Lok Sabha Question No. 373 (STARRED), answered on 2016-08-11
Subject: Production of Aluminium
Ministry: MINES
Asked by: VINAYAK BHAURAO RAUT, SHRIKANT EKNATH SHINDE

## GOVERNMENT OF INDIA MINISTRY OF MINES

## LOK SABHA STARRED QUESTION NO.373 TO BE ANSWERED ON 11/08/2016

## PRODUCTION OF ALUMINIUM

## *373 SHRI VINAYAK BHAURAO RAUT AND DR. SHRIKANT EKNATH SHINDE:

Will the Minister of MINES be pleased to state:

- (a) whether  the  Government  has  signed  an  agreement  with  the  National  Aluminium  Company Limited (NALCO) regarding financial and non-financial targets for the Financial Year 201617;
- (b) if so, the details and the salient features thereof;
- (c) whether  the  agreement  has  also  set  higher  targets  for  production  of  both  alumina  and aluminium as compared to the previous fiscal, and if so, the details thereof;
- (d) the quantum of alumina and aluminium produced by NALCO during 2015-16 and the target for the production during the year 2016-17; and
- (e) the steps taken/to be taken to achieve the targets within stipulated time ?

## ANSWER

THE MINISTER OF STATE (I/C) POWER, COAL, NEW AND RENEWABLE ENERGY AND MINES (SHRI PIYUSH GOYAL)

(a) to (e):  A statement is laid on the Table of the House.

## Statement referred to in reply to part (a),(b), (c),(d) and (e) of the Lok Sabha Starred Question No.373 asked by Shri Vinayak Bhaurao Raut and Dr. Shrikant Eknath Shinde for answer on 11 th August, 2016.

-----

- (a) Yes,  Madam.  Secretary,  Ministry  of  Mines,  Government  of  India  has  signed  a Memorandum of Understanding  (MoU)  with  National  Aluminium  Company  Limited (NALCO) on 18 th July, 2016 setting up physical and financial targets for  the financial year, 2016-17 to be achieved by the Company.
- (b) The details of MoU target for NALCO for 2016-17 are given in the attached assessment format 2016-17 at Annexure. The salient features of MoU, 2016-17 are as follows:

(i) MoU  is  a  mutually  negotiated  agreement  between  the  management  of  the company and Govt. of India wherein the CPSE has undertaken to achieve the targets set for  the  year.  MoU  provides  an  assessment  format  in  a  five  point  scale  ranging  from 'Poor'  to  'Excellent'.  It  covers  the  broad  areas  of  activities  of  NALCO,  namely, production capacity utilization in alumina refinery and aluminium smelter, production efficiency  parameters,  technology  up-gradation,  research  &  development,  capital expenditure  (CAPEX)  and  its  monitoring  parameter,  financial  indicators  such  as turnover and operational profit, etc.

- (ii) An annual 'excellent' production target of 21.30 lakh tonnes of alumina and 3.85 lakh tonnes of aluminium by NALCO has been set which are higher than the previous year's achievements.
- (iii) The 'excellent' target for turnover from operations (net of excise) has been set at Rs. 7100 crore.

(iv)The production efficiency targets have also been set to improve over the previous years' achievements.

- (v) The 'excellent' CAPEX target has been set at Rs. 870 crore.
- (c) & (d):  The 'excellent' targets set for alumina & aluminium production in the financial year 2016-17 are 9.06% & 3.49% higher respectively compared to the actual achievement

in  previous  year,    2015-16.  Production  of  alumina  and  aluminium  in  2015-16  and targets for 2016-17 are as under:-

|           | Unit       |   Production in the year 2015-16 |   'Excellent' target for the year 2016-17 |   'Very Good' target for the year 2016-17 |
|-----------|------------|----------------------------------|-------------------------------------------|-------------------------------------------|
| Alumina   | in lakh MT |                            19.53 |                                     21.3  |                                     21    |
| Aluminium | in lakh MT |                             3.72 |                                      3.85 |                                      3.66 |

- (e) Achievement of physical targets in respect of production and sales parameters are being monitored  regularly  by  the  functional  Directors  and  CMD  of  the  Company.  The performance of NALCO, including the status of major projects, CAPEX achievements are  also  being  monitored  by  Ministry  of  Mines  and  the  Board  of  Directors  of  the company.

