Annual Report2005 06

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ContentsPage No.

Corporate Information 2

Notice 3

Directors Report 9

Management Discussion and Analysis 18

Corporate Governance Report 26

Summarised Balance Sheet andProfit and Loss Account 39

Auditors Report 40

Balance Sheet 44

Profit and Loss Account 45

Cash Flow Statement 46

Schedules to Profit and Loss Account 48

Schedules to Balance Sheet 52

Notes to the Balance Sheet andProfit and Loss Account 63

Balance Sheet Abstract and CompanysGeneral Business Profile 75

Financia l Hig hlig ht s Last Decade 76

Sixty-seventh annual report 2005-2006CHEMICALS

Tata Chemicals Limited

Annual General Meeting : July 17, 2006Time : 3.30 p.m.Venue : Birla Matushri Sabhag ar,

19, Sir Vitha lda s Thackersey Marg, Mumb ai - 400 020

Page No.

Consolidated Financial Statements

- Auditors Report 77

- Balance Sheet 78

- Profit &Loss Account 79

- Cash Flow Statement 80

- Schedules to Profit andLoss Account 82

- Schedules to Balance Sheet 84

- Notes to ConsolidatedBalance Sheet andProfit and Loss Account 90

Financial Statistics 99

BOOK CLOSURE DATES JULY 1, 2006 JULY 17, 2006


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CHEMICALS

Sixty-seventh annual report 2005-2006


Board of Directors(As of March 31, 2006)

Ratan N. Tata(Chairman)

R. Gopalakrishnan(Vice-Chairman)

Keshub Mahindra

(Ceased to be a directo r w.e.f. March 24, 2006)

D. M. Ghia

Nusli N. Wadia

R. C. Khanna

Dr. D. V. Kapur

Prasad R. MenonManaging Director

Dr. T. Mukherjee

Homi R. KhusrokhanExecutive Director

Dr. Vijay L. Kelkar

Registered OfficeBombay House,24, Homi Mody Street,Fort, Mumbai 400 001Tel: 022-66658282Fax: 022-66658143Visit us at: www.tatachemicals.com

Management TeamPrasad R. Menon Managing Director

Homi R. Khusrokhan Executive Directo r

P. K. Ghose Chief Financial Officer

Kapil Mehan Chief Opera t ing Officer (Fert ilisers)

R. Mukundan Chief Opera t ing Officer (Chemicals)Satish Sohoni Chief Operating Officer (Food Additives)

B. Sudhaka r Head-Corpora te HR &Admin ist ra tion

I. L. Mo min VP-Opera tio na l Execella nce

P. M. Khanderia V P-New Projects

Sanjiv Lal V P-Manufacturing

P. C. Jain V P-ManufacturingDr. Arup Ba su V P-Ma nufa ct uring

A. Tyagi V P-Bangladesh Project

Dr. Murli Shast ri Chief Scient ist

T. Vinod Kumar Head-Corporate Audit &Risk Management

Company SecretaryB. Renganathan

Registrar &Share Transfer AgentTSR Darasha w Limited(Formerly Tat a Share Reg istry Limited)Army &Navy Building,148, Mahatma Gandhi Road,Mumbai 400 001.

SolicitorsMulla &Mulla andCraigie Blunt &Caroe, Mumbai.

AuditorsMessers S. B. Billimoria &Co.,

Chartered AccountantsMessers N. M. Raiji &Co.,

Chartered Accountants

WorksInorganic Chemicals Mithapur, GujaratFertilisers Babrala, Dist. Badaun, U.P.Phospha te Haldia, W. Beng al

BankersBank of America, Bank of Baroda, Citibank N.A., Deutsche Bank,HDFC Bank Limited, Punjab National Bank, Standard CharteredBank, Stat e Bank of Bikaner & Jaipur, Stat e Ban k of India, TheHongkong and Shang hai Banking Corporation Ltd., ICICI Bank Ltd.

CORPORATE INFORMATION


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NOTICENOTICE IS HEREBY GIVEN THATTHE SIXTY-SEVENTH ANNUAL GENERAL MEETING OF TATA CHEMICALS LIMITED w illbe held on Monda y, July 17, 2006, at 3.30 p.m. at Birla Matush ri Sabha ga r, 19 Sir Vithalda s Thackersey Marg, Mumba i400 020, to transact the following business: -

1. To receive, consider and ad opt t he Audited Profit and Loss Account for the year ended March 31, 2006 and theBalance Sheet as at that date, together with the Reports of the Board of Directors and the Auditors thereon.

2. To declare a dividend on Ordinary Shares.

3. To a ppoint a Director in place of Mr. R. N. Tata , who retires by rota tion an d is eligible for re-appo intment.4. To a ppoint a Director in place of Mr. Nusli N. Wad ia who retires by rota tion an d is eligible for re-appo intment.

5. To consider and, if thoug ht fit, to pass with or w ithout modification, the following resolution a s an OrdinaryResolution:

RESOLVED that Mr. D. M. Ghia, a Director liable to retire by rotation, who does not seek re-election, is not re-appointed a Director of the Company.RESOLVED FURTHER that the vacancy, so created on the Board of Directors of the Company, be not filled.

6. To appoint auditors and fix their remuneration.

7. REVISION IN THE TERMS OF REMUNERATION OF MR. PRASAD R. MENON, THE MANAGING DIRECTORTo co nsider and, if tho ught fit, to pass w ith or without mod ification, the following resolution as a n OrdinaryResolution:RESOLVED THAT, in partial modification of the Resolution passed at the Annual General Meeting of theCompany held on July 21, 2005 and in accordance with the provisions of Sections 198, 309, 310 and otherapplicable provisions, if any, of the Companies Act, 1956 (the Act) read with Schedule XIII of the Act, theCompany hereby approves th e revision in the p erquisites a nd allow ances pa yable t o Mr. Prasad R. Menon, theManaging Director (including the remuneration to be paid in the event of loss or inadequacy of profit in anyfinancial year during the tenure of his appointment) with effect from April 1, 2006, for the remainder of thetenure of his contract, as set out in the Explana tory State ment a nnexed to t he Notice convening this meeting.

RESOLVED FURTHER THAT the Boa rd be an d is hereby a uthorized to ta ke all such steps as may be necessary,proper and expedient to give effect to this Resolution.

8. REVISION IN THE TERMS OF REMUNERATION OF MR. HOMI R. KHUSROKHAN, THE EXECUTIVE DIRECTORTo co nsider and, if tho ught fit, to pass w ith or without mod ification, the following resolution as a n OrdinaryResolution:

RESOLVED THAT, in partial modification of the Resolution passed at the Annual General Meeting of theCompany held on September 20, 2004 and in accordance with the provisions of Sections 198, 309, 310 andother applicable p rovisions, if any, of t he Compan ies Act, 1956 (the Act) read with Schedule XIII of t he Act, theCompany hereby approves the revision in the perquisites and allowances payable to Mr. Homi R. Khusrokhan,the Executive Director (including the remuneration to be paid in the event of loss or inadequacy of profit inany financial year during the tenure of his appointment) with effect from April 1, 2006, for the remainder of thetenure of his contract as set out in the Explanatory Statement annexed to the Notice convening this meeting.

RESOLVED FURTHER THAT the Boa rd be an d is hereby a uthorized to ta ke all such steps as may be necessary,proper and expedient to give effect to this Resolution.

Notes:1. The relat ive Explanato ry Stat ement pursuant t o Section 173 of the Companies Act, 1956, in respect of the business

unde r item Nos. 5, 7 &8 set o ut a bo ve are a nnexed hereto . The relevant det ails in respect of item Nos. 3and 4 above, as required by Clause 49 of the Listing Agreement entered into with Stock Exchanges are alsoannexed.

2. A MEMBER ENTITLED TO ATTEND AND VOTE ATTHE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTENDAND VOTE INSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES INORDER TO BE EFFECTIVE MUSTBE RECEIVED BY THE COMPANY NOTLESS THAN 48 HOURS BEFORE THE MEETING.


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9. Members are requested to note that no claim shall lie against the Company or the aforesaid Fund in respectof any a mount o f dividend remaining un paid/unclaimed for a period o f seven years from the d ate s theybecame first due fo r payment. Any person/member w ho ha s not claimed d ividend in respect o f the finan cialyear ended March 31,1999 or any yea r thereafter, is request ed t o a pproach t he Compan y /Registrar an d ShareTransfer Agent o f the Comp any fo r claiming t he same.

Bank Mandates

10. In order to provide protect ion aga inst fraudulent encashment of the dividend w arrants, members holdingshares in physical form are requested to intimate the Registrar &Share Transfer Agent under the signature o fthe Sole/First holder, the fo llow ing informat ion to b e incorporat ed on the Dividend Warrant s:

I. Name of the Sole/First joint holder and the folio Number

II. Particulars of Bank Account viz.,

a ) Name of t he Bank

b) Name of the Branch

c) Complete address of the Bank with Pin code Number

d) Bank Account Number allotted by the Bank

In respect of the matters pertaining to Bank details, ECS mandates, nomination, power of attorney, change inname/add ress etc., the memb ers are req uested to approa ch :

the Company s Registrar and Share Transfer Agent , in case of shares held in physical form and

the respective Depository Participant s, in case of shares held in electronic form.

In all correspondence with the Compa ny/Reg istrar and Sha re Transfer Agent, members are requested t o q uot ethe ir acco unt/folio numb ers or DP ID and Client ID in respect o f physical or electron ic holdings respectively.

11. A member desirous of get ting any information in respect of the co ntent s of the Annual Report is req uired to

forward the queries to the Company at least seven days prior to the meeting so that the required informationcan be made available at the Meeting.

On behalf of the Board of Directors

R. N. TATAChairman

MumbaiMay 30, 2006

Registered Office:Bombay House24, Homi Mody Street, Fort,

Mumbai 400 001.


