Neyveli Lignite Corporation

It is my great pleasure to welcome you all to the 47 the Annual General
 Meeting of your company. The audited Statements of Accounts for the
 year ended 31st March 2003 together with the Auditors Report and
 Comments of the C& AG and the Directors Report have already been sent
 to you and with your permission, I take them as read.
 
 PERFORMANCE IN THE YEAR 2002-2003
 
 The last financial year 2002-2003 was a successful year for your
 Company. Your Company achieved many milestones, both in the physical as
 well as in the financial fronts.
 
 PHYSICAL PERFORMANCE
 
 The highlights of physical performance for the year 2002-2003 are as
 under.
 
 * The aggregate Lignite production at 186.24 Lakh Tonnes of the Company
 achieved during the year 2002-2003 was the highest since inception.
 
 * Power generation (Gross) at 14969.95MU and Export of Power at
 12520.58MU, achieved during the year under review were the highest for
 any year since inception.
 
 * For the 3rd consecutive year the Generation of Power and Export of
 Power have exceeded over 14 Billion Units and 12 Billion Units
 respectively in the year 2002-2003.
 
 * Power generation (Gross) from TPS-I at 4378.67 MU, with a Plant Load
 factor of 83.31% and export of Power at 3609.54 MU were the highest
 since inception
 
 FINANCE PERFORMANCE
 
 Your company continues to maintain the double digit growth. For the
 year ended 31st March 2003, your Company recorded a turnover of
 Rs.2681.48 crores against Rs.2236.95 crores recorded in the previous
 year ended 31st March 2002, a growth of 19.87%. Incidentally, the
 turnover recorded for the year 2002-2003 is the highest since inception
 
 The Profit before tax for the year 2002-2003 has increased to
 Rs.1687.83 crores compared to Rs.1198.53 crores recorded for the year
 2001-2002 registering a growth of 40.83% Similarly, the net profit has
 also registered a growth of 40.19% as the net profit has increased from
 Rs.819.20 crores in the last financial year 2001-25002 to Rs.1148.40
 cores in the year 2002-2003.
 
 The power sales of the year 202-2003 includes on amount of Rs.412.34
 crores, being the tariff arrears and I.T. reimbursement, relating to
 earlier years. Further, the power sales for the year 2002-2003 has also
 increased on account of higher generation by both the Thermal Power
 Stations I & II, compared to the previous year.
 
 DIVIDEND
 
 The Board of Directors of your Company have recommended a dividend of
 14% on the paid up equity share capital of Rs.1677.71 crores of the
 Company, for the financial year 2002-2003, compared to the dividend of
 13.50% paid for the year 2001-2002. the total outflow on Dividend for
 the year 2002-2003, including the Distribution Tax amounts to Rs.264.97
 crores, I am sure that the Members will welcome this.
 
 PERFORMANCE IN THE CURRENT YEAR
 
 Your company in the first five months of the current year 2003-2004,
 has registered Overburden removal of 494.46 LM3 against 437.99 LM3
 recorded in the corresponding period of the previous year. During the
 same period in the current year the Lignite production was 83.85 LT
 against 74.66 LT recorded in the corresponding period of the previous
 year. Generation and Export of Power for the first five months of the
 current year was 6980.44MU and 5920.03MU respectively against 6410.25MU
 and 5450.39MU Respectively recorded during the same period in the last
 financial year. I am happy to inform you that the Unit-II of TS-I
 Expn.Project has been put into commercial operation on 5th September
 2003. With this the total power generation capacity of your Company
 raises to 2490MW.
 
 During the current financial year 2003-2004, for the first five months
 ended 31st August 2003, your company has recorded a sales turnover of
 Rs.1026.98 crores as against Rs.910.31 crores during the corresponding
 period in the previous year ended 31st March 2003 registering on
 increase of 12.82%. The Profit before Tax for the first five months of
 the current year is Rs.426.03 crores compared to Rs.452.83 crores for
 the same period in the year 2002-2003. The net profit after tax for the
 said period of five month in the current year is Rs.293.13 crores as
 against Rs.307.07 crores, for the same period in the previous financial
 year ended 31st March 2003. The reason for the marginal decline in the
 Profit is due to higher depreciation and interest costs consequent to
 commissioning of new projects and also due to delay it finalisation of
 power tariff.
 
