Nalco hopes to return to profits in Aluminium by FY19 end after production starts at Utkal D coal block

Indian Navaratna public sector enterprise National Aluminium Company Limited (NALCO) is eyeing return to profitability from its Aluminium business towards the end of fiscal year 2018-19 after the commencement of coal production at its captive Utkal D coal block. The starting of coal mining is expected to pull down power cost significantly making aluminium smelting more profitable for the company.

Power cost alone accounts for 40 per cent of NALCO's overall aluminium production cost. Despite being one of the world's lowest cost producer of alumina (key electrolytic component for aluminium smelting through Hall-Héroult process), NALCO has always found it difficult to contain its cost of production due to escalating power cost. The aluminium major's CoP for hot metal stands somewhere around US$1,450 per tonne.

This is in contrast with the sectoral competitor Vedanta Aluminium who reported an average aluminium production cost of $1,429 per tonne in its last official disclosure. Its Jharsuguda smelter achieved an even lower production cost of $1,388 a tonne. Vedanta could make this happen despite the lack of any captive bauxite sources because of its cost optimization measures and availability of comparatively cheap power from the group company owned power plant near Jharsuguda aluminium smelting complex.

According to the company sources, coal supplies from captive Utkal D coal block will help NALCO pare down CoP by INR 500 per tonne.

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The aluminium major has also entered into a joint venture agreement with NTPC Ltd, formerly known as National Thermal Power Corporation Limited, for a coal-fired power project with a capacity of 2,400 Mw in Gajmara. The total investment planned for the project amounts to INR 14,000 crore. The location chosen is some 45 km from Kamakhyanagar, the site of the aluminium maker's new greenfield smelting facility.

NALCO has agreed to buy 80 per cent of the power generated from the 2,400 Mw project.