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It's business as usual at Balco

Sandip Das

Bharat Aluminium Company (Balco) makes a perfect case study for any management graduate on the contours of divestment in the country.

After remaining shut for over two months (67 days to be precise), the storm over the divestment has suddenly disappeared. The Rs 10-billion company is all set to start 100 per cent production by August.

Yet at the height of the controversy, more than 5,500 workers at the Korba (Chattisgarh) smelter went on strike that began on March 3, to protest against the divestment of the government's 51 per cent stake in Balco to Sterlite Industries.

Chattisgarh chief minister Ajit Jogi supported the strike and threatened to cut water and electricity supply to plant if the deal was not revoked.

The entire controversy snowballed into a bitter political tussle between divestment minister Arun Shourie and Jogi. However, Jogi toned down his postures after Supreme Court intervened and workers resumed duty on May 8 after the new management assured them that their interest would be adequately taken care of.

The divestment of Balco had started in July last year when five companies including the Aditya Birla group-promoted Hindalco, Sterlite Industries and global aluminium major Alcoa submitted expression of interest with the government for taking majority stake in the country's leading integrated aluminium manufacturer.

The government then pruned the list of possible suitors for the company to three, which included Hindalco, Sterlite and Alcoa. After the due diligence was conducted by three shortlisted parties, they were asked to submit their financial bids for Balco.

Hindalco fresh from its acquisition of Indal, was a major contender for buying the government's stake in Balco. It even formed a consortium with Alcoa subsequently as reported by Business Standard in January this year. But at the last moment Alcoa dropped out of the race.

However, the surprise winner in the race was NRI Anil Agarwal-promoted Sterlite Industries, which submitted a bid of Rs 5.51 billion thus overtaking Hindalco.

The government signed the sale deed by early March which prompted the workers to go on an indefinite strike demanding rescinding of the sale.

According to a senior company official, the Korba plant is now operating at 30 per cent capacity and 100 per cent capacity utilisation would be achieved by early August.

"About 240 frozen smelting pots out of a total 408 have been revived and rest would be revived over the next two months," the official said.

According to experts, the company suffered a production loss of around 20,000 tonne during the strike period. Set up in 1965, Balco has a 200,000-tonne-a-year alumina plant set up with Hungarian technology and a 100,000 tonne per annum aluminium smelter based on Soviet technology. The company, which is the third largest producer of aluminium in the country, supplies about 15 per cent of the country's total aluminium production.

To downsize the workforce, the company will offer a voluntary retirement scheme (VRS) in July for its employees. VRS scheme offers two months salary for each completed year of service.

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