ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Optional or Imposed?

This paper attempts an ex post evaluation of the voluntary retirement scheme in Bharat Aluminium from a worker-oriented perspective. Apart from enquiring as to how the VRS optees assess the context in which they had to leave, the article also addresses various related aspects such as reskilling and rehabilitation measures, utilisation pattern of the VRS amount and post-VRS support. It is evident from the field study that many of the voluntarily retired workers were subject to several direct and indirect pressures, prior to their agreement to the voluntary separation scheme. The data also suggests that the support provided by the management during the pre- and post-VRS periods was grossly inadequate.

Optional or Imposed?

An Ex Post Evaluation of Voluntary Retirement Scheme in BALCO

This paper attempts an ex post evaluation of the voluntary retirement scheme in Bharat Aluminium from a worker-oriented perspective. Apart from enquiring as to how the VRS optees assess the context in which they had to leave, the article also addresses various related aspects such as reskilling and rehabilitation measures, utilisation pattern of the VRS amount and post-VRS support. It is evident from the field study that many of the voluntarily retired workers were subject to several direct and indirect pressures, prior to their agreement to the voluntary separation scheme. The data also suggests that the support provided by the management during the pre- and post-VRS periods was grossly inadequate.


ne of the key characteristics of the global economic downturn during the 1980s and 1990s has been the trend among organisations to maintain competitive advantage by divesting themselves of surplus manpower. The liberalisation of the Indian economy, subsequent to the announcement of the new industrial policy by government of India in July 1991, led to dramatic changes, paving the way for strategic restructuring of business firms in the country, consistent with the emerging competitive environment, large-scale technology upgradation and organisational repositioning. The focus of firms (both in the public and private sector) had shifted towards enhancing their competitive advantage in the business, based on a blend of cost competitiveness and product and service differentiation. Manpower restructuring, with an objective to optimise labour cost, has been central to these efforts of organisational revamping. In view of the restrictive stipulations in the Industrial Disputes Act, a propos the retrenchment of the workers, offering an early separation package or voluntary retirement scheme (VRS) was found to be a prominent strategy engaged by Indian firms, while carrying out the agenda of “rationalisation” or downsizing the workforce. As per the existing guidelines, under the VRS, the firms could dissolve their job contract with the workers, by offering a lump sum payment, which is attractive compared to the normal terminal benefit. As the name suggests, the option of the scheme is contemplated as purely optional, with the willingness of the eligible workers. Notwithstanding the envisaged “voluntary” nature of these early retirement packages, it has been often pointed out that such schemes are sometimes implemented with coercion from the management, forcing the workers to accept the deal [Khasnabis and Banerjea 1996].

In the case of public sector units, along side the introduction of VRS, the government has also been implementing some shockabsorbing schemes that address the crucial issues related to preand post-VRS support to the optees.1 However, in the context of the private sector, there have been apprehensions regarding the capability and willingness of firms to provide pre- and post-VRS support to the voluntarily retired workers, which obviously is a resource demanding proposition. These issues become all the more significant in the case of firms, which were earlier under public sector management and were subsequently transferred to the private sector through disinvestment or strategic sale. The voluntary retirement schemes of newly privatised firms are often viewed sceptically, on account of the immediate tendency of the private management to trim the workforce, with minimum cost implications. VRS in privatised firms is often considered as an easy and cost-effective way to shed surplus labour, which inter alia enhances the prospects of profitability. Other options such as plant upgradation and product innovation are expensive, timeconsuming and uncertain, as the private investor may not be very familiar with the sub-sector/undertaking, which was previously in the protected/nationalised sector. It is against this backdrop, the present essay analyses the VRS episode in Bharat Aluminium Company (BALCO) from a worker-oriented perspective.

Context of the Study

Privatisation of BALCO is one of the widely discussed disinvestment cases in India. BALCO is the first public sector run, integrated aluminium producer in the country, with a history of more than 35 years of public sector management, prior to its selling of 51 per cent of share and transfer of management to a “strategic partner” (Sterlite Industries) in 2001.2 The supporters of disinvestment justified it, on account of the perceived gains in terms of higher levels of efficiency. The option was also considered financially viable, as the estimated annual return from disinvestment was found much higher than the annual dividend flow, at the time of strategic sale of the company.3 At the same time, those who opposed the disinvestment anticipated several disadvantages to the workforce – such as a worsening of the terms and conditions of work, deterioration in the organised strength of workers, implementation of “forced” VRS, and so on. This controversy is still continuing – even after five years of the transfer of management of the company to the private strategic partner.

Right from the time of strategic sale4 of the company, there have been intensive criticisms and debates on the likely adverse impact of privatisation on workers and worker communities. Among the perceived disadvantages (by trade unions and workers), the possibility of downsizing the workforce was prominent

– as it directly threatened the job security of nearly 7,000 workers in the company. However, the department of disinvestment maintained a view that the strategic sale may not adversely affect the workforce, as adequate clauses to protect the interests of the employees of the company had been included in the shareholders’ agreement.5

Immediately after the announcement of BALCO’s disinvestment, the majority of the employees went on an indefinite strike since March 3, 2001, which lasted for 67 days. Writ petitions were filed in the Delhi and Chhattisgarh High Courts, which were eventually transferred to the Supreme Court. The workers’ stir ceased and the company resumed its operations in May 2001, following the intervention of the apex court, which directed the new management to pay advance payments to the workers and not to retrench any of them.

