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Directors Report of Tata Power Company Ltd.

Mar 31, 2016

The Directors are pleased to present the Ninety-Seventh Annual Report on the business, operations and the Statements of Account for the year ended 31st March 2016 of The Tata Power Company Limited (Company).

1. Financial Results

Figures in Rs. crore (Table 1)

Consolidated Standalone FY16 FY15 FY16 FY15

(a) Net Sales/Income from Other Operations* 36,461 34,367 8,438 8,678

(b) Operating Expenditure 28,470 27,426 5,721 6,516

(c) Operating Profit 7,991 6,941 2,717 2,162

(d) Less/(Add): Forex Loss /(Gain) 218 (64) 58 48

(e) Add: Other Income 297 352 555 1,025

(f) Less: Finance Cost 3,477 3,699 1,156 1,048

(g) Profit before Depreciation and Tax 4,593 3,658 2,058 2,091

(h) Less: Depreciation/ Amortisation/Impairment 2,376 2,174 665 575

(i) Profit Before Exceptional Item 2,217 1,484 1,393 1,576

(j) Less: Exceptional Item 281 NIL 226 NIL

(k) Profit before Tax 1,936 1,484 1,167 1,516

(I) Tax Expenses 869 1,075 395 506

(m) Net Profit/(Loss) after Tax 1,067 409 772 1,070

(n) Less: Minority Interest 256 289 - -

(o) Add: Share of Profit of Associates 62 48 - -

(p) Net Profit after Tax, Minority Interest and Share of Profit of Associates 873 168 772 1,010

Including rate regulatory income/(expense)

2. Financial Performance and the state of the Company''s affairs

2.1. Consolidated

On a Consolidated basis, the Operating Revenue increased to Rs. 36,461 crore in FY16, from Rs. 34,367 crore in FY15. The increase was mainly due to higher volumes in power trading amounting to 6,737 MUs (refer section 5.8 of MD&A) and higher revenues from the solar equipment business (Rs. 616 crore- refer section 5.11 of MD&A) offset by lower realisation in coal companies.

The Consolidated Profit after Tax in FY16 increased to Rs.873 crore from Rs. 168 crore in the previous year mainly on account of improved operational performance and reversal of impairment loss amounting to Rs. 2,320 crore (refer section 5.2 of MD&A) in Coastal Gujarat Power Limited (CGPL) offset by lower realisations in coal companies and consequent impairment of goodwill amounting to Rs. 2,533 crore in these companies.

2.2. Standalone

On a Standalone basis, the Operating Revenue reduced to Rs. 8,438 crore in FY16 from Rs. 8,678 crore in FY15, mainly due to lower fuel costs and power purchase cost being passed through for the regulated business.

The Profit after Tax in FY16 was lower atRs. 772 crore as compared to Rs. 1,010 crore last year. This was mainly due to provision for diminution in the value of investments made by your Company to the tune of Rs. 226 crore. The Earnings per Share (Basic) in FY16 stood at Rs. 2.36. The operating profit was higher in standalone owing to all-round improvement in performance of the assets.

3. Dividend

The Directors of your Company recommend a dividend of 130% (Rs. 1.30 per share ofRs. 1 each), subject to the approval of the Members.

4. Centenary Year

Your Company completed 100 years of its operations on 9th February 2015, having started its first Hydroelectric Power Generation Unit at Khopoli in the year 1915. Your Company is the third company amongst various Tata Companies to have achieved this rare milestone and has been contributing to the process of nation building for over a hundred years.

Our revered visionary founder, Mr. Jamsetji Tata conceptualized green and clean Power for the city of Mumbai way back in early 1900. Your Company pursued the founder''s vision by generating hydroelectric power at Khopoli, Maharashtra, harnessing the potential from the lakes located in the surroundings of Lonavala. The electricity, thus generated, was transmitted to the city of Mumbai. Your Company has been intrinsically linked with the economic growth and development of two of the most important cities of the country viz. Mumbai and Delhi.

Not only has your Company been the frontrunner in the power sector in India.it has also been pioneering new technologies in the country and has played a significant role in the economic progress of the country through its value chain of power generation, transmission, distribution, solar & wind energy and its defence related engineering systems & solutions.

Today, Tata Power has spread its wings and established itself internationally too. Quietly, as the country has grown, your Company has made sure that electricity, the invisible force that powers a nation, has always been reliably available wherever our operations exist. Considering the values that Tata Power has been following, ''Invisible Goodness'' was chosen as the theme of our Centenary Year Celebration.

In the Centenary Year, your Company held celebrations at all its key establishments along with our key stakeholders, culminating in a mega ceremony in Mumbai in the esteemed presence of Chief Minister of Maharashtra, Power Minister of Maharashtra and the Mayor of Mumbai. The event was also witnessed by some of the distinguished business leaders and the leadership of the Tata Group. Your Company also launched various initiatives for key stakeholders including the society at large. Tata Power engaged not just with the employees and their family members, but also with many external stakeholders.

The ceremonies and the initiatives undertaken in the Centenary Year were a way of showing your Company''s gratitude to all its stakeholders who have helped the Company in achieving this rare milestone and we believe that it has helped us strengthen relationships with all our stakeholders in our ongoing journey for the next several decades and centuries.

5. Current Business

The key businesses of the Company are in the area of Generation, Transmission, Distribution-cum-Retail, Power Trading, Power Services, Coal Mines and Logistics, Strategic Engineering for defence applications. Solar Photovoltaic (PV) manufacturing and Engineering, Procurement, Construction (EPC) services.

As on date of the report, the Tata Power Group of companies had an operational generation capacity of 9,184 MW based on various fuel sources - thermal (coal, gas and oil), hydroelectric power, renewable energy (wind and solar PV) and waste heat recovery.

The Company (including its subsidiaries) has about 20% of its capacity (in MW terms) in clean and green generation sources (Hydro, Wind, Solar and Waste Heat Recovery), while the target is to have 30-40% of its total generation capacity to be from non-fossil fuel based generation sources by 2025.

Details of generation businesses in operations

(Table 2)

Fuel Source Location State Normative Capacity under management (MW)

Mundra Gujarat 4,150

Trombay Maharashtra 1,580

Maithon Jharkhand 1,050

Thermal- Joiobera Jharkhand 428 Coal/Oil/ Gas IEL-Jojobera Jharkhand 120

TPDDL-Rithala New Delhi 108 (Gas based)

IEL-Jamshedpur Jharkhand 120

Thermal- IEL-Kalinganagar Odisna 135 Waste Heat Haldia West Bengal 120 Recovery

Bhira Maharashtra 300

Khopoli Maharashtra 72

Hydro Bhivpuri Maharashtra 75

Dagachhu Bhutan 126

ItezhiTezhi Zambia 120

Wind farms Maharashtra, 621 Gujarat, Madhya Pradesh Karnataka, Tamil Renewables Nadu, Rajasthan

Solar Photovoltaic Maharashtra, 60 (PV) Gujarat, Tamil Nadu and Delhi

Fuel Source Returns/Earnings Model Category Total (MW)

Thermal-Coal/Oil/Gas Long term PPA based on UMPP Bid

Long term PPA - Regulated Return on Equity

Long term PPA - Regulated Return on Equity

Lonq term PPA - Requlated Return on 7,436 Equity and Negotiated PPA

Bilaterally negotiated Long Term PPA

PPA is being pursued

Thermal-Waste Heat Recovery Bilaterally negotiated Long Term PPA

Bilaterally negotiated Long Term PPA 375

Merchant Sales (100 MW) and Bilateral sale to West Bengal (20 MW)

Hydro Long Term PPA - Regulated Return on Equity 693

Merchant Power Sale

Long Term Regulated Return based project

Renewables Long Term PPA based on Feed-in -tariff REC Mechanism (includes 30 MW assets of Indo Rama Renewables) 681

Long Term PPA based on Feed-in-tariff

Total 9,184

The Company de-commissioned the 81 MW Belgaum Power Plant in June 2015 pursuant to conclusion of the PPA term. Sale of the equipment and establishment is under progress.

6. Subsidiaries/Joint Ventures/Associates

As on 31st March 2016, the Company had 28 Subsidiaries (18 of which were wholly-owned Subsidiaries), 35 Joint Ventures (JVs) and 8 Associates.

During the year, the following changes occurred in your Company''s holding structure:

Subsidiaries: Supa Windfarm Ltd., Nivade Windfarm Ltd. and Poolavadi Windfarm Ltd. were incorporated as wholly owned subsidiaries of Tata Power Renewable Energy Ltd. Tata Ceramics Ltd., an erstwhile Associate, became a subsidiary of the Company. NewGen Saurashtra Windfarms Ltd. was merged with Tata Power Renewable Energy Ltd.

Joint Ventures: Your Company invested in Itezhi Tezhi Power Corporation, a hydro power project in Zambia.

Associates: Your Company and Af-Taab Investment Company Ltd. (a wholly-owned subsidiary of your Company) sold their entire respective stakes in Rujuvalika Investments Ltd.

The report on the performance and financial position of each of the subsidiaries, JVs and associate companies has been provided in Form AOC-1.

The policy for determining material subsidiaries of the Company has been provided in the following link: http://www.tatapower.com/aboutus/pdf/dms-policy-15.pdf (scan the adjacent QR code on any mobile device smart phone/tablet to read the policy on the Company website. QRcode scanner app can be downloaded free of cost for Android/iOS/Windows devices from respective app stores)

7. Reserves

The net movement in the various reserves of the Company for FY16 and the previous year are as follows:

Figures in Rs.crore (Table 4)

Particulars FY16 FY15

Revaluation Reserve NIL (2.48)

Securities Premium Account (1.67) 1,930.97

Debenture Redemption Reserve 110.58 (413.20)

Foreign Currency Translation Reserves (Net) Nil 14.57

Foreign Currency Monetary Item Translation Difference Account 7.42 84.09

General Reserve 77.16 101.03

Surplus in Statement of Profit and Loss 71.85 832.42

8. Foreign Exchange - Earnings and Outgo

A summary of foreign exchange transactions of the Company for FY16 and the previous year are as follows:

Figures in Rs.crore (Table 5)

Particulars - Standalone FY16 FY15

Foreign Exchange Earnings 200 419

Foreign Exchange Outflow mainly on account of: 1,283 1,112

- Fuel purchase 935 793

- Interest on foreign currency borrowings, NRI dividends 41 81

- Purchase of capital equipment,components and spares and other miscellaneous expenses 307 238

9. Regulatory and Legal Matters

The businesses of the Company are governed primarily by the Electricity Act, 2003 (EA, 2003). Mentioned below are the critical regulatory orders pertaining to the Company that were issued during FY16, none of which impact the "going concern" status of your Company.

9.1. Compensatory Tariff For CGPL - Mundra UMPP

Due to unforeseen changes in Indonesian law in 2012 and increase of coal prices relative to predicted/envisaged prices at the time of bidding, CGPL is unable to recover the full cost of fuel through the existing tariff. In view of this, CGPL had filed a petition before Central Electricity Regulatory Commission (CERC) seeking relief by way of an appropriate mechanism to offset this adverse impact. CERC passed an order on 21st February 2014, ruling that the Company will be entitled to compensatory tariff to offset additional fuel costs till the hardship continues on account of increase in coal prices.

The said Order was challenged by the Procurers before the Appellate Tribunal for Electricity (ATE). ATE, in its judgement on 7th April 2016, held that the increase in price of Indonesian coal is a "force majeure" event and has directed CERC to provide relief to CGPL as per the PPA. CGPL has approached CERC for appropriate relief. The matter is now with CERC, where hearings have commenced. The ATE has given 3 months'' time to CERC to determine the compensation.

Kindly refer to section 5.2of MD&A of this Annual Report for further details on the matter.

9.2. Multi Year Tariff Orders of MERC

In August 2013, the Hon''ble Maharashtra Electricity Regulatory Commission (MERC) determined the Multi-Year Tariff (MYT) for all distribution licensees for FY14, FY15 and FY16. Subsequently, the Company had filed Mid Term Review (MTR) petitions for Tata Power - Generation, Transmission and Distribution Business with MERC. MERC passed its order in the said MTR Petitions on 26th June 2015.

Thereafter, the MYT Regulations, 2015 were notified on 8th December 2015 for determination of Aggregate Revenue Requirement and Tariff in all matters covered under the Regulations for the Control Period from 1st April 2016 up to 31st March 2020.

Accordingly, the Mumbai Generation, Transmission and Distribution Businesses of the Company have filed MYT Petitions on 10th February 2016,1st February 2016 and 27th February 2016 respectively, which also include the Truing up of FY15and the provisional Truing up of FY16as per the requirements of the MYT Regulations 2011, applicable for these years. All the three matters are currently pending before MERC.

9.3. Key Judgements of the Hon''ble High Court of Bombay, Hon''ble ATE and MERC

In November 2014, the ATE had quashed all restrictions on movement of consumers between Distribution Licensees, but had directed the Distribution Licensees to limit creation of a parallel network. However, in places where the Company had made considerable investment in laying a network or the works were in advanced stages of completion, such network had been allowed to be commissioned and capitalised.

Subsequent to the aforesaid judgement, your Company submitted its revised Network Rollout Plan (Case No. 182 of 2014). MERC passed an interim Order in the said petition on 9th November 2015, whereby the Commission directed constitution of a Committee to examine and finalize the operational specific matters/physical rollout of network for the consideration of the Commission. On 28th March 2016, the Committee (so constituted by the Commission) provided its recommendation to the Commission for its consideration. MERC decided to constitute a public hearing to take the views of all stakeholders. The Network Rollout Plan of your Company is currently pending approval of the Commission.

Another landmark judgement has been passed by the High Court of Bombay on 2nd March 2016 in a Writ Petition filed by the Municipal Corporation of Greater Mumbai (MCGM) against MERC, challenging its right and power to modify the Standard of Performance (SOP) timelines in the MERC SOP Regulations, 2014. Tata Power was included as a Respondent in the said Writ Petition. The High Court has dismissed the petition for being without any merits and further passed certain strictures against MCGM in the said judgement.

9.4. Annual Performance Review (APR) Order for FY14 for Jojobera Units 2 and 3

Jojobera station of Tata Power Group has 5 units. While Unit 1 and 4 (both 67.5 MW) are tied as captive with Tata Steel plant, Units 2 and 3 (67.5 MW each) are regulated as these have PPAs with licensed Discom promoted by Tata Steel. Jharkhand State Electricity Regulatory Commission (JSERC), on 31st May 2015, passed the APR Order for FY14 including truing-up for FY13 and truing-up of energy charges for FY12 for Jojobera Units 2 and 3 wherein JSERC has approved certain additional capital expenditure schemes pertaining to safety of the units. Your Company has filed an Appeal with ATE challenging a few disallowances in the above APR Order.

9.5. Standby Charges

On an appeal filed by your Company, the Supreme Court had stayed the operation of the ATE order in 2007, subject to the condition that your Company deposit an amount of Rs. 227 crore and furnish a bank guarantee for an equal amount. The Company complied with both the conditions. Reliance Infrastructure Limited (R-lnfra) also subsequently filed an appeal before the Supreme Court challenging the ATE order. Both the appeals were admitted in 2007. However, no hearings were held on the matter during the year.

9.6. Energy Charges and ''Take or Pay'' Obligation

MERC directed R-lnfra to pay Rs. 323.87 crore to the Company as the difference between the rate of Rs. 1.77 per kWh paid and Rs. 2.09 per kWh payable for the energy drawn at 220 kV interconnection towards its Take or Pay'' obligation for the years 1998-99 and 1999-2000. On an appeal filed by R-lnfra, the ATE had upheld the Company''s contention with regards payment for energy charges but reduced the rate of interest. As per the ATE order, the amount payable works out to Rs. 34.98 crore (excluding interest), as on 31st May 2008. As regards the Take or Pay'' obligation, the ATE ordered that the issue be examined afresh by MERC after the decision of the Supreme Court in the appeals relating to the distribution license and rebates given by R-lnfra. Tata Power and R-lnfra filed appeals in the Supreme Court. Both the appeals were admitted and listed for hearing and final disposal. The Supreme Court, vide its order dated 14th December 2009, granted a stay against the ATE order and directed R-lnfra to deposit with the Supreme Court a sum of Rs. 25 crore and furnish a bank guarantee for the balance amount. Pursuant to the liberty granted by the Supreme Court, your Company has withdrawn the above mentioned sum subject to an undertaking to refund the amount with interest, in the event the appeal is decided against the Company. No hearings were held during the year on this matter.

9.7. Entry Tax

Your Company filed a writ in the High Court at Bombay (HC) challenging the constitutional validity of the Maharashtra Entry Tax Act. Hearings on the matter concluded and the HC reserved the order. No date is fixed for pronouncement of the order.

10. Risks and Concerns

Your Company is faced with risks of different types, all of which need different approaches for mitigation. Details of various risks faced by the Company are provided in section 4 of MD&A.

11. Risk Management Framework and Internal Financial Controls

Risk Management Framework:

Based on the Risk Management Policy (http://www.tatapower.com/aboutus/pdf/risk-management-policy.) pdf (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website), a standardized Risk Management Process and System has been implemented across Tata Power Group. Risk plans have been framed for all identified risks and uploaded in the system with mitigation action, target dates and responsibility. This has enabled continuous tracking of status of mitigation action and monitoring of Risk Mitigation Completion Index (RMCI). The Risk Register contains the mitigation plans for eleven categories of risk. Eight Functional Risk Management Committees (FRMCs) closely monitor and review the risk plans.

All risks have been classified into strategic, tactical and operational risks. Apex Risk Management Committee (ARMC) meets every quarter to review major strategic and tactical risks, identify new risks and assess the status of mitigation initiatives. As per the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a Risk Management Committee (RMC) was constituted comprising of 3 Independent Directors, 1 Executive Director, Chief Financial Officer and Chief Risk Officer. The RMC meets regularly to review critical strategic risks and summary of top risks of each of the eleven categories and their status in terms of mitigation actions.

The Company has refined its risk quantification method which helps identify key risks of the organisation and reduce subjectivity in assessment of residual value of each risk. This will further help implement appropriate controls in business processes. Also, grouping of risks has been undertaken for better management control.

Last year, British Standards Institution (BSI) conferred the ''Statement of Compliance''on Tata Power for ISO 31000:2009-a recognition that implies that the Company has strong processes for risk identification, management and mitigation. Tata Power is the first power company in India to get this recognition. In FY16, BSI has done the assessment of Tata Power and its eight major subsidiaries viz, CGPL, MPL, TPDDL, TPTCL, TPSSL, TPREL, PTL and IEL. This year, Tata Power Group has again been recommended for conferring the Statement of Compliance, basis BSI''s recent assessment.

Internal financial controls and systems:

The Company has its internal audit function which endeavours to make meaningful contributions to the organisation''s overall governance, risk management and internal controls. The function reviews and ensures sustained effectiveness of Internal Financial Controls (IFC) by adopting a systematic approach to its work.

As per the provisions of Section 177 of the Companies Act, 2013 (the Act) and the Audit Committee Charter adopted by the Board of Directors, one of the roles and responsibility of the Audit Committee, is to review the effectiveness of the Company''s internal control system, including financial controls, information technology security and its control.

Section 143(3) of the Act, provides that the Statutory Auditor''s Report shall state whether the Company has an adequate IFC system in place and the operating effectiveness of such controls, for FY16 and beyond.

As per Section 134 of the Act, Directors of listed companies, based on the representations received from the management, are to confirm in the Directors Responsibility Statement that IFC are not only adequate, but are also operating effectively.

With this objective in mind and to fulfill the requirements of the Act, in FY16, the in-house internal audit team, with the support of two expert audit firms, performed the test of design and test of effectiveness of IFC. Scoping was done based on major classes of transactions, account balances. Seven key business cycles, general IT controls and Entity Level controls were considered for review.

The Internal Audit and Risk Management (IARM) function has generally adopted Committee of Sponsoring Organizations (COSO) framework. COSO is a leading framework which provides guidance on the design and evaluation of internal controls. This has been done for 5 elements and 17 principles, which provides assurance of financial controls in place at the level of functional heads and at top management level. This has helped in assessing the effectiveness and efficiency of operational controls, enhanced governance and consideration of anti-fraud expectations, reliability of financial reporting and statutory compliances. Attributes with internal control deficiencies are identified with action plans to be pursued, responsibility centres and target dates for compliances.

For the Business Process level, controls are evaluated through internal audits and Control Self-Assessment (CSA). These CSAs have also been rolled out across other Tata Power group companies too. The effectiveness of the IFC was then tested by an external consultant who found no significant deficiencies. Further, the statutory auditor through their independent testing of IFC, has also issued an unmodified opinion.

The Internal Audit process includes review and evaluation of process robustness, effectiveness of controls and compliances. It also ensures adherence to policies and systems, and mitigation of the operational risks perceived for each area under audit. Internal Audit Policy and Manual has been framed, based on which a flexible risk based audit plan has been formulated that aligns with the organizational strategy and impact on business objectives. Internal audits are classified into Process Audits, Spot Audits, etc. depending on the past performance and also the risk perception. All processes of the Company have been classified under vital, essential and desirable, based on the analysis of process impact on Company''s Strategic Objectives. Post the audit, process is rated through the Risk Control Index and Process Robustness Index given by the Internal Auditors. Also, theme based audits are carried out for certain areas impacted by changing external environment. Significant observations including recommendations for improvement of the business processes are reviewed by the Management before reporting to the Audit Committee. The Audit Committee then reviews the Internal Audit reports and the status of implementation of the agreed action plan. Post recognition of ''General conformance to international audit standards'' from Institute of Internal Auditors (IIA Global) in 2013, quality review of audit reports is carried out as per 11A global guidelines before the report is issued. Internal audit process has been standardized across the Tata Power Group.

Internal audit plan is executed by and in-house audit team with support of an expert Internal Audit firm. This risk based audit plan has been used for subsidiaries and other group companies as well.

During the previous years, standardisation and automation of Risk Control Matrix (RCM) project was undertaken and completed with the support of an expert audit firm. RCM is of prime importance as it will form the basis of testing effectiveness and assess compliances to the IFC. This project involved control documentation, identification of common controls, which has facilitated standardisation of control ratings, sample size and testing methodology. This project has resulted in better control and improved quality of audit. Your Company has also started its journey towards digitalization through enhanced data analysis on audits which will result in improved quality and focused audits. This standardisation process continued during in the current year for subsidiaries and certain group companies.

