PROJECT REPORT

ON

“STUDY OF performance highlight & EXPORT

MARKETING OF NALCO”

Suryadatta Institute of Management & Mass Communication

Survey No. 342, Near Lalani Quantam,
Behind DSK Ranwara,
Off. Pashan Chandni Chowk Road, 
Pune-21 Maharashtra, INDIA.

FACULTY GUIDE: INDUSTRY GUIDE:

Mr. Manish Singh & Mr. J.R.Kapoor
Meena Solanki Madam Chief Manager (Marketing)

SUBMITTED BY:
Pritish Priyadarsi
Course: MKT+IT
Roll No: 1999/09050032
Batch: 2009-2011

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 Suryadatta Institute of Management & Mass Communication

Summer internship project

Title: - Study of performance highlight & export marketing of NALCO

Objectives: -The main objectives of the project are

To ascertain NALCO’s performance highlight in the

market.

To know the marketing strategies of NALCO.

To study documentation & export sales procedure in detail.

To offer suggestions for effective strategies to cope up with the growing

competition.

Duration: - 2 months (1st June to 30th July 2010)

Name of the project guide: - Mr. J.R. Kapoor

Name of the faculty guide: - Mr. Manish Singh & Meena Solanki Madam.

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 ACKNOWLEDGEMENT

This project has been helped by a number of persons at different stages. I would
be failing in my mission if I do not express my gratitude towards all those people.

I would like to thank Suryadatta Institute of Management and Mass

Communication, pune for providing me an opportunity which has enabled me to
undergo a summer internship which in turn has helped me gain immense
knowledge of the concerned market and the appropriate ways to implement the
theoretical knowledge.

I would like to thank my guide Mr. Manish Singh & Meena Solanki Madam for
their support, valuable suggestions & mentoring me in the proper manner.

I would like to convey my sincere gratitude to Mr. J R Kapoor, Chief Marketing

Manager, NALCO for his kind co-operation & mentoring me in the appropriate
manner which enabled me to bring out this project report.

In addition to this, I would also like to thank other NALCO officials, state
government authorities of Orissa for their whole hearted support & coordination in
my endeavour.

Also I cannot forget the support of Mr. Ashish Sharma & all the respondents who
spared there valuable time in filling my questionnaires and helped me for
completion of my project work with giving opinions at different phases of this
project.

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 DECLARATION

I, Pritish Priyadarsi do hereby declare that the dissertation entitled “Study of

export marketing of NALCO” submitted by me for the fulfillment of summer
internship is an original piece of work done by me and has not been published or
issued to any other institution before. The present document is only submitted to
NALCO.

Place:

Date: Pritish Priyadarsi

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 CERTIFICATE

This is to certify that Mr. Pritish Priyadarsi (MKT+IT), 1999/09050032, a

student of SURYADATTA INSTITUTE OF MANAGEMENT AND MASS
COMMUNICATION has undergone his summer internship training program from
1st June 2010 to 30th July 2010, in the marketing division, NALCO, Bhubaneswar
under the project entitled “STUDY OF EXPORT MARKETING OF NALCO”
submitted for the partial fulfillment of the requirements of PGDM embodies the
work done by him under the guidance of Mr. J.R.Kapoor. He has been sincere,
hard working and dedicated and the work entitled to him has met all the
requirements in detail.

Mr. J R Kapoor
Chief Marketing Manager
NALCO

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 Contents

1. Executive summary

2. Introduction

3. About NALCO

4. Background of the project

5. Objectives of the project

6. Project Methodology

7. Nalco’s performance highlight

8. Marketing Strategies

9. Product Mix

10. Documentation & sales procedure

11. Conclusion

12. Learning

13. Recommendation

14. Bibliography

15. Annexure

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 Executive Summary

The report mainly deals with the marketing strategies & export sales
procedures of NALCO. The study focuses on studying these two aspects of
NALCO, to analyze the performance highlights of it & then coming up with
appropriate recommendations for future. First the aluminum industry of India was
studied to get the insights of it & to find out NALCO’s position in it. The
performance highlights was determined by taking into consideration the production
capacity, efficiency level, sales, profit, employee satisfaction and customer
satisfaction level as well. The marketing strategies & the export sales procedures
were scrutinized intensely to find out sany loopholes that force NALCO to lack
behind other companies in some aspects. Though NALCO proved to be a very
efficient organization but still a lot of areas of improvement were found out &
those were recommended to the company to cope up with the ever increasing
competition. To find out the performance highlight NALCO’s current record was
compared with its last 10 years record as well as with its target for the year in all
sectors concerning alumina & aluminium. For the same objective an employee
satisfaction survey was carried out to examine their satisfaction level & attitude
towards their responsibilities & to the company as a whole. A customer satisfaction
survey was also done & analyzed to find the customer satisfaction index. All these
contributed to satisfy the objective which stated that though NALCO is having a
very good position in the market now but it is soon going to face some serious
threats from other companies. Though NALCO’s production capacity increased in
the current financial year still its profit decreased drastically mainly due to the
current recessionary trend. But another reason is the increasing competition from
other companies like HINDALCO & Vedanta. The customer survey revealed that
it is still having a very good brand image among its current customers. The
employees are mostly satisfied apart from two three factors such as the transfer
policy & safety at the work place. The marketing strategies are quite good to meet
its current targets & the future plans are also heading towards the right path. Export
sales procedures are mostly good though a minor tweaking can be done in the
tendering process of NALCO. All these things are deeply analyzed & appropriate
recommendations are given in this project.