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EXPLANATORY STATEMENTThe fo llow ing Explana tory Sta temen t pursuant t o Sect ion 173 of th e Compa nies Act, 1956 (the Act) sets out a llmaterial facts relating to the business mentioned under item Nos. 5, 7 and 8 of the accompanying Notice datedMay 30, 2006.

Item No. 5:

In accordance with the provisions of Section 256 of the Act and the Articles of Association of the Company,Mr. D. M. Ghia retires by rota tion. Mr. D. M. Ghia h as not soug ht re-election. It ha s bee n decided by t he Boa rd tha t t hevacancy so created on the Board of Directors of the Company should not be filled.

Mr. D. M. Ghia is a Director of the Company since January 22, 1975 and is also a member of the Audit Committeeand Chairman o f Shareho lders/Investors Grievance Committ ee. The Boa rd has placed on record its appreciat ion ofthe contribution made by him to the Company.

Item No. 7:

Mr. Prasad R. Menon was appointed as the Managing Director of the Company for a period of 5 years with effectfrom October 4, 2005, on the terms and conditions and remuneration as approved by the members at the AnnualGeneral Meeting of the Company held on July 21, 2005.

In order to give flexibility to the Board of Directors to decide upon the perquisites and allowances payable to theManaging Director from time to time, within the overall ceiling prescribed under the Act, it is proposed to revisethe t erms of remuneration relating to perquisites a nd a llowa nces paya ble to Mr. Prasad R. Menon with effect fromApril 1, 2006. The Board o f Directors at the ir meeting h eld on May 30, 2006, approved the afo resaid proposa l,subject to the approval of the members. All the other terms and conditions of appointment and remunerationwould remain uncha nged . The revised terms of remuneration a re as set o ut be low:

Remuneration:

Salary up to a maximum o f Rs. Rs. 4,50,000/- per mont h, with annua l increment e ffective April 1 st every year, as maybe d ecided by t he Board, based o n merit and t aking into account the Compa nys performance; benefits, perquisitesand allowances as determined by the Board from time to time and commission based on certain performancecriteria to be prescribed by the Board.

Minimum Remuneration:

Notwithstanding anything to the contrary herein contained, where in any financial year during the currency of thetenure of Mr. Prasad R. Menon, the Company has no profits or its profits are inadequate, the Company will payremuneration by way of salary, perquisites and allowances, as specified above.

The a gg regate of th e remuneration as aforesaid sha ll be w ithin the ma ximum limit specified under Sections 198,309 and all other applicable provisions, if any, of the Act read with Schedule XIII of the Act as amended from time totime.

In compliance with the provisions of Sections 309 and 310 read with Schedule XIII of the Act, the revised terms ofremuneration p ayab le to Mr. Prasad R. Menon are now being p laced befo re the Members in the gene ral meeting fortheir approval. The Boa rd commend s the Resolution for accept ance by the Members.

Mr. Prasad R. Menon is concerned or interested in the resolution at Item No. 7 of the Notice.

This may be t reat ed a s an abst ract under Section 302 of the Compa nies Act, 1956.

Item No. 8:

Mr. Homi R. Khusrokhan was appointed as Executive Director of the Company for a period of 3 years with effectfrom April 1, 2004, on the terms and conditions and remuneration as approved by the members at the AnnualGeneral Meeting of t he Compa ny held o n Septemb er 20, 2004.

In order to give flexibility to the Board of Directors to decide upon the perquisites and allowances payable to theExecutive Director from time to time, within the overall ceiling prescribed under the Act, it is proposed to revise the


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terms of remuneration relating to perquisites and allowance payable to Mr. Homi R. Khusrokhan with effect fromApril 1, 2006. The Board o f Directo rs at the ir meet ing held on May 30, 2006, approved the afo resaid proposa l,subject to the approval of the members. All the other terms and conditions of appointment and remunerationwould remain uncha nged . The revised t erms of remuneration a re as set o ut be low:

Remuneration:

Salary up to a maximum o f Rs. Rs. 4,00,000/- per mont h, with annua l increment e ffect ive April 1 st every year, as maybe d ecided by t he Board, based o n merit and taking into a ccount the Companys performance; benefits, perquisitesand allowances as determined by the Board from time to time and commission based on certain performancecriteria to be prescribed by the Board.

Minimum Remuneration:

Notwithstanding anything to the contrary herein contained, where in any financial year during the currency of thetenure of Mr. Homi R. Khusrokhan, the Company has no profits or its profits are inadequate, the Company will pay

remuneration by way of salary, perquisites and allowances, as specified above.The a gg regate of th e remuneration as aforesaid sha ll be w ithin th e ma ximum limit specified under Sections 198,309 and all other applicable provisions, if any, of the Act read with Schedule XIII of the Act as amended from time totime.

In compliance with the provisions of Sections 309 and 310 read with Schedule XIII of the Act, the revised terms ofremuneration paya ble to Mr. Homi R. Khusrokhan are no w being placed b efore the Members in gen eral meeting fo rtheir approval. The Boa rd commend s the Resolution for accepta nce b y the Members.

Mr. Homi R. Khusrokhan is concerned or interested in the resolution at Item No. 8 of the Notice.

This may be t reat ed a s an abst ract under Section 302 of the Compa nies Act, 1956.


R. N. TATAChairman

MumbaiMay 30, 2006

Registered Office:Bombay House24, Homi Mody Street, Fort,Mumbai 400 001.


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Details of Directors seeking appointment/reappointment at the Annual General Meeting (Pursuant to Clause49 of the Listing Agreement)

Name of the Director Mr. R. N. Tata Mr. Nusli N. Wadia

Date of Birth 28.12.1937 15.02.1944

Date of Appointment 11.04.1983 26.06.1981

Expertise in specific Eminent industrialist with wide business Industrialist with rich

fun ct io na l a rea exp erien ce a cro ss va riet y o f ind ust rie s b usin ess expe rien ce

Qualification B.Sc., Architecture with structure Educated in U.K.

Eng ineering from Corne ll University,Ithaca , New York. Completed the

Advanced Management Program

conducted by Harvard University

Directorship in other Tata Sons Ltd The Bombay Dyeing &Mfg. Co. Ltd

Public Limited Tata Industries Ltd Gherzi Eastern Limited

Companies Tata Steel Limited The Bombay Burmah Trading Corp. Ltd.

The Bombay Dyeing and Mfg Co. Ltd. Britannia Industries Ltd.

Tata Motors Limited. Nowrosjee Wadia &Sons Ltd.The Ind ia n Ho tels Co mpa ny Lt d. Ta ta Steel Lt d.

The Ta ta Pow er Compa ny Ltd. Ta ta Mo tors Ltd.

Tata Tea Ltd. Atul Ltd.Ta ta Informa tio n System Ltd. Wa dia BSN Ind ia Ltd.

Hindustan Aeronautics Ltd.

Tat a Auto comp Systems Ltd.

Tat a Consultancy Services Ltd.Tata Teleservices Ltd.

Tat a Teleservices (Maha rash tra ) Ltd.

Membership ofcommittees of other

public limited NIL NIL

companies (includes

only Audit and

Shareh olders/Investors

Grievance Committee

No. of sha res held in

the Company 28,695 NIL


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DIRECTORS' REPORTTO THE MEMBERSOF TATA CHEMICALS LIMITED

The Directors hereby present their Sixty-seventh Annual Report on the business and operations of the Companytogether with the Audited Statement of Accounts for the year ended March 31,2006:

Previous YearRs. Crores Rs. Crores

FINANCIAL RESULTSTotal Income .............................................................................................................................. 3599.23 3109.88Profit b efore Deprecia tion and Exceptional items ...................................................... 654.49 592.70Less : Deprecia tion .................................................................................................................... 138.93 137.70Profit be fore Tax and Exceptiona l items .......................................................................... 515.56 455.00

Less : Exceptional items

Compensat ion pa id under Employee Separa tion Scheme ............. 4.69 2.06Profit before tax ...................................................................................................................... 510.87 452.94Tax ................................................................................................................................................... 157.84 112.39

Profit after tax .......................................................................................................................... 353.03 340.55Add : Balance in Profit and Loss Account ....................................................................... 623.85 478.03

Amount available for Appropriat ion ................................................................................. 976.88 818.58Appropriations -(a) Propo sed Dividend ......................................................................................................... 150.57 139.82(b) Tax on Dividend ............................................................................................................... 21.12 19.91(c) Gene ral Reserve ............................................................................................................... 36.00 35.00(d) Balance Carried forw ard ............................................................................................... 769.19 623.85

976.88 818.58

Dividend

For the yea r under review, the Directo rs have reco mmended a d ividend o f Rs. 7/- per sha re (Rs. 6.50 per sha re for theprevious year), on the Ordinary (Equity) Shares of the Company, aggregating Rs. 150.57 crores.

PERFORMANCE REVIEW:

MITHAPUR OPERATIONS

Soda Ash

Soda Ash production at 8,10,684 tonnes and sales at 7,06,907 tonnes were higher by 3.7%&3.4%respectively overthe previous year. This production w as the highest in the history of t he Compan y. The market sha re of the Compa nyincreased to 32.8%as against 30.8%in the previous year, and thus maintained its leadership position.

Cement

Production of cement at 4,90,643 tonnes increased by 5.3%and sales at 4,86,064 tonnes accounted for an increase of3.5%as co mpared to t he previous year. The sales recorded w as th e highest ever. Cement prices continued t o remainfirm during the year under review on account of consolidation in the industry.Salt

Tota l production of a ll varieties of salt a t 6,06,445 tonnes w as 22% higher than the previous year and sales at5,80,800 tonnes, were higher by 17.95%. Tat a Sa lt recorded hig hest ever sa les.

