Reports: INTER- FIRM PRODUCTIVITY SURVEY

INTER- FIRM PRODUCTIVITY SURVEY

INTER-FIRM PRODUCTIVITY SURVEY

Task Force Report

September 1985

INDEX

CHAPTER — DESCRIPTION — PAGE NO.

Introduction — (i)
Highlights of the survey — (iii)

1 — Structure of the Industry — 1
2 — Production and Technology — 7
3 — Materials — 15
4 — Personnel & Industrial Relations — 18
5 — Market Related Factors — 32
6 — Finance — 37
7 — Infrastructure facilities — 40
8 — Management Systems & Productivity Culture — 45
9 — Factors hindering Productivity — 48

Annexures — 49

LIST OF ANNEXURES

SL. NO. — DESCRIPTION — GRAPH NO.

I — List of Respondent Companies — -
II — Sample Questionnaire — -

Sales turnover — 1a
Status of capacity utilisation — 2a
External factors affecting capacity utilisation — 2b
Internal factors affecting capacity utilisation — 2c
Level of technology w.r.t. best Indian companies — 2d
Level of technology w.r.t. best Foreign companies — 2e
Extent of modernisation — 2f
Expenditure in R&D to total turnover — 2g
General availability of materials in India — 3a
Industrial relations climate — 4a
General response of Unions to Productivity proposals — 4b
Communication channels and systems — 4c
Types of information shared with employees — 4d
Types of participative managements — 4e
Mode of settlement — 4f
Steps taken towards organised Productivity drive — 4g
Market conditions — 5a
Areas of Planned Cost Reduction Efforts — 5b
Extent of Meeting Working Capital Needs — 5c
Time span for Achieving Productivity Proposals — 8a
Extent of efforts to reduce paper work — 8b

INTRODUCTION

(i)

INTRODUCTION

0.1 BACKGROUND

The Productivity Board for Industrial Machinery appointed a Task Force in April 1984. Its objective was to carry out interfirm survey in all the four regions on "Productivity Appraisal", the broad aim being to understand the factors which helped or hindered productivity. Also, to prepare this comparative report so as to serve as a white paper to the Govt. of India, the board and its members especially those who participated in the survey.

0.2 PREAMBLE

A questionnaire was jointly prepared by the National Productivity Council and M/s. Larsen & Toubro Limited. The questionnaire was mailed by the end of June ’84 to over 100 companies chosen from the DGTD list.

Since the response was initially lukewarm, the task-force appointed a two member team consisting of M/s. I.R. Sethi – Personnel Officer and P.J. Parekh – Works Accountant, both from L&T.

The above team visited about 50 companies during December 1984/January ’85 and due to their vigorous followup, the western region was able to motivate 30 companies to fill up the questionnaires by end March 1985.

0.3

The above team also utilised the opportunity to discuss various issues with top executives of these companies and the gist of their informal conversations is given at the end of this chapter.

0.4 MAIN ASSUMPTIONS:

a) Wherever the turnover (and other details) were given for a part/excess of a year, the same have been pro-rata adjusted for 12 months’s duration.

b) In a few instances some respondents have not answered some questions completely. In such cases the percentages are worked out based on the average figures of the remaining respondents.

0.5 SALIENT FEATURES OF DISCUSSIONS WITH COMPANY REPRESENTATIVES:

General Response:

a) Most of the Companies welcomed the objective for which this study is undertaken.

However, they had apprehensions as to whether the findings of the study will be taken cognisance of while evolving national policy on productivity.

(ii)

As the team understood it, this apprehension resulted from the fact that many suggestions/representations made to the concerned agencies, have failed to stir bureaucratic set-ups.

b) A few of them, however, hoped that the present awakening (about productivity) at various levels would become conducive in evolving concrete action plan.

c) A few companies felt that the information regularly filed with various statutory/voluntary agencies could have been used for this study.

d) By and large, productivity problems were viewed from the point of view of labour productivity only.

0.6

List of respondents who participated in the survey is given at Annexure ‘I’

0.7

The Sample Questionnaire is shown at Annexure ‘II’, which was filled up by the respondent companies.

HIGHLIGHTS OF THE SURVEY

1. STRUCTURE OF THE INDUSTRY:

1.1 The report covers 53 companies (having 98 plants)

8 in North
5 in South
10 in East
30 in West

1.2 These 53 companies employ a total of 1,44,500 persons having total SALES TURNOVER of Rs. 1,821 crores (Average of 1980/81 to 1982/83).

1.3 During the same period these companies recorded an average growth of 24.87% in Sales Turnover with a mere 4% growth in their man-power. Average turnover per employee worked out to Rs. 1.49 lakhs.

2. PRODUCTION AND TECHNOLOGY:

2.1 38% of the industry could utilize its capacity in the range of 35 to 65%.

2.2 53% of the companies feel that demand was the most hindering factor in capacity utilisation.

2.3 40% of the companies suffered on account of poor infrastructure.

2.4 26% respondents were sensitive to government policies.

2.5 Raw material availability was a limiting factor for 34% of respondents.

2.6 23% companies faced problems due to poor ancillary support.

2.7 25% of respondents were saddled with outdated plant and equipments which resulted in excessive breakdowns for 23% of respondents. However 69% companies are in the process of modernisation.

2.8 Expenditure in R&D in 61% of the industry was below 1% of their turnover. This aspect requires a closer consideration.

2.9 21% of the companies still do not carry out Value Engineering analysis. An ample scope exists for NPC to play a significant role in this area.

2.10 Only 11% companies felt that machine availability was a limiting factor.

(iv)

3. MATERIALS:

3.1

30% respondents had an import content upto 10%
34% respondents had an import content between 11 to 20%
28% respondents had an import content between 21 to 40%
8% respondents had an import content more than 40%

3.2 Only 24% respondents felt that raw materials (indigenous) were easily available.
9% were plagued due to shortages while 67% just managed.

