Saturday, October 29, 2011

CPSEs Corpus out of 1.5% PBT - letter dated 24.811 of National Confederatonation of Officers' Associaton (NCOA)


Posted on 17-Sep-2011

Queen City To
Sh. Ashok Kumar Pavadia
Jt. Secretary, DPE


Respected Sir,

We met our Secretary DPE on 17/11/2009 and had a discussion on certain pending issues regarding pay revision. Further to this we would like to bring to your kind notice the following points with respect to the Pay revision of executives in Central Public Sector Enterprises effective from January 2007. These issues need your kind attention, as they are pending for a long time and are demoralizing the executives.

1. Periodicity:
The Office Memorandums issued by DPE regarding the Pay revision of executives in CPSEs have not mentioned about the periodicity. With the result the CPSEs at the time of pay revision effective from January 2007 have not mentioned about periodicity. Historically the Pay in CPSEs is revised once in 5 years except in 1997. In the case of workmen, for the pay revision due from 2007, the guidelines issued by DPE have given the option for the periodicity of 5 to 10 years. In the present context of free market economy, the salaries of executives in CPSEs have to be aligned to the market conditions as regularly as feasible to ensure that proper competent manpower is attracted and retained in the CPSEs, so that they can effectively compete with the Private Sector and Multi-National Enterprises. It may kindly be noted that the Pay revision for executives in Private Sector is carried out on a yearly basis. Also the pay revision for executives and workmen in an Enterprise has to be simultaneous to ensure that there are no serious anomalies (In the case of HMT, all the workmen draw Pay which is higher than the pay of even the General Manager). Keeping this in mind the pay revision for executives shall be carried out after 5 years in January 2012. In the long run the periodicity of Pay revision for employees in CPSEs shall be three years to align them with the market realities.

2. Revision of Pay scales for sick and marginally profit making companies: The 2nd Pay revision committee had recommended that Sick Enterprises that are making cash profits may be allowed to implement the pay revision without Risk Pay or Variable Pay. This recommendation of the committee has not been implemented so far. We request that the government should implement this recommendation and the revised pay scales should be implemented with effect from 1st January 2007 for the marginally profit making and sick CPSEs with 30% fitment benefit. The variable pay and revision of Perks & Allowances can be differed.

The 2nd Pay revision committee had also recommended that CPSEs that are not making cash profits should be examined by BRPSE in a period of 6 months for revival or enclosure. Enterprises that are recommended for revival should include the proposal for revised pay scales. If Enterprises are recommended for closure, the executives should be compulsorily retired by paying compensation based on the revised basic pay. We request that this recommendation of the committee should be implemented immediately. If the government delays a decision further, it may result in key executives leaving the Enterprise and it will become difficult for the government to revive these Enterprises subsequently.

3. Additional increments granted prior to 1st January 2007:
A few CPSEs especially under the Ministry of Defence Production have granted extraordinary additional increments to their executives prior to January 2007 as they are not able attract the best talent. These Enterprises are working in high tech-areas and were finding it very difficult to run the Enterprises as they are not able to attract the technically competent engineers in view of meager salaries when compared to the Private Sector and other CPSE Units like NTPC, NHPC, PGCIL, REC, ONGC, IOC, HPCL, BPCL, GAIL, NMDC, NALCO, BHEL, SAIL, CIL, etc.

The Boards of these CPSEs have granted additional increments prior to 1st January 2007 in these Enterprises to ensure that the Executives / Supervisors will be on par with other leading CPSEs in terms of pay. The Board of the CPSE has the power to grant additional increments and a number of cases they have even take the approval of the administrative Ministry. The DPE vide Clause 2 (ii) of the Office Memorandum dated 26th November 2008 has nullified this.

It is unethical and against natural justice to withdraw these additional increments granted by a competent authority after more than two years. The executives have drawn these increments and received the pay based on these increments during the last two years. You may kindly note, that in a number of cases after the Pay revision (which has taken place after 10 long years), the executive will be fixed at a pay which is less than the pay they are already drawing and there will be recoveries in the salary. We request you sir, to please examine the issue objectively and withdraw this Clause 2 (ii) of DPE OM dated 26th November 2008.

4. Personal pay / Special pay for purposes of Pay fixation on pay revision: It is a well defined policy that Personal Pay, Special Pay etc. of the individual is always considered for purposes of pay fixation at the time of pay revision. Keeping in line with the established policy, the Personal Pay, Special Pay etc. should be considered as basic pay for purposes of Pay fixation at the time of pay revision. In line with the past practice, the family planning increment should be given in the new scale.

