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Directors Report of Power Grid Corporation of India Ltd.

Mar 31, 2015

To, Dear Shareholders, Ladies & Gentlemen,

The am delighted to present on behalf of the Board of Directors, the 26th Annual Report on the performance of your Company during the financial year ending March 31, 2015 together with Audited Financial Statement, Auditors'' Report and Review of the Accounts by the Comptroller and Auditor General of India for the review period.

Financial year 2014-15 marked the completion of 25 glorious years of your Company. In this ''Silver Jubilee'' year, it maintained its growth momentum and saw a number of splendid achievements on all fronts.

In the area of project execution, your Company recorded a capitalization of Rs. 21,760 Crore, which is the highest ever in a single financial year of its history. The Company''s meritorious performance and continuous thrust on commissioning of transmission assets has resulted in higher revenue & earnings, thereby added value for its stakeholders. The successful addition of transmission assets has facilitated seamless power transfer in the Country. A strong and highly integrated inter-State transmission system has enabled development of the vibrant power market and provided momentum to growth of the power sector.

Your Company commenced implementation of Green Energy Corridors across the Country, giving boost to renewable generation by facilitating its integration with the National Grid, displaying the Company''s efforts towards realization of sustainable and inclusive growth. In the area of operational excellence, ''National Transmission Asset Management Centre (NTAMC)'' and ''Enterprise Resource Planning (ERP)'' have been operationalized. These state-of-the-art technological advances have enabled increased transparency & efficiency in asset management and facilitated remote visibility & operation of POWERGRID''s transmission system established across the Country.

Your Company has been given ''Navratna'' status by Govt. of India and it continued to display "Excellent" performance by exceeding most of the targets under the ''Memorandum of Understanding (MoU) signed with Ministry of Power (MoP), Government of India for FY 2014-15''. Based on its performance against the MoU targets, the Company is poised to be rated ''Excellent'' for the year 2014-15, thereby maintaining the record of the getting ''Excellent'' rating year after year over two decades since signing of its first Moll.

Major achievements by your Company on various fronts are mentioned below:

- Capital investment of Rs. 22,456 Crore

- Assets capitalization of about Rs. 21,760 Crore.

- Commissioned new transmission assets comprising about 8,830 circuit kilometre (ckm) of Extra High Voltage (EHV) transmission lines, 8 new sub-stations and 25,786 Mega Volt Ampere (MVA) transformation capacity.

- Investment approval accorded for 33 new transmission projects worth more than Rs. 25,500 Crore.

- Maintained transmission system availability at 99.87% with number of trippings per line limited at 0.53 for the year.

- During the year, a number of large projects were commissioned including important elements, viz. 765 kV D/C Wardha-Aurangabad lines 1 & 2, 765 kV D/C Raipur-Wardha & 765kV Champa-Raipur lines for evacuation of power from IPP Projects in Chhattisgarh, 765 kV D/C Nellore-Kurnool, 765kV D/C Kurnool-Thiruvalam for Southern Region Grid Strengthening, 765kV 2xS/C Angul-Jharsuguda 765kV D/C Jharsuguda- Dharamjaygarh and 765kV S/C Satna-Gwalior-II lines.

- During the year, inter-regional power transfer capacity of 4,200 MW has been added by the Company. The cumulative inter-regional power transfer capacity of the National Grid stood at about 46,450 MW at the end of March, 2015.

FINANCIAL PERFORMANCE

(Figures in Rs. Crore, except per share data)

Description 2014-15 2013-14 Y-o-Y Growth

Revenue

Transmission Charges 16,521 14,327 15.3%

Consultancy-Sale of Services 381 333 14.4%

Consultancy-Sale of Products 0 294 -

Telecom 275 276 -0.4%

Other Income 603 491 22.8%

Total Income 17,780 15,721 13.1%

EBIDTA 15,354 13,427 14.4%

Profit After Tax (PAT) 4,979 4,497 10.7%

Earnings per Share (Rs.) 9.52 9.36 1.7%

Book Value per Share (Rs.) 72.71 65.78 10.5%

Gross Fixed Assets 118,264 96,504 22.5%

Long term borrowing* 93,845 80,470 16.6%

Net Worth 38,037 34,413 10.5%

Debt Equity Ratio 71:29 70:30 -

- including current maturities of long term borrowings

OPERATIONAL EXCELLENCE

Asset Management

As on April 1, 2015, the transmission assets owned and operated by your Company stand 115,637 ckm. of Extra High Voltage (EHV) transmission lines and 192 nos. EHVAC & High Voltage Direct Current (HVDC) sub-stations with 231,709 MVA transformation capacity.

Managing such widely spread assets across the Country has been an extraordinary task involving meticulous planning and observing stringent procedures. Maintenance activities are planned well in advance and an "Annual Maintenance Plan" is chalked out for every asset through live line or shutdown maintenance, as per technical feasibility. In the event of tower damage due to natural calamities or otherwise, Emergency Restoration System (ERS) is being used for restoration of damaged transmission towers in shortest possible time. Further, POWERGRID has taken initiative for development of mobile sub-station (truck mounted) for emergency restoration in case of eventuality.

In spite of the challenging conditions, during the FY 2014-15, your Company maintained availability of the transmission network at 99.87% which is comparable to international standards. The number of tripping per line (unplanned) stood at 0.53 for the year, indicating high reliability of POWERGRID transmission system. This performance could be maintained through training, deployment of advanced techniques including use of helicopters for live line aerial patrolling, hot line maintenance upto 765 kV voltage level, equipment conditioning monitoring including dynamic testing, thermo-vision scanning, frequency response analysis of the transformers and reactor''s etc.

With rapid increase in asset base of your Company, urgent need was felt to provide expert handling to the equipment spread all across the Country. In view of this, National Transmission Asset Management Centre (NTAMC) has been established for remote operation and monitoring of the substations, which is manned by experts on 24X7 basis to provide expert handling to system & equipment. The project constitutes of three distinct areas such as SCADA (Supervisory Control and Data Acquisition System), for gathering of electrical data & control of the switchgear of sub-station, RAS (Remote Accessibility System) and VMS (Video Monitoring System) which can be remotely controlled from the NTAMC and which is used to keep a close watch on the substation switch yard & its premises.

At the end of FY 2014-15, 75 substations are being operated through remote operation including 44 substations without operating staff. MSH (Maintenance Service Hub) facility has been established where specialised group of experts of all areas like control & protection, switchyard equipment, transformer & reactor are available to carry out repair/overhauling of equipment as & when required.

International Benchmarking of POWERGRID O&M practices

In order to improve further, POWERGRID O&M practices are regularly being benchmarked internationally through "International Transmission Operation and Maintenance Study" (ITOMS) carried out by UMS, USA. In ITOMS studies/ benchmarking, about 28 large Power Transmission Utilities across the Globe participate and their performances are evaluated and benchmarked. POWERGRID carried out benchmarking of all its 9 Regions with each other and with other member Utilities of ITOMS to identify areas of improvement. As per ITOMS benchmarking, your Company has been maintaining high performance in its sub-stations & transmission lines operations.

Disaster Management

Being a sound customer centric organisation, your Company has been contributing in restoration of power in areas hit by natural calamities in the Country. This was evident when the State of Jammu & Kashmir (J&K) saw the devastating flood in its history of last 60 years, disrupting the electricity supply in most of the areas of the State. For quick restoration of power in the State, your Company took charge as Nodal Agency to assist J&K Power Department by taking immediate measures such as deployment of manpower, tools & tackles for restoration of flood affected distribution system, diversion of the material to J&K from far-flung States, deployment of Emergency Restoration System (ERS), quick procurement of Distribution Transformers, etc.

Yet again, when unseasonal torrential rainfall caused flood like situation in the State of J&K, landslides were reported at various places and tower collapse was reported in 132 kV Salal-Jammu transmission line. Immediate dispatch of ERS was arranged and erection carried out in a very short time.

Similarly in Andhra Pradesh in October, 2014, after cyclone ''HUDHUD'', support was provided to restore power in the affected areas of three (3) districts, namely Vishakhapatnam, Srikakulam & Vijayanagaram. Wide-spread damage in these three districts had taken place on account of tripping of lines connecting to the area from Khammam, Vijayawada, Vemagiri, in AP and 400kV in feed from Jeypore ( Odisha). Approximately, 1000MW load had crashed due to failure of downstream sub-transmission & distribution network of AP Transco & Discoms in above three districts. Besides, towers collapse was reported in a number of 400KV & 220KV transmission lines in the area and number of bay equipment at 400kV Gazuwaka (POWERGPJD), Simhadri (NTPC) & Kalpaka (APTRANSCO) were also damaged. A team comprising senior officials was sent to site immediately to restore the damaged system. Restoration of distribution system was also carried out.

Your Company''s actions have been lauded by everyone including media and Government, which has further boosted the determination to be ready to face such calamities.

PROJECT IMPLEMENTATION

Your Company has been putting continuous thrust on commissioning of its transmission projects to extract maximum commercial benefits through its Integrated Project Management and Control System (IPMCS).

On project implementation front, your Company has commissioned about 8,830 ckm of EHV (Extra High Voltage) transmission lines and 25,786 MVA transformation capacity with 8 new sub-stations during the year, which includes a number of large projects, including important elements such as 765 kV D/C Wardha-Aurangabad lines 1 & 2, 765 kV D/C Raipur-Wardha & 765kV Champa-Raipur lines for evacuation of power from IPP Projects in Chhattisgarh, 765 kV D/C Nellore-Kurnool, 765kV D/C Kurnool-Thiruvalam for Southern Region Grid Strengthening, 765kV S/C Satna-Gwalior-II & 765kV 2xS/C Angul-Jharsuguda transmission lines. Also, through commissioning of 765kV D/C Jharsuguda- Dharamjaygarh line, 4,200 MW inter-regional power transfer capacity has been added by your Company.

Also, your company has provided active support in the completion of critical 765kV Raichur-Solapur circuit-2 transmission line, which was being implemented through Private Sector participation.

FINANCIAL MANAGEMENT

In the FY 2014-15, your Company continued to show exceptional performance in all its business areas, enhancing the value for the shareholders. Your Company has achieved turnover of Rs. 17,780 Crore and Profit after Tax (PAT) of Rs. 4,979 Crore as compared to Rs. 15,721 Crore and Rs. 4,497 Crore respectively during FY 2013-14 on standalone basis.

On consolidated basis, PAT crossed the Rs. 5000 crore mark, registering at Rs. 5046 crore in FY 2014-15. The turnover on consolidated basis increased to Rs. 18233 crore from Rs. 16146 crore in FY 2013-14.

Capital Investment and Fund Mobilization

In line with its increased target of Rs. 1,10,000 Crore from Rs. 1,00,000 crore capital expenditure target for the XII Plan, Capital investment (CAPEX) of Rs. 22,456 Crore has been made during the year 2014-15 and cumulatively Rs. 65,651 Crore CAPEX has been achieved. For the CAPEX of FY 2014- 15, Rs. 13,014 Crore were mobilised through private placement of bonds & term loan, Rs. 3,070 Crore were mobilised through External Commercial Borrowings (ECB)/Suppler credit and balance Rs.6372 crore was met through internal resources generated & FPO proceeds.

Dividend Payout

For FY 2014-15, your Company has proposed a final dividend of Rs. 1.31 per share in addition to Rs. 0.69 per share of interim dividend paid in March, 2015. The final dividend shall be paid after your approval at the Annual General Meeting. Thus, the total dividend payout for the year amounts to Rs. 1,046 Crore (including an interim dividend of Rs. 361 Crore).

Particulars of loans, Guarantees or investments.

Loans, Guarantees or investments under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual report.

Particulars of contracts or arrangements with related parties

Particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act, 2013, in the prescribed Form AOC-2, are given as Annexure X of the Directors'' Report. Further, attention of the members is drawn on Note No. 2.47 of the Financial Statement which sets out related party disclosure.

Transfer to Reserves

Your company has proposed to transfer Rs. 2400.00 crore to the general reserve and an amount Rs. 1763.00 crore to other reserves.

Statement containing salient features of financial statements of subsidiaries, associate and Joint Ventures Companies

Statement containing salient features of financial statements of subsidiaries, associate and Joint Ventures Companies as required under Section 129 (3) of the Companies Act, 2013, in the prescribed Form AOC-1, is given as Annexure XI to the Director''s Report.

Consolidated Financial Statement

As per the requirements of the Companies Act, 2013, the Audited Consolidated Financial Statement is provided in the Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required u/s 134 (3)(c) & 134 (5) of the Companies Act, 2013, your Directors confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the Directors had selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the Company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the Annual Accounts on a going concern basis; and

(e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

COMMERCIAL PERFORMANCE

As per Central Electrical Regulatory Commission (Sharing of inter-State Transmission Charges and Losses) Regulations, 2010, your Company as the Central Transmission Utility (CTU) of the Country, has been entrusted the responsibility for billing, collection & disbursement of transmission charges bills on behalf of all Inter-State Transmission System (ISTS) Licensees. In this regard, bills on transmission charges are prepared, raised and uploaded on the website portal for Designated ISTS Customers (DICs), including the payment details by the customers.

Your Company is fulfilling the assigned responsibilities effectively and displayed excellent collection efficiency of 97%.

PERFORMANCE AGAINST COMPETITION

Your Company is able to do well in spite of stiff competition and displayed impressive performance under Tariff Based Competitive Bidding (TBCB). During the year FY 2014-15, your Company won three out of four projects put up for bidding under the TBCB route, namely Transmission System Strengthening associated with Vindhyachal-V, Transmission System associated with Gadarwara STPS (2X800 MW) of NTPC Part-A and Transmission System associated with Gadarwara STPS (2X800 MW) of NTPC Part-B. As on 31.3.2015, your Company has won total eight (8) projects through TBCB since its participation.

DEVELOPMENT OF NATIONAL GRID

A strong National Grid enables seamless power flow across the regions and optimum utilization of resources across the Country. Working in this direction, your Company successfully achieved ''One Nation-One Grid-One Frequency'' in the year 2013-14. During the year under consideration, the Company commissioned 765kV D/c Jharsuguda-Dharamjaygarh transmission line, increasing the power transfer capacity between Eastern Region and Western Region by 4,200MW. As a result, the total inter-regional power transfer capacity of the National Grid stands at 46,450 MW as on March 31, 2015. Also to increase the inter-regional power transfer capacity of the National Grid, your Company is executing a number of projects, some of which include high capacity HVDC links. By the end of XII Five Year Plan, it is expected that the inter-regional power transfer capacity of the National Grid will be about 72,250 MW.

GRID MANAGEMENT AND OPEN ACCESS

Power System Operation Corporation Limited (POSOCO), a fully owned subsidiary of your Company, has been managing the national grid successfully. POSOCO, through National Load Despatch Centre (NLDC) and Regional Load Despatch Centres (RLDCs) has been facilitating transfer of power through bilateral and multi-lateral transactions and is playing important role for creating vibrant electricity market in the Country. POSOCO has been designated as the nodal agency for Renewable Energy Certificate (REC) Mechanism, transmission pricing, Short Term Open Access (STOA) in transmission, Deviation Settlement Mechanism, Power System Development Fund (PSDF) management, etc.

During FY 2014-15, to meet the demands in the Country, about 84.36 Billion Units (BUs) of inter-regional energy transfer was facilitated, across the nation using pan-India inter-regional transmission links.

Under Short Term Open Access (STOA), 12,106 nos. of bilateral transactions and 25,942 nos. of collective transaction were approved, allowing energy transfer of 52.55 BUs through bilateral transactions and 28.38 BUs through collective transactions, totaling up to 38,048 approved transactions and 80.93 BUs of approved energy in the FY 2014-15.

Further, your Company, as Central Transmission Utility (CTU), is the nodal agency for processing & grant of Connectivity, Long Term Access (LTA) and Medium Term Open Access (MTOA) to various applicants. Out of 209 Connectivity applications for about 2,10,000 MW capacity received, Connectivity was granted to 90 numbers. of eligible applications of 77,600 MW capacity. As on March 31, 2015, the Company granted LTA to 201 applications of 152,000 MW capacity. Also based on the transmission margins availability, the MTOA was granted to 76 numbers. of applications of 5,100 MW capacity.

QUALITY MANAGEMENT

With the present state of economy & financial issues, the manufacturers are facing tough competition from indigenous as well as international manufacturers. To ensure quality while procuring goods at competitive prices, various quality assurance improvement measures have been initiated and implemented to get better quality products. Process/surveillance audits were carried out to create win-win partnership with suppliers and to get better quality products at low costs.

With vast geographical spread of work & large number of high capacity transmission lines and sub-stations with state-of-Art technology under implementation, capacity building is one of the major challenges. In this direction, your Company has established its ''POWERGRID Academy of Leadership'' at Manesar for capacity building of its staff as well as for power sector-domestic & international. Further, to have self-reliance of indigenous development of High technology / critical products, your Company has mandated its international suppliers to set up manufacturing facilities in India in the field of 765kV Transformer/Reactors, 800kV HVDC equipment, GIS & major equipment, etc.

Your Company continues to do process audits in the manufacturing units of various vendors, sub-vendors & even further below in supply chain to achieve the target of zero product inspection. Activities like calibration of key testing instruments & their validation were undertaken on topmost priority so as to improve quality systems at the manufacturer''s works. Quality audits at sites were also undertaken during the year for instant feedback and to take appropriate corrective action apart from web based feedback system.

In order to ensure quality of product with required technical specifications and to meet project completion target, a number of activities have been undertaken by your Company like defining proper processes for quality manufacturing, quick approval of quality plan of various items and smart inspection of materials. For on time issue of CIP (Customer Inspection Points) /MICC (Material Inspection Clearance Certificate), testing and manufacturing of various critical items, continuous follow up with manufacturers were undertaken.

Another milestone was achieved during the year when two of the Regional Offices of POWERGPJD, i.e. Nagpur (Western Region-I) & Shillong (North-East Region) were awarded certification for their Energy Management Systems under ISO 50001.

Your Company developed and maintained systems and procedures aligned with integrated management system comprising ISO 9001: 2008 for Quality Management System, ISO 14001: 2004 for Environmental Management System and OHSAS 18001: 2007 for Occupational Health and Safety Management System. The certification has been maintained upon rigorous audits by BSI Management Systems.

TECHNOLOGY DEVELOPMENT

Your company gives priority to research and development activities with potential for environmental, social and national interests by incorporating advanced technology solutions in the field of power system. In this direction, your company is setting up State-of-the-Art research and testing laboratories POWERGRID Advanced Research and Technology Centre at Manesar in the field of transmission, renewable integration, power system simulation, material science, advanced equipment diagnostics, smart grid, energy efficiency, control and automation, engineering design etc. This R&D centre shall cater to the research needs of POWERGRID and the country as a whole as well as capacity building of various stakeholders in this field.

The focus areas in development of transmission system across the country and trans-country as well are conserving the Right of Way (RoW), minimizing impact on natural resources, indigenization of technology and maintaining high network availability. To address these aspects, your company has developed new type of tower design including multi circuit type, digital substation through process bus architecture, air core reactor suitable for HVDC terminal etc.

Further, your Company as a part of its technology development process is carrying out a demonstration project on High Temperature Superconductor (HTS) cable system at 220kV voltage level. Being a technology in its development and demonstration stage worldwide, which is known for bulk power transmission with negligible losses on reduced right-of-way, the first-hand experience gained from this R&D project will boost your company''s thrust towards adoption of cutting edge technologies for safe, secure and reliable operation of grid. The operational experience and maintenance know-how gained from the project will pave way for future deployment of this state-of-the art technology in Indian grid.

Your company is considering a pilot project on Fault Current Limiter. The search for a solution to address the issue of rising fault current levels in Indian grid and at the same time which doesn''t affect the reliable operation of the grid leads your company to advanced fault current limiters. These Fault Current Limiters offer a promising solution to tackle the rising fault levels with its unique features in comparison to conventional methods for fault current limitation viz. bus splitting, series reactors etc.

Towards maintaining high network availability by maintaining proper insulation level of EHV transmission line, pollution measurements on pan India basis is being carried out to create base line pollution mapping data facilitating review of EHV lines insulation requirement which is first of its kind in the country.

SMART GRID TECHNOLOGY

Your company has pioneered for development of Smart Grid leading towards Smart City in the country for bringing efficiency encompassing entire power supply value chain.

Your company is implementing one of the world''s largest Wide Area Measurement System(WAMS) through deployment of State-of-the- Art Phasor Measurement Units(PMU) as part of Smart transmission. It covers deployment of PMUs at all 400kV and above substations at State and Central level as well as generation switchyards of 220kV & above across the country as part of Unified Real Time Dynamic State Measurement(URTDSM) scheme. Real time measured system information using fibre optic communication network are to be integrated at State Load Despatch Centres(SLDC), Regional Load Despatch Centres (RLDC) and National Load Despatch Centre(NLDC) for improved visualization and enhanced situational awareness of system operators and planners. Analytics using above data are being developed in association with IIT, Bombay to enhance the efficiency & security of the overall grid management.

Towards smart distribution, after demonstration of various Smart Grid attributes at Puducherry in a comprehensive manner through open collaboration, your company is also extending services for implementation of Smart Grid projects in various states like Himachal Pradesh, Punjab, West Bengal, Tripura, Chhattisgarh, Rajasthan, Haryana, Karnataka and Puducherry. Your company has also submitted project report to Govt. of Haryana on development of smart grid leading towards smart city Gurgaon to provide 24x7 quality power including catering growing demand and make Gurgaon Diesel generator set free city.

Towards facilitating increasing penetration of renewables in the overall generation capacity portfolio, your company has pioneered in implementation of battery energy storage systems of about 1 MW capacity as pilot project in Puducherry to evaluate different battery and its control technologies for proof of concept, areas of application, policy advocacy etc. in Indian context for large scale deployment.

Quality of power is one of the major concerns now in India for performance improvement of process and maintaining health of electrical network equipment. Recognizing its importance, your company has taken initiative to measure various power quality parameters at different cities on pan India at all voltage level to create base line data repository for identification of mitigating measures and application of technological solutions. Already measurements at more than 150 cities/towns completed across the country.

Your company is indigenously developing/developed smart products like smart meter, data concentrator unit, home energy management system, micro grid controller, active power filter etc. for varied applications and applied for patent.

To bring awareness about Smart Grid technologies and its demonstration in a holistic manner, your company is establishing a Smart Grid Knowledge Center equipped with working model of various technologies at POWERGRID Advance Research and Technology Centre (PART) at Manesar. This shall facilitate dissemination of knowledge on smart grid technologies in a learning environment as well as capacity building of utility/consumer and other stakeholders.

Your company also operates Secretariat of the prestigious "India Smart Grid Task Force(ISGTF)" of Ministry of Power, Govt. of India for activities related to Smart Grid.

GRID INTEGRATION OF RENEWABLE ENERGY SOURCES

Integration of Renewable Energy(RE) sources into the grid is one of the top priority of Govt. of India towards energy security and environmental sustainability. In this direction, your company has evolved Green Energy Corridors comprising intra state and inter state transmission infrastructure to facilitate integration of envisaged renewable capacity addition of about 33 GW in 12th plan in RE resource rich states at an estimated cost of about Rs. 38,000 cr. Inter State Transmission System(ISTS) as part of Green Energy Corridors is being implemented by your company. Further, your company has also evolved transmission schemes for integration of proposed ultra mega solar power parks of about 22,000MW in various states as part of Green Energy Corridors-II. Govt. of India also assigned your company to develop Inter State transmission system for nine(9) solar parks of capacity about 10,000 MW in seven(7) states. Implementation of transmission scheme for one(1) solar park in Andhra Pradesh is under progress.

ENERGY EFFICIENCY

Energy conservation through energy efficiency measures plays an important role to address energy saving aspect towards sustainability. Your company initiated activities in identification of energy saving opportunities through carrying out energy audits of various industries including Integrated Steel Plant at Bokaro & Bhilai, SAIL, institutions and other commercial establishments. Your company has more than 70 Bureau of Energy Efficiency (BEE) certified Energy Auditors/Managers. So far through energy audits, energy saving potential equivalent to 4750 MU with avoidable generation of about 900MW has been identified besides reduction in C02 emission. Towards demand side management, your company replaced 1337 old agricultural pumps with energy efficient pumps in Mandya district, Karnataka resulted into energy saving more than 35% with about 3MW load reduction.

Your company is also a BEE Grade-I Energy Service Company (ESCO) to implement energy efficiency solutions. In-house designed Waste heat recovery systems for steel re-rolling mills and implemented at various industries.

Your Company has released a study report "Negawatt Makes-a-Watt" i.e, Energy efficiency opportunities in India covering eighteen(18) energy intensive sectors in the country. Savings more than 20% in electrical energy, 12% in Coal and 7% in oil can be achieved per annum at an investment of Rs.12 lakh crore over a period of 5 years.

''POWERTEL'' - TELECOM SERVICES ON TRANSMISSION INFRASTUCTURE

Your Company is leveraging its Country wide transmission infrastructure with its diversified business portfolio of Telecom under the brand name ''POWERTEL''. During the FY 2014-15, total network coverage has been increased by 12% to 33,241 kms from the earlier reach of 29,641 kms. Number of Points of Presence (PoPs) locations have been increased to 352 from the earlier coverage of 317 PoPs and 44 new customers were added, resulting in increase in total customer base to 187 numbers and a growth of 25% over previous year.

Telecom Backbone Availability for the year 2014-15 was 99.97% better than in the previous year. Total Revenue (including revenue from internal sources) from Telecom Business for FY 2014-15 was Rs. 300.95 Crore as against Rs. 288.21 Crore in the previous year.

Your Company has signed an agreement with Bharat Sanchar Nigam Limited (BSNL) to improve the telecommunication connectivity with the North-Eastern States including Sikkim. It envisages the provisioning of bandwidth on optical fibre media laid over existing high tension electric transmission network of your Company. After completion of the proposed connectivity, the reliability of the telecom services shall improve substantially in North-Eastern region including Sikkim. Your Company has successfully completed the prestigious NKN (National Knowledge Network) project assigned by Govt. of India, which connects all knowledge centres across the Country such as Indian Institutes of Technology (IITs), Indian Institute of Sciences (IISCs) etc., on a high speed connectivity.

National Optical Fibre Network (NOFN)

As a part of Government of India plan to connect 250,000 Gram Panchayats (GP) in the Country by utilizing existing fibres of PSUs (BSNL, Railtel and POWERGRID) and laying incremental fibre to connect to Gram Panchayats wherever necessary, Your Company has been allotted work for development & maintenance of NOFN network in States viz. Telangana, Himachal Pradesh, Jharkhand & Odisha by Bharat Broadband Network Ltd (BBNL). Survey work has been completed in all states. Awards have been placed progressively for supply of duct & accessories and trenching & laying work. 977 nos of Gram Panchayats have been connected with fibre till 31st March 2015.

BUSINESS DEVELOPMENT & CONSULTANCY

Your Company, one among the largest power transmission utility in the world, has developed the expertise in its core areas such as power transmission, sub-transmission, load dispatch and communications (LD&C) etc.

Leveraging its capacity and experience, Consulting services have been provided to a number of customers in India and worldwide. During FY 2014-15, forty (40) Consultancy assignments were secured. During the fiscal 2015, the Company achieved Consultancy Revenue ofRs. 381 Crore from Consulting services.

DOMESTIC

Keeping its commitment to assist State Utilities for an inclusive, healthy and sustainable growth, your Company undertook a number of assignments on behalf of Utilities and other clients covering areas of Transmission, Sub-transmission, Distribution, Load Dispatch & Telecommunication, Smart Grid application, Energy Efficiency, HR Management and Development etc. Major Assignments include Comprehensive Scheme for Strengthening of Transmission & Distribution System in Arunachal Pradesh & Sikkim (Estimated project cost of Rs. 4209 Crore), Strengthening of 400 kV & 220 kV Transmission System of Delhi Transco Ltd (Estimated project cost of Rs. 932 Crore) and Srinagar - Leh Transmission System (Estimated project Cost ofRs. 1788.41 Crore).

In order to expand consultancy market even farther, exploratory forays are being persistently charted out in Oil sector, Railways, Industrial Corridors, etc. which are likely to bear fruit in near future.

Some of the engagements in green-shoot areas like Smart Grid / Non-conventional Renewable Energy and Energy Efficiency initiated by the Company also have potential opportunities to contribute towards income from consulting services.

INTERNATIONAL

Your Company secured a total of 10 assignments with consulting fee of about Rs. 3,700 Lakhs during FY 2014-15, in international arena. Your Company has now international presence in a number of countries of Asia, Africa & Eurasia regions. Countries in which consulting services are being provided include in Afghanistan, Bangladesh, Bhutan, Congo, Ethiopia, Nigeria, Nepal, Kazakhstan, Kenya, Kyrgyz Republic, Myanmar, Senegal, Tajikistan, Tanzania, Uzbekistan etc.

During the FY 2014-15, your Company successfully completed the contract worth USD 64.01 million awarded by Myanmar Electric Power Enterprise (MEPE), within time schedule, for supply of Goods and related Services for 230kV Transmission System associated with Thahtay Chaung Hydro Power Project in Myanmar.

INTERNATIONAL COOPERATION

The proposed cross-country grid is being envisaged for harnessing SAARC nations'' capacities and resources to address growing energy needs of the region. Presently, India has interconnections with Nepal, Bhutan and Bangladesh, which are being strengthened for mutual exchange of power. With these interconnections, while the county imports around 1,500 Megawatt (MW) of power from Bhutan, it exports around 500 MW power to Bangladesh and 150 MW power to Nepal.

Further, for evacuation of power from various upcoming hydroelectric power projects(HEPs) in Bhutan, Punatsangchu-I HEP (Bhutan) - Alipurduar (India) 400kV Double Circuit (D/c) line between countries Bhutan & India, is under implementation and expected to be ready by 2017. Also, for transfer of bulk power, interconnection between India and Nepal through 400 kV Dhalkebar (Nepal) - Muzaffarpur (India) D/c transmission line is under implementation. Further, to augment the power transfer capacity of India - Bangladesh asynchronous interconnection through 400kV (charged at 132kV) Surajyamaninagar (India) - Comilla (South) (Bangladesh) line, addition of another 500MW power terminal module at Bheramara is being firmed up, which will increase the power transfer capability between the two nations by 500MW. For interconnection between India and Sri Lanka through a ±400kV, 500/1000MW under-sea HVDC line, feasibility studies carried out and reports under review. Discussion for interconnection between India and Pakistan through Amritsar (India) - Lahore (Pakistan) line are being held at Government level.

CONTRIBUTION IN DISTRIBUTION REFORMS

Under DDUGJY (Deendayal Upadhyaya Gram Jyoti Yojana) scheme (including erstwhile RGGVY) for rural electricity infrastructure and household electrification, your Company has been executing infrastructure work for rural electrification in sixty-seven (67) districts of nine (9) States in the Country of a base cost of about Rs. 7,409 Crore.

Almost all of the X / XI plans schemes have been completed. Work in 4 districts in Uttar Pradesh (UP) assigned to POWERGRID under XI Plan Phase-II and XII Plan are under implementation.

During FY 2014-15, infrastructure was created for electrification in 581 nos. of partially electrified villages. Also, 2666 nos. of villages were energised. Cumulatively, till March, 2015, infrastructure has been created for electrification of 71,622 villages. Further, service connections were provided to about 35.9 lakh BPL households.

For rural electrification under DDUGJY, your Company has been engaged for execution of projects under the XII Plan in 15 districts of Odisha having sanction cost of about Rs. 1767 Crore and earning potential ofRs. 159 Crore.

XII PLAN PROGRAMME

The Capex plan of your Company has been increased to Rs. 1,10,000 Crore from Rs. 1,00,000 Crore envisaged earlier for XII Plan mainly due to additional transmission infrastructure of various inter-State transmission systems including Green Energy Corridors projects.

Your Company has already made a capital expenditure of Rs. 65,651 Crore in the first three years of the plan period. Based on the ratings given by both domestic and international credit agencies, your Company do not foresee any difficulty for resource mobilisation. The funding for capital expenditure are planned to be met through loans from multilateral institutions such as The World Bank, Asian Development Bank, Supplier''s Credit, External Commercial Borrowings through bonds / notes, besides loans from domestic market and through private placement of bonds.

ERP IMPLEMENTATION & IT

Project "RUPANTAR", the Enterprise Resource Planning (ERP) initiative of your Company has been implemented successfully in the year 2014-15.

Subsequent to completion of the User Acceptance Testing of the business solutions, pilot Go-live of ERP took place in August 2014. After the stabilization of the pilot region, roll out to balance regions was also taken up and completed during October 2014 to February 2015. Presently, majority of the key processes related to the business are running on ERP. Also, a Disaster Recovery Site is being established at Bangalore.

Your Company continues to provide latest IT solutions for betterment of its business process. Both Internet and Intranet have been provided in offices and site locations all over the Country for seamless connectivity and effective working environment. Recruitment process is being conducted for self and for few other companies through online application portal, which is designed, developed and maintained through in-house expertise. Further, various applications like online status of "Swachh Bharat Abhiyaan" (Clean India Mission) works, Inspection Management System, Vigilance Inspection System and Attendance Management System etc. are developed, run and maintained in-house for assisting the business operations.

The Company has also taken up a major technology upgradation of IT infrastructure such as implementation of cloud, security policy, Information Security Management System (ISMS), etc. Further, ISO:27001 Certification for ISMS is also being implemented initially at Corporate Centre.

Your Company has established video conferencing facilities at Corporate Centre, all regional Headquarters, all major Project Headquarters as well as at most of the substations. Video Conferencing is extensively used to carry out meetings, discussions and trainings within and outside POWERGRID network.

ENVIRONMENT AND SOCIAL MANAGEMENT

Your Company, since its inception is working to harmonise environment conservation with all aspects of its projects. Your Company''s activities are non-polluting in nature and their environmental impacts are negligible. Your Company is committed to conservation of natural resources, reducing impact on nature and increasing the service value by use of efficient and safe technology practices.

Key initiatives taken by your Company towards sustainable development are technological initiatives for conservation of precious Right of Way (ROW), rain water harvesting system which is now an integral part of every new substation design, installation of LED bulbs, solar lights, fuel catalysts devices for DG sets etc. Your Company has substantially reduced the land requirement by utilizing new technology like Gas Insulated Substation (GIS) which requires less than one-third (1/3rd) of the land compared to conventional Air insulated Substation (AIS). In order to reduce Carbon footprint, waste paper are used to produce recycled paper for printing of our office stationery like letter heads, writing pads, visiting cards, envelopes etc. This has resulted in reduction in use/procurement of fresh paper.

For the FY 2014-15 your Company have obtained final forest clearance for 29 transmission lines involving 34 forest proposals involving diversion of about 1760 hectares and in-principle forest clearance for 22 transmission lines involving 32 forest proposals for diversion of about 1680 hectares. Some of the major lines for which such forest clearances are obtained include 765 kV Angul-Jharsuguda, 400 kV D/C Dehradun- Abdullapur, 132 kV S/C Tezu-Namsai, 765 kV D/C Dharamjaygarh-Jabalpur etc.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is a commitment of your Company to its stakeholders to conduct business in an economically, socially and environmentally sustainable manner that is transparent and ethical. It primarily focuses on inclusive social-economic growth for development of marginalized and under-privileged sections of the society residing around its areas of operation. With this approach, your Company carries out various CSR activities with thrust on Rural Development/Infrastructural Development, Livelihood Generation, Health, Education, Tree plantation, Environmental, Relief/Restoration during National Calamities etc.

During the FY 2014-15, your Company spent Rs. 47.42 Crore on various CSR activities, which was 75% higher than amount spent of CSR activities during FY 2013-14.

During the year under review, your Company has also participated in the "Swachh Bharat Abhiyaan" by constructing about 10,000 toilets in about 4,500 Government schools in several states of India. It has also undertaken Projects of imparting skill development trainings for industry employment/ self - employment to about 7500 youths departmentally and in association with National Skill Development Corporation (NSDC), National Handicapped Finance and Development Corporation (NHFDC), ITCOT etc. Your Company also distributed aids & appliances to People with Disabilities in association with ALIMCO and arranged "Health Check-up camps" at 30 locations.

Annual Report on corporate social responsibility (CSR) activities and spend of CSR Amount is given at Annexure XII of this Report.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital

Employees are main resources for your Organization. During FY 2014-15, your Company inducted about 321 personnel at various levels viz. Executives, Supervisors & Workmen. Executives recruited through open advertisement on all India basis from reputed engineering and management institutes. Recruitment of non-executives was carried out through employment exchanges and local advertisement at regional level. As on March 31, 2015, the total number of employees of your Company stood at 9,033.

Your Company''s Human Resource Development (HRD) interventions are directed towards learning new competencies and to reinforce good work practices & change workplace behaviour as per the organizational needs. The Company has been able to link the Individual Development Plans (IDP) of employees as per the business requirement, which helps the organization to keep updating the competencies of employees to meet current and future requirements. In order to align with growing competitive business environment, your Company imparted training/ hands on training on major equipment and their operation & maintenance, new Land Acquisition Act, Certified Project Management Programmes, latest survey techniques, networking skills and overhead power line design program, etc.

The yearly Action Plan HRD has been based on ''Organisational Need Analysis (ONA)'' and Training Needs Assessment (TNA)''. Competency Analysis and Skill Gap Analysis have been carried out for various functions in your Company by keeping in view the existing/emerging business scenario. Skill development programmes in the areas of transmission line construction, tower erection & stringing for unemployed / under- employed youths have been conducted at various locations in the Country and more than 600 such youths were trained during FY 2014-15. For conducting such trainings, necessary infrastructure has been created in POWERGRID sub-stations. Cumulatively, about 1600 persons have been trained up to 31.03.2015 under this initiative for enhancing the availability of skilled manpower for construction jobs in the field of transmission.