***************

## MOU Assessment Framework for 2016-17

|         | Criteria                                                                              |                                             | Wtg                                         | MOUTarget                                   | MOUTarget                                   | MOUTarget                                   | MOUTarget                                   | MOUTarget                                   |
|---------|---------------------------------------------------------------------------------------|---------------------------------------------|---------------------------------------------|---------------------------------------------|---------------------------------------------|---------------------------------------------|---------------------------------------------|---------------------------------------------|
| Sl. No. | Evaluation                                                                            | Unit                                        |                                             | Excel.                                      | V. Good                                     | Good                                        | Fair                                        | Poor                                        |
| i.      | Capacity Utilisation: Production                                                      | Capacity Utilisation: Production            | Capacity Utilisation: Production            | Capacity Utilisation: Production            | Capacity Utilisation: Production            | Capacity Utilisation: Production            | Capacity Utilisation: Production            | Capacity Utilisation: Production            |
| a)      | Alumina Refinery : Production of Alumina Hydrate                                      | Lakh MT                                     | 5                                           | 21.30                                       | 21.00                                       | 20.40                                       | 19.80                                       | 19.50                                       |
| b)      | Aluminium Smelter : Production of Aluminium                                           | Lakh MT                                     | 5                                           | 3.85                                        | 3.66                                        | 3.48                                        | 3.31                                        | 3.15                                        |
| ii.     | Efficiency Parameters (Physical operations)                                           | Efficiency Parameters (Physical operations) | Efficiency Parameters (Physical operations) | Efficiency Parameters (Physical operations) | Efficiency Parameters (Physical operations) | Efficiency Parameters (Physical operations) | Efficiency Parameters (Physical operations) | Efficiency Parameters (Physical operations) |
| A.      | Production efficiency:                                                                | Production efficiency:                      | Production efficiency:                      | Production efficiency:                      | Production efficiency:                      | Production efficiency:                      | Production efficiency:                      | Production efficiency:                      |
|         | Smelter: Percentage reduction in DC Power Consumption over previous year              | %                                           | 3                                           | 0.03                                        | 0.025                                       | 0.020                                       | 0.015                                       | 0.010                                       |
|         | Alumina Refinery: Improvement in Electrical Energy consumption over previous year     | %                                           | 4                                           | 0.77                                        | 0.62                                        | 0.46                                        | 0.31                                        | 0.16                                        |
|         | Alumina Refinery: Improvement in Coal consumption over previous year                  | %                                           | 3                                           | 0.75                                        | 0.60                                        | 0.45                                        | 0.30                                        | 0.15                                        |
| B. .    | Technology up - gradation:                                                            | Technology up - gradation:                  | Technology up - gradation:                  | Technology up - gradation:                  | Technology up - gradation:                  | Technology up - gradation:                  | Technology up - gradation:                  | Technology up - gradation:                  |
|         | Smelter: Completion of de - fluoridisation plant based on nano - technology&trial run | Date                                        | 5                                           | 01 - 12 - 16                                | 15 - 12 - 16                                | 31 - 12 - 16                                | 15 - 01 - 17                                | 31 - 01 - 17                                |
| C.      | Research &Development:                                                                | Research &Development:                      | Research &Development:                      | Research &Development:                      | Research &Development:                      | Research &Development:                      | Research &Development:                      | Research &Development:                      |
|         | Smelter: Commercialisation of high speed extrusion alloy billets                      | Date                                        | 5                                           | 15.02.17                                    | 28.02.17                                    | 15.03.17                                    | 22.03.17                                    | 31.03.17                                    |

