Corporate Mission

To excel as a pivotal developmental financial institution in the power sector committed to the integrated development of the power and associated sectors by channelling the resources and providing financial, technological and managerial services for ensuring the development of economic, reliable and efficient systems and institutions.

Contents
Chairmans Speech Directors Report Balance Sheet Profit & Loss Account MOU-Key Performance Parameters Auditors Report Comments of the Comptroller and Auditor General of India Review of Accounts by the Comptroller and Auditor General of India 6 10 30 31 54 55

57

58

Performance at a Glance
PARTICULARS I. RESOURCES (At the end of the year) (Rs. in Crores) Equity Capital Interest Subsidy Fund Reserves and Surplus Borrowings : (i) PFC Bonds (ii) Foreign Loans (iii) Rupee Loan Govt. of India (iv) Term Loans from Banks v) Commercial Paper vI) Cash-credit from Banks II. FINANCING OPERATIONS (During the year) (Rs. in Crores) No. of Loans Loans Sanctioned Loans Disbursed Repayment by Borrowers III. WORKING RESULTS (For the year) (Rs. in Crores) Administrative Expenses Profit before tax Provision for tax Profit after tax IV. NO. OF EMPLOYEES 12.41 562.47 34.80 527.67 236 19.79 660.03 118.67 541.36 271 28.39 738.57 116.10 622.47 272 30.79 745.97 141.83 604.13 268 27.63 950.38 172.05 778.33 268 58 2922.14 2025.71 473 79 3339.00 2467.00 698 93 6490 3404 993 155 7706 3230 1416 145 8506 5150 1992 2436.53 1298.33 1281.77 90.00 2008.85 1810.74 1531.13 700.00 2508.57 2281.96 1529.13 1425.00 3637.06 2241.48 1513.60 1925.00 5027.09 2134.71 3515.00 135.00 170.00 1030.45 194.16 1449.85 1030.45 505.86 1871.33 1030.45 732.29 2355.61 1030.45 896.22 2779.14 1030.45 1093.44 3367.63 1997-98 1998-99 1999-2000 2000-01 2001-02

Financial Review

PROFIT AFTER TAX

(Rs. in Crores) 900 800 700 600 500 400 300 200 100 0 97-98 98-99 99-00 00-01 01-02 528 541 622 604 778 4500 4000 3500 3000 2500 2000 1500 1000 500 0 97-98

NET WORTH
(Rs. in Crores) 4195 3561

3256 2797 2400

98-99

99-00

00-01

01-02

CAPITAL EMPLOYED
(in %age) 2500

GROSS INCOME
(Rs. in Crores)

Share Capital 6%

2098 Reserves 21% 2000 1615 1500 1000 500 1407 1134 1910

Domestic Loans 60%

Foreign Currrency Loans 13%

97-98

98-99

99-00

00-01

01-02

Board of Directors
Shri A.A. Khan Chairman & Managing Director

Dr. K.K. Govil Director (Projects)

Shri R. Krishnamoorthy Director (F&FO)

Shri V.S. Saxena Director (ID&A)

Shri Arvind Jadhav

Director

Shri Ajay Shankar Director

Senior Executives

Smt. Anita Menon Chief Vigilance Officer

Shri S.S. Gupta ED (IAD)

Shri Ashok Gupta ED (Finance)

Shri M.K. Goel ED (Projects)

Shri P.K. Bhargava ED (MS&PR)

Shri J.S. Amitabh Company Secretary

Auditors Bubber Jindal & Co. Chartered Accountants New Delhi Bankers Reserve Bank of India Bank of India State Bank of India Vijaya Bank Canara Bank
5

Registered Office : Chandra Lok, 36, Janpath New Delhi-110 001. Tel. No. (91) (11) 372-2301 to 08 Fax: (91) (11) 331-5822 Website:http://www.pfcindia.com

Chairman & Managing Director

Shri A.A. Khan

Gentlemen, 1. It gives me great pleasure to welcome you to the 16 th Annual General Meeting of the Corporation and to share with you the sustained growth achieved by your Corporation during the year 2001-2002 under various business parameters. 2. Power is a critical component for economic growth and development of the economy. The projected growth of the Indian economy hinges heavily on the performance and growth of the power sector. To achieve Mission 2012 : Power

Chairmans Speech
for All, it is estimated that 1,00,000 MW of additional capacity and associated T&D network are to be added, and an investment of the order of Rs.800,000 crores would be needed in the next decade. In this scenario, the role of Financial Institutions like PFC, is going to be very significant in mobilizing resources, lending to power utilities and steering the power sector towards making it financially and commercially viable, on a sustainable basis. 3. In line with this objective, PFC has, in consultation with Ministry of Power, taken an initiative and moved a preliminary proposal for setting up of India Power Fund (IPF), with resource size growing according to the needs of sector from Rs.2,500 crores to Rs.25,000 crores, for investment in equity and debt to kick-start the power projects. Additionally, in order to enlarge its operation, PFC is considering investment in power sector to the extent of 20% of the total investment during the 10th Plan Period. Further it is planned actions are in hand to broaden the PFCs equity base through Initial Public Offer (IPO), and to tap international market through ADR/GDR. 4. During the year under review, the disbursement of your Corporation have touched an all-time high of Rs.5,150 crores reflecting a growth of 60% over the last year.
CMD, PFC receiving award from Vice President of India at the Conference of Chief Executives of Public Sector Undertakings on 4th May, 2002, New Delhi

Sanctions have also recorded a quantum jump of 10% at Rs.8,506 crores. This is despite the continuing unfavourable terrain for Private Power Projects. You will be further glad to know that by adopting numerous cost-saving measures such as

pre-mature payment of past high-cost-borrowings by taking advantage of lower interest-rate-regime on the one hand and enhancement in efficiencies of our operations on the other, have added to the bottom line posting a growth of 25% in Profit Before Tax of Rs.963 crores resulting into the net profit of Rs.778 crores registering the growth of 29%. 5. Your Corporation has been attaching utmost emphasis to the quality client service. This has remained pivotal point for all Corporate Goals with the objective of achieving total client satisfaction. Besides, sustained client-service approach and recovery drive have led to an impressive recovery rate of 98% during the year enhancing the quality of assets. The Corporation yet again distinguished itself with the NIL, Non-Performing Assets (NPAs), a unique discriminatory feature amongst the FIs/Banks. In order to protect the Corporation from the vagaries of the market uncertainties in future, however, a sensible policy of provisioning norms, Asset- qualification, Income recognition etc. is being contemplated to be finalized with the advice of an Advisory Committee consisting of reputed experts. The consistent all round growth in all operational/financial parameters amply demonstrates that your Corporation has succeeded in creating large reserves of satisfied clients. 6. You may be aware that the total investments in Power Sector during the 9 th Plan Period was estimated at Rs.1,25,000 crores and PFC had set its disbursement target at Rs.17000 crores for the Plan period. I am extremely happy to inform that PFC has made disbursement of Rs.16,525 crores constituting a share of 13.2% in the total investment in the Power Sector and 20% of the State/Private Sector outlay during the 9th Plan. In this context I may mention that your corporation is planning to fund about Rs.43,500 crores during the 10th Plan Period which is an increase of 160% over the level of PFCs disbursement made in the 9th Plan Period. 7. The poor financial health of SEBs, and their perceived inability to pay have been the primary causes for lack of private investment, both domestic and foreign, in spite of liberalization of Govt. policies. This also has seriously affected SEBs ability to invest in new generation projects, to upgrade their T&D network and to undertake system improvement. Unless the health of SEBs improves, major investment from the private sector is unlikely to be realased. 8. Reforms hold the key for most of the problems confronting the sector and to restore the much-needed viability and credibility into the system. I feel that while not weakening the drive for generation capacity addition, and strengthening of transmission system, the need to focus on distribution, which would ensure sufficient cash flows and help in making the sector viable, is to be given utmost priority. I may inform that your corporation has been in the forefront of Reforms & Restructuring of State power sector and is preferred by many States because of its client-friendly approach. Twenty one States have expressed their willingness to reform their power sector with the technical and financial assistance of PFC.
Suratgarh Super TPS of RRVUNL (5x250 MW) 9th Public Power Utilities Chiefs Meet at Thiruvananthapuram on 23rd Jan., 2002

Your corporation has devised a financial package for Reforming States, which includes liberal assistance to finance their major investment requirements, relaxation in certain criteria, grant for technical assistance etc. PFCs financial and technical assistance is linked to implementation of milestones in Reform Operational and Financial Action Plan (R-OFAP). PFC has extended financial assistance in the form of Grants to SERCs during the year 2001-02 and sponsoring seminar to help them becoming operational. 9. PFC has devised a strategy to accelerate capacity addition in partnership with State Power Utilities/State Government for execution of the selected project under a Special Purpose Vehicle (SPV) for which your corporation will take lead for
Minister of Power visited PFC on 16th September, 2002 to review activities of the corporation

financial closure of the project. The distribution of power is still the exclusive domain of the States, and, is the weakest link in the entire electricity supply chain. The distribution system has become fragile and weak due to lack of proper investments and unplanned extension of power supply. Owing to this, the level of T&D losses has reached alarming proportions and made the entire sector commercially unviable. Out of total energy generated on an average, only 55% is billed and only 41% is realized. As a result of this, the gap between average revenue realization and average cost of supply has tremendously increased leading to erosion of SEB resources. The annual losses of SEBs have exceeded a level of Rs.26,000 crores. Hence, Ministry of Power has given the right emphasis by identifying distribution reform as the key area of focus in the Power Sector Reform Process. In order to give fillip to Power Sector reforms in the distribution segment, PFC has been playing an active role in implementation of Accelerated Power Development and Reform Programme of Government of India. PFC has committed to give counter-part funding for such loans under the programme. 10. To complete the generation, transmission, R&M and other projects which were getting delayed due to inadequate funds, PFC had undertaken a programme in IX Plan Accelerated Generation & Supply Programme of Govt. of India so that these projects could be completed in time. Under this programme, PFC had disbursed Rs.9807 crores, and helped in adding 5714 MW of Generation and 11542 MUs through loans subsidised by GOI, its interest subsidy in PFC loans. Looking at the response and success of the programme, GOI is considering extension of this programme to X Plan as well. 11. In keeping pace with the market and the changing interest rate scenario, your corporation continuously monitored and effected downward reduction in lending rates at frequent intervals to help the borrowers. In addition, to expand the range of services, a number of new instruments, such as Performance Guarantees; Take-out financing; Debt refinancing; Debt restructuring; short and medium term loans to Equipment Manufacturers; buyers line of credit etc. have been introduced.

12.

My sincere and grateful thanks goes to the Honble Union Minister of Power, the Honble Union Minister of State for Power, the Secretary (Power), the Special Secretary (Power) and other officials of Ministry of Power, Ministry of Finance, Reserve Bank of India, Planning Commission, Central Electricity Authority, officials of C&AG and other Departments of Govt. of India, World Bank, ADB, KFW, OECF, ODA, Exim Bank of US, EDC of Canada, Commercial Banks, Financial Institutions and various other agencies for their continuous support and guidance to the Corporation. My special thanks and warm appreciation are due to the borrowers of the Corporation for their close and mutually beneficial relationship during the year, which I hope will be further strengthened in the coming years. Finally I would like to place on record my deep appreciation to all the employees and members of the management team for their hard work, commitment, team work and devotion for accelerated achievements in performance during the year under review. I finally believe that with such support a better and brighter future awaits the corporation and the power sector as a whole which in turn will move the nation on the path of progress.
Upstream view of dam under construction at Ranganadi HEP of NEEPCO (3x135 MW)

Place : New Delhi Dated : 26th September, 2002

(A.A. KHAN) Chairman & Managing Director

CMD, PFC presenting a dividend cheque of Rs. 211 Crores to Honble Union Minister of Power & Honble Union Minister of State for Power

Directors Report
To The Shareholders, The Board of Directors have pleasure in presenting their Sixteenth Annual Report on the business and operations of your Corporation and the Audited Statement of Accounts for the year ended 31st March, 2002.

1.

FINANCIAL HIGHLIGHTS
(a) Profitability Profit before tax Add: Prior Period Adjustment Less: Tax adjustment Less: Provision for tax Add: Deferred tax Profit after tax Transfer towards provision for Bad & Doubtful Debts u/s 36(1) (viia)(c) of Income Tax Act, 1961 Transfer to Special reserve u/s 36(1) (viii) of Income Tax Act, 1961 Final Dividend Transfer to General Reserve Balance carried to Balance Sheet (b) Lending operation in 2001-02 Loans Sanctioned Term Loan Working Capital Loan Total Loans Disbursed Term Loan Working Capital Loan Total Rs. 3825 Crores Rs. 1325 Crores Rs. 5150 Crores Rs. 7050 Crores Rs. 1456 Crores Rs. 8506 Crores (Rs. in crores) 962.57 0.57 -12.77 -187.99 15.95 778.33 44.73 323.57 200.00 80.00 130.03

2.0

FINANCIAL REVIEW
2.1 Revenue The total income of the Corporation during 2001-02 amounted to Rs.2098.09 crores compared to Rs. 1909.98 crores in 2000-01 registering an increase of 9.84 %. Of this, the revenue from the main activity of Term Lending (including Bills Discounting) was Rs.1997.61 Crores as against Rs.1751.18 Crores during 2000-01 registering an increase of about 14.07%. The income by way of investment of surplus funds was Rs.30.16 Crores as against Rs.74.13 Crores during 2000-01. Under the lease financing, Consultancy assignments and Exchange gain, the Corporation earned a revenue of Rs. 67.76 Crores during the year as against Rs. 72.98 Crores in the year 2000-01.
10

Sanjay Gandhi TPS, Birsinghpur of MPSEB (4x210 MW)

2.2

Expenses Interest and other expenses of the Corporation for the year 2001-02 accounted for 92.52% of total expenses. Personnel and establishment expenses as a proportion of disbursement is 0.5365% in 2001-02. Risk Management The main risk to which the Corporation is exposed are Credit risk, interest rate risk , liquidity risk and foreign exchange risk. The Corporation has put in place a mechanism to ensure that these risks are monitored carefully and managed efficiently. During the year, to give more emphasis to risk management, a new functional unit named Assets Liability & Risk Management (AL&RM) was set up. The main tasks assigned to the new unit are to study the requirement of risk management in the Corporation, market practices and product available for risk mitigation, compliance with the statutory requirements, if any, etc. To ensure that a comprehensive risk management strategy is created the group has initiated the creation of a system for real time evaluation of risk embedded in loan assets, liabilities, revenue and debt obligation of the Corporation. The group is also focused on monitoring the liquidity position and key financial ratios. An exhaustive exercise of assets liability & risk management for next 10 years provides input for various operational decision. The group also monitors the movement of various market rates and initiates action either directly or through advice for mitigating the risks arising out of these movements. The Corporation has constituted an Asset Liability Committee (ALCO), a senior management group to monitor the risk management activities in the Corporation. PFC was availing the mechanism of Exchange Risk Administration Fund (ERAF) to manage a part of its exchange rate risk. However, due to withdrawal of tax benefits under section-10(23E ) and 10(14A)of the Income Tax Act, 1961 the scheme of ERAF may have to be reviewed and PFC may have to use more market offered products for hedging exchange risk in future.

2.3

Lakwa Gas based TPS of ASEB (4x15 MW)

2.4

Disbursement During the year under report, Disbursements amounting to Rs.5150 Crores (including working capital loan) were made, which is 60% higher than the disbursement achieved during the year 2000-01. The cumulative disbursement till 31st March, 02 stands at Rs.24372 Crores. Realisation The Corporation gives utmost importance to Realisation of its Due towards Principal, Interest etc. During the year under report, against Rs. 4153.44 Crores to be recovered towards Principal, Interest, etc., under Term Loans, Bills Discounting, Working Capital and Lease Finance Scheme, an amount of Rs. 4028.21 Crores was actually realised. This works out to Recovery Rate of 97%. Consistently for the last 4 years, the achievement in Recovery Rate has been around 97-99%. The Corporation has achieved a Recovery Rate of 98% in respect of the Principal amount due during the year as against the MOU (Excellent) Target of 95%. Share Capital The entire paid-up share capital of the Corporation is held by the President of India and his nominees. During the year there has been no change in the paid-up share capital of the Corporation, and at the end of March, 2002, it stood at Rs. 1030.45 Crores.