As a step towards achievement of excellence in audit methodology, data analytics software has been developed which assists in scientific sampling and exception reporting after scanning large databases, facilitates automation, builds reliability in analysis of transactions, assists in effective/focussed field work which will improve the quality and give value added results. The by-product of use of this tool is reduction in man weeks and cost of audits of up to 24 man-weeks for FY17.

Changes to the Internal Audit Process in anticipation of the Act were started in the year gone by. These included creation of a comprehensive framework for fraud, moving towards increased reviews and/or internal audits of group companies for greater comfort on the investments in the group companies, increasingly focused on theme audits and greater automation of the internal audit systems.

Assessment mechanism for measuring the existence and effectiveness of controls are established by the fact that the Value Added Index, which is a measure of effectiveness and contribution of the internal audit to top management and Audit Committee, has improved over the years and so has the Risk Control Index (RCI), thereby giving assurance to management of efficiency and effectiveness of the Internal Financial Controls. The action taken statistics emerging out of internal audit reports for last three years reflect an increase in implementation percentage achieved through rigorous and systematic follow up. Further, the total number of action points has decreased over the last three years, thereby reflecting an improvement in the system and processes.

On review of the internal audit observations and action taken on audit observations, we can state that there are no adverse observations having material impact on financials or commercial implications or material non-compliances which have not been acted upon.

Control Self-Assessment: The Company continued the CSA process this year, whereby responses of all process owners are used to assess internal controls in each process. It was also extended to seven other Tata Power group companies. This helps the Company to identify focus audit areas, design the audit plan and support CEO/CFO certification for internal controls. The CSA questionnaire is designed to test effectiveness of deployment of existing controls for processes which are not to be audited as per the audit plan. The responses received from process owners on the questionnaire are analysed and validated through spot audits. This ensures optimum coverage of audit universe to provide assurance on the operating effectiveness based on results of evaluation across all processes.

Process Robustness Index (PRI): The processes are examined to assess their robustness primarily from the perspective of system driven controls (SAP, CRM, Documentum, etc.), which ensures that deviations from the defined process do not occur due to manual errors. In case controls have not been embedded in the system, other compensating controls such as maker-checker are exercised to assess the robustness of the process. This index is computed on the basis of existence of robust controls and not on the basis of extent of implementation of these controls. Your Company has obtained a copyright for this PRI scoring methodology. While the objective of this measure is to bring about the use of IT and Automation/ Digitalization intervention, it is not the intention to have the outcome achieved through embedded computer & IT systems. Therefore, appropriate flexibility for decision making on last mile, basis the outcomes aspired, is allowed.

The following paragraphs bring out the differentiation between IFC and Process Robustness Controls.

Process Robustness Index (PRI): The processes being audited are examined to assess their robustness in terms of control automation, outcome orientation, benchmarking, integration and data/record management. The scope of PRI is not limited to providing assurance on effectiveness of IFC and process controls, rather it is worked out by considering end-to -end process from inputs to outputs, digitalization, improvements and outcome orientation.

There are eight elements based on which the process robustness is assessed - (1) documentation - process, workflow, training manual; (2) controls - manual or system driven; (3) mechanism for obtaining customer inputs; (4) performance measurement tracking; (5) traceability of records; (6) initiatives taken for process improvements; (7) integration of process being audited with other processes and (8) data management. Based on the system maturity, each of the elements is rated.

As an additional support to establish efficiency and effectiveness of IFC, in addition to internal audits, the Company also submits declarations to various regulatory authorities like MERC, SEBI, RBI etc. The statutory auditors carry out an audit at quarterly intervals and these reports have not reported any adverse findings. The Company''s Secretarial Audit carried out in the currentyear has not indicated any reportable lapses.

12. Safety

Safety has been a core value and always is the top priority in your Company. The Company has a structured safety organization for monitoring, implementing and taking corrective actions for safety improvements. There are approximately 12,500 employees and contract workers at various locations of Tata Power Group.

Safety Statistics FY16

(Table 6)

SI. No. Safety Parameters in your Company''s work jurisdiction (Tata Power, CGPL, FY16 FY15 MPL, IEL, CTTL, Powerlinks, TPDDL and TPSSL)

1 Fatality (Number) 3* 3*

2 LTIFR (Lost Time Injuries Frequency Rate per million man hours) 0.2 0.15

3 Total Injury Frequency Rate (No of injuries per million man hours) 5.19 5.64

4 First Aid Cases (Number) 325 592

* - Company''s contractor''s employees

The Company is deeply aggrieved by the fatalities and accidents. It treats any fatality in any of its premises, of any of its employees, contractor/associate''s employees or any third party with equal gravity and is committed to taking the entire working environment and behaviour to the highest safety standards.

Your Company increased its efforts on safety during the year and took the following additional steps in FY16 to improve safety:

Revised the contractors'' safety code of conduct

Included consequences and rewards in General Conditions of Contracts (GCC) for associates and contractors

Enhanced training of contractors'' workers as well as for the family members

Launched a mobile application on safety for incident reporting

Nominated departmental engineers on rotation basis to be safety incharge

Capability building for high risk roles

High visibility safety tours by leadership and safety observations; audits by safety experts

13. Sustainability

Your Company successfully completed lOOyears of its operation and remains committed to the legacy of being a responsible corporate citizen. It has practiced Sustainability over these lOOyears and thus reinforced the core value of Leadership with Care. For your Company, sustainability is care for the environment, care for the customers and shareholders, care for the community and care for our people.

The Company''s efforts on sustainability were recognized at various platforms and a testimony of this were the various awards bestowed upon your Company, the latest being Sustainable Plus Platinum Label for FY15 by Cll''s Centre of Excellence for Sustainable Development (CESD). It is based on a comprehensive assessment of environmental, social and governance analysis of companies which helps them to measure performance as well as identify risks that challenge sustainability of their business.

The year also saw the launch of the Company''s 6th Sustainability Report for FY15, and the first one to be prepared in accordance with the latest G4 Guidelines of the Global Reporting Initiative (GRI).

13.1. Care for our Community, Community Relations (Social and Relationship Capital)

Your Company has actively worked on five thrust areas in Corporate Social Responsibility (CSR) - Primary Education with focus on girl child. Health & Drinking Water, Livelihood & Employability, Social Capital & Infrastructure and Inclusive Growth.

In FY16, the CSR policy for different Tata Power Group companies was aligned to the five thrust areas and programs were rolled out across locations and mapped with Schedule -VII to the Act with timelines and outcome indicators. The same was approved by the CSR Committees of the respective Tata Power Group companies.

In FY16, Tata Power Group companies reached out to more than 250 villages/urban pockets across 7 states. The year saw your Company ramp-up CSR capabilities and operations across all locations by bringing robustness to systems and processes to ensure effective programs which deliver long-term impact and bring changes to the community. This also marked a shift in bringing focus and institutionalisation of 80:20 paradigm of CSR, with 80% allocation of resources on long-term sustainable and thematic programs and 20% resources on location specific programs. Tata Power Community Development Trust (TPCDT), being the developmental vehicle for CSR programs, was assigned to undertake CSR Programs for Tata Power and its Group companies.

Tata Power Skill Development Institute (TPSDI) launched four key centres and training hubs at Trombay and Shahad (Mumbai), Maithon (Jharkhand) and Mundra (Gujarat). TPSDI undertook modular power skills training and positively impacted 1700 persons in FY16.

The total CSR spend for the Company in FY16 stood at Rs. 29.01 crore as against the requirement of Rs. 28.29 croreas per the Act. Additionally, as a part of disaster relief operations, the Company contributed towards relief efforts in Nepal, Georgia and Tamil Nadu.

Independent monitoring, effectiveness of implementation, impact assessment were undertaken to provide feedback and to refine, realign the programs so that the extent and effectiveness of the initiatives could be improved in pursuance of Tata Power''s objective to improve the quality of life of the community and to get community''s tacit or implied acceptance of the Company''s co-existence with them. One such measure which helped in the purpose is Community Engagement Index (CEI).

Your Company encouraged employee volunteering through its Arpan initiative. Volunteering programs were also organized at Jawhar (a district in Maharashtra), where Tata Power runs Affirmative Action (AA) programs. This program provided the employees an opportunity to understand the concerns of the deprived community and disparity in the living standards of a community which is in close proximity to developed cities like Mumbai and Nashik. To promote employee volunteering across all locations of Tata Power, ARPAN Awards were constituted with the aim of institutionalizing efforts through employee volunteering and recognition of divisions for exemplary work in volunteering. Mulshi (Bhira) division of Hydros bagged the award lastyear.

Major highlights of programs in FY16 (Standalone) are as follows:

Reached out to more than 5 lakh beneficiaries through CSR initiatives in Education, Health, Livelihood, Social Capital and Nurturing Sustainability.

Reached out to more than 230 schools covering more than 1 lakh students, through various educational initiatives resulting in substantial attendance improvement and reduction in dropout rates.

Helped provide 6,700 households with access to sanitation/toilet facility covering over 36,700 children.

Maithon hosted the Life Line Express (first hospital on train) serving nearly 6,000 patients providing medical care for the needy, attending to ENT, dental, cleft lip surgery, orthopaedic, epilepsy, gynaecology and eye issues.

Reached out to 167 villages under vocational training/employability program covering over 1,500 youth.

136 villages were covered under Social Capital & Infrastructure creating 363 Self Help Groups across locations.

114 villages were covered under Rural Energy program reaching out to over 5,800 households.

Over 7.5 lakh trees were planted across locations.

1,039 employee volunteers contributed towards 10,854 volunteering hours.

1,400 Solar Lamps were distributed during Tamil Nadu Flood Relief.

Tata Power supported treatment of cancer patients through Tata Medical Centre Trust.

Annual report of CSR activities is provided in Annexure -1.

13.2. Affirmative Action

Under its Affirmative Action (AA) program, your Company has implemented several initiatives for Employment, Entrepreneurship, Employability, Education and Essential Amenities for the communities around its operating sites and adopted community.

The major programs carried out in the neighbourhood of the operating plants and projects include skill development programs for youth (Industrial Training Institutes, Business Process Outsourcing training and vocational trainings), entrepreneurial programs like fly ash brick making/supporting Self Help Groups, assistance in obtaining caste certificate through dedicated drives and support for educational initiatives for school children like scholarships and coaching classes in the evenings along with assistance in the development of adequate infrastructure.

Your Company continued its work in areas beyond its areas of operations, such as in Jawhar taluka, Palghar district of Maharashtra, which has a tribal population of over 90% of the total population, with a vast majority of them below the poverty line. The activities here included new initiatives like livelihood generation - kitchen garden and poultry farming and setting up of the Village Development Committee (VDC). The VDC has elected members from the village as well as Tata Power and are responsible for the sustainable development of the village.

Some major AA program details are:

Promoted 240 community entrepreneurship ventures like fly ash brick making, poultry farming, garment manufacturing, etc. with an investment of Rs. 139 lakh, which helped to increase family incomes upto Rs. 60,000 to Rs. 80,000 per year.

Outsourced Rs. 17.65 crore of products and services from 36 vendors / contractors.

Provided technical and monetary support for various agricultural interventions to enhance the income of about 730 SC/ST farmers.

Supported 731 SC/ST persons across various Industrial Training Institutes (ITIs), skill development programs.

Built a full-fledged hostel foroutstation SC/ST youth at Industrial Training Institutes (ITIs) atMulshi.

Enabled access to computer education and spoken education to 2,422 SC/ST students across locations.

Provided scholarships to 53 SC/ST students amounting to Rs. 13.17 lakh.

Extra/night coaching classes benefited about 318 SC/ST students appearing class X and XII board examination.

Facilitated access to basic essential amenities like safe drinking water, healthcare, solar lights etc. to over 41,000 SC/ST population across locations.

Helped in obtaining 953 caste certificates at Hydros and Jawhar. The process of obtaining certificate is going on for SC/ ST community across divisions.

13.3. Care For Our Environment (Natural Capital)

The Company, during the year, addressed various aspects of resource conservation, energy efficiency, carbon footprint, renewable power generation, biodiversity and green buildings. Details of initiatives undertaken are given in MD&A Section 9.1.3

Natural Capital

Acknowledging the adverse impact on climate change caused by the global industrialization as also by power sector and to ensure a minimal impact on the environment,your Company drew up plans to limit carbon emissions and move towards a portfolio with a significant proportion of clean and green generation. Tata Power Strategic Intent for the year 2025 is to achieve 30-40% generation capacity from non-fossil fuel based generating sources.

Your Company instituted a process of due diligence to consider all its development proposals (Indian/ International) based on some internal criteria considering assessment of land parcel, water source, treatment and disposal of water effluents and solid waste and likely implications on communities around the proposed development. Tata Power continued to implement activities which focus majorly on resource conservation, waste minimisation, energy and water conservation, and reduction in auxiliary power. These initiatives were tracked through its Green Manufacturing Index (GMI).

The Company is proud of the fact that none of its major Indian operations were in close proximity to any nationally or internationally designated Protected Areas (PA) such as national parks, wildlife sanctuaries. World Heritage Sites, etc. and all such areas (if any) were situated further than laid out requirements, from its operations.

Afforestation activities were on-going across the Company to improve greenery. On a local scale, tree cover is needed within the operating stations to maintain ambient microclimatic conditions by reducing the heat island effect. They are also essential in the catchment areas of the Company''s water reservoirs to ensure steady precipitation to fill the reservoirs. The Company thus, indirectly relies on good quality fertile soil, to sustain the tree cover and control the soil erosion. Additionally, mangrove restoration was carried out at Bharuch, Gujarat covering an area of 1000 hectares. The Company relies on mangrove stretches for providing a barrier against natural hazards from the sea since some of the major operating stations as well as transmission lines run in close proximity to the coast.

Highlights of some Biodiversity initiatives:

Mahseer Breeding program- Since 1971, your Company has been involved in the species conservation project with state fisheries departmentthatincluded setting a Mahseer hatchery at Walwhan, Lonavala. In the last 40 years of the execution of the project, more than 1.85 crore fertilized eggs have been obtained from the hatchery and over 10.4 lakh Mahseer fingerlings have been produced. For creating awareness on Mahseer, an International Conference on Conservation of Mahseer was hosted by Tata Power and attended by fisheries scientists from across the country which culminated in the adoption of''Lonavala Declaration''on Mahseer Conservation. Additionally, an awareness campaign. Act for Mahseer was launched for the Company''s internal as well as external stakeholders. The campaign included various components such as Pledging to save the Mahseer, a Mahseer manual, creation of a mascot. Tor and such other activities.

Natural Capital Valuation at Hydros in Western Ghats- Your Company piloted a unique project on the Natural Capital Valuation for its Hydro operations in Lonavala. This is being carried out to understand the impacts and dependencies between the business operations and the ecosystem services and create a tool that helps the business take decisions considering impact on ecology. This initiative is spearheaded by the Natural Capital Coalition. Tata Power has actively tried to develop a methodology through which ecosystem services can be valued and make it a replicable and consistent one which can be integrated into decision making at the managerial level. The scope of the study included operations focusing on all business activities which result in the setting up and running of a Hydro power plant. Tata Power has seven reservoirs spread in and around the Lonavala-Mulshi area in Maharashtra nestled in the Western Ghats which are rich in biodiversity. There are three Hydro power plants which use the water from these reservoirs.

13.4. ClubEnerji

Tata Power''s Club Enerji is focused on school students to champion the noble cause of conservation of resources and moral and civic values. This, in turn, supplements the cause of nation building. The Club has been ceaselessly working towards creating responsible citizens of tomorrow who focus not only on conserving energy and natural resources (like fossil fuel - coal, oil, gas; water; managing waste; afforestation), but also conserve civic, ethical and moral values in society at large.

The Company has further scaled up the magnitude of this initiative by launching an online module of the Club Enerji programme in 2015. The objective of this initiative was to reach out to a larger audience and impact a larger group of IT skilled children with a vision to transform by adopting a holistic and robust approach towards conservation. Tata Power Club Enerji also reaches out to school children through various interactive mediums and sensitizes them on the need to conserve power and resources.

Recognizing the immense value that schools and school children can bring to the initiative and taking due consideration of the social need, Tata Power started "Tata Power Club Enerji" in 2007 to propagate efficient usage of energy and to educate the society on climate change issues. Club Enerji covers 500 schools across Mumbai, Delhi, Pune, Ahmedabad, Bengaluru, Kolkata, Belgaum, Jamshedpur, Lonavala and five more cities. It has reached out to more than 12.8 million citizens, collectively saved 17.26 million units of electricity- equivalent to saving 17,000 tons of C02.1,337 Mini Clubs have also been formed all over India under the Club Enerji initiative.

Tata Power Club Enerji also launched its comprehensive Online Module in November 2015 with an aim to reach out to a larger audience with a vision of transformation and adoption of a holistic and robust approach towards conservation. The module, since its launch, has also reached out to audiences in new international geographies like Philippines, UAE, USA, UK and South Africa and newer national geographies like Chandigarh, Hyderabad and Chennai.

13.5. Demand Side Management

The Company has been at the forefront of propagating energy conservation and efficiency.

Demand-side management (DSM) refers to cooperative activities between the utility and its customers to implement options for increasing the efficiency of energy utilization, with resulting benefits to the customer, utility and society as a whole.

Industrial, commercial and residential consumers in the city have unique usage patterns. Your Company has developed different programmes for each of these categories and has launched a unique consumer initiative called "Be Green". This initiative gives an opportunity to Mumbai consumers to exchange their old, inefficient electrical appliances for new, 5 star rated energy efficient appliances at a discounted price. The Company has partnered with leading consumer appliance manufacturers for energy efficient equipment. The consumers appreciate these initiatives as it helps to reduce their energy cost by 30% to 50% without compromising on their comfort and convenience.

During this financial year, your Company provided to its customers in Mumbai and Delhi 15.5 lakh LED bulbs and also facilitated the replacement of nearly 20,000 inefficient appliances such as old fans, air conditioners etc. with new star rated energy efficient ones.

Large industrial and commercial consumers need detailed analysis of their energy use to identify the saving potential. Your Company carried out energy audits for such consumers at a large discount. The experts mapped their unique power consumption pattern and offered specific recommendations to improve the processes and equipment efficiency. Several large consumers took the benefit of this programme. In FY16.TPDDL became the only power utility to be empanelled with Bureau of Energy Efficiency as Grade 1 ESCO and provided value added energy efficiency services like comprehensive energy audit and implementation of energy performance improvement projects to its consumers.

Along with different programmes and schemes, Tata Power organized consumer awareness programmes to develop a culture of energy efficiency and conservation.

Your Company received the National Energy Conservation Award under the Discom sector from the Ministry of Power, Government of India for the year 2015.

13.6. Sustainability Reporting

Your Company has adopted the latest Global Reporting Initiative (GRI) G4 guidelines to report on its sustainability performance for FY16. The report, prepared in accordance with the comprehensive criteria, is specific to the Indian operations of your Company viz. generation, transmission and distribution of power and highlights the sustainability performance of your Company. Your Company has been recognized as one of India''s most sustainable companies with the Sustainable Plus Platinum Label for FY 2015 by CM. The Company''s Sustainability Report is hosted on its website: http://www.tatapower.com/sustainability/sustainability-communications. aspx (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website).

13.7. Business Responsibility Report (BRR)

The Business Responsibility Reporting was in line with the SEBI requirement based on the''National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business'' notified by Ministry of Corporate Affairs (MCA), Government of India, in July 2011. Your Company reported its performance for FY16as per the BRR framework, describing initiatives taken from an environmental, social and governance perspective. The BRR is hosted on the Company website: http://www.tatapower.com/investor-relations/pdf/ business-responsibility-report-fy16.pdf (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website).

13.8. Integrated Reporting (IR)

Your Company prides itself in making voluntary disclosures to keep its stakeholders fully informed on all aspects of its business. Your Company decided to take steps to further enhance the disclosures and information provided in its annual report in alignment with the Integrated Reporting framework by International Integrated Reporting Council (IIRC). This year, in addition to the Financial and Manufactured capitals, your Company has included sections on Natural, Intellectual, Human and Social & Relationship Capitals. Over the next few years, your Company will endeavour to cover more aspects in consultation with various stakeholders.

13.9. United Nations Global Compact

Your Company reports on United Nations Global Compact''s (UNGC) ten principles in the areas of Human Rights, Labour standards. Environment and Anti-corruption since 2006. The Company had submitted the 10th Communication on Progress (CoP) to UNGC for FY16.

13.10. Transition to Indian Accounting Standards (IndAS)

With effect from April 1, 2016, your Company is required to align its accounting policies and disclosures with new Indian Accounting Standards or IndAS. Consequently, the financial statements to be issued hereafter will be different from those issued from the current set. Apart from differences in the way assets, liabilities, income, expenses and losses are measured, even the disclosure requirements, as also the various statements comprising the financial report, will substantially change.

In the case of the Company, a number of changes are expected. The most significant change that will affect the net worth as also future profit and loss amounts, will be on account of:

a. The recognition of a fair value gain or loss through profit and loss statement of outstanding derivative contracts that the Company holds at each balance sheet date

b. The recognition of unrealized gain or loss when fair valuing the investments that the Company holds at each balance sheet date

14. Directors and Key Managerial Personnel

Mr. Thomas MathewT, nominee of Life Insurance Corporation of India (LIC) on the Company''s Board, resigned as a Director of your Company effective 30th April 2015. The Board has placed on record its appreciation of the valuable contribution made to the Company by Mr. Mathew during his tenure. Mr. Vijay Kumar Sharma, Managing Director of LIC, was nominated by LIC as Director on the Board effective 19th May 2015. He resigned as Director effective 2nd July 2015. Mr. Pravin H.Kutumbe, Executive Director of LIC, was thereafter nominated by LIC as Director on the Board. Mr. Kutumbe was appointed as an Additional Director with effect from 7th September 2015, in accordance with Article 132 of the Company''s Articles of Association and Section 161 of the Act. Mr. Kutumbe holds office only upto the date of the forthcoming Annual General Meeting (AGM) and a Notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose his appointment as Director.