A number of initiatives on the trade front under project 'BANDHAN' were introduced to strengthen the customerrelat ionship. Salt unde r the brand na me TOPP Salt was introduced in the internat ional market. Export con tinues tobe encouraging . Your Company ma intained its market leadership in the branded sa lt categ ory with a ma rket share of40.1%. Tata Salt w as nominat ed as t he Most Trusted Food Brand in the count ry for t he t hird consecut ive year.


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BABRALA OPERATIONS

Urea production (9,60,113 tonnes) and sales (9,53,518 tonnes) remained at the same level as lastyear. Energy consumpt ion o f urea a t 5.058 G.Cal/MTwa s the lowest in the Fertiliser Indust ry in India.The new pricing p olicy on urea ha s not yet b een finalised. Lower offtake of add itional qua ntities bythe Government had an impact on the volumes.

The ne tw ork of Tat a Kisan Sansar (TKS), ha s spread extensively in the ea stern part s of the country.This netwo rk is support ed by effect ive sourcing partners and efficient supply chain manag ement .This had resulted in an increased trad ing volume o f fertilizer product s.

HALDIA OPERATIONS

Sodium Tripolyphosphate (STPP)

Production o f STPP at 50,647 ton nes wa s lower by 8.1%over the previous year and sales wa s lowerby 19.8%over the previous year. Pressure on margins continues, due to cheaper Chinese imports.

Diammonium Phosphate (DAP)/NPK

Production of DAP a t 2,80,939 tonn es was higher by 10.1%and sa les at 2,74,636 tonnes resulted in adecrease of 9.6%, as compared to the p revious yea r.

Production of NPK at 4,05,704 tonnes wa s higher by 53%and sales at 3,87,098 tonnes g rew by 39.8%.

STRATEGIC INITIATIVES

During the year under review, the following initiatives were undertaken:

Preliminary steps for entering into new business fields such as Nano, Bio ba sed products wereundertaken.

An Innovation Centre was set up during the year for the development of new technologies andbusiness platforms.

An initiative program titled 'UDAAN' wa s launched, essentially focusing on value and profitimprovement, in ad dition t o the cost reduction measures implemented throug h 'MANTHAN'.

Acquisition of o ne-third sta ke in Indo Maroc Phosphore S.A., Morocco (IMACID).

Acquisition of the entire share capital of a U.K. based Soda Ash Company, Brunner Mond GroupLimited (BMGL). Thus BMGL is now a w holly owned subsidiary of the Company.

SUBSIDIARIES

During the year und er review, the Company incorporated a Wholly Owned Subsidiary (WoS) inMauritius in the name of Homefield International Pvt. Limited (HIPL) to make investments globallyand acq uire shares abroa d a s and when business opportunities arise. This WoS beca me a holdingcompany of Homefield Pvt. UK Limited (Homefield - UK) by acquiring its entire share capital.Accordingly Homefield - UK beca me a WoS of the Compa ny a s well.

During the year under review, Homefield UK acquired 100%of the paid-up capital of Brunner MondGroup Limited (BMGL)UK, a co mpany enga ged in the manufacture of soda a sh, for a t ota l considerationof Rs. 798 crores. Accordingly BMGL is now a wholly owned subsidiary of the Company.

The Company has been g ranted exemption by the Ministry of Company Affairs, from att aching withits accounts, the individual accounts of subsidiary companies. However, the consolidated financialstatements of the subsidiaries and the joint venture, in accordance with the Accounting Standards

21 &27 issued by the Institute of Chartered Accountants of India, forms part of this Annual Reportand are reflected in the consolidated accounts of the Company. Further as directed by the Ministry ofCompany Affairs, the financial data of the subsidiaries have been furnished under "Summary ofFinancial Information o f Subsidiary Compa nies" a nd forms pa rt o f th is Annua l Report. The AnnualAccounts of the subsidiaries would be made available for inspection by the members.

JOINT VENTURE

As mentioned in the last year's annual report, the Company acquired one-third stake in Indo MarocPhosphore S.A, Morocco (IMACID) for a consideration of Rs. 166 crores. IMACID was a 50:50 JointVenture compa ny bet ween Office Cherifien Des Phosphates (OCP) and Chamb al Fertilisers &Chemicals

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Limited (CFCL) and is enga ged in t he b usiness of ma nufac turing phospho ric acid. The Investment inIMACID would help securing the supply of phosphoric acid.

FINANCIAL PERFORMANCE OF SUBSIDIARIES AND JOINT VENTURE

The consolida ted financial statements reflect the o perations o f the Homefield Interna tiona l Pvt. Ltd. -Mauritius (HIPL) and Homefield Pvt. UK Ltd. (Homefield -UK), for the period from the date of formationupto March 31, 2006 and in case o f Brunner Mond Group Limited (BMGL) from t he dat e o f acq uisitionupto March 31, 2006. However in case of IMACID, the results considered for the purpose ofconsolidation are for the period from May 2005 to March 31, 2006 to the extent of one-third share.

HIPL, the WoS has recorded a to ta l income of Rs. 33.96 crores w ith a Prof it After Tax (PAT) of Rs. 13.13crores. Homefield UK has reported an interest income of Rs.8.22 crores and an operating loss ofRs. 3.64 crores. BMGL's total income (from the date of acquisition upto March 31, 2006) wasRs. 370.06 crores with a PATof Rs. 37.83 crores. IMACID reported to ta l revenue of Rs. 239 crores witha PATof Rs. 32 crores, for the afo resaid period to the extent of TCLs proportionat e sha re in the jointventure.

CORPORATE AFFAIRS

Finance

During the current financial year there was no conversion of Foreign Currency Convertible Bonds(FCCB) issued in January 2005. The p roceeds o f FCCB were ut ilized pa rtly in May 2005 for acquiringone-third sta ke in IMACID and the b alance fo r part ly financing Homefield U.K. (a WoS) for acq uiring100%shareholding in Brunner Mond Group Ltd, UK. Until utilization, the FCCB proceeds were deployedoverseas in bank deposits, which was in line with the Reserve Bank of India guidelines.

Net interest cost w as low er tha n the previous yea r, despite rise in interest rate s. This was primarilydue to higher interest income a nd a judicious mix of Rupees/Foreign currency borrow ings to financeworking capital.

Voluntary Delisiting

Permission is still awaited from the Calcutta Stock Exchange with respect to the delisting application

made by the Company.Industrial Relations

The relationship with t he recognized Unions continued t o remain cordial.

Rural Development and Social Welfare

In keeping with the Company's commitment towards rural development and social welfare, yourCompany cont inued to undertake rural development a ctivities in the form of a gricultural development,natural resource management, income generation activities, health, education and infrastructuredevelopment.

"Tejaswini", a do mestic manag ement prog ramme launched for creating bet ter qua lity o f life forwomen continued in the second year and 320 women were trained. A similar programme 'Spandan'wa s also launched for men d uring the year under review.

Directors

Mr. Keshub Mahindra stepped down from the Board of Directors of the Company with effect fromMarch 24, 2006. The Boa rd wishes to p lace on record its appreciat ion for th e valuab le guidanceextended and the contribution made by him during his long association with the Company.

In acco rda nce w ith t he req uirement s of t he Com pa nies Act, 1956, Mr. R. N. Tat a a ndMr. Nusli N. Wadia, Directors of the Company are due for retirement by rot at ion and a re eligible for re-appointment.

Mr. D. M. Ghia, who is also liable to retire by rotation has conveyed his decision not to seek re-appointment. Attention o f the members is drawn to the corresponding resolution and the ExplanatoryStatement thereto, in the Notice dated May 30, 2006, convening the Annual General Meeting.

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Attention of the members is also invited to the item Nos. 7 &8 of the Notice convening the AnnualGeneral Meeting, for a revision in the terms of remuneration payable to Mr. Prasad R. Menon, theManaging Director and Mr. Homi R. Khusrokhan, the Executive Director.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, Management Discussion and Analysis, CorporateGovernance Report together with the Auditors' Certificate on compliance of the conditions ofCorporate Governance form part of this Annual Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO

The informa tion req uired under Section 217(1)(e) of the Companies Act, 1956, read with t he Companies(Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto asAnnexure 'A' and forms part of this Report.

PARTICULARS OF EMPLOYEESThe information as required und er Section 217(2A) of t he Companies Act, 1956, read with Companies(Particulars of Employees) Rules, 1975 as amen ded, is annexed he reto a s Annexure 'B' and forms pa rtof this Report.

AUDITORS

M/S. S. B. Billimoria &Co., and M/S. N. M. Raiji &Co., Chartered Accountan ts, who are the st at uto ryauditors of the Company, hold office until the conclusion of the ensuing Annual General Meetingand are eligible for re-appointment . The memb ers are requested t o consider their re-appointmentfor the current financial year 2006-07 and authorise the Board of Directors to fix their remuneration.The ret iring audito rs have, under Section 224 (1B) of the Companies Act, 1956, furnished certificat esof their eligibility for the appointment.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Compa nies Act, 1956,the Directo rs, ba sed o n the representa tionsreceived from the Operating Management, confirm thati) in the preparation of the annual accounts, the applicable accounting standards have been

followed and that there are no material departures;ii) they have in the selection of the accounting policies, consulted the Statuto ry Auditors and ha ve

applied them consistently and ma de judgments and estimates tha t are reasonable and prudentso as to give a true and fa ir view o f the state of affairs of the Company at t he end o f the financialyear viz., March 31, 2006 and of the profit of the Company for the year ended on that date;

iii) they have ta ken proper and sufficient care, to th e best of th eir knowledge and ability, for themaintenance of a deq uate a ccounting records in a ccordance w ith the provisions of the CompaniesAct, 1956, for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities;

iv) they have prepared the annual accounts on a g oing concern basis.

ACKNOWLEDGEMENTS

The Directo rs wish to place on record t heir appreciation for their continued suppo rt and co-operationby Financial Institutions, Banks, Government authorities and other sta keholders. Your Directors a lsoacknowledge the support extended by the Company's Unions and all the employees for theirdedicated service.