In addition, during FY 2014-15, training has been imparted to employees/ participants from Haryana Vidyut Prasaran Nigam Ltd.(HVPNL), Bhakra Beas Management Board(BBMB), Powergrid Company of Bangladesh Ltd. (PGCB), Kenya Electricity Transmission Company Limited (KETRACO), Ceylon Electricity Board, Nepal Electricity Authority, Bhutan Power Corporation, Tanzania Electric Supply Company Limited and US Energy Association, under consulting services basis.

Employee Welfare

Your Company undertakes requisite changes in various policies from time to time in line with the needs and welfare of employees. It has empanelled various hospitals nearby to its establishments including Corporate Centre for the healthcare of employees and their dependents. The issues related to workmen are successfully addressed through the National and Regional Bipartite Committee (PNBC/PRBC), a joint consultative forum comprising management and workmen representatives.

An effective work culture has been established in the Company through empowerment, transparency, decentralization and practice of participative management. Industrial relations scenario in the Company has been cordial and no man-days were lost in FY 2014-15. Healthy community living is spread through periodically conducted cultural programmes for celebrating various occasions like Diwali get-together, Holi Milan, New Year, Raising Day, etc. in all establishments of the Company. Quality food is served to the employees in the ISO 22000:2005 conferred Cafeteria, Office and Food Lounge of Multi-Purpose hall.

Your Company also conducts various sport competitions for boosting the interest of employees in sports and games at intra and inter-regional level for Kabaddi, Cricket, Volleyball, and Badminton etc. Your Company also participates regularly in Inter-PSU Sports meet and its players stood meritorious in Table Tennis, Cricket, Carom, Badminton & Kabaddi tournaments and bagged a number of awards.

On the occasion of Silver Jubilee Celebrations a Mini-Marathon was organised at Corporate Centre, Gurgaon in which employees including CMD & Directors participated with their family members enthusiastically.

Prevention of Sexual Harassment at Workplace

As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (''Act'') and Rules made thereunder, your Company has constituted Internal Complaints Committees (ICC).

Citizen''s Charter

Citizen''s Charter has been formulated for the Company providing a visible front of its vision, mission, objectives, commitments, terms of service and its obligation to various stakeholders. In this, information is available about Company''s schemes, policies, project plans of the corporation and issues of general interest to stakeholders.

Implementation of Official Language

Your Company, being sensitive towards our heritage, social and cultural concerns, continues to prove its commitment for implementation of Official Language Policy of Govt, of India.

Your Company has been encouraging and putting all efforts for promotion of usage of ''Hindi'' in all aspects of management in all levels of the Corporation. Further, the Company has organized various events such as workshops to impart training in translation, enhancing working knowledge through organizing computer trainings and Hindi classes, etc. for increased use of Official language. Events like Akhil Bhartiya Rajbhasha Sammelan, Kavi Sammelans (poetry sessions), Kavita Pratiyogita, Hindi plays and various competitions for employees & their families are organized. Publication of Hindi magazines and circulation of Hindi newspaper to all departments is also being done to encourage Hindi writing and reading. To provide further inspiration, employees are nominated for external Hindi training programs which further educate & encourage the employees to work in Hindi.

Various forums such as Parliamentary Committees on Official Language, Advisory Committee on Official Language and Town Official Language Implementation Committee (TOLIC) have applauded the efforts made by your Company for implementation of Rajbhasha & receiving many accolades.

Corporate Image through Communication Management

Communication Management is an important and powerful weapon for building a strong corporate brand identity to strengthen and modify its relationship with the internal and external stakeholders. Keeping in mind the need for sustained, timely and bona fide communication interventions, your Company has adopted various communication strategies to highlight itself as a major power transmission infrastructure giant contributing significantly towards development of national economy.

Your Company has been issuing various press communiqué to highlight growth, achievements, and developments with a view to maintain regular interaction with the public. Your Company organizes ''Quarterly Press & Analysts'' Meet'' to facilitate face to face interaction with the journalists, analysts and stakeholders which is aimed at winning the trust of the masses through imparting information in a transparent way.

To showcase its technologies and strengths, your Company participated in the ''India International Trade Fair (IITF) 2014'' and Vibrant Gujarat'' targeted towards the common masses and focused clients. Your Company also participated in other business oriented exhibitions in Mumbai, Delhi and the Country of Tanzania to reach out to the target audience for pitching the business.

Communication is not effective unless and until it reaches out to the employees who are the pillar of any organization. To achieve this, your Company deploys various internal communication tools such as monthly newsletters, house journals, wall magazines, lounge and regular media updates. Beside this, Company regularly organizes open house for face to face interaction between management and employees. Company has prepared a corporate movie to showcase its journey on the occasion of Silver Jubilee year. A motivated theme song was also prepared for the employees. All these communication tools have helped individual in gaining an understanding about the organization''s culture & function and making them a brand ambassador of the Company.

RIGHT TO INFORMATION

In order to promote transparency and accountability, an appropriate mechanism has been set up across your Company in line with ''Right to Information Act, 2005''. Your Company has nominated CPIO/ Appellate Authorities at its Corporate Office and Regional offices across the Country to provide required information to the citizens under the provisions of Act.

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FUNCTION

Vigilance Department of your Company performs Preventive, Pro-active as well as Punitive Vigilance. However, the emphasis has been shifted from "Punitive Vigilance" to "Preventive and Pro-active Vigilance". Your Company has taken a number of initiatives to inculcate good governance within the organization. Some of these initiatives are given hereunder:

Process (Online) Inspection

Using this technique, inspections are planned in such a manner that critical pre-award and post-award activities are inspected during execution of works. Process (On-line) Inspection is done in order to check whether there are any shortcomings or not, thereby providing an opportunity for rectification of the defects before the work is completed. Since the focus is more on prevention, critical observations made during such inspections help the management in preventing similar irregularities during the later stages of execution of the projects.

Web Based Vigilance Information Network System (VINS)

With a view to leverage Technology in our work, Vigilance Information Network System (VINS) has been devised by your Company in collaboration with the IT Department, which has significantly cut down time, efforts and cost of working resulting into higher efficiency.

Workshop on Ethics & Values

Every year, two (2) workshops on Ethics & Values are conducted by the Regional Vigilance Department as well as Corporate Centre. These are aimed at encouraging value based ethical decision by the employees. Further, Preventive Vigilance Workshops are also conducted by Vigilance Department for non-vigilance executives. With a view to create awareness among the employees, RTI workshops are organized by Corporate as well as Regional Vigilance Department.

Vigilance Awareness Week 2014

Vigilance Awareness Week was observed in POWERGRID from October 27, 2014 to November 1, 2014. In keeping with the theme ''Combating Corruption- Technology as an Enabler'', various competitions were organized for the employees as well as for their family members, talk on ethics & values and on anti-corruption topics were delivered by eminent personalities. The week concluded with the release of in-house journal of the Vigilance Department ''Candour'' by Shri Pratyush Sinha, former Central Vigilance Commissioner.

ACCOLADES & AWARDS

The excellent performance of your Company has been recognised and appreciated by the Govt. of India and other prestigious organisations & institutions in form of various awards/ accolades in various categories from time to time.

Your Company has been rated ''Excellent'' for its performance as per MoU 2013-14 signed with the Ministry of Power and based on its performance poised to get ''Excellent rating'' for MoU 2014-15 as well.

Your Company has been conferred with the prestigious "ICSI National Award for Excellence in Corporate Governance" for 2014 by Institute of Company Secretaries of India (ICSI) in recognition of the highest levels of transparency and governance practices adopted by the Company.

Your Company proved its mettle on global front by positioning itself in the "Forbes List of Global 2000 Largest and Most Powerful Public Companies", and also "fastest growing electric utility in the world" as per M/s Platts (a division of McGraw-Hill Companies).

"The Economic Times" at its Power Focus 2nd Annual Summit awarded your Company for its remarkable contribution in the Power Sector.

Your Company has been conferred with "CBIP Award" for the best performing Transmission Utility and your CMD has been felicitated with the "Power Persona of The Year Award" by CBIP in recognition of his contribution for accelerated development of power sector.

Your CMD has also been bestowed the prestigious "IEF Meritorious Energy Service Award"

Director (Finance) of your Company, Shri R. T. Agarwal, has been felicitated with the "CA-CFO-Power Sector Award" by the Institute of Chartered Accountants of India in recognition of exceptional performance as CA-CFO in Power Sector for the Year 2014.

MANAGEMENT DISCUSSION AND ANALYSIS

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

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report as stipulated under Clause 55 of the Listing Agreement with the Stock Exchanges is given in Annexure-II.

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

As per requirements of disclosures under Section 134(3) (m) of Companies Act,2013 read with Rule 8 of The Companies (Accounts) Rules, 2014 information relating to conversation of energy, technology absorption and foreign exchange earnings and outgo, is given in Annexure-III to this Report.

Auditors'' Report

The qualification in Statutory Auditors'' report and managements reply thereto is given at Annexure - IV to this Report.

COMPTROLLER AND AUDITOR GENERAL''S COMMENTS

Company has received ''NIL'' comments on the standalone accounts for the year ended March 31, 2015 by the Comptroller and Auditor General of India under Section 143(5) of the Companies Act, 2013. C&AG comments on the consolidated accounts and management''s reply thereto are attached as Annexure-V to this Report.

Performance Audit

The Performance Audit has been conducted by C&AG to assess the effectiveness of ''Planning & Implementation of transmission projects by POWERGRID during XI Plan (2007-2015) and Grid Management by POSOCO.'' The Performance Audit report was placed before the Committee on Public Undertakings in August, 2015. The points forwarded by the Committee in the said report have been duly replied by the management.

Composition of the Board

Your Company''s composition of Board of Directors underwent some changes during the year 2014-15. Shri Santosh Saraf and Smt. Rita Sinha, non-official part time directors ceased to be Directors on the Board of the Company w.e.f. December 27, 2014. The Board wishes to place on record its deep appreciation and gratitude for the significant contribution and support to the Company extended by them during their tenure as Directors of the Company.

As on 31st March, 2015, the Board comprised Twelve Directors out of which five were whole-time Directors including the Chairman & Managing Director, two Government nominees and five Independent Directors.

In accordance with the provisions of Section 160 of the Companies Act, 2013 read with Article 31 (iii) of the Articles of Association of the Company, Shri Ravi P. Singh, Director (Personnel) and Shri R.P. Sasmal, Director (Operations) shall retire by rotation at the Annual General Meeting of your Company and being eligible, offer themselves for re-appointment.

Number of meetings of the Board

The details of number of Board / Committee meetings held during the year are provided in the Report on Corporate Governance, which forms part of this report.

Declaration by Independent Directors:

All the Independent Directors have met the requirements specified under Section 149 (6) of the Companies Act, 2013 regarding holding the position of ''Independent Director'' and necessary declaration from each Independent Director under Section 149 (7) has been received.

Performance Evaluation of Directors:

The requirement of performance evaluation of directors under Section 178(2) of the Companies Act, 2013 has been done away with for Government Companies vide Ministry of Corporate Affairs'' Notification dt. 5th June, 2015. The Independent Directors in their separate meeting has reviewed the work assigned to them under Schedule IV of the Companies Act, 2013, including performance evaluation of Directors and the Board.

Further, the appointment, tenure and remuneration of Directors is decided by the President of India. Remuneration paid to Chairman & Managing Director and Functional Directors are as per terms and conditions determined by the Department of Public Enterprises, Govt. of India. Independent Directors are paid only sitting fee per Board / Committee meeting attended. POWERGRID enters into Memorandum of Understanding (Moll) with Ministry of Power every year wherein Company is evaluated on various financial and non-financial parameters.

Secretarial Audit

M/s Chandrasekaran & Associates, Practising Company Secretary has conducted Secretarial Audit of the Company for the financial year ended March 31, 2015 from. The Report forms part of this Annual Report at Annexure-VI.

The Secretarial Auditor in his report has made the following observations:

"During the period under review the Company has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above subject to the following observations:

1. The Company has complied with the provisions of Section 149 of the Companies Act 2013 and clause 49 of Listing Agreement except with respect to the requirement of appointment of minimum number of Independent Directors since 27.12.2014.

2. The Company has not filed certain e-forms relating to creation of charges with the office of the Registrar of Companies where the Permanent Account Number (PAN) of the lenders are not available, which is mandatory."

Further, the explanation given by the Board on the observation given by the Secretarial Auditor are as under;

1. POWERGRID, being a Govt. Company within the meaning of Section 2 (45) of the Companies Act, 2013, the power to appoint Directors vests with the President of India. The matter has already been taken up with administrative ministry for filling two existing vacancies of Independent Directors on the Board of POWERGRID.

2. POWERGRID could not file certain e-forms relating to charges in MCA21, wherein the Lenders are Multilateral Agencies-World Bank, ADB and IFC for non-availability of PAN of these Agencies. PAN is a mandatory fill under e-filing in MCA-21.

Extract of Annual Return

In accordance with Section 134 (3) (a) of the Companies Act, 2013, the extract of the annual return in the prescribed format in MGT-9 is given as Annexure VII of this Report.

Committees of the Board

The Company has Audit Committee, CSR Committee and other Committees in place. The composition and scope of the Committees are provided in the Report on Corporate Governance.

A report on the Corporate Governance (Annexure-VIII), forming part of this report, together with the Certificate thereon is given in Annexure-IX to this Report.

Risk Management Policy

A Statement indicating development and implementation of a risk management policy of the Company including major elements of risk are given in the Management Discussion and Analysis Report at Annexure-I of this Report.

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller & Auditors General of India. M/s S. K. Mehta & Co., M/s Chatterjee & Co., and M/s Sagar & Associates were appointed as Joint Statutory Auditors for the financial year 2014-15.

COST AUDITORS OF THE COMPANY

Your Company appointed M/s. K. G. Goyal & Associates, Cost Accountants and M/s. R. M. Bansal & Co.,Cost Accountants as Cost Auditors for the Financial Year (FY) 2014-15 under Section 148 of the Companies Act, 2013.

The Cost Audit Reports for the FY 2014-15 will be filed with the Cost Audit Branch, Ministry of Company Affairs before due date i.e. September 27, 2015.

ACKNOWLEDGEMENTS

The Board of Directors, with deep sense of appreciation, acknowledges the guidance and co-operation received from Govt. of India, particularly Ministry of Power, Ministry of Finance, Ministry of Home Affairs, Ministry of External Affairs, Ministry of Statistics and Programme Implementation, Ministry of Environment & Forests, Central Electricity Regulatory Commission, Appellate Tribunal for Electricity, Central Electricity Authority, Department of Public Enterprises, Regional Power Committees, and other concerned Govt. departments/agencies at the Central and State level as well as from Securities and Exchange Board of India, National Stock Exchange of India Ltd., and Bombay Stock Exchange Ltd., Mumbai without whose active support, the achievements of the Corporation during the year under review would not have been possible.

Board''s special appreciation and thanks are to our valued customers, State Governments and State power utilities and other clients, who have awarded various works on consulting services basis and reposed faith in Company''s capability to handle them. The Board also appreciates all its the contribution of Contractors, Vendors and Consultants for successful implementation of cvarious projects by the Company.

The Directors take this opportunity to thank the Principal Director of Commercial Audit and Ex-Officio Member Audit Board-Ill for the cooperation during the year. The Directors also acknowledge the valuable suggestions and guidance received from the statutory auditors during the audit of accounts of the Company for the year under review. The Board also records its appreciation to national/ international financial institutions/ multilateral Financial Institutions (The World Bank & Asian Development Bank)/ Banks/ national (ICRA & CRISIL) & international (Standard & Poor and Fitch) credit rating agencies for their assistance, continued trust and confidence reposed by them on POWERGRID.

On behalf of Board of Directors, I would like to place on record our deep appreciation of the dedicated efforts and valuable services rendered by the members of the POWERGRID family, in the Company''s achievements during the year 2014-15. I would also like to thank the Executive team for their strong leadership, the employee unions, for their support and all our employees for their commitment to achieve the aim to be the world''s premier transmission utility.

For and on behalf of the Board of Directors

(R. N. Nayak)

Chairman & Managing Director

Place: New Delhi

Date: 10.08.2015


Mar 31, 2014

Dear Shareholders,

Ladies & Gentlemen,

It gives me immense pleasure to present on behalf of the Board of directors, the 25th Annual Report on the performance of your Company during the financial year ending March 31, 2014 together with Audited Statement of Accounts, Auditors'' Report and Review of the Accounts by the Comptroller and Auditor General of India for the review period.

It is a matter of pride that this "Navratna" Company, having been formed in 1989, is presently in its "Silver Jubilee" year. It is another happy coincidence that with the commissioning of Raichur-Solapur 765kV Single Circuit line, the work of synchronously connecting the nation, with One Nation, One Grid, One Frequency was also successfully completed in this year. This has led to the emergence of one of the largest electrical grids operating at a single frequency in the world. during these years of electrical unification, the Company displayed its proficiency in all its areas of operation and this has led to a continuous, holistic and inclusive growth of inter-State transmission System. The addition in transmission system, together with efficient operation of such a large network, has indeed contributed phenomenally in development of infrastructure in the country.

Your Company''s sustained performance, reflected through continuous asset creation, increasing revenues, and resultant profits, has also led to creation of value for its shareholders and speaks volumes of its growth journey and operational excellence. Your Company''s strategic importance in development of the country''s power sector has further enhanced its reputation not only within the country but also globally. The confidence of the international investor community, enjoyed by your Company, was evident through their overwhelming response to its second Follow-on Public offer which witnessed a huge interest from the international investors.

Your Company once again demonstrated consistency in exceeding most of the performance targets agreed under the Memorandum of Understanding signed with Ministry of Power (MoP), Government of India for FY 2013-14 and is poised to be rated ''Excellent'' in MoU parameters thus consistently maintaining the record of Excellence year after year since its first MoU signed in 1993-94.

Based on overall performance, your Company stood at top amongst the assessed Companies in the Power Generation and Transmission Syndicate for the FY 2012-13.

Major achievements by your Company during FY 2013-14 on various fronts are mentioned below:

- Capital investment of Rs. 23,158 Crore

- Commissioned new transmission assets comprising about 6,604 circuit kilometre (Ckm) of Extra High Voltage (EHV) transmission lines,

17 new sub-stations and 41,160 Mega Volt Ampere (MVA) transformation capacity.

- Capitalisation of transmission assets worth Rs. 15,904 Crore

- Investment approval accorded for 19 new transmission projects worth about Rs.8,548 Crore.

- Maintained transmission system availability at 99.92% with number of trippings per line limited at 0.56.

- An important landmark, i.e. synchronous interconnection of all-India National Grid, has been achieved through successful commissioning of Raichur (Karnataka) - Solapur (Maharashtra) 765kV Single Circuit line on december 31, 2013.

- Total inter-regional power transfer capacity of 6,300Mw was added during the year thereby enhancing the cumulative inter-regional power transfer capacity of National Grid to about 37,950 Mw at the end of March, 2014.

- International interconnection has been established between India and Bangladesh with the commissioning of Bheramara (Bangladesh)

- Baharampur (India) 400kV d/c line, along with 500Mw High Voltage direct Current (HVdC) back-to-back terminals at Bheramara. The interconnection was inaugurated jointly by Hon''ble Prime Ministers of India and Bangladesh.

FINANCIAL PERFORMANCE

Your Company recorded an impressive financial performance during FY 2013-14 as detailed below, achieving a turnover of Rs. 15,721 Crore and Net Profit of Rs. 4,497 Crore as compared to Rs. 13,329 Crore and Rs. 4,235 Crore during FY 2012-13, registering an increase of 17.9% and 6.2%, respectively.

Your Company continues to show improved performance in all its business areas including Telecom and Consultancy, enhancing the value for the shareholders.

(Fig. in Crore except EPS & Book value)

Description 2013-14 2012-13 Y-o-Y Growth

Revenue

Transmission Charges 14,250 12,163 17.2%

Consultancy - Sale of Service 333 229 45.4%

Consultancy – Sale of Product 294 86 241.9%

Telecom 276 231 19.5%

other operating Income 77 49 57.1%

other Income 491 571 -14%

Total Income 15,721 13,329 17.9%

Profit After Tax (PAT) 4,497 4,235 6.2%

Earnings per Share (Rs.) 9.36 9.15 2.3%

Book Value per Share(Rs.)65.78 56.62 16.2%

Gross Fixed Assets 96,504 80,600 19.7%

Long term borrowing* 80,470 66,188 21.6%

Net Worth 34,413 26,213 31.3%

Debt Equity Ratio 70:30 72:28

Investment 23,158 20,037 15.58%

Capital Investment and Fund Mobilization

During the year under review, your Company made an investment of Rs. 23,158 Crore (15.58% higher than previous year) for implementation of its projects in line with its capex-programme under XII Plan. For this, funds of about Rs.15,528 Crore were mobilised through private placement of bonds, and proceeds of ongoing Supplier''s credit, SBI Line of credit, and loans from multilateral funding agencies like The world Bank, Asian development Bank. In addition, the accrued internal resources and FPo proceeds amounting to about Rs. 7,630 Crore were utilized for funding equity component of the investment.

Your Company''s second Follow-on Public offer of equity shares comprising fresh issue of 13% of existing paid-up equity capital and disinvestment of 4% by Govt. of India was successfully concluded. The issue price was finalized at the upper band of Rs.90 and was oversubscribed 6.74 times overall. while your Company received Rs. 5,321 crore from the proceeds, the Govt. of India received Rs. 1,637 Crore.

At the beginning of the year 2013-14, your Company''s International Credit Rating by both Standard & Poor''s (S&P) and Fitch Ratings Ltd. (Fitch) was BBB- (outlook Negative) which was consistent with India''s sovereign rating. In June, 2013, Fitch Ratings revised the outlook on sovereign rating to ''Stable'' from ''Negative'' and accordingly your Company''s rating by Fitch was raised to BBB- (outlook Stable). The Company continues to have its rating as ''AAA/ stable'' (triple A with stable outlook) by CRISIL, ICRA and CARE ratings domestically.

Dividend Payout

Your Company has been regularly paying dividend @30% of PAT as prescribed under dPE guidelines. For FY 2013-14, your Company has proposed a final dividend of Rs.1.31 per share in addition to Rs. 1.27 per share of interim dividend paid in March, 2014. The final dividend shall be paid after your approval at the Annual General Meeting. Thus, the total dividend payout for the year amounts to Rs. 1,350 Crore (including an interim dividend of Rs. 665 Crore) as against Rs. 1,273 Crore paid during the previous year. The total dividend payout including dividend tax accounts for 35% of Profit after Tax of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required u/s 217 (2AA) of the Companies Act, 1956, your directors confirm that:

i. in the preparation of the Annual Accounts, the applicable accounting standards have been followed;

ii. the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii. the directors have taken proper and sufficient care in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the directors have prepared the annual accounts on a going concern basis.

COMMERCIAL PERFORMANCE

As per Central Electricity Regulatory Commission (Sharing of inter-State Transmission Charges and Losses) Regulations, 2010, your Company, as the Central Transmission Utility (CTU) of the country, has been assigned the responsibility for carrying out activities such as raising of transmission charge bills on behalf of all the Inter-State Transmission System (ISTS) Licensees, collecting the amount and disbursing the same to them. In this regard, bills of transmission charges are prepared, raised and uploaded on the website portal for designated ISTS Customers (dICs), including the payment details by the customers.

It is a matter of pride that the Company achieved about 99% realisation of transmission tariff during FY 2013-14.

OPERATIONAL EXCELLENCE

As on April 01, 2014, the transmission assets owned and operated by your Company stand at about 106,804 Ckm of Extra High Voltage (EHV) transmission lines and 184 Nos. EHVAC & High Voltage Direct Current (HVDC) sub-stations with about 205,923 MVA transforma tion capacity. Your Company continues to wheel about 50% of the total power generated in the country.

Maintaining such a large and highly complex transmission network has been an extremely difficult and challenging task. This has been achieved through deployment of state-of-the-art operation and maintenance techniques, which are at par with international standards. Maintenance activities are planned well in advance and an "Annual Maintenance Plan" is chalked out for every asset such that ''Preventive maintenance'' takes precedence over ''breakdown maintenance''.

Your Company introduced aerial patrolling of transmission lines using helicopter for the first time in India. Transmission line defects are identified by deploying helicopter equipped with Gimbal mounted LIdAR (Light Ranging and detection), Thermo-vision Camera, High resolution digital Video cameras. while Hotline maintenance of 400kV transmission line is already in vogue, your Company is also planning to introduce Hotline maintenance of transmission lines of 765 kV voltage level using Helicopter. To intercept major failures and prevent them, your Company has adopted state-of-the-art condition monitoring techniques, such as ''Frequency Response Analysis'' for Transformers and Reactors, ''dynamic Contact Resistance Measurement'' for Circuit Breakers, ''Third Harmonic Resistive Current measurement'' for Surge Arrestors, ''Thermo-vision scanning'' etc. The Company has also started online monitoring of 765kV equipment (transformers and reactors) for measurement of critical parameters.

Your Company deploys State-of-the-Art ''Emergency Restoration System'' for immediate restoration of collapsed transmission lines due to natural calamities before permanent restoration work is taken up. Your Company has also taken initiative for development of Emergency Restoration System (ERS) for sub-stations of 400kV level using mobile substations mounted on trailer to restore power during emergency and extremely critical situation, wherein whole/ major part of substation is affected.

With a view to optimize its operation and maintenance manpower and efficiently deploying them, your Company is establishing "National Transmission Asset Management Centre (NTAMC)" at Manesar, Haryana for centralised remote monitoring, operation & control of sub- stations.

At the end of 2013-14, fifty-one (51) substations are being operated through remote operation and twelve (12) substations are unmanned. Maintenance Service Hub facility has also been established where specialised group of experts are available for immediate deployment in the event of requirement.

The result of consistent efforts and round the clock monitoring is demonstrated through your Company''s high operational performance during the year in terms of transmission system availability (99.92%) and the number of tripping per line (0.56).

International Benchmarking of O&M practices

with an aim of continual improvement, o&M practices of your Company are being benchmarked internationally through "International Transmission operation and Maintenance Study" (IToMS) carried out by UMS, USA. In IToMS studies/ benchmarking, twenty-eight (28) power transmission utilities across the globe participated and their performances are evaluated and benchmarked. As per the studies, your Company''s overall performance stood in the best quadrant (i.e. low cost and high performance). In addition, performance benchmarking of all nine (9) Regions amongst each other and the region(s) with external member Utilities of IToMS, was also carried out to identify areas of improvement.

PROJECT IMPLEMENTATION

Your Company continues to put in its best efforts to complete its transmission projects within scheduled timelines, thereby extracting the maximum commercial benefit. The Company achieves this through its Integrated Project Management and Control System (IPMCS), timely review meetings, intensive monitoring by top management through video conferencing/ regular site visits and undertaking various pre-emptive initiatives.

As a result of above steps and with the dedicated efforts of the employees, assets worth about Rs. 15,904 Crore were capitalized by your Company during the year 2013-14, adding about 6,604 ckm transmission lines, 17 sub-stations and about 41,160 MVA transformation capacity in the transmission system. Some of the major transmission assets commissioned during the year include 765kV transmission lines such as Sasaram-Fatehpur (S/c), Raichur-Solapur (S/c), Ranchi-wR Pooling Station (S/c), Fatehpur – Agra (S/c), Jabalpur Pooling Station – Bina (d/c), Raigarh (Kotra) – Raipur (d/c). The projects were completed in spite of severe constraints faced during its implementation including challenging terrains, severe Right-of-way (Row) problems. The implementation of High Capacity Power Transmission Corridors is underway and some elements under the same have already been commissioned.

During the year, investment approval was accorded for 19 new projects with an estimated cost of about Rs. 8,548 Crore, which involves about 5,530 ckt km of transmission lines, 4 new sub-stations and transformation capacity of about 12,730 MVA were taken up for implementation.

DEVELOPMENT OF NATIONAL GRID

In its ''Silver Jubilee'' year, your Company achieved one of the major objective of its formation. Nationwide synchronous power grid is established upon successful commissioning of 765kV S/c Raichur – Sholapur line on 31st december, 2013. with this, ''One Nation - One Grid – One Frequency'' has become a reality. Your Company has also commissioned 765kV S/c Sasaram – Fatephur and 765 kV S/c Ranchi-wR Pooling Station inter-regional lines, having 2100 Mw power transfer capacity each. Thus, in this F Y, your Company has added a total inter-regional power transfer capacity of 6,300 Mw, thereby adding total capacity of 8,300 Mw during the first two years of the XII plan period. At the end of 2013-14, the inter-regional power transfer capacity of 37,950 Mw has been established.

By the end of XII Five Year Plan, inter-regional power transfer capacity is envisaged to be 72,250 Mw.

PERFORMANCE AGAINST COMPETITION

Your Company continued to display impressive performance under Tariff Based Competitive Bidding (TBCB) by excelling over its competitors. during the year 2013-14, your Company acquired two Special Purpose Vehicles (SPVs), namely ''Vizag Transmission Limited'' and ''Unchahar Transmission Limited'' for the projects Transmission System for System Strengthening in Southern Region for Import of Power from Eastern Region and Transmission System for ATS of unchahar TPS, respectively. As on March 31, 2014, the Company has secured 5 projects under TBCB, and has won about 40% of the projects floated under TBCB since January, 2011.

GRID MANAGEMENT AND OPEN ACCESS

Power System operation Corporation Limited (POSOCO), a wholly owned subsidiary of your Company, continues to look after the grid management of the country. POSOCO with its state-of-the-art Unified Load despatch & Communication (ULdC) facilities in place, carries out the function efficiently and transparently. Further, National and Regional Load despatch Centres (NLdC & RLdCs) are upgraded and modernised continuously to establish an effective grid management infrastructure in the country.

During 2013-14, to meet the demands in the country, about 78.38 Billion units (Bus) of inter-regional energy transfer was facilitated, across the nation using pan-India inter-regional transmission links and RLdCs.

Under Short Term open Access (STOA), your Company has approved about 33,917 transactions, 10,290 nos. bilateral transactions and 23,627 nos. collective transactions, involving 87 BUs of energy transfer in FY 2013-14 as against 32,139 transactions and about 73 BUs of energy transferred during FY 2012-13.

Your Company, as Central Transmission Utility (CTU), is the nodal agency for processing & grant of Connectivity, Medium Term open Access (MToA) and Long Term Access (LTA) of various applicants. Till March 31, 2014, the Company granted LTA to 148 nos. of applications for 80,000 Mw capacity, out of 223 applications received in all. Further, connectivity was granted for 79 nos. of eligible applications for 70,000 Mw capacity out of 190 applications received for about 195,000 Mw capacity in all. Till 31st March 2014, 127 applications were received for MToA and MToA was granted to 48 nos. of applications in all for about 4,500 Mw capacity.

QUALITY MANAGEMENT

Your Company has put in lot of effort in identifying and implementing various quality improvement measures during the year 2013-14. By way of carrying out continuous process/ surveillance audits, your Company created win-win partnership with suppliers to get superior quality product including reduction in cost.

with the increased area of work & value of supply of equipment/ materials, capacity building remains one of the major challenges for the Company. Inclusion of new vendors upon assessment and developing new sub-vendors especially for 765 kV transformers, reactors, transmission towers were undertaken on priority to meet project requirements.

Process audits are continued to be carried out in the manufacturing units of various vendors, sub-vendors & even further below in supply chain, which are spread all over the country, to achieve the target of zero product inspection. Quality audits at sites were also undertaken during the year for instant feedback and to take appropriate corrective action.

Your Company undertook various activities to ensure that the equipment/material conform to the technical specifications and are supplied in time to meet the completion targets of the projects, such as defining proper processes, quick approval of Quality plans, intelligent inspection of materials (in process & before acceptance). during the year, continuous follow up with manufacturers for timely manufacturing, testing of various critical items and issue of requisite clearances were expedited.

Your Company continues to develop and maintain systems & procedures aligned with Integrated Management System comprising ISo 9001: 2008 for Quality Management System, ISo 14001: 2004 for Environmental Management System and oHSAS 18001: 2007 for occupational Health and Safety Management System. The certification has been maintained after rigorous audits by BSI Management Systems. Your Company also completed implementation of PAS 99 in ER-I and SR-II during FY 2013-14.

TECHNOLOGY DEVELOPMENT

Your Company has been at the forefront in adoption of state-of-the art technologies for improving the efficiency in power transmission and for overcoming the challenges associated with establishment of high capacity power transmission corridors and the National Grid.

One of the key focus areas is the adoption of transmission of power at higher voltage level. Implementation of ±800kV HVdC & development of 1200kV Ultra-High-Voltage AC (UHVAC) system are important milestones in this direction.

800kV Multi-Terminal HVDC System

HVDC system facilitates bulk power transmission over long distances with power controllability, reduced Row and transmission losses. Implementation of ±800 kV, 6,000 Mw multi-terminal HVdC system of around 2,000 kms. from North Eastern Region (NER) (Biswanath Chariali in Assam and Alipurduar of west Bengal) to Northern Region (NR) (Agra in Uttar Pradesh) is progressing well. during the year, 7 Converter transformers were transported from Haldia port in west Bengal to Biswanath Ghat in Assam over Brahmaputra River on Barges and delivered at site. Upon completion, it shall be one of the largest multi-terminal HVdC systems in the world at this voltage level.

1200kV UHVAC Transmission System

The 1200kV UHVAC technology, the highest voltage level in the world, is being developed indigenously by your Company in collaboration with 35 Indian manufacturers under Public Private Partnership (PPP) and 1200kV UHVAC National Test Station at Bina, Madhya Pradesh has been established for the same. The 1200kV Single Circuit (S/c) and double Circuit (d/c) test lines were successfully test charged along with one 1200kV bay and field tests are undergoing. Installation and charging of 2nd 1200kV single phase Circuit Breaker in the first bay of 1200kV National Test Station, Bina was completed in december, 2013. Further, erection of 2 units of transformer for single phase units of the transformer bank in the second bay of the 1200kV test was also completed.

Besides above, during the year, your Company also conducted feasibility study on ''Superconducting Fault Current Limiter (SFCL)'' and formulated a pilot project on Energy Storage in terms of technology, capacity, etc..

Envisioning setting up of a world class laboratory for carrying out research and development in power transmission area, your Company is establishing POWERGRID Advanced Research and Technology Centre (PART) at Manesar, Gurgaon, with state-of-the-art laboratories for power system analysis, advanced equipment diagnostics, smart grid in transmission and distribution, energy efficiency, power system control and automation, material science and engineering design. Further, your Company is also establishing a transmission line research lab to carry out validation of transmission line design and subsequent optimization.

Your Company, in the quest to achieve fully digitized substations, is in the process of introducing Process Bus technology for substations. Your Company is also in the process of mapping pollution intensity of various regions of the Country on a geographical map. This activity shall enable efficient and effective transmission line designs, particularly in high pollution and fog affected areas.

SMART GRID TECHNOLOGY

Your Company continues to take pioneering steps in bringing Smart Grid technology in entire value chain of electricity in the country. In order to promote smart grid technologies, your Company has developed Smart Grid pilot project in the country through open collaboration, at Puducherry. Almost all the attributes of Smart Grid viz Advance Metering Infrastructure (AMI), outage Management System (oMS), demand Response, Power Quality Management (PQM), Renewable Integration through net-metering, Smart Home Energy Management System, Electric Vehicles, Street Light Automation System etc. have been successfully integrated at Smart Grid control centre at Puducherry through latest communication technologies to showcase technology efficacy in a holistic manner. Further, your Company has also prepared project reports for smart grid solutions for Indiranagar (Bangalore), Paradeep Port Trust and Goa.

Recognizing experience and expertise in the field of smart grid development, eight (8) utilities have appointed your Company as Advisor-cum- Consultant for implementation of smart grid project at an estimated cost of about Rs. 200 Crore during FY 2013-14.

Your Company has undertaken full scale implementation of real time smart transmission projects applying State-of-the-Art wide area measurement system (wAMS) using advance synchrophasor technology in the grid. This Unified Real Time dynamic State Measurement (URTdSM) project involves placement of Phasor Measurement Units (PMUs) at all 400 kV and above substations, generation switchyards of 220 kV and above, HVdC terminals and Phasor data Concentrator (PdC) at SLdC, RLdC & NLdC control centres along with backbone communication infrastructure, which has enhanced the efficiency of the overall grid management.

With the growing need of energy storage to facilitate integration of renewables, your Company is implementing Battery energy storage pilot project at Puducherry to evaluate different technologies for proof of concept, application(s), policy advocacy etc. in Indian context. Your Company has also taken lead initiative to establish base line data repository on power quality parameters through field measurement at various voltage level on pan India basis. It also involves identification of mitigating measures/ devices like active harmonic filter, automatic power factor controller etc.

Your Company has been indigenously developing smart products like smart meter, data concentrator unit, home energy management system, micro grid controller, smart cap utilizing solar energy, active filter etc. for varied applications.

