Coal supply not an issue; rains hampering operations: NALCO

National Aluminium Company (NALCO) has declared its first quarter results. The company’s net profit stands at Rs 223 crore versus Rs 377 crore on year-on-year (YoY) basis.

In an interview to CNBC-TV18, BL Bagra, chairman and director-finance at NALCO says, the aluminium segment has been lagging. “It has not been contributing in an expected manner. The only reason is that LME prices have stabilised at a very low level, between the band of USD 1,800 and 1,900 per tonne over the last six months,” he elaborates. He clarifies that the coal availability has not been a problem for the last two quarters. "Since January, the supply of coal has been on expected lines from Coal India’s subsidiary Mahanadi Coalfields. In the Q1, we were very fortunate that we did not have to depend too much on imported coal or expensive coal,” he adds. For the last two months, he says, particularly July and August, the company is struggling with seasonal problems of rain. "The coal stocks, which are available or which we are receiving, are getting wet due to the heavy rains in catchment areas as well as our plant. So, the problem we are facing right now is not availability or the stock of coal, it is only the wet coal getting chocked in the shoots and in the bunkers," he asserts. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee. Q: Your aluminium division expectedly did not do very well because London Metal Exchange (LME) prices have been weak. Can you take us through the pricing trends there? A: The aluminium segment has been lagging. It has not been contributing in an expected manner. The only reason is that LME prices have stabilised at a very low level, between the band of USD 1,800 and 1,900 per tonne over the last six months. They have been dozing off all the economic logic. Despite some curtailments in the production and few smelters being closed down, the inventories remain at high level. LME prices are not improving. Though the premium has increased too much as against USD 80-90 till last year and now the premiums are over USD 200, but that shows only the short-term shortage in the ready delivery market. Nevertheless, the LME being at very low level the aluminium segment has been just recovering marginal cost and making a very small contribution towards our fixed cost. But on the total cost level, the aluminium segment has been a losing segment. But we hope that with these curtailments in the production and the closure of some aluminium smelters in Australia, in Europe and one or two in America, the aluminium prices should now start recovering. _PAGEBREAK_ Q: Your volumes were affected as well because of coal or lack of availability of coal. Do you continue to see that hampering your progress going forward? A: Let me clarify that the coal availability has not been a problem for the last two quarters. Since January, the supply of coal has been on expected lines from Coal India’s subsidiary Mahanadi Coalfields. So, it is not the availability of coal. In the Q1, we were very fortunate that we did not have to depend too much on imported coal or expensive coal. For the last two months, particularly July and August, we are struggling with seasonal problems of rain. The coal stocks, which are available or which we are receiving, are getting wet due to the heavy rains in catchment areas as well as our plant. So, the problem we are facing right now is not availability or the stock of coal, it is only the wet coal getting chocked in the shoots and in the bunkers. This is a problem that all thermal power generators face during the rainy season. The stock has always been above 15-16 days of consumption throughout last six month. But there is only one problem on the cost of the coal side where the prices have increased due to the calorific value shift in the prices as well as the supply note being made by Coal India through the normal route of our merry-go-round (MGR) rail rather the supplies being made from different sidings, through which we have to bring the coal use in Indian railway system. That makes it a big expensive in transportation side. So, the cost of the coal due to price increase as well as higher transport cost make is a bit expensive. But the availability of coal has not been a problem over last six months and right now also it is not a problem. Q: Can you update us on the commissioning date of the Utkal block? A: Utkal captive coal block, all the statutory clearances like the environment, wildlife clearances, mining plant clearances, and approval for the mining lease are in place, but acquisition of land has been a problem. We deposited the amount fixed by the state government as land compensation a couple of years ago with the state authorities who started disbursing amount to the private land owners last April and May. But the pace is very low. Only the acquisition of the land has been a nagging problem. We feel that it make take still some time. Nevertheless, we have received government land for construction of rehabilitation colony. Work has already been ordered and the construction has started for construction of rehabilitation colony. We feel that once the construction of the rehabilitation colony makes some progress, the compensation for land procurement will be hastened. If that happens then by end of December 2013, we hope that the production should start coming from this Utkal coal block. But it all depends upon the pace of the land acquisition by the state authorities.