.

Considering the present business needs and the fast pace of growth the Company has beenexperiencing in the last 5 years and which is only expected to grow exponentially, yourCompany is taking steps to integrate various parts of the systems, like financial andphysical monitoring and control internally through the use of Enterprise ResourcePlanning (ERP).

First workshop cum meeting of Crisis Management Group for "Countering Cyberattacks and Cyber terrorism" was also organised by your Company in association withIndian Computer Emergency Response Team (CERT-In), Department of Information Technology,Ministry of Communications & Information Technology in February, 2010 at Gurgaon.

Major IT endeavours during the year include the following:

• • IT Infrastructure consolidation and strengthening

• Facility Management System initiatives for maintaining IT infrastructureNationwide

• Formulated the Knowledge Management Policy & started IT enabled initiatives

• Initiated implementation of Crisis Management Plan for Countering Cyber attacksand Cyber Terrorism and the draft Crisis Management Plan prepared as per CERT-Inguidelines

• Proto testing of Enterprise Project Management (EPM) application fortransmission projects

• Strategic Planning for EHV infrastructure Asset Management

• Developed e-Performance Management System

• Initiated activities for E-procurement.

ENVIRONMENTAL AND SOCIAL SAFEGUARDS MANAGEMENT

Increasing threat of climate change and environmental degradation due to increasingpollution and growth is a major area of concern today. You must be proud to know that yourcompany, with a goal of achieving sustainable development of the power sector in thecountry has taken proactive measures for improvements in the areas of EnvironmentManagement. POWERGRID’s contribution towards environmental degradation is almostnegligible. Transmission projects are non-polluting in nature and environmentally cleanand don’t generate solid waste.

Your Company is the first PSU to develop Environmental and Social Policy andProcedures (ESPP) in 1998 and upgraded it from time to time through wide consultationswith social bodies, local communities, Govt. agencies, etc. in line with changes andInternational best practices to pre-empt all possible Environment & Social issuesrelated to land acquisition & RoW clearances through proper & timely management.The ESPP outlines Company’s approach and commitment to deal with environmental andsocial issues, relating to its transmission projects and lays its management proceduresand protocol to mitigate the same. During last 12 years, ESPP implementation has drawnmany appreciations/ awards from various stakeholders.

When we take loan from multilateral funding agencies, compliance to their environmentpolicy, besides statutory requirement of the country, have to be ensured and their priorapproval is required before commencing the work. However, considering the environmentpolicy of your Company, which not only takes care of sustainability requirement but hasbeen finalized keeping the international standards, The World Bank has selectedPOWERGRID’s ESPP as the 1st candidate for Use of Country Systems (UCS) in India, inwhich prior approval is not required. This facilitates expeditious compliance of fundingagency requirement and timely implementation of transmission projects.

Your company took keen interest towards development of first Sustainability Report inpower sector, for measuring, disclosing and being accountable to internal and externalstakeholders for organizational performance towards sustainable development.

The results achieved by your company towards conservation of RoW are praiseworthy. Withthe development of innovative tower designs, the RoW requirement has been reduced from 85m to 64 m for 765 kV and from 52 m to 46 m for 400 kV D/c AC line. You would be glad toknow that more than a lakh sq. meters of precious RoW was saved by constructing 765 kVlines by your company till March, 2010. Apart from this, installation of Pole typestructures for 400 kV in urban areas such as Dadri-Ballabhgarh transmission line has notonly reduced the RoW, but were more aesthetic compared to conventional lattice typestructures.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) has always been an integral part of yourCompany’s vision and the cornerstone of Core Values of Good Corporate Citizenship.Your Company is committed towards taking responsibility for its impact, though veryminimal in nature, on society and being accountable to the inhabitants of Mother Nature.As part of Corporate Social Responsibility, your Company is making key contributions tosociety through its core business activities, its social investment and philanthropyprogrammes and its engagement in public policy to ensure Socio-Economic development ofweaker sections of Society and for overall conservation of Environment and improvement ofEcological balance.

