Officers’ Association’s Analysis of the Pay Revision Committee headed
by Justice M.J.Rao
1.0 Restructuring of the CPSEs
he terms of reference of the committee state “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.” However, the committee chose to completely restructure the CPSEs and relate the restructured categorization to pay of individual executives.
Committee has re-categorized the CPSU into five categories based upon Total income, Size of Manpower and Geographical spread of operations. Even while doing so NHPC’s tough working conditions (climate & militancy) and remoteness of the projects have not been given due weightage by the committee and has been kept in A category instead of A+. NHPC, which till date is having wage parity with NTPC have now been downgraded in this report which grossly means 15-20% lesser wages to NHPC officers. It is pertinent to add that NOA had in its earlier communication to the Committee had requested to consider these aspects. NHPC employees work in extremely remote and adverse conditions in areas like Leh, Kargil, Baramulla, Gurej valley of J&K, Twang and Dibang valley of Arunachal Pradesh, Manipur etc. where no other organization except Army is existing.
This type of restructuring is in fact irrational. Size of the enterprise / Income has been taken as the dominant basis for determining the size of the pay package of the executive. Perhaps at the level of the Chairman and Managing Director there may be some justification as size determines the levels of responsibility thereby justifying a linkage between wage and size, but how and why the size of the enterprise should determine the pay and the retirement benefits.
Similarly Income of the organization should not have any link with pay scales as income depends upon cost of Input. Cost of Oil / food grains are increasing day by day and so are the income of companies dealing in these items. Income of the organization for the purpose of categorization should have been normalized by considering various other factors at least in case of Hydropower organizations like adverse terrain / climate / militancy, remoteness etc..
Companies involved in hydropower construction are capital intensive and need large infrastructure for development of hydropower projects. Accordingly the gestation period of these projects depends on the extent of infrastructure and this gestation period is often affected by geographical conditions and geological complexities which in turn lead to cost escalation. At the same time return on equity is very low and fixed because of functioning in a regulated environment controlled by CERC. Also hydropower projects can only be developed at locations where water resource is available. Therefore in case of such companies equity participation along with number and extent of projects should be considered for the purpose of size of the Corporation. Hydropower projects moreover are cheap and clean projects and have nowadays become vital tools for clean development mechanism(CDM). NHPC has commissioned 10 Projects and 12 projects are under construction. These projects are located in Himalayas from J&K to Sikkim and total capital investment for these projects is of the order of Rs. 25,400 Crores.
Some examples of problems with the linkage of wage with size are given below:
a) Only few companies in few sectors (11 to be precise) come within A+. In other words executives working in enterprises in sectors like Hydro Power, Tunneling / Mining, Metal tourism, etc. cannot even dream of ever getting a wage equivalent to a few companies from the Thermal Power, Steel or oil sector;
b) An executive working in the dust and dirt insides the Tunnels / Mines and remote hilly areas cannot get a pay equivalent to an engineer working in a Thermal / Oil Project in well connected Township or a staff officer sitting in air-conditioned comfort advising the CMD of Coal India;
c) A consultancy firm where the entire direct work force belong to the officer cadre can never attract the best talent since it would never grow to the size of ONGC.
2.0 Maintenance of Wage parity with NTPC
The report admits “public sector is under huge pressure in terms of attracting and retaining talent” yet the committee has not created equal opportunity to all the CPSEs to attract talent. By creating a substantial difference in the induction level, the committee has not only ensured intra-PSE competition but also intra PSU attrition. In last two years more than 400 talented officers have left NHPC to join IPPs and NTPC. Any future wage difference with NTPC shall only lead to staff movement from NHPC to NTPC leading to slow decay of the organization. So in any case NHPC’s wage parity with NTPC should be maintained.
3.0 Linkage with profits
In a market economy there is a need for providing flexibility to take care of profitability (or limitation caused by losses) of the enterprise through instruments like risk pay and performance related pay. However determining wage as a consequences to decisions taken without any role either as individuals or as a collective of officers violates the a cause and effect relationship so cardinal to jurisprudence.
It is essential to create conditions that enable the collective of officers to contribute to and influence policies that result in profits and losses based on the principle annunciated in “The Participation of Workers in Management Bill 1990 (Bill No. XXVIII of 1990)” drafted by the Government of India. [Introduced in the Parliament and then allowed to rest in peace (RIP)]. On the other hand the most important players in decision-makings -the bureaucrats in the administrative ministries face no consequences of their decisions. Instead an accounts officers or shop floor engineer is forced to pay the penalty.
4.0 Other Allowances / Perks
Committee has kept certain allowances which are outside the purview of 50% limit. These contain North East allowance subject to a limit of 12.5% of Basic pay, Farflung area allowance subject to a limit of 10% of Basic pay etc. NHPC is already giving Project allowances to the tune of 30% of Basic pay in these areas. such type of recommendations will pose limitations and may increase hardships of NHPC officials. The higher perks / allowances as per site conditions are required to retain the officials in geographically tough terrain and adverse climatic conditions.
5.0 Performance Related Pay(PRP)
The committee has recommended that Performance Related Pay be made an integral part of the compensation package. PRP has been linked to the profits of CPSE and performance of the executives. In addition to this committee has also recommended that all CPSEs should adopt a “Bell Curve Approach” in grading the officers so that not more than 10-15% executives are Outstanding / Excellent. Similarly 10% of Executives should be graded as below par.
The recommendation pertaining to adopting of “Bell Curve Approach” for grading of officers is irrational. If an organization is getting Excellent MoU rating it is not merely because of only 10-15 officers. Any such thing will promote sycophancy and corruption in the organization and spoil individual growth avenues.
6.0 Pay Scales, Pay Fixation, Fitment and Rate of Increment / Stagnation Increments
6.1 Pay Scales
In case Pay Scales corresponding to existing scales are not given in the report, Corporations should be allowed to make their own scales.
Fitment benefit for A category should be same as that of A+.
Procedure should be defined for fixation of Pay in order to grant increments to those employees who have already exhausted stagnation increments or whose stagnation increments are due as on 01.01.2007. This is required because as per existing practice no stagnation increment is given beyond the date of Pay revision duration (viz. Effect of 1997 pay revision is upto 31.12.2006 only and no stagnation increment have been given after this date.)
6.3 Pay Fixation
As most of the officers in NHPC are stuck up at the Maximum limit and have also exhausted the number of stagnation increments, the pay fitment proposed by Justice Rao committee does no suit executives in NHPC and other PSUs as most of them will reach the maximum limt of the scale at the time of intial pay fixation only. It is laso against the proposal from CPSUs wherein they had demanded for open ended pay scales to take care of revision frequency of 10 years.
In order to cover this aspect, there should be provision of Personal pay at the time of fitment so that at least 5 increments are allowed within the scale in addition to stagnation increments. This Personal pay should be absorbed in the next Pay revision. This is necessary in order to avoid pay anomalies between senior and Junior executives.
6.4 Increment / Stagnation Increments
Rate of Increments should not be less than 4% and Stagnation increment should be kept as same as normal increment rate.
7.0 Profit Sharing
Minimum Profit Sharing of 5% should be allowed to all profit earning CPSUs