CRITIQUE OF THE REPORT – HR ISSUES IN

PRIVATE PARTICIPATION IN INFRASTRUCTURE

- A CASE STUDY OF ORISSA POWER REFORMS

K.Ashok RaoSecretary General

National Confederation of Officers AssociationsOf Central Public Sector Undertaking (NCOA)

Adviser, All India Power Engineers Federation (AIPEF)

J 152 SaketNew Delhi 110017, India

theraos@vsnl.com

LABOUR – WORLD BANK INTERACTION"G"Building of the World Bank, "Sunlight Salon"

Washington11-12th July 2002

Table of Contents

1.0 Preamble 3

2.0 2.0 Reforms or an ideological assertion? 32.1 Evaluation of reform with reference to Orissa 42.2 Evaluation of reform with reference to critical issues 5 significant indications that electricity prices will be lowered due to restructuring reduce reliance on government and raise resources from private sources .

3.0 Why was Privatisation carried out without a proper framework? 7

4.0 The issues of Human Resources 7

4.1 Modern form of slavery? 74.1.1 There is no consultation 84.1.2 There is no right of option 84.1.3 Option to settle with the earlier employer denied 9

4.2 Different Perceptions on various HR issues 10

4.3 Other issues 124.3.1 Re-designating4.3.2 Tokenism

4.4 Case study of Andhra Pradesh - Reforms and its impact 13

4.5 Position of the All India Power Engineers Federation 13

5.0 A Framework for discussing an alternative 135.1 In General Terms5.2 Specific to Human Resources

6.0 Conclusion 14

Annexure I Important data on the Indian Power Sector 16

Annexure II Extracts from the Report of the Committee on 17Power sector Reforms in Orissa Exit of AES 18

Annexure III Table giving different perceptions to the human resources problems in Orissa reforms 22

Annexure IV Extracts from the book Vidyut Valayamby Mr. K. Ramachandra Murthy Editor VARTHA 26

Annexure V Letter of the All India Power Engineers Federationto the Prime Minister of India 30

Annexure VI Example of where even the minimalist approach to the employees transfer from one employerto another is not honoured 32

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1.0 Preamble

The Report Under Consideration1 (RUC) starts with the passage

In developing economies, public enterprises occupy an important role. In spite of their impressive size and build up they impose significant economic and financial burden on the State. This inevitably leads to declining investments of the State into more important basic sectors like health, education etc. All these make such loss making public enterprises appropriate for privatization by which it is expected that the State can free itself from the perpetually growing financial burden

This is a doctrinarian position and anyone who disagrees with it is put down as anti-reform and anti progress. The methodology for dismantling the State enterprises or people’s assets in the power sector is a “one size fits all” logic of unbundling and privatisation. And privatisation is by definition a unidirectional vector Privatization Þ competition Þ efficiency. We are not aware of any place on earth developed or developing (from California to New Delhi) where this axiom has been established.

The Electricite de France in a Round Table with the World Bank on ‘Power Supply in Developing Countries Will Reforms Work?’ stated:

“Modern economic theory tells us that competition is more difficult to introduce in network infrastructure than in other industries, and more difficult in electricity that in other networks. It is odd that the World Bank derives no consequence from this, and treats electricity as any other commodity…. We also know that competition does not streamline regulation but makes it on the contrary more complex and burdensome. Introducing competition creates a “half-free, half slave” sector…. Marginally, the idea beyond our discussion about privatisation and competition may be to open the power sector of developing countries to foreign operators, expertise and capital….”

France refuses to either unbundled or privatize, Norway has the option not to privatize but the debt-ridden people of the developing countries do not have the right to make democratic choices of public policy. They have to obey the conditionalities of the World Bank or face retribution not limited only to the power sector. In the last fifty years India has added more than a 100,000 MWs of installed capacity, it has energized more than 12 million agricultural pump sets, electrified more than 500,000 villages and the industry serves more than a billion consumers. Besides this every single legislation and institution that has enabled this to happen is being completely restructured despite obvious failures like Orissa. Important data regarding the power system of India are given in Annexure I. This paper will examine some of these issues.

On human resources the RUC claims that:

However, privatization is also a sensitive issue since it affects the most crucial resource of an organization - the human resource. The effect on HR manifests in many ways. Not only does it restructure terms and conditions of service but also relationships at work. Quite often employees are asked to make sacrifices even to the extreme of being declared surplus and then asked to quit the job

This paper questions why a highly skilled work force, which has in fact built the enterprise, is bartered with insensitivity and inequity, while the World Bank and everybody in the decision making chain argue how important it is to give incentives, concessions and comfort for the investors.

2.0 Reforms or an ideological assertion?As Trade Unions representing those who actually devote their entire life to an enterprise and who can produce their best our mission and objectives are clear. Therefore it is important to state our perception of the objectives that we are expected to serve. Given below is such as assessment of the objectives.

1 HR ISSUES IN PRIVATE PARTICIPATION IN INFRASTRUCTURE - A CASE STUDY OF ORISSA POWER REFORMS an anonymous report circulated by the World Bank for consideration at this meeting

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Objectives of the existing framework of the industry a) To provide power at affordable rates to all classes of consumers b) To make electricity the backbone for food security through irrigation pump sets. c) To support the growth of industry, rail transport and communications.d) To encourage self-reliance by optimizing fuel-energy balance and utilising the domestic primary energy

resources. (e.g., high ash coals rather than imported fuels)e) To take electricity to rural and urban slum areas and provide electricity to the economically disadvantaged f) To ensure regional co-operation in a complex plural society within a situation of shortage of capital and

resources.g) To establish harmony between the State and the Central Governments as well as between States and

ensuring grid discipline (using the Regional Electricity Boards and RLDC as the instruments)h) To build a technological and manufacturing base that would achieve a “concept to commissioning”

capability within the country.

Objectives sought to be achieved through the reforms: a) To enforce the unbundling of the vertically integrated State Electricity Boards in order to facilitate the

privatization which in turn would facilitate the multinational sectors to replace a public monopoly with a private monopoly.

b) To create institutions that have no accountability to the people (legislature), yet regulate and control a highly capital intensive industry - a single paisa (one hundredth of a rupee) increase in tariffs implies an additional annual revenue of Rupees Seventy Thousand per MW per annum (at 80 % load factor)

c) To create a “half slave and half free” sector. While the regulators would control the tariffs and load dispatch conditions of the public funded utilities and organisations, those of the private sector (particularly the foreign funded sector) are being determined by the power purchase agreements.

d) To ensure that the State is demobilized and the entire fund requirement in this capital-intensive industry is based on and controlled by international finance capital.

e) To maximise private profits by ensuring that any statutory ceiling on profits is eliminated.f) To eliminate any form of meaningful and informed social control in this vital infrastructure (and to give the

Multinationals a complete free run)g) To provide this essential public service only to those who can pay. h) To enable private corporations- domestic and transnational to take over the the assets of the State Electricity

Boards at a pittance of their market or replacement value.i) To remove the scrutiny of the courts and j) To use draconian measures (like attachment and confiscation of assets under the procedure of land revenue

arrears) for the realization of electricity dues.

2.1 Evaluation of the reforms with reference to Orissa

The Govt. of Orissa constituted a Committee of Independent Experts2 to Review the Power Sector Reforms (Kanungo Committee) on 30th May, 2001. The Committee was asked interalia to examine “whether the reforms in the electricity sector have proceeded on the desired lines.” The Committee submitted its report in October 2001. Briefly the major findings are listed below. Extracts of the committees report are given in Annexure II.

a) Rural electrification seems to have been the worst casualty of the reform process.b) Billing and collection efficiency under the privatized distribution companies (DISTCOs) far from

improving actually worsened and rampant theft continued unabated. c) The reform scheme had sought to address the problem of T&D losses through i) Capital investment to

strengthen transmission and distribution system so as to reduce technical losses and ii) Privatisation of distribution to bring in better management skills and practices for enforcement of accountability to reduce commercial losses. Neither of these has succeeded so far.

In respect of retail tariffs that actually affect the consumers the findings of the committee are

2 Under the Chairmanship of Mr. Sovan Kanungo IAS (Retired) with the following as members Mr. A.K.Sah (Retd. Chairman UPSEB); Mr. S. Sinha (Prof. IIMA); Mr. S.K. Mohapatra (Retd). Chairman OSEB); Principle and Special Secretaries Energy, Govt. of Orissa

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a) The conclusion that emerges from this exercise is that utilities may not break even if the retail tariff were to go up from the current rate of Rs. 2.81 per unit to Rs. 4.32 per unit. (The report in Para 4.5 has stated, “If 1991 were taken as the base year, the average tariff has registered an increase of 267 % at a cumulative annual growth rate of 15.54 %. With 1991 index as 100 the index of increase in 2001 is 367)

b) Unabated increase in tariff without perceptible reduction of techno-commercial loss or improvement in consumer service has led to growing public discontent against the reforms.

2.2 Evaluation of the reforms with reference to critical issues

Reduce reliance on government and raise resources from private

The following quote below from Committee of Independent Experts clearly establishes that in violation of the shareholders agreement the private distribution companies did not even bring in working capital but merely defaulted in the payments to the State owned GRIDCO.

“The private sector partners of the DISTCOs, neither brought superior management skill into the companies nor did they arrange financial support by way of working capital for the companies. All that they gave was the fund they had brought for acquisition of shares at the time of privatization. When we pointedly asked about infusion of working capital, we were told that infusion of capital into the DISTCOS need to be viewed as joint responsibility of both the partners, not the private sector partner alone We find this attitude difficult to accept, particularly having regard to the clause 8.I in the Shareholders Agreement executed at the time of privatization:

If WESCO (NESCO or SOUTHCO) requires further financing, it shall use and the Investor (BSES Ltd) shall procure that it uses all reasonable endeavorstlo obtain such finance from a third party lender on reasonable commercial terms without breaching covenants in WESCO's (or NESCO's or SOUTHCO's) loan documentation at the time of such further financing provided always that nothing shall oblige a Shareholder to provide any guarantee or security in respect thereof.

The DISTCOs are in dire need of capital, working capital in particular. Instead of using the good offices of BSES Ltd. to secure working capital in accordance with the Shareholders Agreements for the three DISTCOs under their control, they have persistently defaulted in the payment for power they purchased from GR1DCO and thereby have over exploited GRIDCO's misplaced generosity in permitting them to use as working capital GRIDCO's dues towards sale of power. In so far as CESCO is concerned, the situation is worse. The Shareholders Agreement in their case clearly stipulated, among other things, that GR1DCO will provide CESCO working capital support to the extent of Rs.1740 million beyond which it would be the responsibility of AES, the majority shareholder to arrange for working capital. An accommodation of Rs.1740 million was given to CESCO in furtherance of this agreement at the time of privatization, but AES never fulfilled their part of the obligation and were allowed to pile up unpaid power purchase bills amounting to Rs 4030 million by the time they walked away in August 2001”

Almost identical is the case of Uttar Pradesh. Greater NOIDA a suburb of the National Capital Delhi was privatized and handed over to the same company CESC that operated the distribution system in part of the city of Calcutta. The net result is that while the NOIDA power company collects from the consumer it does not pay to the Uttar Pradesh State Electricity Board (or its post reform successor UPPCL) The sum outstanding is Rs. 4116.41 Million.