Company’s ‘Corporate Social Responsibility Policy’ addresses theissue of Community Development (including employment, conservation and environment, etc.)in the vicinity of its offices/ sub-stations where the Resettlement and Rehabilitation(R&R) activities under ESPP have been completed and closed. The policy provides forspending 0.75% of previous year’s net profit on identified CSR activities.

The CSR Budget for the year 2009-10 was Rs. 12.67 Crore in different thrust areas likeEducation, Health, Infrastructural Development, Environment & Ecology, Sports, Arts& Cultural heritage, etc. spread across different Regions, which is non-lapsable andthe unspent amount is to be carried forward to succeeding year. During the year, an amountof Rs. 4.29 crore was spent on CSR activities and the balance amount has been earmarkedfor expenditure during next year. A major portion of CSR initiatives was in thedevelopment of physical infrastructure in nearby villages like constructing class room,library, computer room for schools, primary health centre, drinking & sanitationfacility, check dam, drainage, roads, bus shelter, community centre, street lights,cultural interpretation centre & auditorium etc. These facilities were created withthe objective of these being of long lasting value and have multiplier effect on improvingthe standard and quality of life of the villagers.

CSR initiatives undertaken in different villages around our establishments havecontributed tremendously and earned the goodwill of the local inhabitants. The work doneby the Company has been appreciated by one and all. This has also played a pivotal role inimproving the quality of life of local people by enabling them to use the physicalinfrastructure established by the company and bringing the marginalized people into themainstream of development.

Human Resource Development

Company pursues the philosophy that human value is the most vital asset of theorganization and accordingly, its policy is focused on Human Resource Development (HRD)through sustained efforts towards skill upgradation, career enhancement and job rotation.HRD strategy is evolved with a view to make employees competent for planning, monitoringand timely execution of construction projects, enable them to perform operation &maintenance effectively and upgrade/innovate technologically, provide better careergrowth, etc.

Training needs are identified with two pronged approach. Firstly, a structuredquestionnaire indicating the key result areas of various key functions is circulated amongemployees offline and online to seek the training needs of individuals. Secondly, acommittee consisting of Heads of Departments representing various Regions examines theindividual needs in terms of competencies and the gaps thereof. After a detaileddiscussion with key functionaries of various Departments, individual training needs aredetermined after verification of the same with their Annual Appraisal Reports.Comprehensive Annual HRD Action Planner is evolved based on the above process.

Your Company has been the front runner to implement the revised pay scales as well asperks, which are best in the PSUs. In order to cope up with the increased workload andchallenges, this year about 1,200 employees have been recruited. Due to good reputation ofyour Company and also because of good pay packages, encouraging response has been receivedfrom candidates of IIMs during campus recruitments. Besides, a number of executivetrainees from NITs and IITs have also been recruited through campus recruitments.

Your Company’s Human Resources function took a number of initiatives during theyear in response to intensifying competition for trained manpower. During the year, tonurture and develop the existing manpower, a series of long-duration training &development interventions – both functional and developmental – were carried outwith focus on building leadership capabilities, strategic orientation and skills to suitnew businesses.

Around 6560 employees have undergone classroom, in-house and external trainingprograms, in all functional areas including programs on Sub-station Automation, LatestSurvey Techniques, Developing Marketing Skills for Telecom Business, Advanced Features inIT, Networking Administration and Security, Power System Analysis, etc.. Your Company hasalso taken up training of employees of State Electricity Boards and other power utilitieswithin the country and overseas.

Your Company has collaborations and strategic alliances with prominent managementinstitutes such as IIM, IIT, IPE, MDI, XLRI, ECSI, NPTI etc. as a testimony of successfulpartnership between utility and academic institutions for achieving operational andprofessional excellence. At the same time, the hand-on training programmes being conductedat manufacturer’s premises such as CGL, BHEL, ABB, AREVA etc. are the excellentexamples of fruitful collaboration between the utility and the industry.