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Introduction:-

Salient features of Indian aluminium Industry:

Highly concentrated industry with only five primary plants in the country

Controlled by two private groups and one public sector unit

Bayer-Hall-Heroult technology used by all producers

Electricity, coal and furnace oil are primary energy inputs

All plants have their own captive power units for cheaper and un-interrupted power
supply

Energy cost is 40% of manufacturing cost for metal and 30% for rolled products

Plants have set internal target of 1 – 2% reduction in specific energy consumption in the
next 5 to 8 years.

Energy management is a critical focus in all the plants

Two plants have declared formal energy policy

Each plant has an Energy Management Cell

Achievements in energy conservation are highlighted in the Annual Report of the

company

Energy targets are based on best energy figures achieved in their sector / region and by
the plant itself in the past

Generally, government policies were rated as conducive to energy management

‘Task Force’ formed by BEE in this sector to work as catalyst in promoting energy
efficiency

High cost of technology is the main barrier in achieving high energy efficiency

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Orissa’s Aluminum industry:
53 % of the country’s bauxite resources are found in this eastern state which
entitles India to be the 5th in bauxite & 8th in the aluminum export in the world.
Apart from that 53 % bauxite, Orissa also has resources of 40 % of the total
aluminum produced within the country. The bauxite mines in Orissa are located in
Koraput, Kalahandi, and Raygada & Balangir.

NALCO
It’s a company that believes in the fact that even ordinary people have extra
ordinary attitude. The company is known as National aluminium company limited
or famously known as NALCO. It was incorporated in 1981 as a public sector
enterprise under ministry of mines, govt. of India with the technical collaboration
with Aluminium pechiley of France. NALCO enjoys the status of a five star export
house since January 1992. Today as an ISO 9001:2000, ISO 14001 & OHSAS
18001 company with its products registered in London metal exchange, NALCO
has emerged as the largest integrated bauxite alumina & aluminium complex in
Asia. Now NALCO enjoys the status of a Navratna company.
Vision: To be a reputed global company in the metals & energy sector.
Mission: To achieve growth in business with global competitive edge providing
satisfaction to the customers, employees, shareholders & community at large.
To strengthen its market position, NALCO has started the second phase
expansion after the successful completion of the first phase in 2002. The ongoing
expansion with an investment of more than 5000 crore Indian rupees will raise the
capacity of its various production unit as below.

Unit Original capacities After 1st phase After 2nd phase

expansion expansion

Bauxite mines 24,00,000 MT 48,00,000 MT 63,00,000 MT

Alumina refinery 8,00,000 MT 15,75,000 MT 21,00,000 MT
Aluminium smelter 2,30,000 MT 3,45,000 MT 4,60,000 MT
Power plant 600 MW 960 MW 1200 MW

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NALCO is a bright example of India’s industrial capability with consistent track
record in capacity utilization, technology absorption, quality assurance, export
performance & posting of profits.

Operations:
I: Bauxite mines

NALCO’s 48,00,000 MTPA bauxite mine located at Panchpatmali hills of

Koraput district in Orissa is among the most sophisticated and eco friendly mining
operations of the world. This mining is highly computerized & mechanized.
Transportation of the ore to the alumina refinery, located downhill is done through
a 14.6 km long single flight out curve cable belt conveyer of 1800 MTPA.

II: Alumina refinery

It is one among the top 10 refineries in the world. It has a capacity of 15,
75,000 MTPA, energy efficient & uses Bayer’s process technology. After meeting
the consumption needs of around 7, 00,000 MT of alumina of its own smelter, the
balance quantity of alumina goes to market for selling in the domestic &
international market.

III: Aluminium smelter

It is located at Angul in Orissa & has a capacity of 3, 45,000 MTPA. It

comprises of 3 pot cells with 240 electrolytic pot cells in each along with
integrated facilities from casting of metal, ingots, sows, billets, wire rods & stripes.
With the acquisition & subsequent merger of International aluminium products
limited (IAPA) with NALCO, the 50,000 MTPA export oriented rolled products
unit is added to produce foil stock, fin stock, cable wraps, standard sheets & coils.

Port facilities
NALCO has port facilities at the inner harbor of Vishakhapatnam port on
Bay of Bengal for bulk export of alumina & import of caustic soda lye. It has
storage facility of 75,000 MT each with the ship loading rate of 2200 MTPA. It can
handle export about 1 million MTPA of alumina. Besides aluminum metal is
exported from the port also.

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Captive power plant

It is another show piece in efficient & reliable power generation with 960
mw capacity, close to its smelter & near Talcher coal fields. It provides
uninterrupted power supply to the smelters & also connected to a state grid for sale
of surplus electricity.

Background of the project

It can be seen above that NALCO has a total alumina refinery capacity of
15, 75,000 MTPA. NALCO needs 7,00,000 MTPA for its internal consumption at
its smelter. The balance quantity of approximately 8, 75,000 MT is sold by
NALCO. Out of that amount the company uses around 25,000 MT for production
of specialized alumina, zeolite & some quantity is sold in the domestic market as
alumina. This leaves a balance of 8, 50,000 MT which is exported.
For export sales of alumina, NALCO transfers its alumina from plant to
Vizag port. From there it offers sale of alumina in bulk through large vessels.

Objectives of the project

Aluminium is a metal with its application increasing in various sectors of

growth like housing, infrastructure, aviation, electricity, automobiles etc. At the
same time NALCO is competing with all the existing drawbacks of the industry
within its capacities & a lot of new players are evolving to take advantage of the
demand of alumina in the market. Therefore it is important for NALCO to look
into their product & marketing mix & find some strategy for improvement in their
market share.
In view of above, my project intends to a study of various components of
NALCO’s sales of alumina in the market.
The main objectives of the study are

To ascertain NALCO’s performance highlight in the market.

