)
A practice becoming increasingly common in this country's public sector domain is for the chairmen to sermonise employees in the annual message, making for boring reading. Arguably, this is a dispensable practice, for such messages are full of inanities. In this dismal practice, the one by National Aluminium Company Limited (Nalco) Chairman Ansuman Das is an exception for plain speaking. Das made bold to admit Nalco's leadership position in the aluminium industry built over three decades was getting eroded. The other two producers, Hindalco and Vedanta (Balco is part of the eponymous group) have overtaken Nalco in smelting capacity, in the process eroding some of the past glories associated with it. What, however, remains uncontested is Nalco's integrated production chain from mining of bauxite to its refining into alumina to metal smelting. Integrated operation apart, logistically, including supply of bauxite from the Panchpatmali hills by aerial ropeway to the alumina refinery at Damonjodi, both in Odisha's Koraput district, still remains unmatched. But why has Nalco, despite the head start that includes technology from Aluminium Pechiney (now part of Rio Tinto), not been able to live up to the promise of its early days?
This is despite the company achieving annual production capacity of 6.3 million tonnes (mt) of bauxite, 2.1 mt of alumina and 460,000 tonnes of aluminium by two expansion programmes. Das says the original plant and machinery have aged, as some policies and procedures have ceased to be in sync with contemporary conduct of business. He, therefore, will be seeking 'renewal' for Nalco in many areas, importantly in technology, materials (what possibly Das means is chasing coal block acquisition for the proposed new smelter and also finding access to fresh bauxite deposits), human resources and marketing. In times past, Nalco made decent profits and adequately rewarded shareholders, the government being the principal beneficiary. But profits are now falling. In 2012-13, its net earnings were down to Rs 593 crore from Rs 850 crore in the previous year, despite net income from sales rising 4.8 per cent to Rs 6,809 crore. Escalating input costs, particularly of energy and low aluminium prices on the London Metal Exchange (LME) would largely explain rapid profit erosion. In fact, because of excess global aluminium capacity, high LME inventory and slow progress in resting high cost smelters across the continents, metal prices are staying stubbornly well below $2,000 a tonne.
In a break with the past, Das is casting Nalco in a mould where "financial performance will be the raison d'être" of being in business. From this follows his proposal to take "stringent measures to control cost in every area and eliminate all kinds of wasteful expenditure." Das is aware that he must put the Nalco house in order and shore up employee morale, which took a beating in the past few years. Being politically correct to a fault, Das would desist from recalling some disturbing happenings during the period when Nalco fortunes suffered a setback. But nothing could be more upsetting for Nalco than two of its successive chairmen preceding the current incumbent shown the door by the government, which owns 75 per cent of the company. "So much Nalco time and money were wasted in search of an offshore base to build a smelter when the other two aluminium producers seized opportunities here to create considerable new smelting capacity. For Nalco, the Indonesian outing proved an unmitigated disaster. This and some other disturbing happenings in the past sapped employee morale. We once again need a helmsman like K V B Pantulu who is credited with building our aluminium complex brick by brick. For Nalco redemption, Das will have to come up to Pantulu level or at least close to that," says an insider, who cannot be named for sensitivity of the issue.
The Gujarat refinery will source bauxite from the state's Kutch district and the new stream at Damonjodi will get its supply from recently acquired 75 mt Pottangi deposit. At the same time, Nalco will have to move fast to open a mine at the 70 mt Utkal-E coal block to meet fuel requirements of a 500 Mw power unit linked to smelting capacity raising at Angul by 107,00 tonnes to 567,000 tonnes by stepping up potline amperage. But where Das will be put to the real test is how he navigates the building of a 500,000 tonne smelter supported by a 1,200 Mw power complex at Sundargarh in Odisha. Good that he wants a captive coal block for the project to require an investment of nearly Rs 16,500 crore. But the government should not expect an aluminium maker to compete with independent power producers in an open bidding for coal blocks. Aluminium should get the same treatment as steel and cement in coal block allocations.
