Federal Auditors Take Nalco To Task For Weak Performance And Lost Financial Opportunities

Federal Auditors Take Nalco To Task For Weak Performance And Lost Financial Opportunities

India’s state-owned aluminium producer National Aluminium Company Ltd was taken to task last week by the national auditor for failing to perform to expectations and acting slowly in developing coal mines given to it by the government.

The Comptroller and Auditor General said in a report submitted to Parliament last week that the firm lost out on INR1,086.63 crore between 2012-13 and 2016-17 due to underutilization caused by insufficient power. Per the report, Nalco experienced production losses of 493 thousand metric tons, plus incurring additional expenditures of INR326.62 crore of excess coal consumption and INR239.23 lost due to an undetected drop in coal quality used at captive power plants.

In addition to chronic underutilization, the report says that Nalco produced only 9.631 million metric tons of alumina, falling short of the targeted production of 10.735 million metric tons. The shortfall was largely due to weak production at the company’s bauxite mines, which conspired with quality problems to lead to elevated consumption of both bauxite and caustic soda, per the report.

Bauxite quality problems exacted other financial costs, noted the report. Due to high silica content in Nalco’s bauxite ore, the company required an additional 146 thousand metric tons of caustic soda for the fiscal years of 2013 through 2016, which cost the firm an additional INR426.27 crore. The report indicated Nalco’s awareness of the problem and the INR75.45 crore per year savings that upgrading refining technology would bring the firm, but it did not order the necessary equipment for almost 5 years.

In addition to financial shortfalls, the report chided Nalco for environmental issues. The CAG indicated that Nalco initially pledged to utilize conveyor belts to move bauxite ore from mines to crushers, but instead continued to use dump trucks, which create excess dust and spillage. Noting that the firm defended the practice by saying the Indian Bureau of Mines approved of the practice, the report retorted by saying that the ministry did not have the authority to override conditions set by state and federal environmental regulators.