CHAPTER-1

INTRODUCTION TO THE STUDY AND INDUSTRY PROFILE

ALUMINIUM: A WONDER METAL

Aluminium, which is the 3rd most abundant element in earths crust, was separated as a metal in the year 1825. It took many years of painstaking research to produce aluminium on commercial scale. The inventions of the electrolytic reduction process known as Hall-Heroult process in 1886 and the Bayer Process for large-scale production of alumina from bauxite in 1889, truly led to the growth in production and applications of aluminium. The global production of aluminium has risen from 15 tonnes in 1885 to more than 34 million tones in 2006, with nearly 127 percent increase seen since 1985. In addition, about 16 million tones of aluminium is recycled per annum. Thus nearly 50 million tones of aluminium is available per annum to the world market. Aluminium is a unique metal; strong, durable, flexible, impermeable and light weight, it does not rust and is 100 percent recyclable. It comes in a variety of surface finishes and can take many forms, allowing its use in a vast array of products. Among the non -ferrous metals aluminium is young. Yet its production surpasses the total world production of copper, lead and tin combined together. Aluminium total production is at 50 million tones during 2007 in comparison with 17 million tones of copper, 8 million tones of lead and 0.4 million tones of tin. In terms of production and consumption aluminium is only second to steel.

Aluminium properties & applications:

Aluminium can be alloyed with other Aluminium can be rolled into plates, sheets, materials to make an array of metals with or wafer than foils. The rolling process different properties. The main alloying changes the characteristics of the metal, ingredients are iron, silicon, zinc, copper and making it less brittle and more ductile. magnesium. Aluminium can be cast into an infinite Aluminium can be extruded by heating it to variety of shapes. The statue of Eros in around 5000C and pushing it through a die at Londons Piccadilly Circus erected in 1893 great pressure to form intricate shapes and
2

is cast aluminium.

sections.

Aluminium can be forged by hammering to Aluminium can be joined by welding, make stress-bearing parts for aircraft and adhesive bonding, riveting or screwing. It internal combustion engines. can be formed by bending or super plastic moulding. It can be milled or turned on a lathe. The properties of aluminium heat can be The appearance can be modified by surface or treatments such as anodizing or powder coating.

modified

through

treatment

mechanical working.

Aluminium powder, flake and paste are Aluminium Chemicals are important in formed by blowing gas under pressure at water treatment, papermaking, fire

molten aluminium. These products are used retardants, fillers and pharmaceuticals. in explosives, rocket fuel, metallurgy, chemicals, inks and decorative materials.

Aluminium being light, ductile, durable, non-magnetic, good conductor or heat and electricity, it has found ever increasing uses in transportation, electrical, construction and packaging industries. Aluminium is the mainstay of long distance electrical power transmission. In transportation sector aluminium plays a key role in saving energy and reducing pollution. High aluminium content vehicles can be up to 50 per cent lighter than the conventional vehicles. Lighter cars, truck and trains mean less fuel consumption and less emission of carbon dioxide. The other biggest advantage of aluminium comes from the fact that the products made from aluminium can be recycled repeatedly to produce new products. This helps to save energy as well as mineral resources needed for primary production. On several counts aluminium is considered to be an environmentally sustainable material and because of its recyclability production of aluminium is considered as an investment for the future generation.

Approach of Aluminium Industry:

The industry employs a lifecycle approach to address the challenges of climate change, focusing not only on the energy required to produce aluminium products but also on the energy savings to be made through their use and reuse. It is in the use phase that the majority of energy is used and/or saved (e.g. during the useful life of ears, buildings, aircraft, etc). the high strength-to-weight ratio of aluminium plays a crucial role in producing lighter vehicles and other forms of transport, reducing fuel consumption without compromising performance and safety. The use of lightweight aluminium components in a vehicle can save six to twelve times the energy taken to produce the primary aluminium used in its construction. Up to eight per cent fuel savings can be realized for every 10% reduction in weight. One kilogram of aluminium used to replace heavier materials in a car or light truck has the potential to eliminate 20 kg of CO2 over the lifetime of the vehicle. For other vehicles, such as trains, ferries and aircraft, the potential savings are even greater. Climate change is a challenge that the aluminium industry share with every business and everyone who participates in the global economy. As the world moves to combat climate change, the aluminium industry is moving too. With its immense versatility, smart uses of aluminium will be important part of finding solutions across many applications and the market for aluminium will grow and diversify. The global aluminium industry has therefore, developed a four-pronged voluntary strategy to meet the challenge, which encompasses the full lifecycle of aluminium from production to primary use to recycling and reuse: (i) (ii) (iii) (iv) Reduce greenhouse gas emission from aluminium production; Increase energy efficiency in aluminium production; Maximize used-product collection, recycling and reuse; & Promote the light-weighting of vehicles.

Aluminium Facts:
The Aluminium Industry makes significant contribution to the global economy as well as to many individual nations. It has witnessed an average growth of 8.3% in last 5 years. That is 10.5% in 2007 with 2008 projected at 9% and 2009 at 8%. Mainly it is driven by demand in China. The details statistics for the year 2005-2009 given in Table 1.1 also indicate very growth in china and former east bloc. It is also suggested by the industry experts that the aluminium industry will grow in the range of 6-7% in the long run. Table No. 1.1 Primary Aluminium Demand Outlook
1000 Tonnes Region 2005 United States North America Total Western Europe Japan Total Asia Western World China Former East Block Total World 2,405 6,853 2,441 7,190 2,448 7,461 2,436 7,681 2,480 8,013 -1.0% 3.9% 1.5% 4.9% 0.3% 3.8% -0.5% 2.9% 1.8% 4.3% 6,083 6,932 7,213 7,295 7,493 1.9% 3.7% 4.1% 1.1% 2.7% 2006 2007 2008 2009 2005 2006 2007 2008 2009 Annual Percent Growth

6,149

6,179

5,608

5,487

5,694

-3.5%

0.5%

-9.2%

-2.2%

3.8%

6,952

7,025

6,433

6,304

6,551

-2.6%

1.1%

-8.4%

-2.0%

3.9%

22,638

23,354

23,413

23,673

24,562

1.5%

3.2%

0.3%

1.1%

3.8%

7,105

8,700

12,000

15,000

17,250

19.1%

22.4%

37.9%

25.0%

15.0%

8,995

10,734

14,267

17,394

19,814

15.8%

19.3%

32.9%

21.9%

13.9%

31,633

34,088

37,680

41,068

44,375

5.2%

7.8%

10.5%

9.0%

8.1%

Aluminium is among the most essential material for Indias transportation, packaging and construction industries. In India aluminium is represented by a world class industry that has been a leader in using advanced technology, creating improvement in manufacturing process and finding our new uses/applications of aluminium. The one proven way to create improvements in the quality of life of any nation is through the manufacture and sale of competitively priced, socially desirable and ecologically sustainable products. A whole new industry has developed around aluminium recycling and the high value of aluminium retained from recycling drives Company towards the development of new technologies for product recovery, dismantling, preparation, melting and ingot casting. As a light weight and recyclable structural metal, aluminium has and will continue to play an important role in social progress at the individual and community levels in national security and in a vibrant Indian economy through its pivotal contributions in areas such as transportation (automobiles, trucks, rail cars, ships, and commercial aircraft) food and beverage packaging (aseptic container and beverage cans) infrastructure (bridges, water treatment plants, air ports, railways) building and construction(window, doors) rural electrification (electric cables). The substantial total positive impact of the utilization of aluminium in all of these areas is quite clear when judged on total life cycle cost and efficiency. In India the aluminium industry had its beginning in the early 1940s.The demand for aluminium in the country today is around 10,00,000 tons. However Indias per capita consumption of aluminium large at around 1.2 kg while in China its 8.5 kg and in USA its about 30 kg. About one third of the aluminium available in India is used in the electrical industry, with the balance shared among other sectors, such as transportation, building and construction, packaging, consumer durables etc. India is an exporter of both alumina from which the metal is made and aluminium Hindalco Industries, NALCO AND Sterlite Industries are the 3 big producers in aluminium industry. Tremendous potential exists to widen the scope and usage of aluminium in the country, through development and commercialization of a host of applications for the benefit of industry and the general consumer.

