With soaring profits & exports, Balco sends a rejoinder to all those who opposed its sale

If Balco is considered a bellwether of the privatisation process considering the controversy it was mired in, the progress made by it since then should serve as the perfect rejoinder not just to those who opposed its sale but also the present-day obstacles to disinvestment — the DMK, which stalled the present government’s move to list Neyveli Lignite and the Left parties.

The plant set up in 1973 in Korba with a 1-lakh tonne per annum metal smelter, a 2-lakh tonne alumina plant and a captive 270 MW power plant — whose foundation stone was laid by former Prime Minister Indira Gandhi days before her assassination — never achieved full capacity until 2001 when it had begun making serious losses. Today, power and alumina capacities have been ramped up multifold, revenues and profits have soared, net worth is up three times, margins are not just back from the red but healthier than the industry.

While the numbers are compelling (see chart), they only tell part of the story of Balco’s transformation since it became part of the global steel giant Vedanta group company Sterlite Industries. Cut to December 19 last year, when all trade unions called for a national strike.

While all Korba-based PSUs such as NTPC were closed, Balco was the only plant where workers defied the strike call. “In fact, there was 150 per cent attendance that day as workers from the first shift didn’t leave till those in the next shift came in,” recalls Pramod Suri, Balco’s CEO. So while the workforce has largely remained the same, their outlook and attitude to work and life has changed.

Sure, a thousand-odd workers did opt for VRS. “Basically, they were afraid of the future and turned their backs and ran. Experience has shown us there was nothing to fear but our own fears. We are in a very good situation — workers are getting more money and facilities. In fact, the type of misconduct that would have caused one to lose their job in a PSU, is dealt with greater understanding now,” says INTUC’s Balco union head, V K Sharma. He should know, leading the largest of the seven unions in Balco, he joined the strike in 2001.

With new incentives introduced for workers and an “Employee of the month” rewarded along with his family in a public function on the first Saturday of every month, not only has workers’ body language changed so have scenes outside their homes. Instead of bicycles and an odd moped, now you are more likely to see bikes, scooters and small cars parked outside.

When the new smelter plant with 288 pots set up in record time by May last year went on the blink due to a power failure, Balco’s young engineering and shop floor staff worked overtime to restore the 126 damaged pots and bring production back on stream in just 100 days.

It’s not just that their average salaries have doubled from Rs 1.5 lakh per annum in the PSU days to Rs 3 lakh per annum now, but also the skill upgradation programs routinely held for them, the job opportunities for their children and other “intangibles” at work. Apart from capital investments of Rs 5,000 crore to set up a new 540 MW power plant and a 2.45 lakh-tonne alumina smelter, Balco’s also ventured into new products and new markets even as its increased efficiencies at the original plant to make it perform at 115 per cent. “We are now making aerospace alloys, special alloys and sheets and plates for Vikram Sarabhai Space Centre’s missiles and the defence forces,” says Suri.

From a meagre export of Rs 0.2 crore when Sterlite took over, Balco’s exports crossed Rs 1100 crore in 2006-07. A new brand called ‘Bharatal’ has been registered at the London Metals Exchange and is being sent to 30 countries already. All this has happened without the government investing a penny, though it remains a 49 per cent shareholder and has been getting good dividends. Despite these constraints, the company hopes to be debt-free by this year-end, repaying loans of over Rs 1800 crore through internal resources alone.

There are big expansion plans on the way — a new 6.5-lakh tonne smelter that will make it the largest single million-tonne plant in the world, a new 1200 MW power plant, an alumina park for small industries to cluster around. New investment plans add up to Rs 18,500 crore in the next five years.

Politics, however, is stifling Balco’s ambitions. When it was privatised, the NDA was at the Centre and the Congress in the state. Three years after the takeover, when it came time to exercise the call option for the residual 49 per cent government stake, the UPA was at the Centre, but BJP’s Raman Singh ran the state. So while UPA returned the Rs 1099-crore cheque Sterlite sent it in 2004 and the issue is still stuck in arbitration, Balco has signed an MoU for the new power plant and the aluminum park with the state — the earth-moving work for the power plant has already begun.

It’s not just the Balco management that has reason to be upset. Workers are upset with the Centre too. Sharma says, “Once the government has given Sterlite management control, it doesn’t affect us if it gives them 100 per cent as well. But what we are really upset about is that the Centre is yet to clear the 5 per cent stake for employees, promised in the shareholders’ agreement. We have had 10 meetings with the Mines Ministry but there’s no reply, while employees of PSUs divested after us like Hindustan Zinc got their shares long ago.”

So haven’t the Left unions in Balco raised the matter? “The Left parties don’t know what they want — instead of raising employees’ problems, they are asking for the company’s shares to be bought back by the Centre,” Sharma fumes. Incidentally, in 2002, CITU and other unions alleged that workers were laid off at Balco, the PMO had asked the Union Labour Ministry to examine it in 2002. The committee submitted its report in 2004 and found no basis for the allegations.

Employees and efficient plant operations aside, Balco has also been a responsible corporate citizen in this backward area, partly driven by their parent company’s overall obligations to disclose expenses on such activities to the New York Stock Exchange and London Stock Exchange.

The focus is on holistic development rather than choosing one issue and the results show up. At a quarterly meeting, Balco officials hold with local stakeholders, one of the key demands this reporter hears — please shift the CEO out of the plant so that he can “be closer to the people.” Maybe the politicians are listening.