Mr. R. Gopalakrishnan, Non-Executive Non-independent Director on your Company''s Board, stepped down as Director of the Company effective close of business hours on 24th December 2015, consequent upon his completing 70 years of age, as required by the guidelines adopted by the Company for retirement of Non-Executive Directors. The Board has placed on record its deep sense of appreciation of the immense contribution made to the Company by Mr. Gopalakrishnan during his tenure with the Company since January 1999.

Ms. Vishakha V. Mulye, Independent Director on your Company''s Board, resigned effective close of business on 18th January 2016. The Board has placed on record its appreciation of the valuable contribution made to the Company by Ms. Mulye during hertenure.

Mr. Anil Sardana was re-appointed as CEO and Managing Director of the Company for a period of 5 years from 1st February 2016. His re-appointment and the remuneration payable to him require approval of the Members at the ensuing AGM.

Ms. Sandhya S. Kudtarkar was appointed as an Additional Director with effect from 16th April 2016, in accordance with Article 132 of the Company''s Articles of Association and Section 161 of the Act. Ms. Kudtarkar holds office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose her appointment as Director.

In accordance with the requirements of the Act and the Company''s Articles of Association, Mr. Anil Sardana retires by rotation and is eligible for re-appointment.

Six Board Meetings were held during the year. For further details, please refer to Report on Corporate Governance, which forms a part of this Report.

In terms of Section 149 of the Act, Dr. H. S. Vachha, Mr. N. H. Mirza, Mr. D. M. Satwalekar, Mr. P. G. Mankad and Mr. A. K. Basu are the Independent Directors of the Company. The Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the Act.

In terms of Section 203 of the Act, the following are the Key Managerial Personnel of the Company: Mr. Anil Sardana, CEO and Managing Director Mr. Ashok S. Sethi, COO and Executive Director Mr. Ramesh N. Subramanyam, Chief Financial Officer Mr. Hanoz M. Mistry, Company Secretary

15. Annual Evaluation of Board Performance and Performance of its Committees and Individual Directors

Pursuant to the provisions of the Act and Regulation 25 of the Listing Regulations, the Board has carried out an annual evaluation of its own performance, performance of the Directors individually as well as the evaluation of the working of its Committees.

The following process was adopted for Board evaluation:

i) Feedback was soughtfrom each Director about their views on the performance of the Board covering various criteria such as degree of fulfilment of key responsibilities. Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning. Board culture and dynamics, quality of relationship between the Board and the Management and efficacy of communication with external stakeholders. Feedback was also taken from every Director on his assessment of the performance of each of the other Directors.

ii) The Nomination and Remuneration Committee (NRC) then discussed the above feedback received from all the Directors.

iii) Based on the inputs received, the Chairman of the NRC also made a presentation to the Independent Directors at their meeting, summarising the inputs received from the Directors as regards Board performance as a whole and of the Chairman. The performance of the Non-independent Non-Executive Directors and Board Chairman was also reviewed by them.

iv) Post the meeting of the Independent Directors, their collective feedback on the performance of the Board (as a whole) was discussed by the Chairman of the NRC with the Chairman of the Board. It was also presented to the Board and a plan for improvement was agreed upon and is being pursued.

v) Every statutorily mandated committee of the Board conducted a self-assessment of its performance and these assessments were presented to the Board for consideration. Areas on which the Committees of the Board were assessed included degree of fulfilment of key responsibilities, adequacy of Committee composition and effectiveness of meetings.

vi) Feedback was provided to the Directors, as appropriate. Significant highlights, learning and action points arising out of the evaluation were presented to the Board and action plans drawn up. During the year under report, the recommendations made in the previous year were satisfactorily implemented.

16. Remuneration Policy for the Directors, Key Managerial Personnel and other Employees

In terms of the provisions of Section 178(3) of the Act and Regulation 19 read with Part D of Schedule II to the Listing Regulations, the NRC is responsible for formulating the criteria for determining qualification, positive attributes and independence of a Director. The NRC is also responsible for recommending to the Board a policy relating to the remuneration of the Directors, Key Managerial Personnel and other employees. In line with this requirement, the Board has adopted the Policy on Board Diversity and Director Attributes, which is reproduced in Annexure-ll and Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company, which is reproduced in Annexure-lll to this Report.

17. Committees of the Board

The Committees of the Board focus on certain specific areas and make informed decisions in line with the delegated authority. The following statutory Committees constituted by the Board function according to their respective roles and defined scope:

Audit Committee of Directors Nomination and Remuneration Committee Corporate Social Responsibility Committee Stakeholders Relationship Committee Risk Management Committee

Details of composition, terms of reference and number of meetings held for respective committees are given in the Report on Corporate Governance.

The Board has laid down separate Codes of Conduct for Non-Executive Directors and Senior Management personnel of the Company and the same are posted on the Company''s website at https://www.tatapower.com/ aboutus/pdf/Code-of-Conduct-NEDs.pdf (alternately, scan the adjacent QR Code using a mobile device to read the policy on the Company website). All Senior Management personnel have affirmed compliance with the Tata Code of Conduct (TCOC). The CEO & Managing Director, and key managerial personnel have also confirmed and certified the same. The certification is enclosed at the end of the Report on Corporate Governance.

18. Conservation of Energy, Technology Absorption

The information on conservation of energy and technology absorption stipulated under Section 134(3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is attached as Annexure - IV.

18.1. Intellectual Capital

Your Company has been a pioneer in the Indian power industry for bringing in new, innovative and efficient technologies in its core business areas. Technology plays an important role in overall success of business to support our geographical spread, product portfolio, customer reach and future aspirations. Its Mission "Being the Lead Adopter of Technology with a spirit of pioneering and calculated risk taking" enabled it to adopt advanced/disruptive technologies as well as develop some products and technological processes (value added fly ash products, blending of coal, ZLD, network management/ restoration techniques in T&D, etc.) through a structured Short/Medium & Long term technological roadmapin order to:

1. Earn affection of our customers by delivering superior experience and value

2. Drive competitiveness by operating our businesses at benchmark levels

3. Practice "Leadership with Care" by pursuing best practices on Care for Environment, Community, Customers, Shareholders, people and creating a culture that will reinforce our values.

One of the notable examples to show your Company commitment to technology is its investment in the first supercritical ultra - mega thermal power plant in Mundra which reduces the C02 impact on the environment as compared to a subcritical plant of the same size. Your Company also achieved increased efficiencies of solar photovoltaic panels (13% to 16.8%). Since 75% of generation portfolio is through thermal power plants, the Company put in place a dedicated group (Clean Tech & Applied Research) in association with plant operating teams and CTTL to develop value added products from the solid waste i.e. ash which is generated from the thermal power plants. Some of the examples included making bricks, plaster from bottom ash and using fly ash in ultra thin white topping roads and replacement of sand by bottom ash. Clean Tech & Applied research group also developed products and schemes for Decentralised Distributed Generation and commissions demo plants with the help of Hydros. These products were in the early stages of commercialization. The technology and innovation activities were encouraged at Divisional level and the outcomes were showcased in your Company Knowledge and Innovation Fair and rewarded. There is also a Technology Advisory Council (TACT) consisting of experts, which helps in providing expert guidance in developing projects.

Your Company also participated in international exhibitions, conferences, seminars and workshops for capability building as well as for networking. It also collaborated with institutions such as NT Mumbai, BITS (Pilani), MIT, VIT, NSc, etc. to keep a tab on the technological innovations being developed at these premier institutes as also provide internship to students who carry out work in the related fields. Your Company has a dedicated group which scans various technology related developments in the power generation space through forums such as clean tech, i3, trade and investment forums.

There were various Knowledge Sharing Sessions regularly conducted across the divisions to facilitate the transfer of knowledge and sharing of best practices, which were in addition to business level knowledge sharing sessions organised by the business heads. Company wide webinars were conducted, through Tarang'' - a software tool and communication meets for dissemination of information and knowledge across the Company. K-Hub, a web based knowledge repository, captured internal and external, explicit knowledge. There was a bi-annual Knowledge and Innovation Fair which was used to facilitate sharing of best practices and innovations across the organisation.

Your Company collaborated with its OEMs (Original Equipment Manufacturers), suppliers and technology providers to develop customised solutions for its customers. OEMs and technology suppliers were also invited to the Knowledge Sharing Workshops organised by Tata Power to share knowledge and Best Practices with the participants from across locations and divisions of the organisation.

Your Company learnt and adopted best practices from other Tata group companies by actively participating in the various forums like Learning Missions and Tata EDGE. In addition to the above initiatives,Tata Poweralso encouraged its employees to actively participate in the forums created at the Tata Group level like Tata Innoverse and Tata Innovista. Tata Power was one of the early companies to join Tata Innoverse and leveraged the resource available by consistently posting some of its critical challenges in this group forum.

19. Particulars of Employees and Remuneration

The information required under Section 197 (12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as Annexure-V.

The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in the Annexure forming part of this Report. In terms of the first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. Any Member interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. None of the employees listed in the said Annexure is related to any Director of the Company.

Officers of the organization are divided across five work levels i.e. MA, MB, MC, MD and ME. The work levels are further divided into grades. Blue Collared employees are across different grades but have been classified as unskilled, semi-skilled, skilled and highly skilled.

For the officers, a benchmarking exercise was undertaken in FY16 with the help of a global consultancy firm specializing in remuneration & compensation. The benchmarking was to understand the comparative position of remuneration of Tata Power officers vis-a-vis officers in equivalent grades in five key players in the energy and power sector. As per this report, the median salary of officers at Tata Power in different grades was aligned to the market compensation.

The Company a Isobenchmarked remunerations of 9 key positions below CEO &MD level based on the CXO Compensation Study 2016 carried by Tata Group HR.

19.1. Human Capital

Your Company recognises that its people are a key resource and endeavours to enable its employees to deliver on business requirements while meeting their career aspirations. Human resources plays a pivotal role in enabling smooth implementation of key strategic decisions through aligned capability development, leadership development, diversity and industry relations practices.

Capability Development-Your Company takes pride in the technical and functional excellence of its employees. It aims at providing an environment where continuous learning takes place to meet the changing demands and priorities of the business including emerging businesses and geographies. It developed a structured mechanism to support people development as described below:

1. Competency/Learning levels for various roles are regularly evaluated and established

2. Individual level gaps were identified through an assessment mechanism or PMS cycle (Training Need Identification)

3. Training needs were fulfilled through relevant and best in class interventions

4. Job rotation opportunities discussed and enabled where relevant

Also, your Company established Tata Power Skill Development Institute (TPSDI) for addressing the skill gap in power and allied sectors by training incumbents in the community as part of its Corporate Social Responsibility endeavour. TPSDI providedmodular training and certification across a wide range of employable skills, including electrical, mechanical and solar power skills. The skilled manpower from this institute were available not only to Tata Power, but also contributed to power sector companies across the country. The institute has 4 centres in Shahad, Trombay, Maithon &Mundra.

Leadership Development - The current business environment requires a balance between business acumen, strategic thinking, result orientation and people management which are key leadership skills. Your Company has a Leadership Development Framework which caters to the developmental needs of senior leaders and key employees in its talent pool to meet these needs. Leaders undergo various programs like the Tata Group Induction for Business Leaders (new joinees), Tata Group Strategic Leadership Seminar (TGSLS),Tata Group Executive Leadership Seminar (TGELS),Tata Group emerging Leaders Seminar (TGeLS) and Tata Group Management Development Program (TGMDP). For senior leaders, nominations were made last year to Cambridge Sustainability Leadership Program, Spokesperson Media Training, Market segmentation, Safety conference. Enterprise Risk management, Tata Group Learning Mission and the World Utility Summit. Periodic nominations were made to best in class external leadership programs offered by TMTC, IIMs, XLRI, ASCI, and CM as also to the 3 module in-house flagship programs - STEP (StrategicTraining for Employees'' Progress), EDP (Employee Development Program) and MDP (Management Development Program).

Talent Retention - Your Company believes that retaining talent gives a competitive advantage in a fast evolving and challenging business environment. Meritocracy is the central theme for all employee life cycle processes like Recruitment, Performance Management, Rewards & Recognition, Career Growth and Exit Management. Planned interventions were carried out across all levels of management to identify and retain the right talent. Some of these interventions included, Accelerated Career Enhancement (ACE)-a fast track talent management programme, identification of High Potential officers for further development, succession management, Myfeedback - a developmental tool for senior and top management to enable them to obtain developmental feedback whereby learning and development can be initiated by self or aided by the organization and Management Planning Discussion - a career planning exercise for senior management. Your Company has held its attrition rate below 4% for the past four years.

Diversity - Your Company is an Equal Opportunity Employer in all practice areas. Around 35 senior leaders underwent Diversity & Inclusion workshops to ensure that the organizational agenda percolates from the apex leadership and pervades smoothly throughout the organization. In FY16,19 workshops were organized covering around 400 employees for sensitization of employees towards promotion of workplace diversity in addition to cultural sensitivity trainings, mutual respect for affinity groups, community outreach and cultural celebrations at work.

Also, in line with Tata Group''s vision to create 1000 women leaders by 2020, your Company has been promoting gender diversity within the Tata Power Group of companies through focused interventions like International assignments for women, specially designed LDPs for women colleagues, MD''s Dialogue with women employees to encourage women participation in various forums and to address their concerns and challenges and International Women''s Day Celebrations. Additionally, the induction and on boarding of new joinees included direct communication on key themes such as Tata Code of Conduct, Prevention of Sexual Harassment at Work and mutual respect towards colleagues irrespective of their cultural and social background.

Industrial Relations-Cordial relations exist between Managementand Union based on mutual respectand understanding which allows for smooth and uninterrupted functioning of your Company. Meetings were held periodically between Managementand Union to discuss various issues and the Union was consulted on all significant changes. For all operational changes, your Company in consultation with the person concerned, gave a minimum notice period and followed legal requirements. Agreements with the Union have been signed for four years covering aspects related to health and safety, salary, allowances, benefits and productivity clauses, in line with the business requirements.

Your Company has a robust legal compliance monitoring system for labour laws which is reviewed by top Management. It also has benchmark and forward looking practices related to allied workforce wherein all manpower contracts in the Company have been abolished and its entire allied workforce.

20. Related Party Transactions

In line with the requirements of the Act and the Listing Regulations, the Company has formulated a Policy on Related Party Transactions and the same is uploaded on the Company''s website: http://www.tatapower. com/aboutus/pdf/policy-on-related-party-transactions.pdf(scan the adjacent QR Code to read the details on the Company website). Details of Related Party Transactions as per AOC-2are provided in Annexure-VI.

21. Deposits

(Table 7)

SI. No. Particulars Amount in Rs.

1. Accepted during the year Nil

2. Remained unpaid or unclaimed atthe end of the year* 2,58,105

3. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

- At the beginning of the year Nil

- Maximum during the year Nil

- At the end of the year Nil

4. Details of deposits which are not in compliance with the requirements of Chapter V of the Act Not Applicable

*This relates to deposits accepted under the Companies Act, 1956.

22. Loans, Guarantees, Securities and Investments

The Company, being an infrastructure company, is exempt from the provisions as applicable to loans, guarantees and securities under Section 186 of the Act. The details of investments are provided in the schedules to the financial statements.

23. Extract of Annual Return

Pursuant to Section 92 of the Act and Rule 12 of The Companies (Managementand Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 is provided in Annexure-VII.

24. Auditors

M/s Deloitte Haskins & Sells LLP(DHS LLP), who is the statutory auditor of your Company, hold office until the conclusion of the Ninety-eighth AGM to be held in the year 2017, subject to ratification of its appointment at every AGM. The Members, year on year, will be requested, to ratify its appointment as Auditor and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to Item No. 5 of the Notice.

Members will also be requested to pass a resolution (vide Item No.11 of the Notice) authorizing the Board of Directors to appoint Branch Auditors for the purpose of auditing the accounts maintained at the Branch Offices of the Company abroad.

25. Auditors''Report

The Auditor''s Report does not contain any qualifications, reservations or adverse remarks. The consolidated financial i statements of the Company have been prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements, Accounting Standard 23 on Accounting of Investments in Associates and Accounting Standard 27 on Financial Reporting of Interest in Joint Ventures, issued by the Council of The Institute of Chartered Accountants of India.

26. Cost Auditor and Cost Audit Report

M/s Sanjay Gupta and Associates, Cost Accountant, was appointed Cost Auditor of your Company for FY16.

In accordance with the requirement of the Central Government and pursuant to Section 148 of the Act, your Company carries out an audit of cost accounts relating to electricity every year. The Cost Audit Report and the Compliance Report of your Company for FY15, was filed on 11th September, 2015 with the Ministry of Corporate Affairs through Extensive Business Reporting Language (XBRL) by M/s Sanjay Gupta and Associates, Cost Accountants, before the due date of 30th September 2015.

27. Secretarial Audit Report

M/s. Parikh& Associates, Company Secretaries, was appointed as Secretarial Auditor to conduct a Secretarial Audit of records and documents of the Company for FY16. The Secretarial Audit Report confirms that the Company has generally complied with the provisions of the Act, Rules, Regulations, and Guidelines.

The Secretarial Audit Report is provided in Annexure-VIII.

28. Corporate Governance

Pursuant to Regulation 34 of the Listing Regulations and relevant sections of the Act, a Management Discussion & Ana lysis Statement, Report on Corporate Governance and Auditors'' Certificate are included in the Annual Report.

29. Vigil Mechanism

Your Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the Tata Code of Conduct (TCOC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the TCOC cannot be undermined.

Pursuant to Section 177(9) of the Act, a vigil mechanism was established for directors and employees to report to the management instances of unethical behaviour, actual or suspected, fraud or violation of the Company''s code of conduct or ethics policy. The Vigil Mechanism provides a mechanism for employees of the Company to approach the Chief Ethics Counsellor (CEC) / Chairman of the Audit Committee of the Company.

30. Directors'' Responsibility Statement

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost auditors, secretarial auditors and external consultants including audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company''s internal financial controls were adequate and effective during the financial year 2015-16.

Accordingly, pursuant to Section 134(5) of the Act, the Board of Directors, to the best of its knowledge and ability, confirm that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

b) The Directors 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 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 the Act, for safeguarding the assets of the Company, for preventing and detecting fraud and other irregularities;

d) The Directors had prepared the annual accounts on a going concern basis;

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; and

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.

31. Acknowledgements

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our shareholders, customers, business partners, vendors - both international and domestic, bankers, financial institutions and academic institutions.

The Directors are thankful to the Government of India and the various Ministries, the State Governments and the various Ministries, the Central and State Electricity Regulatory authorities, communities in the neighbourhood of our operations, Corporation and Municipal authorities of Mumbai and local authorities in areas where we are operational.

Finally, we appreciate and value the contributions made by all our employees and their families for making Tata Power what it is.

On behalf of the Board of Directors,

Cyrus P. Mistry

Chairman

(DIN: 00010178)

Mumbai, 23rd May 2016


Mar 31, 2014

To The Members,

The Directors are pleased to present the Ninety-Fifth Annual Report on the business and operations of your Company and the Statements of Account for the year ended 31st March, 2014.

1. Financial Results

Figures inRs. crore

Standalone Consolidated

FY14 FY13 FY14 FY13

(a) Net Sales/Income from Other Operations 8,627 9,567 35,649 33,025

(b) Operating Expenditure 6,073 7,509 27,942 26,386

(c) Operating Profit 2,554 2,058 7,707 6,639

(d) Less: Forex Loss 264 28 789 788

(e) Add: Other Income 656 722 227 369

(f) Less: Finance Cost 868 684 3,440 2,642

(g) Profit before Depreciation and Tax 2,078 2,068 3,705 4,778

(h) Less: Depreciation/Amortisation/ Impairment 587 364 2,730 2,901

(i) Profit before Tax 1,491 7,704 975 1,277

(j) Tax Expenses 537 679 1,008 7,778

(k) Net Profit/(Loss) after Tax 954 7,025 (33) 99

(I) Less: Minority Interest - - 272 208

(m) Add: Share of Profit of Associates - - 45 24

(n) Net Profit after Tax, Minority Interest and Share of Profit of Associates 954 7,025 (260) (85)

2. Dividend

The Directors of your Company recommend a dividend of 125% (^ 1.25 per share) subject to the approval of the Members. The dividend has been increased (from 115% previous year) in view of developments indicating better future prospects, particularly the order on Compensatory Tariff by the Central Electricity Regulatory Commission (CERC).

3. Company''s Performance

3.1 Standalone

On a Standalone basis, the Operating Revenue was lower atRs. 8,627.04 crore, as againstRs. 9,567.28 crore in FY13, a decrease of 10%. However, your Company earned a higher Operating Profit compared to the previous year, but owing to forex losses and reversal of MAT credit accrued in earlier years, your Company reported a Profit after Tax (PAT) of Rs. 954.08 crore, as against Rs. 1,024.69 crore for the previous year. Last year, PAT was higher due to onetime adjustment owing to change in depreciation rate.

Power Business

Operating Revenue for Power Business wasRs. 8,168.70 crore in FY14 as againstRs. 9,157.96 crore in FY13. Lower fuel cost built in the revenue recovery resulted in lower Operating Revenue on a Standalone basis, partly offset by higher transmission charges paid in the Mumbai Regulated business based on the Intra-state transmission order. However, Operating Profit was higher due to favourable Appellate Tribunal Order in Mumbai License Area.

Services Business

Power Services Business had a turnover ofRs. 123.02 crore as againstRs. 116.63 crore in FY13, reflecting a growth of 5%.

Strategic Engineering Division

Tata Power Strategic Engineering Division (SED) booked a turnover ofRs. 335.32 crore in FY14 as againstRs. 292.69 crore in FY13, with the closing order backlog in excess ofRs. 2,400 crore as on 31st March, 2014.

Other Income

Other Income was lower at Rs. 655.76 crore, as against Rs. 721.67 crore in the previous year. This was mainly due to lower income from investment in Fixed Deposits and Mutual Funds. It was driven by higher availability of investible funds in the previous year on account of Hybrid issue ofRs. 1,500 crore during thatyear.

Earnings per share

During FY14, due to higher earnings after full year''s appropriation on unsecured perpetual securities (Rs. 832.20 crore against Rs. 818.07 crore in FY13), Earnings per share (basic) was at 7 3.50 as against f 3.44 in the previous year.