Table No. 1.2

GLOBAL ALUMINIUM METAL PRODUCTION & CONSUMPTION

YEAR PRODUCTION CONSUMPTION DEFICIT/SURPLUS 2007 33912 34380 -468 2008 38104 37804 300 2009 (F) 41815 41154 661 % GROWTH 9.7 8.9 -0.8

CRU Analysts predict that the primary aluminium consumption which reached 37.7 million tones in 2007 is expected to total 87.8 million tones in 2030 reflecting the impact of a stronger outcome to last year combined with a moderately stronger medium term forecast due to China. Table No. 1.3

GLOBAL ALUMINA PRODUCTION & CONSUMPTION

YEAR PRODUCTION CONSUMPTION DEFICIT/SURPLUS 2007 68309 66176 2133 2008 74887 74439 448 2009 (F) 83049 81621 1428 % GROWTH 10.9 9.6 1.3

During 2008, as per the reports in various websites, the following refineries expansions are expected to come on stream: 1. 2. Worsley Alumina Refinery Expansion Alumar Alumina Refinery Expansion (ALCAN+ALCOA+BHPBilliton) 3. Gove Alumina Refinery(ALCAN) 4. Jamalco Alumina Refinery Expansion(ALCOA)
7

(BHP Billiton)

700000MT 2100000MT

1800000MT 1350000MT

5. Alumina Refinery in Guinea(ALCAN) TOTAL

1500000MT 7450000MT

SALIENT FEATURES OF INDIAN ALUMINIUM INDUSTRY

y y y y y y y

Highly concentrated industry with only five primary plants in the country. Controlled by two private groups and one public sector unit. Bayer Hall Heroult technology used by all producers. Electricity, coal and furnace oil are primary energy inputs. All plants have their own captive power for cheaper and un-interrupted power supply. Energy cost is 40% of manufacturing cost for metal and 30 % for rolled products. Plant have set internal target of 1-2% reduction in specific energy consumption in the next 5-8 years.

y y y y

Energy management is a critical focus energy policy. Two plants have declared formal energy policy. Each plant has an energy management cell Achievements in energy conservation are highlighted in the Annual Report of the company.

Energy target is based on the best energy figures achieved in their sector/region and by the plant itself in the past.

y y

Generally, government policies are related as conducive to energy management. Task force formed by BEE in their sector to work as catalyst in promoting energy efficiency.

High cost of technology is the main barrier in achieving high-energy efficiency.

Indian aluminium industry : Shining to grab global opportunities Indian Scenario

India is considered the fifth largest producer of aluminium in the world. It is estimated at about 3037 million tonnes for all categories of bauxite (proved, probable and possible). With the present level of consumption of aluminum, the identified reserves would have an estimated life of over 350 years. India's reserves are estimated to be 7.5 per cent of the total deposits and installed capacity is about 3 per cent of the world. In terms of demand and supply, the situation is not only self-sufficient, but it also has export potential on a competitive basis. India's annual export of aluminium is about 82,000 tonnes. Indias annual consumption of Aluminum is around 6.18 lakh tons and is projected to increase to 7.8 lakh tones by 2007. About a decade back, the primary Indian aluminium producers were BALCO, NALCO, INDAL, HINDALCO and MALCO. Of the five, two (BALCO and NALCO) were in the public sector while the other three were in the private sector. As a result of the process of liberalization of trade in aluminium, India has emerged as a net exporter of aluminium, on competitive terms. Government monopoly, in terms of aluminium production, removal of price and distribution control over aluminium, has been diluted in favour of private sector. The ownership pattern in private sector has undergone changes. With the takeover of INDAL by the HINDALCO, it has emerged as the major producer of aluminium in the country. India is endowed with mineral resources. Bauxite reserves are basically available in the states like Orissa, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra and Bihar. Minerals and metals rich India has the fifth largest bauxite reserves in the world. About 89 per cent of the recoverable reserves of bauxite in India are of metallurgical grade. Bauxite is converted to alumina in alumina refineries and through a smelting process aluminium metal is extracted. Aluminium indispensable and widely used was often called the common mans metal. This was due to the cheap availability of abundant bauxite reserves in India where raw material accounted for 35 per cent of the cost of production. The aluminium industry that emerged in

India in early 1940s, over the years has remarkably grown. Its production has progressively gone up in the public as well as the pr ivate sector. Table No. 1.4

Aluminium Consumption: World and India

Sector World Developed Countries Building & Construction Transport Packaging Electrical Consumer Durables Machinery / Industry Others 19 34 20 7 5 9 6 21 27 22 8 7 8 7 8 18 6 31 23 10 4 India India (Projected) 10 22 7 32 18 8 3

Leading producers
Three producers account for the total production of aluminium in India, namely Nalco, Birlacontrolled Hindalco and Indal (recently merged entities) and Sterlite-managed Balco and Malco. These are integrated producers from bauxite mining to metal production. Nalco and Hindalco are the lowest cost producers of aluminium in the world. In spite of this they have deliberately kept very high prices of aluminium in the domestic market taking advantage of high customs duty. But high customer duty has been cut by 5 percent in the last annual Budget which help bringing down price by Rs.1000 across all sectors. Moreover, integrated producers like Hindalco with a presence in value added products are in a better position to capitalize when compared to secondary or downstream manufacturers in India. The irregular supply of primary aluminium metal, the price volatility in primary aluminium procurement and the depreciation of the rupee (in case of imported metal) have affected the viability of the downstream manufacturers.

10

The companies under the India aluminum industry:

y y y y y

Hindalco (Hindalco Industries Ltd) Indal (Indian Aluminum Co Ltd) Nalco (National Aluminum Co Ltd) Balco (Bharat Aluminum Co Ltd) Malco (Madras Aluminum Co Ltd) Table No. 1.5

a)

Production of Primary Producers of Aluminium in India

2005-06 2006-07 2007-08

COMPANY/YEAR HINDALCO

438,356 INDAL BALCO 210,702 MALCO NALCO TOTAL 358,954 1,008,192

450,725

484,645

352,772

396,551

358,735 1,162,232

359,213 1,240,409

Table No. 1.6 b) Indian Primary Producers Domestic Sales

2005-06 2006-07 2007-08

COMPANY/YEAR HINDALCO

354,164 INDAL BALCO 194,252 MALCO NALCO TOTAL 258,095 806,511

362,675

388,807

256,942

288,125

263,494 883,111

251,612 928,544

11

Table No. 1.7 c) Indian Primary Producers Export Sales

2005-06 2006-07 2007-08

COMPANY/YEAR HINDALCO

79,159 INDAL BALCO 14,039 MALCO NALCO TOTAL 95,746 188,944

87,129

94,853

96,128

107,067

93,122 276,379

101,723 303,643

Table No. 1.8

Indian Primary Producers Total Sales

COMPANY/YEAR HINDALCO 433,323 INDAL BALCO 208,291 MALCO NALCO TOTAL 353,841 995,455 356,616 1,159,490 353,335 1,232,187 353,070 395,192 449,804 483,660 2006-07 2007-08 2008-09

12

Table No. 1.9 d) Domestic Market Share of NALCO vis--vis other Primary Producers
2005-06 2006-07 2007-08

COMPANY/YEAR HINDALCO

43.9 INDAL BALCO 24.1 MALCO NALCO TOTAL 32.0 100

41.1

41.9

29.1

31.0

29.8 100

27.1 100

Table No. 1.10 e) Calcined Alumina Primary Producers Production

2006-07 1,198,658 299,000 1,463,300 2,960,958 2007-08 1,192,709 558,000 1,559,200 3,309,909

COMPANY/YEAR HINDALCO VEDANTA NALCO TOTAL

13

Emerging Trends in India:

y

Indian Aluminium industry has gradually become more outward looking and adventurous with green field and brown field investment proposals and export objectives.

The recent acquisition and mergers within the industry will facilitate technology upgradations, new applications and product developments to match international standards.

Considering the anticipated recovery in the economy and planned investment in infrastructure development, there will be growth impact on power, automobile and construction sectors. The demand for aluminium in India is expected to grow at the rate of 4-5% over next 5 years.

For multi-national companies, India is now a destination for setting up alumina refining facilities and Smelter with possible collaboration and partnership with domestic players.

Import of finished/semi finished aluminium products will increase with anticipated scale downs in tariffs.

The demand for special grade alumina chemicals has been growing in the global market. This would help to boost value addition projects in the downstream of alumina refineries.

Pollution and environment considerations will need increasing attention to the industry on account of growing social activism in this area.

The mineral policy of Govt. of India says that Bauxite to Alumina conversion has lower power intensity and can therefore, be done in India. At more or less global costs.

14

Porter's Fi e Forces
Assessi the B l ce of Power i a B si ess Situation le but powerful tool for understanding where power lies in

The Porter's 5 Forces tool is a si

a business situation. This is useful because it helps you understand both the strength of your current competiti e position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situationof strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit.Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitab However it can be le. very illuminating when used to understand the balance of power in other situations too. These forces can be neatly brought together in a diagram like the one below:

15

1. The likelihood of new entry i.e. the extent to which barriers to entry exist. The more difficult it is for other firms to enter a market the more likely it is that existing firms can make relatively high profits. The likelihood of entering a market would be lower if:
y

The entry costs are high e.g. if heavy investment is required in marketing or equipment

There are major advantages to firms that have been operating in the industry already in terms of their experience and understanding of how the market works. Government policy prevents entry or makes it more difficult; for example, protectionist measures may mean a tax is placed on foreign products or there is a limit to the number of overseas goods that can be sold. This would make it difficult for a foreign firm to enter a market

y y

The existing brands have a high level of loyalty The existing firms may react aggressively to any new entrant e.g. with a price war

2. The power of buyers. The stronger the power of buyers in an industry the more likely it is that they will be able to force down prices and reduce the profits of firms that provide the product. Buyer power will be higher if:
y y

there are a few, big buyers so each one is very important to the firm the buyers can easily switch to other providers so the provider needs to provide a high quality service at a good price the buyers are in position to take over the firm. If they have the resources to buy the provider this threat can lead to a better service because they have real negotiating power