2.5

2.6

A view of 3rd Unit of Bokaro B TPS of DVC

11

3.0

BORROWING
3.1 Borrowing from domestic market and credit rating The Corporation mobilised funds amounting to Rs.4398.05 Crores during the year 2001-02 as against the total mobilisation of funds of Rs.2230.30 Crores during the year 2000-01 from domestic market. The increase in mobilisation of funds during the year is thus 97.19% higher than that of the last year . As against the above mobilisation, the amount of Rs.1390.05 Crores were raised by issue of unsecured, taxable bonds in the nature of debentures, Rs. 1225.00 Crores by way of long / medium term loans from banks / FIs, Rs. 1478.00 Crores by way of issue of commercial paper and Rs.170 Crores by way of taking a line of credit from banks. PFC in its endeavour to keep the cost of fund at lower threshold had used the refinancing route to replace the high cost debt with low cost debt. During the year, the Corporation has prepaid the costlier domestic loans raised from various banks amounting to Rs. 565.00 Crores and GOI loans of Rs. 1513.60 Crores resulting into a considerable saving to the extent of Rs.50.00 Crores approximately for the year in the interest out go of the Corporation. During the financial year 2001-02 PFCs long term borrowing programme was awarded the highest rating of AAA & LAAA by CRISIL and ICRA respectively and PFCs Fixed Deposit Programme has been reaffirmed both by CRISIL and ICRA. 3.2 Redemption and Status of Unclaimed Amount of Bonds No amount became due for redemption during the year 2001-02 (previous year Rs.600 Crores) however balance unclaimed amount of bonds in respect of redemption as at the end of March 2002 is Rs. 0.925 Crores (previous year Rs.1.995 Crores). This represents the amount remained unclaimed by the bondholders, as the bondholders had not surrendered their bond certificates. The bondholders have been individually informed for the surrender of bond certificates. 3.3 Fixed Deposits The Corporation has not accepted or renewed any Fixed Deposit from public during the year. The amount of Rs.1.09 lacs remained unclaimed as on 31.3.2002 (previous year Rs. 1.25 lacs) as the depositors had not surrendered their fixed deposit receipts so far. However during the year an amount of Rs.0.71 lac (including interest of Rs. 0.04 lac) remaining unclaimed for a period of seven years from the due date of maturity of public deposit has been transferred to Central Govt. Fund called Investor Education & Protection Fund in terms of Section 205C of the Companies Act.

Gurunanak Dev TPS of PSEB (4x110 MW)

A view of Vijayawada TPS of APGENCO (6x210 MW)

4.0

NEW BUSINESS ACTIVITIES

Power Finance Corporation is always looking at augment its core business strengths as well as retain its dominant position in arena of financing of power sector. With this in mind the existing Memorandum of Association as well as the Article of Association were amended to provide for a foray in the following areas of operation:

Signing of MoU between PFC & EIL on 27-12-2001. Attended by Shri A.A. Khan, CMD, PFC and Shri Keshav Saran, CMD, EIL

a) b)

Extending of Financial Assistance to Manufacturers of capital equipment for power sector ; Finance of all those activities that have a backward and forward linkage to

12

the power sector including but not limited to development of coal and other mining activities for use as fuel in power projects, development of other fuel supply lines, laying of railway line, road bridges, ports and harbours & to meet such other enabling infrastructure facilities that may be required. A new Unit called the Commercial & Business Units has been set up which shall look into the borrowers and shall also interact with them so as to assist them in a manner as required. The Corporation is also entering into strategic alliances with other organisations to provide synergy to its operations. Significant among these are the EIL and the STC who have agreed to work together with PFC for mutual benefit. A Standing Committee on Policy Affairs has been put in place which shall act as a think tank and suggest new policies that are to be introduced as also amendments to be carried out in the existing policies. During the year the Corporation has introduced five schemes broadening its customer base and activities. The new schemes include issue of Performance Guarantees; Scheme of Take out financing; Debt Refinancing Scheme; Debt Restructuring Scheme; Short/Medium term loans to Equipment Manufacturer. The Debt Restructuring and Debt Refinancing Schemes aim at reduction in cost of borrowing of the borrowers thereby enhancing its liquidity. The Term loan Scheme to Equipment envisages providing funds to the equipment manufacturer thereby ensuring timely delivery of equipment/machinery to user i.e. SEBs etc. During the year, the period of WCL is enhanced from 60-120 days. Further, the response of the borrowers towards WCL was good and a number of SEBs availed facility during the year. To meet the challenges posed by various FIs and Banks, the future business strategy of PFC will have a mix of new products and business areas for both public and private power projects to include fund and non-fund based facilities.

Signing of MoU between PFC & STC on 26.06.2002. Attended by Shri A.A. Khan, CMD, PFC and Shri S.M. Dewan, CMD, STC

5.0

DIVIDEND
The Directors are pleased to recommend a dividend for a total amount of Rs.200.00 Crores (i.e.,19.40% of the paid up share capital) on the subscribed and paid-up share capital of the Corporation for the year 2001-02.

6.0

LENDING OPERATIONS
During the year under report, financial assistance amounting to Rs. 8506 Crores, consisting of Rs. 7050 Crores Term Loan , Rs. 1456 Crores working capital were sanctioned, as against Rs. 6861 Crores term loans, Rs. 845 crores. Working Capital sanctioned during 2000-01. In addition to above, Grant of Rs. 17.34 Crores for studies and Guarantee of Rs. 3.09 Crores were sanctioned in 2001-02 as against Rs. 10 Crores Grants and Rs. 1468 Crores guarantees sanctioned in the year 2000-01. Disbursements during the year 2001-02 were at Rs. 5150 Crores , consisting of Rs. 3825 Crores for term loan and Rs 1325 Crores for working capital against a total disbursement of Rs. 3230 Crores in the year 2000-01. In addition to above Grants of Rs.18.30 Crores for Studies were disbursed in 2001-02 as against Rs. 3 Crores during 2000-01. The category-wise Lending Operations and the physical benefits derived out of the Lending Operations are as per details below: 13

DIVIDEND
(Rs. in Crores) 200 200 150 150 106 100 50 0 108 124.5

97-98

98-99 99-00

00-01

01-02

SANCTIONS
(Rs. in Crores) 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 97-98 98-99 99-00 00-01 01-02 2922 3339 6490 8506 7706

A. B.

TERM LOANS, LEASING, BILLS DISCOUNTING : The sanctions of Term Loans, Leasing and Bills Discounting and Disbursements made during the FY 2001-02 and the cumulative upto March, 2002 to various categories of projects/schemes are summarised below:
2001-02 Cumulative upto March, 2002 Sanctions Rs. Crores Disbursements Rs. Crores

Category

No. of Loans

Sanctions Disbursements No. of Rs. Crores Rs. Crores Loans

System Improvement & Urban Distribution Capacitors Installation Transmission Renovation & Uprating of Hydro Power Projects Renovation & Modernisation of Thermal Power Stations Hydro Generation Thermal Generation Studies & Computerisation Sub-Total Leasing Bills Discounting Working Capital TOTAL

42 1 28 6 15 5 10 3 110 35 145

1211 4 784 14 504 1893 2593 47 7051 1456 8506

769 19 326 33 465 959 1249 6 3826 1325 5150

307 64 451 64 165 81 121 46 1299 2 7 71 1379

3612 486 7030 649 3899 6600 11633 245 34154 285 100 3130 37670

2358 442 4815 443 1977 3300 7600 102 21037 285 100 2929 24371

C.

Guarantee to Projects: Guarantees to fund providers Sanctioned and Executed; project category-wise during the FY 2001-02 are as below:
2001-02 Cumulative upto March, 2002 Executed No. Sanctions Executed

Category

No.

Sanctions

Renovation and Modernisation of Thermal Power Station Hydro Generation Thermal Generation TOTAL

1 1

3.09 3.09

1 1 5 7

284 191 1701 2176

284 191 926 1401

DISBURSEMENTS
(Rs. in Crores) 6000 5000 4000 3000 2000 1000 0 97-98 98-99 99-00 00-01 01-02 2026 2467 3404 3230 5150

D. Grants for Studies:

2001-02 No. Sanctions Rs. Crs. Disbursements Rs. Crs. Cumulative upto March, 2002 No. Sanctions Rs. Crs. Disbursements Rs. Crs.

Model DMS R&M Thermal Reform & Restructuring Institutional Development Total

3 4 5 7 19

14 1 2 1 18

16 1 1 0.11 18

15 14 14 18 61

25 3 5 1 34

18 2 2 1 23

14

E.

Physical Achievements The category-wise estimates of physical achievements through projects/schemes completed during the FY 1999-2000 in which PFC participated in financial assistance are as below: 2001-02 Cumulative upto March, 2002

Category Renovation, Modernisation and Life Extension Hydro (MU/annum addition) Thermal (MU/annum addition) Total (MU/annum addition) Transmission and Distribution HT MVAR Capacitors LT MVAR Capacitors Total Capacitors (MVAR) MVA Transmission transformation capacity MVA Distribution transformation capacity Total Transformation capacity (MVA) Ckt. Km. Transmission lines Ckt. Km. Distribution lines Total Ckt. Km. Lines (Ckt. Km.) Generation Hydro (MW) Thermal (MW) Total Generation (MW)

224 3253 3477

6010 11600 17610

220 kV Deodar s/s-66 kV Capacitor Banks of GEB

750 3 753 1040 12 1052 609 12 621

12502 1138 13640 34004 5995 39999 25373 5958 31331

857 627 1484

3558 13747 17305

7.0

ACCELERATED GENERATION AND SUPPLY PROGRAMME (AG&SP):

The Accelerated Generation & Supply Programme (AG&SP) was approved by GoI in the beginning of the 9th Plan to accelerate the power supply to consumers and included R&M and Life Extension projects/schemes, completion of on-going Generation projects, construction of Missing Transmission Links and System Improvement schemes and Grants for Studies. The programme provides incentives to State Electricity Boards, State and Central Corporations and State Power Departments in the form of interest subsidy of 4% on PFCs lending rate to priority projects, such as Renovation & Modernisation Schemes, Completion of on-going generation projects, evacuation lines, missing transmission links, installation of Capacitors and Meters. Additional interest subsidy of 1% is provided to projects in the North-Eastern Region. There is also a provision of grants under the Programme for all such studies like RLA/LE, reform & restructuring and DMS that are considered desirable and necessary by PFC to meet the policy objectives of the Government of India and PFC under the programme. The programme has made considerable progress since the time it was conceived in 1997-98 and all round gradual improvements have been realised during the implementation of the programme. During the 9th Plan, the programme has helped in commissioning of new Generation Capacity of 5859 MW consisting of 5454 MW in the State Sector and 405 MW in the Central Sector. Generation Capacity addition in the State Sector during the 9th Plan is 88% of the original targeted capacity.

Work-in-progress at Largi HEP of HPSEB (3x42 MW)

15

The details of achievements made by AG&S Programme during 9th Plan is tabulated below: (All amounts in Rs. crores) 1997-98 1998-99 1999-2000 2000-01 2001-02 Amount Sanctioned
Bassi Hydro Electric Project of HPSEB (4x15 MW)

Cumulative upto March2002

- On going Generation Projects - R&M, LE & Refurbishment Scheme - Augmentation of supply - Studies TOTAL Amount Disbursed - On going Generation Projects - R&M, LE & Refurbishment Schemes - Augmentation of supply - Studies TOTAL Generation capacity addition Achieved (in MW) Benefits achieved from R&M, LE and refurbishment (MU/ Annum)

1372 328 334 2034

863 781 470 5 2119

1248 1050 507 11 2816

797 1658 1188 8 3651

3099 84 1019 17 4219

7380 3902 3518 40 14839

960 78 234 1272 676

1315 209 355 1879 1366

1243 484 304 2 2033 1076

584 533 449 3 1569 1721

1461 458 918 18 2855 1020

5563 1763 2260 23 9609 5859

184

1653

2089

3180

3477

10583

8.0

ACCELERATED POWER DEVELOPMENT PROGRAMME (APDP)

Ministry of power has appointed seven (7) public institutions, namely NTPC, PGCIL, ERDA, CPRI, NPC, MECON and WAPCOS, as Advisor-Cum-Consultants (ACC) for the purpose of capacity building exercise covering 63 identified distribution circles in the SEB/State Utilities. NTPC and PGCIL have also been designated as Chief Co-ordinators to overview the work of the ACCs. PFC provided grant (under AG&SP/APDP) amounting to Rs.696.75 lakhs to NTPC, and Rs. 708.08 lakhs to PGCIL as advance for this developmental works. The experts of the ACCs are already working in distribution circles and Detailed Project Reports (DPR) are being prepared to turn circles in to centers under APDP . During FY 2001-02,PFC sanctioned an amount of Rs.651.08 Crores and disbursed Rs. 2901 Crores as counterpart funding for 47 schemes under APDRP comprising of 15 nos. Sub-transmission & Distribution Circle Schemes, 21 nos.R&M (Thermal) Schemes and 11 nos. R&U Hydro Schemes. The sanction included a backlog of 32 schemes, which were sanctioned by APDP Monitoring Committee during FY 2000-01 and 15 schemes of current FY sanctioned by PFC in anticipation of approval by APDP Monitoring Committee/MoP .

9.
A view of Generator Hall of Pong HEP of BBMB

FINANCIAL ASSISTANCE FOR POWER SECTOR STUDIES

Power Finance Corporation (PFC) being a developmental financial Institution provides technical and financial assistance by strategically providing grants, interest

16

free and/or concessional loans to carry out such power sector/R&M/Distribution system studies. The major studies completed during the current financial year are Development of fuel management system in Anpara & Harduaganj TPS of UPRVUNL, Preparation of feasibility report for SCADA System of NDMC, Model DMS at Gangtok of Sikkim Power Dept., RLA & LE study of Faridabad TPS Unit-I(60MW) and Reform based security mechanism for IPPs in MP by CRISIL (jointly funded by PFC & GoMP). Grants worth of Rs. 18 Crores is sanctioned by PFC during the year 2001-02 towards studies in the areas of MDMS, R&M Thermal, Reform & Restructuring and Institutional Development etc. So far PFC has sanctioned Grants worth of Rs. 34 Crores till March, 2002.
220 kV s/s, switchyard at Peddapuram of APTRANSCO

10.

CAPACITOR INSTALLATION, SYSTEM IMPROVEMENT, URBAN DISTRIBUTION AND TRANSMISSION SCHEMES:

The lending operations of PFC has been giving high priority to capacitor installation programme with financial support upto 80% of scheme completion cost and relaxation in eligibility criteria to borrowers. Urban Distribution schemes for the utilities include System Improvement measures such as installation of capacitors for reduction in losses and high accuracy electronic meters for large industrial consumers to improve revenue generation, energy audit etc. and PFC provides financial support upto 70% of the project completion cost. Again, apart from transmission lines, sub-transmission and R&M of transmission and power evacuation lines & Missing transmission links are also financed on priority. Loans worth Rs. 1999 Crores were sanctioned for System Improvement, Capacitor Installation, Urban Distribution & Transmission schemes/projects against Rs. 2070 Crores sanctioned in 2001-02. An amount of Rs. 1114 Crores were disbursed during 2001-02 against Rs.598 Crores disbursed in 2000-01.

11.0 RENOVATION, MODERNISATION AND LIFE EXTENSION

11.1 HE Projects The Corporation accords high priority to financing of R&U schemes and relaxation is given to utilities in terms & conditions. The scheme also gets covered under AG&S Programme of Govt. of India and in the process utilities get concession in lending rate of PFC. During the year 2001-02, the Corporation has sanctioned Rs 14 Crores for R&U of Hydro Power Projects and Rs. 33 Crores have been disbursed against Rs. 28 Crores disbursement in 2000-01. The cumulative financial support provided by PFC for R&U Hydro schemes is Rs. 649 Crores out of which Rs. 443 Crores has already been utilised till 31st March 2002. 11.2 Thermal Project PFC is providing financial assistance for R&M projects under relaxed conditionalities. PFC is helping utilities by providing Grants, Interest free loans for R&M and LE studies in order to assess the life of old power plants and formulate R&M schemes in totality which on implementation may bring older generation units to an acceptable level of efficiency, availability and reliability. PFC is extending Grants/interest free loans for taking up R&M and LE studies. So far, 14 grants worth Rs. 3 Crores are sanctioned and about Rs. 2 Crores are disbursed to SEBs for R&M and LE studies till 31st March 2002. Loans worth Rs. 504 Crores were sanctioned for R & M and Life Extension of thermal power plants and an amount of Rs. 464 Crores disbursed during 2001-02. The cumulative financial support provided by PFC for R&M and Life extension of Thermal Power Plants is Rs. 3899 crores out of which Rs. 1977 Crores has already been utilised till 31st March 2002.
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Srisailam HEP of APGENCO (7x110 MW +6x150 MW)

12.0 GENERATION
12.1 Hydroelectric Projects In order to improve the share of hydro power, which is continuously declining, PFC is pro-actively identifying and providing financial support to hydro generation projects. Further, hydro generation schemes are priority schemes and on-going projects where 1st unit is due for commissioning by March2004, are eligible for 4% interest subsidy on PFCs prevailing lending rates on disbursements made during 9th Plan under GoIs AG&S Programme. During the year the major projects financed are Almati Dam Power House (5x55+1x15MW) of KPCL, Maneri-Bhali HEP Stage-II (4x76MW) of Uttaranchal Jal Vidut Nagam Ltd. and Ranganadi HEP (3x135MW) of NEEPCO in State and Central Sector. During the year 2001-02, the Corporation has sanctioned loans worth Rs. 1893 Crores and an amount of Rs. 959 Crores have been disbursed. The cumulative financial support provided by PFC for Hydro Generation schemes is Rs. 6600 Crores out of which Rs. 3300 Crores has already been utilised till 31st March 2002.
Upper Indrawati HEP of OHPCL (4x150 MW)

12.2 Thermal Projects PFC is providing finance to on-going Thermal Generation projects for their timely completion. Thermal generation projects where 1st unit is due for commissioning by March2002, were eligible for 4% interest subsidy on PFCs prevailing lending rates on disbursements made during 9th Plan under GoIs AG&SP . The Major generation projects sanctioned during the year are Panipat TPS unit- 6 (1x210MW) of HPGCL, Ramgarh CCGT Extension (75.825MW) and Suratgarh TPS Stage III Unit-5(250MW) of RRVUNL, Kovilkalappal CCGT (69.65+38.23MW) of TNEB and CCGT at I.P .Estate, New Delhi (2x104.6+1x121.18MW) of Pragati Power. During the year 2001-02, the Corporation has sanctioned 10 loans worth Rs. 2593 Crores and Disbursed an amount of Rs. 1249 Crores.

