D.L. DUGGAL & co.Chartered Accountants

Block No. C-16, Flat No.4, Vikas Nagar, Shimla-I71009 Ph.2626895 (M) 9736142644

AUDITORS'REPORTS

TO THE MEMBERS OFH P POWER TRANSMISSION CORPORATION LTD.BAROWALlA HOUSE KHALlNISHIMLA

We have audited the accompanying financial statements of H P POWERTRANSMISSION CORPORATION LIMITED, Which comprise the Balance sheetas at March 31st 2013, and the Pre-operative Expenditure Statement and CashFlow Statement for the year then ended, and a summary of significant accountingpolicies and other notes.

Management's responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements thatgive a true and fair view of the financial position, financial performance and cashflows of the Company in accordance with the Accounting Standards referred to insub-section (3C) of section 211 of the Companies Act, 1956. This responsibilityincludes the design, implementation and maintenance of internal control relevantto the preparation and presentation of the financial statements that give a trueand fair view and are free from material misstatement, whether due to fraud orerror.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit in accordance with the Standards onAuditing issued by the Institute of Chartered Accountants of India. ThoseStandards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditor's judgment, including the assessment of the risks ofmaterial misstatements of the financial statements, whether due to fraud or error.

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In making those risks assessments, the auditor considers internal controlrelevant to the Company's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimatesmade by management, as well as evaluating the overall presentation of thefinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriateto provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to theexplanations given to us, the financial statements give the information requiredby the Act in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India:

i) in the case of the Balance sheet, of the state of affairs of theCompany as at March 31st 2013;

ii) in the case of the Pre-operative Expenditure Statement for the yearended on that date; and

iii) in the case of the Cash Flow statement, of the cash flows for theyear ended on that date.

Emphasise of matter paragraph in the Auditors Report on the AuditedFinancial Statement

(i) With Regard to capital work in progress for Kashang Bhaba Project ofRs.13,66, 18,177/- all Bills, Records & the complete work account ismaintained by Senior Executive Engineer, Transmission Division, HPSEB,Bhabanagar from April 2008 to June, 2010 and duplicate copy of bills aresubmitted to corporation. After July, 2010 onwards the entire expenditure onthis project was made by HPPTCL on the basis of payment of original bills.In terms of MOU dated 06.04.09 between HPPCL & HPPTCL the completeproject will be handed over to the Corporation by HPSEB after completion &thereafter for Running & Maintenance of the said Transmission Line but theMOU in this regard between Corporation & HP State Electricity Board is yetto be executed & signed. Accordingly such assets & liabilities of Rs. 66.08lac in respect of this project is yet to be accounted for as the project is stillunder construction (Refer note 15.2.2, 18& 19) .

(ii) In terms of "Himachal Pradesh Power Sector Reforms Transfer Scheme,2010" notified by the State Govt. vide No. MPP-A(3)-1/2001-IV dated10.06.2010 transmission lines having gross value of RS.199,07,72,0001-

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are re-vested with HPPTCL. The value of assets to be transferred toHPPTCL is under reconciliation with HPSEB Ltd. and all assets & liabilitiesin this regard shall be taken in the accounts of HPPTCL after ascertainingthe actual cost of such assets, accumulated depreciation and net block.Accordingly, no provision has been made for any income or expenditurepertaining to said transmission lines (Refer Note No. 20)

(iii) Though corporation is yet to start its commercial activities, as on31.03.2013, balance outstanding in the name of various parties appearingunder current assets, loan & advances and current liabilities are subject toconfirmation and reconciliation.

(iv) During the year on the basis of various judgments of Honorable courts thecorporation has not made any income tax provision which is incontravention to Accounting Standard AS-22 "Accounting for Taxes onincome" which states the income tax provisions to be calculated on thebasis of prevailing tax laws (Refer Note No.15.5 & 21).

The effect of items above on the Corporation's accounts is notascertainable.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2003 issued bythe Central Government of India in terms of sub-section (4A) of section227 of the Companies Act, 1956, we give in the Annexure a statement onthe matters specified in paragraphs 4 and 5 of the said Order.

2-. As required by section 227(3) of the Act, we report that:

a) We have obtained all the information and explanations, which to the bestof 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 beenkept by the Company so far as appears from our examination of thosebooks.

c) The Balance Sheet, the Statement of Pre-operative ExpenditureStatement and Cash Flow statement dealt with by this report are inagreement with the books of account.

d) In terms of Indian Ministry of Finance Department of the Company AffairsNotification No. FSR 829 (E) 21st October, 2003, Govt. Companies it isexempted from the provision section 274(1) (g) of the Companies Act,1956 regarding disqualification of Directors.

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e) In our opinion, the Balance sheet, Pre-operative Expenditure Statement,and Cash Flow statement dealt with by this report comply with theaccounting standards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956 except AS-15, related to Retirement Benefits ofEmployees (refer to Note No 15.4) and AS-22 related to "Taxes onIncome" (refer to Note No. 15.5 &21)

For D.L_..~D@U~~Cha~

'Nll~rz:ei}

M.NO. 085692Firm Regd. No. 06906N

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ANNEXURE REFERRED TO IN PARAGRAPH OF THE AUDITOR'S REPORTTO THE MEMBERS HP POWER TRANSMISSION CORPORATION LTD.ONTHE ACCOUNTS FOR THE YEAR ENDED MARCH, 2013

This is the Annexure referred to in our report on the balance sheet of HPPOWER TRANSMISSION CORPORATION LTD., as on 31st March 2013.

