nlc india ltd Management discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The global power sector is experiencing a profound transformation, as the world grapples with the urgent need to address climate change and embrace sustainable energy solutions. This fundamental shift is driven by the realization that traditional fossil fuel-based power generation contributes significantly to greenhouse gas emissions and environmental degradation. As a result, countries, businesses and communities are increasingly turning to renewable energy sources and innovative technologies to power the world while mitigating the impacts of climate change.

One of the most notable trends in the global power sector is the rapid growth of renewable energy sources. According to the International Renewable Energy Agency (IRENA), in 2020, renewable energy accounted for approximately 26% of the worlds electricity generation capacity, a significant increase from previous years. Solar and wind energy have been at the forefront of this transformation, with their capacity increasing by 18% and 12%, respectively, in the same year.

Furthermore, the falling costs of renewable technologies have made them increasingly competitive. According to the International Energy Agency (IEA), the global weighted-average levelized cost of electricity (LCOE) for solar photovoltaics and onshore wind decreased by 85% and 56%, respectively, between 2010 and 2020. This cost reduction has accelerated the deployment of renewable energy projects across the globe.

Conversely, the use of coal for power generation is gradually declining. In 2020, the IEA reported that coals share in the global electricity generation mix dropped to 34%, the lowest level since 1975. This decline can be attributed to the increasing adoption of cleaner energy sources and the push for emissions reduction targets in various countries. Many nations are phasing out or scaling back coal-fired power plants in favor of renewable energy projects. In addition to embracing renewables, the global power sector is focusing on energy efficiency and electrification initiatives. Energy efficiency measures, such as smart grid technologies, demand-side management and energy-efficient appliances, are gaining traction in both developed and developing countries. These measures help reduce energy wastage and improve overall system efficiency.

Electrification is another critical aspect of the power sectors evolution. Electric vehicles (EVs) and electrified transportation are becoming increasingly popular, providing an alternative to traditional fossil fuel-powered vehicles. The electrification of transportation not only helps reduce greenhouse gas emissions but also presents opportunities for energy storage and demand flexibility through vehicle-to-grid (V2G) technologies.

While the progress towards a sustainable power sector is encouraging, challenges remain. Integrating intermittent renewable energy sources into the grid requires innovative storage solutions to ensure continuous and reliable power supply. Moreover, grid modernization and infrastructure upgrades are essential to accommodate the evolving energy landscape. The global power sector is undergoing a momentous transformation towards sustainability, with renewable energy leading the charge. The declining costs of renewables, coupled with the increasing commitment to emissions reduction, signal a positive trajectory for the future of power generation. Embracing energy efficiency and electrification initiatives further strengthens the sectors potential to drive a cleaner and more sustainable energy future.

From the 2023 perspective, global investment in clean energy has been gaining impressive momentum, reflecting an intensifying commitment towards sustainable development and climate change mitigation. Emboldened by policy support, technological advancements and changing investor sentiment, clean energy is no longer seen as merely an ethical consideration, but as a robust opportunity for secure, long-term financial returns. In a remarkable shift, renewable energy projects, particularly in solar, wind and energy storage, have attracted substantial capital, outpacing investments in traditional fossil fuels. Likewise, the surge in electric vehicle production and infrastructure, coupled with significant investments in energy efficiency and green hydrogen technologies, highlight a broadened clean energy canvas. This trend signifies a decisive, global move towards a low-carbon economy, powered by an understanding that economic growth and environmental stewardship are not just complementary but are in fact intertwined in the blueprint of our future.

In an era where climate change poses an increasingly urgent threat to the health of our planet, global investment in green energy has emerged as a paramount catalyst for positive change. As the world grapples with the need to transition away from fossil fuels and adopt sustainable alternatives, the investment landscape has witnessed a remarkable shift towards renewable energy sources. Embracing this transformative trend is not only a moral imperative to safeguard the environment for future generations but also a strategic opportunity for nations and businesses alike. With the growing realization that clean energy solutions can mitigate environmental degradation, enhance energy security and drive economic growth, global investment in green energy stands poised to revolutionize the way we power our world and pave the way towards a greener, more sustainable future.

Investment in clean energy technologies is significantly outpacing spending on fossil fuels as affordability and security concerns triggered by the global energy crisis strengthen the momentum behind more sustainable options, according to the IEA World Energy Investment 2023 report. Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment over the same period. But more than 90% of this increase comes from advanced economies and China, presenting a serious risk of new dividing lines in global energy if clean energy transitions dont pick up elsewhere.

Global Energy Investment in clean energy and in fossil fuels, 2015-2023

The pursuit of global climate goals remains a paramount priority as nations continue their unwavering commitment to address the pressing challenges of climate change. One of the pivotal milestones in this journey is the Conference of Parties (CoP), convened by the United Nations Framework Convention on Climate Change (UNFCCC). CoP gatherings have become the epicenter of international efforts, where countries reaffirm their dedication to collective climate action. As we stand on the threshold of CoP 27, the world looks ahead with anticipation, knowing that this pivotal event holds the potential to shape the future of our planet. Building upon the foundations laid in previous CoP agreements, this upcoming gathering presents an invaluable opportunity for global leaders to strengthen their resolve, accelerate climate mitigation and adaptation efforts and solidify a shared vision for a resilient, carbon-neutral world. The CoP 27 commitment, when harnessed collectively, will be instrumental in forging a sustainable path forward, ensuring that generations to come inherit a planet capable of supporting life in all its diversity.

United States passed the landmark federal law of "Inflation Reduction Act" (IRA) aimed at addressing climate change and energy security issues. Under IRA, $386 billion had been pledged for the energy and climate sector with a view to spur growth in the renewable equipment sector and reduce its dependency on China. Australia, one of the biggest emitters per capita, passed a legislation enshrining a pledge to slash carbon emissions by 43% by 2030 and to achieve Net-Zero by 2050. Other countries in Asia and Middle East too planned to accelerate the use of renewables and achieve Net-Zero by 2050-2060.

From a global perspective, green hydrogen is increasingly recognized as a game-changing solution within the power sector, holding the potential to completely revolutionize energy systems as we know them. Given that it can be produced via electrolysis of water using renewable energy sources, green hydrogen embodies the promise of a zero- carbon energy carrier, crucial to decarbonizing sectors where direct electrification is challenging. 2023 has witnessed burgeoning interest in green hydrogen, with numerous nations unveiling hydrogen strategies to stimulate production, build infrastructure and create end-user markets. Notably, its applications extend beyond merely a source of power; it is foreseen as an essential component for long-term energy storage, a key enabler for the creation of synthetic fuels and a crucial element in industrial processes such as steel and chemicals production. As countries strive towards ambitious climate targets, the maturation of green hydrogen technologies and the associated decrease in production costs could play a pivotal role in facilitating a global clean energy transition.

