7/30/2019 CCI ON PRP ON 31.8.2012

1/15

Cement Corporation of India Ltd.

Presentation

onPerformance Related Pay

in CCI

31stAugust, 2012

7/30/2019 CCI ON PRP ON 31.8.2012

2/15

Background of the Company

Established in 1965 under Department of Heavy Industry formanufacture and sale of cement specially in remote/deficit areas.

11 plants set up across the country during 1970 to 1990 with acapacity of 42.48 lakh MT.

Company incurred losses resulted into vicious loss making circle.

Accumulated losses was Rs.2153 crore and negative net worth ofRs.(-) 1723.58 crore as on 31.3.2005.

Declared sick and referred to BIFR in the year 1996.

Revival plan approved in March, 2006 envisaging sale of 7 Non-

operating Units and expansion/modernisation of 3 Operating Units.

The ailing company has turned the corner and became profitablefrom the year 2006-07.

Consistently earning profit since 2006-07.

1

7/30/2019 CCI ON PRP ON 31.8.2012

3/15

Organisational Profile

Basic details

Established : 18th January, 1965

Manufacturing & Marketing : Cement (5 Grades)

Number of Plants : 10 (3 Optg.+7 Non-

Optg.)Manpower (as on 31.3.2012) : 907

(Exe.122+Sup.140)

Authorised Share Capital : Rs.900 crore

Paid up Share Capital : Rs.811.41 crore

Net worth (as on 31.3.2012) : (-) Rs.172.60 crore

Accumulated loss (as on 31.3.2012) : Rs.968.34 crore

2

7/30/2019 CCI ON PRP ON 31.8.2012

4/15

Location of CCI Plants

Optng. Plants

IN GREENCAP. 14.46 LMT

(37%)

Non-Optg PlantsIN PINK

CAP. 24.52 LMT

(63%)

Nayagaon

Charkhi Dadri

Kurkunta

Adilabad

Mandhar

Akaltara

Delhi G U

Total: 38.98 LMT(100%)

3

7/30/2019 CCI ON PRP ON 31.8.2012

5/15

Vision and Mission of the Corporation

VISION

To emerge as one of the leading cement companies committedto contribute to the economy and to enhance value for the

stakeholders.

MISSION

To augment the wealth creation for the Company, deliver

superior product and sustain market value.

4

7/30/2019 CCI ON PRP ON 31.8.2012

6/15

Introduction of Performance Related Pay (PRP)

Background

Second Pay Revision Committees recommendations forCPSEs and approval of Government of India made significantHR interventions to drive performance based culture inCPSEs. The salient features are as under:-

Introduction of cost to company (CTC concept);

Performance Management System (PMS) based on keyresult areas;

Differentiation of individual level performance throughBell Curve approach in PMS;

Introduction of PRP directly linked to profits of CPSEs/Unit in the performance of the employee.

PMS to attain organisational, team and individual goal.

PMS must be robust and transparent.5

7/30/2019 CCI ON PRP ON 31.8.2012

7/15

DPE Guidelines on PRP

PRP to be directly linked to the profit of CPSE/Unit and performanceof the employee.

Percentage of PRP ceiling progressively increasing from junior tosenior level from 40% to 200% from executive including Boardlevel.

Performance of the Company to be based on MOU rating 100%

Excellent, 80% Very Good, 60% Good, 40% Fair.

No PRP for Poor rated Company irrespective of profit.

Robust and transparent PMS with Bell Curve approach, gradingemployees not more than 10% to 15% as Outstanding/Excellent

and 10% as BelowPar.

Each CPSE to have professional Board with independent Directors.

Remuneration Committee headed by independent Director to decideannual bonus/variable pay pool and policy for its distribution.

6

7/30/2019 CCI ON PRP ON 31.8.2012

8/15

Funding of PRP

PRP based on physical and financial performance and willcome out of profit.

60% of PRP with a ceiling of 3% of profit before tax for theyear.

40% of PRP from 10% of incremental profit.

Incremental profit to be reckoned from 2008-09.

Total ceiling of PRP 5% of profit for the year.

7

7/30/2019 CCI ON PRP ON 31.8.2012

9/15

Implementation of PRP in CCI

Financial performance vis a vis divisible profit for PRP

Year Profitbefore

Tax

Divisible profit for PRP Employees covered

3% ofPBT

10% ofincremental(limited to2% of PBT)

Total Executive Non-executive

2007-08 40.89 1.23 - 1.23 95 231

2008-09 52.55 1.58 1.05 2.63 98 222

2009-10 52.75 1.58 0.02 1.60 95 228

2010-11 27.13 0.81 - 0.81* * *

2011-12 19.43 0.58 - 0.58* * *

(Rs.Crore)

8

* PRP for the year 2010-11 and 2011-12 has not yet been distributed.

7/30/2019 CCI ON PRP ON 31.8.2012

10/15

Existence of MOU System

CCI has signed MOU with Ministry of Heavy Industries & PublicEnterprises and MOU ratings are as under:-

2007-08 : Very Good2008-09 : Very Good2009-10 : Very Good

MOU system has also been introduced at the Unit level at the

beginning of financial year. MOU is entered between each of theUnit with Corporate Office and the performance of the Unit isabjudged by its MOU rating.

CCI is having 7 Non-operating Units which are closed and areunder sale. MOU has also been entered with these Units based on

different parameters like expeditious sale of Unit, generation offinancial resources, economy in expenditure etc.

Performance of these Non-operating Units are evaluated throughtheir respective MOUs in terms of parameters stipulated above andtheir PRP is linked with the MOU rating and the rating of individual

employee. 9

7/30/2019 CCI ON PRP ON 31.8.2012

11/15

Remuneration Committee

Company is having two independent Directors. TheRemuneration Committee consisting of following Directors

is headed by an independent Director:-

1. Shri V.K. Agarwal, Independent Director Chairman

2. Shri Pankaj Agarwal, Independent Director Member

3. Shri S.K. Goyal, Director (Cost), DHI Member

10

7/30/2019 CCI ON PRP ON 31.8.2012

12/15

Performance Management System

Having robust and transparent PMS since 1995.Based on thefinancial year.

Assessment based on tasks and targets set for each year inquantifiable terms and key performance areas (KPAs) identified foreach appraisee.

Self assessment of performance against targets by appraisee.

Target setting mutually finalised by Reporting Officer and appraiseethrough performance review and planning session.

Provision for mid term review.

Performance assessment of management/leadership traits, skill,potential factor.

Moderation by higher level Committee.to maintain bell Curve.

11

7/30/2019 CCI ON PRP ON 31.8.2012

13/15

Distribution under Bell Curve approach

Excellent : 10%

Very Good : 20%Good : 40%Average : 20%Below average : 10%

Final assessment on weightage basis

Reporting Officer I : 40%Reporting Officer II : 35%Reviewing Officer : _25%

Total : 100%

12

7/30/2019 CCI ON PRP ON 31.8.2012

14/15

Key issues and challenges

PMS in CPSEs largely seen as tool of promoting employees and notas a means of reward or differentiate performance.

Pay Revision Committee recommendations pose not only an HRsystem design challenge, but a deep rooted changed managementtask.

Forced rating under Bell Curve approach poses significantimplementation challenge.

Resistance by reporting officers for placing individual for lowest andhighest groups.

Lowering of rating under moderation system may generateresentment.

Culture of transparency and communication to be evolved at all levelfor acceptance of change.

Key to successful implementation of PRP is a changed managementinitiative that aims to bring a fundamental shift in mindset of

employees. 13

7/30/2019 CCI ON PRP ON 31.8.2012

15/15