To know the marketing strategies of NALCO.

To study documentation & export sales procedure in detail.

To offer suggestions for effective strategies to cope up with the growing

competition.

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Project Methodology:

The whole study of the export sales of NALCO was divided into 5 different
phases.

In the first phase the objectives, scope & the procedure were finalized &
synchronized under the guidelines of the company guide.

The second phase was dedicated for collection of data & information about
NALCO, its marketing strategies & its sales procedure in an extensive
manner & to understand the nitty-gritty of everything.

The third phase was intended to get a practical aspect of the study by visiting
the mine sites as well as the port where export facilities are available.

In the fourth phase various interviews were conducted with authorities of

NALCO, in the same phase feedbacks were also collected from the
customers of NALCO to get the insights & customer satisfaction quotient.

In the final phase with the help of sorted data & information the final report
was prepared.

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NALCO’s performance highlight

To find out the performance highlight of NALCO in the market, two different
processes were undertaken.

1. In the first process NALCO’s record was found out from books, journals,
and websites.
2. In the second process, interviews were conducted with competent authorities
of NALCO; state Govt. & feedbacks were also taken from the customers as
well as the employees of NALCO.

Findings of the first process:-

Since the formation of the company in 1981 as a flagship public sector enterprise
under the ministry of mines, Govt. of India, NALCO has come out with excellent
physical & financial results in all these years, bettering its own records of the
previous years in almost key areas & has always exceeded the targets fixed for the
company. The information of the year 2009-10 is given below with the data of
previous year.

Increase over
PRODUCTION 2008-09 2009-10
previous year (%)
Bauxite (MT) 4,700,027 4,878,888 3.80
Alumina Hydrate (MT) 1,576,500 1,591,500 0.95
Aluminium (MT) 361,262 431,488 19.43
Net Power (Million Units) 5,541 6,295 13.60
SALES      
Export of Aluminium (MT) 82,314 146,948 78.52
Domestic Metal Sale (MT) 271,274 289,031 6.54
Total Metal Sale (MT) 353,588 435,979 23.30

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Production performance:-
It can be seen from the table that the calcined alumina production has increased
considerably in 2009-10 as compared to 2008-09.Its because NALCO is the only
company that exports alumina. That’s why it is going aggressively when it comes
to alumina production. This can also be seen from the total alumina dispatch
figure.

NALCO’s production performance for the last 12 years

Year Bauxite Alumina Aluminium Power

(MT) (MT) (MT) (MU)
1998-99 26,61,557 8,83,300 2,00,162 3,902
1999-00 28,06,288 8,94,500 1,46,205 3,588
2000-01 28,22,464 8,86,000 2,12,663 3,985
2001-02 28,34,189 9,39,000 2,30,516 3,833
2002-03 35,22,059 11,13,000 2,31,674 3,970
2003-04 47,77,003 14,80,000 2,44,708 4,291
2004-05 48,16,762 15,50,100 2,98,208 5,122
2005-06 48,22,000 15,90,000 3,59,000 5,679
2006-07 48,00,000 MT 14, 75,000 MT 3,48,000 MT 5968 MU
2007-08 48, 00,000 MT 15, 59,000 MT 3,57,000 MT 5609 MU
2008-09 47,700,027MT 15,76,500 MT 3,61,262 MT 5,541 MU
2009-10 48,78,888 MT 15,91,500 MT 4,31,488 MT 6,295 MU

Sales performance for the year 2008-09

Sales Units Actual during Performance % increase (+)

2007-08 during 2008- Or decrease (-)
09
Export sales
Alumina MT 8,59,900 8,51,899 - 0.93
Aluminium MT 97,200 83,000 - 14.00

Sales performance against the target

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 Sales Units Target for 2008-09 Achievement
during 2008-09
Alumina export MT 8,50,000 8,51,800
Aluminium export MT 90,000 83,000

Sales performance in the last 10 years

Year Alumina in MT Aluminium in MT

1998-99 6,10,940 39,685
1999-00 4,79,620 95,185
2000-01 4,95,723 1,18,868
2001-02 6,70,120 1,06,283
2002-03 10,37,287 1,07,302
2003-04 9,34,870 1,31,176
2004-05 9,09,000 1,33,000
2005-06 8,62,600 1,21,000
2006-07 7,73,570 1,29,000
2007-08 8,59,900 97,200
2008-09 8,51,800 83,000

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Findings of second process:-

In this process the first step was to find out whether the organization faces
any kind of problem officially. The main objective was to find out whether
NALCO is able to maintain a good coordination between the state government &
the union government for its official & legal bindings.

Almost all the questions got similar kind of response of more than 90 %
employees being very happy with NALCO apart from the following two. So these
two questions are discussed over here.

1. What is the safety of the workplace ?

At the Corporate office, Bhubaneswar

percentage of respondents
7
4

Very Good
Good
Adequate
Poor
Very Poor

89

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At the Alumina refinery, Koraput

percentage of respondents
17
2

Very Good
9 Good
51 Adequate
Poor
Very Poor

21

At the Mine site, Damanjodi

percentage of respondents

2 6
22
Very Good
47 Good
Adequate
Poor
Very Poor

23

17
 As it can be very well seen from the graphs that the safety at different places are
quite different, steps must be taken immediately to avoid any dissatisfaction among
employees. 100 % of the employees at the corporate office said that their
workplace is adequate or better than that while that percentage drastically
decreased to 8 % at the mine site. It was only 19 % at the plant. This is primarily
because of the recent naxalite attack on the plant of NALCO which took away
lives of policemen. Steps have been taken in this regard but it does not seem
adequate. It seems that NALCO is still vulnerable to such attacks in the near
future.

