A study on the proposed

ORGANIZATION STUDY

A report with reference to

National Aluminium Company Limited
Damanjodi, Odisha

Submitted by
Rohan Kumar Tripathy
Reg. No.: 15MBA14251
From 26 Dec 2015 to 6 Jan 2016
Under the supervision and guidance of
DR. DR. Anantha S Iyer

Incharge Industrial Engineering

Faculty Member

Authorized person

Submitted to

CMS Business School,

Jain University,
Bangalore.
Academic Year 2015 2016

Company Profile
National Aluminium Company Limited (NALCO) is a Navratna CPSE under
Ministry of Mines, Govt. of India. It was established on 7th January, 1981, with its
registered office at Bhubaneswar. The Company is a group A CPSE having
integrated and diversified operations in mining, metal and power with sales
turnover of Rs 7024 crore in financial year 2013-14. Presently, Government of
India holds 80.93% equity of NALCO.
The company has a 68.25 lakh TPA Bauxite Mine & 22.75 lakh TPA Alumina
Refinery located at Damanjodi in Koraput dist. of Odisha, and 4.60 lakh TPA
Aluminium Smelter & 1200 MW Captive Power Plant located at Angul, Odisha.
As per diversification plan, NALCO has ventured into renewable energy sectors.
The Company has successfully commissioned two wind power plants. A 50.4 MW
wind power plant at Gandikota, Andhra Pradesh and another of 47.6 MW wind
power plant at Jaisalmer, Rajasthan are operational since December, 2012 and
January, 2014 respectively. 260 KWp Rooftop Solar Power System has been made
operational at Office and Township, Bhubaneswar during FY 2014-15.
NALCO has bulk shipment facilities at Vizag port for export of
Alumina/Aluminium and import of caustic soda and also utilises facilities of
Kolkata and Paradeep ports. The company has its regional marketing offices in
Delhi, Kolkata, Mumbai & Chennai its branch offices at Bangalore, Paradeep ,
Ahmedabad and its 11 stockyards at various locations in the Country.
NALCO is the first Company in Aluminium sector in the Country to venture into
International market in a big way with London Metal Exchange (LME) registration
since May, 1989. The Company is listed at Bombay Stock Exchange (BSE) since
1992. All the manufacturing units and the port facility of the Company, are
certified to ISO 9001, ISO 14001, and OHSAS 18001 Management Systems and
Integrated Management System operates at these units. The energy intensive
manufacturing units i.e. Smelter, CPP & Alumina Refinery are also certified to
ISO 50001 Standard for energy management system. SA 8000 certification is also
obtained for all the manufacturing units and corporate office

In its efforts for capacity addition and expansion, NALCO has extensive plans for
brown field and green field expansion projects, which include 1 MTPA Alumina
Refinery in Gujarat in JV with Gujarat Mineral Development Corporation
(GMDC) (Greenfield), 5th Stream of 1 MTPA capacity in existing Alumina
Refinery at Damanjodi (Brownfield), 0.5 MTPA Aluminium Smelter and 1050
MW Power Complex in Odisha (Greenfield), 0.5 MTPA Aluminium Smelter
abroad and development of bauxite mines at Gudem and KR Konda in Andhra
Pradesh and Pottangi in Odisha etc.
The Company has plans to set up a 2 lakh TPA caustic soda plant in JV with
Gujarat Alkalies & Chemicals Limited (GACL) and 55,000 TPA Aluminium
Conductor plant in JV with Power Grid Corporation of India Limited (PGCIL).
The Company has plans to set up a 14MW wind power plant at mined out area of
Damanjodi and another 100MW wind power plant at any suitable location in the
Country.
The company has formed a JV Company with Nuclear Power Corporation of India
Limited (NPCIL) for establishing 2X700 MW Nuclear Power Plants at an
estimated investment of Rs. 11,459 crore at Kakrapara in Gujarat. For development
of downstream ancillary industries, a JV Company has been formed with IDCO,
Odisha for Angul Aluminium Park.
The company is involved in playing a significant role in the socio-economic
development of the areas where it operates. Rehabilitation of displaced families,
employment, income generation & health care for local people, development of
infrastructure, care for environment and various humanitarian goodwill missions
have earned NALCO a place of pride in the corporate world. With the setting up of
NALCO Foundation and doubling of CSR budget to 2% of the net profit, the
company is well-poised to augment its activities on social responsibilities
significantly.
In order to promote education amongst tribal children, NALCO has sponsored
more than 655 students in reputed educational institutes in Odisha by way of
bearing all their expenses on studies including lodging and boarding etc.

Our Vision:To be reputed global Company in the Metals and Energy Sectors

Our
Mission:To achieve sustainable growth in business through diversification,
innovation and global competitive edge.
To satisfy the customers and shareholders, employees and all other
stake holders.
To continuously develop human resources, create safe working
conditions, improve productivity and quality and reduce cost and
waste.
To be a good corporate citizen, protecting and enhancing the
environment as well as discharging social responsibility in order to
ensure sustainable growth.
To intensify R&D for technology development.

Diversification
The company needs to take a call on whether it will remain in core Aluminum
business or will go for related or unrelated diversification. Apart from Aluminum
business, over the period, the company has already developed expertise in mining
and power generation. Mining of other metals or coal can be said to be related
business. However, NALCO has already developed core competence in generating
power.
Looking at the power scenario within the country, the prospects of power business
in 20 to 50 years appear to be good. With the regulatory authority in place, there
will not be high volatility in power sector what Aluminum industry faces. Besides,
there are assured returns on the investment. The moment one thinks of power
generation, fuel linkage stares at the face. Therefore, if the company decides to get
into power generation, fuel linkage will not be enough; it will require having
captive mines with good quality thermal coal or long term linkages for the relevant
fuel.
As for the mines, the biggest demand of mineral is that of iron ore but it will be
difficult to get into this within the country as all steel plants, existing or in pipeline,
are in the spree to get mining right for iron ore. Worldwide, the race for ownership
of mines has hotted up. It is the miners who have the bargaining power and not the
metal producers. If NALCO venture out of its mining domain of Bauxite, the other
areas could be Copper, Zinc, Uranium, Chromium, Nickel, Platinum, Titanium,
Gold etc.
Logistics is another related business as the company has developed reasonable
muscle in material movement both in land as well as overseas. Today, many
companies are getting out of material movement and want parties to provide them
total logistics solution. This business is in its infancy but has great potential to
grow. If one thinks to plunge in this business, it must think of global logistics and
total solution.
If the above related diversifications are considered, the company will need to be
reorganized as given below. Either it could be separate companies or separate
business units. It is not recommended to go for any unrelated diversification as the
vision clearly defines the canvas where only related diversification has been
provided for.

