NEW DELHI | KOLKATA: Staterun firms are enforcing austerity measures such as ending leave encashment and penalizing non-performers with salary cuts, particularly in loss-making companies, in a slowing economy that has hurt consumer demand.
In some cases, extreme steps such as an across-the-board 25% salary cut for senior executives in a poorly performing CoalIndiasubsidiary was discussed, although finally rejected. But former landline phone monopoly Bharat Sanchar Nigam Ltd, whose wage bill absorbs 75% of its revenue, has decided to cut salaries to the extent staffers failed to meet targets.
The oil sector is also abuzz with expectations of austerity measures, but company executives say they have not received any such communication.Bharat Heavy Electricals Ltd(Bhel) andHindustan AeronauticsLtd (HAL) recently suspended leave encashment to improve cash flow, while several others includingSteel Authority of Indiastopped leave encashment in the last 2-3 years.
Bhel has told its employees that it needs to judiciously utilize cash for buying raw material, manufacturing operations and execution of projects and is making efforts to realize locked up cash.
“In the recent times, the company has been facing strain over the availability of funds for running its operations. Business sectors / units are taking special efforts to realize the cash locked up with customers due to various reasons. This financial condition thus demands that cash outflow on various accounts are regulated to survive in the current situation and cash availability is prioritised for meeting the working capital requirements for purchase of raw materials, manufacturing / operations and project execution. Under these compelling circumstances, it has been decided to suspend in-service encashment of earned leave, ”the company said in its circular issued to its employees.
Encashment of earned leave will, however, be allowed for meeting financial requirements for higher education or marriage of children and in case of resignation, superannuation, death, or accumulation of more than 300 leaves, Bhel told its employees. It did not respond to an emailed query from ET.
Hindustan Aeronautics Ltd has also suspended leave encashment. “HAL has stopped leave encashment for employees who are in service as part of austerity measure. However, those retiring are given the full benefits including the leave encashment, ”company spokesman Gopal Sutar said in response to ET’s query.
However, the company is promptly paying all perks and allowances included in salaries. “We are hopeful of improvement in our financial position in near future,” he said.
Analysts said HAL has receivables of over Rs 20, 000 crore from the government, which has squeezed its cash flow and forced it to take advances from banks to pay salaries. Bharat Sanchar Nigam Ltd (BSNL) has penalized staff that failed to meet landline and broadband expansion targets in August, by way of deductions in their September salary.
An internal BSNL memo, dated September 9, said a review of the achievements for August 2019 shows that many field units had failed to meet landline and broadband targets for which “penalty in the form of recovery from salary in proportion to non-achievement of targets is hereby imposed”. The memo, however, said that the salary deductions “would be rolled back,” for employees who achieve their pending as well as September targets. A BSNL spokesman declined to comment.
In July, BSNL set aggressive sales targets in a bid to rein in operational losses. Its landline team was asked to retain the fixed-line user base as on March 2019, and at least double the fiber-to-the-home connections provided in FY 19.
BSNL, which has 164 , 000 employees, had delayed salary payments for March, July and August this year. Its average monthly salary bill is Rs 800 crore.
The state-run telco, which operates in 20 circles barring Mumbai and Delhi, has accumulated losses of over Rs 57, 500 crore since FY 10 in the face of private competition. Losses in FY 19 are likely to be another Rs 14, 000 crore.
Another company where severe austerity was considered is South Eastern Coalfields Ltd, a subsidiary ofCoal IndiaLtd. whose board took note of its audit committee’s recommendation that all executives from the level of deputy general manager and above should lose 25% of their salary from August this year in view of the poor performance in the June quarter. The recommendation was rejected because Coal India adopts a uniform HR approach across subsidiaries.
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