VRS at sick public sector cos likely to gain pace after Modi govt sweetened offer

In a bid to speed up the process of closing down sick central public sector enterprises (CPSEs), Modi government has sweetened the package for employees opting for Voluntary Retirement Scheme (VRS) by giving them attractive compensation at 2007 notional pay scale. The pace is likely to gather steam as it is working toward closing down those units which cannot be revived, turning around ailing units, and making profitable units leaner and more efficient, reports Financial Express.

The report notes that employees opting for VRS have come down significantly from a high of 34,400 in FY07 to 2,525 in FY15 for all CPSEs, which improved to 3901 in FY17.

Minister of Heavy Industries and Public Enterprises Anant Geete has told Lok Sabha during the question hour on March 21, that his government is looking to support CPSEs which is likely to improve and closing down sick and loss-making units.

VRS is considered as the most compassionate way of retrenching an employee to provide overall reduction. The amount is tax-free and generous to persuade the employee to voluntarily retire from an organisation. In a competitive globalised world, it has become important for an organisation to right-size the manpower to remain competitive and stay relevant.

The government has used VRS as the main tool to cut down the uneconomical staff cost of CPSEs. The major chunk of state-owned CPSEs has reduced their staff through the VRS route. The government is settling all dues along with salary arrears at the time of separation.

Most of the employees who took VRS in FY17 belonged to the sick CPSEs of HMT Bearings, HMT Watches, HMT Chinar Watches, Hindustan Cables, HMT Tractor and Instrumentation Ltd. The number is likely to go up once data for profitable CPSEs are included.

The National Institution for Transforming India (NITI) Aayog has recommended a closure of 26 CPSEs from the 74 identified loss-making units in FY18. Most of these units are closed for over a decade putting a strain of Centre’s finance.