All newly recruited employees are made to undergo an induction program. 259 ExecutiveTrainees have been put through a one year induction training program during the year,which included class-room training, industry visits and on the job training. Employeespromoted across categories are subjected to programs to enhance their skills. As a steptowards integrated development of employees, employees are encouraged to take upmembership of professional bodies through reimbursement of the professional fees.

Emerging business order of power sector fuelled by reform program calls for greateroptimization of human resource, building requisite human resource skills and competencies,motivating people for superior performance, inculcating quality and customer delightoriented practices, involving line managers as partners of HR and bringing a scientificsystem approach to HR function, especially building the business human resource linkage atmicro and macro levels. Your Company has continuously and consistently endeavored to excelon these parameters. Some of the interventions adopted to measure the effectiveness of HRMfunction besides those linked with business includes HR Function Effectiveness Audit,Culture Audit, System Audit, Manpower Audit & Review, etc..

Impact of all these HR function effectiveness measurement exercises along with HRinterventions can be seen through different indicators, like there has been no employeeunrest, strike or lock out in the Company and there has been no grievances in last manyyears and attrition rate is consistently low.

Employee welfare

An effective work culture has been established in the organization through empowerment,transparency, decentralization, practice of participative management etc.

Your Company is the first company in Indian Power Sector to get the entireestablishments certified under Social Accountability 8000:2008. The cafeteria in theCorporate Office and Food Lounge of Multi Purpose Hall of your company is conferred withISO 22000:2005 where quality food is being served to employees. Your Company has also beencertified under OHSAS 18001:1999 for providing a healthy working environment for employeesby ensuring norms for occupational health and safety in the workplace.

For taking care of welfare and improvement in quality of life of employees and theirfamily members, various welfare measures have been provided in the guidelines to enableoverall development of the individual as a contended & conscious citizen.

Cultural programmes are conducted periodically for promoting healthy community livingand entertainment on various occasions like Diwali, Holi Milan, New year, Raising day,etc. Apart from the social gatherings on National festivals, to promote awareness amongstemployees and their families about benefits of classical and traditional art forms likedance, drama, music, etc., various cultural events are organized round the year on regularbasis wherein various renowned artists perform live.

The company has been regularly participating in the Annual Inter-PSU Sports meets andthis year too Your Company participated in Inter-PSU Sports Tournament and won awards inChess, Carrom & Table Tennis tournaments.

Citizen’s charter

Your Company has formulated its Citizen’s Charters providing a visible front ofits objectives, mission, commitments, terms of service and its obligation to variousstakeholders. Information about its schemes, policies, project plans of the Corporationand issues of general interest to stakeholders is available in the offices. Thisinformation is also available on Company’s web site and is updated time-to-time. Thisprovides information on schemes, plans and practices to users outside the organisation aswell as information about accessing the services.

Implementation of official language

In order to give our Rajbhasha "Hindi" its due, your Company has renewed itscommitment to ensure implementation of Rajbhasha policy of Govt. of India and is sensitivetowards Country’s heritage, social and cultural concerns. Several steps have beentaken to promote usage of Indian languages and Rajbhasha "Hindi" in all itsofficial work. Various activities like workshops for training, meetings, poetry session,culture activities, publication of Hindi magazines/papers and lectures from eminentpersonalities are regularly organized. Hindi library of your Company is one of the bestlibraries in Public Sector Units wherein all records of Hindi books & magazines arekept online for easy access through internet. Employees are encouraged to work inRajbhasha to the extent possible. For outstanding and noteworthy contributions in Hindi,number of incentives and reward schemes are in force. Efforts made in promoting theimplementation of Rajbhasha have been applauded in many forums.