3.3 Only 30% respondents reported substantial standardisation.
The country will have to strive hard towards this.

4. PERSONNEL & INDUSTRIAL RELATIONS:

4.1 The percentage of managerial and supervisory staff is on the increase whereas that of the non-supervisory staff is on the decline.

4.2 Percentage of technical staff in the total supervisory staff is increasing while that of the administrative staff is decreasing.

4.3 Percentage of skilled workmen is increasing whereas that of the unskilled workmen is decreasing.

4.4 Salary of all levels of employees is showing an increasing trend.

4.5 51% of the companies have internal unions. Only 20% of the companies felt that their IR climate was excellent and 33% felt that it was good. Though most of the government owned companies had a good IR climate, they suffered due to poor capacity utilisation.

4.6 69% of the companies were involved in developing the attitudes of their personnel. Overall only 62% of the unions respond positively to productivity improvement proposals.

4.7 Notice boards and circulars are the most popularly used channels for communication between union and management, whereas 92% of the management are willing to share information about the Company’s performance at regular intervals.

4.8 Collective bargaining at the enterprise level was the most popular mode of settlement of disputes between management and the union.

5. MARKET RELATED FACTORS:

5.1 Only 12% of the companies had products which were competing with foreign companies.

5.2 Almost all the companies were involved in planned efforts towards cost reduction.

(v)

6. FINANCE:

6.1 A majority of the companies experienced inadequacy of working capital credit for their finished goods, work in progress and raw materials.

7. INFRASTRUCTURE FACILITIES:

7.1 The best rail services were available in the west, road transport was felt to be adequate in all the regions, power shortage was experienced in the Northern and Eastern regions.

7.2 As such, most of the companies did not complain of inadequate availability of skilled labour. Lack of proper communication facilities were felt by 75% of the companies from the North.

STRUCTURE OF THE INDUSTRY

CHAPTER I

STRUCTURE OF THE INDUSTRY

Totally 53 companies were surveyed out of which 8 were from North, 5 from South, 10 from East and 30 from West.

1.1 OWNERSHIP

43 companies were from the private sector and 10 from the public sector, their region-wise breakup being as follows:

Region	Private Sector	Public Sector
North	2	6
South	4	1
East	7	3
West	30	0

Total: 43 (Private) | 10 (Public)

1.2 LOCATION OF PLANTS

These 53 companies have a total of 98 plants, spread all over the country. The region-wise breakup is as follows:

Region	No. of Companies	% wrt Total Plants
North	10	11
South	14	14
East	22	22
West	52	53

Total: 98 | 100%

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1.3 MAJOR PRODUCTS

Air and Gas Compressors, Vacuum Pumps, Construction and Mining equipment, Pump sets, Steam Boilers, Industrial Heat Treatment Furnaces, Industrial Burners, Moulding Machines, Lime Kilns, Machine Tools, Textile Machineries, Industrial Air conditioning and Refrigeration, Water Treatment Plants, Pumps, Diesel Engines, Industrial Gear Boxes, Marine Gear Boxes, Pressure Vessels, Heat Exchangers, Paper Making Machinery, Laser System, Sugar Mill Machinery, Cement Mill Machinery, Drilling Rigs, Road Rollers, etc.

1.4 MAN POWER (TOTAL OF ALL RESPONDENTS)

Year	1980-81	1981-82	1982-83	Average
Total Man Power	1,40,947	1,44,806	1,47,666	1,44,473

% growth (over previous year):
1981-82: 3
1982-83: 2

% growth (over base year):
1981-82: 3
1982-83: 5

1.5 SALES TURNOVER

Range (Rs. lakhs)	No. of Companies	% of Companies
0 – 2000	27	51
2000 – 5000	14	27
Above 5000	12	22

(For details please refer Graph No. 1a)

1.6 REGIONWISE DISTRIBUTION OF SALES TURNOVER (Rs. in Lakhs)

Region	1980-81	1981-82	1982-83	Average
North	38742	50495	53533	47590
South	8937	9773	12561	10423
East	31508	36605	39123	35747
West	77087	88939	99249	88423

Total:
1980-81: 156274
1981-82: 185812
1982-83: 204466
Average: 182123

(Sales Turnover is exclusive of Excise Duty)

1.7 GROWTH OF THE INDUSTRY (OVER THE BASE YEAR) EXPRESSED AS %

Region	1981-82	1982-83	Average
North	30.3	38.2	34.3
South	9.4	40.6	24.9
East	16.5	24.2	20.2
West	15.4	28.7	22.1

Total:
1981-82: 19.9
1982-83: 30.8
Average: 24.9

1.8 SALES TURNOVER EXPRESSED AS % OF TOTAL TURNOVER OF INDUSTRY

Region	No. of Cos.	% of Cos.	1980-81	1981-82	1982-83
North	8	15	24.8	27.2	26.2
South	5	9	5.7	5.3	6.1
East	10	19	20.2	19.7	19.1
West	30	57	49.3	47.9	48.5

Total: 53 companies | 100% | 100.0 | 100.0 | 100.0

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As can be seen from the above tables the industry experienced a growth rate of 18.90% in 1981-82 and 30.84% in the year 1982-83. Companies based in the northern region grew in turnover at the rate of 30.33% and 38.17% in the years 1981-82 and 1982-83 respectively. The lowest growth rate is noticed in the Eastern based companies, the figures being 16.47% and 24.16% for the same two periods.

The average growth rate during the considered period is 24.87%. As against this, totally 25% of the companies had an average growth rate which was higher than that of the industry. The occurrence was highest amongst the companies hailing from the northern region, the figure being 64%. Fifty percent of the companies from the eastern region had a growth rate higher than that of the industry, the figure being 40% for the southern region and only 4% for the west.