Electric Vehicle (EV) adoption has a profound, bidirectional relationship with the power sector. On one hand, the ongoing surge in EV uptake, driven by environmental awareness, policy support and technological innovation, represents a significant new demand avenue for the electricity sector. However, this rising demand also presents grid management challenges, requiring power utilities to adopt smart grid solutions, demand response techniques and advanced energy storage systems to maintain grid reliability and stability.

On the other hand, the nature of the power supply directly affects the carbon footprint of EVs. As of 2023, as grids globally continue to green, the benefits of EVs are increasingly pronounced, reducing greenhouse gas emissions not just from tailpipes, but on a well-to-wheel basis. Furthermore, vehicle-to-grid (V2G) technologies are emerging, where EVs can feed power back to the grid during peak demand, acting as mobile energy storage units and further integrating the transportation and power sectors. As EV adoption accelerates, its evident that the transformation of the transportation sector and the evolution of the power sector are intricately linked, each driving and enabling the other towards a sustainable, decarbonized future.

In 2022, the global market experienced an unprecedented surge in Electric Vehicle (EV) sales, surpassing 10 million units, marking a staggering increase of over 50% compared to 2021 (Source: IEA). Parallelly, to accommodate this rapid EV proliferation, there was a robust 55% increase in EV charging installations, reaching a total of 2.7 million charging points globally by the end of 2022 (Source: IEA). This acceleration was significantly propelled by various government initiatives, including tax credits, purchase incentives and substantial investments in EV infrastructure. The year also witnessed a diversification in the EV market with the rollout of numerous new models by a multitude of automakers, sparking increased consumer awareness and interest. Capitalizing on this burgeoning momentum, a host of new entrants have emerged within the EV landscape, strategically positioning themselves to leverage the ample opportunities presented by this transformative shift in the automotive sector.

The energy sector in India has been on a transformational trajectory from 2022 to 2023, marked by the confluence of policy initiatives, technological advancements and increased commitment towards renewable energy. This Management Discussion and Analysis aims to outline the key trends and strategic shifts observed in this period, offering valuable insights into this dynamic landscape.

In 2022, India embarked on an aggressive renewable energy strategy, largely driven by the governments commitment to attaining 450 GW of renewable energy capacity by 2030. This initiative led to an accelerated growth of the sector, with notable advancements in solar and wind power generation. Furthermore, the launch of the Green Energy Corridor project - aimed at enhancing grid capacity for renewable energy transmission - represented a critical step towards integrating renewables into the countrys energy infrastructure.

Indias wind-solar hybrid policy introduced in the same year further optimized the use of resources by incentivizing colocation of wind and solar installations. This led to increased grid stability and the effective use of land and infrastructure. Notable policy initiatives include:

Must-run status: Renewable energy sources are granted priority dispatch, giving them precedence over other power sources in accessing the grid.

Accelerated depreciation: Allowing renewable energy project developers to claim accelerated depreciation, enhancing the financial attractiveness of investments.

Capital subsidy: Providing financial assistance and incentives to promote the establishment of renewable energy projects.

Government-supported solar park development: Facilitating the establishment of solar parks across the country to encourage large-scale renewable energy projects.

Green Energy Corridor: Strengthening the intra-state transmission network (ISTS) as part of comprehensive grid enhancement planning.

ISTS waiver: Exempting wind and solar projects commissioned before 2022 from Inter-State Transmission System (ISTS) charges, thereby reducing operational costs. This waiver has been extended until June 2025.

Levelized auction tariffs: Introducing competitive bidding processes to determine tariffs, ensuring cost efficiency and optimal utilization of resources.

Lower corporate tax: Providing tax incentives to renewable energy developers, encouraging investment and project viability.

Renewable Purchase Obligation (RPO): Large power consumers, including DISCOMs, are mandated to meet a portfolio standard by procuring a specified percentage of their power from renewable sources.

Indias solar energy sector emerged as a cornerstone of the countrys energy mix during this period. Leveraging Indias geographical advantage and the decreasing solar PV prices, solar power was extensively deployed for electrifying rural areas and transitioning away from fossil-fuel based power generation.

In 2023, the governments efforts towards the establishment of solar parks and ultra-mega solar power projects significantly contributed to a surge in the countrys installed solar capacity, manifesting a strategic shift towards solar power.

The global transition towards green hydrogen as a clean energy carrier did not go unnoticed by India. In 2023, the launch of Hydrogen Energy Mission 2023 underscored Indias commitment to becoming a global hub for green hydrogen production and export. This initiative not only diversified Indias energy portfolio but also opened new avenues for economic growth and international cooperation.

The EV industry in India witnessed substantial growth between 2022 and 2023. Facilitated by supportive government policies such as the FAME II scheme and the entry of numerous new EV models from both domestic and international manufacturers, EV adoption gained significant traction.

This growth was further supported by substantial enhancements in EV charging infrastructure and battery technology. By the end of 2023, India was well on its way towards achieving its goal of 30% EV sales by 2030, symbolizing a strategic move towards sustainable transportation.

A captivating snapshot of Indian Energy Sector in 2022-23

Renewable energy capacity (including large hydro) currently stands at 172 GW (approx.).

The electricity generation target, including renewable energy (RE), for the year 2023-24 has been set at 1,750 Billion Units (BU), indicating a growth of approximately 8.89% over the actual generation of 1,624 BU in the previous year (2022-23). Notably, this generation in 2022-23 showed a significant increase from the 1,491.86 BU generated in 202122, representing a growth of about 8.8%.

Renewable energy generation increased from 170.91 BU in FY22 to 171.28 BU in FY23 while conventional source of energy generation (including Bhutan import) increased from 1,320.88 BU to 1,452.88 BU.

The power supply position in FY 2022-23, energy deficit has reduced from 0.4% to 0.5% in comparison to previous year. The peak deficit has increased from (1.2%) to (4%).

As of March 31st, 2023, the total installed capacity in India stood at 416 GW. Among the energy sources, Coal/Lignite accounts for the largest share at 51%, followed by renewable energy sources (RES) at 30%, hydro at 11%, gas at 6% and nuclear at 2%. This diverse energy mix has allowed India to significantly increase its installed capacity, now approaching double the peak demand. Furthermore, India has become a net exporter of power, supplying electricity to neighboring countries such as Nepal, Bangladesh and Myanmar.

In FY 2022-23, the thermal sector witnessed a modest net generation capacity increase of only 1,460 MW, significantly lower than the 4,485 MW added in the previous year (2021-22). Similarly, the hydro power generation segment added a net generation capacity of 120 MW, a decrease from the 393 MW added during FY 2021-22. Overall, the total new generation capacity added in FY 2022-23 was a mere 1,580 MW, compared to 4,878 MW in FY 2021-22. However, there was a notable growth in the installed capacity of renewable energy sources, which rose from 101.17 GW in March 2022 to 125 GW in March 2023.