During the year, 217 Rajbhasha workshops were organised in which training to work inHindi was imparted to about 2670 employees. 18 offices of your Company have been notifiedunder Gazette of Govt. of India to work in Hindi during the year, thus taking the tally ofnotified offices to 134 overall. This year, about 450 employees were rewarded as per theguidelines, during a campaign organised for encouraging employees to type in Hindi, whichis a new initiative in this direction.

Renewed commitment to transparency

In keeping with the tradition of bringing the internationally acclaimed best practicesfor raising integrity levels in procurement of works and services, the Integrity Pact forpackages above Rs. 100 Crore was implemented on 24th December, 2009 by signing of aMemorandum of Understanding by CMD, POWERGRID and Chairman, Transparency International,India in the presence of Central Vigilance Commissioner, important vendors and otherdistinguished guests. Two Independent External Monitors (IEMs), Shri Arvind Pande, IAS(Retd.), Former Chairman, SAIL and Shri R.S.S.L.N. Bhaskarudu, Former Chairman, PESB havebeen appointed as IEMs on the approval of the Central Vigilance Commission. EarlierIntegrity Pact has been implemented in the organization without IEMs for packages lessthan Rs. 100 Crore.

Special emphasis has been laid on the preventive aspect of vigilance. As part of thisinitiative, process online inspections have been devised to inspect ongoing critical worksat the time of execution by the vigilance executive for shortcomings, if any. During thisperiod, a large number of inspections have been conducted both by Vigilance Executives aswell as the CTE’s Organisation which also includes process online inspectionsconducted during this period in the regions. On the basis of these inspections, adequatecost compensation is affected for not conforming to technical specifications. Besidesthis, 93 CTE paras were also settled during the year.

Training is also imparted on ethics and vigilance matters through various preventivevigilance workshops organized at the Regions in which faculty from Engineering andQA&I departments are also invited to share ground realities at the site as well as thecodal provisions. 197 non-vigilance executives were imparted training in these workshops.Vigilance executives are also sent on training to various organizations like CBI andNational Institute of Criminology and Forensic Science, besides participating in trainingprogrammes organized at Corporate Centre. The Vigilance executives were also part of thefaculty in training programmes organized at NPTI for executive trainees.

On the punitive side, a number of complaints were received and taken up forinvestigation. Necessary disciplinary action was also initiated against some employees. Alarge number of system improvements were also undertaken to further improve the system.

The Vigilance Awareness week was organized in the organization from 3^rd to 7^thof November, 2009 as per the directives of the Central Vigilance Commission. The pledgewas administered to all the employees of the organization across the Country. During theweek, various competitions were also organized for the employees and their family members.An inter-regional competition on ‘implementation of e-governance’ wasorganized during the week in order to encourage the Regions to make maximum efforts inimplementing the directives of the CVC in leveraging technology for better governance.Apart from this, an advertisement was also brought out in the ‘Times of India’and ‘Hindustan’ highlighting the steps taken by your Company to enhancetransparency through implementation of leveraging technology as per the advice of CVC.During the Vigilance Awareness Week, debate competitions on topics related to vigilancewere also organized at various schools. The week concluded with the release of thein-house journal ‘Candour’ by Secretary, Ministry of Labour and Employment.

MANAGEMENT DISCUSSION AND ANALYSIS

In addition to the issues in the Directors’ Report, some issues have been broughtout in report on Management Discussion and Analysis placed at Annexure-I to thisReport.

PARTICULARS OF EMPLOYEES

The particulars of employees of the Corporation who were in receipt of remuneration inexcess of the limit prescribed under Section 217 (2A) of the Companies Act, 1956 is givenin Annexure-II to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

As per requirements of disclosures under Section 217(1) (e) of Companies Act,1956 readwith Rule 2 of the Companies (Disclosures of Particulars in the Report of Board ofDirectors) Rules, 1988 information relating to conversation of energy, technologyabsorption and foreign exchange earnings and outgo, is given in Annexure-III tothis Report.