INTEGRATION OF RENEWABLES

Your Company has developed comprehensive master plan for grid integration of envisaged renewable generation capacity addition during the XII Five Year Plan through Green Energy Corridors across India. The plan covers intra-state & inter-state transmission systems and mitigating measures for grid interconnection of variable & intermittent renewable energy. It also includes other control infrastructure like forecasting tool for renewable generation, establishment of renewable energy management centers, provisions for flexible generation, energy storage, smart grid applications like demand side management & demand response etc. Under this, your Company has been assigned the implementation of inter- State Transmission System portion of the scheme, setting up of Renewable Energy Management Centres and control infrastructure to be included in the Kfw/GIZ, Germany proposal by Ministry of Power, GoI. Your Company has been taking various actions under this and implementation is expected to commence shortly.

The country has huge renewable energy potential through solar and wind, of the order of about 300Gw, at desert/ cold desert waste land in Kutch, Thar, Lahaul & Spiti and Ladakh. To harness the same, your Company has also evolved an integrated development plan for establishment and grid integration of 300Gw capacity addition by 2050 at an estimated cost of Rs. 43.75 lakh Crore, through hybrid transmission corridors utilizing High Voltage direct Current (HVdC) (including VSC based) as well as 1200kV UHV AC/ High temperature superconductor technologies, etc.. A report on the plan, dESERT PowER INdIA – 2050, has been submitted to Ministry of Non-Renewable Energy (MNRE), Ministry of Power (MoP), Ministry of Finance, Planning Commission, Central Electricity Authority (CEA) and Central Electricity Regulatory Commission (CERC).

Your Company has developed plan for installation of rooftop solar Photo Voltaic (SPV) for residential consumers, commercial building, metro stations & tracks and solar street lights for delhi towards sustainability. It covers generation of about 2300 Mwp. A comprehensive report, GREEN dELHI, was prepared and submitted by your Company to Govt. of delhi, MNRE, MoP, Planning Commission, CEA and CERC.

ENERGY EFFICIENCY

India is one of the world''s emerging economic giants, with ever-increasing energy demand. It is facing formidable challenges in meeting its energy needs and sustainable development. Energy conservation through energy efficiency measures shall play an important part to address these challenges to a large extent. Considering potential in this field, your Company has initiated activities in carrying out energy audits of various establishments such as steel industries, cable industries, structural industries, Port Trusts, Airports, Institutions, etc and providing recommendations/ smart solutions for energy efficiency improvement.

In a short time span, your Company has set a benchmark for itself as an Energy Efficiency solution provider. The Company is known as a major Energy Auditing firm in the country with more than fifty (50) Bureau of Energy Efficiency (BEE) Certified Energy Auditors/ Managers. Your Company has also obtained certification under BEE Grade-I Energy Service Company (ESCo) for undertaking implementation of energy efficiency projects on shared saving basis.

Your Company has indigenously designed and developed waste heat recovery system executed projects and the same are operating successfully, enabling huge fuel/ energy savings.

Towards energy conservation, your Company has also undertaken project on demand Side Management in Karnataka for replacement of old agricultural pumps with energy efficient pumps.

Another milestone was achieved during the year when the Corporate office at Gurgaon and two Regional offices at Jammu & Hyderabad were awarded ISo 50001 certification for its efficient and effective Energy Management System.

''POWERTEL'' - TELECOM SERVICES ON TRANSMISSION INFRASTuCTuRE

Your Company diversified into Telecom business under the brand name ''POWERTEL'' to expand its revenue stream by installing overhead optic fibre network using oPGw (optical Ground wire), leveraging its existing countrywide transmission infrastructure. Your Company has an all India Broad Band Telecom Network of about 29,640 km, providing connectivity to all metros, major cities, towns, State capitals including remote areas of North-Eastern Region, Jammu & Kashmir etc. and covering about 317 Points of Presence (PoPs) across the country from where services are being rendered. Your Company possesses, Infrastructure Provider Category-I (IP-I), Internet Service Provider ''A'' (ISP ''A'') and National Long distance (NLd) Service License to provide a variety of Telecom services. during the year 2013-14, the availability of Telecom Backbone system was maintained at 99.94%. Your Company added 32 new customers, increasing its customer base to 150. The income from Telecom increased to about Rs. 276 Crore in FY 2013-14 from Rs. 231 Crore in FY 2012-13.

National Knowledge Network (NKN)

National Knowledge Network (NKN) is a multi-gigabit network, devised by the Govt. of India with the purpose to provide a unified high speed network backbone for educational institutions in India such as Indian Institutes of Technology (IITs), Indian Institute of Science (IISc) etc. on high speed connectivity. Your Company was one of the implementing partners of this prestigious project and the scheme has been operational. An amount of about Rs. 700 Crore has been received against advance from National Informatics Centre (NIC) against NKN order till March 31, 2014.

National Optical Fiber Network (NOFN)

The Government of India envisaged the setting up of National optical Fiber Network (NoFN) for providing connectivity to all the 250,000 Gram Panchayats (GPs) in the country. Your Company is a member of Advisory Body and Core Committee of the ambitious NoFN project, which utilizes existing optical fiber facilities of Bharat Sanchar Nigam Limited (BSNL), POWERGRID and RailTel Corporation of India Limited to connect the Gram Panchayats.

Under this, your Company has been allotted work for development & maintenance of NoFN network in four States viz. Andhra Pradesh, Himachal Pradesh, Jharkhand & odisha by Bharat Broadband Network Ltd (BBNL), covering about 36,000 GPs. The work is to be carried out in about 89 districts covering 1,769 blocks across these four States. The estimated cost of the project for these states would be about Rs. 2,700 Crore. Under Phase-1 of this, your Company received Sanction Letter from BBNL in october 2013 and has submitted to them Phase-1 plan consisting of 37 districts, 670 Blocks and 14,000 Gram Panchayats.

BUSINESS DEVELOPMENT - CONSULTANCY

Domestic

During the year under review, the Company secured thirty seven (37) new consultancy assignments. These include the project of national importance for construction of 220kV Transmission System from Alusteng (Srinagar) to Leh and 66kV interconnection system for drass, Kargil, Khalsti & Leh substations in J&K entrusted by the Govt of India. Your Company also signed agreements with six States of North Eastern region (NER) (Assam, Meghalaya, Mizoram, Manipur, Nagaland and Tripura) to act as ''Project design cum Implementation Supervision Consultant'' for implementation of ''NER Power System Improvement Project'' with The world Bank assistance.

Your Company continues to assist the State Utilities in development of their Transmission & distribution (T&d) infrastructure. one such major assignment includes construction of 765 kV Transmission System associated with Lalitpur Thermal Power Plant (2000Mw) on behalf of the transmission utility of Uttar Pradesh (UPPTCL). In addition, towards Capacity Building assignments during the FY 2013-14, Training was imparted to the employees of transmission utilities in Maharashtra (MSETCL), Madhya Pradesh (MPPTCL), Bhakra Beas Management Board (BBMB) and damodar Valley Corporation (dVC).

In order to broaden the consultancy avenues, exploratory initiatives have been undertaken into oil sector & Railways, which are expected to fructify into business assignments in near future.

International

In the international arena, during the year, your Company secured seven (7) new assignments having total project cost of about Rs. 140 Crore. The Company made inroads in four new countries and provided Consulting Services in 15 countries, viz. Nepal, Bhutan, Bangladesh, Afghanistan, Sri Lanka, Myanmar, UAE, Nigeria, Ethiopia, Kenya, Tajikistan, Congo, Senegal, Kyrgyz Republic, and Pakistan.

During the year under review, among other notable achievements, was the commencement of Management Consultant Project in Ethiopia for a period of 2 years for Establishment & Management of new Ethiopian Electric Power Company, leading to successful formation of a new Utility viz. Ethiopian Electric Utility (EEU) at Ethiopia with its first CEo from your Company. This year also marked completion of prestigious inter-country 400kV asynchronous interconnection link between India and Bangladesh in September, 2013 wherein your Company provided Consulting Services from pre-award to final commissioning stage to Power Grid of Bangladesh for their portion of linked Transmission System in Bangladesh. Your Company has successfully fulfilled its consulting service obligations for export of goods amounting to about US$ 64 million for 230kV transmission lines and substations associated with the Thahtay Chaung Hydro Power Project in Myanmar. Your Company has been appointed as Consultant through International Competitive Bidding for 1000Mw HVdC Interconnection between Tajikistan, Kyrgyz Republic, Afghanistan and Pakistan.

During the year, your Company has earned revenue of Rs. 627 Crore (including about Rs.294 Crore from sale of products) from domestic and International consultancy.

INTERNATIONAL COOPERATION

Once fully developed, South Asian Association for Regional Cooperation (SAARC) Grid shall go a long way in harnessing capacities and resources of SAARC Nations to address the growing energy needs in the region. Your Company continues to strive for preparing a roadmap for the same. Presently, a number of interconnections exist between India & Nepal and India & Bhutan, which are being strengthened for mutual exchange of power.

A milestone has been achieved in this direction with the commissioning of an asynchronous interconnection between countries India & Bangladesh, through 500 Mw High Voltage direct Current (HVdC) back-to-back terminal along with Bheramara (Bangladesh) - Baharampur (India) 400kV d/c line in September, 2013, enabling power flow of the order of 500Mw from India to Bangladesh.

Also, for evacuation of power from various upcoming hydro electric power projects (HEPs) in Bhutan, Punatsangchu-I HEP (Bhutan) – Alipurduar (India) 400kV double Circuit (d/c) line between countries Bhutan & India, is under implementation and expected to be completed by 2015. Also, for transfer of bulk power, interconnection between India and Nepal through 400 kV dhalkebar (Nepal) - Muzaffarpur (India) d/c transmission line is under implementation. Feasibility study for interconnection between India and Sri Lanka through an under-sea HVdC bipole line is under finalization. Further, discussions for interconnection between India and Pakistan through Amritsar (India) - Lahore (Pakistan) line are being held at Government level.

CONTRIBUTION IN DISTRIBUTION REFORMS

Under "Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)" scheme for rural electricity infrastructure and household electrification, your Company has been assigned about one-third of the total works for execution of rural electrification covered in sixty-five (65) districts of nine (9) States in the country at a base cost of about Rs.7,230 Crore. Most of the schemes have already been completed/ nearing completion.

During FY 2013-14, infrastructure was created for electrification in 2,388 villages out of which 2263 were partially electrified and 125 were un-electrified villages. Also, 5,315 villages were energised including 632 un-electrified villages. Service connections were provided to about 85,460 BPL households. Cumulatively, till March, 2014, infrastructure has been created for electrification of 71,042 villages including 32,588 un- electrified villages. Further, service connections were provided to about 36.22 Lakh BPL households.

In addition, RGGVY works in four (4) districts of Uttar Pradesh, namely deoria, Siddhartnagar, Pratapgarh, Kushinagar have been assigned to your Company.

XII PLAN DEVELOPMENT PROGRAMME

Your Company has made an ambitious plan to invest more than Rs. 100,000 Crore during the XII plan, matching with the envisaged generation capacity addition. This investment is mainly towards development of transmission infrastructure for implementation of various inter-State transmission systems including High Capacity Power Transmission Corridors (HCPTCs), inter-regional links for grid strengthening, system strengthening schemes etc.. out of the above capex-plan, your Company has already made a capital expenditure of Rs. 43,195 Crore in the first two years of the plan period. The funding for capital expenditure are planned to be met through loans from multilateral institutions such as The world Bank, Asian development Bank, Supplier Credit, External Commercial Borrowings through bonds / notes, besides loans from domestic market through private placement of bonds. Based on the ratings by both domestic and international credit agencies, your Company do not foresee any difficulty in resource mobilisation.

Your Company has planned to add transmission network comprising about 40,000 ckm of transmission lines and about 100,000 MVA of transformation capacity during the XII Plan. out of this, the Company has already commissioned about 13,760 ckm of EHV transmission lines and about 81,390 MVA of transformation capacity in the first two years of the XII Plan.

ERP IMPLEMENTATION & IT

The implementation of Enterprise Resource Planning (ERP) system for efficient, effective and organized business process is in advanced stage and is expected to ''Go Live'' in 2014-15. during the year, various landmarks have been achieved by the ERP team such as finalization of Business Blue Print for the key processes related to the Company, mapping of the business processes on SAP ERP system, implementation of ERP data Centre at Manesar and imparting training to around 450 power users.

On IT front, your Company continues to espouse latest technologies for the betterment of its business processes. Secure wi-Fi connectivity has been provided in offices and other premises for seamless connectivity and efficient working environment. Your Company continues to carry out recruitment process through online application portal, which is designed, developed and maintained by in-house talent. The same service was also provided to few other organizations to carry out their recruitment drive online. Further, various applications like Inspection Management System, Vigilance Inspection System, and Attendance Management System etc. are developed, run and maintained in-house for assisting the business operations.

The Company has also taken up major technology upgradation of IT infrastructure and has planned to enter cloud enabled computing environment by next year. Apart from Consultant appointed for Cloud Computing, your Company has also appointed a consultant for the implementation of Information Security Management System (ISMS) and for accrediting ISo:27001 Certification.

SUSTAINABLE DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY

Realising its obligation and commitment towards Sustainable development, your Company has taken many initiatives such as construction of National Transmission & Asset Management Centre (NTAMC) Building at Manesar as per Green Rating for Integrated Habitat Assessment (GRIHA) norms, along with 50kw solar plant, and installation of waste Paper Recycling Plant, etc. Your Company is on the way to progressively phase out the use of conventional paper and its procurement in Corporate office as the Company''s letterheads, visiting cards,envelopes, writing pads etc. are being prepared with recycled paper produced in-house. These initiatives are not only testimony of Company''s commitment towards Sustainable development but a firm step in conserving precious ecological resources and reduction of carbon footrpint.

Your Company feels the social pulse of the milieu in which it operates. It believes in inclusive growth and undertakes various social initiatives emphasizing on socio-economic and integral development of areas / communities primarily in and around its areas of operations. with this approach, the Company carries out various community development activities such as Skill development & Capacity Building, livelihood generation, healthcare, education, plantation, sanitation, drinking water, besides infrastructure developments like classrooms, roads, community centres etc..

During the year under review, the Company trained sixty-two (62) youths under the ''Skill development Programme on Transmission line Tower Erection'' in the backward district of Kokrajhar, Assam. other skill development / livelihood training programs imparted to unemployed youth are in the field of tailoring, cutting/ stitching, embroidery, automobile repairing, handloom weaving, food & fruit processing, repairing of household appliances, etc. to secure employment or to be self-employed. The Company also installed hand pumps and improved drainage facilities in Banka (Bihar). The Company also provided 1109 mandays training to employees/ other stakeholders on CSR/ sustainability/ environment conservation. Besides above, energy conservation techniques were installed in five (5) substations establishments under CSR. The Company also published Annual CSR & Sustainability Performance Report for 2012-13 and Annual Target Booklet for 2013-14. Your Company also initiated a project on restoration of village ponds in Chhattisgarh. during the FY 2013-14, the Company made an expenditure of Rs. 21.66 Crore on CSR activities, 0.51% of PAT of the preceding year.

Under its Corporate Social Responsibility initiative, your Company has entered into an agreement with AIIMS, New delhi in March, 2014 for the construction of a 10 storey, 325 beds dharamshala named as (POWERGRID Vishraam Sadan)" inside the premises of Jai Prakash Narayan Apex Trauma Centre (JPNATC), New delhi.

Memorandums of Understanding (MoUs) were also signed with International Crop Research Institute for Semi-Arid Tropics (ICRISAT) for water shed management projects in one village each in Andhra Pradesh and Karnataka.

Your Company extended a financial assistance to ''Chief Minister''s Relief Fund'' for mitigating the sufferings of the victims of cyclone ''Phailin'' in odisha. Employees of your Company have also contributed their one day salary to the ''Prime Minister''s Relief Fund'' for assisting flood victims of the State of Uttarakhand.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital

Employees are the pillars of your organization. during FY 2013-14, your Company inducted two hundred sixty-nine (269) personnel at various levels viz. Executives, Supervisors, workmen. while executives were recruited through open advertisement on all India basis/ campus selection from reputed engineering and management institutes, recruitment of non-executives were carried out through employment exchanges and local advertisement at regional level.

Your Company''s Human Resource development is primarily aimed at learning new competencies, reinforcing good work practices & workplace behaviour, as per organizational needs. The Company encourages innovation, meritocracy and the pursuit of excellence. Employees are synchronously updated and upgraded with changes in technology, strategy and growing competitive business environment, in terms of their knowledge, skill and outlook.

Your Company continue to assess the developmental needs of the employees using online ''Training Need Assessment'' process and link the same with the organisational/ business necessities to enrich its employees with requisite proficiencies. Further, trainings on latest technology and certification courses such as certified Project Management & Risk Management programmes, Latest survey techniques & PLS CAdd, Networking Skills, Hands on training on Transformer & Reactor are promoted to enable employees to be in line with the best in class. during the year, an average 5.96 training mandays / employee was achieved towards training in areas of management development, technological development, behavioural development, etc.

To establish new business area of Energy Auditing, your Company trained additional group of executives for National Certification Examination for Energy Auditors and subsequent accreditation by Bureau of Energy Efficiency (BEE).

Also, for enabling senior executives in their career advancement, Transformational Leadership Programme (TLP) and Transformation Management Programmes (TMP) were conducted at reputed institutions. Apart from focussed functional and behavioural development of its employees, your Company also conducted Programmes on women Empowerment and Empowerment of employees by self-growth (for reserve category employees) and special programme for differently abled employees.

As a part of your Company''s Competency Assessment and Skill Gap Analysis, Corporate HRd, along with external consultant, has updated the Competency directory (both functional and behavioural) for various functions in the Company keeping in view the existing/ emerging business of your Company. Based on this analysis, updated directory assessment centre of one hundred thirty-three (133) nos. executives of deputy General Managers (dGMs) level across the Company has been completed.

Further, for overall skill development in the country, particularly in the area of Power Transmission Line Construction, Capacity Building Programmes are being conducted with the help of Transmission Line (TL) construction contractors under Public Private Partnership (PPP) mode.

To leverage capabilities and resources with other institutions in the area of training, your Company, during FY 2013-14, signed MoUs with IIT, Roorkee, ASCI, Hyderabad, Fore School of Management, New delhi, Asia Pacific Institute of Management, New delhi, Jaipuria Institute of Management, Noida and ITM University, Gurgaon. POWERGRID Academy of Leadership (PAL) being established by your Company at Manesar, near Gurgaon is in advanced stage of completion and expected to reap the benefits soon.

As a part of HRd consulting, your Company trained power professionals from both domestic and overseas utilities, including SAARC nations.

Employee Welfare

Your Company regards its employees as its core strength and, thus, undertakes requisite changes in various policies from time to time for their welfare.

A focused initiative to build employee health and well-being is also in place. The program creates awareness on prevention of lifestyle diseases, encourages employees to make positive health choices and builds a healthy workplace. Similarly, several welfare initiatives such as yoga, counselling, recreational and developmental programmes are available to the employees and their families to promote work-life balance. Eleven (11) Nos. of medical and health check-up camp were organized for employees by your Company.

Your Company has a very effective Grievance Redressal System through which almost all the grievances of the employees are settled, leading to employee satisfaction. These consistent efforts in all directions have resulted in very low attrition rate of less than 1% during the year under review.

During the year, your Company formed ''Internal complaints committees'' as per Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013, reflecting its commitment to provide a safe and caring environment to female employees.

Your Company successfully continues to address the issues related to workmen through the National and Regional Bipartite Committee (PNBC/ PRBC), a joint consultative forum comprising management and workmen representatives. during the year, four (4) meetings with the employees'' representatives were held and the Industrial Relations scenario in the Company has been cordial, leading to no man day loss.

Quality food is served to the employees in the ISo 22000:2005 accredited Cafeteria in the Corporate office and Food Lounge of Multi Purpose hall of your Company. Healthy community living is spread through periodically conducted cultural programmes for celebrating various occasions like Independence day, Republic day, diwali get-together, Holi Milan, New Year, Raising day, etc. in all establishments of the Company.

The Company also conducts various sports competitions, for boosting the interest of employees in sports and games, at intra and inter-regional level for Kabaddi, Cricket, Volleyball, Badminton etc. and participates regularly in Inter-PSU Sports meet also.

Citizen''s Charter

Citizen''s Charter has been formulated for the Company providing a visible front of its vision, mission, objectives, commitments, terms of service and its obligation to various stakeholders. In this, information is available about Company''s schemes, policies, project plans of the corporation and issues of general interest to stakeholders.

Implementation of Official Language

In compliance with the official Language Act, 1963, official Language Rules, 1976 and orders issued by the Government of India from time to time, efforts were made to increase use of Hindi in official work during the year. In all offices of the Corporation, Rajbhasha Committees are functioning for overseeing implementation of official Language effectively and to review the progress of implementation including adherence to policies and the Annual Programme as circulated by the deptt. of official Language, Govt. of India. Your Company is continuously making efforts for the propagation and successful implementation of the official Language Policy. The official Language Implementation Committees both at Corporate and Regional levels held their quarterly meetings regularly to monitor and review the progress made in this direction.

Various forums such as Parliamentary Committees on official Language, Advisory Committee on official Language and Town official language Implementation Committee (ToLIC) have applauded the efforts taken by your Company for implementing Rajbhasha. Your Company also received many accolades on Rajbhasha implementation.

Corporate Image through Communication Management

Communication Management is essential for establishing a strong Corporate Brand Identity and for strengthening the relationship with its stakeholders.

With the ever increasing competition amongst the corporate majors across the globe, Globalisation has manifested its trait making it obligatory for the corporate giants to establish and maintain a strong mutual understanding between the organisation and its stakeholders through well planned and persistent communication interventions dedicated with the aim to acquire and retain good reputation for the Company. Bearing in mind the need for sustained, timely and bona fide communication interventions, your Company has adopted various communication strategies to appropriately highlight itself as an infrastructure major contributing substantially towards development of a sturdy national economy.

Your Company has been issuing various press communiqué for highlighting achievements, growth, recent developments, thereby maintaining a regular interaction with the masses. The Company also organises Quarterly Press & Analysts'' Meet to facilitate face to face interaction of the management with the eminent journalists, analysts and stakeholders. This has helped in winning the trust of the masses and stakeholders.

During the execution of the Company''s second Follow-on Public offer, the focal strengths and expertise of the Company were presented to the investors in various campaigns comprising print and electronic media, outdoor hoardings including investor road shows on pan India basis.

Your Company also participated in the India International Trade Fair (IITF) 2013 exhibition by displaying a stall based on the theme of inclusive growth. Your Company also participated in business oriented exhibitions in Mumbai and delhi and in the country of Tanzania during the year to reach out to focal clients and the common masses.

with a view to disseminate information regarding Company''s mission, goals, strategies, achievements & events and viewpoints of management, your Company deploys various internal communication tools such as monthly newsletters, house journals, wall magazines, lounge and regular media updates.

GRIDTECH

Your Company successfully organised the GRIdTECH 2013, the 4th International Exhibition and Conference on Transmission, distribution, Smart Grid, Renewable Energy and Load dispatch in which a large number of exhibitors showcased their state-of-the-art products in the field of transmission, distribution, grid management, and smart grid. one of the distinct features of the exhibition was ''Student Innovation Centre'' wherein students from a number of engineering colleges displayed their projects mainly in the areas of Smart-Grid, Robotics, etc.

RIGHT TO INFORMATION

In order to promote transparency and accountability, an appropriate mechanism has been set up across your Company in line with ''Right to Information Act, 2005''. Your Company has nominated CPIo/ Appellate Authorities at its Corporate office and Regional offices across the country to provide required information to the citizens under the provisions of Act.

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FuNCTION

Good governance plays a very significant role in building the trust of the Stakeholders and eventually in making an organization successful and sustainable. with this goal, your Company strives to focus mainly on preventive Vigilance and achieve good governance by emphasising transparency, integrity, accountability, fairness, equity and adherence to rules, regulations and the laws of the land.

Your Company uses technology in the form of e-payments, e-billing, e-procurement and reverse auction, e-auction, uploading of contract documents as well as award details, vendor registration, online tracking of bill status, online inspection Management system, etc. for preventive action. Vendor meets have also been conducted as a step towards confidence building of stakeholders. As part of Preventive Vigilance, various inspections, in the form of surprise and process online were conducted, apart from CTE type inspections. Adequate cost compensations were effected on cases not conforming to technical specifications or conditions of contract. A number of complaints, received from internal as well as outside agencies, were taken up for verification, earnestly. on the basis of investigations conducted into these complaints, disciplinary actions, wherever appropriate, were also initiated. The Vigilance department has, on its part, also introduced a number of measures to inculcate good governance within the organization. while, process on line inspection are being conducted at the regions of works which are at a critical stage of execution, bulk SMS are being sent to all employees regularly in order to acquaint them with Conduct, discipline and Appeal Rules. online complaint handling system and continuous improvement in systems and procedures are also steps taken in the same direction. during the year FY 2013-14, the Company continued its focus on the following spheres of functioning, like communication of assessment to the concerned bidders, incorporation of provision relating to conflict of interest, installation of surveillance cameras to increase security, putting contract evaluation rooms under IT enabled surveillance, storage of materials at construction sites, etc.

Pursuant to vigilance observations, system improvement has been taken up in areas such as classification for foundations of tower, identification of safety measures to be exercised during the erection in transmission lines, adherence to specifications & field quantity norms and adoption of common approach for preparation of cost estimates. Further, as a part of capacity building, your Company conducted various workshops on Preventive Vigilance, Ethics and on the RTI Act, both at Corporate Centre and in the Regions.

Your Company organized ''Vigilance Awareness Week 2013'', under the theme "Promoting Good Governance – Positive Contribution of Vigilance", during which various competitions were organized for the employees as well as for their family members. In addition, talk on ethics & values and on anti-corruption topics were delivered by eminent personalities.

ACCOLADES & AWARDS

The excellent performance of your Company has been recognised and appreciated by the Govt. of India and other prestigious organisations & institutions in form of various awards/ accolades in various categories from time to time.

Your Company has been rated ''Excellent'' for its performance as per MoU 2012-13 signed with the Ministry of Power.

Your Company also received four (4) Gold Shields and one (1) Silver Shield under ''Comprehensive Award Scheme for recognizing meritorious performance in Power Sector'' for Transmission System Availability and Early Completion of Transmission Projects for the year 2011-12 and 2012-13 from Ministry of Power.

Your Company was also conferred Award for Corporate HR Excellence in Power Sector by 7th ENERTIA Awards 2013, for being India''s best place to work for Power Professionals and Power Engineers and "e-India PSE 2013 Award" for its "online Human Resource development Management System".

Your Company was conferred the Power Line Award 2013 for being the ''Best Performing Transmission Company''.

Your Company was bestowed with "Top Infrastructure Company" under the category ''Power Transmission'' by dun & Bradstreet.

during the year 2013, your Chairman & Managing director was ranked in ''2013-All Asia executive Team – Best CEos'' by ''Institutional Investors'', a highly rated North American magazine on international financial market matters.

Your CMd has also been conferred with the "Eminent Electrical Engineer Award" by the Institution of Engineers (India), the largest professional body of Engineers in India.

Your Company has won the runners-up trophy of National Championship of Business Management Simulations - 2013 conducted by All India Management Association (AIMA) and represented India in the Asian Championship.

MANAGEMENT DISCuSSION AND ANALYSIS

In addition to the issues in the directors'' Report, some issues have been brought out in report on Management discussion and Analysis placed at Annexure-I of this Report.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report as stipulated under Clause 55 of the Listing Agreement with the Stock Exchanges is given in Annexure-II and forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

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

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

As per requirements of disclosures under Section 217(1) (e) of Companies Act,1956 read with Rule 2 of the Companies (disclosures of Particulars in the Report of Board of directors) Rules, 1988 information relating to conversation of energy, technology absorption and foreign exchange earnings and outgo, information is given in Annexure-IV to this Report.

COMPTROLLER AND AUDITOR GENERAL''S COMMENTS

Company has received ''NIL'' comments on the accounts for the year ended March 31, 2014 by the Comptroller and Auditor General of India under Section 619(4) of the Companies Act, 1956. Copy of the same is attached in Annexure-V to this Report.

CORPORATE GOVERNANCE

A report on the Corporate Governance (Annexure-VI), forming part of this report, together with the Certificate thereon is given in Annexure- VII to this report.

Your Company has got its Secretarial Compliance Audit conducted for the financial year ended March 31, 2014 from M/s Chandrasekaran & Associates, Practising Company Secretary. Their Report forms part of this Annual Report (Annexure-VIII).

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.

The statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies forming part of this Report is given in Annexure-IX.

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller & Auditors General of India. M/s S. K. Mehta & Co., M/s Chatterjee & Co., and M/s Sagar & Associates were appointed as Joint Statutory Auditors for the financial year 2013-14.

COST AUDITORS OF THE COMPANY

Your Company appointed M/s. K. G. Goyal & Associates and M/s. S. C. Mohanty & Associates as Cost Auditors for the Financial Year 2013-14 under Section 233B of the Companies Act, 1956.

The due date for filing Cost Audit Reports for the financial year 2013-14 with the Cost Audit Branch, Ministry of Company Affairs is September 30, 2014 and the same will be filed within the stipulated time.

COMPANY''S BOARD

Your Company''s composition of Board of directors underwent some changes during the year 2013-14. Shri Rakesh Jain, JS&FA, MoP, and Smt. Rita Acharya ceased to be directors on the Board of the Company w.e.f. July 08, 2013 and February 28, 2014, respectively. The Board wishes to place on record its deep appreciation and gratitude for the significant contribution and support to the Company extended by Shri Rakesh Jain and Smt. Rita Acharya during their tenure as director of the Company.

Dr. Pradeep Kumar, Joint Secretary & Financial Advisor (JS&FA), Ministry of Power (MoP) was appointed on the Board w.e.f. September 10, 2013 and Smt. Jyoti Arora Joint Secretary (Transmission) was appointed on the Board w.e.f. March 20, 2014.

In accordance with the provisions of Section 152 of the Companies Act, 2013 read with Article 31 (iii) of the Articles of Association of the Company, Shri R.T. Agarwal, director (Finance) and Shri I.S. Jha, director (Projects) shall retire by rotation at the Annual General Meeting of your Company and being eligible, offer themselves for re-appointment.

ACKNOWLEDGEMENTS

The Board of directors, with deep sense of appreciation, acknowledges the guidance and co-operation received from Govt. of India, particularly Ministry of Power, Ministry of Finance, Ministry of Home Affairs, Ministry of External Affairs, Ministry of Statistics and Programme Implementation, Ministry of Environment & Forests, Central Electricity Regulatory Commission, Appellate Tribunal for Electricity, Central Electricity Authority,

Planning Commission, department of Public Enterprises, Regional Power Committees, and other con cerned Govt. departments/agencies at the Central and State level as well as from Securities and Exchange Board of India, National Stock Exchange of India Ltd. and BSE Ltd., Mumbai without whose active support, the achievements of the Corporation during the year under review would not have been possible.

Board''s special appreciation and thanks are to our valued customers, State Governments and State power utilities and other clients, who have awarded various consulting works and reposed faith in Company''s capability to handle them. The Board also appreciates the contribution of Contractors, Vendors and Consultants for successful implementation of various projects by the Company.

The directors take this opportunity to thank the Principal director of Commercial Audit and Ex-officio Member Audit Board-III for the cooperation during the year. directors also acknowledge the valuable suggestions and guidance received from the statutory auditors during the audit of accounts of the Company for the year under review. The Board also conveys its sincere thanks to national/ international financial institutions/ multilateral Financial Institutions (The world Bank & Asian development Bank)/ Banks/ national (ICRA & CRISIL) & international (Standard & Poor and Fitch) credit rating agencies for their assist ance, continued trust and confidence reposed by them on POWERGRID.

On behalf of Board of directors, I would like to place on record our deep appreciation of the dedicated efforts and valuable services rendered by the members of the POWERGRID Family in the Company''s achievements during the year 2013-14. I would also like to thank the Executive team for their strong leadership, the employee unions for their support and all our employees for their commitment and enthusiasm to achieve our aim to be the world''s premier transmission utility.

For and on behalf of the Board of directors

(R. N. Nayak) Chairman & Managing Director Place: New Delhi Date : 04.08.2014


Mar 31, 2013

To, Dear Shareholders,

Ladies & Gentlemen,

The am delighted to present, on behalf of the Board of Directors, the 24th Annual Report on the performance of your Company during the financial year ending March 31, 2013 together with Audited Statement of Accounts, Auditors'' Report and Review of the Accounts by the Comptroller and Auditor General of India for the review period.

Your Company has earned the reputation as one of the largest and best managed transmission utilities in the world with its remarkable growth in the last two decades and carries about half of the country''s total generated power. Your Company continues to play a critical role in development ofthe Country''s power sector with its various techno-managerial initiatives in inter-State power transmission system along with transparent and effective grid operation in the Country.

Your Company has been selected for ''MoU Excellence Award'' for FY 2010-11 by Department of Public Enterprises (DPE), Ministry of Heavy Industries & Public Enterprises for being the top performer in the Energy Syndicate. Further, based on overall performance, the Company has been rated ''Excellent'' by DPE for the FY 2011-12. Based on the approved score, POWERGRID stand top among the assessed Companies in the Power Generation and Transmission syndicate for the FY 2011-12 and expected to receive the "MoU Excellence Award" again.

Your Company has put on a remarkable performance in FY 2012-13 with achievements exceeding most of the targets under Memorandum of Understanding (MoU) signed with Ministry of Power (MoP), Government of India and poised to get ''Excellent'' rating for FY 2012-13; continuously since signing of its first MoU in FY 1993-94.

Performance highlights of the Company during FY 2012-13 are briefly mentioned here to give an overview of accomplishments in all fronts:

- Made an investment of Rs.20,037 Crore, an increase of about 13% over last year.

- Added about 7,156 circuit kilometre (Ckm) of Extra High Voltage(EHV) transmission lines, 17 new sub-stations and transformation capacity of more than 40,230 Mega Volt Ampere (MVA).

- Assets commercialisation of about Rs.17,213 Crore.

- Investment approval accorded for 24 new transmission projects worth about Rs.12,579 Crore.

- 1200kV Ultra High Voltage (UHV) AC National Test Station at Bina, Madhya Pradesh was test charged and then dedicated to the Nation by Hon''ble Union Minister of State (l/C)for Power.

- Attained 99.90% Transmission system availability with number of trippings per line limited at 0.58.

- Inter-regional power transfer capacity of National Grid has been enhanced by 2,000 MW in the year and cumulative capacity stood at about 29,750 MW by end of March, 2013. Further, in the month of May 2013, the inter-regional power transfer capacity has been increased by 2,100 MW to 31,850 MW.

FINANCIAL PERFORMANCE (Figures in Rs. crore, except per share data)

Description 2012-13 2011-12 Y-o-Y Growth

Income

Transmission Charges 12,163 9,544 27.4%

Consultancy 315* 290 8.6%

Telecom 231 201 14.9%

Other Operating Income 49 129 (62.0%)

Other Income 571 621 (8.1%)

Total Income 13,329 10,785 23.6%

Profit After Tax (PAT) 4,235 3,255 30.1%

Earnings per Share (Rs.) 9.15 7.03 30.2%

Book Value per Share (Rs.) 56.62 50.73 11.6%

Gross Fixed Assets 80,600 63,387 27.2%

Long term borrowing ** 66,188 51,752 27.9%

Net Worth 26,213 23,488 11.6%

Debt Equity Ratio 72:28 69:31

Commercialisation of Assets 17,213 13,045 31.95%

*including consultancy income from sale of products **including current maturities of long term borrowings

OPERATIONAL EXCELLENCE

Transmission assets owned and operated by your Company as on April 1, 2013 has crossed the benchmarking values of 1,00,000 Ckm & 1,50,000 MVA and stands at about 1,00,200 Ckm of Extra High Voltage (EHV) transmission lines, 167 EHVAC & High Voltage Direct Current (HVDC) sub-stations and 1,64,763 MVA transformation capacity which spread over the length and breadth of the country. Using this vast transmission network your Company wheels about 50% of the total power generated in the country.

During the year 2012-13, the average availability of these transmission systems was maintained at 99.90% by your Company with the number of trippings per line limited at 0.58. This high availability of transmission network is consistently maintained by your Company through deployment of technologically advanced operational techniques such as Hot Line Maintenance, Hotline Washing of Insulators with the use of helicopters, Equipment Condition Monitoring techniques including Dynamic Testing of relays, Thermo-vision Scanning, Frequency Response Analysis (FRA) for transformers and reactors, large scale automation of sub-stations, etc. Presently, 43 sub-stations of your Company are being operated remotely and many new sub-stations are being designed for remote operation.

The establishment of the "National Transmission Asset Management Centre (NTAMC)" for centralised remote monitoring, operation & control of sub-stations is nearing completion which will further improve the efficiency and transparency in the operation of the transmission system in the Country.

Your Company has developed for implementing a "Maintenance Service Hub" concept in which specialist manpower is pooled into a hub for undertaking the maintenance of number of sub-stations within a close range. This innovative concept shall enable your Company to enrich your manpower with the multifarious knowledge of its huge network of transmission lines & substations with various types of equipments in terms of makes, technology and ratings.

These technological interventions shall also facilitate rationalization of manpower in the field of O&M and this year your Company has achieved more than 1% manpower rationalization on this account.