Sec:or-wisecapi:it Rs.J

As of 31st May, 2023, the total installed power generating capacity in India stood at 416 GW, according to reports from the Central Electricity Authority (CEA). The private sector plays a significant role, contributing 50.54% of the countrys installed capacity. On the other hand, the States and Central Sectors account for 25.41% and 24.05% of the installed capacity, respectively. This distribution highlights the substantial involvement of the private sector in Indias power generation landscape.

The chart below illustrates the historical trend of total annual electricity generation in India, which includes generation from renewable energy sources. The total annual electricity generation is 1,624.2 BU for FY 2022-23.

Coal-based stations in India witnessed an increase in PLF from 58.87% to 64.15% in FY 2022-23. The sector wise PLF is as follows:

The Indian Power sector experienced several regulatory and policy changes in the past year, propelling its growth and trajectory. Key developments included the promulgation of Late Payment Surcharge (LPSC) Rules, Green Open Access Rules, Ancillary Services regulations, a thoroughly revised Deviation Settlement Mechanism and a new Over- the-Counter platform, alongside a major regulatory push for energy storage systems.

The Ministry of Power invoked Section 11 of the Electricity Act, 2003, twice within nine months (May 2022 and February 2023), aiming to address the increased peak electricity demand. This action directed all imported coal-based power plants to operate at full capacity and issued instructions to domestic coal-based plants to ensure sufficient fuel stock, partially through imported coal blending.

The draft Electricity (Amendment) Bill 2022 proposed several key amendments, including multiple distribution licensees operating within a supply area, stricter penalties for Renewable Purchase Obligation (RPO) non-compliance, a comprehensive redefining of NLDCs functions and responsibilities and changes to the selection criteria for Central/ State Regulatory Commissions Chairman and Members. The Bill, which aims to increase competition and accountability in the distribution sector, was tabled in the Parliaments monsoon session and referred to the Parliament Standing Committee on Energy.

The Ministry of Power issued the Electricity (Amendment) Rules 2022 with key features such as a uniform RE Tariff from a common pool for end procurers, multiple energy storage utilization modes, automatic recovery of fuel and power purchase cost via Fuel and Power Purchase Adjustment Surcharge (FPPAS) and mandatory resource adequacy requirements.

These developments are viewed positively as they promote the closure of purchase contracts between DISCOMs and intermediary entities like SECI, RE grid integration through the deployment of storage and timely cost recovery by DISCOMs.

Indias National Electricity Plan (NEP) charts a transformative course towards a sustainable energy future, driven by ambitious targets for peak electricity demand and electrical energy requirements. The NEP envisions a shift towards non-fossil-based capacity, aiming for around 500 GW of renewable-based installations by 2029-30. By 2031-32, this vision is expected to materialize with an estimated installed capacity of 900,422 MW, comprising 68.4% renewable- based capacity. The embrace of electric vehicles, solar rooftops and green hydrogen production further reinforces this commitment to sustainability. With energy storage playing a critical role, the NEP outlines a requirement of 73.93 GW by 2031-32 to ensure a reliable and resilient power supply. As India forges ahead, the average emission factor is anticipated to decrease significantly, paving the way for a greener, cleaner and more vibrant energy landscape.

During the fiscal year 2022-2023 (FY23), the short-term power market witnessed remarkable growth, with approximately 190 Billion units (BUs) of electricity traded, a significant increase from the 184 BUs traded in FY 22. Power exchanges played a substantial role in this market, accounting for about 42% of the total trading volume. The intense competition among power traders resulted in considerable pressure on trading margins. Notably, the market saw a concentration of 8 key players, while smaller traders primarily focused on regional pockets, predominantly trading their own power supplies.

One of the significant developments in FY23 was the surge in the average clearing price for the Day Ahead Market (DAM), reaching Rs. 5.94 per unit, signifying an almost 35% increase from the previous fiscal year. Several factors contributed to this rise in DAM prices, including a surge in overall demand for electricity, increasing international coal and gas prices and a domestic coal supply shortage, particularly during the monsoon seasons. These supply-demand dynamics put upward pressure on prices, impacting the overall market conditions.

Looking ahead, the tender prices discovered by DISCOMs for the forthcoming months of 2023 have remained high, with price ranges spanning between Rs. 8 to Rs. 11 per kilowatt-hour (kWh). This trend reflects the ongoing challenges in the power sector, driven by various factors influencing electricity prices and supply availability.

In conclusion, FY 23 witnessed a vibrant short-term power market with a substantial increase in trading volumes and heightened competition among key players. However, the surge in DAM prices brought on by multiple factors presents both challenges and opportunities for market participants in the upcoming year. As the power sector continues to evolve, strategic planning, efficient resource management and prudent decision-making will be critical for navigating the complexities of the dynamic short-term power market.

In 2023, Indias coal sector finds itself at a crossroads, caught between the need to fuel a rapidly growing economy and the pressing demands of environmental responsibility and sustainability.

Historically, India has been heavily reliant on coal, being home to the worlds fourth-largest reserves and ranking as the second-largest producer and consumer of the resource. Coal plays a pivotal role in Indias energy mix, catering to approximately 70% of the countrys power production.

India ranks as the worlds second-largest coal producer, having produced approximately 893.08 million tonnes in the fiscal year 2022-23. Coal contributes to about 49.3% of Indias total installed power capacity, not considering lignite, signifying the substantial dependence on this fossil fuel. As India targets to ramp up its power generation capacity in the years to come, coal is expected to be at the forefront of this growth.

On the reserves front, India boasts of an abundance of coal, with geological resources surpassing 361 billion tonnes as of April 1st, 2022. At the current production rate, these reserves are more than adequate to meet the countrys anticipated demand.

Despite the steady significance of coal, India is witnessing a shift in its energy mix. As per the Draft NITI Aayog Report (Nov 21), the share of coal in the energy mix is predicted to decline from 72% at present to 52% by 2030, 43% by 2035 and 34% by 2040 due to the increased penetration of renewable energy sources. While coal remains a significant contributor to Indias energy supply, an increasing commitment towards reducing carbon emissions and combating climate change has driven a paradigm shift. The focus is moving away from further exploitation of coal reserves towards a more balanced and sustainable energy portfolio.

Policy measures aimed at decreasing the countrys carbon footprint have seen the government encouraging coal- based plants to improve their efficiency and reduce emissions. In addition, there is an increasing emphasis on the rehabilitation of mines and land reclamation, reflecting a more responsible approach to coal mining.

Despite these environmental initiatives, coal is likely to remain a significant part of Indias energy mix in the short-to- medium term, especially in sectors such as power generation, steel and cement, where alternative energy sources are not yet fully viable.

