1.  We have audited the attached Balance Sheet of Power Grid
 Corporation of India Limited as at 31st March, 2012, and the Statement
 of Profit and Loss and also the Cash Flow Statement for the year ended
 on that date annexed thereto. These financial statements are the
 responsibility of the Company''s management. Our responsibility is to
 express an opinion on these financial statements based on our audit.
 
 2.  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 from material misstatements.  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 the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a reasonable
 basis for our opinion.
 
 3.  As required by the Companies (Auditor''s 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.
 
 4.  We draw attention to Note No. 2.25(a) & 2.25(c) in respect of
 provisional recognition of revenue from transmission charges.
 
 5.  Further to our comments in the annexure referred to in paragraph 3
 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;
 
 c) The Balance Sheet, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d) In our opinion, the Balance Sheet, Statement of Profit and Loss and
 Cash Flow Statement dealt with by this report are in compliance with
 the Accounting Standards referred to in Sub-Section (3C) of Section 211
 of the Companies Act, 1956;
 
 e) Being a Government Company, pursuant to the Notification no. GSR
 829(E) dated 21.10.2003, issued by the Department of Company Affairs;
 clause (g) of sub-section (1) of section 274 of Companies Act, 1956
 pertaining to disqualification of Directors is not applicable to the
 Company;
 
 f) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements, read
 together with Accounting Policies and Notes on Accounts annexed thereto
 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 :
 
 i) in the case of Balance Sheet, of the state of affairs of the Company
 as at 31st March, 2012;
 
 ii) in the case of Statement of Profit and Loss, of the profit of the
 Company for the year ended on that date; and
 
 iii) in the case of Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 Annexure to the Auditors'' Report
 
 RE: POWER GRID CORPORATION OF INDIA LIMITED
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE
 
 (i) a) The Company has generally maintained records of Fixed Assets,
 showing full particulars including quantitative details and situation
 of Fixed Assets.
 
 b) The fixed assets have been physically verified by external agencies
 during the year and discrepancies, though not material, noticed on such
 verification have been reconciled/ adjusted in the books of account. In
 our opinion, frequency of verification is reasonable.
 
 c) During the year the company has not disposed off substantial part of
 its Fixed Assets.
 
 (ii) a) Physical verification of inventories lying with the company has
 been conducted during the year by the external agencies.  In respect of
 material lying with contractors, company is having system of obtaining
 confirmation from contractors on periodic basis. In our opinion system
 and 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 has maintained proper records of inventory. The
 discrepancies noticed on physical verification of the inventories have
 been properly dealt with in the books of account.
 
 (iii) According to the information and explanations given to us, the
 Company has neither granted nor taken any loans, secured or unsecured
 to / from companies, firms or other parties covered in the register
 maintained under section 301 of the Companies Act, 1956.
 
 In view of above, other paragraphs of clause (iii) of paragraph 4 of
 the Order are not applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems, commensurate
 with the size of the Company and the nature of its business, with
 regard to purchase of inventory and fixed assets and income from sales
 of services. During the course of our audit we have not observed any
 continuing failure to correct major weaknesses in the underlying
 internal control systems. However process of contract closing work
 needs to be further expedited.
 
 (v) According to the information and explanations given to us, there
 are no contracts or arrangements during the year referred to in section
 301 of the Companies Act 1956, to be entered in the register maintained
 under that section. In view of above other paragraphs of clause (v) of
 paragraph 4 of the Order are not applicable.
 
 (vi) Since the Company has not accepted any deposit from the public,
 the question of compliance with the directives issued by the Reserve
 Bank of India and the provisions of section 58A, 58AA and other
 relevant provisions of the Companies Act, 1956, and rules framed there
 under, does not arise.
 
 (vii) The Company has an Internal Audit system. In our opinion, the
 scope and coverage of Internal Audit are commensurate with the size and
 nature of its business.
 
 (viii) We have broadly reviewed the cost records maintained by the
 company pursuant to the Companies (Cost Accounting Records) Rules, 2011
 prescribed by the Central Government under Section 209 (1)(d) of the
 Companies Act, 1956, in respect of Transmission & Telecom Operations of
 the Company and we are of the opinion that prima facie the prescribed
 records have been made and maintained. We have, however, not made
 detailed examination of the cost records with a view to determine
 whether they are accurate or complete.
 
