Difference between NPS and EPS

8/19/2019 Difference between NPS and EPS

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I dedicate this project to my father and mother and am indebted

towards the Almighty to lead me whenever I needed His support.

Last but not the least, to all my friends who supported me in all

aspect of life!!!!!


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ACKNOWLEDGEMENT

“The Marvelous richness of human experience would lose some thing of rewarding joy if

there were no limitations to overcome. The hilltop hour would not be half so wonderful if

there were no dark valleys to traverse”

This project is a product of the invaluable insights, facts and experience I had with

various people. The experience was more than what was visualized as.

A special note of gratitude goes to Mr. P.K. Dhirsamanta (Dy. Manager, NEPFT,

NALCO) and Mr. A.K. Rout (Senior Manager), NEPFT NALCO for his advice and

encouragement that helped me makes this project a reality.

I am deeply indebted to Ms. Kakoli Sen (Faculty), for her constant source of inspiration

and guidance throughout this project.

My heartful thanks to Ms Shegorika Lalchandani, (Faculty), for her advice and

encouragement that helped me to make this project a reality.

Most of all, I express my thanks to “GOD ALMIGHTY” and my family members

especially my father Mr. Swadesh Ranjan Pattnaik without whose love, blessing, support

and strength I could not have complete this project.

Sandeep Ranjan Pattnaik


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EXECUTIVE SUMMARY

During these six weeks of internship at Nalco, I came across various practical skills

which are very much different from that knowledge that are imparted to us in the

classroom teaching. I am very much obliged to my project mentor in the organization

who not only gave me the idea about how to design and equip a good project but also

passed on the information beyond the bound of the curricula of our project.

Here the project revolves around a vital element of society – Social Security which is

most important duty on the part of government to provide it to its citizen. Social Securitycaters to the universal human need for reassurance and support in times of

unemployment, illness, disability, death and old age. The State bears the primary

responsibility for developing appropriate systems for providing protection and assistance

to its workforce and their families. Public support systems for social security in India

have gained prominence over traditional family support in tune with the trends of

urbanization and work place migrations. The dependence on social security varies as per

the need and income status.

In India, both Social Insurance and the Social assistance programs provide for Social

Security needs of workers in the contingencies of sickness, maternity, employment,

injury occupational disease, old age and death. So far as Social Insurance programs are

concerned the following schemes are in existence.

In this project, I have tried to bring out the pros and cons of the EPS – 95 and NPS –

2009. For this project, what will be a better place to pursue this project other than

NALCO, a Navaratna PSU which created a bench-mark within the PSU by adopting NPS

– 2009? Now PFRDA has advised other PSU to follow the footprint of NALCO and

adopt NPS – 2009. Even other PSU have approach NALCO for the know-how from

NALCO regarding NPS – 2009. Recently a conference was conducted at Delhi regardingthe social security and NPS – 2009 where it was been decided that Nalco will guide other

PSU in regards to the NPS – 2009.


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Table of Content

Sl. No Title Pg No

1. ALUMINUM SECTOR 6 – 9

2. NALCO 10 -19

3. FINANCIAL OVERVIEW OF NALCO 20-23

4. PEER GROUP COMPARISON AND SWOT ANALYSIS OF NALCO 24-25

5. EXPANSION PROGRAMMES 25

6. NALCO – A LEAP AHEAD 26

7. GUIDELINES OF CSR FOR CPSEs 27-30

8. NALCO CSR 331

9. SOCIAL SECURITY 32-39

10. EMPLOYEES’ PENSION SCHEME -1995 40- 46

11. NEW PENSION SCHEME – 2009 47-67

12. STATEMENT OF PROBLEM 68

13. OBJECTIVE OF STUDY 68 – 69

14. METHODOLOGY 69 – 70

15. FACTS AND FINDING OF NPS – 2009 70

16. RESULTS/FINDINGS 70

17. CONCLUSION AND RECOMMENDATION 71

18. ANNEXURE – I AND II 72 – 75

19. REFERENCES 76


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Aluminum Sector - An Overview

Aluminum Industry in India is a highly concentrated industry with the top 5 companies

constituting the majority of the country’s production. With the growing demand of

aluminum in India and world market, the Indian aluminum industry is also growing at an

enviable pace. In fact, the production of aluminum is currently outpacing the demand.

Moreover, India has huge reserves of high-grade bauxite and it caters to about 5% of the

world aluminum demand of 54 million tonnes. World aluminum growth rate seems to

touch 4.9%. India has huge reserves of bauxite spread across Odisha, Madhya Pradesh,

Jharkhand and other states. Large reserves of good quality alumina and proximity ot

Asian markets have attracted global aluminum reserves of good quality alumina and

proximity to Asian markets have attracted global aluminum producers in the world

towards India. The availability of cheap labors has given the Indian an edge over its

peers. India serves as a ready market for perpetually aluminum demanding nations like

China. Aluminum Industry in India is a highly concentrated industry with the top 5

companies constituting the majority of the country’s production. With the growing

demand of aluminum in India and world market, the Indian aluminum industry is also

growing at an enviable pace. In fact, the production of aluminum is currently outpacing

the demand.

Though India’s per capita consumption of aluminum stands too low (under 1 kg)

comparing to the per capita consumption of other countries like US and Europe (range

from 25 to 30 kgs), Japan (15 kgs), Taiwan (10 kgs) and China (3 kgs), the demand isgrowing gradually. In India, the industries that require aluminum most include power

(44%), consumer durables, transportation (10-12%), construction (17%) and packaging

etc.

The Indian aluminum industry is dominated by four or five companies that constitute the

majority of India’s aluminum production. Following are the major players in the Indian

aluminum industry –

Hindustan Aluminum Company(HINDALCO)

National Aluminum Company(NALCO)

Bharat Aluminum Company(BALCO)

Madras Aluminum Company(MALCO)

Indian Aluminum Company(INDAL)


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Hindalco: Hindalco, an Aditya Birla Group flagship company is the biggest player in the

aluminum industry in India with around 39% of market share.. Hindalco has its

aluminum plant at Renukoot in Uttar Pradesh. It has various aluminum products with a

market share of 42% in primary aluminum, 20% in extrusions, 63% in rolled products,

31% in wheel and 44% in foil.

Sterlite Industries: The aluminum business of Sterlite Industries Limited comprises of

two aluminum giants – MALCO and BALCO. While BALCO is a partially integrated

producer of aluminum, Malco is a fully integrated producer of aluminum. Sterlite has got

a market share of around 32%.

NALCO: It is one of the leading aluminum producers in India. Government of India has

stake of 81.15% in this company. Its aluminum refinery is located at Damanjodi. It alsohas a smelter located at Angul, Odisha. Currently, NALCO is concentrating on a capex

program to increase its production from 345,000 tonnes to 460,000 tonnes.

SOME OTHER COMPANIES IN THIS SECTOR –

Hindustan Zinc

Jindal Stainless

Kennametal India

INDAL

Sujana Metal Products

Ratnamani Metals

ALUMINUM-STRUCTURE

The Aluminum industry in India can be classified as:

(a) The primary producers who produce ingots and billets (primary form of

Aluminum) using bauxite.

(b) The secondary producers who add value to the ingots and billets to produce

semi-fabricated products..

All the primary producers have integrated forward into the manufacture of high

value semi-fabricated products like rods, rolled products, extrusions and foils.


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Regulated till 1989

Until 1989, the Aluminum Control Order (ACO) required all domestic

manufacturers to ensure that atleast 50% of their ingot production was electrical

grade, for use by the transmission power industry. The government fixed ingot

prices on the basis of a Retention Pricing Mechanism, taking into consideration

the average retention prices of all producers and a minimum return on equity.

The above control resulted in a skewed product mix and shortages of aluminum

for other sectors. The problem was further compounded by the vulnerable

financial position of State Electricity Boards (the main users of electrical grade

aluminum) and high import and excise duties. The producers resorted to inflated

prices for other types of Aluminum to compensate for the disadvantages they

suffered because of this regulation.

The ACO was scrapped in 1989 and in 1991 the government lifted restrictions oncapacity additions resulting in a free market environment.

Aluminum – Inputs

The aluminum industry in India can be classified as: Captive power, ample bauxitereserves, coupled with cheap labour costs make Indian companies amongst the

most competitive Aluminum producers globally.