COMPTROLLER AND AUDITOR GENERAL’S COMMENTS

Comments on the accounts for the year ended 31^st March, 2010 by theComptroller and Auditor General of India under Section 619(4) of the Companies Act, 1956are given in Annexure-IV to this Report.

CORPORATE GOVERNANCE

A report on the Corporate Governance, forming part of this Report, is given in Annexure-V.The Certificate on Corporate Governance obtained from the joint Statutory Auditors isgiven in Annexure-VI to this Report.

BOARD OF DIRECTORS

During the year, Shri Rakesh Jain, Joint Secretary & Financial Advisor, Ministry ofPower, assumed the charge as Director w.e.f. 9^th June, 2009. Shri Sudhir Kumar,MoP joined the Board of the company w.e.f. 22^nd May, 2009 in place of ShriI.C.P. Keshari, who ceased to be on Board of the Company w.e.f. 22^nd May, 2009.Shri Sudhir Kumar, MoP ceased to be Director of the company w.e.f. 11^thDecember, 2009 and Dr. M. Ravi Kanth joined in his place. The Board wishes to place onrecord its deep appreciation for the valuable services rendered by Shri I.C.P. Keshari andShri Sudhir Kumar, during their association with the Company. During the year, Shri R.N.Nayak assumed charge as Director (Operations) on 16^th May, 2009, and ShriI.S.Jha assumed charge as Director (Projects) on 1^st September, 2009.

The tenure of four non-official Part-time Directors on the Board of your Company - Dr.P. K. Shetty; Prof. A. S. Narag; Shri Anil K. Agarwal; Shri F. A. Vandrevala appointed fora period of three years with effect from the date of appointment - 10.07.2007 completed on09.07.2010 and they ceased to be Directors of POWERGRID. The Board wishes to place onrecord deep appreciation for their invaluable contribution and support during theirassociation with the Company.

In accordance with the provisions of Section 255 and 256 of the Companies Act, 1956read with Article 31 (iii) of the Articles of Association of the Company the Directors– Shri Ashok Khanna and Smt. Sarita Prasad shall retire by rotation at the AnnualGeneral Meeting of your Company and being eligible, offer themselves for re-appointment.

ACKNOWLEDGEMENT

The Board of Directors acknowledge with deep sense of appreciation for the guidance andcooperation received from the Govt. of India, Ministry of Power, Ministry of Finance,Ministry of Environment & Forests, Ministry of Statistics and ProgrammeImplementation, Ministry of Home Affairs, Central Electricity Regulatory Commission,Appellate Tribunal for Electricity, Central Electricity Authority, Planning Commission,Department of Public Enterprises, Regional Power Committees, other con cerned Govt.departments/ agencies at the Central and State level as well as from Securities andExchange Board of India, National Stock Exchange of India Ltd., Delhi and Bombay StockExchange Ltd., Mumbai without whose active support it was hard for us to imagine theaccomplishments your Company has achieved during the year.

Your Directors take this opportunity to thank our valued customers, various State powerutilities as also to valued consultancy clients, for providing us with various consultancyworks and reposing faith in our capability to handle them. The Board also conveys itsgratitude to the shareholders, various International and Indian Banks/ MultilateralAgencies/ Financial Institutions/ Credit rating agencies for the faith they have shown inPOWERGRID. Special thanks is reserved for C&AG and the Statutory Auditors for theirconstructive suggestions throughout the year.

The Board also wishes to place on record its appreciation for the untiring efforts andcontributions made by the employees at all levels and the various employee unions toensure that the company continues to achieve greater heights year after year.

Particulars of Employees Pursuant to Section 217(2A) of the Companies Act, 1956 for theyear 2009-2010

* Retired after 31.03.2010.

** Premature Retirement after 31.03.2010.

Notes:

1) Remuneration includes Salary, Allowances, Leave encashment, Leave travel concession,Payment for Subsidised leased accommodations, reimbursement of medical expenses toemployees and employer’s contribution to Provident fund and other funds. In addition,employees are entitled to Gratuity/Group Insurance in accordance with Company’srules.