In the context of Indias growing energy demand, the coal sector in 2023 is focused on balancing its role as a reliable energy provider with the pressing need for environmental responsibility and the transition towards a lower-carbon economy. As India seeks to navigate this energy transition, the role and management of the coal sector will undoubtedly be pivotal.

The Government of India, aligning with global sustainable development goals, aims to provide clean, affordable and sustainable electricity to all citizens. While renewable energys share has been steadily increasing, coal is projected to continue its dominance in Indias electricity generation in the near future.

The Company Wise production of raw coal during last ten years (Quantity in Million Tonnes) is as follows:

2012-13	2013-14	2014-15	2015-16	2016-17	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23
51.01	52.88	62.41	40.09	42.39	46.03	57.43	64.7	69.29	90.53	122.72
53.19	50.47	52.54	60.38	61.34	62.01	64.4	64.04	50.58	65.02	67.14
452.2	462.41	494.23	538.75	554.14	567.37	606.89	602.13	596.22	622.63	703.22
556.4	565.77	609.18	639.23	675.87	675.4	728.72	730.87	716.08	778.2	893.08

The resources have been found mainly in Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana and Maharashtra. As on 1st April, 2022, the total estimated reserves of Coal in India were 361.411 BT.

Details of State-wise and category-wise coal resource are given as under:

					(Million Tonnes)
State	Measured	Indicated	Inferred	Total Resources	% of Total
Total	1,87,105.30	1,47,252.00	27,054.00	3,61,411.46	100%
Odisha	48,572.58	34,080.40	5,451.60	88,104.60	24.38%
Jharkhand	53,245.02	28,259.70	5,155.40	86,660.10	23.98%
Chhattisgarh	32,053.42	40,701.40	1,437.00	74,191.76	20.53%
West Bengal	17,233.88	12,858.80	3,778.50	33,871.25	9.37%
Madhya Pradesh	14,051.66	12,723.00	4,142.10	30,916.73	8.55%
Telangana	11,256.78	8,344.35	3,433.10	23,034.20	6.37%
Maharashtra	7,983.64	3,390.48	1,846.60	13,220.71	3.66%
Bihar	309.53	4,079.69	47.96	4,437.18	1.23%
Andhra Pradesh	920.96	2,442.74	778.17	4,141.87	1.15%
Uttar Pradesh	884.04	177.76	0.00	1,061.80	0.29%
Meghalaya	89.04	16.51	470.93	576.48	0.16%
Assam	464.78	57.21	3.02	525.01	0.15%
Nagaland	8.76	21.83	447.72	478.31	0.13%
Sikkim	0.00	58.25	42.98	101.23	0.03%
Arunachal Pradesh	31.23	40.11	18.89	90.23	0.02%

Lignite, often referred to as brown coal, is a soft, combustible, sedimentary rock that is naturally abundant and relatively cheaper to produce, making it an important part of Indias energy profile. The countrys lignite reserves are estimated to be about 46.20 Billion tonnes as of 1st April, 2022. The State of Tamil Nadu holds the largest deposits of lignite, followed by Rajasthan, Gujarat, the Union Territory of Puducherry, Jammu and Kashmir, Kerala, Odisha and West Bengal.

Despite being considered a lower-grade fuel due to its lower energy content compared to other types of coal, lignite is utilized extensively for power generation in thermal power plants across the country. In particular, it serves as a crucial energy source for states with substantial lignite reserves.

However, in line with global and national efforts to transition towards cleaner and more sustainable energy sources, the Government has been focusing on increasing the share of renewable sources in the countrys energy mix, although lignite is expected to continue to play a role in the energy sector for some time to come.

Lignite Resources (in Million Tonne)

State	Measured	Indicated Inferred	Resources	% of Total
Puducherry	0.00	405.61 11.00	416.61	0.90%
Tamil Nadu	4,926.92	21,981.20 9,652.60	36,560.72	79.10%
Rajasthan	1,168.53	3,029.78 2,259.40	6,457.72	14.00%
Gujarat	1,278.65	283.70 1,159.70	2,722.05	5.90%
J&K	0.00	20.25 7.30	27.55	0.10%
Kerala	0.00	0.00 9.65	9.65	0.00%
WB	0.00	1.13 2.80	3.93	0.00%
Odisha	0.00	0.00 5.93	5.93	0.00%
Total	7,374.10	25,721.70 13,108.00	46,204.16	100.00%

The main report includes a section titled "Operational Performance" which discusses the performance of each segment individually."

Company outlook is discussed in the main report under the heading "Corporate Plan"

A brief on the major risks faced by the Company are given below:

Operational risks:

• Risk in land acquisition

• Realisation of dues from DISCOMs

• Surrender of power by beneficiaries

• Denial of agreed tariff due to delay in commissioning of project within the control period prescribed by Regulators.

• Cost and time over run of projects under execution.

• Higher cost of lignite mining.

• Risk due to stringent environmental norms

• Competition consequent to de-regulation in Indian power sector.

• Stringent norms prescribed by regulatory authorities affecting power tariff.

The Company has well-established Internal Control Systems and Procedures commensurate with its size. The Company has in place an approved and well laid out Delegation of Powers (DoP), Purchase, Contracts and HR Manuals. The internal audit is conducted by external firms of Chartered Accountants covering all offices / Units and their reports are periodically reviewed by the Audit Committee.

The Audit Committee periodically interacts with Internal and Statutory Auditors to assess the adequacy of Internal Control Systems and also supervises the financial reporting process through review of periodical Financial Statements. Further, the accounts of the Company are subject to C & AG audit in addition to the propriety audit conducted by them. The effectiveness of compliance of Service Rules and Office Orders are subjected to periodical HR audit carried out with an objective to identify the deficiency/deviations and for initiating appropriate corrective measures. HR audit has been carried out Unit-wise, during the year focusing on evaluating the correctness / accuracy in complying with the rules and procedures on identified areas in HR.

A Companys internal financial control over financial reporting 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 Companys internal financial control over financial reporting includes those policies and procedures that:

• Regarding the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company.

• 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 authorizations of management and directors of the Company.

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material effect on the Standalone Financial Statements.

Statutory Auditors are required to review the adequacy and operating effectiveness of such internal financial control over financial reporting and furnish a separate audit report on such review as required by Companies Act, 2013 along with the audit report on financial statements.

In order to strengthen internal financial control, external expert has been appointed and a comprehensive document for the key control areas along with responsibility matrix is in place.

A detailed discussion and analysis on financial statements is furnished below. Reference to Note(s) in the following paragraphs refers to the Notes to the standalone financial statements for the financial year 2022-23 placed elsewhere in this report.