The main raw material for the manufacture of Aluminum includes bauxite, causticsoda, calcined petroleum coke, coal tar pitch, and LS/FS furnace oil. The

production process for manufacture of Aluminum is briefly outlined below.

The mined bauxite ore is mixed with caustic liquor and is refined to produce

alumina. This is then smelted (through electrolysis in a smelter) to obtain

Aluminum. Depending on the quality of bauxite, 2.5 – 3 tonnes are required for

manufacture of 1 tonne of alumina. In turn, 2 tonnes of alumina are required for

manufacture of 1 tonne of Aluminum.


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Salient features of Indian Aluminum Industry

Highly concentrated industry with only five primary plants in the country

Controlled by two private groups and one public sector unit Bayer-Hall-Heroult technology used by all producers

Electricity, coal and furnace oil are primary energy inputs

All plants have their own captive power units for cheaper and un-interrupted power Supply

Energy cost is 40% of manufacturing cost for metal and 30% for rolled products

Plants have set internal target of 1 – 2% reduction in specific energy consumptionin the next 5 – 8 years

Energy management is a critical focus in all the plants

Two plants have declared formal energy policy

Each plant has an Energy Management Cell Achievements in energy conservation are highlighted in the Annual Report of the

Company.

Energy targets are based on best energy figures achieved in their sector / regionand by the plant itself in the past

Generally, government policies were rated as conducive to energy management

‘Task Force’ formed by BEE in this sector to work as catalyst in promoting energyefficiency

High cost of technology is the main barrier in achieving high energy efficiency


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NATIONAL ALUMINUM COMPANY LIMITED (NALCO)

National Aluminum Company Limited (NALCO) is considered to be the turning point in

the history of Indian Aluminum Industry. In a major leap forward, NALCO has not only

addressed the need of self-sufficiency in aluminum but also given the country a

technological edge in producing the strategic metal as per world standard. It is India’slargest integrated public sector producer of alumina and second largest producer of

aluminum. Its combination of modern assets, excellent logistics, cheap power and captive

port facilities has all contribution to making it one of the lowest-cost producers of

alumina in the world.

In Orissa, for setting up Asia's largest integrated alumina-Aluminum complex in 1981,

National Aluminum Company Limited acquired 7263 acres of land at Damanjodi in

Koraput district and 4057 acres at Angul. During the inception of the company, 635

families in 51 villages were displaced - 600 families in Damanjodi sector and 35 families

in Angul sector. From these 635 displaced families, employment has been provided to

625 nominees. Confusion regarding educational background and nomination status of balance 10 families has been taken up at appropriate level. Besides, 1495 families were

substantially affected (i.e. parting with one third or more land) in Angul sector. Even

from these, jobs have been provided to 1060 persons. Nalco has also been sponsoring ITI

training to such persons and 543 have been technically trained so far. Apart from

financial compensation, employment and rehabilitation packages, Nalco has also spent

more than Rs. 100 crore towards various social sector development activities. Creation of

infrastructure in the surrounding villages for communication, education, health care and

drinking water gets priority in the periphery development plans of the company.

Community participation in innovative farming, social forestry and sanitation programs

apart, encouragement to sports, art, culture and literature are all part of Nalco's deepinvolvement with the life of the community. Successful operations of the company have

led to employment and income generation for the local people in many significant ways. It was incorporated as a public sector enterprise of the Government of India in 1981

under the Ministry of Mines. Government of India had a share of around Rs 1289 crore in

the total funding of Rs 2408 crore as Capital Cost and the rest of Rs 1119 crore has been

met by Euro-Dollar loan a consortium of International Banks. It boasts of some of the

world’s latest and finest technology in the Aluminum manufacturing industry.

Commissioned during 1985-87, NALCO has emerged to be a star performer in

production and export of alumina and aluminum, and more significantly, in propelling a

self-sustained growth. It has made the country more than self sufficient in alumina and

aluminum needs and has quite impressive export figures as well. Being the largest

exporter of the metal in the country, it has its own section of port facility at

Visakhapatnam. All units of NALCO employ the latest in technology and are some of the

advanced manufacturing units in the world.


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The main units of NALCO are at Damanjodi (Mines and refinery complex) and NALCO

nagar, Angul (Smelter and Captive Power Plant Complex). The Bauxite mines are

situated atop a set of five mountains called Panchpatmalli. These mines are open cast

mines. The refinery complex for producing bauxite is located in Damanjodi. The

company’s headquarter are located in Bhubaneswar, which is the capital of Odisha.

NALCO is considered to be the one of the best profit making PSU n India and reapsimpressively huge benefits every year. It is expanding by currently employing new

projects. The ongoing second phase of expansion is set to make it the sixth largest

producer of the metal in the world.

The company has numerous awards to its credit, some of them being prestigious awards

and recognitions. The company received Indira Priyadarshini Vrikshamitran Award from

Government of India for its contribution in the field of afforestation and wasteland

development. The 960 MW Captive Power Plant of the Company also received the

prestigious Indira Gandhi Paryavaran Puraskar for the year for the year 2000 from

Government of India for its outstanding contributions in the field of environment

management. Besides these, the Company and its Units have received various National,State and Institutional awards for excellence in Safety and Environment Management.

NALCO received ISO 9001:2000 awards and OHSAS 140001 for its excellence in

production technology and occupational health and safety systems respectively.

Share Holding Pattern/Ownership Pattern

The huge chunk of the share is held by Government while the rest is distributed among

the FIIs, DIIs and other investors. Before the recent divestment, the scenario was slightly

87%

5% 5%3%

Percentage of Holding

Promoter FII DII Other


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different. The Government holding was 87.11%, FII was 5%, DII was4.5% and the rest

of 2.39%. But the recent divestment has been done to meet the future expansion policy.

Vision of NALCO:

To be a company of global repute in Metals and Energy Sectors.

Mission of NALCO: To achieve sustainable growth in business through diversification, innovation and

global competitive edge.

To continuously develop human resources, create safe working conditions,improve productivity and quality and reduce cost and waste

To satisfy the customers and shareholders, employees and all other stakeholders.

To be a good corporate citizen, protecting and enhancing the environment as wellas discharging social responsibility in order to ensure sustainable growth.

To intensify Research and Development for technology development.

HR Vision of NALCO:To attain organizational excellence through trust, openness, commitment, creativity,

innovation and providing opportunities for growth, well being and professional

enrichment.

HR Mission of NALCO:To create a learning and knowledge based organizational through continuous innovation,

evaluation and realignment HR practices with the business strategies and to attract,

nurture and retain talent. To inculcate a spirit of creativity, quest for learning, to create aresponsive and competent work force and inspiring and motivational organizational

climate.

HR Philosophy of NALCO:The philosophy of NALCO in the field of human resources and management has been:

To attract competent personnel with growth potential and develop their skill andcapability in a congenial work and social environment through opportunities for

training, recognition, career advancement and other incentives.

To develop and nurture favorable attitude among employees and to obtain their

best contribution to the organization by providing stable employment, safeworking conditions, job satisfaction, quick redress of grievances and through good

pay and welfare amenities, commensurate with the company’s capacity to spend

and the government guideli9nes.


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To foster fellowship and sense of belongingness among all sections of employeesthrough closer association of employees with the management and by encouraging

healthy trade union practices.

Human Resources at NALCO

(As on March, 2010)

Units Permanent (as on March 2010)

Non-Permanent

Worker

Mines 4934000 Contract

Workers

and

12,000 Casual

Workers to whom

Payment were made

on daily basis.

Alumina 1806

Smelter 3160

Captive Power Plant 1456

Port (Visakhapatnam) 60

Corporate 383

Delhi 44

Kolkata 26

Chennai 17

Mumbai 14

Total 7459

Mines Alumina Smelter Captive Power Plant

Port (Vizag) Corporate Delhi Kolkata

Chennai Mumbai


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Quality Policy at NALCO

“Quality will form the core of our business philosophy. Meeting the needs and

expectations of the customer and consistently improving our systems and works ethos

will be our chosen path in achieving excellence in business and fulfilling our social

obligations.”

Guiding Principles:

To ensure a healthy return on investment by maximizing Operational efficiency,

Capacity utilization and Productivity.