Mumbai R. N. TATAMay 30, 2006 Chairman

EPSIn Rs.

0

2

4

6

8

10

12

14

16

18

06050403

ROCE%

0

3

6

9

12

15

06050403


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ANNEXURE TO THE DIRECTORS REPORTAnnexure A

(UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956)

Disclosures

A. CONSERVATION OF ENERGY

(a) Energy conservation measures taken

Automation of Soda Ash Plant-Phase I

Installation of pre-heater for preheating feed bittern using MSTcondensate

Installation of expansion vessel in Klin Feed cement plant

Instrumentation for controlling lime klins process parameters Installation of Advanced Control System in Ammonia plant

Coro-coating on urea cooling water pump

Insulation of steam condensate line from urea B/L to DM plant and

Process air compressor discharge line up to a mmonia plant B/L

(b) Additional Investments and proposals, if any being implemented for reduction of energyconsumption

Automation of MHY plant-Phase I

Automation of watersoftening plant

Automation of glass tower operation at Bromine plant

Modification of existing lime kline charging system Enlargement of Ammonia Still pre-heat er and Stack coolers in Soda Ash plant

PME de-hydrator in Ammonia plant

Advanced process Controller in urea plant

MP process condensate stripping system instead o f LP system in ammonia plant

(c) Impact of the measures at (a) and (b) for reduction of energy consumption and consequent impacton the cost of production.

Increase in overall Soda ash plant operating efficiency

Reduction in steam consumption in MUWplant

Reduction in specific heat consumption of clinker

Reduction in Boiler feed water consumption

Decrease in power consumption in material handling system

Increase in operating efficiency in water softening plant

Optimization of critical process parameters leading to energy saving in the plant

Saving in electrical power and enhance life

Reduction of heat losses from hot pipe surface


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CHEMICALS



(d) Total Energy consumption per unit of production as per Form A:

Form A

The cap tive Steam Pow er plant at Mithapur is based o n "Tota l Energy" concept , co-generating steam andpower and therefore the cost of steam and power is shown as a composite number in the followingcalculation :

POWER AND FUEL CONSUMPTION

1 ELECTRICITY Current year Previous year2005-2006 2004-2005

(a) PurchasedUnits (Kwh) 11,72,900 8,12,900Tot al Amount (Rs. Crores) 1.28 1.30Avg . Rate (Rs./Kwh) 10.90 16.00

(b) Own Generation(i) Through Diesel Generation (Mwh)

Unit per litre of diesel Cost per Unit (Rs.)

(ii) Through Power Plant Unit (Mwh) 485.99 454.95Unit per litre of furnace oil 3074.99 Cost per Unit (Rs.) 6.33 5.22

(iii) Through Steam Turbine/Generat or Unit (Mwh) 4,20,412 4,53,888Steam produced (Tonnes) 43,07,195 41,26,369Total Value o f Elect ricity and St eam produced (Rs. Crores) 158.08 180.26

(iv) Through Gas TurbineUnits p roduced (MWh) 1,48,789 1,56,904Steam produced (Tonnes) 10,40,545 10,92,004Total Value o f Elect ricity and St eam produced (Rs. Crores) 84.62 118.63

2 Coal (specify quality and where used)(Mostly imported Coal received from varioussources and "A" Grade Lignite are used in Boilers)Quantity (Tonnes) 6,32,209 6,32,313Tot al Cost (Rs. Crores) 146.55 133.12Average Rate (Rs./Tonne) 2206.80 2,105.25

3 Natural GasPurchased (SCM) 19,19,83,689 15,21,45,509Tot al Cost (Rs. Crores) 87.33 61.96Average Cost (Rs./SCM) 4.55 4.07

4 NaphthaPurchased (KL) 16,619.16 95,454.96Tot al Cost (Rs. Crores) 30.14 136.60Average Cost (Rs./KL) 18,135.35 14,310.74

5 Furnace OilPurchased (KL) 7835.25 8,591.35Tot al Cost (Rs. Crores) 12.18 11.10Average Cost (Rs./KL) 15548.04 12,922.19

6 HSDPurchased (KL) 165.18 182.55Tot al Cost (Rs. Crores) 0.46 0.41Average Rate (Rs./KL) 27,717.33 22,660.90


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CONSUMPTION PER UNIT OF PRODUCTION

ELECTRICITY (Kwh/MT) STEAM (MT/MT)Current year Previous year Current year Previous year

2005-2006 2004-2005 2005-2006 2004-2005Soda Ash 157.76 146.83 3.41 3.58Sodium Bicarbonate 59.58 73.56 0.76 0.95Caustic Soda Evaporated 2823.71 2,858.12 2.79 2.85Vacuum Evaporated Salt 60.09 61.63 2.06 1.71Cement 128.72 138.46 Urea 70.00 72.00 1.00 1.01Ammonia 150.00 157.00 0.14 0.20Sulphuric Acid 35.00 33.00Phosphoric Acid 174.00 159.00

Sodium Tripolypho spha te 198.00 194.00Diammonium Phospha te 39.00 39.00NPK Complexes 33.00 42.00Single Super Phosphate 32.00 32.00Sulphonic Acid 46.00 46.00SAP (new) 33.00

Furnace Oil Ltr/Tonne HSD Ltr/Tonne

2005-2006 2004-2005 2005-2006 2004-2005Sodium Tripolyphosphate 102 102

Diammonium Phosphate 4 4

NPK Complexes 4 4

B. TECHNOLOGY ABSORPTIONForm B

Research and Development (R&D)

1 Specific areas in which R&D is carried out by the Company

Nano f ilt ra t ion technology

Improved raw material consumption

Waste materials utilization

Water conse rva tion

Product quality improvement

2. Benefits derived as a result of above R & D

Improved water quality for process requirements

Wa st e red uct io n

Improved water conservat ion.

Optimisation of process parameter

3. Future plan of action Continued R &D efforts to a ttain objectives of cost reduction, energy conservation, efficient inventory management,

waste utilization, value addition, environmental improvement and efficient management of water.


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CHEMICALS



MANAGEMENT DISCUSSION AND ANALYSISBusiness OverviewThe f inancia l year 2005-06 wa s a w at ershed yea r for Tat a Chemica ls Limited (Tat a Chemica ls, TCLor the company), as TCL positioned itself as an interna tiona l player.Since 2001, Tat a Chemicals ha s been implementing its long term stra teg ic plans structured a roundthe theme of Defend, Consolid at e and Grow . The first two aspects of t he t heme d efend a ndconsolidat e w ere of critical importa nce in 2001, when the Government of India beg an a gg ressively

opening up th e Indian econo my to international competition by sharplyreducing import d uties. With systema tic and year-on-year tariff cuts,Indian manufacturers became increasingly exposed to the threat ofimports. Despite being a market lead er, TCL realised the urgen t need t ogear up i t se l f to meet the chal lenges of a changing businessenvironment.Consequently, the Company embarked on a programme that focused

on continuously improving internal manufacturing and processefficiencies. By adopting best practices and single-mindedly focusingon improving internal efficiencies, the Company not only consolidatedits position in a more open and competitive market, but also built thefoundation of developing into a globally competitive organisation.Till 2004-05, the Compa nys focus w as o n building a ll round capab ilitiesto Defend and Conso lida te its existing ma rkets. While doing so , theCompany realised tha t such initiatives were necessary, but not sufficient

to lay the foun dat ion for systematically increasing t he long term shareholder value. These ha d tobe supplemented by organic and inorganic grow th in India as well as abroa d.The financial year 2005-06 marks the beg inning of a new Grow th path tha t fo cuses on ha rnessingTCLs strong int ernal orga nisation al capa bilities to g row in a globa l market.The a malg ama tion of Hind Lever Chemicals Limited (HLCL) with t he Compa ny, in 2003-04, broug htproduct and market synergies in the chemicals and fertiliser segment s and since then, the Companyhas ma de the fo llow ing two strateg ic internationa l acquisitions in 2005-06:Indo Maroc Phosphore S.A. (IMACID)The Company laid its first g lobal foot prints b y becoming an eq ual partner in a leading Moroccancompany IMACID. IMACID was promoted in 1997 as a joint venture between Office Chrifien desPhospha tes, Morocco, (OCP) a stat e-ow ned co mpany incorporate d in the Kingdom of Morocco andChamb al Fertilisers and Chemicals Ltd. This alliance no t only secured t he a vailability of a key raw material phosphoric acid for the Haldia operations but also opened up a new vista ofopportunities for future growth by having a well established front-end phosphatic chemicalscompany in northern Africa.Brunner Mond Group LimitedIn the second ha lf of 2005-06, TCL beca me the wo rlds third largest sod a a sh manufa cturer byacquiring the UK-based soda ash company Brunner Mond Group Limited, its Kenyan subsidiary,Maga di Sod a Compa ny Limited and Nethe rlands subsidiary, Brunner Mond BV. With t his, TCL now has soda ash manufacturing capacities in three continents with a significant presence in theinternational market. The tot al soda ash production ca pacity of the co mbined entity w ould now beclose to 3 million tonnes per annum.Thus, from being a highly efficient a nd profita ble Indian co mpan y operat ing in the inorga nicchemicals and fertilisers space, Tata Chemicals has now transformed itself to becom ing a trulyinternational corporation one that leverages the skills of culturally diverse employees tomanufacture and sell its products in different parts of the globe.This transformation is not just an incident , but a n o utcome of d eliberate strateg ic design. TheCompany would continue to explore growth opportunities on a platform of sustainable businesspract ices and cost leadership. The th rust being : developing new products and production processes that optimises resource utilisation and

preserves the environment. targeting global markets that have the best growth potential.

