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Disinvestment of National Aluminium Company Limited (NALCO): A Public Sector Enterprise, Government of India

Disinvestment, the major agenda of the economic reforms of the Government of India (GOI) since 1991, led a debate on the policy and its impact on stakeholders. Following its agenda, the GOI decided to disinvest the National Aluminium Company Limited (NALCO) during 2002-03 and 2005-06. This case highlights the decision to disinvest NALCO, the reaction of stakeholders and its implication, and outcomes. The first part describes the background and the case facts and the second part presents an analysis of the case and proposes the stakeholders' management in the disinvestment process. Opposing the central Government's decision to divest 10% stake of the company, about 5,000 workers and officers of the National Aluminium Company Limited (NALCO), Angui, Orissa, went on a 24 h strike on June 23, 2006; shut the main entrance of the company's smelter and captive power plants. The strike costed approximately Rs. 150 mn.1 On the next day, workers in mines at Danmanjodi joined the strike which adversely affected the mining operations. Consequently, all categories of employees, including officers and contract laborers, took part in the strike. NALCO Mazdoor Sangha (Labor Union) president Somnath Mohapatra said: "If the Government does not reverse its decision, the agitation will intensify."2 Further, NALCO-recognized land displaced people's Union President Krutibas Raju said: "We have decided to warn the Union government with this oneday token strike. If the decision of 10% disinvestment is not withdrawn, we will obviously be forced to decide more stringent action."3 However, a day after the strike NALCO's Executive Director U B Patnaik said: "Employees have joined their duties. Now as many as seven units in the power plant are in operation. All the units of smelter plant are running normally."4 Meanwhile, leaders of the seven trade unions including Central Industrial Trade Union (CITU), AU India Trade Union Congress (AITUC), Indian National Trade Union Congress (INTUC), Hind Mazdoor Sangh (HMS), and Bharatiya Mazdoor Sabha (BMS) met to chalk out the future course of action to oppose the disinvestment decision of NALCO. NATIONAL ALUMINIUM COMPANY LIMITED The Government of India (GOI) incorporated NALCO in 1981, in the state of Orissa, with an objective to meet the domestic demand of Aluminium. It was done in technical collaboration with Aluminium Pechiney, France, Europe's largest metal products company. Eastern coast of India had large deposits of bauxite, which gave an impetus to NALCO's incorporation. The company was a turning point in the history of Indian aluminium industry. It not only addressed the need for self-sufficiency in aluminium, but also gave the country a technological edge in producing aluminium of high standards. NALCO was consistently reporting profit and high turnovers (Appendix 1 and 2). Few players like NALCO, Hindustan Aluminium Company (HINDALCO) and Bharat Aluminium Company Ltd. (BALCO) dominated the Aluminium industry in India. NALCO was Asia's largest integrated complex consisting of 2,400,000 Tons Per Annum (TPA) Bauxite mine at Panchpatmali; 800,000 TPA Alumina refinery at Damanjodi; 218,000 TPA Aluminium smelter at Angui; 600 MW coal fired captive thermal power plant at Angui, and port facilities at Vishakapatnam, Andhra Pradesh (Appendix 3). PRODUCTS NALCO's product range consisted of aluminium ingots, sows, billets, wire rods, alloy wire rods, and cast strips. Its product mix was limited to alumina and primary aluminium in ingot, rod, and billet forms. The company was one of the largest exporters of calcined alumina and primary aluminium in India having markets reaching up to South East Asia, Far East, the Indian subcontinent, the Gulf, China, and the USA. All the excess alumina and 40% of the aluminium ingots were exported and the rest were sold in the domestic market. NALCO consisted of the most modern and advanced technology and its production was the second largest after the Hindustan Aluminum Corporation (HINDALCO). …