Bhubaneswar, 29/09/2011: It gives me immense pleasure to welcome you all to the 30th Annual General Meeting of the company. The Directors’ Report and the Audited Accounts for the year ended March 31, 2011, together with Auditors’ Report of the company are with you, and with your kind permission, I take them as read.

After covering a journey of three decades, as an organization we should take stock of our endeavours and achievements. On this occasion, I wish to share with you my assessment of this journey. The company has performed extremely well on financial front with regular profits and serving shareholders with good dividends and recent bonus award as well. The company has carved a niche for itself in aluminium industry at global level with its quality products and transparent marketing practices. We can take legitimate pride in achieving an all-round appreciation for our efforts in taking care of our surrounding environment, nature and people. However, I believe that the company could perform better in some other areas like expanding capacities, exploiting business opportunities in sectors of mining and metals, diversification, technology updation and project management. I am confident that with such an introspection, the company would move forward with a fresh determination to seize opportunities, harnessing its latent strengths.

I take this opportunity to share with you some of my thoughts on the economic scenario of the country, the aluminium industry in particular, on how your company is positioned and its plans for the future.

THE ECONOMY

Indian economy has been growing at a rate close to 8 percent, the second fastest growth in the world after China. India’s GDP at factor cost at constant prices registered an increase of 8.5 percent in the year 2010-11. This growth is only a shade below the advance estimates that had pegged GDP growth for the fiscal at 8.6 percent. This slight dip in GDP growth can be attributed to weaker performance in industrial sectors than what was anticipated earlier. The economy was expected to grow at about 9 percent in 2011-12 at the beginning of the year but owing to fast changing, rather worsening, scenario in western economies, the estimate has been gradually reduced to 8 percent and even this appears ambitious. While the industry grew at 7.9 percent in 2010-11, it is likely to nurture at 7 percent only, during the present fiscal.

The inflation in the economy continues to be a cause for concern. Despite large-scale tightening of the monetary policy by the RBI and other steps taken by the Government, inflation continues to remain close to the double-digit mark. High international oil and food prices, and hike in Minimum Support Prices for the upcoming agriculture season at home, are some of the factors that constitute the upside risks to inflation.

The strong momentum in exports, seen particularly during the second half of 2010-11, continued in early 2011-12 as well. While this strong start in present fiscal was encouraging, there are indications that this high growth will not be sustainable in the months ahead. Rising interest rates, rising raw materials costs and oil prices, withdrawal of incentive schemes like Duty Entitlement Pass Book (DEPB) and likely slowdown in western and also in some Asian economies are among the reasons that have tempered the outlook for exports.

In 2010-11, foreign investment flows into India saw a dip of about 17 percent over the previous year. This dip was largely on account of a slowdown seen in case of FDI. While in 2009-10 the FDI inflows into India totalled US$ 37.7 billion, in 2010-11 this figure came down to US$ 27 billion.

ALUMINIUM SCENARIO

The global aluminium industry in 2010 was affected by diverse multifaceted economic, political, structural and fundamental factors that had a bearing on the price of aluminium and the mechanism of price determination in alumina.

During the year 2010, the world consumption of alumina was 82.2 million tonnes against the world production of 81.7 million tonnes, thereby showing a deficit of 0.5 million tonnes. The world alumina production and consumption grew by approximately 10.6 percent and 11.6 percent respectively during 2010 as compared to 2009. On the contrary, the Chinese alumina production registered an increase of about 24.6 percent over 2009 production. In 2010, the spot price of alumina averaged around US$ 345 a tonne, approximately 39 percent higher than the prices in 2009. This reflected strong demand for alumina, stemming from growth in aluminium production. Alumina refining capacity remained well ahead of production in 2010, yielding a utilization rate of 83 percent.

During 2010, a number of large alumina producers announced their intention to sell output on the spot market, based on certain fundamental linked indexes rather than traditional contracts linked to the aluminium price. This trend is expected to gain ground rather slowly over the medium term and analysts perceive the number of contract-based sales to decline. During the year 2010, the world consumption of primary aluminium was 41 million tonnes against world supply of 42 million tonnes, showing a surplus of 1 million tonnes. The world supply grew by approximately 10.3 percent while the consumption grew by 16.4 percent during 2010 as compared to 2009.

Despite stronger demand, the market continued to be characterized by a large inventory overhang, both on-warrant at LME Warehouses and off-warrant at Producers stockyards, with limited movements during the year. However, it has been a generic nature of the industry as around 70 to 80 percent of the stock remained tied up in financing deals.