 (ix) a) According to the information and explanations given to us, the
 Company is regular in depositing undisputed statutory dues with
 appropriate authorities including Provident Fund, Investor Education
 and Protection Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax,
 Custom Duty, Excise Duty, Cess and other statutory dues applicable to
 the Company and that there are no undisputed statutory dues outstanding
 as on 31st March, 2012 for a period of more than six months from the
 date they became payable. As informed, provisions of the Employees
 State Insurance Act are not applicable to the Company.
 
 b) According to information and explanations given to us, following
 disputed demands of income tax / sales tax / customs duty / wealth tax
 / service tax / excise duty / cess dues have not been deposited:
 
 Nature of dues       Amount             Forum where the disputes 
                                         are pending
                     (Rs. in crore)
 
 Entry Tax               0.02            Appellate Board, Commercial
                                         Tax Department, Madhya Pradesh
 
 Entry Tax               1.05            Dy. Commissioner (Appeals),
                                         Commercial Tax Department,
                                         Madhya Pradesh
 
 Entry Tax              11.40            Joint Commissioner of 
                                         Commercial Tax 
                                        (Appeal), Patna
 
 Entry Tax               5.98            Honbl. High Court, Punjab
                                         & Haryana
 
 Sales Tax              33.89            J&K State, Sales Tax
                                         Appellate Tribunal
 
 Sales Tax              18.51            Dy. Commissioner of Sales
                                         Tax (Appeal), Jammu, J&K State
 
 Service Tax             1.57            Commissioner of Central
                                         Excise, Patna
  
 Diversion Tax (For 
 non-agriculture 
 use of land)            2.23            S D O, Itarsi
 
 Income Tax            160.84            Commissioner of Income
                                         Tax (Appeals), Delhi.
 
 Income Tax              2.60            Income Tax Appellate
                                         Tribunal, Delhi.
 
 Total                 238.09
 
 (x) The Company does not have accumulated losses at the end of
 financial year and has not incurred any cash loss in the financial year
 under audit, and also in the immediately preceding financial year.
 
 (xi) On the basis of audit procedures adopted by us and according to
 the records, the Company has not defaulted in repayment of dues to any
 financial institution or bank or bondholders.
 
 (xii) The company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities.
 
 (xiii) The company is not a chit fund or nidhi/ mutual benefit
 fund/society. Accordingly, Clause (xiii) of paragraph 4 of the Order is
 not applicable.
 
 (xiv) In our opinion, the Company is not dealing in or trading in
 shares, debentures, and other investments. Accordingly, Clause (xiv) of
 paragraph 4 of the Order is not applicable.
 
 (xv) In the case of Power Link Transmission Limited, wherein the
 Company has pledged its shares in favour of financial institutions for
 financial assistance obtained by the said company, as per the terms and
 conditions of Joint Venture agreement. According to the information and
 explanations given to us, except the above, the Company has not given
 any guarantee for loans taken by others from banks or financial
 institutions. In our opinion and to the best of our information and
 according to explanations given to us, the terms and conditions of the
 above share pledge agreement are not, prime facie, prejudicial to the
 interest of the company.
 
 (xvi) In our opinion on an overall basis and according to the
 information and explanations given to us, the company has applied the
 term loans for the purpose, they were raised during the year.
 
 (xvii) In our opinion, on an overall basis, and according to the
 information and explanations given to us, the company has not used the
 funds raised on short term basis for long term investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties and Companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) The Company has not issued any debentures. However, in respect of
 certain bonds raised during the year amounting to Rs. 2,655 crore
 security/ charge is yet to be created.
 
 (xx) The end use of money raised by Follow-on Public Offer during the
 year 2010-11 as stated in the draft prospectus filed with SEBI and
 offer document are disclosed in the Note No. 2.34 to the financial
 statements and the same has been duly verified by us.
 
 (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 S. K. MEHTA & CO.    For CHATTERJEE & CO.    For SAGAR & ASSOCIATES
 
 Chartered Accountants   Chartered Accountants   Chartered Accountants
 
 Firm Registration 
 No. 000478N            Firm Registration 
                         No. 302114E             Firm Registration 
                                                   No. 003510S
 
 (S.K. Mehta)           (S.K. Chatterjee)        (V. Vidyasagar Babu)
 
 Partner                    Partner                    Partner
 
 Membership No. 010870  Membership No. 003124    Membership No. 027357
 
 Place: New Delhi
 
 Dated: 29th May, 2012