(Three cores of NALCO)

Diversification could be in the same business as well through vertical or horizontal

diversification. NALCO International may undertake trading in metal in addition to
other normal activities overseas. Vertical diversification could be in two ways;
backward or forward. The company is already diversified backward up to mining,
no further backward diversification into mineral exploration, geological survey etc
is recommended unless associated with plans for obtaining concessions. High
value added forward integration into processed and rolled products is
recommended. Presently, companys main products are Alumina and Aluminium.
It also produces Aluminium Rods and Sheets in small quantities. Processed
Alumina in various forms fetches very high value. The company should develop
technology either from within or should acquire it urgently. It can not afford to
loose the opportunity provided by processed alumina. Further down, it sells
Aluminium mainly in the form of ingots or sows where as aluminium wires, sheets,
foils etc have high value addition. For value added products, joint venture/
acquisition/mergers route may be explored.
A. Independent Power Plant (IPP):
The demand for power is increasing in India and will increase further as the
economy grows. Unlike metals the demand for power is not cyclic and will give
assured returns .The company accordingly has enlarged its vision to be a reputed
player in both metals and energy sectors. In pursuance of the same, the company is
making efforts to establish Independent Power Plants in joint venture in medium
and small hydro power projects, wind power and nuclear power.Thrust needs to be
given in harnessing renewable energy and the prospective clean energy such as
nuclear power.

a)Wind Power Projct: 50 MW wind farm is being considered at wind potential

location at an estimated cost of Rs.300 crore. Feasibility study has been completed.
Subsequently, another 50 MW wind farm at mined out areas of Panchpatmali
Bauxite Mines, Damanjodi is being envisaged for captive consumption.
b)Hydro Power Projects: Efforts are being made by the company to enter in to
medium and small hydel power projects through joint venture with established
players.
c)Nuclear Energy: With depleting fossil fuel resources and environmental
restrictions on other sources of energy, nuclear energy has become the most
promising source of future, specifically after Indo-US nuclear deal which has
opened up nuclear fuel sources.The company is also pursuing this option as a
viable alternative to generate commercial power.
B. Diversification to other metals: As part of the enlarged vision the company
can make efforts to enter into other metals in non-ferrous category.The venture into
copper mining and beneficiation and retrieval of gold from abandoned gold mines
can be explored.The other metals which the company can also explore are zinc,
nickel, chromium, platinum, titanium and uranium. A more comprehensive
discussion on zinc and copper is given in para 24.3.
C. Gallium production facility
Gallium is a high value item for sophisticated application in electronics. The total
world production is below 200 tonnes. Ultra pure gallium (7N) finds extensive
application in electronics industry as III-V compound semiconductors and as a
dopant. Gallium (7N pure) at present is not manufactured in India and needs
import. Looking at the opportunity, the company has entrusted the preparation of
DFR to M/s TPE and M/s VAMI of Russia. The capacity of gallium production is
planned to be 10 tonnes per annum. The project cost is about Rs.45 crores. BARC
has standardized a protocol for producing 7N (99.99999%) pure gallium from
commercially available metal (99.3%). The product quality obtained is equal to or
better than imported. The process has been developed at a scale of 2.5 kg/batch and
can be scaled up as required. The company should initiate dialogue with BARC to
upgrade Gallium: (3N Grade) extracted from Bayer process liquor of the Alumina
Refinery to ultra pure grade.

.D. Fly ash utilisation: Huge quantity of ash is being generated from the captive
power station .At present about 2.1 to 2.5 million ton ash is being generated
annually at the CPP of the company. Efforts are being made to utilise the ash in
cement grinding units to supply on along term basis to the potential interested
cement manufacturers. Due to insufficient deposits of cement grade limestone in
vicinity of CPP, the full utilization of the fly ash does not appear feasible. Hence
other modes of ash utilization like highway embankment, mines void filling, fly
ash bricks and export of the fly ash need to be explored vigorously considering the
stiff limitations of ash disposal in the present ash ponds. This is more important
considering the future brown field expansions and need to be addressed with
topmost priority.
E. Manufacture of Aluminium Wagons: To increase the end use of Aluminium
and also to explore to increase the efficiency by reducing weight and wear and tear
of the rail wagons; Aluminium wagons are being developed in collaboration with
BEML
F. Logistics, Trading and Warehousing: The Companys proposed expansion
will require upgrading and installing new logistics facilities, trading in greater
volumes and warehousing at different locations. International logistics, trading and
warehousing ventures will provide benefits of lower costs, duty concessions and
locational advantages of other countries. Joint venture for export and import of
bulk material as well as costal shipping of products need to be explored.
G. Consultancy Services: With the available experience and expertise, there is
scope of undertaking Consultancy, Feasibility Studies, Technology and Design
support in Mining, Refining & Smelting areas. Over the period, it has also
developed expertise in Training, TQM, Pollution Control & other relevant fields
which, too, provide opportunity for consultancy.