Soon after the taking over the company by the Sterlite, the trade unions in BALCO came to the forefront with strong contentions against the management that the VRS in the company was implemented in the form of forced retrenchment, with adverse impacts on the beneficiaries. These concerns were shared with the prime minister by leaders of different trade unions,6 which led to the appointment of a tripartite fact finding committee (FFC).7 The FFC was mandated to assess the nature of the VRS offered by the company and to ascertain whether the new management had flouted the worker welfare provisions in the shareholders’ agreement with the government of India.8 Subsequently, the committee visited BALCO during February 1314, 2003 and submitted its report in September 2004. As per the report, the committee could not reach any conclusion on the veracity of the allegations that VRS was forced upon the employees. While rejecting the accusation of forced retrenchment, the committee observed that no instance was brought to its notice where the BALCO management had departed from the terms of the transaction agreements entered into at the time of disinvestment, barring an objectionable practice of paying VRS benefits in instalments, which is a deviation from standard procedure. However, the committee felt that the strategic partner, “while being technically correct in implementing the transaction agreements, did not pay sufficient heed to the spirit of the provisions of the Transaction Agreements, which protect the interest of the workers”. It also candidly observed the inadequate retraining and rehabilitation measures followed by the firm, while carrying out the rationalisation of workforce [Government of India 2004]. In this context, the discussion in the present paper assumes significance.

VRS Episode in BALCO

Subsequent to the disinvestment of BALCO, it was more or less expected that the new management would be inclined towards downsizing the workforce, soon after the takeover of the company. However, due to specific instructions in the shareholders’ agreement and guidelines in the Supreme Court verdict, the option of retrenchment or lay off was not open to the management, in the first instance. This left the firm with only two possible ways of getting rid of the “surplus” workforce – first, non-filling of the vacancies arisen due to normal retirement or superannuation, and second, introduction of an early retirement package or VRS, which is one of the prominent strategies adopted by the new management.

The first round of VRS was resorted to in BALCO in early 2000, even before the company’s disinvestment, through which about 800 employees were retired. Immediately after the taking over of the company, in July 2001 the BALCO management had reopened the VRS scheme, on the basis of a memorandum of understanding (MoU) signed between the management and all the trade unions functioning in the company. The scheme was voluntary and VRS was granted on the basis of specific written applications. As per the scheme offered as VRS, the employees were offered compensation at the rate of 60 days for each completed year of service [Government of India 2004].

As per the available official information, at the time of strategic sale, there were 6,436 regular employees (including 5,381 workmen) in the company. Of these, 1,302 regular employees (including 1,087 workmen) took VRS, within two-and-half years since the transfer of management. By October 2003, there were 277 pending applications from employees who had applied for VRS, but had not been granted VRS. Of the 1,302 employees, who were granted VRS as on September 30, 2003, 1,281 was given VRS under deferred terms.9 The firm also stopped its operations at the Bidhanbag unit in West Bengal, relocating its employees through transfer or by providing VRS [Government of India 2004].

Data and Profile of Respondents

In the field survey, 280 VRS beneficiaries in and around BALCO Nagar, Korba, Chhattisgarh were interviewed.10 In the absence of reliable and disaggregated information on the VRS optees, the sample selection was done through a “snowball method”,11 where contacts provided by earlier respondents formed the basis for selection of further interviewees. The respondents were mostly residing in nearby villages, within a radius of 6-7 kilometres of BALCO.12 They were interviewed mostly either at their residences or the current workplaces. Some of them were also interviewed at the offices of various trade unions functioning at BALCO Nagar. To supplement the information gathered, discussions were also held with trade union leaders and some other key informants (including normally retired employees and executives of BALCO).

All the respondents covered in the survey fell into the broad category of workmen.13 About 85 per cent of the respondents belonged to the age group 50-60 years (Table 1). Within this category, the concentration was more in the age group 56-60 years (57 per cent), which indicates that the award of VRS was more skewed towards those beneficiaries who are in the higher age groups. A disaggregated analysis of the data revealed that the lowest age of VRS optees was 43 years, while the highest being 58 years. The mean and median ages of the respondents were 55 and 56 years respectively.14 The concentration of elderly among the VRS optees could be due to the inherent preference of the management to get rid of the old and “inflexible” labour, paving way for modernisation and technological upgradation (even at a later stage). Further, given the fact that the compensation amount is calculated vis-à-vis completed years of service, it is natural that those who are with longer service would have been lured towards voluntary separation.

The educational profile of the VRS optees reveals that about half of the respondents (48.5 per cent) were with at least secondary education and out of these a considerable chunk (23 per cent of total) had a minimum 12 years’ of formal education. Slightly more than one-third of the optees were with no formal education, though some of them could read and write. Around 8 per cent of the respondents had some certification or licence, which include ITI certification, driving licence and so on, prior to their joining BALCO. Though a considerable chunk of the respondents were without much formal or technical education, many of them claimed that during the course of their service in the company, they had acquired certain plant level and job specific skills. A comparison of the perceptions of workers regarding their occupational categories at the time of joining the company and leaving the firm (as given in Table 2) substantiates that many of them had certain opportunities for vocational learning during their tenure in BALCO. The majority of these in-service (and informally) trained workers claimed that they had been performing their skilled and semi-skilled tasks in BALCO on par with or even better than the formally qualified hands.