16

3. The power of suppliers. The stronger the power of suppliers in an industry the more difficult it is for firms within that sector to make a profit because suppliers can determine the terms and conditions on which business is conducted. Suppliers will be more powerful if:
y y y

there are relatively few of them (so the buyer has few alternatives) switching to another supplier is difficult and/or expensive the supplier can threaten to buy the existing firms so is in a strong negotiating position

4. The degree of rivalry This measures the degree of competition between existing firms. The higher the degree of rivalry the more difficult it is for existing firms to generate high profits. Rivalry will be higher if:
y

there are a large number of similar sized firms (rather than a few dominant firms) all competing with each other for customers

the costs of leaving the industry are high e.g. because of high levels of investment. This means that existing firms will fight hard to survive because they cannot easily transfer their resources elsewhere

the level of capacity utilisation. If there are high levels of capacity being underutilised the existing firms will be very competitive to try and win sales to boost their own demand

y y

the market is shrinking so firms are fighting for their share of falling sales there is little brand loyalty so customer are likely to switch easily between products

17

5. The substitute threat. This measures the ease with which buyers can switch to another product that does the same thing e.g. aluminium cans rather than glass or plastic bottles. The ease of switching depends on what costs would be involved (e.g. transferring all your data to a new database system and retraining staff could be expensive) and how similar customers perceive the alternatives to be. Using Porter's analysis firms are likely to generate higher returns if the industry:
y y y y y

Is difficult to enter There is limited rivalry Buyers are relatively weak Suppliers are relatively weak There are few substitutes.

On the other hands returns are likely to be low if:

y y y y y

The industry is easy to enter There is a high degree of rivalry between firms within the industry Buyers are strong Suppliers are strong It is easy to switch to alternatives

18

PEST ANALYSIS
Political Factor: The political factor plays a very important role in context to automobile ancillary in India. Changes in laws and regulations, taxation requirements (including tax rate changes) and environmental laws in domestic and foreign jurisdiction, implementation of VAT influences the business to high extent.
y y y

Intervention by the government. Growth in protected and controlled environment. Decline in government protection since late 80s.

Economic Factor: The industry is influenced largely toward an increase in the interest rate hikes, a step taken in order to stabilize the equilibrium of the economic factor of the country. This industry is affected greatly as it is a capital intensive industry. Inflation is also one of the important economic factor affecting the industry.
y y

Dip in production of aluminum as investment falls due to global economic recession. Major historical events also effect aluminum production. The two world wars was example represented a peak in production. This was then immediately followed by dip then a strong climb in production as economies recovered from the war and entered a period of prosperity and growth.

y y

Aluminum is a strategic industry. Since aluminum is an important product, many countries protect their aluminum industry but on a global scale, this has lead to excess productive capacity, lower prices and profitability.

Social Factor: The socio-cultural factor depends upon country to country. In country like India where there is diverse culture, there is a high influence of the socio-cultural factor in the industry. The

19

socio factors such as different class of people and their standard of living have a great impact on the steel industry.
y

Employment is expected to continue to decline due to consolidation and further automation of aluminum making process.

The advent technology too has shown a trend that reduces the need to employ human labour in the industry, then automation of manufacturing process.

y y

Many countries are proposing temporary reduction of days in a work week. Aluminum is no more the labour-intensive industry it is used to be. Earlier, it was often associated with the image of huge work force living in a captive township.

Technological Factors: A new machinery with the better technology has made the product cheaper and of better standard and technical knowledge gaining from the developed world has made customers able to get more innovative products. This innovation will have a competitive edge over the competitors products. With the advent of technology, the industry is able to produce more quantity and better quality in order to meet the domestic and international standards and a chance to compete globally.
y y y y

Total Government spending for Research & Development Focus of Technological efforts Productivity improvements through automation Total Industry spending for Research & Development

20

CHAPTER-2
COMPANY PROFILE

Corporate Office

21

ORIGIN OF NALCO
Incorporated in 1981, as a public sector enterprise, under Ministry of Mines, Government of India, National aluminium Company Limited (NALCO) as Asias largest integrated aluminium complex, comprising Bauxite Mining, Alumina Refining, Aluminium Smelting and Casting, Power Generation, Rail and Port Facilities. With the passage of time NALCO has emerged as a global leader in alumina and aluminium production. This has been made possible through effective acquisition, development and utilization of the human resource to achieve organizational objectives where dynamic HR policies of the company have played a key role. It is transparent and kept need based all the time.

THE BACKGROUND
Following the discovery of large reserves of Bauxite ore in the east coast and the preliminary project work done by Bharat Aluminium Company Limited (BALCO), NALCO was set up by the Government of India in 1981 to implement one of the largest multi -locational integrated Aluminium projects of the world with its own captive power plant and port facilities. The technical collaboration of Aluminium Pechiney of France, the support of Euro-dollar loan from a consortium of International banks and the special dispensations of the Government of India and the Govt. of Orissa helped NALCO to implement the project expeditiously within the budgeted cost of Rs. 2408 crore, under very difficult logistics of project management. Different segments of NALCO went into production in a phased manner starting from nov.1985. Within a short span of time, the company has emerged as a leader in the field of Aluminium production in the country and also has made significant impact abroad. The
22

company has helped the country to make a quantum jump in production of Aluminium and has also been earning substantial foreign exchange through creditable export performances year after year

Table No. 2.1 The integrated complex has five main segments.
SEGMENT Bauxite Mine Alumina Refinery Aluminium smelter Captive power plant Port facilities CAPACITY 4,800,000tpy 15,75,000tpy 3,45,000tpy 960MW 1000,000tpy (Alumina Export) LOCATION Panchpatmali in Koraput Damanjodi in Koraput Angul Angul Visakhapatnam

NALCO serves the national interest and enjoys trust and confidence of the market and public on account of its product excellence, productivity, profitability and good industrial relations. Company has adopted anti-population and energy efficient technologies.

VISION
To be a reputed global Company in the Metals and Energy sectors.

MISSION
To achieve growth in business with global competitive edge providing satisfaction to the customers, employees, share holders, and community at large.

OBJECTIVES
y y y

To maximize capacity utilization. To optimize operational efficiency and productivity. To maintain highest international standards of excellence in product quality, cost efficiency and customer service.

23

To provide a steady growth in business by technology up gradation expansion and diversification.

y y y

To have global presence and earn foreign exchange. To maintain leadership in domestic market. To instill financial discipline at all levels for achieving cost and budgetary controls, optimize utilization of working capital and effective cash flow management.

y y y

To maximize return on investment. To develop a strong R&D base and increase business development activities. To promote a result oriented organizational ethos and work culture that empowers employees and helps realization of individual and organizational goals.

y y y

To maximize internal customer satisfaction. To foster high standards of health, safety and environment friendly products. To participate in peripheral development of the area.

SWOT ANALYSIS
STRENGTH               Integrated operations Operational efficiencies Less dependent on 3rd parties. Strategically located facilities. High quality products at low cost . Reliable and stable supply of key inputs Expansion of facilities at low cost. Flexibility to sale primary Aluminium products in both export and domestic market. ZERO Debt Status. Sound technology base. Consistently good financial performance. Customer confidence. LME registered & Star Trading House status. ISO 9001 for all the production units. Major presence in domestic market for primary metal.

24

   

Leader in Alumina Export. Pit head Captive Power Plant with low generating cost. Production of good quality Alumina at low cost. Large reserves of quality Bauxite.

WEAKNESS        Limited value added products. High dependence on Railways for inward and outward movement of materials. Lower R&D and technical training facilities. Limited Corporate Autonomy. Inadequate supply of Coal by MCL. Inadequate waste utilization. Dependence on imported materials.

OPPORTUNITY          Scope for increase in per capita consumption in India. New areas of application of Alumina & Aluminium. Expanding Global Market. Growth in Power Transmission System. Scope for direct selling of Power. Scope for Joint Ventures within the Country and Abroad. Scope for Backward & Forward integration. Scope for collaboration on R&D facilities, transferring technology & providing Consultancy. Scope for raising funds from domestic and international market.

THREATS  Proposed Greenfield/ Brownfield Alumina plants & Smelters.

25

     

Competition from substitute materials. Increase in scope of import , competition from International traders and multinational companies in domestic market. External interference affecting work and discipline. Likely heavy load on Railways and Port due to growing industrialization in the region. Inadequate power transmission network. Wide fluctuation in LME prices and absence of hedging mechanism in India.

PRODUCTS AND MARKETS

BAUXITE MINES
y y y y y y

8TH LARGEST BAUXITE DEPOSIT IN THE WORLD. LOW ENERGY CONSUMPTION. 48 LAKH TPY CAPACITY- BEING EXPANDED TO 63 LAKH TPY. MECHANIZED MINES WITH HIGH PRODUCTIVITY. TRANSPORT THROUGH CONVEYOR BELT (14.6 KM). 100% CAPACITY UTILIZATION.

ALUMINA REFINERY
y y y y y

15.75 LAKH TPY CAPACITY- BEING EXPANDED TO 21 LAKH TPY. AMONG THE LOWEST COST PRODUCERS. SPL. HYDRATES, SPL. ALUMINA AND ZEOLITE ADDED. CO-GENERATION POWER OF 55.5 MW FROM PROCESS STEAM. 100% CAPACITY UTILIZATION.

