The total labour cost of the sample companies grew by 9 per cent during 1999-00 over the previous year as against 10.8 per cent increase in aggregate sales and 11.8 per cent rise in total cost. This has resulted in a fall in the share of labour costs in both total cost and sales. The share of labour cost in total cost has fallen from 7.48 per cent in 1998-99 to 7.29 per cent in 1999-00 and that of labour cost to sales from 7.20 per cent to 7.08 per cent. A decline of 0.19 percentage point or 0.12 percentage point is not significant, but then it indicates that a change in trend-rise in labour cost is finally under check.

Various VRS programmes and the impact of retiring more and more workers have resulted in this downward trend in the labour cost to total cost ratio and labour cost to sales ratio. Moreover, this increased labour productivity will lead to improved margins in the future.

Now for the nitty gritty. The total cost of these companies taken together increased from Rs 2,38,803 crore in 1998-99 to Rs 2,67,021 crore and labour cost (salaries and wages, provident fund, gratuity etc) from Rs 17,862 crore to Rs 19,469 crore. So, the labour cost to total cost ratio decreased during 1999-00 from the level of 1998-99. But the overall picture does conceal a lot of variations. Of the 348 companies in this study, 166 did better with a decline in labour cost to total cost ratio, while 182 experienced a rise in the period under consideration. Many of them, particularly those in labour intensive hotels, tea and computer sectors, showed a high labour to total cost ratio in both the years, meaning, they spent more on labour per unit of total cost. For example Satyam Computers spent Rs 47 on labour for every Rs 100 spent on total expenditure during 1999-00.

Companies, which have reduced their labour cost share in total cost significantly during 1999-00 from the level of 1998-99 were Alstom (24.97 per cent in 1998-99 to 14.56 per cent in 1999-0), BOC India (11.83 per cent to 6.17 per cent), KSB Pumps (35.89 per cent to 20.66 per cent), LG Balakrishna (11.24 per cent to 9.02 per cent), Mahindra Ugine Steel (9.26 per cent to 7.27 per cent), Pfizer (22.67 per cent to 17.03 per cent) and Rhone-Poulenc (16.77 per cent to 10.89 per cent). In the case of Alstom, VRS helped the company reduce its ratio during 1999-00 from the level of 1998-99.On the other hand, companies which saw a sharp increase in their ratio from 1998-99 to 1999-00 were E-Merck (15.75 per cent in 1998-99 to 18.73 per cent in 1999-0), George Williamson (35.00 per cent to 39.45 per cent), Hindoostan Spg (17.17 per cent to 21.86 per cent), Infosys Techno (45.97 per cent to 56.13 per cent), L&T Information Techno (54.20 per cent to 60.59 per cent), Madras Aluminium (6.15 per cent to 10.29 per cent), MBT (31.82 per cent to 35.36 per cent), Patel Engineering (34.32 per cent to 46.49 per cent) and Tata Infotech (23.04 per cent to 25.80 per cent).

The sharp increase in the ratio of E-Merck during 1999-00 can be explained from the labour cost figures. The labour cost of the company increased by 33.4 per cent to Rs 47.95 crore in 1999-00 from the level of Rs 35.95 crore in 1998-99.

Industries which recorded an improvement in labour use were Pharmaceuticals (9.36 per cent in 1998-99 to 8.94 per cent in 1999-00), cotton textiles (9.54 per cent to 9.41 per cent), cement (6.25 per cent to 6.06 per cent), electrical goods (8.0 per cent to 7.50 per cent), fertilisers (4.54 per cent to 4.26 per cent), manmade fibres (5.55 per cent to 4.98 per cent), engineering others (10.53 per cent to 9.26 per cent), auto (8.85 per cent to 8.60 per cent),iron&steel (9.14 per cent to 8.85 per cent), paints (6.75 per cent to 6.06 per cent) and diversified (5.78 per cent to 4.92 per cent).

An increase in the ratio was witnessed in tea&coffee (26.87 per cent in 1998-99 to 27.14 per cent in 1999-00), food products (3.35 per cent to 3.70 per cent), other chemicals (5.38 per cent to 5.44 per cent), tobacco (3.10 per cent to 3.76 per cent), hotel (24.54 per cent to 25.66 per cent), tyres&tubes (5.97 per cent to 6.25 per cent), computers (15.56 per cent to 19.08 per cent), sugar&breweries (5.89 per cent to 6.51 per cent), paper&products (7.70 per cent to 8.05 per cent), electricity (6.72 per cent to 7.03 per cent) and aluminium (8.94 per cent to 9.60 per cent). The highest and lowest labour cost to total cost ratios were seen in 99-00 in the case of tea&coffee (27.14 per cent) food products (3.70 per cent) respectively.