(i) (a) The corporation has maintained reasonable records showingparticulars including quantitative details and situation offixed assets and Capital Work in Progress.

(b) During the Year, the Corporation has shown record related toverification of Fixed Assets at Corporate Office and division officeonly, but, has not shown any Record related to PhysicalVerification of Capital Work in Progress and during suchphysical verification of fixed assets at corporate office andDivision office no material discrepancies were observed bycorporation.

(c) In our opinion, the corporation has not disposed off substantialpart of its fixed assets during the period.

(ii) The corporation has no inventory, therefore clauses (ii) of the order isnot applicable. .

(iii) (a) The corporation has not granted any loans, secured or unsecured,to companies, firms or other parties listed in the register,maintained under section 301 of the Companies Act, 1956.As theCorporation has not granted any loans, the provision of clause4(iii) (b) (c) and (d) of the Order are not applicable to theCorporation.

(b) The corporation has not taken any loans, secured or unsecured,from companies, firms or other parties listed in the register,maintained under section 301 of the Companies Act, 1956 As theCorporation has not taken any loans, the -provision of clause (iii)(e), (f) & (g), not applicable to the Corporation.

(iv) In our opinion and according to the information and explanation givento us, there are adequate internal control procedures commensuratewith the size of the corporation and the nature of the business withregard to purchase of inventories, fixed assets and for the sale ofgoods except awarding of few contracts. In our opinion, there is nocontinuing failure to correct major weakness in internal control exceptawarding of few contracts ..

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(v) (a) There are no Transactions that need to be entered in theregister maintained in pursuance of Section 301 of the Act.

(b) In view of 4(v) (a) above, Paragraph 4(v) (b) of the CARO isnot applicable.

(vi) Since the corporation has not accepted deposits from the public,paragraph 4(vi) of the order is not applicable.

(vii) In our opinion, the internal audit functions carried out during the yearby an external agency appointed by the Management have beengenerally commensurate with the size and nature of business of thecorporation.

(viii) We were informed that the maintenance of cost records has not beenprescribed by the Central Government under section 209(1) (d) of theCompanies Act, 1956.

(ix) (a) Subject to Note No. 15.4, 15.5 & 21 related to current Income Tax& PF liabilities of employees other than on deputation, according to therecords of the corporation, the corporation is regular in depositingundisputed statutory dues including Provident Fund, Employees' StateInsurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, ExciseDuty, Cess and other statutory dues with appropriate authorities.

(b) According to the information and explanation given to us, there areno undisputed amounts payable in respect of such statutory dueswhich have remained outstanding as at 31st March 2013 for a period ofmore than six month from the date they become payable.

(c) According to information & explanation given to us there are nodues of income tax, sales tax, wealth tax, service tax, custom duty &other statutory dues which have not been deposited on account ofdispute.

(x) The corporation does not have accumulated losses at the end offinancial year. Further, the corporation has not incurred cash losses inthe financial year and being the Corporation is still under ConstructionPeriod, all the expenses has been capitalized and transferred to Pre-operative Expenditure to be appropriated in Future.

(xi) According to the information and explanation given to us and on thebasis of our examination of books of accounts, the Corporation has notdefaulted the Repayment of Dues to any Financial institutions or Bankor Debenture Holders.

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(xii) Since the corporation has not granted any loans or advances on thebasis of security by way of pledge of shares, debentures or othersecurities, paragraph 4 (xii) of the order is not applicable.

(xiii) Since the provision of special statute applicable to chit fund, nidhi ormutual benefits funds/ societies are not applicable to the corporation,paragraph 4 (xiii) of the order is not applicable.

(xiv) Since the corporation is not dealing or trading in shares, securities,debentures or other investments and hence, paragraph 4 (xiv) is notapplicable.

(xv) As informed to us, the corporation has not given any guarantee forloans taken by others from banks and financial institutions.

(xvi) During the year ended the corporation has taken term Loan from ADBthrough HP Government and same is being applied for the purpose forwhich the loan was obtained.

(xvii) The corporation has not raised any fund on short term basis; therefore,paragraph 4(xvii) of the order is not applicable.

(xviii) The corporation has not made any preferential allotments of shares toparties and companies covered in the register maintained undersection 301 of the Companies Act, 1956.

(xix) Since the corporation has not issued any debentures, paragraph 4(xix)of the order is not applicable.

(xx) Since the corporation has not raised any money by way of public issue,paragraph 4 (xx) of the order is not applicable.

(xxi) As informed to us, there has not been any fraud on or by thecorporation noticed or reported during the year.

Place: ShimlaDate: -H~/0 I~ /20/)

For D.L. DUG GAL & CO.Char.Jel.~~c

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egd. No. 06906N

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