NHPC Ltd Directors Report.

To the Members of NHPC Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying Standalone Financial Statements of NHPC Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2021, and the Statement of Profit and Loss(including Other Comprehensive Income), Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and Notes to the Standalone Financial Statements, including a summary of significant accounting policies and Other Explanatory Notes for the year ended on that date (hereinafter referred to as "Financial Statements"). In our opinion and to the best of our information and according to the explanations given to us, the aforesaidStandalone Financial Statements give the information required by the Companies Act 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2021, and profit, changes in equity and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditors’ Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have considered the matters described below to be the Key Audit Matters for incorporation in our Report.

Key audit Matters Addressing the Key Audit Matters
1. Regulatory Deferral Account Debit Balances and accruals of revenue pending tariff Notifications. Our audit procedures based on which we arrived at the conclusion regarding reasonableness of the carrying the value of Regulatory Deferral Account Debit Balances include the following:
Regulatory Deferral Account Debit balances as on 31st March 2021 is Rs. 7063.31 Crores (Rs. 6836.22 Crores up to 31st March 2020) as given in Note 14 of the Financial Statements.This include accruals aggregating to Rs. 3470.59 Crore on account of interest cost and other attributable expenses pertaining to Subansiri Lower Project for the period from the date of interruption of work i.e. 16.12.2011 till 30.09.2019 as indicated in Note 34(22A). Understanding and testing the design and operating effectiveness of controls as established by the management for accrual of income and determination of the amounts recoverable there against.
The operating activities of the Company are subject to cost of service regulations whereby tariff charged for electricity generated is based on allowable capital and other cost and expenses and stipulated return there against. Obtaining and understanding of the amount recoverable in terms of CERC Regulations and assessing, testing and evaluating the reasonableness thereof keeping in view the significant judgements management for such assessments.
Regulatory Deferral Accounts Debit Balances are recognised on undiscounted basis based on the estimates and assumptions with respect to the probability that future economic benefit will flow to the entity as a result of actual or expected action of regulator under applicable Regulatory framework and therefore recoverability thereof is dependent upon Tariff Regulations and related approvals and notifications. The above includes the evaluation of the CERC guidelines and acceptance of the claim made by the Company in the past and the trend of disallowances on various count and adherences and compliances thereof by the management and rationale for assumptions taken under the given situation and business environment.
The accruals made as above are vital and proprietary to the business in which the Company is operating. In absence of specific notification and rate fixation, these are based on the management’s assumptions and estimates which are subject to finalisation of tariff by CERC and commencement of operations of the Projects. Evaluating the various assumptions considered by the management for arriving at the value of Cash generating Unit Note 34(18) in case of Subansiri Lower HE Project and adequacy thereof with respect to the carrying value of the Project in Progress and balances pertaining to the said project under Regulatory deferral Accounts.
Assessing the application of provisions of Ind AS 114, Guidance Note on Accounting of Rate Regulated Activities issued by ICAI for recognition of regulatory deferral balances.
Reviewing the adequacy and reasonableness of amounts recognised and measurement policies followed by the Company and adequacy of the disclosure made with respect to the same in the financial statements of the Company.

 

