10. Excerpts from the report of 2nd pay revision committee (4th part of write up)

(In the 2nd PRC report, certain views of 1st PRC report were reproduced which exposes the myth ‘Autonomy of Public Sector in India’….worth reading)

Justice Mohan Committee which was set up to recommend compensation packages for executives of CPSEs in 1996 (the 1st Pay Revision Committee effective from 01-01-1997) did recognize the difficulties that the public sector was facing in the wake of liberalization of Indian Economy.

It is worthwhile to reproduce certain observations of Mohan Committee on i)impact of Parliamentary and ii) Executive control, iii) judicial intervention and iv) forces of competition on working of CPSEs.

Views of Justice Mohan Committee

 “A characteristic feature of India’s Public Sector is the role of Parliament. The public and Parliament expect the executives of the Public Sector to answer their complaints and enquiries in almost the same detailed manner as they expect government servants to do – so much more in detail than a normal shareholder expects of the corporate management in the Private Sector. As a result, unlike in other more mature economies, in India, the Parliamentary Committee in general and the system of questions in particular tends to go into many details of day to day operations.

Besides agencies of government like Central Vigilance Commission, and the Central Bureau of Investigation exercise powers of superintendence over acts of omissions and commissions on the part of the executives of Public Sector Enterprises.

The result has been the culture of intervention by government bureaucracy in functioning of Public Sector Enterprises. This leads to second guessing of decisions of Public Sector Enterprises and the effective subordination of PSEs to hierarchy of secretariat”.

“In addition to all these, India’s Public Sector Enterprises have a doubtful privilege of being treated as a limb of state as a result of judicial pronouncements. Employees of public sector units get the same rights in respect of their tenure of service as if they are employees of government. This means that Courts have jurisdiction in matters relating to action taken against any officials of Public Sector Enterprises. Besides, even genuine commercial decisions of PSEs are subject to writ jurisdiction offering a temptation to litigious suppliers and customers”.

“It is against this background of a multitude obstacle race run by India’s public sector that one has to adjudge its progress and its problems. Public Sector Enterprises in India are constrained as they are by a mix of invasive vigilance as well as parliamentary and judicial intervention have still to perform in an increasingly competitive environment, where both the Indian private sector and international majors fight for the market. For these and other reasons it is obvious that there is no level playing field to compete with each others”.

“In addition to all this comes a rather constrained policy framework which governs pay and allowances of public sector executives as against the private sector which is able to offer relatively attractive salaries and perquisites”.

While recognizing serious disadvantages that CPSEs face in the changed economic scenario, Justice Mohan Committee did not make any recommendation to provide a level playing field to the CPSEs, particularly in the matter of executive compensation. The committee made the following observations:

“while the pecuniary attractions offered in the private sector are real, the countervailing circumstance of heavy losses in many public sector enterprises also has to be borne in mind. Besides Government as owner of Public Sector Enterprises cannot ignore important aspect of considering all these divergent goals against a broad social objective viz., to maintain a balanced overall structure of wages and income. The task before the Committee has therefore been an exercise in constrained optimization.”

to be continued…

9. Demystifying MOU between CPSE and GOI for the benefit of Singarenians (part-1)

Department of Public Enterprises

(MoU Division)

The Genesis The genesis of the policy of Memorandum of Understanding can be traced to the report of the Arjun Sengupta Commitee. One of the recommendations of this committee was for the introduction of the system of MOU for measurement of performance of public enterprises. The MOU system was introduced on an experimental basis in 1987-88. It was based on the French system. From 1989-90 the signalling system was adopted and it remains in vogue till the present.One of the most important differences between the French system and the signalling system relates to the possibility of making an overall judgement on the enterprises performance in the latter system. In performance contracts belonging to the French system, one could only point out whether a particular target was met or not. This created great difficulty for making an overall judgement regarding enterprises performance. The signalling system overcomes this problem by adopting the system of “five point scale” and “criteria weight” which ultimately result in calculation of “composite score” or an index of the performance of the enterpriseThe MOU system has been adopted in response to the following: Widely held perception that the PSEs are less efficient than their private sector counterparts. PSEs are unable to perform at efficient levels because there are a variety of agencies within the Government who feel that they have a mandate to run public enterprises. These agencies having their own agenda to keep, setting different objectives for the enterprises which are always conflicting. Because of lack of clarity of objectives and confused signals imparted to the management, the accountability of the management is vastly diluted. The management of PSEs thus ceases to be accountable for the performance of the enterprise At the same time, the Management of PSEs are handicapped in their operation due to absense of functional autonomy. Signaling system and Performance Evaluation The MoU system in CPSEs prevalent since 1986 was revamped in 1989, and it moved closer to the “signaling system” of the Pakistani and the Korean models as developed by Prof. Leroy P. Jones (Director, Public Enterprises Programme, Boston University). The ‘performance contract’ under the MoU system, moreover, got de-linked from the medium-term agreement as recommended by Arjun Sengupta Committee. Under the new MoU system that was implemented from the financial year of 1989-90, performance evaluation came to be based on the annual targets agreed upon between the government and the CPSEs, rather than the five-year target. Another novel feature of the new system was finalization of MoU under the overall supervision of a third party, namely, the MoU Task Force constituted by the Department of Public Enterprises. The MoU Task Force is independent of both the administrative ministry and the CPSE. State level Public Enterprises (SLPEs) State level Public Enterprises (SLPEs) form an important part of state economies and have played a very important role in the overall development of the states. Most states have also set up Bureau of Public Enterprises/ Public Enterprises Departments for coordinating/management of SLPEs. In other states, these functions are performed by the Departments of Industries, Finance or Planning, etc. The SLPEs thus fall under the administrative control of various Ministries/Departments in different states. The main functions of the administrative Ministries/Departments concerning the SLPEs include the following: (a) Allocation of finance/Budgetary Support (b) Regular review of performance (c) Approval of various schemes/policies/personnel matters (subject to the concurrence of the Finance Department, Law Department and Public Enterprises Department). Source: Department of Public Enterprises, Government of India. Note: Singarenians may ponder on the functions of SLPEs as mentioned above and their relevance to SCCL. …to be continued