Given below is the region wise breakup of companies having a growth rate higher than that of the industry, as per the range of sales indicated. Figures mentioned are a % of the companies of that region.

Range of Sales (Rs. crores)

Range	North	South	East	West
0–20	13	20	20	-
20–50	26	-	20	4
Above 50	25	20	10	-

Total:
North: 64 | South: 40 | East: 50 | West: 4

For example, 13% of the companies from the north, which had a growth rate higher than that of the industry, were in the range of 0–20 crores Rupees of annual sales.

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Another important factor to be noted is that while only 4% of the companies from the west had a growth rate higher than that of the industry, this sector comprised of almost 50% of the total turnover of the industry. Such comparison of the other regions speaks quite satisfactorily of their performance. The north based companies, comprising of 26% of industry turnover, had 64% of them with a growth rate higher than that of the industry.

21% of the companies had a negative average growth during the periods considered, of which the occurrence was highest amongst the western region based companies, the figure being 31%.

Given below is the region wise breakup of companies having a negative average growth rate, as per the range of sales indicated. Figures indicated are a % of the companies of that region.

Range of Sales (Rs. lakhs)

Range	North	South	East	West
0–2000	-	-	-	24
2000–5000	13	-	-	-
Above 5000	-	-	10	7

Total:
North: 13 | South: - | East: 10 | West: 31

1.9 TURNOVER PER EMPLOYEE (Rs. in lakhs)

Region	1980-81	1981-82	1982-83	Average
North	2.02	2.54	2.33	2.30
South	0.88	0.94	1.14	0.99
East	1.17	1.22	1.33	1.24
West	1.39	1.47	1.49	1.45

Average:
1980-81: 1.37 | 1981-82: 1.54 | 1982-83: 1.57 | Overall: 1.49

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Growth Rate in Turnover per Employee (over base year) Expressed in %

Region	1981-82	1982-83	Average
North	25.74	15.34	20.54
South	6.81	29.54	18.18
East	4.27	13.67	8.97
West	5.75	7.19	6.47

Average:
1981-82: 12.40 | 1982-83: 14.59 | Overall: 13.49

Referring to the above tables, even though the north based companies had the highest average turnover per employee as well as highest average growth rate, they did experience a fall of 10% in their rate of growth in 1982-83 compared to the previous year.

Another interesting feature is the performance of the companies from the south. Their growth rate in turnover per employee increased sharply from 6.81% in 1981-82 to 29.54% in the following year.

As such the western region companies had an average turnover per employee of Rs. 1.45 lakhs, which was very close to the industry average of Rs. 1.49 lakhs. As this group had a sales turnover of 50% of that of the industry, their average growth rate of 22.06% compared favourably with that of the average industry growth rate of 24.87%.

Given below is the % of companies from each region which had a sales turnover per employee that was higher than the industry average of Rs. 1.49 lakhs:

Region	North	South	East	West
% of companies	63	-	10	48

PRODUCTION AND TECHNOLOGY

CHAPTER II

PRODUCTION & TECHNOLOGY

2.1 STATUS OF CAPACITY UTILISATION

Range	1980-81	1981-82	1982-83
35–50%	20	15	10
50–65%	18	15	28
65–80%	25	25	18
80–95%	30	35	26
95% and above	7	10	18

TOTAL: 100 | 100 | 100

(Figures mentioned are % of the total number of companies. For details please see graph no. 2a)

Region-wise Distribution (% of companies)

(1 = 1980-81, 2 = 1981-82, 3 = 1982-83)

Range	North (1/2/3)	South (1/2/3)	East (1/2/3)	West (1/2/3)
35–50%	15 / 15 / 15	– / – / –	33 / 22 / 22	19 / 15 / 5
50–65%	– / – / 30	– / – / –	34 / 22 / 22	19 / 20 / 33
65–80%	15 / – / 15	67 / 67 / 33	11 / 22 / 34	29 / 29 / 9
80–95%	55 / 70 / 25	– / – / 33	11 / 22 / 11	33 / 33 / 33
95% & above	15 / 15 / 15	33 / 33 / 34	11 / 12 / 11	– / 3 / 20

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2.2 EXTERNAL REASONS FOR VARIATION IN CAPACITY UTILISATION

(Refer Graph No. 2b)

a) Demand

53% of the companies felt that lack of demand was a major constraint for proper capacity utilisation in 1981, and this figure went up to 58% in 1982-83. This was particularly felt in the east where 80% of the companies faced this problem. 20% of the companies from the north faced this problem in the first two years considered, and this figure shot up to 50% in 1982-83. On an average about 60% of the companies from the west had this problem in each of the three periods. The figure remained constant at 20% for companies of the southern part of India.

b) Infrastructure

Lack of an adequate infrastructure was felt by about 40% of the companies in the country. In the southern region, 60% of the companies were affected by lack of sufficient power, the figures being 50%, 40% and 30% for north, east and west respectively.

c) Government Policies

Totally only 26% of the companies felt that their capacity utilisation depended on Government Policies. The worst affected were those from the north where about 37% of the companies were very sensitive to Government policies. In the Western sector, about 30% were dependent on Government policies, and this figure was 20% for the east. An interesting feature was that none of the companies from the South felt that they were affected by Government policies!

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d) Raw Material Availability

On an average about 34% companies experienced the problem of lack of availability of raw materials. It was felt most severely in the western region by about 43% of the companies. The figures were 20% and 25% for the southern and northern regions respectively for the 3 years considered.

e) Ancillary Availability

23% of the companies based in the west felt that ancillary availability was a problem and was creating a bottleneck, while none of the other regions reported any such difficulty.

f) Others

In the southern regions some of the companies faced the difficulty of shortage of SS plates 304 and 316 BQ plates, because of import restrictions.

