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UUC 26-8-05

CORPORATE GOVERNANCE PRACTICES/STANDARDS TO BE DISCLOSED ON MTNLS WEBSITE FOREIGN PRIVATE ISSUER DISCLOSURE (A Statement of s !n f "ant Co#$o#ate Go%e#nan"e & ffe#en"es 'et(een t)e N*SE+ Ne( *o#, an& In& an Com$an es A"t/L st n! A!#eement #e-. #ements n #e/at on to MTNL0 On November 4, 2003, the US Securities and Exchan e !ommission "#SE!$% a&&roved the ne' !or&orate (overnance ru)es estab)ished b* the Ne' +or, Stoc, Exchan e "#N+SE$%- .ursuant to these ru)es, /orei n &rivate issuers that are )isted on the N+SE, such as 01N2, must disc)ose an* si ni/icant 'a*s in 'hich its !or&orate (overnance &ractices di//er /rom the !or&orate (overnance standards estab)ished b* the N+SE01N2 is )isted on the 3ndian Stoc, Exchan es i-e-, Nationa) Stoc, Exchan e "NSE%, 4omba* Stoc, Exchan e "4SE%, 5e)hi Stoc, Exchan e "5SE%, !a)cutta Stoc, Exchan e "!SE% and 0adras Stoc, Exchan e "0SE%- On 26 th 6u ust, 2003, the Securities and Exchan e 4oard o/ 3ndia "#SE43$%, /urther amended the &rinci&)es o/ !or&orate (overnance, 'hich 'ere introduced b* SE43 b* addin !)ause 47 in the 2istin 6 reement o/ the Stoc, Exchan es in 3ndia- 6)) Stoc, Exchan es in 3ndia 'ere directed b* SE43 to re&)ace the existin !)ause 47 o/ the 2istin 6 reement "'hich 'as introduced b* SE43 in 8ebruar* 2000 and subse9uent)* amended b* SE43 /rom time to time% 'ith the ne' revised !)ause 47 "#!)ause 47$%- 01N2 is, there/ore, ob)i ed to com&)* 'ith the !or&orate (overnance standards as set /orth under !)ause 47 o/ the 2istin 6 reement and a)so in some o/ the &rovisions o/ the 3ndian !om&anies 6ct, :756- !)ause 47 and the re)evant &rovisions o/ the 3ndian !om&anies 6ct, re/erred to hereunder, are co))ective)* hereina/ter re/erred to as the #3ndian ;e u)ations$1he si ni/icant di//erences in 'hich the !or&orate (overnance &ractices /o))o'ed b* 01N2 in com&)iance 'ith the 3ndian ;e u)ations, di//er /rom the N+SE !or&orate (overnance standards are stated in the tabu)ar /orm be)o'<

