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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

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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

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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.

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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.

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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.

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(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.

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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.

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.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.

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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 to NALCO for its captive use for the 9

th and 10

th 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.

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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 .

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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 tri-hydrate 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

suitable technology for 5th

stream of Alumina refinery under 3rd

phase expansion.

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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

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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 ex-stockyard. 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

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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.

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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.

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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.

The Company completed its brown field 1st

phase expansion in late nineties and 2nd

phase expansion has been partly completed and remaining part is nearing completion.The company has plans for 3

rd

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.

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 :

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

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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.

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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 2009-10.

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

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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.

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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, up-gradation 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

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: 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-nurture-innovation 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

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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

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

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.

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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

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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

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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.

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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.

Our Vision:-