2.3 INTERNAL REASONS FOR VARIATION IN CAPACITY UTILISATION

(Refer graph no. 2c)

a) Obsolete/Outdated Plant and Machinery

Overall 25% of the companies felt that their persistence with outdated plant and machinery had resulted in poor capacity utilisation. In the western region, 37% of the companies were having obsolete plant and machinery whereas in the eastern region, 20% of the companies are using such types of plants.

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Some of the other reasons causing variations in capacity utilisations are as follows:

Reason	N	S	E	W	Total
b) Lack of appropriate skills	13	-	-	10	8
c) Excessive rejection/rework	13	20	-	3	11
d) Poor information systems	13	-	-	17	12
e) Excessive breakdowns	13	-	10	23	23

(Values indicate % of companies of each region)

f) Others

It was felt that poor labour productivity, strict financial restrictions, absenteeism were some of the other internal reasons affecting proper capacity utilisation.

2.4 LEVEL OF TECHNOLOGY

(Refer Graph Nos. 2d and 2e)

Comparing the existing process to the best available in India today:

4% of the companies felt that their technology were outdated
60% had updated technology
36% felt that there was a marginal gap

The region-wise breakup is as follows:

Region	Outdated	Marginal Gap	Up-to-date
North	-	38	62
South	-	40	60
East	10	20	70
West	4	40	56

(Values indicate % of companies of each region)

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Comparing the existing level with that of the best foreign companies:

13% of the companies felt that their technology was outdated
11% had updated technology
75% felt that there was a marginal gap

Region-wise breakup:

Region	Outdated	Marginal Gap	Up-to-date
North	25	75	-
South	-	100	-
East	10	70	20
West	14	72	14

(Values indicate % of companies of each region)

2.5 MODERNISATION IN PLANT AND MACHINERY

(Refer Graph No. 2f)

69% of the companies are in the stage of modernisation and thus improving their technology and efficiency.

Region-wise breakup:

Region	No change	Limited Extent	Modernisation in process	Already Modernised
North	-	12	88	-
South	-	-	100	-
East	-	30	50	20
West	10	17	66	7

(Values indicate % of companies of each region)

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2.6 COLLABORATIONS WITH FOREIGN FIRMS

86% of the companies had on-going collaborations with foreign firms and 93% of them were getting a regular continuous flow of technological improvements.

This is a very good sign as 69% of the companies are in the stage of modernisation which means that the % of companies with up-to-date technology with respect to best Indian companies is going to increase drastically, and the marginal gap will be coming down.

Again with respect to best foreign companies, the % of companies with up-to-date technology is going to increase and the marginal gap will be coming down. Also the % of companies with outdated technology will be going down, which augurs very well for the future.

2.7 RESEARCH & DEVELOPMENT

% of Companies	% of Recurring expenditure in R&D to total turnover
35	0 – 0.5%
26	0.5 – 1%
12	1 – 1.5%
15	1.5 – 2%
12	2% and above

(Refer Graph No. 2g)

69% of the companies have an exclusive R&D setup while others have been utilising the services of recognised research organisations mentioned below:

NCL, NPL, CIRT, ARAI, IIT, Sarabhai Research Centre (Bombay), Textile Research Association, Ahmedabad Textile Industries Research Association, ERDA, CMTI, National Metallurgical Laboratory, CECRA, CSIO (Chandigarh), NRDC, Welding Research Institute, Indian Institute of Science (Bangalore).

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61% of the Companies spend less than 1% of their turnover on R&D.

Regionwise breakup of companies having an exclusive R&D setup

Region	% of Companies of each region
North	100
South	60
East	60
West	60

2.8 VALUE ENGINEERING

79% of the companies undertake Value analysis/Value Engineering studies and their regionwise breakup is as follows:

Region	% of Companies of each region
North	100
South	100
East	90
West	60

2.9 MACHINE AVAILABILITY

89% of the companies felt that machine availability was not a problem and that it was absolutely satisfactory.

Regionwise breakup:

Region	% of Companies of each region
North	75
South	100
East	90
West	90

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Some of the factors contributing to low machine availability were as follows:

Interruption of power supply
Poor raw material availability
Fluctuating demand for products
Frequent breakdown of old plant and machinery
Import policy and time consumed in importing
Financial constraints
Lack of indigenous development of Machine Tool industry
Poor environmental conditions

2.10 VARIOUS SYSTEMS FOLLOWED IN PLANT MAINTENANCE:

Preventive Maintenance Schedule
Annual plant closure for a week – Maintenance week
Subcontracting of maintenance of utilities such as generators, compressed air, power distribution, water supply, building and in-house supervision on a regular basis
Breakdown Maintenance
Predictive Maintenance
Non-destructive testing
Inventory policy for spare parts
Development of indigenous sources of foreign spares
Replacement of conventional machines to CNC
Manufacture of spare parts indigenously

MATERIALS

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CHAPTER III

MATERIALS

3.1 IMPORT CONTENT IN TOTAL MATERIAL CONSUMPTION:

Ranges of Import Content % (wrt total material consumption) % of companies

0–10 % 30
10–20 % 34
20–30 % 19
30–40 % 9
40 % and above 8

TOTAL : 100 %

The above statistics show that 64% of the companies have an import content of less than 20%. More than 50% of the companies have not made any planned efforts to reduce the import content through indigenization. Of the companies which have such plans to reduce their import content, the estimates made in the plans are that their import contents would come down to half of the existing percentage at the end of 1986.

The problems felt by some of the companies in expediting indigenisation are as follows:–

(1) Uncertainty of potential markets
(2) Non availability of main raw materials
(3) Order size too small
(4) Lack of standardisation of equipments
(5) Strict specification
(6) Level of technology with ancillary units being far below international standards.

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3.2 AVAILABILITY OF MATERIALS IN INDIA: (Refer growth no.3a)

(a) Raw Materials:–

Shown below is the table explaining the position of availability of raw materials in India with the values indicating percentage of companies.

