Corporate Governance

In NTPC, Corporate Governance philosophy stems from our belief that corporate governance is a key element in improving efficiency and growth as well as enhancing investor confidence. The Corporate Governance philosophy is scripted as: As a good corporate citizen, the Company is committed to sound corporate practices based on conscience, openness, fairness, professionalism and accountability in building confidence of its various stakeholders in it thereby paving the way for its long term success. The Organization believe that their company shall go beyond adherence to regulatory framework. Our corporate structure, business and disclosure practices have been aligned to our Corporate Governance Philosophy. Transparency, accountability, fairness and intensive communication with stakeholders are integral to our functioning. They also believe in system driven performance and performance oriented systems. NTPC Ltd. accord highest priority to these systems and protect the interests of all shareholders, particularly the minority shareholders. NTPC Ltd. have tried to blend growth and efficiency with governance and ethics. Organizations Board of Directors, guided by the mission statement, formulate strategies and policies having focus on optimizing value for various stakeholders like consumers, shareholders and the society at large. Besides adhering to provisions of Listing Agreement we are also following guidelines on Corporate Governance issued by Department of Public Enterprises, Government of India. The company has a sound Corporate Governance mechanism in place built around following principles: Diversified Expertise based Board drives our Company

NTPC Board, at present, comprises of six full time functional Directors and the Managing Director who is also the Chairman of the company. Companys functional directors are highly experienced professionals in their functional areas, provide directions to the management on operational issues, adoption of systems and best practices in management and oversight of compliance of various legal and other requirements. The Company has nine Independent Directors and two directors nominated by the administrative ministry. The Independent Directors on the Board of the company are appointed by the Government of India through an elaborate procedure of selection which encompasses induction of professionals and experts in relevant field through a Search Committee by the Government of India. Company believes that Independent Directors bring with them the rich experience followed in other companies resulting in imbibing the best practices followed in the industry. Clear definition of roles and responsibilities of Board of Directors leading to decentralized decision making

Companys framework is designed to enable the Board to provide strategic guidelines for the company the effective over-sight of management. The respective roles and responsibilities of Board Members and Senior Executives are clearly defined to facilitate accountability to company as well as its shareholders. This ensures a balance of authority so that no single individual has unfettered powers. Delegation of decision making to various Committees of the Board

Company has taken adequate steps to form various Committees at the Board level to focus attention on crucial issues before placing the same before the Board for consideration. Some of these committees have been constituted voluntarily even though there is no legal requirement under listing agreement. These include the Projects Committee to consider and decide on investment proposals before approval by the Board, Contracts Committee to deal with award of contracts upto a threshold limit set by the Board, Committee on Management controls, to review various internal control systems and their compliance and Investment/Contribution SubCommittee for matters related to deployment of surplus funds, approval of contributions/donations for national, public or charitable causes etc. Other Committees of the Board are- Audit Committee, Shareholders/Investors Grievance Committee and Committee of the Board for allotment and post-allotment activities of the companys Securities. The Audit Committee was constituted in NTPC in 1995, much before it became a statutory necessity under the Companies Act, in 2000. The Audit Committee ensures that truthful and factual financial position of the company is presented to the Board and hence safeguards integrity of the management. Established Code of Conduct to promote ethical and responsible decision making

There are two separate Code of Conduct-one for Board Members and another for Senior Management Personnel in alignment with Companys Vision and Values to achieve the Mission & Objectives and aims at enhancing ethical and transparent process in managing the affairs of the Company. The Code of Conduct also covers issues relating to insider trading in the Companys security. Established System of Accountability - Evaluation of Performance of Board of Directors

The performance of the Board and the Directors are evaluated by the Ministry of Power which is the administrative Ministry for the Company. For evaluating the performance of the company the Government has instituted a system of target setting which is agreed to between the company and the Government through a Memorandum of Understanding (MOU). The MOU system defines the evaluation criteria in advance on parameters like financials performance, productivity, human resource development activities, project implementation, operation performance in order to have objective evaluation of Central Public Sector Enterprise (CPSE). Performance of functional directors on the Board is also evaluated through a performance evaluation system at two levels- first evaluation at the level of Chairman & Managing Director

and the second at the level of Ministry. The performance reports of all directors are reviewed by the Chairman & Managing Director and forwarded to the Ministry for evaluation. Adopted a policy of making timely and balanced disclosures

NTPC believe in disclosure of all material matters concerning the company to all investors. The announcements about the company are based on factual details and presented in a clear and balanced way on regularly on its website and also to the regulators. Going beyond Regulation, we think for our shareholders

NTPC has more than 9.67 lakh shareholders as on 31.12.08. About 99% of these are retail shareholders and the Company besides appointing a Share Transfer Agent for servicing these shareholders has set up an in-house Investor Services Department to ensure proper and timely redressal of grievances of these small shareholders. As a pro-active investor friendly measure, we had undertaken an exercise in August 2008 to credit unpaid dividend amounts by use of supplementary ECS facility/ Direct Payment. Under this initiative, close to 49000 unpaid warrants were paid amounting to Rs.1.23 crores. Continuous efforts are being made to enlarge the number of locations for payment of Dividend through Electronic Clearing System (ECS) etc. Companys Directors constantly interacts with the Institutional Investors to explain to them the strategies and plans of the company. During such interactions, investors express various view points on the sector and business of the company and the management, in turn, addresses their concerns and explains the measures taken by the Company. They also organize an annual investor and analyst conference where their entire Board meets with the analyst and investing community and addresses to their queries and concerns about the company. Establishing a Risk Management System

NTPC has formulated a Risk Management Policy in fiscal 2005 to institutionalize the risk management in the Company. The policy aims to identify, assess, monitor and manage risk not for identifying and capitalizing on opportunities to create value. In order to imbibe the best practices prevalent in the industry, they have appointed a reputed Consultant to develop and implement a Framework for Compliance under clause 49 of the listing agreements with Bombay Stock Exchange/National Stock Exchange. After holding detailed deliberations involving all the units of the Company, an elaborate enterprise wide Risk Management Framework has been developed and risks are being reviewed periodically by the senior management.

Customer Relationship Management

NTPC engages itself in extending continuous support to all its stake holders including customers and it is regarded among its customers for its professionalism. Under its Customer Relationship Management (CRM) programme, the Company has started to offer services/support to customers in selected areas such as Operation & Maintenance, R&D Finance, IT etc with the explicit objective of overall power sector growth.