13.0 PRIVATE SECTOR FINANCING

PFC is supporting private power projects for participating in the private power development, and so far has supported 6676 MW of generation capacity through various types of thermal plants including coal, gas/naphtha, furnace oil or DG set based and hydro plants etc. During the year 2001-02, loans amount to Rs 927.75 Crores have been sanctioned to 4 (four) projects covering 1064. MW capacity and loans amounting to Rs 92 Crores have been disbursed. The Corporation has so far sanctioned loans worth Rs. 5136 Crores and guarantees worth Rs. 711.50 Crores out which an amount of Rs. 812 Crores has already been disbursed till 31st March 2002. During the year, two units of M/s Sanghi Industriess Captive DG sets of capacity 11.33 MW each has been commissioned with PFCs financial support.

14.0 ENVIRONMENT UPGRADATION

PFC gives lot of importance to environment upgradation activities of existing power plants. Environment review of existing power plants are conducted and major environmental issues are identified and implemented. PFC has also relaxed several loan conditonalities to facilitate early implementation of such projects. Loans worth RS. 28.21 Crores were sanctioned for environmental upgradation activities of state utilities during the year 2001-2002. So far, PFC has sanctioned loans worth Rs.532.96 Crores for various environment related activities. PFC has also started funding environment friendly projects based on nonconventional energy resources viz. biomass bagasse etc. PFC has sanctioned loans worth Rs.104.05 Crores for two numbers of biomass based thermal power projects

LANCO Kondapalli TPS (2x115 MW + 1x125 MW)

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during the year. Several biomass and Co-generation project are being appraised for possible funding. Ash utilisation is gaining more focus especially after the Ministry of Environment & Forests notification dated 16.9.1999 regarding 100% utilisation of ash generated by coal based thermal power stations. PFC is making efforts to catalyse the process of flyash utilisation and also assist coal based power plants to meet the regulatory requirement. PFC is in the process of amending its Memorandum of Association so that ash utilisation projects.

15.0 ENERGY EFFICIENCY AND ENERGY CONSERVATION

PFC endeavours to serve the role of a pivotal developmental financial institution in the power sector by encouraging its borrowers to take up activities aiming at achieving energy efficiency and energy conservation in the Power Sector. Renovation and Modernisation of Old Power Plants and Transmission Network, Power System Improvement, Distribution Management System(DMS) and Installation of Capacitors and Meters and priority areas of lending. R&M and Life Extension activities usually result in efficiency improvement and hence energy saving. PFC is also extending grants and interest free loans to take up DMS studies aiming at improved distribution management and proper electricity accounting. PFC is also encouraging power utilities to put up plants with energy efficient technologies. PFC has also extended financing to Power Projects based on nonconventional energy resources viz-mass, bagasse etc. during the past year.

Side view of Boiler, Mill Bay, ESP and TG Building of Unit VI, Stage IV of Panipat TPS of HPGCL

16.0 EXTERNALLY AIDED PROJECTS

PFC is making pro-active efforts to ensure that various lines of credit from Mutlilateral/Bi-lateral funding agencies viz. ADB,KfW, JBIC etc. become available for the Indian Power Sector. PFC is negotiation with these agencies for the quantum of loans as well as terms and conditions that would be beneficial to the Indian Power utilities in general and projects in particular. A loan worth US $ 150 million is being negotiated with ADB which is targeted at strengthening T&D systems of state utilities & R&M activities of old thermal power plants. So far, West Bengal, Assam, Maharashtra, Tamilnadu and Karnataka have been identified as the ADB loan beneficiaries with KfW is in advance stage for carrying out R&MU of old hydro stations.

17.0 INSTITUTIONAL DEVELOPMENT OF POWER UTILITIES

PFC has been adopting a proactive and pragmatic approach to encourage improvement in the financial and operational efficiency of the state power sector. Keeping this in view OFAPs consisting of series of time bound action plan for different functional areas of the utilities are formulated. The OFAPs are formulated with active participation of the concerned utility and approved by the respective Board of the Utilities as well as State govt. The implementation of various activities included in OFAP are monitored quarterly and progress report on the same is sought from the utilities. As on March 2002, OFAPs are in place for 10 SEBs, 12 SGCs, 1 autonomous body, 3 transmission & distribution companies and 5 department run power utilities. OFAPs have been instrumental in bringing about a perceptible change in quantitative and qualitative performance of SEBs functioning. It was not possible to achieve improvements beyond a limit on the basis of OFAP within the existing structure and with a view to take the reform process to its logical conclusion, PFC facilitates formulation of Reform OFAP. R-OFAP besides aiming at bringing about efficiency improvements in the state power sector and focuses on reform/ restructuring activities needed to create an institutional mechanism for the self sustainability of the sector in the long run. During the year 2001-02, R-OFAPs have been entered with DVB, Pragati Power, GSECL and UPPCL.
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A Panoramic view of Raichur TPS (Unit I&II) of KPCL (6x210 MW)

PFC is committed to play a catalytic role in the development of the Indian power sector. For Private Power development, as Escrow to IPPs is not available upfront in most of the states, PFC along with other FIs have worked out an alternate security mechanism to facilitate financial closure of IPPs.

18.0 INITIATIVE TOWARDS REFORMS AND RESTRUCTURING

PFC has been actively persuading State Govts. to initiate Reforms and Restructuring of their power sector in order to make them commercially viable. During the year 2001-02, PFCs relentless efforts yielded in the commitment of State Govt. of Mizoram, Nagaland, and Sikkim to reform their power sector with PFCs financial and technical assistance. In total 17 states have extended commitment to reform their power sector with the support of PFC. PFC has been encouraging states to undertake reform and restructuring studies in order to finalise a reform model that is most suitable to the requirements of the state. Grants are provided by PFC for these studies. PFC has been following a policy for providing technical & financial support to states initiating reforms & restructuring in their power sector, wherein a comprehensive financial package is offered to state power utilities . In case of States going in for reforms with PFCs technical and financial assistance, this package can be as high as 80% of their total investment needs upto the Xth Plan Period. The percentage release of ceiling limit to the borrowers is linked to the achievement of reform milestones as provided in R- OFAP .

Bansagar Tons HEP Phase-II of MPSEB (2x15 MW)

19.0 TRAINING PROGRAMME FOR SEBs AND POWER UTILITIES

Pursuing its commitment to ensuring growth and development of Power Sector in general and State Electricity Boards / Utilities in particular, Power Finance Corporation continues with its efforts to provide a range of training interventions to achieve these objectives. Based on detailed consultation and need assessment six numbers of training programmes were conducted during the year to answer specific growth needs of the sector on a variety of subject as wide as resource mobilisation, power sector reforms through reduction in T&D losses, distribution reforms etc. Special attention was given to states in North Eastern region for whom an exclusive programme on Commercialisation of Power Sector with reference to North Eastern States was delivered at Guwahati. Besides attempting to answer the specific needs of the utilities, these programmes which were attended by large cross section of senior executives from power sector including State Electricity Board, Department of Power, etc. provided an excellent platform for exchange of ideas and experiences sharing. The programme drew excellent response and set into motion the reform and growth process. PFC engaged Institute of Chartered Accountants of India to study the existing system of accounting followed by SEBs and to suggest a new accounting system in line with best accounting practices with a view to meet the information requirement of different stake holders in the changed context of reform and restructuring of the state power sector.

20.0 CONSULTANCY SERVICES

The Consultancy Services draws on the in-depth understanding of the Power & financial sector of the Corporation that it has developed over more than a decade through supporting the institutional development & structured reforms in the power sector. The Thrust area for consultancy is to provide support for operationalisation of new power entities including SERC & to broaden the equity base of the power entities in an effort towards their commercialisation of operations. During the year a consultancy assignment from NPCIL was awarded for the formation of
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Release of study on Accounting in Power Sector by Sh. Suresh P . Prabhu, the then Honble Union Power Minister

joint venture for unit 3 & 4 of Kaiga Atomic Power Project which is the first attempt for setting up a Nuclear Power Plant as Joint Venture Company.

21.0 RESERVATION OF POSTS FOR SC/ST/OBC, EX-SERVICEMEN AND PHYSICALLY HANDICAPPED PERSONS IN THE SERVICES OF CORPORATION
Necessary and adequate steps were taken during the year to comply with instructions of Government of India on the subject of reservation in employment for SC / ST, other backward classes etc. Exclusive recruitment drives were conducted to fill up the positions reserved for ST and OBC categories in order to eliminate the backlog which helped us greatly in eliminating the same.

A night view of IB TPS - Stage-I of OPGCL (2x210 MW)

22.0 VIGILANCE
Vigilance Unit functions as a resource to the top management for carrying out investigation into complaints, suggesting corrective measures for improving the control systems and compliance of laid down procedures, and also carrying-out preventive vigilance exercises. During the year 2001-02, the Vigilance Department functioned as an effective tool of positive management , laying special emphasis on various aspects of Vigilance functioning-Preventive , Detective and Punitive. As a part of preventive vigilance function, the Vigilance Unit continuously reviewed property return of the employees, ensured job rotation in the sensitive posts and worked towards maintenance of transparency in administration. Vigilance Unit also organised workshops on Business Environment & Eco Vigilance, Business Ethics in Administration. Participants in these workshops were the officers of this Corporation. Further as part of preventive vigilance, two competition viz., Poetry Competition and Poster-cum-Slogan Competition were organised with the objective of involving employees and encouraging them to come out with innovative ideas and methods in spreading awareness about the ill effects of corruption. As directed by Central Vigilance Commission (CVC)Vigilance Awareness Week was observed from 31st October to 6th November, 2001. A high profile culture event was organised on 3rd November, 2001 with the aim of highlighting the harmful effects of corruption and to spread the message about the role each one of us can play in the fight against corruption.

23.0 OFFICIAL LANGUAGE

It has been a year of multidimensional activities and achievements for Official Language Implementation. Due to the continuous efforts being made to create a Hindi oriented environment in the Corporation, all the competition during the Vigilance Awareness Week were held in Hindi and a smarika (souvenir) was also published in Hindi. The Corporation was entrusted to organise 90 road shows in various districts of Delhi and Haryana as a public awareness campaign under the ageis of Ministry of Power for Mission 2012-Power of All. All these road shows were organized in Hindi with all the presentations , speeches and printed material distributed in Hindi only. Hindi to English and English to Hindi Dictionary was distributed among all the employees to help them in their day to day official work in Hindi. To create interest in Hindi and to add to their knowledge, approximately 90% amount of total budget of Library was spent on purchase of Hindi Technical Books. To provide knowledge of the usage of bilingual package Leap Office, computer workshops were organized. In addition to all these accomplishments, meetings of Official Language Implementation Committee were organized regularly. Hindi Day and Hindi
21

Year were observed. Various Hindi competitions were organized during the whole year and prizes were given to the winners. Prize money for such competitions was also increased. Several workshops were also organized for the employees having working knowledge in Hindi. The Corporation received Vidyut Rajbhasha Shield (first prize) for the year 200001 and Vidyut Rajbhasha Shield (third prize), for the year 1999-2000 for the outstanding implementation of Official Language Policy in the Corporation under Vidyut Rajbhasha Puraskar Yojna of Ministry of Power.

24.0 AUDITORS
Foundation stone laying ceremony for PFC corporate office by Shri Suresh P . Prabhu, the then Union Power Minister and Smt. Jayawanti Mehta, Honble Minister of State for Power

M/s Bubber Jindal & Company, Chartered Accountants, were appointed as Statutory Auditors of the Corporation for the financial year 2001-02 by Comptroller & Auditor General of India.

25.0 FOREIGN EXCHANGE EARNINGS AND OUTGO

No foreign exchange earned during the year under report and outgo in foreign exchange was Rs. 125.26 crores, made on account of debt servicing, financial & other charges, travelling, issue expenses & other miscellaneous expenses.

26.0 PARTICULARS OF EMPLOYEES U/S 217 (2A) OF THE COMPANIES ACT, 1956.
During the year 2001-02, none of the employees were in receipt of gross remuneration of Rs. 24 Lakhs per annum or Rs.2.00 Lakhs per month and above.

27.0 HUMAN RESOURCE DEVELOPMENT

Acknowledging the fact that human resources have been the most valuable asset for the Corporation, Power Finance Corporation continues with its commitment to ensure their growth. A lean organisation with high employees productivity has been the primary hall-mark of HR culture of the organisation. Their commitment to excellence once again enabled the Corporation to significantly outperform its business target as expressed in MoU, entered into with Government of India for the year. HR productivity rose to a newer peak establishing unparallel bench mark, once again in terms of business and productivity per capita. The growth needs of the employees were adequately taken care of under the training and development policy of the Corporation which aims at equipping the employees with necessary skills and motivational forces to meet the organisational demands and challenges, satisfactorily. Industrial Relation during the year under review remained absolutely harmonious and cordial, thus facilitating achievement of corporate goals.

28.0 GRIEVANCE REDRESSAL

Corporation has taken necessary and adequate steps for redressal of grievance both public and employees related. A well laid out policy has been put into place for effective and prompt handling of grievance. The guidelines issued by Dept. of Administrative Reforms and Public Grievances are also being complied with. Among various measures taken in this regard , the Corporation has developed its own Citizens Charter providing a measure of transparency in its business transaction, as also mechanism for quick redressal of public grievance and has published the same. It has also been placed on Corporations web site to be readily accessible to clients and members of public who require to interact with us.