8. Tribute to Sri.K.Ramakrishna

Sri.Ramakrishna, the first ever Director (E&M) of Singareni Collieries Company Limited is no more… he passed away yesterday the 14^th August, 2016 after battling for life for more than a month, at a hospital in Hyderabad.

‘Laughing Buddha’ famously called by Sri.R.H.Khwaja, the then C&MD of SCCL, ‘Gandhi of Opencast mining’ fondly called by Sri.Vasudeva Rao, Ex-Director, SCCL, Sri.Ramakrishna scripted a new chapter in the maintenance philosophy of Heavy Earth Moving Machinery (HEMM) in the opencast mining in SCCL.

Many Singarenians would recollect the dark days of SCCL especially in the 90s’ when it had accumulated losses to the tune of Rs.1200 Crores by the year 1996-97. Adding insult to injury, there was a House Committee consisting of Members of Legislative Assembly appointed in March, 1997 to find out irregularities if any in the procurement of Heavy Machinery, whether there was a loss to the company on account of machinery lying idle for want of proper maintenance etc. The Committee submitted its report to the Speaker of Legislative Assembly in July, 1999 making recommendations, inter alia on the need for establishing proper systems and controls on the maintenance/repairs of HEMM and material management.

Though the situation was bad in all the opencast mines of the company as pointed out by the House Committee, something different was happening in Manuguru Area since year 1995 under the leadership of Sri.N.B.Krishnamurthy (NBK) posted as the Chief General Manager of the Area. Sri.Ramakrishna was the workshop in charge of Opencast-II mine, while I was Agent of the other two opencast mines in the Area.

The book “Seven Habits of highly Effective people” by Stephen.R.Covey had a profound influence on Sri.NBK which in turn brought a radical change in our (Sri.Ramakrishna and me) perspective of machine maintenance.

We were thoroughly convinced about the ‘Habit-3’ (which is about time management. Time management is not managing time, but it is managing ourselves. Putting First Things First is to “Organize your activities into 4 Quadrants and execute around priorities”)

Sri.Ramakrishna implemented the philosophy in its true spirit bringing down unforeseen downtime drastically by concentrating on preventive maintenance. Earlier culture was working the machine till it breaks down, which some junior executives responsible for machine operation paraphrased it as “tute thak chalaav”. Hydraulic machines were worked with profusely leaking hoses and end-fittings, keeping ready barrels of hydraulic oil nearby, machines were coated with dust, requiring hell lot of time to detect the source of leakage, thorough abuse of HEMM, by improper working conditions in the quarry including poor fragmentation of OB material, lack of tools and tackles etc.

Starting from improving the house keeping in workshop, steam washing of the machines, exhorting on engineers and technicians with words like ‘cleaning is maintenance’, ‘leakage of oil from a machine is equivalent to loss of blood from human beings’, he led from front to bring a radical change in the maintenance culture. He thoroughly believed in a proper balance between production and production capability, postulated as P/PC balance in the book quoted above.

Under his leadership, Manuguru Area Opencast-II mine had become a favourite destination to benchmark best practices for the other opencast mines of the company.