 STATUS OF SECURITISATION OF POWER DUES
 
 I had informed the shareholders in my speech at the last Annual general
 meeting that the State Electricity Boards of Andhra Pradesh, Tamil
 Nadu, Karnataka and Kerala, as recommended by the 'Expert Group' are in
 the process of securitising the power dues as on 30.09.2001 and the
 sur-change after waiver, by issue of Tax-free bonds carrying an
 interest of 8.5% by the respective State Government.
 
 I am happy to share that your Company has since been issued with 8.5%
 Tax-free Special Bonds aggregating to Rs.2590.77 crores towards the
 power dues outstanding as on 30.09.2001 and the sur-change after waiver
 of 60% as per the Securitisation Scheme.
 
 With the above issue of bonds, the outstanding power dues including the
 sur-change as on 1st September 2003 is Rs.602 crores. Your company is
 vigorously pursuing with SEBs for speedy settlement of the above
 standing dues.
 
 STATUS OF PROJECTS UNDER IMPLEMENTATION
 
 You may be aware that all the Projects sanctioned by the Government of
 India, viz., Mine-I Expn., Mine-IA and TPS-I Expn. Costing in aggregate
 around Rs.4000 crores have been completed.
 
 STATUS OF PROJECTS UNDER CONSIDERATION FOR APPROVAL BY GOI
 
 The members may be aware that the following four Projects, involving a
 capital our lay of around Rs.5000 crores, are under advanced stage of
 sanction by the government of India.
 
 a. Mine-II Expn. Of 4.5 MT of lignite per annum
 
 b. TPS-II Expn. Of 500 MW.
 
 c. Rajasthan lignite mine of 2.1 MT per annum
 
 d. Rajasthan power project of 250 MW.
 
 NEW PROJECTS
 
 As reported in the Directors' report, your company has ambitious plans
 to expand its activities further to meet the higher energy demand faced
 by the country. Your company has plans to put up the following projects
 using coal as the fuel, for which the Advance action plan for
 preliminary activities, has also been approved by the Government.
 
 a. TUTICORIN POWER PROJECT (1000 MW)
 
 The estimated cost of the Project is Rs.4000 cores. The project is
 proposed to be developed as a joint venture with Tamil Nadu Electricity
 Board (TNEB). An MOU has also been signed with TNEB in this regard. The
 Project, being 1000 MW capacity, will have the status of mega power
 project and accordingly will be entitled for concessions as announced
 by the Government of India.
 
 b. ORISSA POWER PROJECT (2000 MW)
 
 This project envisages a capital out lay of Rs.8000 crores, will be put
 up in the State of Orissa. This project will also have the status of
 mega power project and will be entitled for all the concessions as
 announced by the government of India.
 
 Other projects under formulations.
 
 1. Mine III with 8.0 MT capacity along with TPS III with the Capacity
 of 1000 MW (2*500 MW) has been planned at a total capital cost of
 Rs.7417.87 crores.
 
 2. Power plant with a capacity of 492 MW, based on the refinery residue
 as Joint venture with Chennai Petroleum Corporation at Chennai is
 planned at a capital cost of Rs.2837 crores.
 
 3. A thermal Power Plant of capacity 125 MW in Neyveli, at a capital
 cost of Rs.455.26 crores utilizing the surplus lignite likely to be
 available.
 
 POWER SECTOR REFORMS
 
 The Electricity Act, 2003 was given assent by the President of India on
 26th may 2003 and came into force on 10th June 2003 repealing the
 earlier Indian Electricity Act, 1910, the electricity supply act, 1948
 and the Electricity Regulatory Commissions, act, 1998.
 