Most of the Foreign Independent Power Producers (FIPP) have insisted and obtained post tax return at 16% (in whatever currency in which the debt and equity was brought in) for a normative generation of 6000 hours (or 68.5 % PLF). Generation above the norm earns an incentive capped at 0.7 % points for every additional 1% of generation. In addition, they have insisted and obtained load guarantees of 80% and 90% irrespective of the system PLF. This 16 % returns has recently been guaranteed even for Delhi’s distribution companies. This rate of return is independent of the reduction in interest rates either in India or elsewhere. (It may be worth mentioning that the Government of India has justified the unilateral reduction in the interest rate of employees provident fund from 12 % to 9 % on the grounds that the returns on Government securities has been reduced)

It is obvious that both in generation and in distribution the reforms and consequent privatisation has only burdened the State and the State owned portion of the unbundled State Electricity Board rather can created conditions

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wherein investments of the State could move ‘into more important basic sectors like health, education etc.’ – the reputed aim of the whole exercise.

Significant indications that electricity prices will not be lowered due to restructuring.

In Orissa the overall increase in Electricity Tariffs between 1996 and 1997 and 2000-01

Category Units per month % IncreaseDomestic 100 59.57Domestic 200 51.64Commercial 100 61.90Commercial 200 48.00Irrigation 200 84.62Small scale industries 20% Load factor (LF) 110.14Medium Industries 30 % LF 49.13Public institutions 40 % LF 81,21Public lighting 1000 109.99Public Water works 50 % LF 67.85Large Industries 70 % LF (EHT) 8.88

For Uttar Pradesh, the largest province in India, the recommendations of the World Bank appointed consultant - Putnam, Hayes & Bartlett Inc is:

Type of customer % increase over the current pricesLow VoltageDomestic 549.6 Agriculture 612.8Commercial 155.0Public Water Works 254.7Public lighting 420.7Medium VoltageIndustry 74.5Public Water Works 202.9High VoltageIndustry 16.5Railway Traction 14.5All this was to be achieved between 1994-95 and 1999-2000 at 1994 constant prices. So far there has been no political will to implement these increases.

In Andhra Pradesh in June 2000 there was a 80 per cent hike in tariffs (prevailing since 1996) on domestic and commercial consumers of power and a 60 % increase in agriculture tariff.

Before the reforms, the postal stamp rate of power transmission was around 1 paise (one hundredths of a rupee) per unit when generation and transmission were integrated under the National Thermal Power Corporation (NTPC). Since the separation of generation and transmission and the creation of Power grid Corporation, the rate has gone up to 10 paise per unit. Currently the Power grid is seeking to increase the tariff to 50 paise per KWH. Even in terms of capital costs power plants there has been an enormous increase particularly in respect of Foreign Investor Power Plant (FIPP)

Reforms will NOT result in reduction in the cost of power for the people of India. To quote Prof. Amulya Reddy3, “In India, the present situation involves administered prices unrelated to true costs and therefore attempts at price rationalization are bound to increase prices. Since the reformers/ restructurers are over-promising, they are sure to under-3 Need for rethink on Karnataka power reforms - Pitfalls of privatisation by AMULYA REDDY published in DECCAN HERALD Bangalore

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deliver - prices are sure to rise. This is being hidden from consumers in the same way that doctors don't inform patients that their miracle cures can have major side-effects.”

We can conclude that all this talk about resources coming from the private sector and releasing government funds for social sectors like health and education is just eyewash. It is a part of the illusionary web of poverty removal that the spin-doctors of the Bretton Wood Twins have been promoting to convince the poor that they are not being short changed. If the reforms do not result in either the reduction of Tariffs and therefore benefit the consumer or benefit the state exchequer and therefore benefit the taxpayer, the legitimate question that can be asked is WHY REFPORMS AND FOR WHOSE BENEFIT?

No doubt the apologists and vested interests will suggest a number of alibis : Its too early, the reforms must be given more time; Instead of a single buyer model there should be a multiple buyer model; The market imperfections can only be corrected when trading is introduced

Or they will just not bother; they will put their feet up on the table and make a simple assertion The natives goofed.

3.0 Why was Privatisation carried out without a proper framework?

Mr. Ashley C Brown Executive Director, Harvard Electricity Policy Group,4 gives eight reasons for a proper framework for Privatisation. Of these eight explanations, the following three explain exactly what was the motivation behind the Orissa Power Sector reforms.

1. The country’s macroeconomic position, rather than a sector-specific problem demands privatisation. Government burdened by debt decides that its only alternative is to sell state owned assets.

2. Pressures imposed from multilateral lenders such as the IMF (International Monetary Fund), the World Bank, regional development banks, and bilateral aid donors demand privatisation. Conditions imposed on loans or grants, compelling governments to shift assets off their balance sheets within a relatively, often arguably, unreasonably short period.

3. Decisions motivated by corruption.

Why the Orissa Power Reforms failed can be understood if the above three reasons are read with another two explanations

4. The IMF and the World Bank regard the time and labour to get the framework ‘right’ as procrastination, or perhaps even view it as passive resistance to privatization. Giving serious consideration to all of the options and balancing of the interests to be served is indeed a complicated, time-consuming business.

5. Privatisation advocates often feel compelled to move quickly before opposition resurfaces. Therefore, they press ahead without paying adequate attention to the framework for privatizing. The result is uncertainty, and lack of a common understanding about the regulatory regime, market rules, social expectations, or other critical matters.

4.0 The issues of Human Resources

4.1 Modern form of slavery?

A highly skilled work force is entitled to proper benefits, inducements and incentives. Transferred from one employer to another on an illusionary promise of a minimalist 5 nature is unacceptable. In most cases the minimalist option is

a) Provide a level transfer in terms of salaries and benefits

4 “Confusing means and ends: framework of restructuring, not privatization, matters most” Mr. Ashley C Brown Executive Director, Harvard Electricity Policy Group, Kennedy School of Government, Harvard University,5 In some cases, even the minimalist promise is not honoured. Refer to Annexure V

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b) Freeze terminal and post retirement benefitsc) Cut out negotiations or reduce them to a formal leveld) Extend the threat that if the employees do not agree, they would be thrown out and made redundant.

Transfer of employees from one employer to another without consultations and seeking other options amounts to forced labour and a new form of slavery. It is frowned upon by judgments of most countries that have held that transfer without consent is contrary to public policy. Some judgements that can be cited are Nokee Vs. Doncaster 1940 (3) ALLER 549; Jawaharlal Nehru University Vs. K.S. Jawatkar (1989) Supp. (1) SCC 679 and Gurmail Singh and Others Vs. State of Punjab and Others (1991) 1 SCC 189 In Gurmail Judgement the Honourable Indian Supreme Court has held that there must be “fairness in action” and that the instrumentalities of the State or the State are required to act fairly and not arbitrarily.

A principal can be established that Qualitative changes cannot be considered equitable by quantitative status quo. Let us examine this. An employee is transferred from the employment of the State to a Multinational. He is transferred from a secure job to an insecure job. He is transferred from a guarantee of a post retirement indexed (compensated for price rise) pension and medical treatment into an uncertain post retirement situation. And in his middle age, in a country where there is no social security, he is blackmailed into accepting whatever is offered or be jobless. And all this in an atmosphere where there is no dignity, respect or concern, nothing but contempt, as is reflected in this passage from the report under consideration. “Employees nurtured in the Orissa State Electricity Board characterized by complacency and unaccountability had to be changed into business oriented customer focused personnel” And he is not even given an opportunity to be convinced that what is being done is in public interest.

4.1.1 There is no consultation

Public property and resources are a community assets and the question of the transfer of such assets deserves to be discussed rationally and comprehensively. Employees of public property and public services are amongst the most informed section of the public. They have given their entire lifetime’s work to the enterprise. Yet they are not considered worthy of a consultative status. To date there has been no meaningful discussion between the Government of India and the World Bank, the prime mover of the reforms, and any or all the National Trade Union Centers in India even though it is almost a decade since the World Bank has imposed reforms in the power sector, whereas anyone risking capital is not only allowed due diligence but also protected against all risks by State and Sovereign guarantees (as in the case of the ENRON power plant) and insurance that even covers political risks!!! The contradictions and contrast is obvious.

4.1.2 There is no right of option

It is not as if the employees are allowed to have an option to choose between the old and new employer.. All that they have to be satisfied with is an assurance from the old employer that all service conditions will remain the same This is a promise that is not honored in most cases.

In Orissa the engineers were having a legal status of “civil servants” which is a Constitutional status under Article 310 and 311. They were being transferred to a company that legally would be a “jural person”. This implies not merely a loss of status but also the right to writ jurisdiction. Several other conditions including pensions were being radically changed with the change of the employer. Yet they were not given an option to join the new employer or remain in the service of the State.

Litigation followed and the following is an extract from the Supreme Court’s judgment in Orissa Electrical Engineers Service Association Vs. State of Orissa.

“It becomes apparent that what the State Government has thereby tried to ascertain was the preference and not the willingness of such employees to remain in the service of the State Government or to get permanently absorbed in GRIDCO or OHPC, The employees were told that their preference in matter of permanent absorption would be considered before taking a final decision…The fact that the State Government retains with it the power of taking a final decision in the matter clearly indicates that it wanted to ascertain preferences only…..We hold that actions

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taken or orders passed on the basis of such ascertainment of willingness are bad and therefore of no effect. ….We direct the State Government to consider the willingness of the Electrical Engineers, who are State Government employees on deputation with OSEB, to revert to the State Service or to get permanently absorbed in GRIDCO or OHPC afresh”

Accordingly, the willingness was ascertained and when the employees opted for State Service, they were told that they would be declared surplus and retrenched. Threats like these ensured that all of them fell in line.

As part of World Bank’s conditionality to unbundle the power sector, a separate transmission corporation (Power Grid) was carved out of the National Thermal Power Corporation (NTPC). The Government as the Owner of NTPC transferred all the transmission assets of NTPC to Power Grid. NTPC transferred all the executives' en-mass along with the assets even without seeking their consent. This was contested in the Hon'ble Delhi High Court. The Delhi High Court judgment argued:

"Transfer of employees outside of the service contract or service regulations is not permissible ...On principle and in law on the question of transfer the stand taken by the employees is correct, but then the employees who fall within the category of workmen are covered by section 25 FF of the I. D. Act ... We do however feel that the respondents acted unfairly when they did not even ask the executives to give their option.... Technically, one may say that these executives have not been treated fairly and principles of natural justice required that the executives should have been heard. We would have certainly interfered and would have quashed the Government order and the circular as far as it transferred and absorbed executive employees of NTPC into Power Grid but for ... section 25 ' FF of the I. D. Act has been applied to the executives as well which is a piece of beneficial legislation for the workmen. Jobs of the petitioners, have been saved with continuity of services..."