The items of the Balance Sheet are as discussed under:

1. Property, Plant & Equipment (PPE), Capital Work in Progress, Assets Under Development

	As at March 31
Particulars	2023 Crore)	2022 Crore)	% Change
Gross Block of PPE (Note-2)	27,016.22	26,070.93	3.63
Net Block of PPE (Note-2)	18,502.90	18,945.65	-2.34
Net Block - RoU Asset (Note-3)	53.59	54.59	-1.83
Net Block of Intangible Assets (Note-4)	175.42	184.71	-5.03
Capital Work-In-Progress (Note-5)	1,011.59	1,012.41	-0.08
Assets Under Development (Note-6)	-	113.58	-100.00

During the year, the gross block of PPE increased by Rs. 945.29 Crore, whereas the net block decreased by Rs. 442.75 Crore.

The increase in gross block is mainly due to capitalization of Mine IA expansion (4 MTPA), acquisition of land in Neyveli as well as in Talabira and LEP of TPS-II, whereas the decrease in net block is mainly attributable to depreciation on the assets.

The marginal decrease in Right-to-Use Assets (RoU Assets) by Rs. 1.00 Crore is mainly on account of periodic depreciation on RoU assets.

The decrease in net block of intangible assets by Rs. 9.29 Crore is mainly attributable to periodic depreciation on Intangible assets and this decrease in net block of asset is partially offset by additions of assets during year of Rs. 2.82 Crore.

During the current year various Project Assets under Development such as TPS- II 2nd Expansion, 10 MW Smart City, Solar 100 MW Hybrid, Mine-III etc. has been moved from Asset Under Development schedule to CWIP Schedule.

2. Non- Current Financial Assets (Note-7) and other Non-Current Assets (Note-8)

a. Investments in Subsidiaries, Associate and Joint Venture Companies (Note-7a)

The break-up of investments in Subsidiaries, Associate and Joint Venture Companies is as follows:

Particulars	As at March 31, 2023 Crore)	As at March 31, 2022 Crore)
Investment in Subsidiaries	4,191.04	3,927.39
Investment in Joint Venture	0.01	0.01
Investment in Associates	5.27	5.27

The change in Investment in subsidiaries is on account of subscription to additional equity shares @ Rs. 10 per Share of Rs. 263.65 Crore (PY Rs.318.18 Crore) of NUPPL, through rights issue. However, the percentage of holding remains unchanged.

b. Non Current Trade Receivables (Note -7b)

As per the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 notified by Ministry of Power on June 3rd 2022, one DISCOM has opted Rs.734.56 Crore under interest free installment scheme within the given cut off date. The dues of such beneficiary has been presented at fair valued as per the requirements of IND AS 109 and non-current balances of dues as at 31st March of current year and previous year are as follows:

Particulars	As at March 31, 2023 Crore)	As at March 31, 2022 (Rs. Crore)
Unsecured -Trade Receivables	377.15	-

c. Non Current Loans ( Note- 7c )

The secured loans and unsecured loans to employees include house building loan, car loan, vehicle loan, multipurpose loan, etc. outstanding at 31st March of current year and previous year are as follows:

Particulars	As at March 31, 2023 (Rs. Crore)	As at March 31, 2022 (Rs. Crore)
Loans to related parties	0.04	0.03
Loans to employees	33.93	21.87

d. Other Non Current Financial Assets ( Note- 7d )

As per the guidelines from Ministry of Coal, Government of India for preparation of Mine Closure Plan, Escrow Accounts have been opened in the name of "Coal Controller Escrow Account NLC India Limited" for each captive mine and the balances held in these escrow accounts are presented as Mine closure deposit. Up to 50% of the total deposited amount including interest accrued in the escrow account shall be released after every five years in line with the periodic examination of the closure plan as per the guidelines. Interest earned on the escrow account is added to mine closure deposit account.

Particulars	As at March 31, 2023 (Rs. Crore)	As at March 31, 2022 (Rs. Crore)
Mine Closure Deposit	497.48	425.11

e. Other Non-Current Assets ( Note - 8)

Particulars	As at March 31, 2022 (Rs. Crore)	As at March 31, 2023 (Rs. Crore)
Capital Advances	1,041.26	395.47
Advances Other than Capital Advances	123.50	123.50

The increase in capital advance is mainly due to advance given for acquiring land for Talabira project & Neyveli Mines and capital advance for FGD project of NNTPS.

3. Current Assets (Note-9 to Note-12)

The current assets as at 31st March 2023 and 31st March 2022 and the changes therein are as follows:

Particulars	As at March 31 (Rs. Crore)		YoY Change	% Change
	2023	2022	(Rs. Crore)
Inventories (Note 9)	833.92	1,025.30	-191.38	-18.67
Trade Receivables (Note 10a)	3,791.44	3,128.65	662.79	21.18
Cash and Cash Equivalents (Note 10b)	71.18	123.52	-52.34	-42.37
Bank balances other than cash and cash equivalent (Note 10c)	129.01	113.37	15.64	13.80
Loans(Note10d)	4.83	25.56	-20.73	-81.10
Other Financial Assets (Note 10e)	2,760.36	1,150.25	1,610.11	139.98
Current Tax Assets (Net) (Note 11)	246.48	468.56	-222.08	-47.40
Other Current Assets (Note 12)	584.04	432.03	152.01	35.19

Inventories (Note 9) :

The reduction in inventory to the tune of Rs. 191.38 Crore is mainly on account of decrease in the closing stock of Raw Material — Lignite during the current year compared with previous year which is mainly due to lower production of lignite.

Trade Receivables (Note 10a) :

Trade receivable balances have increased due to billing of income tax paid under VSVS to DISCOMs and billing of CERC orders received during the year. Further, there is reduction in bills discounted during the current financial year as compared to that of previous year ( Rs. 3,448.69 Crore in current year and Rs. 4,663.19 Crore in previous year.)

Cash and Cash Equivalents (Note 10b) :

The movement in cash and cash equivalents is on account of short term deposit. The deposits are generally maintained for a 5-7-day period, to ensure liquidity. Short term deposit amount of Rs. 50 Crore as on 31st March, 2022 matured in the current year.

Bank balances other than cash and cash equivalent (Note 10c) :

Increase in bank balance other than cash and cash equivalents is on account of additional deposits towards fund maintained for Post Retirement Medical Assistance.

Loans (Note 10d):

Loans balances mainly represents the Secured loans of various nature such as House building Loan, Car/Scooter Loan and unsecured loans such as Multipurpose Loans etc. which has been given to employee. During the current financial year, loan to employees has reduced mainly due to repayment/ settlement of loan amount by the employees vis-a-vis new drawl.

Other Financial Assets (Note 10e) :

The increase in other Financial Asset is mainly due to increase in unbilled revenue on account of provisional Lignite Transfer Price order of 2019-24 for Neyveli mines. Further, the other financial asset increase is attributable to receipt of insurance claim confirmation for TPS-II amounting to Rs. 50 Crore.

Current Tax Assets (Net) (Note 11) :

Reduction in current tax assets is mainly on account of refund received from Income Tax Department for excess taxes paid under VSVS which led to reduction in advance tax assets.

