Top CPSE executives may get 300% basic pay hike

The chairman and managing directors of profit-making Central public sector enterprises can hope for a handsome 300 per cent jump...

The chairman and managing directors (CMDs) of profit-making Central public sector enterprises (CPSEs) can hope for a handsome 300 per cent jump in their basic pay if the government accepts the recommendations of the Second Pay Revision Committee. However, their total remuneration will depend a lot on the performance of the company since most incentives are linked to profits.

De-linking its recommendations from those of the Sixth Pay Commission for government employees, the Committee under retired Supreme Court judge M Jagannadha Rao, has introduced for the first time a profit-linked component in the salary structure of CPSE executives. Called ‘risk pay’, it will be part of their fixed pay and vary between Rs 1,100 and Rs 25,000, depending on the paying capacity of CPSEs. If a CPSE is loss-making, its executives will not get any ‘risk pay’.

Minister for heavy industry and public sector enterprises Santosh Mohan Dev, who received the report today, said, “Never in India’s history has such a hike been proposed. Hopefully, this will stop CPSE executives from being lured by the private sector.” The pay revision, if accepted by the government, will be effective January 1, 2007. Dev said the report has been presented to the Prime Minister’s Office (PMO) and the Finance Ministry. “They may like to approve it and place it before the Cabinet. Otherwise, they can refer it to a committee of secretaries (CoS), which can also hear grievances, if any, of the CPSEs,” he added.

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The Second Pay Revision Committee has suggested classifying existing CPSEs into five categories based on their turnover, manpower and geographical spread of operations. Accordingly, five sets of pay scales have been formulated. A new category A+, comprising largely profit-making Navratnas, has been introduced over and above the existing A, B, C and D categories.

The recommendations are likely to affect 2.5 lakh executives of 217 CPSEs, including loss-making enterprises. For the remaining 13.5 lakh non-executive CPSE employees, the seventh round of negotiations between trade unions and management is underway, said a ministry official.

The basic pay of CPSE chiefs will range between Rs 55,000 and Rs 1 lakh a month depending on the CPSE category. At present, it varies between Rs 27,750 and Rs 31,500 a month. The most attractive component, however, remains Employee Stock Options (ESOPs), which the committee has left to the individual management of the CPSEs to decide. “We have also given the guidelines for the same and the decision of the management will be final in this regard,” said Department of Public Enterprises secretary R Bandhopadhayay, who is also ex-offcio member of the Second Pay Committee.

The Performance-linked Payment has been pegged between 40- 200 per cent of basic pay for profit making A+, A, B, C and D category CPSE executives. In addition, allowances and perks of up to 50 per cent of revised basic pay, excluding House Rent Allowance (HRA) and retrial benefits, find recommendation. As a first, it has mooted a variable annual increment of 2-4 per cent of basic pay, depending on the profitability of a company. Having done away with the City Compensatory Allowance (CCA), it has introduced a 12.5 per cent North-East allowance, 15 per cent Difficult Area allowance, 10 per cent Under Ground Mines allowance and 25 per cent Non-Practicing allowance. These allowances are in addition to the already mooted 50 per cent of basic pay allowances.