The correct answer is C. Compensating windings are used in D.C. generators to neutralize the cross-magnetizing effect of the armature reaction.
Armature reaction is the magnetic field produced by the current flowing through the armature windings of a DC generator. This field opposes the main field produced by the field windings, and can cause a decrease in the output voltage of the generator. Compensating windings are placed on the stator of the generator and are connected in series with the armature windings. They produce a magnetic field that opposes the armature reaction field, and thus helps to maintain the output voltage of the generator.
Option A is incorrect because compensating windings do not reduce eddy currents. Eddy currents are induced currents that flow in the armature conductors due to the changing magnetic field. They can cause heating and loss of power in the generator. Eddy currents are reduced by using laminated armature conductors.
Option B is incorrect because compensating windings do not provide a path for the circulation of cooling air. Cooling air is circulated through the generator by fans or blowers.
Option D is incorrect because compensating windings are used in D.C. generators.