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1. Preamble:

Incentive scheme for the year 2010 -11 will use a combination of 3 elements:

o Individual employees performance (judged by performance rating).o Departments performance (judged by the CPF factor).o Total companys performance (profit sharing scheme) applicable to all

Management staff.

2. For all those in grades M1B M4 :

The scheme for M1B to M4 is common across the organization (Includes bothOperating and Support)

a. A share of companys profits for the year. Details of this is explained in item 4below.

b. Individual performance as reflected by the performance rating.

The table here below summarizes the fixed incentive payable to M1B M4 grades for theIndividual performance.

Grade PR # 3 PR # 4 PR # 5

M1A & M1B 7500 9400 12700

M1 9400 11700 15800

M2 13800 17300 23300

M3 20800 25500 34500

M4 29400 36700 49600

3. For all those in grades M5+ :

The scheme for M5 and above will use a combination of:

a. A share of the companys profits for the year. Details of this is explained in item4 below.

b. The Departments performance as judged by the CPF(Composite PerformanceFactor) for all Operating Divisions OR

The Departments performance as judged by the Support CPF(Combination of 3-4parameters of Customer Satisfaction Index) for all Support Divisions.

SUBJECT: Incentive Scheme for FY 10-11

ISSUED BY: N K Ramesh Sr. GM HR & Admin.

DATE: November 02, 2010

DEPARTMENT: Human Resources & Admin. SUPERSEDES BULLETIN

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For Operating Divisions

3.1.1. The components that go into CPF calculation (For Operating Divisions) have beenstandardized across the company as listed here below:

Parameters Weightage

Billing VA (CY as % of LY/LLY) 40%Interest as % of billing (w.r.t . Improvement over LY / LLY) 20%Productivity (CY as % of LY / LLY) 20%CSI + DSI 20%

3.1.2 All above Parameters of current year to be compared with the to be better of thelast two years except the CSI and DSI.

3.1.3 Productivity is defined as Billing VA/DEE. A 10% improvement in productivity will beconsidered as performance at 150%.

3.1.4 Interest as a % of billing improvement as compared to be best of the last two years.

3.1.5 For dealer businesses, CSI and DSI each will carry a 10% weightage, whereas the otherdepartments will have a 20% weightage for CSI.

3.1.6 Performance on CSI will be judged by CSI = 7.25 as 100% and CSI = 8.0 as 150%.Performance on DSI will be judged by DSI = 6.00 as 100% and DSI = 7.0 as 150%.

3.1.7 Measurements for all parameters will be at the area office/manufacturing divisionlevel, except for productivity, which will be calculated at All India level /manufacturing Division level.

3.1.8 The CPF for the manufacturing division will be calculated at the plant level, and thena weighted average calculated for the Division which will be applicable for all theplants.

3.1.9 To avoid any distortion due to a very high growth of any parameter in a given year,the maximum CY percentage for any parameter will be limited to 150% ; there willalso be a cap of 135 for overall CPF.

3.1.10 CPF component of the incentive will be calculated in the following manner:

Performance Rating 2 : Nil

Performance Rating 3 : 0.80% of each grades annual medianbasic salary for every point increase overweighted CPF = 100.

Performance Rating 4 : 1.10% of each grades annual medianbasic salary for every point increase overweighted CPF = 100.

Performance Rating 5 : 1.35% of each grades annual medianbasic salary for every point increase overweighted CPF = 100.

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The median for the purposes of the calculation is defined as the median for thegrades as existing on September 30, 2010.

For Support Divisions

3.2.1 The components that go into Support CPF calculation (For Support Divisions) havebeen standardized across the company.

3.2.2 The Support scheme will be applicable to HR & Administration, EHS, CFS, FieldProcurement, Logistics, CCM, ERP & IT at the Regional & Corporate levels.

3.2.3 There will be a common approach for all Support Divisions of three or four variablecomponents of CPF with an equal weightage. The parameters for each of the supportdivisions will be as per the annexure.

3.2.4 Support CPF component of the incentive will be calculated in the following manner:

Performance Rating 2 : Nil

Performance Rating 3 : 0.80% of each grades annual medianbasic salary for every point increase overweighted CPF = 100.