To continually improve and redesign Systems, Processes and Practices in order to

ensure error prevention and improve response time.

To adopt internal Customer focus as a means to external customer satisfaction. To treat human resource as the key to the Quality excellence and ensure

development, involvement and satisfaction of employees.

To ensure high quality of inputs through proactive interaction of employees.

To meet obligations towards the society as a responsible corporate citizen.

To provide value for money to all stake holders.

To follow ethical business philosophy at all times.

Commitment:

We declare ourselves to the Quality Policy and Objectives of the Company in letter ad

spirit and commit to continuously to their fulfillment.

Social Accountability Policy

We at NALCO are committed to provide a socially accountable work environment to all

employees and uphold ethical business practices by respecting employees’ rights.

We shall achieve these by adopting a company wide culture, which will help to promote:

Involvement of all employees in sustenance of SA 8000 standard;

Continual improvement initiatives in all social issues;

Learning and training opportunities to all employees;

Fulfillment of relevant statutory rules and regulations, ILO requirements,

applicable international instruments and their interpretation.


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Occupational Health and Safety Policy

NALCO is committed a Safe, Healthy and Sustainable work environment in all its

operations. This shall be achieved by:

Focusing on prevention of Accident and Occupational Health Issue.

Complying with all legal requirement and other requirements related to Safety and

Occupational Health of persons and establishing clearly defined goals and

procedures to achieve the same.

Ensuring Safety and Health of all employees and contract workers in its premises,

including those involved in transportation, cleaning and other such activities.

Conducting Periodic Safety Audit, Environment Audits, Health Check-ups and

Risk Assessment by both internal and external qualified persons.

Considering aspects related to Safety and Health of the personnel as well as the

environmental issues at the time of procurement of equipment and selection of

technologies.

Ensuring health of persons in the peripheral locations, likely to be affected by our

operations.

Periodically monitoring and reviewing safety and occupational health issues at

relevant levels, including the highest levels.

Communicating Safety Hazards and health related issues to all concerned through

suitable means, including training. Involving the workmen in Policy implementation as well as identification of

potential issues.

Considering Health and Safety performance of individual at different levels during

their career advancement, as per NALCO’s policy.

Establishing and maintaining suitable set-up with competent persons to monitor

and bring to the notice of the management any issues related to unsafe conditions

and practices.

Striving for continual improvements, exceeding statutory compliance levels,

wherever feasible.


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Environment Policy

In recognition of the interests of the society in securing sustainable industrial growth,

compatible with wholesome environment, National Aluminum Company Limited

(NALCO) affirms that it assigns high importance to promotion and maintenance of a

pollution-free environment in all its activities.

To use non-polluting and environment-friendly technology.

To monitor regularly air, water, land, noise and other environmental parameters.

To constantly improve upon the standards of pollution control and provide a

leadership in the environment management.

To develop employees’ awareness on environmental responsibilities and

encourage adherence to sound environmental practices.

To work closely with Government and local authorities to prevent or minimize

adverse consequences of the industrial activities on the environmental practices.

To comply with all applicable laws governing environment protection through

appropriate mechanisms.

To actively participate in social welfare and environmental development activities

of the locality around its Units.


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BAUXITE MINE

A fully mechanized open-cast mine of 48, 00,000 tonne per annum, on Panchpatmali hills

of Koraput district in Odisha, serves feed-stock to the Alumina Refinery at Damanjodi,

located 16 km downhill. The transportation is done through a 14.6 km long single flight ,

multi-curve, cable belt conveyor of 1800 TPH(Tonne per Hour) capacity. The mining

capacity has been expanded to 63,00,000 TPA.

Area of Deposit : 16 Sq. Km

Resource : 310 million tonnes

Mineralogy : Over 90 % gibbsitic

Ore Quality : Alumina 45%, Silica 2%

Ore Thickness : 14 mtr (avg.)

Alumina Refinery

The 15,75,000 TPA energy efficient Alumina Refinery, having three parallel stream of

equal capacity, located in the picturesque valley of Damanjodi. The Refinery provides

alumina to the Company’s Smelter at Anugul and exports the balance alumina to

overseas markets through Visakhapatnam Port. Presently, it is being expanded to

21,00,000 TPA capacity.

Smelter Plant

The 3,45,000 TPA capacity and Alumina Smelter, located at Anugul in Orissa, is based

on advanced technology of smelting and pollution control. Its capacity is being further

expanded to 4,60,000 TPA.

Some of the key features of the Plant include:

180 KA cell technology

Manufacturing of carbon anodes, bus bars, anode stems etc

Integrated facilities for manufacturing Ingots, Sows, Billets, Wire Rods, Strips andRolled Products. Advanced 180 KA cell technology

Micro-processor based pot regulation system

Fume treatment plant with dry-scrubbing system for pollution control

and fluoride salt recovery


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Integrated facility for manufacturing carbon anodes, bus bars, anode

stems etc.4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 TPH and 2 x 20 TPH

ingot casting machines

4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills

2 x 45 tonne furnaces and 60/42 per drop billet casting machine 2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine

26,000 tpa strip casting machines

CAPTIVE POWER PLANT

Close to the Aluminium Smelter at Angul, a Captive Power Plant of 720 MW capacity,

comprising 6 x 120 MW clusters, has been established for firm supply of power to the

Smelter.

Presently, the capacity is being expanded to 960 MW.

The salient features:

Micro-processor based burner management system for optimum thermal efficiency

Computer controlled data acquisition system for on-line monitoring

Automatic turbine run-up system

Specially designed barrel type high pressure turbine

Electrostatic precipitators with advanced intelligent controllers

Wet disposal of ash

The water for the Plant is drawn from River Brahmani through a 7 km long doublecircuit pipeline. The coal demand is met from a mine of 3.5 million tpa capacity

opened up for Nalco at Bharatpur in Talcher by Mahanadi Coalfields Limited. The

Power Plant is inter-connected with the State Grid.

Port Facilities

On the inner harbor of Visakhapatnam Port on the Bay of Bengal, NALCO has

established mechanized storage and ship handling facilities for exporting alumina in bulk

and importing caustic soda. This facility can handle ships up to 35,000 DWT.

Ship Loading Rate : 2200 TPH

Alumina Storage : 3 x 25,000 tonnes

Besides, Nalco exports from the port of Paradeep and Kolkata.


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Rolled Products Unit

After acquisition and merger of International Aluminum Product Ltd.(IAPL), Nalco has

started production from this 50,000 TPA plant. The Rolled Production Unit is presently

producing standard coils and sheets. Besides, it has facilities to produce foil stock, fin

stock, cable wrap stock, coil stock and closure stock for a variety of end uses.

Products Manufactured by NALCO:

Aluminum Metal: Standard Ingots (each approx. 20/22.5 kgs)

Sows Ingots (each max 750 kgs)

Billet (in four sizes: 127+/- 1.5mm, 152+/- 1.5mm,178+/- 1.5mm,

203+/- 1.5mm)

Wire Rods (in coil form : 9.5/11.95 mm dia, weight approx. 2 MT)

Alloy wire rods ( Max. width 1600 mm, gauge 6 – 10 mm)

Cast Strips

Alumina Hydrate:

Calcined Alumina

Alumina Hydrate

Zeolite-A


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Financial Overview of Nalco

To give a better picture of the company’s performance, it is better on our part to give

some graphical representation of the performance of the company not only on the

financial part but on the part of production and sales for the better understanding to the

evaluator of the project.