2. Impairment Assessment of carrying amount of Property, Plant and Equipment (PPE) and Capital Work in Progress (CWIP) Our audit procedures based on which we arrived at the conclusion regarding reasonableness of the non-provisioning of any CGU based on impairment testing include the following:
Each of the Hydro Electricity generating plant has been considered as Cash Generating Units (CGUs) of the company and impairment indicators and requirements thereof have been assessed with respect to the Property, Plant and Equipment(PPE) and Capital Work in Progress (CWIP) as given in Note 34(18). This has been assessed that no significant change with an adverse effect on the company has taken place during the year, or is expected to take place in the near future, in the technological, economic or legal environment in which the company operate. Based on the assessment, the company has concluded that there exists no significant impairment indicator or any impairment in respect of the CGUs of the company tested for impairment during the year 2020-21. Based on the above assessment, no provision for impairment against PPE or CWIP has been considered necessary by the Company. Critical evaluation of internal and external factors impacting the entity and indicators of impairment (or reversal thereof) in line with Ind AS 38;
Impairment exercise undertaken which justifies the carrying amount of certain assets as above include the regulatory deferral account balances pertaining to Subansiri Lower Project as dealt with under para 1(a) above, is significant and vital to the Company’s operations. Review of impairment valuation models used in relation to CGU to determine the recoverable amount by analysing the key assumptions used by management in this respect including:
Evaluation of the impairment involves assessment of value in use of the Cash Generating Units (CGUs) and requires significant judgements and assumptions about the future cash flow forecasts, forecast production, forecast volumes, prices and discount rate. - Consistency with respect to forecast for arriving at the valuation and assessing the potential impact of any variances;
- Price assumptions used in the models;
- Factoring of risk inherent to the CGUs in the Cash Flow projections or the discount rate.
- The assumption/estimation for the weighted average cost of capital and rate of discount for arriving at the value in use.
Reviewed the Government policy and approval for setting up the Projects, decision of the Board and the efforts and steps being undertaken in this respect.
Reliance has been placed on management projections for completion timeline, volume of generation and resultant revenue based on expected tariff there against.

 

3. Contingent Liabilities – against claim from Contractors (Note 34.1(a)(i)) Our audit procedures based on which we arrived at the conclusion regarding reasonableness of the Contingent Liabilities include the following:
Various claims lodged by the Contractors against Capital Works amount to Rs. 9893.27 Crore of which Rs. 412.91 Crore have been provided for, leaving a balance of Rs. 9480.36 Crore which have been disclosed under Contingent Liability. This includes matters under arbitration and/ or before the Court which have been decided against the Company, out of which Rs. 2709.13 Crore have been paid/deposited pursuant to the NITI Aayog directions or Court order. Obtained the status of the cases from the legal department and their view on the matter;
Claims made against the Company are significant. Evaluated the contractual terms and conditions and management’s rationale for the adequacy of the provision so far made and the amount remaining unprovided against the demands made against the Company;
These are pending for decision before arbitration or other judicial forums and consequential and possible impact thereof. Provisions/disclosure judgement/ required have been based on the management’s assessment of the probability of the occurrence of the liability. Discussion with management and perusing/ reviewing the correspondences Memos and Notes on related matters.
Reliance has been placed on the legal views and decisions on similar matters and probability of the liability arising therefrom and provision made by the Management pending final decisions;
Reviewed the appropriateness and adequacy of the disclosure and provision by the management as required in terms of the requirement of Ind AS 37 "Provisions, Contingent Liabilities and Contingent Assets".

 

4. Expenditure incurred on Survey and Investigation Projects and those under preconstruction stage upto 31.03.2021 Our audit procedures based on which we arrived at the conclusion regarding carrying the amount of expenditure incurred on survey and Investigation Projects incurred include the following:
Expenditure of Rs. 1192.72 Crores as given in Note 2.2.2 has been incurred for conducting survey and investigation on projects. This includes Interest, administrative and other costs attributable to these projects. Out of this Rs. 954.58 (including Rs. 144.63 Crores during the year) Crores have been provided for keeping in view uncertainty with respect to clearances, approvals for implementing the Projects, leaving Rs. 238.14 Crores which has been carried forward as Capital Work in Progress. Obtained the status of the Projects under Survey and Investigation stage as provided by the management and the reason thereof of keeping them in abeyance.
Further, Capital Work in Progress also includes Projects where active construction activities are yet to be undertaken. Understanding and testing the design and operating effectiveness of controls as established by the management for accounting the expenses incurred (a) for survey and investigation projects and the policy followed for making provisions/ write off for such expenses given the nature of of business of the Company, (b) for project under preconstruction stage and allocation of Borrowing and other cost incurred and allocated there against.
Interest, Administrative and other Costs are capitalized till the projects are abandoned, however, provisions are made as given herein above in cases where in view of the management there are uncertainties in implementing the projects undertaken. Evaluating the management’s rationale with respect to continuing such projects under Capital Work in Progressin spite of there being uncertainties and delay in implementing the same and expected economic use of the same in future.
In the event of related Projects not being undertaken, amounts spent on survey and investigations and those incurred/ allocated prior to construction thereof will no longer be eligible to be carried forward as Capital Work in Progress. Evaluating the tenure of pre and under construction stage of project and management contention of normal period required for the same given the location, size and nature in each case of the respective project.
The matter being technical and proprietary to the nature of business in which the company is operating, reliance has been placed on the management’s contention and representation on the matter.