Brief details of service and VRS are summarised in Table 2. It is evident from the data that around 90 per cent of the VRS beneficiaries were with at least 20 years of service in the company. Among these workers, those between 25 and 30 years assumed a major share (more than half of the total respondents). The pattern also suggests that employees with more than 30 years of service were less than 10 per cent. A quick inference that can be drawn from the data is that the VRS was mostly concentrated towards those people who are having few more years of service. While we juxtapose this inference with the workers’ perception regarding their occupational category (in terms of skill), it could be assumed that a considerable portion of the VRS optees were those who had less skill endowments and had some more years of service (5-10 years). This inter alia points towards two aspects:

(a) as it has been established in theoretical discussions on downsizing generally, in the case of BALCO also, the voluntary separation (or from the point of view of management – getting rid of “liabilities” in the workforce) was more or less oriented towards those who were the “less endowed”; (b) It is also evident that most of the people who have opted VRS or surrendered their job security were primarily those who have not had any major stock of skills that could help in their redeployment in certain other productive sectors.

Distribution of respondents according to the monthly salary groups suggests that more than 80 per cent of the workers were getting less than Rs 10,000 as net monthly salary. Only slightly more than 7 per cent people were with more than Rs 12,000 as net monthly salary. An analysis of the compensation amount received by the workers also indicates that around three-fourth of the respondents received less than Rs 8,00,000, which is an expected pattern in view of the lower status of the workers in terms of skills and designations.

Determinants of VRS Decisions

Several of the respondents mentioned that one of the major reasons for their accepting VRS was the displeasure and the fear accumulated during their short spell of work with the new management. While some of them felt humiliated due to the indifferent and disrespectful attitude of the new management towards them, some others perceived that they would be the target of vindictive action from the management, sooner or later, as they have participated actively in the strike against disinvestment and continued to work in their trade unions or the Balco Bachao Sangarsh Samiti. It was evident from the discussions with the VRS beneficiaries that several of them felt that the new management treated them as “liabilities” rather than “assets”. Further, many of them considered the behaviour of the newly inducted managerial professionals (by Sterlite) extremely insulting. The survey data substantiate this argument, in which more than onethird (35.71 per cent) explained that their prime reason for opting VRS was direct or indirect pressures from the management.

The second major determinant, as per the survey, was peer pressure. 21 per cent of the respondents explained that the VRS option or the contemplation of the VRS option by their fellow colleagues considerably influenced their decision of voluntary retirement. This aspect is found working in two ways. While the company of peers gave confidence to some of them to arrive at the decision, to some others, each instance of VRS application by a colleague added to their insecurity regarding continuation in an already hostile or “perceived to be” hostile work environment.

Another factor which added to their contemplation of VRS was the feeling of redundancy, experienced due to massive restructuring of the workplace. Many of the retirees and trade unionists opined that it was a management strategy to generate panic among workers by putting them to those jobs which they had not handled till then. To cite an example, a workman who was doing typing work was redeployed in stores by the management, where he did not have any grasp of the newly assigned job. In

Table 1: Profile of VRS Optees

Age Up to 45 16 (5.71) 46-50 27 (9.64) 51-55 77 (27.50) Above 55 160 (57.15)

Education No formal education 98 (35.00) Primary 46 (16.43) Secondary 71 (25.35) Intermediate 57 (20.36) Graduate 8 (2.86)

Technical qualification

No technical qualification 257 (91.78) ITI certificate/short-term training 18 (6.43) Licence/other certification 5 (1.79)

Note: Figures given in brackets are percentages to total. Source: Primary Survey, 2005.

Table 2: Details of Service and Perceived Occupational Classification

Completed years of service at BALCO Up to 20 years 30 (10.71) 20-25 years 84 (30.00) 25-30 years 145 (51.79) Above 30 years 21 (7.50)

Perceived occupational classification

  • (a) At the time of joining BALCO Skilled 21 (7.50) Semi-skilled 51 (18.21) Unskilled 208 (74.29)
  • (b) At the time of VRS Skilled 90 (32.14) Semi-skilled 188 (67.15) Unskilled 2 (0.71)
  • Note: Figures given in brackets are percentages to total. Source: Primary Survey, 2005.

    addition to this, it was widely reported that the new management frequently shifted the workers between departments or sections, effectively to: (a) create confusion among the workers regarding their future scope and continuance in the organisation; and (b) ensure that possible “problem creators” and trade union leaders are placed far away from their followers and close peers. For about 19 per cent of the interviewees, the major reason for considering VRS was the panic and tensions that they had to undergo after their redeployment and transfer to new work processes/departments, where they had neither any familiarity nor confidence to proceed.

