PRODUCTION PERFORMANCE

The production of 396,000 tonnes of aluminium in FY 2008 was our highest ever and an increase of 12.8% compared with production in FY 2007. Aluminium production at 102,000 tonnes in the last quarter of FY 2008 was the highest ever quarterly production. This increase in production is primarily attributable to an increase in current density and current efficiency at our BALCO II smelter. We have started the debottlenecking of the new Korba smelter by increasing the current density progressively to a final level of 340 KA. With various improvement measures undertaken, both power plants at Korba performed well and achieved their highest ever production.

We also commenced production from the first stream of the Lanjigarh refinery and produced 267,000 tonnes of calcined alumina during FY 2008. Alumina production in the last quarter was 124,000 tonnes, the highest achieved so far in a quarter, meeting our captive requirements.

Unit Costs

Unit costs of production in Indian rupee terms, the currency in which a majority of costs are incurred, were reduced marginally by 3.5% to INR 71,258 per tonne (or $1,771 per tonne) compared with the previous year, despite general inflationary pressures. Savings in procurement costs of carbon and other raw materials were partially offset by higher coal costs used in producing captive power. Due to the significant appreciation of the Indian rupee against the US dollar by more than 11.0%, the reported cost of production in FY 2008 is higher at $1,771 per tonne, up from $1,630 per tonne in FY 2007.

The unit costs of the BALCO II smelter, other than alumina, in Indian rupee terms was INR 32,385 per tonne ($805 per tonne), lower by 3.3% compared with the previous year due to savings in procurement costs and efficiency improvements which were partially offset by the impact of higher coal costs. The reported cost of production is higher in US dollar terms at $805 per tonne due to significant appreciation of the Indian rupee against US dollar. With the softening of alumina prices in the global markets, consumption costs of alumina for the BALCO II smelter were reduced to INR 34,982 per tonne ($869 per tonne) or by 18.4% in Indian rupee terms.

SALES

We improved our penetration of the domestic market, selling 302,000 tonnes in FY 2008 or 76.0% compared with 74.0% in FY 2007, benefiting contribution vis-à-vis exports. We continue to develop export markets in South-East Asia, the Middle East and Europe and achieved export volumes close to 94,000 tonnes in FY 2008, consistent with the previous year.

Financial Performance

FY 2008 witnessed growth in production volumes, resulting in an increase in contribution. Our costs of production were lower in Indian rupee terms due to procurement and operational efficiencies, which were partially offset by an increase in coal costs. Despite positive developments in volumes and costs, EBITDA for FY 2008 was $380.7 million, lower by 8.4% compared with FY 2007, primarily due to the significant appreciation of the Indian rupee against the US dollar by more than 11.0% and marginally lower average LME prices.

Projects

Jharsuguda Aluminium Smelter

We commenced commissioning of the first phase of Jharsuguda aluminium smelter of 250,000 tonnes in May 2008, one year ahead of schedule. Work on the second phase of 250,000 tonnes and captive power plant is progressing on track for commissioning as per schedule.

Lanjigarh Alumina Refinery

With regards to environmental clearances for the bauxite mines, we are now progressing as per the directions provided by the Honourable Supreme Court of India. We are hopeful of a positive early resolution of the matter.