2. How good is the transfer policy of NALCO ?

percentage of respondents

9 12

17 Very Good
Good
33 Adequate
Poor
Very Poor

29

It can be seen that 42 % of the total employees are not satisfied with the transfer
policy of NALCO while only 12 % of them are saying it’s very good. The point to
be noted here is all the 12 % of the people are currently placed in the corporate
office. Necessary measures must be taken immediately in this regard.

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Marketing strategies of NALCO
Let us analyze the marketing strategy as per some basic concepts of
marketing. Let us first scrutinize the four Ps i.e. product, price, promotion & place.

Product:-
This is the main & key element in the market offering. It’s the basic thing
that the customer wants from any company. The company delivering products of
superior quality always gets an edge over its competitors. Therefore NALCO
always concentrates on its products, tries to come up with unique products that are
in demand. Quality is an aspect that the company always focuses on. It also
involves the timing of introduction of new products making product line decisions
& product innovations.

Price:-
Pricing strategies are the aspects having the utmost importance as it is the
only revenue generating part of the market mix. In case of the aluminium industry
where there is scope for both import & export, a lot of analysis is done before
finalizing the price. When the domestic currency appreciates, a firm can either
reduce its domestic prices, thus maintaining the foreign currency prices at the pre-
appreciation level or maintain the domestic currency prices which would result in
the increase in the foreign currency price. The former would result in the profit
margin coming down, the later in a fall of the market share. NALCO mainly
focuses on market penetration strategy for some products while for most of them it
follows the market skimming strategy.

Promotion:-
The promotional strategy decides the amount that the firm desires to spend
in various markets in promoting its products. In case of aluminium industry
especially Indian aluminum industry there is no real need of any promotional
strategies. Therefore NALCO does not take any specific & regular promotional
campaigns though it comes up with some PR activities by sponsoring different
sports events in Orissa. For example every year NALCO comes up with state level
hockey tournaments & also supports cricket to a large extent. Apart from these

19
NALCO also organizes billiards tournaments, donates ambulances to different
hospitals. It has a mobile van also operating in the capital city. These activities
actually serve its promotion as well as the society as all these are part of corporate
social responsibility of NALCO.

Place:-
It is a very important aspect considering aluminum is a highly hygroscopic
material. The process from extraction of bauxite from the mines, to converting that
to alumina & finally transferring that to alumina & bringing that to the port where
export facilities are available is a very tedious process & every measure is taken
not to increase the operational cost.

Now let’s take the aluminum industry into consideration & find out NALCO’s
strategies to cope up with it so far.

The aluminium industry is highly concentrated with just five plants in India
accounting for the entire production capacity of around 1.2 MT per annum. The per
capita consumption of aluminium in India is only 0.8 Kg against 25 kg in USA, 19
kg in Japan, 10 kg in Europe. Even the world’s average per capita income is about
10 times of that in India. One reason for low consumption in the country is because
consumption pattern of aluminium in India is vastly different from that of
developed countries.

The demand for aluminium is expected to grow by about 9 % per annum

from present consumption levels. This sector is going through a consolidation
phase and existing producers are in the process of enhancing their production
capacity so that a demand supply gap expected in future is bridged.

India, the ninth largest economy in the world, is poised to join the elite
superpowers & India’s rich mineral resources of several primary metals,
accelerates the growth. In particular, aluminium, the third most abundant element
on earth, is increasingly being used in more & more applications increasing in
various sectors of growth like housing, aviation, electricity & automobiles etc. In
India the full potential is yet to be explored & exploited. Now the aluminium
industry has seen the influx of a number of new players.

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 There is a sharp demand curve but unfortunately the supply curve is not
rising as rapidly. So in the conclusion it can be said that there is a huge market for
the aluminium in the near future in the Indian market.

To tap the above market of alumina NALCO has developed following marketing
strategies.

1. Increasing the production capacity of its product by brown field

expansion of the bauxite-alumina plant.

In order to achieve the above NALCO has already started the 2 nd expansion of
its plant which will be commissioned during December 2008. After the expansion
NALCO’s bauxite mines, capacity will increase to 63, 00,000 MT from the present
capacity of 48, 00,000 MT & the alumina refinery capacity will also increase to 21,
00,000 MT from the present 15, 75,000 MT. Even though NALCO is also
expanding its aluminium smelter plant capacity from present 345,000 MT to
460,000 MT , it will only require approximate 920,000 MT of alumina. This will
result in huge balance alumina capacity of around 12, 00,000 MT available for
sale.

2. Entering into long term alumina agreement

Alumina is a commodity whose prices are subject to wide fluctuation in the

market depending on international demand-supply scenario. To remain away from
the uncertain market, NALCO enters into long term agreement with traders or
direct aluminium smelters. This is also necessitated from the fact that alumina
plant is a continuously running plant & in order to keep the plant operational
regular evacuation of the material is extremely necessary from its silos. Thus the
long term contract helps NALCO to remain present in market, to absorb the shock
of wide fluctuation of prices in the market & keep their plant operational.

3. Spot sale of alumina

As mentioned above that alumina is subject to wide fluctuation in the market,

NALCO also reserves some alumina to sale in the spot market. This entitles
NALCO to achieve better realization in case the international prices have risen

21
substantially high. NALCO usually sales alumina in spot market through
tendering. In such cases the tender quantity is usually limited to 25-35 thousand
MT, which is shipped, in one single lot.