    The attractive compensation package offered along with VRS also found to be a crucial determining factor, with more than 8 per cent workers citing it as the most prominent reason. Several of these respondents thought that a handsome compensation package would help them in realising many of their long cherished needs, including: construction/repair of houses; marriages of daughters; higher education of children, and so on.15 Some of them also thought that the investment of a part of the VRS money in certain income generating activities (mainly activities such as opening up of STD booths, stationary/general stores, and so on) would not only bring in some additional recurring revenue (apart from the monthly pension) but also solve the unemployment problems of their sons or daughters.16 The offer of a handsome compensation package obviously led to a situation where many of them were also supported by their family members, especially younger ones, to opt for VRS and utilise the money for some other “productive purposes” (according to their perceptions). Fifty-three per cent of the respondents in the survey opined that their decision of opting for VRS was a considered decision within the family and the members were generally supportive.17 An analysis of the household particulars of the VRS optees suggests that, excluding the voluntary retired person, there was at least one adult member on an average in each family, who was actively engaged in an income yielding economic activity.18 The presence of one more wage/income earning member in the family was, to some extent, found to provide a certain level of confidence to take the decision on voluntary separation.19

    From among other determinants, ill-health was cited as an important reason by more than 8 per cent of the workers. Many of these respondents were engaged in semi-skilled or menial jobs, which demand manual labour, and were found suffering from old age-related diseases.20 Thus, they found the possibility of early retirement with appealing terminal benefits an attractive option. On the whole, it could be concluded that the decision of opting for VRS by the respondents was jointly determined by several factors in which the coercive pressure from the management assumed greater importance.

    Issues Related to VRS

    The respondents testify that there were several aspects that made their VRS experience unpleasant. Many of them had to bear several direct and indirect pressures prior to their option of VRS. Further, many of them were dissatisfied about other disquieting aspects, such as discriminatory provision of VRS, imposition of undesirable terms, as well as the trauma of enduring a disgraceful exit. As mere examination of quantitative data may not reveal the intricacies and complications of their experience, in the present section, the analysis also takes account of the qualitative explanations/narrations of the respondents.

    Optional or Coercive?

    Various modes of coercion were used by the new management in implementing the VRS agenda. Many of the respondents felt that they were forcefully dragged into the scheme, though there was no open or direct threat from the management to accept VRS.21 A commonly used methodology was to prepare the workers to accept the VRS by creating ambiguities and uncertainties. Prior to the introduction of each VRS offer, the management resorted many indirect pressurise tactics at workplace, which forced the workers to seriously think of leaving their job, whenever a suitable situation arose.

    An important strategy followed by the management was to humiliate the workers by directly attacking their self-esteem and questioning their loyalty to the firm. Many of the respondents suggested that one of the major considerations while contemplating VRS was the demoralisation and trauma that they had experienced at the workplace during the post-disinvestment period. It was widely reported that the Sterlite appointed some youngsters, who were given “huge” salaries and status, bypassing all the existing norms in recruitment. The major qualification for these managerial staff was their proximity to Sterlite authorities.22 “Their only job was to insult and humiliate us. They wanted us to feel dejected and then apply for VRS. Probably, that is what they were assigned to do”, one of the respondents remarked. A worker who had worked in BALCO for more than 25 years and took VRS in 2004 explained that: “earlier we believed that the company belongs to us and we were feeling proud about it.23 I did not mind toiling in the company and was respected by my fellow colleagues and superiors for that reason. But, now, the younger supervisors and managers brought by Sterlite behave as if we are nothing. That day, one young man asked me to clean his table and I had to oblige. Later in the evening, I thought seriously about going for VRS”. A similar experience was that of a skilled and experienced worker (operator), who had been entrusted with certain specific tasks all along. When the new manager from Sterlite wanted him to sweep the room every day prior to the beginning of work, he had spontaneously reacted that: “sir, we may be your servants; Still we also have our izzat (self-respect)”. He recollects that his application for VRS was submitted to the management on the very next day, though the matter was in consideration for quite a long time.

    Many of the respondents recollected that their only solace during these hard times of humiliation was the care and consideration shown by some of the managerial staff and superiors, who knew their commitment and industrious nature for several years. Notwithstanding this, the respondents also cited that some of the old officers, in their urge to be in the good books of the Sterlite authorities, had considerably changed their attitude towards subordinates and joined hands with the new management to harass them. They pointed out that the management has shown special attention in luring those officers and managerial staff who are ready to be “extra loyal” and who do not hesitate to go ahead with vindictive actions towards their own fellow colleagues.

    While analysing the above responses, it is evident that the respondents were disturbed when they were asked to do “inferior jobs” that fell out of the purview of their earmarked or specifically assigned jobs. Any degradation in the nature of work was considered painful and as an instance of harassment. This strong belief among the respondents as regards the sanctity of maintaining a strict division of labour, that they used to maintain during the pre-disinvestment period, was also reflected in their remarks about the newly recruited staff and engineers by the Sterlite (both within BALCO and in a newly built up plant by Vedanta, a concern of Sterlite, in close proximity to BALCO). “These new recruits would do anything, including serving tea. But, they can’t expect us to do this”, a VRS recipient remarked categorically. Referring to the newly engaged engineers by the Sterlite on contract basis, another VRS holder stated that: “look at these engineers. They are ready to even drive tractors!”. Thus, the essence of discomfort among the old workers was found to be the mismatch between the conceptualisation of work that they entertained during the pre-disinvestment period and the agenda of “multiskilling”24 that the new management started experimenting with both the old and new employees.