 

5. Recognition of Deferred Tax and evaluation of utilisation thereof. Our audit procedures based on which we arrived at the conclusion regarding appropriateness of non recognition of the unutilised MAT Credit include the following:
Deferred Tax with respect to MAT Credit entitlement of Rs. 2382.61 Crores lying unutilized as on 31st March 2021 has not been recognised. Understanding and testing the operating effectiveness of the company’s control relating to taxation and assessment of carrying amount of deferred tax assets/ liabilities.
This is on the basis of the management’s estimate and evaluation of taxable profit in foreseeable given period in future based on convincing evidences against which such credit can be utilised. Review of the Company’s accounting policy in respect of deferred tax assets on unutilized MAT credit and current year development, if any, requiring change in such policy and management contention on the same.
This involves significant management judgement based on future projections including future capital expenditure for capacity enhancement and which may significantly vary on crystallization. Evaluation of tax credit entitlement as legally available to the company based on internal forecast prepared by the company and probability of future taxable income.
Review of underlying assumption for consistency and uncertainty involved and principle of prudence for arriving at reasonable degree of probability of utilisation of deferred tax assets.
Review of implication pertaining to regulatory regime under which company operates and possible utilisation of the MAT credit and impact thereof on the financial statement under the given current Regulatory provisions whereby creation of such assets lead to adjustment/ reversal of Regulatory Deferral Account Debit Balances.
Evaluation of adequacy and appropriateness of disclosure made in the financial statement.

Information other than the Financial Statements and Auditors’ Report thereon

The Company’s Board of Directors is responsible for the other information. The other information comprises the information included in the Annual Report, but does not include the standalone financial statements and our auditors’ report thereon. The other information as stated above is expected to be made available to us after the date of this auditors’ report.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available, and, in doing so, consider whether the other is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

When we read the other information as stated above and if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and describe necessary actions required as per applicable laws and regulations.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true (financial position), Profit or Loss (financial performance including other equity and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Indian accounting Standards specified under section 133 of the Act. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those Board of Directors are also responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibility for the Audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Standard on Auditing (SAs) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system with stat in place and the operating effectiveness of such controls; reference to financial Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern; and

Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the standalone financial aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial statements may be influenced. We consider quantitative materiality and planning the scope of our audit work and in evaluating the results of our work; and

(ii) to evaluate the effect of any identified misstatements in the standalone financial statements

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matters

i. Due to the ongoing COVID-19 pandemic and recent surge in number of affected cases and the lockdown imposed by State Governments, audit processes and procedures were carried out through remote access of the books of account/records and necessary documents/information made available to us by the management through digital medium. Accordingly relevant documents and supporting although available in E- form as such could not be verified by us in primary and original form.

ii. The financial statements for the year ended 31st March 2020 have been audited by then Joint auditors of the Company. One of them were predecessor audit firms and had expressed an unmodified opinion vide their report dated 27 June 2020. Reliance has been placed on the figures and other information incorporated for the purpose of these financial statements.

Our opinion is not modified in respect of the matters stated in para i and ii above.