29.0 CORPORATE GOVERNANCE

Ash Handling System at Santaldih TPS of WBSEB

PFC is practicing the principles of good Corporate Governance over the past years. Corporate Governance is not only restricted to ensuring compliance with
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regulatory requirements but also meeting the higher standards of transparency, accountability and integrity in respect of all its activities. The Corporation has complied with all the mandatory requirements of Stock Exchange or SEBI or any statutory authority , on any matter related to debt market and no penalty or stricture have been imposed on the Corporation by any of the above institutions. A report in line with the requirement of clause 49 of the Listing Agreement is given below along with Auditors Certificate on compliance with the provisions of Corporate Governance. I. PFCs Philosophy on Corporate Governance :Keeping in view all the significant developments in the domestic and international financial service sector, the Corporation has adopted various innovative management approach to enhance the overall performance and lay emphasis on implementation of sound corporate practices. PFC follows principles to ensure that the decision making process is fair and transparent and the employees of the Corporation subscribe to the Corporate ethics and apply them in their day to day conduct. The Corporation seeks fullest commitment of the Management and Board to improve the practices in respect of good Corporate Governance to set an example for the industry in years to come. II. Board of Directors: The Board of Directors comprises Six members . There are four Whole-time directors including a Chairman and Managing Director and two part-time government directors. The Board discharges its functions either as a full Board or through committees. The Board of Directors and its committees meet at regular intervals. The Board has constituted five Committees, viz. the Audit Committee, the Loan Committee, the Finance Committee, Executive Committee and Management Committee. The following changes have taken place in the Board of Directors of the Corporation since last report :1) Shri Arvind Jadhav, Joint Secretary, Ministry of Power was appointed as Director w.e.f. 31st May, 2002 in place of Shri Ajay Shankar, who ceased to be Director w.e.f. 31st May, 2002. Shri M. Sahoo, Joint Secretary and Financial Advisor, Ministry of Power, was appointed as Director w.e.f. 16th July, 2002 in place of Shri R. Ramanujam who ceased to be Director w.e.f. 16th July, 2002 . Shri V.S.Saxena was appointed as Director (ID&A) w.e.f. 08.05.2002. Shri T. G. Srinivasan, Member (E&C), CEA, ceased to be Director w.e.f. 1st March, 2002. Shri Ajay Shankar, Joint Secretary , Ministry of Power, was re- appointed as Director w.e.f. 19 th September, 2002 in place of Shri M. Sahoo who ceased to be Director w.e.f. 19th September, 2002 .
Ranjeet Sagar Dam HEP , Shahpurkandi of PSEB (4x150 MW)

2)

3) 4) 5)

The Board places on record its warm appreciation of the valuable contribution made by the outgoing Directors as members of the Board. There were 8 meetings of the Board of Directors held during the Year 2001-02 i.e. on 30th April 01, 28th June 01, 17th August 01, 5th October 01, 30th October 01, 10th Dec 01, 30th Jan 02, 14th March 02. Shri K. K. Govil, Director ( Projects) and Shri V. S. Saxena, Director ( ID &A) are also Director on the Board of one more Company , while Shri Arvind Jadhav, Director and Shri Ajay Shankar, Director are also Director on the Board of two more Companies.
A view of Turbine Floor of Kolaghat TPS of WBPDCL

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All the Directors were present in all the Board meetings held during the year except few occasions. The appointment of Directors and payment of their remuneration are decided by President of India as per the Articles of Association of the Corporation. III. Audit Committee : Pursuant to the requirement of section 292A of the Companies Act, 1956 & provisions of Clause49 of Standard Listing Agreement, an Audit Committee of the Corporation was constituted by the Board of Directors in its 164th Meeting held on 30th January, 2001. The Audit Committee has wide and vast powers. The responsibilities of the Audit Committee include overseeing the financial reporting process to ensure proper disclosure of financial statements, investigate any activity within its powers, seek information from any employee, obtain legal or other professional advice, recommending appointment/ removal of external auditors and fixing their remuneration, reviewing the quarterly, half yearly and annual financial statements before submission to the Board, reviewing adequacy of internal control systems and adequacy, structure and staffing of the internal audit function, reviewing findings of internal investigations, discussing the scope of audit with the external auditors and looking at the reasons of substantial defaults, if any, of non-payment to stakeholders. The Committee is Chaired by Dr. K. K. Govil, Director (Projects) and has two part time director from Ministry of Power as its member. Five meetings of the Audit Committee were held during the financial year 2001-02. IV. General Body Meetings : The Annual General meetings during the last three years were held on 22nd Sept 1999, 22nd May 2000 and 21st Aug 2001. There were no special resolutions passed by the Corporation at the last three AGM of the Corporation or through postal ballot at any one of the above meetings. The procedure for postal ballot are same as given under Section 192Aof the Companies Act,1956. Disclosures : There are no materially significant transactions with related parties i.e. promoters, directors or the management, conflicting with the Corporations interest. There were also no instances of non-compliance on any matter related to the Capital Markets during the last three years. Means of Communication : Important informations like financial performance, operational performance and Press Releases on significant developments in the Corporation that has been made available from time to time to the Press and is also available on the website of the Corporation, viz. www.pfcindia.com and has also been submitted to stock exchanges. The quarterly financial results are published in English and Hindi newspapers.

V.

VI.

VIII. Auditors Certificate : The Auditors Certificate on compliance of conditions of Corporate Governance as stipulated in clause 49 of the Listing Agreement is annexed herewith. VIII. Management Discussion and Analysis Report : In accordance with the listing Agreement , the Management Discussion and Analysis report forming part of this report is annexed.

30.0 REPLIES TO THE REPORT/COMMENTS OF AUDITORS

Under Section 217(3) of the Companies Act,1956,the information to the Auditors observations are submitted as under:-

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I. On the report of Statutory Auditors The qualification contained in the audit report is disclosed in the note no.16 and notes on accounts -Schedule 19 forming part of accounts. II. On comments of Comptroller and Auditor General of India:
Sl. Comments No. 1. Profit & Loss Account Operating Income (Schedule-11) Interest on Deposits - Rs.30.15 crores. The above has been arrived at after adjusting excess interest of Rs.5.30 crore accounted for in the previous year due to not considering reduction of rate of interest of from 10 to 9 percent on public deposits by the Government of India for the year 2000-01. This fact has not been disclosed in the accounts. Replies The Govt. Of India had approved and conveyed the credit for the interest of Rs 53.05 Crores for the year 2000-01 calculated @ 10% on the investments made by PFC in the Public Deposits. Accordingly , it was duly considered and accounted in the Year 2000-01 . In June 2001, after finalisation of the Audited Accounts for the Year 2000-01 Ministry of Power conveyed the revised statements of interest on Public Deposit Account , as per Govt. of India decision ., for the reduction of interest on Public Deposit by 1% , amounting to Rs. 5.30 Crores for the Year 2000-01 .This was also correctly considered and accounted under its natural head of income in the Accounts of 2001-02. In our view, there is no specific disclosure requirement under the Companies Act and Accounting Standards. 2 Notes on Accounts ( Schedule 19) Note No. 26 The Company has not provided for the stamp duty liability of Rs.4.02 Crore (based on the prevailing rate) even though the deposit paid towards the cost of land has been booked under the Fixed Assets-Land. Memorandum of Agreement dated 05.02.2002 with Land & Development Office, Ministry of Urban Affairs, Govt. of India, Clause XIX states, Upon completion of construction of said building strictly in accordance with the terms hereof and to the entire satisfaction of President in all respects and upon issuance of certificate in this behalf by President or nominee and upon due fulfilment and performance of all other obligations in the part of Power Finance Corporation Ltd. under this agreement, the President shall grant or cause to be granted to Power Finance Corporation Ltd., a lease of the said premises herein before described in perpetuity from the date of execution of the said lease of land. Accordingly , the liability of stamp duty shall arise only , upon completion of construction of the said building and from the date of execution of the said lease of land. The break up of deferred tax assets and deferred tax liabilities in to major components is as under:Description As on 31.3.02 (Rs. in Crores) 22.65 (14.22) 13.77 (13.38) -13.17 (-20.12) -12.45 (-12.62) 10.80 (-5.14)

3.

Note No.20 The break up of deferred tax assets and deferred tax liabilities into major components of the respective balances has not been disclosed in the above note as required by AS-22.

a) Deferred Tax Asset:(i) Accruals (Income & Expenditure) (ii) Exchange loss on translation of foreign currency loans b) Deferred Tax Liabilities : (i) Depreciation (ii) Lease equalisation Net Deferred Tax Asset/Liability

(Figures in bracket represent the balances as on 01.04.2001)

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31.0 DIRECTORS RESPONSIBILITY STATEMENT

The Directors confirm that in the preparation of annual account ended March 31, 2002 :
Shri A.K. Basu, the then Secretary (Power) and Shri A.A. Khan, CMD, PFC at the MoU-signing ceremony for the year 2002-03 signed on 15th March, 2002

The applicable accounting standard had been followed alongwith proper explanation relating to material departure if any. Reasonable and prudent judgement and estimate were made so as to give a true and fair view of the state of Corporation at 31.03.2002 and of the profit and loss of the Corporation for the period 2001-02. Proper and sufficient care was taken for the maintenance of adequate accounting records in accordance with the provision of Companies Act for safeguarding the assets of the Corporation and for preventing and detecting fraud and other irregularities. The accounts have been prepared on going concern basis.

32.0 MEMORANDUM OF UNDERSTANDING WITH GOVT. OF INDIA

The performance of PFC during 2001-02 against MOU targets qualifies it for excellent rating for the ninth consecutive year. The Corporation has signed the MOU for the year 2002-03 on 15th March, 2002 which provides for an increase of 19% targets for sanctions and 17 % in disbursement towards the corresponding target in the previous year. In tandem with the objectives of its formation, the Corporation has set out ambitious targets for itself in the Xth plan too. In order to augment the existing generation as well as T&D capacity in the power sector ,the Corporation plans to play a very crucial role by setting a cumulative target of Rs.43500 Crores in disbursements during the tenure of the Xth plan as against Rs. 16525 Crores during the IXth plan.

33.0 ACKNOWLEDGEMENT
The Corporation is grateful for the co-operation and continued assistance extended by the Central and State Governments, Reserve Bank of India and various Government agencies, the World Bank, the Asian Development Bank, USAID, DFID of UK, KfW of Germany, and various international financial institutions/ banks, agencies and investors for their assistance, co-operation, guidance and help. The Corporation looks forward to their continued support and encouragement. The Corporation is also thankful to the Comptroller & Auditor General of India, the Statutory Auditors and the bankers for their valued cooperation. The Board of Directors also like to thank its valued clients and customers for their continued co-operation and patronage. The Board would also like to express their deep sense of appreciation to all employees , who are committed to exemplary professionalism, strong work ethics and excellence in performance.

For and on behalf of the Board of Directors

17th PFC Foundation Day Celebrations (on 16th July, 2002)

Date : 26th September, 2002 Place: New Delhi

(A. A. Khan) Chairman & Managing Director

26

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. Industry Structure and Developments : Todays Power Development scenario in the Country calls for making concreted efforts for speeding up the Power developments, than for any other infrastructure activity, which places on PFC a greater onus to seek for sourcing of more resources, purposeful loan portfolio management, funds management, risk management, and customer network for providing the needed impetus and for minimising its financial risk. The entire gamete of business environment continues to undergo radical changes that have created compulsion on PFC to assume a higher role. By virtue of its role, functions and obligation as DFI, PFC is increasingly becoming an integral part of financial sector with underlying objectives of ensuring faster growth of Power Sector. PFC has effective linkages with the entire Power Sector through the State Governments, State power utilities etc. It enjoys the core competency expected of a development FI dedicated to the Power Sector & is effectively organised, to mobilise financial resource, plan profitable investment and create an improved management system to bring about efficient operation through institutional reforms. PFC has been taking initiative to bring about institutional improvement and overall development of Power Sector. The initiative include reform studies, provision for grant/interest free loans for reforms related studies, encouraging States to establish State Energy Regulating Commission organising training, workshop and seminar on the issue relating to Power Sector. The major beneficiary of PFC funding have been the Power- utilities in the State Sector and the municipal bodies. However, the borrower profile has since been enlarged to include central sector, joint sector, private sector power utilities. The funding criterion is based on the borrowers credit worthiness and project viability. PFC has indicated its willingness to fund unbundled power entities formed out of reform process, provided they conform to credit covenants. There will be no change in the terms of the previous loans extended on the strength of either assignment of revenue circles or of state government guarantees. The new covenants to be applied for funding transmission and distribution investments will be entirely on commercial terms. This implies that PFC will have physical asset cover to the extent of 150 percent of their loan values. 2. Outlook : To expand the business, Corporation is relaxing its stringent covenants for sanction of term loans / guarantees, revising its rate of interest and processing fee payment at the time of issue of sanction letter. It is also amending the procedure for premium payable for pre-payment of loan amount keeping in view the benefits of borrowers at large. The Corporation is looking forward for achieving the better results by financing more and more power projects at the lowest level of interest cost and secure implementation of project timely and adequately. The revision in procedure for lending money is made keeping in view all the latest developments across the globe. The change in policy for lending and borrowing by the Corporation is also amended as per the current market scenario. The future policy of the Corporation is in tune with the requirement of Developmental Financial Institutions. 3. Internal Control System : PFC has a proper and adequate system of internal controls to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions of the Corporation are authorized, recorded and reported in time and correctly. The Internal Control systems are supplemented by an extensive programme of internal audits, reviews by management, and documented policies, guidelines and procedures. The internal control systems are designed to ensure that the financial and other records are reliable, for preparing financial statements and other data, and for maintaining accountability of assets. Internal control findings and recommendations are reviewed by the top management and the Audit Committee of the Board. 4. Human Resources and Industrial Relations : It is the policy of PFC to lay emphasis on employee growth and productivity in true sense. The employees of the Corporation are carefully chosen and committed to perform in all situations ensuring unparalleled rise in terms of business and profits, per capita. A very liberal and forward-looking training and development policy have ensured growth and updation of employees skills , equipping them adequately to meet the organizational challenges. Industrial relations within the organization continued to be cordial and harmonious.

27

AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE

The Members, NEW DELLHI

POWER FINANCE CORPORATION LIMITED

We have examined the compliance of conditions of Corporate Governance by Power Finance Corporation Ltd. for the year ended 31st March, 2002 as stipulated in Clause 49 of the Listing Agreement of the said Corporation with Stock Exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Corporation for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Corporation. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Corporation has complied with the conditions of Corporate Governance as stipulated in the above mentioned listing agreement except the following :1. 2. The conditions as to presence of half of the Board members being non-executive and Independent Directors is not complied with. That Audit Committee is comprised of one executive and two non-executive directors as against requirement of three non-executive directors and majority of them being independent.

The Remuneration of Directors is disclosed in the notes to the financial accounts for the year ended 31st March, 2002. As the Corporation is wholly owned by the Government of India, the requirement of forming investors grievance committee has not been deemed necessary by the management. We further state that such compliance is neither an assurance as to the future viability of the Corporate nor the efficiency or effectiveness with which the management has conducted the affairs of the Corporation.

For Bubber Jindal & Co. Chartered Accountants

Place : New Delhi Dated : 26th September, 2002

Sd/(S. Narayanan) Partner

28

29

BALANCE SHEET
as at 31st March, 2002
Description I. Schedule Number As at 31.03.2002 (Rs. in lacs) As at 31.03.2001

II.

SOURCES OF FUNDS (1) SHAREHOLDERS FUNDS (a) Capital (b) Reserves & Surplus (2) LOAN FUNDS (a) Secured Loans (b) Unsecured Loans (3) INTEREST SUBSIDY FUND FROM GOI Total APPLICATION OF FUNDS (1) FIXED ASSETS (a) Gross Block Less : Depreciation (b) Net Block (c) Capital Works in Progress (2) INVESTMENTS (3) LOANS (4) CURRENT ASSETS, LOANS & ADVANCES (a) Cash & Bank Balances (b) Other Current Assets (c) Loans & Advances LESS:CURRENT LIABILITIES & PROVISIONS (a) Current Liabilities (b) Provisions (5) (6) NET CURRENT ASSETS MISCELLANOUS EXPENDITURE (to the extent not written off or adjusted) Deferred Tax Asset (net of liability) Total ACCOUNTING POLICIES NOTES ON ACCOUNTS

1 2 3 4

103045.00 336762.53 72998.00 1025182.14

439807.53

103045.00 277913.83 108000.00 823713.97

380958.83

1098180.14 109343.57 1647331.24

931713.97 89622.02 1402294.82

39100.87 20760.05 18340.82 75.82 600.00 1649359.98 9572.37 7541.85 60676.66 77790.88 27257.00 72659.50 99916.50

39133.62 16608.23 22525.39 0.27 150.00 1329939.60 54619.29 35606.49 34844.92 125070.70 24590.41 50800.73 75391.14

6 7 8

-22125.62

49679.56

10 18 19

1080.24 1647331.24

0.00 1402294.82

Schedules 1 to 19 form integral part of Accounts. Sd/J. S. Amitabh Company Secretary Sd/R. Krishnamoorthy Director ( F & FO ) Signed in terms of our report of even date for BUBBER JINDAL & COMPANY Chartered Accountants Sd/(A.C. Bubber, FCA) Partner Sd/A.A. Khan Chairman and Managing Director

Place : New Delhi Date : 13th June, 2002

30

PROFIT AND LOSS ACCOUNT

for the year ended 31st March, 2002
Description (Rs. in lacs) Schedule Number Year ended 31.03.2002 Year ended 31.03.2001

INCOME Operating Income Other Income Total EXPENSES Interest and other charges Upfront fees and Issue Expenses Personnel & Administration Expenses Depreciation Total Profit for the year Add: Prior Period adjustments Profit before tax & appropriations Less:Tax adjustment for the previous years Less:Provision for Income Tax Add:Deferred Tax Profit available for appropriations Earning per share in Rs. (refer note no. 21 of Sch-19) Accounting Policies Notes on Accounts 18 19 17 16 13 14 15 5 105062.43 1574.41 2763.09 4152.12 113552.05 96257.04 57.64 96314.68 1277.01 18799.20 1594.70 77833.17
765.71

11 12

209552.95 256.14 209809.09

189829.19 1169.13 190998.32

104487.14 2212.66 3079.35 4164.25 113943.40 77054.92 138.32 77193.24 2596.66 14183.44 0.00 60413.14
605.68

Schedules 1 to 19 form integral part of Accounts. Sd/J. S. Amitabh Company Secretary Sd/R. Krishnamoorthy Director ( F & FO ) Signed in terms of our report of even date for BUBBER JINDAL & COMPANY Chartered Accountants Sd/(A.C. Bubber, FCA) Partner Sd/A.A. Khan Chairman and Managing Director

Place : New Delhi Date : 13th June, 2002

31

Schedule No. 1
SHARE CAPITAL
Description (Rs. in lacs) As at 31.03.2002 As at 31.03.2001

Authorised 20000000 Equity shares of Rs. 1000 each Issued, subscribed and paid up 10304500 Equity shares of Rs. 1000 each fully paid up Total 103045.00 103045.00 103045.00 103045.00 200000.00 200000.00

Schedule No. 2
RESERVES & SURPLUS
Description (Rs. in lacs) Opening Additions/ Balances as at Adjustments 1.4.2001 during the year 15787.14 4472.96 Deductions/ Adjustments during the year 0.00 Closing Balance as at 31.03.2002 20260.10

a) b)

Reserve for Bad & doubtful debts u/s 36(1)(viia)(c) of Income Tax Act,1961 Special Reserve created u/s 36(1) (viii) of Income Tax Act, 1961 upto Financial Year 1996-97 Special Reserve created & maintained u/s 36(1) (viii) of Income Tax Act, 1961 Bonds Redemption Reserve General Reserve Profit and Loss Account Total

59984.79

0.00

0.00

59984.79

c)

56232.39 9035.00 81291.91 55582.60 277913.83

39169.81 0.00 18565.00 13003.59 75211.36

0.00 9035.00 7327.66 0.00 16362.66

95402.20 0.00 92529.25 68586.19 336762.53

d) e) f)

Notes:1) Addition to Special Reserve created & maintained u/s 36(1) (viii) of I.T. Act 1961, includes Rs. 32356.62 lacs created for the year 2001-02 and enhancement of Rs. 6813.19 lacs (i.e. Rs. 23.90 lacs for 1997-98, Rs. 4718.46 lacs for 1998-99, Rs. 1525.68 lacs for 1999-2000 and Rs. 545.15 lacs for 2000-2001) for bringing it at par with claims of Special Reserves in the Income Tax Returns. Addition to General Reserve includes amounts written back on account of :a) Excess dividend tax of Rs. 1530.00 lacs appropriated in the year 2000-01. b) Bonds Redemption Reserve of Rs. 9035.00 lacs, in terms of circular no. 6/3/2001-CLV dtd. 18.04.02 issued by Deptt. of Co. Affairs which exempts creation of B.R.R. on privately placed bonds. Deduction from General Reserve is on account of Deferred Tax Liability of Rs. 514.46 lacs created on 01.04.2001 as per A.S. 22 issued by ICAI & transfer of Rs. 6813.19 Lacs to special reserve for earlier years as explained in note no. 1 above.