Your Company has taken a proactive step to restrain the trippings of transmission lines caused due to fog and pollution in various parts of the country by replacing the conventional insulators with polymer insulators. Replacement of insulators in the critical lines / stretches in Northern Region has been completed and replacement of insulators in other parts ofthe country is in progress. This has significantly reduced pollution related trippings in the country. Further, to facilitate optimum selection of insulators for new transmission lines, your Company is conducting pollution mapping in Northern Region and these pollution measurements are being carried out at more than 150 locations ofthe Company and 108 locations ofState Transmission Utilities (STUs). These corrective measures will further minimize the probability of occurrence of flashover in lines passing through pollution affected areas besides optimization of transmission line cost. Pollution mapping of Southern and Eastern Regions are also being taken up by your Company. In addition, advance actions are being taken like cleaning of conventional insulators as a part ofwinter preparedness in less polluted stretches to avoid pollution related trippings.

Your Company has placed state-of-the-art Emergency Restoration Systems (ERS) for transmission lines at strategic locations to enable restoration within shortest possible time of collapsed transmission line towers caused by the eventualities of natural calamities such as earthquake, cyclone, landslide, & sabotage, etc. Additionally, to alleviate the similar eventualities in case of substations, your Company is in the process of procuring a mobile 400/220 kV ERS for substation for quick deployment & restoration of 400kV substation in2to 4 weeks time which otherwise takes several months.

Your Company''s vast nationwide spread transmission network passes through various geographical areas including tough terrains such as snow bound area, deep forest. In these terrains to monitor the condition of transmission lines, a faster and efficient patrolling system was necessitated. Taking this into consideration, your Company has taken up aerial patrolling of transmission lines using helicopters for identifying visual and thermal defects in transmission lines caused due to environmental stresses and thereby to minimize the breakdown nature of maintenance work. To start with this, award for aerial patrolling through helicopters of about 15,000 route kms of transmission lines has already been placed. Further, your Company is also exploring more contemporary techniques such as Robotic Technology for condition monitoring of conductor, earthwire & hardware, etc.

PROJECT IMPLEMENTATION

Best efforts are being put in by your Company for implementing its transmission projects within stipulated time frame to derive commercial benefits. Your Company has developed the Integrated Project Management and Control System (IPMCS) for effective planning, implementation, monitoring and management of the transmission projects. Further, to optimise the implementation time schedule of the projects, various actions have been undertaken including total project review and monitoring using IPMCS and Project Review Meetings at regular intervals through video conferencing. Pre-emptive measures and advance actions on various project linked activities such as land acquisition, state-of-the-art survey techniques and soil investigations, tender activities, funding tie-up, etc., were also undertaken in parallel with project investment approval process.

These well developed system of implementation process has once again resulted in exceptional output and projects worth about Rs.17,213 Crore were commercialised during the year, adding about 7,156 Ckm, 17 sub-stations and transformation capacity of more than 40,230 MVA in the transmission system. Your Company also timely commissioned notable major 765kV and 400kV transmission lines such as 765kV Sasan-Satna-Bina, 765kV Fatehpur-Agra, 765kV Moga-Bhiwani, 765kVJhatikalan-Bhiwani, 400kV D/C Maithon-Koderma, 400kV D/C Mundra-Jetpur, 400kV D/C Chamera Pooling Station-Jallandhar, 400kV D/C Raipur-Wardha inspite of severe constraints faced including challengingterrains, severe Right-of-Way(RoW) problems.

Implementation of High Capacity Power Transmission Corridors (HCPTCs) is progressing as per schedule with completion in a phased manner matching with generation projects. In fact, some of the elements under HCPTCs of Chhaffisgarh and Odisha have already been commissioned in FY 2012-13 and balance elements of HCPTC''s are expected to be completed progressively by FY 2015-16.

During the year, 24 new projects with an estimated cost of about Rs. 12,579 Crore involving about 5,530 Ckt km of transmission lines, 4 new sub-stations and transformation capacity of about 12,730 MVAand supply & installation of 5,207 km of OPGW fibre optic cable were approved and taken up for implementation.

FINANCIAL MANAGEMENT

The Financial performance of your Company in FY 2012-13 has been impeccable, achieving a turnover of Rs.13,329 Crore and Net Profit of Rs.4,235 Crore as compared to Rs.10,785 Crore and Rs. 3,255 Crore respectively during FY 2011-12, growth of about 24% in turnover and 30% in Net Profit. The gross asset base of the Company has been enhanced to Rs.80,600 Crore from Rs. 63,387 Crore in 2011-12, an increase ofabout 27%.

Your Company continues to show improved performance in all its business areas including Telecom and Consultancy businesses, enhancing the value for the shareholders.

Capital Investment and Fund Mobilization

Your Company continues to explore new opportunities for raising long tenure debt from both domestic and international debt investors, for meeting its capex-programme in XII Plan, in addition to debt funding from multilateral funding agencies like The World Bank and ADB.

In this direction, during the year, your Company signed loan agreements with International Finance Corporation (IFC) and Infrastructure Crisis Facility Debt Pool Limited Liability Partnership (ICF Debt Pool LLP) in July, 2012 for a total amount of US$270 million for funding various transmission projects. Further, your Company made its maiden foray into foreign currency markets in January, 2013 and raised US$500 million through issuance of 10 year Foreign Currency Bonds (FCB) at an attractive coupon rate of 3.875% p.a. This maiden issue from your Company received an overwhelming response from the investing community and was over-subscribed nearly 19 times. The Bonds are currently listed in Singapore stock exchange.

In line with its targeted XII Plan capex-programme, your Company during the financial year 2012-13, made a capital investment of Rs. 20,037 Crore which was about 13% higher than last year. AboutRs. 15,700 Crore of the capital investment was mobilised through private placement of bonds in domestic market with attractive coupon rates, Supplier''s credit, proceeds of ongoing SBI Line of Credit, foreign currency bonds and loans from IFC, ICF Debt Pool LLP, multilateral funding agencies like The World Bank, Asian Development Bank etc. In addition, the accrued internal resources and FPO proceeds amounting to about Rs.4300 Crore were utilized for funding equity component of the Company.

During the FY 2012-13, your Company was rated by International credit rating agencies, Standard & Poor''s Rating Services (S&P) and Fitch Ratings, for the first time. Both the agencies have rated your Company at BBB - (outlook negative), consistent with Gol Sovereign Rating. Consequent upon revision of Sovereign rating to ''Stable'' from ''Negative'' recently by ''Fitch Ratings'', the rating of your Company now stands as BBB- (outlook Stable). The Company continues to have its rating as AAA/stable (triple AAA with stable outlook) by CRISIL, ICRA and CARE ratings domestically.

Dividend Payout

For FY 2012-13, your Company has proposed a final dividend ofRs. 1.14 per share in addition toRs. 1.61 per share of interim dividend paid in February, 2013. The final dividend shall be paid after your approval at the Annual General Meeting. Thus total dividend payout for the year amounts to Rs. 1,273.18 Crore (including an interim dividend of Rs. 745.39 Crore) as against Rs. 976.89 Crore paid during the previous year. The total dividend payout including dividend tax accounts for 34.99% of Profit after Tax of the Company.

Your Company values its shareholders and hence determined to pursue its dedication to build and maintain relationships with them by creating wealth for its stakeholders through deploying cutting edge technology, adopting global best practices, optimum utilization of resources and sustainable development.

DIRECTORS'' RESPONSIBILITY STATEMENT

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

i. In the preparation of the Annual Accounts, the applicable accounting standards have been followed;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view ofthe state of affairs ofthe Company at the end ofthe financial year and of the profit of the Company for that period;

iii. The Directors have taken proper and sufficient care in accordance with the provisions ofthe Act for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities;

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

COMMERCIAL PERFORMANCE

With effective from July 1, 2011, Point of Connection (PoC) Charges tariff sharing mechanism has been implemented in the transmission sector for Sharing of Transmission Charges and Losses through Central Electricity Regulatory Commission Regulations, 2010. As the Central Transmission Utility (CTU) ofthe Country, your Company has also been assigned the responsibility of carrying out activities like raising of transmission charge bills on behalf of all the Inter-State Transmission System (ISTS) Licensees (presently 13 nos.), collecting the amount and disbursing the same to them. In this regard bills of transmission charges are prepared, raised and uploaded on the website portal for about 71 Designated ISTS Customers (DICs) including payment details by the customers.

It is a matter of pride that in FY 2012-13, Your Company had achieved a 100% realisation of transmission tariff with highest ever monthly realization of transmission tariff achieved in the month of March, 2013.

DEVELOPMENT OF NATIONAL GRID

Recognizing the need for development of National Grid, thrust was given to enhance the capacity of National Grid in a phased manner. In this direction, your Company had established/ planned various inter-regional links as a part of different generation projects/grid strengthening schemes. The Inter-regional power transfer capacity ofthe National grid has been planned to increase to about 65,550 MW at the end of XII Plan, by adding about 38,000 MW during XII Plan matching with generation capacity addition programme and power transfer requirement across the regions. In line with this, your Company has added 2,000 MW of inter-regional power transfer capacity in FY 2012-13 through upgradation of both 765 kV Gwalior-Agra single circuit transmission lines to 765 kV voltage level from 400 kV voltage level. The cumulative inter-regional powertransfer capacity at the end of first year ofthe XII plan stood at about 29,750 MW.

All India synchronous grid is envisaged for facilitating bulk transfer of power across regional boundaries and to achieve optimal utilization of the resources in the Country. Towards this, presently regional grids of Northern, Eastern, Western and North-Eastern Regions (NEW grid) are already connected through synchronous interconnections and Southern Region (SR) is connected to this NEW grid through over4,000 MW capacity HVDC links. Synchronous interconnection of SR with NEW grid is envisaged through high capacity 765 kV S/c Raichur - Sholapur lines (2 Nos.). One of the above lines is under implementation by private sector and the other line is being implemented by POWERGRID. Both the lines are envisaged to be completed by 2014.

GRID MANAGEMENTAND OPEN ACCESS

Your Company has been instrumental in providing an efficient, reliable, smooth and transparent grid operation and management in the Country. The grid management function in the Country is continued to be looked after by Power System Operation Corporation Limited (POSOCO), a fully owned subsidiary of your Company, with its state-of-the-art Unified Load Despatch & Communication facilities. These facilities are being updated continuously to further improve quality and economy in operation of power systems besides improving data availability, visibility and transparency.

Your Company''s strong transmission network and modernised RLDCs have facilitated about 66 billion units (BUs) of inter-regional energy transfer across the Country during FY 2012-13, as compared to previous year''s energy transfer of about 59 BUs, meeting more demand in energy deficit regions.

During the year, 32,139 transactions involving about 73 BUs of energy were approved under Short Term Open Access (STOA) compared to 24,111 transactions and about 67 BUs of energy during FY 2011-12.

Your Company, as CTU, is the nodal agency for processing & grant of Connectivity, Long Term Open Access/ Long Term Access (LTOA/LTA) and Medium Term Open Access (MTOA) of various applicants. Towards this, as on March 31st, 2013, the Company had granted LTOA/LTA to 151 nos. of applicants with 83,060 MW LTA capacity out of 214 applications with LTOA/LTA sought for about 1,29,408 MW. Some of the LTOA/ LTA applications were withdrawn/closed due to non-satisfactory progress ofthe IPP generation projects. Further, POWERGRID received 180 Connectivity applications for about 1,74,450 MW, out of which connectivity has been granted to 80 nos. of applications for 69,074 MW. The MTOA was granted to 44 nos. of applications for 4,267MW. 27 nos. of MTOA applications were withdrawn/closed as the complete Available Transfer Capability (ATC) was already allocated and some applications are under process.

Unfortunately, there were two major grid disturbances on 30th and 31st July, 2012, which resulted in failure of Northern Regional Grid in first day and that of Northern, Eastern and North-Eastern regional grids by the disturbance occurred on the following day. Restoration ofthe affected areas was taken up immediately on both the days and majority system was normalized in about six to eight hours on respective days itself. An Enquiry Committee headed by Chairperson, CEA was constituted by Gol for investigation of causes for these two grid disturbances in July, 2012. Government of India is monitoring the implementation ofthe Enquiry Committee''s recommendations. Various measures are being taken by POWERGRID, POSOCO and Government of India for secure grid operation such as third party protection audit, advising State utilities to maintain grid discipline & draw power from grid within the schedule, formulation of Islanding schemes in different States, review of Unscheduled Interchange (Ul) mechanism, preparation of comprehensive defence plan covering under-frequency, rate of change of frequency under voltage, system protection schemes to cover large generation and transmission line outages, advise to utilities to prepare outage plans for generating units and transmission lines in consultation with Regional Power Committees and review of transmission planning criteria, etc. Further, petitions have also been filed in Central Electricity Regulatory Commission (CERC) by various Regional Load Despatch Centres including the National Load Despatch Centre on various issues inter-alia, modification in congestion charge procedure, modification in Ul charges and related matters, further tightening the frequency band, primary response from generators etc. In addition, Government of India is contemplating necessary amendments in Electricity Act, 2003 for mitigating the issues in Grid Operation.

QUALITY MANAGEMENT

Your Company with an aspiration to achieve absolute customer satisfaction is continuously endeavouring to provide cost effective & quality services to its valued customers. To achieve this, the Company is taking necessary steps to implement requisite quality measures in each and every step of its chain of operation right from conceptualization of project to commissioning and subsequently during operational phase. Your Company is following Standard Manufacturing Quality Plan at both national & international level while inspection at various manufacturing stages and also adheres to standard Operation and Maintenance (O&M) manuals for operation & maintenance of its transmission system. Further, to improve quality, various techniques are being adopted to identify the areas of improvement and develop action plan for continuous quality improvement in all of its activities.

During the year 2012-13, the certification on Integrated Management System was reviewed and revised certification was acclaimed based on the evaluation of implementation of latest systems and procedures. Your Company is presently certified for Integrated Management System as per Publicly Available Specification, PAS 99:2006 integrating requirements of ISO 9001:2008 (Quality Management System), ISO 14001:2004 (Environment Management System) and OHSAS 18001:2007 (Occupational Health & Safety Management System). Your Company has re-confirmed its certification of the entire Corporation for Social Accountability Standard (SA 8000:2008) after auditing of its establishments for social accountability systems.

Capacity building, being one ofthe major challenge specially in multi-tasking environment under wide area operation, vendor development have been taken-up on priority to meet project requirements both, in execution and supply of 765/400kV equipment.

With zero product inspection as the ultimate goal, your Company has taken up process audits at a number of manufacturing units spread all over the country & also at overseas, at their works. Appropriate corrective actions are also being taken up based on Quality Audit feedback. Further, for asserting quality during transportation, storage, erection and commissioning activities during implementation of projects, Quality Audit on implementation of Field Quality Plans was also carried out.

TECHNOLOGY DEVELOPMENT

Your Company gives priority to research and development activities with potential for social, environmental & national benefits by incorporating advance technology solutions to gear up for future challenge.

The major areas of concern in development of transmission network in the Country are conserving the precious Right of Way (RoW), minimizing impact on natural resources, coordinated development of cost effective transmission corridor and flexibility in upgradation of transfer capacity of lines. In order to address these issues, your Company is deploying technologies such as Multi Circuits, Compact & Tall Towers, High Surge Impedance Loading Lines, Fixed & Thyristor controlled Series Compensation, High Temperature Low Sag (HTLS) Conductors, etc.

Experienced with construction of 765kV Extra-High-Voltage AC (EHVAC) & ±500kV HVDC transmission system, Your Company is now implementing next higher transmission voltages of ±800kV HVDC &working on 1200 kV Ultra-High-Voltage AC (UHVAC) system to achieve efficient utilization of RoW and increased power transfer capability for transfer of bulk power over long distances.

800kV Multi-Terminal HVDC System

Implementation of ±800kV, 6,000 MW multi-terminal HVDC system of around 2,000 km from North Eastern Region (NER) (Biswanath Chariali in Assam and Alipurduar of West Bengal) to Northern Region (NR) (Agra in Uttar Pradesh) is progressing well and commissioning shall be in 2015-16. Upon completion, it shall be one of the largest multi-terminal HVDC systems in the world at this voltage level. HVDC system at 800kV level is particularly used for bulk power transmission over long distance with reduced RoW and losses.

1200kV UHVAC Transmission System

The 1200kV UHVAC technology, the highest voltage level in the world, is being developed indigenously by your Company in collaboration with 35 Indian manufacturers. This is one ofthe unique R&D projects in Public-Private Partnership model. In this, a 1200kV National Test Station is being established by the Company to facilitate indigenous development of UHVAC technology. The 1200kV Single Circuit (S/c) and Double Circuit (D/c) test lines were successfully test charged along with one 1200kV Bay at 1200kV UHVAC National Test Station at Bina, Madhya Pradesh and field tests are currently undergoing. Hon''ble Union Minister of State (l/C) for Power has dedicated the 1200kV Ultra High Voltage (UHV) AC National Test Station at Bina, Madhya Pradesh to the Nation in December, 2012.

Other technological initiatives such as Pollution & Lightning mapping, Emergency Restoration Systems for 400kV substation (Mobile substation), Process bus architecture for Substation Automation System, Transmission Line Arrestors, Mobile Test Van, 33kV Mobile Capacitor Bank & High Temperature Superconductor Technology for bulk power transmission, fault current limitation (Superconducting Fault Current Limiter) and energy storage (Superconducting Magnetic Energy Storage) applications are being taken up/ explored by your Company for their viability in Indian PowerSystem to ensure more efficient, safe, secure & reliable operation of Grid.

SMART GRID TECHNOLOGY

Your Company continues to take pioneering steps in bringing Smart Grid technology in all facets of power supply value chain in the country. First Smart Grid Control Center in the Country has been established at Puducherry by your Company through open collaboration with more than 70 organizations & academic institutions. Under this, important Smart Grid attribute i.e. Advanced Metering Infrastructure (AMI) has been implemented and other functionalities like Outage Management System, Demand Response, Microgrid, etc. are being taken up in a progressive manner. This Smart Grid pilot project would be very helpful to demonstrate technology efficacy, evolution of commercial mechanism and suitable regulation, formulation of interoperability framework, indigenization of technology and renewable integration, etc. which can be scalable and replicable at other places in the Country for overall benefits to both consumers and utilities.

In addition, efficient street light management system has been implemented at Puducherry which has resulted in reduction of energy consumption for street lighting by about 15%. Further, development of Smart Home Energy Management System is being carried out in association with IIT, Kharagpur to facilitate consumers in energy management process through remote operation. Towards green energy initiatives, installation of 50kWp roof-top solar PV plant at NTAMC building, Manesar is under progress.

In addition to preparing Project Report for Smart Grid implementation by various distribution utilities/cities, your Company has prepared the feasibility report for upcoming green field project at Dholera SIR, coming under Delhi- Mumbai Industrial Corridor (DMIC).

Your Company has taken leadership initiative for implementation of Smart Grid Technology in transmission also. Towards this, the Company has executed Wide Area Measurement System (WAMS) pilot project in four (4) regions and is under progress in the Eastern Region. Under this initiative, presently about 40 nos. Phasor Measurement Units (PMUs) are in operation, facilitating dynamic real time measurements and better visualization of power system which are useful in monitoring safety & security of the grid along with enhanced situational awareness and taking control/corrective actions.

For full scale implementation of WAMS technology on pan India basis, your Company has proposed "Unified Real Time Dynamic State Measurement System (URTDSM)" scheme integrating State and Central grids, i.e. PMU placement at all HVDC, 400kV and above substations / generating stations including 220 kV level and PDC (Phasor Data Concentrator) at strategic locations. The Scheme shall enhance the efficiency in overall grid management in electricity open market regime. Total estimated cost of the URTDSM project is aboutRs. 655 Crore.

GREEN ENERGY CORRIDORS - GRID INTEGRATION OF RENEWABLE ENERGY

Integration of Renewable Energy Resources with grid is the top priority worldwide for energy security and also for carbon emission reduction. Government of India is taking various initiatives in the area of renewable energy capacity addition and about 42 GW of generation is envisaged in XII plan. Your Company has taken a lead initiative and developed a comprehensive master plan, Green Energy Corridors, which has been released by Ministry of Power and Ministry of New & Renewable Energy (MNRE) for integration of renewables coming up country- wide in XII plan.

This covers identification of transmission requirement at inter-State and intra-State level for grid integration of envisaged renewable capacity addition. Further, to address the intermittency and variability characteristics of renewable generation, other control infrastructure like forecasting of renewable generation and demand, Real time measurement/monitoring through Synchrophasor technology, flexible generation, ancillary reserves, Demand-side & demand response management and energy storage, establishment of Renewable Energy Management Centers (REMC) etc. is also identified.

A Joint Declaration of intent is also signed between Govt, of India & Govt, of Germany for cooperation in the field of integration of renewable energy sources in the form of providing financial assistance through soft loan of about 1 billion euro by Germany to develop prioritized Inter- State & Intra-State transmission systems i.e. Green Energy Corridors as well as sharing oftechnical expertise in the above field.

PERFORMANCE IN TELECOM

Your Company is leveraging its countrywide transmission infrastructure diversified into Telecom business under the brand name ''POWERTEL'' to expand its revenue base. Your Company has an all India Broad Band Telecom Network of about 29,300 km with connectivity provided to all metros, major cities, towns, State capitals including remote areas of North-Eastern Region, Jammu & Kashmir etc. covering about 290 Points of Presence (PoPs) across the country from where services are being rendered. Your Company is the only utility in the Country providing Telecom Services on overhead optic fibre network using Optical Ground Wire (OPGW) on power transmission lines and possess Infrastructure Provider Category-1 (IP-1), Internet Service Provider ''A'' (ISP ''A'') and National Long Distance Service License (NLD) to provide a variety of Telecom services.

Availability of Telecom Backbone system was maintained at 99.92% during FY 2012-13. The income from Telecom in FY 2012-13 has increased to about Rs.231 Crore from Rs.201Crore in FY 2011-12. The revenue from our telecommunication business is mainly on account of leasing of bandwidth on our fibre-optic links to various customer segments viz, Telecom Service Providers, Government Departments, Multi National Companies (MNCs), media etc.

National Knowledge Network (NKN)

Your Company is one of the implementing agencies of the prestigious National Knowledge Network (NKN) project devised by Govt, of India which plans to connect all knowledge centres across the Country such as Indian Institutes of Technology (IITs), Indian Institute of Science (lISc) etc., on high speed connectivity. Total expected revenue to the Company under this project over a period of 10 years is aboutRs. 900 Crore. Total advance amount received from National Informatics Centre (NIC) against NKN order is Rs. 640.85 Crore till March 31, 2013. National Optical Fiber Network (NOFN)

Your Company is a member of Advisory Body and Core Committee of the ambitious National Optical Fiber Network Project through which Government of India plans to connect 2,50,000 Gram Panchayats (GPs) on Optical Fiber network utilizing existing facilities of Bharat Sanchar Nigam Limited (BSNL), POWERGRID and RailTel Corporation of India Limited at an estimated cost of Rs. 20,000 Crore with completion period of 24 months. As a part of this, your Company has completed a pilot project at Parawada Block, Viskhapatnam District (Andhra Pradesh) in October 15, 2012 utilizing existing fibers of BSNL & POWERGRID and laying incremental fiber wherever required.

Under this, your Company has received an allotment letter from Bharat Broadband Network Ltd (BBNL) for development & maintenance of NOFN network in four States viz. Andhra Pradesh, Himachal Pradesh, Jharkhand & Odisha covering about 36,000 GPs. The work is to be carried out in about 89 districts covering 1,769 blocks across these fourStates. The estimate cost of the project for these four States would be about Rs. 2,700 Crore. As a part of this, your Company has signed a MoU with BBNL for developing NOFN network in 4 States on Build, Operate and Maintain basis, on December 04, 2012. Presently, survey activities are under progress.

BUSINESS DEVELOPMENT & CONSULTANCY

Your Company continues to showcase its leadership in its core areas such as Power Transmission, Sub-transmission, Distribution and Telecom utilising the techno-commercial proficiency to offer consultancy services worldwide.

On the domestic front, during FY 2012-13, the Company has bagged 26 new assignments aggregating to a project cost ofRs.715 Crore, with continued & unbounded trust in your Company by Public & Private utilities alike. To enhance customers'' base, business promotion activities have been undertaken by your Company with various Central Public Sector Undertakings like SAIL, RINL, DMIC, DFCC, Railways, etc. & succeeded in bagging contract with SAIL for providing technical services to four plants of SAIL. In addition, being the front runner in Smart Grid implementation in the Country, our initiatives to provide technical services for Smart Grid / Smart City applications are expected to bear fruit and bring number of consultancy assignments in near future.

Further, your Company has undertaken an international Joint Venture (JV) with Nepal. As a result of this, Cross border Power Transmission Company Ltd., (CPTC) became operational this year, which has 10% equity participation from Nepal Electricity Authority. This Company shall implement Indian portion of Indo-Nepal link (Muzaffapur, India to Dhalkebar, Nepal). For Nepalese portion of this international link, your Company shall be participating 26% equity in another international JV Company i.e., Power Transmission Company Nepal Ltd., (PTCN).

In international arena, during the year, your Company had bagged 9 (nine) new assignments having project cost of Rs. 332 Crore. At the end of the FY 2012-13,17 assignments were under execution with footprint in 11 countries viz. Nepal, Bhutan, Bangladesh, Afghanistan, Sri Lanka, Myanmar, UAE, Nigeria, Ethiopia, Kenya &Tajikistan.

During the year, your Company has earned revenue ofRs. 315 Crore from consultancy business including consultancy income from sale of products, surpassing previous year''s revenue ofRs. 290 Crore.

SAARC Grid

Your Company continues to play an active role in preparing a roadmap for developing South Asian Association for Regional Cooperation (SAARC) market for electricity to develop a cross country power-grid, harnessing each other''s capacities and resources to address the growing energy need in the region. Presently, various interconnections exist between India & Nepal and India & Bhutan and these are being strengthened for mutual exchange of power. For evacuation of power from various upcoming Hydro Electric Power (HEPs) in Bhutan, Punatsangchu-I HEP (in Bhutan) - Alipurduar (in India) 400 kV Double Circuit (D/c) line between Bhutan & India is under implementation and expected to be completed by 2015. Further, an asynchronous interconnection between India & Bangladesh through 500 MW High Voltage Direct Current (HVDC) back-to-back terminal along with Bheramara (Bangladesh) - Baharampur (India) 400kV D/c line is under implementation and expected to be completed by 2013. For transfer of bulk power, interconnection between India and Nepal through 400 kV Dhalkebar (in Nepal) - Muzaffarpur (in India) D/C transmission line is under implementation. For interconnection between India and Sri Lanka, feasibility study for a ±400kV, 500/1000MW under-sea HVDC bipole line is under finalization. Further, discussions at Government level are being held for interconnection between India and Pakistan through Amritsar (India) - Lahore (Pakistan) line.

EXPLORING NEW HORIZONS

Your Company continues to pursue its exploration towards backward integration and is forming Joint Venture Companies with the prime producers of raw material for manufacturing of major transmission equipment. In this direction, your Company has signed MoU with SAIL for manufacturing of transmission line towers and its parts including Research & Development facilities in addition to the MoUs signed earlier with National Aluminium Company Limited (for Conductors) and Rashtriya Ispat Nigam Limited (for transmission line towers). These facilities are envisaged to cater to domestic/ international market.

Further, with a view to spur the development of sub-transmission system in the Country by providing support to States, your Company has formed Joint Venture Companies (JVCs) namely Bihar Grid Company Limited with Bihar State Power (Holding) Company Limited and Kalinga Bidyut Prasaran Nigam Private Limited with Odisha Power Transmission Corporation Limited, on 50:50 equity participation basis for development of Intra-State Transmission System in the State of Bihar & Odisha, respectively. Various regulatory / statutory approvals in respect of the above are under process. Further, discussions are under process for forming a similar Joint Venture Company with other State(s).

CONTRIBUTION IN DISTRIBUTION REFORMS

Govt, of India''s "Rajiv Gandhi Grameen Vidyutikaran Yojana(RGGVY)" scheme for Rural Electricity Infrastructure and Household Electrification was launched for the attainment of the National Common Minimum Programme of providing access to electricity to all Rural Household. Your Company has taken a lead role in implementation of RGGVY works and has been assigned one-third of the total works for execution of rural electrification covered in 68 districts of nine States in the Country of a base cost of about Rs. 7,230 Crore. Most of the schemes have already been completed. During FY 2012-13, infrastructure was created for electrification in 3,852 villages out of which 146 were un-electrified villages and 8,053 villages were energised out of which 1,115 villages were in un-electrified category. Service connections were provided to about 1.82 Lakh BPL households. Cumulatively, till March, 2013, infrastructure has been created for electrification of 68,654 villages out of which 32,463 were un-electrified villages and service connection to about 35.37Lakh BPL households were provided.

XII PLAN INVESTMENT PROGRAMME

In XII Plan, your Company had planned to make an investment of Rs. 1,00,000 Crore matching with the envisaged generation capacity addition. This investment is mainly for implementation of various inter-state transmission systems including High Capacity Power Transmission Corridors (HCPTCs), inter-regional links for grid strengthening, system strengthening schemes, etc. Out of the planned Rs.1,00,000 Crore, your Company has already made a Capital expenditure of Rs.20,037 Crore in the first year of the Plan i.e. FY 2012-13. During the XII plan, transmission network addition of about 40,000 ckm of transmission lines and about 1,00,000 MVA of transformation capacity has been envisaged in which your Company has already commissioned 7,156 Ckm of EHV transmission lines and transformation capacity of more than 40,230 MVA in FY 2012-13.

To meet the CAPEX of Rs.1,00,000 crore, your Company has to raise a Debt of about Rs.70,000 Crore of which about Rs.38,800 crore, i.e. 54%, has already been tied up through funding from various mechanisms. Further, your Company has excellent credit rating by both domestic and international credit agencies and thereby do not foresee any difficulty for resource mobilisation. The Loan requirements are planned to meet through Loans from multilateral institutions like The World Bank, Asian Development Bank, Supplier Credit, External Commercial Borrowings through bonds / notes besides loans from domestic market through private placement of bonds.

ERP & IT

Your Company is establishing the Enterprise Resource Planning (ERP) system in its organization to manage the massive information flows in the system. The main package of ERP Project has been awarded to M/s Tata Consultancy Services (TCS) which includes development of Data Centre, Disaster Recovery Centre and augmentation of communication network. The pilot project ofthe same is expected to be operational during FY 2013-14. The pilot project will cover the Company''s Corporate Centre in Gurgaon and one of its regional headquarters.

During the year, your Company had provided Laptops and data-cards to the employees for efficient accomplishment of their functions with swifter & easier storage, usage, transfer and retrieval of data. Further, utilising the skills & in-house expertise, the Company has systematically developed various software applications to smoothening its functional areas. The Company has also renewed its website in a contemporary fashion to make it more user friendly. Being located in pan India basis, advanced communication system has became essential and to actualize that the Company had installed High Definition Multi-conference Unit (MCU) at Corporate Office, Gurgaon including Video Wall System. Your Company has taken the necessary steps for is0:27001 certification and for implementation of the necessitated Information Security Management System (ISMS) across the organization tendering is in process.

SUSTAINABLE DEVELOPMENT

Major concern that globe is facing now is the environmental degradation and increasing threat of climate change. The transmission projects being implemented by your Company are environmentally clean and involve neither disposal of solid waste, effluents or hazardous substances in land, air or water nor large scale excavation which may result in soil erosion.

However, your Company has proactively formulated and followed the Environmental and Social Policy & Procedures (ESPP) for the conservation of forests, flora & fauna, resettlement & rehabilitation. Following the principle of Avoidance, Minimization and Mitigation, your Company ensured to evade Great Indian Bustard Sanctuary in Madhya Pradesh and Achanakmar-Amarkantak Biosphere Reserve in Chhaffisgarh during construction of765 kV Indore-Dahod and 765 kV Dharamjaigarh-Jabalpur lines respectively.

Your Company was the first Company in power sector to come out with the ''Sustainability Report'' in March, 2010 and second such report has been published in March, 2013, providing all stakeholders a clear picture of our contribution to sustainable development through its activities. The report is based on GRI-G3 guidelines. International Standards like Accountability, UK Standard "AA1000:2008 APS and AA1000:2011 SES" have been followed to make the process more inclusive.

The Company has taken various initiatives towards sustainable development and in the direction of reducing its carbon footprint. Towards this, the Company has adopted Rain Water Harvesting facility in its establishments. Every substation being constructed now is provided with rain water harvesting systems. In addition, energy efficient Light Emiffing Diode (LED) bulbs and Solar lights are being provided in new substations to reduce in-house consumption of energy. A waste paper recycling plant has been installed at Gurgaon substation and with the produced recycled papers letter heads and business cards are being printed. New buildings are being constructed as per Green Building norms. Your Company with an initiation to reduce the energy consumption has undertaken Energy audit at 12 of its sub-stations during FY 2012-13 and based on its reports necessary actions undertaken for improvement.

Your Company is focusing on more number of high capacity transmission systems which will help in utilizing the right-of-way in an optimal manner and minimizing the loss of forest, flora & fauna and natural resource like land, etc.

CORPORATE SOCIAL RESPONSIBILITY

Your Company, emphasizing on socio-economic and integral development of areas/ communities primarily in and around its areas of operations, carries out various community development activities such as Skill Development & Capacity Building, livelihood generation, healthcare, education, plantation, sanitation, drinking water besides infrastructure developments like classrooms, roads, community centres etc.

During the FY 2012-13, the Company made an expenditure of Rs. 21.75 Crore [0.67% of Profit After Tax (PAT) of the preceding year] for carrying out about 440 CSR projects including 19 in education sector, 152 in the area of infrastructure, 140 in healthcare and 131 for livelihood. During this period, about 1.09 lakh tree saplings were also planted by your Company in different parts of the Country.

Towards various skill development programmes, the Company has given more emphasis on training youths in the area of "Transmission Line Tower erection" which is being conducted in association with leading EPC Contractors. During the year, 258 candidates were trained under this program and most of them were gainfully employed in the transmission industry. Other skill development / livelihood training programs imparted to unemployed youth are in the field of tailoring, cuffing/ stitching, embroidery, automobile repairing, handloom weaving, food & fruit processing, repairing of household appliances, etc. to secure employment or be self-employed.

An extensive programme on Maternal & Child Healthcare was organised in 15 villages of Gurgaon, Mewat & Jhajjar districts of Haryana. A total of 72 health camps in different villages of these 3 districts were conducted under this program during FY 2012-13.

Further, your Company is in the process of establishing 4 nos. Industrial Training Institutes (ITIs) with 2 nos. each in the States of J&K and Odisha. Consequently upon establishment of these ITIs, the same shall be handed over to the concerned State Government for operation and maintenance.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital Our employees are the most important asset and their incessant growth is the most treasured investment. Your Company encourages and initiates various programmes for bolstering and enriching the continuous development of the knowledge horizon ofthe employees.

In order to align the human resource development strategy with the business objectives, the Company conducted Organization Need Assessment (ONA) capturing the organizational requirement for competency enhancement of employees and then conducted online Training Need Assessment (TNA) for individual employees. Through the online TNA process, your Company has been able to link the development plans of employees with Performance Management System which helps the organization to keep updating the competencies of employees to meet current and future requirement.

Apart from focussed functional and behavioural development of its employees, the Company conducted series of certified Learning & Development Programs on Regulatory Framework in Power Sector and certified workshop on Earned Value Management System for top and senior level executives as part of their strategic development. During the year, an average 5.95 training mandays per employee has been achieved to equip employees for leadership development, technological enhancement and future challenges.

During FY 2012-13, POWERGRID has inducted 117 personnel at various levels viz., executives, supervisors, workmen through open advertisement on all India basis and campus selection from reputed engineering and management institutes for executives, and for non-executives through employment exchanges and local advertisement at regional level.

New initiative of Mentorship Development has been taken under which young executives are guided by the mentors who nurture, guide and direct them to integrate with the system and values of the organization and counsel them on regular basis. Seffing the tone for new business areas in Energy Auditing, the Company has trained group of executives for undergoing through the process of National Certification Examination for Energy Auditors and subsequent accreditation by Bureau of Energy Efficiency (BEE).

To create a vibrant workforce rising to opportunities and challenges in Company''s future business context, POWERGRID Climate Survey 2012- 2013 was conducted amongst executive and supervisor level employees with a view to capture the key factors of employee satisfaction, employee engagement and the existing organisational cultural capabilities and the future cultural capabilities.

Your Company has started running its own Hot Line Training Centre at Hyderabad duly accredited by Central Electricity Authority (CEA). This centre is the only accredited Hotline Training Centre in India and has been set up to provide in-depth approach and training for technical and practical know-how of live line maintenance.

During the FY 2012-13, your Company has signed Memorandum of Understanding (MoUs) with IIM, Lucknow, IIM, Bangalore, CPRI, Bangalore, IIT, Chennai and IIFT, New Delhi which will enable the organization to leverage each other''s capability and resources in areas of pedagogy, training, research and innovation in systems, process, etc.

Employee Welfare

Your Company undertakes requisite changes in various policies from time to time in line with the needs and welfare of employees. The Company had empanelled various hospitals nearby to its establishments including Corporate Centre for the healthcare of employees and their dependents.

Your Company successfully continues to address the issues related to workmen through the National and Regional Bipartite Committee (PNBC/PRBC), a joint consultative forum comprising management and workmen representatives. During the year, the Industrial Relations scenario in the Corporation has been cordial and no man days were lost. An effective work culture has been established in the organization through empowerment, transparency, decentralization, and practice of participative management.

Quality food is served to the employees in the ISO 22000:2005 conferred Cafeteria in the Corporate Office and Food Lounge of Multi Purpose hall of your Company. Healthy community living is spread through periodically conducted cultural programmes for celebrating various occasions like Diwali get-together, Holi Milan, New Year, Raising Day, etc. in all establishments of the Company.