Performance Rating 4 : 1.10% of each grades annual medianbasic salary for every point increase overweighted CPF = 100.

Performance Rating 5 : 1.35% of each grades annual medianbasic salary for every point increase overweighted CPF = 100.

The median for the purposes of the calculation is defined as the median for thegrades as existing on September 30, 2010.

3.2.5 CSI will be calculated on the basis of CSI = 7.25 as 100% and CSI = 8.0 as 150

3.2.6 For the smaller Divisions / Departments like CCM; Corporate Quality; ChannelManagement etc., the Support CPF will be based on the average of the CPF of theDivisions they support.

4 Profit Sharing :

As in the previous years, 5% of the operating profit will be set aside as distributableprofit. Assuming that the eligible number of employees in July 2011 will be same as inJuly 2010, and the profit sharing component will be the same as that of 2009-10, the

Profit Sharing amount is arrived at by applying the following multiplier to thedistributable profit :

Grade Multiplier

M-1A / M-1B 0.0091

M-1 0.0115

M-2 0.0180

M-3 0.0311

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M-4 0.0483

M-5 0.0678

M-6 0.0977

M-7 0.1677

M-8 0.2115

M-9 0.2518

The multipliers for grades M10 to M12 to be decided by DC / MC.

4.1 An additional multiplier will be applied for the profit sharing component based on theindividuals performance rating as shown below.

Performance Rating 3 : 0.80.Performance Rating 4 : 1.10.Performance Rating 5 : 1.35.

4.2 If the number of eligible employees changes then both the grade multiplier as well asthe performance multiplier would be suitably modified to ensure that the total payout

of the profit sharing amount of the incentive shall not exceed 5% of the operatingprofit.

5 Eligibility :

5.1No incentive is payable to those who leave us during the financial year. In other words,incentive is payable to only those who are on board as of 31 March 2011.

5.2New joinees need to have spent atleast 3 months in the financial year to be eligible forincentive provided that they are on board on the day of incentive disbursement or havecompleted one year, whichever is earlier.

5.3For those who have been promoted during the year, incentive will be based on the newgrade for the full year. This is irrespective of when they have been promoted.

6 Incentive Calculations & Payment:

6.1 Incentive calculations will be started once the final Operating Reports for the year arepublished by the Accounts department.

6.2 Corporate HR will then prepare and send a Template to all the Commercial managersto help them work out the CPF amounts based on Grade wise & Performance Rating.

6.3 Commercial Managers of the divisions will use this template to calculate the CPFcomponent, based on formula mentioned in item 2, and the overall incentive payoutsfor each Area, Region & manufacturing Division. Individual incentive amount will thenbe calculated based on his grade & Performance rating. These details will be sent toCorporate HR.

6.4 Corporate HR will do the similar calculations for all the Support function employees.These calculations will be shared with the Functional Heads.

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6.5 Based on the overall Company Operating Report, Corporate HR will determine theDistributable Profit. If required, the Multiplying factors mentioned under point 4may be revised, based on the number of employees eligible for the incentive, to ensurethat the total profit sharing component is equal to the distributable profit.

6.6 The total incentive payout will be discussed at the EC. Subject to clearance by EC,instructions for incentive payout to each employee will be sent by PBO to therespective payroll departments. VP HR will send the information on incentive payoutsfor VP/EVPs to Corporate accounts separately.

000ooo000

Annexure for Support CPF

Finance Cost Management & Advisory Support

Finance

Legal, statutory, policy & process compliance & Process Efficiency MIS Accuracy & Timeliness Overall Support

Recruitment / Staffing

HR

Personnel Policies & Implementation Efficiency People Development Overall Support

Sourcing & Vendor Development

Materials

Purchase Effectiveness (cost reduction, timely delivery) Policy, Process & Statutory Compliance Overall Support

Warehouse & Inventory Management (inventory planning, cost, breakage, FIFO,housekeeping)

Logistics

Transport management (cost, breakage, damage, timely delivery) Reports / Information/ Data Accuracy & Timeliness Overall Support

Weightage for the each of the above parameters for the Support CPF will be equal.