2)

3)

32

Schedule No. 3
SECURED LOANS
Description (A) SECURED REDEEMABLE BONDS a) 10.5% (Tax Free) Secured Redeemable Bonds (Non-Cumulative) 2003 - 6th Series (Date of Redemption & Amount given at S.No. 2 in the notes below) 10.5% (Tax Free) Secured Redeemable Bonds (Non-Cumulative) 2004-7th Series (Date of Redemption & Amount given at S. No. 3 in the notes below) 8.85% (Tax Free) Secured Redeemable Bonds (Non-Cumulative) 2004-8th Series (Date of Redemption & Amount given at S.No.4 in notes below) (Rs. in lacs) As at 31.03.2002 As at 31.03.2001

25000.00

25000.00

b)

30498.00

30500.00

c)

17500.00

17500.00

(B)

LONG TERM LOANS From Banks a) b) State Bank of India - I Punjab National Bank Total 0.00 0.00 0.00 72998.00 20000.00 15000.00 35000.00 108000.00

Notes to Schedule 3
(1) All the above Bonds and interest thereon are secured by charge on all movable assets of the Corporation, including bank balances, receivable, investments and book-debts, both present and future, pertaining to the business of the Corporation, ranking pari passu. 10.5% Tax Free Secured Redeemable Bonds 2003-Sixth Series of Rs.8358.00 lacs, Rs.1676.00 lacs, Rs.9664.00 lacs, Rs.3145.00 lacs and Rs.2157.00 lacs are redeemable at par on the expiry of 7 years from the dates of allotment i.e. 29.03.1996, 06.05.1996, 04.06.1996, 05.07.1996 and 25.07.1996 respectively and/or redeemable at par after the expiry of 5 years on exercising the put or call option by the Bondholders or by the Corporation. 10.5% Tax Free Secured Redeemable Bonds 2004 - Seventh Series of Rs.14514.00 lacs, Rs.9764.00 lacs and Rs. 6222.00 lacs redeemable at par on the expiry of 7 years from the dates of allotment i.e. 10.02.97, 10.03.97 and 10.04.1997 respectively and/ or redeemable at par after the expiry of 5 years on exercising the put or call option by the Bondholders or by the Corporation. During the year, bonds of Rs. 2.00 Lacs are redeemed on excercising the put option by the Bondholders. 8.85% Tax Free Secured Redeemable Bonds 2004-Eighth Series of Rs.16589.00 lacs and Rs.911.00 lacs are redeemable at par on the expiry of 7 years from the dates of allotment i.e. 13.11.1997 and 18.11.1997 respectively and/or redeemable at par after the expiry of 5 years on exercising the put or call option by the Bondholders or by the Corporation. Term Loan from Banks is secured against book debts of the Corporation ranking pari passu with other secured book debts of the Corporation.

(2)

(3)

(4)

(5)

33

Schedule No. 4
UNSECURED LOANS
Description

(Rs. in lacs)
As at 31.03.2002 As at 31.03.2001

(A) BONDS * a) Guaranteed by the Government of India 11.5% Bonds 2008 Ist Series 11.5% Bonds 2010 2nd Series 11.5% Bonds 2011 3rd Series 12% Bonds 2012 4th Series 13% Bonds 2007 5th Series 13.5% Bonds 2004 6th Series (Repayable serially on 26.12.2008, 3.1.2010, 7.1.2011, 10.2.2012, 19.12.2007 and 28.3.2004) b) Other Bonds 10.4% Unsecured Tax Free(NonCumulative)2008-I Series (Date of Redemption & Amount given at S.No.1 in the notes below) 8.70% Unsecured Tax Free(NonCumulative) 2009-II Series(Date of Redemption and amount given at S.No. 3 in the notes below) 8.20% Unsecured Tax Free(NonCumulative )2010 - III Series (Redeemable at par on July 19,2010) 13.25% Unsecured Taxable(NonCumulative)2005-I Series(Redeemable at par on June2,2005) 12.75% Unsecured Taxable(NonCumulative)2003-II Series(Redeemable at par on Oct.30,2003) 13.85% Unsecured Taxable(NonCumulative)2009-III Series(Date of Redemption & Amount given at S.No.2 in the notes below) 11.90% Unsecured Taxable(NonCumulative)2007-IV Series( Date of Redemption & Amount given at S.No.4 in the notes below ) 11.20% Unsecured Taxable(NonCumulative)2007-V Series (Date of Redemption & Amount given at S.No.5 in the notes below) 2000.00 2000.00 2000.00 2200.00 1450.76 1000.00 10650.76 2000.00 2000.00 2000.00 2200.00 1450.76 1000.00 10650.76

15050.00

15050.00

7500.00

7500.00

5000.00

5000.00

5000.00

5000.00

10000.00

10000.00

16215.00

16215.00

28100.00

28100.00

25160.00

25160.00

34

(Rs. in lacs)
Description 10.68% Unsecured Taxable(Non-Cumulative ) 2007 - VI Series (Date of Redemption & Amount given at S.No.6 in the notes below ) 11.89% Unsecured Taxable Bonds (NonCumulative ) 2007- VII Series ( Date of Redemption & Amount given at S.No.7 in the notes below ) 11.30% Unsecured Taxable Bonds(NonCumulative) 2008- VIII Series (Date of Redemption & Amount given at S.No. 8 in the notes below) 9.30% Unsecured Taxable Bonds(NonCumulative) 2008- IX Series (Date of Redemption & Amount given at S.No. 9 in the notes below ) 9.70% Unsecured Taxable Bonds(NonCumulative )2011- X Series ( Date of Redemption & Amount given at S.No. 10 in the notes below ) 9.25% Unsecured Taxable Bonds(NonCumulative )2012- XI Series ( Date of Redemption & Amount given at S.No. 11 in the notes below ) 8.85% Unsecured Taxable Bonds(NonCumulative )2009- XII Series ( Date of Redemption & Amount given at S.No. 12 in the notes below ) (B) LOANS Long Term Loans a) b) Rupee Loan Govt. of India Foreign Currency Loans :(i) Guaranteed by Govt. of India Asian Development Bank Credit National, France Credit Lyonnais, France World Bank KFW - I KFW - II Others Syndicated Loan from Banks - I Syndicated Loan from Banks - III 7.5% Fixed Rate Euro Notes Floating Rate Notes 38828.00 10566.20 914.23 503.85 2591.80 1433.60 13055.25 48860.00 47771.03 48947.42 0.00 15000.00 6000.00 0.00 0.00 10000.00 41591.07 10294.35 1320.69 508.28 2474.66 1624.28 0.00 151359.63 As at 31.03.2002 As at 31.03.2001

11478.00

11478.00

111377.00

111377.00

45175.00

45175.00

21758.00

0.00

35400.00

0.00

77497.00

0.00

4350.00

419060.00

0.00 280055.00

54837.68

57813.33

(ii)

158633.70

26603.25 46790.00 46152.00 46790.00 166335.25 5000.00 15000.00 10000.00 2500.00 10000.00 10000.00

c)

From Banks:Indian Overseas Bank Bank of Baroda - I Jammu & Kashmir Bank Ltd. State Bank of Patiala - I Corporation Bank State Bank of India - II

35

(Rs. in lacs)
Description As at 31.03.2002 As at 31.03.2001

State Bank of Patiala - II Oriental Bank of Commerce Canara Bank State Bank of Patiala - III State Bank of Hyderabad Punjab National Bank - II Union Bank of India State Bank of Saurashtra Bank of Punjab Bank of Baroda - II Satate Bank of Mysore State Bank of Travancore00
d) From Financial Institutions:ICICI Ltd. LIC OF INDIA - I LIC OF INDIA - II e) Short Term Loans a) From Banks:Vysya Bank Syndicate Bank Indusind Bank Central Bank of India Corporation Bank Bank of Baroda Allahabad Bank Development Credit Bank (on Mibor terms) b) Commercial Paper:(Rs. 5000 lakh, Rs. 5000 lakh & Rs. 3500 lakh are repayable on 30.04.02, 21.05.02 and 07.06.02 respectively) Overdraft (Cash-credit) from Banks :HDFC Bank State Bank of Patiala Central Bank of India Canara Bank Total * The Bonds for Rs. 29.36 lacs are held by PFC Ltd. Employees Provident Fund as at 31.3.2002 as per the details given below :(a) 11.5% Bonds 2010 - 2nd Series (b) 11.5% Bonds 2011 - 3rd Series (c) 13.0% Bonds 2007 - 5th Series (d) 13.5% Bonds 2004 - 6th Series (e) 11.89% Bonds 2007 - 7th Series

5000.00 10000.00 10000.00 5000.00 10000.00 5000.00 5000.00 7500.00 10000.00 40000.00 5000.00 10000.00 153500.00
25000.00 30000.00 50000.00 105000.00

5000.00 10000.00 10000.00 5000.00 10000.00 5000.00 5000.00 0.00 0.00 0.00 0.00 0.00102500.00
25000.00 30000.00 0.00 55000.00

10000.00 10000.00 5000.00 20000.00 27500.00 10000.00 8000.00 2500.00 93000.00

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

13500.00 3000.00 5000.00 5000.00 4000.00 17000.00 595471.38 1025182.14 0.00 0.00 0.00 0.00

0.00

c)

0.00 533008.21 823713.97

(Rs. in lacs) 0.50 1.50 0.76 1.60 25.00 29.36

(Rs. in lacs) 0.50 1.50 0.76 1.60 25.00 29.36

36

Notes to Schedule 4
(1) 10.4% Tax Free unsecured redeemable Bonds 2008 - First series of Rs.2500 lacs, Rs.3000 lacs, Rs.2000 lacs, Rs.5000 lacs, Rs. 1050 lacs and Rs.1500 lacs redeemable at par on the expiry of 10 years from the dates of allotment i.e. 4.9.1998, 5.9.1998, 8.9.1998, 9.9.1998, 14.9.1998 and 12.10.1998, respectively. 13.85% Taxable unsecured redeemable Bonds 2009-Third series of Rs.15715 lacs and Rs.500 lacs are redeemable at par on the expiry of 10 years from the dates of allotment i.e. 2.2.1999 and 9.2.1999 respectively and/or redeemable at par after the expiry of 7 years on exercising the put or call option by the bond-holders or by the Corporation. 8.70% Tax Free unsecured redeemable Bonds 2009 - Second series of Rs.3050 lacs and Rs.4450 lacs are redeemable at par on the expiry of 10 years from the dates of allotment i.e. 15.10.1999 and 15.12.1999 respectively. 11.90% Taxable unsecured redeemable Bonds 2007-Fourth series of Rs.28100 lacs are redeemable on the expiry of 7 years from the date of allotment i.e. 4.1.2000 and/or redeemable at par after the expiry of 5 years on excercising the put or call option by the bondholders or by the Corporation. 11.20% Taxable unsecured redeemable Bonds 2007-Fifth series of Rs.19460 lacs and Rs.5700 lacs are redeemable on the expiry of 7 years from the dates of allotment i.e. 14.3.2000 and 29.3.2000 respectively and/or redeemable at par after the expiry of 5 years on excercising the put or call option by the bond-holders or by the Corporation. 10.68% Taxable unsecured redeemable bonds 2007 - Sixth series of Rs.7078 lacs and Rs.4400 lacs are redeemable at par on the expiry of 7 years from the dates of allotment i.e. 1.6.2000 and 23.6.2000 respectively and/or redeemable at par after the expiry of 5 years on excercising the put or call option by the bond-holders or by the Corporation. 11.89% Taxable unsecured redeemable bonds - Seventh series of Rs.10259 lacs,Rs.11016 lacs,Rs.48200 lacs and Rs.41902 lacs are redeemable at par on the expiry of 7 years from the dates of allotment i.e. 12.10.2000,01.11.2000,10.11.2000 & 20.11.2000 respectively and/or redeemable at par after the expiry of 5 years on excercising the put or call option by the bond-holders or by the Corporation. 11.30% Taxable unsecured redeemable bonds 2008 - Eighth Series of Rs.45175 lacs are redeemable on the expiry of 7 years from the date of allotment i.e. 9.01.2001 and/or redeemable at par after expiry of 5 years on excercising the put or call option by the bondholders or by the Corporation. 9.30% Taxable unsecured redeemable bonds 2008 - Ninth Series of Rs.21758 lacs are redeemable at par on the expiry of 7 years from the date of allotment i.e. 10.09.2001 and/or redeemable at par after the expiry of 5 years on excercising the put or call option by the bond-holders or by the Corporation.

(2)

(3) (4)

(5)

(6)

(7)

(8)

(9)

(10) 9.70% Taxable unsecured redeemable bonds 2011 - Tenth series of Rs.35400 lacs are issued with separately transferable redeemable principal parts (STRPP) with each bond bearing a total face value of Rs. 10000000 each comprising 7 detachable and separately transferable principal parts - I and VII parts of Rs. 1500000/- each and II to VI parts of Rs. 1400000/- each. The separate principal parts are designated as A,B,C,D,E,F , and G and would be redeemed at par from the date of allotement i.e. 23.11.2001 as follows: PART AMOUNT (Rs. in Lacs) 5310.00 4956.00 4956.00 4956.00 4956.00 4956.00 5310.00 REDEMPTION

A B C D E F G

At the end of 4th year from date of allotment At the end of 5th year from date of allotment At the end of 6th year from date of allotment At the end of 7th year from date of allotment At the end of 8th year from date of allotment At the end of 9th year from date of allotment At the end of 10th year from date of allotment

15% 14% 14% 14% 14% 14% 15%

(11) 9.25% Taxable Unsecured Redeemable Bonds 2012 - Eleventh Series of Rs. 77497 lacs are redeemable at par on the expiry of 10 years from the date of allotment i.e. 20.02.2002 and/or redeemable at par after the expiry of 7 years on excercising the put or call option by the bond-holders or by the Corporation. (12) 8.85% Taxable Unsecured Redeemable Bonds 2009 - Twelveth Series of Rs.4350 lacs are redeemable at par on the expiry of 7 years from the date of allotment i.e. 22.03.2002 and/or redeemable at par after the expiry of 5 years on excercising the put or call option by the bond-holders or by the Corporation.