Shortage Available with difficulty Easily available
9% 67% 24%

(b) Components and Sub-Assemblies:–

Shown below in the table explaining the position of availability of components and sub assemblies in India with the values indicating percentage of companies.

Shortage Available with difficulty Easily available
20% 60% 20%

The two tables suggest that on an average only one fifth of the companies are not finding any problem in material availability.

3.3 EXTENT OF STANDARDISATION:–

Following table shows the extent to which standardisation of materials has helped to improve the production. Values indicate percentage of companies.

Negligible Average Substantial
14 56 30

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3.4 PROBLEMS FACED IN STANDARDISATION OF KEY MATERIALS:–

(1) Non availability of materials of international standards like steel, aluminium, special steels, carbon steel (of EN series), and other commercial quality steels, ferro nickel, standard alloys and structural items.

(2) The number of such suppliers being very few, any failure by them to honour their commitment hampers production.

(3) Individual customers have their own specifications for raw materials.

(4) Jobs being tailor make, standardisation becomes difficult.

(5) Standardisation of suppliers makes them complacent, thus service and price structure deteriorates with time.

(6) Fluctuation in prices.

(7) Monopoly houses insist on buying goods through their dealers.

(8) Non availability of Indian Standards.

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CHAPTER IV

PERSONNEL AND INDUSTRIAL RELATIONS

4.1(a) Following table gives the percentagewise breakup of the various levels of employees as compared to the total number of employees.

Details 1980–81 1981–82 1982–83

% of Managerial staff in the total number of employees
6% 6.5% 7%

% of Supervisory staff in the total number of employees
12% 14% 15%

% of Non-supervisory staff (including workmen) in the total number of employees
82% 79.5% 78%

As can be seen from the above table, the percentage of managerial and supervisory staff is increasing whereas that of the non-supervisory staff is on the decline.

(b) % of technical staff in the managerial staff
77% 78% 78%

% of administrative staff in the managerial staff
23% 22% 24%

% of technical staff in the supervisory staff
80% 83% 83%

% of administrative staff in the supervisory staff
20% 17% 17%

% of technical staff in the total supervisory staff
78% 81% 81%

% of administrative staff in the total supervisory staff
22% 19% 20%

Total supervisory = (Managerial + Supervisory) staff

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% of workmen in total non-supervisory staff
86% 86% 86%

% of clerical staff in total non-supervisory staff
14% 14% 14%

% of highly skilled workmen
22% 23% 23%

% of skilled workmen
41% 44% 46%

% of semi-skilled workmen
41% 44% 46%

% of un-skilled workmen
15% 13% 12%

(d) Growth-rate in 1981–82 Growth-rate in 1982–83

% growth rate in managerial staff
12% 19%

% growth rate in supervisory staff
23% 33%

% growth rate in total supervisory staff
20% 28%

(e) % growth rate in total no. of employees
7% 9%

(f) Growth rate in clerical staff
0.3% 0.5%

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(g) Growth rate in workmen
5% 6%

(h) Growth rate in total non-supervisory staff
4% 5%

(i) Growth rate in highly skilled workmen
10% 10.5%

(j) Growth rate in skilled workmen
13% 19%

(k) Growth rate in semi-skilled workmen
-0.07% -9.42%

(l) Growth rate in unskilled workmen
9% -15%

4.2 Remuneration of employees:

Shown below in the maximum and minimum level of remuneration/fringe benefits as well as average level in Rupees per month to each class of employee.

Remuneration includes basic salary, DA, all other allowances on Monthly basis.

Fringe benefits consist of bonus/ex-gratia, LTA, medical, PF, other benefits.

Class of Employees

Max. level Min. level Average
1980–81 1981–82 1982–83 1980–81 1981–82 1982–83 1980–81 1981–82 1982–83

1. Managerial:

a) Technical
6633 6800 7125 1724 1592 1826 3300 3620 3725
% Rise 7.4 5.9 12.8

b) Administr.
6633 6633 6633 1880 1592 1826 3125 3436 3695
% Rise 0 (-2.9) 16.2

2. Supervisory:

a) Technical
3056 3365 3473 586 668 779 1843 1947 1991
% Rise 13.6 32.9 8.0

b) Administr.
3000 3150 3250 586 668 779 1861 1879 1918
% Rise 8.3 32.9 3.1

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Class of Employees Max.level Min.level Average
1980–81 1981–82 1982–83 1980–81 1981–82 1982–83 1980–81 1981–82 1982–83

3. Non-Supervisory:

a) Clerical
3567 4542 6150 586 668 779 1640 1781 1823
% Rise 72.4 32.9 11.8

b) Highly skilled workmen
2224 2658 2958 473 516 602 1250 1331 1391
% Rise 33.0 27.3 11.3

c) Skilled
2056 2626 2756 473 516 602 990 1021 1076
% Rise 34.0 27.3 8.7

d) Semi-skilled
1665 2626 2756 473 516 602 796 873 906
% Rise 65.5 27.3 13.8

e) Un-skilled
1665 2626 2756 473 516 602 684 712 791
% Rise 65.5 27.3 15.6

(% Rise is for the year 1982–83 over 1980–81.)

The remuneration-pattern reveals following significant trends:

Of all the 3 categories surveyed, the growth in the managerial remuneration is the least – barely 6–7% (over 2 year period) for technical managers and NIL for administrative managers.
The supervisory category has fared better with an increase of between 13.6% (at max. level) and 32.9% (at minimum level) over 2 year period. Once again "technical" supervisors have fared better than the Administrative supervisors.
The unionised (non-supervisory) category seems to have landed a bonanza with increases averaging between 33% to 72.4% in a short-span of 2 years! The lion's share goes to the "clerical" category with an increase of 72.4% followed by "unskilled" category with 65.5% increase. Obviously the collective bargaining power and the unions seem to have played a major role in obtaining such fantastic increases in the remuneration of their members. In light of this, it does not seem mere coincidence that the relative strength (%) of non-supervisory staff is showing a decreasing trend.