Backward and forward integration

A Backward Integration Possibilities
Apart from Caustic soda which can be considered depending on the utilisation of
its by-product chlorine; Aluminium fluoride, CT pitch, CP coke and Lime, too,
constitute major inputs. Aluminium fluoride at present price of around Rs. 66,000
per ton with consumption rate of 23 kg per ton of metal appears to be quite
attractive proposition for backward related diversification. CT pitch and CP coke,
too, appear attractive when one looks at consumption rate, price volatility and
availability. Based on the situation faced by the company in terms of quality,
availability and price volatility, it should seriously consider to enter into
manufacturing of these inputs through M&A, joint venture or setting up its own
plant, in India or abroad.
.B Acquisition of Coal Mines:
The company urgently needs to get lease and develop the mining of coal.
Presently, Ministry of Coal, Govt. of India has allocated the Utkal E coal block
th

th

to NALCO for its captive use for the 9 and 10 units of CPP. The block has an
estimated reserve of 63 million ton and under full operation is planned to yield 2
million tpy. This should ensure cost effective coal supply to CPP for the proposed
capacity expansion. The approved investment in this project is Rs. 215 crore and is
scheduled to be commissioned by 2010. The Company should also consider
acquisition of coal mines abroad for coal with low ash content and high calorific
value. This will help in blending of low ash coal from abroad with the high ash
coal from MCL to reduce load on ash disposal system and attendant maintenance
problems.
.C Acquisition & Merger/ Setting up of downstream facility:
i) Specialty Alumina:
There are many varieties of specialty alumina. Nalco hitherto has been
producing only a few varieties, that too, at lower end of the product range fetching
much lower price. There are ample opportunities to develop/acquire technology for
rest of the specialty alumina. In line with this, efforts are being made to form joint
ventures with reputed global players of specialty alumina for an additional capacity
of 100,000 ton per annum.

ii) Aluminium Alloy:

Considering the fact that production of aluminium from scrap is significantly
less energy intensive and capital investment for such a project is considerably less,
the company is considering setting up a plant to produce Aluminium Alloy ingots
from scrap aluminium that can be used by construction, casting, automobiles, rail
industry etc. The proposed plan would produce 50000 MTPA of alloy ingot of
different grade as per market requirement.
The special alloys needed in Aviation and Space Industry from virgin metal
can be considered as R&D projects and produced in joint ventures with Defence
establishments.

iii) Other downstream facilities:

Since there exists a need for enhancing the utility of Billet, Wire Rod and Strip
casting capacities of the company, acquisition ,contract hiring, or conversion
agreements with under utilised / closed extrusion , cable making and rolling
facilities should be considered .

10

Refinery:
For recovery of alumina from bauxite by dissolving the same in caustic,
digestion technology is selected based on the composition of Bauxite. Atmospheric
and medium pressure digestion technologies are suitable for those bauxite which
contains predominantly tri-hydrate alumina, whereas, bauxite having mono-hydrate
alumina (bohemite & diaspore) calls for employing high pressure digestion.
a) Atmospheric Digestion:
In this case bauxite containing predominantly tri-hydrate alumina is digested under
atmospheric pressure condition and at a temperature of 105-107 deg C. Due to
relatively lower temperature, it requires high caustic concentration, fine grinding
and relatively higher residence time. Alumina to caustic ratio (Rp) of digestion
liquor is also relatively low (1.10 1.12) in this case, thus restricting liquor
productivity in the range of 70-75 kg/m3. As it requires very high caustic
concentration, evaporation load (water evaporated per MT of alumina) and steam
consumption is generally high in case of atmospheric digestion. However, capital
investment in case of atmospheric digestion unit is significantly low as compared
to medium or high-pressure digestion unit.
b) Medium Pressure Digestion:
Medium pressure digestion is also suitable for bauxite containing mainly trihydrate alumina. In this case, relatively coarse ground bauxite is digested with
caustic at a pressure of 4-4.5 kg/cm2 (a) and temperature of 140-145 deg C.
Caustic concentration is generally maintained 170-190 gpl as Na2O as compared to
225-230 gpl in case of atmospheric digestion. Due to higher temperature, alumina
to caustic ratio (Rp) is appreciably higher (1.25 1.30) in this case and with
employment of suitable precipitation technology, liquor productivity in the range
of 90-95 kg/m3 could be achieved. However, due to high temperature of digestion,
impurity pick-up in liquor is much higher and calls for installation of specific
impurity removal unit.
Presently all the four streams of alumina refinery are using atmospheric
digestion.NALCO has taken up studies through Rio Tinto Alcan to identify most
th

rd

suitable technology for 5 stream of Alumina refinery under 3 phase expansion.

11

PRODUCTS:
Leading manufacturer and exporter of Aluminium alloys such as: Aluminium Metal
Ingots
Alloy Ingots
T-Ingots
Sows
Billets
Wire Rods
Cast Strips

Alumina & Hydrates

Calcined Alumina
Alumina hydrate
Zeolite-A
Special Products
Speciality Hydrate/Alumina (Alumina Chemical)
Rolled Products
Aluminium Rolled Products
Aluminium Chequered Sheets
Power
Thermal Power
Co-generation Power
Wind Power
Solar Power

12

Departmental Function:Marketing
The demand of aluminium metal fluctuates from time to time depending
upon the prevalent economic scenario, GDP growth, market dynamics, substitution
effect, funds availability, growth of consuming industries such as power,
construction, automobile, packaging etc. and a host of other factors. To be able to
market its products effectively at present, the Companys Marketing Department,
consists of Domestic, Export, Marketing Finance and Logistics Departments. Right
since inception, NALCO Management has been pursuing a marketing strategy of
balancing domestic sale vis--vis export so that the realization obtained is
optimum.
The Company sells its products in the domestic market ex-plant and exstockyard. The Companys Smelter Plant is located at Angul and it has nine
stockyards located at Jaipur, Baddi and Faridabad (Northern Region), Kolkata
(Eastern region), Visakhapatnam, Bangalore and Chennai (Southern Region) and
Bhiwandi and Silavssa (Western Region).The customers are contacted by
Marketing executives working at corporate office at Bhubaneswar and at regional
offices located at New Delhi, Kolkata, Chennai and Mumbai and branch office at
Bengaluru. Considering the market scenario, demand-supply trend in domestic
market, inventory holding, LME price trend and other factors, the domestic prices
and discounts are fixed for different products for sale in the domestic market. This
pricing policy is uniformly applicable to all its customers and the price ruling on
the date of despatch is applicable irrespective of the date of financial arrangement
made by the customers. In order to have consistent product supply and better
customer satisfaction as a marketing strategy in domestic market, NALCO enters
into annual MoUs with number of customers for supplying minimum agreed
quantity every month. This has been appreciated by customers and NALCO is able
to maximize its sale through MoU customers in the domestic market. The MoU
scheme was introduced w.e.f 2002-03. With the increase in production capacities
of NALCO and its competitors the Company is planning several new strategies to
increase its presence in the domestic market. The Company exports its products
through the ports of Visakhaptnam, Kolkata and Paradeep. Presently, the exports
made by NALCO are generally on forward delivery contract basis. Having made a
presence in the export market and domestic production being higher than domestic