PRODUCTION and SALES

ALUMINA(in ‘000 MTs)

0

200

400

600

800

1000

1200

1400

1600

2005-06 2006-07 2007-08 2008-09

Production 1590 1475 1576 1577

Export 863 774 860 852

A x i s T i t l e

Chart Title


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ALUMINUM

(in ‘000 MTs)

0

50

100

150

200

250

300

350

400

2005-06 2006-07 2007-08 2008-09

Production 359 359 360 361

Export Sales 96 93 101 82

Domestic Sales 258 263 252 271

A x i s T

i t l e

Chart Title


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POWER

(in ‘000 MTs)

2005-06 2006-07 2007-08 2008-09

Generation 5679 5968 5609 5541

Sales 322 421 129 81

Consumption 5357 5547 5480 5460

0

1000

2000

3000

4000

5000

60007000

A x i s T i t l e

Chart Title


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FINANCIAL PERFORMANCE

Turnover and Net Profit(Rs. in Crore)

Sales Turnover(Rs. in Crore)

0

1000

2000

3000

4000

5000

6000

7000

2005-06 2006-07 2007-08 2008-09

Sales Turnover 5324 6515 5474 5531

Net Profit 1562 2381 1632 1272

A x i s T i t l e

Chart Title

2005-06 2006-07 2007-08 2008-09

Export 2306 2586 2134 2085

Domestic 3018 3929 3340 3446

0

5001000

1500

2000

2500

3000

3500

4000

4500

A x i s T i t l e

Chart Title


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Dividend Payment(Rs. in Crore)

Expenditure Breakdown(Rs. in crore)

0

10

20

30

40

50

60

70

80

322.00 483.00 387.00 322.00

2005-06 2006-07 2007-08 2008-09

% of Dividend

% of Dividend

18%

20%

7%

35%

7%13%

Rs. in Crore

Raw Material Staff Cost Repair and Maintenance

Power and Fuel Depreciation Others


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PEER GROUP COMPARISON

NAME OF THE

COMPANY

CURRENT

MARKET

PRICE

MARKET

CAPITALIZATION(Rs.

in million) EPS(Rs.) P/E P/B.V. DIVIDEND

NALCO 367.00 236461.77 8.13 45.18 2.42 60

HINDALCO 138.45 265297.50 7.16 19.34 1.12 135

CENTURY

EXTRUSIONS 5.85 468.00 0.54 10.83 1.72 10.00

GUJURAT FOIL 63.05 517.10 3.51 17.96 3.92 0.00

*FIGURE AS ON 11TH FEBRUARY, 2010

SWOT ANALYSIS OF NALCO

STRENGTH:

1. Availability of huge deposit of bauxite

2. “state of the art” technology

3. Huge power production.

4. Low energy consumption

5. Maintenance of production and quality of metal production

6. Presently it is the market leader

7. High profitability leader.

8. Co-ordination among the various department thereby decreasing the chances ofconflict

9. Increased customer satisfaction

10. Last but not the least, the feather of NAVRATNA status studded to the crown of

NALCO.

Weakness:

1. High transportation cost from the refinery to the smelter.

2. Prices of Aluminum depend upon London Metal Exchange quotes.

3. The cash reserves are increasing each year without any further utilization or

investment.


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Opportunity:

1. Growth of the potential domestic market

2. Widespread uses of Alumina for various purposes

3. Utilization of the idle cash reserves in other booming sector like Nuclear Power or

in further expansions.

4. Identifying the prospect of setting up manufacturing units in foreign countries as

well as looking for new source of raw material in foreign countries.

Threat:

1. Instability of the LME quotes.

2. High tax rate imposed on the metal.

3. Devaluation of the rupee leading to the increase of the debt amount

4. Dumping of the metal at low cost by the European countries.5. Depressed LME prices resulting in more import of metal thereby decreasing

demand of product from NALCO.

6. Rejection of LP

Expansion Programme

In order to strengthen its business and increase market share, the company has been

pursuing expansion programs on a sustained basis. Soon after the completion of first

expansion, the Company launched its 2nd

phase expansion commenced on October 2004,

which involved fresh investment of more than Rs. 4402 Crore. The ongoing expansion

will raise the capacities of its various segments:

Unit Original Capacities

After 1st Phase

Expansion

After 2nd Phase

Expansion

Bauxite Mines 24,00,000 MT 48,00,000 MT 63,00,000 MT

Alumina Refinery 8,00,000 MT 15,75,000 MT 21,00,000 MT

Aluminum Smelter 2,30,000 MT 3,45,000 MT 4,60,000 MT

Power Plant 600 MW 960 MW 1200 MW

The Company is now planning for 3

rd

phase expansion at an investment of Rs.6000Crore, which will further increase Aluminum Smelter capacity to 5.80 Lakh tonnes and

power generation to 1400 MW per annum.


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NALCO – “A Leap Ahead”

New era has begun. With the advancement of 21st century, Nalco has begun to change its

course of operation to cope up with the flow of modernization. Nalco has started the

process to design itself as a 21st century company. Nalco has designed a plan for its

horizontal as well as its vertical expansion along with the diversification of its operation.

The company is planning to utilize its unused cash reserves so as to decrease the cash

burden on itself. Nalco is planning to raise a part of the amount of the total funding from

public issue of Nalco’s shar e. The company is going for the issuance of FPO. The fund

raised from the FPO will be utilized for the purpose of both expansion as well as the

diversification. The company is going to divide its operation into three parts at corporate

level – Nalco Power, Nalco Metals and Nalco International.

1. Nalco Power:

Nalco is planning to invest about Rs. 1000 Crore in future project of state-run

Nuclear Power Corporation of India Limited (NPCIL). The two companies had

entered into an agreement to team up with each other for setting up nuclear power

plant in different part of India.

2. Nalco Metals:

Nalco metals will constitute the operation starting from mining of bauxite from

Panchpatmalli, Damanjodi to the production of Aluminum metals in the Smelter in

Angul. Nalco is considering of buying coal, copper, uranium and bauxite mines in

Nambia. It will also be operated under the head of Nalco Metals.

3.

Nalco International:

Nalco International will look after the operation of its own International trade

houses which will be set up at Dubai and Singapore. The export of minerals and

aluminum metals produced in the manufacturing unit will be exported to this

Trade houses and from this houses they will be forwarded to its consumer

countries as per the demand.

\NALCO

NALCO

POWER

NALCO

METALS NALCO

INTERNATIONAL


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GUIDELINES ON CORPORATE SOCIAL RESPONSIBILITY

FOR CENTRAL PUBLIC SECTOR ENTERPRISES (CPSE)

CHANGE IN APPROACH

With the rapidly changing corporate environment, more functional autonomy, operationalfreedom etc., CPSEs today are required to adopt CSR as a strategic tool for sustainable

growth.

CSR, in the present context, means not only investment of funds for social activities but

also integration of business processes with social processes.

NEED FOR LINKAGE WITH COMMUNITY

An Enterprise needs to address the concerns of the society in which the enterprise is

operating. There should be free interaction between enterprises and community

leaders. In order to address the social needs of the community, viable projects need to beidentified to meet its requirements.

OVERARCHING CONCEPT

CPSEs may approach Corporate Social Responsibility as a professional management

process, with a long-term strategy, integrating it with corporate strategies. CSR activities

may be planned in parallel to the business plan, looking at every possible opportunity to

link and integrate business plans with the social and environmental concerns available.

PLANNING THE CSR INITIATIVE

A long-term Corporate Social Responsibility Plan needs to be prepared matching

with the long-term business plan;

This may be broken down into short-term and medium term plans, specifying

activities to be undertaken, budgets allocated, responsibilities and authorities

defined, and measurable results expected

IMPLEMENTATION

The Plan must clarify implementation guidelines involving:

Participation of Voluntary Organizations, Specialist Organizations and

Community-Based Organizations;

Base-line Surveys;


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Documentation of the experience;

Setting up a CSR Hub with participation of Department of PE, SCOPE and

CPSEs;

Monitoring and Evaluation;

Lessons learnt for future use.

THRUST AREAS

Areas related to the business of the PSE as a natural corollary to the business;

Assistance to be mostly project based rather than donation, so as to generate

community goodwill, create social impact and visibility;

Finalizing of time-frames and various milestones before commencement of a

project; Involving of suppliers in order to ensure that the supply-chain also follows the

CSR principles;

Emphasis on principles of Sustainable Development, based on the immediate and

long-term social and environmental consequences of the activities undertaken;

Improvement of the existing ecological conditions;

Ensuring skill enhancement and employment generation by co-creating value with

local institutions and people.

ACTIVITIES THAT WILL NOT COUNT AS CSR

Benefits to staff

Grants to organization/institutions

IMPLEMENTATION MODALITIES

CSR Activities to be carried out by Specialist Agencies;

Such activities generally not to be conducted by CPSE employees / staff;

Specialist Agencies to include NGOs, Institutes, Academic Organizations, Civil

Society / Community-based Organizations, Trusts, Missions etc., who haverequisite expertise;

Utmost efforts to be made to find out the reliability, and track record of the NGOs

/ Organizations entrusted with CSR activities;


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Initiatives of State Governments as well as Central Government Departments /

Agencies could be dovetailed/ synergized with CSR activities;

Avoidance of any duplication of CSR activities by the CPSEs, the State

Governments and local level Programs.