I1 COMPOSITION OF BOARD OF DIRECTORS INCLUDING INDEPENDENT DIRECTORS REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN COMPLIANCE BY MTNL NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uire )isted !)ause 47 re9uires that the board o/ directors 01N2 4oard o/ 5irectors com&rises o/ t'e)ve com&anies to have a ma=orit* o/ the com&an* sha)) have an o&timum directors, /our bein executive directors, /our bein o/ inde&endent directors and combination o/ executive and non-executive non-executive directors, t'o bein (ovt- nominee set /orth in detai) the ri orous directors 'ith not )ess than /i/t* &ercent o/ the directors and t'o ex-o//icio directors- >o'ever, &rinci&)es b* 'hich a )isted board o/ directors com&risin o/ non- &resent)*, on)* one non-executive director is com&an* can determine executive directors and /urther that 'here the /unctionin on the 4oard as the remainin three 'hether a director 9ua)i/ies as !hairman is a non-executive director, at )east non-executive directors have retired- 3n terms o/ its inde&endent one-third o/ board shou)d com&rise o/ 6rtic)es o/ 6ssociation, such directors can be inde&endent directors and in case he is an a&&ointed on)* a/ter the a&&rova) in 'ritin o/ the executive director, at )east ha)/ o/ board .resident o/ 3ndia i-e- the (overnment- 01N2 has shou)d com&rise o/ inde&endent directors- ta,en u& the matter 'ith (ovt- o/ 3ndia, to ta,e 1he said !)ause a)so sets out the &rinci&)es immediate action /or a&&ointment o/ re9uisite non/or determinin #inde&endent director$- 1he executive directors on the 4oard o/ 01N2 to said !)ause a)so &rovides that nominee enab)e 01N2 to com&)* 'ith the 2istin directors a&&ointed b* an investin or )endin re9uirementsinstitution sha)) be deemed to be inde&endent directorsII1 E2ECUTIVE SESSIONS AS RE3UIRED B* N*SE STANDARDS REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN COMPLIANCE BY MTNL NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE standards re9uire non- Under the 3ndian ;e u)ations, i-e-, c)ause 47 Non-executive directors &artici&ate in a)) the 4oard mana ement directors "bein o/ the 2istin 6 reement and the 3ndian 0eetin s as 'e)) as the meetin s o/ the &ersons 'ho are not com&an* !om&anies 6ct, no such meetin s are !ommittees o/ the 4oard on 'hich the* are o//icers% to meet at re u)ar)* re9uired- 6ccordin to !)ause 47 u& to one- members such as the 6udit !ommittee, constituted schedu)ed executive sessions ha)/ o/ the members o/ the 4oard o/ directors b* the 4oard'ithout mana ementcan a)so ho)d mana ement &ositions- 1here is

no re9uirement that the non-mana ement directors must meet re u)ar)* 'ithout mana ement, exce&t as members o/ the 6udit !ommittee and other !ommittees o/ the 4oard o/ 5irectorsIII1 COMMITTEES REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uires that Under the 3ndian ;e u)ations, a )isted in addition to an 6udit com&an* is not re9uired to have a !ommittee, a )isted com&an* Nominatin !ommittee or a !or&orate must have a Nominatin ? (overnance !ommittee- 1he on)* mandator* !or&orate (overnance re9uirement is to have an 6udit !ommittee!ommittee and a >o'ever, c)ause 47, under its non!om&ensation !ommittee, mandator* re9uirements, su ests a each com&osed entire)* o/ ;emuneration !ommittee and a inde&endent directors 'ith a Shareho)ders !ommittee'ritten charter that addresses certain s&eci/ied &ur&oses and res&onsibi)itiesIV1AUDIT COMMITTEE REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uires that 1he 3ndian ;e u)ations i-e- Section 2726 o/ a )isted com&an* has an 6udit the !om&anies 6ct, :756 and !)ause 47 o/ !ommittee com&osed o/ three the 2istin 6 reement &rovide /or the inde&endent members that re9uirement o/ an 6udit !ommittee and satis/* the inde&endence sti&u)ate that the com&an* sha)) have a

COMPLIANCE BY MTNL

3n 01N2, since remuneration o/ a)) directors is /ixed b* the (ovt- o/ 3ndia and the non-executive directors are &aid /ixed sittin /ee /or attendin each meetin o/ the 4oard?4oard@s !ommittees, there has been no need /or constitutin an* ;emuneration !ommittee- 1here is a)so no Nomination !ommittee as a)) the a&&ointments o/ directors are made b* the (ovt- o/ 3ndia, in terms o/ the 0emorandum and 6rtic)es o/ 6ssociation-

COMPLIANCE BY MTNL

3n 01N2, 'e have constituted an 6udit !ommittee, ivin the terms o/ re/erence as &er the 3ndian ;e u)ations, i-e-, &rovisions o/ the 3ndian !om&anies 6ct and !)ause 47- 1he !ommittee has three members inc)udin the !hairman- 1he

re9uirements o/ ;u)e :06-3 under the Exchan e 6ct, 'ith a 'ritten charter that addresses certain s&eci/ied &ur&oses and res&onsibi)itiesSection 3"a%"58% o/ the Securities Exchan e 6ct o/ :734, as amended de/ines 6udit !ommittee as a committee "or e9uiva)ent bod*% estab)ished b* and amon st the board o/ directors o/ an issuer /or the &ur&ose o/ overseein the accountin and /inancia) re&ortin o/ the issuer and audits o/ the issuer@s /inancia) statementsA and i/ no such committee exists 'ith res&ect to an issuer, the entire board o/ directors o/ the issuer-