PRODUCT MIX

Aluminium Metal
Ingots
Sows
Billets
Wire rods
Alloy wire rods
Cast strips
     
      
Alumina & Hydrate
Calcined Alumina
Alumina Hydrate

Zeolite-A

Special Products
Specialty
Hydrate/Alumina
(Alumina Chemicals)
 
 
Rolled Product
Aluminium Rolled
Products

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Documentation & sales procedure
Generally, documentation is perceived to be the most complex, difficult & critical
activity of export marketing, particularly in India. Procurement of an export order
& acquisition or production of goods for exports is as important as ensuring their
physical delivery & remittance of sales proceeds. The documentation formalities
are essential for enabling the importers to get the contracted goods & the exporters
to get the sales amount as well as to secure export incentives in various forms.

One may categorize export documents into three dimensions on the basis of their
role in smooth flow of trade. These dimensions are

1. Commercial dimension
2. Legal dimension
3. Incentive dimension

Commercial dimension
The set of commercial documents used as shipping documents or principal export
documents are essential smooth flow of international trade. For a consignment
being sent on CIF basis, the full commercial documents consist of the following.

A. Commercial invoice
B. Bill of lading/ Airway bill/ Post parcel receipt/ Railway receipt/ Lorry
receipt
C. Cargo insurance policy/ Certificate
D. Bill of exchange

In addition of the above specified documents, specific transactions may need

addition documents upon buyer’s requirement, which may flow out of either legal
necessities or commercial need. It may also be noted that the kind & number of
copies of these documents depend upon the nature of the export contract.

23
Legal dimension
After becoming an export company, it is required to obtain a registered-cum-
membership certificate (RCMC) from the relevant export promotion council,
commodity board or any other designated body. The next step in becoming an
exporting unit is to obtain importer-exporter code number from the “Director
General of foreign trade”.

(a) GR form/PP form

GR/PP form in duplicate is required for every consignment for obtaining custom’s
clearances. This form is needed as a legal requirement under foreign exchange
regulation act of India. GR form needed for all consignments other than the one
being shipped by post while PP form is needed for going by post.

(b) Shipping bill

Shipping bill is the main document for obtaining custom’s permission for shipping
goods. This document is of four types.

Dutiable shipping bill

Frees shipping bill
Drawback shipping bill
Ex-bond shipping bill

Incentive dimension
Exports from India are supported through a number of assistance & incentive
schemes. The exporter wishing to avail of these schemes have to put forward his
claims by presenting relevant documents supporting his claim to different
authorities. These documents are AR form, copy of shipping bill, copy of bill of
lading etc.

24
Documentation
All exports of metallurgical grade calcined alumina (sandy type) of NALCO are
through tendering on FOB ST (spout trimmed) Vishakhapatnam port (India) basis
in bulk. The typical lot size per alumina shipment is 25-35,000 MT. there are two
types of tendering.

Open tendering: These tenders are published in the newspapers; publications

etc and remain available for viewing & participation in the tender by a large
group of people & organization.

Limited tendering: Such tenders are limited to the customers who remain in
the preferred lost of customers of an organization. This is being done to stop
the non-serious participants in the tender.

NALCO’s export sales procedure is based on tender floated only to the customers
who are registered with NALCO. So it can be seen here NALCO goes for limited
tendering.

For registration the company specifies following eligibility criteria which is

available in the NALCO’s web site & also communicated to the prospective buyers
when they contact the company for buying alumina.

A. Eligibility

 Tender for spot contracts:

Only overseas prospective buyers/companies having sound

financial & business credentials and experience in international
trading are eligible to be registered with NALCO.
Overseas offices of central public sector undertakings of Govt.
of India are also eligible to apply for the registration.
The annual turnover of the buyers should not be less than USD
15.00 million or equivalent.

25
  Tender for term contracts:

Only overseas prospective buyers/companies having sound

financial & business credentials are eligible to be registered
with NALCO.
Overseas offices of central public sector undertakings of Govt.
of India are also eligible to apply for the registration.
The overseas buyers should have experience in international
alumina or bulk commodity business and should have
purchased minimum 50,000 MT of alumina or bulk commodity
during last three years including at least one bulk cargo of
around 25,000 MT.
The annual turnover of the buyers should not be less than USD
70 million or equivalent. If the turnover /accounts statement of
the subsidiary / division seeking registration is not available
Sseparately, the group turnover / account statement may be
considered provided the group holding company gives
undertaking guaranteeing performance of subsidiary / division.
The group holding company should have majority stake in the
subsidiary.

B. Document information to be furnished for registration:

Name, address, telephone, telefax, e-mail of the company for

correspondence along with the names of contact persons &
their capacities.
Description about the business activities of the company,
address of the registered office and contact numbers.
In case the overseas buyer has an Indian representatives,
details of the representative along with due authorization. If the
overseas buyers have offices in India the details about the
Indian offices.

26
 Published latest annual reports. If such annual reports are not
published, the same should be declared and certified accounts
statements may be furnished.
Prospective buyers shall have to arrange to provide their
banker’s certificate in respect of their solvency / financial
capability by the bankers directly to NALCO.
The names of the first class international banks through whom
the buyer intends to open letter of credit.
Details of alumina cargos / bulk commodities purchased during
last three years with supporting documents (for registration in
tenders for term contracts).
Any other information which the buyer feels relevant for
registration.

Bid opening:
In this step various registered customers are required to bid for the material
in the presence of committee members and different bidders in which the sale order
goes to the highest bidder.