FUNDING

The CSR budget to be mandatorily created through a Board Resolution as a percentage of

net profit in the following manner:

TYPE OF CPSES EXPENDITURE RANGE FOR CSR

Net Profit in a Financial Year (Previous Year) (% of profit)

i. Less than Rs. 100 crore 3% – 5%

ii. 100 crore to Rs. 500 crore 2% – 3% (Subject to a Min. of 3 cr)

iii. 500 crore and above 0.5% – 2%

The CSR Budget to be fixed for each financial year. This funding not to lapse –

must be transferred to a CSR Fund, which will accumulate – as in the case of non-

lapsable pool for North East.

In case CPSEs have different Profit Centers like Factories / Plant locations, they

may be allocated separate CSR budgets to be spent by them under the Annual CSR

Budget allocations.

MONITORING

Monitoring of the CSR projects is very crucial and needs to be a periodic activity

of the Enterprise;

The Board of CPSEs should discuss the implementation of CSR activities in their

Board meetings;

The CPSE should bring a separate paragraph / chapter in the Annual Report on the

implementation of CSR activities / projects including the facts relating to physical

and financial progress

The implementation of CSR guidelines to form a part of the Memorandum ofUnderstanding to be signed between CPSE and the Government;

The performance of CSR should be monitored by the Ministry / Department on

regular basis;


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In MoU Guidelines from 2010-11 onwards, 20% has been earmarked out of the

non-financial parameters for performance under CSR.

For proper monitoring of CSR activities, companies may appoint a CSR

committee or a Social Audit Committee or a suitable, credible agency to critically

assess fulfillment of social obligations. CSR projects should also be evaluated by an independent external agency. This

evaluation should be both concurrent and final.

MONITORING & EVALUATION BASELINE SURVEYS AND

DOCUMENTATION

Impacts made may be quantified to the best possible extent with reference to base

line data, which need to be created by the CPSEs before the start of any project.

Hence, Base-line Surveys mandatory.

The documentation relating to CSR approaches, policies, programs, expenditures,

procurement, etc. to be put in the public domain, particularly through the internet.


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NALCO CSR – “It is not the Charity, It is the Responsibility”

Nalco has always tried to prove itself a responsible and star corporate citizen of the

country. It has always tried to deliver its duty more than its expectation towards the

society. The company has adopted a policy of playing a catalytic role in improving the

quality of the life of people living in the peripheral villages, in collaboration with the

local government authorities. These activities includes: creation of infrastructures for

communication, education and health care, water supply apart from undertaking social

forestry, organizing rural sports and supporting cultural activities. Even before the land is

acquired and foundation-stone is laid for a project, the company launches its CSR

activities in the area to create a favorable mood among the local people towards the

project.

As a policy NALCO allocates 1% of its net profit per year for the periphery development

activities of the succeeding year. Out of this allocable fund, 40% is allocated for the

Damanjodi, 40% towards Angul and the rest 20% is for other areas. Around Rs.136.87

Crore has been allocated towards the periphery development including the special

projects. Nalco has created a trust within the local people towards the company. It will

foster the relation between the company and the people of the local area. Nalco has set up

a Corporate Social Responsibility Foundation and has doubled the allocated money from

1% of its net profit to 2%

. Nalco is now playing a vital role in the economic development of the area where it

operates. Rehabilitation of displaced families, employment and income generation for

local people, development of infrastructure, environment care and humanitarian goodwill

missions have earned Nalco a special place in the hearts of the local people of the area

where Nalco operates.


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PROJECT


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INTRODUCTION

Social Security protects not just the subscriber but also his/her entire family by giving

benefit packages in financial security and health care. Social Security schemes are

designed to guarantee at least long term sustenance to families when the earning member

retires, dies or suffers a disability. Thus the main strength of the Social Security system is

that it acts as a facilitator – it helps people to plan their own future through insurance and

assistance. The success of Social Security schemes however requires the active support

and involvement of employees and employers.

The term “Social Security” is of almost indefinite connotation as it covers several

measures of protection against various contingencies “from Womb to Tomb” or “from

the Cradle to the Grave”. “It is a scheme of social insur ance against interruption and

destruction of earning power and for special expenditure arising at birth, marriage or

death. It is an attack on five giants namely, Want, Disease, Ignorance, Squalor and

Idleness” The concept of Social Security is as old as c ivilization itself. The concept of old

age, disability and survivor’s protection, as an essential ingredient of Social Security, was

included in the objectives of International Labor Organization, set up after the First

World War in 1919. The oldest institution of social security in the history of mankind is

family. Closely connected by flesh and blood, inspired by the tales of filial devotion,

fraternal affection and parental sacrifice and encouraged by various religions, every

member of the family consider it as a part of his duty to share his weal and woe with

other members. Income from family property and family labor was pooled together and

was used for the maintenance of all members, whether protective or non-protective. The

family is supposed to look after physical needs of its member including food, shelter,

clothing as well as providing comfort and love acceptance and approval. The break-up of

the joint family system following emergence of the urbanization and industrialization has

resulted in the need for social security through the society.


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Main Characteristics of Social Assistance

It provides for selected social dependency needs.

The entire cost of the Scheme is borne by the State.

It applies uniform and statutory means test. It may follow from the above study

that the social assurance has the following features

a. It is a device for providing social security benefit for special cases.

b. Assistance is granted by the state from its own fund directly or through

some appropriate Organization.

c. Assistance is granted as a matter of right.

d. The financial resources of social assistance scheme are of the limited order

and benefits given can be only for a short duration of time.

e. It is granted to those persons who fulfill certain prescribed conditions and

f. Social Assistance is supplemented rather than substitutive to social

insurance.

The purpose of social security:- The fundamental purpose is to give individuals and

families the confidence that their level of living and quality of life will not, so far as

possible, be eroded by any social or economic eventuality. This involves prevention of

the occurrence of contingencies which involve loss of substantial reduction of income.

According to International Labor Organization, there are nine branches of social security

benefits which are – Medical Care, Sickness Benefit, Unemployment Benefit, Old age

benefit, Employment injury benefit, family benefit, Maternity benefit, invalidity benefitand survivor benefit. In the life of man, there are two stages of dependency – childhood

and old age and in the intervening years of adult life, there are likely to occur spells

during which he can not earn his living. Illness enters into every one’s experience and

apprehension of it is felt at all ages. A person who falls sick is threatened with two stages

of unemployment, at first because he cannot work and later because he would have lost

his job. Similarly every body is exposed to a certain number of risks or contingencies viz.

Unemployment, Sickness, Invalidity, Maternity, Employment Injury, Old age and death

of the bread winner. For the great majority of those who have nothing to live on but their

earnings, any one of these risks on contingencies, resulting inevitably in loss of incomeand is liable to plunge workers and their family into extreme poverty.


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Social Security System in India

The constitution of India lays down, in its directive principles (Article-41) “the State shall

within the limits of its economic capacity and development, make effective provisions for

securing the right to work, to education and to public assistance in case of

unemployment, old age, sickness and disablement and in other cases of undeserved want”

In India, both social insurance and social assistance programs provide for Social Security

needs of workers in the contingencies of sickness, maternity, employment, inquiry

occupational disease, old age and death. So far as Social Insurance programs are

concerned the following schemes are in existence.

The principal Social Security Laws enacted centrally in India are the following

The Workmen’s Compensation Act, 1923

The Employees’ State Insurance Act, 1948

The Employees’ Provident Fund and Miscellaneous Provision Act, 1952

The Coal Mines Provident Fund Act

Provident Fund for Tea Plantation in the State of Assam

Seamen’s Provident Fund

The Maternity Benefit Act, 1961

The payment of Gratuity Act, 1972

In addition, a number of social assistance scheme both central and state Government

schemes – provide social assistance benefits for the welfare of specific categories of

workers. Most of these schemes cater to the 90% of the work force which is in the

unorganized sector, for whom the benefits of a Contributory Social Insurance Scheme is

yet to be extended, as is provided to worker in the unorganized sector. Today Social

Security exists for employees in Organized Sector whereas it is absent in the unorganized

sector. In the employee category, the complete responsibility of social security is given to

the Employer and State’s assistance is negligible. Out of 400 million workforces in India,

about 8% of them are brought under the PF/Pension legislation. The Government of India

is very keen to extend this benefit to the unorganized sector.