13

demand, it is always prudent to maintain a certain minimum quantum of export on

a consistent basis, despite fluctuation in domestic realization vis--vis export
realization, so as to make NALCOs presence continued in the international market
and to retain overseas customer base.
The Company could consider some of the following strategies for the future up to
year 2020:
1. Branding of its products.
2. Concentrating and consolidating on core competency: The major players across
the world are now focusing on their core competency. NALCO may also focus on
their core competency which is Refining, Power generation & Smelting. NALCO
has been producing good quality Ingots and Sows since inception which are LME
registered, has quality assurance and its cost is competitive. NALCO should
leverage this strength and go in for existing and new value added products
consistently with quality assurance and customer acceptability of those products.
3. Increasing the product range considering the demand-supply pattern.
(a) Considering firm demand from power sector, the company is presently doing a
feasibility study of setting up an Alloy-Wire Rod mill with a capacity of 25,000
tpy. With shift in demand from sector to sector, the company shall remain abreast
of shift in demand from consuming sectors and position itself accordingly.
(b) In view of the growing demand of billets increasing their production by
introducing billets with new alloys and new diameters as per the market
requirement.
(c) Taking into account the requirement of flipped coils from steel plants the
Company could start producing flipped coils to meet their requirement.
(d) Increase in production of alloy ingots and start producing new grades of alloy
ingots.
4. Rolled Products being a downstream product increasing production of rolled
products in various alloys, widths and specifications as per customer requirements.
5. NALCO undertakes Customer Satisfaction Index (CSI) study every six months
where the customers are giving their feedback on the marketing performance of the
Company on its products, customer service etc. The frequency of CSI study may
be increased and parameters of evaluation reviewed periodically based on market
dynamics.

14

6. Increased use of IT to enhance customer satisfaction such as creating a login for

each customer in NALCOs website wherein he can get all details regarding his
despatch instructions, despatch details, DI outstanding details, his accounts with
NALCO and the credit balance etc.
7. Joint R&D efforts along with the Aluminium Association of India and other
primary producers to find out more uses of Aluminium thereby increasing the
market size of the Aluminium industry.
8. Segment the market and have key accounts managers for big customers i.e have
a single window for customers lifting above 500MT per month. This should help in
enhancing customer satisfaction.
9. Presently NALCO is accepting firm financial arrangements in form of advance
and Letter of Credit. Considering that market is going to be more competitive in
future the Company may consider accepting a wider variety of financial
arrangements other than advance and Letter of Credit.
10. Opening of more stockyards at different strategic locations to cater to the small
customers. Depending on the requirement even consider setting up Inland
Container Depots at central places like Nagpur and Delhi which are well connected
by road and rail.
11. Since the market has become very dynamic, to take advantage of market
situation the company should consider fixed price contracts in exports.
12. To expand the customer base in exports, start looking for new customers and
enter into one-to-one contracts with them with well-defined pre-qualification
criteria.

15

Logistics augmentation
The supply chain for a company should be developed in advance considering the
following factors
-Analysis of demand pattern region-wise and seasonal variation.
Flexible transportation system which can sustain change of different parameters
at the time of need.
-Obtaining strong relationship with carriers and vendors.
-A proper logistics information system between manufacturers and purchasers.
st

nd

The Company completed its brown field 1 phase expansion in late nineties and 2
phase expansion has been partly completed and remaining part is nearing
rd

completion.The company has plans for 3 phase brown field expansion the details
of which is mentioned under Growth in clause 4 of this Corporate Plan. Apart from
the above the company is planning to set up alumina plant at Andhra Pradesh,
aluminium plant at Jharsuguda in India apart from some International projects
abroad mainly to take care of surplus alumina. Logistics and supply chain
management is the lifeline of any company. To cater to such voluminous growth,
the whole chain of logistics starting from augmentation of Railway/Road facilities
at the source rolling stock to carry the goods, the intermediate hubs and end points
at the stockyards or major destination points of customers need to be strengthened.
The following aspects may be considered for NALCOs expansion programme :
1. Infrastructure at exchange yards and holding yards should be augmented such
as increase in railway tracks, improvement in signaling system, providing level
crossing/road over bridge, improvement in unloading system(full rake) etc to
handle the increased traffic and avoid demurrage charges.
2. A special freight corridor or doubling and electrification of existing railway line
between Damanjodi and Angul wherever it does not exist, can be made on PPP
basis to handle the increased traffic. Proposal may be explored with Railways
for establishing a MGR System for transportation of alumina and coal from/to
Damanjodi.
3. The possibility for bulk export and import of coal, alumina and aluminium
metal and other major input materials on a joint venture with shipping
companies may be explored. It is understood that SAIL is planning for similar

16

joint venture.
4. For aluminium movement, the following aspects may be considered for
implementation.
-Though transportation of Aluminium metal using rail is cheaper compared to by
road, yet the rail transportation in NALCO depends on quantum of export as most
of the domestic sale is catered to by road transportation. For the cost benefit aspect,
the trend has to be reversed. Also, as per the industry standards, movement of
products/commodity over 500 KM distance, rail is the preferred mode of
transportation. Further, NALCOs road haulage cost from Angul is about 30%
higher than the market rate, due to socio-political issues prevailing in an around the
place. The augmentation in railway facilities should be commensurate with the
expansion so that the percentage of railway transportation may improve.
-The increased usage of rail transportation can be efficiently managed by rail
containers. The present unreliable service of Indian Railways can be addressed by
utilizing the services of container train operators, licensed by Railways to operate
on their network. Just like inventory management, NALCOs domestic customers
may be categorized into A, B & C types depending on their amount of off-take and
optimization model can be undertaken to fulfill their requirement. -To avoid delay
in dispatch process due to manual processing of documents, an IT-integrated
dispatch model on real time basis should to be developed. It can be a part of ERP
system to aid in production planning and inventory management. Further, the real
time information of dispatch system will strengthen the MIS to reduce processing
delays and improve efficiency.
-Nalco should develop consensus for adopting ICD model in-house or hire
central facilities available to address its logistics concerns.
-Nalco may consider outsourcing aluminium logistics operation from plant to
various customers, domestic or international to a dedicated and reliable
service provider having rail & road transportation and warehousing
capability. Such service provider offering end to end solution will cover
both the short term and long term risk which NALCO and its customers
are exposed to, on account of timeliness, cost and security.
-Nalco should carry out introduction of higher loading capacity trucks. This will
increase efficiency and reduce transportation cost.

