As I wrote in last years annual report, India is back on the growth
 path. Of course, there are different views about this growth - whether
 we can soon transit to over 9%, or whether we will be hovering around
 the 8% mark until we conquer infrastructural bottlenecks, or the extent
 to which growth prospects can get affected by persistent inflation and
 consequential increases in the interest rate by the Reserve Bank of
 India. All of us are debating these issues.  However, nobody that I
 know of denies the fact that India has smartly recovered from the
 consequences of the global financial and economic crisis; and that
 there is enough entrepreneurial energy throughout the country to
 generate at least 8% real GDP growth.
 
 There is another thing that none can deny. It is the terrible shortage
 of power throughout India, and the urgent need to build - and get on
 stream - thermal, hydro, nuclear and renewable power plants with
 associated transmission and distribution infrastructure throughout the
 land.
 
 Consider the facts. In 2010-11, India as a whole suffered from a peak
 demand deficit of 9.8%. Every region faced power deficits. Among the
 more industrialised parts of the nation, Western India was the worst
 off with a peak demand deficit of 14.7%; followed by Northern at 8.9%;
 then Southern at 6.4%; and Eastern at 5%. The worst was the North East
 where the peak deficit was 18.5%.
 
 There are three reasons for this universally persistent shortfall.
 First, generation capacities have not grown fast enough. Indeed, the
 difference between planned and actual is huge. For instance, the actual
 cumulative capacity addition over the last five years is around 50% of
 what was planned. Second, the transmission infrastructure remains weak.
 Despite efforts to achieve better grid connectivity, there is a major
 gap between targets and achievement. Third, distribution still remains
 an area of concern in most parts of India.  Distribution loss, in
 monetary terms, is huge.
 
 If India is to achieve consistent 9% plus GDP growth over the next
 decade, it has to improve the power infrastructure at a rapid pace.
 Yet, as it stands today, there are some critical constraints. Let me
 share with you a few of these. Despite the seeming investment boom in
 the power sector, I am concerned about some issues.
 
 In the first place, most of the private sector thermal power projects
 were based on assumptions of high merchant power tariffs and off- take.
 The rates have crashed, typically to levels well below those that were
 assumed in preparing the feasibility studies. Thus, the presumed basis
 for profitability of many private power projects - where high merchant
 tariffs and demand would more than compensate for low state electricity
 board (SEB) tariffs and payouts - seems to have got stuck. Merchant
 power is offering less per unit than anticipated; and most SEBs have
 neither the money nor the financial ability to adequately pay for
 power. Thus, power projects that planned for a blended tariff rate of
 over Rs.3.60 per unit are under risk; and those who planned at Rs.5 and
 above are completely unviable.
 
 Then there is the issue of coal linkage. As many thermal power projects
 are discovering to their dismay, coal linkages often exist only on
 paper - but not in reality. Moreover, with steady increase in coal
 prices world-wide and with Indias largest public sector supplier of
 coal having become more income sensitive now that it is a listed
 company, the price of coal is getting higher than planned. And the
 existing buyers of power are not necessarily interested in underwriting
 that higher price.
 
 Finally, there is the problem of grid connectivity. Even if a power
 plant got assured coal, it would have to connect its perishable product
 to the national grid. That is proving to be a problem in many regions,
 especially remote power plants that, while being close to mine
 pitheads, are far removed from the main inter-state transmission lines.
 
 Power, therefore, is an opportunity - but not an opportunity for all
 and sundry. One has to know the business; one has to have serious
 expertise; one must have adequate back-stops at all levels; and,
 ideally, one has to own the distribution.
 
 This is where your Company scores over many others. CESC generates as
 well as distributes. Its generating stations at Budge Budge, Southern,
 Titagarh and New Cossipore cumulatively generate 1,225 MW, which feeds
 into the Companys distribution grid for meeting the power needs of
 Kolkata and its neighbourhoods. CESC is a utility company that services
 over 2.5 million customers. Last year alone, it added around 1.2 lakh
 customers - an increase of over 25% over the previous year. In spite of
 a significant increase in peak demand to 1,686 MW, your Company was
 able to maintain its high standards in the availability and reliability
 of power.
 
 It is this combination of generation and distribution that has allowed
 your Company to be relatively insulated from the increasing
 uncertainties of the power sector which I have outlined above.
 
 Consequently, CESC has done well financially. During 2010-11, your
 Companys earnings from sale of electricity increased by 19.7% over
 last year to reach Rs.3,940 crore. Including other income, total income
 grew by 18.7% to Rs.4,092 crore. Profit before depreciation and
 taxation (PBDT) grew by 21.2% to Rs. 882 crore during the year.  Profit
 after taxes (PAT) for 2010-11 increased by 12.7% to Rs.488 crore. These
 are sound results.
 
 The 2 x 300 MW coal fired thermal power project at Haldia (West Bengal)
 is progressing well. All requisite clearances and investment approval
 are in place. Coal linkages have been secured. The project is scheduled
 to be completed by the end of 2013-14. The 2 X 300 MW coal fired
 thermal power project at Chandrapur (Maharashtra) is also progressing
 according to schedule. We have also entered the solar energy space at
 Bikaner (Rajasthan), to understand the business and create necessary
 expertise in an area that promises to be significant in the future.
 
 May I, on behalf of you and the Board of Directors, congratulate your
 Companys management for achieving strong financial and operational
 results in 2010-11Rs. I feel proud of being the Chairman of an enterprise
 that does so well in power generation and distribution.  May it
 progress. Finally, my thanks to you for your support and good wishes.
 
 
 
                                                          R P Goenka
 
 24 June 2011                                               Chairman