3.2 Consolidated

On a Consolidated basis, the Operating Revenue was higher at Rs. 35,648.70 crore, as against Rs. 33,025.43 crore in FY13, an increase of 8%. The increase was mainly due to Coastal Gujarat Power Limited (CGPL) operating all of its units during the current year, Maithon Power Limited (MPL) tying up sale of additional 150MWon a long term basis with West Bengal State Electricity Distribution Company Limited (WBSEDCL), higher sales by Tata Power Trading Company Limited (TPTCL) and by Tata Power Solar Systems Limited (TPSSL).

Your Company has also reported 16% increase in the Consolidated Operating Profit at Rs. 7,706.45 crore as compared to Rs. 6,638.50 in Previous Year, mainly driven by full operation of Mundra and Maithon plants and favourable order from Appellate Tribunal for Electricity (ATE) for Mumbai operations. This was despite lower coal prices affecting coal mines profitability.

The Consolidated Loss after Tax at Rs. 259.97 crore is higher as compared to the previous year, mainly on account of higher forex losses and finance cost.

4. Subsidiaries/Joint Ventures

With the vision of becoming the most admired and responsible Integrated Power Company with an international footprint, your Company has over the years, forged strategic partnerships through Joint Ventures (JVs) and Subsidiaries. As on 31stMarch, 2014,your Company had 25 Subsidiaries (16 are wholly-owned Subsidiaries), 31 JVs and 10 Associates.

During the year FY14, your Company has acquired/created the following companies as a part of its growth plans: AES Saurashtra Windfarms Private Limited, acquired during the year, contributing 39.2 MW of wind capacity Joint Ventures Adjaristsqali Netherlands BV and Adjaristsqali Georgia LLC, created as investment vehicles for the Georgia Hydro project

Following are the major highlights of FY14 related to your Company''s Subsidiaries/JVs. Operational details of major subsidiaries are available in Management Discussion and Analysis section.

4.1 Coastal Gujarat Power Limited

Coastal Gujarat Power Limited (CGPL), a wholly owned subsidiary of your Company, has implemented and commissioned all five units of the 4,000 MW (5 x 800 MW) Ultra Mega Power Plant (UMPP) at Mundra in Gujarat.

Power Purchase Agreement (PPA)

Due to rise in coal prices and the current structure of the PPA, CGPL is not able to recover the full cost of fuel through its tariff. In view of this, CGPL had submitted a petition to the CERC seeking relief by way of establishment of an appropriate mechanism to offset the adverse impact caused by the steep hike in coal prices. CERC, in its order dated 15th April, 2013, had given the directive to constitute a committee to recommend a quantum of compensatory tariff. Subsequent to the committee report, CERC passed an orderon 21st February, 2014 ruling thatthe company will be entitled to compensatory tariff to offsetadditional fuel costs till the hardship continues on account of increase in coal prices. CERC has stipulated a three year period to undertake review of Compensatory Tariff.

The salient features of CERC order are as follows:

The Commission has fixed operating parameters for arriving at the Compensatory Tariff which shall be effective 1st April, 2013. The Commission has also ordered compensation of losses incurred from the commissioning of the units upto March 2013 amounting toRs. 329 crore to be recovered over 36 equal instalments. In arriving at the Compensatory Tariff, incremental profit from coal mines and 1% of Equity will be deducted.

The Commission has also allowed sale of power to third parties in excess of 80% of the normative availability - to be shared with procurers in the ratio of 60% to procurers and 40% to your Company. The sharing shall be for margin above the variable cost of fuel from the revenue accrued to the company.

The said order has been challenged before the ATE and the hearing has commenced.

Sustainability

In its endeavour to become the ''Neighbour of Choice'', CGPL continues to undertake initiatives for the local community in the areas of livelihood and income generation, education and health. Various community development activities have been undertaken aligned with 5 thrust areas identified to address the need of the stakeholders - Augmenting Primary Education System (Vidya), Building and Strengthening Healthcare Facilities (Arogya and Swachch Jal), Enhancing Programmes on Livelihood and Employability (Samriddhi and Daksh), Building Social Capital and Infrastructure (Sanrachna) and Nurturing Sustainability for Inclusive Growth (Akshay). A Triple Bottom Line Approach'' of sustainable development is being followed to achieve a satisfied community that has trust and faith in the company and its operations. Cooperation from the village Gram Panchayat has led to the formation of the Village Development Advisory Committee (VDAC), which is the first contact pointforthe companyforall developmental workto be carried outin different villages.

The company and its lenders have received complaints from a few NGOs, who have alleged that CGPL has not done enough to protect the livelihood of fishermen in the neighbourhood. Further, there is an allegation that there is an impact to the local community caused by coal, ash and outlet water. The company has engaged with all NGOs who work closely with the local community as well as fishermen who undertake fishing in and around Mundra UMPP area. In addition, various frameworks have been instituted in close consultation with lenders like IFC.ADB and others, for implementation of various programs as well as for constant oversight and monitoring of such initiatives. Besides, the company has undertaken proactive measures to improve the quality of life of local communities including fishermen. The company has furnished all such details to the lending institutions and the same has been acknowledged by them. Based on the inputs from both CGPL and local communities, financial institutions as well as Pollution Control and State authorities are satisfied with the work done by the company.

The company continues to enhance the reach and effectiveness of various initiatives for fishermen communities as well as other communities in its neighbourhood. The company abides by all stipulated norms including mitigation action for any environmental, community and ecological impact.

4.2 Investment in Coal Companies

Your Company continues to hold its equity stake in PT Kaltim Prima Coal (KPC) and PT Baramulti Suksessarana Tbk (BSSR), which continue to be a part of the supply chain forTata Power Group''s coal off-take requirements.

In FY14,your Company signed an agreement to sell its 30% stake in PT Arutmin Indonesia and associated companies in coal trading and infrastructure. The aggregate consideration for Tata Power''s 30% stake is USD 510 million, subject to certain closing adjustments. The sale is subject to certain conditions and restructuring actions, which your Company targets to complete in FY15.

4.3 Maithon Power Limited

Maithon Power Limited (MPL), a Joint Venture between your Company (74%) and Damodar Valley Corporation (DVC, 26%), has set up a 1,050 MW (2 x 525 MW) power plant at Maithon in Jharkhand.

Out of the total capacity of 1,050 MW, 300 MW power had been tied up through long term PPAs, each with DVC, WBSEDCL and Tata Power Delhi Distribution Limited (TPDDL), and balance 150 MW has been tied up under long term PPAwith Kerala State Electricity Board (KSEB) on 31st December, 2013. MPL has applied for Long Term Access of transmission of power to KSEB which is yet to be allotted.

4.4 Tata Power Delhi Distribution Limited

TPDDL, a subsidiary of your Company is a Joint Venture between Tata Power (51%) and the Government of National Capital Territory (NCT) of Delhi (49%). TPDDL has a registered consumer base of 1.4 million and serves a peak load of around 1,500 MW. The company''s operations span across an area of 510 sq. km. in Northern and Northwestern part of Delhi.

Tariffs in the past have been insufficient to ensure recovery of the power purchase costs of the company, which has resulted in accumulation of Regulatory Assets to the tune ofRs. 5,146.39 crore as in FY14. In the spirit of moving towards Cost Reflective Tariff, the Regulator has granted TPDDL an increase in tariff of 55% in the past 3 years. The Regulator has also granted a 8% Deficit Recovery Charge towards amortization of Regulatory Gaps in addition to creation of Power Purchase Adjustment Mechanism to true up for quarterly variations in Power Purchase Costs. Delhi Electricity Regulatory Commission (DERC) has also proposed liquidation of Regulatory Assets over the period of next 8 years.

4.5 Tata Power Renewable Energy Limited

TPREL, a wholly owned subsidiary of your Company, is in the business of setting up power projects based on clean and renewable energy sources such as wind, solar, waste heat recovery and biomass.

During the year, TPREL has successfully commissioned 24 MW out of the 32 MW wind project at Visapur in Maharashtra, and acquired the 39.2 MW operating wind farm at Saurashtra in Gujarat from AES Corporation. This is in addition to the 21 MW wind plant at Dalot, Rajasthan, which was commissioned in FY13 and 25 MW Solar Power Plant at Mithapur, which is operational since January 2012.

The 28.8 MW solar project at Palaswadi in Maharashtra has also been completed, except that the interconnecting transmission line could not be connected to the state grid due to lack of permissions.

4.6 Tata Power Solar Systems Limited

TPSSL, formerly known as Tata BP Solar India Limited has aligned its business segments into three major verticals -

1. Manufacturing of solar photovoltaic (PV) cells: TPSSL is recognised as a Tier 1 module manufacturer and offers market competitive cost and efficiency products to its customers. Due to cheaper imports, the company faces challenges in fully utilizing its manufacturing capacity.

2. Projects: TPSSL completed more than 100 MW of large scale ground mounted solar projects including a 50 MW solar PV project for National Thermal Power Corporation (NTPC). In addition to this, the Company executed a 28.8 MW solar PV project for TPREL and several other small scale and rooftop grid connected solar systems.

3. Products:TPSSL''s Products business grew by more than 20%. The company actively participated in various government programmes, e.g., solar home and street lighting system in Tamil Nadu, solar pumps in Rajasthan and solar power packs in Kerala. While the solar thermal water heater market grew by more than 10%, TPSSL''s market share increased by more than 25%.

4.7 Industrial Energy Limited

Industrial Energy Limited (IEL), a Joint Venture of your Company (74%) with Tata Steel Limited (26%), commenced its operations in May 2009. It is operating a 120 MW coal based plant in Jojobera. It is also operating a 120 MW co-generation plant (Power House #6) in Jamshedpur, inside the Tata Steel plant.

IEL is currently executing a 202.5 MW (3 x 67.5 MW) waste heat recovery project, which will meet the power requirement for Tata Steel''s plant in Kalinganagar, Odisha. The project is in advanced stages of execution.

4.8 Tata Power Trading Company Limited

TPTCL is the second largest power trading company in the country. TPTCL transacted 11,488 MUs during FY14 as compared to 9,431 MUs in the previous year and has shown a CAGRof 31% over the past 5 years.

4.9 International Projects

Your Company''s JV in South Africa, Cennergi (Proprietary) Limited, achieved financial closure of the 134 MW Amakhala Emoyeni Wind Farm and the 95 MW Tsitsikamma Community Wind Farm being implemented by it.

In June 2013, your Company acquired 40% shares in Adjaristsqali Netherlands BV through its wholly owned subsidiary Tata Power International Pte. Ltd. Adjaristsqali Netherlands is implementing hydro projects in Georgia through its 100% subsidiary, Adjaristsqali Georgia LLC.

In April 2013, a Memorandum of Understanding was executed with the Ministry of Electric Power, Government of Myanmar, for development of an imported coal fired power project on Build, Own and Transfer basis.

Your Company has also executed a Memorandum of Understanding in November 2013 with the Ministry of Industry and Trade, Government of Vietnam, for developing the 1,200 MW Long Phu 2 coal fired power project in SocTrang Province of Vietnam on Build, Own and Transfer basis.

5. Credit Rating

As on 31st March, 2014, your Company had the following credit ratings- a Corporate Credit Rating of B with a Positive outlook from Standard & Poor''s Rating Services and a corporate family rating of B1 with a Negative outlook by Moody''s Investor Services. The rating is not for any specific debt issuance of your Company.

Your Company''s INR denominated instruments are rated AA- by CRISIL, and AA by CARE and ICRA. The CRISIL and ICRA ratings have a Negative Outlook. The ratings have been assigned on the basis of consolidated credit profile of Tata Power and its subsidiaries.

6. Sustainability

Your Company is guided by its founder, Mr. Jamsetji Tata, who once said "In a free enterprise, the community is not just another stakeholder in the business but is, in fact, the very purpose of its existence". Your Company firmly believes in integrating its business with the social fabric of the society that it operates in and is a firm supporter of the triple bottom line concept.

The Sustainability thought process has been laid out as a conceptual model with the governing principle of "Leadership with Care". Tata Power embodies the Tata Group''s philosophy of building strong sustainable businesses.''Care''is one of the core values and has the following elements: Care for Environment, Care for Community, Care for Customers and Care for People i.e. employees, shareholders, suppliers, partners etc.

6.1 Your Company''s efforts towards Care for our People, Care for our Community and Care for Environment are elaborated below:

Safety - Care for our People

In Tata Power Safety is a core value over which no business activity has a higher priority. Further, the commitment is shown through the Safety vision, pledge and policy. Apart from this. Safety culture at Tata Power is guided by the 10 commandments of Safety.

Tata Power has an Apex Safety Committee chaired by the CEO & Managing Director which reviews the safety performance and guides the implementation of detailed action plans through Central Safety Committees and Site Implementation teams at all sites. Safety Bipartite Committees structure has been constituted to enhance safety culture and standards in the organisation with the involvement of all employees and reinforce safety as a core value as well as percolate the ownership of safety at individual level with the help of structured reviews and discussion.

Safety practices of Tata Power JVs and subsidiaries are aligned with Tata Power Safety standards and procedures. In FY14, your Company imparted 277,278 man hours of safety training to employees/contract workmen. Your Company has trained 100% of contract employees in FY14 through contractors''safety induction programs.

Safety Statistics FY14:

Sl. No. Safety Parameters FY14 FY13 (For Tata Power, CGPL, MPL, IEL)

1 Fatality (Number) 05 01

2 LTIFR (Lost Time Injuries Frequency Rate per million man hours) 0.41 0.34

3 Total Injuries Frequency Rate (TIFR) (Number of Injuries per million man hours) 13.58 17.88

4 First Aid Cases (Number) 555 757

Care for our Community

Your Company firmly believes in making a positive impact on the community in the vicinity of its operations.

Tata Power Skill Development Institute

The Indian Power sector is poised for significant capacity additions in the 12th and 13th Plan Period needing large scale adequately skilled workforce. There exist skill gaps across the entire value chain. With more and more services being obtained from Service Providers, ensuring that they deploy adequately skilled manpower has become crucial for the industry in general and your Company in particular.

Your Company has set up Tata Power Skill Development Institute (TPSDI) to ensure that workforce deployed by the contractors is adequately skilled. TPSDI would be involved in imparting modular power skills training, testing, certification and accreditation, in a phased manner. To begin with, it would focus on the contractors'' workforce of Tata Power and would over time, cater to other companies in the power sector.

Care for our Environment

Environment management is a value that is embedded in your Company''s DNA and helps in incubating a culture of acting responsibly towards the environment. Your Company addresses various aspects of resource conservation, energy efficiency, carbon footprint, renewable power generation, biodiversity and green buildings. Your Company also follows various measures like Environmental Compliance, Corporate Sustainability Protocol Index (CSPI), Green Manufacturing Index (GMI) to keep track of the initiatives and their impact. The following key initiatives were taken up during FY14:

Measurement, tracking and reduction of Specific Water Consumption

Development of Green Belt at Mundra and Maithon

Sewage Treatment Plants at Hydro stations

Reuse of waste material atTrombay and Distribution divisions

Promoting E-Bill subscription by consumers in Distribution business

These initiatives are expected to improve the performance of individual units on important environmental aspects.

Your Company has focussed its initiatives for sustained ash utilization at all its generating plants using coal. Trombay, Jojoberaand Maithon achieved 100% fly ash utilization whereas CGPL achieved 25% in its first year of full operation, which is in line with regulatory requirements. Special attention has been given for developing new uses of ash and creating value added products from ash.

Your Company has started water foot-printing exercise at its operating locations. This will help in better understanding of watershed, impact of its water discharges and future proofing of water requirements for Company''s operations.

Your Company strives to create environmentally responsible employees by promoting and showcasing individual efforts in green initiatives through Greenolution.

6.2 Club Enerji

Club Enerji, previously known as Tata Power Energy Club, is an initiative that takes energy and resource conservation beyond your Company. This initiative helps in sensitizing the community on sustainability through various conservation ideas. Tata Power Club Enerji reaches out to school children through various interactive mediums and sensitizes them on the need to save power. It has reached out to over 400 schools in India and has sensitised over 7 million citizens, who in turn have helped save more than 11.2 MUs of electricity till date. This saving is equivalent to saving 11,200 tonnes of C02and is enough to light up over 5,200 houses for a year.

The Club has also launched a Civic & Moral Values programme across schools to develop better citizens of tomorrow and also plans to roll out a Waste Management Module.

6.3 Affirmative Action

Under its Affirmative Action (AA) program, your Company has continued to develop deprived communities, particularly Scheduled Castes (SC) and Scheduled Tribes (ST). The Apex Committee led by the CEO & Managing Director, Executive Director and external experts like the Director of Tata Institute of Social Sciences (TISS) continued to give strategic directions on AA.

A comprehensive ''Needs Assessment'' study on AA was conducted covering 100% SC/ST households (over 68,000 persons) across Tata Power divisions, CGPL, MPL and TPDDL

Your Company has implemented several programs for the 4E''s (Employment, Entrepreneurship, Employability and Education) benefiting over 10,500 persons in FY14. The major programs are Skill Development Programs for youth. Rural BPO (Business Process Outsourcing), Entrepreneurship Development (agarbatti manufacturing,fly ash brick manufacturing), upliftment of self-help groups, science laboratory, providing scholarships, extra coaching classes, computer and spoken English classes. Your Company has also started working in Jawahar Taluka in Thane District of Maharashtra, which has a tribal population of over 90% with a vast majority of them below the poverty line. Your Company is engaged with a tribal residential school, a Government ITI through employee volunteering and is also conducting BPO training for youth in association with Tata Consultancy Services (TCS).

6.4 Sustainability Reporting

Your Company is conscious of its role as a Responsible Corporate Citizen and has an uncompromising adherence to demonstrate performance on Sustainability. Your Company has adopted the Global Reporting Initiative (GRI) guidelines to report on its Sustainability performance. The current Sustainability Report FY14 is based on the GRI G3.1 guidelines covering all the 84 indicators. The scope of this report has also been enhanced by including subsidiaries like Chemical Terminal Trombay Limited (CTTL) and also divisions such as SED in the reporting purview. Your Company''s Sustainability Report will be hosted on its website www.tatapower.com.

In the last year, your Company has evolved and deployed policies in areas such as human rights, advocacy, and responsible supply chain management. Your Company became a proud recipient of CM ITC Sustainability Award, 2013 for Significant Achievement on the Journey Towards Sustainable Development. This is a testimony of the Company''s effort on Sustainability.

6.5 Business Responsibility Report (BRR)

The Business Responsibility Reporting is in line with the SEBI requirement based on the ''National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business'' notified by Ministry of Corporate Affairs (MCA), Government of India, in July 2011. Your Company has reported on the framework of BRR, describing initiatives taken by your Company from an environmental, social and governance perspective. The BRR is hosted on the website www.tatapower.com.

6.6 United Nations Global Compact

Your Company adheres to reporting on United Nations Global Compact (UNGC), on ten principles in the areas of Human Rights, Labour standards. Environment and Anti-bribery. Your Company has been reporting to UNGC since 2006 on these principles. In September 2013, your Company had submitted the Communication on Progress (CoP) to UNGC. The Company is also submitting its Sustainability Report to UNGC.

7. Innovation

Your Company follows various sources to keep abreast of developments in the area of clean technologies. Interactions are on with faculty members from leading institutions such as the NT (Bombay), Institute of Chemical Technology (ICT) and various other universities. Technologies in a variety of areas like solar (PV, with trackers, thin-film, concentrated PV and concentrated thermal). Hydro Kinetic Turbine generation, fuel cell (telecom tower application), gasification (biomass, coal), coal drying etc. are being evaluated. The highlights are:

1. Solar Concentrated Thermal: A consortium led by NT, Bombay synchronised the 1 MW solar concentrated thermal power demonstration plant at the National Solar Centre in Gurgaon. Tata Power was handling the Operations & Maintenance of the demonstration plant

2. Solar PV with single axis (E-W) tracking: Your Company commissioned a 70 kW solar PV based power plant under "Revenue on Units Generated basis-Opex model" in Lonavala.The unique feature of this project includes installation of a single axis East-West tracker which tracks the movement of the sun and tilts the angle of the solar panels by 1 degree every 20 minutes. Due to this, the panels are always exposed to direct irradiance which boosts the plant load factor (PLF) by 15%. Commercial viability of this project has been demonstrated

3. Micro Hydro Kinetic Turbine: Your Company has also tested a 10 kW micro hydro kinetic turbine by installing it in the tail race of its hydro station at Bhira. This turbine can generate electricity in water streams having velocities ranging from 0.75 m/s to 4.2 m/s. The turbine requires water depths of 2.5 m from the bed. The power conditioning unit was developed in-house. The system has performed well and has given consistent results. This can in future be replicated in various streams wherein the above conditions are fulfilled

4. Novel Coal Drying Process: An application has been filed for an Indian and an international patent for the drying process. It uses a screw conveyer as a dryer. A preliminary design report has been prepared. The estimated cost of drying will be less than $10/ton of dried coal or less than RsO.IO/kWh.The process was tested and proven at a lab scale with 50 kg batches and has the potential to bring down the cost of drying substantially compared to existing models

5. Bottom ash based brick making: Bottom ash based bricks were manufactured successfully. A patent on the same has been filed

6. Ultra Thin White Topping technology: CTTL, a wholly owned subsidiary of Tata Power, in association with BASF, has developed a concrete mix which can help replacing 40% of cement with Fly Ash. The polyheed admixture developed for Trombay Thermal Station Fly Ash has been used in a demonstration project. A demonstration road stretch of 3.5 mx 100 m has been laid. This road has lower absorption of solar energy (higher reflectivity) and is expected to have a longer service life

8. Foreign Exchange Earnings and Outgo

On a Standalone basis, the foreign exchange earnings of your Company during the year under review amounted to Rs. 335.65 crore (previous year Rs. 359.84 crore), mainly on account of interest, dividend, etc. The foreign exchange outflow during the year was Rs. 1,721.55 crore (previous yearRs. 2,418.14 crore), mainly on account of fuel purchase ofRs. 1,355.10 crore (previous yearRs. 2,202.49 crore), interest on foreign currency borrowings, NRI dividends ofRs. 83.27 crore (previous yearRs. 84.84 crore) and purchase of capital equipment, components and spares and other miscellaneous expenses ofRs. 283.18 crore (previous yearRs. 130.81 crore).