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4.3 LABOUR UNIONS:

Of the companies surveyed, 51% of the companies had internal unions and 49% had external unions, with the regionwise break-up being:

Region Internal Unions External Unions

North 100% –
South 20% 80%
East 70% 30%
West 37% 63%

(Values indicate % of Companies of each region)

4.4 INDUSTRIAL RELATIONS CLIMATE (Refer Graph No.4a)

Overall the Industrial Relations Climate was quite encouraging with 20% of the companies having excellent relationships, 33% good, 45% average and only 2% of the companies felt that their relationship with the unions was poor.

Now the regionwise break up is:

Region Poor Average Good Excellent

North – 13% 37% 50%
South – –% 75% 25%
East – 80% –% 20%
West 4% 44% 37% 15%

(values indicate % of companies of each region)

From the above information, it can be concluded that the best Industrial Relations climate prevails in the North in which all the companies had Internal unions and in 50% of them the IR climate was excellent and in 37% it was good, which only confirms the view that for good industrial relations, internal unions is a necessity.

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In support of the above argument, 37% of the companies in the Western region had internal unions, and only 15% of the companies felt that their IR climate was excellent. With reference to the eastern region companies in which 70% of the unions were internal and 20% of them had an excellent IR climate. Very few of the companies from the southern region had responded to the particular topic, and hence not considered for discussion.

An interesting feature of the above discussion is that while 82% of the companies surveyed were from the private sector, totally only 49% of the companies had internal unions, thus indicating that most of the private sector companies did have external union.

Comparing the Industrial Relations climate with the type of ownership of the companies, we find that though 82% of the companies were from the private sector, totally only 53% of the companies had an IR climate that was either excellent or good. Thus we can infer from the above figures, that private companies do not necessarily have the best of IR climate.

A comparison of the IR climate with the status of capacity utilisation shows that an average of 40% of the companies had a capacity utilisation of 80% and above, while 53% of the companies had an IR climate that was either excellent or good. Following table shows the percentage of companies from each region having an excellent IR climate and also an average capacity utilisation of 95% and above.

Region Excellent IR climate Above 95% cap. utilisation

North 50 15
South 25 33
East 20 11
West 15 20

(Values indicate % of companies of each region)

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The figures above indicate that in the western regions 15% of the companies had an excellent IR climate while 20% of the companies from this region had a capacity utilisation of above 95%. It should also be remembered that in this region, none of the companies surveyed were from the public sector.

Again in the southern region, where one out five companies are from the public sector, 33% of the companies had an average capacity utilisation of 95% and above, while only 25% of the companies had an excellent IR climate.

To explain the point further, 75% of the companies from the Northern region were from the public sector, 50% of the companies of this region had an excellent IR climate but still only 15% of the companies had a capacity utilisation of 95% and above.

Even in the eastern region where three out of ten companies were government owned, only 11% of the companies had a capacity utilisation of 95% and above.

The above discussion lead us to the conclusion that while most of the government owned companies had good IR climate they suffered a lot due to poor capacity utilisation.

4.5 INDUSTRIAL RELATIONS CLIMATE AND SALES TURNOVER PER EMPLOYEE:

On the whole, 20% of the companies had an excellent IR climate with an average industry turnover per employee of Rs.1.45 lakhs. Table shown below indicates the percentage of companies from each region having an excellent IR climate and the average turnover per employee of that region.

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Region Excellent IR climate Average turnover per employee

North 50% Rs.2.30 lakhs
South 25% Rs.0.99 lakhs
East 20% Rs.1.24 lakhs
West 15% Rs.1.45 lakhs

Some of the reasons mentioned for major strikes/lockouts in the three years considered were widespread indiscipline, go-slows, work stoppages, violence, strike in support of general demands during settlements negotiations such as bonus etc.

4.6 SYSTEMS OF DEVELOPING EMPLOYEES:

(a) As far as attitudinal development of employees was concerned, 69% of the companies were involved in developing the attitudes of their personnel.

Their regionwise breakup was:
Region (Values indicate % of companies of each region)

North 88
South 60
East 50
West 72

(b) 82% of the companies were involved in improving the existing skills of the employees and their regionwise breakup is as follows:

Region % of companies of each region

North 86%
South 100%
East 90%
West 75%

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4.7 APPROACHES ADOPTED TO DEVELOP EMPLOYEES:

Some of the various approaches adopted by the companies to develop employees are as follows:

Apprentice training
Sponsoring candidates for outside training
Formal training – internal and external
On the job training, job rotation
Training with collaborator
Encouraging involvement in professional associations
NPC conducted Workers' Educational Classes
Workers' Education Programmes
Participative methods like departmental meetings
Welfare activities, incentive schemes for attendance bonus, production bonus, suggestion scheme.
Employee participation in Works Committee, Sports club, credit society, canteen committee, safety committee.
Lectures by managerial staff to subordinates and workers on increasing productivity.
Class room lectures, study tours, technical film shows, guest lectures.

4.8 % OF MANDAYS SPENT ON TRAINING AWAY FROM WORKPLACE:

Totally only 53% of the companies are sponsoring training courses away from the work place for their workmen, supervisory and managerial staff.

Following table shows the % of companies having such programmes along with % of mandays spent.

Ranges of % of mandays spent For workmen For supervisory and managerial staff

0–5% 75% 64%
5–10% 15% 29%
10% and above 10% 7%

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4.9 RESPONSE OF UNIONS TO PRODUCTIVITY IMPROVEMENT PROPOSALS:
(Refer graph no.4b)

Overall the response was quite satisfactory with 15% of the unions being committed to it, 47% being enthusiastic about it, 26% being lukeworm towards it and only 11% cool about it.