2) None of the Employees listed above is related to any of the Directors of theCompany.

3) Remuneration mentioned above is inclusive of retirement/ separation benefits paidduring the year and is not indicative of any regular remuneration structure of employeesof the Company.

(a) Energy conservation measures taken and on hand:

It has been the endeavour of POWERGRID to make all out efforts for conservation ofenergy in all its projects - right from the planning stage, to the execution stage andthroughout the O&M period. Before finalizing the transmission schemes, variousalternatives/ technologies for power transfer are examined and one of the major criteriafor selection of transmission system/ technology is lower losses. In fact, POWERGRID hasadopted new technologies like 765kV AC, 500kV HVDC, 800kV HVDC and 1200kV AC in itstransmission systems for bulk power transfer across various regions which result in lowerlosses in the system.

At design stage of the transmission system, optimization of various parameters is doneso that losses in the transmission system are optimized. The conductors are selected afterdetailed optimization studies which consider reduction of line losses as one of theprimary criteria. The bus bar materials and the clamps and connectors are chosen meetingstringent international requirements so that losses are optimized. During evaluation oftransformer & shunt reactor packages, equipment with minimum losses is givenweightage. In case of HVDC system also, the selection of filter components, ThyristorValves, Converter Transformer etc, parameters are done in such a way that overall lossesare minimized even under worst operation of system operating parameters. Further, in caseof transmission hardware, the material with lower losses is specified. Parameters andtypes of various other equipments are also chosen in a manner that the losses areoptimized. Thus, energy conservation measures are taken by POWERGRID at every step so asto develop an efficient and low-loss transmission network.

(b) Additional investment and proposals, if any, being implemented for reduction ofconsumption of Energy:

As stated above, POWERGRID undertakes energy conservation measures by means ofreduction of losses in its transmission schemes right from planning to execution stage.

B. RESEARCH AND DEVELOPMENT

1 & 2 It has been POWERGRID’s endeavour to pursue the research and developmentefforts in the field of new technologies in transmission system to remain at par withinternational standards. Also, realizing the need for conservation of Right-of-Way andfuture requirement of development of high capacity transmission system to meet the futurepower requirement, POWERGRID is actively pursuing seamless integration of new andefficient technologies in Indian power Grid to create environment-friendly transmissionsystem. POWERGRID has been according special emphasis on adoption of new technologiesavailable around the globe for improving the quality of power supply, reduction of losses,optimum utilization of the available transmission assets, conservation of environment andoptimizing upon the cost of delivered power. The company is working in collaboration withInternational/National research institutions, academic institutions and manufacturers, andis thus enhancing its in-house capabilities for design and engineering of state-of-the-arttransmission systems.

Specific Areas in which R&D has been carried out by the company and benefitsderived thereby are given below:

Completed Projects:

1. Completed in-house design of 24 no towers for transmission lines which includedriver crossing towers for 400kV and 765Kv, 400kv upgradeable to 1200kV AC tower (5 No.).1200kV S/c and D/c AC Tower for test line (3 No.) and tested successfully 4 nos of towers.

2. Completed in-house design of approx. 500 nos. tower foundations for transmissionlines upto 765kV including special foundations.

3. Indigenous development and type testing of extra high strength 320KN & 420 KNinsulators for 400kV/765 KV AC transmission lines.

4. Performance evaluation of Polymer composite insulators which were in service formore than 6 years in POWERGRID lines.

5. Indigenous development and type testing of extra high strength 420KN HVDC insulatorsfor 800kV HVDC transmission lines.

6. Indigenous development and type testing of Polymer long Rod 120kN & 160kN ACinsulators for 400kV AC transmission lines in heavily polluted areas (Threemanufacturers).