|         |                                                                                                                                                                                   |                                 |                                 | MOUTarget                       | MOUTarget                       | MOUTarget                       | MOUTarget                       | MOUTarget                       |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|---------------------------------|---------------------------------|---------------------------------|---------------------------------|---------------------------------|---------------------------------|
| Sl. No. | Evaluation Criteria                                                                                                                                                               | Unit                            | Wtg                             | Excel.                          | V. Good                         | Good                            | Fair                            | Poor                            |
| iii.    | Leveraging Net Worth:                                                                                                                                                             | Leveraging Net Worth:           | Leveraging Net Worth:           | Leveraging Net Worth:           | Leveraging Net Worth:           | Leveraging Net Worth:           | Leveraging Net Worth:           | Leveraging Net Worth:           |
|         | CAPEX                                                                                                                                                                             | Rs. Crore                       | 15                              | 870                             | 783                             | 705                             | 634                             | 571                             |
| iv.     | Monitoring Parameter:                                                                                                                                                             | Monitoring Parameter:           | Monitoring Parameter:           | Monitoring Parameter:           | Monitoring Parameter:           | Monitoring Parameter:           | Monitoring Parameter:           | Monitoring Parameter:           |
|         | Percentages of value of CAPEX contracts/projects running/completed during the year without time/ cost overrun to total value of CAPEX contracts running/completed during the year | %                               | 5                               | 100                             | 90                              | 80                              | 70                              | 60                              |
| v.      | Turnover for Operations:                                                                                                                                                          | Turnover for Operations:        | Turnover for Operations:        | Turnover for Operations:        | Turnover for Operations:        | Turnover for Operations:        | Turnover for Operations:        | Turnover for Operations:        |
|         | Revenue from Operations (net of excise duty)                                                                                                                                      | Rs. Crore                       | 5                               | 7,100                           | 6,862                           | 6,598                           | 6,327                           | 6,142                           |
| vi.     | Operating Profit/ Surplus:                                                                                                                                                        | Operating Profit/ Surplus:      | Operating Profit/ Surplus:      | Operating Profit/ Surplus:      | Operating Profit/ Surplus:      | Operating Profit/ Surplus:      | Operating Profit/ Surplus:      | Operating Profit/ Surplus:      |
|         | Profit Before Tax (excluding other income, extraordinary and exceptional items) as percentage of Revenue from Operations                                                          | %                               | 10                              | 2.90                            | 2.75                            | 2.60                            | 2.40                            | 2.00                            |
| vii.    | Early signs of weakness:                                                                                                                                                          | Early signs of weakness:        | Early signs of weakness:        | Early signs of weakness:        | Early signs of weakness:        | Early signs of weakness:        | Early signs of weakness:        | Early signs of weakness:        |
|         | Reduction in Claims against the Company not acknowledged as debt, over the previous year (CPSE& Others)                                                                           | %                               | 5                               | 25                              | 20                              | 18                              | 16                              | 15                              |
| viii.   | Marketing efficiency parameter:                                                                                                                                                   | Marketing efficiency parameter: | Marketing efficiency parameter: | Marketing efficiency parameter: | Marketing efficiency parameter: | Marketing efficiency parameter: | Marketing efficiency parameter: | Marketing efficiency parameter: |

|         |                                                                                            |                              |                              | MOUTarget                    | MOUTarget                    | MOUTarget                    | MOUTarget                    | MOUTarget                    |
|---------|--------------------------------------------------------------------------------------------|------------------------------|------------------------------|------------------------------|------------------------------|------------------------------|------------------------------|------------------------------|
| Sl. No. | Evaluation Criteria                                                                        | Unit                         | Wtg                          | Excel.                       | V. Good                      | Good                         | Fair                         | Poor                         |
| A.      | Number of days of inventory of finished goods and work - in - progress to sale of products | No. of Days                  | 5                            | 24.5                         | 25.0                         | 26.0                         | 27.0                         | 28.0                         |
| B.      | Marketing efficiency ratios:                                                               | Marketing efficiency ratios: | Marketing efficiency ratios: | Marketing efficiency ratios: | Marketing efficiency ratios: | Marketing efficiency ratios: | Marketing efficiency ratios: | Marketing efficiency ratios: |
|         | Trade Receivables as percentage of Revenue from Operations (Gross)                         | %                            | 5                            | 3.00                         | 3.20                         | 3.50                         | 4.00                         | 4.50                         |
| ix.     | Return on Investment:                                                                      | Return on Investment:        | Return on Investment:        | Return on Investment:        | Return on Investment:        | Return on Investment:        | Return on Investment:        | Return on Investment:        |
| 1.      | Dividend /PAT                                                                              | %                            | 5                            | 81.65                        | 74.55                        | 67.17                        | 64.92                        | 61.16                        |
| 2.      | PAT / Net Worth or Shareholders Fund                                                       | %                            | 10                           | 3.82                         | 3.44                         | 3.11                         | 2.77                         | 2.61                         |
| 3.      | Dividend/ Net Worth                                                                        | %                            | 5                            | 2.96                         | 2.57                         | 2.09                         | 1.80                         | 1.61                         |
|         | Grand Total                                                                                |                              | 100                          |                              |                              |                              |                              |                              |

1. It was decided that where achievement is not verifiable from annual report of the CPSE, the same  would  be  accepted  on  the  basis  of  certification  by  way  of  resolution  from  Board  of Directors.

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