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Social Security Laws

The Workmen’s Compensation Act, 1923

The Workmen’s Compensation Act is the first piece of legislation towards social

security. It deals with compensation for workers who are injured in the course ofduty. The scheme of the Workmen’s Compensation Act is not to compensate the

worker in lieu of wages. The general principle is that a worker who suffers an

injury in the course of his employment, which results in a disablement, should be

entitled to compensation and in the case of a fatal injury, his dependant would be

compensated. Under the Workmen’s Compensation Act it is the employer who is

responsible to pay compensation (as opposed to the employees State insurance.

Establishments to which the Employees’ State Insurance Act applies to the

liability to pay compensation are on the ESI Corporation). The meaning of

compensation in this Act is limited to compensation granted under the Act for

employment injuries sustained during the course of work. It is also limited tospecifically monetary compensation other than a salary, travel allowance, and any

other form of remuneration that could be paid under normal circumstances of

employment

To get an overall understanding of the Act it is useful to look at the “Statement of

Objects and Reasons’ published with the Act when it was first passed in 1923. To

quote: “ …the growing complexity of industry in this country with the increasing

use of the machinery and consequent danger to workmen, along with the

comparative poverty to workmen themselves renders it advisable that they should

be protected, as far as possible from hardship arising out of accidents.

The Employees’ State Insurance Act, 1948

The Employees’ State Insurance Act, 1948 provides for health care and cash ents

in the case of sickness, maternity and employment injury. The Act is applicable to

non-seasonal factories using power and employing 10 or more employees and

non-power using factories and certain other establishments employing 20 or more

employees. The ESI Scheme is administered by a statutory body called the

Employees’ State Insurance Corporation (ESIC), which has members representing

Employers, Employees, Central and State Governments, Medical Profession and

the Parliament. The Union Minister for Labour & Employment is the Chairman. A

Standing Committee constituted from among the members of the Corporation, actsas the executive body for administration of the Scheme and is chaired by Secretary

to the Government of India, Ministry of Labour & Employment. There are 24

Regional Boards and 345 Local Committees in existence at present.


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The Employees’ Provident Fund and Miscellaneous Provision Scheme, 1952

The Employee’s Provident Funds and Miscellaneous Provisions Act, 1952 is a

welfare legislation enacted for the purpose of instituting a Provident Fund for

employees working in factories and other establishments. The Act aims at providing social security and timely monetary assistance to industrial employees

and their families when they are in distress and/or unable to meet family and social

obligations and to protect them in old age, disablement, early death of the bread

winner and in some other contingencies. Presently, the following four Schemes are

in operation under the Act through the EPFO:

Employees’ Provident Funds Scheme, 1952

Employees’ Deposit Linked Insurance Scheme, 1976

Employees' Pension Scheme, 1995

New Pension Scheme, 2009

The Maternity Benefit Act, 1961 (M.B. Act), which provides for 12 weeks

wages during maternity as well as paid leave in certain other related contingencies.

The Payment of Gratuity Act, 1972 (P.G. Act), which provides 15 days wages

for each year of service to employees who have worked for five years or more in

establishments having a minimum of 10 workers.

Evolution of Income Security for Elder, disabled and Survivor’s in India:

Government Employees

The concept of old-age Pension was brought to India by the British, because the

person who were brought by them from England to occupy the higher

bureaucracy, had to be given old age pension, as they were entitled to be given old

age pension, as they were entitled to it, if they had remain in their own country.

The benefit was also extended to all Government employees as they had to rule

through them. Moreover it would have looked discriminately if it was available to

only one section of employees, who were British citizen and not available to the

employees of Indian origin. The Central Government employees are also enjoying

the benefit of pension and the payment of pensions is regulated under the CCS

(Pension) Rule, 1972. Similarly the Armed Forces Personnel, Railway Employeesand members of All India Service are enjoying the pensionary benefits at par with

Central Government Civilian employees through separate notifications issued by

the respective Ministries/Department. The pension schemes for the Government

employees are financed from the General Revenue of the Government of India.

Thus, in a sense it is a Social Assistance Scheme.


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In 1965, the Gratuity Scheme was introduced for the Government employees. In

respect of Central Government employees who join the service on or after

1.10.2001, the Government is considering framing of a separate pension scheme

on recommendations of Pension Regulatory Authority set up by the Government

of India.

Industrial Employees

The Employees’ Provident Funds Scheme was framed under the EPF Act, 1952.

With a view to protect the family of the PF members, who die while in service, a

Scheme name Employees’ Family Pension Scheme was framed under the EPS and

Family Pension Fund Act, 1952 in the year, in the year 1971, as a Social Insurance

Scheme. In the year 1976, the Employees’ Deposit Linked Insurance Scheme was

framed under the EPF and MP Act, 1952, providing lump sum benefit, which was

linked to the PF deposits of the subscribers who dies while in service. On behalf ofthe employees, the employer is required to pay the contributions towards the EDLI

scheme, 1976. In the year 1995, the Employees’ Provident Pension Scheme, 1971

was re placed by Employees’ Pension Scheme, 1995 which provides pension on

Superannuation, Family Pension to the family of the member who die while in

service or away from service or while drawing pension. In addition, Disablement

Pension, Children Pension, Orphan Pension, Disabled Children Pension and

pension for nominee and dependent parents and other benefits viz. Return of

Capital and communication are also being provided. The working class in India

was demanding one more retrial benefit and accordingly the Government of India

introduced the payment of Gratuity Act in the year 1972.

Other Schemes in general

The Public Provident Fund Scheme, 1967 is a statutory Scheme of the Central

Government framed under the provisions of the PPF Act, 1968. The scheme came

into force w.e.f 1.07.1968 the PPF scheme can be availed by any individual in his

or spouse name and this is a boon to the self employed and entitled for income tax

benefits.

The Government of India included the National Social Assistance Programmes(NSAP) in the Central Budget for the year, 1995-96 and it came into effect from

15th

August, 1995. The NSAP for the time being included:

1. National Old Age Pension Scheme2. National Family Benefit Scheme (Survivor Benefit Scheme)3. National Maternity Benefit Scheme


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4. Social Security Group Insurance Scheme for weaker section

NALCO’s Role in Maintenance of Social Security

NALCO Employees’ Provident Fund Trust (NEPFT) looks after the maintenance of the

Laws of Social Security in NALCO. The board of Trustees for NEPFT, headed by theChairman-cum-Managing Director of the company, has been reconstituted, following a

meeting of the Board of Trustees on June 15, 2009. The meeting was presided by Shri

C.R Pradhan, CMD while Shri B.L. Bagra, Director (Finance), attended the meeting as

special invitee. The representative of NEPF Trust and officials were also presented on the

occasion. The new board of Trustees for the NEPF with the following members

(nominated by Employees’ Recognized Union and Management) has been constituted

(W.E.F 1st January, 2009).

Employees’ Representative

Shri B.P. Kar, Senior PS, Corporate Shri B.N. Soren, EA (Administration), Mines Shri L.D. Rout, EA (HRD), Alumina Refinery Shri Malaya Swain, Accountant, Smelter Shri P.K. Behera, Sr. EA, (HRD) Smelter

Employer’s Representative

Shri S.C. Das, Executive Director (Finance), Corporate Office

Shri S.K. Das, Dy. General Manager (Finance), Smelter & Plant Complex Shri K Ravindranath, Dy. General Manager (Electrical), Mines & RefineryComplex

Shri S.K. Mishra, Dy. General Manager (HRD), Corporate Office Shri A.K. Rout, Sr. Manager (Finance),NEPFT, Corporate Office Shri P.K. Dhirsamant, Dy. Manager (Finance), NEPFT, Corporate Office


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Employees’ PensionScheme – 1995

(w.e.f. 16th

November 1995)


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Early Pension:

With a minimum service of 10 years and any time before attaining the age

of superannuation but after 50 years of age provided the member retires orotherwise ceases to be in employment.