Sale order / contract with the highest bidder:

In this step, a sale order or contract is formed with highest bidder in which
price, quantity of materials, lay days, other conditions are specified. For sale of
alumina Nalco in general enters into contract on FOB Vishakhapatnam port basis.

FOB- Free On Board:

It means that the seller fulfills his obligation to deliver when the goods have
passed over the ship’s rail at the named port of shipment. This means buyer has to
bear all costs and risks of loss of damage to the goods from that point. This term
can only be used for sea or inland waterway transport. When the ship’s rail serves
no practical purpose, such as in the case of roll-on / roll-off or container’s traffic,
the FCA term is more appropriate to use.

27
Apart from this there are different types of transport procedures as well such as

1. Free Carrier (FCA)

2. Free Alongside Ship (FAS)
3. Cost & Freight (CFR)
4. Cost, Insurance & Freight (CIF)
5. Carriage Paid To (CPT)
6. Carriage & Insurance Paid To (CIP)
7. Delivered At Frontier (DAF)
8. Delivered Ex Ship (DES)
9. Delivered Ex Quay (DEQ)
10.Delivered Duty Unpaid (DDU)
11.Delivered Duty Paid (DDP)

Process of lifting the Cargo

Buyer’s job: the buyer’s job is to open the letter of credit in the opening
bank in favor of NALCO. The supplies are against irrevocable letter of credit
(L/C), payable at sight, in US dollars, at the counters of State bank of India,
commercial branch, Bhubaneswar, India. The L/C must be opened in a first class
international bank acceptable to NALCO and conforming to uniform customs &
practice for documentary credits, 1993 revision, and publication no. 600 of ICC.
The L/C must allow TT reimbursement within two working days. The buyer
should also arrange for the shipping vessel for lifting the cargo from the
Vishakhapatnam port.

Letter of credit
A letter of credit is an undertaking issued by a bank at the request of an
importer, to an exporter to the effect that if exporter exports the goods and presents
the specified documents strictly as per the specified terms, the banks will make the
payment without fail. Therefore a letter of credit is an undertaking to pay. It is
issued by a bank in importer’s country. It is an undertaking to the exporter.
Therefore it is always addressed to him. However it is not sent to him directly.
Instead, it is sent through a bank in his country so that the genuineness of the
instrument can be verified by such bank. The bank issuing the letter of credit is
28
liable to pay the amount, once the exporter presents the documents strictly in
compliance with terms & conditions of the letter of credit. This liability is absolute
on the part of the issuing bank and it has to pay the value of import covered under
the L/C to the exporter, independent of the fact whether it gets paid by the importer
or not.

Need for a letter of credit

In international trade the buyer (also called importer) and the seller
(exporter) mostly, do not know each other personally. The seller does not like to
part with goods without being paid & the buyer does not like to pay before the
receipt of the goods. This problem is solved to a great extent by arranging a letter
of credit. Under this arrangement, the buyer requests his bank to issue a letter of
credit. The bank acts as an intermediary and issues this letter of credit to the
exporter. Through this letter, the bank undertakes to pay the amount to the seller if
he sends the goods and submits the documents as in the letter of credit. The letter
of credit acts as a firm undertaking of a bank to pay. It carries the creditworthiness
of the bank & therefore the exporter becomes sure of payment once he performs
his part of the contract and sends the documents strictly as per the terms of the
letter of the credit. The importer also becomes sure of getting the goods after
payment to bank which enables him to receive all the required documents.

29
Seller’s job (NALCO):
As the contract is based on FOB terms, NALCO’s job is to transport the
merchandise up to the port and keeping it ready for loading on to the vessel.

Pre dispatch / loading documentation:

The following two documents are required:

1. PI (Proforma invoice)
2. Standard instruction to the port office of NALCO.

The next step is filing of documents with customers and taking permission from
the port authority for loading on the vessel. The port authority in the form of
shipping bill will give the permission. After getting the shipping bill the shipment
containers are loaded on to ship at the port.

Post shipment documentation:

After loading the shipment on to the ship following documents are required:

1. Bill of lading: It is given by captain / agent of the vessel certifying that the
vessel has received the shipment.
2. As per the L/C, certain documents are necessary:
a. Certificate of origin
b. Certificate of weight
c. Certificate of analysis / quality

Then the next step is presenting the documents to NALCO’s advising bank through
the marketing-finance department, which also prepares the commercial invoice.

The advertising bank then checks the documents and sends telex message to the
opening bank of the buyer for release of the payment.

30
Conclusion

After doing the study & analyzing the data collected during the study it is
found out that though NALCO has improved its production capacity but its profit
decreased in the current financial year as compared to the last year. But NALCO
has another expansion plan to increase its efficiency.

The main point to be noted here is that the state government is rejecting any
expansion & extraction policy of other players in the market because of the
decreasing reserves of bauxite. But NALCO has a site which it has not started
extraction at. It has also acquired another site in Andhra Pradesh which makes its
reserves available for at least 100 years at the current extraction speed. This will
surely help NALCO in expanding & competing with other players. The marketing
strategies adopted by NALCO are good enough to cruise in the current market
scenario. The export sales procedure is healthy enough that makes it the only
exporter of alumina from the Indian sub continent.

NALCO has got a good position in the aluminium market. Its products enjoy
worldwide reputation and are accepted in many countries because of its quality. It
is capable of expansion plans because of its sound financial condition. All its
expansion program are the vital examples in achieving its goal of securing a good
status at the international level.