37

Schedule No. 5
FIXED ASSETS
(Rs. in lacs) GROSS BLOCK Description Opening Balance as at 1.04.2001 Additions/ Adjustments during the year Deductions/ Adjustments during the year 0.00 0.00 0.00 0.89 0.45 0.00 1.34 117.30 Closing Opening Balance as Balance as at at 31.03.2002 1.04.2001 DEPRECIATION For the Charged to year P.P.A. during the year Withdrawn/ Written back during the year 0.00 0.00 0.00 0.32 0.23 0.00 0.55 0.00 Closing Balance as at 31.03.2002 0.00 8.35 242.23 98.31 79.73 13.65 442.27 20317.78 NET BLOCK As at 31.03.2002 As at 31.03.2001

OWNED ASSETS Land Buildings EDP Equipments Office and other equipments
38

3442.04 75.07 296.17 182.03 99.59 26.76 4121.66

0.00 1.21 38.50 11.19 9.39 0.00 60.29 25.60

3442.04 76.28 334.67 192.33 108.53 26.76 4180.61

0.00 4.76 201.18 83.07 70.91 9.07 368.99

0.00 3.58 40.81 15.56 9.05 4.58 73.58 4078.54

0.00 0.01 0.24 0.00 0.00 0.00 0.25 0.00

3442.04 67.93 92.44 94.02 28.80 13.11 3738.34

3442.04 70.31 94.99 98.96 28.68 17.69 3752.67

Furniture & Fixtures Vehicles Sub-Total LEASED ASSETS

Plant & Machinery 35011.96 (Refer note) Total Previous year NOTE :39133.62 35132.04

34920.26 16239.24

14602.48 18772.72

85.89 4019.18

118.64 39100.87 16608.23 4152.12 17.60 39133.62 12457.22 4164.25

0.25 0.44

0.55 20760.05 18340.82 22525.39 13.68 16608.23 22525.39 22674.82

Following amounts are included in Plant & Machinery on account of Lease Adjustment Account in the respective columns :2001-02 Opening Balance Addition Deduction 6465.87 25.60 117.30 2000-01 5791.14 674.73 0.00

Schedule No. 6
INVESTMENTS
(Rs. in lacs) Description Long Term Investments(Unquoted)- at cost 6000000 Equity Shares of Rs.10/- each fully paid up of Power Trading Corpn.Ltd. Total 600.00 600.00 150.00 150.00 As at 31.03.2002 As at 31.03.2001

Schedule No. 7
LOANS
(Rs. in lacs) Description Secured Rupee Loan to Independent Power Producers Rupee Loan to Central PSUs Foreign Currency Loan to IPPs Unsecured (considered good) State Electricity Boards, State Power Generating Corporations, Central PSUs and State Governments Working Capital Loan to SEBs and SGCs Rupee Loan to Independent Power Producers Foreign Currency Loans to IPPs and SEBs FCL Translation Loss on Back to Back Loans Recoverable from Sub-Borrowers/ERAF (Refer Note No. 11 of Sch.-19) FCL Translation Loss Recoverable from ERAF (Refer Note No. 12 of Sch.-19) Bills Discounted Total 33680.00 31368.79 21840.90 19816.67 18085.00 16422.14 As at 31.03.2002 As at 31.03.2001

1372705.13 102980.00 7962.90 38870.24

1120460.72 53476.08 20962.90 39369.85

23105.46 13152.91 3693.65 1649359.98

24343.22 11498.78 5504.24 1329939.60

39

Schedule No. 8
Description I. CURRENT ASSETS

CURRENT ASSETS, LOANS & ADVANCES

(Rs.in lacs) As at 31.03.2002 As at 31.03.2001

(A) CASH AND BANK BALANCES a) (i) Cheques in hand (ii) Imprest with postal authority 2960.14 0.37 2960.51 289.75 0.27 290.02

b) In Current Accounts with :i) Reserve Bank of India ii) Scheduled Banks c) Deposits with Scheduled Banks in Fixed Deposits 1362.86 433.00 1795.86 4816.00 9572.37 4187.36 1441.86 5629.22 48700.05 54619.29

(B) OTHER CURRENT ASSETS a) Interest Accrued on Deposits b) Guarantee fee Accrued but not due on Foreign Currency Loans c) Swap Reciepts Accrued but not due d) Guarantee fee Accrued but not due e) Interest accrued but not due on HBA f) Interest accrued but not due on Vehicle Advance 2204.64 47.79 144.35 6.52 277.48 54.19 5325.10 64.00 0.00 52.76 213.20 45.54

g) Financial charges recoverable from sub-borrowers on borrowings in Foreign Currency h) Accrued income on working capital i) j) Application money with Power Trading Corporation Ltd. Discount & Finance House of India Ltd.

9.59 1793.29 0.00 0.00 3004.00 7541.85

9.73 856.16 450.00 3000.00 25590.00 35606.49

k) Public Deposit A/C with GOI

II.LOANS & ADVANCES Loans a) - Employees (Secured) b) - Employees (Unsecured) 363.75 676.56 1040.31 209.78 643.58 853.36

40

(Rs.in lacs) Description Advances (Unsecured considered good) Advances recoverable in cash or in kind or for value to be received a) b) c) d) e) f) g) h) Employees Prepaid Expenses Prepaid financial charges on Commercial Paper Others Exchange Risk Administration Fund Interest Tax recoverable Advance Income Tax Security Deposits Total 17.48 26.11 127.71 3554.74 0.01 40.78 55754.09 115.43 59636.35 60676.66 77790.88 42.95 8.81 0.00 288.69 0.01 40.78 33507.44 102.88 33991.56 34844.92 125070.70 As at 31.03.2002 As at 31.03.2001

Note :LOANS AND ADVANCES INCLUDE : Balance as at 31.3.2002 Directors Officers 0.00 46.20 Maximum during 2001-02 0.17 136.87 Balance as at 31.3.2001 0.00 83.95 Maximum during 2000-01 0.01 96.73

41

Schedule No. 9
Description (A) CURRENT LIABILITIES a) b) c) Creditors for leased assets Creditors for Expenses

CURRENT LIABILITIES & PROVISIONS

(Rs. in lacs) As at 31.03.2002 As at 31.03.2001

54.84 1403.45

54.84 2734.79

Unclaimed 9% (Tax Free) Secured Redeemable Bonds(NC) 1997, Ist series (Redeemed at par on Dec. 17,1997) Unclaimed 9% (Tax Free) Secured Redeemable Bonds(NC)1998, 2nd series (Redeemed at par on July 30,1998) Unclaimed 9% (Tax Free) Secured Redeemable Bonds(NC) 1999, 3rd series (Redeemed at par on Jan. 14,1999) Unclaimed 17% Secured Redeemable Bonds(NC)1999, 1st series (Redeemed at par on Feb. 10,1999) Unclaimed 9% Secured Redeemable Bonds(NC)2000, 5th series (Redeemed at par on June 27,2000) Unclaimed Public Deposits Unclaimed Interest : On Bonds On Public Deposit Interest Accrued but not due : On Bonds On Loans Other liabilities 90.79 0.24 13924.93 11048.50

3.50

3.50

d)

10.00

10.00

e)

1.00

2.00

f)

16.00

16.00

g)

62.00 1.12 102.96 0.28 10769.31 10122.94 27257.00

168.00 1.78

h) i)

91.03

103.24

j)

24973.43 640.63

20892.25 604.00 24590.40

k)

(B) PROVISIONS a) b) c) Taxation Leave Encashment Dividend :Final Corporate Dividend Tax Gratuity Total 52477.18 182.32 20000.00 0.00 0.00 72659.50 99916.50 32401.12 332.24 15000.00 3060.00 7.38 50800.74 75391.14

d)

42

Schedule No. 10
Description

MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted)

As at 31.03.2002 1594.70 514.46 1080.24 1080.24 0.00 0.00

(Rs. in lacs) As at 31.03.2001

Deferred Tax Asset created during the year Less: Deferred Tax Liability created as at 1.4.2001 by debiting the General Reserve Total

0.00 0.00

Schedule No. 11
OPERATING INCOME
Description Interest on Loans Upfront fees on Rupee Loans Service charges on Loans Management, Agency & Guarantee Fees Commitment charges on Loans Interest on Deposits Lease Income Lease Equilisation Bill Discounting Income Income from Consultancy Assignments Exchange Gain on FCL Payments Total (Rs. in lacs) Year ended 31.03.2002 196976.75 100.05 263.48 450.40 1080.63 3015.53 6690.94 -91.70 889.72 58.17 118.98 209552.95 Year ended 31.03.2001 171112.24 654.06 283.85 459.03 1240.57 7412.93 6387.82 674.73 1368.56 205.98 29.42 189829.19

Schedule No. 12
OTHER INCOME
Description Interest on Income Tax Refund Miscellaneous Income Total (Rs. in lacs) Year ended 31.03.2002 0.00 256.14 256.14 Year ended 31.03.2001 126.79 1042.34 1169.13

43

Schedule No. 13
Description (A) INTEREST a) b) c) d) Bonds Loans

INTEREST AND OTHER CHARGES

(Rs. in lacs) Year ended 31.03.2002 44335.10 44007.17 10426.96 1291.72 100060.95 29595.84 57774.39 7987.46 1194.58 96552.27 Year ended 31.03.2001

Interest to GOI on Interest Subsidy Fund Swap Premium ( Net )

(B) OTHER CHARGES a) b) b) c) d) Commitment & Agency Fees Financial Charges on Commercial Paper Guarantee, Listing & Trusteeship fees Bank charges Exchange Loss on Translation of FCL Total 27.23 116.72 140.84 17.72 4698.97 5001.48 105062.43 29.68 0.00 150.61 14.26 7740.32 7934.87 104487.14

Schedule No. 14
Description Upfront Fees Other Issue Expenses Total

UPFRONT FEES AND ISSUE EXPENSES

(Rs. in lacs) Year ended 31.03.2002 0.00 1574.41 1574.41 Year ended 31.03.2001 37.50 2175.16 2212.66

44

Schedule No. 15
Description

PERSONNEL & ADMINISTRATION EXPENSES

(Rs. in lacs) Year ended 31.03.2002 968.51 81.07 263.57 344.25 202.87 41.60 4.60 98.98 47.41 233.20 46.70 26.25 0.00 356.75 0.46 5.46 1.76 4.57 35.08 2763.09 Year ended 31.03.2001 1223.07 95.69 235.88 304.72 166.01 38.10 5.40 103.31 35.87 207.44 47.83 31.63 5.00 405.43 1.79 3.15 130.46 3.42 35.15 3079.35

Salaries, Wages and Bonus Contribution to Provident and other funds Staff Welfare Office Rent Rent for Residential accomodation of employees Electricity & Water charges Insurance Repairs & Maintenance Stationery & Printing Travelling & Conveyance Postage, Telegraph & Telephone Professional & Consultancy charges Donation Miscellaneous Loss on sale of assets Auditors remuneration Expenditure relating to Consultancy Assignment Rates & Taxes Wealth Tax Total Notes :1. Miscellaneous includes: a) Books & Periodicals b) Advertisement c) Membership & Subscription d) Entertainment e) Conference & Meeting Expenses f) Security Expenses g) Training h) EDP Expenses i) Business Promotion / Related Expenses j) Grants k) Equipment Hire Charges l) Expenditure relating to APDP Cell m) Road Show Expenses 2. Auditors Remuneration includes : a) Audit fees b) Tax Audit fees c) Other services Payments made in r/o CMD and other Directors a) Salaries, Wages & Bonus b) Contribution to Provident and other funds and Leave salary and Pension contribution c) Travelling :i) Inland ii) Foreign

5.40 101.83 13.67 21.92 37.75 15.58 24.54 3.50 58.40 7.71 23.53 10.65 22.27 3.15 0.95 1.37 12.59 1.50 12.73 15.27

5.58 148.91 13.01 24.64 26.09 13.11 51.22 24.80 36.48 37.25 9.95 0.29 0.00 1.58 0.47 1.10 20.87 1.88 11.19 19.38

3.

45

Schedule No. 16
Description (A) PRIOR PERIOD EXPENSES 1 2 3 4 5 6 7 8 9 10 11 12 Salaries,Wages & Bonus Repairs & Maintenance Vehicle Maintenance Printing & Stationery Advertisement Depreciation

PRIOR PERIOD ADJUSTMENTS

(Rs. in lacs) Year Ended 31.03.2002 12.10 0.27 0.00 0.77 0.00 0.25 0.00 0.39 0.10 0.56 1.14 0.10 15.68 0.25 1.29 0.40 0.36 1.70 0.43 0.97 0.08 0.10 0.00 0.00 0.00 5.58 Year Ended 31.03.2001

Remuneration to Consultants Miscellaneous Training Expenses Professional Charges Telephone Expenses Travelling & Conveyance

(B)

PRIOR PERIOD INCOME 1 2 3 4 5 6 Interest & Other charges Travelling & Conveyance Staff Welfare Expenses Remuneration to Consultants Guarantee Fees Miscellaneous Income 56.32 0.00 0.00 4.27 11.27 1.46 73.32 134.68 4.40 4.82 0.00 0.00 0.00 143.90

PRIOR PERIOD ADJUSTMENTS (NET)

57.64

138.32

Schedule No. 17
APPROPRIATION
Description a) b) c) d) Transfer towards Reserve for Bad & Doubtful Debts u/s 36 (1) (viia) (c) of Income Tax Act, 1961 Transfer to Special Reserve created & maintained u/s 36 (1) (viii) of Income Tax Act, 1961 Transfer to Bonds Redemption Reserve Dividend :Final Corporate Dividend Tax General Reserve Balance carried to Balance Sheet Total (Rs. in lacs) Year ended 31.03.2002 4472.96 32356.62 0.00 20000.00 0.00 8000.00 13003.59 77833.17 Year ended 31.03.2001 2779.73 16950.25 9035.00 15000.00 3060.00 6000.00 7588.16 60413.14

e) f)

46

Schedule 18
ACCOUNTING POLICIES 1.0 Revenue Recognition: 1.1 Income from interest, including service charges and commitment charges, on loans and advances (other than working capital loans) to the borrowers, is accounted for on cash basis according to notification No.GSR.550 (E) dated 16/05/1989 of the Deptt. of Company Affairs. The Corporation is raising the demand of repayment of instalments worked out on total disbursement made till date of the demand but the repayment is being adjusted against earliest disbursement irrespective of subsidised or differential interest rate. Rental on leased assets is accounted for from the commencement date, as prescribed in the lease agreement entered with the lessee, and is accounted for on accrual basis. Income from Lease Rentals is recognised on the basis of implicit interest rate, in the lease, in accordance with Guidance Note on Accounting for Leases issued by the Institute of Chartered Accountants of India, applicable to the leases prior to 1.4.2001. Financial charges recoverable on the advances made to machinery supplier/manufacturer and/or expenses incurred for the purposes prior to commencement of the lease rentals are also accounted for on accrual basis. Incomes other than stated above in 1.1 and all expenses are accounted for on accrual basis.

1.2

1.3

1.4

2.0 Fund Raising Transactions: 2.1 2.2 Expenditure on raising of funds including discount on bonds is charged to the Profit and Loss Account in the year in which it is incurred. The discount/financial charges on the Commercial Papers are amortized over its tenure.

3.0 Investments: 3.1 Investments are valued at cost.

4.0 Foreign Exchange Transactions: 4.1 The following transactions are accounted for at the rates prevailing on the date of the transaction. i) ii) 4.2 Expenses and income in foreign exchange and The amounts borrowed and lent under foreign currency loans.

The following balances are expressed in Indian Currency at the rates prevailing at the close of the accounting year: i) ii) iii) iv) v) Foreign Currency loans / borrowings availed of to the extent not hedged. Funds kept in foreign currency account with Banks abroad; Contingent liabilities in respect of guarantees given in foreign currency; Income earned abroad but not remitted to India; and Loans granted to borrowers.

4.3 4.4

The loans granted on back to back basis to sub-borrowers in foreign currency are translated at the year end rate and any translation loss is shown as amount recoverable from sub-borrowers. The loans re-payable in foreign currency are translated at the year end rate and any translation gain/loss is accounted for in Profit and Loss Account for the year. The portion of loan swapped into INR are not translated at the year end rate and stated at the reference rate fixed in the swap translation. Further, in case of forward exchange

47

contracts, the difference between the forward rate and the exchange rate at the date of transaction is recognised as income or expense over the life of the contract. 4.5 In cases where foreign currency loan repayments have been received from borrowers but not fully repaid to the lenders, translation loss on the amount not repaid is shown as recoverable from the Exchange Risk Administration Fund. If translation loss exceeds the accumulated Exchange Risk Fund, such difference is charged to the profit and loss account of the year. In respect of the Foreign Currency Loans (FCL) relent in Rupee terms, the Corporation periodically makes a contribution to Exchange Risk Administration Fund (ERAF) for meeting out exchange rate variation. If translation loss exceeds the accumulated Exchange Risk Fund, such difference is charged to the profit and loss account of the year.

4.6

5.0 Fixed Assets/Depreciation: 5.1 5.2 5.3 5.4 Fixed assets are shown at historical cost less accumulated depreciation, except assets retired from active use and held for disposal are stated at lower of the book value and net realisable value. Depreciation is provided on Written Down Value method, in accordance with the rates prescribed in Schedule XIV of the Companies Act, 1956. Hundred per cent depreciation is provided on the items of assets acquired during the year costing upto Rs.5000/-. Depreciation on assets acquired in the course of leasing business is provided on Straight Line Method at the rates prescribed under Schedule XIV to the Companies Act, 1956 or over the primary balance period of lease of assets, whichever is higher.