Other Current Assets (Note 12) :

Other current asset consists of prepaid expenses, advances other than employee advances, deposits with Government Authorities w.r.t various indirect taxes and other misc. assets which can not be classified in any other schedule has been classified as other current assets.

The increase in other current asset is mainly on account of increase in advances given to related parties by Rs. 55.60 Crore and further the increase in other advances is also attributable to advance payment of Royalty and GST etc. by Rs. 86.53 Crore.

4. Regulatory Deferral Account Debit Balances (Note-13).

Expense/income recognized in the Statement of Profit & Loss to the extent recoverable from or payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations are recognized as Regulatory deferral account balances. The Company reviews its regulatory balances at each balance sheet date and the adjustments arising from the above are adjusted in regulatory deferral balances from the year in which the same become recoverable or payable to the beneficiaries.

Regulatory deferral account debit balance consists of various incomes which accrue to the Company from its beneficiaries due to various actions of the Regulator. During the current Financial year the regulatory account balance has been reduced by Rs. 1,186.73 Crore as compared to previous financial year mainly due to :

i. During the year , the Company has received the provisional tariff order for the period 2019-24 for thermal power stations( except NNTPS and BTPS) and truing up orders for the period 2014-19 for all its thermal power stations (except BTPS).Consequent to allowance of water charges, security expenses and consumption of capital spares as part of O&M, regulatory assets created in this regard has been withdrawn in the current year.

ii. Further, during the year CERC has issued order for the period 2014-19 allowing enhanced wage revision of executives, non-executives, CISF, gratuity limit enabling the Company to bill the same to the beneficiaries. Accordingly, the total claim of Rs. 783.64 Crore which was earlier recognized under regulatory asset has been withdrawn from regulatory deferral account.

Reduction in Regulatory Deferral Account debit balances is partly off set by

i. Exchange differences arising from settlement/ translation of monetary items denominated in foreign currency to the extent recoverable from or payable to the beneficiaries in subsequent periods as per CERC Tariff Regulations are recognized on an undiscounted basis as Regulatory deferral account debit/credit balance by credit/debit to Movements in Regulatory deferral account balances and adjusted from the year in which the same becomes recoverable from or payable to the beneficiaries. Accordingly, an amount of Account Rs. 134.34 Crore as at 31st March 2023 has been accounted for as Regulatory deferral account debit balance (31st March 2022: Rs. 117.85 Crore).

ii. Based on the petition filed with CERC for NNTPS ( 2 X 500 MW) , the differential amount ( provision tariff order and tariff petition) of Rs. 360.27 Crore ( PY Rs. 114.36 Crore) considered under regulatory deferral account debit balances.

iii. The Company undertakes concurrent Mine Closure activity. In line with the Mine Closure Guidelines issued in May 2020 by Ministry of Coal, Gol, actual expenses incurred on mine closure up to a maximum of 50% of the Mine Closure Deposit along with interest in Escrow Account can be withdrawn on verification in every five years. Based on expenses incurred on actual mine closure for the 5 years period from 2016-17 to 2020-21 the Company has submitted a claim for Rs. 171.15 Crore to Coal Controller which is pending for approval and same has been recognized under Regulatory Deferral Asset.

Further an amount of Rs. 23.33 Crore ( PY Rs. 22.22 Crore) has been considered as regulatory income during the

Financial Year 2022-23 in line with mine closure guidelines.

5. Total equity (Note-14 and 15)

The total equity of the Company at the end of financial year 2022-23 increased to Rs. 14,638.86 Crore from Rs. 13,806.64 Crore in the previous year. Major reasons for the 6.03% increase are tabulated below:

Particulars	Total Equity Crore)	Book Value per Share ( Rs.)
Opening balance as on 1st April, 2022	13,806.64	99.57
Profit for the year	1,248.24	9.00
Other comprehensive income and other adjustments to reserves	-0.02	0.00
Dividend	(416.00)	(3.00)
Balance as on 31st March, 2023	14,638.86	105.57

The President of India holds 1,09,82,21,224 of shares constituting 79.20% of total share capital and the remaining 20.80% shares are held by public as on 31st March, 2023.

6. Non-Current and Current Liabilities

Details of Schedules	31-March 23 (Rs. Crore)	31-March 22 (Rs. Crore)	Difference
Long term borrowings including current maturities of long term borrowings ( Note 16 (a) & 19 (a) )	8,850.34	9,954.03	-1,103.69
Lease Liability- Note 16 (b)	27.18	27.40	-0.22
Other Non-Current Financial Liabilities - Note 16 ( c )	648.06	937.27	-289.21
Deferred Tax Liability ( net )- Note - 17	3,077.25	2,828.64	248.61
Other Non-Current Liabilities - Note - 18	619.99	551.90	68.09
Current Borrowings excluding current maturities of long term loan - Note 19 (a)	498.00	285.00	213.00
Current Trade Payable - Note 19 (b)	1,635.53	1,076.51	559.02
Other current financial liabilities- Note 19 (c)	161.69	162.10	-0.41
Other Current Liabilities- Note -20	790.25	721.06	69.19
Provisions- Note -21	434.29	572.68	-138.39

Details of Non-Current and Current Liabilities are discussed below:

i. Non-Current financial liabilities and Current maturities of long term borrowings (Note-16(a) and 19(a)):

Particulars	31-Mar-23 Crore)	31-Mar-22 Crore)
Borrowings in Non-current financial liabilities (Note-16a)	7,816.91	8,826.06
Current maturities of non-current borrowings included in current liabilities-(Note-19 (a))	1,033.43	1,127.97
Total borrowings	8,850.34	9,954.03

During the year, repayment of terms loans, project specific loans and others borrowings mainly resulted in the reduction in long term borrowings in current year compared with previous year.

ii. Lease Liabilities - Note no 16 (b)

To meet its requirements w.r.t maintaining offices/guest houses at various locations, its requirement of vehicles for official purpose and use of Power evacuation facility for its solar stations, the Company has entered a number of lease agreements with various parties. The lease liability represents the present value of future lease payments as on 31st March, 2023. The reduction in lease liability is due to lease payments during the FY 2022-23.

iii. Other Non-Current Financial Liability - Note no 16 ( C )

The other non current financial liabilities represents liabilities towards capital expenditures. The liability has decreased to Rs. 648.06 Crore In FY 22-23 ( PY Rs. 937.27 Crore ) mainly due to discharge of capital liability of NNTPP projects and other capital liability for solar and others.

iv. Non-current liabilities -Deferred tax liabilities (net) (Note-17):

Deferred tax liabilities (net) have increased from Rs. 2,828.64 Crore as at 31st March, 2022 to Rs.3,077.25 Crore as at 31st March, 2023. Net increase in deferred tax liability during the year amounting to Rs. 248.61 Crore is mainly on account of reduction in deferred tax asset on tax losses / provisions and utilization of MAT credit during the current financial year.