Report on Other Legal and Regulatory Requirements

i. As required by the Companies (Auditors’ Report) Order, 2016 ("the Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the "Annexure A" a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

ii. Based on the verification of books of account of the Company and according to information given to us, we give below a report on the Directions issued by the Comptroller and Auditor General of India in terms of Section 143(5) of the Act:

Sl. No. Directions Reply
1 Whether the Company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated. According to the information and explanations given to us and based on our audit, all accounting transactions are routed through ERP system implemented by the Company. Period end Financial Statements are compiled offline based on balances and transactions generated from ERP system. We have neither been informed nor we have come across during the course of our audit any accounting transactions having impact on the integrity of the accounts along with the financial implications which have been processed outside the IT system.
2 Whether there is any restructuring of an existing loan or cases of waiver/write off of debts/loans/interest etc. made by a lender to the Company due to the Company’s inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for? According to information and explanations given to us and based on our audit, there is no case of restructuring of an existing loan or cases of waiver/ write off of debts / loans / interest etc. made by lender to the Company.
3 Whether funds (grants/ subsidy etc.) received/receivable for specific schemes from Central/State Government and its agencies were properly accounted for/ utilized as per its terms and conditions? List the cases of deviation. According to information and explanations given to us and based on our audit, the Company has accounted for and utilized the funds received for specific schemes from Central/State agencies as per the terms and conditions of the schemes.

iii. Further to our comments in the annexure referred to in the paragraph above, as required by Section 143(3) of the Act, we report that:

a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c) the Balance Sheet, the Statement of Profit and Loss (including Other Comprehensive Income),the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account; statements

d) in our comply with opinion, the aforesaid Indian Accounting standalone financial Standards specified under Section 133 of the Act;

e) in terms of Notification th June 2015 issued by the Ministry of Corporate no.G.S.R.463(E)dated05 Affairs, provisions of Section 164(2) of the Act regarding disqualifications of the Directors, are not applicable as it is a Government Company;

f) With respect to the adequacy of the internal financial statements controls with reference to of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure B". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal control; and

g) With respect to the other matters to be included in the Auditors’ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements Refer Note no. 34 para 1 to the standalone financial statements;

ii. The Company did not have any material foreseeable losses against long-term contracts including derivative contracts and thereby requirement for making provision in this respect is not applicable to the Company;

iii. There has been no delay in transferring amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

iv. As per notification number G.S.R. 463(E) dated 5th June, 2015 issued by Ministry of Corporate Affairs, section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

For Arora Vohra & Co. For K.G. Somani & Co. For Lodha & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
Firm’s ICAI Registration No.: 009487N Firm’s ICAI Registration No.:006591N Firm’s ICAI Registration No.:301051E
CA Narinder Malik CA Bhuvnesh Maheshwari CA R.P. Singh
Partner Partner Partner
M. No. 097008 M. No.088155 M. No. 052438
UDIN:21097008AAAABY5911 UDIN:21088155AAAAAV3062 UDIN:21052438AAAABW9921
Place: Ludhiana Place: New Delhi Place: Kolkata
Date: 10th June 2021 Date: 10th June 2021 Date: 10th June 2021

ANNEXURE "A" TO THE AUDITORS’ REPORT OF EVEN DATE:

i) a. The Company has maintained proper records showing full particulars, including quantitative details and situations of Fixed Assets.

b. As per the information and explanations given to us and on the basis of our examination of the records of the Company, the Tangible Fixed Assets except Land in certain Units, have been physically verified by the management/ outside agencies, in a phased manner, which in our opinion is reasonable, having regard to the size of Company and nature of its business. The reconciliation of physically verified assets with the book records in certain cases is in progress. Discrepancies noticed on the physical verification and consequential adjustments are carried out on completion of According to information and explanations given by the management and in our opinion, the same are not material.

c. According to the information and explanations given to us, the records examined by us and based on the Title/Lease deeds provided to us, we report that, the title/Lease deeds, comprising all the freehold/leasehold immovable properties of land and building, are held in the name of the Company as on the balance sheet date except for the following where the title/lease deeds are not available with the Company:

