All PSUs may not be able to hike salaries

More than a third of central public sector undertakings CPSUs will not be able to pass on the benefits of the revised pay guidelines to their employees.....

More than a third of central public sector undertakings CPSUs will not be able to pass on the benefits of the revised pay guidelines to their employees. The employees of loss-making PSUs will have to bear the brunt of non-performance. PSUs in the red will not be allowed to raise salaries at all.

The basic tenet behind the fresh guidelines is that only profit-making enterprises will be rewarded with more salary and wages. As a result,some of the biggest companies in sectors such as coal,aviation,capital goods and textiles will not be able to dip into their income for additional funds to hike salaries.

Some companies that will not be able to pass on benefits include national carrier Air India,National Textile Corporation,Eastern Coalfields,Hindustan Cables,ITI and HMT Watches.These companies,which figure in the top 10 loss-making enterprises,posted a combined operating loss of Rs 7,419 crore,almost 65 per cent of the total losses incurred by CPSUs.

In addition,even those PSUs which have a large number of employees may not be able to dole out the complete benefits. If the employee number is too large then the additional salary outgo may result in an over 20 per cent dip in profits,making it impossible for the management to give them the pay hike recommended in the guidelines. For instance,profit making Coal India,with over 4.13 lakh employees,may have to work out its accounts before deciding on the hikes and the extent of the hike.

Increasing the pay would mean a decrease in profitability of a company as the wage bill will rise. PSUs will be able to implement basic structure but they may land into the problem of determining performance related pays. Every PSU will have to work on their individual model of performance evaluation for determining performance related pay. PSUs will have to work out their accounts and profitability, said Arup Roy Chowdhury,chairman,SCOPE.

Consider the case of Bharat Heavy Electricals Limited,where a provisioning of roughly Rs 1,700 crore towards pay hike amounted to only 2 per cent growth in PBT year-on-year for 2008-09. So,the impact will have to be assessed as BHEL,being a navratna company,has managed its profitability well,whereas others might not be able to absorb the impact of pay hike. There are a number of marginally profit-making companies that may get affected.

Such PSUs seem to have no option but to take it up with their administrative ministry and see how they can work it out. Most probably they will not be able to implement the direction in full,Chowdhury added. The government has made it clear time and again that the centre will not fund any additional pay hike and the decision to award pay hike solely rests with the CPSUs based on their balance sheet health.According to government estimates,in 2007-08 around 16 lakh CPSU employees received average per capita emoluments of over Rs 3 lakh per annum.

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The department of public enterprises has issued a notification last year stating,the revised pay scales would be adopted,subject to the condition that the additional outgo by such revision for a period of 12 months should not result in more than 20 per cent dip in profit before tax for the year 2007-08 of a CPSU in respect of executives and non unionised supervisory staff taken together.