ALUMINIUM SMELTER
y y y

MODERN TECHNOLOGY FROM AP, FRANCE. CAPACITY 3.45 LAKH TPY- BEING EXPANDED TO 4.6 LAKH TPY. INTEGRATED ANODE MAKING, ALUMINIUM CASTING AND ROLLING.
26

y y

INGOTS, BILLETS, WIRE RODS, SOWS & STRIP COILS. 50,000 MT CAPACITY ROLLED PRODUCTS UNIT.

CAPTIVE POWER PLANT

y y y y

960 MW -CAPACITY- BEING EXPANDED TO 1200 MW. LOW COST OPERATION. HIGH PLANT LOAD FACTOR. ADVANCED ELECTROSTATIC PRECIPITATOR (99.9% EFFICIENCY) TO CONTROL POLLUTION.

ZERO DISCHARGE OF EFFLUENTS .

PORT FACILITIES VIZAG :

y y y y y

CAPACITY TO HANDLE SHIPS UPTO 35,000 DWT. MECHANIZED MOBILE SHIP LOADER. MECHANIZED STORAGE FACILITIY. EXPORT OF ALUMINA AND IMPORT OF CAUSTIC SODA.

OTHERS :
y

EXPORT OF ALUMINIUM THROUGH KOLKATA & PARADIP PORTS.

27

PERFORMANCE OF NALCO
Table No. 2.2 The production, sales & financial performance of the company for the last three years is given below:
Sl. Particulars No. A. 1. 2. 3. 4. B. 1. 2. C. 1. 2. 3. 4. PRODUCTION Bauxite Alumina Hydrate Aluminium Power SALES Alumina Aluminium FINANCE Gross sales turnover Gross Margin Profit Before Tax Profit After Tax Rs. Crs. Rs. Crs. Rs. Crs. Rs. Crs. 5,324 2,811 2,430 1,562 6,515 3,942 3,620 2,381 5,474 2,754 2,467 1,632 MT MT 862,616 95,747 773,573 92,678 859,943 100,847 MT MT MT MU 4854,253 1590,000 358,954 5,679 4623,278 1475,200 358,734 5,968 4684,684 1575,500 360,457 5,609 Unit 2006-07 2007-08 2008-09

28

, 1,5

MI
,

HY
1,5 5,5 1,4 5,

1,5

1,

MI I M

35 , 54 35 , 34

Ye

29

 

 



35 ,

35 ,

, 45

3 1,

5,968 6,000 5,900 5,800 5,679

)
M

5,700 5,600 5,500 5,400 2006-07 2007-08

10

Ye

850,000 784,4 3 800,000



750,000

700,000 006-07 2007-08

Ye

2008-09

30

900,000

$#

  

5, 1

&

MI

24

( %

E P WE
4

GE E

5 2 36

'&

2 "

5,609

2008-09

871, 5

360,000 353,841 355,000 354,314

350,000 343,911 345,000

340,000
2006-07 2007-08
Ye

31

DE

DA 98

CB

MI I M

2008-09

CHAPTER-3

ORGANIZATION DESIGN

32

ORGANIZATIONAL CHART

BOARD OF DIRECTORS

CHEIF VEGELENCE OFFICER

COMPANY SECRETRY

EXECUTIVE DIRECTOR FINANCE

EXECUTIVE DIRECTOR PRODUCTION

EXECUTIVE DIRECTOR COMMISSION

EXECUTIVE DIRECTOR PROJECT & TECH.

GM (F)

GM (F)

GM (P)

GM (P)

GM (C)

GM (C)

GM (P&T

DGM (F)

DGM (F)

DGM (P)

DGM (P)

DGM (C)

DGM (C)

DGM (P&T)

33

DIR CTOR FINANC

F F

DIRECTOR PRODUCTION

DIR CTOR COMMISSION

DIR CTOR PROJECT & TECHNICAL

DIRECTOR PERSONNEL & ADMINISTRATIO N

EXECUTIVE DIRECTOR PRESNL. & ADMIN.

GM (P&T

GM (P&A)

GM (P&A)

DGM (P&T)

DGM (P&A)

DGM (P&A)

C A

-4

BUSIN SS L V L FUNC IONS AN PROC SSES

34

MARKETING
 The Company sells its alumina and metals both in the domestic and export markets.  Approximately 50% of the alumina produced is exported and balanced is utilized for consumption in smelter.  As regards distribution of metal - in FY07-08 2.5 Lakh MT was sold in domestic market and 1.01 Lakh MT was exported. However, this may change depending upon market dynamics.  The network of domestic marketing is through regional offices located at Delhi, Kolkata, Chennai & Mumbai and branch office at Bangalore.  Presently, Nalco has the following stockyards:
y y y y

Northern Region- Jaipur, Faridabad & Baddi Eastern Region Kolkata & Rajmundry Southern Region- Chennai, Bangalore & Vizag Western Region- Silvassa & Bhiwandi.

Domestic sale of metal is done on ex-factory basis as well as through stockyards against advance payments or LC. As a policy, no credit sales are being done presently .Sales are being made through LCs, and advance payments. Export sales are done only through LCs in any first class bank having transaction with SBI. Customers taking deliveries from the factory often face bottleneck due to local truck owners associations. This has been a cause of concern for the Company. The stockyard sales have helped better customer satisfaction. Export marketing is a centralized function carried out from the corporate office. The Marketing Dept. maintains a record of potential overseas customers through process of registration/pre-qualification for tendering sales from time to time. The Company always targets to realize maximize premium over the average LME prices depending on the market condition. Thus there have been price realizations above LME prices.

35

Alumina and Aluminium produced by NALCO are sold in as many as 30 countries including USA, Japan, China, UK, Norway, France, Brazil, Korea, Indonesia, Singapore, Hong Kong Bahrain, Iran and UAE. The export sale of metal is mostly concluded on CIF Singapore freight parity, shipments to various other ports, if involved, are charged extra. The export shipment of metal is done from the ports of Vizag, Kolkata and Paradip as containerized cargos. The transportation is coordinated by the marketing department with the help from clearing and forwarding agents and the shipping liners. Alumina export sale is done through both term contracts and spot sales to the highest bidders and against letter of credits, shipments is done as bulk cargos from the Vizag Port where the company has got required berth and handling facilities.

FUTURE PROSPECT
y y y y y y y

Scope for increase in per capita consumption in India. New areas of application of Alumina & Aluminium. Expanding Global market. Growth in power transmission system. Scope for direct selling of power. Scope for joint ventures within the country & Abroad. Scope for rising funds from domestic and international market.

36

THE OPERATIONS AND QUALITY FUNCTION

BAUXITE MINES

On Panchpatmali hills of Koraput district in Orissa, a fully mechanized opencast mine of 4.8 million tpa capacity is in operation since November, 1985, serving feedstock to Alumina Refinery at Damanjodi located on the foothills. Presently, the capacity is being expanded to 6.3 million tpa. The salient features:
y y y y y y y

Area of deposit - 16 sq. km. Resource - 310 million tonnes Ore quality - Alumina 45%, Silica 2% Mineralogy - Over 90% gibbsitic Over burden - 3 meters (average) Ore thickness - 14 meters (average) Transport - 14.6 km long single flight multicurve cable belt conveyor of 1800 tph

ALUMINA REFINERY The 15,75,000 tpa Alumina Refinery, having three parallel streams of equal capacity, is located in the picturesque valley of Damanjodi in Koraput district. In operation since September, 1986, the Refinery is designed to:
y y

Provide Alumina to the Company's Smelter at Angul Export the balance Alumina to overseas markets through Visakhapatnam Port

Presently, the capacity is being expanded to 21,00,000 tpa.

37

The salient features:

y y y y

Atmospheric pressure digestion process Pre-desilication and inter-stage cooling for higher productivity Energy efficient fluidised bed calciners Co-generation of 3x18.5 MW power by use of back pressure turbine in steam generation plant

ALUMINIUM SMELTER The 3,45,00 tpa capacity Aluminium Smelter is located at Anugul in Orissa. Based on energy efficient state-of-the-art technology of smelting and pollution control, the Smelter Plant is in operation since early 1987. Presently, the capacity is being expanded to 4,60,000 tpa.

The salient features:

y

Advanced 180 KA cell technology Micro-processor based pot regulation system Fume treatment plant with dry-scrubbing system for pollution control and fluoride salt recovery

y y

y y

Integrated facility for manufacturing carbon anodes, bus bars, anode stems etc. 4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 tph and 2 x 20 tph ingot casting

38

machines
y y

4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills 2 x 45 tonne furnaces and 60/42 per drop billet casting machine 2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine 26,000 tpa strip casting machines With the acquisition and subsequent merger of International Aluminium Products Limited (IAPL) with Nalco, the 50,000 tpa export-oriented Rolled Products Unit is all set to produce foil stock, fin stock, can stock, circles, coil stock, cable wraps, standard sheets and coils.

y y y

CAPTIVE POWER PLANT

Close to the Aluminium Smelter at Angul, a Captive Power Plant of 960 MW capacity, comprising 8 x 120 MW clusters, has been established for firm supply of power to the Smelter. Presently, the capacity is being expanded to 1200 MW.