    An oft-cited incident by many of the respondents regarding the panic generated by the new management was related to the “modernisation of the workplace!”.25 As per the explanations provided by the workers: One day, a newly inducted manager (by Sterlite) directed some of the workers to dump all the typewriters in a room. While his instructions were being carried out, he kept on uttering remarks such as: “this is the last day that I would see these wretched old machines around”; “if one has to modernise, this is the thing to begin with”; “machines one could get rid off, but, what to do with the folks?”. The typists who were present were in panic as they did not have any clue regarding what was going on. Further, they were all the more anxious when the management did not explain to them what they had to do, for days together. The only remark from people who mattered was “You need not worry. Nothing would happen to your salary. You’ll get it in time”. A VRS recipient recollects that when the company invited the next round of VRS applications, soon after this incident, there was “no dearth for applicants!”

    There were also few complaints that VRS was often thrust upon the employees, even without their full consent. To substantiate, a VRS optee narrated an incident related to an accident that happened to a semi-skilled worker inside the plant, while on duty. As the option form of VRS was in English, the worker had signed it, mistaking it as the injury card. As the accident happened at the workplace, the management admitted him to a hospital in Raigarh and met the hospital charges of about Rs 5,000. However, they deducted the same amount from the VRS dues given to the worker, which was released without much delay. After few days when he had to get a reference letter from the management to get further treatment from the hospital, the management refused to do that. Further, there was no alternative medical assistance given to him and he was directed to vacate the company quarter quickly, as in the case of any other VRS holder.

    Selective Provision

    There was a strong contention among the respondents that the VRS was not offered to all those who (are eligible for and) have applied for it. Quite often, many interested candidates were denied VRS option by the management.26 It was also cited that the deferring of the VRS option of the employee was effectively used by the management to minimise the firm’s liability arising due to the compensation package offered to the employees. For instance, in some cases, where the employees had voluntarily applied for VRS, the acceptance of the proposal was delayed through (informal) persuasions – such as promising better career prospects in the near future. Subsequent to this, the management apparently found out some other means to get rid of the same workers, with lesser financial burden to the firm. A clear-cut case of this is the deferring of VRS to a group of officers, through an unwritten request from the management and an immediate implementation of a reduced age for mandatory retirement of the officers (from 60 to 58), through which the management could successfully evade the payment of a legitimate huge sum of compensation to the officers as VRS amount.27 Workers also felt that, generally, the management pre-decides whom to be offered VRS and ensures that the downsizing is done only according to the predetermined plan. Substantiating this view, a senior trade union leader opined that the management had been working with a pre-designed plan for implementing VRS and accordingly applied multiple ways for pressuring the right candidates. Thus, the argument here is that though the VRS was, theoretically, offered to all those people who satisfy the minimum requirements and who are willing to opt it, in essence, it was aimed towards getting rid of only those workers, who are pre-identified by the management for “voluntary” separation! Some of the respondents opined that initially they were forced to opt for VRS and finally when they had made up their mind, the management slackened the pace of process of sanctioning the request. Notwithstanding this argument, more than 90 per cent of them agreed that they received the sanction orders within one-two months of their application for VRS.

    Deferred Payment

    A major reason for dissatisfaction of the VRS beneficiaries was the arbitrary decision of the management to follow a deferred payment system, where as the VRS compensation amount is paid only in five instalments with a gap of six months between each payment.28 Many of the retirees cited that this deferment of payment had created lots of problems in future household planning. Instances were cited, where the retirees had to find out other sources of finance for certain already committed heads of expenditure, in anticipation of the realisation of the VRS amount in single payment, including completion of construction/renovation of houses and marriage of daughters, following precommitted obligations. Workers also complained that while payment of ex gratia was made in five instalments, all payable amounts and recoveries from them were deducted from the first instalment itself. Many of the retirees as well as trade unionists functioning in BALCO said that while the workmen were given their dues in five instalments, the ex gratia to the company’s executives was paid in one go. It was also cited that the management had deducted a sum from their VRS amount, to recover the advance payment made to them at the time of resuming duties after the 67 days’ strike, following the direction of the apex court.29

    Disgraceful Exit

    Many a respondents felt that they got a disgraceful exit from the firm, due to the indifferent attitude of the management towards their long contribution in building up BALCO to its present stature. A most frequently cited instance was the management’s stringent attitude, while vacating the retirees from the staff quarters. The retirees were directed to vacate the quarters at the earliest. To put pressure on them in this regard, the management retained considerable sums (which are reported to be ranging from Rs 25,000 to Rs 50,000) from the payments admissible to voluntarily retired employees, till they vacate the quarters. Most of the retirees found this act demeaning. As one respondent remarked: “After all we are leaving and they [the management] know that we have to. But, pushing us out without even thinking that we have built up this company shows their attitude. They are not loosing any single rupee, if one stays for a few more days. They don’t have any faith in us. They believe in money”. Further, it was explained that the management returned the retained sum, only after ensuring that the quarters are given back in good condition, with all fittings (including minor fixtures such as bulbs and similar petty items). There had been occasions, where some small amounts were deducted, while releasing the withheld sum. In some cases, the workers were even directed to further clean the quarters and show it to the company representatives, as its condition was not found satisfactory. In the cases of some workers, the management also charged Rs 200 per day from the VRS holders for additional stay beyond the stipulated period.

    All the above aspects cumulatively led to a situation, where a majority of the respondents felt that their past contribution to the growth of the company had been dishonoured by the new management, through a pressurised and disgraceful exit, with unfavourable terms and conditions.