6.0 Grant from USAID: Grant from United States Agency for International Development (USAID), under Energy Management Consultancy & Training (EMCAT) Project, is accounted for as follows:6.1 6.2 6.3 Assets fully covered under the grant are accounted for at a nominal value of Re. 1/- by crediting General Reserves. Assets not fully covered by the value of grant received are accounted for by capitalising the payment to the extent not received from USAID. The revenue expenditure reimbursable from grants given by USAID is debited to amount receivable from USAID and squared up on receipt of amount.

7.0 Grants from Govt. of India: 7.1 Grants reimbursed to the grantee under any scheme for studies to SEBs etc. are accounted as amount recoverable from the Govt. of India and squared up on receipt of amount.

8.0 Others: 8.1 8.2 Prepaid expenses, prior period expenses and income of items of Rs.5000/- and below are charged to natural heads of account. Provision for gratuity and leave encashment is accounted for on actuarial valuation basis carried out at the year end.

48

Schedule 19
1.

CONTINGENT LIABILITIES AND NOTES ON ACCOUNTS

Contingent liabilities: (i) On account of guarantees issued: (a) Rs.20108.39 lacs equivalent to JPY 5.452 Billion (previous year Rs.31290.74 lacs equivalent to JPY 8.315 Billion) (b) Rs.3382.15 lacs equivalent to EURO 7.906 million (previous year Rs.4359.87 lacs equivalent to EURO 10.5822 million). (c) Rs.16431.63 lacs equivalent to US$ 33.630 million (previous year Rs.18203.48 lacs equivalent to US$ 38.905 million). (d) Rs.1200.00 lacs (previous year Rs.1003.28 lacs) The Corporation has preferred appeals before the I.T.A.T. against the order of CIT (Appeals) for assessment year 96-97 and before the CIT (Appeals) against the order of the Assessing Officer for assessment years 95-96, 97-98, 98-99 and 99-2000 involving tax demand of Rs.433.68 lacs, Rs. 305.79 lacs, Rs. 3598.73 lacs, Rs. 2599.35 lacs and Rs. 947.00 lacs respectively. Pending decision of the respective appellate authorities, the Corporation has provided liability for the aforesaid amounts. Accrued income not accounted for in the books of account in respect of income from interest, service charges and commitment charges on loans and advances to borrowers is Rs. 56810.92 lacs (Previous year Rs. 54582.71 lacs) in terms of Accounting Policy No. 1.1. (a) The Corporation discharges its obligation towards payment of interest and redemption amount in respect of bonds for which warrants are issued by depositing the amount in the respective designated Interest/Redemption Warrant Bank Accounts. The total balances in respect of Interest and Redemption Warrant Accounts as on 31.03.2002 held in specified banks is Rs. 1562.18 lacs (previous year Rs. 1360.54 lacs). (b) During the year, an amount of Rs. 0.71 lacs (including interest of Rs. 0.04 lacs) remaining unclaimed for a period of seven years from the due date of maturity of public deposit has been transferred to Central Govt. fund called Investor Education & Protection Fund in terms of Section 205 C of the Companies Act as ameded by the Companies (Amendment) Act, 1999. In terms of Reserve Bank of Indias Notification No. DNBS.135/CGM (VSNM) 2000 dated 13th January, 2000, the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 shall not apply to PFC. As on 31.3.2002, the total principal loan amount in default is Rs. 4346.29 lacs (previous year Rs. 776.09 lacs), which are unsecured but considered good. (Rs. in lacs) Description (a) Expenditure in foreign currency :- (Actual outgo) (i) Interest on loans to foreign institutions (ii) Financial & other charges (iii) Travelling (iv) Membership & Subscription (v) Issue Expenses (vi) Training Expenses (vii) Books and Periodicals (b) Earnings in foreign currency :- (Actual Received) Others (Processing Fees) 8. Managerial Remuneration and Related Party Disclosures : Description Salaries & Allowances Contribution to Provident Funds and other welfare fund Contribution to Leave Salary & Pension contribution Other Perquisites Chairman & Managing Director 4.69 (7.40) 0.56 (0.54) Nil (Nil) 8.18 (7.32) 0.00 19.73 (Rs. in lacs) Other Directors 7.90 (13.47) 0.94 (0.97) Nil (0.37) 8.65 (8.99) Year ended 31.03.2002 12429.14 79.52 15.09 0.09 0.00 2.59 0.33 Year ended 31.03.2001 15638.05 86.23 22.39 2.74 274.49 1.33 0.21

2.

3.

4.

5. 6. 7.

49

Remuneration paid to key managerial personnel, Shri A.A. Khan, Chairman & Managing Director, Shri R. Krishnamoorthy, Director (F&FO) and Shri K.K. Govil, Director (Project) are Rs. 13.43 lacs, Rs. 7.92 lacs and Rs. 9.57 lacs respectively. (The figures in brackets are previous year figures) In addition to the above perquisites, the Chairman & Managing Director and other Directors have been allowed to use staff car including private journey upto a ceiling of 1000 kms. per month in terms of O.M. No.2(53)/90-DPE(WC)-GIV dated 26.3.99 on payment of Rs.520/-per month. 9. The Corporation created a trust in the name of Exchange Risk Administration Fund (ERAF Trust) for the purpose of managing the Exchange Risk. Borrowers of foreign currency loans of PFC and PFC itself contribute to ERAF to manage exchange risk. Exchange loss on Foreign Currency debt servicing is reimbursed by the Trust to PFC, subject to availability of balance in the Fund Account.

10. The exchange loss (net of gains), during the year arising on translation of foreign currency assets and liabilities other than loans relent on back to back basis, is Rs. 4698.96 lacs (previous year Rs. 7740.32 lacs) charged to Profit and Loss Account. 11. The cumulative exchange loss (net of gains), arising on translation of foreign currency Assets and Liabilities re-lent on back to back basis as at the year end is Rs. 23105.46 lacs (previous year Rs. 24343.22 lacs) shown as amount recoverable from borrowers/ ERAF . 12. In Foreign currency loans where PFC has to bear exchange risk, contributions are made periodically to ERAF to cover such risks. An amount of Rs. 13152.91 lacs (previous year Rs. 11498.78 lacs) is recoverable from ERAF towards exchange loss on PFC loans, relent on rupee terms. 13. An amount of Rs. 16.16 lacs has been shown as amount recoverable from DDA in Schedule No. 8 - Current Assets, Loans & Advances. This comprises of Rs. 15.56 lacs towards the amount deducted by the Collector of Stamps and bank charges of Rs.0.60 lac levied by Bank for collection of treasury bill. Since DDA could not hand over possession of the plot of land, PFC took up the matter with DDA for return of the documents for claiming refund of the amount of Stamp Duty from the Collector of Stamps, Delhi. At the time of refund, the Collector of Stamps deducted an amount of Rs.15.56 lacs out of the amount of Rs.155.60 lacs of Stamp Duty and further an amount of Rs.0.60 lac has been deducted as Bank Charges for collection of treasury bills by PFCs bankers, for the said amount of refund. The amount of Rs. 16.16 lacs on this account is considered recoverable from DDA. The matter for recovery has been sent to Ministry of Power for placing it before Committee of Disputes. The Ministry of Power agreed to refer the matter before Committee of Disputes as per laid down procedure. The Corporation will file the claim on receipt of the written confirmation. 14. (a) The Corporation has purchased assets amounting to Rs.27999.22 lacs from APSEB which has been leased out to them. Sale Deed for the above assets was executed between PFC and APSEB on 14.2.97 for the amount of Rs.26410.33 lacs only. Execution of Supplementary Sale Deed for the balance amount of Rs. 1588.89 lacs is pending. However, the ownership of the leased assets for the total value of Rs.27999.22 lacs is with PFC, in terms of the Sale Agreement and related documents. In case of leased assets to MSEB, the asset has been capitalised for Rs. 546.85 lacs. Out of the above, the payment of Rs. 54.84 lacs is outstanding. The party had submitted the bills of Rs. 9.42 lacs which were returned for want of clarification. The party has requested for cancellation of Rs. 16.42 lacs and bills for remaining amount of Rs. 29.00 lacs are yet to be received.

(b)

15. The Corporation is following the cash system of accounting for the purpose of computation of income under Income Tax Act, 1961. 16. In addition to Rs.89622.02 lacs standing to the credit of subsidy fund as on 31.3.01, an amount of Rs.34500.00 lacs was received from the Govt. of India during the year under Accelerated Generation and Supply Programme Scheme for SEB/SGC/State Power Deptt. with some special incentive for NE States and SERC States. As per the guidelines issued by the Ministry of Power, Govt of India vide their letter No. 32024/17/97-PFC dated 23.09.97, amount of interest of Rs.25377.53 lacs subsidised is debited on the due dates of payment of interest to PFC by its borrowers and interest @ 12% p.a. of Rs. 10599.08 lacs (comprising interest of Rs. 172.12 lacs @ 12% to be recovered from borrower and interest of Rs. 10426.96 lacs @ 12% to be paid by PFC) is credited to the fund at the year end. Balance of Rs. 109343.57 lacs is shown under the head Interest Subsidy Fund. Further, the Corporation is claiming discounted value of subsidy from Government of India at indicative rates of 19.08% and 11.53% for loans with terms exceeding 5 years and those not exceeding 5 years respectively and is maintaining a consolidated interest subsidy fund account instead of loan wise subsidy account. During the year, the Corporation has prepared a projected loan wise subsidy utilisation statement for each loan tenure and the projections indicate a net surplus in discounted value terms of Rs. 21307.20 lacs (comprising of surplus of Rs. 26306.97 lacs on 166 loans and a deficit of Rs. 4999.77 lacs in 57 loans). The surplus/deficit in the subsidy is due to variations between underlying assumptions for claiming subsidy at uniform rate and the actual subsidy passed/to be passed. The Corporation has taken up the matter with MOP to adjust the net surplus of Rs. 21307.20 lacs after adjusting the deficit of Rs.4999.77 lacs against the pending interest subsidy claims with the Government. 17. The Corporation has formulated a contributory post retirement medical facilities scheme under which retired/separated employees and their spouses (and children upto an age limit in case of deceased employees) residing at places, where the Corporation has its empanelled hospitals/dispensaries, would be allowed medical facilities on payment of one time contribution of Rs.1,500/- in terms of PFC Medical Attendance Rules as amended from time to time.

50

18. Some of the State Electricity Boards against whom loans are outstanding or for whom guarantees are given, were restructured by the respective State Governments and new entities formed through respective State Governments notifications. Consequently, the liabilities on account of loans stand transferred to respective new entities to whom respective projects are so transferred by the State Governments. While tripartite agreements for loan given to erstwhile Haryana State Electricity Board and Andhra Pradesh State Electricity Board have been executed amongst PFC, new entities and State Governments, except in case of loans transferred to APGENCO by erstwhile APSEB tripartite agreements are yet to be executed in few cases. Agreements are yet to be executed for loans/guarantees taken over by new entities of UPSEB. RSEB, KEB, OSEB, in case of HSEB for world Bank TA loan and guarantees only. Also, upon the formation of new states of Chattisgarh and Uttaranchal, the tripartite agreement and fresh guarantees from respective state governments for the loans transferred to newly formed entities in these states are yet to be executed. 19 (a) (b) The Corporation has complied with all the mandatory accounting standards as issued by the Institute of Chartered Accountants of India, New Delhi. There is no separate reportable segment in terms of accounting standard No. 17 issued by the Institute of Chartered Accountants of India, New Delhi.

20. Deferred tax asset of Rs. 1080.24 lacs net of liability of Rs. 514.46 lacs has been created as per Accounting Standard No. 22 on Accounting For Taxes on Income and shown under the head Miscellaneous Expenditure (to the extent not written off or adjusted). 21. In terms of Accounting Standard No. 20 issued by the Institute of Chartered Accountants, earning per share is worked out as follows:Earning Per Share = Net Profit (after adjustment of prior period items and effect of change in accounting policies) Number of Shares = 78902.63 (Previous year 62412.01) 10304500 (Previous year 10304500) = Rs.765.71(Previous year Rs. 605.68)

22. Accounting Policy at SI. No. 8.2 (Schedule 18) in respect of provision tor leave encashment has been changed resulting in increase in profit by Rs. 149.91 lacs. 23. All known liabilities upto 10th May, 2002 relating to Financial year 2001-2002 have been provided and accounted for. 24. The Corporation has no information as to whether any of its suppliers constitute small scale industrial undertakings and therefore the due amount of such suppliers has not been identified. 25. Confirmation from some of the borrowers as to the balance outstanding as on 31.3.2002 has not been received 26. The value of land includes an amount of Rs. 3182.97 lacs on account of deposit paid to Land and Development office, Ministry of Urban Affairs, Govt. of India and would be amortised after the completion of building/execution of lease in accordance with MoA with L&D Office on the remaining life of the lease. 27. Figures of foreign exchange liabilities and assets have been converted at exchange rates at the year end as given below:Exchange Rates 1. (Rs./US$) 2. Rs./1 Yen 4. Rs./EURO 31.3.2002 (Rs.) 48.86 0.3688 42.78 31.3.2001 (Rs.) 46.79 0.3763 41.20

28. Previous years figures have been re-grouped/re-arranged, wherever necessary, to make them comparable with the current year. 29. Figures have been rounded off to the nearest lacs of rupees. 30. Balance Sheet abstract and Companys General Business Profile as per Part IV of Schedule VI of the Companies Act, 1956 is enclosed as Appendix.

Schedules 1 to 19 form integral part of Accounts. Sd/J. S. Amitabh Company Secretary Sd/R. Krishnamoorthy Director ( F & FO ) Signed in terms of our report of even date for BUBBER JINDAL & COMPANY Chartered Accountants Sd/(A.C. Bubber, FCA) Partner Sd/A.A. Khan Chairman and Managing Director

Place : New Delhi Date : 13th June, 2002

51

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2002
(Rs in lacs) PARTICULARS A. Cash Flow from Operating Activities :Net Profit before Tax and Extraordinary items ADD: Adjustments for : 1 Loss on Sale of Assets 2 Profit on Sale of Fixed Assets 3 Depreciation(including prior period) Operating profit before working Capital Changes: Increase/Decrease : 1 Loans ( Given ) 2 Other Current Assets 3 Loans & Advances 4 Current Liabilities Cash Inflow/Outflow from operations 1 Advance Income Tax Paid 2 Income Tax Refund 96314.68 0.47 -0.11 4152.37 100467.41 -319420.38 2478.64 -3585.08 2616.96 -217442.45 -22246.81 0.00 2001-02 77193.24 1.79 -0.49 4164.69 81359.23 -175066.02 -3121.70 3265.89 9070.59 -84492.01 -18688.48 667.33 42.48 -3345.05 -674.74 0.00 173030.00 0.00 50000.00 0.00 -59981.46 0.00 -5600.97 16393.19 0.00 0.00 -13819.50 169550.05 -70632.92 83209.29 12576.37 -70632.92 160021.26 53530.79 29678.50 83209.29 53530.79 2000-01

B. Cash Flow From Investing Activities : 1 Sale of Fixed Assets 0.43 2 Purchase of Fixed Assets -135.84 3 Plant & Machinery 91.70 4 Equity Investment in Power Trading Corporation -450.00 Net Cash Used in Investing Activities C. Cash Flow From Financial Activities : 1 Issue of Bonds 139005.00 2 Raising of Short Term Loans from Banks 123500.00 3 Raising of Term Loans from Banks 122500.00 4 Repayment of Term Loans -56500.00 5 Redemption of Bonds -107.00 6 Repayment of GOI Loan -151359.63 7 Decrease in Foreign Currency Loans 10677.21 8 Interest Subsidy received from GOI 19721.55 9 Bonds Bought Back -2.00 10 Unclaimed PDS -0.66 11 Final Dividend Paid -16530.00 Net Cash in-flow from Financing Activities Net Increase/Decrease in Cash & Cash Equivalents Cash & Cash Equivalents as at 1st April, 2001 Cash & Cash Equivalents as at 31st March, 2002 Net Increase/Decrease in Cash & Cash Equivalents Sd/A.A. Khan Chairman and Managing Director

-239689.26

-102513.16

-493.71

-3977.31

We have examined the attached Cash Flow Statement of Power Finance Corporation Limited for the year ended 31st March, 2002. The Statement has been prepared by the Company in accordance with the requirements of Listing agreement Clause No. 32 with THE NATIONAL STOCK EXCHANGE and is based on and in agreement with the corresponding PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE COMPANY covered by our report of even date to the members of the Company. for BUBBER JINDAL & COMPANY Chartered Accountants Place:New Delhi Date:13th June, 2002 Sd/(A.C. Bubber, FCA) Partner

