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Governance deficit delays NALCO's expansion proj: CAG

business Updated: Sep 04, 2012 21:52 IST

Aluminium giant NALCO has invited criticism from CAG for possible "governance deficit" which the government auditor says has resulted in many inadequacies, including delays in its Rs 4,091.51 crore second phase capacity expansion project.

"Gaps and inadequacies in project formulation and execution points towards a governance deficit in the company which needs to be addressed appropriately," Comptroller and Auditor General (CAG) said in its report tabled in Parliament on Tuesday.

It said the "system weaknesses" contributed significantly in delaying the project and due to delay in completion of civil and electrical works, the mining equipment procured in 2008 at a cost of Rs 103 crore could not be commissioned.

The equipment pertained to saving cost for bauxite transportation. The government had approved the company's second phase capacity expansion plan in 2005 to take its bauxite mining capacity to 6.3 million tonne per year (MTPY) from 4.8 MTPY, alumina refinery capacity to 2.1 MTPY from 1.5 MTPY and smelter capacity to 0.46 MTPY from 0.3 MTPY.

Also, it planned taking the capacity of captive power plant (CPP) to 1,200 MW from 960 MW.

However, the expansion plan which was scheduled to be completed by December 2008 got delayed "due to various gaps and inadequacies in planning and execution," the CAG report said.

It added, "the completion of expansion of smelter, CPP and refinery was delayed by 12 months, 23 months and 36 months respectively."

Noting that the second capacity expansion plan was very vital for the growth of the company and the country, it said that the company did not explore the availability of improved technology while formulating the plan.

"As a result, the DPR (detailed project report) had to be revised which led to delayed commencement of project which had a cascading effect on the completion of the project," it said.

Also, it expressed unhappiness over roping contractors with poor track record for the project.

"While awarding the contracts, the company did not learn from its past experience and awarded the critical contracts to the contractors with poor track record in executing earlier contracts," it said.

The company also awarded contracts or another critical activity to an inexperienced contractor by accepting its abnormally low offer, it added.

NALCO is Asia's largest integrated aluminium complex, encompassing bauxite mining, alumina refining, aluminium smelting and casting, power generation, rail and port operations.