5. Enhancing income tax exemption up to Rs. 10.00 Lakhs for gratuity with effect from Jan. 2007: The ceiling limit for payment of gratuity has been enhanced to Rs. 10.00 Lakhs for CPSEs from Jan. 2007. However the limit for income tax exemption has not been raised. The present limit of Rs. 3.50 lakhs was fixed in 1996. DPE should take up with the Ministry of Finance for enhancement of limit for income tax exemption for gratuity to Rs. 10.00 Lakhs for CPSEs employees with effect from 1st January 2007. It may be noted that all government employees are exempted from payment of income tax up to Rs. 10.00 lakhs on Gratuity with effect from 1st January 2006.
The recommendation of the 2nd pay revision committee for the removal of ceiling for payment of gratuity should be implemented. There will be no additional burden on the CPSEs as the Superannuation benefits including Gratuity are limited to 30% of the Pay. The Enterprises will contribute 30% of Pay only for all the Superannuation befits which include PF, Gratuity, medical benefit for retired employees and Pension.

6. Taxation of Perks for Company owned / leased accommodation: The executives residing in Company quarters and leased accommodation are being charged Perks taxation, if they are not paying 10% of the basic pay as rent recovery. It has nothing to do with the type of accommodation and the market rent of the quarter. In a number of cases executives are provided lower grade of accommodation due to non availability of quarters. Even in such cases the executives have to pay Perks tax. In most of the cases the rent recovery at 10% will be higher than the market rent of the houses. With the result the employee prefer to stay outside the Township and draw HRA. This will make the quarters vacant. The employees of CPSEs shall be treated on par with the government employees for purposes of Perks taxation for the housing accommodation. The rent recovery shall be based on licensee fee and the perks tax should not be applicable if the licensee fee is paid as rent recovery.

7. Retire Employees Medical Benefit: The 2nd Pay revision committee had recommended that CPSEs may create a corpus by contributing 1 to 1.5% of PBT to create a fund in order to take care of medical and any other emergency needs of retired employees who are not adequately covered by the Pension Scheme. Even though the government has accepted the recommendations, none of the Central Public Sector Enterprises have implemented this DPE order in letter and spirit. The DPE and the administrative ministries should review implementation of this circular and ensure that this order is implemented by all the CPSEs within the next three months.

8. Disparity in pay with respect to non-officers: There are disparities existing in the pay, even in the pre-revised scale in companies like Hindustan Machine Tools Ltd. The non-executives draw higher salaries because of the agreement made during 1992 pay revision, allowing percentage increment and open ended pay scales for workmen. This needs to be corrected urgently as it has demoralized the executives as they are drawing much less Pay than their sub-ordinates.

9. The issue of executive promoted from non-executives to executive and also the fitment of Executives recruited after 01.01.2007. The Executive recruited after 01.01.2007 had not benefited with 30 % Fitment, This issue shall be considered for a favorable decision.
10. Issue of non practicing allowance (NPA): Earlier to this revision NPA has always be considered as pay purpose of calculation of DA, CPF and gratuity. In the recent orders clarity is missing in the subject matter. Number of PSE’s are considering NPA as a part of pay and others are not willing to do so as the DPE circular is not clear in this issue. Necessary the guidelines may be issued in this subject.
11. Maternity Leave: Women employees of CPSEs should be treated on par with the government employees in terms of Maternity leave and Child care leave.

12. Upgrading large CPSEs as A+ Enterprise: Over a period of time some of the CPSEs have grown in size. The volume of business they carry out is large and comparable to Multi-national Enterprises, their activities are spread over the globe and they operate in highly technical intensive areas. They are competing with the global players and have proved their capabilities. To name a few under this category NTPC, BHEL, ONGC, Indian oil, SAIL, Coal India, NALCO, NMDC, HAL, BEL. These Enterprises have to be identified based on defined parameters and categorized as A+ Enterprises and the posts of CMD and functional Directors have to be upgraded.

We will be grateful to you if you could give us a meeting at your convenience for us to present these issues and discuss further.

Thanking you, yours faithfully,

Baby Thomas
Secretary General, NCOA

Note: Attn: Mr. Rajesh Singh: Sir, you may kindly inform us the date/ time by FAX to 0484 2720893. Or through phone: 09446081060 (self, Cochin)/ Mr. K. Ashok Rao, Delhi-9868101640. Thanks & regards.
Baby Thomas.

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