    Pre- and Post-VRS Support

    Most of the VRS optees (76 per cent) got the information about the VRS scheme and its details from the company authorities only. While 18 per cent of the respondents understood the details from fellow-workers, the rest (6 per cent) obtained the information from friends, who had some previous knowledge from their relatives or persons known to them. Though a majority of the respondents (89 per cent) explained that the communication from the management was adequately clear as regards the details of the VRS, at least 8 per cent opined that the management’s explanation was grossly inadequate and they were not fully aware of the pros and cons of the VRS package.

    From detailed discussions it was evident that the management has not made any serious efforts in counselling and preparing the workers for the VRS.30 Similarly, the efforts towards retraining and redeployment/rehabilitation of the workers were also found surprisingly absent. The near absence of efforts on “retraining”31 also highlight a serious laxity of the management on an important aspect that needs to be given due care while going ahead with the agenda of “rationalisation” of the workforce.

    More than 80 per cent of the VRS optees complained that they did not receive the VRS amount immediately and had to wait for one to three months or even more. Many of the retirees had really tough times approaching the concerned officers repeatedly and requesting to release their VRS dues. It was generally felt that the management had not shown much interest in ensuring the timely payment of VRS amount and at times even these retirees had to bribe the concerned staff, the amount of which was reported to vary from Rs 100 to Rs 2,000.

    The retirees also complained that the management did not give adequate attention to ensure that their pension papers reached the concerned office of the state government located at Raipur. As most of them had almost no practical knowledge in dealing with government offices, they found it extremely difficult to get their pensions right, given the indifferent and non-cooperative attitude of the BALCO management in terms of sharing proper information and in ensuring timely processing of their papers. This even resulted in certain collective action arrangements among the beneficiaries to solve common issues. For instance, a VRS Employees Union (Swaichik Sewa Nivruthi Karmachari Sangh) was found functioning in the vicinity of BALCO, which was formed by a group of VRS optees to collectively address their post-retirement issues. From detailed discussions with the office bearers of this union, it was evident that inadequacy of post-VRS support systems from the management was the prime reason for collectivity in this direction. Some of the retirees even found it extremely difficult to enter the plant/office premises to gather information, as they were not having a helmet and an official identification card.

    There were no major post-retirement support systems for the VRS holders. All the benefits they used to derive during their job, such as medical coverage to the family, education expenses of children, residential facility, etc, were not extended after the VRS, barring a reduced version of medical assistance, which was offered to the retirees and their spouses, after attaining the age of 60.32

    Current Occupational Profile and VRS Benefit Utilisation Pattern

    An analysis of the current occupational profile of the respondents testifies to the sorry state of occupational rehabilitation of the retirees. Eighty per cent of the respondents were found unemployed during the period of survey. More than 60 per cent of these respondents opined that they were willing to work, but could not find any promising and acceptable avenues to productively engage them. Forty-five out of the 280 respondents interviewed (16 per cent) reported that they are productively engaged in farming on their own plots. However, even among these respondents, a considerable number was facing acute underemployment. The rest (around 4 per cent) of the retirees were found engaged in running small-scale businesses. However, it was unanimously opined by all the respondents in the survey that the business prospects in the locality has gone down considerably, subsequent to the massive acceptance of VRS by many workers, which was not corroborated with a commensurate level of induction of new workers. The large-scale shifting of many of the worker households to far off regions, during the post-VRS period, also added to this sluggishness in the business. More than two-thirds of the VRS beneficiaries, who are currently engaged in some productive occupations, suggested that their present engagement is considerably inferior to what they had been doing as an employee of BALCO. Notwithstanding this, most of them were happy that they could get at least some alternative engagement, which was not possible for many of their erstwhile colleagues.

    An analysis of the utilisation pattern of the VRS amount shows that more than one-third (around 35 per cent) of the total amount was found invested in monthly instalment schemes, National Savings Certificates or fixed deposits with post offices or banks. More than one-fifth (21.76 per cent) of the total amount was spent on asset creation (such as building/renovating houses,33 buying or upgrading land, and so on). The proportion spent on education of children was 4 per cent of the total amount. While the expenditure on conducting marriages of daughters (including dowry) and sons was around 10 per cent, that on medical care and hospital treatment was around and 8 per cent.34 Around 14 per cent was utilised towards buying consumer durables (such as TV, vehicles, fridge, etc). The investment on income generating business activities (such as starting shops) was found to be about 2 per cent of the total amount received by the respondents. On the whole, it is evident that due to lack of financial planning and proper advice, most of the VRS optees spent a considerable portion of the money on unproductive heads. Most of them now feel that the remaining assets/deposits are not sufficient enough to make their future secured. This again highlights the inadequate level of attention and post-VRS assistance provided by the company to plan the rehabilitation of the voluntarily separated workforce.


    The insights from this case study, thus, strongly suggest that, in the absence a soft and compassionate approach towards the workforce, quite often, the downsizing exercises carried out through voluntary separation schemes result in adverse outcomes to the beneficiaries. In view of this, the worker rationalisation packages should be implemented not only as per their content but also in their true spirit. The other important requirement is to design and implement certain shock-absorbing systems, to ensure care and support to the rationalised workers during the pre- and post-VRS phases, with due attention to aspects such as retraining, reskilling, rehabilitation and a modicum of social security. The concerted efforts of all relevant social actors are required towards this realisation of this end. The field data also provides a useful input towards assessing and rethinking the implications of crucial policy decisions such as privatisation or disinvestment, not only in terms of economic efficiency but also with respect to their social and welfare impacts.