4.1.3 Option to settle with the earlier employer denied

Even the option to make a complete break with the old employer and embark on a new employer is denied. It is not as if the employee can say that I am willing to make a clean break with my previous employment, settle my accounts relating to severance and terminal benefits before I join the new employer. In such a situation the employees would be able to withdraw all their terminal benefits. But that is not to be allowed. They are told that only on the date of their normal retirement can they withdraw their terminal benefits. They have to work on the basis of a promise from the Government that the new employer will honour their commitments. And that too in Orissa where within two years “It became clear that AES were pulling out from the management of CESCO. AES nominees on CESCO board refused to make any provision for paying staff salaries leading to serious tension and uncertainty” (Refer to a write up AES in Annexure II). If the new employer does not even consider current salary as sacrosanct what is the basis for trusting the employer with terminal benefit?

In Orissa, engineers as government servants were entitled to pension, gratuity, family pension and leave salary as terminal benefits. As part of the reforms the Government promised that the terms and conditions of service would be in no way less favourable than what was in existence. The transfer scheme specifically stated that

a) All service benefits will be protectedb) For all practical purposes service shall be treated as continuousc) Employees will draw all their benefits from the later corporations and it will not be less than what they would

have got from the Government had they continued to be Government servantsd) Government will from time to time deposit funds with GRIDCO and OHPCe) Employees shall receive entire benefits from GRIDCO after superannuation.

In the case of those who took pension from the Government at the time of absorbtion, GRIDCO treated them as if they were recruited afresh. Those who had only ten years of service (minimum service for terminal benefits) or less were not entitled to any terminal benefits. Had their service been treated as continuous they would have got pension for the entire length of service. Now they get pension as on 31.3.1997 and any further service in GRIDCO does not account for pension, cumulative contributory provident fund or gratuity or any other terminal benefit.

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At this moment the Engineers of the Delhi Vidyut Board (Electricity Board) have filed litigation in the High Court demanding that they be allowed to opt to take their pension before they are transferred to the new employers. The one hundred thousand employees of the Uttar Pradesh Electricity Board are struggling to recover a pension fund worth Rs. 80,682 million. yet the process of unbundling and privatisation is going on as if there were no liabilities on this score.

4.2 Different Perceptions on various HR issues

The RUC states that

Since this study is more to understand the HR issues qualitatively rather than in quantitative terms, reliance has been more on data gathered by in-depth interviews. Data has been collected by face-to-face interviews and over telephonic discussions. The primary data has been supplemented by secondary data from published material and company documents…… Political will of the Government of Orissa along with the measures taken to improve the terms and conditions of service helped the organization to sell the idea to the employees. Even if the employees had some reservation about restructuring, it could not stand strong in view of the clear and direct thrust given by the Government of Orissa irrespective of the political colour of the government. The significant improvement brought about in the terms and conditions of service for both the executives and the non-executives put the efforts for restructuring in a positive light. The Early Voluntary Retirement Scheme although very attractive to the employees could not be utilized to the fullest extent because of lack of funds. However with the limited amount GRIDCO could reduce the employee strength substantially…… With various notifications and clarifications from different quarters specially with regards to the pension benefit, the employees’ reluctance was reduced to a great extent. In addition training played its role in skill up-gradation and in preparing the employees to the needs of the emerging scenario.

When we examine these claims against the findings of the Study team of the Andhra Pradesh Engineers 6 and the Committee of Independent Experts or look at the present ground reality the above statements do not stand scrutiny.

The different perceptions on the issues of Human Resources have been presented in a Tabular form in Annexure III. There are extracts from three reports of the above agencies:

1. HR issues in private participation in infrastructure- a case study of Orissa power reforms – July 2002. Report under consideration (RUC)

2. Report of the Study Team of the Andhra Pradesh State Electricity Board Engineers’ Association – August 1999. Refer to Annexure II for brief details.

6 The Andhra Pradesh State Electricity Board Enegineers’ Association in October 1999 undertook a similar study. The Study team had detailed discussion with the Management, Employees, Trade Unions/ Engineers Associations, Regulatory Commission and Consumers of all voltage classes and categories. The study team covered all sections of employees workmen and non-workmen from GRIDCO, OHPC; two distribution companies and OPGC. Both field and Headquarters were covered. The study team personally contacted over 400 employees. Around 100 employees gave the responses in writing but rest of them preferred to respond orally and not commit anything on paper

The study teams' approach to get the views of the employees on reforms was two fold: i) Getting the feed back from the employees by serving a common questionnaire. ii) Elicit t h e views by direct interaction with the representatives of various unions/ associations and those employees who were directly or indirectly associated with reform process.The questionnaire consists of 17 queries relating to various aspects of employees concern and their opinion on entire reform process was circulated. The issues that were raised in the questionnaire were 1) Workload; 2) Working Conditions; 3) Pay and Allowances; 4) Accountability; 5) Job Security; 6) Career Planning; 7) Performance Appraisal System; 8) Disciplinary Proceedings and Grievances; 9) Training and Development; 10) Pensionary Benefits; 11) Oth e r welfare measures like Medical, GIS, Children Education etc. 12) Social Status; 13) Early Voluntary Retirement Scheme; 14) Organisational Performance; 15) Hike in power tariffs 16) U n i o n / Association and Management Relationship; 17) Public response to reform process Each query consists of three options viz., Bad, Same, Good. The employees were asked to answer the questionnaire comparing post reform situation with pre-reform situation by marking one of the three choices available for each question.

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3. Report of the Committee of Independent Experts7 to Review the Power Sector Reforms (Kanungo Committee) - October 2001

A careful review of the Table would show that there is a marked difference in the perception of the RUC and the other two reports. The order in which the issues appear are based on the order in which they are presented by the Engineers Association of Andhra Pradesh.

Working Conditions: while RUC reports that even a casual visit to the privatized component would suggest the difference in the working conditions, the other two reports suggest that this is only at the superficial level. Neither the employees perceived an improvement nor did the experts notice that the private players had brought managerial skills and knowledge of the ground realities. Current reality : There has been a 25 % increase in the revenue collection after AES abandoned CESCO

Pay and allowances RUC reports an increase in travel comfort and hotel stay on duty besides status quo in pay revision method (Based on Government pay commissions) The other reports suggest dissatisfaction in the work force besides positive resentment towards discriminatory compensation introduced by AES. Questions of the legal validity of such discrimination have also been raised.Current Reality: Traditionally the employees of the Orissa State Electricity Board were having higher salaries than their counterparts in the Government. The revision made was as per the Fifth Pay Commission recommendations meant for Government servants. There has been no extra benefit. The House rent allowance for executives has been reduced. Since there are very few promotional avenues most executives are stagnating at the top of their pay scales.

Job security While RUC frowns upon job security the employee’s perception is quite the opposite they feel that there should be job security Current Reality: Executives are being compulsorily retired after they attain 50 years of age at the discretion of the company (A provision for compulsory retirement after 50 was there even earlier but it was used in the rarest of rare cases on the basis of clear cut guidelines and a proper review. Such as retirement due to lack of medical fitness or based on an apprehension of doubtful integrity etc)

Promotion RUC reports an increase in career advancement opportunities. There is skepticism about this claim.Current Reality: As a result of the new organizational chart prepared by the consultant Price Waterhouse there has been a squeeze in the number of posts in engineering. Most graduates would retire after getting one or two promotion in their entire career, not withstanding claims by the RUC that after the reforms eight levels have been created. The consultants held out a lure that the reforms would provide rewarding career growth opportunities this myth has been completely shattered. Improvement have been made areas like Finance and Human Resource Management that is in line with the operating philosophy of the reforms.

Disciplinary Proceeding There is agreement that there has been quicker disposal of disputes, there are questions about the conduct of the enquiries and concern about lack of skillful handling of the situation

Accountability RUC claims a change towards business orientation and customer focus. This is challenged by the employees, while the experts report no improvement. Current reality: The employees feel that while HR consultants are being hired at huge cost, neither do these consultants have any accountability nor is there any improvement except in training. The ground reality is that the redtapism has increased in all HR matters be in sanction of leave, award of annual increments, medical advance etc. For all these small matters employees have to run from pillar to post.

Training and Development There is agreement that there has been an increase in training programme in GRIDCO but the same is not so in the case of the distribution companies.

7 Seventy-nine people and organisations gave written submissions and 46 individuals and organisations deposed before the Committee of Independent Expert. The submissions and depositions were from all sections, Government, Private sector, Consumers and Trade Unions etc.

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Pension There is agreement that pension is an important topic that remains unresolved and very fluid. (This has been discussed in earlier paragraphs)

Other welfare measures There is disagreement on nature and content of compensation to the dependents of the deceased employee.

Social Status There is disagreement on the perception of social status.

Voluntary Retirement Perception on what constitutes discrimination and discretion is evident.

Organisational performance Claims of improvement in performance including in critical areas like revenue collection are disputed. Current Reality: The positions at management levels have not been filled properly as a result the performance can only deteriorate. For example the Secretary (Energy) to the Government of Orissa is holding additional charge of the CEO of the Orissa Hydro Power Corporation and the Orissa Power Generation Corporation. The CEO of CESCO (abandoned by AES) appointed by the regulator is the CEO of Orissa Milk Federation (he heads CESCO only on a part time basis). The Managing Director of NESCO and SOUTCO are the same person. There is no technical director in the Boards of any of the Distribution Companies, GRIDCO or OHPC.

Tariff & Public Response RUC considers attitudinal change as critical to recognize that electricity is not a charitable organisation. Employees and experts feel that the tariff hike was not reasonable and would lead to public discontent.

Union – Management relations RUC reports professionalisation of the Human Resources department and improvement in the union management relations. The employees had a different perception

4.3 Other issues

4.3.1 Re-designatingThe RUC states

“After corporatisation, the engineers of GRIDCO starting from Chief Engineers to Assistant Engineers were designated as Managers. The purpose of redesignation was to introduce a cultural change in the functioning of the organization and to basically inculcate in them a feeling that they had to start functioning as managers rather than only as engineers. It also served to indirectly break the culture that it was an engineers’ organization. It is a purely commercial organization.”

The idea that a change in designation brings a cultural change is quite erroneous. In a pubic service it could even create problems. For example, the public understands the job of an Assistant Engineer or Chief Engineer. It is not for nothing that in the Districts the British retained a fifteenth century designation “Hazur Sheristadar.” Even after Independence, the designation of the Chief Executive Officer of the District continues to be Collector even though the emphasis has shifted from revenue collection to development. What is important is that as far as the World Bank is concerned every sector and every country is just the same – “one size fits all” syndrome. It is not a coincidence that every one of the consultants that have been imposed on India by the World Bank have been Chartered Accountants and Business Management firms. Power industry from Generation to utilization and equipment manufacture is and will remain engineering intensive – market or no market.