There is still some deficiency in its strategies which if sorted out soon will
make NALCO the best among all the NAVARATNA companies & truly a
showpiece.

31
Learning

1. As aluminium industry is highly centralized & tough competition is seen

among some big players only, the whole industry study actually gave a new
dimension to the manufacturing industry knowledge.
2. Employee satisfaction is a very important matter of concern when a
company analyses its performance even if it’s a manufacturing one like in
the case of NALCO. Their satisfaction level actually increases the
productivity & efficiency level of the organization.
3. It’s anytime better to retain the customers rather than going in for new
customers.
4. Marketing strategies adopted by a public sector unit is actually quite
different from the private players existing in the market.
5. The basic criteria & the requirements to trade in the international market
were known during the study of the project.
6. The tendering & bidding process involving larger transactions were studied.
7. It was concluded that production, sales & profit are not the only parameter
of choosing the performance but employee & customer satisfaction also hold
much importance.
8. A company must have to innovate with its product line in order to have the
competitive advantage.
9. Efficiency in the supply chain management & the promotional & marketing
activities are very important in industries in which there is not much
competition involving price.

32
Recommendations

1. NAXALITE ISSUE

Though naxalite issue is not directly affecting the productivity of NALCO, but
it definitely has an impact on its profit as it increases the loss. The last attack on
NALCO at its mine site was mainly aimed at stealing the explosives that are used
to blast the hard rock of the hills containing bauxite. The whole thing not only
caused loss in lives & explosives only but it affected the production also as
extraction was completely stopped for 7 days & it was done in only one shift
instead of two for the following 7 days. This left the refinery plant in serious need
of bauxite for some days though there were enough reserves at the plant.

Now after the attack, I would seriously recommend NALCO to increase its
security big time as that part of the state is dominated by the naxalites & NALCO
cannot afford any such attacks. Though it has been increased now but I guess
NALCO is still vulnerable for further attacks. So NALCO must tighten its security.

2. TRANSFER POLICY

When I was having a casual conversation with the employees about the
company they all seemed very enthusiastic. But when I tried to get the information
the second time around, I came to know that apart from the safety issues, one issue
was the transfer policy of NALCO. As I have already shown in the graphs about
the dissatisfaction level of the employees at the mines, I would recommend
NALCO to take the measures as soon as possible.

33
 3. CHINA’S STRATEGY

China has announced reduction in export tax on plates, sheets & rods which
will cause oversupply of aluminium metal into the international market. Chinese
industry players also expect the government may reduce the export tax on primary
aluminium & aluminium alloy to 5 % from 15 %. Traders in Japan & South Korea
fear that oversupplied Chinese exports would adversely affect the local markets.
As a matter of fact there is already surplus existing in the global market with
production at 40,332,000 tonnes & consumption at 39,122,000 tonnes. So I would
recommend NALCO to ask the Indian government to take some necessary
measures such as increasing the import tax to prevent the Indian players to import
from China. It should be noted here that Canadian govt. has already imposed a tax
between 40 % & 119 % on import of Chinese aluminium extrusions.

4. ALUMINA PRODUCTION CURTAILMENT

According to the sources, alumina market was 0.59 million tonnes surplus in
2007. Though it has decreased but it is still more than 0.39 million tonnes. In 2009,
the alumina market looks to remain under pressure as the demand of it is driven by
the demand for aluminium which is expected to remain weak. So NALCO needs to
adjust its alumina production rates to rebalance the market as alumina is not a
storable commodity.

5. DOMESTIC SALES

Along with the export sales, NALCO should also focus on the domestic market.
Because of the recession the international market is going down but at the same
time there is a need in the domestic market. India is currently the fastest growing
car market in the world growing twice as fast as the global average. It
manufacturers the entire range of components like engine parts, drive, transmission
& steering sub systems etc. The consumption pattern of Aluminium in India is
different. The largest contributor to Aluminium consumption is Power sector
which is expected to feel relatively less heat following the global meltdown as the
sector is marked by government spending. Apart from auto sector growth, NALCO
can also focus on the transportation & the packaging sector in India.

34
 Year 2006-07 2007-08 2008-09 2008-09
(up to Nov’ (extrapolated)
08)
Production (1) 11,62,232 12,40,409 8,65,801 12,98,701
Domestic 8,83,111 9,28,544 6,03,637 9,05,455
Sales (2)
Imports (3) 1,10,623 1,73,207 1,03,848 1,55,772
Scrap Imports 2,34,208 2,04,400 1,38,930 2,08,395
(4)
Total 12,27,942 13,06,151 8,46,415 12,69,622
Domestic
Consumption
% of imports 28.10 28.91 28.70 28.70
in domestic
consumption

It can be seen from the above table that 28 % of the domestic consumption is still
ruled by imports. NALCO definitely can try to tap this market by increasing its
domestic sales.
Though it is the only exporter of alumina in the Indian sub continent but in the
domestic sales it lacks behind HINDALCO in spite having a larger production
capacity. So by increasing its quality for the domestic market, expanding the
customer database, it should also try to tap the domestic market.

6. EXPANSION PLANS

I would recommend NALCO to go ahead with all its expansion plans &
projects in spite of the current recession & the fall in the profit that it suffered this
time. The reason for saying so is the current recession is not predicted to last for
more than five years & any project of NALCO would take at least that much of
time to start operation. One more advantage for going with the projects now is that
during this period the machineries, labor & other input costs can be obtained at a
cheaper rate.