    [This paper is based on the report of a research study conducted by the author at V V Giri National Labour Institute, Noida. The views expressed in the paper are purely those of the author and not of the V V Giri National Labour Institute or of the ministry of labour and employment. The help rendered by Sudha Bharadwaj and Anoop Singh was crucial in organising the field study. The author is also grateful to Daman Lal Sahu, Reekesh Kumar Diwar, Pradeep Kumar Prajapati, Krishna and Nawab Wahabul Haque for their assistance in data collection and computation. Constructive comments from Neetha N have been of immense help, at various stages of preparation of this essay. The usual disclaimers apply.]

    1 The organisation of a corpus fund for financing the early separation schemes in PSUs, known as the National Renewal Fund (NRF) and the subsequently introduced Scheme for Counselling, Retraining and Redeployment of Rationalised Employees of Central Public Sector Enterprises (CRR Scheme) are instances of the government’s concern towards ensuring the smooth rehabilitation of the VRS optees. While the efficacies of these shock-absorbing schemes are still debated, it is crucial to note that, in the public sector, redeployment and rehabilitation aspects of the “rationalised workforce” are addressed to some extent, while carrying forward the agenda of downsizing.

    2 The process of disinvestment of BALCO was started in 1997, with the advice of the Disinvestment Commission to sell 40 per cent of the company’s equity stake to a strategic partner, and to publically offer a certain portion of the shares to institutions, small investors and employees (in the domestic market), thereby bringing down its equity holding to 26 per cent. It was suggested that the company could finally off-load the balance 26 per cent in a similar manner, at an appropriate time. Subsequently, in 1998, the commission further advised the government to offer 51 per cent or more of the company’s shares to a strategic partner, with transfer of management. In this backdrop, the government proceeded with the disinvestment of BALCO, through a global bidding process. Though in the beginning of the process, expressions of interest were received from various national and international aluminium producers, the final bid was confined to only two domestic producers, viz, HINDALCO and MALCO (Sterlite). As an outcome of this bidding process, the government has transferred 51 per cent of the company’s equity at a sale price of Rs 551.5 crore [Government of India 2001].

    3 The department of disinvestment explained the financial viability of this disinvestment project, as follows. Through the sale of 51 per cent of equity the government received an amount of Rs 551.5 crore. Earlier, the government had taken out Rs 244 crore of cash surplus from the company, and also Rs 31 crore dividend tax on this transaction. The total revenue to the government, thus, amounts to Rs 826.5 crore. If this amount were to be invested by the government in a fixed cost deposit, it would get an annual return of Rs 82.6 crore (assuming an interest rate of 10 per cent). The department viewed that this amount would be many times higher than the annual dividend flow to the government [Government of India 2001].

    4 Strategic sale involves transfer of 51 per cent or more of the company’s shares, along with transfer of management control to the strategic partner.



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    5 The clauses 7.2 (e), (g) and (f) as well as Recitals H and J of the Shareholders’ Agreement stipulated several labour protection measures, including: (a) continuation of employment of all the then existed employees in the employment of the company; (b) disallowing retrenchment of any part of labour force of the company for some stipulated period; (c) ensuring a favourable option of voluntary retirement to the employees; and (e) continuation of employment policies that ensure benefit of the members of the SC/ST, physically handicapped and other socially disadvantaged categories [Government of India 2001; Remesh 2006a; 2006b].

    6 This meeting was held on October 18, 2002. 7 The same committee was also entrusted to study the post-disinvestment issues related to the Modern Food Industries Limited (MFIL).

    8 The terms of reference of the committee were: (a) To assess whether lay-off/retrenchment had been resorted to by the concerned companies; and (b) To assess whether there were any deviations from the shareholders agreement with the government of India in respect of clauses dealing with labour issues [Government of India 2004].

    9 The payment was made in five instalments, each of which is paid with a gap of six months. The VRS recipients were entitled to 7 per cent interest on the deferred amount [Government of India 2004].

    10 This field research was conducted, during February-July 2005, as a part of a larger study by the author [Remesh 2006b], which, apart from the evaluation of VRS, also examined the implications of disinvestment on workplace relations as well as on regional development.

    11 Thus, the study does not purport to have followed a statistically representative sampling.

    12 The villages covered in the survey include: Bhadrapara, Lalghat, Bela, Bhela Kachar, Duggupara, Daihanpara, Dundu, Rogbahari, Rumgara, Pohadia, Jambahar, Sonpuri and Risda.

    13 As per the available official estimates, workmen constitute more than 80 per cent of VRS opted employees. Broadly, the term workmen may be used to denote the non-officer category of employees, which is a broader set of workers including: supervisors, operators, fitters, masons, foremen and chargemen, miner, store keeper, stenographers, typists, security guards, electricians, machinists, attendants, cooks, firemen, clerks, welders, drivers, semiskilled workers and general labour.

    14 The age mentioned here correspond to the age at the time of VRS.

    15 It is to be noted here, that these calculations were entirely based on the respondents’ earlier perception that the money would be received in single payment.

