Wages and the workforce: Staff down but CPSE salary burden rising

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New Delhi | Published: May 1, 2018 4:39:00 AM

Stagnant revenue, coupled with the limited success in paring redundant staff, has worsened central public sector enterprises’ (CPSEs) salary burden in recent years, official data show.

cpse employees, cpse employees pay hike, cpse employees salary hike, pay hike for cpse employees, salary hike for cpse employees, cpse employees news, Pay Commission cpse, Pay Commission cpse employees, cpse hike Pay Commission, cabinet committee for economic affairs Pay Commission, pay comission, 7th pay commission, 7th cpecThe profitable CPSEs enjoy more freedom to design attractive VRS for their surplus staff.

Stagnant revenue, coupled with the limited success in paring redundant staff, has worsened central public sector enterprises’ (CPSEs) salary burden in recent years, official data show. The CPSEs’ wage-cost-to-sales ratio rose from a low of 5.9% in FY15, the year the Narendra Modi government assumed office, to 7.2% in FY17. The ratio might have worsened further in FY18, the year that saw pay hikes for about 4 lakh CPSE officers — the total CPSE staff is 11.3 lakh at present — on the lines of the Seventh Pay Commission award, entailing an extra expenditure of around Rs 8,000 crore.

The salary bill (total emoluments) of these firms rose from Rs 1.22 lakh crore in FY14 to Rs 1.4 lakh crore in FY17. CPSE staff strength declined from over 14 lakh in FY13 to 13.5 lakh in FY14 and further to 11.3 lakh in FY17. However, their wage-cost-to-sales ratio has started rising again since FY14 owing to the stagnation in revenue and rising salaries.

Total net income (revenue) of CPSEs — there were 257 operating units in FY17 — had peaked at Rs 20.56 lakh crore in FY14; however, there was a rather steep declining trend since then, to Rs 17.64 lakh crore in FY16. CPSE revenue improved to Rs 18.22 lakh crore in FY17.

While the Modi government got these state-owned enterprises to up their investments in recent years — to a degree, CPSE capex curbed the declining trend in overall investment rate in the economy — these firms’ profitability has been on the decline. CPSEs’ aggregate net profits decline from Rs 1.28 lakh crore in FY14 to Rs 1.03 lakh crore in FY15, and improved thereafter to Rs 1.28 lakh crore in FY17.

Total number of employees in CPSEs has been declining steadily since FY07 (except during FY12). However, per capita staff cost has been on the rise. The per capita staff cost has gone up by 50% from Rs 8.3 lakh per annum in FY13 to Rs 12.4 lakh in FY17. Sources said across-the-board wage hikes for non-officer staff are likely to be implemented through FY19.

The annual staff reduction, the bulk of it due to non-filling of vacancies after superannuation and various voluntary retirement schemes (VRS), shot up to 1.06 lakh in FY16 from 58,000 in FY15. In fact, the annual staff reduction in CPSEs averaged around 44,000 since FY05. The number of staff taking VRS came down from over 30,000 in FY05 to an average of around 3,000 between FY15 and FY17.

As per the guidelines issued by the department of public enterprises for time-bound closure of sick CPSEs on September 9, 2016, employees are offered attractive VRS packages at notional 2007 pay scales and other employees’ related liabilities including payment of salary arrears till they are separated from the company. Prior to this guideline, employees were offered two models of VRS with no change to their pay scales (some dated back to early 1990s). The profitable CPSEs enjoy more freedom to design attractive VRS for their surplus staff.

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