Their regionwise breakup is as follows:

(Figure indicate % of companies of each region)

Region Cool Lukeworm Enthusiastic Committed

North – – 75% 25%
South – – 100% –
East – 40% 50% 10%
West 20% 34% 30% 16%

4.10 COMMUNICATION CHANNELS AND SYSTEMS:
(Refer graph no.4c)

Notice Boards Circulars House Magazines News-Letters Handouts Others

95% 82% 46% 33% 25% 16%

The above information indicates that notice boards and circulars were the most popular means of communication between managements and unions.

Some of the other modes of communication used are:

Regular meetings with employee representatives
Personal discussions
messages and shop letters

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4.11 INFORMATION SHARING:

92% of the managements were willing to share information about the Company's performance at regular intervals with employee representatives.

The regionwise breakup is as follows:

Region % of companies of each region

North 100%
South 100%
East 100%
West 87%

4.12 TYPES OF INFORMATION SHARED WITH THE EMPLOYEES:
(Refer graph no.4d)

Production related 97%
Productivity related 91%
Methods improvement 83%
Market conditions 72%
Technological developments 57%
Profitability 29%
Financial data 23%
Competitors' plans 17%
Others 4%

(Values indicate % of companies)

In order of popularity of informations shared, the types are listed above. The point to be noted here is that informations regarding profitability, financial data and competitors' plans are shared by very few companies with their employees. Others include cost data, incentive suggestion scheme, quality and inventory.

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4.13 TYPES OF PARTICIPATIVE MANAGEMENT PRACTISED BY THE ORGANISATIONS:
(Refer Graph No.4e)

The popularity of practices following by the organisations were as follows:

Participation in shop floor decision making 84%
Participation in managerial decision making 31%
Board level participation 4%
Others 10%

Others include suggestion scheme, quality circles, Works Committee, Participation in Sports Club, Annual Social Gathering, Credit Society, Union-Management meetings.

4.14 MODE OF SETTLEMENT:
(Refer graph no.4f)

Collective Bargaining at the enterprise level (CBEL) was the most popular mode of settlement between managements and unions, with 78% of the companies using it. Collective bargaining at the industry level (CBIL) stood next with 36% of the companies using it. Settlements of disputes by tribunals came last at 17%.

The regionwise breakup is as follows:
(Values indicate % of companies in each region)

Region CBEL CBIL Tribunal awards Others

North 75% 25% 13% 13%
South 80% 20% 20% –
East 90% 80% 20% –
West 74% 26% 17% 4%

Others include labour court awards.

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4.15 STEPS TAKEN BY ORGANISATIONS TOWARDS ORGANISED PRODUCTIVITY DRIVE:
(Refer graph no.4g)

Suggestions 74%
Workers' Education 68%
Lectures by experts 57%
Attendance awards 55%
Performance awards 53%
Film shows 50%
Special bulletins 23%
Slogan contest 19%
Productivity Quiz contest 6%
Others 14%

(Values indicate % of companies)

Others include employee counselling, incentive schemes, productivity exhibitions.

4.16 In 68% of the companies, there was a specific clause in the agreements with the union with reference to productivity norms and improvements, rationalisation, updating technology. Some of the different types of such agreements are as follows:

Agreements on Average Production rates for most components.
Laying down norms of production, and if on an average all departments achieve it, then a special incentive is given to all workmen/staff.
Expected efficiency of each level of worker is mentioned in the agreement and then the actual efficiency is monitored monthly.
Workmen shall have minimum productivity level of 75% as per standards set by the Industrial Engineering.
Fixed quantum of production – agreement with union.

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Improvement in productivity by:

a) Improvement on standard norms
b) Utilisation of installed capacity
c) Flexibility of workmen in trade
d) Reducing wastage by reducing rejection
e) Optimum utilisation of raw-materials.

Multi-skill development of workers
Change in work-practices
Job evaluation done through NPC
For each department, a fixed quantum of production is agreed and also corresponding production prize. Minimum limit of efficiency and maximum limit of price ceiling is fixed.
Productivity level indicated for the next two years to be achieved in a phased manner.

MARKET RELATED FACTORY

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CHAPTER V

MARKET RELATED FACTORS

5.1 MARKET CONDITIONS:

3% of the companies felt that their products held a monopoly in the market, 15% thought that their products were averagely competitive, 65% of them felt that the markets in which they operated were highly competitive and only 12% of them had products which were competing with foreign companies.

(Refer graph no.5a)

5.2 EFFECTS OF SHORT TERM DEMAND FLUCTUATIONS

On the whole, 38% of the companies thought that the extent to which short term demand fluctuations affects production plans was great, another 38% felt that it was normal and 24% of the companies said that effects of such demand fluctuations were small. Now when 65% of the companies are having products which are being sold in a highly competitive environment, it is only obvious that short term demand fluctuations would affect their production plans to a very great extent.

5.3 PLANNING IN COST REDUCTION EFFORTS
(Refer graph no.5b)

Almost all the companies were involved in such a drive towards cost reductions, by planned efforts. The various methods used for achieving such goals are listed below along with the % of companies that are using them.

Operational economy 81%
Product designs development 79%
Material substitution 79%
Material standardisation 77%

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Process development 70%
Others 12%

Others include wastage reduction, inventory control, value engineering, study on breakup of components to economise in freight and erection costs.

From the above tables, it is quite obvious that most of the companies seem to be giving a lot of importance to operational economy, process design development, material substitution and material standardisation. Operational economy is heading the list as 34% of the companies find that excessive rejection, rework and excessive breakdowns are affecting their capacity utilisation. Product designs development is undertaken by 79% of the companies. Sixtynine Percent of the companies are having their own R&D set up while others are using the services of recognised Research organisations in their effort to produce a better product.

Material substitution gains importance as only 20% of the companies find that their raw materials are easily available. This is further reinforced by the fact that 79% of the companies are carrying out value engineering studies.