17

Financing
The present expansions programme with a capital expenditure of around Rs.
4400 crore fully funded by internal accruals is expected to be completed by 200910.
The Company has made plan of investment of around Rs. 58,000 crore to be
spent in phased manner during the plan period (Ref Annexure III). The Company is
debt-free and has surplus funds of Rs. 3763 crore at beginning of the plan period,
i.e. April 2009. There is estimated to be internal generation of around Rs. 44,900
crore during the plan period after payment of dividend. In order to meet the
funding requirement for the projects, Company would raise funds from market
through loan (both from foreign as well as domestic market) and through equity
depending upon market situation and appetite. The phasing of debt-equity mix
would also be determined to achieve an appropriate gearing ratio as against the
totally debt free financing as at present. The fund raising thorough loan will start
from the financial year 2011-12 and go till 2017-18 in phased manner and through
equity by issuing additional equity shares in the years 2012-13 and 2015-16. With
this additional issue of equity, the status of majority holding by the Govt. of India
would not alter even if the Govt. does not participate in fresh issue. The plan for
fund raising has been shown in cash flow statement (Annexue II).
At the end of the planned period, the gross sales of the company is projected
to reach Rs25,380 crores from Rs 5520 crores at the beginning of the period.
Similarly net profit after tax is projected to reach Rs 5440 crores from Rs 1270
crores. The operating results for the plan period is given in Annexure I. Further at
the end of the plan period, the net worth of the company is projected to reach to
Rs.43,200 crore, from Rs.9,770 crore at beginning of the period. The gross asset
block and net block of asset the company will reach Rs.67, 800 crore and
Rs.44,500 crore from Rs.9,900 crore and Rs.4,000 crore respectively.
The financing of the growth projects should pose no problem with
substantial reserves & surplus and cash in hand supported by highest rating of
AAA+ by Crisil and by Icra which reflects the confidence in the company by the
financial markets in India and abroad. The exact mode of financing should,
however, depend on money market conditions at the time of approaching the
market. It would be prudent to keep the capital structure flexible to accommodate
borrowings outside the projections to finance new value-addition projects or
acquisitions considered in this Corporate Plan.
The Finance department of the company should be more vibrant and market

18

oriented. All the information and data computation and compilation should be on
real time basis once ERP system is implemented in the current year, 2009-10.
The integrated risk management policy approved by Board has since been
implemented across the units for all the identified risks. The adoption of risk
management policies shall go a long way particularly for finance department for
effective controlling and mitigating the various risks.

19

Research and Technology Development

In the pursuit towards organizational growth through sustained development
in process, product and technology through research & development activity, it is
essential to have the companys own Research centre besides plant level small
research unit where people are indulged in routine problem solving activities. All
major alumina producers in the world such as Alcan (Pechiney), Alcoa, Aluswiss
etc. have their own centres and that is how they are technology leaders.
Keeping in the above in view, the company has decided in principle to
establish a world class Research & Technology Centre at Bhubaneswar. The
investment is likely to be around Rs.140 crores.
Nalcos own centre will facilitate in increasing the technical strength, upgradation of technology through research and validation and finally developing
technology on alumina and aluminium. All the world leaders in the field of
alumina & aluminum do sponsor certain amount of R&D work to Govt. research
Lab., but as far as technology development is considered they do themselves at
their centers. It has been seen that R&D centers operated by producers are viable
and result oriented as new inventions in process & technology can be validated at
the plant for implementation.
Aluminum industry is undergoing continuous technological improvements
and several refinery and smelter are in pipe line in India including that of NALCO
which will get the advantage of such centre. The centre can commercialise research
findings through patents. Technology based research carried out at own centre is
always closely guarded for commercialization. The mission of the center would be
to develop and strengthen technology expertise pertaining to Bauxite, Alumina and
Aluminium in the next five years which will enable NALCO to be self sustained in
the field of bauxite mining, alumina refining and aluminium smelting technology
with the following objectives:
Objectives:
. Achieve analytical excellence
. Establish technical strength to match with the technology leaders
. Cost control through lower capital and operating cost
. Increase yield/productivity & product quality
. Environmental sustainability
. Technology development for value added and downstream products through
lab. and bench/pilot scale research
. Commercialisation of process and patents
. Disposal/utilization of waste and bye-products

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. Developing technical expertise with collaborative research

. Internal technology development & technology transfer with strong analytical
service to justify cost of operation of the Centre
The broad activities of the Centre will be:
. Chemical, Physical & Morphological characterization of Ores, Minerals and
Raw
Materials for Metal, Refractory &Chemical industries with special emphasis
to Bauxite,
Alumina, Aluminium and other allied areas.
. Chemical, Physical & Morphological characterization of finished products,
bye
products etc.
. Setting up of sophisticated Analytical Laboratory with modern instrument
techniques.
. Engineering section with design and development facility along with an
Instrument
Lab. to maintain the equipments/ instruments.
. Research on Bauxite, Alumina, Aluminium & Allied products.
. Data Bank on process parameters, trials, modifications, improvements and
literature
etc.for technology up-gradation, technical strength & future reference
. Mathematical Modeling in areas related to Alumina and Aluminium
technology.
. Process, Product and Technology development activities.
. Market development for Products / Technology developed.
. Research on cost reduction, Energy & Environment management areas.
. Raw Materials Development pertaining to Alumina and Aluminum process.
. Patenting of Know-how & Commercialization of Process and Patents.
. Creating related infrastructures required for the R&D Centre like: Workshop,
. Technical library, Training facilities, Lecture halls, Auditorium etc.
. Bench Scale / Pilot Scale units -Phase wise.
. Emphasis in basic research pertaining to aluminum industry.
The R&D department should undertake tasks to improve further on the
consumption
norms and create new benchmarks. In the process company will not only bring
substantive cost reduction but also can also patent the improvements in process.

