Neyveli Lignite Corporation

We have audited the attached Balance Sheet of NEYVELI LIGNITE
 CORPORATION LIMITED, as at 31sl March, 2009 the Profit and Loss account
 and also the Cash Flow Statement 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 the 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 statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 As required by the Companies (Auditors Report) Order, 2003 issued by
 the Central 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.
 
 Further to our comments in the Annexure referred to above, we report
 that
 
 (i) 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.
 
 (ii) In our opinion, proper books of account as required by law have
 been kept by the Company in so far as it appears from examination of
 those books and proper returns adequate for the purposes of our audit
 have been received from Rajasthan branch not visited by us. The Branch
 Auditors Report has been forwarded to us and has been appropriately
 dealt with.
 
 (iii) The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account and with the audited returns from Rajasthan branch.
 
 (iv) In our opinion, the Balance Sheet, Profit and Loss account and
 Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in sub-section (3C) of Section 211 of
 the Companies Act, 1956, except:
 
 Accounting Standard AS-6, regarding Depreciation Accounting in respect
 of unamortised depreciable amount not charged over the revised
 remaining useful life in respect of Specialised Mining Equipment (SME)
 existing on 31.08.2007 (the date of the order of the Ministry of
 Company Affairs reducing the rate of depreciation for
 
 SME from 11.31% to 6.33%). Had this method of accounting been followe<
 the provision for depreciation for the period would have been lower b
 Rs.147.33 crore. Accordingly profit for the year and fixed assets are
 understate to that extent.
 
 (v) As per the notification no. G.S.R. (E) dated 21.10.2003, issued
 under section 620 (1) of th Companies Act 1956, clause (g) of
 sub-section (1) of section 274 of the Companies Act, 195( is not
 applicable to Government Companies.
 
 (vi) As the Central Government is yet to notify Cess payable under
 Section 441 A, the reportin requirement under Section 227(3)(g) of the
 Companies Act, 1956 does not arise.
 
 Subject to our comments in para (iv) above, in our opinion and to the
 best of oi information and according to the explanations given to us,
 the said accounts give th information required by the Companies Act,
 1956, in the manner so required and give, 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 asat31st March, 2009;
 
 (b) In the case of Profit and Loss Account, of the Profit for the year
 ended on that date; and
 
 (c) In the case of Cash Flow statement, of the Cash Flows for the year
 ended on that date.
 
 Annexure to the Auditors Report
 
 Referred to in paragraph 3 of our report of even date,
 
 (i) (a) The Company has maintained proper records showing full
 particulars including quantitative details and situation of Fixed
 Assets.
 
 (b) The Company has a policy of verifying all the Fixed Assets once in
 five years, which is
 
 reasonable having regard to the size of the Company and nature of its
 assets. As explained to us, physical verification has not been carried
 out during the year. Pending reconciliation of discrepancies observed
 on the physical verification done during the year 2006, a sum of
 Rs.0.86 crore has been retained as provision towards possible losses.
 
 (c) During the year the Company had not disposed off substantial part
 of Fixed Assets.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management. In our opinion, the frequency of verification is
 reasonable.
 
 (b) The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory. No material
 discrepancies were noticed on physical verification as compared to book
 records.
 
 (iii) The Company has not granted/taken any loan to/from Companies,
 firms and other parties listed in the register maintained under Section
 301 of the Companies Act, 1956.
 
 (iv) 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 with regard to purchases of inventory, fixed assets and with
 regard to the sale of goods.  During the course of our audit, we have
 not observed any continuing failure to correct major weaknesses in
 internal controls.
 
 (v) There were no transactions of purchase of goods and materials and
 sale of goods, materials and services in pursuance of contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 and aggregating during the year Rs.5,00,000 or
 more.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted deposits from public hence
 the provisions of section 58A, 58AA or any other provisions of the
 Companies Act, 1956 and the rules made there under are not applicable
 to the Company.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) The Central Government has prescribed the maintenance of records
 under Section 209(1) (d) of the Companies Act, 1956 in respect of
 Thermal Power Station Units and we are of the opinion that prima facie,
 the books of accounts prescribed under the Cost Accounting Records
 (Electricity Industry) Rules, 2001, have been maintained by the Company
 and the proforma specified therein for the year are under preparation.
 We have however not carried out a detailed verification of such
 records.
 
 (ix) (a) The Company has generally been regular in depositing Provident
 Fund dues of its own employees. Based on information and explanations
 given to us the Company has laid down systems and procedures regarding
 deposit of PF dues relating to contractors workers.  The ESI Act does
 not apply to the Company.
 
 (b) Based on information and explanation given to us, no undisputed
 amounts payable in respect of Investors Education and Protection Fund,
 Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise
 Duty, Cess and any other Statutory dues were outstanding as at 31st
 March, 2009 for a period of more than six months from the date they
 became payable.
 
 (c) According to the information and explanation given to us there are
 no dues of Income Tax, Sales Tax, Customs duty, Wealth Tax, Excise duty
 and Cess which have not been deposited on account of any dispute.
 
 (x) The Company does not have accumulated losses as at the end of the
 financial year and has not incurred cash losses during the financial
 year covered by our audit and the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to any
 financial institution, bank or debenture holders.
 
 (xii) The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 Hence the question of maintenance of documents and records does not
 arise.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual
 benefit fund/society.  Therefore, the provisions of clause 4(xiii) of
 the Companies (Auditors Report) Order, 2003 are not applicable to the
 Company.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditors Report) Order,
 2003 are not applicable to the Company.
 
 (xv) The Company has not given any guarantee for loans taken by others
 from banks or financial
 
 institutions based on the records produced to us.  (xvi) In our
 opinion, the term loans have been applied for the purpose for which
 they were raised.  (xvii) According to the information and explanations
 given to us and on an overall examination of the
 
 Balance Sheet of the Company, we report that no funds raised on
 short-term basis have been
 
 used for long-term investment.
 
 (xviii) According to the information and explanations given to us,
 during the year the Company has not made preferential allotment of
 shares to parties and Companies covered in the register maintained
 under Section 301 of the Act.
 
 (xix) According to the information and explanations given to us, during
 the year covered by our audit report, securities have been created in
 respect of bonds issued.
 
 (xx) The Company has not raised any money through public issue. Hence
 the provisions of clause 4(xx) of the Companies (Auditors Report)
 Order, 2003 are not applicable to the Company.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
 
       for P.B. VIJAYARAGHAVAN & CO.,     for GANESAN AND COMPANY
                 Chartered Accountants    Chartered Accountants
                     P.B. Srinivasan            G. Hari Govind
                           Partner                     Partner
                     M. No. 203774               M. No. 206563
 
 Place: Chennai
 Date: 20.06.2009