The salient features:

y y y y y

Micro-processor based burner management system for optimum thermal efficiency Computer controlled data acquisition system for on-line monitoring Automatic turbine run-up system Specially designed barrel type high pressure turbine Electrostatic precipitators with advanced intelligent controllers

39

Wet disposal of ash

The water for the Plant is drawn from River Brahmani through a 7 km long double circuit pipeline. The coal demand is met from a mine of 3.5 million tpa capacity opened up for Nalco at Bharatpur in Talcher by Mahanadi Coalfields Limited. The Power Plant is interconnected with the State Grid.

PORT FACILITIES On the Northern Arm of the Inner Harbour of Visakhapatnam Port on the Bay of Bengal, Nalco has established mechanized storage and ship handling facilities for exporting Alumina in bulk and importing Caustic Soda. The salient features:
y y

Maximum ship size - 35000 DWT Alumina reception - 48 x 53 tonne pay-load wagons

y y

Alumina storage - 3 x 25000 ton RCC Silos Ship loading rate - 2200 tph

These facilities are being upgraded to handle higher volumes of exports, following expansion of production capacities.

40

ROLLED PRODUCTS

Nalco has set up a 50,000 MT per annum Rolled Products Unit, integrated with the Smelter Plant at Angul, for production of aluminium cold rolled sheets and coils from continuous caster route, based on the advanced technology of FATA Hunter, Italy.

41

PLANTS SPECIAL FEATURES TO ENSURE WORLD CLASS FACILITIES

Sidewell type Melting Furnace

Ensures better temperature control, composition uniformity, higher melt rate and higher yields when melting light scrap Excellent level control of metal in the launder which results in better quality Removes hydrogen and alkali metal impurities from molten aluminium Eliminates inclusions and suspended impurities Eliminates ripple effect, ensures high quality cast coils with better

Tilting type Holding Furnace

On-line Degassing Facility Ceramic Foam Filter

Unique 15 tilt Super Caster

profile, accurate gauge and metallurgical properties to International Standards

Four

separate

Casting

lines,

individually complete with its own To ensure casting of four different grades of aluminium products Furnaces, Casters etc. Cold Rolling Mill with automatic gauge Reduction in thickness upto 0.12 mm with gauge accuracy and control and automatic flatness control Annealing Furnace with Nitrogen flatness to International Standards Ensures brighter surface with no brown stain simultaneously, thus reducing lead time drastically

Controlled atmosphere Precision equipment Special Roll Grinder with Millitron System

Slitters & Cut-to-Length Ensure close tolerance on width, length and diagonal, straight buildup and smooth, tear-free edge Computerized numerical control cambering maintains stringent tolerance while recording actual profile of the roll in the form of a chart

42

TABLE NO. 4.1 Mechanical properties against Temper designation

% ELONGATION (Min) 0n 50 mm GAUGE LENGTH Alloy AA1050 Temper 0 H12 H14 H16 H18 AA1100 0 H12 H14 H16 H18 AA1200 0 H12 H14 H16 H18 AA1235 0 H12 H14 H16 H18 AA8011 0 H12 H14 H16 H18 AA3003 0 H12 H14 H16 H18 AA3105 0 H12 H14 H16 H18 AA5005 0 H12 H14 H16 UTS (Mpa) 0.12-0.32mm 55-95 75-110 85-120 95-130 110min 75-105 95-130 110-145 130-165 150 min 70-110 90-130 105-140 125-150 140min 65-95 80-115 88-127 118-147 138 min 85-120 105-140 125-160 150-180 1 75 min 95-130 120-160 140-180 165-205 185 min 95-145 130-180 150-200 170-220 190 min 105-145 125-165 145-185 165-205 15 1 1 1 15 1 1 1 15 1 1 1 15 1 1 1 14 3 1 1 1 14 3 1 1 1 12 2 1 1 0.33-0.63 mm 18 6 2 2 2 17 3 2 2 1 17 3 2 2 2 17 3 2 2 2 20 4 2 2 1 20 4 2 2 1 16 1 1 1 1 16 4 2 1 0.64 - 1.20mm 23 7 6 4 3 22 5 3 3 2 22 5 3 3 2 22 5 3 3 2 22 6 3 3 2 22 6 3 3 2 19 2 2 1 1 19 6 2 2 1 .21-3.00mm 25 12 10 5 4 30 8 5 4 4 30 8 5 4 4 30 8 5 4 4 25 9 5 4 4 25 9 5 4 4 20 3 2 2 2 21 9 3 3

43

H18 AA5052 0 H12 H14 H16 H18

185 min 170-215 215-265 235-285 255-305 270 min

13 3 2 2

15 4 3 3 3

17 5 4 4 4

19 7 6 4 4

NOTE: for H22, H24, H26, H28 temper, UTS will be same as UTS of H12, H14, H16 and H18 temper but % Elongation shall be slightly higher than the values indicated against H1x tempers.

TABLE NO. 4.2 Chemical Composition of Alloys

Specifications % Sl.No. Alloy % Si % Fe % Cu % Mn % Mg % Cr % Zn % Ti % V Other % Other % Aluminium

Impurities Impurities Each Total 0.15 max

AA3003

0.60 max

0.70 max

0.05 0.20

to

1.00 to 1.50 0.15 max 0.05 max 0.05 max 0.05 max 0.30 to 0.80 0.05 max 0.10 max 0.70 to 1.10 0.05 max 0.10 max -

0.10 max

0.05 max

AA5005

0.30 max 0.25 max 0.95 max

0.45 max 0.40 max

0.05 max 0.05 max

0.20 max 0.05 max 0.10 max 0.10 max 0.40 max 0.10 max 0.05 max

0.05 max 0.03 max 0.05 max 0.05 max 0.05 max 0.03 max 0.05 max

0.15 max

AA1050

0.03 max 0.05 max 0.10 max 0.06 max

0.05 max -

0.15 max 0.15 max 0.15 max

99.50 min

AA1100

(Si+Fe) 0.05 to 0.20 0.05 max 0.70 max 0.30 max

99.0 min

AA1200

1.00(Si+Fe) max 0.60 max 0.65 max 0.25 max 0.50 0.40 max 0.60 to 1.00

0.20 to 0.80 0.05 max 2.20 to 2.80 0.05 max

99.00 min

AA3105

0.20 max

AA1235

(Si+Fe) 0.05 max 0.10 max

0.15 to 0.35 0.05 max

0.05 max

99.35 min

AA5052

0.15 max

AA8011 to
0.90

0.10 max

0.20 max

0.10 max

0.08 max

0.05 max

0.15 max

44

THE FINANCE FUNCTIONS

NALCO years. has remained results production the forerunner of and the with best quality reflect turnover of the and products companys net profit over the

Financial in

company Sales

robust have

performance

marketing.

grown over the years. Zero debt status of the company has made the position of the company

very strong for any fresh borrowing market. Government of India has also given green signal to Nalcos proposal for equity restructuring. Hence Nalcos

position in the financial market has become strong, all these have enthused Nalco to invest further operations. Companys total income was Rs.5,631 crore as against Rs.5,576 crore during the previous year. The profit af ter tax for the year under report stands at Rs.1,272 crore as against Rs.1,632 crore for the previous year. The decline in profit is due to lower sales realization in alumina and aluminium due to global recession which started in the 2nd quarter and continued during rest of the financial year. The Company achieved export earning of Rs.2,071 crore during the year as against Rs.2,135 crore of the previous year. The summarized financial results as compared to the previous year are furnished below: Table No. 4.3 Mar ' 10 Income Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses Expenses capitalised Cost of sales Operating profit Other recurring 5,184.73 957.09 1,909.91 843.60 93.54 160.01 Mar ' 09 5,221.35 724.73 1,571.46 771.06 99.73 164.39 Mar ' 08 5,144.14 659.11 1,246.84 552.97 96.18 156.40 (Rs. in crore) Mar ' Mar ' 07 06 6,056.60 633.87 1,112.42 392.88 87.78 131.22 4,950.69 552.62 1,155.98 331.45 90.33 128.06 2,258.44 2,692.25 123.23 in downstream facilities to diversify and spread its

-0.22 -0.19 3,963.93 3,331.18 1,220.80 1,890.17 299.95 386.21

2,711.50 2,358.17 2,432.64 3,698.43 429.85 298.18

45

income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Preference dividend Dividend tax Retained earnings

1,520.75 2,276.38 92.08 88.57 319.39 272.44 1,109.28 1,915.37 354.56 659.70 754.72 1,255.67 33.87 -2.02 25.63 18.62 814.22 825.02 161.08 27.38 636.56 1,272.27 1,287.66 322.16 54.75 910.75

2,862.49 67.86 281.10 2,513.53 855.13 1,658.40 -21.55 -5.33 1,631.52 1,667.64

3,996.61 51.43 306.13 3,639.05 1,238.70 2,400.35 -12.62 -6.35 2,381.38 2,391.87

2,815.48 39.65 377.24 2,398.59 834.35 1,564.24 36.16 -38.20 1,562.20 1,577.78 322.16 45.18 1,210.44

386.59 483.23 65.70 72.56 1,215.35 1,836.08

Details of sales are given below: (In MT) Particulars Export Alumina Aluminium Domestic Alumina & Hydrates Aluminium Total Metal Sale Total Chemical Sale 37,637 2,71,274 3,53,591 8,89,523 31,730 2,51,612 3,53,335 8,91,714 8,51,886 82,317 8,59,984 1,01,723 2008 -09 2007 -08

46

THE HUMAN RESOURCE FUNCTION Nalco is a and reservoir skill-base of are 7000 plus the high-value best in human India. resources, whose and

knowledge

among

Professionalism

teamwork are fused with personal responsibility to enhance performance at all levels, through and appropriate reward organizational systems, as structures as and empowerment. welfare The and compensation well the employees

social security schemes provided by the company are among the best in the country.