9. Disclosure of Particulars

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988are given in the prescribed format as Annexure I to the Directors'' Report.

Particulars of Employees: In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of the employees are set out in the Annexure to the Directors'' Report. However, having regard to the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Annual Report is being sent to all Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

10. Subsidiaries

Vide General Circular No: 2/2011 dated 8th February, 2011, the Ministry of Corporate Affairs, Government of India, has granted a general exemption to companies from attaching the Balance Sheet, Profit and Loss Account and other documents referred to in Section 212(1) of the Companies Act, 1956, in respect of its subsidiary companies, subject to fulfilment of the conditions mentioned therein. Accordingly, the said documents are not being attached with the Balance Sheet of your Company. A gist of the financial performance of the subsidiary companies is contained in the report. The Annual Accounts of the subsidiary companies are open for inspection by any Member/Investor and your Company will make available these documents/details upon request by any Member of the Company or to any investor of its subsidiary companies who may be interested in obtaining the same. Further, the Annual Accounts of the subsidiary companies will be kept open for inspection by any investor at the Registered Office of your Company and that of the subsidiary company concerned, and would be posted onthewebsiteoftheCompanywww.tatapower.com.

11. Directors

Consequent upon his completing 65 years of age, in line with Company''s policy for retirement of Executive Directors, Mr. S. Ramakrishnan stepped down as Director and Executive Director of your Company with effect from close of business hours on 28th February, 2014. The Board has placed on record its appreciation for the valuable contribution made by Mr. Ramakrishnan to your Company.

Mr. Ashok S. Sethi was appointed as an Additional Director with effect from 7th May, 2014, in accordance with Article 132 of the Articles of Association of the Company and Section 161 of the Companies Act, 2013 (the Act). Mr. Sethi holds office only upto the date of the forthcoming AGM and a Notice under Section 160(1) of the Act has been received from a Member signifying its intention to propose Mr. Sethi''s appointment as a Director. The Board also appointed Mr. Sethi as Executive Director effective the same date. His appointment and remuneration require the approval of the Members at the ensuing AGM.

The Company has, pursuant to the provisions of Clause 49 of the Listing Agreements entered into with Stock Exchanges, appointed Dr. Homiar S. Vachha, Mr. Nawshir H. Mirza, Mr. Deepak M. Satwalekar, Mr. Piyush G. Mankad, Mr. Ashok K. Basu and Ms.Vishakha V. Mulyeas Independent Directors of the Company. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49. In accordance with the provisions of Section 149(4) and proviso to Section 152(5) of the Companies Act, 2013, these Directors are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of the forthcoming AGM of the Company.

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr. Cyrus P. Mistry retires by rotation and is eligible for re-appointment.

12. Auditors

Messrs. Deloitte Haskins & Sells LLP (DHS LLP), who are the statutory auditors of your Company, hold office until the conclusion of the forthcoming Annual General Meeting. It is proposed to re-appoint DHS LLP as statutory auditors of the Company from the conclusion of the forthcoming AGM till the conclusion of the Ninety-eighth AGM to be held in the year 2017, subject to ratification of their appointment at every AGM. DHS has, under Section 141 of the Act, furnished a certificate of its eligibility for re-appointment. The Members year on year will be requested, to ratify their appointment as Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to Item No.4 of the Notice.

During the year, the Company had received intimation from DHS LLP stating that Deloitte Haskins & Sells had been converted into a Limited Liability Partnership (LLP) under the provisions of the Limited Liability Partnership Act, 2008 with effect from November 20, 2013. In terms of Ministry of Corporate Affairs, Government of India, General Circular No.9/2013 dated April 30,2013, if a firm of Chartered Accountants, being an auditor in a Company under the Act, is converted into an LLP, then such an LLP would be deemed to be the auditor of the said Company. The Board of Directors of the Company have taken due note of this change. Accordingly, the audit of the Company for Financial Year 2013-14 was conducted by DHS LLP.

Members will also be requested to pass a resolution (vide Item No.17 of the Notice) authorizing the Board of Directors to appoint Branch Auditors for the purpose of auditing the accounts maintained at the Branch Offices of the Company abroad.

13. Auditors''Report

The Notes forming part of the Accounts referred to in Auditors''Report of the Company a re self-explanatory and, therefore, do not call for any further explanation under Section 217(3) of the Companies Act, 1956.

The consolidated financial statements of your Company have been prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements, Accounting Standard 23 on Accounting of Investments in Associates and Accounting Standard 27 on Financial Reporting of Interest in Joint Ventures, issued by the Council of The Institute of Chartered Accountants of India.

14. Cost Auditor and Cost Audit Report

M/s Sanjay Gupta and Associates, Cost Accountant, was appointed Cost Auditors of your Company for FY14.

In accordance with the requirement of the Central Government and pursuant to Section 233B of the Companies Act, 1956, your Company carries out an audit of cost accounts relating to electricity every year. The Cost Audit Report and the Compliance Report of your Company for the Financial Year ended 31st March, 2013, by M/s Sanjay Gupta and Associates, Cost Accountants, which was due for filing with the Ministry of Corporate Affairs by 30th September, 2013, was filed on 23rd September, 2013.

15. Corporate Governance

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors'' Certificate, are included in the Annual Report.

16. Directors''Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the operating management, confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed and thatthereare no material departures therefrom;

2. They have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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 of the Company for that period;

3. They have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting 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;

4. They have prepared the annual accounts on a going concern basis.

17. Acknowledgements

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, both international and domestic. Bankers, Financial Institutions and Academic Institutions.

The Directors are thankful to the Government of India and the various Ministries, the State Governments and the various Ministries, the Central and State Electricity Regulatory authorities. Corporation and Municipal authorities of Mumbai and other cities where we are operational.

Finally, we appreciate and value the contributions made by all our employees and their families for making Tata Power what it is.

On behalf of the Board of Directors,

Cyrus P. Mistry Chairman Mumbai, 29th May 2014


Mar 31, 2013

To The Members,

The Directors are pleased to present the Ninety-Fourth Annual Report on the business and operations of your Company and the statements of account for the year ended 31st March, 2013.

1. FINANCIAL RESULTS Figures in Rs. crore

Tata Power Tata Power Group Standalone Consolidated FY13 FY12 FY13 FY12

(a) Revenue from Operations (Net) 9,567.28 8,495.84 33,025.43 26,001.40

(b) Operating Expenditure 7,543.22 6,711.21 26,580.73 21,101.18

(c) Operating Profit 2,024.06 1,784.63 6,444.70 4,900.22

(d) Add: Other Income 721.67 983.46 369.20 268.76

(e) Less: Finance Costs 678.25 514.87 2,635.53 1,527.09

(f) Profit before Depreciation and Tax 2,067.48 2,253.22 4,178.37 3,641.89

(g) Less: Depreciation/ Amortisation/Impairment 364.10 570.35 2,901.69 3,134.64

(h) Profit before Tax 1,703.38 1,682.87 1,276.68 507.25

(i) Less: Tax Expenses 678.69 513.14 1,177.96 1,475.54

o) Net Profit/(Loss) after Tax 1,024.69 1,169.73 98.72 (968.29)

(k) Less: Minority Interest - - 208.07 190.16

(l) Add: Share of Profit of Associates - - 23.92 70.77

(m) Net Profit/(Loss) after Tax, Minority Interest and 1,024.69 1,169.73 (85.43) (1087.68)

Share of Profit of Associates

2. COMPANY''S PERFORMANCE

2.1 Standalone

On a Standalone basis, your Company earned a higher Profit before Tax (PBT) compared to the previous year. However, owing to higher Tax provisioning, your Company reported a Profit after Tax (PAT) of Rs. 1,024.69 crore, as against Rs. 1,169.73 crore for the previous year.

The Operating Revenue was higher at Rs. 9,567.28 crore, as against Rs. 8,495.84 crore, an increase of 13%. Operating Revenue was higher mainly on account of higher fuel cost built in the Revenue recovery; higher transmission charges paid in the Mumbai Regulated business based on the Intra-state transmission order; higher built-in tariff and through improved operational performance. The Operating Profit was higher by 13%, significantly through improved operational performance and favourable Appellate Tribunal for Electricty (ATE) Order in Mumbai Licence Area. Other Income was lower at Rs. 721.67 crore, as against Rs. 983.46 crore in the previous year. This was mainly due to lower dividend income from Coal investments; driven by lower global coal prices as compared to last year, in spite of higher coal production from the mines.

During FY13, due to lower earnings after full year''s appropriation on unsecured perpetual securities, the Earnings per share (basic) was at Rs. 3.44 as against Rs. 4.53 in the previous year.

2.2 Consolidated

On a Consolidated basis, the Operating Revenue was higher at Rs. 33,025.43 crore, as against Rs. 26,001.40 crore, an increase of 27%. The increase in the Consolidated Operating Revenue was primarily on account of the additional revenue generated from Coastal Gujarat Power Limited (CGPL) and Maithon Power Limited (MPL), higher revenue of Tata Power Delhi Distribution Limited (TPDDL) on account of increase in power purchase cost and higher volume traded by Tata Power Trading Company Limited (TPTCL).

The Consolidated Loss after Tax at Rs. 85.43 crore is lower as compared to the previous year, mainly on account of relatively lesser impairment provisions of the Mundra assets and no charge-off of deferred stripping costs, during the year.

3. DIVIDEND

The Directors of your Company recommend a dividend of 115% (Rs. 1.15 per share) subject to the approval of the Members. The dividend has been reduced (from 125% previous year) due to the ongoing challenge in CGPL caused due to change of law and unprecedented imported coal price increase compared to the bid.

4. SUBSIDIARIES/JOINT VENTURES

With the vision of becoming the most admired and responsible Integrated Power Company with an international footprint, your Company has over the years, forged strategic alliances through Joint Ventures (JVs) and Subsidiaries. As on 31st March, 2013, your Company had 23 Subsidiaries (14 are wholly-owned Subsidiaries), 26 JVs and 10 associates.

During the year 2012-13, your Company has acquired/created the following Subsidiaries or JVs:

- Tata Power Solar Systems Limited (TPSSL) : Acquired 51% of the equity held by BP Alternative Energy Holdings Limited (BP) in TPSSL (formerly Tata BP Solar India Limited) to become a 100% owner of TPSSL.

- PT Baramulti Suksessarana Tbk (BSSR) : Acquired 26% stake in BSSR, Indonesia through its 100% subsidiary Khopoli Investments Limited (Khopoli). PT Antang Gunung Meratus (AGM), a 100% subsidiary of BSSR, and BSSR together own approximately 1 billion tonnes of coal resources in south and east Kalimantan in Indonesia.

- PT Mitratama Perkasa (PTMP): Your Company, through PT Sumber Energi Andalan Tbk (in which it effectively holds 94.61% stake through Trust Energy Resources Pte. Limited), acquired 30% stake in PTMP, a coal mining service provider in Indonesia.

- Tata Power Jamshedpur Distribution Limited (TPJDL): The Company signed a Distribution Franchisee Agreement (DFA) with Jharkhand State Electricty Board (JSEB) on 5th December, 2012 for a period of 15 years for power distribution in the Jamshedpur Circle in Jharkhand, for which the business operations are likely to commence with effect from October, 2013. The area to be served is approximately 3,600 square km, having a consumer base of about 3 lakh.

Following are the salient highlights related to your Company''s substantive Subsidiaries/JVs :

4.1 Coastal Gujarat Power Limited

CGPL, the Company''s wholly owned subsidiary, has implemented and commissioned the 4,000 MW (5 x 800 MW) Ultra Mega Power Plant (UMPP) at Mundra in Gujarat.

Project Commissioning

The fifth and last unit of Mundra UMPP was commissioned on 22nd March, 2013. During the year, four units of Mundra UMPP (4 x 800 MW) were commissioned. With the commissioning of Mundra UMPP, CGPL now holds the record of commissioning the maximum capacity ever during a year (3,200 MW) by any utility, with NTPC closely following at 3,160 MW.

The project continues to abide by stipulated norms for its operations including environment, community engagement and ecological impact.

Power Purchase Agreement (PPA)

Under the existing PPA, CGPL is able to recover partial cost of fuel through its tariff. International coal prices have gone up significantly during the last five years accentuated by the changes in Indonesian coal price regulations. This has led to significant financial burden for CGPL including impairment provisioning against its assets. Your Company is of the view that this is an industry-wide issue and not specific to Mundra UMPP alone and needs urgent resolution.

CGPL had submitted a petition to the Central Electricity Regulatory Commission (CERC) seeking relief by way of establishment of an appropriate mechanism to offset the adverse impact caused by the steep hike in coal prices. After several hearings, CERC, in its order dated 15th April, 2013, has given the directive to constitute a committee to recommend a compensatory tariff.

The above referred committee has begun its discussions and your Company is hopeful of an early resolution.

Provision for Impairment

During the year, the Company made an impairment provision of Rs. 850 crore as against Rs. 1,800 crore for the previous year. Hence, the provision as on 31st March, 2013 stood at Rs. 2,650 crore (Rs. 1,800 crore as on 31st March, 2012).

The coal price assumptions factored at the time of bid were based on the industry outlook existing at that time. The Company had factored the availability of discounts and stable pricing for long term coal contracts which were prevalent at that time. Accordingly, the Company had quoted 45% of the coal cost in the escalable component in its bid. However, due to changes in Indonesian regulation, the Company is exposed to under-recovery of coal costs.

During the year, the Company assessed the cash flows expected to be generated over the useful life of the assets. In estimating the future cash flows, the management has, based on information from independent third parties/institutions, made certain assumptions on a consistent manner, relating to fuel prices, foreign exchange, future revenues and operating parameters, which the management believes reasonably reflect future expectations of these parameters. These assumptions are monitored on a periodic basis by the management and adjustments made as necessary.

Financing

In view of the financial impact as a result of high coal prices, the lenders to the project have sought additional support from Tata Power as part of its sponsor support obligations. Tata Power has offered to transfer the cash flows from the coal investments to meet the debt service of CGPL as an interim arrangement. The Company has sought certain waivers from lenders to enable further disbursements of loans. The same is under discussion and is likely to be finalized shortly.

Sustainability

CGPL, in its endeavour to become the ''Neighbour of Choice'', continues to take initiatives for the local community in the areas of livelihood and income generation, education and health. This has been done by continuously engaging with local communities and by partnering with government agencies.

The Company and some of the project lenders have received certain complaints with regard to social and environmental compliances from organisations claiming to represent sections of the local communities. The Company has clarified to the national and international institutions that it is proactive in its association with the communities around the project area and has ensured compliance to all requirements. Since much of these concerns arise out of inadequate understanding of power plant operations, a website explaining the practices, the societal and environmental safeguards being implemented, has been created to foster better understanding. (www.tatapower.com/cgpl-mundra/myths-realities.aspx).

4.2 Investment in Coal Companies

The performance of the two Indonesian thermal coal companies, viz. PT Kaltim Prima Coal and PT Arutmin Indonesia reveals that while the production during calendar year 2012 was 74.44 MT as against 65.63 MT in calendar year 2011, the coal price realization for the year was US$ 81.01/tonne as compared to US$ 93.20/tonne in the previous year. The lower price of coal impacted the profitability of the coal companies substantially as compared to the earlier years.

In FY13, your Company also acquired 26% stake in BSSR, Indonesia. BSSR has listed its shares on the Indonesian Stock Exchange. Your Company also signed a long term coal supply agreement with AGM.

4.3 Maithon Power Limited

MPL, a JV between your Company (74%) and Damodar Valley Corporation (DVC) (26%), has set up a 1,050 MW (2 x 525 MW) power plant at Maithon in Jharkhand. Commercial operation of Unit 1 of MPL was declared on 1st September, 2011 and Unit 2 commercial operation was declared on 24th July, 2012, with power sale commencing from first day of commercial operation.

Out of the total capacity of 1,050 MW, 300 MW power has been tied up through long term PPAs, each with DVC, WBSEDCL and TPDDL, thus totalling to 900 MW. For the balance 150 MW, long term arrangements are being pursued.

4.4 Tata Power Delhi Distribution Limited

TPDDL (formerly North Delhi Power Limited), a subsidiary of your Company (51% ) with balance shares held by Delhi Power Company Limited, a Government of Delhi undertaking, is engaged in distribution of electicity in North and North-West Delhi and services around 1.3 million consumers spread over an area of 510 square km.

TPDDL''s liquidity position continues to be under considerable stress due to the large accumulated Revenue Gap caused by Regulatory Assets which is non-cash accrued revenue promised by Regulators to be recovered in subsequent years through increased tariffs. The accumulated Revenue Gap recoverable from future tariffs has increased over the years from Rs. 322 crore in FY09 to Rs. 4,712 crore in FY13. This is primarily on account of increase in power purchase cost during the period, which increased from Rs. 2.86/unit in FY09 to Rs. 5.45/unit in FY13 (91% increase) against an average billing rate (excluding Electricity Tax) increase from Rs. 4.52/unit in FY09 to Rs. 6.72/unit in FY13, reflecting a 49% increase over the same period.

Bulk of the tariff increase has taken place mainly in the last two years with an average 22% increase in September, 2011 and another 21% increase thereon from July, 2012 plus levy of 8% Deficit Recovery Surcharge to ensure liquidation of the accumulated Revenue Gaps. Apart from this, quarterly power purchase price adjustment factor was brought in from July, 2012 and presently additional 3% surcharge under Power Purchase Cost Adjustment Charges is being charged. Prior to this tariff increase, the last major tariff revision had been carried out by Delhi Electricity Regulatory Commission (DERC) in FY06 except for a marginal 1% increase in FY08. Although the prevailing increased tariffs are designed to reflect the current costs, they are not able to liquidate the outstanding Revenue Gap and the Regulatory Assets increased by Rs. 758.24 crore during FY13.

Your Company has provided alternative solutions to address the issue of burgeoning Revenue Gap. Appropriate advocacy is being done on this issue.

4.5 Cennergi Projects -Tsitsikamma and Amakhala

Your Company''s JV in South Africa, Cennergi Proprietary Limited, has made steady progress towards achievement of financial closure for two wind projects for which it was declared successful by the Department of Energy, Government of South Africa.

4.6 Tata Power Renewable Energy Limited (TPREL)

TPREL, a wholly owned subsidiary of your Company, is in the business of setting up power projects based on clean and renewable energy sources such as wind, solar, waste heat recovery and biomass.

During the year, TPREL has successfully commissioned the 21 MW wind plant at Dalot, Rajasthan.

4.7 Tata Power Solar Systems Limited (TPSSL)

TPSSL (formerly Tata BP Solar India Ltd.) currently has four business lines: (1) Manufacturing and sale of solar cells and modules; (2) Providing engineering, procurement and construction-cum-commissioning services (EPC) and O&M to solar project developers (3) Developing and selling solar PV products in rural markets and (4) Developing and selling of solar thermal (water heating) products in urban markets.

The Company, consequent to taking over BP''s share, does not have ready access to the European markets. Also, the Company has witnessed cheap imported solar cells and modules flooding the Indian markets, which has resulted in TPSSL achieving substantially lower production of solar cells and modules.

The market outlook for solar energy products and projects continues to look promising despite policy delays in India and TPSSL is significantly increasing its focus on the downstream businesses of EPC services and solar products, and expects to grow revenues in the future.

4.8 Industrial Energy Limited (IEL)

IEL, a JV of your Company (74%) with Tata Steel Limited (26%), commenced its operations in May, 2009. It is operating 120 MW coal based plant in Jojobera. It is also operating 120 MW co-generation plant (PH#6) in Jamshedpur, inside the Tata Steel plant.

IEL is currently executing the 202.5 MW (3 x 67.5 MW) waste heat recovery project, which will meet the power requirement for Tata Steel''s plant in Kalinganagar, Odisha. All clearances for the project are in place; EPC contract has been awarded. Boiler drum of Unit 1 has been lifted in March, 2013. The project is in an advanced stage of completion.

4.9 Tata Power Trading Company Limited (TPTCL)

TPTCL is in the business of power trading since June, 2004 and is the first company in India to receive power trading license from CERC. TPTCL has diversified and strengthened its power portfolio by entering into long term power purchase and sales contracts for sale of power in the long term as well as over the short term, in the merchant market.

The revenue from operations for FY13 was Rs. 3,789.29 crore, as compared to Rs. 1,926.70 crore in the previous year. The PAT increased by 74% to Rs. 24.48 crore, as against Rs. 14.05 crore in the previous year. TPTCL transacted 9,431 MUs during FY13 as compared to 5,583 MUs in the previous year and has shown a CAGR of 41% over the past 5 years. It was ranked the second largest trader with a market share of 13.89% in FY13.

5. CREDIT RATING

As on 31st March, 2013, your Company had the following credit ratings - a Corporate Credit Rating of BB - with a Negative outlook from Standard & Poor''s Rating Services and a corporate family rating of B1 with a Stable outlook by Moody''s Investor Services. The rating is not for any specific debt issuance of the Company.

Your Company''s INR denominated instruments are rated AA by CRISIL, CARE and ICRA. The CRISIL and ICRA ratings have a Negative Outlook. The ratings have been assigned on the basis of consolidated credit profile of Tata Power and its subsidiaries.

6. REGULATORY ENVIRONMENT

Regulatory reforms in the power sector are critical given the current challenges across the value chain. Your Company is actively engaged in addressing the bottlenecks in the regulatory environment and has been working through the Ministry of Power and other stakeholders in the industry with the Advisory Group that has been formulated by the Minister of State for Power.

The key issues that are currently being addressed through this forum are: Resolving Coal and Gas Deficits, Amendments to the Electricity Act, 2003, Transmission Bottlenecks, Standard Bidding Guidelines, Institutional Mechanism for expediting investments and debottlenecking Hydropower projects.