Soda A s h19.8 %

Other s5.5 %STPP2.1 %

Pho s phatic sFertili s er s

39.8 %

Cement4%

Urea20 %

Salt8.8 %

Sales Break-up


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1

TCL has no w emb arked o n a phased process of integrating the b usinesses that were acq uried. Thesuccess of any post-acquisition integration exercise largely hinges on aligning and realising thesynergies of the orga nisations. A focused prog ramme called Project Fusion has been launched tosystematically carry out the Brunner Mond integration and is executed in a manner such that thefocus on meeting business objectives is constantly maintained. Integration is being carried out bysetting-up cross-functional teams to explore the potential synergies between the companies.In keeping with its commitment for developing sustainable products and production processes,TCL set up an Innova tion Centre during 2005-06. This centre, which is a t a n incubat ion st ag e,focuses on cutting edge research on developing products and production techniques based oncleaner and greener technolog y. The aim is to b uild a more sustainab le future product ba se.Business EnvironmentTCLs main business comprises inorga nic chemicals and fertilsers. Except fo r soda ash , wh ich isexported to South Asian, Middle Eastern and South East Asian markets, other products essentiallycatered to the d omestic market. While individual product groups und er each of t hese b usinesseshave their own local market dynamics, in an increasingly open trade regime, the businesses as awhole are directly or indirectly affected by global demand.The g loba l economy performed we ll in 2005-06 growing by over 3 per cent pe r annum. China andIndia, two of the fastest growing economies of their size, continued to grow impressively registering a GDP grow th o f 9.8 per cent a nd 8.1 per cent respectively. Among st the more mat uredmarkets, the US economy grew b y 3.5 per cent a nd Ja pan by 2.7 per cent. This gene ral upsurge inglob al dema nd a ugured we ll for TCLs produc t portfolio. Favorable ma rket conditions, coupled w ithfocused improvements in interna l efficiencies, led to improvement s in the Compa nys financialperformance.Financial Highlights for the financial year 2005-06 :- On a standalone basis

Net Sales increased by 16.9%from Rs.3,008 crores in 2004-05 to Rs.3,518 crores in 2005-06. Operating profit (PBDIT) increased by 12.9 % from Rs.516 crores in 2004-05 to Rs.582

crores in 2005-06. Profit aft er tax (PAT) increased b y 3.7%from Rs.340.6 crores in 2004-05 to Rs.353 crores in

2005-06. Basic Earning per share (EPS) grew from Rs.15.83 to Rs.16.41.

The reduction in profitability w as d ue to low ma rgin on trad ing a ctivities and increase in the costof certa in man ufac turing items. While margins w ere lower, Return on Capita l Employed (13.2%) andReturn o n Netwo rth (16.3%) remained almost at the sa me level as tha t o f the p revious year. Thereis very limited risk in terms of financial leveraging and with a debt equity ratio of 0.67 and a netcash flow from operations of Rs.246.30 crores in 2005-06, the Company is well positioned to makefurther investments and grow profitably.

- On a consolidated basis Net Sales of Rs.4,029 crores Net Profits of Rs.428 crores Basic earnings per share of Rs.19.91

Segment-wise PerformanceThe Compa ny operate s in two segment s viz. inorga nic chemicals and fertilisers. While the chemica lsbusiness co ntribut ed 40%, the fertiliser business a ccount ed fo r 60%. TCL is the ma rket leader inSoda Ash and branded salt, in India.

I. Chemicals BusinessTCLs primary prod ucts in t his business a re soda a sh, salt, STPP a nd cement . Most of t he Companysinorganic chemical products are produced at its facility in Mithapur-Gujarat. Established in 1939,this is Indias largest and most integrated inorganic chemicals complex. Some of the phosphoricba sed compo unds a re manufact ured at Haldia. The Mithap ur plant is backed by closely locat ed sa ltpans and limestone quarries.

Soda Ash19 %

VacuumSalt 8 %

ComplexFertilizers

39%

Urea

19 %

Cement4 %

STPP4 %

Others5 %

OtherIncome

3 %

RUPEE EARNED

Materials62 %Employee

3 %

Distribution9 %

Overheads5 %

Taxe s8 %

Financial4 %

Dividend4 %

Retention5 %

RUPEE DEPLOYED


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CHEMICALS



Soda Ash & STPP

As of t oda y, the Mitha pur plant ha s an installed ca pacity of 875,000 tonnes of soda ash a nd 50,000tonn es of sodium bi-carbona te. The plant also produces a slew of o ther chemicals like ca ustic sodaand hydrochloric acid, which basically complement and complete the entire chemical integrationloop.

Having begun initiatives through Project Manthan in 2001, the Company continues to activelystress on further improving efficiencies of the Mithapur plant. A second version of the project,called Project Unnati, has been launched to further analyse the various processes and make themeven more cost effective.

As sta ted earlier, the Company acq uired Brunner Mond Group Limited a nd beca me th e third largestsod a a sh playe r in the world. With th is acq uisition, there is a st ructural shift in t he w ay TCL haspositioned its soda ash business.

Markets

During 2005-06, revenue from the chemicals business increased by 20.7%from Rs.1135 crores in2004-05 to Rs. 1421 crores in 2005-06. Soda ash accounted for 50%of the inorganic chemical salesand 19%of the total sales. Sales volume of soda ash grew by 3.4%over the previous year.

In 2005-06, driven by higher rural spends in the low er end and progression of custo mers to b etterquality products in urban areas, the fabric wash industry witnessed a higher growth both in thelower and in the highe r end of t he ma rket. In fa bric wa sh, TCL supplies soda a sh and STPP, whichcater to two extreme ends of the market in terms of pricing.

Soda ash is also supplied to the glass industry, which experienced 12%growth in construction in2005-06, as w ell as 7% grow th in the a utomo bile sector coming o n the b ack of a 12 per centgrow th in 2004-05. The b oom in construction a lso contributed to the revenues of th e Compan yscement business.

In the 1.8 million MTIndian soda a sh ma rket (sales), TCL maint ained its leade rship position w ith asha re of 32.8%. Domestic sales o f sod a a sh increased by 23% from Rs.516 crores in 2004-05 toRs.636 crores in 2005-06. Globally, the soda ash market continued to witness an excess demand

cond ition. Thus prices remained at high levels and TCL cont inued to b uild its p resence in internat ionalmarkets with strategic exports to SAARC countries, the Middle East and South East Asia.

In the fa bric wa sh spa ce, TCL also p roduces STPP, which beca me a part of t he Comp any s port folioconseq uent to the a malga mation o f Hindusta n Lever Chemicals with th e Company. STPP account edfor 5%of the inorga nic chemical sales and 2%of the tot al sales. STPP is targete d a t th e higher endof the fabric wash market and acts as a builder in washing powder. Pressure on margins due toChinese imports led to lower market growth, during the financial year 2005-06.

TCL registered bett er sales of sodium bi-carbona te driven ma inly b y de mand from pha rmaceuticalcompanies, food processors, dye manufacturers and the sugar industry.

Outlook

While the d omestic soda ash ma rket to day still grow s by around 3 per cent per ann um, with theexpected rise in construction activity and increase in per capita household incomes in India, theCompany expects the market to grow by over 5 per cent in the next few years.

In sod a a sh, customised product qua lity, cost, delivery and service are the key factors tha t de terminesuccess. Glass and d etergent manufact urers require soda ash w ith different b ulk density an d pa rticlesize distribution, and ind ividua l req uirements of g lass customers also vary w ith the ir processes. TCLis focused on meeting these challenges by improving production efficiency through cost controlmea sures. The existing supp ly chain man ag ement is also be ing streng thened . While at loca l level,the Compan y shall continue to leverage cost effectiveness arising from capt ive ava ilab ility ofchemical grade limestone, solar salt and efficient energy and water management, at global level itwill optimise resource utilisat ion across plants in three different geo graphies.

From be ing a n India-centric player making inroa ds into g loba l markets t hroug h export s, TCL now isa significant a nd influential compa ny in th e g lobal sod a ash market. Through multi-location

R

s .

C r o r e s

L a k h M T

TCL s Dome s tic S oda A s h S ale s

490.7

516.1

49 8 .2

466. 8

Amount in Rs. Crore Qu a ntity in L a kh MT

5.1

5.6 5.6

5.4

5.9

450

490

530

570

610

650

2005-062004-052003-042002-032001-02450

490

530

570

610

650

2005-062004-052003-042002-032001-024.5

5.0

5.5

6.063 6.3

R s . C

r o r e s

L a k h

M T

TCL s S oda A s h Export s

59.6

8 0.176. 3 2

49.4

17.2

0

10

20

30

40

50

60

70

8 0

90

2005-062004-052003-042002-032001-020.0

0.5

1.0

1.5

2.0

0.3

1.0

1.3

1.5

1.1



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2

production fa cilities, Tat a Chemicals is idea lly placed t o of fer an op timal value propo sition to ma jorgloba l customers. The Compa ny is positioning itself as a supplier to grow th markets that fill thestructural and geographical gap between the two major players in the soda ash market, namelyUSA and China.

Cement

TCLs cement plant wa s originally envisaged as a forwa rd integration fo r treating w aste limestone.Tod ay, this is a grow th o rient ed b usiness. The cement business is focused on t he regional market o fGujarat and its Tata Shudh cement b rand is we ll accepted there.

The Compa nys cement sa les increased by 26% from Rs.113 crores in 2004-05 to Rs. 143 crores in2005-06. Cement a ccount ed fo r 10% of the inorg an ic chemical sales and 4% of to ta l sales. TCLscement business remains a unique proposition that continues to harness improvements inenvironment mana gement to grow its output. The Company has invested in six filters for solidwaste management, and has spent over Rs.340 crores in its Effluent Solid Filtration (ESF) processesto preserve the environment . These investments w ill sustain the grow th in ca pacity a nd develop

the cement business while addressing the needs of environmental sustainability.Outlook

With the cont inuing emp hasis on development o f infrastructure and t he bo om in constructionindustry, the current momentum in the cement industry would continue.