One can appreciate the high standards of maintenance he had set in Manuguru by the following example:

During my inspection of Goutham khani Opencast workshop as Director (Operations), in 2009 or so, I expressed my displeasure at the poor maintenance practices there and asked the then SO to GM of Kothagudem Area, who accompanied me, whether he visited  Opencast-II workshop in Manuguru.  When he replied in the negative, I ordered him to visit immediately along with concerned E&M engineers and report back. After a week or so I got a report from him listing about 56 maintenance practices followed there, many of which are yet to be implemented in GK Opencast.

He was very fond of telling us his personal experience of a visit to the workshop of Sundaram Motors or Sunderam Fasteners (I don’t recollect exactly). He told that he was given a white apron during the visit and at the end of the tour he was asked to lie down on the floor. When he got up he was asked to check up whether there was any speck of dust on the white apron. He found none. That was the level of perfection he was striving for.

The present generation of engineers both mining and E&M of SCCL working in opencast or underground mines should ask themselves where they stand in maintaining and further improving the maintenance practices set by the visionary engineers like Sri.Ramakrishna.

The true tribute to Sri.Ramakrishna who lived every minute of his working life in the service of Mother Singareni, is to take the maintenance practices to next level to achieve highest possible operational efficiency in SCCL.

 

7. Excerpts from the report of 2nd pay revision committee (3rd part of write up)

Background of evolution of public sector enterprises in India

• Prior to Independence, there were few ‘Public Sector’ Enterprises in the country. These included the Railways, the Posts and Telegraphs, the Port Trusts, the Ordinance Factories, All India Radio, few enterprises like the Government Salt Factories, Quinine Factories, etc. which were departmentally managed.
• Independent India adopted planned economic development policies in a democratic, federal polity. The country was facing problems like inequalities in income and low levels of employment, regional imbalances in economic development and lack of trained manpower. India at that time was predominantly an agrarian economy with a weak industrial base, low level of savings, inadequate investments and infrastructure facilities.

• In view of this type of socio-economic set up, our visionary leaders drew up a roadmap for the development of Public Sector as an instrument for self-reliant economic growth. This guiding factor led to the passage of Industrial Policy Resolution of 1948 and followed by Industrial Policy Resolution of 1956. The 1948 Resolution envisaged development of core sectors through the public enterprises. Public Sector would correct the regional imbalances and create employment.
• Independent India adopted planned economic development policies in a democratic, federal polity. The country was facing problems like inequalities in income and low levels of employment, regional imbalances in economic development and lack of trained manpower. India at that time was predominantly an agrarian economy with a weak industrial base, low level of savings, inadequate investments and infrastructure facilities.
• Prior to Independence, there were few ‘Public Sector’ Enterprises in the country. These included the Railways, the Posts and Telegraphs, the Port Trusts, the Ordinance Factories, All India Radio, few enterprises like the Government Salt Factories, Quinine Factories, etc. which were departmentally managed.
• Industrial Policy Resolution of 1948 laid emphasis on the expansion of production, both agricultural and industrial; and in particular on the production of capital equipment and goods satisfying the basic needs of the people, and of commodities the export of which would increase earnings of foreign exchange.
•  In early years of independence, capital was scarce and the base of entrepreneurship was also not strong enough. Hence, the 1956 Industrial Policy Resolution gave primacy to the role of the State which was directly responsible for industrial development. Consequently the planning process (5 year Plans) was initiated taking into account the needs of the country. The new strategies for the public sector were later outlined in the policy statements in the years 1973, 1977, 1980 and 1991. The year 1991 can be termed as the watershed year, heralding liberalisation of the Indian economy.

• The public sector provided the required thrust to the economy and developed and nurtured the human resources, the vital ingredient for success of any enterprise; public or private.

 GLOBAL TREND

• The Public Sector emerged as the driver of economic growth consequent to the industrial revolution in Europe. With the advent of globalization, the public sector faced new challenges in the developed economies. No longer the public sector had the privilege of operating in a sellers market and had to face competition both from domestic and international competitors.
• Further, in the second half of the 20^th century in the developed economies, the political opinion started swinging towards the views that the intervention as well as investment by Government in commercial activities should be reduced to the extent possible.

• Many eminent economists argued that Government must not venture into those areas, where the private sector could undertake job efficiently. Lot of emphasis was laid on market driven economies, rather than State controlled and administered economies.

• The collapse of socialist economy of the Soviet block convinced the policy planners, around the world, that role of the State should be that of a facilitator and regulator rather than the producer and manager. It may be worth mentioning that, in various countries, the turn towards liberalism including deregulation and decontrol also led to discontent amongst some sections of population as its benefit did not flow down to the weaker and disadvantaged sections of society.

• Today, both Public Sector & Private Sector have become an integral part of the economy. There may not be much difference in working of these sectors in advanced countries, but in developing countries, the performance of Public Sector has considerable scope for improvement. It is also observed that Pay packages are almost similar in both sectors in developed countries, but large differences exist in remuneration in the two sectors in developing countries, like ours.