II. Disablement Pension

Paid to the member on permanent and total disablement during the service if at

least one month’s contribution has been paid.

III. Widow/Widower

The widow or widower pension shall be payable to the spouse of the member

when member dies

While in service

Away from Service

As a pensioner

This pension is payable upto the death of the spouse or upto date of remarriage

whichever is earlier.

IV.

Children Pension

The children pension to each child shall be 25% of the widow/widower pension

and is payable to two children at a time upto their age of 25 years and will run

from the oldest to the younger in that order. The pension shall be paid

concurrently along with the widow/widower pension. The legally adopted children

of the member are also eligible for children pension

V. Orphan Pension

The orphan pension to each child shall be 75% of the widow/widower pension and

is payable to two children at a time up to their age of 25 years and will run from

the oldest to the younger in that order, on the death or remarriage of the spouse of

the member.


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VI. Disabled Children/Orphan Pension

If the child or children of the member is/are permanently or totally disabled at thetime of death of the member, then a disabled children or orphan pension is payable

up to the entire lifetime of the child irrespective of the age and number of children

in the family in addition to the normal children/orphan pension payable to the

other normal children.

VII. Nominee Pension

If there is no spouse or an eligible child for the member on his death, then the

nominee executed through the Nomination proforma in Form 2 for the EPS-95would be eligible to get a nominee pension up to his/her life time with quantum of

pension same as the widow pension.

VIII.

Pension to the dependent father/mother

If there is no spouse, children or a valid nominee to a member, then a pension

equal to the widow pension shall be payable to the dependant father up to his

death and then to the dependant mother up to her entire life time.

Previously under the old Employees’ Family Pension Scheme, 1971, only

widow/widower pension was payable, in case of only death while in reckonable service

and prior to completion of 60 years of age. In absence of widow or on cessation of

Widow Pension, pension was payable to the eldest child up to the age of 25 years and

then it was to pass on to the younger children, one at a time, subject to the age limit of of

25 years. There was no provision for pension to member and capital return or

commutation or disablement pension. At the time of leaving the service, the employee

was entitled to withdrawal benefit only.


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METHOD OF CALCULATION OF PENSION AND THE MINIMUM AMOUNT

PRESCRIBED

Monthly Member Pension

The quantum of pension payable to a member on superannuation and/or exit from service

on attaining the age 58/50 years shall correspond to the period of pensionable service

rendered by the member and his pensionable salary i.e. the last twelve months’ average

pay drawn by him at the time of exit. The pension is calculated by the formula

(Pension Salary x Pensionable Service)

70

Those retiring after 16-11-1995, shall have also the benefit of past service pension for the

period of membership under the erstwhile Employees’ Family Pension Scheme, 1971 on

factor formula basis provided in Paragraph 12(3) in the EPS-1995 as below:

Years of Past Service Salary up to

Rs.2500/- per

month

Salary more than

Rs.2500/-

per month

Up to 11 years 80 85

More than 11 years but up to 15 years 95 105

More than 15 years but less than 20 years 120 135

Beyond 20 years 150 170

However, the amount shall be multiplied by the corresponding Table B factor for the

period that had elapsed between 16-11-1995 and the date of exit is date of attaining 58

years for superannuation/early pension, date of death for widow/widower pension and

date of disablement for disablement pension.


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Both the amounts would be aggregated to calculate the total monthly member pension

subject to the minimums prescribed as below:

Date ofCommencement of

Pension

Minimum formulaPension For Pension

For Pensionable

Service

MinimumAggregate

Pension

Minimum afterproportionate

reduction for

eligible service

less than 24 years

From 16.11.1995 to

15.11.2000

335 500 265

From 16.11.2000 to

15.11.2005

438 600 325

From 16.11.2005 635 800 450

However these minimums are prescribed only to the existing members. For new

entrants the pension would be as per the formula.

Disabled Member Pension:

The pension is calculated as above subject to a minimum of Rs.250/- per month

Widow/Widower Pension:

If Member dies in service then

Widow Pension = Member Pension treating the date of death of retirement (or) Table ‘C’

factor (or) Rs.450/- whichever is higher

If the members dies away from service before 58 with service of more than 10 years

then

Widow Pension = Member Pension treating the date of exit from employment as date of

retirement (or) Table ‘C’ factor (or) Rs 450/- whichever is higher


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New Pension Scheme –

2009


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GLOSSARY

PFRDA Pension Fund Regulatory and Development Authority

NPS New Pension System

GOI Government of India

CRA Central Recordkeeping AgencyCRA-FC CRA Facilitation Centre

KYC Know Your Customer

NSDL National Securities Depository Limited

T+1 Transaction Plus One Day

NPIN Internet Personal Identification Number

T-PIN Telephonic Personal Identification Number

PRA Permanent Retirement Account

PRAN Permanent Retirement Account Number

PF/PFM Pension Funds/Pension Fund Managers

RFP Request for Proposal

ASP Annuity Service Provider

TB Trustee Bank

PoP Point of Presence (NALCO)

PoP-SP Point of Presence - Service Provider (Authorised

branches of

POP for NPS)

UAT User Acceptance Test


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PENSION FUND REGULATORY AND DEVELOPMENT

AUTHORITY (PFRDA)

Pension Fund Regulatory and Development Authority (PFRDA) was established by the

Government of India on 10th

October 2003 to promote old age income security byestablishing, developing and regulating pension funds, to protect the interests of

subscribers to schemes of pension funds and for matters connected therewith or incidental

thereto.

1. The Central Government has introduced the New Pension System (NPS) with effect

from 01 January 2004. The new pension system covers, at present, new entrants to

Central Government services (excluding Armed Forces) some State Government

services and autonomous bodies at their discretion and all citizens of India on a

voluntary basis with effect from 1st May 2009.

2. The NPS is based on a unique individual Permanent Retirement Account Number

(PRAN) created for individual subscribers. In this system, a subscriber shall

periodically contribute savings into his/her Permanent Retirement Account (PRA)

while he/she is working and shall use the accumulations at retirement to procure a

pension for the rest of his/her life. Subscribers in this system shall enjoy a variety of

important facilities and rights including portability across jobs and locations, rightsand choices regarding selection of Pension Fund(s) and schemes, freedom to switch

between Pension Funds and service providers and nationwide access over a period

of time.

3. PFRDA has already put in place the institutional framework and infrastructure

required for administering the 'New Pension System' (NPS) for government

employees. Various institutional entities such as Central Record Keeping Agency

(CRA), Pension Fund Managers (PFM), Trustee Bank (TB), Custodian and NPS

Trust have been appointed and are now functional.

4. The recordkeeping and administration functions for all subscribers of the New

Pension System will be centralized and performed by a Central Recordkeeping


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Graphic Representation of NPS Architecture

The key stakeholders of the New Pension System are as follows:

Pension Fund Regulatory and Development Authority (PFRDA)

Funds Flow


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PFRDA is the regulator for the NPS. PFRDA is responsible for appointment of various

intermediaries in the system such as Central Record Keeping Agency (CRA), Pension

Funds, Custodians, NPS Trustee Bank, etc. PFRDA shall also monitor the performance of

the various intermediaries. PFRDA has a significant role to play in safeguarding the

interest of subscribers. It will regulate the manner in which subscriber contributions are

invested by PF(s) and will make all efforts to ensure fair play for subscribers. It shall also

ensure that all stakeholders comply with the guidelines/regulations issued by PFRDA

from time to time.

Central Recordkeeping Agency (CRA)

The recordkeeping, administration and customer service functions for all subscribers of

the New Pension System will be centralized and performed by the CRA. The CRA shall,

on the basis of instructions received from subscribers, transmit such instructions to the

appointed Pension Funds on a regular basis. The CRA will also provide periodic,

consolidated PRAN statements to each subscriber.

Pension Funds (PFs)/Pension Fund Managers

Appointed PFs would manage the retirement savings of subscribers under the NPS. PFs

would use their secure access codes to confirm receipt of netted assets and instructions

regarding fund allocation, confirm allocation of funds and communicate the NAV of each

scheme to CRA on a regular basis. The PFs will be required to invest strictly inaccordance with guidelines issued by the PFRDA.