 The Act consolidates the laws relating to generation, transmission,
 distribution, trading and use of electricity. It aims at creating
 measures conducive to development of Electricity Industry, promoting
 competition therein, protecting interest of consumers and supply of
 electricity to all areas.
 
 The salient objectives of the Act includes, inter-alias, provision for
 license free generation and distribution in the rural areas,
 de-licensing of generation and captive generation, provision for
 licensing for transmission, distribution and trading of electricity,
 open access in transmission and distribution etc. The act further
 provides for the constitution of Central Electricity Authority,
 Regulatory Commissions and establishment of Appellate Tribunal.
 
 The Electricity Act, 2003 has numerous implications on your Company's
 business which is engaged in the generation of electric power. While
 new Act opens up new visitors in the are of power distribution, power
 trading, direct sale of power to consumers, etc. it throws a great
 challenge in the power generation area itself s new entry in the power
 generation has been facilitated in the absence of any license and
 freedom provided for captive power generation with open access to the
 transmission and distribution lines. The establishment of National Grid
 also is proceeding at a high speed facilitating transfer of surplus
 power from the Eastern Region to the deficient Southern Region in which
 your Company operates.
 
 TARIFF POLICY
 
 As per the provisions of the new Electricity Act, the Central
 Government will frame the Tariff Policy and based on that the Central
 Electricity Regulatory Commission (CERC) will regulate the tariff
 proposals of the Utilities. Recently, the government of India has
 brought out the draft tariff policy seeking comments from the concerned
 for finalisation. The new tariff policy will over the tariff for the
 period starting from 01.04.2004.
 
 There is a great pressure on the improvement of the operation norms not
 only in the generation of power but also in the captive mining with a
 view to reduce the cost of power generation and your Company has to
 take necessary steps in this regard to remain competitive not only in
 the region but also with comparable tariff from other surplus states.
 Further, with the introduction of availability based tariff and Merit
 Order System, the consumers have started regulating the power purely on
 the commercial basis in terms of surplus situations. While the scenario
 in the power generation is fast becoming highly competitive, your
 Company is gearing itself to the new situations to continue of remain
 as a competitive power generator. Number of steps have been taken by
 your company such as.
 
 a. Broadening the fuel source for power generation instead of remaining
 only as the lignite based power generator.
 
 b. Improving the production norms both in the mining as well as in the
 power generation.
 
 c. Introducing new technologies in the proposed new projects both in
 the mining as well as in the power generation.
 
 d. Retrofitting the state of the art systems in the existing power
 plants as well as in the Mines to enhance the efficiency and the
 productivity.
 
 INDUSTRIAL RELATIONS
 
 The industrial relations scenario of your Company continues to be
 cordial. The management has always believed that the employees of the
 Company are the pillars behind the success of your company. The
 employee relations in the company have been harmonious and
 constructive. Continued emphasis on participative work culture and the
 regular system of holding discussions with the recognised Union and the
 Associations have helped to enhance the mutual trust and confidence.
 
 Acknowledgement
 
 I take this opportunity to express thanks, on your behalf, to Ministry
 of Coal, GOI, for their continued support and to the various other
 departments of the Government of India as well as the Government of
 Tamil Nadu for extending their support and company-operation. I wish to
 place it on record due appreciation for the hard work and dedication of
 our executive, supervisors and workmen. Our thanks are also due to the
 Associations and Unions for their whole-hearted company-operation in
 maintaining good and cordial Industrial Relations. Last but not the
 least, I express my sincere thanks to my colleagues on the Board for
 all their endeavors during the year.
 
 I now move the Director's Report and the Audited Statements of Accounts
 as on 31st March 2003 and the Profit and Loss Account for the year
 ended on that date for approval and adoption.
 
 Date:  29.09.2003                                      S.JAYARAMAN 
 Place: Chennai                                 CHAIRMAN-CUM-MANAGING
                                                         DIRECTOR