7. SUSTAINABILITY

At Tata Power, the Sustainability thought process - across Economic, Environment, Social and Cultural dimensions, is captured in the Tata Power Sustainability Model which has the over-arching objective of"Leadership with Care". This dovetails well with the Tata Group philosophy of "Improving the quality of life" and Tata Power''s own byline - "Lighting up Lives"

The Tata Power Sustainability Model covers the entire range of stakeholders (customers, shareholders, community, employees, society at large). Your Company has also instituted "CARE" as one of the values of the organization. The enablers to achieving the organization''s objectives are several initiatives including Adoption of Technology, Benchmarking, Advocacy, Leadership and Oversight, Governance processes on sustainability, etc.

7.1 Your Company''s efforts towards Care for our People, for our Community and for the Environment are elaborated below:

Care for our People - Safety

Your Company has declared Safety as a core value and consequently emphasized its intent for maintaining a healthy and safe environment in and around its operating facilities as well as at project sites through its Organizational Health & Safety policies/guidelines.

Highlights of efforts in the area of Safety are as follows:

- The Company is pursuing the process of implementing British Safety Council (BSC) 5 Star Safety Management System (SMS) to further strengthen the internal processes.

- Web based safety training is being pursued to cover 15 critical safety topics. More than 500 employees have been trained on all 15 topics through this initiative.

- A specially designed safety appreciation program titled "Super-Vision for Safety" was launched across Tata Power for first line Supervisors, realizing the importance of effective supervision for reducing the safety risks during execution.

- "Access control" philosophy has been introduced to ensure that only trained and certified persons are deputed in safety critical jobs.

- Safety awareness has been greatly enhanced at homes and schools. This has been achieved through various monthly campaigns.

Specific safety targets with lead and lag indicators are monitored against targets. A summary of safety results achieved (both employees and contract workforce) is given below:

Sl. No. Parameters FY13 FY12 (For Tata Power, CGPL, MPL, IEL, Powerlinks, TPTCL,TPREL and TPSSL)

1 Fatality (Number) 1 1

2 LTIFR (Lost Time Injuries Frequency Rate per million man hours) 0.34 0.20

3 Total Injuries Frequency Rate (TIFR) (Number of Injuries per million man hours) 17.88 20.97

4 First Aid Cases (Number) 757 1,430

We deeply regret to report a fatal accident that took place at CGPL involving a contract worker. Although it is impossible to indemnify the loss of human life, the family of the deceased person has been given financial assistance to reduce the impact of financial distress. A detailed Root Cause Analysis has been conducted to avoid recurrence of such incidents at our sites.

Care for our Community

Your Company has identified the following five thrust areas that can help it focus its community relations efforts, share learning across the multiple locations that it operates in and enable initiatives to make a difference at a regional/state or national scale. The five thrust areas have also been aligned to the national and global frameworks on Community Development. The thrust areas are:

a) Augmenting Rural Primary Education System

b) Building and Strengthening Healthcare Facilities

c) Enhancing Programs on Livelihood and Employability

d) Building Social Capital and Infrastructure

e) Nurturing Sustainability for Inclusive Growth

Your Company is pursuing initiatives across all the identified thrust areas. Presently, Community Relations Iniatives are positively impacting lives of 0.3 million people across 208 villages. About 7,200 hours of volunteering for social causes was generated by employee participation.

Care for our Environment

For Tata Power, "Care for the Environment" implies targeting outcomes in the following areas:

- Compliance at all times to relevant Environment related National/Local standards/Regulatory requirements.

- Commitments have 20-25% of its portfolio from non-Greenhouse Gas (non-GHG) sources.

- Reducing Water consumption; promoting re-useand ensuring necessary quality of discharge waterfromits powerplants.

- Minimizing waste generated; promoting reuse and recycling of waste products (e.g. fly ash, etc.).

- Minimizing emissions like SOx, NOx, Fugitive Dust, Particulate matter, etc.

- Minimizing Soil contamination atarea of operations.

- Preserving the Bio-diversity around our plants.

- Increasing the green cover in the vicinity of its operations.

Your Company has a comprehensive strategy to address the above and perodically reviews the same to drive improvements.

7.2 Club Enerji

Club Enerji, previously known as Tata Power Energy Club, is an initiative that takes energy conservation beyond your Company. This initiative helps in sensitizing the community on sustainability through various conservation ideas. Tata Power Club Enerji reaches out to school children through various interactive mediums and sensitizes them on the need to save power. It has reached out to over 400 schools in India and has sensitised over 5.2 million citizens, who in turn have helped save more than 8.7 MUs of electricity till date. This saving is equivalent to saving 8,700 tonnes of CO2 and is enough to light up approximately 4,070 houses for a year.

In the year 2012, Club Enerji has been bestowed with the Eco Advocate Award by Asia Pacific Enterprise Leadership Awards (APELA) at Singapore. It was recognized at the "2012 International Business Awards" with Gold Stevie Award for being the best Marketing Campaign of the Year 2012 - Energy category. It has also been awarded Gold at the ABCI awards in the category Best Communication material and Bronze for its Resource Conservation Module.

7.3 Affirmative Action

In line with the Tata Group policy, your Company has prepared its Affirmative Action (AA) Policy. Your Company has focused its efforts towards 4Es - Education, Employability, Employment and Entrepreneurship programs for the development of deprived communities, particularly SCs and STs.

During the year, Tata Power covered 6,500 students under education programs and 750 youth and women under skill development training programs. Also, contracts worth Rs. 7 crore were awarded to 10 SC/ST vendors. Your Company has planned to ramp up its AA activities significantly.

7.4 Sustainability Reporting

Your Company is conscious of its role as a Responsible Corporate Citizen and has an uncompromising adherence to the norms of Corporate Governance. This year, your Company commemorates the completion of a decade of the Sustainability Reporting journey with the launch of the Sustainability Report 2012-13. This report is based on the GRI G3.1 guidelines covering all the 84 indicators. The scope of this report has also been enhanced by including the major subsidiaries like CGPL and MPL in the reporting purview. Your Company''s Sustainability Report will be hosted on the website www.tatapower.com.

7.5 Business Responsibility Report (BRR)

Vide its Circular dated 13th August, 2012, Securities and Exchange Board of India (SEBI) mandated the inclusion of BRR as a part of the Annual Report for top 100 listed entities based on their market capitalisation on BSE Limited and National Stock Exchange of India Limited at 31st March, 2012. The said reporting requirement is in line with the ''National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business'' notified by Ministry of Corporate Affairs (MCA), Government of India, in July, 2011. Pursuant to the above, the Stock Exchanges amended the Listing Agreement by inclusion of Clause 55 providing a suggested framework of a BRR, describing initiatives taken by your Company from an environmental, social and governance perspective. In line with the press release and FAQs dated 10th May, 2013 issued by SEBI, your Company''s BRR will be hosted on its website www.tatapower.com. Any shareholder interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of your Company.

7.6 United Nations Global Compact (UNGC)

The Global Compact requires businesses to adhere to ten principles in the areas of human rights, labour standards, environment and anti-bribery. Your Company has been reporting data since 2006 as per the Global Compact Initiative taken up by the Secretary General of the United Nations. For the current year, your Company will submit responses to the Global Compact for its ''Communication on Progress'' on various Principles in its business processes. The details of UNGC compliance will be hosted on www.unglobalcompact.org.

8. INNOVATION

8.1 CleanTech and Non-GHG generation technologies

Your Company follows various sources to keep abreast of the Applied R&D updates on clean technologies. Interactions are on with faculty members from leading institutions such as the IIT, Bombay; University of Mumbai, Institute of Chemical Technology (ICT) and various other universities. Technologies in a variety of areas like solar (PV, thin-film, concentrated PV and concentrated thermal), micro-turbine wind energy generation, CO2 absorption using algae, carbon capture reuse and storage, fuel cell (telecom tower application), gasification (biomass, coal), etc. are being evaluated. During the year, your Company has continued to expand its presence in the field of CleanTech and Non-GHG generation techonologies. The highlights are:

i. Geothermal : Your Company has invested in Geodynamics Limited, a leading Australian company in enhanced geothermal systems. Your Company has invested AUD 50 million in the project so far. Geodynamics has commissioned a 1 MW pilot plant.

ii. Floating Solar PV : Sunengy Pty. Limited is an Australia based start-up company that has designed a floating concentrated PV system using Fresnel lenses. The first string of the 13.5 kW is operational and the performance is being monitored.

iii. Micro-Wind : Micro turbines of capacities of 2 kW from Windtronics, 5 kW and 12 kW from WePower and 5 kW from Unitron have been installed at the test bed site. Another 2 kW Windtronics turbine has been installed and commissioned at Trombay generating station. The turbines are being studied for understanding their performance in Indian conditions.

iv. Solar Concentrated Thermal : A consortium led by IIT, Bombay is on the verge of completion of 1 MW solar concentrated thermal power plant at the National Solar Centre in Gurgaon. Arrangements for commissioning and operating the same are in progress.

v. Biomass Gasification System : An 18 kW Biomass based gasification system has been set up in the Trombay Colony premises. The system consumes 25 kilogram/hour. of biomass as a fuel and the output power will be diverted for the colony consumption.

vi. Continuous Hydro-Thermal Dewatering of Coal : Your Company is working with Exergen Pty. Limited- an Australian company, on a technology that alters chemical properties of coal and makes it hydrophobic. Low grade coal (~ 50% moisture) is processed at 100 Bar pressure and 250O C to produce good quality coal (25% moisture). Exergen is in the process of raising funds to complete the 50TPH plant.

8.2 Strategic Engineering Division (SED)

In FY13, SED reaffirmed its support to the indigenisation goal of the Ministry of Defence through research, design and development of various electronic systems and sub-systems in the areas of Communications, Networking, Voice & Data Processing, Optronics, Airfield and Air Traffic Management.

9. FIXED DEPOSITS

Your Company has not accepted any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding as on 31st March, 2013.

10. FOREIGN EXCHANGE EARNINGS AND OUTGO

On a Standalone basis, the foreign exchange earnings of your Company during the year under review amounted to Rs. 359.84 crore (previous year Rs. 631.78 crore), mainly on account of interest, dividend, etc. The foreign exchange outflow during the year was Rs. 2,418.14 crore (previous year Rs. 2,451.71 crore), mainly on account of fuel purchase of Rs. 2,202.49 crore (previous year Rs. 2,071.89 crore), interest on foreign currency borrowings and NRI dividends of Rs. 84.84 crore (previous year Rs. 70.33 crore) and purchase of capital equipment, components and spares and other miscellaneous expenses of Rs. 130.81 crore (previous year Rs. 309.49 crore).

11. DISCLOSURE OF PARTICULARS

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the prescribed format as Annexure I to the Directors'' Report.

Particulars of Employees: In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 (the Act), read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are set out in the Annexure to the Directors'' Report. However, having regard to the provisions of Section 219 (1)(b)(iv) of the Act, the Annual Report is being sent to all Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of your Company.

12. SUBSIDIARIES

Vide General Circular No:2/2011 dated 8th February, 2011, the Ministry of Corporate Affairs, Government of India, has granted a general exemption to companies from attaching the Balance Sheet, Profit and Loss Account and other documents referred to in Section 212 (1) of the Act in respect of its subsidiary companies, subject to fulfilment of the conditions mentioned therein. Accordingly, the said documents are not being attached with the Balance Sheet of the Company. A gist of the financial performance of the subsidiary companies is contained in the report. The Annual Accounts of the subsidiary companies are open for inspection by any Member/Investor and the Company will make available these documents/details upon request by any Member of the Company or to any investor of its subsidiary companies who may be interested in obtaining the same. Further, the Annual Accounts of the subsidiary companies will be kept open for inspection by any investor at the Registered Office of your Company and that of the subsidiary company concerned, and would be posted on the website of the Company www.tatapower.com.

13. DIRECTORS

Mr. Adi J. Engineer, stepped down as Director of your Company with effect from 27th August, 2012, consequent upon his completing 75 years of age, in line with the policy adopted by the Board for retirement of Directors. The Board has placed on record its appreciation for the valuable contribution made to your Company by Mr. Engineer.

Mr. Ratan N. Tata resigned as Chairman of the Board of Directors of the Company with effect from 8th November, 2012. He stepped down as Director with effect from 28th December, 2012 consequent upon his completing 75 years of age (in line with the policy adopted by the Board for retirement of Directors). The Board has placed on record its appreciation for his selfless and tremendous contribution towards the growth of the Company over two decades.

Mr. Cyrus P. Mistry was appointed as Chairman of the Board of Directors in place of Mr. Tata effective 8th November, 2012.

Ms. Vishakha V. Mulye was appointed as Additional Director of the Company, with effect from 28th February, 2013, in accordance with Section 260 of the Act and Article 132 of the Articles of Association of the Company. Ms. Mulye holds office only upto the date of the forthcoming Annual General Meeting and a Notice under Section 257 of the Act has been received from a Member signifying his intention to propose Ms. Mulye''s appointment as a Director.

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr. R. Gopalakrishnan, Mr. N. H. Mirza and Mr. Thomas Mathew T. retire by rotation and are eligible for re-appointment.

14. AUDITORS

Messrs. Deloitte Haskins & Sells (DHS), who are the statutory auditors of your Company, hold office until the conclusion of the ensuing Annual General Meeting. It is proposed to re-appoint DHS to examine and audit the accounts of your Company for FY14. DHS has, under Section 224 (1) of the Act, furnished a certificate of its eligibility for re-appointment. The Members will be requested, as usual, to appoint Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the Members is invited to Item No.6 of the Notice.

Members will also be requested to pass a resolution (vide Item No.10 of the Notice) authorizing the Board of Directors to appoint Auditors/Branch Auditors/Accountants for the purpose of auditing the accounts maintained at the Branch Offices of the Company, in India and abroad.

15. AUDITORS'' REPORT

The Notes forming part of the Accounts referred to in Auditors'' Report of the Company are self-explanatory and, therefore, do not call for any further explanation under Section 217(3) of the Act.

The consolidated financial statements of your Company have been prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements, Accounting Standard 23 on Accounting of Investments in Associates and Accounting Standard 27 on Financial Reporting of Interest in Joint Ventures, issued by the Council of The Institute of Chartered Accountants of India.

16. COST AUDITOR AND COST AUDIT REPORT

M/s Sanjay Gupta and Associates, Cost Accountants, were appointed Cost Auditors of your Company for FY13.

In accordance with the requirement of the Central Government and pursuant to Section 233B of the Act, your Company carries out an audit of cost accounts relating to electricity every year. The Cost Audit Report and the Compliance Report of your Company for the Financial Year ended 31st March, 2012, by M/s N. I. Mehta & Co., which was due for filing with the Ministry of Corporate Affairs by 31st January, 2013, was filed on 11th January, 2013.

17. CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors'' Certificate, are included in the Annual Report.

18. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Act, the Directors, based on the representations received from the operating management, confirm that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

ii) They have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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 of the Company for that period;

iii) They have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting 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) They have prepared the annual accounts on a going concern basis.

19. ACKNOWLEDGEMENTS

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, both international and domestic, Bankers, Financial Institutions and Academic Institutions.

The Directors are thankful to the Government of India and the various Ministries, the State Governments and the various Ministries, the Central and State Electricity Regulatory authorities, Corporation and Municipal authorities of the areas where your Company operates and the community associated with its area of operations. The Directors are also thankful to the international Governments and regulatory authorities in the countries that it seeks to grow its business.

Finally, we appreciate and value the contributions made by all our employees and their families for making Tata Power what it is.

On behalf of the Board of Directors,

Cyrus P. Mistry

Chairman

Mumbai, 30th May, 2013


Mar 31, 2012

The Directors are pleased to present the Ninety-Third Annual Report on the business and operations of your Company and the statements of account for the year ended 31st March, 2012.

1. Financial Results Figures in Rs. crore

Standalone Consolidated

FY12 FY11 FY12 FY11

(a) Net Sales / Income from Other Operations 8,495.84 6,918.48 26,001.40 19,450.76

(b) Operating Expenditure 6,711.21 5,330.30 21,101.18 14,857.99

(c) Operating Profit 1,784.63 1,588.18 4,900.22 4,592.77

(d) Add: Other Income (including net gain on exchange) 983.46 493.58 268.76 410.50

(e) Less: Finance costs 514.87 459.80 1,527.09 866.15

(f) Profit before Depreciation and Tax 2,253.22 1,621.96 3,641.89 4,137.12

(g) Less: Depreciation / Amortization / Impairment 570.35 510.14 3,134.64 98024

(h) Profit before Tax 1,682.87 1,111.82 507.25 3,156.88

(i) Less: Tax Expenses 513.14 170.33 1,475.54 974.97

(j) Net Profit after Tax 1,169.73 941.49 (968.29) 2,181.91

(k) Less: Minority Interest - - 190.16 196.50

(I) Add: Share of Profit of Associates - - 70.77 74.19

(m) Net Profit after Tax, Minority Interest and Share of Profit of Associates ' 1,169.73 941.49 (1,087.68) 2,059.60

2. Financial Highlights

2.1 Standalone results

During the year, your Company reported a Profit after Tax (PAT) of Rs. 1,169.73 crore, as against Rs. 941.49 crore for the previous year. The Operating Revenue was higher at Rs. 8,495.84 crore, as against Rs.6,918.48 crore, an increase of 23%. Operating Revenue was higher mainly on account of higher fuel cost. The Operating Profit was higher by 12% due to improved operational performance in Mumbai Operations.

Other Income was higher at Rs. 983.46 crore, as against Rs.493.58 crore in the previous year, a growth of 99%. This was due to higher dividend income from coal companies, forex gains (as the Company adopted the option given in para 46A of AS-11 in the notification issued by Ministry of Company Affairs) and higher treasury income.

Earnings per share (basic) was at Rs. 4.53 as against Rs. 4.08 in the previous year.

2.2 Consolidated results

The Consolidated Operating Revenue which stood at Rs. 26,001.40 crore grew by 34% as against Rs. 19,450.76 crore for the previous year. PAT was at Rs. (1,087.68) crore as against Rs. 2,059.60 crore for the previous year. The increase in the Consolidated Operating Revenue was primarily on account of strong operational performance and higher coal price realization in Indonesian Coal Companies.

The Consolidated PAT is lower mainly on account of provisions made for impairment of Mundra project, reversal of forex gains and charge off of deferred stripping costs by the Indonesian Coal companies.

3. Dividend

The Directors of your Company are pleased to maintain a dividend of 125% (Rs. 1.25 per share) subject to the approval of the shareholders.

4. Existing Businesses

As of 31st March, 2012, The Tata Power Group of Companies had an installed generation capacity of 5,297 MW based on various fuel sources: thermal (coal, gas, oil), hydroelectric power, renewable energy (wind and solar photovoltaic) and waste heat recovery. The details of the installed capacity are given in Table 1.

Table 1: Details of installed capacity

Installed Capacity Category Total

Fuel Source Location State (MW) (MW)

Trombay Maharashtra 1,580

Maithon Jharkhand 1,050

Mundra Gujarat 800

Thermal - Coal / Jojobera Jharkhand 428

Oil/Gas IEL-Jojo bera Jharkhand 120 4,207

Rithala New Delhi 108

Belgaum Karnataka 81

Lodhivali Maharashtra 40

Thermal - Waste IEL- Jojobera Jharkhand 120

240

Heat Recovery Haldia West Bengal 120

Bhira Maharashtra 300

Hydro Khopoli Maharashtra 72 447

Bhivpuri Maharashtra 75

Wind farms Maharashtra, Gujarat,

Renewables Karnataka, Tamil Nadu . 375 403

Solar Photo voltaic Maharashtra, (PV) Gujarat 28

Total 5,297

Thus, your Company has 20.58% of MW capacity through non-Green House Gas (GHG) based generating sources.

Your Company also has businesses of Transmission, Power Distribution-cum-Retail in Mumbai, and other value added businesses.

Table 2: Details of other businesses

Business Location Key details

Over 1,085 circuit kilometers of Transmission Lines, connecting generating Mumbai station in Mumbai Operations to 18 Receiving Stations in Mumbai.

Trans mission Eastern/ North Over 1,166 circuit kilometers of transmission line which transmits surplus power Eastern regions from Eastern / North Eastern region (Siliguri) to Uttar Pradesh (Mandula). Mumbai Over 2,200 circuit kilometers of distribution network. Distri bution New Delhi Over 10,500 circuit kilometers of distribution network.

Mumbai Over 2,85,000 customers with sales of over 5,800 MUs in FY12.

Retai' New Delhi Engaged in serving over 1,300,000 customers with sales of over 7,500 MUs in FY12.

Strategic Mumbai One of the leading suppliers of defence equipment and solutions amongst Electro nics Indian Private Sector.

One of the leading service providers for Project Management, Operations and Power Services Mumbai Maintenance (O&M) and specialized services in the power sector.

5 NEW GENERATION PROJECTS

5.1 Projects Under Construction

Table 3:Details of projects under construction

Fuel Source Location State Capacity Category Total

Thermal - Coal / Oil / Gas Mundra Gujarat 3,200 3,852 Kalinga nagar Odisha 652

Hydro Dagachhu Bhutan 126 126

Renewables Wind farms Maharashtra, Rajasthan 150 150

Total 4,128 4,128

5.1.1 Coastal Gujarat Power Limited (CGPL)

CGPL, the Company's wholly owned subsidiary, is implementing the 4,000 MW (800 Rs.5 units) Ultra Mega Power Project (UMPP) at Mundra in Gujarat. The project, estimated to cost about Rs. 18,000 crore, is progressing as per schedule. The cumulative progress till the end of March 2012 was approximately 95% with total capital commitments of 100% of total equipment ordering and a total actual expenditure of over Rs. 16,000 crore. All major civil, structural, mechanical, electrical and control & instrumentation work is complete and about 6,500 direct and indirect workmen are deployed at the site. Commissioning activities are in full swing in Units 2 to 5, while Unit 1 of 800 MW is in operation.

The turbine erection for other four units is complete and boiler light-up for Units 2, 3 and 4 has been successfully completed. Unit 2 will be synchronized shortly. Unit 3 steam blowing is expected to start in May 2012.The last boiler i.e. Unit 5 boiler is expected to light up in second quarter of FV13.The Power Evacuation System which is being implemented by Power Grid Corporation of India Limited (PGCIL) is nearing completion with 2 out of 3 double circuit lines commissioned. The third and last evacuation line is expected to be commissioned during first quarter of FY13.

Your Company has continued its emphasis on safety, through programs, education and sensitization of workers and supervisors with the help of an NGO.