DOMESTIC OUTLOOK

The domestic aluminium supply will continue to witness more metal from the expanded capacities of the producers. The domestic demand is expected to continue its strong showing, on the back of a robust industrial growth. It is anticipated that the market will grow at about 9 percent. According to analysts, aluminium industry in India would be oversupplied, considering that major aluminium projects would begin commercial production, with about 2 million tonnes surplus.

INTERNATIONAL OUTLOOK

Demand for aluminum in 2011 would be affected by monetary policy tightening by China, thereby affecting growth in manufacturing and industrial activities. Industry experts have anticipated 2011 to be a year of uncertainty and volatile prices. Aluminum prices could come under pressure as production of the metal in China, the world’s top aluminum market is expected to grow at a whopping 24 percent this year to around 20 million tonnes. The aluminium price may continue to react to macro-economic news, thereby averaging around $2300 to $2600 a tonne during 2011.

In 2011, alumina spot prices are forecast to increase by 12 percent to average around US$ 390 a tonne. World consumption of alumina is forecast to rise, supported by the construction of new smelters in China, India and the Middle East. The alumina market is expected to remain roughly in balance in 2012, with spot prices in the range of $350 to $370 a tonne, subject to changes in the LME aluminium price and the success of the Index-based pricing.

NALCO’s PERFORMANCE

Production

You will be pleased to know that Aluminium Smelter and Captive Power Plant of your company recorded the highest-ever production during the year. The level of capacity utilization at Mines was 100.5 percent with a production of 48.24 lakh tonnes; Alumina Refinery was 98.8 percent with 15.56 lakh tonnes; Aluminium Smelter was 96.4 percent with 4.44 lakh tonnes and Captive Power Plant was 91.7 percent with 6608 million units. The slight decrease in alumina hydrate production at Refinery, as compared to 15.91 lakh tonnes achieved in the previous fiscal, was due to shutdown of plant for taking hook-up jobs under expansion project and taking up a few pending maintenance jobs. Bauxite transportation was in line with the demand of Alumina Refinery for achieving the near rated capacity.

Sales

You will be pleased to know that your company achieved the highest-ever domestic metal sale of 340,752 tonnes surpassing the previous record of 289,032 tonnes achieved in 2009-10 and was 17.9 percent higher than the last year. Total metal sale of your company during the year under report was 438,952 tonnes, which is the highest-ever, surpassing the previous best of 435,979 tonnes achieved during the previous year. This has been possible due to rise in demand for aluminium and improvement in company’s share in the domestic market. Besides, your company also widened its international customer base for metal by adding new overseas clients during the year.

In the value-added segment, the company sold 20,126 tonnes of rolled products, surpassing the previous highest sale of 15,092 tonnes achieved in 2009-10. During the year, your company exported 4,614 tonnes of billets, after a gap of almost a decade. You will be happy to note that your company added T-ingot to its product range, which is first of its kind in the country.

The alumina sale at 681,917 tonnes during the year under report was 8.4 percent less as compared to previous year’s sale of 744,069 tonnes, due to higher consumption in Smelter Plant for producing more aluminium metal, thereby resulting in less availability of alumina for sale compared to last year.

The domestic sale of alumina, special grade alumina and other chemical products was 45,916 tonnes during the year which was the highest-ever surpassing the previous highest of 44,420 tonnes achieved in 2009-10.

Finance

Dear Members, you will be pleased to know that your company has earned a net profit after tax of Rs.1,069 crore for the year, as compared to Rs.814 crore in the previous year, resulting in an increase in net profit by Rs.255 crore, i.e. a jump of 31 percent. Sales revenue during the year at Rs.5,959 crore was higher by Rs.904 crore, an increase of 18 percent as compared to the previous year.

The profit for the year was higher because of higher sales realization as compared to the previous year, in addition to some contributions by way of higher production and sale of metal. The results would have been still better, but for the adverse impact of exchange rate of rupee on sales, which made a dent of Rs.159 crore during the year. The operating cost was higher by Rs.399 crore, an increase of 10 percent over the previous year, due to increase in prices of coal, fuel oil and provisioning for wage revision.

Human Resource

Your company continued to maintain healthy human relationships and the industrial relations situation remained cordial. HR interventions like participative management across various levels in the organization, openness and transparency in dealing with employees in general and Unions in particular have helped in sustaining harmonious IR environment. The Recognized Unions have played constructive role as partners in the growth of production, productivity and all-round performance of your company. The collective bargaining process with the Recognized Unions on the issue of wage revision of non-executive employees remained very constructive, leading to amicable wage settlement for a term of ten years.