…to be continued in my next blog on this topic.

6. Excerpts from the report of 2nd pay revision committee (2nd part of write up)

2nd part of my blog on PRP

Preface: …..Something drastic needs to be done – (a) to prevent this ongoing exodus; and (b) to attract right managerial talent to the public sector system. It is, therefore, absolutely necessary that the remuneration levels are cut off from the umbilical chord that traditionally ties public sector salary level with government salary level. The CPSEs need to be taken away from day-to-day government control and placed side by side with the private sector units with whom they compete. In fact, our major concern is to help turning the CPSEs into commercially profitable organizations. Indeed, this is also a mandate given to us in the Government’s terms of reference.

…….We, therefore, see no reason why the level of remuneration in the commercially successful CPSEs should not be significantly higher than the present level, although they may not be able to go to the level that prevails in highly successful private sector entities. We have recommended a system where a significant portion of the remuneration recommended will depend on the profitability and performance of the concerned enterprise.

….Thus, let there be no fear that our recommendations will saddle the government with any financial outgo. In fact, wherever major enhancement has been proposed, it will only be applicable to companies which make good profits.

…..A question that was repeatedly raised in our discussion with CPSEs was that 10 years are too long a period for pay revision in the public sector and that this time gap should be reduced to five years or so.

Our general preference will be that once our recommendations have been given effect, the responsibility of future revision should be given to the Board of Directors of a company subject to the approval of the concerned Ministry in discharge of its role as shareholders.

We would like to see that we are the last such committee for deliberating on the remuneration structure in the public sector as a whole and that hereafter no such committee will be necessary. Revision can be considered by the Board of Directors and the concerned Ministry as and when necessary on the basis of the economic situation and the nature of the concerned industry

…to be continued in my next blog on this topic.

5. Performance Related Pay (PRP)-SCCL (1st part of the write up)

Dear Fellow Singarenians

As all of us are very much concerned and agitated about the inordinate delay in resolving the issue of Performance Related Pay (PRP) by the management of SCCL, I thought of writing a series of blogs on the subject and share it in social media for all of us to have proper information for a meaningful discussion and suggestions.

I shall start with the constitution of 2nd Pay Revision Committee, its terms of reference, Recommendations, BPE guidelines, circulars issued from time to time by BPE/CIL/SCCL, the representation to SCCL management by SROWA etc.

The 2nd Pay Revision Committee has been constituted by the Department of Public Enterprises (DPE) vide Resolution dated 30th November 2006, under the Chairmanship of Mr. Justice M.Jagannadha Rao, with 4 Members and a Member
Secretary.

Some  Terms of Reference of the Committee:

• The Committee will examine the principles that should govern present structure of
  pay, allowances, perquisites, and benefits for the following categories of Central Government Public Sector Enterprises (CPSEs) executives, taking into account the total package of benefits available to them including non-monetary ones, and suggest changes therein which may be desirable and feasible:
  (i) Board level functionaries
  (ii) Below Board level executives
  (iii) Non-unionised supervisory staff
• The Committee will make recommendations so as to transform the CPSEs into
  modern, professional, citizen-friendly and successful commercial entities that are also dedicated to the service of the people.
• The Committee will work out a comprehensive pay package for the categories of
  employees of CPSEs mentioned at sub para 2.2.1 that is suitably linked to promoting
  efficiency, productivity and economy through rationalization of structures, organizations, systems and processes as well as promoting functional and operational autonomy within the Public Sector Enterprises with a view to leveraging economy, responsibility, transparency, discipline, accountability, assimilation of technology and research and development. The existing patterns of scales based on Central Dearness Allowance(CDA) pattern or Industrial Dearness Allowance(IDA) pattern, categorization of CPSEs such as Schedule ‘A’, ‘B’, ‘C’ and ‘D’, Miniratna, Navratna, loss, profit making CPSEs and CPSEs referred to BIFR or BRPSE may also be taken into account while evolving suitable pay packages. The Committee will also examine the issue concerning separate pay revision guidelines in respect
  of Navratna CPSEs.
• The Committee will examine and make recommendations with respect to the general
  principles, financial parameters and conditions which should govern the desirability,
  feasibility and continuation/modification of the Productivity Linked Incentives Scheme and Performance Related Payments.
• While finalizing its report, the Committee will also take into account the report of the Sixth Pay Commission.
• The Committee will make its recommendations to the Government within a period of
  18 months and it will have its headquarters in Delhi.
• The decision of the Government on the recommendations of the Committee will take
  effect from 1.1.2007.                                                                                                                                                   …..to be continued in the 2nd part of the blog