4.3.2 Tokenism Unless the employee share holding is enough to enable employees to play a decisive role in the management of the enterprise, tokenism does not in any way create an incentive. Therefore, the general experience with tokenism is that an employee when buying a share wants to be considered an employee but when selling it wants to be as free as any other speculator.

4.4 Case study of Andhra Pradesh - Reforms and its impact

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English translation of an extract from the Book – Vidyut Valayam (in Telugu) by Mr. K. Ramachandra Murthy EDITOR of a vernacular newspaper VARTHA is given in Annexure III. It gives details of the employee’ concerns and agitation in Andhra Pradesh. (The book will soon be available in English)

4.5 Position of the All India Power Engineers FederationThe All India Power Engineers Federation (AIPEF) which represents about 70,000 engineers serving the State Electricity Boards adopted a resolution in April 2002 This was conveyed in a letter addressed to the Prime Minister of India by Mr. Shailendra Dubey Secretary General of the Federation. It is reproduced in Annexure IV.

The contention of the Federation is that the power situation in India is rapidly deteriorating and at the present rate there would need to be extensive power cuts in urban and rural areas. The Federation believes that the Govt. of India and the State Govts have created this situation by blindly following the direction of the World Bank, instead of concentrating on sustaining the average annual 7% growth rate. The Federation claims that the Government and the World Bank reforms have lead to a situation wherein in Generation there are scams like ENRON and unaffordable high cost of power, and in distribution sector there has been a failure in the privatisation of distribution in NOIDA and in Orissa.

5.0 A Framework for discussing an alternative

One of the techniques used for justifying reforms is to say there is no alternative (TINA) and then to pick holes in any alternative that is formulated. Alternatives not founded on very specific and detailed information and data can easily be faulted. What can be stated here are the broad principles and policy formulations for an alternative. The only purpose of making this brief list is to illustrate that an alternative is possible.

5.1 In General Terms1. Recognize the nature of the problem. The most critical problem has been the financial problem created by a

gross violation of the law.2. Consider the example of Norway, which has restructured the power industry and introduced reforms in

generation whilst overwhelmingly retaining public ownership; create conditions of improvement in efficiency within public ownership.

3. The finances of the Board’s fragments need to be restructured. The Govt. of India and the Governments of the State must provide funds to the power sector in the same manner in which funds were given for the recapialisation of Banks and Mutual Funds.

4. Rewrite the PPAs or nationalize the ENRON type of projects. Just stop purchase of all high cost private power. Make the recently built 500 MW Coal based power plant of the NTPC (Simhadri project) the benchmark for cost of coal based power plants.

5. Ensure direct subsidy from the Government to the Utilities for low cost power to be given to farmers. Farmers must get low cost power at least at the same rate as the cost of water under irrigation schemes. (The Indian farmer gets a pittance as subsidy compared to his counterparts in Europe and USA with whom he is expected to compete after the removal of the quantitative restrictions and the various multilateral agreements in the WTO)

6. Establish committees consisting of engineers, workers, and farmers at every sub station level to improve the working of the utility and for ensuring prompt payment of bills and stoppage of theft.

7. Throw out the high cost foreign consultants, auditors and accountants who are giving advice at an exorbitant cost. There are enough Indian experts who are extremely knowledgably and experienced not only in power systems but also the Indian situation.

5.2 Specific to Human Resources issues

8. There must be comprehensive and detailed consultations with the employees where the reason for the policy proposed should be explained and employees convinced. Simply because you cannot convince you do not have the right to coerce. Doctrinarian and ideological decisions cannot be imposed on employees by exploiting their vulnerability.

9. There must be recognition of the fact that the employees a) Have built the organisation b) Are prized employees with relevant skillsc) Are entitled to inducements, incentives

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10. Any package must read the above into it other than just continuity of service and level transfer.11. If employees wish to leave handshake terms must be evolved12. Terms for terminal benefits, by way of lump sum , must be worked out and the option to take this amount

before joining the new employer must be available.13. In effect the new employer’s service must be treated as if it were a reemployment and service conditions

should be negotiated while protecting the continuity of service (after all the new employer needs continuity just as much as the employees do)

14. Due importance needs to be give to transition from one form of employment to another and from one employer to another. In effect this involves a transition from being an employee with Constitutional protection (that is one of “status”) to being a contract employee; from an employer defined as the State under Article 12 of the Constitution to being a “jural person”; from employees having “writ jurisdiction” for legal grievance redressal to having recourse to redressal through a “civil suits”.

6.0 Conclusion

Undoubtedly in any country where there is an acute shortage of resources and a large population, shortages would be endemic. Therefore there would be problems in terns of supply, economies, consumer demands and complaints (particularly from the vocal middle class and the motivated media). The solution however has nothing to do with resolving the problem; and more to do with off loading the industry as part of a financial load shedding and transferring public assets from public to private hands (preferably in favour of multinationals from the “civilized world”)

The entire reform programme and process in the power sector of the state of Orissa and elsewhere in India has been motivated engineered and coerced by the World Bank. Even Shylock the Jew who demanded a pound of flesh was more merciful. His claim was based on the party defaulting in the repayment of debt. There is NO record of India ever having defaulted on its payments to the World Bank or any other institution from the “civilized world” Yet India has been subject to the most ruthless and compulsive “reform” and “ restructuring programme in the power sector whose benefits are obvious only to the Consultants and Multinationals patronized by the World Bank.

Mr. Robert Cooper, Senior British Diplomat and Adviser8 to the British Prime Minister Tony Blair has been kind enough to explain why.

“Postmodern imperialism takes two forms. First there is the voluntary imperialism of the global economy. This is usually operated by an international consortium through International Financial Institutions such as the IMF and the World Bank - it is characteristic of the new imperialism that it is multilateral. These institutions provide help to states wishing to find their way back into the global economy and into the virtuous circle of investment and prosperity. In return, they make demands that, they hope, address the political and economic failures that have contributed to the original need for assistance. Aid theology today increasingly emphasizes governance. If states wish to benefit, they must open themselves up to the interference of international organisations and foreign states (just as, for different reasons, the postmodern world has also opened itself up.)”

One specific example would explain the assertions made in the above two paragraphs. In a nation that added a hundred thousand Megawatts in less than fifty years the cost of Consultants in Orissa alone is Rs. 3060 million. Out of Rs, 3060 Million only 0.0117 million or Rs. 117,000 or 0.038 percent went to an Indian organisation – the Xavier Institute of Management Bhubhaneshwar, the rest went to foreign consultants from Europe or North America. The entire purpose of the World Bank is to serve the interests of Multinational Corporations and consultants of the “civilized world” and leave unbearable debt for the people of the Third World – the “Wretched of the Earth.”

The Report under consideration (RUC) has a classical paragraph

8 'Reordering the World: the long-term implications of September 11', published by The Foreign Policy Centre

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“Being an Indian company BSES management is well aware of the local mindset, which does not seem to apply for AES. This acts both ways. While the understanding of local human sentiments and its idiosyncrasies provides with a practical base for human resource management, occasionally BSES gets caught in the whirlpool of events influenced by the local environment. On the other hand AES (as indicated earlier) is consistently trying to enculturise the organization with a different outlook. In this process and in addition to other processes, for example, they are even bringing in non-Indian nationals to work side by side with the locals. This is definitely a laudable determined effort towards moulding the mindset, but unless carefully introduced it might create an unnecessary dissonance. But overall as interactions indicate AES appears to be a more vibrant company than BSES”

For all the glib talk the fact that stares you in the face is that the average revenue under the management of AES was Rs. 320 million per month. After AES abandoned CESCO, on an appeal from GRIDCO the Orissa Electrical Regulatory Commission appointed a CEO from among the bureaucrats in the Government of Orissa. The revenue under this interim management has increased to an average of Rs. 420 million per month (almost a 32% increase)

What is a mindset? Like concessions given to the rich and powerful are called incentives and those given to the poor and deserving are called subsidies, what the natives think is dismissed as a “mindset” and the thought process of the “civilized world” is innovative. Enough is enough.

15

Annexure I

Important data on the Indian Power Sector

The rate of growth of the sector has been over 7 % per annum. In fifty years, from a little over 1000 MW, the industry has added over 1 hundred thousand MW (as on March 31st 2001 was 101,660 MW) of installed capacity, with the private sector contributing less than 10 %.

India is one of the less that a dozen countries which has an electrical equipment manufacturing unit comparable to SIEMENS, ABB, GE etc. Thus India is the only developing country in the Third World which has indigenous capability from concept to commissioning.

The actual expenditure in the Power sector in the fifty years has been over Rs. 3,000 Billion (nearly US $ 65 billion at current values) The value of the assets built at this cost, at the current market rate, would be of the order of Rs. 12,.500 Billion (minimally) (US$ 240 billion)

Gross Generation 499,450 Million Kwh (or Gigawatt Hours); Number of Villages electrified 506,916; Number of agricultural pump sets electrified 12,514,244; Number of consumers of electricity 969,709; Number of employees per miilion Kwh 2.49 (All India average); Number of employees per 1000 consumers 9.02 (All India average). Three fourths of India is arid or semi-arid. The consumption of electrical power as a percentage of total power

consumed in Agriculture has gone up from 5.37 % in 1950-51 to over 50 % in 1995-96 and during the same period animal draft power has gone down from 56.75 % to 12 %. This implies that the agricultural economy of India (and the food insecurity of nearly one billion people) is dependent on electricity for the effective use of available ground water. In terms of electrical tariffs it would be difficult, in a competitive market, to discriminate between farmers who receive irrigation canal water and those who obtain it from pumping ground water using electricity.

Besides agriculture the rural economy accounts for 53 % of the total employment in manufacture, 71 % in construction, 47 % in transport and 45 % in trade.

India has a large section of small and middle farmers who can barely make two ends meet. There is no `social security’ either for the marginal farmers or for farm labour.

The loss of revenue to the State Electricity Boards due to open defiance of the law by State Governments (Sec. 59 of the Electricity (Supply) Act 1948) is estimated, by the Planning Commission, at Rs. 282,380 Million, the internal resources generated by the State Electricity Boards is Rs.130,920 Million, subtract from of the sum of these two figures Rs. 202,200 Million the commercial loss of the State Electricity Boards. It would be obvious that nothing more than compliance of the law by State Governments is required to turn around the SEBs. On the basis of just these relevant facts it is legitimate to draw the following conclusions: That the existing legislative framework has enabled the State Electricity Boards, and other institutions (like the

CEA, REBs) to make spectacular achievements. That the Electrical power industry in India is a profitable venture. That the losses incurred are due to the violation and defiance of the law by the Governments of the various

states rather than due to failure of the existing legislation.