Salt

During the financial year 2005-06, sales of all varieties of salt grew by 17%from Rs. 274 crores toRs. 321 crores. Salt a ccounted for 23%of th e inorga nic chemicals sales and 9%of t he t ota l sales.

Markets

A pioneer in the branded edible salt segmen t, Tata Salt continues to be t he ma rket lead er with asha re of 40.1%. Branded sa lt accounts fo r a litt le over a quart er of the 5.4 million t onn e edible sa ltmarket in India. During t he yea r under review, the iodized ed ible salt market in India de-grew b y 7per cent to 4.7 million tons per annum. However, within this category, the share of national-leveledible salt brands grew by 3.6 per cent.

Salt has low entry barriers and hence there is competition from a plethora of brands at both thelocal and regional levels. Further, entities in the fast moving consumer goods (FMCG) sector havestaked for a place in the national branded segment through competitive products as well asag gressive sa les and marketing strateg ies. These relatively recent b rands h ave limited brand eq uitybut have been generating sales through aggressive pricing at high levels of discount.

In a ddition, salt is a high-volume, low -value product; and logistics planning for such a product is acha lleng ing t ask. The finan cial year witnessed challenges like hike in rail freight rate s and insufficientavailability of railway wagon capacity.

Notw ithstanding these challenge s, TCL has don e w ell during t he yea r. Sales realisation and volumesof Tat a Salt grew by 17%a nd 22%respec tively in 2005-06. Key sa les initiatives like Weak MarketDevelopment, Project Coverage and Operation Reach were undertaken during the year to increasethe w idth and depth of th e sales distribution net work. Use of alternative transpo rt routes (primarilyby sea) helped in optimising the product supply chain.

The Compa ny ha s developed a well-defined b rand architecture model, which po sitions t he existingproducts (Tat a Salt, Tat a Fine Tab le Salt, Tat a Samund er Crysta l Salt, Tat a Samunder Cooking Soda ).Several marketing a ctivities like redefining t he con sumer perception o f Tat a Sa lt through a new commercial campaign Chutki Bhar Vishwas and trade linked localised promotional activity wereunderta ken by th e Compa ny. Tata Samunde r Crystal Salt (which meets a specific consumerrequirement w ithin the salt categ ory in South India) has achieved sales grow th o f 42 per cent. TataSamunder Cooking Soda (Indias first refined fo od grad e brand ed co oking soda ) is ga ining consumeraccepta nce in Western India.

In the year 2005-06, Tat a Sa lt wa s nominat ed as t he Most Trusted Foo d Brand in the coun try fo r thethird co nsecut ive year in a n a nnua l survey cond ucted by Economic Times and AC Nielsen. Withinthe overall FMCG catego ry, it reta ined the fifth position for the second consecutive year.

R s

. C r o r e s

L a

k h M T

TCLs Cement Sales

50.5

104.0 101.3

113.2

142.5

0

25

50

75

100

125

2005-062004-052003-042002-032001-020

1

2

3

4

5

6

Amou nt in R s . Crore Q u antity in Lakh MT

4.34.5

4.74.9

2.2

R s . C

r o r e s

L a k h

M T

TCL s S alt S ale s

227. 3

274. 3

3 21.5

220.7

162

0

50

100

150

200

250

300

2005-062004-052003-042002-032001-020

1

2

3

4

5

6

7


3 .2

4.24.5

5.0

5.90


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22

CHEMICALS



Tata Salt has a lso ma de a foray into th e international market. It has an estab lished presence in theinternational branded edible salt category in Singapore, UAE, Oman, Qatar and Bahrain throughlaunch of Topp Salt in t hese g eog raphies. The b rand is backed b y superior product qua lity andattractive packaging.

Being a food product, extreme care is taken over the hygiene and infrastructure used in theproduction o f Tata Salt. Both t he pa ckaging process as well as the packing material are carefullychosen to ensure a quality product for the consumer. As a result of these initiatives, the Mithapurproduction site is both ISO 9001:2000 and Hazard Analysis &Critical Control Parameters - HACCP(specifically related to food sector) compliant. Each individual packing centre is also in the processof applying for HACCP certification.

Tata Salt continues to remain committed t o Desh Ko Arpan Programme (DKAP) in a ssociat ion w ithNanhiKali Founda tion, which enab les over a t housand children to avail school educat ion. In a ddition,during 2005-06, it facilitated a joint programme for sports and academic coaching with MumbaiMunicipal Corporation in som e of the schoo ls in Mumbai. This activity ena bled the und er-privileged

children t o improve t heir performance.Outlook

In keeping with the philosophy of continuous consumer centric innovation, which is the hallmarkof any true FMCG organisation, several developmental activities have been planned for the fiscal2006-07. A comprehensive project to develop customised sales and marketing strategy has beenlaunched with the twin objectives of growing market share and increasing realisations. A timelinehas been developed for a series of new product development initiatives both within and outsidethe salt cat ego ry. The exports ma rket sha ll be expanded to cover entire Middle East, parts of SouthEast Asia and Africa.

II. Fertiliser Business

TCL has a wide -produc t p ortfo lio co mprising nitrogenous fertiliser (urea), pho spha tic fertiliser (DAPand complexes) and potassic fertiliser (SSP). Urea accounted for 33%of the fertiliser sales and 20%of total sales.

Tod ay, TCL has presence a cross a ll three key a gro-nutrient s: namely Nitrogen (N), Phospho rous (P)and Pot assium (K). The Compa nys manufa cturing fa cility at Ba bra la, Utta r Prad esh (the coun trysmost e nergy eff icient fert iliser complex) produces urea an d ammonia. The Haldia plant p roducesbulk chemicals and phosphatic fertilisers.

During 2005-06, the Fertiliser and Phosp ha te b usinesses o f TCL were merged into a sing le FertiliserStrategic Business Unit. This will help in rea lising g reate r synergies from the o perat ions at the t woplant locat ions as w ell as servicing the Compa nys customers, bett er.

The yea r 2005-06 was a lso the year in which TCL extend ed its foo tprints o utside t he country b ybeco ming a n eq ual pa rtner in a lead ing Moroccan Compa ny, IMACID. The stra teg ic inten t of t hisacq uisition wa s to reap ma ximum ben efits from the phospha te va lue chain. The Jo int Ventureprovides the Company with a consistent and regular source for phosphoric acid a key raw material in the phosphatic fertiliser business. It also opens up opportunities to explore the NorthAfrican and Middle Eastern geographies for fertiliser manufacturing.

Markets

Globally, 2005-06 was a good year for fertilisers. Demand-supply conditions remained stable andprices were firm. While glob al supply-demand conditions ha ve an indirect effect on Indian ma rketsthrough controlled imports, most of the Indian fertiliser market is still characterised by Governmentcontrols on prices. So, fortunes of domestic fertiliser companies depend mainly on the Indianmarket and pricing conditions.

On the positive front, there has been a revival in the agriculture sector. In 2005-06, agriculture andallied sectors grew by 2.3 per cent a bit over its long term trend growth rate. Food-grain

R s .

C r o r e s

L a k h M T

TCL s Urea S ale s

8 19.7

722.1

617.663 7.3

9.0

8 .6 8 .6

9.5 9.5

0

100

200

300

400

500

600

700

8 00

900

2005-062004-052003-042002-032001-025.5

6.5

7.5

8 .5

9.5

660.4



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production increased by 4.7 MTt o 209.3 MTin 2005-06. There w as a lso a n ew found impet us toag riculture in the Union Budg et 2006, throug h various incentive schemes a nd a co nscious move toincrease agriculture credit.

Total d omestic sa les of Urea in India are around 220 lakh MT. TCL sold 9.53 lakh t onn es a ccoun tingfor 4%of the co untry s market. In the fert iliser business, Urea acco unted for 33%of fertiliser salesand 20%of th e tot al sales. In the core comma nd a rea TCLs market share wa s14.7%lower off-ta keof additional quantities by the Government impacted volumes.

The financial yea r 2005-06 has truly been a yea r of ope ration al excellence a t Bab rala. 9,60,113tonne s of urea w as produced. The plant set a new record in energy efficiency in the coun try byregistering a n energ y consumption ra tio of 5.058 Gcal/MT. It also set a new ben chma rk by recordinguninterrupted production at the ammonia plant for 253 days and simultaneous production at bothits urea units for an uninterrupted 167 days. It also set a new record of 10.6 million accident-freeman hours and 1,194 accident free days.

Awards - Babrala Plant

During the year, the plant received several awards and recognitions. Among them are:

National Energy Conservation Award, 2005: First prize. Instituted by the Bureau of EnergyEfficiency, Ministry of Power, Government of India.

The IMC Ramkrishna Bajaj Nationa l Quality Awa rd, 2005 in the manufac turing cat ego ry.

Awa rd for Excellence in Natural Gas Conservation 2005: First prize in the fertiliser sector.Instituted by Gas Authority of India Limited.

BSC 5 Star certification in Health and Safety Manag ement System for the third time in a row;and BSC 5 Star in environment sustainability twice in a row.

Best plant performance awa rd 2005 from Fertiliser Association of India.

Excellence Award in SHE Manag ement from the Indian Chemicals Manufactures Association(ICMA).

Golden Peacock Environment Manag ement Award for 2005 for its environment performance.

DAP & NPK-HALDIA

During the financial year 2005-06, DAP &NPK registered a production of 686,643 tonnes, 32%higher than the previous year. During the year under review, the Company was successful inimproving the underlying profitability of its Haldia operations and in effecting considerable costsaving s. The SSP plant in Haldia prod uced 140,236 MT, which w as 14.6 per cent highe r tha n theproduction in 2004-05. DAP, NPK, complex fertilisers a nd ot hers a ccoun ted for 67%of the fertiliserssales and 40%of the total sales.