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Human Resources
The company has its HR Vision and mission as described below:
HR Vision
To attain organisational excellence through trust, openness, commitment,
creativity, innovation and providing opportunities for growth, well being and
professional enrichment.
HR Mission
To create a learning and knowledge based organisation through continuous
innovation, evaluation and realignment HR practices with the business strategies,
and to attract, nurture and retain talent. To inculcate a spirit of creativity, quest for
learning, to create a responsive and competent work force and inspiring &
motivational organisational climate.
Nalco believes in achieving organisational excellence though human
resources and practices with people centric approach to leverage the latent
potential of its competent workforce to align with the organizations business
objective. Emerging from the organizations mission statement, the strategic
human resource development goal & objective of Nalco is to create an atmosphere
of techno-managerial excellence to become a company of global repute in metal &
energy sector. The overall objectives of the human resource development plan is to
build a vibrant and learning organisation, so as to overcome the challenges on
quality and retain the operation par excellence, induct and retain the competent
human resources and reinforce the immaculate commitment to the organisation and
enhance a sense of belongingness. Human resource functions has formulated an
integrated strategy which rests on a quadrilateral of HR i.e. competency,
commitment, culture building and quest for learning & innovation.
Notwithstanding the culture of a public sector organisation, Nalco recognises that
people are the primary source of its competitiveness. Nalco is proud of its tradition
and heritage. But that doesnt mean the organisation is stuck in the past. To keep
the organisation ahead in the ever-changing global business scenario, we are
constantly driving forward the boundaries of human resources management. In the
backdrop of business competitiveness & strife for excellence in the core business,
globally and aligning with the companys mission and vision statement, the
Company design and focus the human resources development policies and
initiatives with emphasis on the stated focus area mentioned below :

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. Commitment: Aligning of the HR vision with the companys vision &

mission statement. Create an environment to shift the HR from staff function
to a strategic partner in business operations. The HR will play an anchor role
in developing, nurturing and sustaining the core values of the organisation.
Nalco will strive continuously to foster a climate of openness, mutual trust
and team work, promote equal opportunity for all the employees without
unacceptable treatment, provide a safe and healthy workplace, respect
employees voluntary freedom of association, foster a climate of creativity &
innovation, enhance employees competency through virtual learning, and
provide opportunity for growth along with work-life balance and restructure
the organisation for ensuring right man at right place so as to make the
organisation agile.
. Competency: HR as a change agent will strive to enhance productivity and
performance of the organisation by developing competency and potential of
its workforce. To be in total alignment with corporate mission and strategy,
to maintain the human resource at optimum level, to meet the objectives &
goals of the Company, HR envisages competency mapping, balance score
card for succession planning in the critical areas, robust performance
appraisal system, multi-skilling, building cross functional team to take up
critical tasks & HR audit. Focus of recruitment would be to recruit
professionally qualified personnel with a combination of soft & hard skills,
attitude and urge for learning in line with the organisational requirement
through appropriate manpower planning keeping in line with both short and
long term business objectives.
. Culture building: Nalco has a unique work culture embodied with the core
organisational value & philosophy of trust-openness-commitment-nurtureinnovation to achieve the organisational excellence. The organisation
operates within transparent HR policies and procedures and envisages the
implementation of on-line performance appraisal system in near future.
Performance and potential based promotion system offering exposure to
cross functional area through inter and intra-functional job rotation for
nurturing the leadership capability amongst the employees. The organisation
respects employees voluntary freedom of association. The organisation is
looking forward to revamp the existing mentoring system, concept of
documentation of events/ case studies for future reference, knowledge
management, implementation of social accountability 8000 across the

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organisation, climate study at an interval of five year to identify areas for

OD intervention, re-introduce open forum to create a culture of openness
and transparency in the organisation. The Company is also looking forward
in near future to implement standardization and simplification of HR process
& system & automation of routine services (e-HR services).The Company is
also in a process of developing culture sensitization among its employees,
fostering a culture of discipline and proactive industrial relation
management. Nalco encourages employee participation in management and
suitably rewards innovative suggestions. Employees are provided with a
platform for interactive participation to enable them to participate in the
management and foster an innovative culture. It will have a positive impact
on the overall operation of the organisation since it has led to enhance
efficiency and productivity and reduce wastage & cost. The focus of the
reward system in the Company like variable package & performance related
pay is to promote team work and cultivate a sense of achievement and
excellence in the organisation. Participative forum like joint management
committees, quality circles, suggestion-reward scheme enrich its work
culture and there is a constant endeavor to upgrade the said schemes
according to the organisational requirement which will lead to achieve the
Companys overall excellence.
. Learning & innovation: A learning organisation is essential for the survival in
the contemporary business environment. An integral part of people centric policies
of the Company, is its thrust on the knowledge up-gradation and development of
its employees. The Company encourages and inculcates a spirit of learning among
its employees. Identification of training competency profile in terms of mission
statement of the Company would be the strategy for training intervention. The
Company is in a process of identifying critical leadership competencies at the top
management position & identifying the next generation leader through
development centers and prepare them to take up the critical positions. The
Company is also planning to develop an e-learning portal, by which employees can
enhance their soft and hard skills through e-learning modules along with training
impact assessment and return on investment analysis. Besides, developmental
training would be imparted towards customer orientation at each level of human
resources. The HRD Center for Excellence is the premier nodal agency responsible
for developing the human resources of Nalco. The Company is also looking

24

forward to market its HRD expertise and operate the training institute as a profit
center. The Corporate vision in the Company towards HR is to ensure continuous
development of human resources and make the oraganisation a great place to work
for through individual learning, innovation & creativity.