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Annexure II

Extracts from the Report of the Committee on Power sector Reforms in Orissa

The Govt. of Orissa constituted a committee on 30th May, 2001 under the Chairmanship of Mr. Sovan Kanungo IAS (Retired) with the following as members Mr. A.K.Sah (Retd. Chairman UPSEB); Mr. S. Sinha (Prof. IIMA); Mr. S.K. Mohapatra (Retd). Chairman OSEB); Principle and Special Secretaries Energy, Govt. of Orissa. The Committee was asked interalia to examine “whether the reforms in the electricity sector have proceeded on the desired lines.” The Committee submitted its report in October 2001. Given below are extracts from the report and an unabridged reproduction of Annexure 9.

Para 4.36 Privatisation of all four DISTCOs at the same time instead of sequential disinvestment and that too well in advance of the original schedule baffled us. The reasons given (in Paragraph 3.8 - continued hemorrhage of the distribution set up; period of prolonged uncertainty should be avoided since it would lead to demoralization of the staff and fall of productivity; it was also hoped that offering of all four Zones for privatisation would stimulate investor interest, bring in better bids and wider participation) may have been well intentioned but looking back we feel that they do not out weigh the wisdom of the policy referred to in paragraph 3.5 that sequential privatisation should be preferred so that errors in the privatisation of one zone could be avoided when the next zone was privatized. Para 4.52 The private sector partners of the DISTCOs, neither brought superior management skills into the companies nor did they arrange financial support by way of even working capital for the companies. All that they gave was the fund they had brought in for acquisition of shares at the time of privatisation. ….the DISTCOs are in dire need of capital, working capital in particular. Instead of using the good offices of BSES Ltd, to secure working capital in accordance with the Shareholders Agreement for the three DISTCOs under their control, they have persistently defaulted in the payment for the power they purchased from GRIDCO and thereby have over exploited GRIDCO’s misplaced generosity in permitting them to use as working capital GRIDCO’s dues towards sale of power. In so far as CESCO is concerned, the situation is worse. The Shareholders Agreement in their case clearly stipulated, among other things, that GRIDCO will provide CESCO working capital support to the extent of the Rs. 1740 million beyond which it would be the responsibility of AES, the majority shareholder to arrange the working capital. An accommodation of Rs. 1740 Million was given to CESCO in furtherance of this agreement at the time of privatisation, but AES never fulfilled their part of the obligation and were allowed to pile up unpaid power purchase bills amounting to Rs. 4030 Million by the time they walked away in August 2001.

Para 4.54 They have neither brought in better management skill nor even managerial personnel with dedication and knowledge of ground realities…… We feel that an adversarial relationship can do no good to an organisation and there is an urgent need to develop mutual trust and goodwill. The quality of management required for this purpose needs to be delivered by the private sector.

Para 4.69 The Committee did not get evidence of any innovative practice introduced in the management of privatized DISTCOs including the critical area of consumer care.

Para 4.40 Unlike other items of expenditure which have grown by leaps and bounds, the expenditure on repair and maintenance has fallen short of levels approved by the Orissa Electricity Regulatory Commission (OERC). This is indicative of neglect of the vital area of maintenance so essential for achieving the objective of ensuring quality power supply.

Para 4.43 The conclusion that emerges from this exercise is that utilities may not break even if the retail tariff were to go up from the current rate of Rs. 2.81 per unit to Rs. 4.32 per unit. (The report in Para 4.5 has stated, “If 1991 were taken as the base year, the average tariff has registered an increase of 267 % at a cumulative annual growth rate of 15.54 %. With 1991 index as 100 the index of increase in 2001 is 367)

Para 4.66 High cost consultants were also retained to assist the utilities in developing internal systems of operation management, financial control, technical services, contract management, project implementation etc. The cost incurred so far is Rs. 3060 Million (Out of the Rs, 3060 Million only 1.17 Million or 0.038 % went to an Indian organisation – the Xavier Institute of Management Bhubhaneshwar, the rest went to foreign consultants)

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….. Judging by the fate of the reform and the present state of the utilities, we feel that not only were some of the major assumptions underlying the reform scheme over ambitious and unrealistic but the utilities for whose benefit the consultants were engaged also could not assimilate much of their advice. As a result, the utilities, instead of developing inner strength with the assistance of the consultants, tended to be excessively dependent on them. Specific instances of this leading to near atrophy of organizational strength came to our notice. We suggest that this practice, which weakens organisations rather than strengthening them and demotivates the employees instead of improving their skill and confidence should end as soon as possible.

Para 4.59 Rural electrification seems to have been the worst causality of the reform process. Even in the Orissa State Electricity Board (OSEB) days this activity was considered unattractive, a dedicated wing under the exclusive charge of a Chief Engineer had been set up in OSEB to keep pushing implementation of this high priority national programme. When OSEB was restructured and DISTCOs were privatised, the rural electrification wing got disbanded and the focus on rura; electrification disappeared.

Para 5.7 Billing and collection efficiency under the privatized distribution companies (DISTCOs) far from improving, actually worsened and rampant theft continued unabated.

Para 5.9 Unabated increase in tariff without perceptible reduction pf techno-commercial loss or improvement in consumer service has led to growing public discontent against the reforms.

Para 5.10 The reform scheme had sought to address the problem of T&D losses through a) Capital investment to strengthen transmission and distribution system so as to reduce technical losses and b) privatisation of distribution to bring in better management skills and practices for enforcement of accountability to reduce commercial losses. Neither of these has succeeded so far.

Para 5.18 As far as BSES managed DISTCOs are concerned, the attitude of deliberate default in payment to GRIDCO must end.

Para 5.19 The system of escrow put in place to secure regular payments to GRIDCO towards power purchase has not worked.

Para 4.55 In respect of pensionary benefits employees apparently have found that pension scheme preferred by them and also adopted by the companies has turned out to be disadvantages to many of them, particularly those who came over from the Government at a higher age.

Exit of AES(Annexure – 9 of the High Powered Committee)

1. Following an international competitive tender, GRIDCO disposed of 51% of its shareholding in three out of four of its distribution subsidiaries with effect from 1st April, 1999. The 4th subsidiary company (CESCO) could not be privatised because the preferred bidder backed out. Thereafter, GRIDCO entered into a series of negotiations with all pre-qualified bidders including a consortium led by AES Corporation. AES expressed their unwillingness to pick up 51 % shares in CESCO. During negotiations, it was agreed that GRIDCO would allow CESCO a cash accommodation up to Rs.1740 Million; working capital requirement over and above Rs.1740 Million would be provided by AES the majority shareholder. AES consortium execute the necessary documentation, namely, Bulk Supply Agreement, Shareholders Agreement and Share Acquisition Agreement and put in place an escrow mechanism to ensure timely payments due to GRIDCO on account of bulk power supplied to CESCO so that GRIDCO, in turn would be able to discharge its escrow obligation to OPGC, where AES, with 49% share holding, has management control. AES Corporation also provided a letter of comfort to GRIDCO assuring GRIDCO of all assistance to the CESCO management. The management of CESCO passed into the hands of AES consortium with effect from 1 September 1999.

2. In September 1999, CESCO management came up with a proposal to create a separate management cadre with conditions of service radically different from what were laid down in the CESCO Officers Service Regulations. The management cadre consisting of Team Members, Team Leaders and Group Leaders were proposed to replace the existing hierarchical structure which had high salaries and perks compared to regular CESCO Officers, with the gross pay of Team Leaders ranging from Rs.20,000 to Rs.50,000 per month. Part of this was reimbursed in cash for a variety of purposes. Concomitant with high emoluments was the total discretion of the management to give large bonuses to

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encourage productivity, to reduce emoluments as a mark of displeasure or to terminate the service of an employee after giving him a months' notice. Right from the beginning, GRIDCO nominees had expressed apprehension about soundness of the new cadre especially because it would radically disturb the prospects of existing CESCO employees who had been guaranteed no adverse changes in their service conditions and prospects. Legal opinion was against the formation of such a cadre with the proposed service conditions but CESCO management went ahead with the proposal and recruited about 50 outsiders; 22 regular CESCO employees (ex GRIDCO employees) also joined the cadre in the months that followed after resigning from their parent CESCO cadre. Some of the outsider recruits were in their early 30's and had only a few months of distribution experience. They were posted over the heads of Executive Engineers having 25 to 30 years of experience. Morale and discipline suffered a lot as a result.

3. AES management did not have anyone with HR background. When this was pointed out to them, their stock reply was that in AES Companies, every employee is an HR man as well as a PR man and that AES has no one special responsibilities for HR or PR work anywhere in the World. This stand effectively prevented CESCO management from communicating their points of view even to their own employees. It also led to a lot of misunderstanding of the management's motives. For example, a widely circulated pamphlet alleged that the administrative expenses of post-privatisation CESCO was far in excess of what they were during 1998-99. CESCO management, when contacted in October 2001, clarified tha t the facts and figures in the pamphlet were the same as the projections made in CESCO's tariff filing for the year 1999-2000 and that the actual expenditure was less, as in the Table below.

Rs. in MillionHead of Expenditure As per Tariff filing 1999-00 As clarified by CESCO in

October 20011998-99 1999-00 2000-01 1999-00 2000-01

Telephone, communications 3.55 4.31 6.87 3.80 5.36

Legal, Consultancy, professional charges

1.95 32.05 80.03 14.70 15.04

Traveling/ Conveyance 21.92 29.34 43.09 26.90 39.65Watch & Ward, Misc. 7.50 10.19 13.93 10.19 12.89

Note: CESCO have not finalised their management accounts for 00-01. The Rs 80.03 Million projected for legal and consultancy expenses for 2000-01 included Rs.70 Million to be paid for consultancy charges to be received from AES Corporation of USA. This did not materialize. But the fact remains that the Company did engage a legal consultant whose monthly retainer slip was Rs. 0.1 Million + Rs.15,000 for car expenses. For Court appearances and preparation of documents he was paid separately. These rates were far in excess of the rates paid to legal consultants discharging similar responsibilities.

4.By August 2000, CESCO exhausted the Rs.1740 Million cash accommodation which was allowed by GRIDCO. According to the Agreement with AES, shortfalls beyond this limit were to be made good by then but this was not done. They also delayed till July 2000, putting in place an escrow mechanism. They were requested to bring in funds in accordance with prior agreements but they pleaded their inability to raise any funds. Instead, CESCO management started defaulting in their payments to GRIDCO for bulk supply.

5. The tripartite arrangement among OPGC. GRIDCO and the State Govt. envisaged CESCO's receivables being escrowed to GRIDCO on the one hand and OPGC on the other hand having an escrow against GRIDCO's receivables to the extent of the bills raised by OPGC for supply of power. With CESCO defaulting to GRIDCO, the latter were seriously constrained in meeting their escrow obligations to OPGC who started reducing power supply to GRIDCO. When OPGC management did not respond even to the urgent requests of the State Government for a discussion to sort out the matter, GRIDCO obtained interim orders from the High Court restraining OPGC from imposing power cuts. GRIDCO also moved OERC (No. 31/2000) praying issue directions to CESCO to honour their various contractual commitments including escrow. The case was finally disposed of by OERC in an order dated 19.04.2001 in which the Commission directed CESCO to abide by their contractual commitments.

