Nalco investment under CVC scanner

Debabrata Mohanty Posted: Nov 22, 2012 at 0122 hrs
Bhubaneswar The strange investment by public sector Nalco in a Rs 12,000 crore alumina project in Gujarat has come under a Central Vigilance Commission (CVC) probe.

The project is a joint venture with the state-owned Gujarat Mineral Development Corporation (GMDC) to set up an alumina and smelter plant project in Kutch district of the state. Nalco was the sole bidder for the project which can erase its reputation as the lowest cost producer of alumina in the world.

The MoU for the project was signed by the former officiating chairman and managing director of Nalco, Bajrang Lal Bagra, despite an adverse report by consultancy firm ICRA. The consultant had advised against the project saying both the smelter and alumina projects will be nonviable as the company would have to build its own railway infrastructure to get the bauxite and use power from the state electricity grid as the state has no coal to offer for a captive power station.

The Union ministry of mines under Dinsha Patel had surprisingly cleared the project, despite the adverse comments. Bagra has since been reverted as director (finance) in the company and he is already under a CBI probe over his role in a Rs 15 crore lime procurement scandal. Nalco is one of the companies the government plans to disinvest in this fiscal. Joint secretary in the Union mines ministry, Arun Kumar, who is also on Nalco board as part-time official director, however, said he was unaware of any official probe by CVC into the GMDC-Nalco joint venture. “There may be some in-house probe which CVC does. But no official probe as yet,” he said, refusing to comment further.

The Gujarat project was cleared for Nalco to bid after a Mumbai-based bauxite miner and exporter Ashapura Minechem walked away from the project which it had signed up for in 2005. The company could not build the plant for which they forfeited Rs 80 crore as upfront charges to GMDC as per the terms of the MoU. Nalco too will lose Rs 226 crore it has paid out as MoU fees and bank guarantee if the project stalls.

Documents available with The Indian Express show that Bagra, got the JV with GMDC approved under which Nalco will buy bauxite for 25 years at a price linked to the mineral’s prevailing rate at the London Metal Exchange. Back home in Orissa, Nalco sources alumina from its captive mines at far cheaper price which accounts for the company’s high valuation. Nalco’s director (project and technicals) NR Mohanty told The Indian

Express he was unaware of any such probe, but said the project would go ahead only after the Detailed Project Report gets ready. “After that we would take a call,” he said.

Nalco’s project in Kutch district is expected to build up a capacity of 1 million tonne per annum of alumina as well as a 0.5 million tonne per annum aluminum smelter.

CVC sources said an inquiry by Nalco’s Chief Vigilance Officer is now underway after two separate complaints reached the CVC over the company management failing to cover its financial risk while signing the MoU with GMDC.

While one complainant’s name is being kept secret under Public Interest Disclosure and Protection of Whistleblower scheme of the Commission, the other complaint was lodged by Nalco Employees Union in Damanjodi and President of Nalco Officers’ Association in Angul.