EXTENSION OF MINING LEASE

You will be pleased to know that with vigorous efforts, your company could successfully comply with various requirements for getting the Mining Lease over south block of Panchpatmali Bauxite Mines extended for further period of 20 years.

CORPORATE PLAN

The company has adopted the new Corporate Plan and Vision 2020 since 2009-10. Pursuing the Vision Statement of becoming a “Reputed Global Company in the Metals and Energy Sectors”, your company initiated actions, encompassing the whole gamut of business activities, for achieving the objectives set out in the Corporate Plan. Here, I would like to share the progress so far on various initiatives:

• Your company is actively pursuing to set up a smelter and power project in Indonesia at suitable location, primarily because of availability of good quality coal at economic price. Two coal mining firms have been identified for possible long-term arrangement for sourcing coal for the proposed project.

• Your company has been pursuing for setting up a smelter and power project in Odisha. Considering the uncertainty on the location in Odisha project, your company may have to explore for an alternate location elsewhere in India.

• Due to unfavourable ground conditions in the area surrounding the bauxite mines in Gudem and KR Konda blocks in Andhra Pradesh, your company is moving cautiously on the field activities for the proposed mines and refinery project.

• Your company has identified Kakarapar Atomic Power Station (KAPS) - 3 & 4 project for development, jointly with Nuclear Power Corporation of India Ltd. at a project cost of Rs.11,450 crore. The recommendation of our Board for the investment is under consideration by the Government of India.

• Your company has placed orders to set up a 50.4 MW wind power plant in Andhra Pradesh at an investment of Rs.274 crore. The plant is expected to be commissioned by February 2012. Establishment of the wind power plant will partially meet the company’s obligation to source power from renewable source of energy as mandated by National Action Plan for Climate Change.

• Angul Aluminium Park, a joint venture between your company and Orissa Industrial Infrastructure Development Corporation (IDCO) has taken off with the company having 49.5 percent equity. The activity of acquisition of land is in process.

Expansion Projects

You will be pleased to know that all the segments of 2nd Phase Expansion have been commissioned. The facilities commissioned as part of 2nd Phase Expansion at Alumina Refinery are under stabilization. The upgradation of 4th Stream of Alumina Refinery from 0.525 million tonnes to 0.70 million tonnes and that of Bauxite Mines from 6.3 million tonnes to 6.825 million tonnes, at an estimated project cost of Rs.409 crore, is scheduled to be commissioned by June, 2012. The upgradation of Smelter Potlines from 180 KA to 220 KA at an estimated investment of Rs.1500 crore for both Smelter and Captive Power Plant is under implementation. On completion of the project, expected by 2017, the capacity of the Smelter Plant would go up by 1 lakh tonnes per year.

Utkal-E Coal Block

Utkal-E Coal Block with estimated reserves of around 70 million tonnes shall cater to the requirement of 9th and 10th Units of CPP. The project is estimated to cost Rs.280 crore. The coal block is likely to become operational by June, 2012.

NALCO FOUNDATION

Besides periphery development works undertaken through RPDACs set up by the State Government, your company set up a Foundation in 2010 for its CSR activities by allocating an additional one percent of its net profit every year, thereby doubling the CSR budget. The Foundation is based on the Guidelines on Corporate Social Responsibility for CPSEs, issued by the Government of India. Accordingly, the Foundation has adopted project-based approach, ensuring community participation, accountability, sustainability and measurable results.

I am pleased to inform you that in recognition of its CSR initiatives, Nalco received the PSE Excellence Award 2011, in the Maharatna and Navratna category, for Corporate Social Responsibility and Responsiveness, instituted by the Department of Public Enterprises (DPE), Govt. of India and Indian Chamber of Commerce.

ACKNOWLEDGEMENT

On behalf of the company and all of you, I take this opportunity to thank our valued customers, investors, suppliers, bankers, consultants, Directors on the Board, the Government of India, particularly the Ministry of Mines, the Government of Odisha, Indian Railways, Mahanadi Coalfields and other Government agencies. I must acknowledge the support and co-operation of my colleagues and thank all the employees of Nalco for their untiring efforts in achieving yet another year of success for your company.

Note: This does not purport to be record of the proceedings of the Annual General Meeting.