7. Corona cage studies, Air Gap Insulation studies and voltage distribution studies for1200 kV transmission system.

8. Interference measurements (Electric field , Magnetic field, Audible Noise & RIV)for 765kV AC Seepat-Seoni transmission line

9. Study of EMI effect on Co-axial and Control Cables in association with CPRI &LRDE, Bangalore

10. Online condition monitoring systems for transformers at Mandola substation andRihand HVDC station were installed to facilitate real time data to detect faults atincipient stage and provide alarms in advance in case of fault in the transformers. Thesystem will also provide the dynamic over load capacity of the transformers.

11. Uprating of short circuit current capacity of existing equipments e.g. circuitbreakers,CTs etc. from 40 kA to 50 kA.

12. Revision of surge arrestor specification to optimize the stresses on circuitbreakers during reactor switching

13. Provision of on line drying equipment and hydrogen and moisture monitoringequipment in all large 400kV and 765kV transformer and reactors

14. Optical fiber sensors are provided in critical equipment such on 765kV transformersand reactors to monitor hot spot

Ongoing projects

1. For development of 1200kV UHVAC Super grid, 1200 KV UHVAC test station is beingestablished at POWERGRID substation at Bina, MP with joint efforts of POWERGRID, IndianEquipment Manufacturers and CPRI. This will facilitate the Indian Equipment Manufacturersto test their 1200 kV class equipment being developed by them. Successful testing willlead to indigenization of 1200 kV class equipment resulting in reduction in project costs.

2. High Capacity, 800kV, 6000 MW HVDC multi terminal system for long distance powertransfer over 2000 km. from NER/ER to NR.

3. 2500 MW, 500kV Balia – Bhiwadi HVDC Bipole with Lapwing conductor underimplementation

4. Re-conductoring of existing 400kV D/c Purnea-Siliguri line with high temperatureendurance conductor to enhance the capacity of the transmission corridor by about twotimes.

5. Development of in-house foundation and tower designs for use in on-goingtransmission line projects.

6. Implementation of High Surge Impedance Loading (HSIL) line

7. Tower design and optimization studies for Hooghly river crossing (2KMs Span) forCESC.

8. Line design and optimization studies for 765kV D/c lines

9. For efficient Grid management, continuous upgradation of the load dispatch centresthrough technologies like Intelligent Grid comprising Wide area monitoring, adoptiveislanding, Voltage Security Assessment, Dynamic Security Assessment.

10. Several existing Substations in different Regions are being augmented for remoteoperation from nearby Substations so as to reduce the operation cost.

11. Development of GIS in association with Indian manufacturers

12. Measurement of synchro phasors for wide area monitoring and protection of NationalGrid

13. Indigenous Development of SF6 gas filled Current Transformer with BHEL.

14. Implementation of Controlled Switching schemes of circuit breakers for 400kVtransmission lines.

15. Development of Optical Instrument Transformers with CPRI/ERDA.

16. Engineering Data Integration on GIS Platform.

17. Collection of lightning data for assessment of lightning activity using lightningdetection system. Lightning sensors shall be installed in the in North Eastern Region.Lightning detection system shall detect lightning activities as well as intensity oflightning in the transmission lines or in the vicinity of lines. The data will be used infailure analysis and selection of transmission line parameters & planning

18. Indigenous vendor development for ACSR Moose conductor for 400kV.

Technology Absorption :

1. For route selection, length optimisation and estimation of BOQ for transmissionlines, POWERGRID is employing modern Survey techniques.

2. Substation Automation with IEC 61850 protocol is being adopted for all newSubstations of POWERGRID. This would result in savings in operational cost and increasedoperational and maintenance efficiency.

3. As a step towards National grid, 765kV AC and 500kV HVDC technology has beenimplemented in our country. Now, 800kV HVDC and 1200kV UHVAC technologies are beingplanned for bulk power transfer across the country.

4. For maximum utilization of existing infrastructure, application of Seriescompensation including TCSC has been adopted on EHV lines.

5. In special areas, compact towers like pole towers, delta configuration towers andnarrow based towers which reduce the space occupied by the tower base, are being used.Also tall towers and multi-circuit towers are being used for conservation of scarceright-of-way.