Material standardisation: In the 3rd chapter, it has been already mentioned that 86% of the companies felt that the extent to which standardisation has helped improve productivity was either substantial or average. Hence it is quite obvious that material standardisation is gaining in prominence today as its potential has not yet been tapped to the best possible extent.

Process development: The fact that only 11% of the companies are uptodate in their technology w.r.t. to the best foreign companies, indicate that a lot of work remains to be done in this field. But it should also be remembered that 86% of the companies have an on going foreign collaboration which suggests that the situation would ease out with the passing of some time.

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5.4 GOVT. DEVELOPMENT (PLAN) EXPENDITURE:

85% of the companies felt that their units were sensitive to fluctuations in Government expenditure on development and 92% of such companies thought that this linkage has been affecting their performance.

Some of the reasons mentioned are as follows:

Sale of water well drills is based on allocation of funds by state and Central Governments. Allocation by Government for coal and metal mining expenditures affects sales plans directly, since government purchases amount to 70% of sales.
Due to the textile strike the demand for boilers has come down. At times due to recession in the engineering industry the demand for furnaces and foundry moulding machines are also affected.
Non availability of cement owing to government restrictions resulted in reduced construction activity.
Order bookings depending on expansion of foundry projects and their modernisation, are affected by government policies and development of engineering industries in general.
Modernisation of textile mills as planned has not been implemented. The policies of National Textile Corporation has a great influence on order bookings of textile machineries.
Companies involved in the manufacture of sugar mills, cement plants, nuclear, space launching vehicle and other projects of national importance are deeply affected by government policies.

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Delay in finalisation, resource allocation and implementation of government projects affects manufacturing programme and financial needs.
Some companies are affected mainly due to MRTP regulations. Banks and financial institutions finance about 95% of sale of tractors. Thus any change in the policy of these institutions affects the performance of the companies. Also government policies regarding mechanisation of agriculture, import of tractors, tractor components, licensing of tractor manufacture, price control on tractors, excise and customs duty, affects performance.
Some companies feel that a higher outlay for modernisation of textile mills through liberalised IDBI assistance will provide impetus and increase demand for textile machinery. Also they feel that an higher outlay in the energy sector will improve the profitability of the textile units and this will induce them to embark on modernisation of textile machinery.
Demand for air pollution control system has increased subsequent to enactment of Air Pollution Act 1981.
Government policies with respect to allocation of funds to Coal India Ltd. affects performance.
Government policy with regard to investment in development and modernisation of mines affects flow of orders from mining sector.

a) Government policies to import equipment for projects when it is available indigenously.

b) Government policies to compel manufacturers to procure raw-materials indigenously when small quantities cannot be procured in a short time.

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c) Project authorities asking for very short delivery requirement where import of raw materials are involved.

d) Government policy in giving price preference to Public Sector undertakings.

e) Government plan outlay for fertilizer, refinery, oil and gas, chemicals, etc.

FINANCE

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CHAPTER VI
FINANCE

6.1 INVESTMENT IN NEW TECHNOLOGIES/MACHINERIES:

44% of the companies felt that they were finding it difficult to invest in new technologies and machineries for improving productivity.

Some of the difficulties faced by the companies in investment in new technologies/machineries are as follows:

For a FERA Company, diversification in a new field beyond the existing licence capacity is subject to Central Government approval.
Expansion is not possible in Bombay Metropolitan Area. Also due to cumbersome rules & procedures, latest technology is not forthcoming.
Cumbersome licensing procedures for import, new collaboration etc. which entails long delays.
Financial constraints
Due to uncertain market conditions investments will have to be planned with great care. Otherwise due to high investments, cash flow will get badly affected and the company is likely to become a "sick" unit.
The forging industry today is suffering from the twin evils of 100% extra capacity and stagnating demand situation. Under these conditions investing in new technology/machineries does not work out to be viable unless the investment is of a cost-reduction nature.

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Inadequacy of the existing capacity utilisation due to import of second-hand paper making plants.

a) Cost of imported Machine Tools becomes exorbitantly high due to the high incidence of Custom duty.

b) Adequate profits cannot be generated (due to competition) to invest in New Technology/Modernisation.

c) High rate of inflation further erodes the profit margins.

a) Investing in new technology means import of certain advanced machinery. Apart from general type of machine tools all other machinery for production involve long procedure for import license etc.

b) Paucity of investible funds due to low profitability and difficulty of obtaining institutional finance.

c) There is a marked lack of willingness of customer to pay any premium for better engineered/higher technology products as long as someone gives similar functions at lower costs although not necessarily with same productivity or reliability.

6.2 WORKING CAPITAL
(Refer graph no.5c)

Values indicate % of companies.

Credit needs	Inadequate	Adequate	More than sufficient
1) For finished goods	61%	39%	-
2) For work-in-progress	53%	45%	2%
3) Raw materials	56%	41%	3%
4) Accounts receivables	58%	42%	-

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6.3 INVENTORY

(a) The average inventory turnover ratio is 3.5 for the industry. 68% of the companies had an average inventory turnover ratio that was higher than the ratio for the industry.

(b) Totally 54% of the companies had an inventory turnover ratio that had an increasing trend, 34% of the companies had a ratio that was decreasing and in 12% of the companies the ratio was steady.

(c) Of the respondents to this question, 72% of the companies had a sales turnover which was increasing, and 28% of the companies had a turnover that was decreasing.

(d) Of the companies which had a sales turnover that was increasing, 86% had an average inventory that was increasing, in 3% of the cases the average inventory was steady and it was decreasing in 11% of the companies.

(e) Among the companies that had sales turnover which was decreasing, 36% of them had an average inventory that was increasing, 7% of the companies had an average inventory that was steady and in 57% of the companies the average inventory was decreasing.

INFRASTRUCTURE FACILITY

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CHAPTER VII
INFRASTRUCTURE FACILITIES