While a griculture g rowt h ha s been positive in 2005-06, it is a fact tha t fa rm output oscillatesregularly between positive and negative growth. Moreover, India still has low productivity inag riculture. The right mix of NPK fertilisers across spe cific g eog raphies w ill go a long wa y in improvingthis prod uctivity. Thus, with t he right kind of policy initiat ives, there is considerab le scope forgrowt h of pho spha tic and p otassic fertilisers. TCL cont inued to do w ell in these fertiliser groupsand maintained its market lead ership in its core geo graphies of West Beng al, Bihar an d Jha rkand.There w as a 40 per cent g rowth in o verall sales of NPK fertilisers.

These factors contribut ed t o TCLs fert iliser sa les increasing b y 17%from Rs.1866 crores in 2004-05to Rs.2,181 crores in 2005-06.

Outlook

While TCL cont inues to leverag e its product ion efficiencies and ma rket reach , much of t he futuremarket growt h w ould be d ependent on t he policies of the Government of India. The Governmenthas a difficult balancing a ct in providing farmers with cheap fertilisers and a lso reducing their ownsubsidy burden. Nevertheless, the Company believes that the Government is taking steps in theright d irection in respect of t he fertiliser subsidy. The move from a pricing scheme b ased on ind ividua l


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plants to one based on group of plants has corrected the process to a great degree, but is still notoptimal. More reforms are needed for the future growth of this industry.

Tata Kisan Sansar (TKS)

TCL has furth er extended its presence in rural Ind ia t hroug h t he Tat a Kisan Sa nsa r (TKS) initiative.While this had initially been set up as a one -stop-shop for dea ling a gricultural inputs like fertilisersand pesticides, the scope has increased immensely over the years.

The TKS initiat ive has progressed in a ma nner w hich create s value fo r farmers by improving farmproductivity t hrough b etter a grono mical practices, facilitating fa rm credit an d providing ag ricultureinputs from a single source. The TKS netw ork has sp read conside rably since its incep tion, and in2004-05 extend ed to the ea stern g eog raphies of West Beng al, Biha r and Jharkhand. The Compa nyhas 487 centres w hich offe r 204 product s. This netw ork is further supported by effect ive sourcingpartners and efficient supply chain management.

The Compa ny ha s used this platform to inform, educat e a nd develop fa rmers. This has b een d onethrough interact ive sessions o f o ver 3000 TKS Manchs, 300 crop seminars, 1,300 village me eting s,24,000 samples of soil and water testing and other similar initiatives. In addition, 37,000 acres ofcontract farming w as fa cilitated through the TKS.

Having ma de this foray into rural India , TCL sees th is as a ma jor platform to provide end-to -endag ricultural and ag ronomic solutions w hich can be extended to a co mplete rural retailing initiative.

Risk Management

TCL pays utmo st import ance to risk management in all its business dealings. The Compa ny hasbeen fo llow ing an enterprise-wide a pproach to risk manage ment w hich lays empha sis on identifyingand mana ging key operationa l and st rateg ic risks. Through this approa ch, it strives to identifyopportunities that enhance organizational value while managing or mitigating risks that canadversely impact the Companys future performance.

Within the orga nisation, the focus on risk mana gem ent is entrenched at a ll levels of decisionmaking where each manager contributes to the risk management process and risks are owned

by co ncerned line and business manag ers. To en sure consistency o f the risk manag ement processacross the o rganisation, TCL has a lso prepared and ado pted a w ell-defined risk manag ement cha rterba sed o n th e interna tiona l stand ard AS/NZS 4360:1999. The risk management framew ork enta ilsregular review of risk status and risk exposure by designated senior management committees.

Internal Control Systems

TCL has a interna l audit a nd co ntrol system. The Compa ny has an Interna l Audit Depa rtmen t sta ffedwith qua lified and experienced people. The Internal Audits are con ducted ba sed o n a risk basedaudit plan which is approved by the Audit Committee at the beginning of the year. Besides this,special audits are also carried out from time to time.

In the year under review, the Company initiated a focussed programme to evaluate the designeffectiveness of existing management controls across all its locations. Under this initiative, theCompany also undertook steps to implement new control measures in line with global best-in-class practices. Control Effectiveness Index (CEI), a tool is being used for evaluating the effectivenessof con trols in process/funct ion.

Human Resources

Over the last few years, a key focus area of the Company has been on developing functionalcompetencies amo ng human resources. Key org anisation initiatives such a s Unnat i and Mantha nhave gone a long-way in infusing new skills and fostering a climate of learning and collaboration.

A structured communication process inside the organisation is critical to enhancing employeeproduct ivity a nd sa tisfaction levels. TCL systema tically promotes skill sharing throug h cross-functionaland cross-location movements of employees across the organisation. Employee perception oncommunication is also tracked closely and their feedba ck is used t o further improve this process.


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In the year unde r review, TCL launche d a Volunta ry Retirement Scheme (VRS) the seco nd in lastfour years for its workforce at Mithapur. 184 workers or 12 per cent of the total eligible workforceavailed the VRS.

As of March 31,2006, TCL ha d 3,306 employees o n its rolls. The Compa ny cont inues t o en joy excellentIndustrial Relat ions in all its plan ts. The a cquisition o f Brunner Mond Group Limited wo uld ad daround 1000 employees.

Community Development

TCL, as with a ll other Tat a Group companies, is actively committ ed t o developing communities andtakes pride in the commitment shown by the employees. Community development is conductedthrough a systematic process which includes a separate, dedicated department, established trustsand societies and programs such as Desh Ko Arpan . Senior leaders and employees are activilyinvolved in cummunity develpment activities.

During the year under review, the Company organised multiple volunteer programmes includingmedical camps such as Lifeline Express (a special train that visits sites providing medical help), eyecamps, inoculation ca mps, capa city building t raining, impact a ssessment an d ed ucation. All of t heseprogrammes w ere voluntarily serviced b y the employees, with g reat ent husiasm. During the financialyea r 2005-06, TCL employees rendered in over 12,618 hours of vo luntary se rvice.

The q uality o f the Corporate Social activities have been recog nised at t he district, sta te a nd th ena tiona l level, and the Tat a Chem icals Society fo r Rural Development (TCSRD) has been recogn izedas a lead NGO by various state and national bodies.

Cautio nary Stat ement

Stat ements in this Management Discussion and Anal ysis describin g th e Comp anys objectives, projections,estimates and expectat ions may be forward looking stat ements within the meaning of applicable laws and regulations. Actual results migh t d iffer substant ially or mat erially from those expressed or implied.Import ant developments that could aff ect th e Compan ys operations include a downtrend in t he agriculture, fabric wash and glass industry global or do mestic or both , significant changes in political and economic environm ent in India or key markets abroad, tax laws, litiga tion, labour relations, exchange rate fluctu ation s, interest and other costs .


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CORPORATE GOVERNANCE REPORT

1. Companys Philosophy on the Code of Governance

Introduction

Corporate Governance is about promoting corporate fairness, transparency, accountability and integrity of themanagement. It also aims to align as nearly as possible the interests of individuals, corporations and society andthereby enhancing t he stakeholders value. Best results are achieved when the compa nies begin to treat t he CorporateGovernance system not as a mere structure but as a way of corporate life.

Good corporate governance practices have always been an integral part of your Companys Philosophy, which isfurther strengt hened by a dop tion o f the Tat a Business Excellence Model and the Tat a Code of Cond uct.

In compliance with the disclosure requirements of Clause 49 of the Listing Agreement executed with the stock

exchang es, the det ails are set out below:

2. Board of Directors

The Board o f Directors provide strat egic direction and thrust to the o perations of t he Company, thereby enh ancingthe va lue of the sta keholders.

Composition

The Boa rd has an opt imum combina tion o f Executive and Non-Executive Directors, and is in conformity with Clause49 of the listing agreement entered into with the stock exchanges, in which the Companys Ordinary Shares are listed.The composition of t he Boa rd as o n March 31, 2006 was as und er:

2 Promoter, Non-Executive Directors (Including the Chairman)

2 Executive Directo rs (Including the Mana ging Directo r)

5 Independent, Non-Executive Directors

1 Non Independent, Non Executive Director

None of the Directors on the Board is a Member of more than 10 Committees and Chairman of more than 5Committees (as per Clause 49(I)(C)(ii)) across all the companies in which he is a Director. All the Directors have madethe requisite disclosures regarding Committee positions held by them in other companies.

Meetings held

The Boa rd met e ight times on t he fo llow ing dat es during t he financial yea r 2005-2006:May 13, 2005 May 31, 2005

July 21, 2005 September 16, 2005

October 25, 2005 December 13, 2005

January 31, 2006 March 28, 2006Board Procedure

The ann ual calendar of Board Meetings is ag reed upon a t the beg inning of the year.

The Agenda is circulat ed w ell in adva nce to the Board members. The items in the Agen da are ba cked by comprehensivebackground information to enable the Board to take appropriate decisions. In addition to the information requiredunder Annexure IA to Clause 49 of the Listing Agreement, the Board is also kept informed of ma jor events/items an dapprovals taken wherever necessary. The Managing Directo r, at the Boa rd Meetings, keeps the Boa rd apprised o f theoverall performance of the Company.


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Code of Conduct

The Company has ado pted the Tat a Code of Conduct for all the employees o f the Company including the WholetimeDirecto rs. During the year, the Board had approved a Code o f Conduct for Non-Executive Directors. The Code ofConduct for the employees as well as Non-Executive Directors are posted on the Companys website.

Further, all the Board members and senior management personnel (as per Clause 49 of the Listing Agreement) haveaffirmed compliance with the respective Code of Conduct. A declaration to this effect signed by the ManagingDirector (CEO) forms part of this report.

