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New system on cards to pay bonuses to oil PSU employees

NEW DELHI: There is good news for oil sector executives who are losing bonuses because of state controls on fuel prices. The government is preparing a new system of rewards that will insulate them from the vagaries of rupee-dollar exchange rates and whimsical controls on fuel rates. 

The oil and finance ministries will formulate the system to ensure adequate performance-related pay (PLP) to employees despite lower profits because of rising fuel subsidies, government officials said. Oil industry executives say that staff morale is a big casualty and state firms fear losing top talent to private rivals. 

"Our work force is our key strength. It would be difficult to keep them motivated unless we give them their due," a director in a state firm said. 

Normally, public sector firms distribute about 5% of their profits as PLP to employees as incentives. But, the bonus is allowed only when a company earns a profit, which is significantly higher than the profit of previous financial year. The government fixes profit targets for each company before the beginning of the financial year. 

Oil firms, particularly, 
Indian Oil Corp, Bharat Petroleum CorporationBSE 0.37 %, Hindustan Petroleum CorporationBSE 0.46 % and Gail IndiaBSE 0.41 % have told the government that despite their excellent performance they often miss their targets because of reasons beyond their control, officials said. 

"Abnormal fluctuation in international crude oil prices, unprecedented rupee depreciation and rising revenue losses on diesel, kerosene and cooking gas raise subsidies. The unpredictable subsidy burdens depress out profits significantly despite best performance by employees. Why to penalise them for something beyond their control," said a senior oil company executive. 

BPCLBSE 0.37 % and HPCLBSE 0.46 % reported a combined net loss of Rs 4,334 crore in the in the first quarter this financial year despite robust top line, Gail's net profit fell by 29% because of higher subsidy contribution. 

"We often absorb interest costs worth thousands of crore because of delay in getting cash compensation by the government," an 
IOCBSE -1.40 % executive said. State oil marketing companies sell diesel, kerosene and cooking gas at government-determined prices, which are often below market rates. 

Part of their revenue losses are compensated by 
ONGCBSE -0.24 %, Oil IndiaBSE 0.81 % and Gail. The government pays them cash compensation to meet a large part of subsidy burden, but often marketing firms bear significant subsidy burden. The four companies' combined work force is over 62,500. 

The government acted after managements of state oil firms, particularly Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corporation and Gail India, cautioned that companies' performance would be adversely affected by a demoralised work-force, government and industry officials said. 

After initial resistance, the department of public enterprises has recently directed ministries of oil and finance to find a "final solution" so that employees of public sector "do not suffer due to decision not in their control," government officials said.