    16 Here also, it is to be noted that most of them had stereotype plans for rehabilitating themselves and due to lack of proper guidance and counselling they were not in a position to foresee the possible depression that may arise in the local economy after a major drive of VRS, which is not followed by an equal level of refilling of positions.

    17 At the same time, around 27 per cent of the respondents remarked that they took the decision of opting for VRS as against the wish of some or all the family members. While 18 per cent of the respondents opined that their family members were confused or indecisive in the matter of supporting/opposing the VRS decision of the prime bread winner (in most of the cases), a very few (less than 2 per cent) explained that their decision of opting for VRS was unilaterally taken, without the involvement of any of the family members.

    18 In the 280 surveyed households, there were 320 breadwinning members, further to the VRS beneficiaries.

    19 A significant portion of the respondents opined that their decision for VRS was a considered and consulted decision, involving the adult members of the family, especially those who are wage/income earners.

    20 This aspect assumes some importance, in view of the limited medical support provided by the firm during the post-VRS period.

    21 Notwithstanding this, the workers and trade unionists opined that threat of VRS was effectively used by the management, while downsizing the workforce at the company’s New Delhi office and at its perennially loss incurring plant in Bidhanbag, prior to its closure. It was also pointed out that when the employees at the New Delhi office protested against their transfer to Korba, their salaries and allowances were even stopped and remained unpaid for more than seven months. The present essay, however, does not probe into the actuality of these aspects, as it is strictly confined to those workers in the BALCO Nagar Unit at Korba, Chhattisgarh.

    22 This aspect was also pointed to by a retired executive of BALCO. It was explained that the new management gave the newly recruited managerial staff attractive salaries and perks, without following any norms, where as the old and experienced executives in the company were paid as per the salary structure followed by the company, during the pre-disinvestment period.

    23 The same feeling was shared by an executive who retired from BALCO a few months before the field survey. To quote him: “In those days we were feeling proud while introducing ourselves as Balconians. Now we don’t know whether we can do it with the same degree of confidence and whether the new management would endorse it”.

    24 This strategy of multiskilling is clear from the current recruitment pattern of the firm. In recent years, while BALCO reduced the strength of workmen considerably through VRS, a considerable chunk of newly recruited workers were those with graduation (mostly BSc), without any special technical qualification. For instance, the estimates provided by some trade unionists indicate that in 2005, the firm increased the stock of general graduates almost threefold (i e, from 88 to 273), whereas the stock of workmen in the company declined from 3,162 to 2,741 during the same period.

    25 Modernisation of the plant is cited as one of the prime reasons for considering disinvestment of the company, through strategic sale.

    26 As per the available official information, as on Ocotber 1, 2003, there were 277 pending applications from employees who had applied for VRS and some of them had also given consent for deferred payment of their VRS dues, but had not been granted VRS [Government of India 2004].

    27 This case was explained by a retired executive during a discussion with the study team and it was pointed out that the matter had been pending with the Chhattisgarh High Court, during the survey period.

    28 This act of the management is a departure from the standard procedure, as noted earlier by the fact finding committee [Government of India 2004].

    29 The trade unionists in the study area opined that this arbitrary action of cutting benefits to the employee is illegal as there are no directions from the apex court in the verdict that the sum needs to be recovered.

    30 Only 8 per cent of the respondents opined that they got some counselling from the company, prior to the VRS.

    31 The neglect of retraining while carrying out the agenda of downsizing in PSEs was also highlighted by earlier evaluations. For instance, a VVGNLI evaluation study on the efficacy of the counselling, retraining and redeployment points towards less importance attached to retraining aspects by the PSEs. Similarly, Datt (2005) points out the inadequate level of opportunities for retraining and redeployment in the case of PSEs, which are proceeding with agendas towards downsizing or voluntary separation.

    32 Many of the respondents informed that if they remit Rs 2,000 within one month of VRS, the VRS holder and his/her spouse would get medical facilities from the company, after attaining age 60.

    33 However, a considerable chunk of expenditure was spent on unproductive heads, such as decorating houses, constructing/renovating temples, and so on.

    34 The higher proportion of medical expenditure also shows that in the absence of adequate medical coverage to the family during the post-VRS period, the individual savings are considerably used towards meeting health-related contingencies.


    Datt, Ruddar (2005): Economic Reforms, Labour and Employment, Deep and Deep, New Delhi.

    Government of India (2001): ‘Disinvestment of BALCO’, Department of Disinvestment, New Delhi.

    – (2004): ‘Report of the Committee Constituted to Look into Labour Related Issues in the Context of Disinvestment in Modern Industries Ltd (MFIL) and Bharat Aluminium Company Ltd (BALCO)’, Ministry of Labour and Employment, New Delhi, India.

    Khasnabis, Ratan and Sudipti Banerjea (1996): ‘Political Economy of Voluntary Retirement – Study of Rationalised Workers in Durgapur’, Economic and Political Weekly, Vol 31, No 52.

    Remesh, Babu P (2006a): ‘Eroding Livelihoods: Narratives of BALCO Disinvestment and ‘Rationalised’ Workers’, paper presented at the Sixth International Conference on Labour History, Association of Indian Labour Historians and V V Giri National Labour Institute, November 1-3, New Delhi.

    – (2006b): ‘Impact of Privatisation on Labour: A Study of BALCO Disinvestment’, NLI Research Studies Series No 72, V V Giri National Labour Institute, Noida.

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