Nature Area in Hectares Gross block as at 31.03.2021 Net block as at 31.03.2021
(Rs. In Crore) (Rs. In Crore)
Freehold land 190.48 31.60 31.60
Leasehold Land included under Right of Use Assets 397.21 165.35 145.18
Building under Lease - - -

ii) As informed, the inventories of the Company except for inventories in transit, have been physically verified by the management/ outside agencies during the year. Even though we were not able to ensure the physical presence during verification process due to movement restrictions on situation, based on alternative procedures applied by us for verifications in this respect, in our opinion and according to the information and explanations given to us, the procedure followed and frequency of such verification are reasonable. The discrepancies noticed on physical verification of to book records were not material and the same have been properly dealt with in the books of account.

iii) According to the information and explanations given to us, the Company has during the year granted unsecured loan of Rs. 12.40 Crore to one of the Joint Venture Company which is covered in the register maintained under Section 189 of the Act.

a) In our opinion the terms and conditions of grant of such loans are not, prima facie, prejudicial to the interest of the Company.

b) In respect of Loan granted by the Company during the year,the schedule of repayment of principal and interest has been stipulated. The Company has during the year further extended the repayment schedule of Unsecured loan of Rs. 6 Crore granted in earlier years which was due for repayment during the year. In view of the above the repayment of Principal and repayment of interest is regular.

c) There is no overdue amount in respect of such loan granted to the company.

iv) In our opinion and according to information and explanations given to us the Company has, in respect of loans, investments, guarantees, and security, complied with the provisions of section 185 and 186 of the Act.

v) The Company has not accepted any deposits within the meaning of sections 73 to 76 or any other relevant provisions of the Act. In respect of overdue earnest money deposits and security deposits, Management is of the view that overdue earnest money deposits and security deposits of suppliers/contractors appearing in the books are in the nature of retention money for performance of contracts for supply of goods and services and accordingly, not to be treated as deemed deposits by virtue of amendment in rule 2, sub rule (1), clause (c) of the Companies (Acceptance of Deposits) Amendment Rules 2016.

vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 148 (1) of the Act in respect of the Company’s products to which the said rules are made applicable and are of the opinion that prima facie, the prescribed records have been maintained. We have however not made a detailed examination of the said records with a view to determine whether they are accurate or complete.

vii) a. According to the information and explanations given to us, during the year, the Company has generally been regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Goods and Service Tax, Service tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other material statutory dues as applicable to it.

There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service tax, Custom Duty, Excise Duty, Value Added Tax, Cess and other material statutory dues in arrear as at March 31, 2021 for a period of more than six months from the date they become payable.

b. According to the information and explanations given to us, the details of disputed dues of income tax, sales tax, service tax, customs duty, excise duty and Value added Tax, if any, as at March 31, 2021, are as follows:

Name of Statute Nature of Duties Amount ( In Crore) Financial Year to which it pertains Deposit under Protest ( In Crore) Forum at which case is pending
Income Tax Act, 1961 Income Tax 0.01 2010-11 0 ITO, Srinagar
159.45 2016-17 0 Assessing Officer, Income Tax
Sales Tax Acts/ Vat Acts Sales Tax /Vat 2.74 2012-13 0 JC, Siliguri Charge
16.60 2012-13 0 Appellate Tribunal
16.69 2004-05 to 2011-12 15.29 Sr. Joint Commissioner Siliguri, Circle
40.24 2013-14 to 2014-15 & 2016-17 to 2017-18 0 Appellate Authority
41.95 2015-16 0 Appeal to be filed.
215.21 1994-95 0 State Tax Officer, J&K
Finance Act, 1996 Service Tax 18.62 2004-05 to 2009-10 1.70 CESTAT, Chandigarh
28.58 2008-09 to 2016-17 27.25 Service Tax Tribunal, Kolkata
101.00 2013-14 to 2017-18 0 Central Excise and Service Tax Appellate Tribunal
Custom Act, 1962 Custom Duty 25.15 2019-20 0 Department of Customs & Excise

viii) In our opinion and on the basis of information and explanations given to us by the management, we are of the opinion that the Company has not defaulted in repayment of dues to financial institutions, banks, Governments or debenture holders.