Human Resource VISION To attain organizational excellence through trust, openness, commitment, creativity, innovation and providing opportunities for growth, well being and professional enrichment.

Human Resource MISSION This department is headed by GM (HRD & Administration), assisted by DGM and a team of other executives. The HRD department looks after the Manpower Planning, Recruitment, Employee establishment matter and Employee wages and salary administration, Industrial relation, Welfare, Contract labour Management, Training and development and Satutory reports and return. The Administration wing deals with township administration, law and order, Security, Protocol, Hospitality, Transport Pool, Liaison with Government agencies, Rehabilitation, Peripheral Development , Furniture & Stationery, Raj Bhasa Cell, Sanitation and Horticulture etc.

47

ORGANISATIONAL STRUCTURE OF HRD DEPARTMENT:

In any

organization HRD department

plays an important role in

managing

and controlling the overall administration of the organizational activities. The internal organizational structure of HRD department varies widely in different companies depending upon their size and philosophy.In NALCO, the Head

of HRD &Administration reports to the Head of Mines & Refinery Complex i.e. Executive Director (M&R).While the GM (HRD &Admn) renders functional

advice to Executive Director (M&R), the DGM (HRD &Admn) supported by Chief Manager (HRD) and a team other HR executives renders functional

advice to General Manager (Alumina Refinery) in matters relating to HR of Alumina Refinery. Functions like Recruitment, Promotion, Training & Development etc. are handled by a separate group under DGM (HRD &Admn) commonly for Mines & Alumina Refinery. Manpower Planning is looked after by the Industrial Engineering Wing which reports to GM (HRD &Admn).

ROLE OF HRD DEPARTMENT IN THE ORGANIZATION:

The HRD Department has staff relationship with other departments managers in the total organization. It is responsible for advising line management and top management on all areas relating to the Human Resource Management. There has been a sea change in the role of H R Manager to-day. He is no more confined to welfare and industrial relations functions. With the change in the business scenario giving rise to stiff competition among industrial organizations and advancement of technologies, the human resources have to be kept ready all the time to face the challenges. And development of human resource is one of the key roles of an HR Manager. To-day the role of HR Manager is that of a change agent and he is regarded as the employee champion. Keeping the above in view, the HRD Department in Nalco has gone beyond its traditional roles and has embarked upon a slew of new functions. WithISO 9001: 2000 certification and implementation Total Productivity Maintenance (TPM),training and development has assumed great importance.Competency mapping and

48

bridging the gap in competency through well devised training programmes has been the thrust of the time.

THE PHILOSOPHY OF NALCO IN THE FIELD OF HR

NALCO has a well defined comprehensive policy on HR, which states as under:
y

To attract competent personnel with growth potential and develop their skills and capabilities in a congenial work and social environment through opportunities for training, recognition, career advancement and other incentives.

To develop and nurture favorable attitudes among the employees and to obtain their best contributions to the organization by providing stable employment, safe working conditions, job satisfaction, quick redressal of grievances and through good pay and welfare amenities commensurate with the companys capacity to spend and the governments guidelines.

To foster fellowship and sense of belongingness among all sections of employees with the management through closer association of employees with the management and by encouraging healthy trade union practices.

HRM POLICIES Policies are general statements that guide thinking and action in decision-

making. A policy is a plan of action. Each organization has its own policy. In Nalco, the company has a codified personnel policy, which is circulated in the form of a manual known as HRD manual. Further a hand book entitledThe Company You Keep codifying salient points of various rules, has been made. and issued to each employee. intranet Moreover, and the The rules are also available in HRD in the

Companys

website.

various

functions

department

are carried on inline with the guidelines provided in the policy. This policy is formulated by the Board Of Directors of the company and implemented by various levels of management as per the delegation of powers.

49

SCOPE OF THE POLICIES

The HRD policy covers the areas wage with its of and manpower salary planning, recruitment, training resource keeps on placement, and maintenance function, etc. administration, on assets human and

development, The

separation company

emphasis as

development.

regards

employee

upgrading their skills, knowledge and competence so as to make the human potential match with the organizational needs. Policies get amended from time to time depending upon the need of the organization within the framework of law and Government guidelines.

FUNCTIONAL AREAS OF HRD DEPARTMENT

The functions of HRD may also differ from one organization to another depending upon the size of the organization, management philosophy and HR policy followed by the company. In Nalco, the HRD department has overall responsibility for dealing with human resources in the company.The main functions of HRD are;
y y y y y y y y y y

Manpower Planning Recruitment and Selection Employee Relation/ Establishment Function Wage and Salary Administration Industrial Relation Welfare Contract labour Management Training And Development Performance Appraisal Employee Motivation

50

MANPOWER OF NALCO
In Nalco, the human resources are the principal assets to operate and maintain the diverse, complex and highly automated plants, equipment and facilities. The manpower strength as on 31.03.2010

Total SC/ST Representation Land Displaced Persons Physically Handicapped Women Employees

7426 2516 1975 70 320

TRAINING AND DEVELOPMENT

TRAINING OBJECTIVES
y y y

Achieve systematic integration of training with the organization's mission Stimulate constructive interaction between employees problems & perspective of the organization Establish a distinctive work-culture for the organization

THE TRAINING SET-UP Keeping in view the locations of the production units, the need for providing specialized technical training and the Company's overall management development policies, there are three distinct training set-ups: 1. Training Institute at Angul 2. Training Institute at Damanjodi 3. HRD Centre for Excellence, Bhubaneswar The Training Institutes are well equipped with latest audio-visual training aids, lecture halls,
51

workshops, model rooms, drawing rooms, laboratory, library and auditorium. The hostel complexes for the trainees in NALCO townships are excellent examples in vibrant community living. Sports and games provide a constructive pastime to the trainees.

TRAINING SYSTEMS The total spectrum of training has been classified into 7 major sectors. 1. Contractual Training on technological know-how. 2. Functional specialisation & Refresher training within & outside the organisation. 3. Advanced Management Training for Sr.Executives at specialised institutes in India & abroad. 4. Management Development Programme, Induction & Orientation Training in-house. 5. Training of the Trainees, i.e, Graduate Engineers, Management Trainees, Operative Trainees, Land Displaced Trainees, Apprentices under the Act. 6. Supervisory Development Programme in-house. 7. Workmen Development Programmes in-house.

Management Development Philosophy The objectives of management Development in NALCO:

y y y y y

To upgrade the skills, abilities, capacities of managers to handle broader assignments. To be able to move towards releasing the organisational need for succession, promotion and better performance. To help the managers to use more effectively the Company's existing resources. To help the managers, as individuals " to perceive more clearly & control more effectively the situations in which,at the outset,nobody knows what to do" To develop the managers through problems of business by using experience on the job as the powerful instrument of learning and thereby improve the performance of the manager, as well as operation of the business.

52

CORPORATE SOCIAL RESPONSIBILITY

ITS NOT CHARITY, ITS OUR RESPONSIBILITY At Nalco, when we started our activities in Orissa 29 years ago, there was no such nomenclature like Corporate Social Responsibility or CSR. All that we knew was our Moral Responsibility towards the society.

But today, CSR has become a buzzword in the corporate world. More and more organizations are waking up to this belated realization that beyond productivity and profitability, it is the social accountability that determines their image.

Presently, even before the land is acquired and foundation-stone laid for a project, the company launches its CSR activities in the area. It is presumed that on a solid CSR foundation, a strong business empire can be built.

As a policy, Nalco has been allocating 1% of its net profit of the year for periphery development activities of the succeeding year

Out of this allocable fund: 40% is for Damanjodi sector, where the companys Mines & Refinery are located; 40% is for Angul sector, where the companys Smelter & Power Plant are located; and 20% is for other areas. AMOUNT ALLOCATED TOWARDS PERIPHERY DEVELOPMENT TILL 2009-10 (including special projects) At Damanjodi At Angul Other Areas : : : Rs.48.88 Cr Rs.61.10 Cr Rs.26.89 Cr Rs.136.87 Cr

------------------------------------------------------TOTAL :

53

(To foster scientific temper among rural students, Nalco takes them to Bhubaneswar and shows them Pathani Samant Planetarium, Regional Museum of Natural History and Regional Science Centre.)

BEYOND PERIPHERY Soon after the Super Cyclone in Orissa in the year 1999, Nalco has constructed 197 Primary Schools-cum-Cyclone Shelters, under Prime Minister's National Relief Fund Scheme.

