Steel in the new Millennium - 3d - Sectoral Activities

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Steel in India
SAIL's integrated plants

By C.S. Venkata Ratnam

Part d

Wages

Labour cost (wages and other benefits) as a percent of total cost in SAIL remained stable between 1988-89 and 1991-92 at 14.8 per cent (Table 5) even though the wage bill alone had gone up by 63% (from Rs. 4,276.2 million to Rs. 6,952.5 m ($195 m)) and total labour costs, including wages/salaries, incentives, benefits and other allowances, had risen by 46% (Rs. 9,092.9 m to Rs. 13,302.6 m ($372m)).

Table 5. Employment costs at SAIL, 1988-89-1991-92
(Rs. Million (%))

	1988-89	1989-90	1990-91	1991-92
Wages & salaries	4 276.2 (47)	5 540.5 (54)	6 180.4 (56)	6 952.5 (52)
Incentives & rewards	627.2 (7)	641.0 (6)	742.8 (6)	1 139.5 (9)
Other allowances	1 871.5 (21)	1 274.0 (12)	991.5 (9)	1 404.2 (11)
Fringe benefits	2 318.0 (25)	2908.8 (28)	2 242.6 (29)	3 806.4 (28)
Total	9 092.9	10 364.3	11 157.3	13 302.6
Average wages, salaries/employee/year (Rs)	31 671	34 833	37 204	45 665
Average benefit cost/employee/year (Rs)	13 883	17 950	20 415	23 747
Average employment cost/employee/year (Rs)	45 554	52 783	57 619	69 412
Labour as % of total cost	14.8	15.1	14.8	14.8
Source: Statistics for Iron and Steel in India (New Delhi, SAIL), 1992.

Incentives account for 6% to 9% of the total wage cost, including salaries of administrative and managerial staff. The share of incentives in total wages of production workers ranges from 5% (the ailing IISCO, Burnpur) to 27% (the profit-making Bhilai and Bokaro). Labour costs at SAIL were held at the 1988-89 level due to a 42% improvement in labour productivity in 1987-92. Labour productivity in the private sector (TISCO) was static from 1986 to 1992 at 72-74 tonnes per worker per year. Table 6 shows labour productivity over ten years.

Table 6. Labour productivity, 1982-92

(Ingot tonnes per man)

	1981-82	1986-87	1987-88	1990-91	1899
BSL	71	61	66	98	108
DSP	38	39	41	45	45
RSP	47	44	47	56	56
IISCO	34	29	31	24	29
SAIL	55	51	56	70	78
TISCO	64	74	74	72	72

In the early 1990s the average annual remuneration of public sector steel workers in India was Rs. 57,600 ($1,600) compared with RS. 54,500 in commercial banks, Rs. 49,000 in central government non-departmental undertakings and Rs. 32,000 in railways, but below that in the oil and gas industries. In 1990-94 the average emoluments per employee in SAIL increased by 78% (more than in the three other leading public sector companies in the oil and energy sectors) while the value added per employee increased by 60% -- also more than in other sectors ( Pran Nath, 1996). In each case wage increases outstripped productivity gains. Other input costs have risen much higher than wage costs (India, 1995).

Significantly, the Memorandum of Agreement of NJCS reached at New Delhi on 18 May 1995 provides for the following clauses on a performance-linked benefit scheme and on restricting eligibility of Leave Travel Concession(LTC)/Long Leave Travel Concession (LLTC):

While discussing the future challenges of the steel industry, it was agreed that a company-based Performance Linked Benefit Scheme would be introduced so as to motivate the employees to put in maximum efforts for improvement of production, productivity and profitability. Accordingly, a scheme would be jointly worked out based on parameters like saleable steel, gross margin, energy consumption, productivity, etc. This would be effective from the start of 1994. The monthly payment under this scheme would vary from Rs. 75 to Rs. 145 per month for the lowest and the highest pay ranges.

Employees joining the services of the Company on or after 18.5.1995 shall be entitled to claim LTC/LLTC only for self, spouse and maximum two children. The present eligibility and entitlement of dependent parents will discontinue.

Labour disputes and their settlement

Pay and benefits are revised throughout India in industry level negotiations facilitated through the NJCS which concerns itself not only with wage negotiations, but also with implementation, monitoring and review as well as with broad issues facing the industry. Steel is the only industry in India where, during the last 25 years, five industry level national agreements were concluded without the loss of a single manday. If, during the past 25 years, there were a few token strikes they were in response to a general strike called by national federations of trade unions opposing certain macro-economic reforms, or for other political reasons.

Workplace governance and employee participation

Technological and human resource obsolescence, an underemployed, overmanned workforce and excessive regulation adversely affected quality, customer satisfaction and competitiveness in the steel industry Following recent liberalization, SAIL initiated a turnaround strategy based on extensive and intense consultation at all levels throughout the organization to diagnose the malady and identify areas of concern for prioritized action. Brain-storming sessions were held cutting across hierarchical demarcations collectively to identify the areas which needed urgent attention and action to lead the company on the path to recovery and growth. Employees collectively identified the following areas as "priorities for action" and came up with detailed action plans to implement them:

* Improving work culture.

* Utilization of installed facilities.

* Improving production and productivity.

* Generating profits through cost control.

* Improving customer satisfaction.