6. The AES management of OPGC had serious difficulties with their employees who threatened to resort to agitational tactics on several occasions. When matters came to a head, the State Government had to issue a

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notification on 26.05.2001 under the provisions of the Orissa Essential Services (Maintenance) Act, 1998 prohibiting strikes in 'all establishment in the State dealing with the production, transmission and distribution of electrical energy.’

7. By early 2001, GRIDCO was fairly certain that the CESCO management was bypassing the escrow mechanism but in the absence of any reliable data from CESCO, GRIDCO were unable to establish their suspicion. Hence, GRIDCO approached OERC (Case No. 32/2001) to once again direct CESCO to comply with the earlier OERC order which had directed that CESCO should honour the contractual commitments. While the case was being heard by OERC, GRIDCO got definite information that CESCO management had bypassed the escrow mechanism by diverting an amount of Rs. 185.9 Million GRIDCO once again moved OERC Case No. 34/2001) requesting OERC to initiate criminal action. At that stage, the State Government intervened and held discussions with CMD, GRIDCO and MD of CESCO. Thereafter, GRIDCO petitioned OERC that they did not wish to pursue their plea. Accordingly, OERC dropped the case. OERC also did not proceed further against the CESCO management in case No. 32/2001. Instead, the Commission in an order dated 26th July 2001 took a lenient view and closed that case.

8. OERC in their tariff order dated 19 January 2001 had given certain concessions to large industries. CESCO, however, did not pass on those concession. Two of the aggrieved industries approached OERC who, after hearing all the parties, directed CESCO to correct the bills of the petitioners in conformity with the tariff order. Since CESCO had pleaded that the error was owing to an incorrect computer programme, CESCO were also directed to rectify the computer programme. In spite of this clear direction, it was brought to the Commission's notice that their directions were being floated by CESCO. The failure of CESCO to implement the orders of the Commission were seen to be a deliberate act of defiance. OERC in their order dated 28 July 2001 imposed a fine of Rs. One hundred thousand on CESCO.

9. AES apparently had come into CESCO hoping that they would also get 2% more of the shares in OPGC which would then give them a 51% shareholding in the generation Company. When this did not materialise, AES started losing interest. On 25 July, 2001, AES wrote to the Company Secretary of GRIDCO seeking permission to sale their stake in CESCO to a third party, alternatively, AES offered to sale the shares to GRIDCO at a negotiated price. Under the Shareholders Agreement, however, there is a lock-in period of five years (ending on 31.03.2004) before which no shareholder can dispose of his share. GRIDCO therefore turned down the request. The matter was thereafter discussed at various levels. The Chairman of AES Corporation who had a discussion with the State Government in July 2001 made it clear that AES was not interested in continuing with the management of CESCO. By that time CESCO had already run up an overdue of Rs. 5770 Million towards purchase of bulk power from GRIDCO (including the initial cash accommodation of Rs. 1740 Million). The Managing Director and other functional Directors of CESCO resigned in July 2001, they were replaced by the Technical Director who also functioned as the new Managing Director and four other non-executive Directors. Even before formally resigning, the outgoing MD and the other nominee Directors of AES had been staying in Delhi. They had left no instruction have to handle the company's bank accounts in their absence or how to pay the employees who were getting restive. In-house billing (and hence collection) in several Divisions came to a stand still since the computers were kept in the corporate office which was under their lock and key. Things did not change even after the Technical Director who became the new M.D. assumed charge in July. The AES nominees held two Board meetings in Delhi against the express request of the GRIDCO nominees. The new M.D. too was replaced by another person in September,2001 and that appointment had to be approved at the A.G.M. of the Company as the person concerned was under age.

10. It became clear that AES were pulling out from the management of CESCO. AES nominees on CESCO board refused to make any provision for paying staff salaries leading to serious tension and uncertainty. CESCO area had just suffered damages from heavy rain and flood in July 2001, restoration work was in progress, however, because of the prevailing uncertainty progress of the restoration work also suffered. The Board of Directors of GRIDCO resolved that there was serious apprehension of disruption of power supply to the CESCO areas aggravated by employee dissatisfaction and unrest. GRIDCO approached OERC (Case No. 39/2001) seeking appropriate orders to ensure that CESCO carried out responsibilities under their license conditions. OERC in their order dated 27 August 2001 vested the management of CESCO in a Chief Executive Officer, whose services were made available for the purpose by the State Government. The Chief Executive officer assumed charge the same day.

11. The CEO under took a quick review of the financial position of CESCO having regard to widespread allegation of mis-utilisation of funds. There were also allegations that though the employees had paid their dues on account of

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Provident Fund, pension etc. these were not deposited with the appropriate Trusts. The CEO in a note dated 3 September 2001 addressed to OERC reported that provisionally the liabilities of CESCO were to the tune of Rs. 6530 Million including Rs. 5770 Million payable to GRIDCO for bulk power purchase. The liabilities include substantial amounts not paid to Pension Trust, Provident Fund Trust, suppliers and contractors.

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Annexure III

TABLE GIVING DIFFERENT PERCEPTIONS TO THE HUMAN RESOURCES PROBLEMS IN ORISSA REFORMS

Issues Engineers’ Association’s

Survey August 1999

Report underConsideration (RUC)

July 2001

Committee ofIndependent Experts

ReportOctober 2001

Working conditions 48% employees felt that there is no improvement in working conditions 40% said that conditions turned to worse after reforms.

Priority was accorded to revenue collection without the necessary infrastructure resulting employees facing reprisals from public. (One employee of WESCO was murdered; one lineman of SESCO lost his teeth several Assistant Engineers ?????

Even a casual visit to the CESCO office at Bhubaneswar would reveal the difference in the style of management under a private company.

The overall effect, one gets a feeling of activity. Unlike the atmosphere that prevails in the GRIDCO office (although there has been considerable

improvement) in CESCO one gets engrossed in action. Thus the main impact on human resource appears to be more qualitative. The employees have been, after privatization, pushed into developing a business like attitude in a competitive world

DISTCOs neither brought in better management skill nor even managerial personnel with dedication and knowledge of ground realities

DISTCOs have a single point program of collection drive and have shown no interest in improving employee motivation or customer service.

Pay and allowances 70% employees felt that there is no improvement in pay & allowances after reforms, 25% felt that the situation is bad after reforms.

Problems of Residential House Rent Allowance of officers not resolved Particularly Engineers were very sore about the way transfer scheme is interpreted by the management while extending allowances like HRA.

Discriminatory salary structures were introduced by AES at all levels including the Directors on the Board. For example, Directors nominated by AES were getting Rs. Two hundred thousand per month whereas the Directors appointed by t he Govt. of Orissa were paid only Rs. Eighteen thousand per month.

Keeping the guidelines of the Fifth Pay Commission Report in mind a memorandum of understanding was arrived at on October 29, 1997

Entitlements for traveling by Air, Air-conditions 1st Class as well as entitlements for re-imbursement of Taxi Fare has been extended to officers, entitled to reimbursement of Hotel expenses fixed

GRIDCO nominees on the Board expressed apprehension on such discrimination. Legal opinion was also against such cadres

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Job Security 68% employees feel insecure about their future. Only 1% feel they are more secured than earlier.

The employees perceived power sector reforms as a blindfolded jump into the abyss of uncertainty. The business model of Privatization Þ competition Þ efficiency was perceived by the employees as Privatization Þ competition Þ hire and fire policy Þ exploitation….. Near absence of any social security system also makes it difficult for an employee of any organization to even contemplate premature retirement.

Career Planning Promotions have been totally stopped after the introduction of reforms and several employees are not sure about their promotional avenues and prospects. Many of the posts are declared surplus

In OSEB, engineers who joined as assistant engineers got their promotions after perhaps ten years or more, and there were Executive Engineers who had served for 25 years or more.

There was substantial disenchantment among the SEB staff in this regard. To increase the career advancement opportunities in GRIDCO, the number of levels in the organization was increased.

The power sector, far from generating growth, has been a major victim itself…... The impact of reform on employment opportunities and career development needs to be viewed in this light.

Disciplinary Proceedings

After reforms, the disciplinary cases are being disposed off at quick pace. But, the employees felt that the punishments are awarded without conducting proper enquiries. Only 3% employees appreciated the present Grievance redressal system.

With the formation of GRIDCO there has been a decline in the number of disputes

While firm action against known miscreants is necessary to enforce discipline and accountability, this can not be done without skillful handling of situations and willingness to mitigate genuine grievances and resolve issues that generate simmering discontent. The quality of management required for this purpose needs to be delivered by the private sector.

Accountability 37% of employees felt Accountability has gone down after reforms 47% felt there is no change.

Employees nurtured in the OSEB characterized by complacency and unaccountability had to be changed into business oriented customer focused personnel.

Contrary to expectations, there is no perceptible improvement in customer care under privatized DISTCOs

Training and Development

25% employees felt the training after reforms is good whereas 33% felt there is no improvement, while 38% feel it is bad now. Post reforms, Gridco has introduced several training programmes for

GRIDCO’s institutional building consultants not only helped in arranging and providing training in various areas but also helped in building up a sustainable institutional capacity

The Committee, however, was given to understand that State Load Dispatch centers (SLDC) is not staffed with adequate number of trained personnel but is dependent on consultancy support. This needs immediate correction

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personnel development. But, the unbundling of Gridco into 4 distribution companies and transfer of majority of staff to these companies again brought the situation to a grinding halt.

Pension Only 1% employees felt the new schemes are good. 82% employees feel there is no change in other welfare measures. Various trusts have been formed for pension, provident fund etc., but without any opening balances. The liabilities on these is met out of current revenues. Employees expressed concern that if companies continue to suffer losses, they may not get their terminal benefits also

As regards the financial benefits are concerned the officers’ main apprehension was the possibility of a reduction in the pension amount With the formation of the DISTCOs, the Pension Trust Fund is to be divided between GRIDCO and the DISTCOs and it is to be managed jointly by Trustees taken from management and the employees.

Pension remained an important topic for the employees even after the privatization. Since the matter is still very fluid it has been decided that after retirement the employee return the employer’s share to get the pension which is about 50% of their last drawn pay. As of now GRIDCO pays the pension amount and debits the newly privatized companies.

Employees apparently have found that the pension scheme preferred by them, and adopted by the companies, has turned out to be disadvantageous…There is an apprehension that liabilities of Government / GRIDCO towards Pension Trust may not have been assessed correctly.

Other Welfare Measures

Social Status

GRIDCO discontinued the scheme of employment on compassionate grounds. The High Court held that the scheme should be continued. But the Court Order has not been implemented. GRIDCO is depositing an amount of Rs 100,000 in favour of deceased employees' dependents and the interest amount is paid to them. 50% of the employees felt that their ?????