5.1.2 Kalinganagar, Odisha: 652.5 MW [3 x 67.5 MW (Gas based) 3 x 150 MW (Coal and gas based)]

Both the projects are being executed through Industrial Energy Limited (IEL), a JV of the Company (74%) with Tata Steel Limited (26%). This plant is being set up to cater to the power requirements for a 6 MTPA steel plant for Tata Steel at Kalinganagar in Jajpur district of Odisha.

CPP1 202.5 MW (3 x 67.5 MW): Order recommendations for Engineering, Procurement & Commissioning, Steam Generator (SG), Steam Turbine Generator (STG) and General Civil Works (GCW) packages have been placed on vendors. The project is progressing as per schedule.

CPP2 450 MW (3 x 150 MW): Applications for 'Consent to Establish' and 'Aviation Clearance' have been submitted. Application for long term linkage for 2.3 MTPA has been submitted to Ministry of Coal (MoC), Ministry of Power (MoP) and Central Electricity Authority (CEA). Recommendation from CEA has been sent to MoP and MoC. As an option, use of middling's, tailings from Tata Steel, e-auctioned coal and imported coal is being worked out. Signing of MoU between IEL and Tata Steel Limited for supply of coal is being pursued. The technical specifications for various packages are under finalization.

5.1.3 Dagachhu Hydroelectric Power Project, Bhutan

The 126 MW (2 x 63 MW) Dagachhu project is being implemented by Dagachhu Hydro Power Corporation Limited (a JV of the Company [26%], Druk Green Power Corporation Limited [59%] and National Pension and Provident Fund of Bhutan [15%]) in Bhutan. The civil works are being executed by M/s. Hindustan Construction Company Limited, India. More than 37% of concreting at weir has been completed and for desalted, more than 62% of concreting has been completed. The excavation of connection tunnel has been completed and the tunnel lining is in progress. For head race tunnel, more than 47% of tunnel excavation has been completed. Cumulatively around 6.2 kilometers tunneling has been completed and tunnel lining works have also commenced.

5.1.4 Renewable Energy Projects Wind Power

Your Company is developing wind power projects of over 150 MW in India, of which 80 MW is proposed to be commissioned during FY13 across Maharashtra (50 MW) and Rajasthan (30 MW). The Company's new JV-Cennergi (Pty) Limited has also been selected as a preferred bidder for two wind power projects totaling 234 MW in South Africa.

Solar Power

Your Company is in the process of acquiring suitable land parcels in the states of Maharashtra, Rajasthan, Gujarat and Karnataka to develop solar projects. The Company through Cennergi, is also evaluating development of solar project in South Africa.

25 MW solar project at Mithapur was successfully commissioned and Commercial Operation Date (COD) was achieved on 25th January, 2012,

5.2 Projects Under Planning - India

5.2.1 Coastal Maharashtra Project

During the year, your Company has made further progress in the Coastal Maharashtra project at Dehrand, Maharashtra. Resettlement and Rehabilitation (R&R) agreement has been signed with Government of Maharashtra (GoM) in July 2011. The project has all the statutory clearances for its commencement.

Land acquisition by Maharashtra Industrial Development Corporation Limited (MIDC) as per Maharashtra Industrial Development (MID) Act continued during the year. About 70% (692 out of 993 acres) of private land has been acquired so far. Well structured Community Relations (CR) activities are in place and are being implemented in the villages covered for the project.

While your Company is progressing well with the land acquisition, economic options for coal sourcing and -logistics are under evaluation.

5.2.2 Tiruldih Power Project, Jharkhand

The process of land acquisition for the 1,980 MW (3 x 660 MW) project has achieved significant progress. More than 300 acres of private land has been registered in the name of your Company. The entire land acquisition process is defined to be completed by March 2013. The Company has successfully extended MoU with the Government of Jharkhand (GoJ) which is valid for 3 years. Water allocation of 62 cusecs for the project is expected shortly.

5.2.3 Dugar Hydroelectric JV Project

The consortium of the Company and SN Power Singapore Pte. Limited (SN Power), a subsidiary of Statkraft, Norway, was awarded the Dugar hydroelectric project through a competitive bidding process carried out by the Government of Himachal Pradesh (GoHP). The project is being developed through a Special Purpose Vehicle (SPV), Dugar Hydro Power Limited (DHPL). DHPL is a JV between the Company (50% 1 share) and SN Power (50% -1 share).

Pre-feasibility studies are under progress by the joint project team set up by your Company and SN Power.

5.2.4 Maithon Expansion : 1320 MW (2 x 660)

Ministry of Environment and Forests (MoEF) has issued Terms of Reference for environment clearance. Environment Impact Assessment report along with necessary documents has been submitted for public hearing. Technical presentation at Jharkhand State Pollution Control Board (JSPCB) took place successfully. Coal linkage application has been filed with MoC.

5.2.5 Naraj Marthapur Project, Odisha

The major clearances for the 660 MW Naraj Marthapur project have been obtained. The environmental clearance has been granted by MoEF, subject to clearance from National Board of Wild Life for which the process is on. Proposal for using clean technology is also under discussion for Naraj Marthapur project.

5.3 Projects Under Planning - International

In spite of robust growth in domestic power demand, multiple constraints across the entire value chain have made growth in the country very challenging. Thus, your Company has decided to venture in international markets that offer a greater potential for growth with the strategic intent of maximizing returns and minimizing risks.

5.3.1 Sorik Marapi Geothermal Project - Indonesia

The consortium of your Company, Origin Energy Limited (Origin) and PT. Supraco Indonesia (Supraco) won the Sorik Marapi geothermal concession in a competitive bid process on 2nd September, 2010.

The project is in the exploration phase. Detailed geosciences studies (geological, geochemical and geophysical) have been completed. The preliminary resources assessment report is positive.

Exploratory drilling is expected to commence in Q4 FY13. Sufficient progress is being made in infrastructure planning and development required to carry out the exploratory drilling (like issuance of various permits, land lease/acquisition etc). There has been good engagement with the local community in the Sorik Marapi area through numerous activities led by SMGP's Community Relations. The exploration phase of the project is expected to end in September 2013.

5.3.2 African Power Business - Cennergi

Your Company has formed a 50:50 JV with Exxaro Resources Limited, the second largest coal producer in South Africa. Cennergi, the JV company, would develop power generation projects in South Africa, Botswana, Namibia and other African countries. This company plans to initially develop renewable energy projects and thereafter, coal fired and hydro power plants in the countries of interest. Cennergi was declared successful in two wind projects which were bid in April 2012,ciggregating to 234 MW.

Your Company is actively pursuing business opportunities in other countries as well and hopes to increase its global footprint in the coming years

6. Key Subsidiaries

6.1 Coastal Gujarat Power Limited

CGPL, the Company's wholly owned subsidiary, is implementing the 4,000 MW (800 x 5 units) UMPP at Mundra in Gujarat. The project, estimated to cost Rs. 18,000 crore, is progressing as per schedule. While Unit 1 is under operation, Commissioning activities are in full swing in Units 2 to 5.

Recent changes in Indonesian coal price regulations have resulted in an increase in price of Mundra UMPP's coal off-take arrangements with Indonesian coal companies. In addition to this, there is an unprecedented increase in global coal prices as compared to the year 2006, when the Company had bid for Mundra UMPP. As per the existing Power Purchase Agreement (PPA), there is only a partial pass through of increase in coal price, which is leading to an additional financial burden. Your Company is of the view that this is an industry wide issue and not specific to Mundra UMPP alone.

The issue is being represented to the government of the procuring states and the Central Government in different forums and through different industry associations. The Company is hopeful of fruitful resolution of the issue.

Given the circumstances, as a part of its sponsor support obligation to the project leaders, Tata Power has offered to transfer 75% of the dividend flow of coal SPV (which holds the ownership of 30% equity investment in two coal mines in Indonesia) to CGPL or any other alternate structure/method to support the debt service. Your Company is in discussions with lenders to formalize a suitable structure as part of sponsor support obligation.

CGPL, in its Endeavour to become 'Neighbor of Choice', continues to take initiatives for the local community in the area of livelihood and income generation, education and health as part of its community relationship programme. This is done by continuously engaging with local communities and by partnering with government agencies.

6.2 Industrial Energy Limited (IEL)

IEL commenced operations in May 2009. The 120 MW coal based Unit 5 was commissioned in FY11 in Jojobera in the existing location of Units 1 to 4. It is also operating a 120 MW co-generation plant (Power House 6) in Jamshedpur inside the Tata Steel plant. The Company is progressing to execute a 652.5 MW thermal project in Kalinganagar, Odisha. This plant would meet the power requirement for Tata Steel Limited.

During FY12, IEL earned revenue pf Rs.433.7 crore .(as against previous year revenue of Rs. 125.5 crore) and a PAT of Rs.78.0 crore (as against previous year PAT of Rs. 24.9 crore). The increase in revenue is due to commissioning of 120 MW Unit 6.

Table 4: Details of thermal power generation for FY12 -IEL

Generation (MUs) Generation Availability (%) Plant Load Factor (%)

FY12 FY11 FY12 FY11 FY12 FY11

IEL 1,574 738 94 93 74.5 70

6.3 Maithon Power Limited (MPL)

MPL, a JV between your Company (74%) and Damodar Valley Corporation (DVC) (24%), has set up a 1,050 MW (2 x 525 MW) power plant at Maithon in Jharkhand. Your Company is rendering project management and O&M services to MPL.

Unit 1 COD was declared on 1st September, 2011 with power sale commencing from first day of operation. The power has been tied up in a long term PPA with DVC and a medium term PPA with Tata Power Trading Company Limited (TPTCL). The provisional tariff order for its power sale to DVC has been determined by Central Electricity Regulatory Commission (CERC) in November 2011 till 31st March, 2012. Power sale to TPTCL, which has back to back PPAs with Tata Power Delhi Distribution Limited (TPDDL) and BSES Rajdhani Power Limited (BRPL), was guided by the terms of the respective PPAs.

Unit 2 achieved full load on primary fuel on 23rd March, 2012. Final testing of all the systems is under progress. Unit 2 is planned to be declared commercially operational in H1 FY13.

MPL has obtained necessary approvals for additional funding requirements for the increase in project cost. Your Company has infused equity of Rs. 987.84 crore and the debt drawn by MPL is Rs. 2,998.46 crore. The operational performance for MPL in FY12 is as follows:

Table 5: Operational performance of MPL forFY12

Generation (MUs) Generation Availability (%) PLF (%)

Unit 1 1,225 65 46

Since Unit 2 COD is yet to be declared, the unit performance is not shown in the above table.

MPL is also planning to expand by adding another 1,320 MW capacity consisting of two units of 660 MW each, adjacent to the ongoing 1,050 MW (2 x 525 MW) power plant. Adequate land and water resources are already in place. Application for environment clearance has been made and coal linkage by way of tie up with DVC is being worked out.

6.4 Powerlinks Transmission Limited (PTL)

PTL is a JV between your Company (51%) and PGCIL (49%). PTL transmits power from the 1,020 MW Tata Hydro Electric Power Project in Bhutan and surplus power from the Eastern/North-Eastern region of India through its transmission lines between Siliguri (West Bengal) and Mandaula (Uttar Pradesh), spanning a distance of 1,166 kilometers. The availability of transmission line was maintained at 99.66% for Eastern Region in FY12 (previous year availability: 98.62%) and 99.85% for Northern Region (previous year availability: 99.78%), as against the minimum stipulated availability of 98%.

During FY12, PTL has earned revenues of Rs. 281.63 crore (as against previous year revenues of Rs. 288.41 crore) and a PAT of Rs. 112.35 crore (as against previous year PAT of Rs. 105.68 crore). PTL has paid interim dividend of Rs. 1.25 per share (previous year interim dividend was Rs. 1.4 per share) and recommended final dividend of Rs. 0.65 per share for FY12 (previous year final dividend was Rs. 0.70 per share).

6.5 Tata Power Delhi Distribution Limited (TPDDL)

TPDDL (formerly North Delhi Power Limited) is a subsidiary of your Company (51% share) with balance shares held by Delhi Power Company Limited, a Government of Delhi undertaking. TPDDL is engaged in distribution of electricity in North and North-West Delhi and services around 1.3 million consumers spread over 510 square kilometers. The peak load in this area is about 1,400 MW, with energy consumption of over 7,500 MUs. '

In FY12, TPDDL has earned revenues from operations aggregating to Rs. 5,338.88 crore, a growth of about 30% over the previous year (Rs. 4,119.02 crore). The Company earned PAT of Rs. 338.65 crore in FY12 compared to Rs. 258.18 crore in FY11, reflecting an increase of around 31% over the previous year.

The tariff order for FY12 released by Delhi Electricity Regulatory Commission (DERC) in August 2011 was made effective from September 2011. However, the tariffs fixed by DERC for FY12 are not fully cost reflective. In FY12,TPDDL billed its consumers at rates which factored a power purchase cost of Rs. 4.06 per unit (plus fuel price adjustment surcharge) against an actual cost of Rs. 5.29 per unit. In FY11, power purchase cost of Rs. 2.63 per unit was considered as against actual cost of Rs. 4.26 per unit. The gap in cost recovery in FY11 was because tariff fixed for FY10 continued in FY11.This was due to the stay order of Delhi High Court for release of tariff order for FY11 on a PIL filed before it.

The DERC, in its last tariff order, has stated that it shall Endeavour to recover the past revenue gaps and unrecovered revenue gap for FY12 in the course of forthcoming Multi Year Tariff (MYT) Period (FY13-FY15). The DERC has also issued a letter reiterating the above and confirming that it shall allow carrying cost on the unrecovered revenue gap. Tariff determination process for FY12-FY13 is presently underway. Therefore, TPDDL's current year revenues include Rs. 1,781.63 crore (previous year Rs. 1,156.43 crore) as income recoverable from future tariff.

During FY12.TPDDL was bestowed the 'Asian Power Utility of the Year Award' for 2011, by Asian Power Awards, Singapore for the fifth year in succession,' Utility of the Year' by India Power Awards,' Best Performing Utility (Urban)' by Enertia Awards and the' Safety Innovation Award' by the Institute of Engineers (India).

6.6 Tata Power Trading Company Limited (TPTCL)

TPTCL is in the business of power trading since June 2004 and is the first company in India to receive a power trading license from CERC.

TPTCL transacted 5,583 MUs during the year as compared to 4,354 MUs in the previous year and has shown a CAGR of 36% over the past 5 years. It was ranked the third largest trader with a market share of 10% in FY12.The gross revenue for FY12 was Rs. 1,926.70 crore as compared to Rs. 1,932.05 crore in the previous year. The PAT increased by 52.78% to Rs. 14.05 crore, as against Rs. 9.15 crore in the previous year.

Electricity traded in the short term power market has gradually increased to nearly 7% of the generation, of which close to 5% is via bilateral trading and the balance 2% is through power exchanges. TPTCL has also diversified its supply sources by entering into long term power purchase contracts with various power developers for sale of their power in the long term as well as in the merchant market.

6.7 Trust Energy Resources Pte. Limited (Trust Energy)

Trust Energy, a wholly-owned subsidiary of your Company, was set up in 2008 to manage overseas fuel logistics and coal sourcing, thereby achieving vertical integration in order to support the Company's growing power business.

Trust Energy (along with Energy Eastern Pte. Limited [EEPL], a wholly-owned subsidiary of CGPL) has organized a fleet of five cape size vessels. EEPL has entered into long-term charters for three cape size vessels. The ships have started their commercial operations and are expected to be fully deployed to service the needs of Mundra UMPP, after 2013. Currently, the fleet is chartered out in the open market.

Trust Energy has been awarded the prestigious Approved International Shipping (AIS) scheme from the Government of Singapore, which provides a zero tax incentive, for its shipping income.

6.8 Tata Power Renewable Energy Limited (TPREL)

TPREL is in the business of setting up renewable power projects based on hydro power (25 MW), wind, solar and biomass. TPREL has commissioned its first 25 MW Solar Power Project at Mithapur in January 2012.

TPREL is developing more solar power projects in Maharashtra, Rajasthan, Gujarat and other states and has placed orders for 150 MW wind projects to be set up in Maharashtra and Rajasthan.

TPREL is seeking organic and inorganic growth opportunities with the goal of building a robust portfolio of renewable energy capacity-

6.9 NELCO Limited (NELCO)

NELCO, established in 1940, is listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE).Your Company, along with its subsidiary, holds 50.10% stake in NELCO.

NELCO's Integrated Security & Surveillance Solutions business (ISSS) has been active in providing integrated security and surveillance solutions in the defense sector, government bodies (e.g. Indian Railways) and other industries. It also provides solutions in the field of meteorology and has prestigious contracts from important organizations like Indian

Air Force (IAF) and Indian Meteorology Department (IMD). NELCO is also a leading VSAT service provider in the country catering to a large segment of the market. It has a major presence in the BFSI, Education, Telecom and Oil & Gas sectors due to its innovative solutions. It offers various solutions on the VSAT network which enables internet access, bandwidth on demand, IP multicasting and digital streaming. It has the satellite earth station at Mahape, Navi Mumbai and the same is augmented continuously to keep it current with the latest technology. It currently has around 25,000 VSATs deployed across the country,

NELCO has also started offering Managed Services around Managed Data Center Hosting services, Managed Network services, Remote Infrastructure Monitoring services, Application Performance Monitoring to add on to its basic services offering of VSAT communication.

Tatanet Services Limited (Tatanet), a subsidiary of NELCO, holds the requisite licenses for providing the shared hub VSAT services.

During the 12 months period ended 31st March, 2012, NELCO has posted a total income of Rs. 123.09 crore and net loss of Rs. 12.75 crore.

6.10 Af-Taab Investment Company Limited (Af-Taab)

Af-Taab is a wholly owned investment subsidiary of your Company. During FY12, Af-Taab earned an operating income of Rs. 8.80 crore and PAT of Rs. 5.07 crore, as against Rs. 206.65 crore and Rs. 163.08 crore respectively in FY11.

6.11 Chemical Terminal Trombay Limited (CTTL)

CTTL is a wholly owned subsidiary of your Company offering bulk storage facility of liquid chemicals and petroleum products. CTTL is also in the business of supplementing services for coal handling operations and fly ash disposal management at Trombay generating station. During FY12, CTTL earned an operating income of Rs. 19.15 crore and PAT of Rs. 5.23 crore, as against Rs. 13.38 crore and PAT of Rs. 3.44 crore respectively in FY11.

6.12 Tata BP Solar India Limited (Tata BP Solar)

Tata BP Solar, a JV between your Company (49%) and BP Alternative Energy Holdings Limited (BP) (51%), is a manufacturer of solar cells and modules. On 27th December, 2011, your Company signed Share Purchase Agreement with BP to purchase its 51% equity in the company, on completion of which, your Company will have full ownership.

In FY12, its production of solar cells was 22,538 KW as against 54,482 KW in FY11 and the production of solar modules was 55,977 KW as against 75,194 KW in FY11. During the year, the turnover of the Company was better by 3% to Rs. 930.54 crore (FY11 Rs. 905.93 crore). Total solar market in FY12 grew to about 700-800 MW from 80-100 MW in the previous year. The market is currently highly competitive and fragmented among different companies.

7. Investments in Indonesian Coal Companies

Your Company through its subsidiaries Bhira Investments Limited and Khopoli Investments Limited based in Mauritius and Bhivpuri Investments Limited based in Cyprus has invested in PT Kaltim Prima Coal, PT Arutmin Indonesia, Indocoal Resources (Cayman) Limited, PT Indocoal Kaltim Resources and PT Indocoal Kalsel Resources to acquire a stake of 30% in each of these companies.

The performance of the two Indonesian thermal coal companies, continued to be robust. The production during calendar year 2011 was 65.63 MT as against 60.13 MT in 2010. Coal prices showed good recovery in calendar year 2011. Coal price realization for calendar year 2011 was US$ 93.20/tonne as compared to US$ 70.82/tonne in the previous calendar year. The high price of coal ensured that the profitability of the coal companies improved.

The total external outstanding debt in the coal SPVs stands at US$ 790 million as on 31st March, 2012. This debt was taken for the acquisition of a 30% stake in two major Indonesian coal companies viz. PT Kaltim Prima Coal and PT Arutmin Indonesia and related companies (coal companies) and for other investments out of coal companies including the newly formed JV with Exxaro in South Africa. The debt consists of US$ 450 million of hybrid issue and US$ 340 million of loan with recourse to your Company.

The equity interest in the two Indonesian coal companies provides a price hedge against coal prices to the power business, which uses imported coal, against rising coal prices, besides providing security of fuel supply through the off-take agreements.

8. Sustainability at Tata Power

Sustainability forms the core of your Company's vision - "To be the most admired Integrated Power and Energy Company delivering sustainable value to all stakeholders"

Your Company has always set a standard in adopting sustainable practices in its business and has developed its sustainability model with the intent of 'Leadership with Care'. The key elements of the sustainability model are - Care for our Environment, Care for our Customers, Care for our Employees and Care for our Community.

Some of the key initiatives for community relations carried out by your Company are as follows:

i) An Industrial Training Institute has been started at Mulshi (Maharashtra) to improve employability options for youth in the area.

ii) Skill development trainings are conducted at Maithon (Jharkhand), Trombay (Maharashtra), Naraj Marthapur (Odisha) and hydro power plant areas (Maharashtra) to enable youth to undertake self employment.

iii) Improvement of Education Programs has benefited over 19,000 students in Maithon (whole Nirsa block in Jharkhand), Tiruldih and Jawahar (Thane, Maharashtra).

iv) A rural BPO was set up in Khopoli (Maharashtra) and is currently providing employment to -400 youth.

v) Nursing courses have been conducted for 35 women in the areas adjacent to our hydro power plants and all these women have been successfully employed.

vi) Mobile medical services and specialized medical camps organized by your Company have serviced more than 23,300 patients.

vii) Over 1 million saplings have been planted in our hydro power plant areas (Maharashtra), Naraj Marthapur (Odisha), Jojobera and Maithon (Jharkhand) towards a greener environment.

viii) Tata Power Community Development Trust has played a major role in providing flood relief to the Odisha flood victims in collaboration with NGOs.

ix) Your Company's employees are active volunteers and have contributed over 6,000 hours for various social and environmental causes.