Funds received from PM's Office Nalco's contribution Total Expenditure

Rs.6.37 Cr Rs.1.31 Cr Rs.7.68 Cr

----------------------------------------------------------------------------------:

NALCO TO DOUBLE ITS CSR EXPENDITURE Navratna Nalco has decided to set up a Corporate Social Responsibility Foundation by the end of April, 2010. For this, the company shall be allocating one percent of its net profit every year. So far, Nalco was spending one percent of its net profit for its periphery development programme. With the setting up of Nalco CSR Foundation, the amount now stands doubled. Moreover, the Govt guideline is to spend 5% of the net profit from mining revenue for CSR activities; whereas Nalco has decided to spend 2% from its overall net profit, which is much higher Building Nalco does not mean merely contributing to the aluminium capacity of the country. It has involved playing significant roles in the economic development of the areas where Nalco operates. Rehabilitation of displaced families, employment and income generation for local people, development of infrastructure, environment care and humanitarian goodwill missions have earned Nalco a place of pride, not only in the corporate world of India but also

54

in the hearts of the people of Orissa. Now, the doubling of CSR fund indicates that with the passing years, Nalco has become more mellowed and matured, sharing its success with the society at large.

THE BIGGEST CSR INITIATIVE SO FAR Creating Nalco has meant much more than contributing to the Indian aluminium industry or to the government exchequer. It has involved the transformation of a simple and naive civilization to a vibrant industrial society, rehabilitating the displaced persons, training local youths, creating direct and indirect job opportunities, besides improving education, communication, transportation, health care and drinking water facilities.

Among all these Corporate Social Responsibility initiatives, the schools set up by the Company stand out as Nalcos biggest contribution to the society.

Funded by the Company, one English-medium school and one Oriya-medium school, in each of these townships, were started with the management of Delhi Public School Society, New Delhi and Chinmaya Mission Trust, Bombay, respectively, way back in 1983-1984. Subsequently in 1991-92, the management of Oriya-medium schools was entrusted to Sikshya Vikash Samiti, Orissa, and the schools were re-named as Sarswati Vidya Mandir. Presently, around 9000 children are studying in these four schools. Right from the inception, importance was given to set up good schools in Nalcos own townships at Angul and Damanjodi, as education for the employees children was one of the top priorities of the management. But more significantly, the doors of the schools were kept open for the children of Nalcos associates and other meritorious children living in the vicinity, which is more than 30% of the total strength of these schools. As a result, the educational subsidies provided by Nalco were passed on to non-Nalco children as well.

55

As per financial calculations made a couple of years back, following is the annual educational subsidy provided to each child in Nalco-aided schools: TABLE NO. 4.4 Delhi Public School, Angul Delhi Public School, Damanjodi Saraswati Vidya Mandir, Angul Saraswati Vidya Mandir, Damanjodi

: Rs.12,391

: Rs.15,412

: Rs.11,981

: Rs.19,354

That is, on an average, each child gets a subsidy of about Rs.15,000 per annum; when multiplied by student strength of 9000, it works out to a whopping Rs.13.5 crore per annum. This includes more than 30% for non-Nalco children. Financials apart, the role of Nalco in creating responsible citizens of tomorrow is perhaps more momentous. And come to think of it, Nalco has been extending these facilities for the past 27 years, without ever tom-tomming about it! The other day, I laid my hands on an ONGC publication, named Saga of Courage & Conviction. I would like to share a small but thought-provoking excerpt from it, which touched me.

Well, after the Kargil war, General V.P. Mallik wrote a comprehensive book titled, Kargil: From Surprise to Victory, wherein he has mentioned about Mrs Sudha Murthy. And I quote:
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After the war, one day Sudha Murthy, wife of Narayan Murthy, the then Chairman of Infosys Ltd., rang me up. She asked me for the names and addresses of the personnel who had been captured by the Pakistani Army at Kaksar and then killed after interrogation. I had these details sent to her. In a rare gesture of sympathy, she met the families of these personnel and also gave them monetary assistance from the Infosys Foundation which is involvedincitizenswelfareprogrammes.

During and after the war, many public and private organizations had contributed to the Kargil Welfare Fund in 1999, including Nalco. In that year, our employees had also donated one days salary amounting to Rs. 18 lakhs, while the Company contributed Rs. 1 crore, to this Fund.

But the fact that General Mallik chose to narrate just one story reflects the fact that it is not important what you give, what is important is how you give . It was the passion of Mrs Murthy that fascinated General Mallik to mention the story. It is the expression of genuine care and concern that distinguishes one company from another. There are different ways of treating an ailing person: Allopathy, Homeopathy, Naturopathy But, it is the Empathy of the treating surgeon and his team, which impacts instantly. A patient hearing, a thoughtful look, a gentle touch and a few encouraging words do not cost anything. But all these caring and sharing ways do wonders in recuperation of the ailing man. But unfortunately, due to shortage of time, and other priorities in life, we treat the poor and needy persons around us with Apathy, which perhaps is more debilitating than the social malady one suffers from.

So, as we plan to set up Nalco Foundation to execute our Corporate Social Responsibility in a planned and passionate way, the Nalco team could take a leaf from the Infosys Foundation in general and Mrs Murthy in particular. Lets be more empathy-driven in our ventures rather than meeting per se the responsibilities thrust upon.

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GUIDELINES ON CORPORATE SOCIAL RESPONSIBILITY FOR CENTRAL PUBLIC SECTOR ENTERPRISES CHANGE IN APPROACH With the rapidly changing corporate environment, more functional autonomy, operational freedom etc., CPSEs today are required to adopt CSR as a strategic tool for sustainable growth. CSR, in the present context, means not only investment of funds for social activities but also integration of business processes with social processes.

NEED FOR LINKAGE WITH COMMUNITY An Enterprise needs to address the concerns of the society in which the enterprise is operating. There should be free interaction between enterprises and community leaders.

In order to address the social needs of the community, viable projects need to be identified to meet its requirements.

OVERARCHING CONCEPT CPSEs may approach Corporate Social Responsibility as a professional management process, with a long-term strategy, integrating it with corporate strategies.

CSR activities may be planned in parallel to the business plan, looking at every possible opportunity to link and integrate business plans with the social and environmental concerns available.

PLANNING THE CSR INITIATIVE A long-term Corporate Social Responsibility Plan needs to be prepared matching with the long-term business plan; This may be broken down into short-term and medium term plans, specifying activities to be undertaken, budgets allocated, responsibilities and authorities defined, and measurable results expected.

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IMPLEMENTATION The Plan must clarify implementation guidelines involving: Participation of Voluntary Organizations, Specialist Organizations and Community Based Organizations; Base-line Surveys; Documentation of the experience; Setting up a CSR Hub with participation of Deptt of PE, SCOPE and CPSEs; Monitoring and Evaluation; Lessons learnt for future use.

THRUST AREAS Areas related to the business of the PSE as a natural corollary to the business; Assistance to be mostly project based rather than donation, so as to generate community goodwill, create social impact and visibility; Finalizing of time-frames and various milestones before commencement of a project; Involving of suppliers in order to ensure that the supply-chain also follows the CSR principles; Emphasis on principles of Sustainable Development, based on the immediate and long-term social and environmental consequences of the activities undertaken; Improvement of the existing ecological conditions; Ensuring skill enhancement and employment generation by co-creating value with local institutions and people.

ACTIVITIES THAT WILL NOT COUNT AS CSR BENEFITS TO STAFF GRANTS TO ORGANIZATIONS/INSTITUTIONS

IMPLEMENTATION MODALITIES CSR Activities to be carried out by Specialist Agencies; Such activities generally not to be conducted by CPSE employees / staff; Specialist Agencies to include NGOs, Institutes, Academic Organizations, Civil Society / Community-based Organizations, Trusts, Missions etc., who have requisite expertise;
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 Utmost efforts to be made to find out the reliability, and track record of the NGOs / Organizations entrusted with CSR activities; Initiatives of State Governments as well as Central Government Departments / Agencies could be dovetailed/ synergized with CSR activities; Avoidance of any duplication of CSR activities by the CPSEs, the State Governments and local level Programmes.

FUNDING The CSR budget to be mandatorily created through a Board Resolution as a percentage of net profit in the following manner:

TYPE OF CPSES EXPENDITURE RANGE FOR CSR Net Profit in a Financial Year (Previous Year) (i) Less than Rs. 100 crore (ii) 100 crore to Rs. 500 crore (iii) 500 crore and above (% of profit) 3% 5% 2% 3% (Subject to a Min. of 3 cr) 0.5% 2%

The CSR Budget to be fixed for each financial year. This funding not to lapse must be transferred to a CSR Fund, which will accumulate as in the case of non-lapsable pool for North East. In case CPSEs have different Profit Centers like Factories / Plant locations, they may be allocated separate CSR budgets to be spent by them under the Annual CSR Budget allocations.

MONITORING Monitoring of the CSR projects is very crucial and needs to be a periodic activity of the Enterprise; The Board of CPSEs should discuss the implementation of CSR activities in their Board meetings; The CPSE should bring a separate paragraph / chapter in the Annual Report on the implementation of CSR activities / projects including the facts relating to physical and
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financial progress; The implementation of CSR guidelines to form a part of the Memorandum of Understanding to be signed between CPSE and the Government; The performance of CSR should be monitored by the Ministry / Department on regular basis; In MoU Guidelines from 2010-11 onwards, 20% has been earmarked out of the nonfinancial parameters for performance under CSR. For proper monitoring of CSR activities, companies may appoint a CSR committee or a Social Audit Committee or a suitable, credible agency to critically assess fulfillment of social obligations. CSR projects should also be evaluated by an independent external agency. This evaluation should be both concurrent and final.