Social status has gone down after reforms, whereas only 5% felt that social status has improved after the introduction of reforms. 41% find no change in their social status.

Under OSEB regime, employment was being given to dependants of the deceased workers on duty on rehabilitation grounds. While this may help the organization in fulfilling its commitment to employment security the overall effect on the employment profile and number is far from positive.

As a government employee they enjoyed considerable protection as “public servants”, the terms and conditions of employment of which are set out in the Orissa service code, the classification control rules,

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and the government servants conduct rules. Under the above, employees (specially the officers cadre) enjoy tremendous security of job so much so that one cannot file a writ petition without permission from the government.

Early Voluntary Retirement Scheme (EVRS)

About 1500 employees opted to retire but only 600 applications were considered. Employees were not clear why only 600 requests were considered when the surplus staff identified by working group of HRD is over 10000. 53% employees felt that EVRS is bad.

The management admitted that deselection of certain potential EVRS applicants was done by personally calling those employees and persuading them not to apply since their future in the company was bright. Needless to mention this was done very discreetly and by people at very senior level.

Organisational Performance

Only 4% felt that performance has improved after reforms 47% felt that performance has gone down and 30% felt that the performance remained unchanged.

Management claims that there have been improvements in the performance although they admit that “there has not been much improvement in the distribution loss which still hovers around 46%” The revenue collection has increased although the improvement in the quality of service has not been that significant.

Billing and collection efficiency under the privatised distribution companies (DISTCOs) far from impro\ang",~actually worsened and rampant theft of electricity continued unabated. GRIDCO also is unable lo recover cost and is incurring heavy debt to finance losses year after year. In this situation, the generating companies are also facing problems of inadequate cash realisation. The situation has become so critical that the private sector partner in one of the DISTCOs, AES has abandoned the management of CESCO.

Tariff & Public Response to Reforms

Effective tariff hike d u r i n g the past four years is 66.1%. 45% employees felt the hike is 'high' where as 40% felt that hike is Very high' only 11% felt that tariff hike is "reasonable".

Attitudinal reorientation of the employees has been significant as they are now tuned to the idea that companies dealing with electricity are not a charitable organization.. As a senior official of the company elaborates “We are now threatening to disconnect electricity even to municipalities, hospitals etc. if payment is not received. This was unthinkable in the past”.

Unabated increase in tariff without perceptible reduction of Techno-commercial loss or improvement in customer service has led to growing public discontent against reform.

Unions & Associations Relationship with the Management

Only 6% employees felt that the relationship is good after reforms whereas 56% employees felt that the relationship is bad now. Everybody felt while management is giving patient hearing to their problems, but in practice, nothing is done to redress their grievances.

The short time frame to complete the negotiation and finalize the agreement the approach displayed by the Management of GRIDCO indicates that unlike the days in OSEB, GRIDCO was being professionalized. For the first time unions were asked to come jointly and not as disparate groups and thus a joint action committee of four major federations were formed.

We feel that an adversarial relationship can do no good to an organization and there is an urgent need to develop mutual trust and goodwill.

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Annexure IVEnglish Translation of extracts

from Vidyut Valayamby Mr. K. Ramachandra Murthy, Editor VARTHA (a Telugu daily)

Chapter 17: REFORMS AND EMPLOYEES

In this chapter, we will focus on the agitations launched by APSEB (Andhra Pradesh State Electricity Board) employees against power sector reforms and Government attempts at pacifying and convincing them. Against 75000 sanctioned posts in the APSEB, there are now 60000 employees - 12000 in generation stations (GENCO) and 48000 in transmission and distribution (TRANSCO & DISCOMS) systems. Employees began to discuss power sector reforms when the Government of India embraced economic liberalisation in 1991 and planned to induct the private sector into power generation. The debate gained intensity when agreements were signed with the Hindujas, the Spectrum Technologies and the GVK Group for setting up power plants in the private sector. Agitation in three phases: Initially, almost all categories of employees opposed the reform process. Their opposition, corresponding with the pace of reforms, manifested itself in three phases. First stage: Power sector employees belonging to various associations and unions formed a Joint Council of Action (JCA) when the Government decided to invite private sector investments in power generation. The important members of the JCA were the APSEB Engineers' Association, APSEB Assistant Engineers' Association, 1104 Union, 327 Union (INTUC), AP Power Diploma Engineers' Association and United Electricity Employees' Union (CITU). There were other small organisations representing account sofficers etc. The JCA organised a massive rally in Hyderabad on March 15, 1995. The then Chief Minister N. T. Rama Rao assured employees that the Government would review its decision on private sector participation in generation and that any decision would be taken only after consultations with employees. Present Chief Minister N. Chandrababu Naidu was then the Minister for Power. Second stage: The employees intensified their agitation after the publication of the Hiten Bhayya Committee report in April 1995. (The State Government had constituted the high power committee to suggest power sector restructuring). The committee categorically recommended the unbundling of the APSEB and privatisation. In October 1995, after taking over as Chief Minister, N. Chandrababu Naidu mounted a powerful campaign in favour of reforms. Employees too strongly resisted reforms. Debates, disputes, dharnas (sit-ins) and rallies became the order of the day for almost two years. The Cabinet appointed a sub-committee comprising Ministers Devender Goud and P. Ashok Gajpathi Raju for talks with employees. Although the employees served a strike notice in July 1997, they dropped the plan twice to facilitate talks with the Government. Then rumours of the Government already propitiating some unions surfaced. Following pressure from members, the the JCA leadership called for a token strike on August 18-19. But the employees were divided on the strike issue. The then Transport Minister K. Chandrasekhara Rao (now Telangana Rashtra Samithi President) tried to bring about an amicable settlement. But during discussions the Chief Minister made it plain that reforms were inevitable. The employee organisations debated the Government stance that very night. Some organisations announced support to the Government. Only, the 1104 Union, the APSEB Assistant Engineers' Association and the Technical Employees' Association appeared to stand by the strike decision. But on the last day, even the Assistant Engineers' Association and the Technical Employees' Association dropped out of the strike plan. Only the 1104 union observed the two-day token strike. With that the JCA collapsed. The 1104 Union warned of an indefinite strike if the Electricity Reforms Bill was introduced in the Assembly and launched it on April 27, 1998 when the bill was introduced. The United Electricity Employees' Union (CITU) adopted an uncompromising stance against the Government in all stages, much to the chagrin of JCA leadership. JCA leaders, therefore, tried to keep a distance from the union. Whenever a leader

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appeared to have succumbed to the Government, the union released a leaflet exposing him. Only the 1104 Union and the United Electricity Employees Union took part in the April 1998 strike. The Government invoked the Essential Services Maintenance Act (ESMA) and deployed the Army to break the strike. In response to a writ petition filed by a farmer, the Andhra Pradesh High Court directed employees and the Government to resolve the issues through a dialogue. The employees ended their strike in three days. Later on, the APSEB was unbundled without any resistance. The Government entered into a tripartite agreement with organisations which did not take part in the strike. According to agreement involving employees, the Government and the APSEB, the reform process will not result in any retrenchment of employees or deterioration in their service conditions and they will continue to enjoy facilities like pension as in the past. Union leaders who did not take part in the strike were deputed to study the power sector in the U. S. There was criticism that the leaders did not submit any report after their U. S. visit. Third stage: APSEB employees were disappointed over the failure of their resistance movement. Some of them felt the leaders had stabbed them in the back. The APSEB Engineers' Association showed the door to the old guard and elected a new leadership. By then, the reforms in Orissa had begun. The new APSEB Engineers' Association Executive deputed a seven-member team of engineers to Orissa. The team thoroughly studied the process in Orissa and submitted a 100-page report. Although TRANSCO tried to prevent the publication of the report in view of the Assembly elections, its contents reached the employees. In the elections, the Telugu Desam Party (TDP) under Chandrababu Naidu was re-elected. Meanwhile, instances of the Government violating the tripartite agreement came to light. The Government could not dispel employees' misgivings over pension and other benefits. Even as unrest among employees brewed, the Government unilaterally announced the "Second Transfer Scheme" under which DISCOMs were hived off from TRANSCO. As per the tripartite agreement, the Government had to carry out institutional changes only after consultations with employees. The Government decision made the employees go on an agitation from April 4, 2000. The main demands of the employees were: 1). Distribution should continue to be in Government hands, 2). The Government should categorically state that generating stations would not be sold, 3). The Government should set up a Trust to take care of employees' pensions and other terminal benefits, 4). Common seniority shall be maintained for five years under APTRANSCO, which is the main successor entity of the erstwhile APSEB, as per the tripartite agreement. 5). The Government should disclose all the secret agreements it had entered into concerning the power sector. Once the agitation started, the Government appointed a Cabinet sub-committee with Ministers Thummala Nageswara Rao, Devender Goud and K. Subbarayudu as members. The engineers' association announced plans to hold a rally on April 24. Although the Government invoked ESMA as usual, the rally turned out to be successful. The Chief Minister invited engineers' representatives for talks. Not satisfied with the trend of discussions, they announced a strike from May 16 but dropped it finding that other unions were not enthusiastic. The Government tried to split the engineers' association by encouraging the leadership defeated in association elections to form a rival organisation. Later, the engineers launched a hundred thousand signature movement opposing reforms. The first signatory was the prominent freedom fighter Vavilala Gopalakrishnayya. Although engineers could not halt the reforms, they carried out a campaign against the reforms citing Orissa failures through print and electronic media. When the power tariffs were raised in June 2000, political parties plunged into the field, eclipsing the weakened resistance by employees. Reasons for employees' agitation: Employees are concerned about the prospect of getting terminal benefits like pension, gratuity on retirement, job security and service conditions, the growing work load because of posts being kept vacant, and violation of tripartite agreement provisions. Misgivings over pensions: Employees have many misgivings over pensions. When the board was split up on January 31, 1999, there should have been Rs. 46,170 million in the gratuity and general provident fund (GPF) accounts, including Rs.2300 million contributed by staff towards GPF. But the board did not have the amounts in the accounts. Engineers' associations demanded that the Government take the responsibility of payments by making budgetary allocations. The Government, however, rejected the employees' demand contending that it would have to shoulder a heavy burden if it had to pay pensions to employees of undertakings being privatised. The Government announced that