The Company also conducted various sports competitions, for boosting the interest of employees in sports and games, at intra and inter- regional level for Kabaddi, Cricket, Volleyball, Badminton etc. Your Company also participates regularly in Inter-PSU Sports meet also. Your Company players in Cricket, Table Tennis, and Carom have stood meritorious and bagged awards in the Inter-PSU tournaments.

Citizen''s Charter

The Company formulated its Citizen''s Charter providing a visible front of its mission & objectives, commitments, terms of service and its obligation to various stakeholders. In the Citizen''s Charter information is available about Company''s schemes, policies, project plans ofthe Corporation and issues ofgeneral interest to stakeholders.

Implementation of Official Language

Your Company, being sensitive towards our heritage, social and cultural concerns, continues to prove its commitment for implementation of Rajbhasha Policy of Govt, of India.

Your Company is enforcing and puffing all efforts for usage of Hindi in all aspects of management in all levels ofthe corporation. Further, the Company is organizing various events such as workshops to impart training in translation, enhancing working knowledge through organizing computer trainings and Hindi classes, etc. for increased use of Official language. Events like Akhil Bhartiya Rajbhasha Sammelan, Kavi Sammelan (poetry sessions), Kavita Pratiyogita, Drama, Publication of Hindi Magazines/papers, competitions and meetings, etc. are regularly organized. To provide further inspiration, employees are nominated for external Hindi training programmes which are encouraging them to work in Hindi.

Various forums such as Parliamentary Committees on Official Language, Advisory Committee on Official Language and Town Official Language Implementation Committee (TOLIC) had applauded the efforts taken by your Company for implementing Rajbhasha besides receiving many accolades.

Corporate Image through Communication Management

In the current global competitive scenario, it is crucial that Companies carve out a unique niche for itself in terms of building strong relationship with its stakeholders and establishing brand identity for themselves through various innovative communications management initiatives.

In order to facilitate interaction with the stakeholders in respect of achievements, growth, recent developments on operational and financial front, regular press communique have been issued by your Company and face to face interaction of the management arranged with the analysts and stakeholders at the Quarterly Analyst Meet and Press Meet. This has enhanced brand exposure with existing and potential clients, investors and other stakeholders.

Your Company through its efficient communication management handled the most challenging communication crisis by disseminating prompt information amongst the press and journalists regarding restoration of the National Grid in July/ August, 2012. The management was regularly updating the press and the media by releasing hourly updation reports and interviews thereby maintaining a transparent communication with the public.

Your Company successfully participated in the India International Trade Fair (IITF) 2012 exhibition by creating a theme stall based on Smart Grid Technology and 1200 kV HVDC transmission line, focusing on its ongoing activities, core competencies and current assignments. The Company also participated in many business oriented exhibitions, technical, social seminars and workshops to reach out to its principal clients and the public.

With a view to integrate the employees'' outlook towards the Company''s mission, goals and strategies numerous internal communications tools are deployed such as monthly newsletters in digital form, wall magazines, lounge for regular event updates to apprise the developments, achievements & viewpoints of organisation. Besides this, we also provide a stage to our employees for direct interaction with management by organizing "Open House" session time to time where CMD and Directors interact with all the employees either directly or through video conferencing. These internal communications has been instrumental in boosting employee morale, enthusiasm and in turn giving a fillip to revenue per employee.

EXHIBITION AND CONFERENCE ON NEWTECHNOLOGIES - GRIDTECH 2013

Your Company with the support of Ministry of Power and in association with CBIP and IEEMA has organised its 4th International Exhibition and Conference GRIDTECH 2013 on new technologies in transmission, distribution, smart grid/city, load dispatch & communication. Being an excellent global networking opportunity for exhibitors, visitors and delegates, GRIDTECH 2013 provided an opportunity for all Companies to showcase their Transmission, Distribution, Smart Grid, Load Dispatch and Communication expertise and know-how and to identify business opportunities in the electricity market in India and abroad. Recognising the importance in development of Smart Grid/City for sustainable development, special considerations and showcasing were done for exhibiting real life working of Smart Grid/City covering various functionalities by the exhibitors including the demonstration of the functioning of Smart Home Energy Management System.

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FUNCTION

Your Company focuses more on Preventive and Pro-active Vigilance, apart from Detective, Predictive and Punitive Vigilance. Aiming at better transparency in working of the Organisation and to inculcate a sense of Ethics, Integrity and sound Corporate Governance several steps are being taken for improving the system and vigilance administration through various technologies such as Online Complaint Handling System, Vigilance Information Network System (VINS), Online Property Returns, e-bidding, e-payments, e-auction, e-procurement, e-billing, etc. in the Organisation as a whole. Various workshops on Preventive Vigilance, Ethics and the RTI Act are also conducted both at the Corporate Centre as well as in the Regions.

Your Company, as a part of Preventive Vigilance, inspections in the form of surprise and process online were conducted, apart from CTE type inspections. Based on the inspections conducted, adequate cost compensation was effected on points not conforming to technical specifications or conditions of Contract, etc. On the basis of surprise inspections conducted, some cases were also registered for investigation and necessary disciplinary proceedings were initiated in some cases. A number of complaints were also received both internally as well as from outside agencies. The Company has adopted zero tolerance towards corruption. The complaints received are therefore, taken up for verification, earnestly. On the basis of investigations conducted into these complaints, disciplinary action, wherever appropriate, was also initiated against some employees. The Vigilance Department continues its drive to spread awareness amongst employees by sending bulk SMS and e-mails regarding the provisions of the Conduct, Discipline and Appeal Rules. Continuous improvement in systems and procedures has always remained one of the hallmarks of your Company. The Company have, like in previous years, continued its focus on spheres of functioning, like, communication of assessment to the concerned bidders, incorporation of provision relating to conflict of interest, restriction relating to purchase of mementoes to visiting dignitaries, installation of surveillance cameras to increase security, storage of materials at construction sites, etc. Vendors'' meet were also organized during the year in various Regions to bolster more interaction with the stakeholders.

During Vigilance Awareness Week, your Company organized a number of programmes both at Corporate Centre and regions like essay, debate, quiz, slogan and painting competitions both for employees as well as for their family members. Panel discussions and lectures by eminent personalities and academicians were also organized. The Vigilance Commissioners, Shri R. Srikumar and Shri J.M. Garg, addressed the employees at Corporate Centre and at the Regions (through Video Conferencing) during this week. The in-house journal ofthe Vigilance Department, ''Candour'' was also inaugurated during this period and distributed widely amongst the employees.

ACCOLADES & AWARDS

Govt, of India and other prestigious organisations & institutes has bestowed your Company with various awards/ accolades in various categories.

Your Company has been selected for ''MoU excellence award'' for FY 2010-11 by Department of Public Enterprises (DPE), Ministry of Heavy Industries & Public Enterprises for being the top performer in the Energy Syndicate.

Your Company had been conferred with the "3rd Rajeev Gandhi Excellence Award 2011" under the ''Best Power Company of the Year'' Category by an NGO "Pehchan", to commemorate Late Prime Minister Shri Rajiv Gandhi''s birthday, in a function held on August 20, 2012 at New Delhi.

Your Company has also been conferred with the 4th DSIJ PSU Awards 2012 for "Fastest Growing Navratna in non-manufacturing category" by Dalai Street Investment Journal in a function held in New Delhi on March 23, 2013.

Further, your Company''s team had won the National Championship of National Competition for Business Management Simulations -2012 and represented India in Asian Championship.

MANAGEMENT DISCUSSION AND ANALYSIS

In addition to the issues in the Directors'' Reports, some issues have been brought out in Report on Management Discussion and Analysis placed at Annexure-I.

BUSINESS RESPONSIBILITY REPORT

The Business Responsibility Report as stipulated under Clause 55 ofthe Listing Agreement with the Stock Exchanges is given in Annexure-ll and forms part of the Annual Report.

PARTICULARS OF EMPLOYEES

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

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

As per requirements of disclosures under Section 217(1) (e) of Companies Act,1956 read with Rule 2 of the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 information relating to conversation of energy, technology absorption and foreign exchange earnings and outgo is given in Annexure-IV to this Report.

COMPTROLLER AND AUDITOR GENERAL''S COMMENTS

Company has achieved ''NIL'' comments on the accounts for the year ended March 31, 2013 by the Comptroller and Auditor General of India under Section 619(4) ofthe Companies Act, 1956. Copy is attached in Annexure-V to this Report.

CORPORATE GOVERNANCE

A Report on the Corporate Governance (Annexure-VI), forming part of this Report, together with the Certificate thereon is given in Annexure-VII to this report.

Your Company has got its Secretarial Compliance Audit conducted for the financial year ended March 31, 2013 from M/s Sanjay Grover & Associates, Practising Company Secretary. Their Report forms part of this Annual Report (Annexure-VIII).

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller & Auditors General of India. M/s S. K. Mehta & Co., M/s Chatterjee & Co., and M/s Sagar & Associates were appointed as Joint Statutory Auditors for the financial year 2012-13.

COST AUDITORS OF THE COMPANY

Your Company had appointed the Cost Auditors Shri Jugal Kishore Puri and M/s. K. G. Goyal and Associates for the Financial Year 2012-13. Further, M/s. K. G. Goyal and Associates and M/s. S. C. Mohanty & Associates have been appointed as Cost Auditors for the Financial Year 2013-14 under Section 233B of the Companies Act, 1956.

The due date for filing Cost Audit Reports for the financial year 2012-13 with the Cost Audit Branch, Ministry of Company Affairs is September 27, 2013 and the same will be filed with the Cost Audit Branch within the stipulated time.

POWERGRID''S BOARD

During the year under report, some changes took place in the Directorate. Shri Ravi P. Singh assumed the charge of Director (Personnel) with effect from (w.e.f) April 1, 2012 and Shri R. P. Sasmal, took over the charge of Director (Operations) with effect from August 1, 2012. Five non-official part time directors viz. Shri R. K. Gupta, Dr. K. Ramalingam, Shri R. Krishnamoorthy, Shri Ajay Kumar Mittal and Shri Mahesh Shah were appointed with effect from January 16, 2013.

Further, Shri Rakesh Jain, JS&FA, MoP, ceased to be Director on the Board of the Company w.e.f. July 08, 2013 (Afternoon). The Board wishes to place on record its deep appreciation and gratitude for the invaluable contribution and unstinted support to the Company extended by Shri Rakesh Jain during his tenure as Director ofthe Company.

In accordance with the provisions of Section 255 and 256 of the Companies Act, 1956 read with Article 31(iii) of the Articles of Association of the Company, Smt. Rita Sinha, Shri Santosh Saraf, Independent Directors shall retire by rotation at the Annual General Meeting of your Company and being eligible, offer themselves for re-appointment.

ACKNOWLEDGEMENTS

The Board of Directors, with deep sense of appreciation, acknowledges the guidance and co-operation received from Govt, of India, particularly Ministry of Power, Ministry of Finance, Ministry of Home Affairs, Ministry of External Affairs, Ministry ofStatisticsand Programme Implementation, Ministry of Environment & Forests, Central Electricity Regulatory Commission, Appellate Tribunal for Electricity, Central Electricity Authority, Planning Commission, Department of Public Enterprises, Regional Power Committees, and other concerned Govt, departments/ agencies at the Central and State level as well as from Securities and Exchange Board of India, National Stock Exchange of India Ltd., and BSE Ltd., Mumbai without whose active support, the achievements by the Corporation during the year under review would not have been possible.

Board''s special appreciation and thanks are due to our valued customers, various State power utilities and other clients, who have awarded various consultancy works and reposed faith in Company''s capability to handle them. The Board also appreciates the contribution of contractors, vendors and consultants for successful implementation of various projects by the Company.

The Directors take this opportunity to thank the Principal Director of Commercial Audit and Ex-Officio Member Audit Board-Ill for the co-operation during the year. Directors also acknowledge the valuable suggestions and guidance received from the statutory auditors during the audit of accounts of the Company for the year under review. The Board also conveys its sincere thanks to various national/ international financial institutions/ banks/ credit rating agencies for their timely assistance, continued trust and confidence reposed by themon POWERGRID.

We have achieved a great deal this year and none of it would have been possible without the skills and dedication of each member of POWERGRID family at all levels. I would like to thank the Executive team for its strong leadership, the various employee unions to ensure that the Company continues to achieve greater heights year after year and all our employees for their commitment and enthusiasm to achieve ouraim to be the world''s premier transmission network utility.

For and on behalf of the Board of Directors

Place: New Delhi (R. N. Nayak)

Date: 06.08.2013 Chairman & Managing Director


Mar 31, 2012

It gives me immense pleasure to present on behalf of the Board of Directors, the 23rd Annual Report on the performance of your Company during the financial year ending March 31, 2012 together with Audited Statement of Accounts, Auditors' Report and Review of the Accounts by the Comptroller and Auditor General of India for the review period.

Your Company has once again surpassed its performance targets set forth under Memorandum of Understanding (MoU) with Ministry of Power (MoP), Government of India. Based on overall performance, your Company is poised to achieve 'Excellent' rating for FY 2011-12 too.

Your Company, in a brief span of 20 years, has grown by leaps and bounds and has carved a niche for itself amongst the largest transmission utilities in the world. The Company has been contributing significantly towards development of power sector in India through continuous innovations in technical & managerial fields and by undertaking coordinated development of power transmission network along with effective and transparent operation of Regional Grids and National Grid.

In order to keep pace with changing business environment, your Company set its 'Vision' to be the "World Class, Integrated, Global Transmission Company with Dominant Leadership in Emerging Power Markets Ensuring Reliability, Safety and Economy" and aligned its mission and objectives as a vanguard of foresight.

Out of many challenges met by your Company, the performance of your Company has been specifically commended in (i) execution of last leg of Transmission System in Creek area of Gujarat for evacuation of power from the Country's first Ultra Mega Power Project (UMPP) at Mundra before stipulated time, and (ii) restoration of Kishenpur-Wagoora 400kV Double circuit (D/c) transmission line in snow bound area of Kashmir valley about 5000 ft. above sea level within 48 hours under extreme hostile weather conditions.

Your Company has heralded creditable accomplishments in all its areas of operations. The major achievements during the year are as under:

Rs. Investment of Rs. 17,814 Crore, an increase of about 48% over last year.

- Added about 10,600 circuit kilometre (ckm) of Extra High Voltage (EHV) transmission lines, 15 new EHV sub-stations and transformation capacity of more than 30,000 Mega Volt Ampere (MVA).

- Record commissioning of Assets worth Rs. 14,021 Crore.

- Investment approval accorded for 43 new transmission projects worth about Rs. 39,225 Crore.

- Transmission system availability attained - 99.94%, highest so far in the history of the Company.

- With the addition of Inter-Regional power transfer capacity of 5,600 MegaWatt (MW), total inter-regional capacity of National Grid enhanced to 28,000 MW.

FINANCIAL PERFORMANCE

(Figures in Rs. Crore, except per share data)

Description 2011-12 2010-11 Y-o-Y Growth

Income

Transmission Charges 9,544 7,903 20.76%

Consultancy 290 299 (3.0%)

Telecom 201 187 7.5%

Other Income 750 710 5.6%

Total Income 10,785 9,099 18.5%

Profit After Tax (PAT) 3,255 2,697 20.7%

Earnings per Share (Rs.) 7.03 6.19 13.6%

Book Value per Share (Rs.) 50.73 46.12 10.0%

Gross Fixed Assets 63,387 50,343 25.9%

Long term borrowings * 51,752 39,433 31.2%

Net Worth 23,488 21,351 10.0%

Debt Equity Ratio 69:31 65:35 -

Commissioning 14,021 7,313 91.7%

- including current maturities of long term borrowings.

OPERATIONAL EXCELLENCE

As on April 1, 2012, transmission assets of about 92,981 ckm of EHV transmission lines, 150 EHV sub-stations and transformation capacity of 124,525 MVA, spread over the length and breadth of the Country are under operation. Your Company continues to wheel about 50% of total power generated in the Country through its transmission network.

Your Company consistently maintains high availability of its transmission network by implementing technologically advanced operational techniques such as Hot Line Maintenance, Washing of Insulators hotline with the use of helicopters, Equipment Condition Monitoring techniques including Dynamic Testing of relays, Thermo-vision Scanning, Frequency Response Analysis (FRA) for transformers and reactors, large scale automation of sub-stations, etc.. Presently, 32 sub-stations of your Company are being operated remotely and many new sub-stations are being designed for remote operation. For further improvement in operational efficiency, a "National Transmission Asset Management Centre" is being established to facilitate centralised operation, monitoring & control of sub-stations remotely. This will help in optimal utilisation of manpower & other resources of a group of substations by creating "Maintenance Service Hub" facilities, and reduce the response time in case of faults & breakdowns.

Replacement of conventional insulators with polymer insulators at polluted stretches in NCR area has contributed significantly in achieving safe, secure & reliable operation of Grid during foggy weather conditions.

Average availability of transmission systems during the year 2011-12 was maintained at 99.94%, highest ever in the history of the Company. Number of trippings per line was also abated at 0.59.

To meet eventualities like earthquake, fire, cyclone, landslides, sabotage, etc., your Company has kept state-of-the-art Emergency Restoration Systems (ERS) at strategic locations for restoration of collapsed transmission line towers in shortest possible time. Further, to mitigate the above eventualities in case of substation, a mobile 400/220kV ERS substation is being procured, which will facilitate quick deployment & restoration of sub-station in only 1-2 weeks, which otherwise may take several months.

Some potent options are also being explored like use of robotic technology for condition monitoring of conductor, earthwire & hardwares besides aerial patrolling of transmission lines using helicopters.

PROJECT IMPLEMENTATION

Your Company puts its best efforts to implement transmission projects within stipulated time frame to derive maximum economic benefits. Further, your Company takes a variety of measures such as advanced and cost effective Integrated Project Management and Control System (IPMCS) for total project review and monitoring, Standardisation of Designs, Project Review Meetings (PRMs) at regular intervals through video conferencing, pre-emptive measures and advance actions on various project linked activities such as land acquisition, survey and soil investigations, tender activities, funding tie-up, etc. in parallel with project investment approval process.

All these dynamic facets led to excellent performance on project implementation front during FY 2011-12 and not a single MW power is bottled-up for want of our transmission. Transmission projects worth about Rs. 14,021 Crore were commissioned during the year, thereby adding about 10,600 ckm, 15 sub-stations and transformation capacity of more than 30,000 MVA in the transmission system. Major 400kV transmission lines commissioned during the year include Korba STPS-Raipur D/c, Wardha-Parli D/c(Quad), Baripada-Mendhasal D/c, Mundra-Bachau-Ranchorpura D/c (triple snowbird), Maithon RB-Ranchi D/c, Uri-II - Wagoora single circuit (S/c), Mauda-Wardha D/c(Quad) & Biharshariff-Sasaram D/c(Quad) lines. Major 765kV transmission lines commissioned during the year include Gaya-Balia, Balia-Lucknow, Seoni-Wardha, Bina-Indore, Sasaram-Fatehpur (Circuit-1), Gaya-Sasaram S/c lines.

Notably, timely commissioning of 400kV D/C Mundra-Ranchorpura in September'11 and 400kV D/C Mundra-Limbdi D/c (triple snowbird) lines in February'12 associated with the 1st UMPP Project of the Country enhanced the image of confidence in power sector. In spite of severe Right-of-Way (RoW) problems, readiness of these systems had been ensured by your Company on its commitment.

During the year, 43 new projects with an estimated cost of about Rs. 39225 Crore involving about 16900 Ckt km of transmission lines, 22 new sub-stations and transformation capacity of about 56000 MVA, HVDC terminal capacity of 3000 MW and 16200 km of OPGW fibre optic cable were approved and taken up for implementation.

FINANCIAL MANAGEMENT

Your Company has recorded an impressive financial performance during FY 2011-12, achieving a turnover of Rs. 10,785 Crore and Net Profit of Rs. 3,255 Crore as compared to Rs. 9,099 Crore and Rs. 2,697 Crore respectively during FY 2010-11. The gross asset base of the Company has been enhanced to Rs. 63,387 Crore from Rs. 50,343 Crore in 2010-11, an increase of about 25.9%.

Your Company, through its improved performance in Telecom and Consultancy businesses, also enhanced value for the shareholders.

Capital Investment and Fund Mobilization

The Company undertook capital investment of Rs. 17,814 Crore during the financial year 2011-12, which is about 48% higher than last year. Rs. 9,698 Crore were mobilised from domestic market through private placement of bonds with attractive coupon rates and proceeds of ongoing loans from multilateral funding agencies, viz. The World Bank (WB) and Asian Development Bank (ADB) were utilised, besides accrued internal resources.

During the year, your Company has also tied up a line of credit of Rs. 5000 Crore from State Bank of India, of which Rs. 1000 Crore has been drawn in FY 2011-12 and balance is to be drawn in the subsequent years for part financing of the capital expenditure of POWERGRID projects.

Domestic credit rating agencies namely, CRISIL, CARE and ICRA have assigned credit ratings of AAA/Stable (triple AAA with stable outlook), AAA and LAAA respectively for our bonds issue. These credit rating agencies have also assigned AAA (Highest Safety) and LAAA ratings for long-term borrowings.

In addition to above, process of mobilization of additional loans from The World Bank (WB) and ADB was also taken up during the year for implementation of various transmission projects during XII Plan. Towards this, two loan agreements with ADB for a loan amount totalling to USD 576 million with sovereign guarantee, and also for the first time, a Non-Sovereign loan of USD 250 million on commercial principle basis was signed in March, 2012.

Dividend Payout

For FY 2011-12, your Company has proposed a final dividend of Rs. 1.31 per share in addition to Rs. 0.80 per share of interim dividend paid in Feb. 2012. The final dividend shall be paid after your approval at the Annual General Meeting. Thus, total dividend pay out for the year amounts to Rs. 976.89 Crore (including an interim dividend of Rs. 370.39 Crore) as against Rs. 810.23 Crore paid during the previous year. The total dividend pay out including dividend tax accounts for 34.8% of Profit after Tax of the Company.

Your Company is driven by its persistent zeal to build relationships and create wealth for its stakeholders through deploying cutting edge technology, adopting global best practices, optimum utilization of resources and sustainable development.

DIRECTORS' RESPONSIBILITY STATEMENT

As required u/s 217 (2AA) of the Companies Act, 1956, your Directors confirm that:

i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed;

ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii) The Directors have taken proper and sufficient care for the maintenance of adequate records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

COMMERCIAL PERFORMANCE

Point of Connection (PoC) Charges tariff sharing mechanism through Central Electricity Regulatory Commission Regulations 2010, for Sharing of Transmission Charges and Losses has been implemented in the transmission sector w.e.f. July 1, 2011. POWERGRID as Central Transmission Utility (CTU) of the Country has been assigned the responsibility to carry out activities like raising of transmission charge bills on behalf of all the ISTS Licensees, collecting the amount and disbursing the same to them. In order to implement the Billing, Collection and Disbursement (BCD), a Portal has been developed by your Company during the year through which bills of transmission charges are prepared, raised and uploaded on the website for about 61 Designated ISTS Customers (DICs) including payment details by the customers.

Through petitions and follow up with Central Electricity Regulatory Commission (CERC), Regulatory Approvals have been secured by your Company for transmission projects worth total estimated cost of about Rs. 26,170 Crore during the year so as to take up these projects for investment approval and execution.

DEVELOPMENT OF NATIONAL GRID

In line with the Plan for enhancement of inter-regional power transfer capacity of the National Grid, Rourkela–Raigarh 400kV D/c, Sasaram–Fatehpur 765kV S/c & Gaya–Balia 765kV S/c inter-regional links with aggregate capacity of 5,600 MW have been commissioned. With this, the cumulative inter-regional power transfer capacity of National Grid has been enhanced to about 28,000 MW. Commissioning of these inter-regional links has strengthened the inter-regional grid capacity of Eastern Region with Western Region and Northern Region. This would go a long way in promoting economic energy exchange by facilitating transfer of power across the Country.

Four major regional power grids of the country, namely Northern, Eastern, North-Eastern & Western continued to operate at same frequency in synchronous mode as one of the largest synchronous grid in the world with total installed capacity of about 148,000 MW. Southern Regional grid, which is presently connected through various High Voltage Direct Current (HVDC) links with rest of the grid is planned to be connected synchronously by early 2014 through high capacity Raichur–Sholapur 765kV (2xS/c) lines.

To further strengthen the National Grid, various high capacity HVDC and EHV Alternating Current (EHVAC) inter-regional links with total capacity of 38,400 MW have been planned to take care of inter-regional power transfer requirement of various planned generation projects including Independent Power Producers (IPPs) scheduled for commissioning in XII Plan. The Inter-regional power transfer capacity of National Grid thus envisaged to be enhanced to about 66,400 MW by end of XII Plan.

GRID MANAGEMENT AND OPEN ACCESS

Grid Management function is continued to be looked after by Power System Operation Corporation Limited (POSOCO), a 100% subsidiary company of POWERGRID. Unified Load Despatch & Communication (ULDC) schemes have continued to bring quality and economy in operation of power system besides improving data availability, visibility and transparency.

With the ever expanding transmission network in the Country, complexities of grid operation are also escalating. Keeping this in mind, the facilities at all the five Regional Load Despatch Centers (RLDCs) and National Load Despatch Centre (NLDC) are being upgraded continuously through deployment of latest technology. Indian Power Grid had not experienced any major grid disturbance during the past nine years. However, the electricity grid experienced two major disturbances consecutively on 30th July & 31st July, 2012. While the first disturbance affected only Northern Region, the second one affected Northern, Eastern and North Eastern Regions. However, the essential loads were restored at the fastest pace within few hours of the incidents and power supply was restored progressively and normalised completely on the same day of the incident(s). Further, to avoid such recurrence in future, various actions have been/are being taken by your company.

Our strong transmission network and modernised RLDCs have facilitated about 58 Billion Units (BUs) of inter-regional energy transfer across the Country, as compared to previous year (about 56 BUs). Growth of inter-regional power exchange helped in meeting more demand in energy deficit regions besides achieving overall economy.

During FY 2011-12, 24,109 transactions involving about 67 BUs of energy were approved under short term open access (STOA) compared to 19,883 transactions and about 55 BUs of energy during 2010-11.

Your Company, as CTU is the nodal agency for grant of Long Term Access (LTA), Medium Term Open Access (MTOA) and Connectivity. LTA has been granted for about 82,000 MW to 133 nos. of IPP projects, MTOA has been granted for about 2400 MW to 33 nos. of applicants and connectivity has been granted to 67 nos. of eligible applicants for about 59,710 MW.

QUALITY MANAGEMENT

Your Company is continuously striving to provide cost effective & quality services to its valued customers thereby deriving high customer satisfaction. To achieve this, your Company is implementing appropriate quality measures at every stage from conceptualisation of project till commissioning and subsequently during operational phase. Quality improvement techniques are being adopted to identify the areas of improvement and develop action Plan for continuous quality improvement in all of its activities.

During the year, Integrated Management System of your Company was reviewed and based on evaluation of implementation of the latest systems and procedures, the revised certification was acclaimed. Your Company stands certified for Integrated Management System as per Publicly Available Specification, PAS 99:2006 integrating requirements of ISO 9001:2008 (Quality Management System), ISO 14001:2004 (Environment Management System) and OHSAS 18001:2007 (Occupational Health & Safety Management System). Establishments of your Company have been audited for its Social accountability systems & certification of entire Corporation for Social Accountability Standard, SA 8000:2008 is re-confirmed. Your Company is following standard manufacturing quality Plan both at national & international level during inspection at various manufacturing stages and adhered to standard O&M manuals for operation & maintenance of its transmission system.

For capacity building, specially considering vast geographical spread of our operations, vendor development has been taken-up on priority to meet project requirements in execution as well as in supply of 765kV transformers, reactors & other critical equipment.

With a target to move towards zero product inspection, around 50 manufacturing units spread all over the Country/overseas were taken-up for process audits at their works.

Quality audits at sites have also been taken up during the year. Appropriate corrective actions were also ensured based on Quality Audit feedback. Quality Audit on implementation of Field Quality Plans was also carried out for assurance of quality during transportation, storage, erection and commissioning activities during implementation of projects.

TECHNOLOGY DEVELOPMENT

Your Company has undertaken several technological advancements aimed at conserving RoW, minimizing impact on natural resources & human habitat and cost effectiveness in evacuation of power by upgrading & uprating of existing transmission lines, use of High Temperature endurance Conductors, Series Compensation including Thyristor Control, Flexible AC Transmission System (FACTS), use of Multi Circuits, Compact & Tall Towers, Gas Insulated Sub-stations (GIS), High Surge Impedance Loading (HSIL) Lines, Large Scale Automation of Sub-stations, unmanned Sub-stations etc..

Power transmission at higher voltage levels not only offer increased power transfer capability, it also helps in reduction of transmission losses and reduction of Right of Way requirement. Experienced with implementation and operation of ±500kV HVDC & 765kV EHVAC transmission systems, your Company is now working on higher transmission voltages of 800kV HVDC & 1200kV Ultra High Voltage AC (UHVAC).

800kV multi-terminal HVDC System

Implementation of ±800kV, 6000 MW multi-terminal HVDC system of around 2000 km from North Eastern Region (Biswanath Chariali in Assam and Alipurduar of West Bengal) to Northern Region (Agra in Uttar Pradesh) is under construction. It shall be amongst world's largest ±800kV multi-terminal HVDC system.

1200kV UHVAC Transmission System

To meet the long-term bulk power transfer requirement an overlaying super grid with 1200kV UHVAC system has been envisaged. The 1200kV UHVAC technology, the highest voltage level in the world, is being developed by your Company in collaboration with 35 Indian manufacturers. This is one of the unique R&D projects in public-private partnership model.

The pilot 1200kV S/c line was successfully test charged and 1200 kV D/c line erected at 1200kV UHVAC National Test Station at Bina, Madhya Pradesh in February, 2012 by your Company. The 1200 kV UHVAC technology current under field testing.

This endeavour shall benefit Indian power sector to enter into new era of 1200kV level with 1200kV class equipment from the manufacturers within Country.

Other Initiatives

Technological initiatives such as Pollution & Lightning mapping of transmission system, Process bus technology & Superconducting (Zero Resistance) Technology are being taken up/ explored for their viability in Indian Power System to ensure more efficient, safe, secure & reliable operation of Grid.

SMART GRID TECHNOLOGY

Smart Grid is confluence of Information, Communications & Electrical/ Digital technologies. Smart Grid, apart from facilitating real time monitoring and control of power system will help in reduction of AT&C losses, peak load management/ demand response, integration of renewable energy, power quality management, outage management etc.. Smart Grid will act as a backbone infrastructure to enable new business models like smart city, electric vehicles, smart communities apart from more resilient and efficient energy system and tariff structures.

Your Company is taking leadership initiative for implementation of Smart Grid Technology in the Country and has already installed 8 Nos. of Phasor Measurement Units (PMUs) as part of Wide Area Measurement Systems (WAMS) as a pilot in Northern Region Grid.

Unified Real Time Dynamic State Measurement (URTDSM) project for installation of PMUs, Phasor Data Concentrators (PDCs) etc. has been formulated. First test lab for PMU and PDC testing in India is being established by your Company at Bhiwadi in Northern Region.

Secretariat of the prestigious "India Smart Grid Task Force (ISGTF)" forum, is being operated by your Company and providing technical support in evaluation of proposals. Model Request for Proposals (RfP) has been prepared for Smart Grid Pilot project in distribution sector. Further, your Company is also providing technical support for Ministry of Power in evaluation of proposals received from Utilities for establishing Pilot Project in Distribution Sector.

Your Company has formed specialised "Smart Grid" department to take up implementation of Smart Grid / Smart City Projects. Detailed Project Report (DPR) for a number of cities like Amritsar, Raipur (Satara), Puducherry, Agartala, and Panipat for pilot smart grid projects have been submitted under India Smart Grid Task Force. Further, project reports for implementation of Smart grid/ cities for Firozabad and Katra have been submitted and for Bidhuna, Shikohabad, Jammu (Gandhinagar Division), Baghat, Gulmarg, Pahalgam, Charar-i-Sharief, Chitradurga (Karnataka), District/cities of Tripura, Chhatisgarh, Haryana, Punjab, Bihar etc. are under preparation.

The pilot Smart grid/ Smart city project in Puducherry has been taken up for which an MOU has been signed with Electricity Dept., Govt. of Puducherry in March 2012. In all, 63 organizations have joined hands with your Company for implementation this pilot project.

Your Company has evolved a comprehensive scheme for Green Energy Corridor associated with renewable energy sources integration into the Grid. Also, it has identified other measures to facilitate smooth integration of large scale renewable generation capacity addition.

PERFORMANCE IN TELECOM

Your Company with its brand name 'POWERTEL' in Telecom business is the only utility in the Country having overhead optic fibre network using OPGW (Optical Ground Wire) on power transmission lines. POWERGRID has an all India Broad Band Telecom Network of about 25000 Kms.

It is a matter of pride that your Company is one of the few telecom players with a marked presence in remote areas of NER, J&K etc.. It has acquired National Long Distance (NLD) and Internet Service Provider (ISP-A) and Infrastructure Provider Category-I (IP-I) licences to provide a variety of services.

During the year, few more cities viz. Kottayam, Nadia, Puruliya, Jalpaigudi, Bhagalpur, Saifai & Kurukshetra have been added to our telecom network, taking the tally to 206 cities.

During the year, your Company added 11 new customers on its network, further increasing its already illustrious list of Customers, which include prime telecom companies, prestigious Government organizations, International Operators and various Government Offices. In addition, the Company is also planning to attract customers from entertainment and broadcasting industry.

Total Order Book of Telecom rose to Rs. 1,050 Crore from Rs. 650 Crore in previous year (i.e. up by 62%) despite a general slowdown experienced by Telecom industry due to intense price wars. Telecom Backbone system availability during the fiscal was maintained at 99.97%.

National Knowledge Network (NKN) project

Your Company is one of the implementing agencies for the prestigious National Knowledge Network (NKN) project through which Government plans to connect all knowledge centres across the Country such as IITs, IISc, etc. on high speed connectivity. Revenue realised under this project during FY 2011-12 is Rs. 45.02 Crore.

National Optical Fiber Network (NOFN) project

Your Company is a member of Advisory Body and Core Committee of National Optical Fiber Network (NOFN) project through which Government of India plans to connect 250,000 Gram Panchayats on Optical Fiber network at an estimated cost of Rs. 20,000 Crore with completion schedule of 24 months, utilising existing facilities of BSNL, POWERGRID and RAILTEL. POWERGRID share in the project is expected to be 20% involving 50,000 Gram Panchayats. A Pilot Project has been taken up in Vizag (AP).

Multi Protocol Lable Switching (MPLS)

Your Company has taken up implementation of MPLS through Virtual Private Network which will provide highly Secure & Reliable Network connectivity (any-to-any) on Internet Protocol (Routing). Apart from being cost effective, MPLS offers advantages like maximum Bandwidth Utilization, Scalable & Simpler Customer Connectivity (Radial Connectivity), easy Provisioning & Maintenance etc..

BUSINESS DEVELOPMENT & CONSULTANCY

Your Company has established itself as one of the leading consultants in the field of Power Transmission, Sub-transmission, Distribution, Load Despatch & Communication and Telecom sectors and is utilising this expertise to offer consultancy services world wide.

On the domestic front, during FY 2011-12, your Company has bagged 41 new assignments having project cost of Rs. 1002 Crore. Further, your Company has been appointed as Design cum Implementation Supervision Consultant for strengthening of Transmission & Distribution System of 6 States of NER having Project cost of around Rs. 8400 Crore.

In international arena, the Company is working in 11 countries viz. Nepal, Bhutan, Bangladesh, Afghanistan, Sri Lanka, Myanmar, UAE, Nigeria, Ethiopia, Kenya & Tajikistan.

During the year, your Company signed Memorandum of Understanding (MoU) with Kenya Electricity Transmission Co. Ltd. (KETRACO) and Ethiopian Electric Power Corporation (EEPCo) for providing assistance for development of Power Transmission network in their countries. In addition, a General Cooperation Agreement was signed with Gulf Cooperation Council Interconnection Authority (GCCIA) for providing technical services in areas of Operation and Maintenance of HVDC, Telecom, Grid Operations, Technical services, system planning and operation etc.. Further, an MoU was signed with International Finance Corporation (IFC), an extended arm of the World Bank, for extending co-operation between POWERGRID and IFC to identify and evaluate transmission projects for development and/or Own/Co-own transmission projects in Asian and African Continents by providing financial and technical services to Project's client.

SAARC Grid

POWERGRID has emerged as a strong player in South Asia and is playing an active role in formation of a strong SAARC grid for effective utilization of resources for mutual benefits. Presently, various electrical interconnections exist between India & Bhutan and India & Nepal and these are being further strengthened for substantial exchange of power across the borders. An asynchronous interconnection between India & Bangladesh is under implementation. Also, feasibility study for an under-sea interconnection between India and Sri Lanka is under finalization and 500MW Amritsar (India) - Lahore (Pakistan) HVDC link between India and Pakistan is under discussion.

STRATEGIC ALLIANCES

Your Company intends to enter into manufacturing of transmission line towers/ conductors/ equipment by forming Joint Venture Companies (JVCs) with the manufacturers of basic raw material. In this direction, your Company has signed MoUs with National Aluminium Company Limited (NALCO) and Rashtriya Ispat Nigam Limited (RINL) to explore the opportunity of manufacturing conductors and transmission line towers respectively, including research and development.