Safety and health of employees are of prime importance to your Company. Further, we have also introduced Greenolution wherein employees are encouraged to carry out green initiatives voluntarily. During the year, your Company has notched up a number of achievements in relation to Sustainability. Your Company adopted Global Reporting Initiative (GRI) guidelines for sustainability reporting and prepared its sustainability report entitled 'Responsible Growth and Beyond' for FY11 based on GRI G3 guidelines. This Sustainability Report was externally assured and accorded A Application Level Check from GRI. Your Company also submitted its response to The Carbon Disclosure Project (CDP), UK an independent not-for-profit organization holding the larqest database for investors. Your Company secured 2nd position in Indian Utilities sector with Carbon Disclosure Leadership Index (CDLI) of 71.

Care for the Environment addresses our commitment towards resource conservation, energy efficiency, carbon footprint, renewable power generation, biodiversity and green buildings. One of our major initiatives towards sensitizing the community on sustainability is the Tata Power Club Enerji (the Club), previously known as Tata Power Energy Club.

In FY12, the Club has reached out to 285 schools nationwide, sensitized over 1.5 million citizens and saved more than 2.48 MUs. The Club has a strong, sustainable and replicable model to spearhead a movement. It has developed 25,348 Energy Champions, 26,273 Energy Ambassadors and 1,029 self-sustaining mini energy clubs this year. This energy brigade is creating a self-sustaining movement on energy conservation across the nation.

The Club has been bestowed the Asian Leadership Award for 'Environmental Leadership and Best Corporate Social Responsibility Practice, 2011'. CMO Asia Awards has recognized the Club as the 'Best Marketing Campaign of the Year, 2011'at Singapore. The Club has also been recognized internationally and was bestowed the' Most Innovative Campaign' award at USA's The Energy Daily's 2010 Leadership Awards.

9. United Nations Global Compact

Your Company has been reporting data since 2006 as per the Global Compact Initiative taken up by the Secretary General of the United Nations in 2002. The Global Compact requires businesses to adhere to ten principles in the areas of human rights, labour standards, environment and anti-bribery. For the current year, the Company has submitted response to the Global Compact for its 'Communication on Progress' on various principles in its business processes.

10 Safety

In your Company, safety is considered of prime importance. Therefore, M/s, DuPont was engaged over a period of three years to bring about a cultural change in the safety processes. Significant advancements in the field of safety have been achieved in FY12 by implementing various safety measures.

An Apex Safety Committee (ASC), chaired by the Managing Director, reviews the Company's safety performance on a regular basis and guides the implementation of detailed action plans through Central Safety Committees and Site Implementation teams at all sites. Safety Management System (SMS) has been upgraded to meet the requirement of British Safety Council (BSC) 5 star SMS model. Several new safety standards and procedures were introduced to ' strengthen the SMS. Access control philosophy was introduced for controlling safety-critical jobs.

Regional Apex Safety Committees were introduced to enable greater participation of line management in safety activities. Dedicated Office Safety Committees were established to drive improvement in offices.

Several risk-based third party safety audits were conducted on electrical, fuel and fire protection systems. Electrical safety audits for customer's premises were introduced to ensure safety of major customers. Several off-the-job safety measures were implemented to enhance the safety awareness on Road safety and Home safety amongst employees' family and amongst school children in the operating vicinity.

11. Renewable and New Technology

Your Company follows various websites and forums to keep abreast of the Research and Development (R&D) updates on clean technologies. Interactions are on with faculty members from the Indian Institute of Technology (IIT), Bombay, University of Mumbai, Institute of Chemical Technology (ICT) and various other universities to stay updated on new technologies in the clean and renewable energy space. Technologies in a variety of areas like C02 absorption using algae, carbon capture reuse and storage, fuel cell (telecom tower application), gasification (biomass, coal), solar (PV, thin-film, concentrated PV and concentrated thermal), micro-turbine wind energy generation, etc. are being evaluated. During the year, your Company has continued to expand its presence in the field of renewable energy. Some key highlights are:

i) Geothermal: Your Company has invested in Geodynamics, a leading Australian company in enhanced geothermal systems with a view to bring the learning from the investment to India. Your Company has invested AU$ 50 million in the project so far. Currently, the fourth injection well is being drilled. Your Company has impaired the investment based on current estimates of value.

ii) Solar Concentrated Thermal: A consortium led by IIT, Bombay is setting up a 1 MW solar concentrated thermal power plant at the National Solar Centre in Gurgaon, outside of New Delhi. Your Company will be providing technical manpower for O&M of this power plant.

iii) Floating Solar PV: Sunengy Pvt. Limited is an Australia based start-up company that has designed a floating concentrated PV system using Fresnel lenses. Your Company is planning to test a 13.5 kW pilot unit at Walwhan Lake in Lonavala.

iv) Micro-Wind: Your Company is setting up a test bed of micro wind turbines for installation and commissioning of selected turbines. This test bed will help the company determine the most cost-effective forms of micro-wind energy. Micro turbines of capacities of 2 kW from Windtronics, 5 kW and 12 kW from We Power and 5 kW from Unitrin have been installed at this site. Another 2 kW Windtronics turbine has been installed and commissioned at Tomboy generating station. The turbines are being studied for understanding their performance in Indian conditions.

v) Biomass Gasification System: Your Company plans to set-up a power generation system utilizing biomass gasification to generate synthetic gas that is fired in a gas engine to generate power. The fuel source (biomass) will be grown in a plantation for the purpose of harvesting in a sustainable manner. The first unit will be 250 KW in capacity and will need 6 tonne/day of biomass.

vi) C02 capture using algae: Your Company is designing a pilot plant that can capture ~10 TPD of C02. This will be the first plant of its kind in India and will have the flexibility to utilize different solvents so that we can compare the latest C02 capture processes. Most of the captured C02 will be reused e.g. for carbonation, dry ice manufacturing or as an algae feed. A part of the captured C02 (1 TPD) will be fed to algae in a Photo Bio Reactor (PBR) system. The algae will be harvested and then value added materials like fish food and neutraceuticals (for human consumption) can be extracted from the algae.

vii) Microwave applications in drying of coal: There are losses in efficiency due to high moisture content in coal used in coal fired power plants. In order to reduce these losses and investigate the possibility of drying of coal using microwave, preliminary studies along with experiments were carried out. The success of the study will pave the path for establishing future capacity. This application would also be useful in the Exergen process for removing the moisture from the coal.

12. Corporate Services

12.1 Financing

Your Company has issued perpetual debentures amounting to Rs. 1,500 crore in June, 2011.The key features are that these debentures are perpetual in nature with no fixed maturity or redemption and are callable only at the option of the Company at the end of the 10th year and annually thereafter. The coupon (which may be deferred at the Company's option, subject to certain conditions being met) on the debentures is set at 11.4% p.a., with a step up of 100 bps if the debentures are not called after 10 years. These debentures rank senior only to share capital of the Company.

Your Company arranged a long term loan of Rs. 800 crore from Infrastructure Development Finance Company Limited (IDFC) for funding the capital expenditure requirements of its Mumbai Operations. This loan carries an interest rate of 1.20% p.a. spread over and above 1 year IDFC benchmark rate prevailing on date of each disbursement. Of this, the Company has availed Rs. 378 crore at an average cost of 11.20% p.a. in FY12.

TPREL tied up the debt requirement of Rs. 255 crore through a consortium of domestic lenders consisting of State Bank of India and Export-Import Bank of India, at an interest rate of 11.25% p.a. (SBI base rate plus'125 bps) with an interest reset at the end of every 12 months.

12.2 Business Excellence

i) Tata Business Excellence Model (TBEM)

This year, exercising the option given by Tata Quality Management Services (TQMS) to high scoring Tata companies, of getting assessed every alternate year, the Company did not participate in the TBEM external assessment process. Instead, the Company implemented a detailed internal assessment process across all the divisions in the Company. The internal assessment process mimicked the external assessment process, to the extent possible.

ii) Organization Transformation (OT)

Your Company continued its efforts in building leaders. As part of the structured OT exercise for officers, 'Leher', provided an opportunity to two hundred officers in the management cadre, across functions, levels and sites to consolidate their learning and effectively spread their individual transformations to others in the Company and enculturise them. The cultural shifts, include taking ownership, collaborative responsiveness, taking decisions that address the greater common good, and working on their own individual development plans. Another OT initiative, 'LASER' (Learn, Apply, Share, Enjoy, Reflect), aimed at achieving high standards of shop-floor excellence and strengthening the relationships between front- line officers and workmen has been implemented. It achieved high levels of success, in terms of relationship building, improving operational efficiencies, and improving the workplace. The programme covered all operating sites and 109 projects were taken up with 42 projects having been completed, yielding an estimated annualized saving of Rs. 1.60 crore.

iii) Structured Problem Solving (SPS)

The SPS programme launched last year in your Company has gathered momentum and over 400 officers from across sites have been trained on SPS. SPS attempts to analyse data available from the various processes, using quality tools, to arrive at solutions for continuous improvements. Of the 105 SPS projects taken up during the year, 62 projects have been completed, reporting an estimated annualised saving of Rs. 34 crore.

iv) 'Sankalp'

Sankalp, a programme to bring in operational excellence, delivery excellence and cost efficiency, using the Total Operational Management methodology has gained strength across the Company. The Sankalp programme, which takes up projects that have a major effect on the Company's profitability, has achieved a saving of Rs. 84 crore accrued during the year. The key projects taken up in Trombay include improvement of heat rates of the 500 MW Unit 5 and the 250 MW Unit 8.

v) Business Process Reengineering (BPR)

The BPR efforts in your Company were concentrated in the specific area of distribution and retail sales in view of the rapid increase in the number of customers in Mumbai. Some of the projects taken up were SAP based Customer Relationship Management (CRM) which would provide a single window for all customer related information and automate workflows for customer facing processes, SAP based Business Communication Management to enable customers to use various channels of communication like interactive voice over telephone, email, SMS and integrating it with CRM etc.

BPR has also undertaken an exercise to study the existing cost structure for generation, transmission and distribution and validate the allocation methodologies.

12.3 Regulatory matters

The business of Tata Power is governed primarily under the Electricity Act, 2003 (EA 2003) and the regulations framed by the regulatory commissions under EA 2003. Every year, each regulated business of your Company is required to file two documents with the concerned regulatory commission - an Annual Performance Review (APR) for the year gone by and Annual Revenue Requirement (ARR) for the coming year. The APR contains details of the actual performance of the business, including all relevant operational and financial details. The ARR contains the projected revenue requirement based on demand projections, fuel cost and plans for operational and capital expenditure.

Of late, regulatory commissions have issued Multi Year Tariff (MYT) regulations that propose a method to fix tariff for a period of five years, with a possibility of a mid-term review. Such MYT regime has been brought by the state regulators of Maharashtra and Jharkhand for a five year period commencing from 1st April, 2011 to 31st March, 2016. Under this regime, a projection of the business parameters have to be made for the five year period. In compliance therefore, this year the Company, in addition to the APR petition, filed documents called the Business Plan and Multi Year Tariff Petition for its Mumbai business as well as two of its units at Jojobera.

12.3.1 Mumbai Operations

i) MERC order for truing up of FY10 and FY11

MERC passed an order in February, 2012 on the Company's truing up petition for FY10 and FY11. In this order, certain expenditures for FY10 and FY11 were disapproved by MERC. An appeal has been filed against such disallowances in the Appellate Tribunal for Electricity (ATE). Recently, the Company was allowed to recover Fuel Adjustment Charge (FAC) on ad-hoc basis by MERC.

ii) Changeover of consumers to Tata Power

Your Company has successfully changed over a large number of consumers from another power distributor. It was contended by the other licensee, that such changeover is causing financial loss due to loss in cross subsidy and this loss needs to be recovered. A petition was filed in MERC, which decided that this would be considered at the time of the tariff filings of the other distributor. MERC, in its order on tariff filing of the other distributor, has determined cross subsidy surcharge for various categories of such changed over consumers. An appeal has been filed in ATE against such determination of cross subsidy surcharge in the parallel licensee scenario.

iii) Laying of network in South Mumbai Area

MERC, in its order in February 2010, had directed your Company to lay distribution network in South Mumbai area for supplying electricity to the consumers. Brihan Mumbai Electricity Supply and Transport Undertaking (BEST), which also has a distribution license in this area, had challenged this Order in ATE under the contention that the Company is not allowed to lay distribution network in South Mumbai as BEST, a local authority already has a network in South Mumbai. In February 2011, ATE dismissed the appeal of BEST and confirmed the order of MERC. BEST then appealed the matter in the Hon'ble Supreme Court and obtained a stay on the judgment of ATE in March 2011. The Hon'ble Supreme Court in October 2011 remanded the matter back to ATE for hearing on merits. ATE, after hearing the case on merits, has passed a judgment in April 2012, dismissed the appeal and upheld the MERC order. The appeal has been admitted on 10th May, 2012. Pending disposal of the appeal, status quo as of that date shall be maintained by the parties.

iv) Approval of PPA between Generation and Distribution businesses of Tata Power

The Generation and Distribution businesses of your Company entered into a PPA for contracting 458 MW power from various units of its generation business with distribution business to meet the rising demand due to change over consumers. The PPA was submitted to MERC for approval under Regulation 25.1 of the MERC (MYT) Regulations, 2011. MERC, in its order in October 2011, approved the above PPA at regulated tariffs.

12.3.2 Eastern Region Operations

i) JSERC Tariff Order of FY12 for Jojobera Unit 2 and Unit 3

The Jharkhand State Electricity Regulation Commission (JSERC) has issued tariff order of Jojobera Unit 2 and Unit 3 for FY12 in August 2011. In its first tariff order for Jojobera Unit 2 and Unit 3 under Generation Tariff Regulations 2010, JSERC has disapproved certain revenue proposed by the Company. An appeal has been filed with ATE against such disallowances and the judgment of ATE on the matter is expected soon.

ii) MYT Business Plan and Petition of Jojobera Unit 2 and Unit 3

Your Company has filed MYT Business Plan and Petition for Jojobera Unit 2 and Unit 3 for the control period (FY13-FY16) to the JSERC and the tariff order of the same is expected soon.

iii) CERC Tariff Order for Maithon Power Project

CERC, after considering Petition No. 274/2010 along with Interlocutory Application Nos. 11/2011 and 14/2011, has passed the tariff order in November 2011 for sale of 150 MW from 525 MW Unit 1 to DVC for FY12. Unit .1 of MPL has been commissioned in September 2011.

12.4 Legal matters

12.4.1 Standby Charges

On an appeal filed by your Company, the Supreme Court has stayed the operation of the ATE order, subject to the condition that the Company deposits an amount of Rs. 227 crore and submits a bank guarantee for an equal amount. Your Company has complied with both the conditions. RInfra has also subsequently filed an appeal before the Supreme Court challenging the ATE order. Both the appeals have been admitted and are listed for hearing and final disposal.

12.4.2 Energy Charges and 'Take or Pay' Obligation

MERC directed RInfra to pay Rs. 323.87 crore to your Company towards the difference between the rate of Rs. 1.77 per kWh paid and Rs. 2.09 per kWh payable for the energy drawn at 220 kV interconnection and towards its 'Take or Pay' obligation for the years 1998 - 1999 and 1999 - 2000. On an appeal filed by RInfra, the ATE upheld the Company's contention with regard to payment for energy charges but reduced the rate of interest. As per the ATE order, the amount payable works out to Rs. 34.98 crore (excluding interest), as on 31st May, 2008. As regards the 'Take or Pay' obligation, the ATE has ordered that the issue should be examined afresh by MERC after the decision of the Supreme Court in the appeals relating to the distribution licence and rebates given by RInfra. The Company and RInfra filed appeals in the Supreme Court. Both the appeals have been admitted and are listed for hearing and final disposal. The Supreme Court, vide its order dated 14th December, 2009, has granted stay against the ATE order and has directed RInfra to deposit with the Supreme Court a sum of Rs. 25 crore and furnish a bank guarantee for the balance amount. Pursuant to the liberty granted by the Supreme Court, the Company has withdrawn the above mentioned sum subject to an undertaking to refund the amount with interest, in the event the appeal is decided against the Company.

13. Foreign Exchange Earnings/Outgo

The foreign exchange earnings of your Company during the year under review amounted to Rs. 631.78 crore (previous year Rs. 117.76 crore), mainly on account of forex interest, etc. The foreign exchange outflow during the year was Rs. 2,448.55 crore (previous year Rs. 1,241.25 crore), mainly on account of fuel purchase of Rs. 2,071.89 crore (previous year Rs. 1,016.83 crore), repayment of foreign currency loans with interest thereon, NRI dividends and Foreign Currency Convertible Bonds (FCCB) interest of Rs. 72.73 crore (previous year Rs. 58.43 crore) and purchase of capital equipment, components and spares and other miscellaneous expenses of Rs. 309.49 crore (previous year Rs. 173.85 crore).

14. Disclosure of Particulars

Particulars required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the prescribed format as Annexure I to the Directors' Report.

Particulars of Employees: In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 (the Act), read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are set out in. the Annexure to the Directors' Report. However, having regard to the provisions of Section 219 (1)(b)(iv) of the Act, the Annual Report is being sent to all Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of your Company.

15. Sub-division of equity shares

At the last Annual General Meeting of the Company, the Members approved sub-division of the Company's equity shares having a face value of Rs. 10/- each into equity shares having a face value of Rs. 1/- each. Accordingly, 24,29,47,084 issued equity shares of the Company, having face value of Rs.10/- each were sub-divided into Rs. 2,42,94,70,840 equity shares having face value of Rs. 1/- each. 27th September, 2011 was fixed as the Record Date for the purpose of the said sub-division. Corporate action to credit the demat accounts of Members was taken on 28th September, 2011. Those who held their shares in physical form, and did not opt to receive their holdings in electronic form, were mailed the share certificate representing their holdings by 10th October, 2011.

16. Subsidiaries

Vide General Circular No: 2 / 2011 dated 8th February, 2011, the Ministry of Corporate Affairs, Government of India, has granted a general exemption to companies from attaching the Balance Sheet, Profit and Loss Account and other documents referred to in Section 212 (1) of the Act in respect of its subsidiary companies, subject to fulfilment of the conditions mentioned therein. Accordingly, the said documents are not being attached with the Balance Sheet of the Company. A gist of the financial performance of the subsidiary companies is contained in the report. The Annual Accounts of the subsidiary companies are open for inspection by any Member/Investor and the Company will make available these documents/details upon request by any Member of the Company or to any investor of its subsidiary companies who may be interested in obtaining the same. Further, the Annual Accounts of the subsidiary companies will be kept open for inspection by any investor at the Company's Head Office and that of the subsidiary company concerned and would be posted on the website of the Company.

17. Directors

Mr Banmali Agrawala, Executive Director, resigned from the services of the Company with effect from close of business hours on 30th November, 2011. The Board has placed on record its appreciation of the valuable contribution made to your Company by Mr Agrawala.

Mr Cyrus P Mistry was appointed as an Additional Director with effect from 23rd December, 2011, in accordance with Article 132 of the Articles of Association of the Company and Section 260 of the Act. Mr Mistry holds office only up to the date of the forthcoming Annual General Meeting (AGM) and a Notice under Section 257 of the Act has been received from a Member signifying his intention to propose Mr Mistry's appointment as a Director.

Dr R H Patil, Director, resigned from the Board with effect from 20th March, 2012. The Board has placed on record its appreciation of the valuable contribution made to your Company by Dr Patil. Dr Patil expired on 12th April, 2012.

In accordance with the requirements of the Act and the Articles of Association of the Company, Mr R N Tata, Dr H S Vachha and Mr A K Basu retire by rotation and are eligible for re-appointment.

18. Auditors

M/s. Deloitte Haskins & Sells (DHS), who are the statutory auditors of the Company, hold office until the conclusion of the ensuing AGM. It is proposed to re-appoint DHS to examine and audit the accounts of the Company for FY13. DHS has, under Section 224 (1) of the Act, furnished a certificate of its eligibility for re-appointment. The Members will be requested, as usual, to appoint Auditors and to authorize the Board of Directors to fix their remuneration. In this connection, the attention of the members is invited to Item No. 6 of the Notice.

Members will also be requested to pass a resolution (vide Item No. 8 of the Notice) authorizing the Board of Directors to appoint Auditors/ Branch Auditors/ Accountants for the purpose of auditing the accounts maintained at the Branch Offices of the Company, in India and abroad.

In accordance with the requirement of the Central Government and pursuant to Section 233B of the Act, the Company carries out an audit of cost accounts relating to electricity every year.

19. Auditors' Report

The Notes forming part of the Accounts referred to in Auditors' Report of the Company are self-explanatory and, therefore, do not call for any further explanation under Section 217 (3) of the Act.

The consolidated financial statements of the Company have been prepared in accordance with Accounting Standard 21 on Consolidated Financial Statements, Accounting Standard 23 on Accounting of Investments in Associates and Accounting Standard 27 on Financial Reporting of Interest in Joint Ventures, issued by the Council of The Institute of Chartered Accountants of India.

20. Corporate Governance

To comply with conditions of Corporate Governance, pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a Management Discussion and Analysis Statement, Report on Corporate Governance and Auditors' Certificate, are included in the Annual Report.

21. Directors' Responsibility Statement

Pursuant to Section 217 (2AA) of the Act, the Directors, based on the representations received from the operating management, confirm that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures there from;

ii) They have, in the selection of the accounting policies, consulted the Statutory Auditors and have 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) They have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting 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) They have prepared the annual accounts on a going concern basis.

22. Acknowledgements

On behalf of the Directors of the Company, I would like to place on record our deep appreciation to our Shareholders, Customers, Business Partners, Vendors, both international and domestic, Bankers, Financial Institutions and Academic Institutions.

The Directors are thankful to the Government of India and the various Ministries, the state Governments and the various Ministries, the Central and State Electricity Regulatory authorities, Corporation and Municipal authorities of Mumbai and other cities where we are operational.

Finally, we appreciate and value the contributions made by all our employees and their families for making Tata Power what it is.

On behalf of the Board of Directors,

R N Tata

Chairman

Mumbai, 22nd May, 2012

 
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