9ua)i/ied and inde&endent 6udit !ommittee consistin o/ minimum three members, a)) bein non-executive directors "'ith the ma=orit* o/ them bein inde&endent% and 'ith at )east one director havin /inancia) and accountin ,no')ed e- 1he !hairman o/ the !ommittee sha)) be an inde&endent director1he !hairman sha)) be &resent at 6nnua) (enera) 0eetin to ans'er shareho)ders 9ueries- 1he 6udit !ommittee shou)d invite such o/ the executives, as it considers a&&ro&riate "and &articu)ar)* the head o/ the /inance /unction% to be &resent at the meetin s o/ the committee, but on occasions it ma* a)so meet 'ithout the &resence o/ an* executives o/ the com&an*- 1he /inance director, head o/ interna) audit and 'hen re9uired, a re&resentative o/ the externa) auditor sha)) be &resent as invitees /or the meetin s o/ the 6udit !ommittee- 1he !om&an* Secretar* sha)) act as the secretar* to the committee3t is /urther re9uired that the 6udit !ommittee sha)) meet at )east /our times a *ear and not more than /our months sha)) e)a&se bet'een t'o meetin s- One meetin sha)) be he)d be/ore /ina)isation o/ annua) accounts and one ever* six months- 1he 9uorum sha)) be either t'o members or one third o/ the members o/ the 6udit !ommittee, 'hichever is hi her and minimum o/ t'o inde&endent directors1he 6udit !ommittee sha)) have &o'ers

!hairman is non- executive and inde&endent director-- 1he other t'o members are (ovt5irectors- Since the a&&ointment o/ non-executive directors is done b* the (ovt- o/ 3ndia and 'e have a)read* ta,en u& the matter 'ith the (ovt- o/ 3ndia /or ur ent a&&ointment o/ these directors, &articu)ar)*, in vie' o/ the necessit* to reconstitute the 6udit !ommittee- 6/ter the (ovt- a&&oints more inde&endent directors on the 4oard, the 6udit !ommittee sha)) be reconstituted to have a)) members as inde&endent and non-executive directors1he 6udit !ommittee is /unctionin strict)* as &er the &rovisions contained in the 3ndian ;e u)ations-

'hich shou)d inc)ude the /o))o'in < a% to investi ate an* activit* 'ithin its terms o/ re/erenceb% to see, in/ormation /rom an* em&)o*eec% to obtain outside )e a) or other &ro/essiona) adviced% to secure attendance o/ outsiders 'ith re)evant ex&ertise, i/ it considers necessar*1he com&an* a rees that the ro)e o/ the audit committee sha)) inc)ude the /o))o'in a% Oversi ht o/ the com&an*@s /inancia) re&ortin &rocess and the disc)osure o/ its /inancia) in/ormation to ensure that the /inancia) statement is correct, su//icient and credib)eb% ;ecommendin the a&&ointment and remova) o/ externa) auditor, /ixation o/ audit /ee and a)so a&&rova) /or &a*ment /or an* other servicesc% ;evie'in 'ith mana ement the annua) /inancia) statements be/ore submission to the board, /ocusin &rimari)* onA - 0atters re9uired to be inc)uded in the 5irector@s ;es&onsibi)ities Statement to be inc)uded in the 4oard@s re&ort inc)udin that the directors had &re&ared the annua) accounts on a oin concern basis- 6n* chan es in accountin &o)icies and &ractices- 0a=or accountin entries based on exercise o/ =ud ement b* mana ement- Bua)i/ications in dra/t audit re&ort- Si ni/icant ad=ustments made arisin out o/