35
 7. SPOT & TERM CONTRACT

As discussed earlier, NALCO offers two types of contracts. Every registered

customer is given equal chance & new bids are invited for every lot of alumina.
My suggestion would be to give preference to the term contract owners while
finalizing the spot contracts. Because this will increase the brand loyalty among
them & they are the bigger customer that NALCO relies on. So they should be
given preference in this case.

8. PROMOTION

As discussed earlier, NALCO has never gone for promotional activities because
of the nature of the market. But according to me the market is changing. NALCO
has to restructure its strategies in order to cope up with the increasing competition.
Vedanta is investing heavily in promotion with hoardings, bill boards & TV
commercials. A picture of a hoarding of Vedanta aluminium limited is given in the
next page.

Though it’s not a big threat as of now but NALCO should start acting according to
the market change as soon as possible. To tap the domestic market it has to go for
promotional activities.

36
Recent activities by the competitors……...
Hindalco's Q1 net profit: Rs.602.9 crore
Hindalco Industries, the country's largest aluminium producer, reported a
flat net profit of Rs.602.9 crore in the first quarter of 2007-08 fiscal, compared to
Rs.601.5 crore in the corresponding period a year ago. This performance can be
attributed to lower prices for alumina, which offset the gain from rise in metal
output.

The company, which bought Canada's Novelis in a $6 billion deal in April,

registered a 9 per cent increase in net sales at Rs.4,677.9 crore in the first quarter,
compared to Rs.4,273.7 crore in the corresponding period a year earlier. Other
income grew 61 per cent to Rs.124.6 crore.

Analysts said low realization of alumina and frequent cuts in domestic aluminium
prices hit Hindalco's profit. They said aluminium prices, which were stable in
recent months (while other metals on record highs), are expected to rise in coming
quarters which would have a positive impact on Hindalco's profitability. Hindalco's
Chief Financial Officer S. Talukdar said the integration of Novelis had begun but
the full benefits of the acquisition would accrue only after 2010.

(Source: Business Standard 31.07.07)

Birla to up Hinalco stake to deter bidders

Kumar Mangalam Birla plans to take majority control of Hindalco Industries
to forestall a takeover in what's potentially a record year for metals and mining
mergers.

"I would like our stake to be more than 50% and, if not, at least 40% in the next
two years," Birla said. His family owns 31.4% of the $5.6 billion company,
according to its website.

(Source: DNA, 25.07.07)

37
Hindalco buys Alcan's 45% in Utkal Alumina
Aditya Birla group's flagship company Hindalco Industries announced an
agreement to buy out Canadian aluminium major Alcan's 45% stake in Utkal
Alumina International (Utkal) for an undisclosed amount. The Utkal joint venture
was established in 1992 and involves the development of a new bauxite mine and
setting up an alumina refinery in Orissa. The transaction will be complete in a
month, Hindalco Industries has stated.

The transaction marks the complete exit of Alcan, and Hindalco becomes the 100%
owner of the Utkal project. The Aditya Birla group had initially acquired a 20%
stake in Utkal Alumina when it bought out Indal in 2000. Later, it increased its
stake to 55%.

(Source: The Financial Express, 19.07.07)

Vedanta to invest Rs.100 cr in forest conservation

The Orissa government has asked for Rs.100 crore from Vedanta Resources
for conservation of ecology in the Niyamgir hills. Out of this amount, Rs.42 crore
will be spent on the wildlife in the area, where the Vedanta group's Sterlite
Aluminium will mine for bauxite.

State steel and mines minister Padmanabha Behera told that the latest in scientific
technology would be used for mining of bauxite in Niyamgir hills. Only 20
hectares will be allowed for mining at a time. Steps will be taken to plant 16 lakh
trees under a compensatory afforestation programme.

Under a peripheral developmental project, Rs.12 crore will be spent for the
betterment of the lives of 7000 tribals living in the surrounding 21 villages.

(Source: The Financial Express, 04.07.07)

38
Bibliography:-

Books

1. Philip Kotler, Kevin Lane Keller : Marketing Management, 2008

2. NALCO : Inside story of NALCO

3. Energy Management Policy – Guidelines for Energy Intensive Industry of

India, Chapter 3, pp 13-36 by Bureau of Energy Efficiency

Magazines & articles

4. Minerals & metals review, April 2010

Websites

5. www.energymanagertraining.com/aluminium/pdf/Industry%20overview
%20-%20Aluminium.pdf
6. www.nalcoindia.com
7. www.rediff.com/india/business/budget2009/special
8. www.aluminiumtoday.com
9. www.crugroup.com

39
Employee’s name ____________________________________________________

Gender_________________________________________________________

Department ________________________________________________________

1. How long have you been working for NALCO?

a. Less than 3 months

b. Less than 1 year
c. Less than 3 years
d. More than 3 years

2. Do you know who are you responsible to & responsible for?

a. Yes
b. No
c. Think so

3. Have you worked for any other company before?

a. Yes
40
Please tick in the appropriate box as per your ratings where 1 = very good, 2 =
good, 3 = adequate, 4 = poor & 5 = very poor.

1. Your understanding of company’s mission & goals.

1 2 3 4 5

2. Depth, truth & quantity of information & knowledge conveyed from the top
management as well as within two different departments.

1 2 3 4 5

3. Safety of your workplace.

1 2 3 4 5

4. Your benefits (salary, compensation, holiday & sick benefits)

1 2 3 4 5

5. The environment in this organization in balancing between work and

personal life.

1 2 3 4 5

6. Opportunities for professional growth in this organization.

1 2 3 4 5
7. Transfer policy of NALCO.

41
 1 2 3 4 5

8. Employee performance evaluation.

1 2 3 4 5

Thank You

42