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GENCO would take over the old liability of Rs.46,170 million and GENCO, TRANSCO and DISCOMs would take care of current (after the APSEB unbundling) contributions. Following the additional liability, GENCO's asset values were correspondingly boosted. GENCO would issue Government-guaranteed bonds to a Trust to be formed. The Trust would utilise the interest on the bonds to pay pensions and gratuity and make GPF contributions. GENCO raises funds by hiking the rate at which it sells power to TRANSCO. In other words, the amount will be collected from consumers. This proposal bristles with two problems. Since consumers have already paid once towards the pension fund by way of charges, a second time collection by way of dues is objectionable. APTRANSCO argues that the old collection was spent in the power sector and there was nothing wrong in collecting for a second time. The Andhra Pradesh Regulatory Commission, however, is not prepared to intervene contending that it would not like to go into the merits of the decision taken before it came into the picture. Employees fear that they will be in a predicament if some one goes to a court of law questioning what is a double taxation - collection of funds twice for the same cause. The employees are also concerned over a circular of the Union Ministry of Economic Affairs dated March 31, 1999. The circular details the guidelines for investments by non-governmental provident funds, superannuation funds and gratuity funds. According to the circular, 25 per cent of the funds have to be invested in Central Government securities, 15 per cent in State Government securities and 40 per cent in public sector undertaking bonds. Ten per cent of the funds can be invested in any of the three avenues listed earlier. The balance of ten per cent of the funds can be invested in corporate bonds or the three avenues listed earlier. GENCO does not have the Rs.46,170 million, which is described as an old liability, since it dipped into it long ago. As it cannot transfer the non-existing Rs.46,000 million, GENCO issues bonds for the amount to the proposed Trust. It pays interest on the bonds to the Trust by collecting it from consumers. The Trust uses the interest for payment of pension and gratuity and making GPF contributions. This GENCO plan runs counter to the Union Economic Affairs Ministry circular of March 31, 1999. The State Government cannot stand guarantee for more than 35 per cent of GENCO bonds. The real troubles will surface after the beginning of privatisation. If the Trusts are not in accordance with the Trust Act, 1882, Provident Fund Act, 1952 and Income Tax Act, 1961, employees face the music. Government rules do not allow deduction of contributions to Trusts from taxable income. The Government has so far not responded to employees' apprehensions. Concern over job security: The Orissa experience shows that whatever be the number of assurances concerning job security, the situation will be different after privatisation. Ignoring High Court directives, private companies in Orissa sacked employees and did not provide jobs to the next of kin of the deceased. Employees fear that service conditions will deteriorate after privatisation. Increase in workload: There are now 12000 vacant posts in TRANSCO. The management has no plans to fill the positions. Even if appointments have to be made fleetingly, TRANSCO plans to recruit candidates on contract basis. APSEB was one of the very few utilities in the country which had the least number of staff. As vacancies are not filled, the workload on the existing staff has gone up. As performance targets are set and laggards punished, employees are seized of insecurity. Violation of agreement: The Government is violating the letter and spirit of the tripartite agreement among the Government, employees and the APSEB. One of the main points of the agreement is that TRANSCO should take decisions on all matters during the transition period of five years from the date of unbundling. But GENCO takes its own decisions in matters like job recruitment ignoring the understanding. Employees fear this may create complications in future. According to the agreement, the working conditions and benefits of employees should not deteriorate following reforms. Although APGENCO, APTRANSCO and DISCOMs were established under the Companies Act of

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1956, the benefits that should accrue to them under the Act are not extended. As per the Companies Act, the maximum gratuity that can be paid to a retiring employee is Rs.350,000. But the power sector companies continue to stick to the old gratuity ceiling of Rs.250, 000 under APSEB dispensation. TRANSCO rejected the engineers' demand that the ceiling be raised to Rs.350,000. Significantly, TRANSCO argued that the tripartite agreement merely assured the employees that their existing benefits would be protected; there was no mention of any extra benefits. But in Orissa and Haryana, the ceiling on gratuity was raised to Rs.350,000. The Government, which had dismissed employees' concern over privatisation of services in the tripartite agreement, has announced privatisation of distribution in stages. The employees point out that only when the Government divestment does not exceed 49 per cent of its equity in DISCOMs their services will not be privatised. Lack of control: Fears over job security have prompted a section of employees to make hay while the sun shines. That is why there are allegations of rampant corruption after the formation of DISCOMs. In their bid to break the movement against reforms, top echelons took the support of the corrupt elements. Now action cannot be taken against them. Increase in corruption in the post-reform era is not confined to Andhra Pradesh. The story is the same in all States. A committee of the legislature has recommended that retired employees should not be reappointed. But in the power sector, the retired are being appointed special officers, consultants and directors. Again, appointments and promotions are discriminatory in that only one or two classes of people are preferred in violation of all rules and regulations. Viewing discrimination as a fact of life, employees have ceased questioning. To resolve problems that crop up in the reform process, a Task Force sub-committee headed by the Energy Secretary and including APGENCO officials and employees' representatives was set up. But the sub-committee does not meet often. The rare meetings are ritualistic, allege the staff. Employees are discontented because the Government has not allayed their fears over reforms. By relying on force instead of redressing their grievances, the Government has only accentuated their fears and anxieties. Any governmental programme will be a success only when employees' potentials are recognised and tapped.

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Annexure V

ALL INDIA POWER ENGINEER'S FEDERATION(Regd.Under Societies Act XXI Of I860), Regd. No.-24085/93,

Hydel Field Hostel, 17 Rana Pratap Marg, Lucknow-226001, Phone:0522-205417(Assc.Off), 423503 (R) FAX: 0522-228586

NO: - 53/A1PEF/POWER

DATE: - 18 th May02

Mr. Atal Bihari Vajpayee Prime- Minister, INDIA New – Delhi

Sub: - Against destroying power sector of the country in the name of so-called reforms.

Respected Sir,

AIPEF federal executive meeting was held at Hyderabad on 28th April, to review power sector scenario in the country. I have been directed to inform you about the resolution passed in this meeting. AIPEF represents about 70,000 power engineers in power sector of different states.

1. That the power situation in India is rapidly deteriorating at this rate there is going to be extensive power cuts in urban and rural areas. This may lead to power roits and even food roits.

2. This situation has been created by the Govt. of India and the state Govts. blindly following the direction of the World Bank. Instead of concentrating on sustaining the average annual 7% growth rate, the governments during the last decade have been busy amending the law, dismantling the electricity Board and creating condition favourable to the multinational and their Indian fronts. In the process even on going project of the SEB have been either abandoned or slowed down

3. The result is for all to see. Either there have been scams like the ENRON or unaffordable high cost power has been added by the private sector. In the process not only has the power sector been jeopardized but even the Indian financial institution are in danger of creating unsustainable bad debts.

4. Having failed in generation the concentration has shifted to privatizing the distribution sector. Assets worth Billions of rupees will be passed on to private interests at below book value and on terms and condition that are unacceptable for public interest.

5. Process of privatisation of distribution system is being pushed, state after state, at enormous speed. This inspite of failure in privatisation of distribution in NOIDA in U.P. and Orissa. A high-powered committee headed by Mr. Kanungo IAS having two senior secretaries to the Govt. of Orissa and former chairman of the state electricity board has recorded :- (i) There has been neither any improvement in management nor in dealing with the problems of the consumers(ii) There has beer, neither reduction in theft nor billing and collection efficiency,(iii) Rural electrification has become the main casuality.

6. The hard facts of the power industry are : -(a) The Indian agriculture has overcome the problem of two third of India being arid or semi arid due to the

ability to pump ground water. Agriculture has fundamentally changed in favour of food grain and cash crops.

(b) This implies that all state Governments ( and the Govt. of India) will have to ensure continued supply of power to the farmers. The ceiling on the cost of power supplied to the farmer will have to be based on the principal of equity between the cost of ground water and canal irrigation water, disparity between the two cannot be sustained.

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(c) In urban areas electricity has become a necessity and is no longer a luxury in large parts of urban areas, it is not possible even to provide drinking water without electricity.

7. Given this reality, and the fact that the Indian people have low purchasing capacity it is not possible to commercialise electricity and sell it at commercial rates eliminating subsidies and cros subsidies. The world Bank policies and the electricity Bill 2001 is neither implementable nor sustainable.

8. The only alternative is strict adherance to the sixth schedule of the Indian electricity (Supply) Act 1948 and to ensure the viability of the state electricity Boards, strict compliance with section 59 of the Indian electricity (Supply) Act 1948

9. It is very disturbing to note that there is a delibrate attempt by state Govt. to capture the regulatory commission by insisting that the regulatory commission is bound by whatever the government may prescribe as policy. The glaring example is the recent notification issued by the govt. on National Capital Region in Delhi.

10. Hand picked persons are being placed in key positions in the power sector for example: a) Chairman CERC :- The former secretary Ministry of power who was a member of the selection

committee for the post of chairman CERC. He is IAS officer with limited knowledge of either electric power or law.

b) Secretary Ministry of Power Govt. of India:- The CEO of BSES which is agressibly trying to take large parts of the different assests of the SEB's BSES has taken over three of the four distribution companies in Orissa and had bid for two or the three distribution of companies being sold up in Delhi.

c) Chairman CEA:- In violation of the law a person is being appointed a member CEA for 24 hours in order to qualify to be appointed chairman CEA

Name of these has had no direct experience in policy making or regulatory bodies associated with power sector in the past five decades. On the other hand they clearly represent vested interest invincible to the state electricity Boards.

11 It is a matter of distress that neither the Govt. of India nor the state Govt. has created machinery for effective consultation with the employees particularly the engineers. Consultation only implies discussions with the World Bank, Multinational and private vested interests.

12 Through this resolution the power engineers appeal to the people of this country to take interest in what is happening in the power sector and to save it before the power sector collapses with disastarous consequences in the entire Indian economy.

We, the power engineers, pledge to support any peoples movement that seeks a " sane and nationalist Power policy and programme

Thanking you with regards

Sd/- Shailendra Dubey SECRETARY - GENERAL

Yours faithfully

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Annexure VIExample of where even the minimalist approach

to the employees transfer from one employerto another is not honoured

The Madras Port is a Trust of the Govt. of India and all employees are governed by industry wise settlement. Under the I.D. Act the Govt. and the Port authorities had entered into a ten-year wage settlement in the middle of the year 2000. A part of the port called the container terminal was then leased to a foreign monopoly company. The terms of lease as far as the employees are concerned was as follows The new employer (lessee) would be retain only a small percentage of the work force

presently and that too on new terms of service to be negotiated with the new employer. As for the rest of the work force they would be sent off. When this was challenged before the Hon’ble Madras High Court the Government, the Port

Trust and the Dock Labour Board filed affidavits stating that all labour laws would be complied with and no action detrimental to the workers would be taken without compliance with law.

However, the assurance became meaningless when the new employer called the employees to renegotiate the terms of service and remuneration. This when there was a ten-year settlement that was in force and by law binds the employer and his successor as well as the employees.

The aftermath of this situation is The Hon’ble High Court dismissed the plea of the employees challenging the grant of lease to

the foreign company. It also dismissed the argument that the successor employer was bound by a valid wage settlement that was in force.

The Dock labour Board has been scraped by an Act. The Union Finance Minister has announced that the existing protective labour laws would be

annulled or watered down by changes in legislation.

During the court proceedings the documents produced by the Govt. showed that the basic framework of the lease including the condition of service of the employees are based on the guidelines given by the multilateral institutions and agreements.