CONTRIBUTION IN DISTRIBUTION REFORMS

To enable end consumers to derive benefit of additions in generation & transmission, Govt. of India's Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY) Scheme aims at providing electricity in all villages & habitations and provides access to electricity to all rural below poverty line (BPL) households.

Under RGGVY, your Company has been assigned the job for execution of rural electrification works in 65 districts in the Country. Upto end of XI plan, your Company has created infrastructure for electrification of 64,803 villages out of which 32,318 were un- electrified villages and provided 33.57 lac Service Connections to BPL households.

During FY 2011-12, infrastructure for electrification in 9358 villages, including 1688 un-electrified villages, was created and Service connections were provided to about 6.783 Lakh BPL households.

By end of FY 2011-12 cumulatively 30,178 Villages have been charged including 11,229 during the year.

XI PLAN ACHIEVEMENTS

Your Company surpassed its planned capital investment of Rs. 55,000 Crore during XI Plan and made an investment of more than Rs. 55,300 Crore for development of inter-State transmission system.

Achievements in XI Plan provide ample testimony to the untiring efforts put in by your Company. To propel the growth of your Company to the next orbit, Govt. of India has accorded the prestigious Navratna Status in May 2008, thereby providing greater autonomy & powers.

Accelerated growth path of your Company during XI Plan can be seen from the following table, which shows a phenomenal built up of about 50% capacity of Company's present network in XI Plan only w.r.t. the capacity as built in last many years.

Parameter At the end of X At the end of XI Addition during XI Growth in XI Plan Plan Plan Plan

Transmission network (ckm) 59,461 92,981 33,520 56.37%

Sub-stations (nos.) 104 150 46 44.23%

Transformation Capacity (MVA) 59,415 124,525 65,110 109.59%

Inter-regional Capacity (MW) 14,100 28,000 13,900 98.58%

Gross Assets (Rs. Crore) 29,015 63,387 34,372 118.46%

During XI Plan, your Company has operationalised 765kV EHVAC level by charging Sipat-Seoni transmission line at its rated voltage in October, 2007. Additionally, during the plan, seven (7) number of 765 kV sub-station and above 3500 ckm. of 765 kV transmission lines have been added. Further, the highest voltage level in the world, 1200kV UHVAC Test Station has been test charged.

National Load Despatch Centre (NLDC), the apex body to ensure integrated operation of the national power system at national level, commissioned in Feb., 2009. Power System Operation Corporation Limited (POSOCO), a 100% subsidiary of your Company, set up to look after Grid Management function in line with GoI directive, started commercial operation from 1st October, 2010.

As part of prestigious international consultancy assignments, the construction of 220kV Transmission line from Pul-e-Khumri to Kabul in Afghanistan completed in Jan., 2009 and 400kV GIS substation in Dubai (UAE) successfully commissioned in 2010.

GoI has made Tariff Based Competitive Bidding (TBCB) mandatory for inter-State Transmission System from January 5, 2011. Leveraging its competitive edge, your Company has secured both the transmission projects invited under TBCB since then.

XII PLAN INVESTMENT PROGRAMME

Considering the generation capacity addition of 75,7851 MW envisaged during XII Plan, total fund requirement for transmission sector is estimated at about Rs. 180,000 Crore. In this, major portion of the investment i.e. about Rs. 100,000 Crore is planned by the Company during XII Plan for further development of inter-State transmission systems which includes development of High Capacity Power Transmission Corridors (HCPTCs) apart from inter-regional links for enhancement of National Grid capacity & various system strengthening schemes.

Your Company is placed in a comfortable position in terms of resource mobilisation owing to its excellent credit rating. Loan requirement is planned to be met through borrowings from multilateral funding agencies (The World Bank and Asian Development Bank), Supplier's credit, ECB loan and from domestic sources on the basis of requirement.

ERP & IT

Your Company has made remarkable strides in the area of Information Technology (IT) and systematically developed, through in-house efforts, software applications for most of the functional areas for deploying IT for efficient and effective discharge of its objectives. Laptops and datacards have been provided to employees to enable them to discharge their functions efficiently.

Main package of ERP Project has been awarded. The project includes deployment of Data Centre, Disaster Recovery Centre and augmentation of communication network.

Initiative towards implementation of Information Security Management System (ISMS) leading to ISO:27001 certification across the organization have been undertaken.

SUSTAINABLE DEVELOPMENT

Transmission projects are environmentally clean and involve neither any disposal of solid waste, effluents and hazardous substances in land, air and water nor large scale excavation which may result in soil erosion. Transmission line projects rather help in reducing environmental impacts of power projects, especially thermal power projects. Generation Projects could be located far away from inhabited areas to have minimum transportation of coal and for bulk power transfer, high capacity transmission lines are set-up to dispatch power to load centre located distance apart.

Your Company has proactively followed the Environmental and Social Policy & Procedures (ESPP) for the conservation of forests, flora & fauna, resettlement & rehabilitation. POWERGRID believes that its guiding principles of Reliability, Security and Economy have to match up to the rising expectations of a cleaner, safer, healthier environment for people, both affected and benefited by its activities. After adoption of ESPP, forest involvement on our transmission lines have been reduced to 1.35% from the level of 6% in 1998.

POWERGRID was the first Company in power sector to come out with 'Sustainability Report' and 2nd such report shall be coming out shortly, providing all stakeholders a clear picture of our contributions to sustainable development through its activities.

POWERGRID has undertaken Rain Water Harvesting systems in 6 Sub-stations with total expenditure of Rs. 25.75 lakhs as part of the Company's Sustainable Development initiative to contribute to the endurance of our ground water reserves.

Transfer of huge quantum of power across the regions poses massive challenges like RoW, clearing of forest, etc.. Therefore, your Company is focusing on more number of high capacity 800kV HVDC systems and 765kV D/c lines to minimise RoW and environmental problems. In addition, as mentioned your Company is developing 1200kV AC technology, highest AC voltage level in the world, as next higher AC voltage in the Country. The 1200kV AC voltage line would enable transfer of 7000-8000 MW power over single corridor which will help in utilizing the right-of-way in an optimal manner and minimizing of loss of forest, flora & fauna and scarce natural resource like land etc..

Besides, your Company has successfully demonstrated up-gradation of existing lower voltage lines to higher voltage operation to enhance the power transmission capacity within the same corridor without felling additional trees.

Optimization of RoW and its associated environmental and social impact in extra high voltage transmission line are far reaching and implementation of this voltage/ technology will go a long way in minimizing environmental and social impact of high voltage transmission line.

For overall sustainable development of the sector, your company's major thrust is on inclusive development of the sector. Towards this, your company besides undertaking capacity building program for various State power utilities, is in the process of forming Joint Venture Companies with State power utilities to take up intra-State transmission System & management contract for distribution circles etc.

As a step further a specalised dedicated Smart Grid, Distribution Management, Energy Efficiency and Carbon Emmission reduction Cells have been created to take up these activities not only for POWERGRID establishment but for other utilities as well. Certification of our employees as Energy Auditor is being taken up in big way. During the year, Energy audit was completed at 12 sub-stations and reports have been implemented.

CORPORATE SOCIAL RESPONSIBILITY

Your Company emphasises on the overall development of areas and communities around its establishments. It undertakes various community development schemes through provision of facilities like health, education, drinking water besides infrastructure like roads, community centres etc..

During FY 2011-12, CSR expenditure of Rs. 24.93 Crore [0.92% of Profit after tax (PAT) of the preceding year] was made on carrying out more than 400 CSR projects, including 166 in the area of Infrastructure, 82 in Health, 57 in Education, 33 in Environment and 40 in Livelihood. These projects were carried out in consultation with the local stakeholders in the vicinity of the establishments, and therefore, have played a pivotal role in identifying the most pressing needs, and subsequently, improving the socio-economic conditions of the marginalized sections. During this period, more than 1.55 lakh tree saplings were also planted. There is an ambitious plan of planting over one million trees in the coming years.

Your Company has also collaborated with number of specialized agencies to roll out its CSR initiatives. Some of the significant interventions were in the field of Capacity building training to youths in "Transmission Line Tower erection" which are being conducted in association with leading manufacturers. During this year, 213 unskilled workers have been trained through Capacity Building Programme and gainfully employed in the transmission industry. Livelihood training programmes were also imparted to unemployed rural youth in tailoring, cutting/ stitching, embroidery, automobile repairing, handloom weaving, food & fruit processing, repairing of household appliances, etc. to secure employment or be self employed. Your Company has adopted Government ITIs at Buxar&Marhoura in Bihar, Bargi-Jabalpur in M.P. and Bhadravati in Maharashtra for upgradation under Public Private Partnership mode of "Adopt an ITI" scheme of GOI. Total about 500 students have passed out from these institutions in various trade such as moulding, welding, plumbing, electrical, mechanical etc. Further your company is in the process of setting up of two (2) new ITIs each in the States of J & K and Odisha for enhancing the capacity building of the sector as well as employablity of the youth of our country.

Some of the other noteworthy CSR initiatives include reclamation of Reserve Forest in Assam wherein tree saplings were planted in 100 hectares of land, providing mid-day meals to primary students in Haryana, providing Maternal & Child Health care services to around 45,000 villagers in backward areas of Mewat, Jhajjar & Gurgaon and providing broadband connectivity to few remote village panchayats in Maharashtra, Odisha & Assam.

PEOPLE, OUR CORE STRENGTH

Attracting Talent, Nurturing & Development of Human Capital Our employees & their continuous development are the most valuable asset & investment of the Company. Your Company encourage innovation, meritocracy and the pursuit of excellence through continuous development. In this direction, your company is setting up a state-of-the-art HRD centre at Manesar named "POWERGRID Academy of Leadership" (PAL) at an estimated cost of over Rs. 55 crore for development of the employees of POWEGRID as well as that of State utilities.

During FY 2011-12, POWERGRID has inducted 394 personnel at various levels viz., Executives, Supervisors, Workmen through open advertisement on all India basis and campus selection from reputed engineering and management institutes for executives, and for non-executives through employment exchanges and local advertisement at regional level.

For overall competency enhancement of employees in synchronization with business needs, environment and individual development Plan, your Company has boosted up its training efforts and an average 6.15 training mandays per employee has been achieved.

A centre for training on maintenance of live high voltage lines of up to 400kV has been established at Hyderabad 400kV sub-station. The state-of-the-art facility has been recognised as Category-I training centre in power sector by Central Electricity Authority for imparting training in Hot Line Maintenance on the live power transmission lines.

MoUs have been signed with Foundation of Innovation and Technology Transfer of IIT, Delhi (FITT, IIT Delhi) for conducting certification programmes for operation & maintenance of transmission system and telecom.

Corporate Yellow Pages of your Company have been collated to cope with the competitive regime. In fact, with the arrival of Knowledge economy, your Company is rising up to manage the knowledge assets, share, use, re-use, capitalize them and remain ahead of the competition.

Project management is the value driver that helps the organization gets most out of its performance. In view of the organisational need, 46 executives got the Certification in Project Management from international bodies.

Employee Welfare

Keeping in pace with changing needs and welfare of employees, various policies and rules are being revised/ amended from time to time. Various hospitals adjacent to our establishments have been empanelled both at Corporate Centre as well as in other establishments for benefit of Employees and their dependents. The Cafeteria in the Corporate Office and Food Lounge of Multi Purpose hall of your Company is conferred with ISO 22000: 2005 where quality food is served to employees.

Cultural programmes are conducted periodically for promoting healthy community living and celebrating various occasions like Diwali get-together, Holi Milan, New Year, Raising Day, etc..

The Company has also been organizing Intra & Inter-Regional Sports Competitions for Kabaddi, Cricket, Volleyball, Chess, Badminton etc. and regularly participating in the Inter-PSU Sports Meet. POWERGRID players in Kabaddi, Table tennis and Lawn- Tennis have stood meritorious and bagged awards in the Inter-PSU tournaments. Your Company's team has emerged as National Champions in prestigious National Management Games-2012, organised by All India Management Association and qualified to represent India in Asian Management Games Challenge.

POWERGRID National & Regional Bipartite Committees provides a platform for addressing issues related to workmen. During the year, the Industrial Relations have been maintained cordial and no manday was lost.

Citizen's Charter

The Company formulated its Citizen's Charter providing a visible front of its mission & objectives, commitments, terms of service and its obligation to various stakeholders. In the Citizen's Charter information is available about Company's schemes, policies, project plans of the Corporation and issues of general interest to stakeholders.

Implementation of Official Language

Your Company has proven its commitment for implementation of Rajbhasha Policy of Govt. of India and is sensitive towards our heritage, social and cultural concerns.

All out efforts have been made to ensure use of Hindi in all aspects of management at all levels in the Corporation. For increased use of Official language, various activities were undertaken such as organizing workshops to impart training in translation, enhancing working knowledge through organizing computer trainings and Hindi classes, etc.. Akhil Bhartiya Rajbhasha Sammelan, Kavi Sammelan (poetry sessions), Kavita Pratiyogita, Drama, Publication of Hindi Magazines/ papers, competitions and meetings, etc. are regularly organized. To provide further inspiration to work in Hindi, employees are nominated for external Hindi training programmes. The efforts made in implementation of Rajbasha have been applauded in many forums and the Company has received many accolades.

Corporate Image through Communication Management

Building Communication Capital is as important as Human Capital to build relation between organisation and its stakeholders. Your Company has adopted a number of communication interventions to present itself as an infrastructure major contributing to nation building.

In order to facilitate dissemination of information and interaction with all stakeholders with regard to our achievements, growth, recent developments on operational and financial front besides updation of website, regular press communiqué have been issued by your Company and face to face interaction of the management arranged with the analysts and stakeholders at the Quarterly Analyst Meet and Press Meet. This has enhanced brand exposure with existing and potential clients, investors and other stakeholders. Information and latest updates & announcements regarding the Company are posted on Company's website including Financial results, approval to projects granted by the Board etc..

Your Company successfully participated in the India International Trade Fair (IITF) 2011 exhibition by creating a theme stall based on 1200kV UHVAC transmission line. The Company also participated in other business oriented regional exhibitions in Jharkhand, Mumbai and other places to reach out to local clients and the common masses.

Internal communications play a key role in enabling employees across the Company in understanding and embracing the Company's mission, goals and strategies. Towards this objective, your Company has continuously deployed communication tools such as monthly newsletters, CMD's communique, house journals, wall magazines, lounge and regular media updates to apprise the employees of the developments, achievements & events, viewpoints of the management and also provide a platform to employees to participate and take pride in being associated with POWERGRID. "Open house" sessions are also regularly organised where CMD and Directors of your Company interact with all the employees, either directly or through video conferencing.

EXHIBITION AND CONFERENCE ON NEW TECHNOLOGIES - GRIDTECH 2011

With the support of Ministry of Power, Govt. of India, GRIDTECH 2011, an International exhibition and conference on new technologies in transmission & distribution and synergic areas like load despatch, telecommunications, application software etc. was organised. GRIDTECH 2011 provided a unique opportunity for the power utilities, manufacturers, research institutions, policy makers, academicians, consultants etc. to gain exposure to state-of-the-art products and technologies like 1200kV UHVAC, 800kV HVDC, FACTS, GIS, Superconductors, Smart Grid, substation automation, compact lines, power system protection system, modern distribution management, renewable energy sources, integrated communication system etc..

RENEWED COMMITMENT TO TRANSPARENCY & VIGILANCE FUNCTION

Several initiatives have been taken to strengthen internal systems to enhance efficiency and effectiveness of the Vigilance function. The Vigilance Department lays emphasis in the awareness process. In line with this, training has been imparted on ethics and vigilance matters through various preventive vigilance workshops. Apart from these, vigilance executives were also sent on training to various organizations like Central Bureau of Investigation (CBI) and the National Institute of Criminology and Forensic Science, besides participating in training programmes organized for capacity enrichment of the vigilance executives. The Vigilance Executives at the regions also undertook regular knowledge enhancement sessions while on tour or inspections, which gave a feedback on the practical issues being faced by personnel at the execution level. Besides these, Vigilance Audit of some of the Departments has also been conducted, which is aimed at examining the primary objectives of a Unit/ Department and impact assessment in terms of achievement of these primary objectives. It brings out the extent of risk, irregularities, mistakes & omissions under various provisions of the rules, and also examines whether there are any lacunae in the system/ rules and its application leading to the said defects. On assessment of these, remedial measures have been suggested.

As part of pro-active vigilance, process online inspections have also been conducted in which critical works are inspected at the initial stage of execution by the vigilance executive for shortcomings and for advising corrective measures at the initial time, if any. As a result of Vigilance audit, large number of system improvements were implemented which include standard Field Quality Plan, safety norms, Project Insurance Policy, maintaining proper storage, construction related records, Qualifying Requirements on procurement, HR Policies etc.. A large number of inspections have been conducted both by Vigilance executives as well as by the CTE's Organisation. Based on these inspections, adequate cost compensation was effected on the points for not conforming to technical specifications etc.. To facilitate report generation & compliance on inspection reports generated through the Vigilance Inspection System (VINS), a system has been devised for furnishing online replies on the internet. On the punitive side, a number of complaints were received and taken up for investigation. Necessary disciplinary action wherever appropriate was also initiated against some employees.

While e-payments, document tracking, uploading of contractual documents, web based complaint handling system has already been implemented in the Organisation from 2007 onwards, lately, e-procurement has been successfully implemented in the Organisation with the signing of Contract Agreement with two leading Application Service Providers (ASP), viz. M/s Telecommunications Consultants India Limited (TCIL) & M/s m junction services Limited (mjunction). Further, provision of e-Reverse auction has also been included in the agreements.

To spread awareness amongst employees and to prevent violation of the Conduct, Discipline & Appeal (CDA) Rules, bulk SMS on the CDA Rules are being sent to all the employees regularly. Vigilance Department also uploaded CDA Rules Quiz, the Public Interest Disclosure and Protection of Informers (PIDPI) Resolution of CVC, Case studies and closed inspection reports on the intranet website. During the Vigilance Awareness Week from 31st October to 4th November, 2011 the theme of the year "Participative Vigilance" as decided by Central Vigilance Commission was celebrated in befitting manner by administering the pledge to all employees as well as through several competitions and programmes which included painting and debate competitions for the employees, their children and outside schools children. Lectures by eminent personalities on topics related to corruption, ethics and values were organized at different installations of the Corporation. The in-house journal of the Vigilance Department – "Candour" was released during the valedictory function of the Vigilance Awareness Week by the Chief Guest, Shri Anil Kumar Sinha, IPS, Addl. Secretary, Central Vigilance Commission. He also gave away prizes to the prize winners on the occasion.

ACCOLADES & AWARDS

Your Company has been bestowed with numerous awards in various categories by Govt. of India and other prestigious organisations & institutes.

Six projects of POWERGRID bagged the prestigious National Awards for Meritorious Performance in Power Sector instituted by the Government of India for the year 2009-10 & 2010-11. POWERGRID received three Gold Shields and two Silver Shields for Transmission System Availability and one Silver Shield for Early Completion of Transmission Project.

In recognition of its continued efforts to provide secure & reliable transmission system, POWERGRID was conferred with 'Power Line Awards 2012' in the category "Best Performing Transmission Company".

'Environmental Excellence & Sustainable Development award-2011' by the Indian Chamber of Commerce and '4th India Power Awards 2011' under the 'Largest CPU in Transmission Sector' and 'Overall Utility Performance- Transmission' Categories were conferred on your Company for its outstanding performance.

In Telecom Business, as a testimony of the excellent work being done by your Company, it has been bestowed with "Excellence in Innovation in Tower Management" Award by INFOCOM CMAI National Telecom Awards 2011.

MANAGEMENT DISCUSSION AND ANALYSIS

In addition to the issues in the Directors reports, some issues have been brought out in report on Management Discussion and Analysis placed at Annexure-I.

PARTICULARS OF EMPLOYEES

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

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

As per requirements of disclosures under Section 217(1) (e) of Companies Act,1956 read with Rule 2 of the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, information is given in Annexure-III to this Report.

COMPTROLLER AND AUDITOR GENERAL'S COMMENTS

Company has received 'NIL' comments on the accounts for the year ended 31st March, 2012 by the Comptroller and Auditor General of India under Section 619(4) of the Companies Act, 1956. Copy is attached in Annexure-IV to this report.

CORPORATE GOVERNANCE

A report on the Corporate Governance (Annexure V), forming part of this report, together with the Certificate thereon is given in Annexure-VI to this report.

Your Company has got its Secretarial Compliance Audit conducted for the financial year ended 31st March, 2012 from M/s Sanjay Grover & Associates, Practising Company Secretaries. Their Report forms part of this Report. (Annexure-VII)

STATUTORY AUDITORS OF THE COMPANY

The Statutory Auditors of your Company are appointed by the Comptroller & Auditor General of India. M/s S. K. Mehta & Co., M/s Chatterjee & Co., and M/s Sagar & Associates were appointed as Joint Statutory Auditors for the financial year 2011-12.

COST AUDITORS OF THE COMPANY

POWERGRID had appointed the Cost Auditors Sh. Jugal Kishore Puri, M/s. Chandra Wadhwa & Co, M/s. S. C. Mohanty & Associates and M/s. K. G. Goyal and Associates under Section 233B of the Companies Act, 1956 for the Financial Year 2011-12.

The due date for filing Cost Audit Reports for the financial year 2011-12 with the Cost Audit Branch, Ministry of Company Affairs is September 30, 2012 and the same will be filed with the Cost Audit Branch within the stipulated time.

POWERGRID'S BOARD

During the year, Shri R. N. Nayak who was our Director (Operations) took over the charge of Chairman & Managing Director with effect from 1st September, 2011.

Shri R. T. Agarwal assumed the charge of Director (Finance) with effect from July 29, 2011. Smt. Rita Acharya, Jt. Secy, MoP joined the Board of the company w.e.f. August 26, 2011 in place of Dr. M. Ravi Kanth Jt. Secy. (Trans.), MoP, who ceased to be Director on Board of the company w.e.f. August 16, 2011. Further, Shri Santosh Saraf and Smt. Rita Sinha joined the Board as non-official part time directors w.e.f. December 27, 2011.

Shri S. K. Chaturvedi demitted the office as Chairman & Managing Director on 31st August, 2011 upon attaining superannuation. Shri V. M. Kaul, Director (Personnel) superannuated on March 31, 2012 and ceased to be Director on the Board of POWERGRID. The tenure of - two non-official part-time Directors - Shri Ashok Khanna and Shri S.C. Tripathi came to an end on April 24, 2011; four non-official Part-time Directors - Dr. P. K. Shetty, Prof. A. S. Narag, Shri Anil K. Agarwal and Shri F. A. Vandrevala came to an end on July 9, 2011 and that of Mrs. Sarita Prasad, non-official part time Director came to an end on August 3, 2011 and they ceased to be Director.

The Board wishes to place on record its deep appreciation and gratitude for the invaluable contribution and unstinted support to the Company extended by these directors.

Shri Ravi P. Singh assumed the Charge of Director (Personnel) with effect from April 1, 2012. Shri R. P. Sasmal has been appointed as Director (Operations) with effect from August 1, 2012.

In accordance with the provisions of Section 255 and 256 of the Companies Act, 1956 read with Article 31 (iii) of the Articles of Association of the Company, Shri I. S. Jha, Director (Projects), Shri R. T. Agarwal, Director (Finance) and Smt. Rita Acharya, Director shall retire by rotation at the Annual General Meeting of your Company and being eligible, offer themselves for re-appointment.

ACKNOWLEDGEMENTS

The Board of Directors, with deep sense of appreciation, acknowledges the guidance and co-operation received from Govt. of India, particularly Ministry of Power, Ministry of Finance, Ministry of Home Affairs, Ministry of External Affairs, Ministry of Statistics and Programme Implementation, Ministry of Environment & Forests, Central Electricity Regulatory Commission, Appellate Tribunal for Electricity, Central Electricity Authority, Planning Commission, Department of Public Enterprises, Regional Power Committees, and other concerned Govt. departments/agencies at the Central and State level as well as from Securities and Exchange Board of India, National Stock Exchange of India Ltd., and Bombay Stock Exchange Ltd., Mumbai without whose active support, the achievements by the Corporation during the year under review would not have been possible.

Board's special appreciation and thanks are due to our valued customers, various State power utilities and other clients, who have awarded various consultancy works and reposed faith in Company's capability to handle them. The Board also appreciates the contribution of contractors, vendors and consultants for successful implementation of various projects by the Company.

The Directors take this opportunity to thank the Principal Director of Commercial Audit and Ex-Officio Member Audit Board-III for the cooperation during the year. Directors also acknowledge the valuable suggestions and guidance received from the statutory auditors during the audit of accounts of the Company for the year under review. The Board also conveys its sincere thanks to various national/international financial institutions/ banks/ credit rating agencies for their timely assistance, continued trust and confidence reposed by them on POWERGRID.

We have achieved a great deal this year and none of it would have been possible without the skills and dedication of each member of POWERGRID family at all levels. I would like to thank the Executive team for its strong leadership, the various employee unions to ensure that the company continues to achieve greater heights year after year and all our employees for their commitment and enthusiasm to achieve our aim to be the world's premier transmission network utility. ~

For and on behalf of the Board of Directors

Place: New Delhi (R. N. Nayak)

Date : 09.08.2012 Chairman & Managing Director


Mar 31, 2011

Dear shareholders,

Ladies & Gentlemen,

I am privileged to present, on behalf of the Board of Directors, the 22nd Annual Report on the business and operations of your Company for the financial year ended on 31st March 2011 togeth er with the Audited Statements of Accounts, Auditors' Report and Review of the Accounts by the Comptroller & Auditor general of India for the review period.

I am happy to share with you that your Company has excelled in all areas of its operations achieving significant milestones such as exceeding budget utilization target, meeting overall targets under Memorandum of Understanding (MoU) with Ministry of Power, government of India, timely commissioning of projects, etc. Based on the overall performance, your Company is poised to get "excellent" rating for FY 2010-11 as well, continuing the track record of achieving the highest rating since signing of its first MoU in FY 1993-94.

Your Company has been conferred with 'moU excellence award' for FY 2008-09 by Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, govt. of India for being the top performer in the Energy Sector. The Company has also been bestowed with the 'scope award for excellence and outstanding Contribution to the Public sector management (2008- 09) - Large scale Pse Category'. Both the awards were presented to POWERGRID by our Hon'ble Prime Minister in a ceremony held on December 15, 2010.

Your Company has been ranked as 8th overall in the fastest-Growing asian Companies and 18th as fastest-Growing Global Companies in the "Platts top 250 Global energy Company rankings" for the year 2010. Your Company has also featured in the "forbes Global 2000" list.

Performance highlights of your Company during fY 2010-11 are briefly mentioned here to give an overview of accomplishments in all fronts:

- Made an investment of Rs. 12,005 Crore during the year, an increase of about 13% over the investment made in last year (Rs. 10,617 Crore).

- on the project implementation front, added about 6,760 ckm of transmission lines, 11 new sub-stations and transformation capacity of about 9,500 mVa.

- Assets worth Rs. 7,313 Crore are declared under commercial operation.

- Investment approval for 25 new transmission projects worth about Rs. 21,150 Crore was accorded by the Board. This includes the project of international importance, "Cross country grid Interconnection between India and Bangladesh".

- transmission system availability of 99.80% was achieved, highest so far in the history of the Company. There was no major grid disturbance in any part of the country during the year and grids were operated smoothly.

- Inter-Regional power transfer capacity addition of 1,600 mW was achieved during the year with the commissioning of Barh – Balia 400 kv Double circuit (Quad) line, enhancing inter-regional capacity of National grid to 22,400 Mw.

- Under consultancy business, a total of 45 new orders with estimated project cost of about Rs. 600 Crore received, and in this financial year, revenue of Rs. 299.35 Crore is earned from Consultancy business as compared to Rs. 269 Crore earned during previous year.

- Financial Performance

(Figures in Rs. Crore, except per share data)

Description 2010-11 2009-10 Y-o-Y Growth

Income

Transmission Charges 7,691 6,576 16.95%

Consultancy 299 269 11.15%

Telecom 187 158 18.35%

Short Term open Access Income 212 124 69.60%

other Income 711 376 89.10%

Total Income 9,100 7,504 21.27%

Profit After Tax (PAT) 2,697 2,041 32.14%

Earnings per Share (Rs.) 6.19 4.85 27.63%

Book value per Share (Rs.) 46.12 37.81 21.98%

gross Fixed Assets 50,352 43,202 16.55%

Debt 40,883 34,417 18.64%

Net worth 21,351 15,914 34.16%

Debt Equity Ratio 65:35 68:32

Capitalisation 7,313 3,610 102.58%

Operational Excellence

Your Company, with its strong in-house expertise in all specialised areas of power transmission business, has carved a niche for itself amongst the largest transmission utilities in the world. Today, your Company wheels about 50% of total power generated in the country through its transmission network. As on 31st March, 2011, your Company owns & operates a transmission network of 82,355 ckm of transmission lines, 135 nos. of EHv & HvDC substations and transformation capacity of about 93,050 mVa. During FY 2010-11, transmission system availability of 99.80% was achieved for our transmission network. Besides, number of trippings per line was also contained at 1.27 against MoU target of 2.5 under "Excellent" category. Maintaining such high availability was possible through deployment of state-of-the-art operation & Maintenance techniques at par with international standards. Your Company follows state-of-the-art preventive maintenance. Equipment health is assessed periodically using "Condition Assessment Techniques". Maintenance activities are planned well in-advance and an "Annual Maintenance Plan" is chalked out for every asset through live line or shut down as per technical feasibility. Your Company also employs state-of-the-art "Emergency Restoration System" for restoration of collapsed transmission lines, due to natural calamities or otherwise, in shortest possible time. Replacement of aged assets has also been taken up as per prevalent CERC tariff regulations.

o&M activities of your Company are ISo certified. Systems and procedures are in place and being upgraded periodically to keep abreast with the latest technology. Formats for documentation on schedule & procedures have been standardized for all assets. All substations and line offices can access these documents through Company's web-portal. Periodic reviews are also conducted at regional level as well as at Substations and Line offices to evaluate implementation of the systems and procedures. Presently, about 30 sub-stations of POWERGRID are operated remotely and many new sub-stations are being designed for remote operation. For further improvement in operational efficiency, "national transmission asset management Centre" is being established to control & operate most of the sub-stations remotely and establishment of "Maintenance Service Hub" facility has commenced, which caters to the maintenance need of a group of sub-stations rather than placing staff in each sub-station. This will not only help in optimal utilisation of manpower & resources but also reduce the response time in case of faults & breakdowns.

options are also being explored for use of Robots in transmission lines' inspection besides aerial patrolling of transmission lines using helicopters, to optimise manpower requirement/ time management for line patrolling and improve efficiency in maintaining them.

Project Implementation

Transmission projects are planned, implemented, monitored and controlled through Integrated Project Management and Control System, which has been developed matching with the organization structure, effective working, flow of information and feed back. Project implementation activities involves total project review and monitoring including Standardisation of Designs, Project Review Meetings at regular intervals through video conferencing, pre-emptive measures and advance actions on various project linked activities such as land acquisition, state-of-the-art survey techniques and soil investigations, tender activities, funding tie-up, etc. in parallel with project investment approval process.

During FY 2010-11, transmission projects worth Rs. 7,313 Crore were commissioned as compared to Rs. 3,610 Crore for the previous year. Your Company has commissioned about 6,760 ckm of transmission lines, 11 new sub-stations and transformation capacity of about 9,500 mVa. These additions to the Company's network have helped in improving power supply situation in various regional grids leading to improved system reliability and better grid stability to meet the total all time high peak demand of 111gw & 811BU of energy in 2010-11.

Presently, transmission projects of about Rs. 93,000 Crore are under various stages of implementation and are progressing well matching with commissioning schedule of generation projects in the country. This includes 25 new transmission projects approved by the Board of Directors in FY 2010-11 at an estimated cost of about Rs. 21,150 Crore comprising of about 8,000 ckm of transmission lines & 5200 Km of fibre optic network, 23 nos. sub-stations and transformation capacity of about 32,000 mVa. Major ongoing projects are, Transmission System associated with generation projects like Subansiri & Kameng HEPs (which includes 2000 km, ±800 kv HvDC bipole link), DvC & Maithon Right Bank project, Sasan, Mundra & Krishnapatnam Ultra Mega Power Projects, Pallatana gBPP, Bongaigaon TPS, Transmission system for transfer of power from Bhutan to NR/wR, Interconnection between Indian & Bangladesh power grids, Development of High Capacity Transmission corridor for phase-I IPPs in the State of odisha, Transmission system for IPP generation Projects in the State of Sikkim & Chhattisgarh, etc. and System Strengthening schemes in Northern, Eastern, western & Southern Regions etc. Your Company has an impeccable track record of not bottling up of even a single mega Watt of power from central sector generation projects for want of inter-state transmission system. Accelerated growth path of your Company during XI plan can be demonstrated from the following table, which shows a phenomenal built up of about 30% capacity of Company's present network in last four years only w.r.t. the capacity as built in last many years.

Parameter as on as on addition during first the beginning of Xi Plan the end of FY 2010-11 four years of Xi Plan

Transmission network (ckm) 59,461 82,355 22,894

Sub-stations (Nos) 104 135 31

Transformation Capacity (MvA) 59,415 93,050 33,635

Financial Management

Your Company exhibited an impressive financial performance during FY 2010-11, earning a net profit of Rs. 2,697 Crore, thereby registering a highest ever rise of 32% as compared to previous year's profit of Rs. 2,041 Crore. Turnover of the Company stands at Rs. 9,100 Crore from Rs. 7,504 Crore during FY 2009-10, i.e. up by 21%. gross Asset Base has been enhanced to Rs. 50,352 Crore from Rs. 43,202 Crore in FY 2009-10.

Dividend Payout

In FY 2010-11, your Company registered Earnings per Share (EPS) of Rs. 6.19 as compared to Rs. 4.85 in previous fiscal. Your Board of Directors have recommended a final dividend of Rs. 1.25 per share for the year 2010-11, in addition to an interim dividend of Rs. 0.50 per share paid in February, 2011. The total

dividend paid for the year is Rs. 1.75 per share as against Rs. 1.50 per share paid last financial year. The final dividend shall be paid after your approval at the Annual general Meeting. The total dividend pay-out for the year amounts to Rs. 810.23 Crore representing 30% of profit after tax for the year. Your Directors believe that strategic diversification into synergic business would lead to increase in shareholders' value. Therefore, focussed attention is being given for expanding the telecom and consultancy businesses for further improvement in financial performance.

Capital investment and fund mobilisation

Your Company made an investment of Rs. 12,005 Crore during FY 2010-11 for implementation of various ongoing projects.

The requisite funds were mobilised from domestic market, proceeds of loans from multilateral funding agencies, namely, The world Bank and Asian Development Bank, besides internal resources of approx. Rs. 4,000 Crore (including FPo proceeds).

Directors' responsibility statement

As required u/s 217 (2AA) of the Companies Act, 1956, your Directors confirm that:

- In the preparation of the Annual Accounts, the applicable accounting standards have been followed;

- The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

- The Directors have taken proper and sufficient care in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

Xi Plan investment programme

For development of inter-State transmission system, an investment of about X 55,000 Crore has been planned by your Company during XI Plan which includes further development in National grid by adding inter-regional transmission systems, system strengthening schemes, transmission system to facilitate evacuation of power from generation projects under central sector and Ultra Mega Power Projects (UMPPs). Stepping towards realising the target, your Company has already made a capital investment of aboutRs. 37,445 Crore during the four (4) years' period of XI plan for implementation of various projects.

Your Company has an excellent credit rating with financial institutions, thereby, is placed in a comfortable position in terms of resource mobilisation. The Company, as such, does not envisage any problem in mobilizing the resources for meeting the planned investment during last year of XI plan period. Loan requirement is planned to be met through borrowings from multilateral funding agencies (The world Bank and Asian Development Bank), Supplier's credit and from domestic sources on the basis of requirement. Your Company being rated AAA by CRISIL, does not foresee any problem in mobilizing the required resources from domestic market at competitive rates.

Going Public

Company's Follow-on-Public offer (FPo) of divestment of 10% of govt. equity (420,884,123 shares) and issue of 10% fresh capital (420,884,123 shares) in November, 2010 received huge response both from domestic & foreign institutional investors; and was oversubscribed by almost 15 times. FPo subscription opened on 9th November 2010 and closed for QIBs on 11th November 2010 and on 12th November 2010 for others. The issue price was fixed at Rs. 90 per share and a discount of 5% was offered for retail investors and employees. Post-issue, holding of government of India is 69.42%, while the balance 30.58% is held by public. out of Rs. 3,721 Crore raised from fresh issue of shares under FPo, Rs. 1,600 Crore has been spent during the FY 2010-11 on capital expenditure of identified projects. The funds garnered through FPo shall help the Company for part financing of projects during XI and XII plan.

Commercial Performance

Your Company's performance on commercial front is highly satisfactory, especially in terms of realisation of transmission charges. During the year 2010-11, current realisation stood at about Rs. 7,192 Crore, the highest so far, against Rs. 6,570 Crore realised last year. Post-securitisation, outstanding dues (beyond 90 days of billing) stands at 'nil' as on March 31, 2011. The present LC coverage is about Rs. 567 Crore which is equivalent to 115% of average monthly billing.

During the year, a total of 222 petitions of transmission projects involving transmission charges of Rs. 2,957 Crore were filed with CERC for Tariff period 2009-14. It includes filing of advance petitions, for the assets whose DoCo are anticipated till June, 2011.