audit /indin s- !om&)iance 'ith accountin standards- !om&)iance 'ith stoc, exchan e and )e a) re9uirements concernin /inancia) statements - 5isc)osure o/ an* re)ated &art* transactions i-e- transactions o/ the com&an* o/ materia) nature, 'ith &romoters or the mana ement, their subsidiaries or re)atives etc- that ma* have &otentia) con/)ict 'ith the interests o/ com&an* at )ar e- Bua)i/ications in the dra/t 6udit ;e&ortd% ;evie'in 'ith the mana ement, the 9uarter)* /inancia) statement be/ore submission to the 4oard /or a&&rova)e% ;evie'in 'ith the mana ement, externa) and interna) auditors, the ade9uac* o/ interna) contro) s*stems/% ;evie'in the ade9uac* o/ interna) audit /unction, inc)udin the structure o/ the interna) audit de&artment, sta//in and seniorit* o/ the o//icia) headin the de&artment, re&ortin structure covera e and /re9uenc* o/ interna) audit% 5iscussion 'ith interna) auditors an* si ni/icant /indin s and /o))o' u& there onh% ;evie'in the /indin s o/ an* interna) investi ations b* the interna) auditors into matters 'here there is sus&ected /raud or irre u)arit* or a /ai)ure o/ interna) contro) s*stems o/ a materia) nature and re&ortin the matter to the boardi% 5iscussion 'ith externa) auditors be/ore the audit commences nature and sco&e o/ audit as

'e)) as have &ost-audit discussion to ascertain an* area o/ concern=% ;evie'in the com&an*@s /inancia) and ris, mana ement &o)icies,% 1o )oo, into the reasons /or substantia) de/au)ts in the &a*ment to the de&ositors, debenture ho)ders, shareho)ders "in case o/ non-&a*ment o/ dec)ared dividends% and creditors)% !arr* out an* other /unctions as mentioned in the terms o/ re/erence o/ the 6udit !ommittee3t is /urther re9uired that the 6udit !ommittee sha)) mandatori)* revie' the /o))o'in in/ormation< :- 0ana ement discussion and ana)*sis o/ /inancia) condition and resu)ts o/ o&erationsA 2- Statement o/ si ni/icant re)ated &art* transactions "as de/ined b* the 6udit !ommittee%, submitted b* mana ement3- 0ana ement )etters ? )etters o/ interna) contro) 'ea,nesses issued b* the statutor* auditors4- 3nterna) 6udit ;e&orts re)atin to interna) contro) 'ea,nessesA and 5- 1he a&&ointment, remova) and terms o/ remuneration o/ the !hie/ interna) auditor sha)) be sub=ect to revie' b* the 6udit !ommittee-

V1S4ARE4OLDER APPROVAL OF E3UIT* COMPENSATION PLANS REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN COMPLIANCE BY MTNL NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uire that 1he 3ndian ;e u)ations 'ou)d re9uire an* 01N2 has no e9uit* com&ensation &)ans or shareho)ders o/ a )isted e9uit* com&ensation &)ans a&&)icab)e to !EO schemes- 6n* such &)ans, i/ /ormu)ated, 'ou)d com&an* must be iven the or directors or revisions thereto, to be besides re9uirin the a&&rova) o/ the shareho)ders, o&&ortunit* to vote on a)) a&&roved in the Shareho)ders@ 0eetin 'here a)so re9uire the &rior a&&rova) o/ the (overnment e9uit* com&ensation &)ans and a)) shareho)ders are iven an o&&ortunit* to in terms o/ 01N2@s 0emorandum and 6rtic)es o/ materia) revisions thereto, vote /or the same- 0oreover, the &o'er to 6ssociationsub=ect to certain s&eci/ied im&)ement an* such &)ans 'ou)d a)so re9uire exce&tionsto be mentioned and su&&orted b* the com&an*@s charter i-e- its 0emorandum and 6rtic)es o/ 6ssociationVI1CORPORATE GOVERNANCE GUIDELINES REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN COMPLIANCE BY MTNL NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uire that a 6s &er the &rovisions o/ Section 2:C "266% o/ Ee are com&)*in 'ith a)) the re9uirements o/ )isted com&an* must ado&t and the 3ndian !om&an* 2a', 'e are re9uired to 3ndian ;e u)ationsdisc)ose cor&orate overnance ive 5irectors@ ;es&onsibi)it* Statement uide)ines that address certain re ardin &re&aration o/ annua) accounts, minimum s&eci/ied standards a&&)icab)e accountin standards, etc- !)ause 'hich inc)ude, director 47 o/ the 2istin 6 reement re9uires a 9ua)i/ication standards, director se&arate !or&orate (overnance ;e&ort res&onsibi)ities, director access to ether 'ith 0ana ement 5iscussion D to mana ement and 6na)*ses to be iven a)on 'ith 5irectors@ inde&endent advisors, director ;e&ortcom&ensation, director orientation and continuin education, mana ement