6. Shallow and deep resistivity measurements using magneto telluric techniques forlocating ground electrode stations for HVDC system has been adopted.

7. Special insulators like polymer composite insulators have been adopted intransmission lines in polluted areas.

8. High temperature conductors like INVAR have been adopted for increasing the transfercapacity of transmission corridors.

9. GIS technology has been adopted in substations where severe space constraints exist.

10. On line transformer monitoring techniques for monitoring of critical parameters ofpower transformers.

11. Under execution, world’s first 800kV HVDC Multi terminal project.

C. CONSERVATION OF LAND AND ENVIRONMENTAL CONCERNS

For the ground return mode of operation of HVDC Bipolar Transmission system, electrodestations are being used up to now, which require approx. 150 acre of land (75 acre foreach terminal of Bipolar system) at electrode site. The land for these electrode stationshave to be selected keeping in view that there are no metallic buried objects i.e.metallic oil and gas pipe line, metallic pipes, railway line, telephone lines usingmetallic wires, electrical operated water pump sets etc within a radius of about 8 to 10km from the centre of the proposed site of the earth electrode station. Since the inverterTerminal is generally located near the load centres, the cost of land acquisition is veryhigh.

Further, the electrode line of the HVDC Terminal also requires its right of way whichcreates the constraint in land usage. Even after taking full care in land selection forlocating earth electrode station, there is still a big element of uncertainty about theproper functionality of the earth electrode station and may result into undesirablesurface currents leading to unacceptably high step and touch potential around theelectrode site and it has been reported in the ground return operation of a number of HVDCsystem all over the world.

Major future HVDC link are proposed to evacuate bulk power from Chhattisgarh area.Because of geographical location and the deep soil resistivity profile of the area, theperformance of HVDC monopolar ground current operation might be a cause of concern.Selecting suitable land for electrode station in this area fulfilling the technicalrequirements of high Ground Return Currents in monopolar operation of HVDC can bedifficult.

For future 800 KV / 600 KV projects, the usage of third return conductor on thesame tower carrying the line conductor, instead of having a ground electrode as returnpath is being analysed. Apart from eliminating the element of uncertainty about the properfunctionality of the earth electrode station, the usage of third conductor as a returnpath will result in conservation of land required for conventional electrode station. Itwill avoid a separate electrode line and corresponding right of way related to theelectrode line resulting in further land conservation.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign Exchange Earnings

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THECOMPANIES ACT, 1956 ON THE ACCOUNTS OF POWER GRID CORPORATION OF INDIA LIMITED, NEW DELHI,FOR THE YEAR ENDED 31 MARCH 2010

The preparation of financial statements of Power Grid Corporation of India Limited forthe year ended 31 March 2010 in accordance with the financial reporting frameworkprescribed under the Companies Act, 1956 is the responsibility of the management of thecompany. The statutory auditor appointed by the Comptroller and Auditor General of Indiaunder Section 619(2) of the Companies Act, 1956 is responsible for expressing opinion onthese financial statements under section 227 of the Companies Act, 1956 based onindependent audit in accordance with the auditing and assurance standards prescribed bytheir professional body the Institute of Chartered Accountants of India. This is stated tohave been done by them vide their Audit Report dated 25 May 2010.

I on the behalf of the Comptroller and Auditor General of India have conducted asupplementary audit under Section 619(3)(b) of the Companies Act, 1956 of the financialstatements of the Power Grid Corporation of India Limited for the year ended 31 March2010. This supplementary audit has been carried out independently without access to theworking papers of the statutory auditors and is limited primarily to inquiries of thestatutory auditors and company personnel and a selective examination of some of theaccounting records. On the basis of my audit nothing significant has come to my knowledgewhich would give rise to any comment upon or supplement to Statutory Auditor’s reportunder Section 619(4) of the Companies Act, 1956.