As per CERC Regulation on Sharing of Inter-State Transmission charges and losses, 2010, your Company, as CTU, has been mandated to perform Billing, Collection and Disbursement (BCD) on behalf of all the inter-State Transmission Service licensees. In view of this, new Transmission Service Agreement, Revenue Sharing Agreement & BCD procedures after incorporating comments from designated inter-State Customers and inter-State Transmission System licensees were drafted and submitted to CERC for approval. Several workshops have been conducted across all the regions with the State Transmission Utilities and DISCoMs for their institutional building for new billing, collection and disbursement mechanism.

Development of National Grid

Your Company is taking adequate measures for strengthening/ establishing the inter-State and inter-regional links for enhancing the capacity of National grid in a time bound manner so as to ensure optimal utilization of uneven distribution of energy resources. Inter-Regional capacity addition of 1,600 mW was achieved during the year with the commissioning of Barh–Balia 400 kv Double circuit (Quad) line in June, 2010. By 31st march 2011, national Grid with inter-regional power transfer capacity of about 22,400 mW has been established, placing it among one of the largest synchronous grid in the world with installed generation capacity of about 1,17,000 Mw. Currently, substantial power is being exchanged across the regional grids and the capacity of this National grid is planned to be enhanced to about 28,000 Mw by the end of XI Plan with the expectation of generation capacity addition as programmed.

Grid Management

Development of National grid through reliable and stable operation of regional power grids has been a priority area for your Company. The Company is facilitating power evacuation from Central Sector generating Stations through its strong and robust transmission network and it is a matter of great pride that evacuation constraint has not been generally faced by any Central Sector generating Station during the year.

grid Management is carried out through a hierarchial control philosophy using Supervisory Control and Data Acquisition, SCADA. Considering the increased complexity of grid operation of such a large network of the country, the facilities at all the five Regional Load Despatch Centers and National Load Despatch Centre are being upgraded continuously through deployment of latest technology. Your Company's effective grid management measures & techniques are not only paying rich dividends but also restricted minimal grid disturbances besides improvement in vital grid parameters, improved data availability, visibility and transparency. This is very well demonstrated since indian Power Grids have not experienced any major grid disturbance during more than last eight years. Even minor grid disturbances in regional grids have come down significantly.

All these measures have also led to increase in inter-regional power exchanges on real-time basis and helped in meeting more demand of energy deficit regions, thereby improving overall economy of the country. During FY 2010-11, about 56,700 million Units (mUs) of inter-regional energy transfer was facilitated across the country as compared to about 52,000 MUs during FY 2009-10. The frequency remained within the prescribed IEgC band (49.5 – 50.2 Hz) for most of the period. on behalf of various State Power utilities and other players in the regional pool, POWERGRID, through its RLDCs, facilitated settlement of UI charges to the tune of Rs. 10,357 Crore in FY 2010-11.

Power system operation Corporation Limited (PosoCo), a 100% subsidiary of your Company which was set up to look after grid Management function in line with goI directive, has started commercial operation from 1st october, 2010. open access in inter-state transmission:

In order to promote development of competitive electricity market, Short Term open Access (SToA) in inter-State transmission was successfully implemented since 2004.

Under SToA, about 19,900 transactions were approved during the year involving more than 55,000 mUs of energy. Since introduction of SToA in May, 2004, cumulatively more than 73,600 bilateral transactions have taken place and about 218 Billion Units (BUs) have been exchanged. Around hundred captive power plants across the country have also availed the benefit of SToA.

Being the nodal agency for grant of Long Term Access (LTA) to private producers, your Company has undertaken development of high capacity transmission corridors for evacuation of large quantum of power from various IPP generation projects. LTA has been granted for about 90,000 Mw to 135 nos. of IPP projects. Development of transmission system for IPPs generation projects was a major concern especially due to non-finalisation of beneficiaries and firm commissioning schedule of generation projects by the generating companies. Taking the lead role, your Company organized various meetings with power generation developers, CEA, Ministry of Power and took up the case with CERC actively thereby achieving timely development of transmission systems for IPPs. Nine High Capacity Power Transmission Corridors have been finalized for meeting evacuation requirement of IPPs coming up in the State of Jharkhand, odisha, Chattisgarh, Madhya Pradesh, Andhra Pradesh and Tamil Nadu at an estimated cost of about Rs. 58,000 Crore, for which regulatory approval was accorded by CERC in May, 2010. Implementation of these corridors has been taken up by your Company in a phased manner matching with progress of generation projects. This shall go a long way in integrated development of transmission system in the country.

Quality – a WAY of Life

Your Company aims to provide quality services to its valued customers, and in order to do so, quality improvement measures/ techniques are being adopted at every stage right from conceptualisation of project till commissioning and subsequently during its operation. Besides, the areas requiring improvement are identified and immediately addressed. Your Company's Quality Management System (QMS) is built upon the philosophy of Prevention, i.e. Quality Assurance rather than Detection while final product inspection. This system covers Design, Engineering, Procurement, Construction, operation and Maintenance activities for AC & HvDC transmission systems, SCADA, EMS & Communication projects.

During the year, Quality management system of your Company was reviewed and based on evaluation of implementation of the latest systems and procedures, the revised certification was accorded. Your Company is certified with integrated management system as per Publicly available specification, Pas 99:2006 integrating requirement of ISo 9001:2008 (Quality), ISo 14001:2004 (Environment) and oHSAS 18001:2007 (occupational Health & Safety Management System). All the establishments of your Company were also audited for social accountability system, sa 8000:2008.

Technology Development

Conserving Right-of-way (Row), minimizing impact on natural resources, coordinated development of cost effective transmission corridor, flexibility in upgradation of transfer capacity of lines matching with power transfer requirement are major areas of concerns in development of transmission network in the country. In order to address these issues effectively and to ensure development of efficient, coordinated and economical inter-State transmission system, the Company has undertaken several technological innovations.

For efficient utilisation of precious Row, the Company is deploying state-of-the-art technologies such as high temperature low sag Conductors, series compensation including Thyristor Control, Multi Circuits, Compact & Tall Towers, High Surge Impedance Loading Lines, etc. For effective grid operation, high-tech o&M practices such as hotline maintenance, live line washing of insulators, use of emergency restoration system, large scale automation of sub-stations, etc. are being adopted. Your Company gives priority to research activities with potential for societal, environmental & national benefits by application of advance technologies and finding solutions to gear up for future challenges. After commissioning & operating 765 kv UHv AC & ±500kv HvDC transmission system, POWERGRID is now working on next higher transmission voltages of 1200 kV UHVaC & ±800kV HVDC systems to achieve efficient utilization of Row and increased power transfer capability for transfer of bulk power over long distances.

The 1200kV UHV aC technology is being developed by your Company for the first time in the world. This is one of the unique R&D projects in public-private partnership model. Development of 1200kv UHvAC technology has already been initiated by establishment of a Test Station (at Bina in the State of Madhya Pradesh), which is under progress as a collaborative effort with 34 indigenous equipment manufacturers who are partners in this development process. The objective of the project is development and establishment of 1200kv voltage level in the country with concerted co-ordination among technical experts for finalization of technical parameters, field testing, and trial operation etc. and extend support to equipment manufacturers for indigenous development of 1200kv system equipment. This endeavour shall not only benefit Indian Power sector but also Indian manufacturers who would emerge as world leader for 1200kv class equipment. with the introduction of Ultra High voltage in the transmission system, in addition to enhanced power transfer capability of the line, it will help in reduction of transmission losses and minimise Right of way requirement.

Implementation of /- 800 kV, 6000 mW HVDC Bi-pole of length around 2000 Km from North Eastern region (Biswanath Chariali in the State of Assam) to Northern Region (Agra in the State of Uttar Pradesh) is under construction. This shall facilitate high quantum of power transfer. once implemented, this shall be the longest /- 800kv HvDC line.

Your Company is taking leadership initiative for implementation of smart Grid technology in the country. In this direction, your Company has implemented Smart grid Pilot Project using wAMS in Northern Region grid, for the first time in India. "india smart Grid task force", being headed by Shri Sam Pitroda, Adviser to Hon'ble Prime Minister on Public Information Infrastructure & Innovations, is a nodal point for government's activities related to Smart grid. Secretariat of this prestigious forum is now being operated by your Company.

High Temperature Superconducting cable provides unique solution of large amount of power transmission at lower voltage. In order to study the preliminary feasibility of developing the use of superconducting technology in transmission, an experimental superconducting AC line parallel to existing transmission line of 220kv at gurgaon gas Insulated Substation (gIS) is being explored.

Lightning mapping of the system is very useful in optimizing lightning protection design and real time operation & maintenance of transmission lines. Pollution mapping helps in optimal insulation design and maintenance of transmission lines. Considering huge transmission expansion plan, POWERGRID has initiated pollution mapping of Northern Region in association with CPRI, Bangalore and lightning mapping in North-Eastern Region.

national High Power test Laboratory Pvt. Ltd. (nHPtL), a Joint venture Company of POWERGRID, NTPC, NHPC and DvC has been created in May, 2009 for establishment of a fully independent, professionally managed, international class, "on Line High Power short Circuit test facility" in India which shall provide a full range of short circuit test facilities for electrical equipment manufacturing industry and power utilities.

Green initiatives

Major reason for continuous degradation of earth's climate and environment may be attributed to emission of billions of tons of greenhouse and other potent gases in atmosphere due to mankind's heavy dependence on fossil fuel for many of its daily needs. As Indian population is increasing and economy is growing at large pace, demand for power will increase manifold. It is well established fact that growth brings with it the risk of environmental problems, and unless significant energy conservation measures and large scale use of eco-friendly measures are undertaken, necessitating huge investments to protect the environment. Transmission projects can play a significant role in harnessing clean/green power through innovative and challenging initiatives. Accordingly, POWERGRID, being a responsive organisation, is constructing ±800kv HvDC high capacity transmission system for transfer of about 6,000 Mw of power from hydro projects in North-Eastern Region to far away beneficiaries in Northern & western Regions. The expected environmental benefits are:

- Will reduce CO2 emissions by replacing thermal generation at load centres of Northern & western Regions by transmitting about 6,000 Mw of clean/green hydro power generated in phases in the remote and under developed North-Eastern Region of the country with negligible environment impact.

- Otherwise, the Northern & Western Regions of the country, which are deficit in energy, would set up equivalent coal fired thermal power plants. It is envisaged that about 257 million tons of Co2 emission would be reduced during the 30 year lifecycle of the HvDC transmission system.

It is heartening to note that our sincere efforts towards environment protection has started bearing fruits in terms of the appreciation and awards POWERGRID had received during the last three years.

Business Development & Consultancy

Your Company has acquired in-house expertise at par with global standards in the field of Planning, Design, Engineering, Load Despatch and Communication, Telecommunication, Contracts, Finance and Project Management. Utilising this expertise, consultancy is being offered at national & international level.

The Company has emerged as a strong player in transmission sector in South Asia, Middle-east Asia & African countries and is providing consultancy services in United Arab Emirates (UAE), Nigeria and Bangladesh. Your Company has been keenly participating in projects funded by ADB, The world Bank, and other foreign organizations in various countries like vietnam, China, Kenya, Ethiopia, Uzbekistan, Afghanistan & Bangladesh.

Throughout the year, business development opportunities continued to receive focussed attention and thrust across the entire value chain of the power sector. During the year 2010-11, your Company has bagged 45 new assignments having project cost of about Rs. 600 Crore. Your Company has earned revenue of about Rs. 299.35 Crore during FY 2010-11 as consultancy fee from its various ongoing assignments against Rs. 269 Crore earned last year.

Further, your Company is playing an active role in preparing a roadmap for developing SAARC market for electricity on a regional basis to develop a cross country power-grid, harnessing each other's capacities and resources in order to address the growing energy need in the region. Presently, various interconnections exist between india & nepal and between india & Bhutan. For evacuation of power from various upcoming HEPs in Bhutan, Punatsangchhu-I HEP (in Bhutan) - Alipurduar (in India) 400 kv D/c line between Bhutan & India is under implementation and expected to be completed by 2015. Further, an asynchronous interconnection between india & Bangladesh through 500 Mw HvDC back-to-back terminal along with Bheramara (Bangladesh) - Baharampur (India) 400kv D/C line is under implementation and expected to be completed by 2013. In addition, an interconnection between india and sri Lanka through HvDC bipole link including submarine cable for sea portion is being finalised. Further, for bulk transfer of power, interconnection between India and Nepal through 400 kv Dhalkebar (in Nepal) - Muzaffarpur (in India) D/C transmission line is under finalisation.

Telecom Business

In order to shore up its revenue base, POWERGRID spotted the opportunity of convergence between transmission & telecom, and entered into telecom business to leverage its country wide transmission infrastructure. Your Company is currently managing about 25,000 km of telecom network connecting all metros, major cities & towns, which has been maintained at an availability of 99.98%.

It is our constant endeavour to provide a robust highway of telecommunication at affordable cost with ultra modern and eco- friendly implementation techniques. The Company is one of the few telecom players with marked presence in remote areas and has acquired Infrastructure Provider Category-I (IP-I), Internet Service Provider (ISP) Category 'A' and National Long Distance (NLD) licenses to provide a variety of services.

During 2010-11, telecom business earned revenue of about Rs. 187.20 Crore for the Company. Revenue realization to the tune of 99% of total sales was achieved during the year. The telecom business registered a Profit before Tax of Rs. 29.73 Crore for the financial year ended 31st March 2011; and order Book rose to about Rs. 650 Crore in FY 2010-11 from Rs. 410 Crore in previous year (i.e. up by 58%) despite a general slowdown experienced by Telecom industry due to intense price wars. Your Company is one of the implementing agencies for the prestigious national Knowledge network project at a project cost of Rs. 6,000 Crore. The project envisages a gigantic 3 layer Telecom network of all knowledge centres across the country such as IITs, IISc, etc. on high speed connectivity. In this, your Company has bagged a contract of Rs. 900 Crore to be realised over a period of 10 years, out of which advance of Rs. 384 Crore was received during FY 2010-11.

with the focus now shifting more towards rural connectivity, POWERGRID's role in telecom becomes even more significant as it has presence in rural & remote areas of the country by way of its Power Transmission network. Considering an ever increasing base of transmission towers across the country with a present base of about 1,50,000 towers including remote/ rural areas, a business model of leasing transmission towers for placing telecom antennas has been formulated to generate additional business. In the first phase, tower space has been leased out in 3 States of J&K, HP & Punjab for installation of Telecom Antennas and for other States, it is under process. Your Company has made synergic tie-ups with multiple service providers for spreading out of its Point of Presence to more than 2200 nodes on Pan-India basis. Company is also venturing into Multi-protocol Label Switching services as a value addition to its Dense wavelength Division Multiplexing / Synchronous Digital Hierarchy based Point to Point Telecom Network and has ventured into Data Center business for in-house requirement. This indeed is a major leap in achieving strategic network expansion by which your Company has strengthened its capabilities to reach and cater even remotely placed segments particularly small towns and villages.

In recognition of its sturdy and reliable Telecom Infrastructure and its Telecom services, your Company has been conferred with "emerging telecom infrastructure Provider award" by INFoCoM CMAI National Telecom Awards, 2010. ContriBUtion in DistriBUtion reforms

To derive benefit of additions in generation & transmission by end consumers, govt. of India has launched Accelerated Power Development & Reforms Programme (APDRP) and Rajiv gandhi grameen vidyutikaran Yojana (RggvY), which are aimed at bringing qualitative improvement in sub–transmission and distribution sector and expected to achieve reduction of AT&C losses. Your Company is playing a significant role in carrying forward the distribution reforms through undertaking APDRP works on behalf of govt. of India in various parts of the country. Most of these schemes have been commissioned/ are nearing completion. Under RggvY, your Company has been assigned the job for execution of rural electrification works in 68 districts in the country covering about 72,800 villages. During the year, POWERGRID created infrastructure for electrification in 4710 un-electrified villages against a target of 3500 villages, achievement of about 135%. Service connections were provided to about 10.60 Lakh BPL households against a target of 7 Lakh, achievement of over 150%. Cumulatively, till March, 2011, infrastructure has been created for electrification of 55,445 villages. Further, service connection to about 26.79 Lakh BPL households has also been released under RGGVY.

E-Governance

In line with international practices, your Company has taken up an initiative to deploy Enterprise wide IT System, which will facilitate operation of different business processes in an integrated manner and to achieve optimal use of resources. This includes, rolling-out of Enterprise Resource Planning (ERP) system across the organization along with establishment of state-of-the-art Data Centre, Communication Network and Disaster Recovery Site which shall be completed progressively in next two to three years. In addition, the Company has also taken various steps to improve upon IT security envisaging potential increase in IT dependence in day to day operations. Your Company has been assigned the task for establishing "CERT-Transmission", a forum of all State transmission utilities of the country, to address IT security and required timely response at the time of crisis.

Sustainable Development

As we all know, electricity has become a necessity in our day to day life and it plays the pivotal role in economic development of the country. while, it's use in one hand has sharply benefited the quality of life, on the other hand it's generation has raised several social, environmental, economical and political issues, which need to be understood in its right perspective and addressed accordingly. Though transmission projects are non polluting, your Company has developed a detailed corporate strategy document "environmental and social Policy and Procedures (esPP)" in 1998 and upgraded it from time to time through wide consultations with social bodies, local communities, govt. agencies, etc. in line with International best practices. The policy outlines the Company's approach and commitment to deal with environmental and social issues, relating to transmission projects, and lays out management procedures and protocols to address the same. The policy is applauded by the multilateral funding agencies like The world Bank & ADB and the Company applies the same for all projects across the country. Your Company is the first Power Company in India, which has come out with the Sustainability Report in March, 2010 and is giving shape to sustainability reporting process so as to establish a procedure for information disclosure and communication to stakeholders. Sustainability reporting benefits the Company in the long run by establishing a system of measuring, monitoring and reporting environmental and social performance.

The pioneering technologies like 1200kv UHv AC & ±800kv HvDC being undertaken by your Company will enable transfer of large quantum of power over single corridor upon implementation and further minimise the environmental and social impact.

Corporate Social Responsibility

Your Company has earmarked one percent (1%) of Profit After Tax (PAT) for the preceding year as non lapsable budget for CSR activities. During FY 2010-11, a major portion of CSR budget was spent on different thrust areas like education, health, infrastructure development, games & sports etc. Being of long lasting value, these facilities have played a pivotal role in improving the standard and quality of life of local people around our establishments. The efforts made by your Company have been applauded and earned the goodwill of the local inhabitants.

Your Company sponsored ten students, who were meritorious but under privileged for taking coaching for preparation of IIT-JEE entrance exam-2011 in "Utkarsh Super-30, Delhi Centre", as a part of Corporate Social Responsibility. It is heartening to know that six out of ten students got into IITs and rest four students qualified for other reputed engineering institutes. Public Distribution Shops in the villages of Rajavur, Senganadipudur & Karupusamypudur were constructed and handed over to the Block Development officer, Udumalpet which benefitted nearly 900 local villagers. Further, 15 desktop computer systems were handed over to the Principal of the Deaf Enabled Foundation in Hyderabad. 118 nos. of solar street lamps were handed over to District Administration of Raichur for the benefit of Umalipannur, Duganur, Kataknur and Malkapur villages of Raichur district and a 250 kvA Dg was provided to District Hospital of Leh.

People, our Prime movers Development of Human Capital

Your Company strongly believes that human capital is the most vital asset of the organization and accordingly, its policies are focused on development of human resource through skill upgradation, career enhancement, job enrichment & job rotation.

Your Company has developed in-house online Training Need Assessment (TNA) System through which individual TNA of 8,300 employees were captured. The findings of TNA were corroborated & discussed with Focus group at Regional and Corporate level for identification and alignment with organizational requirements before finalisation of Learner's Planner for 2011-12.

For overall competency enhancement of employees in synchronization with business needs, environment and individual development plan, 49,831 mandays of training was imparted to the employees during FY 2010-11. In addition, induction training was provided to 143 Executive Trainees, 316 Supervisor Trainees and 340 workmen Trainees during the year. Training has also been imparted to the employees of State power utilities and other utilities within the country and overseas.

MoUs have been signed with MDI, gurgaon, Jamia Millia Islamia, New Delhi, Amity International Business School & Birla Institute of Management Technology, Noida, which will enable organizations to leverage each others capability and resources in area of pedagogy, training, research and innovation in systems, process etc. Further, your Company has tie-up with Foundation of Innovation and Technology Transfer of IIT, Delhi for conducting certification programmes for operation & maintenance of transmission system and telecom.

Considering the growing needs of the organization, a number of initiatives have been taken up with high priority accorded for Training & Development.

During the year, POWERGRID has inducted 979 personnel at various levels viz., Executives, Supervisors, workmen in different areas through open Advertisement on All India basis and Campus Selection from reputed Engineering and Management Institutes for executives, and for non-executives through Employment Exchange and local advertisement at regional level.

For mutual benefit in the area of Power Transmission Line Construction, your Company has initiated capacity building programmes and overall skill development in the country with the help of Transmission Line (TL) construction contractors under Public Private Partnership mode. A Memorandum of Understanding was signed with some of the TL Construction Contractors for training of unemployed youth in the field of TL construction jobs. Short term training courses were also offered in Power Transmission Line Tower Erection and Power Transmission Line Stringing works. Accreditation to these courses are being accorded by Directorate general of Employment and Training (DgET), Ministry of Labour & Employment under Modular Employable Skills of Skill Development Initiative Scheme and these courses have been included in the list of Modular Employable Skills courses approved by National Council for vocational Training (NCvT). Candidates, after successfully passing the examination conducted by Assessing Bodies appointed by DgET, shall be provided certificate by NCvT, govt. of India.

For augmenting the Capacity Building initiatives, "transmission Line management institute" has been established at Misa along with extension Centre at Salakati in Assam.

Knowledge Map and Knowledge Matrices of your company have been prepared along with its business verticals. This has helped the organization to identify the present knowledge assets in relation to corporate strategy and identify sources for bridging the knowledge gap. This has enabled your Company to figure out where knowledge, expertise and experiences reside in our people, documents, processes, systems and systemic routines. It is the first document of its type in Indian Power Industry.

Your Company has been bestowed with numerous awards in various categories. The major HR related awards bagged this year are "training excellence Gold award" by greentech Foundation for its hallmark performance in area of Training and Development, "Best Hr strategy in Line with Business award" and "award for excellence in training" by Asia's Best Employer Brand Awards 2010 at Singapore; "amity Hr excellence award" for Best Environment friendly and Employees Safety practices; "award for talent management" under 5th Employer Branding Awards 2010-11 by Employer Branding Institute and "organization with innovative Hr Practices" under global HR Excellence Awards 2010-11; "Hr excellence award for PsU sector for innovative Hr Practices" under Talent Leadership and HR Awards (for excellence in Human Resource Development) presented by Star News; "india shining star Csr award" in the Power Sector instituted by wockhardt Foundation, Mumbai.

Employee welfare

During the year, the Industrial Relations scenario in the Corporation has been cordial and no man days were lost. An effective work culture has been established in the organization through empowerment, transparency, decentralization, and practice of participative management.

The Company also holds open sessions, chaired by the CMD and all the functional Directors, for eliciting views/suggestions of the employees concerning the overall development & growth prospects of the organization.

Your Company believes in participation of all the employees down upto workmen level for meeting the objectives of the company. In your Company, POWERGRID National Bipartite Committee (PNBC), a joint consultative forum comprising of management and workmen representatives exists, which provides a platform for addressing issues related to the workmen cadre at the national level including the signing of three long term wage agreements. The forum is associated with the decision making process in policy formulation concerning larger issues of workmen category. The forum has also been instrumental in communicating the company's vision, business plans, core values and important business developments. Besides, regional level issues pertaining to workmen are dealt through regional forum of PNBC called PRBC (POWERGRID Regional Bipartite Committee). Your company was amongst the first few companies to implement wage revision (w.e.f. 1st January, 2007) for workmen & supervisors, this year.

Citizen's Charter

Your Company has formulated its Citizen's Charter providing a visible front of its objectives, mission, commitments, terms of service and its obligation to various stakeholders. Information about its schemes, policies, project plans of the Corporation and issues of general interest to stakeholders is available in the offices. This information is also available on Company's web site.

Implementation of official Language

Your Company is committed to ensure the implementation of Rajbhasha policy and has made all efforts to ensure use of Hindi as laid out in the Rajbhasha Annual Plan of the government of India. To promote the use of official language, various activities like "Annuvad Abhayaas Karyakram", training for use of computer in Hindi applications are organized to enhance the working knowledge. In addition, lectures on various topics by eminent Hindi scholars are arranged on regular basis to change the mindset of the employees.

Your Company maintains one of the best libraries in public sector wherein books, popular/ literary magazines and newspapers in Hindi are available. Every year, "Akhil Bhartiya Rajbhasha Sammelan", "Kavi Sammelan", "Drama", and competitions in Hindi writing etc. are also organized.

Attractive incentive schemes for employees have also been instituted for official working in Hindi and to contribute articles/ write ups for in-house magazines.

The effort made by your Company has been applauded in many forums. As a result of the excellent work being done by your Company in the field of Rajbhasha implementation, the Company has been conferred with "NTPC Rajbhasha shield for the year 2009-10" and "Rajabhasha Shiromani" shield. The Company's in-house magazine "grid Darpan" has bagged "Rajbhasha grih Patrika Samman" during the year.

Corporate Image Through Communication Management

This year, your Company launched the desired publicity campaign wherein the key strengths and expertise of the Company was presented to potential investors. Print and electronic media, Tv & radio commercials, outdoor hoardings and investor road shows were held for publicity campaign. This has equally contributed to the mega success of the Follow-on-Public offer of the Company.

Your Company launched advertisement campaigns in leading business magazines to pitch the consultancy business to SEBs, IPPs and other potential clients. Your Company also participated in a number of Exhibitions and Conferences including the "world Energy Congress" held in Montreal, Canada so as to maximize brand exposure and to explore business opportunities. Your Company successfully organised the gRIDTECH 2011 exhibition and international conference in which about 120 exhibitors showcased their state-of-the-art products in the field of transmission, distribution and grid management. Internal communications play a key role in enabling employees across the company to understand and embrace the Company's mission, goals and strategies. Monthly newsletters, house journals, wall magazines are published & widely circulated to apprise the employees of the developments, achievements & events, viewpoints of management and also give a platform to employees to participate and take pride of their Company. The media centre link of your Company's website was also revamped as Communication Lounge with new features such as media coverage, PR kit, industrial photography, query form etc.

Your company maintained cordial relations with the media so as to effectively deliver key messages to target audiences. In order to ensure that the Company's perspective on any given issue is reflected in the media, regular press releases were issued and press conferences were conducted along with interviews of top management were regularly published in leading publications/ journals & electronic media.

Vigilance - Transparency

governed by the principles of good Corporate governance, the Company strives to be accountable to the nation by being as transparent as possible about its operations; and the year gone by was another such year for Company's renewed commitment to transparency. During the year, a large number of systems improvements were undertaken by the Company to plug loopholes in the system and emphasis was laid on the awareness process in the Company.

Training was imparted to employees on 'Ethics and vigilance Matters' through various preventive vigilance workshops, in which 440 non-vigilance executives were imparted training. vigilance executives were also sent on training to various organizations like CBI and the National Institute of Criminology and Forensic Science, besides participating in training programmes organized at Corporate Centre. In addition, vigilance executives were also sent on foreign training at RIPA International, London.

Your Company also conducts process online inspections in which critical works are inspected at the initial stage of execution by the vigilance executives for shortcomings, if any. A large number of inspections have been conducted both by vigilance executives as well as by the Chief Technical Examiner's organisation (CTE). on the basis of these inspections, adequate cost compensation was affected for not conforming to technical specifications, wherever applicable. Besides this, a considerable number of CTE paras were also settled during the year.

The vigilance Awareness Period was organized from 25th october to 1st November, 2010 as per the directives of the Central vigilance Commission. The pledge was administered to all employees across the Country. During the week, various competitions were organized for the employees and their family members. Billboard and banners were put up at public places in order to generate publicity against corruption. Street plays and road shows were also organized. During this period, debate competitions on topics related to vigilance were also organized at various schools. The week concluded with the release of the in-house journal 'Candour' at the valedictory functions wherein prizes were also distributed.

To spread awareness amongst employees and to prevent violation of the Contract Rules, bulk SMS service was inaugurated during the occasion of the vigilance Awareness Period and sent to all employees in order to educate them on vigilance matters. Bulk SMS on the Conduct, Discipline & Appeal (CDA) Rules are being sent to all the employees every month.

Management Discussion And Analysis

In addition to the issues in the Directors' Report, some issues have been brought out in report on Management Discussion and Analysis placed at annexure-i to this Report.

Particulars of Employees

The particulars of employees of the Corporation who were in receipt of remuneration in excess of the limit prescribed under Section 217 (2A) of the Companies Act, 1956 is given in annexure-ii to this Report.

Conservation of Energy, Technology Absorption And Foreign Exchange Earnings And Outgo

As per requirements of disclosures under Section 217(1) (e) of Companies Act,1956 read with Rule 2 of the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, is given in annexure-iii to this Report.

Comptroller And Auditor General's Comments

Comments on the Accounts for the year ended 31st March, 2011 by the Comptroller and Auditor general of India under Section 619(4) of the Companies Act, 1956 are given in annexure-iV to this report.

Corporate Governance

A Report on the Corporate governance annexure-V, forming part of this Report, together with the Certificate thereon is given in annexure-Vi to this Report.

Your Company has got its Secretarial Compliance Audit conducted for the financial year ended 31st March, 2011 from M/s. Sanjay grover & Associates, Practising Company Secretary. Their Report forms part of this Annual Report. (annexure-Vii)

Statutory Auditors of the Company

The Statutory Auditors of your Company are appointed by the Comptroller & Auditor general of India. M/s A.R. & Co., M/s Umamaheswara Rao & Co., M/s S R I Associates were appointed as Joint Statutory Auditors for the financial year 2010-11.

Cost Auditors of the Company

POWERGRID had appointed the following Cost Auditors under Section 233B of the Companies Act, 1956 for the Financial Year 2010-11:

Sh. Jugal Kishore Puri, Cost Accountant - NR-I, NR-II & SR-II

M/s. Chandra wadhwa & Co, Cost Accountants - wR-I, wR-II & SR-I

M/s. Mani & Co., Cost Accountants - ER-I, ER-II & NER

The due date for filing Cost Audit Reports for the financial year 2010-11 with the Cost Audit Branch, Ministry of Corporate Affairs is September 30, 2011 and the same will be filed with the Cost Audit Branch within the stipulated time.

Powergrid's Board

During the year, the tenure of four non-official Part-time Directors - Dr. P. K. Shetty, Dr. A. S. Narag, Shri Anil K. Agarwal and Shri F. A. vandrevala came to an end, who were appointed for a period of three years with effect from July 10, 2007 to July 9, 2010 and accordingly, they ceased to be Directors of POWERGRID. However, they were reappointed by goI vide order dated october 19, 2010 w.e.f. July 10, 2010 for a period of one year. The tenure of two non-official Part-time Directors Shri Ashok Khanna and Shri S.CTripathi came to an end on April 24, 2011 and they ceased to be Directors. The Board wishes to place on record its deep appreciation for the valuable services rendered by Shri Ashok Khanna and Shri S.CTripathi, during their association with POWERGRID. Shri J. Sridharan, Director (Finance) superannuated on April 30, 2011 and ceased to be Director on the Board of POWERGRID. The Board also wishes to place on record its deep appreciation and gratitude for the invaluable contribution and unstinted support to the Company given by Shri J. Sridharan during his tenure as Director (Finance).

Further, the tenure of four non-official Part-time Directors - Dr. P. K. Shetty, Dr. A. S. Narag, Shri Anil K. Agarwal and Shri F. A. vandrevala came to an end on July 9, 2011 and they ceased to be Directors. The tenure of Mrs. Sarita Prasad, non official part time Director came to an end on August 3, 2011. The Board wishes to place on record its deep appreciation for the valuable services rendered by Dr. P. K. Shetty; Dr. A. S. Narag; Shri Anil K. Agarwal; Shri F. A. vandrevala; Shri Ashok Khanna; Shri S. C. Tripathi; and Mrs. Sarita Prasad.

Shri R. T. Agarwal taken the charge of Director (Finance) with effect from July 29, 2011.

In accordance with the provisions of Section 255 and 256 of the Companies Act, 1956 read with Article 31(c) (iii) of the Articles of Association of the Company, Shri v. M. Kaul, Director and Shri Rakesh Jain, Director shall retire by rotation at the Annual general Meeting of your Company and being eligible, offer themselves for re-appointment.

Acknowledgements

The Board of Directors, with deep sense of appreciation, acknowledges the guidance and co-operation received from govt. of India, particularly Ministry of Power, Ministry of Finance, Ministry of Home Affairs, Ministry of External Affairs, Ministry of Statistics and Programme Implementation, Ministry of Environment & Forests, Central Electricity Regulatory Commission, Appellate Tribunal for Electricity, Central Electricity Authority, Planning Commission, Department of Public Enterprises, Regional Power Committees, and other con cerned govt. departments/agencies at the Central and State level as well as the Securities and Exchange Board of India, National Stock Exchange of India Ltd., and Bombay Stock Exchange Ltd., without whose active support, the achievements by the Corporation during the year under review would not have been possible.

Board's special appreciation and thanks are due to our valued customers, various State power utilities and other clients, who have awarded various consultancy works and reposed faith in Company's capability to handle them. The Board also appreciates the contribution of contractors, vendors and consultants for successful implementation of various projects by the Company. The Directors take this opportunity to thank the Principal Director of Commercial Audit and Ex-officio Member Audit Board- III for the cooperation during the year. Directors also acknowledge the valuable suggestions and guidance received from the Statutory Auditors during the Audit of Accounts of the Company for the year under review. The Board also conveys its sincere thanks to various national/international financial institutions/ banks/ credit rating agencies for their timely assist ance, continued trust and confidence reposed by them on POWERGRID.

we have achieved a great deal this year and none of it would have been possible without the skills and dedication of each member of POWERGRID family at all levels. I would like to thank the Executive team for its strong leadership and all our employees for their commitment and enthusiasm to achieve our aim to be the world's premier transmission network utility.

For and on behalf of the Board of Directors

Place: New Delhi (s. K. Chaturvedi)

Date: 04.08.2011 Chairman & Managing Director


Mar 31, 2010

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

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

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

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

220/110/20 kV Chimtala Substation, in Kabul, Afghanistan along with the Pul-e-Khumri - Kabul 220 kV Double circuit transmission line completed by POWERGRID last year under the consultancy assignment, was inaugurated by His Excellency Mr. Hamid Karzai, the President of Islamic Republic of Afghanistan in May, 2009. With the commissioning of Chimtala Substation and associated transmission system in Afghanistan, power flow to Kabul has commenced from neighboring country Uzbekistan. It was one of the largest infrastructure projects ever undertaken in Afghanistan and through this system, for the first time in decades, Kabuls four million people can enjoy the benefits of a stable source of electricity. Certificates of appreciation were given by Honble Minister of Energy and Water, Afghanistan in recognition of the difficulties and challenges involved in the project implementation and contributions made by POWERGRID.

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

Your Company has featured in the list of top 250 global energy companies compiled by Platts, a leading provider of energy and commodities information and named in the 20 fastest-growing Asian companies.

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

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

FINANCIAL RESULTS

Rs. Crore

2009-10 2008-09

Turnover * 7504 6139

Gross Margin 6247 5037 Less: Depreciation 1980 1094

Prior period Adjustment 96 70

Deferred Revenue Expenses written off 2 2

PBIT 4170 3871

PBT 2626 2229

PAT 2041 1691

APPROPRIATIONS

Transfer to Bonds Redemption Reserve 630 491

Interim Dividend 210 210

Proposed final Dividend 421 295

Tax on Interim Dividend 36 36

Provision for Dividend Tax on proposed final dividend 70 50

Transfer to General Reserve 800 700

Transfer to Self Insurance Reserve 38 35

Transfer to LDC Reserve 16 -

Transfer to CSR Activities Reserve 8 -

* Excluding Foreign Exchange Rate Variation.

OPERATIONAL EXCELLENCE

Over a decade and half of excellent business operations, your Company has developed strong in-house expertise in all specialised areas of power transmission business and has carved a niche for itself amongst the largest transmission utilities in the world. As on 31st March, 2010, your company owns and operates a transmission network of about 75,290 ckt kms of inter-State transmission lines, 124 nos. of EHV & HVDC substations with transformation capacity of about 83,100 MVA and about 50% of total power generated in the country is wheeled over it. For the year, availability of 99.77% was achieved for the transmission system, highest ever in the history of the company, and number of tripping per line was contained at 2.07 against MoU target (Excellent) of 2.60.

To enhance the efficiency of its operations, State-of-the-art O&M measures like Hotline Maintenance, Emergency Restoration System and the cleaning of insulators through helicopters was adopted. Equipment health is being assessed periodically using "Condition Assessment Techniques" with sophisticated tools. All shut down and non shut down maintenance activities are planned in advance and an "Annual Maintenance Plan" is worked out for each and every asset. There are well defined levels for approval of test results depending on their importance and criticality. As a result, your company has been able to display its capability in consistently maintaining the high transmission system availability, comparable with the best international standards. In addition, State-of-the-art "Emergency Restoration System" were also deployed for restoration of collapsed transmission lines in minimum possible time. Further, appropriate initiatives have been taken up to replace ageing transmission assets as per prevalent CERC tariff regulations.