Annuity Service Provider (ASP)

ASPs would be responsible for delivering a regular monthly pension to the subscriber for

the rest of his/her life. On receipt of personal and banking information details of

subscriber from CRA and of specified sum from the trustee bank the ASP would use its

access codes to confirm receipt. ASP would then begin payments of annuities to the

subscriber.

Trust & Trustee Bank (TB)

A Trust would be responsible for taking care of the funds under the NPS. The Trust

would hold an account with a bank and this bank would be designated as NPS Trustee


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Bank. NPS Trustee Bank will facilitate fund transfers across various entities of NPS

system viz. PFM, Annuity Service Providers, subscriber, etc. PFRDA has already

established NPS Trust under the provisions of the Indian Trusts Act w.e.f. 27th

February

2008 and Bank of India is functioning as NPS Trustee Bank. The NPS Trust is being

administered by the Board of Trustees, as constituted by the PFRDA.

Point of Presence (POP)

POP shall be the first point of interaction between the voluntary subscriber and the NPS

architecture. PoP shall perform the functions relating to registration of subscribers,

undertaking Know Your Customer (KYC) verification, receiving contributions and

instructions from subscribers and transmission of the same to designated NPS

intermediaries. Detailed functions to be performed by the PoP(s) are listed out in section

2 of this RFP., PoP(s) and their authorized branches (PoP-SPs) shall also be required to

comply with the provisions of the Prevention of Money Laundering (PML) Act , 2002

and the rules framed thereunder, as may be applicable, from time to time.

Voluntary Subscribers

Subscribers will have complete control on how their contributions and savings in PRAN

are managed. They will be able to select a professional Pension Fund ( PF) from a pool of

competing Pension Funds. Each PF in this system will offer a limited number of simple,

standard investment schemes with different risk and return profiles. They will also be

able to seamlessly switch savings between investment schemes subject to such conditions

as prescribed by PFRDA from time to time.

FUNCTION OF POPs

The following sets of functions are primarily expected from PoP/PoP-SP. However, these

are not exhaustive.

INITIAL CUSTOMER INTERACTION FOR NPS

a) Addressing queries of potential subscribers regarding NPS.

b) Providing and displaying PFRDA approved information/material on NPS and

application form/ offer document/other publicity material


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The application and other request forms as prescribed by PFRDA for various services

under NPS would be required to be printed, stored and made available to NPS subscribers

by the PoP. In addition, these forms shall also be made available in downloadable format

on the PFRDA, PoP and CRA websites.

SUBSCRIBER R EGISTRATION

a) Receive the duly filled application form along with the KYC documentation as

may be applicable from time to time.

b) Verification of KYC documents as may be required from time to time.

c) At the time of registration, PoP-SP shall collect and verify contributions that may

be received through cash/cheque/Demand Draft.

d) Collection/deduction of NPS application processing fees and issue of receipt to the

subscriber against the same.e) Duly accepted application form shall be submitted on a daily basis, to CRA/CRA-

Facilitation Centre (FC) for digitization by hand where the PoP-SP and the CRA-

FC are co-located. Where the PoP-SP and CRA-FC are not co-located, the former

shall have the option to transmit the documents (original application form along

with documents) to the nearest CRA-FC either by hand or through post. For the

purpose, PFRDA/CRA may map PoP-SP(s) to nearest CRA-FC location.

f) Currently CRA-FC(s) are existing in approx 50 cities.

g) CRA would, on successful digitization, dispatch the PRAN kit directly to thesubscriber. The CRA shall also inform the PoP-SP of the PRAN numbers allotted

to its subscribers.

h) On receipt of PRAN numbers, PoP-SP shall upload the subscriber contribution

files into

CRA system and simultaneously arrange to transfer the funds into the account of

the NPS trust maintained with the Trustee Bank. For this purpose, the PoP/PoP-SP

is expected to maintain a separate, earmarked account for the NPS contributions

received.

i) The initial contribution of subscriber shall be remitted to the trustee bank on the

day it receives information from CRA about the PRAN number allotment to the

subscriber


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j) On successful digitization, the CRA shall retain the original NPS application form

and the

KYC documents for storage.

MAINTENANCE OF

HARD COPIES AND

R ECORD OF

TRANSACTIONS

(i) PoPs and PoP-SPs shall ensure maintenance, reporting and retention of records

of all

transactions in accordance with the provisions of PML Act, 2002 and Rules

framed

thereunder, as may be applicable, from time to time.

(ii) CRA shall store hardcopy of the NPS application form and other supporting

documents

submitted by the subscriber at the time of registration towards fulfilling the

KYC norms. In addition, CRA shall also maintain documents submitted by thesubscribers for effecting any changes in demographic details.

Note: NSDL/CRA has agreed to store the hard copy documents on behalf of PoP/PoP-

SP. This arrangement would, accordingly, need to be formalised in writing between

the PoP/PoP-SP and NSDL. NSDL shall however not be charging PoP/PoP-SP for

storage of such KYC documentation. The responsibility for KYC verification shall,

however, be that of PoP/PoP-SP.

R EGULAR SUBSCRIBER CONTRIBUTION UPLOAD

a) Verify PRAN card details on the deposit slip, the format for which shall be

prescribed by PFRDA.

b) Collection and verification of contributions that may be received

through cash/cheque/Demand Draft/ Electronic Clearing System (ECS).

c) Collection/deduction of contribution processing fee and issue of receipt to the

subscriber against the same.

d) Uploading subscriber contribution details online into the CRA system, in respect

of subscribers for whom clear funds are available, on a daily basis.

e) Remit clear funds into the account of the NPS trust maintained with the Trustee

Bank on a T+1 basis.

f) Maintain hard copies of deposit slips


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E Withdrawal Request processing At the current PoP-SP to which the

subscriber is linked in the CRA system

F Receiving Grievances and their redressal Initially, only at the parent PoP-SP

G Subscriber shifting within the same PoP Initially the subscriber has the option to

shift from his/her Parent PoP-SP to anyother PoP-SP within the same PoP.

H Subscriber shifting from one PoP to any

other PoP

In due course of time (as stipulated by

PFRDA) the subscriber will have the

option to shift from one PoP to any

other PoP registered with PFRDA.

PFRDA will lay down the procedures as

and when inter-pop operability is

established.

SERVICE LEVEL STANDARDS/R EQUIREMENTS

Sl.No Functions of the PoP Service level/Standards

A Registration of Subscriber Submission of application forms to CRA-FC byend of the day (EoD)

B KYC Verfication, Retentionand maintenance of record oftransactions

As per the provisions of the PML Act, 2002 andthe rules framed thereunder, as may beapplicable, from time to time.

C Transmission of funds to NPStrust account maintained withTB

Clear funds have to be transferred to theTrustee Bank on a T+1 basis.

D Switch/Scheme preferencechange

Request to be uploaded into the CRA system asand when received from subscriber by PoP-SP/PoP.

E Grievances Grievances against the PoP-SP to be normallyresolved within 7 days from the date of receiptof grievance.

F Subscriber shifting Request to be uploaded into the CRA system asand when received from subscriber byPoP/PoP-SP.

G Subscriber shifting from onePoP to any other PoP

In due course of time (as stipulated by PFRDA)the subscriber will have the option to shift fromone PoP to any other PoP registered withPFRDA. Operational details to be prescribed byPFRDA in due course.


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TECHNICAL ELIGIBILITY CRITEREA FOR PoP

Any institution bidding for PoP Registration is required to fulfill following basictechnical eligibility condition to be registered as PoP under NPS.

a) Regulated by both Reserve Bank of India, Securities and Exchange Board of India

or Insurance Regulatory and Development Authority.

b) Having a minimum of 25 branches, covering at least 25 districts spreading over 3

or more States with each branch conforming to IT infrastructure and capacity to

electronically link to the CRA (detailed IT requirement as mentioned in section

3.2 of this document). Each of these branches should have demonstrated capability

to electronically transmit in an efficient and secured manner clear NPS subscriber

contribution and subscriber information on at least "T+1" basis.

c) Minimum net worth (paid-up capital+reserves+surplus) of INR 1.00 Cr as on 31 st

March 2009.

d) A three year track record of profitability (Profit after tax) as of 31st March 2009.

e) The institution should be in business

Documents

Difference between NPS and EPS