succession, annua) &er/ormance eva)uation o/ the boardVII1CODE OF BUSINESS CONDUCT AND ET4ICS REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uire that a !)ause 47 "to be e//ective /rom 3: st 5ecember )isted com&an* must ado&t and 2005% contains the re9uirement that the 4oard disc)ose a code o/ business o/ 5irectors sha)) )a* do'n a code o/ conduct conduct and ethics /or /or a)) 4oard members and senior directors, o//icers and mana ement o/ the !om&an* and that the em&)o*ees and &rom&t)* !ode o/ !onduct sha)) be &osted on the disc)ose an* 'aivers o/ the Eebsite o/ the !om&an*- 6)) 4oard members code /or directors or o//icersand senior mana ement &ersonne) sha)) a//irm com&)iance 'ith the code on an annua) basis1he 6nnua) ;e&ort o/ the !om&an* sha)) contain a dec)aration to this e//ect si ned b* the !EOVIII1CERTIFICATION RE3UIREMENTS REQUIREMENTS UNDER REQUIREMENTS UNDER INDIAN NYSE CORPORATE REGULATIONS GOVERNANCE RULES (NYSE STANDARDS) N+SE Standards re9uire that !)ause 47 &rovides< each )isted com&an*@s !hie/ :1he com&an* sha)) obtain a Executive O//icer must certi/* certi/icate /rom either the auditors or to the N+SE each *ear that he &racticin com&an* secretaries re ardin or she is not a'are o/ an* the com&)iance o/ conditions or cor&orate vio)ation b* the com&an* o/ overnance as sti&u)ated in this c)ause N+SE cor&orate overnance and annex the certi/icate 'ith the standards- 8urther each )isted director@s re&ort, 'hich is sent annua))*

COMPLIANCE BY MTNL

6 !ode o/ !onduct as sti&u)ated has been a&&roved b* the 01N2 4oard and is made a&&)icab)e to a)) 4oard members and senior mana ement &ersonne)1he said case is a)so )isted on the 'ebsite o/ the com&an*-

COMPLIANCE BY MTNL

01N2 is com&)*in 'ith the N+SE re9uirements as 'e)) as 2istin 6 reement re9uirements and is ta,in ste&s accordin )*Ee are re u)ar)* obtainin a certi/icate /rom a &racticin !om&an* Secretar* to this e//ect-

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com&an* !EO must &rom&t)* noti/* the N+SE in 'ritin a/ter an* executive o//icer o/ the )isted com&an* becomes a'are o/ an* materia) noncom&)iance 'ith an* a&&)icab)e &rovisions o/ this Section 3036

to a)) the shareho)ders o/ the com&an*1he same certi/icate sha)) a)so be sent to the Stoc, Exchan es a)on 'ith the annua) re&ort /i)ed b* the com&an*21he non-mandator* re9uirements iven in 6nnexure 3 5 ma* be im&)emented as &er the discretion o/ the com&an*- >o'ever, the disc)osures o/ the com&)iance 'ith mandator* re9uirements and ado&tion "and com&)iance%? non-ado&tion o/ the nonmandator* re9uirements sha)) be made in the section on cor&orate overnance o/ the 6nnua) ;e&ort-