The Telegraph
Since 1st March, 1999
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Politicians are not known to be a sentimental lot. But last Friday, emotions ran high in the Orissa assembly as the Biju Janata Dal legislator from Koraput, Jayram Pangi, threatened to immolate himself if the Centre went ahead with the privatization of the public sector National Aluminium Company. Pangi threatened that the people of Damanjodi — Nalco’s bauxite refinery site — would not allow anyone to enter the area if the PSU was privatized. At the end of a three-day marathon debate on Nalco on Tuesday, the chief minister and BJD president, Naveen Patnaik, had to assure the assembly that he was opposed to the privatization and that he would convey the sentiments of the house to the Centre”.

A few days ago, all trade unions and political parties of the state, barring the Bharatiya Janata Party, had called an Orissa bandh to protest the privatization process. What surprised everyone was that the BJD, which had embarked on a public sector reform programme in the state, was doing a volte face on Nalco even as Patnaik insisted that he was opposed to the Nalco privatization. Ironically, it was Patnaik who, as Union steel and mines minister in 1998, had allowed 30 per cent disinvestment of Nalco. On its part, the Congress said that Nalco was a sentimental symbol for Indira Gandhi had laid its foundation stone.

But to a casual observer, the frenzy that the state’s politicians had worked up over the Nalco privatization seems to be aimed more at earning political brownie points than stalling a move detrimental to the state’s economy. But would Orissa lose if the government sells 29.15 per cent of its stake to a strategic partner with management control'

The answer could vary depending on whether one is pro-privatization or anti-privatization. During the current phase of disinvestment, the government plans to sell 59.15 per cent of the 87.15 per cent stake it holds. While 30 per cent of this would be sold as public offering in the domestic and global markets, 29.15 per cent would be picked up by a strategic partner with management control. The government hopes that it would fetch about Rs 7,000 crore from the public offering and strategic sale.

Fears of Orissa losing out could be presumptuous. Between 1991 and 2001, Nalco had given the state exchequer just about Rs 87 crore a year. The contribution came mainly in the form of royalties for bauxite extracted from the Panchpatmali hills and the sales tax and income tax levied on it. Orissa gets Rs 48 as royalty per tonne of bauxite mined.

Nalco, set up in 1981 and commissioned in 1987, has the largest captive bauxite reserves in Asia at the Panchpatmali hills in Koraput district. With deposits of 300 million tonnes, the mines are expected to last another 100 years and are said to store excellent quality bauxite. Nalco officials say any company that takes over would have to pay the same amount of royalty and taxes as prescribed. In fact, Orissa’s revenues from Nalco may go up in the event of privatization as its turnover and profit would rise, says a Nalco official.

The other point of concern among politicians is the development around Nalco, which they fear would stop after privatization. But Nalco may matter little as far as Orissa’s development is concerned. Between 1991 and 2001, Nalco spent just about Rs 30.53 crore on peripheral development activities at Angul, Damanjodi and the rest of Orissa. In effect, Nalco spends about Rs 3 crore annually on the state’s development.

Bizarre though it may seem, among Nalco’s development activities was providing funds for the All Orissa Bodybuilding Championship in Koraput in 1998-99, providing television sets for the police community centre at Sunabeda and contribution for the state police hockey and kabaddi meet in the last few years. The money, obviously, could have been spent on more important areas. The development bill was also a meagre 0.5 per cent of the profit of the previous year. May be that is why the BJP legislator from Angul district, Dharmendra Pradhan, has demanded that the state publish a white paper on the peripheral development activities of all PSUs in the state, including Nalco’s, during last ten years. “What we should demand is that the money collected from Nalco’s disinvestment should be spent entirely on the state’s development,” Pradhan said.

In the assembly, Pradhan and his party argued for Nalco’s privatization, citing declining profits. With an initial project cost of Rs 2,407 crore, the navratna PSU has a net worth of Rs 3,200.5 crore. In the last few years, another Rs 540 crore has been invested by the Centre for acquiring the International Aluminium Plant from Mukand’s and other smaller projects. Also, Nalco’s profits over the past years hardly inspires confidence. From Rs 546.97 crore in 1997-98, its profits came down to Rs 248.25 crore in 1998-99. Again from Rs 655.83 crore in 2000-01, profits nose-dived to Rs 403.76 crore last year. Nalco sources insist that the profit in 1998-99 plummeted because of the failure in the potline of the smelter plant at Angul while last year’s low income was due to the Rs 150 crore wage revision bill the company picked up for its 6,500-odd full-time employees.

In fact, in the face of intense competition, Nalco could easily go into the red. With a Rs 200 crore annual salary bill for its 6,500-odd workforce, on an average, every Nalco employee earns about Rs 25,000 a month. Once privatized, many of its employees may be laid-off for the poor work culture, a fact underlined by the Krishna Das Nair committee which looked into the problems of the smelter plant. Politicians feel that retrenchment in Nalco would affect their vote bank severely. More important, privatization would effectively derail their biggest gravy train in the state.

The Nair committee blamed the smelter plant crisis on “widespread indiscipline” and “bad work culture” while accusing its then director (personnel and administration), of failing to effectively control indiscipline among workers. The director had been charge-sheeted by its vigilance department for subversive action. A public interest litigation is also pending in the Orissa high court against his alleged recruitment of people in gross violation of all the rules.

There is also evidence that senior officials used the company’s funds to further personal interests. The comptroller and auditor general, in his annual report in 2000, pointed out how the board of directors in November 1996 approved the creation of a chair in the name of the company in the Management Development Institute, Gurgaon, and kept an amount of Rs 20 lakh in fixed deposit in a bank. The proposal was routed through Nalco’s human resources development department headed by the director (P&A) who went on to join the MDI, Gurgaon, after retirement from Nalco. “It appears that that such investment was made for the benefit of a retired executive (who took part in the decision-making process) at the cost of the company’s interest,” the CAG report noted.

Amid the claims and counter-claims over privatization, critics such as the Union mines minister, Uma Bharti, and others have now put a hurdle citing the Rs 4,000 crore expansion cum-modernization programme. But all this could at best delay the process as Nalco employees know best. With the process of privatization at an advanced stage, it looks like a futile exercise for the anti-privatization brigade.

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