MONITORING & EVALUATION BASELINE SURVEYS AND DOCUMENTATION Impacts made may be quantified to the best possible extent with reference to base line data, which need to be created by the CPSEs before the start of any project. Hence, Base-line Surveys mandatory. The documentation relating to CSR approaches, policies, programmes, expenditures, procurement, etc. to be put in the public domain, particularly through the internet.

CSR HUB The Department of Public Enterprises, in conjunction with SCOPE and the CPSEs will create a CSR Hub which will undertake / facilitate the following activities: Nation-wide compilation, documentation, and creation of database; Advocacy; Research; Preparation of Panels of Implementing Organizations; Promotional activities, including production of short films, printing of brochures, pamphlets etc.; Conferences, Seminars, Workshops both national and international; Act as a Think Tank; Any other matter as entrusted to it from time to time by the DPE;
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CHAPTER-5

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

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ANALYSIS
NALCO is an actively growing PSU, diversifying into related fields with many new projects up its sleeve. As already mentioned, Nalco has a major presence in the domestic market and considering this, it is safe to presume that Nalco wont face any difficulty in selling its products in the domestic market. Since its inception, Nalco was planned to export Alumina, hence, proper infrastructure facilities were not developed for Aluminium export. No doubt that at present Nalco has one of the latest technology in production of metal and one of the best cargo handling and loading systems in the world, but for various other support facilities like transport, shipment, etc., Nalco depends heavily on external agencies. Participation in various trade fairs, exhibitions, etc., are a few of the methods through which Nalco comes in contact with potential buyers. Besides, these various Govt. organizations like FIEO, CAPEXIL, FICCI, etc., provide information about the customers. Top-level officials of Nalcos marketing department also visit various countries to ascertain the customers out there & to facilitate long-term relationship with the buyer. This is important because when one is dealing with foreign buyers, one doesnt know about their credibility, their solvency and their willingness to honour the contract. Moreover, the rules, regulations and culture & practices differ among nations, and hence a deeper understanding of the region & culture facilities decision-making and alleviates the risk to a considerable extent. When Nalcos metal was not registered at LME, it faced considerable difficulties in fixing price both in domestic as well as international market. After getting registered at LME, Nalco adopted LME-linked pricing strategy for its products. This made the process of price fixation
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less cumbersome and ensured that the demand-supply situation of the products determined their price. Registration at LME also increased the demand for NALCOs metal, thereby Nalcos metal commands a good premium in the international market. Nalcos products confirm to international standards with respect to size, shape and weight and hence, Nalco does not face much problem in their packaging & shipment. Though LME registration has made Nalcos metal competitive in the international market, the Western metal of the same purity commands a higher premium than Eastern metal in some warehouse like Singapore, Hong Kong, Taiwan, etc.

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LIMITATIONS
Nalcos marketing activities in the international market are affected by various variables both within and outside the country and both controllable and uncontrollable in the course of the marketing activities, various impediments to the smooth functioning of marketing activities were observed. In order to make its export efficient and effective, which would drive Nalco towards its goal To be a reputed global company in the Metals & Energy Sector, Nalco must prioritize its needs and strive to eliminate the hindrances of its face for smooth functioning. Mentioned below are some factors, which inhibit the efficiency of Nalcos marketing activities in the international market. Paradip port, which is the nearest port to the smelter lacks infrastructure for handling of cargo, hence, Nalco has to transport goods to Vizag, thereby incurring more costs.
y

Nalco is heavily dependent on Indian Railways for transport of its goods. Sometimes, this causes delay in shipment and Nalcos credibility gets affected.

Nalco does not have any branch in foreign countries with whom it indulges in active trade. This causes a lot of inconvenience and uncertainty, because in this case the credibility of the buyers is very difficulty to assess.

Nalco doesnt have the flexibility to store its metal in LME warehouses. This prevents Nalco from taking advantage of favourable market situations.

Nalco has restrictions on the quantity of goods it can export. This causes pile up of inventory in case of demand in domestic market is low.

Nalco doesnt have the permission to engage in various market operations like hedging, options trading, etc., which prevents Nalco from taking advantage of

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favourable market situations. Besides these, there are various factors which indirectly affect Nalcos marketing setup. These are : Nalcos metal is branded as Eastern metal as a result of which it gets a lesser premium in comparison to Western metal, in come of the markets in the Far East.
y

Sometimes, unnecessary delay is caused in shipping the goods because of lack of coordination with the customs department.

There remains a nagging power problem at the Smelter because of which the quality of the products often goes down which prevents Nalco from fulfilling its export commitments.

Following are some of the constraints observed in marketing: Export of Hydrate in bulk has not been very successful due to lack of handling facilities at Damanjodi and Vizag.
y

Heavy fluctuations in demand supply position in the international market eventually leading to substantial fluctuations in LME price.

Nalco has no means of hedging against such fluctuations as hedging is banned in India.

Poor transport system affecting the sales/export schedule.

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SUGGESTIONS
The capacity realization by 2009-10 is likely to put pressure on the marketing and supply chain departments. Today, the company is hardly doing any marketing. It follows LME pricing and is shy of fully utilizing the spot market opportunities for better price realization. Of course, there will be some risk of lower realization as well. Linking domestic price to the LME price has improved realization from the domestic market but there is need to develop proactive measures and faster response to the pricing strategies of the competitors. Further, hedging instruments for management of risks arising out of wide fluctuations in international prices and exchange rates are required for long term sale contracts. Today LME registration, Quality Assurance, Competitive Cost etc. are some of the factors which have enabled Nalco to attract and retain customers of alumina and aluminium but it is already facing difficulty in marketing its rolled products. Once the projects stated above are implemented, the pressure on marketing department will increase many folds. In the years to come, the market will become more and more competitive both at the national as well as international levels. Product Range, Customer Care, Value Added Services, Market Diversification & Penetration, Market Promotion, Dynamic Pricing and Branding will have to be introduced in its marketing tools. Further, to improve the companys market image and to force a customer service culture in the organization, it is very desirable to allow the customers to charge penalty for delayed deliveries and poor quality. (A practice, the company is imposing on its suppliers but does not practice itself). Special effort will have to be made to increase the size of the pie rather than only fighting for a bigger piece from the same pie. For this, Marketing Dept will have to initiate joint efforts by all aluminium producers aimed at higher penetration mainly into construction where Indian consumption is low and sectors are expected to have high growth. Apart from marketing, the sales organization, too will have to be revamped to deliver the products without loss, damage and delays. The company presently sells its products on exfactory basis. Though it is ideal situation, with increase in production and competition, more stockyards will have to be organized as customers would want to lift their requirement from the nearby stockyard rather than waiting for the supplies from the plant. Sales call will have
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to be made on the buyers as steel industry has already started. Customer segmentation and segmentwise specialized service will have to be developed. Sales will have to be effected making use of Information Technologies. Customer will have to be provided on-line business transaction that will make both the dispatch by the company and payment by the customer with a click of button along with generating real time accounting and tax documents and sending them to relevant destination for making required transactions.

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CONCLUSION
ALUMINIUM production is characterized by high entry barriers. The first stage in the manufacturing process involves the production of alumina, by refining bauxite ore; the second involves processing alumina in a smelter to extract aluminium. The costs of establishing new capacities are high. The availability of good quality bauxite at a reasonable price is the most important factor in determining the competitiveness of a unit. Electrical power is a key input in aluminium smelters and its cost is a key variable. The high cost of setting up an integrated plant, the limited access to technologies and the long gestation periods of projects imply that the industry has a tendency to be oligopolistic in nature. This tendency has gained momentum in the last few years. NALCO's biggest strength is the quality of its bauxite ore. The alumina content in its ore, at 45 per cent, is regarded as very high; the silica content, low at 2 to 4 per cent, makes its ore among the best. With these advantages, the company is the least-cost producer of alumina in the world. While NALCO's cost of producing alumina is about $100 a tonne, the next best-competitive price, of a global major, is $140 per tonne. With the smelter situated close to the pithead of the coalfields near Angul, NALCO's transportation costs are low. Although the company commands a share of 40 per cent of the aluminium output in India, its market share (in value terms) is only about 23 per cent. Hindalco, which has a production share of about 46 per cent, has a market share of over 42 per cent. This is the result of the way the public sector has been "reigned in" by government controls and red tape, and most significantly, the manipulations of the private companies. NALCO's profitability rests on its access to low-cost bauxite and that the company has not developed its capability for value-addition A senior NALCO officer told Frontline that "NALCO has not been allowed to come in the way of its private competitors" by developing downstream products such as aluminium sheets, foils and other extruded products. This, he said, would not have been a difficult task; nor would it entail substantial capital costs or investments in technology. He also pointed out that takeover of IAPL (now called the Rolled Products Unit of NALCO) would enable the company to make inroads into markets for downstream products.
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