Since action plans for improvement were based on a shared concern and consensus, implementation was strengthened with necessary inputs by way of training and complementary changes in organization structures, processes and procedures. Not only did a loss-making company become profitable within five years, it also totally dispensed with budgetary support long before the Government decided to withdraw support from central public sector undertakings. The unions have cooperated with management in dispensing with restrictive and wasteful practices, such as rigid compartmentalization of jobs, restrictions on crew size, problems in shift overlaps, overtime, etc. Cross-functional and multi-skill training helped in absorbing the otherwise redundant employees through retraining and relocation in existing and new facilities. There was virtually no loss of mandays due to industrial action during the 1990s. Though labour productivity continues to be low by international standards, it has increased by about 25% in less than five years.

SAIL has institutionalized employee participation and provided for consultation and cooperation at various levels:

* Industry level -- National Joint Consultative Committee for the Steel Industry.

* Enterprise level -- Joint Committee on Production and Productivity.

* Plant level -- Joint Committees for Production, Safety, Grievances, Welfare, etc.

* Zonal level -- Joint Committees for Production, Safety, Grievances, Welfare, etc.

* Shopfloor level -- Production, Safety, Welfare, etc.

SAIL has 615 bi-partite committees in which 4,063 management representatives and 6,415 worker representatives take part. Virtually one in 20 persons participates in them. It is more than a coincidence that the maximum number of bipartite committees are in the two most profitable plants of SAIL (Bokaro and Bhilai). IISCO has only 20 bipartite committees, but the number of both management and worker representatives per committee in IISCO is disproportionately large. A very large committee may not be conducive for greater and effective interaction on specific issues.

Suggestion scheme

SAIL has a long-standing suggestion scheme. The number of suggestions received stagnated at barely one per 100 employees. The company foresaw the winds of change in the economy and the industry and realized that, to face competition in a liberalized and globalized economy, it is important to tap the best brains in the company and involve them as much as possible. While resources may be limited, creativity is unlimited. To promote total involvement of the workforce and boost the suggestion scheme 1990-91 was declared the "Year of Suggestions". The company revamped the schemes to extend their coverage, conducting awareness workshops and training programmes and streamlining the follow-up/implementation machinery. The operation of the scheme was decentralized to reduce the lead time in processing and implementing suggestions. A two- tier award system was introduced to provide a token award on acceptance of a suggestion and another after its implementation. Individual rewards ranged from Rs. 2,000 to Rs. 10,000 ($280). Besides wide publicity, training and other supportive measures, the company also organized a national inviting 100 habitual/frequent suggestors to the event at its expense with a view to giving them additional recognition and reward, and also to share ideas and experiences thereby conveying management's commitment to the scheme. The number of suggestions received increased 20 times in the next two years and the company claimed an estimated additional saving of over Rs. 1,300 million ($3.6 m) due to the implementation of suggestions. The suggestors are involved in the implementation of their suggestion. Union representatives are also involved in various stages of processing of the suggestions, making it a joint initiative. Publicity measures undertaken by the company in its various plants and other establishments include the following:

* Personal letters from senior managers inviting suggestions from employees.

* Message inviting employees to offer suggestions was printed on the pay slips.

* Poster and slogan competitions.

* Display of posters all over the plants, township, etc.

* 30-minute films on suggestions.

* Campaign in various workplaces with an eventual target of one suggestion per employee per year.

* Presentation of suggestions before all senior executives at the respective shopfloors once every month.

* A session on the suggestion scheme is being included in all employee training programmes.

* Suggestion trophies are planned to be introduced to inculcate competitive spirit in promoting innovation and involvement across work teams in different locations.

Modernization: Case study of Durgapur Steel Plant (DSP)

DSP was built by a consortium from the UK, commissioned in 1959 and reached full production (1 Mt per year) in 1964-65. Between then and 1990, however, DSP only achieved full production in five years. An internal assessment revealed the major problems, including: poor product quality; high production cost; under utilization of capacity; high energy consumption; and high manning levels and low productivity. Modernization was considered necessary for the plant to become viable.

When DSP was set up, the industrial environment in Durgarpur was characterized by inadequate infrastructural development and hostility in industrial relations aggravated by militant and multiple trade unionism. According to expert studies, DSP suffered from excess labour and low productivity. Supervisory and managerial personnel were demoralized and generally unable to exercise their authority vis-a-vis their subordinates.

DSP employed about 30,000 persons, including 2,500 executives. Labour-management relations have been strained during much of the plant's life. The plant has three unions which, together, constitute the bargaining forum and jointly discuss issues with management. Over 70 three-tier labour-management committees were established for labour-management consultation in the plant.

In the early 1980s the management realized the need for modernization and proceeded on the basis of a report prepared by a consulting firm. Modernization of DSP has three objectives: to double capacity; to replace obsolete machinery; to install new technology, replacing OH furnaces with BOFs, ingot casting with continuous casting, and to use TNT and slit rolling technology in the merchant mill. The result is expected to be improved yields and productivity, reduced energy consumption (25% less), a 5% fall in production costs, and reduced environmental impact.

SAIL management set up a task force of five senior managers and initiated extensive information sharing and a consultation process with workers at all levels and the unions. Bipartite dialogue with the three unions was also helpful in creating an environment where everyone saw the problems in a similar light and realized the urgency and magnitude of the task to make modernization work. The emphasis on communication and consultation helped the plant to increase and achieve the increased capacity after its modernization.

Updated by BR. Approved by OdVR. Last update: 28 September 2000.