ix) In our opinion and according to the information and explanations given to us, the Company has not raised any money by way of initial public offer or further public offer during the year. The Company has raised money by issue of debt instruments during the year. On the basis of our examination and according to the information and explanations given to us, money raised by way of debt instruments have been applied for the purpose for which the loans were obtained.

x) During the course of our examination of books of Account carried out during the year in accordance with generally accepted auditing practices in India, We have neither come across incidence of any material fraud during the year by the Company or on the Company by the officers and employees nor have we been informed of any such cases by the Management.

xi) As per notificationnumber G.S.R. 463(E) dated 5 th June 2015 issued by Ministry of Corporate Affairs, section 197 of the Act as regards the managerial remuneration is not applicable to the Company, since it is a Government Company.

xii) The Company is not a Nidhi Company and hence reporting under paragraph 3(xii) of the Order is not applicable to the Company.

xiii) According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with Section 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the Standalone Financial Statements as required by the applicable accounting standards.

xiv) According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. Accordingly, clause 3 (xiv) of the Order is not applicable to the Company.

xv) According to the information and explanations given to us and as represented to us by the management and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable.

xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For Arora Vohra & Co. For K.G. Somani & Co. For Lodha & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
Firm’s ICAI Registration No.: 009487N Firm’s ICAI Registration No.:006591N Firm’s ICAI Registration No.:301051E
CA Narinder Malik CA Bhuvnesh Maheshwari CA R.P. Singh
Partner Partner Partner
M. No. 097008 M. No.088155 M. No. 052438
UDIN:21097008AAAABY5911 UDIN:21088155AAAAAV3062 UDIN:21052438AAAABW9921
Place: Ludhiana Place: New Delhi Place: Kolkata
Date: 10th June 2021 Date: 10th June 2021 Date: 10th June 2021

ANNEXURE "B" TO THE INDEPENDENT AUDITORS’ REPORT

(Referred to in paragraph (f) under ‘Report on Other Legal and Regulatory Requirements’ of our report of even date)

Report on the Internal Financial Controls with reference to financial statements under Clause (i) of Subsection 3 of Section 143 of the Act

We have audited the internal financial controls with reference to financial statements of NHPC Limited ("the Company") as at March 31, 2021 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company’s internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial control with reference to financial statements was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material ements, whether due to fraud or error. stat misstatement of the standalone financial We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial statements . controls with reference to financial

Meaning of Internal Financial Controls with reference to financial statements

A Company’s internal financial control with reference to financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal financial control with reference to financial statements includes those policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Company’s assets that could have a material effect on the standalone financial statements.

Inherent Limitations of Internal Financial Controls with reference to financial statements

Because of the inherent limitations of internal financial controls with reference to financial statements, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls with reference to financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at March 31, 2021, based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Other Matters

i. Due to the ongoing COVID-19 pandemic and recent surge in number of affected cases and the lockdown imposed by State Governments, audit processes and procedures were carried out through remote access of the books of account/records and other necessary documents/information made available to us by the management through digital medium. Accordingly relevant documents and supporting although available in E- form as such could not be verified by us in primary and original form. of the Our opinion is not modified in matters stated in para i above.

For Arora Vohra & Co. For K.G. Somani & Co. For Lodha & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
Firm’s ICAI Registration No.: 009487N Firm’s ICAI Registration No.:006591N Firm’s ICAI Registration No.:301051E
CA Narinder Malik CA Bhuvnesh Maheshwari CA R.P. Singh
Partner Partner Partner
M. No. 097008 M. No.088155 M. No. 052438
UDIN:21097008AAAABY5911 UDIN:21088155AAAAAV3062 UDIN:21052438AAAABW9921
Place: Ludhiana Place: New Delhi Place: Kolkata
Date: 10th June 2021 Date: 10th June 2021 Date: 10th June 2021