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Quality Management :
Total Quality Management activities were initiated in NALCO in 1993, with
formation of Quality Apex Council at Corporate level, Sub Apex Councils at
Complex level and TQM departments at Corporate Office and Units. The company
adopted the 3P route to Total Quality, i.e. Product > Process > People and thereby
focused on the three vital elements for Organisation wide Quality to achieve
Customer Satisfaction. Companys Quality Policy first issued in 1993 was revised
and reissued in 1996 to encompass the above approach, using Jurans triology of
Quality Planning, Quality Control, and Quality Improvement. As per plan the
initial focus was on creating awareness amongst employees about Quality and
accordingly awareness training programmes were conducted for creating a desire
and fundamental concepts for quality. Simultaneously, from the perspective of
customer focus and satisfaction, efforts were directed towards obtaining and
maintaining Quality Management Certification for all the manufacturing units.
QMS Certification:
Quality Management Systems or all the units were initially certified to ISO
9002: 1994, as applicable to the companys nature of business, during the period
1994-1996. Subsequently, with revision of the International Standards, QMS of all
the units along with relevant corporate functions and Port Facilities were updated
to ISO 9001: 2000. All the units have been recertified from time to time as per
stipulations of the certifying bodies. The dates of commencement of QMS
certification are:
Alumina Refinery (incl. Port Facilities) : Nov., 1994
Smelter Plant : Feb., 1995
Captive Power Plant : Dec., 1995
Mines : Jan., 1996
Quality Circles:
As part of the efforts to motivate and involve employees at all levels in
quality related activities and bring in improvements by solving unresolved
problems, small group activities like Quality Circles were started in 1993. Training
on Quality Circle Tools and Techniques were imparted to employees. Number of
Quality Circles has gone up to 53 and many Quality Circles have won accolades in
National and International Forum by the virtue of their project works. QC
involvement has also addressed the higher level motivational needs of employees.

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Statistical Problem Solving and other interventions:

To address higher level problems pertaining to cross-functional domain, the
formation of multi-functional teams were encouraged. Quality Circle members and
executives involved in multi-functional teams have been imparted exposure to
structured problem solving methodology and most of them got trained on basic QC
tools. Training on Control Charts and Process Capability has been imparted to
several managers for improving Problem Solving capability of executives. Problem
prevention orientation tools like FMEA have also been introduced in some units.
Considering manufacturing process and the health of equipment as a critical area
for improvement, TPM and 5S activities have also been introduced.
The Road Ahead:
Quality Management activities at present are heavily focused on ISO 9000 &
Quality Circle. In view of the companys plans for enhancing its capacities through
brown and green field expansions, venturing into commercial power business,
Joint ventures in India and abroad, thrust on Total Quality Management and TPM
in future are extremely important. Higher level Problem Solving, Process Control,
improvement of overall equipment effectiveness through TPM and Lean
manufacturing need to be integrated into organisations future action plans and
thrust areas. Management needs to give deep thought to various related aspects
including ownership at higher level, provision of adequate qualified resources and
defined role & accountability,offline management for successful implementation of
these initiatives.

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Systems Management
Business models are ever changing. Today leading companies use e-business
strategies for conducting their business. Nalco has to change its business practices
and has to become IT savvy. It already has plans to enhance its IT usage in the
organization through Information and Communication Technology (ICT) through
the following initiatives.
ICT is the nerve system of any business organization. Nalco shall seek to
leverage Information and communication technologies to support and serve its
business and social needs and functions to the maximum possible extent.
Some of the solutions and approaches shall be as under:
. ERP integrated with advance solutions like supplier chain management,
customer
relationship management.
. Integration of Plant process data with MIS
. Data warehouse & Knowledge management,
. Creation of business intelligence modules for tracking customers, competitors,
markets
etc.
. Integration with suppliers and customers and Govt agencies, e-business
. Paper less office,
. Document management systems for spaceless storage and quick retrieval with
authorisation.
. Single sign-on multi-factor authentication systems, integrated with national level
UID
. Use of RFID(Radio frequency ID)for material, equipment and personnel
identification
. GPS based mobile assets / traffic monitoring systems
. Integration of data and analog unified communication networks
. Desktop based video multi-conferencing
. Intelligent eco-friendly low energy consuming buildings.

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Social Aspect Of NALCO:Corporate Governance

Good governance means adoption of best ethical business practices which also
ensure the Company to be within the regulatory frame work. The adoption of such
corporate practices ensures accountability of the persons in charge of the Company
on the one hand and brings benefits to investors, customers, employees and the
society at large on the other. The Company believes in such business practices and
places prime importance on providing reliable financial information, maintaining
transparency and compliance of the laws in letter and spirit.
NALCOs corporate governance philosophy is based on the Gandhian principle of
Trusteeship and accepts the inalienable right of the shareholders as true owners of
the Organization and of their role as trustees of the shareholders as well as of other
stakeholders. It believes in its commitment to values, ethics, good business practice
and distinction between personal and corporate interest in managing the affairs of
the Company. NALCO, in its pursuit to excellence, has been practicing good
Corporate Governance ever since it was incorporated. The thrust is always given in
attaining maximum level of transparency, accountability and equity in all facets of
its operations and in its interaction with all segments of stakeholders.
As part of good Corporate Governance, the Company has voluntarily got the
Secretarial Audit carried out for the year 2007-08 as well as for the previous years
too and will continue to do so for the years to come. For the past 29 years, NALCO
has consistently stood for integrity, values, ethics and quality. NALCO has been a
pioneer in benchmarking its corporate governance practices with the best in the
Country
th

The Government of India has conferred NAVRATNA status on NALCO on 28

April, 2008. It is considered that dilution of equity will further unlock the value
and provide better Governance structure. At present the Govt. of India, is holding
87.15% of share after disinvestment of earlier 13.85% of its share.

29

The way ahead

As part of the commitment to follow global best practices, Corporate Governance
guidelines and best practices have evolved over a period of time. Over the years,
the Board has developed corporate governance guidelines to help fulfill our
corporate responsibility to various stakeholders. These guidelines ensure the Board
will have the necessary authority and processes in place, to review and evaluate
our operations when required. The type of investment and expansion envisaged
calls for better Governance. Adherence to sound principles of corporate
governance, through a system of checks, balances and personal accountability is
vital to protecting NALCOs reputation, assets, investor confidence, and customer
loyalty.