v. Other Non-current Liabilities (Note-18):

Non-current liabilities have Increased from Rs. 551.19 Crore in FY 2021-22 to Rs. 619.99 Crore in FY 2022- 23 mainly due to increase in deposit of Mine closure by Rs. 73.83 Crore which is partially offset by Rs. 5.74 Crore on account of reduction in deferred income.

vi. Current liabilities (Note-19):

The current liabilities excluding current maturity of long term borrowings as at 31st March, 2023 were Rs. 3,519.76 Crore as against Rs. 2,817.35 Crore as at the end of previous financial year. The break-up of current liabilities is as under

Particulars	31-Mar-23 Crore)	31-Mar-22 Crore)	% change
Borrowings excluding current maturities of long term debt (Note- 19 a (a) )	498.00	285.00	74.74
Trade payables (Note-19 b)	1,635.53	1,076.51	51.93
Other financial liabilities (Note-19 c)	161.69	162.10	-0.25
Other current liabilities (Note-20)	790.25	721.06	9.60
Provisions (Note- 21)	434.29	572.68	-24.17
Total	3,519.76	2,817.35	24.93

Below are the reasons for significant changes

Borrowings (Note- 19 a):

In order to meet the short term fund requirements, the Company has taken short term borrowings of treasury bill linked working capital loan carrying interest rate @ 7.6% and outstanding amount of this treasury bill linked working capital loan as on 31st March, 2023 was Rs. 498 Crore as against Rs. 285 Crore as on 31st March, 2022.

Trade payables (Note-19 b)

The trade payables has been increased by Rs. 559 Crore from Rs.1,076.51 Crore as at 31st March, 2022 to Rs. 1,635.53 Crore as at 31st March, 2023.

Other Financial Liabilities ( Note 19 c )

Other financial liabilities represents financial liabilities such as unpaid dividends and accrued interest of long term as well as short term liabilities. There is minor change in other financial liability in current year in compared with previous year.

Other current liabilities (Note-20)

The increase in other current liabilities during the year is mainly on account of increase in royalty liability due to provisional tariff order for lignite transfer price for Neyveli mines for the control period 2019-24 and other recoveries w.r.t to Talabira mines.

Provisions (Note- 21)

Reduction in provisions is mainly on account of withdrawal of provision for contingencies provided in previous year in respect of capital advances w.r.t Bithnok and BTPS Expansion projects.

7. Regulatory Deferral Account Credit Balances (Note-22):

Amount under regulatory deferral liabilities as on 31st March, 2023 relates to the impact arising out of various regulatory orders for the previous tariff periods.

I) The Company has filed appeals before the Appellate Authority of Electricity (APTEL) against the following CERC orders / filed review petition before CERC which are pending for disposal:

1. Thermal Power Station II (Neyveli) - Rejection of substitution of actual secondary fuel consumption (SFC) in place of normative SFC in computing energy charge rate, disallowance of de-capitalization of LEP Assets and reduction of claim towards capital expenses while truing up for the tariff period 2009-14

2. Lignite Truing up-Disallowance of O &M escalation at 11.50% p.a. as per MOC Guidelines considering FY 2008-09 as the base year.

3. Sharing of profits and incentives on additional generation in TS -II on adoption of pooled lignite price considering the cost of Mines - II Expansion.

The impact on the above mentioned orders have been considered appropriately under Regulatory Deferral Account Balances / Net Movement in Regulatory Deferral Balances in accordance with Ind AS 114, in the respective previous financial periods.

4. The Company has filed review petition before CERC on the true up order for determination of Lignite Transfer Price for the Tariff Period 2014-19. During the year CERC has admitted the review petition for disallowance of additional capitalization w.r.t. new assets and disallowances of stores for the purpose of interest on working capital and has set aside the review of O&M Expenses as the similar issue for the period 2009-14 is sub-judice before APTEL and O&M Expense for the period 2014-19 is subject to the final decision of APTEL. In view of the order, the Company has considered in Regulatory Expenses of Rs. 783.79 Crore (including interest) in addition to the existing amount already provided in different periods under Regulatory Deferral Account Balances towards O&M Expenses for the period 2014-19.

II) CERC has issued trued up order in respect of TPS-II expansion for the tariff period 2014-19 on 09th June, 2022. The Company has filed a review petition on 20th July, 2022 and pending disposal of the review petition, the Company has accounted an amount of Rs. 48.03 Crore arising out of the difference between billed rate and trued up order rate under regulatory deferral liabilities.

III) The Company has filed Tariff Petition for tariff period 2019-24 for all its Neyveli mines on 26th July, 2022 and for Barsingsar mines on 26th December, 2022. Refer Note no. 23(d) for Neyveli Mines. Pending disposal of the said Petition, the Company has billed energy charges based on provisionally approved Lignite transfer rate by CERC for NNTPS tariff petition for tariff period 2019-24 for Neyveli mines and provisionally approved rate by CERC for the tariff period 2014-19 for Barsingsar mines. Pending receipt of tariff order with respect to Barsingsar Mines for Tariff period 2019-24, an amount of Rs. 40.90 Crore (including interest) representing the difference between billed rate and petition rate has been accounted under regulatory account balances.

IV) As per CERC regulations (second amendment) 2019-24, the company is required to share the Non tariff income arising from sale of coal (Talabira Mines) to the beneficiary. Accordingly an amount of Rs. 143.54 Crore has been recognized as regulatory liabilities.

8. Total Income (Note-23 & Note-24)

Sl.No Particulars	FY 2022-23 Crore)	FY 2021-22 (Rs. Crore)	Change (Rs. Crore)
Revenue
1 Sale of Power	10,283.23	8,147.44	2,135.79
2 Sale of Lignite / Coal	2,565.20	1,749.88	815.32
3 Sale of by-products	88.81	59.08	29.73
4 Consultancy & other services	38.79	37.43	1.36
Less: Transfer to CWIP & Rebate	21.03	137.35	-116.32
5 Revenue from Operations	12,955.00	9,856.48	3,098.52
Other Income
6 Interest on deposits, loan to subsidiary, loan to employees and others	388.68	44.24	344.44
7 Provisions written back	446.40	24.51	421.89
8 Dividend from subsidiary	97.37	331.05	-233.68
9 Surcharge	86.46	344.80	-258.34
10 Others (Net off transfer to CWIP)	221.99	61.29	160.70
Total Income	14,195.90	10,662.37	3,533.33

The major source of revenue from operations and its variations from last year are briefly explained below :

Revenue from Operations:

The revenue form sale of power has increased by 26.21% mainly due to improved Plant Availability Factor of NNTPS ( 2 x 500 MW) and Barsingsar units ( 2 x 125 MW ) which has resulted in the increase in power generation and in turn increase in revenue from operations.