O&M activities of your company are ISO certified and systems and procedures are being modified periodically to keep abreast with the latest technology. Documents of maintenance schedule, procedures and formats have been standardized for all assets. All substations and line offices can access these documents through Companys website portal. Periodical reviews are conducted at Substations and Line offices to evaluate implementation of the systems and procedures.

As on date about 16 sub-stations are operated remotely. Keeping in view the successful experience of remote operation and international trend of unmanned sub-stations, actions are being initiated to establish "National Transmission Management Centre" to control & operate most of the sub-stations remotely and "maintenance hub" to cater to the maintenance requirements of nearby group of sub-stations rather than placing staff in each sub-station for optimal utilisation of manpower & also to reduce the response time in case of fault.

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

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

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

QUALITY MANAGEMENT

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

During the year, Quality Management System (QMS) of your Company was reviewed and based on evaluation of implementation of the latest systems and procedures the revised certification with validity upto June, 2013 was obtained. Today, your company stands certified with Integrated Management System (IMS) as per Publicly Available Specification, PAS 99:2006 integrating requirement of ISO 9001:2008 (Quality), ISO 14001:2004 (Environment) and OHSAS 18001:2007 (Occupational Health & Safety Management System). POWERGRID also stands audited for Social Accountability System, SA 8000:2008 for all its establishments. With the accreditation of ISO 9001:2000 for all Regional Load Dispatch Centres (RLDCs) during the last year, QMS certification for all establishments of POWERGRID has been completed.

GRID MANAGEMENT AND OPEN ACCESS

Optimum utilization of generation resources requires development of a strong transmission network and its implementation has been taken up by your Company in a phased manner. Planned rapid expansion of regional grids and their integration to form National Grid poses great challenges in Grid Operation & Management. Toward this, various inter-regional links have been implemented matching with generation capacity addition programme and growing power demand in the country. Central Sector Generating Stations have not faced any generation evacuation problem on account of transmission constraints during the year, as the strong and robust transmission network set up by your Company is there to take care of evacuation related issues.

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

Development of various inter-regional transmission links, strong transmission network and modernised Regional Load Despatch Centers (RLDCs) have also facilitated manifold growth in inter-regional power exchanges on real-time basis. During FY 2009-10, about 52,000 MUs of inter-regional energy transfer was facilitated across the country as compared to about 46,000 MUs during FY 2008-09. The increased inter-regional power exchanges have helped in meeting more demand in energy deficit regions besides achieving overall economy.

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

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

Inter-State power exchange in an Open Access environment:

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

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

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

PROJECT IMPLEMENTATION

Your Company gives utmost priority for implementation of its projects with economy and within stipulated time frame to be eligible for additional return on equity of 0.5% as per the prevailing CERC tariff norms and to derive maximum economic benefits. Your companys advanced and cost effective Integrated Project Management and Control System (IPMCS) for total project review and monitoring has been contributing significantly. Project implementation activities involves total project review and monitoring including Standardisation of Designs, Project Review Meetings (PRMs) at regular intervals through video conferencing, pre-emptive measures and advance actions on various project linked activities such as land acquisition, survey and soil investigations, tender activities, funding tie-up, etc. in parallel with project investment approval process.

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

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

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

FINANCIAL MANAGEMENT

The year 2009-10 has been another year of impressive financial performance for your Company, with a Turnover of Rs. 7504 Crore and Net Profit of Rs. 2041 Crore as compared to Rs. 6,139 Crore and Rs. 1,691 Crore respectively during FY 2008-09, an increase of 22.2% and 20.7% respectively. The Gross Asset Base of the Company has been enhanced to Rs. 43,202 Crore in 2009-10 from Rs. 40,319 Crore in 2008-09.

Dividend Payout

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

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

Directors Responsibility Statement

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

- In the preparation of the Annual Accounts, the applicable accounting standards have been followed;

- The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

- The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

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

XI Plan Investment programme

Government of Indias mission of Power for All by 2012 envisages sufficient, reliable & quality power to all at optimum cost, and, inter-alia achieving GDP growth rate of 8-9%. The gigantic task can only be accomplished with matching investments in the power sector. For development of inter-State transmission system, an investment of about - 55,000 Crore is planned by the Company during XI Plan for further developing National Grid including inter-regional transmission systems, system strengthening schemes, transmission system for evacuation of power from generation projects under central sector and Ultra Mega Power Projects (UMPPs). In fact, during first 3 years of XI plan, investment of - 25,440 Crore (46% of planned investment) has already been made. For the FY 2010-11, an outlay of - 12,900 Crore has been kept. Balance expenditure of about - 16,700 Crore is envisaged to be made in FY 2011-12 based on the generation capacity addition.

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

COMMERCIAL PERFORMANCE

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

DEVELOPMENT OF NATIONAL GRID

Your company is playing an important role in development of National Grid for optimum utilisation of generation resources and for meeting power demand in various parts of the country. As on March 31, 2010, National Power Grid with an inter-regional power transmission capacity of about 20,800 MW has been established which includes one of the largest synchronous grid in the world with installed generation capacity of over 1,15,000 MW. Four major regional power system grids, namely Northern, Eastern, North-Eastern & Western are presently operating at same frequency in synchronous mode. Southern Region is connected to this grid through various HVDC links. Substantial amount of power is being exchanged across the country. In fact, establishment of National Grid is also facilitating transfer of short term surplus power from any place to any other place in the country from generation under State and Private sector as well.

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

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

TECHNOLOGY UP-GRADATION, RESEARCH & DEVELOPMENT

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

Technology upgradation is a continuous process. Liberalisation & globalisation have led to greater competition from both domestic as well as international companies. This has reinforced the need for technology upgradation to attain international levels of competitiveness and to be able to offer contemporary levels of technology. In order to meet these objectives, the development effort is being pursued by entering into collaboration with reputed foreign manufacturers, forming joint ventures, in-house R&D efforts and through interaction with various research organisations.

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

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

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

The latest in the transmission business is the use of Smart Grid technology which envisages providing choices to each and every customer for deciding the timing and amount of power consumption based upon the price of the power at a particular moment of time. Your Company is taking leadership initiative for implementation of Smart Grid Technology in the country for effective transmission & distribution of power. Two pilot projects for transmission system of Northern & Western Region Power System have already been undertaken which involves deployment of Synchro Phasor based WAMS (Wide Area Measurement System) Technology. Your companys initiative would prompt other utilities for similar action and we are ready to provide necessary help to all these organizations.

A two day international workshop on Smart Grid was organized by your company in January, 2010 for all the Power Utilities of the country at the Gurgaon Office in which technological and strategically important issues involved in implementation of the smart grid were discussed. The workshop was inaugurated by Honble Union Minister of Power, Shri Sushilkumar Shinde. Senior officials of Ministry of Power, Central Electricity Authority, State Power utilities and Industry experts from India, and abroad, etc. have participated in the workshop.

PERFORMANCE IN TELECOM

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

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

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

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

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

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

BUSINESS DEVELOPMENT & CONSULTANCY

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

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

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

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

CONTRIBUTION IN DISTRIBUTION REFORMS

A well planned generation system, integrated transmission system & reliable distribution system penetrated through remotely located villages & habitations is the need of the hour. You can proudly claim that your Company is playing a significant role in carrying forward the distribution reforms through Govt. of Indias sponsored Accelerated Power Development & Reforms Programme (APDRP) and Rajeev Gandhi Grameen Vidyutikaran Yojna (RGGVY) schemes in various parts of the Country. These schemes are aimed at bringing qualitative improvement in distribution sector and expected to achieve reduction of AT&C losses.

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

E-GOVERNANCE:

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

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

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

Major IT endeavours during the year include the following:

- IT Infrastructure consolidation and strengthening

- Facility Management System initiatives for maintaining IT infrastructure Nationwide

- Formulated the Knowledge Management Policy & started IT enabled initiatives

- Initiated implementation of Crisis Management Plan for Countering Cyber attacks and Cyber Terrorism and the draft Crisis Management Plan prepared as per CERT-In guidelines

- Proto testing of Enterprise Project Management (EPM) application for transmission projects

- Strategic Planning for EHV infrastructure Asset Management

- Developed e-Performance Management System

- Initiated activities for E-procurement.

ENVIRONMENTAL AND SOCIAL SAFEGUARDS MANAGEMENT

Increasing threat of climate change and environmental degradation due to increasing pollution and growth is a major area of concern today. You must be proud to know that your company, with a goal of achieving sustainable development of the power sector in the country has taken proactive measures for improvements in the areas of Environment Management. POWERGRIDs contribution towards environmental degradation is almost negligible. Transmission projects ^^ are non-polluting in nature and environmentally clean and dont generate solid waste.

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

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

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

The results achieved by your company towards conservation of RoW are praiseworthy. With the development of innovative tower designs, the RoW requirement has been reduced from 85 m to 64 m for 765 kV and from 52 m to 46 m for 400 kV D/c AC line. You would be glad to know that more than a lakh sq. meters of precious RoW was saved by constructing 765 kV lines by your company till March, 2010. Apart from this, installation of Pole type structures for 400 kV in urban areas such as Dadri-Ballabhgarh transmission line has not only reduced the RoW, but were more aesthetic compared to conventional lattice type structures.

CORPORATE SOCIAL RESPONSIBILITY

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

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

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

CSR initiatives undertaken in different villages around our establishments have contributed tremendously and earned the goodwill of the local inhabitants. The work done by the Company has been appreciated by one and all. This has also played a pivotal role in improving the quality of life of local people by enabling them to use the physical infrastructure established by the company and bringing the marginalized people into the mainstream of development.

EMPLOYEES, OUR ASSESTS FOR SUCCESS

Human Resource Development

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

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

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

Your Companys Human Resources function took a number of initiatives during the year in response to intensifying competition for trained manpower. During the year, to nurture and develop the existing manpower, a series of long- duration training & development interventions – both functional and developmental – were carried out with focus on building leadership capabilities, strategic orientation and skills to suit new businesses.

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

Your Company has collaborations and strategic alliances with prominent management institutes such as IIM, IIT, IPE, MDI, XLRI, ECSI, NPTI etc. as a testimony of successful partnership between utility and academic institutions for achieving operational and professional excellence. At the same time, the hand-on training programmes being conducted at manufacturers premises such as CGL, BHEL, ABB, AREVA etc. are the excellent examples of fruitful collaboration between the utility and the industry.

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

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

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

Employee welfare

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

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

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

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

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

Citizens charter

Your Company has formulated its Citizens Charters providing a visible front of its objectives, mission, commitments, terms of service and its obligation to various stakeholders. Information about its schemes, policies, project plans of the Corporation and issues of general interest to stakeholders is available in the offices. This information is also available on Companys web site and is updated time-to-time. This provides information on schemes, plans and practices to users outside the organisation as well as information about accessing the services.

Implementation of official language

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

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

Renewed commitment to transparency

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

Special emphasis has been laid on the preventive aspect of vigilance. As part of this initiative, process online inspections have been devised to inspect ongoing critical works at the time of execution by the vigilance executive for shortcomings, if any. During this period, a large number of inspections have been conducted both by Vigilance Executives as well as the CTEs Organisation which also includes process online inspections conducted during this period in the regions. On the basis of these inspections, adequate cost compensation is affected for not conforming to technical specifications. Besides this, 93 CTE paras were also settled during the year.

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

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

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

MANAGEMENT DISCUSSION AND ANALYSIS

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

PARTICULARS OF EMPLOYEES

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

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

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

COMPTROLLER AND AUDITOR GENERALS COMMENTS

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

CORPORATE GOVERNANCE

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

BOARD OF DIRECTORS

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

The tenure of four non-official Part-time Directors on the Board of your Company - Dr. P. K. Shetty; Prof. A. S. Narag; Shri Anil K. Agarwal; Shri F. A. Vandrevala appointed for a period of three years with effect from the date of appointment - 10.07.2007 completed on 09.07.2010 and they ceased to be Directors of POWERGRID. The Board wishes to place on record deep appreciation for their invaluable contribution and support during their association with the Company.

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

ACKNOWLEDGEMENT

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

Your Directors take this opportunity to thank our valued customers, various State power utilities as also to valued consultancy clients, for providing us with various consultancy works and reposing faith in our capability to handle them. The Board also conveys its gratitude to the shareholders, various International and Indian Banks/ Multilateral Agencies/ Financial Institutions/ Credit rating agencies for the faith they have shown in POWERGRID. Special thanks is reserved for C&AG and the Statutory Auditors for their constructive suggestions throughout the year.

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

For and on behalf of the Board of Directors

Place: New Delhi (S. K. Chaturvedi)

Date: 11.08.2010 Chairman & Managing Director


Mar 31, 2003

I am privileged to present on behalf of the Board of Directors, the 14th Annual Report of Power Grid Corporation of India Limited (POWERGRID), together with the Audited Statements of Accounts for the financial year 2002-03. It has been another eventful year for your company, which can be appreciated from the score sheet presented below.

Project Implementation

POWERGRID continued to implement its projects with economy and within stipulated time frame to derive maximum economic benefits. Its advanced and cost effective Integrated Project Management and Control System (IPMCS) for total project review and perpetual monitoring, has contributed significantly. I am happy to report that during the financial year 2002-2003, POWERGRID commissioned projects worth Rs. 5,300 crore, highest so far in any one year in the POWERGRIDs history. These projects were completed at a cost lesser by Rs. 850 crore than the Govt. of India approved cost. Major transmission projects that were commissioned are, 500 MW Sasaram HVDC back-to-back, +/- 500 kV/2000 MW Talcher-Kolar HVDC Bi-pole, 400 kV D/C Kolhapur-Mapusa, 400 kV S/C Jamshedpur-Rourkela, 400 kV D/C Raipur-Rourkela, and 400 kV D/C Vijayawada-Nellore-Chennai transmission system. The company established eleven (11) new 400/220 kV EHV AC sub-stations and HVDC stations in the year, besides extension of many existing sub-stations.

Operations and Maintenance

During the year, about 6,000 Ckt. Kms. of transmission lines were added enhancing its network size to 46,245 Ckt. Kms., consisting of 563 Ckt. Kms. of 800 kV, 4,368 Ckt. Kms. of HVDC, 31,952 Ckt. Kms. of 400 kV, 7,277 Ckt. Kms. of 220 kV, 2,048 Ckt. Kms. of 132 kV & 37 Ckt. Kms. of 66 kV transmission lines. This extensive transmission network along with 79 substations with transformation capacity of 44,736 MVA was maintained at an average systems availability of 99.39 % exceeding the target level of 98.25% set for the year.

Financial Management

The company registered a Turnover of Rs 2532.74 crore and earned a Net profit (After tax) of Rs. 642.59 crore thereby recording a Net profit margin of 25.37%. The companys Gross asset base and paid-up capital at the end of the financial year 2002-03 stood at Rs. 18,943. crore and Rs. 3,074 crore respectively as against Rs. 13,777 crore and Rs. 3,068 crore at the end of last financial year. The Debt to Equity ratio at the end of the financial year was 61.39 with scope for further leveraging of the capital.

Statutory Auditors, in their Audit Report have qualified the provision of depreciation on fixed asset at the rates specified in the tariff notification issued by CERC instead of rates notified Under the Electricity (Supply) Act, 1948 resulting in understatement of depreciation and overstatement of profit for the year by Rs. 461 crore.

The above Auditors comment is due to the reason that the rates of depreciation notified the Govt. of India u/s 25A of the Electricity (Supply) Act,1948 have not so far been amended to correspond

to the CERC rates. The charse of depreciation considered in the Profit & Loss A/C is at the rates notified by CERC for recovery of depreciation included in the transmission charges and maintaining the earlier principle, there is no overstatement of profits.

The significant changes in the accounting policies are given below:

I. ULDC Assets have been commissioned during the financial year in Northern and Southern Regions. POWERGRID has also constructed ULDC assets for SEBs, Tariff of which is being recovered as Levelised Tariff. These transactions are considered as finance lease in terms of AS-19 issued by ICAI. The following new accounting policy in respect of treatment of lease rentals from investment in State Sector ULDC assets in the books of POWERGRID has been made:

a) State Sector ULDC assets leased to the SEBs are considered as Finance Lease. Net investment in the leased assets is accounted as lease receivables under Loans and Advances.

b) Finance income on leased assets is recognised based on a pattern reflecting a constant periodic rate of return on the net investment.

c) Exchange Rate Variation (ERV) on foreign currency loans relating to leased assets is adjusted to the amount of lease receivables and is amortised over the remaining tenor of lease. ERV recovery (as per CERC norms) from the constituents is recognized net of such amortised amounts.

II. Surcharge which was hitherto being accounted for on receipt basis is now accounted for on receipt/certainty of receipt. This change in policy has resulted in increase in other income and profit by Rs.192.29 crore.

As per the terms of the tripartite agreement signed by State Govts. (on behalf of SEBs), Ministry of Finance and RBI, all surcharge and interest payable by the SEBs on the overdues of CPSUs shall be written off to the extent of 60%. Out of Surcharge of Rs. 192.29 crore accounted for during the year, Rs. 188.78 crore pertains to period covered by tripartite agreement and is net of the waived amount of Rs. 221.85 crore. However, the waived amount was never accounted for as income in any of the earlier years as per the accounting policy of the Corporation.

Dividend

Interim dividend to the tune of Rs.50 crore has been paid in March, 2003 and the Directors have recommended a further dividend of Rs.50 crore for the financial year 2002- 03 in addition to the interim dividend.

Transfer of Profit to Reserves

Appropriation of profit towards General Reserve amounting to Rs.500 crore and Rs.115.25 crore towards Redemption Reserve has been proposed.

Directors Responsibility Statement

- In the preparation of the Annual Accounts, the applicable accounting standards have been followed.

- The Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.

- The Directors had taken proper and sufficient care in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities,

- The Directors had prepared the annual accounts on a going concern basis.

Capital Investment and Fund Mobilisation

The company undertook a capital investment of Rs. 2,561 crore during the financial year 2002-03 and the required funds were tied up from internal resources, bonds/term loan from the domestic sources, grant from Government of India and ECB/Suppliers Credit. A suppliers Credit from Skandinaviska Enskilda Banken, Sweden amounting to SEK 345 million was tied up during the financial year for financing the 1x500 MW Back to Back HVDC project at Vizag associated with East-South Interconnector-lll project. Rs. 810 crore was mobilised at competitive rates from the domestic capital market by issue of bonds directly on private placement basis as well as through long term loans. In order to tap the lower interest rates prevalent in the international as well as domestic markets, Foreign loans amounting to approximately GBP 33 million and domestic loans amounting to Rs.250 crore were refinanced during the financial year 2002-03 resulting in net savings of about Rs.37 crore in the interest outgo during the residual life of the loans.

Following up on the refinancing initiative, Govt loans amounting to Rs. 699 crore have been refinanced in July, 2003 by raising bonds directly from the domestic capital market on private placement basis at competitive interest rate resulting in savings of Rs. 235 crore in the interest outgo during the residual life of the loans.

Commercial Effectiveness

The outstanding dues of CPSUs in power sector were securitised in line with Alhuwalia Committee Report by signing the Tripartite Agreement. This should facilitate liquidation of past dues and timely payment of the current dues. In pursuance of the above, a total amount of Rs. 2029.77 crore (including a Surcharge of Rs. 161.37 crore) have been reconciled with all the States for issuance of bonds by RBI under securitisation scheme to settle all the old outstanding dues up to 30.09.2001. Twenty Seven States have signed the Tri-partite agreement against which Rs. 1833.96 crore (including a Surcharge of Rs. 115.38 crore) stands covered for issuance of bonds. Remaining two States shall be signing the Agreement shortly. Out of the twenty seven states, who have signed the agreement, twenty

six States have already signed notification and authorised RBI to issue the bonds. In 1 st phase, the bonds related to 17 States amounting to Rs 1274.38 crore have been received on 1st September, 2003 and Bonds from the other nine States are also being received shortly.

Based on the all round performance during F.Y 2002- 03, POWERGRID Is once again poised to achieve the highest rating i.e. "Excellent" under the MoU signed with Ministry of Power.

National Grid

In line with the plan to establish an integrated National Power Grid in the country by the year 2012 with inter- regional power transfer capacity of 30,000 MW various inter-regional transmission schemes were undertaken.

The first phase of National Grid has been accomplished with commissioning of Sasaram HVDC B/B Project in Sept, 2002, 3 months ahead of schedule and at a cost lesser by Rs. 75 crore from the Government approved cost. Capacity addition for the second phase of National Grid has also commenced in F.y. 2002-03, with commissioning of 2000 MW Talcher-Kolar HVDC bipole link in September, 2002 and 400 kV D/C Raipur- Rourkela link in Mar03, enhancing inter-regional transfer capacity to 8000 MW from almost non-existent level five years ago. The implementation of 2000 MW, 1400 kms. long Talcher- Kolar HVDC project has the distinction of being the longest HVDC bipole link in Asia. This project was not only commissioned 9 months ahead of schedule but also at a cost, which is Rs. 700 crore less than the Govt. approved cost of Rs. 3,865 crore. Completion of Raipur-Rourkela 400 kV D/C AC interconnection between Eastern and Western Region has led to creation of a synchronised regional grid covering North-Eastern /Eastern/Western Regions with a total installed capacity of more than 50,000 MW stretching from Arunachal Pradesh in North Eastern Region to Goa in Western Region, traversing a distance of more- than 2500 Kms.

As a result of the above endeavours, during the year 2002-03, POWERGRID facilitated inter- regional power transfer of 13,000 MU valued at Rs. 2000 crore, about 40% higher compared to that achieved during FY 2001 -02. This power would have remained bottled up without the facilities created by POWERGRID. The power transfer has taken place mostly from power surplus Eastern Region to other power deficit regions. This has helped exporting region by way of reduced charges and importing region by mitigating the power shortage. Thus enhancement of inter-regional power transfer added huge economic value.

Encouraging Grid Discipline

Close on the heels of commissioning of Northern Region and Southern Region ULDC schemes, POWERGRID has test-charged the North-Eastern Region ULDC scheme during F.Y 2002-03. These complex projects involving the state-of-the-art technology have resulted in real time monitoring and control of the grid to enhance its reliability, stability, and security. Further, POWERGRID, in its efforts to ensure delivery of quality power and to encourage healthy grid behaviour, facilitated implementation of Availability Based Tariff (ABT) in all the regions viz. Western Region w.e.f. 1.7.2002, Northern Region w.e.f. 1.12.2002, Southern Region w.e.f. 1.1.2003 and Eastern Region w.e.f. 1.4.2003. ABT has a built in commercial mechanism, to reward proper grid behavior Commissioning of ULDC and implementation of ABT has significantly improved the vital grid parameter like grid frequency, which was hovering between 48 Hz and 52 Hz most of the time in the previous years, is now generally within the specified band of 49.0 Hz to 50.5 Hz. The voltage profile has also improved. Such improvement has not only increased life expectancy of the equipment

involved in power generation/Transmission/distribution but also of electricity driven equipments/ appliances at consumers end. Implementation of ABT has also facilitated reduction in cost of delivered power through merit order dispatch.

New Initiatives

Projects

In line with the companys ambitious expansion plan, new projects, worth about Rs. 3700 crore, have been taken up for implementation in year 2002-03, which include, System strengthening in ER & NR, Series Compensation on Raipur-Rourkela Line, Transmission System associated with Chamera-ll Hydro-Electric Project (HEP), Tala-Siliguri Transmission System, Transmission System associated with Dulhasti HEP, Series Compensation on Nagarjuna Sagar-Cuddapah & Gooty-Neelamangala 400 kV line, Transmission System associated with Extension of Tarapur Atomic Power Plant, Transmission System associated with Rihand-ll Super Thermal Power Project and Telecom Diversification projects.

In Pursuit of Latest Technology

Keeping pace with the advancement of technology in the sector elsewhere in the world, POWERGRID has attached prime importance to Technology upgradation. It is working in collaboration with research institutions, academic institutions and manufacturers, and is thus enhancing its in-house capabilities for design and engineering of state-of-the-art transmission systems. It has accorded major thrust in technologies like Flexible AC Transmission System (FACTS), High Temperature Endurance Conductors, Compact Towers, alternate type of tower structures like Guyed Structures, Pole Structures etc. In the field of operation and maintenance, POWERGRID is employing upto date technologies like Hot Line maintenance, Hot line washing, Tuning of Power System Stabilizer (PSS), Removal of closing resistors in the Circuit Breakers, Equipment Condition Monitoring and Residual life Assessment etc to improve the reliability, availability and security of transmission system.

Strategic Alliance

Facilitating infusion of Private capital

JV Route

POWERGRID, in its attempts to encourage private participation in the transmission sector has joined hands with private player, Tata Power for implementation of major transmission lines associated with Tala HEP in Bhutan, costing about Rs. 1,100 crore. The project with route length of around 1200 Kms. covers high capacity transmission lines from Siliguri (West Bengal) to Mandola (Uttar Pradesh) near Delhi constituting a major inter-regional component under second plan of National Grid. Kicking off the Joint venture, Tata Power has already picked up the 51 % stake in the Shell Company viz. Tala - Delhi Transmission Limited. This shall be for the first time in the history of Indian Power System that power transmission line shall be built with private participation. Further, such a JV shall pave the way for more such JVs thereby supplementing POWERGRIDs resources and efforts and facilitate MOPs initiative for private sector participation.

IPTC route

In addition to JV route, POWERGRID had also identified 400 KV D/C Bina-Nagda- Dehgam Transmission line with an estimated cost of about Rs. 450 crore as the pilot project for implementation by an Independent Power Transmission Company, which shall be privately wholly owned. Evaluation of the proposals submitted by the bidder (only one bidder) is underway. This process is being carried out under regulatory supervision.

Consultancy Business

There was a quantum jump this year in booking consultancy assignments and revenue realisation besides assisting SEBs. POWERGRID has secured 27 new consultancy assignments with a consultancy fee component of more than Rs. 155 crore, which shall accrue over a period of three years. The corresponding project cost is more than Rs. 1,200 crore.

Some of the major assignments include turnkey execution of 400KV D/C Vishnuprayag - Muzaffarnagar Transmission system with an estimated project cost of Rs. 323 crore on behalf of UPPCL, turnkey execution of various sub-transmission improvement projects in the State of Bihar, IT consultancy project for Delhi Transco.

POWERGRID could also make international foray by booking first international consultancy order from M/s Bhutan Telecom for turnkey execution of Optical Fibre Ground Wire and associated terminal equipments on the existing lines in Bhutan and technical consultancy for execution of National Load Despatch Centre in Bhutan.

Capitalisms on New Business opportunities

Convergence with Telecom

To strengthen its position in the competitive telecom business, POWERGRID commissioned Delhi-Lucknow-Mumbai telecom link (2,600 Kms.) in a record time of 9 months. The Delhi-Lucknow-Mumbai telecom link was inaugurated by Honble Prime Minister at Lucknow through Video Conferencing with Honble Chief Minister of Delhi on Delhi side and Honble Govenor of Maharashtra on Mumbai end. Agreements were signed with leading telecom players like VSNL, Data Access, Daksh, Convergys, Bharti Telenet, Spectranet, Wipro Spectramind etc for using POWERGRIDs telecom network. With few links, the company generated revenue of about Rs. 8.3 crore from its telecom operation during F.Y 2002-03.

A major boost to POWERGRIDs Telecom venture has been received with the GOI approval for the implementation of POWERGRIDs nationwide telecom network of about 14000 Kms. at an estimated cost of Rs. 934 crore. This network shall be operational by the year 2004 and shall interconnect about 60 cities including all the State capitals.

Contributing to Distribution Reforms under APDRP

Under Accelerated Power Development & Reforms Program (APDRP) of Ministry of Power, POWERGRID has been assigned the role of Advisor-cum-Consultant (AcC) to lend its managerial and technical expertise for developing 105 Distribution Circles. This includes 37 Circles, where POWERGRID has a direct role and in the remaining Circles which are being developed by NPC, WAPCOS, ERDA and SEBs, the company is acting as the co-ordinator. At the end of the first phase of the APDRP Program, projects worth Rs. 16,000 crore have been approved, which includes the projects worth Rs. 5587 crore, where POWERGRID is associated.

In addition, POWERGRID has also undertaken implementation of projects under APDRP on turnkey and bilateral basis in the States like Goa & Bihar. Major projects taken up for implementation are Renovation and Modernisation of Distribution systems in the circles

of PESU (East), Patna and Muzaffarpur in Bihar and North Goa, implementation of Rural Electrification Schemes in about 2600 villages in the districts of Vaishali and Muzaffarpur in Bihar.

Leveraging Human Capital to achieve excellence

POWERGRID believes that its human resource consisting of about 7000 employees is the most important asset and accordingly, its policies are focused on development of human potential through skill upgradation, career enhancement and job rotation to achieve organisational objectives. An effective work culture has been established in the organisation through empowerment, transparency, decentralisation and innovative practice of participative management through Open House interaction. POWERGRIDs growing productivity through an average annual growth of about 44% in the asset base of the company is witnessed with a manpower growth of only about 2.4% per annum.

Human Resource Development (HRD) is considered as a strategic function in POWERGRID. During the year, the company has designed and executed business aligned management development, technical training and competency enhancement programmes on its own and also in collaboration with reputed management development institutes such as IIMs, XLRI, ASCI, MDI and technical training institutes that include NTs, NPTI, Hotline Training Center. The company imparted training to 1602 employees during financial year 2002-03, surpassing the MoU target of 1,500.

Providing significant improvement in the quality of work environment, POWERGRID established a state-of-the-art Corporate Office building named "Saudamini" in Gurgaon near Delhi with modern features like Automated Controls, Rain Water Harvesting and Outdoor Lighting using Solar Energy etc. Further, to maintain nutritional standards, a dining facility has been created which is common for all the levels of employees including the Board Members. Thus, it is also facilitating in building up a sense of brotherhood and belongingness.

Implementation of Rajbhasha

In pursuance of Govt. of Indias policy to promote extensive use of Rajbhasha in the corporation, POWERGRID has notified in the gazette for using Hindi in all its official works. During the year, the Parliamentary Committee on Rajbhasha visited various establishments of the corporation and found implementation of Rajbhasha to be highly satisfactory. The efforts made by POWERGRID in promoting the implementation of Rajbhasha have been applauded in many forums, which is reflected in POWERGRID bagging the Rajbhasha Shield of Ministry of Power. About 400 employees have been imparted training in subjects

related to Rajbhasha and a large number of employees have been imparted training in Hindi software.

E-Governance

POWERGRID is systematically developing competency to deploy Information Technology for efficient and effective discharge of its functions. Some of the salient achievements are Web based Enterprise wide Information Portal as a step towards E-Governance, State-of-the-Art Multi Locational Video Conferencing System, Inspection Management System on internet based B2B platform and Enterprise wide Converged IT and Communication System. The Video Conferencing is utilised extensively for various meetings and follow up actions leading to substantial monetary savings and curtailing travelling time of senior executives.

Management of Environmental and Social Issues

Creating Sustainable Corporate Values

POWERGRID, being in the infrastructure sector, is in enviable position to directly contribute to the society. Power, today drives all the economic activities in the society. POWERGRID, as the provider of inter-state transmission facilities and as operator of the countrywide electrical grids, has a pivotal role in countrys power sector.

The sustainability of corporate values is proven by the fact that they are in consonance with the values cherished by the society. The objectives of the company are in alignment with the requirements of its stakeholders. End results of such value system are witnessed in all-round performance of the company, which has surpassed the targets. The company continues to make conscious efforts not only for sustaining such value-system but also inculcating desirable values.

Concern for Environment

Impact of POWERGRIDs business on environmental degradation is almost negligible, however, it believes that conservation and management of the environment has to remain the integral and essential part of economic development. Following the well established principles of environmental management, POWERGRID has evolved its own Environmental and Social Policy & Procedures (ESPP) in consultation with a wide section of people to take ample care of environmental and social issues arising out of its activities. This ESPP document, which has been inducted for application in all of its projects, helps to address all environmental and social issues at appropriate time and in appropriate manner.

POWERGRID has been successfully implementing the ESPP through in-house designing of Rehabilitation Action Plan (RAP) and Environment Assessment Management Plan (EAMP). All projects were implemented according to these plans. These plans are executed at site and monitored

not only at the highest level of the hierarchy but also by multilateral funding agencies like WB & ADB.

Emergency Restoration

POWERGRID, in conscious endeavours to discharge its broader social responsibilities, has taken many steps which include faster restoration of transmission system belonging to State utilities which are damaged during Natural calamities like flood, earthquake, cyclones, etc

Citizens charter

POWERGRID formulated its Citizens Charter providing a visible front of its objectives, mission, commitments, terms of service and its obligation to the stakeholders. This is also intended to provide all information on schemes, plans and practices to users outside the organisation as well as information about accessing the services.

Social justice

The Corporation has faithfully implemented the Govt. directives to take care of the interests of Scheduled Castes, Scheduled Tribes and other Backward Classes. For monitoring the same, POWERGRID has nominated Liaison Officers in the Corporate Centre and Regional Establishments. Appropriate funds have been earmarked for the welfare of the SC/ST community and a number of welfare schemes have been implemented in the SC/ST populated villages near its establishments.

Remaining Vigilant

In its continuous efforts towards bringing about total transparency in management, POWERGRID has gone ahead to promote the culture of zero tolerance. As a part of this effort, POWERGRID has tried to ensure speedy disposal of disciplinary cases by appointing Inquiry Officers from the panel approved by the CVC and by conducting regular and surprise inspections at regular intervals. The Organization received about 42 complaints during the year, out of which 21 complaints were taken up for investigation. Investigations were completed in 19 cases. On the preventive side, 69 inspections were conducted. The CTEs organisation also conducted 5 intensive examinations of the major works of POWERGRID.

In order to create an environment conducive to vigilance activities, significant achievement was made by involving senior management in preventive anti-corruption work. As a part of this effort, a workshop was organised in the Corporate Center in collaboration with IIM, Kolkata on "Ethics and business values", in which about 30 executives from the middle management level participated. Besides this, workshops were organised in the Regions on ethics and vigilance, for about 125 non-vigilance Executives.

As a part of its social responsibility, POWERGRID also organised one-act play competition, thematic lectures by eminent personalities, debates, essay and slogan competition on the occasion of the Vigilance Awareness Week.

Particulars of Employees:

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

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

As regards the requirements of the disclosures under Section 217(1) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, information is is given in Annexure-ll to this Report.

Comptroller and Auditor Generals comments:

Review of the accounts for the year ended 31st March, 2003 by the Comptroller and Auditor General of India under Section 619 (4) of the Companies Act, 1956 along with Directors comments on the points raised by the C&AG given in Annexure-lll to this report.

Corporate Governance

As per clause 49 of the Listing Agreement, a report on the Corporate Governance, forming part of this report, together with the Auditors Certificate regarding the compliance of the Corporate Governance are given in Annexure-IV to this report.

POWERGRIDs Board

During the year, a number of changes took place in the constitution of the Board of Directors. Shri U.C.Misra assumed the charge as Director (Personnel) POWERGRID w.e.f. 1.8.2002 in place of Shri A.I.Bunet who superannuated on 31.07.2002. The Board gratefully acknowledges the invaluable contribution and guidance received from him during his tenure with POWERGRID. Shri A.K.Kutty, JS, MOP and Shri M.Sahoo, JS&FA, MOP joined the Board of POWERGRID w.e.f. 22.7.2002 vice Shri P.I.Suvrathan and Shri R.Ramanujam respectively. Shri V.V.R.K.Rao Member, (G.O.), CEA ceased to be a Director on attaining the age of superannuation w.e.f. 30.06.2002. Shri Shashi Shekhar, JS, MOP joined the Board of POWERGRID w.e.f. 17.6.2003 in place of Shri A.K.Kutty, JS, MOP who ceased to be a Director of POWERGRID Board. The Board of Directors also place on record its deep appreciation for the contribution and guidance received from S/Shri V.V.R.K.Rao, R.Ramanujam, P.I.Suvrathan and A.K.Kutty. Appointment of non-official part- time Directors whose place fell vacant on 26.7.2001 is awaited.

Acknowledgements

The Directors place on record their grateful thanks for the guidance and cooperation extended all through by Ministry of Power, Central Electricity Authority, Ministry of Home Affairs, Central Electricity Regulatory Commission, Dept. of Economic Affairs, Ministry of Finance, Planning Commission and other concerned Govt. departments/agencies at the Central and State level without whose active support, the achievements by the Corporation during the year under review would not have been possible. Moreover, the Board extends its sincere thanks to the customers of the corporation, the State Electricity Boards/ Corporations for their endeavour to pay the transmission charges in spite of their financial hardships.

The Directors take this opportunity to thank the Principal Director of Commercial Audit and Ex-Officio Member Audit Board-Ill for the cooperation during the year. Your Directors also acknowledge the valuable suggestions and guidance received from the statutory auditors viz. M/s. Hingorani M & Co., M/s. Venugopal & Chenoy and M/s D.R Sen & Co. during the audit of accounts of the company for the year under review.

Your Directors further wish to place on record their sincere thanks to the various national/ international Financial Institutions/Banks/Credit Rating Agencies for the continued trust and confidence reposed by them by rendering the continuous timely assistance and patronage for successful implementation of the various projects by the company.

Last but not the least, the Board of Directors place on record the valuable contribution and appreciation for the support and the cooperation extended by each member of the POWERGRID family in the affairs of the company.

For and on behalf of the Board POWER GRID CORP OF INDIA LTD.

(R.P. SINGH) Chairman & Managing Director

Date : 29.09.2003. Place: New Delhi.

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