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Corporate Social Responsibility (CSR)

Corporate Social Responsibility is the obligation of the Company to the society, or
more specifically, the companys stake holders who are affected by the Corporate
Policies and practices. These stake holders are individual or groups who can affect
or are affected by the achievement by the Companys objectives.
In line with the above, the very mission statement of NALCO has embodied
this philosophy of Corporate Social Responsibility which also contains to achieve
sustainable growth in business with global competitive edge providing satisfaction
to the customers, employees, share holders and all stake holders.
Objective of NALCOs CSR Policy:
The following are the objectives of the NALCOs Corporate Social
Responsibility Policy:

To participate in improving the living standards and quality of life of the

community through upliftment of economic status and community care.

To participate in developing infrastructural facilities as per the social and

economic need of the community.

To participate in activities relating to environment & safety.

To participate in the areas of health care and health education.

To participate in promoting education, sports, games, arts, crafts, culture and

preservation of historical and archeological monuments.

To participate in such other activities which are required for development of

the stake holder and improvement of the good will of the Company.

To participate in the relief operations during natural calamities.

Over the years Nalco has funded various developmental projects in the periphery
areas of Angul and Damanjodi where the production activities of the Company are
concentrated. The Company has also extended significant relief and rehabilitation
support to the State Government and Central Govt. at the time of natural
calamities, apart from playing a role in the promotion of sports, art, culture and
literature mainly at the State level and at Central level in a limited measure, on a
regular basis. The Company has also helped development of public amenities like
parks, hospitals etc. in other parts of Orissa. In view of the economic backwardness
of the State and NALCO being the only Govt. of India PSU having its Corporate
Office at Bhubaneswar pressure to do more has been mounting. With the future

31

expansion and higher profitability, the expectations of the society in general and
the stake holder in particular from the company is likely to increase further.
Considering the above and keeping in view the philosophy that NALCO is like
a Trustee of the public Trust and its responsibility is to ensure the benefits goes to
the pubic in general and the stake holders in particular, the Company needs to have
a strategic CSR and for the same, the following approach is suggested.

v) To generously contribute to various events at all levels -local, state and national,
in the areas of traditional art, culture, preservation of historical and
archeological monuments.

vi) To contribute in the field of state/national level sports and games. vii) To
provides scholarships to meritorious poor students.

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Strategy for building Corporate Image

In the present competitive business scenario, it has become essential to establish a
good corporate image of the company through effective utilization of various tools
of communication.
The communication strategy will focus on following aspects:
a) Internal communication (Employees) b) External Communication (other
stakeholders like customers, stakeholders, business associates, Govt. etc)
Internal Communication:
Communication among employees is crucial to the success of a growing
organization like Nalco. The employees need to be kept motivated through
effective communication in order to achieve the vision of the company.
a) House Journal
Presently Corporate Communication brings out a house journal Parichaya
quarterly for distribution among employees. This needs to be strengthened by
publishing the journal every month in order to improve internal communication.
b) Video Magazine
A video magazine Nalco Track produced professionally may be circulated every
2 months highlighting the achievements of the company as well as the employees
and future growth plans and screened at Corporate Office and plant sites through
cable network for motivating employees.
c) Nalco Website
Internet/Intranet has today emerged as a powerful vehicle of instant
communication. Well-designed home page as well as web pages should be
incorporated in the existing company website with up-to-date information. Besides,
new features such as company achievements, employees achievements and other
human-interest stories shall be incorporated to make the website more informative
and interesting.
d) Letters from CEO
To improve internal communication, well-designed letters from CEO shall be
printed and circulated on important occasions/events of the company, like
foundation day, world environment day, Utkal Divas, Safety Day etc.
Besides, personalized letters shall be sent to individual employees on significant
achievements either in plant/office work or other areas such as games/sports and

33

culture. Such congratulatory letters may be accompanied by cash prizes and

citation.
External communication
As part of the image building exercise, it is essential to strengthen external
communication with the companys stakeholders, such as, customers, bankers,
suppliers, business associates, statutory agencies, state and Central Govt. etc.
a) Corporate Advertisement
(i) Corporate Advertisement shall consist of specially planned and creatively
designed publicity material to project positive image of the company, its
achievements and socio-economic role as well as role in environment protection.
This will help create favourable disposition of the public and Govt. agencies
towards the company.
(ii) The corporate advertisements shall be released in leading news papers and
magazines on important occasions, like, Foundation day, Republic day, World
Environment day, Safety day etc.
(iii) Chairman/AGM speech and chairmans message on important national issues
like Industry, economy or environmental issues shall be published in leading
newspapers.
b) Corporate Campaign:
A series of well-designed corporate advertisements may be published in leading
newspapers and journals on specific themes, like, environment, CSR, safety, health
or issues like road safety, child labour to project the image of the company as a
responsible corporate citizen of the country.
c) Marketing and Product advertisement
(i) Marketing and product advertisements shall be undertaken in major
newspapers/journals for attracting customers attention and promoting the brand
image of the company wherever it is considered relevant.
(ii) Launching of new products, opening of stockyards, improvement in customers
relations shall be announced through advertisements.

34

A. Electronic Media
Electronic media like business TV channels offers excellent opportunities for
branding and image building.
i) Business TV channels may be utilized for publicizing Nalcos corporate
message through well-produced TV advertisements in select
programmes.
ii) Corporate story can also be produced and telecast through these
channels on annual basis on occasions like AGM or while going to
market for fund raising.
iii) News features and sponsored programmers on various aspects of CSR,
environment etc. can be telecast in local TV channels.
B. Outdoor Media
Outdoor media provides excellent opportunity for corporate presence at strategic
location. i) Hoardings displaying various messages of the company shall be put up
at strategic locations of BBSR where companys corporate office is located. ii)
Glow signs shall be installed in major airports and railway stations of the
state/country.
C. Participation in National and International Exhibitions
Exhibitions are powerful tool of showcasing Corporate image, apart from
generating customer contact and business development.
Sponsorship
As part of corporate image building exercise, the company shall selectively
sponsor events in the areas of social, cultural, educational and sports activities.
i) Instead of small contributions here and there, the company shall pick up one
major national event in a year for main sponsorship to get proper publicity
mileage. ii) The company may also go for associate sponsorship at National/State
level depending on availability of budget.

35