Further during the year, your Company has received several regulatory/tariff orders such as Provisional Lignite transfer price for its Neyveli Mines for tariff period 2019-24, Tariff order for control period 2019-24 for its Thermal Station -II, Thermal Station I Expansion & Thermal Power station II expansion and truing up order for control period 2014-19 for all thermal except Barsingsar thermal, order for billing of Wage revision & gratuity enhancement.

The increase in power sales is partly offset by reduction in performance of TPS-II and URS sales during the current financial year as compared to previous financial years.

Revenue from Sales of lignite/coal has increased by 46.59% in the current financial year as compared to previous financial year due to higher production and off take by linked thermal plants as well as sharp increase in demand for coal has resulted in increase in price.

Other Income ( Note No. 24)

The Other income of the Company has increased by 53.98% during the current year as compared to Previous year mainly due to interest income recognised on account of various CERC orders, write back of provisions created for debtors and advances which are no longer required during the current Financial Year.

9. Expenses (Note Nos. - 25 to 29) and Net movement in Regulatory (Note No.30)

Details of various expenses and movement with previous year are as follows:

EXPENSES	Note	March 31, 2023 (Rs. Crore)	March 31, 2022 Crore)	% Change
Changes in Inventories	25	268.42	476.49	(43.67)
Employee Benefit Expenses	26	2,526.32	2,624.48	(3.74)
Finance Costs	27	755.63	783.78	(3.59)
Depreciation and Amortization Expenses	28	1,419.69	1,528.13	(7.10)
Other Expenses	29	5,196.71	3,306.43	57.17
Total Expenses		10,166.77	8,719.31	16.60
Net movement regulatory deferral account balances income / (Expenses)	30	-2,179.00	345.53	(732)

(Note: Expenses increase (+) and Decrease (-))

The total Expenses and the movement in regulatory have increased mainly due to the following reasons:

Note 25 Decrease in level of closing stock of lignite compared to opening stock resulted in the movement in inventory in the current financial year.

Note 26 Decrease in the Employee Benefit Expenses is on account of reduction in average employee strength from 10,822 nos in FY 2021-22 to 10,380 nos in FY 2022-23 which was partly offset by annual increments and increase in DA in the current financial year.

Note 27 Finance costs have reduced mainly due to better fund management on account of collection from debtors through bill discounting and repayment of long-term loans in respect of commissioned projects. Further the Company has diversified its borrowing portfolio to more competitive low- cost short-term borrowings.

Note 28 The reduction in cost of depreciation and amortization due to change in life of mine development from 25 years to 20 years in the FY 2021-22 which has resulted additional depreciation in FY 2021-22.

Note 29 The Increase in other expenses by 57.17% in the current financial year as compared to previous financial is mainly attributable to the increase in expenditure with respect to royalty (including DMF and NMET, additional royalty), MDO charges, stores, fuel & belt consumption, repair and maintenance expenses in the current year as the production (lignite and coal) in the current year has increased as compared to previous year.

In addition to the above, your Company has received CERC order for provisional lignite transfer price for Neyveli mines for control period 2019-24. Based on the order the Company has written off from its debtors during the current financial year towards water, security and power surrender and surcharge which were billed to beneficiaries in earlier periods.

Note 30 Reduction of income in net movement regulatory deferral account balances income / (Expenses) during the current year compare with previous is mainly on account of :

i) During the year, the Company has received the provisional tariff order for the period 2019-24 of its thermal power stations( except NNTPS and BTPS) and truing up orders for the period 2014-19 of its thermal power stations (except BTPS).Consequent to allowance of water charges, security expenses and consumption of capital spares as part of O&M, regulatory assets created in this regard has been withdrawn in the current year.

ii) Further, during the year the CERC has issued order for the period 2014-19 allowing enhanced wage revision of executives, non-executives, CISF, gratuity limit enabling the Company to bill the beneficiaries. Accordingly, the total claim of Rs. 783.64 Crore which was earlier recognized under regulatory asset has been withdrawn from regulatory deferral account.

iii) The Company has filed review petition before CERC on the true up order for determination of Lignite Transfer Price for the Tariff Period 2014-19. During the year CERC has admitted the review petition for disallowance of additional capitalization w.r.t. new assets and disallowances of stores for the purpose of interest on working capital and has set aside the review of O&M Expenses as the similar issue for the period 2009-14 is sub-judice before APTEL and O&M Expense for the period 2014-19 is subject to the final decision of APTEL. In view of the order, the Company has considered in Regulatory Expenses of Rs. 783.79 Crore (including interest) in addition to the existing amount already provided in different periods under Regulatory Deferral Account Balances towards O&M Expenses for the period 2014-19.

Details of Significant Changes in Key Financial Ratios

Name of Ratio	FY 2022-23	FY 2021-22	Variation (%)
Current Ratio	1.85	1.64	12.80
Debt - equity ratio	0.64	0.75	-14.67
Interest Service Coverage Ratio	5.18	5.78	-10.38
Inventory Turnover Ratio	13.94	8.06	72.95
Trade Receivable Turnover Ratio	3.55	2.26	57.08
Operating Margin	11.73	21.66	-45.84
Net Profit Margin	11.71	12.47	-6.09

Reasons for variations beyond 25%:

i. Inventory Turnover Ratio

The inventory turnover ratio has increased due to significant increase in operating revenue and reduction in inventory in current year compare with previous year thus resulted in increase of inventory turnover ratio.

ii. Trade Receivable Turnover Ratio

The increase in trade receivable are due to accounting of several CERC orders received during the current financial year which resulted in the increase in turnover and reduction of average debtors due to implementation of various measures for efficient debtor collection such as bill discounting, LC etc.

iii. Operating Margin:

The reduction in operating margin by 45.84% in the current financial year is mainly on account of receipt of adverse CERC orders in case of Mines and few thermals.

The net worth of the Company has increased from Rs. 13,693.06 Crore to Rs. 14,638.86 Crore during the current financial year. The accretion to the net worth is mainly due to profits earned by the Company during the current year and movement of income and expenses details as stated above, in Sr No.8 and Sr No.9

Environmental Protection and Conservation, Technological Conservation, Renewable Energy Developments, Foreign Exchange Conservation.

Covered in main Report

Material developments in Human Resources / Industrial Relation front including number of people employed

Covered in main Report

Corporate Social Responsibility

Covered in the main Report.

Cautionary Statement

Statement in the Directors Report, describing the Companys strengths, strategies, projections and estimates are forward looking statements and progressive within the meaning of applicable laws and regulations. Actual results may vary from those expressed or implied depending upon economic conditions, Government policies and other incidental factors and hence it is cautioned not to place undue reliance on the forward looking statements.

	For and on behalf of the Board of Directors
Place: Neyveli	Prasanna Kumar Motupalli
Date: 30th August, 2023	Chairman and Managing Director