Firms keep a tight leash on staff spend

Growth in staff spend of central PSUs dipped substantially between 2008-09 and 2009-10, a study by FE of a cross-section of these companies revealed.

Of the 60 firms that FE tracked, the growth in staff cost over the previous year was just 9% in 2009-10 as against 27% in 2008-09. A virtual freeze on new recruitment in some PSUs due to the global economic crisis and various belt-tightening measures taken in its wake are among the key reasons for the slower growth in employee cost.

The total staff cost of these 60 PSUs increased from Rs 30,533 crore during 2007-08 to Rs 38,778 crore during 2008-09 and further to Rs 42,282 crore during 2009-10.

The sales of these PSUs rose by 20.9% to Rs 10.05 lakh crore during 2008-09, but fell 5.9% to Rs 9.45 lakh crore in 2009-10. Correspondingly, the total expenditure of these PSUs also increased by 24.6% to Rs 9.06 lakh crore during 2008-09 and fell by 8% to Rs 8.33 lakh crore during 2009-10.

Among the PSUs, the highest increase in the growth of staff cost was seen in the case of MTNL,where it increased from 29.4% during 2008-09 to 138.4% during 2009-10. The steep rise in MTNL?s staff cost last year was primarily due to payment of arrears of Rs 740 crore on account of a wage revision, effective from January 2007, and another Rs 1,754 crore disbursed towards pension-related arrears from January 2006.

Among the 60 PSUs, 21 saw a steady increase in their staff cost-to-total expenditure ratio. Mention may be made of IOC, MTNL, BPCL, Oil India and SCI. The staff cost to total expenditure ratio of IOC steadily increased from 1.24% during 2007-08 to 1.91% during 2008-09 and further to 2.26% during 2009-10. Similarly a steady downward trend was seen in the case of ten PSUs.

As for MTNL, its sales steadily decreased from Rs 4,722 crore during 2007-08 to Rs 4,456 crore during 2008-09 and further to Rs 3,654 crore during 2009-10. The net profit of the company turned out to be a negative Rs 2,514 crore during 2009-10 from a positive Rs 211 crore during 2008-09. The loss of MTNL was also due to provisions for retirement benefits on revised pay.

One interesting aspect is that nearly 33% PSUs? staff spend decreased during 2009-10, while only eleven PSUs showed a decline in staff spend during 2008-09. A significant decline in staff cost during 2009-10 was recorded in the case of SAIL, Dredging Corporation, MRPL and ITDC.

SAIL?s thrust towards optimisation of human resource resulted in an overall reduction in employee strength by about 6,000, primarily on account of natural separation. As a result, labour productivity in SAIL plants in 2009-10 went up to 226 tonne per man year, highest since its inception.