52

BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE

I. Registration details Registration No.: 24862 Balance Sheet Date: II. 31 Date Public Issue Nil Bonus Issue Nil III. Position of Mobilisation and Deployment of Funds (Amount in Rs. lacs) Total Liabilities 1647331.24 Sources of Funds Paid-up Capital 103045.00 Secured Loans 72998.00 Interest Subsidy Fund from GoI 109343.57 Application of Funds Net Fixed Assets 18416.64 Net Current Assets -22125.62 Accumulated Loss Nil IV. Performance of Company (Amount in Rs. lacs) Turnover 209809.09 Profit/Loss Before Tax (+) 96314.68 Earning per share in Rs. 765.71 V. Total Expenditure 113552.05 Profit/Loss After Tax (+) 77833.17 Dividend Rate % 19.41% Investments 600.00 Loans 1649359.98 Misc. Expenditure 1080.24 Total Assets 1647331.24 Reserve & Surplus 336762.53 Unsecured Loans 1025182.14 3 Month State Code:55 2002 Year Right Issue Nil Private Placement Nil

Capital Raised during the year (Amount in Rs. lacs)

Generic Names of Three Principal Products/Services of Company (as per Monetary terms). Items Code No. (ITC Code) Product Description: To Finance Power Projects in particular Thermal, Hydel & Transmission Projects Item Code No. (ITC Code) Product Description: To Finance Investigation & Survey of Power Projects Item Code No. (ITC Code) Product Description: To Advance by way of Lease Finance and Bills Discounting

53

MOU-KEY PERFORMANCE PARAMETERS 2001-02

A. Quantitative Parameters Parameters MoU (Very Good) 6300 3840 94% 2285 1600 570 575 12.68 71.02 MoU (Excellent Target) 6650 4030 95% 2400 1680 600 610 13.42 69.80 (Rs. in crores) Achievements

Sanctions Disbursement Realisation Resource Mobilisation Accelerated Generation & Supply Programme (Disbursement) Accelerated Power Development Program (Sanction) Gross Margin Net Profit to Closing Networth (%) Operating Ratio (%) B. Qualitative Parameters

8506 5150 98% 5000 2855 651 1004 18.60 52.21

MoU Target Completion Date (Excellent Category)

Achievements

a) b) c)

Training Programmes for SEBs (Nos.) OFAPs/Studies (Nos.) Timely submission of draft MoU for 2002-03 after due discussion with Admn. Ministry/Deptt. Timely submission of Performance Evaluation Report (Composite Score) for 2000-2001 MoUs on the basis of provisional data Timely signing of MoU for the year 2001-02

5 7 Before 08.12.2001 Before 30.04.2001

6 15 Submitted on 07.12.2001 Submitted on 25.04.2001

d)

e)

Before 01.04.2001

Signed on 29.03.2001

54

AUDITORS REPORT
The Members, POWER FINANCE CORPORATION LIMITED NEW DELHI 1. We have audited the attached Balance Sheet of Power Finance Corporation Limited , as at 31st March , 2002 and also the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. 2. As required by the Manufacturing and other Companies (Auditors Report) Order, 1988, issued by the Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 3. Further to our comments in the Annexure referred to in paragraph-2 above, we report that: (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (b) In our opinion , proper books of account as required by law have been kept by the Company so far as appears from our examination of those books (Proper statement of accounts and information for the purposes of our audit have been received from other offices not visited by us); (c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account; (d) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; (e) On the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2002 from being appointed as a Director in terms of Clause (g) of subsection (1) of Section 274 of the Companies Act, 1956; (f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements, read in conjunction with the Notes thereon and Significant Accounting Policies and subject to the following comments:(i) Attention is drawn to Note No. 16 of Schedule 19 regarding interest subsidy from Government of India. The Corporation has taken up with Government of India for adjustment of excess interest subsidy received amounting to Rs. 21307.20 Lacs (Net) against pending claims of the Corporation in this regard. (ii) Consequent to the change in the accounting policy in respect of provision for leave encashment, the profit of the Corporation is higher by Rs. 149.91 Lacs (Refer Note No. 22 of Schedule 19). give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India:(a) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2002; and (b) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date. For BUBBER JINDAL & CO., Chartered Accountants, Sd/(A.C. Bubber) Partner

New Delhi Date : 13th June, 2002

55

ANNEXURE TO THE AUDITORS REPORT

(Referred to in Paragraph (2) of our report of even date) 1. The Company has maintained records to show particulars including details and situation of fixed assets. As certified by the Management, physical verification of the assets have been carried out and no material discrepancy has been noticed. 2. None of the fixed assets have been revalued during the year. 3. As the Company does not carry inventories of stores and the other materials, clause III, IV, V and VI of paragraph 4(A) of the aforesaid order are not applicable. 4. The Company has not taken any loan from Companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. (Since section 370 (1B) of the Companies Act, 1956 stands deleted w.e.f. 31st Oct, 1998, hence, rest of the information of the para is no more applicable). 5. The Company has not granted any loan to companies, firms or other parties listed in the register(s) maintained under section 301 of the Companies Act, 1956. (Since section 370 (1B) of the Companies Act, 1956 stands deleted w.e.f. 31st Oct, 1998, hence, rest of the information of the para is no more applicable). 6. In respect of loans and advances in the nature of loans given by the Company, parties are generally repaying the principal amounts and the interest as stipulated, subject to Note No. 6 of Schedule 19. The Company has taken reasonable steps for recovery of the amount in default. 7. In our opinion and according to the information and explanations given to us there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of fixed assets. 8. The Company has not entered into any transaction of purchase and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the register maintained u/s 301 of the Companies Act, 1956, aggregating during the year to Rs. 50,000/- or more in respect of each party. 9. As the Company does not carry inventories of stores and materials, clause XII of paragraph 4(A) of the aforesaid order is not applicable. 10. The Company has complied with the provision of section 58-A of the Companies Act, 1956 and the rules framed there under and directives of Reserve Bank of India. 11. As the Company does not carry on business of manufacturing, the clause XIV of paragraph 4(A) of the said order is not applicable. 12. The Company has an Internal Audit System, which in our opinion is broadly commensurate with its size and nature of business. 13. The maintenance of cost records under Section 209 (1) (d) of the Companies Act. 1956, has not been prescribed by the Central Government. 14. The Company has been regular in depositing Provident Fund dues with the appropriate authorities. 15. There are no undisputed amounts payable in respect of Income Tax, Wealth Tax and Sales Tax which are outstanding as on 31st March, 2002 for a period of more than six months from the date they become payable. 16. On the basis of examination of books of accounts carried out by us in accordance with the generally accepted auditing principles and according to the information and explanations given to us, no personal expenses of employees or directors have been charged to the profit and loss account other than those payable under contractual obligations or in accordance with the generally accepted business practice. 17. The Company is not a sick industrial Company within the meaning of clause (o) of sub- section (1) of Section (3) of the Sick Industrial Companies (Special Provision) Act, 1985. 18. The Company has maintained adequate documents and records in respect of loans granted by it to various State Electricity Boards, State Generation Corporations, State Governments , CPSUs and independent power producers. Some of the State Electricity Boards against whom loans are outstanding or for whom guarantees are given, were restructured by the respective State Governments and new entities formed through respective State Governments notifications. Consequently, the liabilities on account of loans stand transferred to respective new entities, to whom respective projects are so transferred by the State Governments. While tripartite agreements for loan given to erstwhile Haryana State Electricity Board and Andhra Pradesh Electricity Board have been executed amongst PFC, new entities and State Governments, except in case of loans transferred to APGENCO by erstwhile APSEB, tripartite agreements are yet to be executed in few cases. Agreements are yet to be executed for loans/guarantees taken over by new entities of UPSEB, RSEB, JKSEB, KEB, OSEB, in case of HSEB for World Bank TA loan and guarantees only. Also, upon the formation of new states of Chattisgarh and Uttaranchal, the tripartite agreement and fresh guarantees from respective state governments for the loans transferred to newly formed entities in these states are yet to be executed. 19. The Company is providing consultancy services as incidental to the main business. The operating income from this activity is negligible and as such, the Company has not introduced a system of allocating man-hours utilised to the relative consultancy services jobs. 20. Para No. III and IV of 4(D) of aforesaid order are not applicable. For BUBBER JINDAL & CO., Chartered Accountants, New Delhi Date : 13th June, 2002 Sd/(A.C. Bubber) Partner

56

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956, ON THE ACCOUNTS OF POWER FINANCE CORPORATION LIMITED, NEW DELHI, FOR THE YEAR ENDED 31ST MARCH, 2002
Profit and Loss Account Operating income (Schedule - II) 1. Interest on Deposits - Rs. 30.15 crore The above has been arrived at after adjusting excess interest of Rs. 5.30 crore accounted for in the previous year due to not considering reduction of rate of interest from 10 to 9 percent on public deposits by the Government of India for the year 200001. This fact has not been disclosed in the accounts. Notes on Accounts (Schedule 19) 2. Note No. 26 The Company has not provided for the stamp duty liability of Rs. 4.02 crore (based on the prevailing rate) even though the deposit paid towards the cost of land has been booked under the Fixed Assets-Land. 3. Note No. 20 The break up of deferred tax assets and deferred tax liabilities into major components of the respective balances has not been disclosed in the above note as required by AS-22.

Place : New Delhi Date : 12th August, 2002

Sd/(Malashri Prasad) Principal Director of Commercial Audit and ex-Officio Member, Audit Board -III, New Delhi.

57

REVIEW OF ACCOUNTS OF POWER FINANCE CORPORATION LIMITED, NEW DELHI, FOR THE YEAR ENDED 31ST MARCH, 2002 BY THE COMPTROLLER AND AUDITOR GENERAL OF INDIA
Note: The Review of Accounts has been prepared without taking into account the qualifications contained in the Statutory Auditors Report and comments under Section 619(4) of the Companies Act, 1956. 1. Financial position The table below summarises the financial position of the Company under broad headings for the last three years : (Rs. in crores) 1999-2000 LIABILITIES a) Paid-up capital i) b) (I) Government Reserves & Surplus i) ii) iii) iv) v) Free Reserves & Surplus Share premium account Capital Reserves Reserves for bad & doubtful debts u/s 36(1) (viia)(c) of Income Tax Act,1961 Special Reserve created u/s 36(1)(viii) of Income Tax Act, 1961 upto Financial Year 1996-97. 945.10 130.08 594.05 393.06 293.32 732.29 1368.75 157.87 599.85 562.32 90.35 896.22 1611.16 202.60 599.85 954.02 1093.44 1030.45 1030.45 1030.45 2000-2001 2001-2002

vi) Special Reserve created & maintained u/s 36(1) (viii) of Income Tax Act, 1961. vii) Reserve Fund u/s 45 IC of RBI Act, 1934 as amended.

viii) Bonds Redemption Reserve transferred to General Reserve in the current year. ix) II) c) Bonds Redemption Reserve under Section 117C of the Companies Act,1956.

Interest Subsidy Fund From GOI

Borrowings i) ii) iii) iv) v) vi) From Govt. of India From financial institutions - Banks Foreign currency loans Cash credit Others Interest accrued and due Current liabilities and provisions Provision for gratuity Total 1529.13 1425.00 2281.96 2506.73 452.68 0.16 12314.01 1513.60 1925.00 2241.49 3637.05 753.84 0.07 14776.86 0.00 3650.00 2134.71 170.00 5027.09 999.16 0.00 17472.48

d)

i) ii )

58

ASSETS e) f) g) h) Gross Block Less: Depreciation Net Block Capital Works in Progress i) j) k) l) m) n) o) Investments i) ii) Loans Current assets, loans and advances 351.31 124.57 226.74 0.40 1.50 11548.74 536.63 12314.01 83.95 391.33 166.08 225.25 1.50 13299.40 1250.71 14776.86 496.87 391.01 207.60 183.41 0.76 6.00 16493.60 777.91 10.80 17472.48 (-)221.25

Misc. expenditure not written off Accumulated loss Deferred Tax Assets Total Working capital {j(ii)-d(i)-c(vi)} Capital employed (Mean of opening and closing balances {a+b+c(i) to c(v)}) Net worth {a+[b(I) (i+ii+v+vi+vii+viii)]-k-l} Net worth per rupee of paid up capital (in rupees)

10654.90 3255.98 3.16

12942.06 3561.37 3.46

15248.14 4195.48 4.07

p) q) 2)

Sources and utilisation of funds Funds amounting to Rs.3364.83 crore from internal and external sources were realised and utilised during the year as detailed below:-

Sources of funds a) Funds from operations : Profit after tax Add depreciation Increase in borrowed funds Interest subsidy fund received from GOI. Decrease in capital works in progress. Decrease in working capital (excluding proposed dividend and dividend tax) Total Utilisation of funds a) b) c) d) e) f) Increase in Investments Increase in capital work in progress Increase in loans Dividend & Dividend Tax Paid Decrease in provision for gratuity Deferred Tax assets Total 778.33 41.52

(Rs. in crores)

819.86 1664.66 197.22 0.32 698.72 3380.78 4.50 0.76 3194.20 165.30 0.07 15.95 3380.78

b) c) d) e)

59

3)

Working results The working results of the company for the last three years ending 31st March, 2002 are given below: (Rs. in crores) 1999-2000 i) ii) iii) iv) v) vi) vii) ix) Operating income Other or Misc. Income Profit before tax and prior period adjustments Prior period adjustments Profit before tax Provison for tax Deferred tax Proposed Dividend and Tax thereon 1612.38 2.34 776.57 0.03 776.60 154.13 0.00 622.47 138.20 2000-01 1898.29 11.69 770.55 1.38 771.93 167.80 0.00 604.13 180.60 2001-02 2095.53 2.56 962.57 0.58 963.15 200.76 15.94 778.33 200.00

viii) Profit after tax 4) Ratio Analysis

Some important financial ratios on the financial health and working of the Company at the end of last three years ending 31st March, 2002 are as under: 1999-2000 a) b) Liquidity ratio Current ratio [j(ii)/d(i)+c(vi)] Debt equity ratio Long term debt equity [c (i to v but excluding short term loans)/p] Profitability ratios (a) Profit before tax to: i) Capital employed ii) Net worth iii) Operating income (b) Profit after tax to equity (c) Earning per share (in rupees) 5. Loans disbursed The following table indicates the loans disbursed, interest on outstanding loans, repayments received and amount outstanding at the end of the three years ending 31st March, 2002. (Rs. in crore) Year Amount outstanding at the beginning of the year Outstanding but not due 1999-00 2000-01 2001-02 8742.20 11154.69 12922.06 Outstanding & due (including interest) 11.84 2.55 17.36 Loans disbursed during the year 3398.95 3229.94 5149.46 Interest for the year on outstanding loans 1419.98 1710.90 2080.00 Repayments received during the year (including interest) 2415.73 3158.67 3954.08 Amount outstanding at the beginning of the year Outstanding but not due 11154.69 12922.06 16087.57 Outstanding & due (including interest) 2.55 17.35 127.22 7.29 23.85 48.16 60.41 604.08 1.19 2.38 2000-01 1.66 2.62 (In Percentages) 5.96 21.68 40.66 58.63 586.28 6.32 22.96 45.96 75.53 755.33 2001-02 0.78 2.32

c)

Place : New Delhi Date : 12th August, 2002

Sd/(Malashri Prasad) Principal Director of Commercial Audit and ex-officio Member, Audit Board -III, New Delhi.

60

ORGANOGRAM
CMD VIG C-MIS Capital Restru CBD IA

Dir(IDA) ED(IAD) HR E&NER E&CC

61
VIG IA C-MIS CBD Cap. Rest CC&PR MS -

Dir(Proj.) ED(MS&PR) ED(Proj.) AG&SP CC&PR MS ER&NER SR RO(S) RO(W) WR NR EAP APDP CA&T

Dir (F&FO)

Co. Sectt.

CSG

NR SR WR

ED(Fin) RM P&FO LD&R

AL&RM

L&D IPP

Vigilance Internal Audit Corporate Management Commercial & Business Development Capital Restructuring Corporate Communication & Public Relations Management Systems

HR E&CC L&D IPP ED MS&PR IAD E&NER NR SR WR

Human Resources Estate & Construction Civil Legal & Documentation Independent Private Execeutive Director Management Systems & Public Relations Institutional Appraisal & Development Eastern&North-Eastern Region Northern Region Southern Region Western Region

AG&SP ER&NER SR RO(S) RO(W) WR NR EAP APDP

Accelerated Generation & Supply Programme Eastern Region & North Southern Region Regional Office (South) Regional Office (West) Western Region Northern Region Externally Added Projects Accelerated Power Development Programme

Co. Sectt. CA&T AL&RM RM SII P&FO LD&R CSG

- Company Secretariat Corporate Accounts & Taxation Asset, Liability & Risk Management Resource Mobilisation & Bond Servicing Investor Interface Policy & Financial Operation Loan, Disbrusement & Recovery

- Consultancy Services Group

Dotted line indicates administrative reporting relationship