Category and Attendance of Directors

The names and ca teg ories of the Directors on the Board, their at tend ance a t Board Meetings held during the financialyear 2005-2006 and at the last Annual General Meeting (AGM), as also the number of Directorships and Committeepositions held by them in other public limited companies as on March 31, 2006 are as follows:

Name Category No. of Whether Number of No. of CommitteeBoard attended Directorships positions held in

Meetings AGM in other public other publica tt end ed h eld o n limit ed co mpa nies* limit ed co mpa nies*

during the July 21,financial 2005 Chairman Board Chairman Member

year of Member of the2005-2006 the Board Committee

Mr. R. N. Tata (Chairman) Promoter, 5 No 11 2 - -Non-Executive

Mr. R. Gopalakrishnan Promoter, 8 Yes 1 10 - 3(Vice-Cha irma n) No n-Executive

Mr. Keshub Mahindra Independent, 6 Yes 3 4 1 -(Ceased to be a Director Non-Executivew.e.f. March 24, 2006)

Mr. D. M. Ghia -do- 7 Yes 2 1 - -

Mr. Nusli N. Wadia -do- 5 Yes 5 4 - -

Mr. R. C. Khanna -do- 8 Yes - 3 1 3

Dr. D. V. Kapur -do- 8 Yes 2 4 3 1

Mr. P. R. Menon Executive 8 Yes - 5 - 1(Managing Director)

Dr. T. Mukherjee Non Independent, 7 Yes 2 4 - 1Non-Executive

Mr.Homi R. Khusrokhan Executive 8 Yes - 1 - -(Executive Director)

Dr. Vijay L. Kelkar Independent, 6 Yes 1 7 - 1Non-Executive

* Note: Excludes Directorships in Private Limit ed Companies, Foreign companies and Government Bodies. Only Audit Committ ee and Shareholders/Investors Grievance Committ ee have been considered for the Committ ee positions.


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Shareholdings of Non-executive directors as on March 31, 2006 are as under:

Name No. of Ordinary shares held % of Paid-up Capital

Mr. R. N. Tata (Chairman) 28695 0.013

Mr. R. Gopalakrishnan(Vice-Chairman) 15000 0.007

Mr. R. C. Khanna 8000 0.004

3. Audit Committee

Composition as at March 31, 2006

Mr. R. C. Khanna Chairman

Mr. R. Gopalakrishnan Member

Mr. D. M. Ghia Member

Dr. Vijay L. Kelkar (w.e.f. April 1, 2005) Member

Mr. R. C. Khanna is a q ualified Senior Chartered Accountant . Other memb ers of t he Committee ha ve wide exposure inthe relevant area s. The co mposition of t he Comm ittee is in co nformity w ith Clause 49 (II) (A) of th e ListingAgreement.

Terms of Reference

The te rms of reference of t he Audit Committee, broad ly are as und er:

1. Overseeing t he Companys financial reporting process and the disclosure of its financial information to ensurethat the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment of the statuto ry auditor, fixation of audit feesand for other services.

3. Reviewing, with the Mana gement, the qua rterly and annual financial statements before submission to the Boardfor approval.

4. Reviewing the ad equa cy of internal control systems and internal audit function, including the structure of theinternal audit department, staffing and seniority of the official heading the department, reporting structurecoverage and frequency of internal audit.

5. Discussing with internal auditors any significant findings and follow up there on.

6. Reviewing the findings of any internal investiga tions by the internal auditors into mat ters where there is suspectedfraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to theBoard.

7. Discussion with the statutory auditors before the a udit commences, about t he nature and scope of audit as wellas po st-audit discussion to ascertain any a rea of co ncern.

8. To look into t he reasons, if any, for substantial defaults in the payments to the depo sitors, debenture holders,shareholders (in case of non payment of declared dividend) and creditors.

9. In ad dition t o t he ab ove, all items listed in Clause 49 (II)(D) of the Listing Agreement.


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Meetings held:

During the financial year 2005-2006, seven Audit Committee meetings were held on the following dates:

May 27, 2005 July 20, 2005

July 25, 2005 October 24, 2005

October 27, 2005 January 30, 2006

February 1, 2006

Attendance:

Name of Director No. of Meetings Attended

Mr. R. C. Khanna 7

Mr. R. Gopalakrishnan 7

Mr. D. M. Ghia 7

Dr. Vijay L. Kelkar(Appointed w.e.f April 1, 2005) 3

The Mana ging Directo r, the Chief Financial Officer and the Chief Inte rnal Audito r are invited fo r all themeetings. General Manager - Finance &Accounts, Chief Operating Officers and Head Human Resources are invitedfor the meetings as and when required. Representatives of the Statutory Auditors are also present at all themeetings.

Mr. B. Renganathan, Company Secretary acts as the Secretary to the Committee.

All the members of the Audit Committee were present at the last Annual General Meeting held on

July 21, 2005.

4. Remuneration Committee

Composition as at March 31, 2006

Mr. R. N. Tata Member

Mr. R. Gopalakrishnan Member

Consequent to the resignation of Mr. Keshub Mahindra from the Board of Directors of the Company, with effect fromMarch 24, 2006, he ha d a lso ceased to be t he Chairman a nd member o f the Remunerat ion Committee. Till cessationMr. Keshub Mahindra was the Chairman of the Remuneration Committee.

The Committee w as reconst ituted on May 15, 2006, with the induction o f Mr. Nusli N Wad ia (Independent Director) asthe Chairman and member of the Remuneration Committee.

Terms of Reference:

To appraise the performance of Manag ing and Executive Directors; and To determine and recommend to the Board, compensation payable to Managing a nd Executive Director.

Meeting & AttendanceOne meeting was held during the financial year 2005-2006 i.e. on May 31,2005 and all the members attended thesame.Mr. Keshub Mahindra, the then Chairman of the Remuneration Committee was present at the last Annual GeneralMeeting.


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Remuneration Policy:

Non-Executive Directors

The remunera tion of t he Non-Executive Directo rs (NEDs) of the Compa ny is decided b y the Boa rd of Directors. TheNEDs are paid remuneration by way of Commission and Sitting Fees. In terms of the approval of the members at the64th Annua l General Meeting of t he Compa ny held on December 15, 2003, commission is paid at a rat e no t exceedingone per cent of the net profits of the Company calculated in accordance with the provisions of Sections 198, 349 and350 of t he Compa nies Act, 1956. The d istribution of t he commission amo ngst the NEDs is determined b y the Boardand is broad ly based on atten dance, contribution at the Board Meetings a nd various Committee Meetings as w ell astime spent on operational matters other than at the aforesaid meetings.

The Company did no t ha ve any pecuniary relat ionship or transact ions with t he Non Executive Directors during thefinancial year 2005-2006.

Sitting fees

The Compa ny pa ys Rs. 10,000/- per meeting tow ards sitting fees to Non-Executive directo rs for at tend ing the mee tingsof t he Boa rd, Audit Committee and Committee o f Directors. An a mount of Rs. 5000/- per meeting is be ing pa id forattending the meetings of Shareholders Investor Grievance Committee and Remuneration Committee.

Managing Director and Executive Director

The Company pays remuneration to its Mana ging Directo r and Executive Directo r by wa y of salary, perquisites andallowances (a fixed component) and commission (a variable component). Salary is paid within the overall limitsapproved b y the members of th e Company. The Boa rd, on t he recommenda tions of t heRemunera tion Committee, approves the annua l increment s (effective 1st April each yea r). Within the prescribedceiling, the perquisite package is recommended by the Remuneration Committee to the Board. Commission iscalculated with reference to the net profits of the Company in a particular financial year and is determined by theBoard of Directors at the end of the financial year based on the recommendations of the Remuneration Committee,subject to the overall ceiling as stipulated in Sections 198 and 309 of the Companies Act, 1956.

Service Contracts, Severance Fees and Notice Period with Managing Director and Executive Director:

Managing Director:

Period of contract : 5 years from October 4, 2005

Termination of the contract : By either party giving the other six months notice or the Company paying sixmonths salary in lieu thereof.

Severance fees : Nil

Executive Director:

Period of contract : 3 years from April 1, 2004

Termination of the contract : By either party giving the other six months notice or the Company paying six

months salary in lieu thereof.

Severance Fees : Nil


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Details of remuneration paid to the Directors during the financial year 2005-2006

Executive Directors: (Rupees)

Director Salary Perquisites Commission (for theand Allowances# financial year 2004-2005)

paid in 2005-2006

Mr. P. R. Menon 28,80,000/- 39,86,617/- 65,00,000/-(Managing Director)

Mr. Homi R. Khusrokhan 24,00,000/- 34,21,188/- 40,00,000/-(Executive Director)

# Does not include contribution to Gratuity Fund, as separate figures are not available for t he Managing Director and Executive Director.

Non-Executive Directors:Director Sitting Fees Commission (for the financial year

2004-2005) paid in 2005-2006

Mr. R.N. Tata 1,05,000 16,80,000

Mr. R. Gopalakrishnan 2,05,000 16,70,000

Mr. Keshub Mahindra 65,000 3,65,000(Ceased to b e a Directorw.e.f March 24, 2006)

Mr. D.M. Ghia 1,55,000 6,95,000

Mr. Nusli N. Wadia 80,000 6,60,000

Mr. R.C. Khanna 1,50,000 10,80,000

Dr. D.V. Kapur 80,000 3,45,000

Dr. T. Mukherjee 70,000 4,85,000

Dr. Vijay L. Kelkar 90,000 1,30,000

Mr. U. M. Rao 3,90,000(ICICI Bank Nominee -Nomination withdrawnw.e.f. November 4, 2004)

Commission payable to the directors for the financial year 2005-06Non Executive Directors : Rs. 80,00,000

Managing Director : Rs. 80,00,000

Executive Director : Rs. 50,00,000

As per the practice, commission t

Documents

Annual Report2005 06